A limited number of unlisted securities have traded since 1980 on the Unlisted Securities Market (USM). The USM closed at the end of 1996, to be replaced by the Alternative Investment Market (AIM).

AIM was set up in June 1995 as a market for small, young and growing companies operated by the London Stock Exchange as a regulated market of a Recognised Investment Exchange. The market offers an opportunity for companies to raise capital for expansion, a trading facility and a way of establishing a market value for their shares.

There are fast approaching 1500 companies currently listed on AIM. The market cap of the index varies quite widely. AIM companies tend to trade on wider spreads than companies on the main market, and liquidity can be a problem.

One of the advantages of investing in AIM companies is that for tax purposes they are treated as 'unquoted investments' (even though they are quoted). The significance of this is that for every year that you hold AIM shares, you get 5% 'taper relief' on any gains you subsequently make. So if you are a higher rate taxpayer who would normally pay 40% CGT, and you hold shares for one year then sell them, you only pay 35% CGT. If you hold shares for four years or more, the tax rate falls to 10%. Note that this only applies to shares bought after 6th April 2000.

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