Exhibit 10.1

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Forward-looking
        statementsThis Annual
        Report and Accounts and Form 20-F 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 debt
        reduction plans,
      the Groups credit
        rating,
      expectations regarding
        sales, trading 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 and/or those of the Groups
        associates and joint ventures,
      capital expenditure and
        investment plans,
      adequacy of capital,
      financing plans, and
      those 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 and Form 20-F 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 and Form 20-F, including,


without
           limitation, changes in the Groups business or acquisition 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 recently 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 119 to 121 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.










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selected financial data

|                                                                                    |       |  | 2002  |   | 2001  | •  | 2000  | •  | 1999  | •  | 1998  | •
|----------------------------------------------------------------------------------- | ----- |  | ----- | - | ----- | -- | ----- | -- | ----- | -- | ----- | -
|                                                                                    | notes |  | £m    |   | £m    |    | £m    |    | £m    |    | £m    |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Summary of Group profit and loss accounts                                           |       |  |       |   |       |    |       |    |       |    |       |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Turnover                                                                            |       |  |       |   |       |    |       |    |       |    |       |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Continuing operations                                                               |       |  |       |   |       |    |       |    |       |    |       |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|International
      Businessesø                                                     |       |  | 5,543 |   | 5,645 |    | 5,570 |    | 5,512 |    | 5,370 |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Regional and
      Industrial                                                       |       |  | 582   |   | 780   |    | 845   |    | 667   |    | 473   |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|                                                                                    |       |  | 6,125 |   | 6,425 |    | 6,415 |    | 6,179 |    | 5,843 |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Discontinued operations                                                             | 1     |  |      |   |      |    | 1,333 |    | 2,270 |    | 3,443 |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Total                                                                               |       |  | 6,125 |   | 6,425 |    | 7,748 |    | 8,449 |    | 9,286 |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Trading profit before goodwill amortisation
      and exceptional items             | 2     |  |       |   |       |    |       |    |       |    |       |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Continuing operations                                                               |       |  | 533   |   | 573   |    | 617   |    | 534   |    | 520   |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Discontinued operations                                                             |       |  |      |   |      |    | (5    | )  | 72    |    | 130   |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|                                                                                    |       |  | 533   |   | 573   |    | 612   |    | 606   |    | 650   |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Trading profit before exceptional items                                             |       |  |       |   |       |    |       |    |       |    |       |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Continuing operationsø                                                              |       |  |       |   |       |    |       |    |       |    |       |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|International
      Businesses                                                      |       |  | 506   | * | 532   | *  | 565   | *  | 538   | *  | 506   | *
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Regional and
      Industrial                                                       |       |  | (10   | ) | 4     |    | 17    |    | (39   | )  | (9    | )
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|                                                                                    |       |  | 496   |   | 536   |    | 582   |    | 499   |    | 497   |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Discontinued operations                                                             |       |  |      |   |      |    | (5    | )  | 72    |    | 130   |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Total                                                                               |       |  | 496   | * | 536   | *  | 577   | *  | 571   | *  | 627   | *
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Exceptional items charged to trading profit                                         |       |  |      |   | (143  | )  |      |    | (98   | )  | (223  | )
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Trading profit after exceptional items                                              |       |  | 496   |   | 393   |    | 577   |    | 473   |    | 404   |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Share of operating profits less
      losses of associates before exceptional items | 18    |  | 57    |   | 100   |    | 61    |    | 3     |   
|                                                                                    |       |  |       |   |       |    |       |    |       |   
|Share of exceptional items of associates                                            |       |  |      |   | (9    | )  |      |    |      |    |      |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Fundamental re-organisation costs                                                   |       |  |      |   |      |    | (14   | )  | (74   | )  |      |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Profits less losses on sale or closure
      of operations                          |       |  | 50    |   | 7     |    | (515  | )  | 368   |    | 89    |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Profit (loss) on disposal of fixed assets                                           |       |  | 3     |   | 8     |    | 11    |    | 20    |    | 3     |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Amounts written off investments                                                     |       |  | (99   | ) | (22   | )  |      |    |      |    | (34   | )
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Net interest payable                                                                | 3     |  |       |   |       |    |       |    |       |    |       |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Group                                                                              |       |  | (123  | ) | (162  | )  | (186  | ) | (316  | ) | (332  | )
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Associates                                                                          |       |  | (28   | ) | (67   | )  | (60   | )  | (29   | )  |      |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Total                                                                               |       |  | (151  | ) | (229  | )  | (246  | )  | (345  | )  | (332  | )
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Profit before taxation                                                              |       |  | 317   |   | 205   |    | (87   | )  | 503   |    | 133   |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Taxation                                                                            |       |  | (111  | ) | (97   | )  | (96   | )  | (165  | )  | (78   | )
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Attributable to minorities                                                          |       |  | (27   | ) | (28   | )  | (24   | )  | (7    | )  | 12    |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Net profit (loss) for the financial year                                            |       |  | 179   |   | 80    |    | (207  | )  | 331   |    | 67    |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Continuing operations                                                               | 4     |  | 166   |   | 91    |    | 267   |    | 137   |    | 58    |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Discontinued operations                                                             | 1     |  | 13    |   | (11   | )  | (474  | )  | 194   |    | 9     |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Total                                                                               |       |  | 179   |   | 80    |    | (207  | )  | 331   |    | 67    |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Profit before taxation, goodwill amortisation
      and exceptional items           |       |  | 400   |   | 401   |    | 450   |    | 376   |    | 321   |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Earnings per £1 Ordinary Share
      before goodwill amortisation                   |       |  |       |   |       |    |       |    |       |    |       |  
|and exceptional
      items                                                         | 5     |  | 23.7  | p | 29.8  | p  | 32.7  | p  | 28.7  | p  | 26.1  | p
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Earnings per £1 Ordinary Share                                                      | 5     |  |       |   |       |    |       |    |       |    |       |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Basic earnings (loss) per £1
      Ordinary Share                                   |       |  |       |   |       |    |       |    |       |    |       |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Continuing operations                                                               |       |  | 14.9  | p | 10.5  | p  | 30.7  | p  | 15.8  | p  | 6.7   | p
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Discontinued operations                                                             | 1     |  | 1.2   | p | (1.3  | )p | (54.5 | )p | 22.3  | p  | 1.0   | p
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Total basic earnings (loss) per £1
      Ordinary Share                             |       |  | 16.1  | p | 9.2   | p  | (23.8 | )p | 38.1  | p  | 7.7   | p
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Diluted earnings (loss) per £1
      Ordinary Share                                 |       |  |       |   |       |    |       |    |       |    |       |  
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Continuing operations                                                               |       |  | 14.8  | p | 10.5  | p  | 30.7  | p  | 15.7  | p  | 6.7   | p
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Discontinued operations                                                             | 1     |  | 1.2   | p | (1.3  | )p | (54.5 | )p | 22.3  | p  | 1.0   | p
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Total diluted earnings (loss) per
      £1 Ordinary Share                           |       |  | 16.0  | p | 9.2   | p  | (23.8 | )p | 38.0  | p  | 7.7   | p
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  
|Dividends per £1 Ordinary Share                                                     |       |  | 7.5   | p | 13.3  | p  | 26.6  | p  | 26.6  | p  | 26.6  | p
|                                                                                    |       |  |       |   |       |    |       |    |       |    |       |  

|* | After
        amortisation of goodwill £37m (2001 £37m, 2000 £35m,
        1999 £35m, 1998 £23m).                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Includes exceptional interest of £16m income in 2000 and
        £54m expense in 1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|ø | International
        Businesses include National Starch, Quest, Performance Specialties and
        Paints.                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|• | As restated
         see notes 1 and 10 to the
        financial statements. Notes 1 and 10 to the financial statements outline
        the restatements that have been made relating to FRS 19 Deferred Tax for
        the years 2001 and 2000. The 1999 and 1998 years have also been restated.
        Shareholder funds at 31 December 1999 decreased by £42m and at 31
        December 1998 decreased by £109m. The net profit for the year ended
        31 December 1999 increased by £79m, and for the year ended 31 December
        1998 decreased by £16m.



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|                                                                            | 2002   |   | 2001   | * | 2000   | * | 1999   | * | 1998   | *
|--------------------------------------------------------------------------- | ------ | - | ------ | - | ------ | - | ------ | - | ------ | -
|                                                                            | £m     |   | £m     |   | £m     |   | £m     |   | £m     |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Summary of Group balance sheets                                             |        |   |        |   |        |   |        |   |        |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Fixed assets                                                                |        |   |        |   |        |   |        |   |        |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Intangible assets
       goodwill                                          | 574    |   | 613    |   | 609    |   | 626    |   | 652    |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Tangible assets                                                             | 1,961  |   | 2,186  |   | 2,398  |   | 2,474  |   | 3,816  |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Investments in
      participating and other interests                      | 69     |   | 374    |   | 327    |   | 292    |   | 170    |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Current assets                                                              | 2,898  |   | 3,126  |   | 3,725  |   | 3,545  |   | 4,395  |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Total assets                                                                | 5,502  |   | 6,299  |   | 7,059  |   | 6,937  |   | 9,033  |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Creditors due within one year                                               | (2,418 | ) | (3,601 | ) | (3,508 | ) | (2,906 | ) | (4,386 | )
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Total assets less current liabilities                                       | 3,084  |   | 2,698  |   | 3,551  |   | 4,031  |   | 4,647  |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Creditors due after more than one year                                      | 1,395  |   | 1,754  |   | 2,294  |   | 2,323  |   | 3,009  |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Provisions for liabilities and charges                                      | 1,121  |   | 1,257  |   | 1,447  |   | 1,456  |   | 1,549  |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Minority interests                                                          | 69     |   | 51     |   | 59     |   | 50     |   | 49     |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Shareholders funds  equity                                                | 499    |   | (364   | ) | (249   | ) | 202    |   | 40     |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|                                                                            | 3,084  |   | 2,698  |   | 3,551  |   | 4,031  |   | 4,647  |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Summary of statements of Group cash
      flows                             |        |   |        |   |        |   |        |   |        |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Net cash inflow from operating activities                                   | 623    |   | 637    |   | 586    |   | 582    |   | 856    |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Dividends received from equity accounted
      associates                   |       |   |       |   | 5      |   | 4      |   | 5      |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Net cash outflow from returns on investments
      and servicing of finance | (185   | ) | (207   | ) | (230   | ) | (307   | ) | (350   | )
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Taxation                                                                    | (35    | ) | (58    | ) | (104   | ) | (65    | ) | (220   | )
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Capital expenditure and financial investment                                | (184   | ) | (206   | ) | (226   | ) | (356   | ) | (520   | )
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Acquisitions and disposals                                                  | 236    |   | (92    | ) | (138   | ) | 2,028  |   | 42     |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Equity dividends paid                                                       | (106   | ) | (185   | ) | (231   | ) | (232   | ) | (232   | )
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Cash inflow (outflow) before use of liquid
      resources and financing    | 349    |   | (111   | ) | (338   | ) | 1,654  |   | (419   | )
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Management of liquid resources                                              | (13    | ) | 253    |   | (12    | ) | 215    |   | 529    |  
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Financing                                                                   | (344   | ) | (77    | ) | 336    |   | (1,909 | ) | (135   | )
|                                                                            |        |   |        |   |        |   |        |   |        |  
|Increase (decrease) in cash                                                 | (8     | ) | 65     |   | (14    | ) | (40    | ) | (25    | )
|                                                                            |        |   |        |   |        |   |        |   |        |  
|*   As restated  see
      note 1 to the financial statements.             |        |   |        |   |        |   |        |   |        |  

The financial data on pages 4 to 6 has been
  selected from the financial statements of the ICI Group for the last five years
  or, where certain items are not shown in those annual audited financial statements,
  has been prepared for the purposes of this report. This data should be read
  in conjunction with, and is qualified in its entirety by reference to, the financial
  statements and notes relating to the accounts included elsewhere in this report.
  The data has been restated where appropriate to accord with the Groups
  current accounting policies (which precede and form part of the Groups
  financial statements) and the basis of presentation of financial information
  (described in notes 1 and 10 to the Group financial statements).

