Exhibit
    14.1

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|4 |           | HIGHLIGHTS | 
|- | --------- | ---------- | 
|  |           |            | 
|  | ICI Group

| |  |  |  | 
| |  |  |  | 

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | ICI is
          one of the worlds
          major specialty chemicals and paints businesses with products and ingredients
    developed for a wide range of consumer and industrial markets.                                                                                                                                                                                                                                                               |  | The businesses are supported
        by group functions that provide expertise in specific disciplines, namely,
        information technology, procurement, human resources, manufacturing,
        finance, sustainability, safety, health and the environment (SSHE), and
        applied technology, where real value can be created for ICIs
        customers through the application of advanced technology across the
Group.
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 
| |  | ICIs
        specialty products and paints businesses comprise National Starch, Quest,
        Uniqema and ICI Paints. These businesses serve diverse consumer and industrial
        markets through some 70 strategic business units, comprising around 180
        operating units with an array of market leadership positions across the
        world. In addition, a number of Regional and Industrial businesses remain
        in
ICIs
portfolio. | 
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                      

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|6 |  | GROUP STRATEGY
|- |  | --------------
|  |  |               





| |  |  | History |  |  |  | Balance
      of activities | 
| |  |  | ------- |  |  |  | --------------------------- | 
| |  |  |         |  |  | 

|
|

|                                          |  | Background
        and recent historyOver the past eight years ICI
        has established a portfolio of specialty chemicals and coatings businesses
        through a number of acquisitions and disposals. Since 1997 the Group has
        bought and sold businesses worth in excess of £12bn and has repositioned
        itself towards higher added-value sectors of the chemicals industry.
      The transformation of ICIs
        core operations is now essentially complete. However, the Group will continue
        to seek opportunities to grow its business both organically and through
        small, strategic bolt-on acquisitions, thereby strengthening its portfolio. |  | Spread
        and balance of ICIs
        activitiesICI is headquartered in the
        UK, where it also has a number of major manufacturing activities. Outside
        the UK, operations are conducted by locally managed subsidiary companies
        staffed almost entirely by nationals of the country concerned. Eighty-six
        per cent of the employees of ICIs
        businesses are located outside the UK.
      The Group has operations in over 50 countries
        around the world and its customers are spread across a diverse range of
        product sectors; from foods and beverages to detergents and other domestic
        products; from semi-conductors and mobile phones to paper and packaging.
      No one sector dominates ICIs
      customer base and no one customer represents a material proportion of Group
      turnover.
|----------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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|ICI ANNUAL
      REPORT AND ACCOUNTS 2004 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

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|GROUP STRATEGY |  | 7
|-------------- |  | -
|               |  |  





| | Strategy | 
| | -------- | 

ICI strategic matrixICIs
  vision is to develop leadership in formulation science. Central to this vision
  is building a portfolio of businesses that are leaders within their respective
  industries, bringing together outstanding knowledge of customer needs with leading
  edge technology platforms to provide a distinctive competitive advantage for
  ICIs customers. As part of the 2003 strategic review, the individual business units of ICI were reviewed and evaluated in terms of market attractiveness, competitive position, and financial characteristics. Each business was then
mapped onto a two by two matrix. This strategic matrix now drives generic strategy development across ICI. Strategies for those businesses within thegrow
aggressivelysegment are focused on profitable sales growth, whereas those for businesses within themaintain selectivelysegment emphasise improvement in cost and capital effectiveness. The strategic review identified significant opportunities for creating and capturing additional value from three principal sources:





      Differentiated resource
        allocationInvesting in technology
        and marketing in those businesses where sustainable competitive advantage
        can be created.
      Cost and capital effectivenessAchieving a step-change in cost and capital effectiveness for ICI overall;
        in the near term through the successful delivery of the 2003 restructuring
        programme, and sustainably through changing organisational, cultural,
        and behavioural norms in ICI to consistently improve effectiveness.
      Strategy executionA greater focus on strategy execution; delivered by upgrading operational
        capabilities and enhancing rewards for short-to medium-term performance
        delivery.




|                                        |  |  |                             
|--------------------------------------- |  |  | ----------------------------
|ICI
      strategic matrix             |  |  | Strategic
      plan targets
|                                        |  |  |                             
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|                                        |  |  |                             
|                                        |  |  |                             
| Only
      major business units shown |  |  |                             



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|DESCRIPTION
    OF BUSINESS |  | 9
|--------------------------- |  | -









| | National Starch | 
| | --------------- | 



BackgroundNational
      Starch, which accounted for 33% of the Groups sales in 2004, is a
      global leader in industrial adhesives and specialty food starches. In addition,
      the business has strong positions in electronic materials and specialty
      polymers.
      It provides many specialty ingredients for attractive, relatively non-cyclical
markets. National Starch produces thousands of technically
    advanced products and operates an international network of 154 manufacturing
    and customer service centres, located in 37 countries on six continents.
    The Group believes that National Starchs
    position in these markets has been achieved through its strong polymer technology
    and application understanding, both natural and synthetic, and a high degree
of technical support for its customers. National Starch is headquartered in Bridgewater,
    New Jersey, USA, with regional offices in the UK (Europe) and Singapore (Asia).
    Major manufacturing facilities are located in the USA, Canada, the UK, Germany,
    the Netherlands, Poland, Japan, Thailand, Korea, China and Brazil, with further
manufacturing facilities located in 21 other countries around the world. StrategyNational
      Starchs
      strategy focuses
  on delivering value through three main activities: 
    building on strengths in areas where it
    has good opportunities for profitable growth
    delivering innovative new products to
    its customers, and
    continually improving cost efficiency
    particularly in its more mature businesses Consistent with the ICI strategic matrix,
    National Starch allocates resources preferentially to those businesses within
    thegrow
    aggressivelysegment.
These include the Electronic Materials business, and the Starch and Adhesives


businesses in Asia. The disposal of the Vinamul
    emulsion polymers businessamaintain
    selectivelybusinesswas
announced in 2004. Brief description of activitiesNational Starch is one of the largest producers ofspecialty adhesivesin the world, including those based on both natural and
synthetic polymers, water-borne, hot melts and 100% solids products. The adhesives divisions products are used to seal cases and cartons and to fix labels to bottles and cans. Paper applications include
laminating, bag making, tissue, paper tube winding and box manufacturing. Adhesives are also used in bookbinding, envelopes, magazines, and remoistenable stamps. Adhesives are also critical components in the performance of disposable
nappies/diapers, personal sanitary products and disposable hospital supplies. Pressure sensitive adhesives are used to manufacture self-adhesive tapes, labels, decals, and transdermal drug delivery patches. National Starchs adhesives and primers are used in the assembly of sports shoes and for assembly operations in the woodworking,
construction, recreational vehicle and transportation industries. For the corrugating industry, specialty carrier starches provide bond strength for adhering board to corrugating medium and contribute to increased production and reduced waste. They improve the overall quality and
water resistance of shipping cases. Specialty synthetic polymer products add increased water resistance for more demanding applications. National Starch also manufactures a wide range ofspecialty starches,focused principally on food and industrial applications.
In food applications they enhance texture and appearance and provide effects which enable end-consumer products to withstand the rigours




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|10 |  | DESCRIPTION OF BUSINESS
|-- |  | -----------------------



| |  | 
| |  | 



of ultra-high temperature processing, microwave cooking, freeze/thaw cycles and extended storage. Principal industrial applications include the pulp and paper industry where starches provide strength and contribute to
productivity enhancements. Specialty surface size starches increase runnability in the size press and printability on the end users printing press, while replacing
more costly additives. In the specialty food ingredients area Nationals products are used for fruit preparations, canned foods, binders for meat and fish
products and pet foods and a range of coating agents to control texture, crispiness and appearance in battered foods. Products are also used to improve the quality and stability of a range of dairy foods. National Starchs stabilisers and thickeners are used to control the viscosity, stability, mouth-feel and texture of a wide variety of sauces and salad dressings. In the bakery market, the
divisions ingredients are used to control moisture retention, texture and structure of baked doughs and their fillings. Encapsulation products encapsulate flavours and
fragrances and stabilise flavour emulsions. National Starch has multiple capabilities in specialty synthetic polymers, resins and redispersible powders for markets as
diverse as personal care, construction, water treatment, detergents, paper coatings and apparel. Specialty polymers improve the holding power in hair sprays and gels and the manageability and softness of mousses, conditioners, shampoos and other styling aids. They are also used to thicken and emulsify cosmetic and
beauty products and increase the functionality of sunscreens, hand and body creams and lotions. Products also include dispersants, anti-scalants and detergent builders, as well as thickeners for the carpet, adhesive and detergent industries. The divisions Elotex operation also manufactures redispersible powder polymers, which improve


the adhesion, flexural strength, insulation properties and shrink-resistance of cements, grouts, adhesives and other construction products. Theelectronic and engineering materialsdivision manufactures, markets and sells adhesives, encapsulants, specialty coatings
and process lubricants used in the manufacture of electronic, automotive, medical, aerospace and other equipment and components. Within the division, Ablestik supplies adhesives and encapsulants used for semiconductor packaging and microelectronic assembly. Products include adhesive pastes, printable paste and films, and underfill encapsulants.
Acheson electronic materials supplies thick film materials and specialty coatings used in keyboards and switches, printed circuits, and other electronic components. Emerson & Cuming supplies adhesives, encapsulants, and coatings used in circuit
assembly and in fabrication of electronic, electrical, and electromechanical components. Tra-Con provides adhesives and coatings in single-use and other specialty packages serving a broad range of industrial customers. Acheson DAG supplies process
lubricants and application systems used in metalworking and casting. Markets and distributionSpecialty products manufactured by National Starch are sold mainly by direct sales forces, alliances and distributors. Customers are primarily other manufacturers, in a range of markets from consumer-oriented
manufacturers of branded goods in the food and personal care sectors to those involved in papermaking and packaging industries.




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|DESCRIPTION
      OF BUSINESS |  | 11
|----------------------------- |  | --



|
|



Raw materialsThe primary raw materials used by National
        Starch are petrochemical based raw materials, corn and tapioca. National
        Starchs main chemical raw material is vinyl acetate monomer. Developments in 2004National Starch made good progress in
  2004 developing its businesses through selected capital and revenue investments.
  The food starch business expanded its manufacturing capability in Asia with
  a new world-class production facility in Shanghai, China. It also opened a Process
  Innovation Centre in Bridgewater, New Jersey, to facilitate the development
  of a range of specialized carbohydrate-based ingredients for natural, clean-label
  foods and nutrition products. In mid 2004, the food starch division increased
  the production capacity for Hi-maize resistant starch by a third.
  Hi-maize, the only natural, granular resistant starch available
  in the United States, has been formulated into many low-carbohydrate foods because
  of its ease of use, its natural identity and its strong clinical support. The food starch business also expanded its
  crop identity-preservation programme and implemented Truetrace to
  verify the non-genetically modified organism (non-GMO) status of food ingredients
  made from corn grown in the United States. Truetrace provides customers
  with traceability for Nationals food ingredients at all stages of their
  development, from seed to crop, to production and distribution.


Revenue investments included the development
  and launch of a number of important new products. In 2004, the adhesives division
  introduced its Cool-Lok hot melt adhesives in pastille form, which
  is expected to improve product performance in customers manufacturing
  facilities. Other new products included the Aerobond 12-200A adhesive,
  developed to provide board laminators with a formulation that will maximize
  line speed and adhesion. New food starch products introduced in 2004
  included Novation Prima, an exceptionally stable functional native
  starch that delivers superior freeze-thaw and shelf-life stability. The clean-label
  Prima products enable food manufacturers to make simple starch declarations
  on their labels in the U.S. and ingredient rather than additive
  classifications in the European Union. National also introduced Elleggance,
  an egg replacement system designed to replace whole eggs, egg yolks and egg
  whites in a wide range of baked goods. Elleggance exhibits superior
  textural and organoleptic properties, typical of high-quality baked goods containing
  eggs, is easy to use, lowers production costs, eliminates egg-related processing
  safety issues and lowers cholesterol content. In the US, the division introduced Novomega
  encapsulated Omega-3, an encapsulated long-chain Omega-3 fatty acid in powder
  form, extending the range of food applications for the heart-healthy
  ingredient. Novomega is the result of joint agreement between National
  Starch and Omega Protein. The product can be easily added to baked goods without
  affecting their taste, texture or aroma. New products introduced by the specialty synthetic
  polymers division, included Nsight natural clarification polymers,
  a new generation of naturally sourced starch chemistries designed for the water
  and wastewater treatment market.




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|12 |  | DESCRIPTION
      OF BUSINESS
|-- |  | -----------------------------



| |  | Quest
| |  | -----



Within electronic materials, Ablestik introduced
  Ableflex 6200 series printable paste adhesives to meet customer
  requirements for increased performance and lower package costs in board-on-chip
  assemblies, which are expected in the next two years to become the mainstream
  for high speed DRAM devices used in computer memory. Ableflex 6200
  adhesives offer customers higher reliability and reduce overall packaging costs
  by 20% compared with tape adhesives currently used. Emerson & Cuming introduced
  the new E 1218 series of CSP underfill encapsulants, targeted at high volume
  manufacturers in the handheld and computer electronics industries. E 1218 series
  underfills not only improve the quality and life of laptop computers and giga-byte
  sized digital audio players, but also help customers increase their yield and
  throughput, reduce cost, and enable rework of failed components. Emerson &
  Cuming also introduced a new termination coating, Eccocate C 910-3,
  for use in multi-layered ceramic capacitors.


BackgroundQuest is one of the world leaders in the
  creation, application and production of flavours and fragrances for a wide variety
  of consumer brands. In 2004 Quest accounted for 10% of the Groups sales.
  The business is headquartered in Naarden, the Netherlands, and is organised
  around two operating divisions, Flavours and Fragrances. Each division accounts
  for around half of Quests ongoing turnover (excluding sales of the divested
  food ingredients business). The Flavours division is also headquartered
  in Naarden. The Fragrance divisions headquarters is in Ashford, in the
  UK. Major manufacturing facilities are located in the Netherlands, the UK, USA,
  Mexico, France, Australia and Indonesia, with smaller manufacturing facilities
  in eight other countries. Quest has its own sales distribution network in 32
  countries and is represented elsewhere by sales agents. Science, innovation and creativity are the
  key pillars of Quests research effort, with innovation at the heart of
  Quests business. It designs and develops new flavour and fragrance ingredients
  and compounds that create a distinctive sensory impact. This demands a complex,
  artistic and technical process, combining the knowledge and skill of Quests
  perfumers and flavourists with the expertise of its application and research
  chemists. Quest has research centres at Ashford and Naarden, and product development
  teams at six other sites around the world. Quest also benefits from being part
  of the wider ICI Group and the science base that is available to support innovation. StrategyQuest operates in markets that ICI believes
  present attractive growth opportunities. Within the ICI strategic matrix, both
  the Flavours and Fragrances business are therefore positioned in the grow
  aggressively segment. The Group believes that Quests competitive
  position is based on four distinctive strengths.




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|DESCRIPTION
      OF BUSINESS |  | 13
|----------------------------- |  | --



|
|



These are:•
    the quality of its customer
      relationships and consumer understanding;•
    the creative skills of its
      perfumers and flavourists;•
    the technological advances
      resulting from its research and development; and•
    the customer service and support
      provided by its marketing and application groups as well as its global network
      of servicing units.These strengths
      enable Quest to assist its customers in making their products and brands
      successful. Within the overall Group strategy, Quests strategy is
      to continue to build on these strengths, while:•
    focusing on growth with key
      customers;•
    investing in consumer understanding;•
    creating and making best use
      of an effective and efficient innovation process; and•
    working to ensure operational
      excellence in both service levels and costs by focusing on appropriate parts
      of the value chain and by continuous process improvement. Brief
    description of activitiesQuests innovative flavours
    and fragrance products consist of compounds of blended ingredients created
    by expert flavourists, perfumers and scientists. Certain of these compounds
    contain molecules which have been created by Quests chemists and which
    add distinctive characteristics to its products. Quest also has a strong presence
    in nature-identical flavours for sweet and culinary applications. Fragrance ingredients
      are the scented building blocks of the fragrance formulae. They can also
      contribute additional technical characteristics, such as deodorisation or
      insect repellence, to the finished compound.


In both divisions finished products are manufactured
  through a compounding process that, whilst relatively non-capital intensive,
  demands high degrees of precision in dosage control, ingredient traceability
  and cleanliness. Proprietary knowledge of formulae and processes is retained
  by the business and secures strong product differentiation. Critical to the
  success of the business is researching consumer trends, developing successful
  molecules and ingredients and delivering the expertise of the flavourist or
  perfumer to the customer in the finished product. Raw materialsQuest purchases thousands of different
      raw materials from sources across the world. The main natural raw materials
      are extracts and concentrates from fruits, vegetables and other flora as
      well as animal products and essential oils. Synthetic raw material purchases
      are mostly organic chemicals. The flavours business is organised around several
  key markets and global customer accounts. The principal markets are sweet and
  savoury foods and beverages. Similarly, the fragrance business is organised
  around key product applications and accounts. The principal markets are personal
  care, homecare products, fine fragrance, and oral care. Developments in 2004In the second quarter of 2004
  Quest divested its food ingredients business, which together with the flavours
  business had previously made up the food division. The food ingredients business
  had been categorised within ICIs strategic framework as maintain
  selectively. The flavour product portfolio was enhanced
  with a number of new product launches in 2004. Dairy Designer, a
  range of fermented dairy extracts, was launched to enable modification of taste
  and aroma characteristics of dairy products




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|14 |  | DESCRIPTION
      OF BUSINESS
|-- |  | -----------------------------



| |  |  | Uniqema
| |  |  | -------



that are incompatible with current flavour systems. WithinCitrusense, Quests range of citrus flavours, new cultivars, add backs and topnotes were developed to help beverage customers to launch distinguishable
products, underpinning Quests position and progress in the citrus market segment.Coffeesensewas launched globally to facilitate the ongoing diversification in coffee flavours both for coffee and other beverage applications.Quisineis a new range of culinary flavours that give authentic taste to industrial
cooked food. TheQuisinerange demonstrates Quests creativity in capturing different cooking techniques in authentic taste profiles, respecting culture and local preferences of consumers around the world. During 2004 Quest completed a new Research and Development centre in Naarden. In September a significant customer event was organized to showcase the new facilities, focusing on Quests flavour application and research capabilities under the themeQuest is back and better. In the fragrance business, Quest continued to offer clients unique propositions. The consumer-understanding programme proved to be a key differentiator with clients in terms of insight into their fragrances and brands.
The tool has been extended from fine fragrance for use in research in home and personal care products, allowing targeted development of perfumes and marketing for these areas. In 2004, the business extended its position further with a number of key clients. Growth of the fine fragrance business was sustained by successfully winning a number of high profile brands such asBeyond Paradise MenandTrue Starfrom the Estee Lauder Companies,Curiousfrom Elizabeth Arden andEcho Womenfrom Lancaster.


Background Uniqema is a leading manufacturer of surfactants,
    oleochemicals and derivates with major operations in North America and Europe.
    In 2004 Uniqema accounted for 11% of ICIs sales. The business supplies a broad range of base and specialty chemicals into a wide range of end markets and applications. Its market scope includes polymers, lubricants, personal care, health care, process intermediates,
crop protection, oilfield, textiles, polymer additives and cleaning. Strategy ICI believes that Uniqemas
    strength is its strong market position in the synthetic lubricants, personal
    care and the European and US oleochemicals sectors. Within the overall Group
    strategy, Uniqemas
    businesses are predominately within themaintain
    selectivelysegment
    of the strategic matrix. As such, Uniqemas strategy includes growth in selected, niche markets, but focuses
    on improving its operational cost base through manufacturing site rationalisation
    and reducing overhead costs. Brief description of activities
    ICI believes that Uniqema has a strong position
    in synthetic lubrication. It manufactures and markets a wide range of synthetic
    basestocks and ingredients which are formulated into engine, compressor, gear
    hydraulic and process oils and fluids, where high performance or environmental
    characteristics are required. Products are frequently tailored to specific
    customer requirements. ICI also believe that Uniqema is a leader in synthetic
    refrigeration lubricants, to which it provides worldwide technical support. As a prominent player in the personal care market, Uniqema provides ingredients for skin care, hair care, oral care and toiletries. These include new vegetable-based products for skin care formulations, mild
ingredients for cleansing formulations and functional ingredients for skin repair products and UV protection products.




