Report of the directors

The directors have pleasure in submitting their report together with the audited financial statements for the year ended 31 December 2007.

The consolidated income statement is set out in the Financial Statements' section and shows a profit for the financial year of £94.4 million (2006: £80.1 million). An interim dividend of 0.84p per ordinary share was paid on 29 September 2007 to ordinary shareholders. The directors recommend a final dividend for the year of 1.46p per ordinary share which, if approved at the Annual General Meeting, will be payable on 29 May 2008 to ordinary shareholders registered at 2 May 2008. The total dividend for the year will then amount to 2.30p per ordinary share (2006: 1.90p).

The principal activity of the Company is that of a holding company based in London. Its subsidiaries and related companies provide a broad range of services in the areas of media communications and market research.

The subsidiary and associated undertakings principally affecting the profits or net assets of the Group in the year are listed in note 16 to the parent company financial statements.

A review of the business and likely future developments of the Group is given in the Letter to Shareholders and in the Business and Financial Reviews. These sections form part of, and are incorporated by reference within, this Directors’ Report.

Information about the use of financial instruments by the Company and its subsidiaries is given in note 20 to the financial statements.

Details of significant post-balance sheet events are contained in note 34 to the financial statements.

The Group’s policy with respect to charitable donations and the amounts donated are detailed on our Social Impacts page.

The Company does not impose a formal code of payment practice on its subsidiaries. However, the Group’s policy is to try to create relationships with its suppliers such that they trust us and want to do business with us. In selecting external suppliers we use competitive processes that are fair and transparent, and designed to maximise value and quality of service for our clients and ourselves.

At 31 December 2007, the Group had 74 days purchases outstanding (2006: 67 days). The creditor day analysis is not applicable to the holding company.

The names of the directors at the date of this report and biographical details are given on the Board of directors page.

On 31 March 2007 Jeremy Hicks retired as chief financial officer and Alicja Lesniak was appointed as his successor.

The interests of the directors in the shares of the Company are shown in the Remuneration Report.

Details of the directors who will be retiring by rotation at the forthcoming Annual General Meeting, in accordance with the Articles of Association, are set out in the separate circular containing the Notice of AGM that accompanies this Annual Report and Accounts. That section of the circular forms part of, and is incorporated by reference within, this Directors’ Report.

Details of all the directors’ service agreements, including notice periods, are given in the Remuneration Report.

A qualifying third party indemnity (‘QTPI’), as permitted by the Company’s Articles of Association and sections 232 and 234 of the Companies Act 2006, has been granted by the Company to each of the directors of the Company. Under the provisions of the QTPIs the Company undertakes to indemnify each director against liability to third parties (excluding criminal and regulatory penalties) and to pay directors’ costs as incurred, provided that they are reimbursed to the Company if the director is convicted or, in an action that is brought by the Company, judgement is given against the director.

At 18 March 2008 the Company had been notified of the following interests of 3% or more in its ordinary shares, in accordance with chapter 5 of the Disclosure and Transparency Rules:

Details of the authorised and issued share capital, together with details of the movements in the Company’s issued share capital during the year are shown in note 23 to the financial statements.

The Company has one class of share capital which is divided into ordinary shares of 5p each and which carry no right to fixed income. Each share carries the right to one vote at general meetings of the Company.

There are no specific restrictions on the size of a shareholding nor on the transfer of shares, which are both governed by the general provisions of the Articles of Association and prevailing legislation. The directors are not aware of any agreements between holders of the Company’s shares that may result in restrictions on the transfer of securities or on voting rights.

The trustees of the Aegis Group Employee Share Trust (AEST) have agreed to waive any right to all or any future dividend payments on shares held within the AEST except in certain limited circumstances, none of which are currently applicable. Details of the shares held are set out in note 24. The trustees of the AEST may vote or abstain from voting on shares held in the AEST in any way they think fit and in doing so may take into account both financial and non-financial interests of the beneficiaries of the AEST.

No person has any special rights of control over the Company’s share capital and all issued shares are fully paid.

The directors are authorised to allot unissued shares in the Company up to a maximum nominal amount of £17,778,495. No such shares have been issued or allotted under this authority, nor is there any current intention to do so, save for shares to be issued to satisfy existing obligations. This authority is valid until the date of the forthcoming Annual General Meeting at which time a resolution will be proposed to renew the authority as detailed in the enclosed circular.

The Company has no current authority to allot shares without regard to the pre-emption provisions of the Companies Acts or to purchase its own shares. However, special resolutions will be put to shareholders at the forthcoming Annual General Meeting seeking such authorities details of which are set out in the enclosed circular.

Any amendments to the Articles of the Company may be made in accordance with the provisions of the Companies Act by way of special resolution. A resolution to amend the Articles will be put to the Annual General Meeting to be held on 23 May 2008. The proposed changes to the Articles derive from the Companies Act 2006. The Companies Act 2006 was enacted on 8 November 2006 and is being implemented in stages. Details of the specific changes being proposed are set out in full in the explanatory notes to the separate notice convening the Annual General Meeting.

With regard to the appointment of directors, the Company is governed by its Articles of Association, the Combined Code, the Companies Acts and related legislation.

The Company shall have no fewer than two and no more than 16 directors. Directors may be appointed by the Company by ordinary resolution or by a resolution of the Board. A director appointed by the Board may only hold office until the following Annual General Meeting but is then eligible for election. He/she is not taken into account in determining the directors or the number of directors who are to retire by rotation at that meeting.