Amounts above are stated in accordance with
  generally accepted accounting principles in the UK (UK GAAP). Refer to note
  42 of the Group financial statements for a discussion of the main differences
  between UK GAAP and generally accepted accounting principles in the US (US GAAP).



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selected financial data

|Notes:
      1  Discontinued
             operationsThe basis on which operations
         have been included under the heading of “Discontinued operations” is
          explained in note 1 to the Group financial statements, together with
         a
        list of these operations for 2000. Discontinued operations for 1998 and
          1999 comprised the Melinex polyester film operations, a 51% shareholding

        in AECI Explosives Limited, the Propafilm oriented polypropylene films
          business, the International Explosives operations in Canada, Latin
         America
        and Europe and the explosives distribution business in the USA, the Teesside
          Utilities and Services business, the Polyurethanes business, the Tioxide

        business, Selected petrochemicals businesses (Olefines and Aromatics),
          the Acrylics business and the Fluoropolymers business.
      2Trading
        profitTrading profit consists of turnover, royalties and other income, less
        related costs of sales, distribution, research and development, administration
        and other expenses. Depreciation is included in each category, as appropriate,
        in the Group profit and loss account.
      3Net
        interest payable and taxationNet interest payable and taxation has been allocated to Discontinued operations
        to reflect the legal entity incidence of these items within the businesses
        divested.
      4Exceptional
            items  Continuing operationsExceptional items relating to “Continuing
operations” included in the Group profit and loss account were as follows:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                             | 2002 |   | 2001 |  | 2000 |  | 1999 |  | 1998 | 
|------------------------------------------------------------ | ---- | - | ---- | - | ---- | - | ---- | - | ---- | -
|                                                             | £m   |   | £m   |   | £m   |   | £m   |   | £m   |  
|                                                             |      |   |      |   |      |   |      |   |      |  
|Continuing operations                                        |      |   |      |   |      |   |      |   |      |  
|                                                             |      |   |      |   |      |   |      |   |      |  
|Exceptional items before taxation                            | (56  | ) | (177 | ) | 28   |   | (11  | ) | (105 | )
|                                                             |      |   |      |   |      |   |      |   |      |  
|Taxation on exceptional items                                | 1    |   | 48   |   | (4   | ) | 58   |   | 23   |  
|                                                             |      |   |      |   |      |   |      |   |      |  
|Exceptional items attributable to minorities                 | (6   | ) | (2   | ) |     |   | 3    |   | 4    |  
|                                                             |      |   |      |   |      |   |      |   |      |  
|Exceptional net profit (loss)                                | (61  | ) | (131 | ) | 24   |   | 50   |   | (78  | )
|                                                             |      |   |      |   |      |   |      |   |      |  
|As
      restated  see note 1 to the financial statements. |      |   |      |   |      |   |      |   |      |  

Note 3 to the Group financial statements gives
  details of exceptional items from 2000 to 2002.

Exceptional items disclosed separately in the
  UK GAAP Group profit and loss account would be incorporated in individual line
  items under US GAAP.

5  Earnings per £1 Ordinary Share 
  pence

|                                                                            | 2002    |   | 2001    | * | 2000    | * | 1999    | * | 1998    | *
|--------------------------------------------------------------------------- | ------- | - | ------- | - | ------- | - | ------- | - | ------- | -
|Average Ordinary Shares                                                     | million |   | million |   | million |   | million |   | million |  
|                                                                            |         |   |         |   |         |   |         |   |         |  
|Weighted average Ordinary
      Shares in issue during the year             | 1,123   |   | 876     |   | 876     |   | 876     |   | 876     |  
|                                                                            |         |   |         |   |         |   |         |   |         |  
|Weighted average shares held
      by Groups employee share ownership plan | (9      | ) | (7      | ) | (7      | ) | (8      | ) | (4      | )
|                                                                            |         |   |         |   |         |   |         |   |         |  
|Basic weighted average Ordinary
      Shares in issue during the year       | 1,114   |   | 869     |   | 869     |   | 868     |   | 872     |  
|                                                                            |         |   |         |   |         |   |         |   |         |  
|Dilutive effect of share options                                            | 2       |   |        |   |        |   | 2       |   | 2       |  
|                                                                            |         |   |         |   |         |   |         |   |         |  
|Diluted weighted average Ordinary
      Shares                              | 1,116   |   | 869     |   | 869     |   | 870     |   | 874     |  
|                                                                            |         |   |         |   |         |   |         |   |         |  

Basic earnings per £1 Ordinary Share
  (after exceptional items) and diluted earnings per £1 Ordinary Share (after
  exceptional items) for a period are calculated by dividing the appropriate value
  (continuing, discontinued or total) of net profit (loss) for the financial year
  (see table on page 4) by, respectively, basic weighted average Ordinary Shares
  in issue during the period or diluted weighted average Ordinary Shares in issue
  during the period.



|Basic earnings per £1 Ordinary
      Share            |         |  |       |  |     |  |       |   |      |  |     | 
|----------------------------------------------------- | ------- |  | ----- |  | --- |  | ----- | - | ---- |  | --- | 
|                                                      |         |  |       |  |     |  |       |   |      |  |     | 
|Net profit (loss) for the financial year              | £m      |  | 179   |  | 80  |  | (207) |   | 331  |  | 67  | 
|                                                      |         |  |       |  |     |  |       |   |      |  |     | 
|Basic weighted average Ordinary Shares
      in issue | million |  | 1,114 |  | 869 |  | 869   |   | 868  |  | 872 | 
|                                                      |         |  |       |  |     |  |       |   |      |  |     | 
|Basic earnings (loss) per £1 Ordinary
      Share     | pence   |  | 16.1  |  | 9.2 |  | (23.8 | ) | 38.1 |  | 7.7 | 
|                                                      |         |  |       |  |     |  |       |   |      |  |     | 



|Earnings per £1
      Ordinary Share before goodwill amortisation and exceptional items                 |         |  |       |  |      |  |      |   |     
|------------------------------------------------------------------------------------------------------- | ------- |  | ----- |  | ---- |  | ---- | - | ----
|                                                                                                        |         |  |       |  |      |  |      |   |     
|Net profit (loss) for the financial year                                                                | £m      |  | 179   |  | 80   |  | (207 | ) | 331 
|                                                                                                        |         |  |       |  |      |  |      |   |     
|Add: Goodwill amortisation                                                                              |         |  | 37    |  | 37   |  | 35   |   | 35  
|                                                                                                        |         |  |       |  |      |  |      |   |     
|Exceptional
      items                                                                                 |         |  | 48    |  | 142  |  | 456  |   | (117
|                                                                                                        |         |  |       |  |      |  |      |   |     
|Net
        profit before goodwill amortisation and exceptional items                                   |         |  | 264   |  | 259  |  | 284  |   | 249 
|                                                                                                        |         |  |       |  |      |  |      |   |     
|Basic weighted average Ordinary Shares
      in issue                                                   | million |  | 1,114 |  | 869  |  | 869  |   | 868 
|                                                                                                        |         |  |       |  |      |  |      |   |     
|Basic
        earnings per £1 Ordinary Share before goodwill amortisation and
        exceptional items | pence   |  | 23.7  |  | 29.8 |  | 32.7 |   | 28.7
|                                                                                                        |         |  |       |  |      |  |      |   |     
|*   As restated  see
      notes 1 and 10 to the financial statements.                                 |         |  |       |  |      |  |      |   |     

Earnings per share before goodwill amortisation
  and exceptional items have been calculated, since these charges can have a distorting
  effect on the trend of underlying earnings.



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description of business

General ICI is one of the worlds leading specialty
  products and paints businesses with products and ingredients developed for a
  wide range of consumer and industrial markets. In 1997, ICI began the process of refocusing
  the business from commodity chemicals into higher value added specialty products
  and paints, addressing specific and specialised customer needs. This transformation
  is now essentially complete. The Groups businesses are now more knowledge
  intensive than capital intensive and focused on delivering innovative products
  to customers in a wide range of sectors of the world economy. The specialty products and paint businesses,
    referred to as the International Businesses, comprise National Starch, Quest,
    Performance Specialties and Paints. These businesses serve diverse consumer
    and industrial markets through some 40 strategic business units, comprising
    close to 100 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. ICI believes that its International Businesses
  have a quality customer and product mix, strong management teams and potential
  for profitable growth. The higher growth potential businesses include electronic
  and engineering materials, specialty food starches, flavours and fragrances,
  personal care ingredients, lubricants and, in Asia, adhesives and decorative
  paints. Group Strategy
    The Groups businesses operate across a wide spectrum of consumer and
    industrial markets, and across a wide geographic spread. Its strategy is to
    be an industry leader in creating value for its customers and shareholders
    in its chosen markets. This requires ICI to achieve profitable organic sales
    growth. The key aspects of this strategy are to: 
      focus on higher value added
        specialty products and brands,
      serve a wide range of markets
        including a number of niche markets,
      develop long-term relationships
        with customers by addressing their specific and specialised needs,
      innovate and use technology
        creatively to facilitate organic growth,
      invest in growth markets
        and build leading market positions,
      grow through organic growth
        supplemented by small, strategic, bolt-on acquisitions in its chosen growth
        areas,
      improve its operational
        performance, and
      pursue synergies across
        the Group. In order to implement its strategy, the Group
    aims to attract, train and develop talented people and to maintain a strong
    commitment to safety, health and the environment. Group
  Financial ObjectivesThe Groups financial objectives derive from a combination of top-down
    goals and a biennial strategic planning process. These strategic financial
    objectives then form the basis for all financial targets. At the Group level,
    management is focused on achieving the following goals over the medium term.
    While demanding, management believes they should be achievable. Sales growthWith respect to sales, management is aiming
    to achieve organic growth of 4 to 5% per annum on average (1 to 2% over assumed
    GDP). Subject to the right opportunities becoming available,


management is aiming to achieve
on average a further 1 to 2% growth per annum through small strategic bolt-on
acquisitions in its chosen growth areas.  Trading margin expansionAverage trading margin (before amortisation
  of goodwill and exceptional items) for the Group in 2002 was 9% (2001 9%).
Management is aiming to achieve an improvement
  in trading margin of approximately 0.5% per annum on average over the next 4
  to 5 years. Recent historyIn July 1997, ICI took a major step to reposition
  its business towards the higher added value sector of the industry with the
  acquisition of the companies and businesses comprising the Speciality Chemicals
  division of Unilever PLC and Unilever N.V. for a cash consideration of $8 billion
  (£4.8 billion). This acquisition was consistent with its strategy to shift
  its business profile towards products which meet specific customer needs and
  to areas where leading positions in profitable growth markets can be won through
  the application of its technology and skills. Consistent with the Groups strategy,
  ICI has divested nearly all of its industrial chemicals portfolio, including
  its Polyester, Fertilisers, Tioxide, Petrochemicals, Chlor-Chemicals and Klea
  businesses. Since July 1997, ICI has divested more than 50 businesses with proceeds
  from the sale of assets and businesses in excess of £7.0 billion. In addition,
  it has continued to reposition its business towards higher added value sectors
  of the industry through a number of acquisitions within the international specialty
  and paints businesses. ICI believes that it has now essentially completed the
  transformation of the Group. However, the Group will continue to look for opportunities
  to grow its business both organically and through small, strategic bolt-on acquisitions,
  thereby strengthening its portfolio. In 2001, ICI initiated a wide ranging restructuring
  programme across all of its International Businesses in order to underpin future
  growth and provide cost savings and working capital improvements. In September 2002 ICI concluded the sale of
    Synetix, its catalyst business, subsequently completing the transaction in
    December  within 12 months of first announcing its intention to divest
    the business.




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Geographic focus ICIs headquarters is in the UK, where
  it also has several significant manufacturing sites. Outside the UK, operations
  are conducted by locally managed subsidiary companies staffed almost entirely
  by nationals of the country concerned. Eighty-four per cent of the employees
  of ICIs businesses are located outside the UK.