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|DESCRIPTION
      OF BUSINESS |  | 15
|----------------------------- |  | --



|
|



Uniqema also supplies process intermediates based on natural fats and oils such as coconut, palm kernel and rape seed, which are split to yield fatty acids and by-product glycerine. Further processing of fatty acids
yields a range of higher added-value products, such as surfactants, soaps, lubricants and polymers. Raw
        materialsThe raw materials
        for Uniqema include a wide range of both renewable (palm oil, rape-seed
        oil and tallows) and petrochemical based (ethylene oxide and propylene
        oxide) raw materials. The headquarters and one of the major operating centres of Uniqema is in Gouda in the Netherlands. The other major operating centres of Uniqema are in Wilton in the UK, Newcastle Delaware, USA and Kuala Lumpur in
Malaysia. Uniqema has a total of 15 manufacturing sites in Europe, North America and Asia Pacific. Developments in 2004
  Uniqema made good strategic progress in 2004
  in market conditions that were improved in the USA but remained generally weak
  in Europe. The restructuring programme launched in 2003 yielded significant
  benefits from improved manufacturing efficiencies, lower inventories and reduced
  operating costs. The business commenced a plant rationalisation programme that
  is expected to be completed in the middle of 2005 with the closure of a manufacturing
  site in New Jersey, US and the relocation of its production to a larger Uniqema
  site in Delaware.


A rationalisation of Uniqemas product range commenced and has yielded good returns, reducing the complexity of Uniqemas product portfolio. Work also commenced on developing a new channel strategy for supplying Uniqemas customers across Europe, with the principal benefits expected in 2006. Selected new products were also launched during the year, reflecting the differentiated resource allocation strategy applied to the business. Where opportunities exist, because of proprietary knowledge and patented
products, further value can be created within the portfolio.




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|16 |  | DESCRIPTION
      OF BUSINESS
|-- |  | -----------------------------



| | ICI Paints
| | ----------



Background ICI Paints is a leading international paint business
  and accounted for 39% of the Groups
  sales in 2004. It concentrates primarily on decorative paint (over 90% of ICI
  Paintssales in 2004) and packaging coatings for food and beverage cans. ICI Paintsglobal business headquarters is located in Slough, in the UK. Major manufacturing facilities are located in the USA, UK,
Brazil, Argentina, Germany, the Netherlands, France, China, India and Malaysia. Additional manufacturing facilities are located in 15 other countries. ICI Paints maintains its own sales distribution network in over 30 countries, and sells elsewhere
through agents and distributors. Strategy The Decorative Paints strategy is essentially
  one of organic growth, supported by initiatives to improve the quality of the
  business by leveraging ICI Paintsinternational capabilities. ICI Paints
  also uses its global knowledge and capabilities and applies these effectively
  in each of the regional and national markets in which it operates. The strategy of ICI Paints is to maintain and develop its branded leading market positions in the global paints and coatings industry. ICI Paints expects to further develop its strategy by: •
    Profitable growthchannelling scarce resource (revenue
      expenditure, capital and people) to those areas which will generate best
      rewards.•
    Innovationdriving for new major differentiated
      products and services, linking strategic marketing with world leading technical
      skills.•
    Operational excellenceimplementing key restructuring plans
      and improving planning/operating processes to reduce costs and inventory
      while improving customer delivery reliability.•
    People and organisation capability
      development.


Key competencies, which ICI Paints employs across its businesses include: •
    Marketingidentifying areas of significant potential
      through market understanding and exploiting these through highly professional
      category and brand management skills.•
    Research and developmentsupporting the increased emphasis
      on innovation in products, packaging and services, and targeting high impact
      cost reductions through leading edge colour, polymer and formulating science.•
    Operationsimplementing process improvements
      and improved delivery reliability by sharing expertise and best practice
      across its businesses.•
    Procurementoptimising the mix of central contracts
      using ICIs total purchasing
      power and local contracts bringing the advantages of tailored solutions/flexibility. The regional markets for decorative paint are at different stages of growth and maturity and the ICI Paints strategy reflects this. The Asia region is one of generally high growth, with paints markets tending to be fragmented, and the real competitive landscape restricted to the country level. To obtain competitive advantage in the region requires
the leveraging of capabilities by transferring best practice in innovation, purchasing, marketing and channel development. The key focus of the business is to maintain accelerated profitable growth, with particular focus on China, Vietnam and
Thailand. The European region contains some large mature markets and a number of developing growth markets in Eastern and Central Europe. In the mature markets, ICI Paints has a leading position in the UK, with strong brands
underpinned by a focus on innovation. There is significant brand equity withDulux,Hammerite,CuprinolandPolycell. The focus of the European business is on improvement of product range, expansion in




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|DESCRIPTION OF BUSINESS |  | 17
|----------------------- |  | --



|
|



developing markets, reduction of its cost-base and the improvement of operational efficiency and profitability of the Continental European operations. The Latin American business has strong positions in Brazil, Argentina and Uruguay where brand strength is maintained through capability in marketing and a focus on innovation. In North America markets are generally mature and ICI has a strong presence in both trade and retail markets. In trade markets the focus is on a marketing strategy which establishes insights to end user needs, and in
securing distribution density within metropolitan areas. In the retail business, the value chain is highly consolidated with a few retailers controlling 80% of distribution. ICI Paints has a significant relationship in this market with The Home
Depot. ICI Paints is also a leader in the sale of internal and external coatings for food and beverage cans. It manufactures and distributes a broad product offering of packaging coatings and has significant market positions
in both the established markets of Europe and North America and the emerging markets of Asia and Latin America. The focus of this business is on profitable growth in South East Asia and Latin America, exploring opportunities for growth in non-metal
packaging, in particular with PET bottle coatings, and in supply chain optimisation. Technology and innovation are also important factors in the growth of ICI Paints. Success is enhanced by being first to the market with innovative, value-adding products and services that meet market needs. ICI Paints
benefits technologically from the colloid, polymer and particle related science base and research carried out by other parts of the Group.


Brief description of activitiesThe decorative paints business has well-established brands in paint, woodcare, metalcare, adhesives and fillers and these includeDulux,Glidden,Devoe,Valentine,Coral,Alba,Xyladecor,Hammerite,Polycell,PolyfillaandAlabastine. Paint is manufactured through a mixing process that requires a high degree of control over product measurement, quality control and continuous assessment. Typically manufacturing operations are relatively non-capital
intensive and activities can be scaled through additional working-shifts. Raw materialsKey raw materials for ICI Paints include
      resins, solvents and pigments supplied by major chemical companies. Paints are sold through a range of distribution channels. Branded architectural paints are sold through a combination of both independent retailers and stores and the Groups own retail concerns, particularly in North America and the UK. Can coatings are supplied directly to beverage and food manufacturers in Europe, the Americas and Asia.




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|18 |  | DESCRIPTION
        OF BUSINESS
|-- |  | -------------------------------
|   |  |                                



|
|



Developments in 2004
  During 2004 ICI Paints has continued to focus on strengthening its brands and developing innovative products and services which meet and anticipate customersneeds around the world. In 2004, ICI Paints launched a number of new and innovative products and services to strengthen its brands across all key markets. There has been a successful international roll-out ofMagic Whiteincluding an extension to trim products,EasycanPolycell Basecoat andCuprinol Rollable. These were all innovations that were
brought to market initially in 2003, but have been exploited internationally during 2004. In 2004 key innovations brought to market have been: •
    Pyroshield, a water-based flame retardant that achieves the highest levels
      of regulatory compliance with no hazardous combustion products•
    Once
      Ready to Roll, offering the convenience of a ready to use product,•
    Sublime
      Touch, a sensorial new wall finish introduced in Latin America•
    A new colour display for the UK Retail
      market•
    A re-designed web-site to assist colour
      scheming and other customer service needs•
    Extensions to Point of Sale Tinting in
      Asia The Paints business has also benefited from significant cost savings as a result of the restructuring programme announced in 2003.




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|DESCRIPTION
        OF BUSINESS |  | 19
|------------------------------- |  | --



| | Regional and Industrial | 
| | ----------------------- | 



Background
Regional and Industrial comprises several businesses which are essentially local in their scope, the most significant of which are located in Pakistan, Argentina and India. The businesses accounted for 7% of the
Groups sales in 2004. In Pakistan and India, ICI operates through non wholly-owned subsidiary companies, quoted on the local stock exchanges. Strategy
ICI has divested many of the Regional and Industrial businesses in recent years, and further divestments will be made if they enhance value. The strategies of most of the businesses are focused on selective areas of
growth, with an emphasis on improving cost and capital effectiveness. Brief description of activities
ICI Pakistan has interests across a number of different market sectors. The more important of these are the manufacture of polyester staple fibre for the textile industry and soda ash for soaps, detergents, glass and
paper. Other businesses of ICI Pakistan include pharmaceuticals, specialty products and trading. Pakistan PTA Limited, located at Port Qasim near Karachi, manufactures purified terephthalic acid (PTA) for the fibre industry. ICI India sold its nitrocellulose business in March 2004 and its Regional and Industrial business operations now comprise a rubber chemicals business which has manufacturing facilities near Kolkata. ICI Argentina manufactures a range of products of which wine chemicals and sulphur related products are the most important. The wine chemicals business is located near Mendoza, whilst the sulphur related products are
manufactured at San Lorenzo, near Rosario.


The Regional and Industrial businesses sell into a wide range of industries including engineering, textiles, pharmaceuticals, aerospace, electronics and the extractive industries. Products are either marketed directly
or through independent merchants, wholesalers and distributors who resell to small users. Commodity products are sold through a direct sales force or through distributors primarily to other operators in the chemical industry. Developments in 2004
During 2004, the Group sold 18.9% of the issued
share capital of Pakistan PTA Limited by private placement. Gross proceeds from
the disposal amounted to £26m.




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|24 |  | OPERATING AND FINANCIAL
      REVIEW
|-- |  | ------------------------------------

Counterparty credit risk The Groups
    counterparty credit risks arise mainly from non-central operating cash held
    on short-term bank deposit, the positivemark
    to marketeffect of swaps and counterparty risk arising from the liquidity of the Groups
    captive insurance company. The Group considers the risk of material loss in
    the event of non-performance by a financial counterparty to be low. Quantitative disclosure about market risk
    The analysis below presents the sensitivity of
  the market value or the fair value of the Groups
  financial instruments to selected changes in market rates and prices. The rates
  of change chosen reflect the Groups
  view of changes that are reasonably possible over a one year period. Fair values
  are quoted values or, where these are not available, values obtained by discounting
  cash flows at market rates or using option valuation models. The fair values
  for interest rate risk are calculated by using a standard zero coupon discounted
  cash flow pricing model. Market risk  Interest rate sensitivity
    The sensitivity analysis in the table which follows
  assumes an instantaneous 1% movement in interest rates of all currencies from
  their levels at 31 December 2004, with all other variables held constant. Market risk – InterestratesensitivityFair value
      
      Fair value change31 December
      +1%
      
      1%2004
      
      2003
      movement in
      movement ininterest rates
      interest rates£m
      £m
      £m
      £mLoans
      (1,355
      )
      (1,940
      )
      42
      
      (45
      )Currency swaps
      (2
      )
      (21
      )
      
      
      Interest rate swaps
      12
      
      17
      
      (4
      )
      5 The movement in fair value of debt and instruments hedging debt will not result in any immediate change to the Groups financial
statements since fair values are not recognised on the Groups balance sheet. An absolute increase in interest rates of all currencies of 1% would increase Group net
interest payable for the year by £11m. Market risk  Foreign currency sensitivity
    The sensitivity analysis in the table which follows
  assumes an instantaneous 10% change in foreign currency exchange rates against
  Sterling from their levels at 31 December 2004, with all other variables (including
  interest rates and currency option volatility) held constant. Market risk  ForeigncurrencysensitivityFair value
      
      Fair value change31 December
      
      +10%
      
      10%2004
      
      2003
      strengthening
      
      weakeningof sterling
      *
      of sterling
      *£m
      £m
      £m
      
      £mLoans
      (1,355
      )
      (1,940
      )
      78
      
      (96
      )Currency options
      
      
      6
      
      
      
      Currency swaps
      (2
      )
      (21
      )
      28
      
      (34
      )Forward contractshedging debt
      (12
      )
      (12
      )
      18
      
      (22
      )hedging working capital
      1
      
      1
      
      2
      
      (2
      )hedging anticipated
             cash flows
      
      
      1
      
      
      
      * Against all currencies.


The Groups debt after financial derivatives at the 2004 year-end was held 58% in US dollars, 31% in Euro and Euro related currencies, 7%
in Yen and 4% in other currencies. Market value changes from movements in currency rates in loans, currency swaps and forward contracts hedging debt, and similar movements in the values of the investments being hedged, are taken through the
Groups statement of total recognised gains and losses in accordance with SSAP 20 and FRS No. 3. Market value changes due to exchange movements in forward contracts hedging working capital are recognised in trading profit immediately, but are offset by gains/losses on the working capital they are hedging.


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|OPERATING
      AND FINANCIAL REVIEW |  | 29
|------------------------------------ |  | --



| | Group expenditure on tangible fixed
    assets                                   |     
| | -------------------------------------------------------------------------------- | ----
| |                                                                                 
| |                                                                                  |     
| |                                                                                  | 2004
| |                                                                                  | £m  
| |                                                                                  |     
| | Continuing operations                                                            |     
| |                                                                                  |     
| | National Starch                                                                  | 64  
| |                                                                                  |     
| | Quest                                                                            | 17  
| |                                                                                  |     
| | Uniqema                                                                          | 18  
| |                                                                                  |     
| | Paints                                                                           | 48  
| |                                                                                  |     
| | International Businesses                                                         | 147 
| |                                                                                  |     
| | Regional and Industrial                                                          | 13  
| |                                                                                  |     
| | Total                                                                            | 160 
| |                                                                                  |     
| | Depreciation                                                                     | 169 
| |                                                                                  |     
| | * Includes Synetix and Security
    Systems businesses, which were sold in 2002. |     
| |                                                                                  |     






Sources and availability of raw materials
    The raw materials used by the Group are from
    a diversity of sources, including petrochemical based raw materials, renewable
    resources, and a range of other materials. These raw materials are generally
    available from multiple suppliers which would enable business to continue
    in the event of any interruption of supply, although some business units rely
    on a small number of suppliers for their key raw materials. The prices of
    raw materials are subject to normal conditions of supply and demand. The prices
    of some raw materials are volatile and are affected by cyclical movements
    in commodity prices and the availability of such materials. Intellectual property ICI has thousands of patents and patent applications
    which help to protect its technology and numerous trademark registrations
    which help to protect its brands. In addition, ICI derives substantial competitive
    advantage from trade secrets and proprietary business knowledge relating to
    formulae, products, processes and technical know-how. ICI uses appropriate terms of employment and management processes to identify and protect its intellectual property. As necessary, it enters into confidentiality agreements with customers, suppliers and other third
parties to protect the confidentiality of its proprietary, technical and business information. Capital expenditure The analysis in the table above summarise the
    Groups
    capital expenditure on tangible fixed assets over the three year period ending
    31 December 2004. Capital expenditure of £160m for 2004 was £6m
    above 2003, and included investments in a new starch manufacturing facility
    in China and in support of the restructuring programme. In 2004, capital expenditure was incurred on a large number of relatively minor projects aimed at achieving additional capacity, as well as for productivity improvements through increased automation of manufacturing
processes and the relocation and consolidation of facilities. Commitments for capital expenditure not provided in the Groups consolidated financial statements totalled £123m at 31 December
2004 (2003 £132m). These are analysed further in note 39 to the consolidated financial statements between those for which contracts have been placed and those authorised but not yet contracted.




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|30 |  | OPERATING AND FINANCIAL
      REVIEW
|-- |  | ------------------------------------



Research and development (R&D)A Technology Board, comprising the
    senior business R&D managers and led by the Group Vice President of R&D,
    is responsible for the development of the Groups Technology Strategy
    and its implementation by the R&D staff employed by the Groups businesses.
    In 2004, expenditure on R&D by continuing operations before exceptional
    items and excluding Technical Service, amounted to £147m (2003 £150m;
  2002 £148m). This expenditure represented 2.6% of sales in 2004 (2003 2.6%; 2002 2.5%). Each of the Groups businesses is responsible for its own R&D resources and for driving innovation to meet the needs of its customers
and markets. The business R&D teams are complemented by a central R&D resource that aims to provide world class capabilities that are common to all the businesses. The Groups distributed technology network draws on the expertise across ICI thus allowing new products and processes to be developed and exploited by individual businesses more rapidly, and stimulating new options from the combination of
the technical capabilities of the Groups different businesses. In 2002, a Business Development Board was established, comprising senior managers from the individual Businesses, the Group Vice President of R&D, planning support from the Corporate Centre, and chaired by the
Executive Vice President Uniqema. The purpose of the Board is to accelerate the commercial exploitation of technology opportunities within ICI, and reflects the desire to continuously develop and strengthen the links between market needs and
technology capability. In 2004 the Business Development Boards attention has been focused on the exploitation of the Groups capabilities in Delivery Systems that control the in-use release of products in the personal care, flavours, and fragrances markets. The Business Development Board has also been working
with the Technology Board in managing the portfolio of projects undertaken by the central technical resources, so as to optimise the business value to the ICI Group. ICI has appointed three leading academics to a Science Advisory Board to help challenge and develop its expertise in the breadth of rapidly changing science and technology needed in its Businesses. The appointees are
Paul Calvert, Professor of Materials Science at the University of Massachusetts, Dartmouth; Jean Frechet, Professor of Chemistry at the University of California, Berkeley; and Gary Beauchamp, Director and President of the Monell Chemical Senses
Center in Philadelphia. The Science Advisory Board has been closely involved in developing strategy in key capability areas such as High Throughput Experimentation, delivery systems, nutrition and fillers/resins. The Groups prime technology areas, namely biosciences, molecular sciences, and materials, have been established to support its goals in
selected growth markets. Within each of these areas is a portfolio of projects that is intended to accelerate the Groups long-term technology development. Bioscience has key areas of knowledge and expertise, which the Group applies to the development of personal care, food and beverage products. Products to combat the rise in human obesity are an opportunity that ICI is
already addressing and show good growth potential. The Business Development Board and the Technology Board are supporting projects in this sector to develop knowledge and strengthen capabilities.


