Director’s statement on corporate governance

The Board of Directors is responsible for the strategic direction, investment decisions and effective control of the Group. As Tim Dyson, the Chief Executive, is located in San Francisco, the Board meets mainly by telephone conference (at least monthly and at other times when required). They meet face-to-face when possible and aim to do so at least quarterly. There is a schedule of matters reserved for Board approval which is regularly reviewed and includes, among other things, the Group’s annual budget, establishment of new subsidiaries, property leases, significant acquisitions or disposals of fixed assets, and significant client contracts. During the year, 19 Board meetings were held, which included three face-to-face meetings (the others being by telephone conference). All Directors attended all meetings, save for Ian Taylor, who was unable to attend two meetings, and David Dewhurst, who was unable to attend one meeting.

The Audit Committee and Remuneration Committee comprise the two non-executive Directors, Ian Taylor (Committee Chairman) and Will Whitehorn. The Nomination Committee comprises Will Whitehorn (Committee Chairman), Ian Taylor and Tim Dyson. There were two Remuneration Committee meetings and two Audit Committee meetings during the year, and these were attended by all members.

Prior to each monthly Board meeting, every member of the Board receives an agenda, supporting documents and when relevant, monthly trading results, together with a detailed commentary. The non-executive Directors are encouraged to ask for further information if necessary.

The non-executive Directors held meetings during the year without the executives present to discuss, among other things, the performance of the Company and that of the executive Directors.

The roles of the Chairman and Chief Executive are separate and clearly defined. The Chairman, Will Whitehorn, is responsible for the leadership of the Board and the Chief Executive, Tim Dyson, is responsible for managing the Group’s operations.

There were no changes to the Board during the year to 31 July 2009. The Board comprises two executive Directors: Tim Dyson, Chief Executive, and David Dewhurst, Finance Director. There are two non-executive Directors: Will Whitehorn, Chairman, and Ian Taylor, who is also the Company’s senior independent Director. Biographies of all the Directors are set out in Board of Directors. The Board considers that the current Board structure is appropriate, and it complies with the QCA guidelines for AIM companies which permits an independent Chairman to be counted as one of the two independent non-executive Directors. The Board views both Ian Taylor and Will Whitehorn as independent by the criteria set out in the Combined Code, and free from any relationship or circumstance which could affect their independent judgement.

Appointments to the Board are the responsibility of the Board upon recommendation of the Nomination Committee. There was no requirement for a Nomination Committee meeting during the year.

The Directors have adopted a number of policies and procedures to help them operate effectively. These include access to independent professional advice. Appropriate training for new and existing Directors is provided where necessary.

In accordance with the Company’s Articles of Association one-third of the Directors must retire by rotation each year. This year Will Whitehorn and Ian Taylor will retire and will be subject to re-election.

The Remuneration report sets out details of the Directors’ remuneration and the work of the Remuneration Committee.

The Statement of the Directors’ Responsibilities in respect of the Financial statements is set out in this report. The Directors have reviewed the Group’s budget and cash requirements for the year ending 31 July 2010 and considered outline plans for the Group thereafter. The Directors are satisfied that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going-concern basis in preparing the financial statements.

The Directors have responsibility for the system of internal control for the Group and for reviewing its effectiveness. It is the responsibility of management to implement Board policies on risk and control. The Group’s system of internal control is designed to manage and reduce, rather than eliminate, risk.

The Board assesses key areas of internal control and risk management and sets policies accordingly. At least once a year each of the core businesses is given the task of identifying and setting out its own key risks. The resulting document must contain a review of the extent and likelihood of each risk and the effectiveness of the controls that manage these risks. The Board also requires the businesses to identify and report any significant risks that arise during the year as soon as they arise. The Audit Committee reviews the businesses’ risk documents and produces a significant-risks document for the Group which is considered and approved by the Board. It identifies ways to manage and control these risks and sets policies accordingly.

The Board can therefore confirm that there is a process for identifying, evaluating and managing the significant risks facing the Group. It has been in place throughout the year, and is up-to-date (as at the date of approval of these financial statements). It is regularly reviewed and accords with the Turnbull guidance.

The Board considers the principal risks and uncertainties facing the Group to be:

• Employee risk - ensuring that the right people are in the right roles and key employees are retained. As a public relations business, the Company is heavily reliant on key employees who are vital to its success. The ability to recruit new talent and retain existing employees remains an important issue for the Group. The Group’s HR teams regularly consider talent-management issues and the remuneration and motivation of staff.
• Client risk - the loss of a major client. The Group is continuing to reduce the percentage of total revenue that comes from a few major clients; however, the loss of clients is still a risk to the Group. In the technology sector, merger and acquisition activity has led to increased consolidation of companies, which can also lead to the loss of clients. All businesses continue to actively seek new clients to keep the reliance on major clients to a minimum.
• Currency risk - although the Company is listed in the UK, it makes much of its profit outside the UK. This exposes it to the risk of fluctuations in foreign exchange rates. The Group has established treasury policies and procedures to mitigate this risk as much as possible. A sub-committee of the Board has been established to consider if and when hedging products should be put in place.
• Regional risk - as a global company, the Group needs different approaches in different regions as the economy changes. The Group needs to ensure it has appropriate strategies and policies to respond to regional changes.

The Board has considered the need for a separate internal audit function but has decided that, because of the size of the Group, this function will continue to be carried out by existing finance staff. This decision will be reviewed annually.

The Audit Committee meets periodically and at least twice per year with the external auditors, and with other Directors and management attending by invitation. The primary role of the Committee is to keep under review the Group’s financial reporting procedures and financial systems and controls and to ensure the integrity of the financial information reported to shareholders. Its key terms of reference are:

• reviewing the findings of the audit work undertaken by the Group’s auditors;
• reviewing the effectiveness of the financial reporting and internal control procedures;
• reviewing the relationship with external auditors; and
• determining the level of the auditors’ fees.

Its terms of reference are available on the Company’s website www.nextfifteen.com. The independence and objectivity of the auditors are considered by the Committee on a regular basis. The split between audit and non-audit work for the year is set out in note 4 to the financial statements. The non-audit fees were in respect of non-audit tax services, advice on the Company’s share option and long-term incentive schemes and corporate finance advisory work. This work is not considered to affect the independence or objectivity of the auditors. The Committee also receives an annual confirmation of independence from the auditors.

The Company meets regularly with its institutional shareholders and is keen to encourage shareholder participation at the Annual General Meeting, at which the Chief Executive makes a presentation summarising the progress of the Group throughout the year and invites any questions from attendees. Proxy votes are disclosed following a show of hands on each resolution. Prior to last year’s Annual General Meeting all shareholders were given the opportunity to submit questions to the Board even if they were unable to attend. These questions were answered by the Board and a video of this question-and-answer session was uploaded to the Company’s website. The Company also publishes its annual and interim reports on its website, as well as the Company’s regulatory news announcements and some analyst reports. The Company has also started adding video clips to its website when it announces its interim and full-year results to explain the results further. These measures enable information on the Company to reach a greater number of investors and interested stakeholders.

The Chairman, Chief Executive and Finance Director regularly attend one-to-one meetings with key institutional shareholders after the publication of the Company’s interim and preliminary results. While the other non-executive Director does not ordinarily attend meetings with major shareholders, he would do so if requested by the shareholders.