The following table shows the turnover and
  profit before tax, amortisation of goodwill and exceptional items for the Groups
  businesses located in each geographic area for the three years ended 31 December
  2002.

|                                           | Turnover |   | Profit
      before tax,
      goodwill amortisation
      and exceptional items |  
|------------------------------------------ | -------- | - | -------------------------------------------------------------------------------- | -
|                                           |          |   |                                                                                  |  
|                                           | 2002     |   | 2001                                                                             |  
|                                           | £m       |   | £m                                                                               |  
|                                           |          |   |                                                                                  |  
|Continuing operations                      |          |   |                                                                                  |  
|                                           |          |   |                                                                                  |  
|United Kingdom                             |          |   |                                                                                  |  
|                                           |          |   |                                                                                  |  
|Sales
      in the UK                      | 852      |   | 1,054                                                                            |  
|                                           |          |   |                                                                                  |  
|Sales
      overseas                       | 516      |   | 503                                                                              |  
|                                           |          |   |                                                                                  |  
|                                           | 1,368    |   | 1,557                                                                            |  
|                                           |          |   |                                                                                  |  
|Continental Europe                         | 1,559    |   | 1,533                                                                            |  
|                                           |          |   |                                                                                  |  
|USA                                        | 2,202    |   | 2,276                                                                            |  
|                                           |          |   |                                                                                  |  
|Other Americas                             | 656      |   | 748                                                                              |  
|                                           |          |   |                                                                                  |  
|Asia Pacific                               | 1,277    |   | 1,263                                                                            |  
|                                           |          |   |                                                                                  |  
|Other countries                            | 54       |   | 53                                                                               |  
|                                           |          |   |                                                                                  |  
|                                           | 7,116    |   | 7,430                                                                            |  
|                                           |          |   |                                                                                  |  
|Inter-area eliminations
      and sales to |          |   |                                                                                  |  
|                                           |          |   |                                                                                  |  
|discontinued
      operations              | (991     | ) | (1,005                                                                           | )
|                                           |          |   |                                                                                  |  
|Total                                      | 6,125    |   | 6,425                                                                            |  
|                                           |          |   |                                                                                  |  
|Discontinued operations                    |         |   |                                                                                 |  
|                                           |          |   |                                                                                  |  
|Total                                      | 6,125    |   | 6,425                                                                            |  
|                                           |          |   |                                                                                  |  
|Associates                                 |          |   |                                                                                  |  
|                                           |          |   |                                                                                  |  
|Share of profits
      less losses         |          |   |                                                                                  |  
|                                           |          |   |                                                                                  |  
|Interest payable                           |          |   |                                                                                  |  
|                                           |          |   |                                                                                  |  
|Group net interest payable                 |          |   |                                                                                  |  
|                                           |          |   |                                                                                  |  
|Total                                      | 6,125    |   | 6,425                                                                            |  
|                                           |          |   |                                                                                  |  



|                                            | Turnover |   | Profit before
      tax,
      goodwill amortisation
      and exceptional items |  
|------------------------------------------- | -------- | - | -------------------------------------------------------------------------------- | -
|                                            |          |   |                                                                                  |  
|                                            | 2002     |   | 2001                                                                             |  
|                                            | £m       |   | £m                                                                               |  
|                                            |          |   |                                                                                  |  
|Continuing operations                       |          |   |                                                                                  |  
|                                            |          |   |                                                                                  |  
|International
      Businesses              |          |   |                                                                                  |  
|                                            |          |   |                                                                                  |  
|National
      Starch                       | 1,841    |   | 1,853                                                                            |  
|                                            |          |   |                                                                                  |  
|Quest                                       | 716      |   | 727                                                                              |  
|                                            |          |   |                                                                                  |  
|Performance
      Specialties               | 804      |   | 832                                                                              |  
|                                            |          |   |                                                                                  |  
|Paints                                      | 2,182    |   | 2,233                                                                            |  
|                                            |          |   |                                                                                  |  
|                                            | 5,543    |   | 5,645                                                                            |  
|                                            |          |   |                                                                                  |  
|Regional and
      Industrial               | 615      |   | 821                                                                              |  
|                                            |          |   |                                                                                  |  
|Inter-class eliminations
      and sales to |          |   |                                                                                  |  
|                                            |          |   |                                                                                  |  
|discontinued
      operations               | (33      | ) | (41                                                                              | )
|                                            |          |   |                                                                                  |  
|Total                                       | 6,125    |   | 6,425                                                                            |  
|                                            |          |   |                                                                                  |  
|Discontinued operations                     |         |   |                                                                                 |  
|                                            |          |   |                                                                                  |  
|Total                                       | 6,125    |   | 6,425                                                                            |  
|                                            |          |   |                                                                                  |  
|Associates                                  |          |   |                                                                                  |  
|                                            |          |   |                                                                                  |  
|Share of profits
      less losses          |          |   |                                                                                  |  
|                                            |          |   |                                                                                  |  
|Interest payable                            |          |   |                                                                                  |  
|                                            |          |   |                                                                                  |  
|Group net interest payable                  |          |   |                                                                                  |  
|                                            |          |   |                                                                                  |  
|Total                                       | 6,125    |   | 6,425                                                                            |  
|                                            |          |   |                                                                                  |  



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description of business

 Continuing operationsICIs
    businesses comprise National Starch, Quest, Performance Specialties and ICI
    Paints, which are referred to as the International Businesses, and a number
    of smaller Regional and Industrial businesses.
  National StarchNational Starch, which accounted
        for 30% of the Groups sales in 2002, is a global leader in industrial
        adhesives and specialty food starches. In addition, the business has strong
        positions in electronic materials, specialty polymers and specialty starches,
        and has niche businesses in personal care and healthcare ingredients.
        It provides specialty ingredients for attractive, relatively non-cyclical
        and high growth markets. The Group believes that National Starchs
        position in these markets has been achieved through its unique polymer
        technology and application understanding, both natural and synthetic,
        and a high degree of technical support for its customers. Within the overall
        Group strategy, National Starchs strategy is to:

    
        continue to build on these strengths
          in areas where it sees good growth opportunities, such as electronic
          materials, personal care, and Asia Pacific,
        innovate and introduce new products
          to all of its customers, and
        focus in its more mature businesses
          on improved cost efficiency.National Starch produces thousands of
        technically advanced products and operates an international network of
        153 manufacturing and customer service centres, located in 37 countries
        on six continents.

      National Starchs world and American
        headquarters is in Bridgewater, New Jersey, USA. Its European headquarters
        is in High Wycombe, UK and its Asia Pacific operations headquarters is
        in Singapore.

Major manufacturing
      facilities are located in the USA, Canada, the UK, Germany, Netherlands,
      Japan, Thailand, Korea, China and Brazil, with other manufacturing facilities
      located in 21 other countries around the world.
      In 2002 the Electronic and Engineering
        Materials (EEM) business opened a new manufacturing and technical facility
        near Shanghai, China, where the Acheson unit manufactures materials to
        supply to Chinese and multi-national customers in the electronic and automotive
        industries. Ablestik, another EEM business, expanded its facility in Linton,
        near Cambridge, in the UK to meet the growing needs of European semi-conductor
        and micro-electronic manufacturers.

      National Starch comprises four
        distinct business groupings:

		 
        Adhesives (41% of National Starch sales
          in 2002),
        Specialty Starches (25% of National
          Starch sales in 2002),
        Specialty Synthetic Polymers (20% of
          National Starch sales in 2002), and
        Electronic and Engineering
          Materials (EEM) (14% of National Starch sales in 2002).
      .AdhesivesNational Starch is one of the largest
    producers of industrial adhesives in the world. It manufactures a broad range
    of adhesive types, including adhesives based on both natural and synthetic
    polymers, water-borne, hot melts, 100% solids, reactive adhesives and pressure
    sensitive adhesives.

  The divisions products are used in
    packaging for sealing cases and cartons and fixing labels to bottles and cans.
    There are a number of paper converting applications such as laminating, bag
    making, tissue, paper tube winding and box manufacturing. Converting adhesives
    are also used in bookbinding, envelopes, magazines, and remoistenable stamps.
    Adhesives are also critical components in the construction of disposable nappies/diapers,
    personal sanitary products and disposable hospital supplies.
  National Starchs high performance curing
    adhesives are used to laminate plastic films, metal foils and paper for numerous
    flexible packaging applications. 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. The Bondmaster business unit supplies
    adhesives for assembly operations in the woodworking, construction 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 meat, fruit, vegetable and shipping cases.
    Specialty synthetic polymer products add increased water resistance for demanding
    applications.
    In 2002, the division introduced a number
      of new products including: Cool-Lok 34-274A, a low temperature
      hot melt adhesive that resists high heat better than previous products;
      Ultracase 100% solid adhesive that permits bookbinders to eliminate
      waste caused by moisture; and Ultra-Set glued lap adhesive for
      corrugated containers.
    Specialty StarchesNational Starchs food starches
      are an important part of many everyday foods. They enhance texture and appearance
      and provide effects which enable end-consumer products to withstand the
      rigours of ultra high temperature (UHT) processing, microwave cooking, freeze/thaw
      cycles and extended storage.
  In the specialty food ingredients area, the
    Starch division produces products which are used for fruit preparations, meals
    and 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 for the dairy market are used to improve the quality and stability
    of a range of dairy foods. Ingredients for cereals and snacks influence the
    expansion, texture and eating quality of a variety of baked, fried and extruded
    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 the moisture retention, texture and structure of baked
    doughs and their fillings. Encapsulation products encapsulate flavours and
    fragrances, stabilise flavour emulsions and are used in starches that improve
    mouth-feel properties in beverage systems.
  Products in pharmaceutical and nutrition
    areas include specialty starches for use as carriers, binders and disintegrants
    in tablets and capsules, thickeners for liquid dosage medicines, pharmaceutical
    grade dusting powders for surgical gloves and specialty ingredients for the
    nutrition industry.




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  In the pulp and paper industry, the divisions
    specialty starches provide strength and contribute to enhanced productivity
    in the manufacture of unbleached kraft, fine papers, bleached board, newsprint
    and recycled fibre stocks.Additives
    and liquid polymers improve the biodegradability and strength of tissue and
    towel products. Specialty surface size starches increase runnability in the
    size press and printability on the end users printing press, while replacing
    more costly functional additives.The division has also created a starch-based
      replacement for plastic packaging. ‘Eco-Foam loosefill is composed
      of nearly 100% starch and protects the contents of packages as effectively
      as polystyrene peanuts, yet is fully degradable and decomposes
      in water.New products introduced in 2002 included:
      100% organic Novation starches that enable food manufacturers
      to include the texture and taste consumers seek along with foods they feel
      will help them stay healthy; and ‘Versa-Sheen glazing agent
      which enables bakers to coat items such as croissants and cookies with an
      attractive high sheen.Specialty Synthetic Polymers
  National Starch has multiple capabilities in specialty polymers, resins and
  redispersible powders for markets as diverse as personal care, construction,
  water treatment, detergents, paper coatings and apparel.The Vinamul Polymer businesss binders,
  saturants and laminants add desirable characteristics to non-wovens (fibrefill,
  interlinings, disposable garments), textiles and papers.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.The Alco businesss products include dispersants,
  anti-scalants and detergent builders, as well as rheology modifiers (thickeners)
  for the carpet, adhesive and detergent industries. Dithiocarbamate chemistry
  is used in microbiocides and metal precipitants for process water treatment.Elotex redispersible powder
      polymers improve the adhesion, flexural strength, insulation properties
      and shrink-resistance of cements, grouts, adhesives and other construction
      products.New products introduced in 2002 included:
      ‘Structure-XL a naturally derived polymer for skin care emulsions;
      ‘DynamX technology, for hair care formulators; and ‘Alcosperse
      747, a polymer that improves performance of detergents used for laundering,
      automatic dishwashing and hard surface cleaners.Electronic and Engineering Materials (EEM)
  The EEM division 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. The division serves customers
  worldwide with formulations and application assistance to meet demanding performance
  and processing requirements.The EEM division is comprised of five business
  units, each focused on specific product lines and end-use markets.
        Ablestik supplies adhesives
          and encapsulants used for semiconductor packaging and microelectronic
          assembly. Products include adhesive pastes, films, tape adhesives, and
          underfill encapsulants.