Molecular Sciences underpin much of the Groups product development and here its focus is on high throughput R&D to explore novel
molecules, formulations and processes. In addition to growing capabilities in the ICI businesses, a centre of excellence has been established with corporate funding to apply the High Throughput Experimentation methodologies in developing
ICIs position in formulation science and technology. Projects have been completed in areas such as personal care, lubricants, paint, and materials development. Current projects in the materials area are directed
towards increasing the Groups
ability to fabricate at the nano-scale for macro-scale  effects. From such research
has come the recentlylaunched,
Dulux Diamond Glaze range, where exceptional hardness and durability
is achieved
at a highly competitive  price through the control of polymer structure at the
molecular level. Fundamental research on transport properties in filled polymer
systems is carried out by the central resources and underpins the growth of the
Electronic and Engineering
Materials division of National Starch. The prime technology areas mentioned above are underpinned by strong capabilities in measurement science, and in modelling, both critical elements of ICIs strong formulation science base. The competitive edge of the Group comes from the combination of these capabilities, not merely the demonstration of excellence in any one area. With the steady growth of ICIs business in China the provision of technical capabilities in that region is of increasing importance.
Existing applications laboratories will be reinforced, and it is planned to add local product development capability for growth businesses such as paints, adhesives and electronics. Regulation, safety, health and the environment
    ICIs
    businesses are subject to the normal regulatory framework applicable to a
    specialty products and paints company, notably various health, safety and
    environmental rules both at national and local levels in each of the jurisdictions
    in which it operates. The scope and severity of such laws vary across the
    different businesses and according to the jurisdiction concerned. The various
    manufacturing processes that are operated require consents and licences including
    relevant emission permits. The Group requires full compliance by its businesses
    with all relevant Safety, Health and Environment (SHE) laws and regulations
    in each jurisdiction in which it operates. Its businesses also voluntarily conform to international and national codes of best practice appropriate to their business. ICI attaches great importance to safety and health, to reducing any adverse environmental impact of its activities, year-on-year and to developing products and services with improved environmental features. ICIs policy is to improve its SHE performance continuously and to have in place quantitative measures to monitor progress. For these
reasons, since 1991 ICI has published 5-year improvement targets for SHE. The current set,Challenge 2005, was published in 2001 to be achieved by the end of the year 2005.Challenge 2005focuses on the effects of the Groups activities on climate change, air, land, water, and other potential impacts. Targets include reducing
environmental burden in specific categories, a commitment to improve energy efficiency per tonne of production by a further 5% of the 2000 base level, and on further reducing,




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|OPERATING
      AND FINANCIAL REVIEW |  | 31
|------------------------------------ |  | --



by 50%, employee and contractor injuries and illnesses from the 2000 outturn. ICI developed the measurement of environmental burden in 1995 in order to take account not just of the quantity of an emission but its
potential impact on the environment. It uses the environmental burden methodology to help prioritise actions for further performance improvement. ICI maintains its focus on SHE and, in the fourth year ofChallenge 2005, is on plan to meet the majority of its objectives and has actions in place to address those areas that are behind target. Full details are published in the Sustainability Report and on our website, www.ici.com. ICIs performance in 2004 is currently being verified by Enviros Consulting Ltd, and the detailed performance results and verification statement will be published on the website.
During 2004, there were eleven instances of breaches of safety, health, environmental or product regulations which resulted in prosecutions or fines totalling £40,000. Each was investigated and appropriate action taken. The main process by which the Group manages SHE issues and seeks to meet its objectives is the Responsible Care Management System (RCMS). This sets out standards along with guidelines, training, auditing and procedures
for reviewing and reporting performance, all of which are essential to continuous improvement. The system covers operations on site as well as security, product stewardship and community relations. RCMS has been independently verified by
Lloyds Register Quality Assurance Limited as complying with the US and UK Responsible Care Codes, the certifiable international standards for environmental and
Occupational Health and Safety management systems, ISO 14001 and OHSAS18001, and the ICC (International Chamber of Commerce) Business Charter for Sustainable Development. ICI works to manage and minimise the risks associated with the condition of the soil and groundwater on its sites and has developed further procedures to enable the ranking of priorities for management attention. ICI
is engaged in research aimed at developing and implementing more cost effective environmental remediation technologies, some of which is being done in collaboration with other companies and academic institutes. The raw materials which the Groups businesses use and the products that they produce are subject to demanding regulations concerning
product safety in all parts of the world. These regulations, which also cover product testing and risk assessment requirements, are subject to review and revision, as is currently happening in Europe with the proposed REACH (Registration, Evaluation
and Authorisation of Chemicals) regulations. The Group is assessing the potential impact of these proposals on its businesses and will ensure compliance when the new European Union regulations come into force. There is a growing pressure from legislators, customers and the general public to reduce the environmental and health impacts of products throughout their life cycle. ICI is responding to this by ensuring that each
business has aProduct Stewardshipprogramme in place. This voluntary programme
embraces, through best business practices, product regulatory requirements, societal pressures, reducing the risk of harm to people and the environment, and ICI aims to provide the relevant information to enable correct use and disposal of
products.


Anticipating external pressures and concerns and providing speedy, innovative solutions with lower environmental and societal impact is becoming a key aspect of sustaining competitive advantage. ICI recognises these
pressures and is responding with the introduction of new processes, products and services that improve the efficiency of use of raw materials and utilities and reduce adverse effects. Processes are in place for regular reviews of environmental liabilities, and provisions were established by 31 December 2004 in accordance with the accounting policy described in the Group financial statements on page
59. Although there can be no guarantees, management believes that, within the existing legislative framework and taking account of the provisions already established, the cost of addressing currently identified environmental obligations (as ICI
currently views these obligations) is unlikely to have a material adverse effect on its financial position or results of operations. Employees As of 31 December 2004, ICI employed 33,820
    people. An analysis of employee numbers
    by business and geographical area may be found in note 35 to the consolidated
    financial statements. ICI has a mixture of unionised and non-unionised operations
    across the world. ICI considers its relations with its employees to be generally
    good.




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|32 |  | BOARD OF DIRECTORS AND
    EXECUTIVE MANAGEMENT TEAM
|-- |  | ----------------------------------------------------









| | Board of Directors | 
| | ------------------ | 



1. Peter B Ellwood, CBEChairmanAppointed a Non-Executive Director and Deputy Chairman on 27 June 2003 and Chairman with effect from 1 January 2004. Peter Ellwood joined Barclays Bank in 1961 where he held a number of senior roles including Chief Executive of Barclaycard from 1985 to 1989. In 1989 he joined TSB Bank as Chief Executive, Retail Banking, was appointed a Director of TSB Group in 1990 and became Group Chief Executive in 1992. Following the merger with Lloyds Bank in 1995, he became Deputy
Group Chief Executive of Lloyds TSB Group plc, subsequently becoming Group Chief Executive in 1997 until his retirement in 2003. He was Chairman of Visa International from 1994 to 1999. Peter Ellwood was made a Commander of the Order of the British Empire for services to banking in 2001 and is a Fellow of the Chartered Institute of Bankers. He has received Honorary Doctorates from both Leicester
University and the University of Central England. He is Chairman of the UK Royal Parks Advisory Board, The Royal Parks Charitable Foundation and The Work Foundation of Great Britain. He is also a Director of the Royal Philharmonic Orchestra and
Deputy Chairman of the Royal College of Music. In his business career Peter Ellwood has been a leader in driving structural change and efficiency improvement and he brings to his role as Chairman extensive business experience, energy and determination. Aged
61. 2.  John D G McAdamChief ExecutiveAppointed a Director on 1 March 1999 and Chief Executive on 9 April 2003. He joined the Company in 1997 following the acquisition of the Speciality Chemicals businesses from Unilever. John McAdam graduated from Manchester University with a first class honours degree in chemical physics and, after completing his doctorate, was awarded a research fellowship. In 1974 he joined Unilever as a management trainee and held a variety of managerial positions within Birds Eye Foods before joining the Board of Unilevers flavours and fragrance business, PPF International, as Technical Director. In 1987, he joined the Board of Quest International as Senior Vice President in charge of Manufacturing, Logistics and Procurement before returning to
Birds Eye Walls, where he assumed Board responsibility for Manufacturing, Research and Development. In 1993 he was appointed Chairman of Unichema International and, following ICIs acquisition of the Unilever Speciality Chemical
businesses in 1997, became Chairman and Chief Executive Officer of Quest and a member of the ICI Executive Management Team. In January 1998 he was appointed Chairman and Chief Executive of ICI Paints and the following year he was elected to the
Board of ICI with additional responsibility for Research, Development and Technology and ICIs activities in Asia. John McAdam is a business leader with a strong focus on results and extensive knowledge of ICIs operations around the world. The
Board


believes that the combination of knowledge, drive and leadership that he is bringing to bear on the issues facing ICI is serving both the Company and its shareholders well. John McAdam is a Non-Executive Director of Severn Trent Plc, a member of the University of Surrey Business Advisory Board and a member of the University of Cambridge Chemistry Advisory Board. Aged 56. 3.  David C M HamillDirectorAppointed a Director on 8 December 2003. He is Chairman and Chief Executive of ICI Paints. David Hamill joined the Company from Royal Philips Electronics where he was a member of the Group Management Committee. A graduate in production engineering and management from Strathclyde University, David Hamill
worked for Honeywell and General Instruments before joining Philips Semiconductors as product manager in 1986. He held a number of senior positions within PhilipsPower Semiconductors and Lighting businesses, becoming President of Philips Lighting Asia Pacific in 1996 and Executive Vice President of Philips Lighting and Chief Executive Officer of the Lamps business group two years later. In May 2001 he became President and Chief Executive Officer of Philips Lighting. David Hamill has held senior management roles in Europe and Asia where he has gained considerable production, commercial, marketing and finance experience. Whilst his experience with large retail customers has specific
relevance for ICI Paints, his broader business expertise, and in particular his understanding of Asian markets, is of value to the Group as a whole. David Hamill was appointed a Non-Executive Director of BPB plc on 26 January 2005. Aged 47. 4.  Charles F KnottDirectorAppointed a Director on 1 September 2004. He is Chairman and Chief Executive of Quest International. Charles Knott graduated from Newcastle University in 1976 with an honours degree in Mathematics and Statistics. He joined National Starch and Chemical Company in 1984 as Commercial Director of Laing-National in
Manchester and subsequently served in Germany and the Netherlands before returning to the UK in 1990 as Managing Director of National Starchs UK Adhesives
operations. Charles Knott was appointed Divisional Vice President, Performance Adhesives, in the United States and in 1994 became Senior Divisional Vice President and General Manager for the US Adhesives business. In 1995 he relocated to Singapore to lead National Starchs Asia-Pacific operations as Corporate Vice President. He was appointed
National Starch Chief Operating Officer in January 2001. In March 2003 he became Chairman and Chief Executive of Quest International, and Executive Vice President and member of the Executive Management Team of ICI. Aged 50.




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|BOARD OF DIRECTORS AND
    EXECUTIVE MANAGEMENT TEAM |  | 33
|---------------------------------------------------- |  | --









| |  | 
| |  | 



5. William H PowellDirectorAppointed a Director on 2 February 2000. He is Chairman and Chief Executive of National Starch and Chemical Company and has Board responsibility for Sustainability (which includes Group Safety, Health and Environment matters). William Powell joined National Starch and Chemical Company in 1976, gaining extensive experience in production, planning and general management. In 1981, he was appointed Divisional Vice President of Manufacturing for Adhesives and Resins. He was promoted to Corporate Vice President of the Resins and Specialty Chemical Division in 1984; Corporate Vice President, International in 1986; Group Vice President, Industrial Starch and Food Products division in 1989; and Executive Vice President in 1997. In 1999, he was appointed Chairman and Chief Executive Officer. William Powell has a degree in chemistry and a masters degree in chemical engineering from Case Western Reserve University. In addition
he has a Masters in Business Administration from the University of North Dakota. He is a past Chairman of the Corn Refiners Association and currently an Honorary Director. He is a Non-Executive Director of Granite Construction Inc. and a member of
the Institute of Food Technologists and the American Institute of Chemical Engineers. He is also a member of: the Board of Directors of the American Chemistry Council; the Executive Committee of the Society of Chemical Industry, American Section;
the Board of Overseers of the New Jersey Institute of Technology; and the Board of Trustees of the State Theatre of New Jersey. Aged 59. 6.  Timothy A ScottChief Financial OfficerAppointed a Director and Chief Financial Officer on 23 May 2001. He is Chairman of the ICI Charity Trust and Appeals Committee. A graduate of St Catherines College, Oxford with a degree in chemistry, he is a member of the Chartered Institute of Management
Accountants. Timothy Scott joined the Company in 1997 following the acquisition of the Speciality Chemicals businesses from Unilever. He joined Unilever in 1983 and during the first six years of his career worked in a variety of
businesses in the UK, US and the Netherlands in a range of financial positions. In 1989 he joined Unilevers UK-based Mergers & Acquisitions department and three
years later moved to Unichema in the Netherlands as Senior Vice President Commercial, becoming Group Vice President, Europe in 1995. In 1998 he was appointed Chief Administrative Officer for ICI Paints in North America and the following year became
ICIs Vice President Strategy and Performance. Aged 42.


7. Adri BaanNon-Executive Director
Appointed a Non-Executive Director on 25 June 2001. He has a masters degree in physics from the University of Amsterdam and joined
Philips as a project manager in 1969. He has held a series of senior positions with Philips in Europe and North America. From 1984 to 1986 he was Vice Chairman of Philips Industrial Electronics in Eindhoven and two years later was appointed Executive Vice
President, North American Philips. He was Managing Director of Philips Business Electronics from 1993 to 1996 and Chief Executive Officer and a Member of the Group Management Committee from 1996 to 1998. In 1998 he was appointed Executive Vice
President, Royal Philips Electronics and Member of the Management Board, a position which he held until 2001. In addition he was formerly the Chairman of Integrated Production and Test Engineering N.V., and a Director of Medquist, NPM Capital, PSA Corporation Limited (Port of Singapore Authority) and Hesse-Noord Natie, Port of
Antwerp. He is currently a Director of: Wolters Kluwer
N.V.; ASM International N.V.; International Power plc; the Trust Office of KAS
BANK NV; OCE NV; PSA Europe Limited; and AFM (the Authority for Financial Markets
in the  Netherlands). He is also Vice Chairman of Koninklijke Volker Wessels
Stevin N.V. Aged 62. 8. Rt. Hon. Lord Butler
of Brockwell,
KG, GCB, CVOSenior Independent DirectorAppointed a Non-Executive Director on 1 July 1998. He is the Boards Senior Independent Director. After graduating with a double first in Mods and Greats from University College, Oxford, Robin Butler joined the Treasury in 1961 where he held a succession of posts before becoming Private Secretary to the Financial
Secretary in 1964 and Secretary of the Budget Committee from 1965 to 1969. He was seconded to the Bank of England in 1969 and subsequently acted as Private Secretary to three Prime Ministers. In 1985 Robin Butler became second Permanent Secretary, Public Expenditure and in 1988 he was appointed as Secretary of the Cabinet and Head of the Home Civil Service. He is currently Master of University College, Oxford and a Non-Executive Director of HSBC Holdings plc. In 1999 he served on the Royal Commission on Reform of the House of Lords and in 2004 chaired the UK Review of
Intelligence on Weapons of Mass Destruction. He is also a trustee of the Globe Trust, a trustee of the Rhodes Trust and Chairman of the Churchill Museum UK Appeal Committee. Aged 67. 9.  Joseph T GormanNon-Executive DirectorAppointed a Non-Executive Director on 20 September 2000. He is Chairman of the ICI Audit Committee. A graduate of Kent State University and holding a doctorate from Yale Law School, Joseph Gorman practised law for 5 years before joining the




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|34 |  | BOARD OF DIRECTORS AND
    EXECUTIVE MANAGEMENT TEAM
|-- |  | ----------------------------------------------------



| | Board of Directors (continued) | 
| | ------------------------------ | 





legal department of automotive safety systems manufacturer, TRW Inc. in 1962. He became Secretary of TRW in 1970 and Vice President in 1972. He served as Vice President and General Counsel from 1976 to 1980 when he was elected Executive Vice President and given responsibility for the Industrial
& Energy business unit. In 1985 he was appointed President and Chief Operating Officer of the Company and three years later became Chairman and Chief Executive Officer. A past Chairman of the US-Japan Business Council, he received Japans 1994 Prime Ministers Trade Award for his contribution to promoting improved US-Japan trade relations. He has served on the Boards of the US-China Business Council and the Prince of Wales Business Leaders
Forum and was a member of the Presidents Export Council. He is a trustee of the Centre for Strategic and International Studies and also serves the Council on
Competitiveness as a co-industry vice chair and member of the executive committee. Joseph Gorman is a Director of Alcoa, Inc., The Procter & Gamble Company and National City Corporation. Aged 67. 10. Richard N HaythornthwaiteNon-Executive DirectorAppointed a Non-Executive Director on 20 February 2001. He is Chairman of the ICI Remuneration Committee. A graduate of The Queens College, Oxford with a degree in Geology and a Sloan Fellow of the Massachusetts Institute of Technology,
Richard Haythornthwaite has over twenty five years of international industry experience covering a broad mix of strategic and operational roles. He has extensive experience in organisational and cultural change leadership, cost reduction programmes, results-driven performance initiatives and executing and negotiating acquisitions and divestments
worldwide. Richard Haythornthwaites career began with BP plc where he held a variety of positions in its European and American operations from 1978
to 1995, including General Manager of the Magnus Oilfield and President of BP Venezuela. In 1995 he joined the Board of Premier Oil, where he was responsible for corporate and commercial affairs, and two years later joined Blue Circle Industries plc as Chief Executive of Heavy Building Materials in Europe
and Asia. He was appointed Group Chief Executive of Blue Circle in 1999. Following its acquisition of Blue Circle in 2001, he became a Non-Executive Director of Lafarge S.A., standing down from that Board in July 2003. From 1999 to 2003 he was a
Non-Executive Director of Cookson Group plc. Richard Haythornthwaite has, since 2001, been Group Chief Executive of Invensys plc. In addition he is the Chairman of the Centre for Creative Communities and the Almeida Theatre Company Limited as well as a board
member of the British Council and the National Museum of Science and Industry. Aged 48.


11. Baroness Noakes, DBENon-Executive DirectorAppointed a Non-Executive Director on 1 March 2004. A law graduate of Bristol University, Baroness Noakes has extensive experience both in the City, as a senior partner of KPMG, from which she retired in 2000, and as
an adviser to the UK Government. She joined Peat Marwick Mitchell & Co (now KPMG) in 1970 and was made a partner in 1983. Her experience was a combination of corporate and public sector work and she led KPMGs international government practice. From 1979 to 1981 she was seconded to HM Treasury. In a further secondment in 1988, she joined the Department of Health as Director of Finance and Corporate Information on the NHS Management Executive, the Board
chaired by the NHSChief Executive. She was a Director of the Bank of England from 1994 to 2001 becoming the Senior Non-Executive Director in 1998. She was a
Non-Executive Director of John Laing plc from 2002 to 2004 and has also served as President of the Institute of Chartered Accountants in England and Wales. Baroness Noakes is currently the Senior Independent Director at Carpetright plc and is a Non-Executive Director of Hanson plc and the English National Opera. She is also a Shadow Economic Affairs Minister in the House
of Lords and is a trustee of the Reuters Founders Share Company. Aged 55.  New Directors appointed
        between Annual General Meetings to fill casual vacancies, or as additional
        Directors, retire at the Annual General Meeting following their appointment
        and are eligible for election. At each Annual General Meeting of the
        Companys
        shareholders one third of the other Directors (being those longest in
        office since their last election) also retire and are
eligible for re-election.Charles Knott retires under
        Article 76 of the Companys
    Articles of Association. He is recommended for election to the Board.Adri Baan, Joseph Gorman
        and William Powell retire under Article 96 of the Companys
        Articles of Association. All three Directors are
recommended for re-election.In addition, Robin Butler
        retires in accordance with the policy set out on page 54. He is recommended
    for re-election.All Executive Directors
        are employed on rolling contracts subject to no more than one years
    notice.No Director or Officer has
    a family relationship with any other Director or Officer.