At every Annual General Meeting at least one third of the directors must retire by rotation. Where the number of directors is not divisible by three, the minimum number of directors to retire will be the number which is nearest to and less than one third. If there are fewer than three directors, they will all retire. The directors who will retire by rotation will be those who were in office at the time of the two previous Annual General Meetings and did not retire at either of them. If the number so retiring is less than the number required to retire, additional directors must retire. The further directors to retire will be those who have been directors the longest since they were last elected to the Board. If there are directors who were last elected on the same date, they can agree on who is to retire. If they cannot agree, they must draw lots to decide. At the Annual General Meeting at which a director retires, shareholders can pass an ordinary resolution to re-elect the director or to elect some other suitable person in his place.

The only people who can be elected as directors at an Annual General Meeting are: (i) directors retiring at the meeting; (ii) anyone recommended by the directors; and (iii) anyone nominated by a shareholder. The nominating shareholder must be entitled to vote at the meeting. He must deliver to the Company a letter stating that he intends to nominate another person for election and the written consent of that person to be elected. These documents must be delivered to the Company not less than seven and not more than 42 days before the day of the meeting.

The Company may by special resolution remove any director before the expiration of his term of office. A director automatically stops being a director if: (i) he resigns; (ii) he offers to resign and the Company accept his offer; (iii) all of the other directors (at least three of them) resolve to or a sign a written notice requiring his resignation; (iv) he is or has been suffering from mental ill health; (v) he is absent without permission of the Board for a continuous period of six months and the directors pass a resolution removing him from office; (vi) he becomes bankrupt or compounds with his creditors generally; (vii) he is prohibited by law from being a director; or (viii) he ceases to be a director under legislation or is removed pursuant to the Articles.

The following significant agreements contain provisions entitling the counterparties to those agreements to exercise termination or other rights in the event of a change of control of the Company:

• 450,000,000 multicurrency credit facility agreement dated 9 June 2006 (as amended) between, amongst others, the Company, The Royal Bank of Scotland plc (as agent) and the financial institutions named therein as banks (the ‘Facility’). On a change of control of the Company, unless the Majority Banks (as defined therein) otherwise agree, all loans, letters of credit and guarantees, together with all accrued interest and other sums payable under the agreement, shall be prepaid and, upon such prepayment being made, the total commitments of the banks under the Facility shall be cancelled and reduced to zero.
• Note purchase agreements dated 20 November 2000, 28 July 2005 and 17 September 2007 (as amended, the ‘Note Purchase Agreements’) pursuant to which notes amounting in aggregate to US$160,000,000 (the ‘2000 Notes’), US$342,000,000 (the ‘2005 Notes’) and US$125,000,000 (the ‘2007 Notes’, together with the 2000 Notes and the 2005 Notes, the ‘Notes’) respectively were issued by the Company. Each holder of Notes has an option on a change of control of the Company to require the Company to prepay the entire principal amount of the Notes held by that holder together with interest accrued thereon and the Make- Whole Amount (as defined in each of the Note Purchase Agreements). At the date of this Directors’ Report, an aggregate principal amount of US$147,000,000 of the 2000 Notes have matured.

The Group operates throughout the world and therefore has developed employment policies that meet local conditions and requirements. These policies are based on the best traditions and practices in any given country in which it operates and are discussed on our Social Impacts page.

Details of the special business and the resolutions to be proposed at the forthcoming AGM are given in the enclosed circular, along with the Notice of Meeting.

Deloitte & Touche LLP have expressed their willingness to continue in office as auditors and resolutions to re-appoint Deloitte & Touche LLP as auditors to the Company and to authorise the directors to fix their remuneration will be proposed at the forthcoming Annual General Meeting.

Each of the directors at the date of approval of this report confirms that:

• so far as the director is aware, there is no relevant audit information of which the Company’s auditors are unaware; and
• the director has taken all the steps that he/she ought to have taken as a director in order to make himself/herself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of section 234ZA of the Companies Act 1985.

The directors are responsible for preparing the Annual Report and the financial statements. The directors are required to prepare financial statements for the Group in accordance with International Financial Reporting Standards as adopted by the EU (IFRSs) and have elected to prepare financial statements for the Company in accordance with United Kingdom Generally Accepted Accounting Principles (UK GAAP).

In the case of the Group’s financial statements, company law requires the directors to prepare such financial statements in accordance with IFRS, the Companies Act 1985 and Article 4 of the IAS Regulation. International Accounting Standard 1 requires that financial statements present fairly for each financial year the Group’s financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board’s ‘Framework for the Preparation and Presentation of Financial Statements’. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRSs.

• properly select and apply accounting policies;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; and
• provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance.

In the case of the Company’s UK GAAP accounts, company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the profit and loss of the Company for that period.

In preparing these financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent; and
• state whether applicable UK Accounting Standards have been followed.

The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and of the Company, for safeguarding the assets, for taking reasonable steps for the prevention and detection of fraud and other irregularities and for the preparation of a directors’ report and directors’ remuneration report which comply with the requirements of the Companies Act 1985.

The directors are responsible for the maintenance and integrity of the Company website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements differs from legislation in other jurisdictions.

By order of the Board

John Ross
Company secretary
18 March 2008