        Acheson supplies thick
          film materials and specialty coatings used in cathode ray tubes, keyboards
          and switches, printed circuits, and other electronic components. Specialty
          coatings are also used for noise reduction and wear resistance in automotive
          components.Acheson also supplies
          process lubricants and application systems used in metalworking and
          casting.
        Emerson & Cuming supplies
          adhesives, encapsulants, and coatings used in circuit assembly and in
          fabrication of electronic, electrical, and electromechanical components.
        Permabond supplies adhesives
          used in product assembly, structural bonding, and repair applications,
          including disposable medical devices, electric motors, automotive components,
          and motor vehicle assembly.
        Tra-Con provides adhesives
          and coatings in single-use and other specialty packages serving a broad
          range of industrial customers through telemarketing programmes.Quest Quest, which accounted for 12% of the Groups
  sales in 2002, is a leader in the development, application and production of
  fragrances, flavours and food ingredients for a wide variety of consumer brands.
  Quest operates in fast moving markets that the Group believes present attractive
  growth opportunities and comprises two major strategic businesses:
    
        Food (60% of Quest sales
          in 2002), and
        Fragrance (40% of Quest
          sales in 2002).ICI believes that Quests competitive
  position is based on four distinctive strengths. These are:
    
        the quality of its customer
          relationships,
        the sensory design skills
          of its perfumers and flavourists,
        the technological advances
          resulting from its research and development, and
        the customer service and
          support provided by the 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, in fine fragrances and in Asia,
        investing in consumer
          understanding,
        creating and making best
          use of an effective and efficient innovation process,
        working to ensure operational
          excellence in both service levels and costs by focusing on appropriate
          parts of the value chain (for example, expanding its position in novel
          fragrance ingredients while outsourcing non-core activities) and continuous
          process improvement.Quests innovative flavours and fragrance
  products consist of compounds of blended ingredients under formulae 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.





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description of business

Food ingredients include emulsifiers, hydrocolloids,
  proteins and bio ingredients (enzymes, cultures and yeast), developed to meet
  the changing commercial requirements in taste and texture of its customers
  brands.
Fragrance ingredients are the scented building
  blocks of the fragrance formulae. They also contribute additional technical
  characteristics, such as deodourisation or insect repellence, to the finished
  compound.
In the food market, growth has been driven
  by the desire of consumers for new and more sophisticated flavours as well as
  for foods that are compatible with a healthy lifestyle. These factors have stimulated
  the demand for products such as convenience foods, ethnic foods, low-cholesterol
  and low-fat food products, as well as soft drinks that must also meet expectations
  in taste, texture and appearance.
    During 2002, ‘Quest HIT Flavours,
      a state of the art topnote range based on artisanal cooking as a benchmark,
      was launched in a variety of regions. Specific successes have been achieved
      with the range in Europe, North America and Asia. ‘Pure Delivery
      (an encapsulation technology) continued to be rolled out across the globe
      and gained adoption by a major key account. Progress on consumer appeal
      platforms has continued with increased adoption of the ‘TrendAntenna
      process. The Hyprol protein hydrolysates for sports drinks has been successfully
      launched and is supported by a dedicated web site: www.hyprol.com.
Quests Fine Fragrance business has been
  behind a stream of new scents. Among 2002s perfume launches, containing
  Quest fine fragrances, have been Armanis Mania for Men, Givenchys
  Eau Torride, Jennifer Lopez signature scent Glow and Bora Bora, a unisex fragrance
  based on bio-captive ingredients.
Science, innovation and creativity are the
  key pillars of Quests research effort. Innovation is at the heart of Quests
  business. It designs and develops new fragrance and flavour 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 in the UK and Naarden in the Netherlands,
  together with specific product process development teams at six other sites
  around the world. Quest also benefits from its membership of the wider ICI group
  and the science base that is available to support innovation.
The Food divisions headquarters is in
  Naarden, the Netherlands, where Quests corporate headquarters is also
  located. The Fragrance divisions headquarters is in Ashford, UK. Major
  manufacturing facilities are located in the Netherlands, the UK, USA, Mexico,
  France, Australia, Ireland and Indonesia with smaller manufacturing facilities
  in 11 other countries. Quest has its own sales distribution network in 38 countries
  and is represented elsewhere by sales agents.
  Performance SpecialtiesAt the beginning of 2002, Performance Specialties
    consisted of two main strategic business units: Uniqema and Synetix, plus
    the smaller Security Systems business. During the course of the year Security
    Systems was sold to Lincolnshire Management Inc. and Synetix to Johnson Matthey
    plc.
Performance Specialties accounted for 13% of
  the Groups sales in 2002. As a percentage of Performance Specialties sales
  in 2002, Uniqema represented 83%, Synetix 15% and other businesses 2%.
UniqemaUniqema was formed at the beginning of 1999.
  Its operating sectors comprise lubricants, personal care, and performance technologies.
ICI believes that Uniqemas strength is
  its strong positions and applications capabilities in the personal care and
  synthetic lubricants markets, and in the European and US oleochemicals sector.
  Within the overall Group strategy, Uniqemas strategy is to seek profitable
  growth in personal care and lubricants, and cost leadership in base oleochemicals.
Uniqema supplies innovative customised effect
  chemicals for purposes such as dispersion, wetting, emulsification, polymer
  modification, adjuvancy, lubrication, emolliency and defoaming. These effects
  are supplied as ingredients for personal and healthcare formulations, for lubricant
  formulations and for the production of agrochemicals, paint dispersions, resins,
  polymers and oilfield chemicals, as well as for use in textile processing. 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 believes that Uniqema is also
  a leader in synthetic refrigeration lubricants, to which it provides worldwide
  technical support.
As a prominent player in personal care, 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.
In the more regionally based Performance Technologies
  business, the main product streams are based on natural oils and fats, and strong
  positions in polymers are based on a range of specialty dimers, which are used
  in adhesives, coatings and resins, printing inks, engineering plastics, fibres
  and foams. Performance Technologies also includes specialist sectors in textile
  and oil applications.
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.
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 16 manufacturing sites in Europe,
  North America and Asia Pacific.
In 2002 Uniqema closed its offices in Everberg,
  Belgium and successfully completed the implementation of new Enterprise Resource
  Planning (ERP) computer systems at all sites in Europe.
    PaintsICI Paints is a leading international paint
      business and accounted for 36% of the Groups sales in 2002. It concentrates
      on decorative paint (91% of ICI Paints sales in 2002) and coatings
      for food and beverage cans (9% of ICI Paints sales in 2002).
    In 2002, 46% of ICI Paints sales were
      in North America, 34% in Europe, 12% in Asia and 8% in Latin America and
      Rest of World. ICI believes that ICI Paints strengths include its
      well-established brands and the global nature of the business which allow
      ICI Paints to use its resources, expertise and experience to offer the best
      solution for each local market and the needs of the end users.



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Within the overall Group strategy, 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:
    
        building its business
          in high growth areas such as China, India and elsewhere in Asia,
        capitalising on supply
          chain rationalisation opportunities,
        utilising best practice
          throughout the business to reduce costs.The decorative paints business has well-established
      brands such as ‘Dulux, ‘Glidden, ‘Valentine,
      ‘Coral, ‘Alba and ‘Color Your World.
The acquisition in 1998 of the European Home
  Improvement business of Williams Plc added further strong brand names in Europe
  such as ‘Hammerite, ‘Cuprinol, ‘Polyfilla,  ‘Polycell,
  Xyladecor, Molto and Alabastine. The acquisition
  broadened and strengthened the decorative product range to include wood care,
  metal care, adhesives and fillers. The decorative paint business has four regional
  strategic business units as the worldwide paint market is still highly regional.
    During 2002 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.
      Achievements in 2002 included extending the ‘Hammerite range
      in Latin America, a new ‘Cuprinol rollable paint in the UK,
      the launch, also in the UK, of ‘Polycell Basecoat, a product
      similar to paint which covers hair line cracks and serves as a base for
      emulsion paint finish on interior walls, the US launch of Dulux ‘Fortis,
      a premium exterior paint and Alkyd paint using the new ICI Advanced Alkyd
      technology, and the introduction of a second generation ‘Dulux 5-in-1’
      paint in China.
ICI Paints is a leader in sales of internal
  and external coatings for food and beverage cans. It also manufactures and distributes
  a broad product offering of packaging coatings and has significant market positions
  in both the mature markets of Europe and North America and the emerging markets
  of Asia and Latin America.
Technology and innovation are also important
  factors in the growth of ICI Paints. Success is dependent on being first to
  the market with innovative, value-adding products and services which meet real
  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.
    ICI Paints business headquarters is at
      Slough in the UK. Major manufacturing facilities are located in the USA,
      UK, Brazil, Argentina, Germany, Netherlands, France, China, India and Malaysia.
      Additional manufacturing facilities are located in 16 other countries. ICI
      Paints maintains its own sales distribution network in 32 countries, and
      sells elsewhere through sales agents and distributors.
  Regional and IndustrialThe Regional and Industrial businesses comprise several businesses which are
  essentially local in their scope. Excluding sales relating to continuing supply
  contracts involving businesses that have been divested and which are transacted
  at nil margin, Regional and Industrial businesses accounted for 9% of the Groups sales in 2002. The most significant of these businesses
  are located in Pakistan, India and Argentina. In Pakistan and India, ICI operates
  through non wholly-owned subsidiary companies whose share capital is quoted
  on the local stock exchanges. During 2002 the regional explosives operations
  in the USA and the UK were divested.
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,
  glassand paper. Other businesses of ICI
  Pakistan include pharmaceuticals, seeds and specialty products. Pakistan PTA
  Limited located at Port Qasim near Karachi manufactures purified terephthalic
  acid (PTA) for the fibre industry.
ICI Indias regional business comprises
  explosives, rubber chemicals, and nitrocellulose. The explosives business, centred
  at Gomia, manufactures a wide range of modern bulk and packaged explosives.
  The rubber chemicals business has manufacturing facilities near Kolkata, and
  the nitrocellulose business is based in Gujarat. ICI Indias pharmaceuticals
  business was sold in early 2002.
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.
Huntsman International Holdings LLCHuntsman International Holdings LLC (HIH),
  formed in 1999, is controlled by Huntsman Corporation and comprises ICIs
  former Polyurethanes and Tioxide businesses and the majority of ICIs former
  UK based Petrochemicals businesses, together with the propylene oxide assets
  of Huntsman Corporation.
    ICIs interests in HIH comprise a holding
      of subordinated loan notes in HIH and an equity interest in ICI Alta Inc.,
      a wholly owned subsidiary. ICI Alta Inc. holds ICIs 30% equity interest
      in HIH and a contract for the sale of this equity interest in HIH to Huntsman
      Specialty Chemicals Corporation (HSCC), as announced on 21 December
      2001 (see material contracts on page 122). On 17 June 2002,
      ICI announced it had reached an agreement with CSFB Global Opportunities
      Partners L.P. (now Matlin Patterson Global Opportunities Partners L.P.)
      for the sale of ICIs interests in HIH. The aggregate purchase price
      payable under this new agreement is $440m (£283m). Of this amount,
      $160m (£109m) has been received. The remaining $280m (£174m)
      (with an amount equivalent to interest from 15 May 2002 to the date of payment)
      will be payable on 15 May 2003, with Matlin Patterson Global Opportunities
      Partners L.P. having the option to pay all or part of the amount due prior
      to 15 May 2003 by means of installment payments.
Ownership of the HIH Notes, subject to a pledge
  arrangement, has been transferred and ownership of ICI Alta Inc. will be transferred
  when the full purchase price has been received. As a result of this transaction,
  HIH has ceased to be treated as an associate from 17 June 2002.
Discontinued OperationsFor UK GAAP purposes, the Group classifies discontinued
  operations as material operations which it has sold or permanently terminated
  either during a particular financial year or during the subsequent period to
  the date of signature of the annual accounts for such financial year. There
  were no operations reported as discontinued during 2002 or 2001 and the last
  businesses to be so classified, in 2000, were the: Chlor-Chemicals, Klea and
  Crosfield businesses, Methanol business, and the Groups 50% equity holding
  in Philips-Imperial Petroleum Ltd.
Markets and distributionICI sells its products through an extensive network
  of subsidiaries, associates and distributors.
Specialty products manufactured by National
  Starch, Quest and Uniqema 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, perfume
  and personal care sectors to those involved in surfactants, lubricants, papermaking
  and chemicals.