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|BOARD OF
    DIRECTORS AND EXECUTIVE MANAGEMENT TEAM |  | 35
|---------------------------------------------------- |  | --



| | Executive management team | 
| | ------------------------- | 



|The Executive Management Team
        comprises the
Executive Directors and the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                       | Date first appointed as an
    Officer*
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                       |                                        
|12.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Leonard J Berlik                                                                                                                                                                                                                      |                                        
|Appointed a member of the Executive
        Management Team in 2000. He is Executive Vice President, Uniqema. He
        also has regional oversight responsibilities for Group activities in
        Europe, the Middle East and Africa He joined National Starch and Chemical
        Company in 1972 and, prior to his appointment with Industrial Specialties
        (now Uniqema) in 2000, served as Executive Vice President of the Adhesives
        Division. He is a Non-Executive Director of NIZO food research B.V. Aged
    57.                                                                                                                                              |                                                                                                                                                                                                                                       |                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                       |                                        
|13.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Michael H C Herlihy                                                                                                                                                                                                                   |                                        
|Appointed a member of the Executive Management
        Team in 1996. He is General Counsel, Executive Vice President Mergers
        and Acquisitions and Company Secretary. A graduate of St Catherines
        College, Oxford, Michael Herlihy qualified as a solicitor in 1977 and
        joined ICI in 1979, gaining broad experience in the Petrochemicals and
        Plastics and Agrochemicals Divisions. In 1992 he was appointed Group
        Taxation Controller before being appointed General Counsel in 1996. In
        2000 he assumed the role of Executive Vice President Mergers and Acquisitions
        and became Company Secretary on 1 November
2003. Aged 51. |                                                                                                                                                                                                                                       |                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                       |                                        
|14.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Rolf Deusinger                                                                                                                                                                                                                        |                                        
|Appointed a member of the Executive Management
        Team in 2002. He is Executive Vice President Human Resources. He joined
        the Company in October 1999 as Senior Vice President Human Resources
        for ICI Paints. Previously he was Head of International Human Resources
        for Messer Griesheim GmbH based in Germany. He has nearly 20 years international
        experience in the field of Human Resources, predominantly in consumer
        businesses, including PepsiCo, covering the Americas, Europe and Central
    Asia. Aged 47.                                                                                                                     |                                                                                                                                                                                                                                       |                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                       |                                        
|*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | The persons listed above together with
        David J Gee, Executive Vice President, Regional and Industrial Businesses,
        are regarded as the Officers of the Company for the purposes of the Annual
    Report and Accounts. |                                        





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|CORPORATE GOVERNANCE |  | 37
|-------------------- |  | --






Nomination Committee
The Nomination Committee is responsible for proposing new appointments of Directors to the Board and reviews succession plans and arrangements for the Board and EMT. It met on four occasions in 2004. The Nomination Committee comprises the independent NonExecutive
Directors under the chairmanship of Mr Ellwood. In 2004 the Committee dealt with the appointment of two new Directors as described above. It also agreed the processes to be followed in relation to future Board appointments and discussed succession planning
arrangements for NEDs. Remuneration Committee
The Remuneration Committee determines, on behalf of the Board, the Companys policy on the remuneration of the Chairman, Executive
Directors and the most senior management of the Company. The Committee determines the total remuneration packages for these individuals including any compensation on termination of office. It met on five occasions in 2004. The Committee comprises the independent NEDs under the chairmanship of Mr Haythornthwaite. The Chairman of the Committee normally invites the Chairman, Chief Executive, Executive Vice President Human Resources and Vice
President Performance & Reward to attend meetings to respond to specific questions raised by the Committee. This specifically excludes any matter concerning their own personal remuneration. The Remuneration Report on pages 43 to 54 includes details of remuneration policy and practices, and the remuneration of Directors.




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|38 |  | CORPORATE
        GOVERNANCE | 
|-- |  | ---------------------------- | 
|   |  |                              | 

Audit CommitteeThe Audit Committee assists the Board in the discharge of its responsibilities for corporate governance, financial reporting and corporate control. It met on four occasions in 2004. The Committee comprises the
  independent NEDs under the chairmanship of Mr Gorman. The dates on which these individuals were first appointed to the Committee are as follows: J T Gorman
   September 2000A Baan
   June 2001Lord Butler
   July 1998R N Haythornthwaite
   February 2001Baroness Noakes
   March 2004 The Board has determined that Mr Gorman and Baroness Noakes are the Audit Committees financial experts. Regular attendees at Audit Committee meetings, at the invitation of the Chairman of the Committee, include: the Chairman, Chief Executive, Chief Financial Officer, Chief Internal Auditor, Group Financial Controller and
the General Counsel. The Committee regularly meets with the external and internal auditors without the presence of management.


Audit and internal control
In accordance with the Turnbull Guidance on internal control, the Board confirms that there is a process for identifying, evaluating and managing the significant risks to the achievement of the Groups strategic objectives. The process has been in place throughout 2004 and up to the date of approval of the Annual Report and Accounts, and accords with the Turnbull Guidance. The
effectiveness of this process has been reviewed regularly by the Audit Committee which reports its findings for consideration by the Board. The processes used by the Audit Committee to review the effectiveness of the system of internal control include: 
   Discussions with management on risk areas identified by management and/or the audit process;
   The review of internal and external audit plans;
   The review of significant issues arising from internal and external audits;
   The review of management processes for significant Group risks defined by the full Board on the basis of proposals from the Group Risk Committee (GRC);
   Annual compliance statements from each business and major function. The Audit Committee reports to the Board the results of its review of the risk management process for the full Group risk register. The full Board reviews the Group risk register. The Board then draws its collective
conclusions as to the effectiveness of the system of internal control. The GRC consolidates and prioritises for the Board the inputs received from management of the businesses and corporate functions. The GRC comprises the heads of major corporate functions, the Chief Internal Auditor and
the Deputy General Counsel. The GRC reviews input from the businesses and corporate management and reports its conclusions to the Audit Committee. The internal audit function reviews internal controls in all key activities of the Group, typically over a three year cycle. It acts as a service to the businesses by assisting with the continuous improvement of
controls and procedures. Actions are agreed in response to its recommendations and these are followed up to ensure that satisfactory control is maintained. Quarterly reviews are also conducted between internal audit management and the senior
management of the businesses to assess their current control status and to identify and address any areas of concern. The Board is responsible for maintaining and reviewing the effectiveness of the Groups system of internal controls. The internal control
systems are designed to meet the Groups particular needs and the risks to which it is exposed. They are designed to manage rather than eliminate the risk to the
achievement of business objectives, and can only provide reasonable and not absolute assurance against misstatement or loss. The Groups strategic direction is regularly reviewed by the Board.


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    ACCOUNTS 2004

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| |  | CORPORATE GOVERNANCE |  | 39
| |  | -------------------- |  | --
| |  |                      |  |   

Annual plans and performance targets for each business are set by the Chief Executive and are reviewed in total by the Board in the light of the Groups overall objectives. The processes to identify and manage the key risks to the success of the Group are an integral part of the internal control environment. Such processes include strategic planning, the appointment of senior managers,
the regular monitoring of performance, control over capital expenditure and investments and the setting of high standards and targets for safety, health and environmental performance. Businesses are responsible for meeting the defined reporting
timetables and compliance with Group accounting manuals which set out accounting policies, controls and definitions. The Chief Executive receives a monthly summary of financial results from each business, and the Groups published quarterly financial
information is based on a standardised and timely reporting process. Responsibility for monitoring compliance with Group policies and guidelines rests with the chief executive officers of the businesses and with senior managers at the Corporate Centre. Annual statements of compliance
are provided to the Board, and these statements are reviewed by the relevant functional leader for each policy area. In turn, there is an annual report to the Audit Committee, on behalf of the Board, on the degree of compliance with Group policies
and guidelines. Corrections to any weaknesses found are monitored and controls are developed to match changing circumstances.





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|ICI ANNUAL REPORT AND
    ACCOUNTS 2004

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|40 |  | CORPORATE GOVERNANCE | 
|-- |  | -------------------- | 
|   |  |                      | 

Principles of business conductAs a leading international company, ICIs
reputation for high ethical standards is central to its business success. A Code
of Business Conduct which provides guidance in this area has been communicated
throughout the Group and a confidential, independently operated, whistle-blowing
service is also provided to enable staff to report any suspected non-compliance.
The Code is
published on the Companys website (www.ici.com) and is available in paper
form from the Company Secretariat on request.





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|ICI ANNUAL REPORT AND
    ACCOUNTS 2004

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|44 |  | REMUNERATION REPORT
|-- |  | -------------------
|   |  |                    

2005 Remuneration structure Performance Growth Plan (PGP)The PGP makes conditional awards
  of ICI shares to Executive Directors which are linked to performance over a
  fixed three-year period, measured as follows: •
    for the Chief Executive and
      Chief Financial Officer, the number of shares earned under the PGP will
      depend wholly on the Total Shareholder Return (TSR) for ICI relative to
      the TSR of each of the companies in ICIs
      Peer Group as set out below. TSR is the change in share price plus reinvested
      dividends;•
    for the other Executive Directors,
      each of whom has responsibility for the performance of one of ICIs
      International Businesses, reward will also be based on the performance of
      their Business:•
    50% of their award will be based on the
      TSR performance of the Company relative to the Peer Group;•
    the other 50% of their award will depend
      on the Economic Profit performance over three years of the Business for
      which the Executive Director is responsible. Economic Profit is based on
      profit after tax less a charge for the use of capital.


•
    in addition, the Remuneration Committee
      must be satisfied that the underlying profit performance of ICI is sufficient
      to justify the receipt of shares under the PGP, notwithstanding the relative
      TSR achieved. The Peer Group for the TSR element represents key competitors of ICIs International Businesses and companies comparable to ICI, selected
on the basis of market location, size, portfolio and performance. The Peer Group is approved by the Remuneration Committee with advice from external independent advisers. It is reviewed annually and also on the occasion of a significant event
impacting either ICI or one of the Peer Group companies. The companies for the conditional awards to be made in 2005 are: Air Products and Chemicals, Akzo Nobel, BASF, Ciba Speciality Chemicals, Clariant, Crompton Corporation, Degussa, Dow Chemical,
DSM, Du Pont, Givaudan, International Flavors & Fragrances, Rohm and Haas Company, PPG Industries, The BOC Group and The Sherwin-Williams Company. TSR has been selected as a performance measure as it will reward any relative out-performance of ICI versus its global competitors. TSR is calculated by independent external advisers and approved by the Remuneration
Committee. Economic Profit has been selected as it is a critical measure of profitable growth and efficient use of capital that are significant contributors to the generation of sustainable shareholder value. The Economic Profit
targets for each International Business, which are set by the Remuneration Committee, are designed to be as demanding as the TSR measure. The shares required to make awards under the PGP are provided via a trust funded by ICI. There is no dilution of the Companys issued
share capital as the shares are purchased in the market.




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  2004

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|REMUNERATION
      REPORT |  | 45
|------------------------- |  | --



2004 Actual remuneration Base salaries Salaries for Executive Directors were reviewed
    and increased with effect from 1 January 2004 when individual increases ranged
    from 2.5% to 6.7% with an average increase of 4.9%. Salaries remained around
    the market median. Details are shown in the Directorsemoluments table on page 47. Annual Incentive Plan
    The bonus opportunity available to Executive
    Directors for 2004 for the achievement of on-target performance was 50% of
    base salary, with a maximum opportunity of 100% of base salary for significant
    over-achievement. The targets focused on the delivery of profit, cash generation and key strategic objectives with greatest weighting on the financial measures of profit and cash. For those executives responsible for the performance of
one of ICIs International Businesses, the heaviest weighting was on profit of the executives own business, with the other financial measure being the cash performance of their business. On-target performance and the ranges defining minimum and maximum payment were agreed by the


Remuneration Committee and were set to be appropriately challenging for ICI Group and for each International Business. Indicatively, the financial performance required to achieve maximum payment in 2004 on the profit
measure was 15% greater than the level for on-target performance. Bonus payments to the executives in respect of performance in 2004 reflect the strong performance of ICI Group and the majority of the International Businesses. Profit targets were exceeded by ICI Group and all the
International Businesses. There were high levels of cash generation and most cash flow targets were exceeded. This was achieved in conjunction with effective capital expenditure and good management of working capital throughout the year. The key strategic objectives for 2004 focused on improving performance in specific areas of the business and strengthening the organisation. The executives demonstrated good performance against their key strategic
objectives, with high levels of achievement in the areas of financial management and development of people. The payments under the 2004 Annual Incentive Plan are shown in the Directorsemoluments table on page 47.




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  AND ACCOUNTS 2004

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|46 |  | REMUNERATION REPORT
|-- |  | -------------------



2004 Actual remuneration
  (continued) Long-term incentives For the 2002 to 2004 performance period of the
  Performance Growth Plan, ICIs
  Total Shareholder Return ranked 14 out of the 17 companies in the Peer Group
  and, as a result, all awards under the TSR performance measure for this cycle
  lapsed. Two Directors received awards under the Economic Profit measure of the Performance Growth Plan and these are shown on page 48 together with details of the performance achieved. Share options granted up to and including 2003, under the share option plan approved by shareholders in 1994, were subject to a three-year performance test with subsequent re-testing. This plan has passed its 10-year
approval period and no grants have been made since December 2003. The shares to meet options granted under this plan do not dilute ICIs issued share capital as they
are bought in the market. Share options granted in 2004 were made under a new plan approved by shareholders in 2004. Details of this plan are laid out on page 44 and the performance condition set out on page 50. There is no retesting of the
Performance Condition.


Performance graphs (not subject to audit) The first graph shows ICIs five-year performance versus the Peer Group of companies for the TSR performance condition for PGP
awards.  As required by the disclosure legislation, the second graph illustrates the performance of ICI and abroad equity market
indexover the past five years. The index shown is the FTSE 100 as ICI has been a constituent of this index throughout the five-year period.




ICI ANNUAL REPORT AND ACCOUNTS
  2004

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|REMUNERATION
    REPORT |  | **47**
|----------------------- |  | ------
|                        |  |       

Directors emoluments(audited)

| |                                                      |          |  | Base salary |  | Annual incentive |  | Benefits and other    |  | Compensation for loss |  | Total    | 
| | ---------------------------------------------------- | -------- |  | ----------- |  | ---------------- |  | --------------------- |  | --------------------- |  | -------- | 
| |                                                      |          |  | and fees    |  | payments         |  | emoluments (note 2,3) |  | of office (note 4)    |  | (note 5) | 
| |                                                      |          |  | (note 1)    |  |                  |  |                       |  |                       |  |          | 
| |                                                      |          |  |             |  |                  |  |                       |  |                       |  |          | 
| |                                                      |          |  | 2004        |  | 2003             |  | 2004                  |  | 2003                  |  | 2004     | 
| |                                                      | notes    |  | £000        |  | £000             |  | £000                  |  | £000                  |  | £000     | 
| |                                                      |          |  |             |  |                  |  |                       |  |                       |  |          | 
| | P B Ellwood                                          | 6,7      |  | 240         |  | 51               |  |                       |  |                       |  |          | 
| |                                                      |          |  |             |  |                  |  |                       |  |                       |  |          | 
| | Dr J D G McAdam                                      | 6,8      |  | 640         |  | 522              |  | 609                   |  | 252                   |  | 19       | 
| |                                                      |          |  |             |  |                  |  |                       |  |                       |  |          | 
| | D C M Hamill                                         | 3,6      |  | 390         |  | 25               |  | 289                   |  |                       |  | 113      | 
| |                                                      |          |  |             |  |                  |  |                       |  |                       |  |          | 
| | C F Knott                                            | 1,3,6,11 |  | 124         |  |                  |  | 99                    |  |                       |  | 26       | 
| |                                                      |          |  |             |  |                  |  |                       |  |                       |  |          | 
| | W H Powell                                           | 8,9      |  | 397         |  | 435              |  | 206                   |  | 97                    |  | 13       | 
| |                                                      |          |  |             |  |                  |  |                       |  |                       |  |          | 
| | T A Scott                                            |          |  | 375         |  | 355              |  | 340                   |  | 139                   |  | 24       | 
| |                                                      |          |  |             |  |                  |  |                       |  |                       |  |          | 
| | A Baan                                               | 10       |  | 36          |  | 30               |  |                       |  |                       |  |          | 
| |                                                      |          |  |             |  |                  |  |                       |  |                       |  |          | 
| | Lord Butler                                          | 10       |  | 46          |  | 40               |  |                       |  |                       |  |          | 
| |                                                      |          |  |             |  |                  |  |                       |  |                       |  |          | 
| | J T Gorman                                           | 10       |  | 46          |  | 40               |  |                       |  |                       |  |          | 
| |                                                      |          |  |             |  |                  |  |                       |  |                       |  |          | 
| | R N Haythornthwaite                                  | 10       |  | 46          |  | 40               |  |                       |  |                       |  |          | 
| |                                                      |          |  |             |  |                  |  |                       |  |                       |  |          | 
| | Baroness Noakes                                      | 1,6,10   |  | 30          |  |                  |  |                       |  |                       |  |          | 
| |                                                      |          |  |             |  |                  |  |                       |  |                       |  |          | 
| | Directors who retired or resigned during
       2003 |          |  |             |  |                  |  |                       |  |                       |  |          | 
| |                                                      |          |  |             |  |                  |  |                       |  |                       |  |          | 
| | Lord Trotman                                         | 6        |  |             |  | 200              |  |                       |  |                       |  |          | 
| |                                                      |          |  |             |  |                  |  |                       |  |                       |  |          | 
| | Dr B R O Neill                                      | 4,6      |  |             |  | 178              |  |                       |  |                       |  |          | 
| |                                                      |          |  |             |  |                  |  |                       |  |                       |  |          | 
| | P J Drechsler                                        | 4,6      |  |             |  | 79               |  |                       |  |                       |  |          | 
| |                                                      |          |  |             |  |                  |  |                       |  |                       |  |          | 
| | Total                                                |          |  | 2,370       |  | 1,995            |  | 1,543                 |  | 488                   |  | 195      | 
| |                                                      |          |  |             |  |                  |  |                       |  |                       |  |          | 

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1)  | Base salaries and fees for 2004, included in the table, are the same as the annual base salaries or fees in payment at 31 December 2004 except in respect of Mr C F Knott whose annual base salary,
denominated in sterling, was £364,000 and Baroness Noakes whose annual fee was £36,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(2)  | Benefits include company car, medical insurance and life and long-term disability insurance (where not provided within pension benefit plans).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(3)  | Other emoluments comprise a retirement benefit allowance payable in cash to Mr D C M Hamill (see note 5 to pension benefits table on page 51) and an overseas allowance payable to Mr C F
Knott.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(4)  | Compensation for loss of office, as previously disclosed in the 2003 Remuneration Report, comprises all amounts that were required to be paid under agreements relating to Dr B R ONeill and Mr P J Drechsler in respect of termination of their employment in 2003. As neither Dr ONeill
nor Mr Drechsler obtained alternative employment during the period to which these payments related, there was no mitigation and the amounts agreed were therefore paid in full. No further payments are due to either individual.                                                                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(5)  | No payments were made during 2004 or 2003 in connection with expense allowances paid in respect of qualifying services chargeable to UK income tax.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(6)  | Mr P J Drechsler and Dr B
       R ONeill
       resigned as Executive Directors on 24 March 2003 and 8 April 2003
respectively.Dr J D G McAdam was appointed
as Chief Executive on 9 April 2003, Mr P B Ellwood was appointed as a Non-Executive
Director and Deputy Chairman on 27 June 2003, Mr D C M Hamill was appointed as
an  Executive Director on 8 December 2003, Baroness Noakes was appointed a Non-Executive
Director on 1 March 2004 and Mr C F Knott was appointed as an Executive Director
on1 September 2004. Lord Trotman retired
on  31 December 2003 and Mr Ellwood was appointed Chairman with effect from 1
January 2004. All amounts reported for these individuals are in respect of the
part of the year for which they were employed as Directors.             
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(7)  | During 2004, Mr P B Ellwood elected to receive 30% of his fees in the form of ICI Ordinary Shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(8)  | During the year to 31 December 2004, Dr J D G McAdam received fees as a Non-Executive Director of Severn Trent Plc amounting to £32,500 of which £4,250 was delivered in the form of
Severn Trent Plc ordinary shares. Also during 2004, Mr W H Powell received fees as a Non-Executive Director of Granite Construction Incorporated from the date of his appointment on 22 July 2004 to 31 December 2004 of US$29,350 (£15,954), of
which US$14,675 (£7,992) was delivered in the form of Granite Construction Incorporated stock units. (This note is not subject to audit.)                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(9)  | In 2004 Mr W H Powell received a base salary of US$728,000 (2003 US$710,000). The year on year reduction in the sterling value in the table is due to translation at the average exchange rate (2004
£1 = US$1.832 : 2003 £1 = US$1.63).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(10) | For 2004 the remuneration of NonExecutive Directors comprised an annual fee of £36,000 (2003 £30,000).
An additional £10,000 per annum (2003 £10,000) was paid to the Chairman of Board Committees and to Lord Butler in respect of his position as Senior Independent Director.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(11) | Mr C F Knott has service agreements
       with Quest in both the Netherlands and in the UK. Mr Knotts
       annual base salary
as at31 December 2004 under these agreements
comprised€377,000
and £108,000 respectively. The base salary disclosed is the
total sterling equivalent in respect of the part year Mr Knott was employed as
a Director. Mr Knott also participates in a one-off incentive agreement linked
to the trading profit of Quest over a three-year period ended 31 December 2005.
This  arrangement pre-dates his appointment as an Executive Director and was
agreed in 2003 under the terms of his appointment as Chairman and Chief Executive
of Quest. The maximum payment that relates to his appointment as an Executive
Director is
approximately £40,000.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(12) | The aggregate emoluments paid or payable to directors in respect of qualifying services, which comprise base salary and fees, annual incentive payments, benefits and other emoluments totalled,
£4,108,000 (2003 £2,565,000).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

