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Following an eventful 2010, David O'Hara has contacted a number of AIM experts for their comments on the year and their hopes for 2011.

David O’Hara, Founder, Blackthorn Focus

2010 bought a welcome amendment to AIM Rule 19 that now compels companies to declare the pay of each director. Until February companies could simply aggregate this figure into a single line in their accounts called 'Directors Emoluments' or some such. Now shareholders can determine if directors' pay is commensurate with their achievements.

If there is one further change on AIM I would like to see in 2011 it is the publication of 'market expectations' - the expected profit figure the company is working to. Frequently, this is simply code for 'broker expectations'. My objection is that unless you are a client of those brokers, you do not know what the company is expecting to deliver. Trading statements that reference these expectations have to be distributed to everyone on an equal basis, so why not the expectations themselves?

Since the summer, the investment community has started to believe in successful smallcap companies again. Long may that continue, in 2011 and beyond.

Gavin Oldham, Chief Executive Officer, Share plc

For the past two years small and medium sized businesses have done well, with the FTSE AIM All-Share index putting on a further 42% in 2010 compared to the FTSE 100’s rather pedestrian 9%. However the market continues to suffer attrition as companies move elsewhere.

The climate at present is particularly favourable to SMEs, as the Government knows that they are the key to private sector recovery: particularly so far as employment is concerned. Multi-national companies tend to site their operations overseas, particularly in the Far East: small companies build their businesses at home. So conditions over the next few years should be really good for small, growing companies.

But how well is AIM equipped to serve them? Capital raising is expensive and, with most corporate brokers only understanding placings as their preferred method of issue, most companies end up in the secondary market with an insufficient spread of shareholders to provide liquidity. The Government could also help by ending stamp duty for SMEs and allowing AIM shares to be included in ISAs.

In summary: the market and the Government need to get up to speed to help smaller British companies build the private sector recovery.

Marcus Stuttard, Head of AIM, London Stock Exchange

Fifteen years on from its launch, AIM is the most successful junior market in the world, home to over 1150 companies, operating in over 90 countries, contributing £21 billion to UK GDP and supporting 570,000 jobs. Even in the challenging market conditions of recent years, AIM has demonstrated its vital role in the SME funding ladder, having raised over £5.5 billion in 2010.

As the New Year dawns, we are continuing our very active dialogue with policy makers and are seeing promising signs of a renewed focus on the importance of SMEs to innovation and growth. Dynamic public markets like AIM, where companies can access equity finance on an ongoing basis, will continue to support and drive entrepreneurial activity.

I strongly believe that AIM has the credentials and momentum to maintain its role as the world’s leading growth market and look forward to continue welcoming ambitious, innovative companies to AIM over the coming months and years as AIM provides the capital to help power economic recovery.

Paul McManus, Director, Walbrook PR

AIM has recovered well having more than doubled since the lows of March 2009, and whilst we’re still a long way off the highs of 06/07, investors are seeing that small and growing AIM shares are bringing good returns.

For funds to continue to flow into AIM companies the Coalition Government needs to herald a return to the previous tax benefits of the Venture Capital Trust (VCT) scheme – income tax relief of 40% with the trust to be held for three years, rather than the 30% tax relief and the trust having to be held for five years as it is today.

However with my PR hat on I would have to flag up that increasingly the City Editors of our national newspapers are obsessed with big high street names and FTSE 100 companies – rarely do they cover the smaller, AIM listed companies. More coverage needs to be dedicated to AIM and magazines like Investors Chronicle need to drop their arbitrary £10m cut-off when covering smaller companies where plenty of value can still be found in the microcap space.

Philip Quigley, Director, National Head of Transaction Services, Smith & Williamson

I would like to see the development of an efficient, cheap to access market for debt securities of AIM companies. With difficulties in raising or renewing traditional bank finance likely to continue, companies will need to replace bank lines but, to maintain gearing, a layer of junior debt sitting above equity and below bank debt is needed. Currently, there is no effective mechanism to allow external investors to provide this layer. In some circumstances, bespoke instruments are issued, often to closely related parties, but then investors find it difficult to price this debt and liquidity is also an issue.

The solution is a straightforward, simple quoted debt instrument with clear and standard terms and maturity profiles, easily comparable across companies. Existing shareholders would benefit through avoiding the dilutive effect of issuing new ordinary equity to replace bank debt whilst the instrument would offer a different risk profile for new investors. An all round win.

Roger Hardman, Head of Research, Hardman & Co

Many low quality companies have been forced off AIM in the last two years. At Hardman & Co. we view this as a good thing. There are still lots of walking wounded, and we would be happy to see the AIM team intensify its weeding out process. 'Three strikes and you are out' (three years without a profit maybe) would be one possible way. Another would be the system run by some North American markets, if your share price is below a certain level for three months consecutively, you lose your listing.

AIM was originally launched as a low cost market where NOMADs policed the companies and the London Stock Exchange would police the NOMADs. Companies are now regulated quite heavily, maybe that was inevitable. But 'three strikes and you are out' (three successive losers perhaps) could apply to NOMADs as well.

We wonder whether AIM may be losing ground internationally. Some companies that should be floating in London are choosing Hong Kong instead, and others - Asian Citrus is an example - have decided to dual list. The centre of gravity of the financial world appears to be shifting, and that is bad for the British economy.

Simon Like, Fund Manager, MD Barnard & Co

I have heard many commentaries regarding AIM over the past 24 months.

I do not view AIM negatively although some private clients are sceptical of it due to the low liquidity of some smaller companies. This cause is not helped by the flight to large cap funds by many of the Institutional Houses and the vast reduction of small cap funds and small cap managers. Even VCTs have had restrictions imposed on them at a time when the small businesses need them most due to continued constraints within Bank Finance.

I would like the Directors of the Companies quoted to align their interests in the Company with those of their shareholders. At times I feel that the Directors are too willing to raise money via equity at a dilutive price that is detrimental to those who initially supported the Company.

Finally, I would also like to see it being more restrictive for Companies to just delist their shares.

Tony Rawlinson, Partner, Cairn Financial Advisers

A year ago things looked fairly bleak but there have been positive stirrings in 2010. Following the big shake-out on AIM, investors woke up to the fact that there were some good value opportunities and concentrated their fire power on the best of these. Private equity funds also spotted undervalued, high quality AIM companies and these have been steadily acquired on attractive terms. As share prices have risen (AIM is up 42% in the past 12 months) these opportunities have receded and investors are now looking again at some of the new candidates seeking a quotation.

What do we need to complete the prospect in 2011? The key is for private investors to feel secure enough to invest in smaller companies again. AIM has provided an excellent platform for smaller companies to show off their wares but there are still too many instances of smaller shareholders being disadvantaged and these need to be addressed. Corporate governance is vital and all participants need to play a role.

Other improvements needed are some common sense carve-outs and exemptions from some of the legal and accounting rules designed for much larger companies - for instance to allow low cost rights issues once again.

Written by David O'Hara

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