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description of business

Group expenditure on tangible fixed assets2002
    
   2001
   
   2000
   
   
   2002
    
   2001
   
   2000£m
    
   £m
   
   £m
   
   
   £m
    
   £m
   
   £mContinuing operations
   
    
   
   
   
   
   Continuing operationsNational Starch
   52
    
   85
   
   96
   
   United Kingdom
   53
    
   59
   
   52Quest
   52
    
   34
   
   28
   
   Continental Europe
   65
    
   49
   
   56Performance Specialties
   38
    
   43
   
   39
   
   Americas
   64
    
   86
   
   96Paints
   53
    
   55
   
   54
   
   Asia Pacific
   33
    
   44
   
   31International Businesses
   195
    
   217
   
   217
   
   Other
       countries
   
    
   
   
   Regional and Industrial
   20
    
   21
   
   18Total  Continuing operations
   215
    
   238
   
   235
   
   Total  Continuing operations
   215
    
   238
   
   235Discontinued operations
   
    
   
   
   54
   
   Discontinued operations
   
    
   
   
   54Total
   215
    
   238
   
   289
   
   Total
   215
    
   238
   
   289
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. Can coatings are supplied directly to beverage
  and food manufacturers in Europe, the Americas and Asia.
The Groups
Regional and Industrial businesses sell into a wide range of industries including
engineering, textiles, pharmaceuticals and the extractive industries. These 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.
  SeasonalityDue to the diversity of their product portfolios
    and broad international coverage, seasonality in the National Starch, Quest
    and Uniqema businesses is not significant. ICI Paints, however, is affected,
    with higher sales of products used on the exterior of buildings normally during
    better weather conditions. With the geographic profile of ICI Paints, this
    results in higher activity levels in the second and third quarters of the
    year.
  Sources and availability of raw materialsRaw materials and supplies are purchased
    from a variety of industry sources, principally the agricultural and chemical
    sectors and to a lesser extent from the mining sector. They are generally
    available from multiple suppliers and alternative sources are generally available
    to enable business to continue in the event of any interruption from present
    sources. Prices are subject to normal conditions of supply and demand.
The primary raw materials used by National Starch are corn, tapioca and chemicals.
Specialty hybrid corn (high amylose and waxy seeds) is planted under contract
for National Starch to guarantee supply of these special strains. Starch manufacturing
facilities in Thailand are located close to the sources of production of tapioca
root to ensure reliability of supply. National Starchs
main chemical raw material is vinyl acetate monomer, the cost and supply of which
is dependent on the price of natural gas and manufacturing capacity of suppliers.
Quest 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
  raw materials for Uniqema include a wide range of both renewable (palm oil,
  rape-seed oil, tallows) and petrochemical based (ethylene oxide, propylene oxide)
  raw materials.
  The raw materials for ICI Paints include resins,
    solvents and pigments from major chemical suppliers.
  Intellectual propertyICI has thousands of patents and applications
    which help to protect its technology and numerous trademark registrations
    which help to protect ICIs brands.
    In addition, it 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.
  CompetitionDue to the breadth and variety of the products
    and end markets served, the Group encounters a wide range of competitors,
    from multinational companies to many small local and independent firms.
National Starch does not compete with any one competitor in all of its markets.
However, multinational competitors in specific markets
include HB Fuller, Rohm & Haas and Air Products. Similarly, Uniqema does
not compete with any one competitor in all of its markets, but in particular
markets competitors include Cognis, Fina, Akzo Nobel and Twin Rivers.
Quest is one of the top five flavour and fragrance manufacturers which together
account for approximately half of the total market. Quests
main competitors are multinational flavour and fragrance houses, including International
Flavors & Fragrances and Givaudan.
ICI Paints competition
is mainly national in character. However, international competitors include Sherwin
Williams and Akzo
Nobel.
  Capital expenditureThe analyses in the tables above summarise
    the Groups capital expenditure
    on tangible fixed assets over the three year period ended 31 December 2002.
In 2002, over 90% of capital expenditure was incurred by the International Businesses.
One significant project has been the implementation of new enterprise resource
planning systems in Quest.




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The remainder of the expenditure has been incurred on a large number of relatively minor projects aimed at achieving additional capacity for specialty products, as well as for productivity improvements through
increased automation of manufacturing processes and the relocation and consolidation of facilities. A significant portion of the expenditure relates to information technology and to the support of customers including tinting machines (Paints) and
creative systems (Quest).
Commitments for capital expenditure not provided in the Groups consolidated financial statements totalled £163m at 31 December
2002, compared with £146m at the end of the previous year. These are analysed further in note 40 to the consolidated financial statements between those for which contracts have been placed and those authorised but not yet contracted.
  Research and development (R&D)A Technology Board, comprising the senior
    business R&D managers and led by the Group Vice President for 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 2002, expenditure on R&D
    by continuing operations excluding Technical Service, amounted to £148m
    (2001 £151m; 2000 £157m  both as restated). This expenditure
    represented 2.4% of sales in 2002, up from 2.3% in 2001 and the same as in
    2000.
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. Its capabilities are in colloid interface science; high throughput
experimentation (HTE); modelling; particle engineering and polymer science. It also provides measurement science services to the ICI businesses as well as undertaking a small measurement science development programme. 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
Performance Specialties. 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.
The Groups prime technology areas, namely biosciences, chemistry and materials, have been established to support its goals in selected
growth markets. These areas (or megathemes) constitute a portfolio of projects, which are intended to accelerate the Groups long-term technology development, and avoid
business duplication while reducing individual business risk.
Bioscience has key areas of knowledge and expertise which the Group applies to
the development of personal care, food and beverage products. Projects under
way focus on the use of natural materials, linking consumer response to the molecular
constituents of the Groups products, and the development of superior product effects through improved understanding of skin science. An
example is the collaboration with Arena Pharmaceuticals Inc to apply Arenas

proprietary CART technology to olfactory and gustatory G protein-coupled receptors (GPCRs) to develop assays and then screen compounds supplied by ICI businesses.
Chemistry underpins much of the Groups product development and here its focus is on high throughput R&D to explore novel molecules,
formulations and processes. A successful collaboration with Symyx Inc has made it possible to rapidly build an ICI Centre of Expertise in High Throughput Screening and Formulation which is now advancing a portfolio of projects for the ICI
Businesses. Investments in HTE capability continue at Quest, and are beginning in Paints.
Current projects in the materials area are directed towards bio-materials and
renewable resources, exploiting effects shown by bio-polymers and bio-molecules,
and increasing the Groups ability to fabricate at the nano-scale for macro-scale effects. The combination of these capabilities is particularly focused on controlled and targeted delivery of effect products e.g.
the collaboration between National Starch and Uniqema has already led to the launch of two new crop protection products; Metasperse dispersants, and Semkote seed coatings.
  The competitive edge of the Group comes
    from the combination of these capabilities, not merely the demonstration of
    excellence in any one megatheme area. Nowhere is this more evident than in
    ICIs ability to offer products with a multisensory (touch,
    taste, fragrance and colour) dimension. The power and opportunity that this
    approach offers is displayed in the ICI report on The Secrets of the
    Senses commissioned from Dr Charles Spence from the Department of Experimental
    Psychology at the University of Oxford.
  Regulation, safety, health and the environmentICI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. Its businesses also voluntarily conform to international
    and national codes of best practice appropriate to their business.
ICI attaches great importance to the safety and health of its employees, to reducing
any adverse environmental impact of its activities year-on-year and to developing
products and services with improved environmental
features.
Most aspects of the Groups business are subject to laws relating to safety, health and environment (SHE). The scope and severity of such
laws vary across the different businesses and according to the jurisdiction concerned. The various manufacturing processes which are operated require consents and licences including relevant emission permits. The Group requires full compliance by
its businesses with all relevant SHE laws and regulations in each jurisdiction in which it operates.
ICIs policy is to improve its SHE performance continuously and to have in place quantitative measures to monitor progress. For these
reasons, ICI published a set of targets in 2001 to be achieved by the end of the year 2005 for improvements in Safety, Health and the Environment (Challenge
2005). Targets for the last of these included reducing its environmental burden in specific categories and a commitment to improve energy efficiency per tonne of
production by a further 5% of the 2000 base level. ICI developed the measurement of environmental burden 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.




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description of business

Challenge 2005 focuses on the effects of the Groups activities on climate change, land, water, and other potential impacts using the
environmental burden concept introduced in 1995, and to achieve a further 50% reduction in employee injuries and illnesses from the 2000 outurn.
We maintain our focus on SHE and, in the second year of our current five-year
programme, are on plan to meet the majority of our Challenge 2005 objectives
and have actions in place to address those areas where we are behind. Full details
are published in our Sustainability Report and on our website, www.ici.com. ICIs performance in 2002 is currently being verified by Enviros
Consulting Ltd, and the detailed performance results and verification statement will be published on its website. During 2002, there were eleven instances of breaches of safety, health or environmental regulations which resulted in prosecutions or
fines totalling £95,000. 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 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 standard for environmental management systems, ISO 14001
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 its
sites and has developed further procedures to enable the ranking of priorities
for management attention. ICI is actively 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 which 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 European Union Chemicals Policy White
Paper. 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 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 which improve the efficiency
of use of raw materials and utilities and reduce adverse environmental effects.

Processes are in place for regular reviews of environmental liabilities, and provisions were established by 31 December 2002 in accordance with the accounting policy described in the Group financial statements on page
51. 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.
  LitigationSave as disclosed below, neither ICI nor
    any of its subsidiaries is involved in any legal or arbitration proceedings
    which may have, or have had, during the 12 months preceding the date of this
    document, a material effect on the financial position of the Group, nor are
    any such proceedings pending or threatened involving ICI or any of its subsidiaries.
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 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. Due to the nature of the suits, Glidden is
unable to quantify the amount being claimed although the suits are likely to involve substantial claims for damages.
The cases presently pending against Glidden include: a suit filed in 1989 by
the New York City Housing Authority in New York state court seeking the removal
of all lead-based paint from two housing projects; a purported statewide personal
injury class action filed in 1998 on behalf of all lead poisoned children in
New York state court; a personal injury suit filed in 1999 on behalf of six lead
poisoned minors in state court in Maryland, and a personal injury action filed
in 2002 on behalf of a lead poisoned adult in state court in Mississippi. Five
other individual personal injury actions were filed in 2000 and 2001 against
Glidden and other members of the lead industry in Maryland state court, however,
these actions have not been served on any of the defendants and no activity is
expected for the foreseeable future. One additional personal injury action was
filed in late 2002 in New York state court but Glidden has not been served in
that
case.
Glidden has been dismissed from seventeen cases in 2002 and was not named as
a defendant in more than two dozen lead paint lawsuits filed this year. Glidden
continues to believe that it has strong defences to all of the pending cases
and has denied all liability and will continue to vigorously defend all actions.
ICI Chemicals & Polymers Limited (C&P), a subsidiary, is involved in
arbitration proceedings in Singapore regarding PTA technology exchange and licence
arrangements with PT Polyprima Karyareksa (Polyprima). Fees due under these arrangements
are being claimed against Polyprima who, in response, has claimed damages totalling
up to $130m for alleged breach of contract, alleged fraud, deceit, misrepresentation
and concealment, allegations which C&P rejects and intends to resist vigorously.
C&Ps claim against Polyprima was heard before an arbitration tribunal in Singapore in May 2002 and the decision of the
tribunal is awaited.
In connection with the disposal of the Groups Chlor-Chemicals business to Ineos Chlor, Ineos Chlor has made a £65m claim against
the Group relating to expenditure allegedly required in relation to the Runcorn site, which the Group is disputing. As yet, legal proceedings have not been commenced by Ineos Chlor but it is possible that they will be in
the near future.