ICI ANNUAL REPORT AND ACCOUNTS 2004

---



Back to Contents

|**48** |  | REMUNERATION
    REPORT
|------ |  | -----------------------
|       |  |                        

Awards under Performance Growth Plan(audited)

| |                                  |       |  | Date of  | Share price    | Ordinary
        Shares that would be |                           | Maximum number of Ordinary |                          | Performance period | 
| | -------------------------------- | ----- |  | -------- | -------------- | ------------------------------------- | ------------------------- | -------------------------- | ------------------------ | ------------------ | 
| |                                  |       |  | award    | determining    |                                       | awarded for median TSR/on |                            | Shares
        that      |                    | 
| |                                  |       |  |          | award (note 1) |                                       | target Economic Profit    |                            | could
        be awarded |                    | 
| |                                  |       |  |          |                |                                       |                           | performance                |                          |                    | 
| |                                  |       |  |          |                |                                       |                           |                            |                          |                    | 
| |                                  |       |  |          |                |                                       |                           | TSR                        |                          | Economic Profit    | 
| |                                  | notes |  |          |                |                                       |                           | measure                    |                          | measure            | 
| |                                  |       |  |          |                |                                       |                           |                            |                          |                    | 
| | Directors as at 31 December 2004 |      
| |                                  |       |  |          |                |                                       |                           |                            |                          |                    | 
| | Dr J D G McAdam                  | 2     |  | 28.03.02 |                | 3.25                                  |                           | 20,949                     |                          | 20,949             | 
| |                                  |       |  |          |                |                                       |                           |                            |                          |                    | 
| |                                  |       |  | 24.02.03 |                | 2.37                                  |                           | 63,292                     |                          | n/a                | 
| |                                  |       |  |          |                |                                       |                           |                            |                          |                    | 
| |                                  | 3     |  | 11.08.03 |                | 2.37                                  |                           | 29,535                     |                          | n/a                | 
| |                                  |       |  |          |                |                                       |                           |                            |                          |                    | 
| |                                  |       |  | 12.02.04 |                | 2.21                                  |                           | 115,837                    |                          | n/a                | 
| |                                  |       |  |          |                |                                       |                           |                            |                          |                    | 
| | D C M Hamill                     |       |  | 12.02.04 |                | 2.21                                  |                           | 35,294                     |                          | 35,294             | 
| |                                  |       |  |          |                |                                       |                           |                            |                          |                    | 
| | C F Knott                        |       |  | 10.05.03 |                | 2.37                                  |                           | 29,536                     |                          | 29,536             | 
| |                                  |       |  |          |                |                                       |                           |                            |                          |                    | 
| |                                  |       |  | 12.02.04 |                | 2.21                                  |                           | 32,488                     |                          | 32,488             | 
| |                                  |       |  |          |                |                                       |                           |                            |                          |                    | 
| | W H Powell                       | 4     |  | 28.03.02 |                | 3.25                                  |                           | 65,316                     |                          | 65,316             | 
| |                                  |       |  |          |                |                                       |                           |                            |                          |                    | 
| |                                  | 4     |  | 24.02.03 |                | 2.37                                  |                           | 85,144                     |                          | 85,144             | 
| |                                  |       |  |          |                |                                       |                           |                            |                          |                    | 
| |                                  | 4     |  | 12.02.04 |                | 2.21                                  |                           | 78,796                     |                          | 78,796             | 
| |                                  |       |  |          |                |                                       |                           |                            |                          |                    | 
| | T A Scott                        |       |  | 28.03.02 |                | 3.25                                  |                           | 40,050                     |                          | n/a                | 
| |                                  |       |  |          |                |                                       |                           |                            |                          |                    | 
| |                                  |       |  | 24.02.03 |                | 2.37                                  |                           | 59,916                     |                          | n/a                | 
| |                                  |       |  |          |                |                                       |                           |                            |                          |                    | 
| |                                  |       |  | 12.02.04 |                | 2.21                                  |                           | 67,873                     |                          | n/a                | 
| |                                  |       |  |          |                |                                       |                           |                            |                          |                    | 

|(1) | The number of shares comprising the PGP awards is determined by the average share price of ICI Ordinary Shares for the three days preceding the date of grant. Prior to 2004 it was determined by the
average share price for the month of December prior to the commencement of the performance period. In the case of the grants made on 28 March 2002 the December average share price shown in the table has been adjusted for the effect of the 2002
Rights Issue. In accordance with the disclosure legislation the Company is required to state the market price of its shares on the date of the award and these were as follows: 28 March 2002 £3.42, 24 February 2003 £1.57, 11 August 2003
£1.63 and 12 February 2004 £2.22.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(2) | Award made when Dr J D G McAdam was Chairman and Chief Executive of ICI Paints, with 50% of the award based on the Economic Profit performance of the Paints business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(3) | On appointment as Chief Executive in 2003, Dr J D G McAdam received a supplementary award in accordance with the increase in his salary on appointment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(4) | Mr W H Powells awards are in the form of ADRs, but for the purpose of this table have been disclosed in terms of
Ordinary Share equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(5) | No variations to awards were made during 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

Shares vested under the Performance Growth Plan(audited)

The following shares in respect of the performance period 1 January 2002 to 31 December 2004 vested on 11 February 2005.

|          |                 | Ordinary Shares vested |         | Percentage of maximum number of Ordinary |                             
|--------- | --------------- | ---------------------- | ------- | ---------------------------------------- | ----------------------------
|          |                 |                        |         |                                          | Shares that could be awarded
|Number    | Share price at  | Value of shares        | TSR     |                                          | Economic                    
|of shares | date of         | at date of             | measure | Profit                                   |                             
|vested    | vesting         | vesting                |         | measure                                  |                             
|          | £               | £                      | %       | %                                        | %                           
|          |                 |                        |         |                                          |                             
|          | Dr J D G McAdam | 41,898                 |         | 2.75                                     |                             
|          |                 |                        |         |                                          |                             
|          | Mr W H Powell   | 37,132                 |         | 2.75                                     |                             
|          |                 |                        |         |                                          |                             

For comparative purposes, the value of shares vesting in 2003 was £43,792.

The award vesting to Dr J D G McAdam is in respect of his employment as the Chairman and Chief Executive of ICI Paints. Growth in Economic Profit for ICI Paints was above the maximum level set for the Business and this
is reflected in the shares vested to Dr McAdam. The award vesting to Mr W H Powell reflects the NCV performance of National Starch. This was between the target and threshold level for vesting that was set at the start of the 2002-2004 performance
cycle. The award to Mr Powell was made in the form of ADRs but for the purposes of this table have been disclosed in the form of Ordinary Share equivalents at the price of ICI shares on the date of vesting. The award to Mr T A Scott lapsed. The
awards to Dr McAdam and Mr Powell based on the TSR condition also lapsed.

Prior to being appointed as a Director, Mr C F Knott participated in a cash based long-term incentive plan operated by National Starch. The performance period relating to this award made in 2002 ended on 31 December
2004. Mr Knott will receive US$25,267 in respect of his service as a Director during the performance period due to the Economic Profit performance of the National Starch business, which was as laid out above in respect of the shares vesting to Mr W
H Powell.



ICI ANNUAL REPORT AND ACCOUNTS 2004

---



Back to Contents

|REMUNERATION
          REPORT |  | **49**
|----------------------------- |  | ------
|                              |  |       

Directors interests in share
options(audited)

Grants during 2004 were made subject to a sliding scale performance condition that determines the number of shares that could vest. The condition is set out on page 50.

No gains were realised on the exercise of share options during 2004 or 2003.

| |                                  |       | Options                |                     | Options  |           | Options |           |    |                                                 |   |          |  |          |  |               |  |         
| | -------------------------------- | ----- | ---------------------- | ------------------- | -------- | --------- | ------- | --------- | -- | ----------------------------------------------- | - | -------- |  | -------- |  | ------------- |  | --------
| |                                  |       | outstanding
        at |                     | granted  |           | lapsed  |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       | 1
        January 2004 | during
        2004 |          | during    |         |           |    | Options outstanding at 31 December
        2004 |   |          | 
| |                                  |       | or
        date of     |                     | (note 2) |           | 2004    |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       | appointment            |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       |                        | (note 1,2)          |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       |                        | Number of           |          | Number of |         | Number of |    | Number of                                       |   | Exercise |  | Date of  |  | Earliest date |  | Latest  
| |                                  |       |                        | shares              |          | shares    |         | shares    |    | shares                                          |   | price    |  | grant    |  | from which    |  | expiry  
| |                                  |       |                        |                     |          |           |         |           |    | (note 3,4)                                      |   |          |  |          |  | exercisable   |  | date    
| |                                  | notes |                        |                     |          |           |         |           |    |                                                 |   | £        |  |          |  | (note 5)      |  |         
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| | Directors as at 31 December 2004 |      
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| | Dr J D G McAdam                  |       |                        | 24,545              |          |           |         |           |    | 24,545                                          |   | 10.077   |  | 18.05.98 |  | 18.05.01      |  | 17.05.08
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  | 6     |                        | 108,121             |          |           |         |           |    | 108,121                                         |   | 5.454    |  | 29.04.99 |  | 29.04.02      |  | 28.04.09
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       |                        | 90,416              |          |           |         |           |    | 90,416                                          |   | 4.242    |  | 21.02.00 |  | 21.02.03      |  | 20.02.10
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       |                        | 138,564             |          |           |         |           |    | 138,564                                         |   | 4.292    |  | 05.03.01 |  | 05.03.04      |  | 04.03.11
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       |                        | 149,647             |          |           |         |           |    | 149,647                                         |   | 2.840    |  | 13.03.02 |  | 13.03.05      |  | 12.03.12
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       |                        | 465,251             |          |           |         |           |    | 465,251                                         |   | 1.340    |  | 17.03.03 |  | 17.03.06      |  | 16.03.13
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  | 7     |                        | 654,761             |          |           |         |           |    | 654,761                                         |   | 1.680    |  | 11.08.03 |  | 11.08.06      |  | 10.08.13
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       |                        |                     |          | 831,168   |         |           |    | 831,168                                         |   | 2.310    |  | 30.06.04 |  | 30.06.07      |  | 29.06.14
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       |                        | 8,145               |         |           |         |           |    | 8,145                                           |  | 1.580    |  | 11.12.03 |  | 01.02.09      |  | 31.07.09
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| | C F Knott                        |       |                        | 10,909              |          |           |         |           |    | 10,909                                          |   | 10.077   |  | 18.05.98 |  | 18.05.01      |  | 17.05.08
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       |                        | 40,825              |          |           |         |           |    | 40,825                                          |   | 4.333    |  | 08.03.99 |  | 08.03.02      |  | 07.03.09
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       |                        | 47,535              |          |           |         |           |    | 47,535                                          |   | 4.242    |  | 21.02.00 |  | 21.02.03      |  | 20.02.10
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       |                        | 138,564             |          |           |         |           |    | 138,564                                         |   | 4.292    |  | 05.03.01 |  | 05.03.04      |  | 04.03.11
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  | 8     |                        | 154,448             |          |           |         |           |    | 154,448                                         |   | 2.840    |  | 13.03.02 |  | 13.03.05      |  | 12.03.12
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  | 8     |                        | 394,288             |          |           |         |           |    | 394,288                                         |   | 1.340    |  | 17.03.03 |  | 17.03.06      |  | 16.03.13
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  | 9     |                        |                     |          | 466,233   |         |           |    | 466,233                                         |   | 2.310    |  | 30.06.04 |  | 30.06.07      |  | 29.06.14
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| | D C M Hamill                     |       |                        | 386,138             |          |           |         |           |    | 386,138                                         |   | 2.020    |  | 10.12.03 |  | 10.12.06      |  | 09.12.13
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       |                        |                     |          | 506,493   |         |           |    | 506,493                                         |   | 2.310    |  | 30.06.04 |  | 30.06.07      |  | 29.06.14
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| | W H Powell                       | 4,8   |                        | 39,104              |          |           |         |           |    | 39,104                                          |   | 8.466    |  | 04.08.97 |  | 04.08.00      |  | 03.08.07
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  | 8     |                        | 31,284              |          |           |         |           |    | 31,284                                          |   | 10.077   |  | 18.05.98 |  | 18.05.01      |  | 17.05.08
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  | 8     |                        | 92,380              |          |           |         |           |    | 92,380                                          |   | 4.482    |  | 08.03.99 |  | 08.03.02      |  | 07.03.09
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  | 8     |                        | 98,708              |          |           |         |           |    | 98,708                                          |   | 5.690    |  | 28.05.99 |  | 28.05.02      |  | 27.05.09
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  | 8     |                        | 192,696             |          |           |         |           |    | 192,696                                         |   | 4.242    |  | 21.02.00 |  | 21.02.03      |  | 20.02.10
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  | 8     |                        | 272,816             |          |           |         |           |    | 272,816                                         |   | 4.292    |  | 05.03.01 |  | 05.03.04      |  | 04.03.11
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  | 8     |                        | 337,452             |          |           |         |           |    | 337,452                                         |   | 2.840    |  | 13.03.02 |  | 13.03.05      |  | 12.03.12
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  | 8     |                        | 820,808             |          |           |         |           |    | 820,808                                         |   | 1.340    |  | 17.03.03 |  | 17.03.06      |  | 16.03.13
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  | 8     |                        |                     |          | 778,608   |         |           |    | 778,608                                         |   | 2.310    |  | 30.06.04 |  | 30.06.07      |  | 29.06.14
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| | T A Scott                        |       |                        | 9,863               |          |           |         |           |    | 9,863                                           |   | 10.077   |  | 18.05.98 |  | 18.05.01      |  | 17.05.08
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  | 6     |                        | 25,311              |          |           |         |           |    | 25,311                                          |   | 5.454    |  | 29.04.99 |  | 29.04.02      |  | 28.04.09
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       |                        | 46,386              |          |           |         |           |    | 46,386                                          |   | 4.242    |  | 21.02.00 |  | 21.02.03      |  | 20.02.10
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       |                        | 116,440             |          |           |         |           |    | 116,440                                         |   | 4.292    |  | 05.03.01 |  | 05.03.04      |  | 04.03.11
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       |                        | 143,045             |          |           |         |           |    | 143,045                                         |   | 2.840    |  | 13.03.02 |  | 13.03.05      |  | 12.03.12
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       |                        | 440,438             |          |           |         |           |    | 440,438                                         |   | 1.340    |  | 17.03.03 |  | 17.03.06      |  | 16.03.13
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       |                        |                     |          | 487,012   |         |           |    | 487,012                                         |   | 2.310    |  | 30.06.04 |  | 30.06.07      |  | 29.06.14
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       |                        | 2,412               |         |           |         | (2,412    | ) |                                                 |   | 3.943    |  | 02.10.98 |  | 01.12.03      |  | 31.05.04
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       |                        | 1,367               |         |           |         |           |    | 1,367                                           |  | 4.092    |  | 26.11.99 |  | 01.02.05      |  | 31.07.05
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       |                        | 532                 |         |           |         |           |    | 532                                             |  | 3.038    |  | 08.12.00 |  | 01.02.06      |  | 31.07.06
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         
| |                                  |       |                        | 4,694               |         |           |         |           |    | 4,694                                           |  | 1.580    |  | 11.12.03 |  | 01.02.09      |  | 31.07.09
| |                                  |       |                        |                     |          |           |         |           |    |                                                 |   |          |  |          |  |               |  |         

|   | Grants awarded under a UK
       all-employee Sharesave Scheme in which UK Executive Directors could participate.
       No performance conditions are attached to options granted under this scheme
       as
it is an all-employee share option scheme.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                          
|(1) | No variations were made to Directorsoptions or the terms and conditions of any Directorsoptions during the year 2004 or the period ended 14 February 2005.                                                                                             
|    |                                                                                                                                                                                                                                                          
|(2) | No amount was paid for the award of any options.                                                                                                                                                                                                         

ICI ANNUAL REPORT AND ACCOUNTS 2004

---



Back to Contents

|50 |  | REMUNERATION
        REPORT | 
|-- |  | --------------------------- | 
|   |  |                             | 

Directors interests
      in share options (continued)(audited)

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                            
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------
|(3)  | Grants under the Executive
    Share Option Plan in 2004 were made subject to the following sliding scale
    performance condition:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                            
|     | Percentage of shares vesting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Earnings Per Share for 2006
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                            
|     | Nil                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | less than 25.0p            
|     | 33.3%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 25.0p                      
|     | 66.7%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 27.9p                      
|     | 100.0%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 30.7p                      
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                            
|     | There
        is no retesting of the condition after the three year performance period.
        The EPS figures that determine vesting, as laid out above in the Performance
        Condition, are quoted under current accounting standards and will require
        restatement when International Financial Reporting Standards are adopted
        in full. The Remuneration Committee will ensure that the adjustments
    made are fair and equitable.                                                                                                                                                                                                                                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(4)  | Grants made under the share
        option scheme prior to 2004 were made subject to an EPS performance condition
        that over a three-year period in the life of the option the growth in
        ICIs EPS (excluding
        amortisation of goodwill and exceptional items) must be equal to, or
        greater than, the increase in the UK Retail Prices Index plus 3% per
        annum. Options granted in 2000, 2001 and 2002 have failed to meet their
        performance condition to date. The performance conditions relating to
        these options will be retested in 2006. The grant to Mr W H Powell in
        1997 is an exception as it was made before he was appointed a Director
        and is not subject to a performance condition, in accordance with ICIs
    practice in the USA at that time.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(5)  | The earliest
        date from which an option is exercisable is subject to any outstanding
    performance condition being met.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(6)  | In accordance
        with the Listing Rules of the Financial Services Authority, the annual
        grant of share options made on 29 April 1999 to certain Executive Directors
        involved with the then proposed disposal of businesses to Huntsman ICI
        Holdings LLC was delayed. As a result of this delay, those participants
        were granted fewer options at a higher exercise price than would have
        been the case had the grants been made to them at the same time as they
        were made to all other participants at an exercise price of £4.33
        (adjusted for the Rights Issue). The Remuneration Committee decided that
        those individuals so affected should receive the same gross gain at the
        time they exercise their
options as if the grant had not been delayed.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(7)  | Following his
        appointment as Chief Executive in 2003, Dr J D G McAdam received a one-off
    option grant of two times salary in addition to his annual grant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(8)  | Awards made in
        the form of Stock Appreciation Rights, denominated in ADRs, that for
        the purpose of this table have been disclosed in terms of Ordinary Share
        option equivalents at the price of the ICI shares at the date of grant.
    Any gain on exercise of these awards is delivered in the form of ADRs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(9)  | The grant to
        Mr C F Knott that was made in 2004 was prior to his date of appointment
    as an Executive Director.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(10) | The market price
        of the shares at 31 December 2004 was £2.41 and the range during
        2004 was £1.93 to £2.47. The Register of DirectorsInterests
        (which is open to inspection by shareholders) contains full details of
        Directorsshareholdings
        and options to subscribe
for shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(11) | The Chairman
    and Non-Executive Directors are not eligible for share option grants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(12) | During the period
        1 January 2005 to 14 February 2005 there were no changes in the interests
    of Directors in options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(13) | The total number
        of options to be satisfied by the issue of new shares, which is relevant
        to dilution limits of the share capital in issue, is in respect of grants
        made under the UK all-employee Sharesave Scheme and the 2004 Executive
        Share Option Plan. There are limits on the number of newly issued shares
        that can be used to satisfy awards under this scheme together with all
        of the Groups other share schemes
        in any 10 year period. The limits and the Groups
        current position against those
limits are set out below.                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| | Limit                                    | Current Position | 
| | ---------------------------------------- | ---------------- | 
| | 5% of Group s share
    capital can be  | 0.3% used        | 
| | used for discretionary share
    schemes |                  | 
| |                                          |                  | 
| | 10% of Group s share
    capital can be | 1.1% used        | 
| | used for all share schemes               |                  | 
| |                                          |                  | 

| | The total number of shares committed
        under all ICI share option schemes during the three years to 31 December
        2004 is set out in note 23 to the Accounts on page 90. Between 1994 and
        2003 all discretionary share schemes have operated using shares purchased
        in the market by an employee benefit trust. Details of shares held in
        this trust are on
page 89.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                       
|---------------------------------------
|ICI ANNUAL REPORT AND
    ACCOUNTS 2004

---



Back to Contents

| |  | REMUNERATION REPORT |  | 51
| |  | ------------------- |  | --
| |  |                     |  |   

Retirement benefits
  Details of the accrued pension to which each Director is entitled on leaving service, and the transfer value of those accrued pensions are shown in the table below. A transfer value is the present value lump sum
equivalent of the accrued pension and is calculated in accordance with the Guidance Note published by the Institute and Faculty of Actuaries (GN 11).

