The Board is accountable to the Company’s shareholders for good corporate governance. The Company is committed to high standards of corporate governance throughout the Group. Although the Company now has its listing on the Alternative Investment Market, it continues to comply, voluntarily, with the Combined Code on Corporate Governance (the “Combined Code”). It also makes reference to the QCA guidelines for AIM companies.  

This reports states how the Company has complied with the provisions set out in Section 1 of the Combined Code and details any exceptions to this.  

The Board

The Board directors are 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, amongst other things, approval of 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, 17 Board meetings were held which included four face-to-face meetings (the others being by telephone conference). All directors attended all meetings save for Will Whitehorn who was unable to attend two meetings, and David Dewhurst and Ian Taylor who were unable to attend one meeting each.

The Audit and Remuneration Committees 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 five Remuneration Committee meetings and two Audit Committee meetings during the year which were attended by all members of the Committee.

Prior to each monthly Board meeting every member of the Board receives an agenda, supporting documents and 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, amongst other things, the performance of the Company and of the executive directors. 

Chairman and Chief Executive

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.

Board balance and independence

There was one change to the Board during the year to 31 July 2007. Brendan Magee retired from the Board on 23 January 2007. The Board now comprises two executive directors: Tim Dyson, Chief Executive Officer, 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 here. The Board acknowledges that the current Board structure does not comply with the Combined Code requirement of having at least two independent non-executive directors. Under the Combined Code the Chairman can not be counted as an independent non-executive director. However, due to the size of the Group, 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 judgment. As Will Whitehorn is the Chairman and Ian Taylor is the senior independent director, the Company does not appoint a Deputy Chairman.   

Appointments to the Board

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.

Information and professional development

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

Board performance evaluation

Due to the small size of the Board, it did not carry out a formal performance evaluation during the year. The Board does acknowledge the importance of a suitable evaluation process and is committed to ensuring this is put in place during the next financial year.

Re-election of directors

In accordance with the Company’s Articles of Association, all directors are subject to re-election every three years. This year Ian Taylor will retire and will be subject to re-election.

Remuneration

The Remuneration Report sets out details of the directors’ remuneration and the work of the Remuneration Committee.

Financial reporting

The Statement of the Directors’ Responsibilities in respect of the Financial Statements. The directors have reviewed the Group’s budget and cash requirements for the year ending 31 July 2008 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.

Internal control and principal risks

The Combined Code requires that the Board review the effectiveness of the Group’s internal controls to cover all controls including financial, operational, compliance and risk management.

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 policy accordingly. At least twice a year each of the core businesses are tasked with identifying and documenting their own key risks document. This 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 Group significant risks document 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 an ongoing 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 – key employees leaving or being absent from the business. As a public relations business, key employees are vital to its success. The ability to recruit new talent and retain existing employees remains an important issue to the Group.
  
• 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. Some of the Group’s businesses still however have a major reliance on a few large 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 of 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.

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 finance staff. This decision will continue to be reviewed annually.

Audit Committee and auditors

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 is considered by the Committee on a regular basis. The split between audit and non-audit work for the year is set out in note 6 to the financial statements. The non-audit fees were in respect of non-audit tax services. 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.

Relations with shareholders

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. The Company also publishes its annual and interim reports on its website and provides an audio webcast of its results presentations. The Company’s regulatory news announcements and analyst reports are also available on the website.  

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. Whilst other non-executive directors do not ordinarily attend meetings with major shareholders, they would do so if requested by the shareholders.