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Ineos Chlor has also approached the UK Department of Trade and Industry to seek
Regional Selective Assistance for certain capital projects and is also seeking
financial support from its parent company and the Group. ICI has received reports
that Ineos Chlor may seek to close part or all of its business if this financial
support is not forthcoming. If such a closure was to occur, a number of Chlor-Chemicals
contracts in the Groups name which have not yet been novated to Ineos Chlor
and certain environmental liabilities could revert to the Group or be accelerated.
  EmployeesAs of 31 December 2002, ICI employed 36,660
    employees. An analysis of employee numbers by business and geographical area
    may be found in note 36 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 good.
  PropertyICI operates production, marketing and research
    and development facilities worldwide. The individual business descriptions
    on the preceding pages provide details of these facilities. ICI owns substantially
    all of its properties, free of material encumbrances, and it believes such
    properties are adequate for their purposes and suitably utilised according
    to the individual nature and requirements of the relevant properties.
  InsuranceICI maintains the types and amounts of insurance
    customary in the industries and countries in which it operates. This includes
    but is not limited to Employee Related Accidents and Injury policies, Property
    Damage policies and Directors and Officers liability coverage. ICI considers
    its insurance coverage to be adequate both as to the nature of the risks covered
    and the amounts insured for the businesses conducted by the Group. The insurance
    market, since the terrorist attacks on the United States on 11 September 2001,
    has become far more expensive and limited in coverage availability. There
    are indications that insurance costs will continue to increase and that the
    scope of coverage available in the market will become more limited.





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operating and financial review
TurnoverGroup sales, as reported for the
  year, were £6,125m, 5% lower than 2001 (£6,425m in 2001 and £6,415m
  in 2000 or £7,748m including discontinued operations). The lower sales
  in 2002 were largely the consequence of divestments, principally in the Regional
  and Industrial businesses, and adverse foreign exchange translation effects.
International Business sales, at £5,543m,
  were 1% ahead of 2001 on a comparable basis. Growth resumed in North America
  and remained strong in Asia, more than offsetting lower sales in Latin America,
  where economic conditions remained challenging. Sales in Europe were slightly
  ahead of the prior year. Each of the International Businesses delivered comparable
  sales growth, with National Starch and Performance Specialties both 2% ahead,
  and Paints and Quest both 1% ahead of last year.
As reported sales for the International Businesses
  were 2% below 2001 (2001 £5,645m; 2000 £5,570m), with the effects
  of foreign exchange translation (2%), and divestments in Performance Specialties
  (1%) accounting for the difference from the comparable performance.
  Trading profit*Group trading profit for the
    year was £533m, 7% lower than 2001 (2001 £573m; 2000 £617m
    or £612m including discontinued operations).
Trading profit for the International Businesses
  for the year, at £543m, (2001 £569m; 2000 £600m) was only
  1% lower than 2001 on a comparable basis. Paints and National Starch both made
  good progress in difficult conditions, and were up 9% and 5% respectively on
  a comparable basis. However, comparable trading profit was 23% lower for Quest,
  which was impacted by supply chain problems, and 24% lower for Performance Specialties,
  with Uniqema being particularly affected by rising raw material prices in the
  second half of the year.
*
      Profit figures are quoted
        before goodwill amortisation and exceptional items unless otherwise stated.References to comparable
        performance exclude the effect of currency translation differences and
        the impact of acquisitions and divestments on the results reported by
        the International Businesses. A reconciliation between comparable
        and as reported performance measures can be found on pages
        28 and 31. A more detailed explanation of comparable performance
        appears on page 124.
As reported International Business trading profit
  was 5% lower than last year, with the difference from the comparable performance
  due to the effects of foreign exchange translation (2%) and divestments
  (2%).
Regional and Industrial businesses reported
    a £10m trading loss for the year, £14m lower than in 2001 (2000
  £17m profit) due to the loss of profits from divested businesses and
  a  legal provision in relation to one of ICIs former businesses.
  AssociatesThe Groups share of losses
    of associates before exceptional items for the year was of £10m, in
    line with last year (2001 £10m loss; 2000 £40m profit). Reduced
    losses from Huntsman International Holdings LLC (which ceased to be accounted
    for as an associate from 17 June 2002) were offset by losses in Irish Fertilizer
    Industries (which went into liquidation in November 2002). The Group result
    included the Groups share of operating profit before exceptional items
    from associates of £18m (2001 £57m; 2000 £100m) less net
    interest payable by associates of £28m (2001 £67m; 2000 £60m).
  InterestThe Group net interest charge
    for the year was £123m compared to £162m in 2001 (2000 £202m
    excluding exceptional interest income), primarily as a result of lower average
    net debt following the successful completion of the Rights Issue, and lower
    interest rates during the year.
  Profit before taxProfit before tax, goodwill
    amortisation and exceptional items for the year was £400m, £1m
    lower than last year (2000 £450m). Lower trading profits for the International
    Businesses, by £26m, and a loss for Regional and Industrial businesses
    were almost entirely offset by the lower interest costs. Profit before tax,
    but after goodwill amortisation and exceptional items was £317m compared
    to £205m in 2001 (2000 £87m loss, including the provision for
    loss on the sale of the Chlor-Chemicals, Klea and Crosfield operations of
    £503m).
During 2002 the adverse currency translation
  effect compared to last year on the Groups reported profit before tax,
  goodwill amortisation and exceptional items was £11m.
  Exceptional itemsThere was no net exceptional
    charge to trading profit in 2002 (2001 £143m loss relating to the restructuring
    programme to improve cost effectiveness and supply chain efficiencies across
    the International Businesses; 2000 nil).


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There were also no exceptional losses from
  associates (2001 £9m loss relating to a restructuring programme in Huntsman
  International Holdings LLC; 2000 nil).
Exceptional items charged after trading profit
  for the year comprised a £50m profit from the sale or closure of operations
  (2001 £7m profit; 2000 £515m loss), and a £3m profit on the
  disposal of fixed assets (2001 £8m profit; 2000 £11m profit) and
  £99m written off investments (2001 £22m; 2000 nil).
In 2002, the pre-tax profit from the sale or
  closure of operations included a £90m profit on the sale of the Groups
  catalyst business, Synetix, and a £17m profit on the sale of the Security
  Systems business. These were partially offset by a £32m loss on the divestment
  of the UK Nitrocellulose and Energetic Technologies businesses and a £27m
  loss due to the liquidation of Irish Fertilizer Industries, in which the Group
  has a 49% interest.
Amounts written off investments in 2002 of
  £99m related to a provision against ICIs existing investments in
  Ineos Chlor, where uncertainty exists as to the extent to which, and period
  over which, these amounts will be recovered.
In total, exceptional items before tax and
  minority interests for 2002 amounted to a loss of £46m (2001 £159m
  loss; 2000 £502m loss). Exceptional items after tax and minorities were
  a loss of £48m (2001 £142m loss; 2000 £456m loss).
  TaxationTaxation on profit before goodwill
     amortisation and exceptional items was £115m, £1m lower than
     2001  (2000 £142m), with the Group effective rate being maintained
     at 29%  (2000 32%). Prior years have been restated for the effect of FRS
     No. 19.
  Net profitNet profit before goodwill amortisation
    and exceptional items was £264m, compared to £259m in 2001 and
    £284m in 2000.
Net profit after goodwill amortisation and
  exceptional items was £179m, compared to £80m in 2001 and a loss
  of £207m in 2000.
The results for 2001 and 2000 have been restated
  for the effect of FRS No. 19.
  Earnings per shareBasic earnings per share before
    goodwill amortisation and exceptional items for the year were 23.7p compared
    to 29.8p in 2001 (2000 32.7p).
Basic earnings per share after goodwill amortisation
  and exceptional items were 16.1p compared to 9.2p in 2001 (2000 loss per share
  23.8p).
Prior years profit and earnings per share
  figures have been restated for the effects of the bonus element of the Rights
  Issue, and for FRS No. 19. The weighted average number of shares in issue in 2002
  was 1,114m compared to 869m in 2001 (2000 869m).
  Dividend and dividend policyAs previously stated, the Groups
    dividend policy is that dividends should represent about one third of net
    profit before goodwill amortisation and exceptional items. In line with this
    policy, the Board has recommended a second interim dividend of 4.5p, to bring
    the total dividend for 2002 to 7.5p.
  Shareholders fundsThe net profit for the year
     of £179m was reduced by dividends of £(88)m and an adverse movement
      through reserves due to foreign exchange of £(57)m, but increased
      by  the issue of new shares for the Rights Issue £807m and other
      goodwill  items of £22m to give an overall net increase in shareholders
    funds in 2002 of £863m. At the end of 2002, shareholders funds
     were in surplus of £499m (2001 deficit £(364)m; 2000 deficit £(249)m).
      The prior year figures have been restated for the effect of FRS No. 19.
  Performance and value based managementThe Group remains committed
    to value based management and further progress was made during the year. The
    Group continued to focus on better utilisation of both fixed and working capital,
    and average working capital as a percentage of sales in the International
    Businesses was reduced by over 1% on a comparable basis. Despite lower trading
    profits for the International Businesses, the return on average net assets
    in the International Businesses of 20% remained unchanged from 2001.



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operating and financial review

Cash flow  UK GAAPThis commentary relates to the Statement of Group cash flow on page 55, which
is prepared in accordance with FRS No.1 (revised).
The Group net cash inflow from operating activities for 2002 was £623m, £14m
lower than last year due mainly to lower trading profits.
Capital expenditure and financial investment for the year, at £184m, was £22m
lower than 2001, with lower spend on tangible fixed assets and higher proceeds
from the sale of fixed assets. Returns from investments and servicing of finance
and cash tax spend were also reduced.





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Net proceeds
  from disposals were £290m against £17m last year, and comprised
  £423m gross disposal proceeds (2001 £315m) less expenditure against
  divestment provisions of £133m (2001 £298m). Disposal proceeds in
  2002 mainly related to the divestment of Synetix (gross proceeds of £260m),
  the first instalment in relation to the sale of ICIs
  interests in Huntsman International Holdings LLC (£109m) and the divestment
  of Security Systems. Acquisition expenditure, including investments in participating
  interests, at £54m, was also £55m lower than 2001.The Group generated a cash inflow before the use of
  liquid resources of £349m in 2002, compared to a cash outflow of £111m
  in 2001. The much improved cash flow was primarily due to the higher net disposal
  proceeds, combined with lower equity dividends, acquisition costs, interest
  and tax payments.
Treasury policiesThe Groups
Treasury seeks to reduce financial risk, to ensure sufficient liquidity is available
to meet foreseeable needs and to invest cash assets safely and profitably. It
operates within policies and procedures approved by the Board, which include
strict controls on the use of financial instruments in managing the Groups
risk. The Group does not undertake any trading activity in financial instruments.
The Group reviews the credit quality of counterparties and limits individual
and aggregate credit exposures accordingly.
Financing and interest rate riskAt 31 December 2002, the Groups
net debt was £1,667m (2001 £2,917m; 2000 £2,799m).
The Groups
policy is to finance the Group mainly through a mixture of retained earnings
and debt. Debt is principally sourced from long-term loans, medium-term notes,
commercial paper, securitised receivables and bank debt. The Groups borrowings
are primarily raised centrally by Group finance companies and on-lent to operating
subsidiaries on commercial terms. The Group borrows in the major global debt
markets in a range of currencies at both fixed and floating rates of interest,
and uses derivatives to generate the desired currency and
interest rate profile of borrowings.
The Groups
exposure to interest rate fluctuations on its borrowings is managed through the
use of interest rate swaps and forward rate
agreements. The Groups policy is to maintain between 40% and 60% of its
long-term borrowings at fixed rates for periods of up to 5 years. Notes 20 and
38 to the consolidated financial statements show the overall interest rate structure
of the Groups borrowings at the end of 2002.
The Groups
borrowings (after taking account of swaps and forward contracts) are denominated
mainly in US Dollars. Details of the currency mix of borrowings are shown in
note 38 to the consolidated financial statements. The currency disposition of
the borrowings is used as a partial, long-term hedge of the cash flows arising
from investments overseas and as a hedge against any
future business disposal proceeds. In addition, it takes into account the availability
and costs of funds, and the sensitivity of Group gearing and earnings ratios
to exchange rate movements.
The maturity of loans is shown in note 20 to the consolidated financial statements.
The Groups
objective in determining borrowing maturity is to ensure a balance between flexibility,
cost and the continuing availability of funds. As such, it funds in a mix of
long-term and short-term maturity debt.Funding policy aims to produce a reasonably even maturity profile for long-term debt up to around 5 years. The average maturity for long-term debt was 2.5 years at 31 December 2002.
Liquidity and investmentsAt 31 December 2002 the Group had at its disposal £1.509bn equivalent of
committed borrowing facilities with varying maturities up to the year 2006. Of
this, a $1,100m committed borrowing facility is maturing in January 2004 and
some £201m of short-term committed borrowing facilities have varying maturities
of less than one year. These facilities provide back-stopping for short-term
funding as well as flexibility to supplement future cash
flows.
The Groups net debt position has historically changed over the course of a year, and in particular, short-term debt has generally
increased in the early part of the year to fund working capital requirements. These working capital needs arise principally from the seasonality of the Paints business, which experiences higher sales of products used on the exterior of buildings,
and thus working capital, during the North American and European summer (the second and third quarters of the year). The Groups commercial paper programmes and other
short-term borrowings are used to fund these working capital fluctuations. At 31 December 2002, the Group had £226m of short-term borrowings outstanding.
During 2002, the principal movements in long-term debt were a $200m (£129m)
10 year note maturity, and $500m and $250m (£484m) 5 year note maturities.
Also in 2002, the Group redeemed £300m in FRPS (fixed rate redeemable preference
shares) reducing the amount outstanding at 31 December 2002 to £100m compared
to £400m at 31 December 2001. The Group runs a receivables securitisation
programme in the US, with £95m outstanding, out of a total available facility
of £111m, at 31 December 2002. This outstanding amount has been reported
in the Groups financial statements under current
instalment of loans (note 20 to the consolidated financial statements) and the available facility is included in its total committed borrowing facilities. Off balance sheet financing mainly comprises the leases described in note 35 to the
consolidated financial statements and a series of forward contracts (total nominal amount of £122m as of 31 December 2002) used to hedge some of the obligations of the employee share ownership plans.
During 2003, £500m of loans will be maturing, which, in addition to various
bonds and notes, includes the £100m of FRPS and £95m from the receivables
securitisation programme. These are expected
to