Directors pension benefits
(audited)

| |                 |       |  |            |   | Defined benefit
        pension plans |  |                |  |                | Defined contribution |               
| | --------------- | ----- |  | ---------- | - | ------------------------------------- |  | -------------- |  | -------------- | -------------------- | --------------
| |                 |       |  |            |   |                                       |  |                |  |                |                      |               
| |                 |       |  |            |   |                                       | 
| |                 |       |  | Additional |   | Accrued                               |  | Transfer value |  | Transfer value |                      | Increase in   
| |                 |       |  | pension    |   | pension at                            |  | of accrued     |  | of accrued     |                      | transfer value
| |                 |       |  | accrued    |   | 31 December                           |  | pension at     |  | pension at     |                      | of accrued    
| |                 |       |  | in 2004    |   | 2004                                  |  | 1 January      |  | 31 December    |                      | pension       
| |                 |       |  | (note 1)   |   | (note 2)                              |  | 2004           |  | 2004           |                      | during year   
| |                 |       |  |            |   |                                       |  |                |  |                |                      | (note 3)      
| |                 | notes |  | £000 p.a.  |   | £000 p.a.                             |  | £000           |  | £000           |                      | £000          
| |                 |       |  |            |   |                                       |  |                |  |                |                      |               
| | Dr J D G McAdam | 3,4   |  | 100        |   | 462                                   |  | 5,276          |  | 7,369          |                      | 2,050         
| |                 |       |  |            |   |                                       |  |                |  |                |                      |               
| | D C M Hamill    | 5     |  | n/a        |   | n/a                                   |  | n/a            |  | n/a            |                      | n/a           
| |                 |       |  |            |   |                                       |  |                |  |                |                      |               
| | C F Knott       | 4,6   |  | 5          |   | 182                                   |  | 1,818          |  | 2,008          |                      | 184           
| |                 |       |  |            |   |                                       |  |                |  |                |                      |               
| | W H Powell      | 7     |  | (6         | ) | 292                                   |  | 4,051          |  | 3,975          |                      | (76           
| |                 |       |  |            |   |                                       |  |                |  |                |                      |               
| | T A Scott       | 4     |  | 16         |   | 158                                   |  | 1,032          |  | 1,239          |                      | 182           
| |                 |       |  |            |   |                                       |  |                |  |                |                      |               

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The additional annual pension accrued during the year (or since appointment as an Executive Director), payable at normal retirement age.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(2) | The accrued annual pension at the end of the year, payable at normal retirement age.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(3) | The transfer value calculations take into account the combined effect of notional interest and the individuals age
which will typically increase transfer values by 8%-9% year on year. Additional factors that impact the transfer values (which are net of contributions by Directors) over the year reflect any changes in pensionable pay and the service of each
Director as well as changes in actuarial assumptions, particularly for equity and bond returns. For Dr J D G McAdam approximately 20% of the increase in transfer value reflects the increase in salary on his promotion to Chief Executive in 2003 and
the effect of this on his 30 years accrued pensionable service. This increase is in accordance with the rules of the ICI Specialty Chemicals Pension Fund.                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(4) | Dr J D G McAdam, Mr T A Scott and Mr C F Knott participate in the ICI Specialty Chemicals Pension Fund. Pensionable salary under this plan includes annual bonus, subject to a maximum of 20% of base
salary for Dr McAdam and 15% of base salary for Mr Scott and Mr Knott. The pensionable element of bonus is particular to these three Executive Directors and reflects their terms of employment and continuous pensionable service prior to their
transfer from Unilever to ICI in 1997, on the acquisition of certain specialty chemicals businesses. This pensionable bonus element entitlement has been frozen since the time of transfer and has not been increased in line with promotion or increases
in ICIs bonus levels.                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(5) | Mr D C M Hamill participates in the ICI UK Retirement Plan, a defined contribution plan, in respect of base salary up to the Inland Revenue earnings cap (currently £102,000 for 2004/5). He
also receives a retirement benefits allowance, payable in cash and subject to income tax, in respect of base salary above this cap. This allowance is reported in the Directorsemoluments table on page 47 and for the 2004 period totalled £86,625 (2003 £5,073 for the period from date of his appointment on 8 December 2003).                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(6) | The transfer value for Mr C F Knott shown in the column headedTransfer value of accrued pension at 1 January
2004is for his accrued pension at his date of appointment on 1 September 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(7) | Mr W H Powell participates in the National Starch and Chemical Company Pension Plan for Salaried Employees and the Supplementary Retirement and Savings Plan of National Starch and Chemical Company.
Under these Plans, pension is based on average pay, including annual bonus, during the previous five years, during which time Mr Powell was promoted to Chairman and Chief Executive Officer of National Starch and Chemical Company. He also
participates in two defined contribution plans, for which the employers contributions are set out above. Mr Powells figures reflect not only the change in value of benefits but also movements in exchange rates used for the translation to sterling (2004 £1 = US$1.832 : 2003 £1 = US$1.63).
The actual additional pension accrued in the year was US$31,779 and the actual transfer value increased over the year by US$455,009.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(8) | The Listing Rules of the Financial Services Authority require disclosure above and beyond that set out in the Companies Act. Specifically the following disclosures for defined benefit plans which
are calculated on an alternative basis to those disclosed in the table above. Additional annual pension accrued in 2004 (net of inflation): Dr J D G McAdam £88,660; Mr T A Scott £11,280; Mr C F Knott £2,840; Mr W H Powell
(£6,480). Transfer values at 31 December 2004 of the increase in accrued pension (net of inflation and contributions by the Director): Dr McAdam £1,379,200; Mr Scott £63,800; Mr Knott £25,500; Mr Powell
(£75,659).                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(9) | In 2003 there were three Directors for whom retirement benefits were accruing in respect of qualifying service under money purchase schemes (defined contribution schemes) and five Directors under
defined benefit schemes. Contributions made to money purchase schemes in 2003 in respect of Directors totalled £63,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

UK Inland Revenue pensions simplification tax regime
The Remuneration Committee has agreed ICIs approach in response to the UK pensions simplification legislation, which will become
effective on 1 April 2006, for those Executive Directors who are members of UK pension plans. Such Executive Directors will be given the option of either:

| | maintaining the existing pension promise, in which case the executive would take personal responsibility for any additional taxation arising, or                                                                            
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                             
| | ceasing to accrue pension benefits in respect of future service and instead receiving a cash retirement benefit allowance, subject to income taxation. Past service benefits would remain linked to
future salary increases.

This is in line with ICIs defined contribution benefits policy and the level of retirement benefit allowance payable will be in line
with existing contribution rates to the ICI UK defined contribution plan.

|ICI ANNUAL REPORT AND
        ACCOUNTS
2004
|-------------------------------------------

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|52 |  | REMUNERATION REPORT | 
|-- |  | ------------------- | 
|   |  |                     | 

Directors interests
in shares(audited)

| |                     | notes |             | 1 January |  | 31 December | 
| | ------------------- | ----- | ----------- | --------- |  | ----------- | 
| | 2004                | 2004 
| | or date of          |      
| | ICI Ordinary Shares |       | appointment |          
| |                     |       |             |           |  |             | 
| | P B Ellwood         |       |             | 6,746     |  | 25,241      | 
| |                     |       |             |           |  |             | 
| | Dr J D G McAdam     | 1     |             | 111,068   |  | 131,156     | 
| |                     |       |             |           |  |             | 
| | D C M Hamill        | 1,2   |             |          |  |            | 
| |                     |       |             |           |  |             | 
| | C F Knott           | 1     |             | 88,529    |  | 88,529      | 
| |                     |       |             |           |  |             | 
| | W H Powell          | 1,3   |             | 76,012    |  | 76,012      | 
| |                     |       |             |           |  |             | 
| | T A Scott           | 1     |             | 46,648    |  | 46,648      | 
| |                     |       |             |           |  |             | 
| | A Baan              |       |             | 10,000    |  | 14,000      | 
| |                     |       |             |           |  |             | 
| | Lord Butler         |       |             | 1,636     |  | 1,636       | 
| |                     |       |             |           |  |             | 
| | J T Gorman          | 4     |             | 14,184    |  | 14,184      | 
| |                     |       |             |           |  |             | 
| | R N Haythornthwaite |       |             | 12,791    |  | 12,791      | 
| |                     |       |             |           |  |             | 
| | Baroness Noakes     |       |             |          |  | 13,600      | 
| |                     |       |             |           |  |             | 

Consistent with the policy on personal shareholding, no Executive Directors have disposed of shares acquired via Company share-based plans except to meet consequent income tax liabilities.

All shares held by Directors are held beneficially.

In addition to the interests in the table above, on 11 February 2005 Dr J D G McAdam and Mr W H Powell became entitled to shares awarded to them under the Performance Growth Plan (PGP), as detailed in the table ofShares vestedon page 48. Dr J D G McAdam, Mr C F Knott, Mr D C M Hamill, Mr W H
Powell and Mr T A Scott have conditional interests in PGP awards made in 2003 and/or 2004, as set out on page 48.

|(1) | Dr J D G McAdam, Mr D C M Hamill, Mr C F Knott, Mr W H Powell and Mr T A Scott are potential beneficiaries of the Companys employee benefit trust, which is used to satisfy awards under the senior staff share plans, and are therefore treated as interested in the 7.8m (2003 8.7m) shares, including ADRs expressed as Ordinary Share equivalents, held by
the trustee at 31 December 2004. Their interests at 14 February 2005 were 7.4m shares.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(2) | Mr D C M Hamills interest in shares as at 14 February 2005 was 3,000 Ordinary Shares.                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(3) | Mr W H Powells interest in shares at 1 January 2004 and at 31 December 2004 comprised 16 Ordinary Shares and 18,999
ADRs (representing 75,996 Ordinary Shares).                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(4) | Mr J T Gormans interest in shares at 1 January 2004 and at 31 December 2004 comprised 3,546 ADRs (representing
14,184 Ordinary Shares).                                                                                                                                                                                                                                                                                                              

During the period 1 January 2005 to 14 February 2005 there were no changes in the interests of Directors in shares other than as set out above in respect of Mr D C M Hamill and in respect of the employee benefit
trust.

|ICI ANNUAL REPORT AND
    ACCOUNTS 2004
|---------------------------------------

---



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|REMUNERATION
      REPORT |  | 53
|------------------------- |  | --



Directors
  service agreements and letters of engagement(not subject to audit)









Executive DirectorsIt is the Remuneration Committees
  policy that Executive Directors are employed on contracts subject to no more
  than 12 monthsnotice, in accordance with current corporate governance best practice. The Remuneration
  Committee strongly endorses the principle of mitigation of damages on early
  termination of a service agreement.

The dates of current Executive Directorsservice agreements, the dates on which their appointments took effect and the current expiry
dates of their agreements are as follows:

| | Executive Directors | Date of service agreement | Effective date | Expiry date                                   
| | ------------------- | ------------------------- | -------------- | ----------------------------------------------
|
| | Dr J D G McAdam     | 14.10.03                  | 09.04.03       | Terminable on 12 months notice               
|
| | D C M Hamill        | 28.10.03                  | 08.12.03       | Terminable on 12 months
      notice         
|
| | C F Knott           | 02.09.04                  | 01.09.04       | Terminable on 12 months notice (note
      1)
|
| | W H Powell          | 17.02.00                  | 02.02.00       | Terminable on 12 months notice (note
      2)
|
| | T A Scott           | 11.05.01                  | 23.05.01       | Terminable on 12 months notice (note
      3)
|

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As set out in Note 11 to the
      table of DirectorsEmoluments,
      Mr C F Knott has two Service Agreements, both dated as set out above. Mr
      Knotts
      appointment as an Executive Director of the Company is non-remunerative
      and is covered by a separate letter of appointment. Mr Knotts
      employment is terminable on 12 monthsnotice from the Company. To comply
      with statutory employment legislation in the Netherlands, Mr Knott is required
      to give six months notice of termination of employment to the Company. An
      ICI subsidiary company in the Netherlands has agreed to provide Mr Knott
      with certain protection against any future loss on disposal of the house
      he has purchased as his residence in the Netherlands. In the event that
      he ceases employment in the Netherlands with an ICI Group company, other
      than by resignation or for a reason relating to his conduct, during a period
      of 10 years from31 August 2003 and
      in the event the house is sold at a price less than the original purchase
      price, the ICI subsidiary will reimburse him for 75% of the difference between
      the sale price and the original purchase price. The exact amount of the
      benefit to him as a result of this arrangement will not be known until the
      house is sold but at the current valuation of the property no reimbursement
      would require to be made.

ICI ANNUAL REPORT AND ACCOUNTS 2004

---



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|54 |  | REMUNERATION REPORT
|-- |  | -------------------

Directors
  service agreements and letters of engagement (continued)(not subject to audit)

Executive Directors(continued)

|(2) | Mr W H Powells
      appointment as an Executive Director of the Company, which is non-remunerative,
      is terminable by either party giving not less than 12 monthsnotice in writing. Mr Powell is separately
      employed by National Starch and Chemical Company as Chairman and Chief Executive
      and this employment is terminable on 12 monthsnotice that may run concurrently.                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(3) | In addition to the normal
      notice provisions, the Company may also terminate Mr T A Scotts
      service agreement at any time with immediate effect on payment in lieu of
      notice equivalent to 12 monthsgross base salary together with the
      gross value of the other benefits Mr Scott is entitled to receive under
      his service agreement (see the table of Directorsemoluments on page 47 for a description
      of these benefits) as at the date of termination.

There are no express provisions for compensation payable upon early termination of an Executive Directors contract other than as
detailed above.

Chairman and Non-Executive Directors

The dates of the Chairmans
    and current NEDs letters of engagement, the date on which their appointment
    took effect and the current expiry dates are as follows:

| | Chairman                    | Date of letter | Effective date | Expiry date                          
| | --------------------------- | -------------- | -------------- | -------------------------------------
| | and Non-Executive Directors | of engagement  |                |                                      
|
| | P B Ellwood                 | 15.12.03       | 01.01.04       | Terminable on 12 months
      notice
|
| | A Baan                      | 24.07.01       | 25.06.01       | (note 1)                             
|
| | Lord Butler                 | 12.06.98       | 01.07.98       | (note 1)                             
|
| | J T Gorman                  | 25.10.00       | 20.09.00       | (note 1)                             
|
| | R N Haythornthwaite         | 22.02.01       | 20.02.01       | (note 1)                             
|
| | Baroness Noakes             | 06.02.04       | 01.03.04       | (note 1)                             
|

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Subject to satisfactory performance,
      NEDs are normally expected to serve two three-year terms commencing with
      the first Annual General Meeting after the date of their appointment. However,
      there may be circumstances where NEDs are invited to remain on the Board
      after the expiry of their second three-year term for a further period of
      up to three years. Any such invitation will be subject to the Director in
      question standing for annual re-election by shareholders. NEDs have no right
      to compensation on the early termination of their appointment.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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ICI ANNUAL REPORT AND ACCOUNTS 2004

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|122 |  | TRANSITION TO INTERNATIONAL
      FINANCIAL REPORTING STANDARDS
|--- |  | ---------------------------------------------------------------

