CORPORATE GOVERNANCE

The board of Imagesound plc is committed to business integrity and high standards of corporate governance. Our policy is to comply with the recommendations of the Combined Code so far as is practicable and appropriate for a public company of our size, nature and stage of development.

The board provides leadership, sets the group’s values and standards, agrees strategic aims, is responsible for internal controls, decides on budgets to enable it to meet its objectives, approves all acquisitions and major capital expenditure and reviews management performance.

Each month the board reviews a full set of management accounts and reports from the executive chairman, managing director and finance director including performance against budget across all aspects of the group’s operations, margin analysis, forecast out turns, balance sheet, cash flow projections, market analysis, and trading pipelines. Key performance indicators have been identified for consistent measurement against our targets. Reports are circulated in a timely manner in preparation for meetings. The board has regular strategic reviews.

The group has established an audit committee and remuneration committee with formally delegated duties and responsibilities set out in their respective terms of reference. All members of both committees are the non-executive directors.

The audit committee receives and reviews reports from management and the auditors relating to the annual and interim accounts and the accounting and internal control systems in use throughout the group. The audit committee has unrestricted access to the auditors. All members of the audit committee have recent and relevant financial experience. The audit committee conducted a full review of the group’s internal controls, risk assessment, and management’s ongoing monitoring of risks and control systems and this will continue during 2008.

The audit committee monitors the independence and objectivity of our external auditors, KPMG Audit Plc. The remuneration committee, now chaired by Richard Gregory (previously chaired by Derek Mapp), comprising the non-executive directors, reviews the scale and structure of the executive directors’ remuneration, the terms of their service contracts, and share incentive schemes, and approves the senior management salary structure.

The remuneration and terms and conditions of the appointment of the non-executive directors are set by the board. Non-executive directors are appointed for an initial period of three years. No director may participate in any meeting at which discussions or decisions regarding his own remuneration take place.

Due to the size of the company there is no separate committee to consider nominations for any new appointments to the board.

The non-executive directors meet together, on their own, at regular intervals.

Effectiveness of our staff is monitored by a full personal performance appraisal scheme, with individual and team objectives. Full staff meetings are held twice a year.

The executive chairman, managing director and financial director have maintained regular contact with major institutional shareholders and significant individual shareholders. The board recognises the importance of good communication with shareholders.

Audit Committee

Stephen Yapp (Chairman), Richard Gregory and Ken Pratt

Remuneration Committee

Richard Gregory (Chairman), Stephen Yapp and David-Clayton Smith

Last updated: 11/08/2008