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operating and financial review

be refinanced through new debt issues. Access to the full range of the debt markets
which we currently enjoy requires us to maintain our investment grade credit
rating. Any downgrade of ICIs credit rating would reduce its funding options, including
a loss of access to the major commercial paper and money markets, significantly
increase its cost of borrowings and have an adverse effect on its results of
operations and cash flow.
With respect to the sale of ICIs
interest in Huntsman International Holdings LLC the remaining $280m (£174m) will be payable by
Matlin Patterson Global Opportunities Partners L.P. on 15 May 2003, with the purchaser having the option to pay all or part of the amount due prior to 15 May 2003 by means of instalment payments. Other than the $160m (£109m)
already received, sums due from the purchaser will carry interest from May 2002
to the date of payment.
Under the arrangements with Ineos Chlor Limited (described in note 40 to the
consolidated financial statements), a further £30m could be lent by the
Group to Ineos Chlor.
The following table summarises ICIs
principal contractual obligations at 31 December 2002, including instalments,
which are described in the consolidated financial statements and related notes.
The table below only includes the contractual obligations which are described
in the consolidated financial statements and excludes all other contractual obligations
such as derivatives,
and other hedging instruments, and also the non-novated contracts referred to
in the narrative of note 40 to the consolidated financial statements. Further
analysis of the individual obligations can be reviewed by reference to the notes
indicated in
the table below.
Total
   
   Payments due
      by periodLess
than
1 year
   
   1-3
years
   
   4-5
years
   
   After
5 yearsAs at 31 December 2002
   notes
   
   £m
   
   £m
   
   £m
   
   £m
   
   £mLoans
   20
   
   1,863
   
   500
   
   662
   
   657
   
   44Finance lease obligations
   35
   
   5
   
   1
   
   2
   
   1
   
   1Operating leases
   35
   
   332
   
   64
   
   92
   
   53
   
   123Capital expenditure
   40
   
   23
   
   23
   
   
   
   
   
   Total
   
   
   2,223
   
   588
   
   756
   
   711
   
   168Foreign currency riskMost of the Groups
net assets are denominated in currencies other than Sterling with the result
that the Groups Sterling balance sheet can be significantly affected by
currency movements. The Group partially hedges this effect by borrowing in currencies
other than Sterling. The Group does not hedge translation exposures other than
by passive use of currency borrowings.
The Group requires its subsidiaries to hedge their material transaction exposures
(sales and purchases in currencies other than their functional currency) using
forward contracts. The majority of this hedging is performed by Group Treasury.
The Group selectively hedges its anticipated future trading cash flows up to
12 months ahead using forward contracts and purchased currency options. The Groups
profits are denominated in many currencies across the world, the most significant
of which are the US dollar and related currencies. The adverse impact due to
translation exposures on the Group trading profit (before goodwill amortisation
and exceptional items) of a 5% strengthening in Sterling against the US dollar
is approximately £7m.
Counterparty credit riskThe 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.EuroEconomic and Monetary Union (EMU) has been implemented in the twelve participating member states of the European Union. These countries adopted the Euro as their only currency with effect from 1 January 2002. These
  participating countries do not include the United Kingdom where ICI is headquartered.
The Groups
strategy for trading with suppliers and customers in Continental Europe has been
to facilitate the use of the Euro. However for the time being, the Group will
continue to report its results in Sterling and keep under review the case for
any redenomination of its share capital.
Although the introduction of the Euro eliminates exchange rate risks between
the former currencies of participating countries, while the UK remains outside
of EMU, and while ICI continues to report in Sterling the Group will remain exposed
to potential foreign exchange fluctuations which occur between the Euro and Sterling.
The adverse impact due to translation exposures on the Group trading profit (before
goodwill amortisation and exceptional items) of a 5% strengthening in Sterling
against the Euro is approximately £3m.
Quantitative disclosure about market riskThe 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.
Interest rate riskThe sensitivity analysis assumes an instantaneous 1% move in interest rates of
all currencies from their levels at 31 December 2002, with all other variables
held constant.
Fair value
     31 December
   
   Fair value change+1
   %
   1
   %2002
   
   2001
      
      movement in
   interest rates
      
      movement in
   interest rates£m
      
      £m
   
   £m
   
   £mLoans
   (2,010
   )
   (3,077
   )
   41
   
   (42
   )Currency swaps
   27
   
   38
   
   (16
   )
   17Interest rate swaps
   36
   
   68
   
   
   
   Interest rate caps
   
   
   
   
   
   
   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 increase in short-term interest rates of all currencies of 1% would
  increase Group net
interest payable for the year by £12m.
  Foreign currency risk
    The sensitivity analysis assumes an instantaneous 10% change in foreign currency
    exchange rates against Sterling from their levels at 31 December 2002, with
    all other variables (including interest rates and currency option volatility)
    held constant.
  The currency mix of debt at the 2002 year-end was held 57.5% in US dollars,
    14.1% in Euro and Euro related currencies, 16.7% in Yen and 11.7% other.


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Fair
        value
                 31 December
      
      Fair value change+10%
      
      10%2002
        £m
      
      2001
        £m
      
      strengthening
        of sterling*
        £m
      
      weakening
        of sterling*
        £mLoans
      (2,010
      )
      (3,077
      )
      85
      
      (103
      )Currency swaps
      27
      
      38
      
      43
      
      (52
      )Forward contractshedging debt
      (4
      )
      32
      
      34
      
      (41
      )hedging workingcapital
      1
      
      1
      
      1
      
      (1
      )hedging anticipatedcash
        flows
      6
      
      1
      
      2
      
      (2
      )* Against all currencies.Market value changes from movements in currency
    rates in long-term debt, currency swaps and forward contracts hedging debt,
    along with 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.
  Critical Accounting PoliciesThe Groups main accounting policies are set out on pages 50
    and 51 of the consolidated financial statements and conform with UK Generally
    Accepted Accounting Principles (UK GAAP). The Group considers
    the following to be its critical accounting policies under UK GAAP:
  Environmental liabilities
    With regards to environmental liabilities, the Group is subject to obligations
    and contingencies pursuant to environmental laws and regulations that in future
    will or may require it to take action to correct the effects on the environment
    of prior disposal or release of chemical substances by the Group or other
    parties. The ultimate requirement for such actions, and their cost, is inherently
    difficult to estimate. Provision for these costs are made when expenditure
    on remedial work is probable and the cost can be estimated within a reasonable
    range of possible outcomes. Processes are in place for regular reviews of
    environmental liabilities and provisions. The environmental provisions are
    detailed in notes 21 and 22 and discussed in note 40 to the consolidated financial
    statements.
  Divestment provisions
    The divestment provisions have arisen as a result of the reshaping of the
    Groups portfolio of businesses to focus its resources on paints and
    specialty products. The initial determination of the size of these provisions,
    and the subsequent timing and amounts of the expenditure in relation to these
    provisions, is inherently difficult to estimate and therefore requires considerable
    management judgement. Provisions were established at the time of each disposal
    and are regularly reviewed based on latest available facts. The divestment
    provisions are set out in note 22 to the consolidated financial statements.
  Contingent liabilities
    The Group is subject to a number of contingent liabilities. No provision has
    been made for these contingent liabilities since either the obligations have
    been evaluated as possible and their existence will be confirmed
    by uncertain future events, or they have not been recognised, as either a
    transfer of economic benefits is not probable, or the amount cannot
    be measured with sufficient reliability. Details of the Groups contingent
    liabilities are set out in note 40 to the consolidated financial statements.
Investments
    As a result of the transformation programme, the Group retains a number of
    investments. The recoverability and hence carrying value of these assets requires
    considerable management judgement. Currently, significant items where management
    judgement has been used in ascertaining recoverability include the Groups
    interests in Huntsman International Holdings LLC (note 17) and Ineos Chlor
    (notes 3 and 40).
  Retirement benefits
    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 which is ICIs largest defined
    benefit schemes and which at 31 December 2002 had liabilities of approximately
    £6.5bn. This fund accounts for approximately 87% of the Groups
    retirement benefit scheme by asset value and in projected benefit terms. In
    preparing the Group accounts on the basis of relevant UK accounting standards,
    key assumptions are required in respect of, for example, rates of inflation,
    increases in earnings, member demographics, healthcare cost inflation, discount
    rates and returns on investments. These assumptions are assessed, and regularly
    reviewed, in accordance with the advice of independent qualified actuaries.
  Exceptional items
    Exceptional items are material items which derive from events or transactions
    that fall within the ordinary activities of the Group and which individually
    or, if of a similar type, in aggregate, need to be disclosed by virtue of
    their size or incidence if the financial statements are to give a true and
    fair view. The determination of which items should be separately disclosed
    as operating exceptional items requires a significant degree of judgement.
  The Group considers goodwill to be an additional
    critical accounting policy under US GAAP:
  Goodwill
    Included within the US GAAP disclosures in note 42 is capitalised goodwill
    at 31 December 2002 of £3,507m. In the period to 31 December 2002, an
    impairment of £122m was recognised representing the entire goodwill
    in the Paints Latin America reporting unit. Goodwill is required to be tested
    for impairment at least annually using a two-stage approach at a reporting
    unit level. In the first stage, significant management judgement is required
    to determine the fair value of the reporting unit for example, in forecasting
    the underlying cash flows of the unit, in estimating terminal growth values,
    and in selecting an appropriate discount rate. Where the second stage is performed,
    further management judgement is applied to determine the fair values of the
    identifiable assets and liabilities of the reporting unit. If alternative
    management judgements were adopted in implementing this impairment exercise
    then different outcomes could be arrived at, including potentially a larger
    impairment charge.
  New Accounting StandardsUK Accounting Standard FRS No.17Retirement
    Benefits,which will affect future consolidated
    financial statements, and its impacts are discussed in note 1 to the consolidated
    financial statements; it will not have an impact on cash flows. New US Standards
    are outlined in note 42.
  Related party transactionsThe main related party transactions are with Irish Fertilizer Industries
    Ltd, Huntsman International Holdings LLC and IC Insurance Ltd (details are
    in note 41 to the consolidated financial statements).