Transition to International
  Financial Reporting Standards



ICI will be reporting its financial results
  in accordance with International Financial Reporting Standards (IFRS)
  as adopted by the European Union (EU) from 1 January 2005. The transition date for adoption of IFRS is
  determined in accordance with IFRS 1First
  Time Adopting of International Financial Reporting Standards, and has provisionally been determined as 1 January 2004. However,
  this transition date is subject to finalisation of the Securities and Exchange
  Commission (SEC) proposed
  rule for an exemption from provision of a second year of comparatives. If the
  SEC does not confirm this exemption, or the conditions are unduly onerous or
  impractical for the Group, the transition date will be 1 January 2003. As noted in the 2003 Annual Report, the Group
  established a project team and Steering Committee to oversee the transition
  to IFRS. The project comprised a number of workstreams covering the areas identified
  as being impacted by the move to IFRS. There were fourteen of these workstreams
  covering key specific areas such as financial instruments, foreign exchange,
  share options, pensions and other areas such as Group policy databases, budget
  processes, systems and controls, training, presentation of accounts and investor
  relations. The project team completed an impact analysis
  of each standard, which identified the main differences between the Groups
  existing accounting policies and IFRS, the effect on the reporting process and
  the system changes required. The Groups consolidation system was modified
  to comply with IFRS. Training on IFRS was delivered to key finance staff throughout
  the Group. The key areas identified that affect the Group
  accounts under IFRS are as follows: IAS 19  Employee benefitsThe Group will measure pension commitments
    and other related benefits in accordance with IAS 19. ICI plans to adopt the
    option in IAS 19 allowing all actuarial gains or losses to be taken directly
    to the statement of recognised income and expense, subject to endorsement
    by the EU. Measurement of the Groups pension commitments and other related
    benefits under IAS 19 is estimated to produce broadly similar results to those
    under FRS 17. Disclosure of the Groups retirement benefit arrangements
  in accordance with FRS 17 is provided in Note 36. IFRS 2  Share-based paymentsThe Group operates a range of share-based incentive
    schemes (both awards of options and shares) for employees that are impacted
    by IFRS 2. Under the Groups current accounting policies, an expense
    has only been recognised for the awards of shares and this expense has been
    calculated and is based on intrinsic value. Under IFRS 2, an expense will
    be recognised in the income statement for all share based payments. This expense
    will be calculated based on the fair value at the date of the award using
  the Black-Scholes pricing model. The Group does not intend to adopt the exemption
  under IFRS 2 to apply the standard only to awards made after 7 November 2002,
  instead a full retrospective approach will be followed in order to provide full
  year on year comparability of results. IFRS 3  Business combinationsThe Group will adopt the exemption in IFRS
    1 to apply IFRS 3 prospectively from the transition date and thus not to restate
    business combinations prior to this date. The Group has not undertaken any
    significant acquisitions since the transition date. The impact on the financial
    statements of adopting this standard is the cessation of amortisation of goodwill,
  which instead will be tested for impairment on transition, and annually thereafter. IAS 21  The effects of changes
        in foreign exchange ratesThe Group has a range of intercompany funding
    arrangements in place in order to optimise the sourcing of finance for the
    Group and optimise the funding of its subsidiaries. Under both UK GAAP and
    IFRS, foreign exchange gains/losses on intra-group loans are recognised in
  the income




statement, unless the loans can be designated
  as part of the Groups investment in its foreign operations, when the exchange
  gains/losses can then be recognised in reserves. However, IFRS is stricter in
  determining which loans can be designated as part of the Groups investment
  in its foreign operations, including exclusion of intra-group loans that are
  not in the functional currency of either the lender or the borrower. Group Treasury
  has taken action to reduce the potential volatility arising from this change
  in accounting treatment. In particular, significant nonfunctional currency loans
  have been re-designated into sterling. In addition to the above, the Group partially
  hedges its net investment in foreign subsidiaries by denominating external debt
  in a mix of foreign currencies. Under UK GAAP, the goodwill, which was offset
  against reserves is included as an asset in this hedge calculation. Under IFRS,
  goodwill in reserves is not designated as an asset and therefore cannot be used
  in the hedging calculation. The exclusion of goodwill in reserves from the assets
  in the hedge calculation will introduce volatility into the income statement
  as a result of the impact of foreign exchange differences arising from movements
  on that part of the debt that cannot be considered a part of the net investment
  hedge. IAS 32 / IAS 39  Financial instrumentsThe Group will take the exemption not to restate
    comparatives for IAS 32Financial
    Instruments: Disclosure and Presentation,
    and IAS 39 Financial Instruments: Recognition and Measurement. As a
    result, the comparative information in the 2005 Financial Statements will
    be presented on the existing UK GAAP basis. The Group will present a reconciliation
    between the closing 2004 balance sheet and the opening 2005 balance sheet
  with the results for the six months to 30 June 2005. The own shares that the Group has acquired,
  or is committed to acquire under forward contracts, to hedge its obligations
  under various share option schemes will be included as treasury stock under
  IAS 32. As the Group has the option to equity settle the forward contracts they
  will be included in treasury stock on transition and no fair valuation will
  be performed on such contracts going forward. The associated liabilities for
  these contracts will be included as part of net debt (for the amount reflecting
  the extent that the contracts are out of the money) and as an other liability
  (for the amount reflecting the current recoverable amount if the contracts were
  to be cash settled). Other mattersIAS 1 does not provide definitive guidance
    on the format of the income statement, but states key lines that should be
    disclosed. It also requires additional line items and headings to be presented
    on the face of the income statement when such presentation is relevant to
    an understanding of the entitys financial performance. IAS 1 explains
    that due to the effects of an entitys various activities, transactions
    and other events differing in frequency, potential for gain or loss and predictability,
    disclosing components of financial performance assists in an understanding
    of the financial performance achieved and in making projections of future
    results. Factors to be considered include materiality and the nature and function
    of the components of income and expense. ICI believes items that were previously
    referred to as exceptional items under UK GAAP should still be
    separately identified to assist in understanding the financial performance
    of the Group. Such items will be included within special items
  under IFRS. Whilst no changes to the segments are required
  beyond the existing International Business level, ICI intends, given the stricter
  definitions and to reflect better the structure of the Group. A reconciling
  item will be included in the Group's segment disclosure that represents Corporate
  and Other costs that are not directly attributable to individual segments i.e.
  largely those relating to operating as a "PLC". Parent Company AccountsICI will to continue to present the Company
    accounts in accordance with UK GAAP for the foreseeable future. Consequently
  Company accounts will be presented separately from the Group accounts.




ICI ANNUAL REPORT AND ACCOUNTS
  2004

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|RISK FACTORS |  | 123
|------------ |  | ---

Risk factors



ICI operates in competitive
  markets. If the Group does not continue to compete in its markets effectively
  by developing innovative products and responding effectively to the activities
  of its competitors, it could lose customers and its results of operations could
  be adversely affected. ICI has a wide portfolio of business units
  competing across a diverse range of geographic and product markets. The Groups
  business may be adversely affected if it does not continue to develop innovative
  products that satisfy customer needs and preferences, develop new technology
  or enhance existing technology that supports product development or provides
  cost or other advantages over its competitors, and attract and retain skilled
  employees that are key to creating new products. Because the Group is subject
  to price competition from its competitors, it must also continue to satisfy
  these objectives while maintaining a competitive cost base. In addition, some of ICIs competitors
  in certain markets are larger and have greater financial resources than the
  Group, which may enable them to deliver products on more attractive terms or
  to invest larger amounts of capital into their businesses, including expenditure
  for research and development. If any of the Groups current or future competitors
  develop proprietary technology that enables them to produce new products or
  services or to deliver existing products or services at a significantly lower
  cost, the Groups products and services could be rendered uneconomical
  or obsolete. While some of the Groups product range
  comprises products and services that are protected by proprietary knowledge
  or patents, some of its businesses use technology that is widely available.
  Accordingly, certain product segments of the Groups business may be vulnerable
  to new competitors and may be adversely affected by increased price competition.
  Any of these developments could lead to a loss of customers and could adversely
  affect the Groups results of operations. The price volatility
      of some of the raw materials ICI uses could adversely affect its results
  of operations. ICI uses significant amounts of various chemicals
  and other materials as raw materials in manufacturing its products. Prices for
  some of these raw materials are volatile and are affected by cyclical movements
  in commodity prices, availability of such raw materials, demand for a variety
  of products which are produced using these raw materials, levels of price competition
  among local and global suppliers and general economic conditions. The Groups
  diverse portfolio of value added products provides some ability to pass on higher
  input prices to its customers, but this ability is, to a large extent, dependent
  upon market conditions. There may be periods of time in which the Group is not
  able to recover increases in the cost of raw materials for some products due
  to weakness in demand for such products or the actions of its competitors. This
  may adversely affect the Groups results of operations. The occurrence of major
      operational problems could have an adverse effect on the Groups results
  of operations and cash flow. The Groups revenues are dependent on
  the continued operation of its various manufacturing facilities. Operational
  risks include: •
      equipment and systems failures;•
      failure to comply with applicable
        regulations and standards and to maintain necessary permits and approvals;•
      raw material supply disruptions;•
      labour force shortages or
        work stoppages;•
      events impeding or increasing
        the cost of transporting products;•
      natural disasters; and•
      terrorist attacks.




While the Group maintains insurance at levels
  that it believes are appropriate for its industry, some of these operational
  risks and problems could result in uninsured losses or liabilities or in losses
  and liabilities in excess of its insurance coverage. The occurrence of major
  operational problems resulting from the above or other events may have an adverse
  effect on the results of operations of a particular manufacturing facility,
  or with respect to certain of these risks, the results of operations and cash
  flow of the Group as a whole. ICI derives a significant
      percentage of its revenue in some of its businesses from sales to major
      customers, and if it is unable to retain these customers, its results of
  operations could be adversely affected. While no single customer accounted for more
  than 10% of Group sales in 2004, sales to major customers in some of its businesses,
  particularly in the Paints and Quest businesses, are significant. ICI believes
  that the wide selling range and nature of the specialty products it supplies
  reduce the potential adverse consequences of the loss of business from any one
  customer for any one of its products or in any one of its businesses. Nevertheless,
  the loss of major customers, without replacement, could have an adverse effect
  on the Groups results of operations. The Groups reliance
      on key suppliers in some of its businesses could result in an adverse effect
  on results of operations. Some of the Groups business units rely
  on a small number of suppliers for their key raw materials. If any of these
  suppliers is unable to meet its obligations or increases its prices, the Group
  may not be able to find a replacement supplier that is able to provide such
  raw materials on similar terms. Consequently, the Group may be forced to pay
  higher prices to obtain raw materials, which it may not be able to pass on to
  its customers in the form of increased prices for its finished products. In
  addition, some of the raw materials used may become unavailable, and there can
  be no assurance that the Group will be able to obtain suitable and cost effective
  substitutes. Furthermore, any consolidation in the industries that supply the
  Groups raw materials could further reduce the number of available suppliers. Any interruption of supply or price increases
  caused by these or other factors, which the Group is not able to mitigate by
  securing satisfactory replacement suppliers, could have an adverse effect on
  its results of operations. ICIs indebtedness
      and resulting leverage could reduce its operational and competitive flexibility,
      increase its vulnerability to adverse economic and industry conditions,
      increase its interest costs and adversely affect results of operations
      and cash flow. ICIs outstanding net indebtedness amounted
    to £920m as of 31 December 2004. ICIs indebtedness could affect
    the Group in adverse ways, in particular by requiring the Group to dedicate
    a significant portion of its operational cash flow to service payments on
    such indebtedness, and by limiting its ability to borrow additional funds
    or refinance existing indebtedness on attractive terms. Furthermore, its indebtedness could increase its vulnerability to adverse
    economic and industry conditions, limit its ability to fund future capital
    expenditures, research and development and other general corporate requirements
    and limit its flexibility to react to changes in its business and the industries
    in which the Group operates. In addition, like many other companies, ICI
  is dependent on its ability to obtain short-term financing to fund a portion
  of its financing requirements. While ICI has access to £718m in committed
  and undrawn bank facilities as of 31 December 2004, limitations on ICIs
  ability to access short-term financing could increase its interest costs and
  could adversely affect its results of operations and cash flow.




ICI ANNUAL REPORT
  AND ACCOUNTS 2004

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|124 |  | RISK FACTORS
|--- |  | ------------

Risk factorscontinued



A decision by the rating
  agencies to downgrade ICIs credit rating would reduce its funding options,
  increase its cost of borrowings and have an adverse impact on results of operations
  and cash flow. A number of factors, some of which are not
  within the Groups control, may, individually or in combination, affect
  the rating agencies view of the Groups credit profile and lead them
  to place the Group on credit watch or downgrade its credit rating, including: •
    a significant deterioration
      in the Groups operating performance;•
    the inability of the Group
      to restore the profitability of its core specialty chemicals business in
      the near term;•
    the incurrence of material,
      unexpected additional cash charges leading to a weakening in cash flow/debt
      metrics;•
    a significant deterioration
      in the economic environment in which the Group operates;•
    the occurrence of any of the
      events described in the other risk factors contained in this Annual Report
      and Accounts. Recently disposed businesses
      may expose ICI to costs that could have an adverse effect on its results
  of operations, cash flow and financial condition. In recent years, ICI has carried out a programme
  of strategic disposals, in the course of which it has given to other parties
  in those transactions certain indemnities, warranties and guarantees, including
  indemnities, warranties and guarantees relating to known and potential latent
  environmental, health and safety liabilities. There are also a number of contracts
  relating to businesses that ICI exited as part of its disposal programme which
  have not been novated to the purchasers of these businesses. ICIs original disposal of the Chlor-Chemicals
  business to Ineos Chlor included an agreement for ICI to provide Ineos Chlor
  with a £100m loan facility. As part of an overall refinancing package
  for Ineos Chlor, ICI agreed on 31 July 2003 to make available new funding of
  £60m alongside £45m of new funding from the Ineos Group and £50m
  of Regional Selective Assistance (RSA) from the UK Government. As
  a consequence of this, the £65m claim previously notified to ICI by Ineos
  Chlor in connection with the original sale of the business has been withdrawn.
  By October 2004 ICI had advanced £105m out of its total funding commitment
  of £160m. In October 2004 Ineos agreed to take over ICIs
  outstanding funding commitments to Ineos Chlor of £55m. ICI wrote off
  all existing indebtedness from Ineos Chlor and took an exceptional charge of
  £5m before tax in its third quarter results. In connection with the sale of the Groups
  50% interest in Teesside Gas Transportation Ltd and Teesside Power Ltd, the
  Group received counter guarantees from Enron Corp. for guarantees that it had
  given (and which currently remain in place) for certain pipeline capacity and
  gas purchase contracts. While the two businesses for which ICI have provided
  these guarantees continue to operate normally, Enron Corp. has filed for Chapter
  11 bankruptcy protection in the United States. As of 31 December 2004, the estimate
  of the Groups maximum potential liability under these guarantees was £312m. The extent to which ICI will be required in
  the future to incur costs under any of the indemnifications, warranties, guarantees
  or contracts discussed above or any similar contractual provision which the
  Group entered into in connection with its disposal programme, is not predictable
  and, if the Group should incur such costs, the costs could have an adverse effect
  on results of operations, cash flow and financial condition.




Risks associated with
      the Groups international operations could adversely affect its results
  of operations. ICI is an international business with operations
  located in over 50 countries and conducts business in many currencies. These
  operations are subject to the risks associated with international operations
  which include: •
    slowdown or recession in global,
      regional or national economic growth;•
    tariffs and trade barriers;•
    exchange controls;•
    fluctuations in national currencies;•
    social and political risks;•
    national and regional labour
      disputes;•
    required compliance with a
      variety of foreign laws, regulations and standards; and•
    the difficulty of enforcing
      legal claims and agreements through some foreign legal systems. Furthermore, some of ICIs businesses
  are subject to cyclical fluctuations in the industries and economies in which
  they operate. Finally, like all international businesses, ICI faces the risk
  of exposure when costs arise in a different currency than sales and the risk
  arising from the need to translate foreign currency denominated profits into
  pounds sterling, the Groups reporting currency. Any of the risks discussed
  above could adversely affect its results of operations. Economic, social and
      political conditions in developing economies could adversely affect the
  Groups results of operations and future growth. ICI has operations in many developing economies
  in Asia and Latin America, and its strategy includes continuing to expand its
  business in these regions. However, many developing economies have recent histories
  of economic, social and political instability brought about by a number of factors,
  including unexpected changes in local laws, regulations and standards, substantial
  depreciation and volatility in national currencies, the imposition of trade
  barriers, and wage and price controls. In particular, ICIs businesses
  in Argentina and Brazil have been, and may continue to be, affected by recent
  economic conditions in those countries. Any of these factors could adversely
  affect ICIs results of operations and future growth. ICIs exposure to
      consumer markets exposes it to legal risks, regulation and potential liabilities
      from product liability claims asserted by consumers which could have an
  adverse effect on results of operations and financial condition. A significant proportion of the Groups
  products is sold directly or indirectly to end-user consumers, even if the Group
  does not itself provide these products directly to consumers. This exposure
  to consumer markets exposes the Group to legal risks, regulation by relevant
  authorities and potential liabilities to consumers of these products, which
  may not be covered by the Groups existing insurance coverage or may exceed
  its insurance coverage. Any of these factors could have an adverse effect on
  the Groups results of operations and financial condition. Certain companies in
      the Group are defendants in various lawsuits which, if successfully asserted
      against them, could have an adverse effect on its results of operations
  and financial condition. Certain companies in the Group are defendants
  in various lawsuits. These lawsuits concern issues such as alleged product liability
  and contract disputes. For a more detailed discussion of these lawsuits, see
  note 39 to the consolidated financial statements.




ICI ANNUAL REPORT AND ACCOUNTS
  2004

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|RISK FACTORS |  | 125
|------------ |  | ---



The Glidden Company (Glidden), a
  wholly owned subsidiary of ICI, is a defendant, along with former lead paint
  and pigment producers as well as other lead product manufacturers and their
  trade associations, in a number of law suits in the United States. These suits
  seek damages for alleged
personal injury caused by lead-based paint or the costs of removing lead-based
  paint. An alleged predecessor of Glidden manufactured lead pigments until the
  1950s and lead-based consumer paint until the 1960s. Glidden is currently a
  defendant in four active suits and is also named in three unserved cases. Glidden
  is unable to quantify the amount being claimed although the suits are likely
  to involve substantial claims for damages. Rulings adverse to Glidden or other
  defendants could lead to
additional claims. The successful assertion of claims made under these or other current or future
lawsuits could have an adverse effect on the Groups
results of operations and financial condition. Violations of environmental, health and safety and other laws, regulations
and standards could restrict the Groups operations, expose it to liability,
increase its costs and have an adverse effect on its results of operations, cash
flow and financial condition. ICI is subject to a broad range of laws, regulations and standards in each of
the jurisdictions where it operates, relating to pollution, the health and safety
of employees, protection of the public, protection of the environment and the
generation, storage, handling, transportation, treatment, disposal and remediation
of hazardous substances and waste materials. These regulations and standards
are becoming increasingly stringent. In the ordinary course of business ICI is subject to inspections and monitoring
by the appropriate enforcement authorities. ICI also requires relevant permits
and approvals for its operations which require compliance with their terms and
which may be subject to renewal, modification and, in some circumstances, revocation. It is the Groups
policy to require that its subsidiaries comply with relevant laws, regulations
and standards. However, violations of applicable laws, regulations and standards,
in particular provisions of environmental, health and safety laws (including
spills or other releases of hazardous substances to the environment) or of permit
or approval requirements, could result in
restrictions on the operation of the Groups facilities, damages, fines
or other sanctions, increased costs of compliance as well as reputational damage.
ICI is also subject to environmental laws and regulations, principally in respect
of soil and groundwater remediation, that in the future may require it to take
action to correct effects on the environment of prior disposal or release of
chemical substances by
the Group or other parties. ICI has established provisions in respect of future environmental, health and
safety liabilities that are not covered by enforceable indemnities from third
parties, for which expenditure is probable and the cost of which can be estimated
within a reasonable range of outcomes. These actual and potential liabilities,
however, are inherently difficult to predict and to quantify. Existing provisions
could therefore be inadequate to cover these liabilities, and additional costs
to meet such actual and potential obligations could have an adverse effect on
the Groups
results of operations, cash flow and financial
condition. ICI has given undertakings and guarantees relating to pension funds, including
the solvency of the ICI UK Pension Fund, which could have an adverse effect on
its results of operations and cash
flow. ICI provides retirement benefits for the majority of its former and current employees
through a variety of defined benefit and defined contribution schemes. These
include the ICI UK Pension Fund (Fund), which is ICIs
largest defined benefit scheme and which, at 31 December 2004, had liabilities
of approximately £6.9bn. This fund accounts for approximately 85% of ICIs
retirement benefit schemes


by asset value and projected benefit terms and covers approximately 76,500 former
and current employees in the UK. ICI guarantees the solvency of the Fund. On 16 October 2003, ICI announced the completion of the triennial valuation of
the Fund . The valuation concluded that as of 31 March 2003, the ICI UK Pension
Fund had a deficit for funding purposes of £443m and a solvency ratio of
93%. ICI has agreed to make top-up contributions to the Fund
of £62m per year for nine years from 2004 and has provided an asset-backed
guarantee, via a wholly owned subsidiary specifically incorporated to provide
the
guarantee, for £250m to support its commitments to the Fund. Such asset-backed
guarantee is secured by way of a fixed and floating charge over the assets of
the subsidiary. At 31 December 2004, over 84% of the Funds
assets were invested in investment grade fixed-interest and index linked securities
or cash.
The balance of the Funds assets were invested mainly in equities. Accordingly, ICI is exposed to the financial performance of its retirement benefit
schemes and particularly to the financial performance of the ICI UK Pension Fund.
In certain circumstances, ICI may be required to increase its top-up contributions
to the Fund. This could have an adverse impact on the Groups
results of operations and cash flow.


ICI ANNUAL REPORT AND ACCOUNTS 2004

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|126 |  | SHAREHOLDER INFORMATION
|--- |  | -----------------------

Shareholder information

Trading market for Ordinary SharesThe principal trading market for the Companys
Ordinary Shares is the London Stock Exchange. ADSs (each representing four Ordinary
Shares) evidenced by ADRs issued by Citibank, as depositary, are listed on the
New York Stock Exchange.

|                                     | Total   |  | In the        | 
|------------------------------------ | ------- |  | ------------- | 
|                                     |         |  | United States | 
|                                     |         |  |               | 
|Number of record holders of:         |         |  |               | 
|                                     |         |  |               | 
|Ordinary Shares as at 1 January 2005 | 151,832 |  | 700           | 
|                                     |         |  |               | 
|ADSs as at 14 February 2005          | 2,263   |  | 2,208         | 
|                                     |         |  |               | 

As of 14 February 2005 the proportion of Ordinary Shares represented by ADSs
was 8.5% of the Ordinary Shares in issue.

The following table shows, for the years and months indicated, the reported high
and low middle market values for the Companys
Ordinary Shares on the London Stock Exchange and the reported high and low sale
prices of ADSs on the New York Stock Exchange:

|                                       | £1
    Ordinary Shares |  | ADSs       | 
|-------------------------------------- | ---------------------- |  | ---------- | 
|                                       | Year/month             |  | Year/month | 
|                                       | high                   |  | low        | 
|                                       | £                      |  | £          | 
|                                       |                        |  |            | 
|Year                                   |                        |  |            | 
|                                       |                        |  |            | 
|2000                                   | 6.74                   |  | 3.54       | 
|                                       |                        |  |            | 
|2001                                   | 5.57                   |  | 2.83       | 
|                                       |                        |  |            | 
|2002                                   | 4.30                   |  | 2.03       | 
|                                       |                        |  |            | 
|2003                                   |                        |  |            | 
|                                       |                        |  |            | 
|First quarter                          | 2.38                   |  | 0.92       | 
|                                       |                        |  |            | 
|Second quarter                         | 1.48                   |  | 0.90       | 
|                                       |                        |  |            | 
|Third quarter                          | 2.10                   |  | 1.22       | 
|                                       |                        |  |            | 
|Fourth quarter                         | 2.13                   |  | 1.69       | 
|                                       |                        |  |            | 
|Year                                   | 2.38                   |  | 0.90       | 
|                                       |                        |  |            | 
|2004                                   |                        |  |            | 
|                                       |                        |  |            | 
|First quarter                          | 2.47                   |  | 1.94       | 
|                                       |                        |  |            | 
|Second quarter                         | 2.36                   |  | 1.93       | 
|                                       |                        |  |            | 
|Third quarter                          | 2.32                   |  | 2.05       | 
|                                       |                        |  |            | 
|Fourth quarter                         | 2.41                   |  | 2.07       | 
|                                       |                        |  |            | 
|Year                                   | 2.47                   |  | 1.93       | 
|                                       |                        |  |            | 
|2004                                   |                        |  |            | 
|                                       |                        |  |            | 
|July                                   | 2.29                   |  | 2.05       | 
|                                       |                        |  |            | 
|August                                 | 2.32                   |  | 2.13       | 
|                                       |                        |  |            | 
|September                              | 2.21                   |  | 2.07       | 
|                                       |                        |  |            | 
|October                                | 2.24                   |  | 2.10       | 
|                                       |                        |  |            | 
|November                               | 2.40                   |  | 2.13       | 
|                                       |                        |  |            | 
|December                               | 2.41                   |  | 2.29       | 
|                                       |                        |  |            | 
|2005                                   |                        |  |            | 
|                                       |                        |  |            | 
|January                                | 2.42                   |  | 2.31       | 
|                                       |                        |  |            | 
|February (through to 14 February 2005) | 2.78                   |  | 2.32       | 
|                                       |                        |  |            | 

The share price on 14February 2005
was £2.78; the ADR price was $21.06.

On 4 February 2002 ICI announced a seven for eleven Rights Issue. Dealings in
nil paid Ordinary Share rights and ADS rights began on 26 February 2002.

|Defaults,
    dividend arrearages and delinquencies
|---------------------------------------------------
|(a)                                                
|                                                   
|(b)                                                

ICI ANNUAL REPORT AND ACCOUNTS 2004

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|SHAREHOLDER
    INFORMATION |  | 127
|--------------------------- |  | ---



|Control of
    Company
|----------------------
|(a)                   
|                      
|(b)                   
|                      

|                                          | As at 10
    February 2003 |  | As at 9 February
    2004 |  | As at 14February
    2005 | 
|----------------------------------------- | -------------------------- |  | ------------------------- |  | ------------------------- | 
|Identity of Group                         | Amount                     |  | Per cent                  |  | Amount                    | 
|                                          | owned                      |  | of class                  |  | owned                     | 
|                                          | (number                    |  |                           |  | (number                   | 
|                                          | of shares)                 |  |                           |  | of shares)                | 
|                                          | millions                   |  |                           |  | millions                  | 
|                                          |                            |  |                           |  |                           | 
|Citibank Shareholder Services*            | n/a                        |  | n/a                       |  | n/a                       | 
|                                          |                            |  |                           |  |                           | 
|Barclays PLC                              | n/a                        |  | n/a                       |  | 112.5                     | 
|                                          |                            |  |                           |  |                           | 
|Brandes Investment Partners LLC           | 103.7                      |  | 8.71                      |  | 102.0                     | 
|                                          |                            |  |                           |  |                           | 
|Standard Life Investments Ltd             | n/a                        |  | n/a                       |  | 44.7                      | 
|                                          |                            |  |                           |  |                           | 
|Capital International Limited             | n/a                        |  | n/a                       |  | n/a                       | 
|                                          |                            |  |                           |  |                           | 
|Legal & General
    Investment Management | n/a                        |  | n/a                       |  | 44.3                      | 
|                                          |                            |  |                           |  |                           | 
|Morley Fund Management Ltd                | n/a                        |  | n/a                       |  | n/a                       | 
|                                          |                            |  |                           |  |                           | 
|JPMorgan Chase Bank*                      | 110.9                      |  | 9.31                      |  | 107.4                     | 
|                                          |                            |  |                           |  |                           | 
|Artisan Partners LP                       | 37.4                       |  | 3.14                      |  | 82.0                      | 
|                                          |                            |  |                           |  |                           | 
|Franklin Resources Inc                    | 44.9                       |  | 3.77                      |  | n/a                       | 
|                                          |                            |  |                           |  |                           | 
|                                          |                            |  |                           |  |                           | 

|* | This interest relates to ADRs
       issued by JPMorgan Chase Bank and by Citibank Shareholder Services, when
       acting in
respective periods as Depositary; ADRs evidence ADSs.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

No other person held an interest in shares, comprising 3% or more of the issued
Ordinary Share Capital of the Company, appearing in the Register of Interests
in Shares maintained under the provisions of Section 211 of the Companies Act
1985.

The voting rights of the major shareholders, listed in the table above, do not
differ from those of any other shareholder of the Companys
Ordinary Shares.

|(c)                                                                    | The Company does not know of any arrangements the operation of which might result in a change in control of the Company.                                                                                                                                                                                                                                                                                                                                                                                                      
|---------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                      
|Exchange
    controls and other limitations affecting security holders
|(a)                                                                    | There are no governmental
       laws, decrees or regulations in the UK restricting the import or export
       of capital or affecting the remittance of dividends, interest or other
       payments to
non-resident holders of the Companys Ordinary Shares or ADSs. However,
a 1.5% stamp duty reserve tax is payable upon the deposit of ICI Ordinary Shares
in connection with the creation of, but not subsequent dealing in, ADRs. This
is in lieu of the normal 0.5% stamp duty on all purchases of Ordinary Shares.
|                                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(b)                                                                    | There are no limitations
       under English Law or the Companys Memorandum and Articles of Association
       on the right of non-resident or foreign owners to be the registered holders
    of and to vote Ordinary Shares of the Company.                                                                                                                                                                                                                                                                               

ICI ANNUAL REPORT AND ACCOUNTS 2004

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Shareholder informationcontinued




|128 |  | SHAREHOLDER INFORMATION
|--- |  | -----------------------

Incorporation of the CompanyImperial Chemical Industries PLC was originally
    incorporated in the United Kingdom and registered in England, under the Companies
    Acts, 1908 to 1917 on 7 December 1926 as a limited company. It was re-registered
    under the Companies Acts, 1948 to 1980 as a public limited company on 30 June
    1981. Registered Office20 Manchester Square
    London W1U 3AN Telephone +44(0)20 7009 5000




ICI ANNUAL REPORT AND ACCOUNTS 2004

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|SHAREHOLDER
      INFORMATION |  | 129
|----------------------------- |  | ---



Documents on display  Securities
      and Exchange CommissionICI files annual, semi-annual and special reports
  and other information with the SEC. Any document that ICI files may be read
  and copied at the SECs public reference room at 450 Fifth Street, N.W.,
  Washington, D.C. 20549, USA. Please call the SEC at +18007320330
  for further information or view reports filed since 4 November 2002 online
  at
  www.sec.gov.




Exchange ratesThe following table sets forth, for the years,
  months and dates indicated, the noon buying rate in New York City for cable
  transfers in pounds sterling as certified by the Federal Reserve Bank of New
  York for customs purposes (the noon buying rate): Highest
      
      Lowest
      
      Average
      
      Atrate
      
      rate
      
      rate
      
      31 Decduring
      
      during
      
      duringUS$ to pound sterling (£) (1)
      
      period
      
      period
      
      periodYear
      
      
      
      
      
      (2) (3
      )
      (2
      )2000
      
      1.65
      
      1.40
      
      1.51
      
      1.502001
      
      1.50
      
      1.37
      
      1.44
      
      1.452002
      
      1.61
      
      1.41
      
      1.50
      
      1.612003
      
      1.78
      
      1.55
      
      1.64
      
      1.782004
      
      1.95
      
      1.77
      
      1.84
      
      1.922004August
      
      1.85
      
      1.79September
      
      1.81
      
      1.77October
      
      1.84
      
      1.78November
      
      1.83
      
      1.91December
      
      1.95
      
      1.912005January
      
      1.91
      
      1.86February (as of 14 February)
      
      1.89
      
      1.86 The noon buying
      rate on 14 February 2005 was $1.89 = £1(1)
    All figures have been taken
      directly or derived from figures released through the Public Information
      Office of the Federal Reserve in Washington, D C or New York City.(2)
    The noon buying rate on such
      dates differed from the rates used in preparation of the Groups financial
      statements as of such dates.(3)
    The average is the average
      of the noon buying rate on the last day of each month during the period
      indicated. Fluctuations in the exchange rate between the
  pound sterling and the US dollar will affect the US dollar equivalent of the
  pound sterling prices of the Ordinary Shares of Imperial Chemical Industries
  PLC on the London Stock Exchange and, as a result, will affect the market prices
  of ADSs on the NYSE. Cash dividends, if any, will be paid by the Company in
  respect of Ordinary Shares in pounds sterling, and exchange rate fluctuations
  will affect the US dollar amounts received by holders of ADSs on conversion
  by the Depositary of such dividends. A substantial proportion of the Groups
  assets, liabilities, revenues and expenses are denominated in currencies other
  than pounds sterling. Accordingly, fluctuations in the value of the pound sterling
  relative to other currencies can have a significant effect on the translation
  into sterling of non-sterling assets, liabilities, revenues and expenses (see
  Operating and financial review, pages 23 and 24).




ICI ANNUAL REPORT
  AND ACCOUNTS 2004

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|130 |  | DEFINITIONS
|--- |  | -----------

Definitions

In this document the following words and expressions
  shall, unless the context otherwise requires, have the following meanings:

|ADR                                                                                                     | American Depositary Receipt
      evidencing title to an ADS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|ADS                                                                                                     | American Depositary Share representing
      four underlying Ordinary Shares of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|bn                                                                                                      | billion  1,000 million                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Company                                                                                                 | Imperial Chemical Industries
      PLC                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Comparable performance                                                                                  | References to comparable
      performance excludes the effect of currency translation differences andthe impact of acquisitions and divestments on the results reported by the
      International Businesses.Performance
      is measured on a consistent basis over two or more financial periods. Comparable
      resultsfor both 2004 and 2003 are
      translated at constant exchange rates, which equate to the annual averageexchange rates for 2003 and exclude
      the results of divested businesses and the impact of acquiredbusinesses from the relevant periods.
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Demerger                                                                                                | The Demerger of Zeneca Limited
      and its subsidiaries from the ICI Group                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Depositary                                                                                              | Citibank Shareholder Services,
      as depositary under the deposit agreement pursuant to which the ADRs are
      issued                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Directors                                                                                               | The Directors of Imperial Chemical
      Industries PLC                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Earnings before interest, tax,                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|depreciation and amortisation
      (EBITDA)                                                            | ICI defines EBITDA as profit
      before interest, tax, depreciation, goodwill amortisation and exceptionalitems. ICI s total depreciation
      before exceptional asset write-downs was £169m (2003 £191m;
      2002£196m). Management believes
      EBITDA serves as an important financial indicator, however, EBITDAshould not be considered in isolation, or as an alternative to operating
      profit or net profit or cash flowfrom
      operating activities, in each case, determined in accordance with UK or
      US GAAP as appropriate.                          
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Effective tax rate                                                                                      | Effective tax rate is calculated
      as taxation (excluding tax on exceptional items) divided by profit before
      tax,before exceptional items and
      goodwill amortisation.                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|ESOP                                                                                                    | Employee share ownership plans,
      of which the principal plans are the 2004 Executive Share Option Plan,the
      1994 Senior Staff Share Option Scheme, the 1994 Stock Appreciation Rights
      Plan, the PerformanceGrowth Plan
      and the Performance Share Plan.                                                                                                                                                                                                                                                                                                           
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|FRS                                                                                                     | Financial Reporting Standard
      (UK)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|ICI, ICI Group or the Group                                                                             | Imperial Chemical Industries
      PLC and its subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Interest cover                                                                                          | Calculations of interest cover
      are based on the sum of the Group s operating profit before exceptionalitems and goodwill amortisation, and net associated company income (associate
      operating profit lessshare of net
      interest payable by associates) divided by ICI s interest cost (excluding
      associate interest).                                                                                                                                                                                                                                         
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|London Stock Exchange                                                                                   | London Stock Exchange plc                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|m                                                                                                       | million                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|NYSE                                                                                                    | New York Stock Exchange                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Ordinary Shares                                                                                         | Ordinary shares of £1
      each in the capital of Imperial Chemical Industries PLC                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|pound sterling, £,pence or p                                                                            | Refers to units of UK currency                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|SEC                                                                                                     | The United States Securities
      and Exchange Commission                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|SFAS                                                                                                    | Statement of Financial Accounting
      Standards (US)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Trading profit                                                                                          | ICI defines trading profit
      as operating profit before exceptional items and goodwill amortisation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Trading margin                                                                                          | Trading profit, expressed as
      a percentage of sales.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|UK or United Kingdom                                                                                    | United Kingdom of Great Britain
      and Northern Ireland                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|US dollar, dollar, US$ or
      $                                                                       | Refers to units of US currency                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|USA or US or United States                                                                              | United States of America                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Zeneca                                                                                                  | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                        | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Figures in parentheses
      in tables and financial statements are used to represent negative numbers.



ICI ANNUAL REPORT AND ACCOUNTS 2004

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| |  | DEFINITIONS |  | 131
| |  | ----------- |  | ---
| |  |             |  |    

|Definitions used in computation of Group Financial Targets
|----------------------------------------------------------
|                                                          

|Comparable sales growth                 |  | Sales growth compared to prior
        period excluding the effects of currency translation differencesand
    the impact of acquisitions and divestments.                                                                                                                                                                                                                                                      
|--------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                 
|Trading margin                          |  | Trading profit expressed
    as a percentage of sales.                                                                                                                                                                                                                                                                                                                                                          
|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                 
|Group earnings per Ordinary
    Share   |  | Group profit after tax and
        minority interests divided by the weighted average number of shares in
        issue (less the weighted average number of shares held by the Group s
    employee share plans) during the period.                                                                                                                                                                           
|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                 
|Return on average net assets
    (RONA) |  | Trading profit as a percentage
    of average net operating assets excluding goodwill.                                                                                                                                                                                                                                                                                                                          
|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                 
|Return on capital employed
    (ROCE)   |  | Group trading profit after
    goodwill amortisation, before exceptional items, after restructuring amortisation*
        and after a tax chargefor
    the last twelve months divided by the average of capital employed for this
        current period end and that of the twelve months previously; expressed
    as a percentage.                                                                         
|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                        |  | Notes:                                                                                                                                                                                                                                                                                                                                                                                                          
|                                        |  | *                                                                                                                                                                                                                                                                                                                                                                                                               
|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                
|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                 
|Capital employed                        |  | ICI defines capital employed
    as net operating assets plus net operating exceptional items.                                                                                                                                                                                                                                                                                                                  
|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                 
|Net operating assets                    |  | Tangible fixed assets plus
        goodwill on acquisitionsø plus
    operating working capital.                                                                                                                                                                                                                                                                                                                
|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                        |  | ø                                                                                                                                                                                                                                                                                                                                                                                                               
|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                 
|Net operating exceptional
    items     |  | For financial ratio calculation
    purposes only, this is defined as: Asset write downs arising on restructuring
        plus cash cost of restructuring before tax and after amortisation: for
    financial ratio purposes only, cash expenditure is capitalised in each year
    that expenditure occurs and is then amortised over three years
    starting on 1 January following the year of expenditure.
|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                 

|                                       
|---------------------------------------
|ICI ANNUAL REPORT AND
    ACCOUNTS 2004

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| |  | FORWARD-LOOKING
    STATEMENTS |  | 133
| |  | ------------------------------ |  | ---
| |  |                                |  |    

Forward-looking statementsThis Annual Report and Accounts contains
  statements concerning the Groups business, financial condition, results
  of
operations and certain of the Groups plans, objectives, assumptions,
projections, expectations or beliefs with respect to these items. These statements
are intended as forward-looking statements within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. These statements include, without limitation,
those concerning: 
   the Groups strategy and its ability to achieve it;
   the benefits of the restructuring programmes in the Groups businesses;
   the Groups net debt;
   the Groups credit rating;
   expectations regarding sales, operating profit and growth;
   plans for the launch of new products and services;
   the impact of regulatory initiatives on operations and costs;
   the Groups possible or assumed future results of operations;
   capital expenditure and investment plans;
   adequacy of capital;
   financing plans; and
   statements preceded by, followed by, or that include the wordsbelieve,expect,intend,will,plan,anticipate,goal,aim,seekor similar
expressions. The Company cautions that any forward-looking statements in this Annual Report and Accounts may and often do vary from actual results and the differences between these statements and actual results can be material.
Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which




speak only at their respective dates. The
      Company undertakes no obligation to release publicly the result of any
      revisions to these forward-looking statements that may be made to reflect
      events or circumstances after the date of this Annual Report and Accounts,
      including, without limitation, changes in the Groups
      business or acquisition or divestment strategy or planned capital expenditures,
or to reflect the occurrence of unanticipated events. By their nature, forward-looking statements
      involve risk and uncertainty because they relate to events and depend on
      circumstances that will occur in the future. There are a number of factors
      that could cause actual results and developments to differ materially from
      those expressed or implied by these forward-looking statements. These factors
      include, among other things: 
    the impact of competitive
          products and pricing;
    changes in the price of
          raw materials;
    the occurrence of major
          operational problems;
    the loss of major customers;
    limitations imposed by
          the Groups
          indebtedness and leverage;
    a credit rating downgrade
          by the rating agencies;
    contingent liabilities,
          including those arising in connection with disposed businesses;
    risks associated with
          the Groups
          international operations;
    risks of litigation; and
    other factors described
          in the Companys
          filings with the Securities and Exchange Commission. You should readRisk
      Factorson pages 123 to 125 for more information regarding factors
      that could cause actual results and developments to differ from those expressed
      or implied by the forward-looking statements in this document.




|                                       
|---------------------------------------
|ICI ANNUAL REPORT AND
    ACCOUNTS 2004

---