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operating and financial review
US GAAP resultsUnder US GAAP, the net income in 2002
  was £9m (2001 £13m net income; 2000 £456m net loss) compared
  with net income of £179m (2001 £80m net income; 2000 £207m
  net loss) under UK GAAP. Under US GAAP, shareholders equity at 31 December
  2002 was £2,805m, at 31 December 2001 was £2,568m and at 31 December
  2000 was £2,828m compared to £499m (surplus) and £364m (deficit)
  and £249m (deficit) respectively under UK GAAP. These differences primarily
  result from the differing accounting treatment of purchase accounting adjustments,
  pensions, disposal accounting, capitalisation of interest, foreign exchange,
  derivative instruments, and restructuring costs.
Summary US GAAP informationThe financial statements of the ICI Group are prepared in accordance
  with UK GAAP. UK GAAP differs in certain respects from US GAAP. Net income of
  continuing and discontinued operations and shareholders equity calculated
  in accordance with US GAAP are set out below. Note 42 to the Groups financial
  statements describes the significant differences between UK GAAP and US GAAP
  affecting the ICI Groups net income and shareholders equity for
  the three years ended 31 December 2002.
2002
      £m
    
    2001
      £m
    
    2000
      £m
    
    1999
      £m
    
    1998
      £mNet income (loss)Continuing operations
    (107
    )
    (4
    )
    (467
    )
    4
    
    (45
    )Discontinued
      operations
    116
    
    17
    
    11
    
    49
    
    1Net income (loss)
    9
    
    13
    
    (456
    )
    53
    
    (44
    )Basic and diluted earnings (loss) per £1
      Ordinary Share*Continuing operations
    (9.6
    )p
    (0.5
    )p
    (53.8
    )p
    0.5
    p
    (5.2
    )pDiscontinued
      operations
    10.4
    p
    2.0
    p
    1.3
    p
    5.6
    p
    0.1
    pNet earnings (loss) per £1 Ordinary
      Share
    0.8
    p
    1.5
    p
    (52.5
    )p
    6.1
    p
    (5.1
    )p£m
    
    £m
    
    £m
    
    £m
    
    £mShareholders equity
    2,805
    
    2,568
    
    2,828
    
    3,373
    
    3,557Total assets
    8,739
    
    9,779
    
    10,344
    
    10,348
    
    12,716
    Prior years have been restated to classify
      Synetix as a discontinued operation under US GAAP.*
    As restated – see note 10 to the
      financial statements.
DividendsDividends paid (including the related UK
      tax credit) on each ADS translated into US dollars at the rates of exchange
      on the respective dividend payment dates (or, in the case of the second
      interim dividend for the year 2002 to be paid on 22 April 2003, the rate
      on 5 February 2003), were:2002
      $ per ADS
    
    2001
      $ per ADS
    
    2000
      $ per ADS
    
    1999
      $ per ADS
    
    1998
      $ per ADSDividends declared per ADS (each representing
      four Ordinary Shares)
    0.48
    
    0.76
    
    1.56
    
    1.73
    
    1.76Dividends paid per ADS (each representing
      four Ordinary Shares)
    0.69
    
    1.24
    
    1.63
    
    1.72
    
    1.78Ratio of earnings to fixed charges
  Continuing operationsFor the purpose of computing this ratio, earnings consist of the income
  from Continuing operations before taxation of Group companies and income received
  from companies owned 50% or less, plus fixed charges excluding capitalised interest.
  Fixed charges consist of interest (including capitalised interest) on all indebtedness,
  amortisation of debt discount and expense and that portion of rental expense
  representative of the interest factor.
2002
    
    2001
    
    2000
    
    1999
    
    1998Ratio of earnings to fixed chargesFor the Group
      (under UK GAAP)
    2.3
    
    1.7
    
    2.4
    
    1.6
    
    1.2For the Group
      with estimated material adjustmentsto
      accord with US GAAP
    1.0
    
    1.5
    
    
    
    1.3
    
    0.5The deficiency of earnings to fixed charges
  for the years ended 31 December 2000 and 1998 was £422m and £201m,
  respectively.


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Review of 2002 business results
  National StarchNational Starchs sales of £1,841m
    were 2% ahead of 2001, and trading profit of £224m was 5% ahead, both
    on a comparable basis. The growth in sales and profitability reflected both
    the modest recovery in economic conditions in North America in comparison
    to 2001 and continued growth from the Asian businesses. Investment in restructuring,
    announced during 2001, improved the competitiveness and profitability of the
    Specialty Polymer and Adhesive businesses in both the US and Europe.
  Foreign exchange translation effects accounted
    for the difference between comparable and as reported results with sales and
    trading profit as reported 1% lower and 3% higher than 2001 respectively.
  The following commentary on the four business
    groupings within National Starch refers to performance measured on a comparable
    basis.
  AdhesivesAdhesives sales were 1% ahead of 2001, and
    trading profit was also ahead, as gross margin percentages improved partly
    due to lower raw material costs throughout most of the year. The business
    also benefited from savings from the 2001 restructuring programme. Growth
    within Asia was strongest in China, Indonesia, Malaysia and India, offsetting
    weakness in Japan, where economic conditions continued to be difficult. In
    the United States, business performance improved in the second half of the
    year, although full year sales remained slightly behind. In Europe, sales
    were slightly ahead for the year, with a strong second half performance stemming
    from new contract wins. During the year a new manufacturing facility was opened
    in Shanghai, China.
  StarchSales for Starch were 4% ahead of 2001, while
    trading profit was lower, largely due to lower profits in the United States.
    Sales growth in Asia was strong, particularly in food starch, although higher
    raw material costs lowered gross margin percentages during the middle of the
    year. In the United States, sales mix was poor, with growth in commodity food
    starches outpacing growth in specialty food starch. Papermaking starch sales
    in North America improved in the second half, following new business wins
    in both the United States and Canada. However, with average corn costs for
    the year higher than 2001, and fixed costs also higher, trading profit in
    North America was lower. In Europe, sales and trading profit in both food
    and papermaking were ahead for the year.
Specialty Synthetic PolymersSpecialty Synthetic Polymers sales were 2%
    ahead of 2001, and with the benefits from the 2001 restructuring programme
    and lower raw material costs, trading profit was well ahead of 2001. The Personal
    Care polymers business introduced a number of new products during the year,
    helping it to deliver another year of growth. Alco Chemical performed strongly
    during the year, particularly in sales of its low molecular weight polymers
    to the water treatment industry in the United States. The Elotex redispersible
    powders business also performed well and delivered its strongest growth in
    the United States, and from expansion into Eastern Europe and Asia. The Vinamul
    emulsion polymer business achieved strong profit growth due to good fixed
    cost control and lower average raw material prices, albeit from lower overall
    sales.
  Electronic and Engineering Materials
    Electronic and Engineering Material sales were
    6% ahead, a modest recovery from a weak 2001. Sales were relatively strong
    in the second quarter and towards the end of the year, but uncertainty in
    the electronics and telecommunications markets meant that there was no sustained
    recovery during 2002. Trading profit was ahead of 2001 despite increased fixed
    costs, mainly on sales and research resources to support future growth. Ablestik
    delivered good growth in the semiconductor materials market and Emerson &
    Cuming also delivered sales growth, particularly from strong sales in ink
    jet materials. Acheson sales were ahead for the year, primarily as a result
    of growth in its process lubricants business.
  QuestQuest delivered sales of £716m,
    1% ahead of 2001 on a comparable basis, with good overall growth in North
    America and Asia, offsetting lower Food sales in Europe and Fragrance sales
    in Latin America. Food delivered 2% sales growth whilst Fragrance sales were
    1% lower. Overall gross margin percentages were in line with 2001, with favourable
    product mix offset by tolling costs and adverse exchange rate movements. However,
    with an estimated £17m impact from production issues arising from second
    quarter systems changes in a foods factory in the Netherlands, trading profit
    of £82m was 23% lower on a comparable basis.
  As reported, sales and trading profit were
    2% and 23% lower respectively, with the effect of foreign exchange translation
    accounting for the difference from the comparable sales performance.
  During the year, Quest continued to implement
    the major programme announced in 2001 to rationalise its cost base and upgrade
    its business systems.





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Review of 2002 business results
operating and financial review
Reconciliation Table 
      Comparable to As Reported Sales and Trading profit*
      2002 vs 2001National
        Starch
    
    Quest
    
    Performance
        Specialties
    
    Paints
    
    International
        BusinessesSales
    %
    
    %
    
    %
    
    %
    %Comparable change (2002 vs
      2001)
    2
    
    1
    
    2
    
    1
    
    1Foreign exchange translation effect
    (3
    )
    (3
    )
    (1
    )
    (3
    )
    (2
    )Divestment effect
    
    
    
    
    (4
    )
    
    
    (1
    )As Reported change (2002 vs
      2001)
    (1
    )
    (2
    )
    (3
    )
    (2
    )
    (2
    )Trading profit*Comparable change (2002 vs
      2001)
    5
    
    (23
    )
    (24
    )
    9
    
    (1
    )Foreign exchange translation effect
    (2
    )
    
    
    (2
    )
    (2
    )
    (2
    )Divestment effect
    
    
    
    
    (2
    )
    
    
    (2
    )As Reported change (2002 vs
      2001)
    3
    
    (23
    )
    (28
    )
    7
    
    (5
    )*   before goodwill amortisation
      and exceptional itemsFragrance Fragrance comparable sales were 1% lower in
    a difficult market, partly due to economic slowdown in Latin America combined
    with a general market slowdown in fine fragrance retail sales throughout the
    year. However, the introduction of new products resulted in strong performances
    in Quests fine fragrance and personal care businesses, which largely
    compensated for more difficult conditions in aroma chemicals and other segments.
    Consequently, the improved sales mix and benefits from supply chain efficiencies
    contributed positively but, with adverse foreign currency movements and increased
    fixed costs to support future growth, trading profit was below 2001.
  Food Food had a difficult year but still delivered
    2% comparable sales growth, with particularly strong sales performances for
    both flavours and food ingredients in Asia and in North America. Sales in
    Europe were lower. Gross margin percentages and fixed costs were both negatively
    impacted by the second quarter ERP implementation issues in the Netherlands
    and, consequently, trading profit was well below 2001.
  Performance SpecialtiesThe reported sales and trading profit
    for Performance Specialties for 2002 reflect the effects of the divestment
    of the Synetix and Security Systems businesses during the year. Security Systems
    was sold to Lincolnshire Management Inc. in July 2002 and Synetix was sold
    to
Johnson Matthey plc for £260m in the
    fourth quarter of 2002. As reported sales of £804m and trading profit
    of £49m were 3% and 28% below 2001 respectively.
  Uniqema Uniqema had a difficult year; sales of £669m
    were 2% ahead of 2001 on a comparable basis but trading profit of £28m
    was 24% lower. The business experienced significant pressures on gross margin
    percentages, mainly as a result of weaker sales mix in fatty acids and increases
    in raw material costs. Market prices of glycerine (a major by-product from
    Uniqema processes) fell in the first quarter but showed no further year on
    year weakness in subsequent quarters.
  Lubricants and Personal Care delivered good
    comparable sales growth in 2002, 9% and 4% respectively. Lubricants sales
    were driven by strong demand in the industrial sector in Europe and the compressor
    sector in North America. Personal Care grew in all regions, and particularly
    in China and Korea, while sales of new skincare products also increased.
  The 2001 programme of restructuring and efficiency
    improvements is on track to deliver full cost savings and working capital
    reductions by 2004. In 2002 Uniqema closed its offices at Everberg in Belgium
    and successfully completed the implementation of new ERP computer systems
    at all sites in Europe.






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SynetixSynetix sales for the 10 months up to the divestment
  were 8% ahead of 2001 on a comparable basis with growth in all main markets.
  Gross margins were above 2001 due to improved sales mix, and trading profit
  was consequently up.
  PaintsFor 2002, Paints delivered sales of £2,182m
  and achieved comparable sales growth of 1% despite the economic difficulties
  in Latin America, where sales were down 24%. Performance in Asia was excellent,
  with double-digit sales and trading profit growth. Trading profit for Paints
  of £188m, was 9% ahead on a comparable basis, with a trading loss in Latin
  America more than offset by profit growth in other regions. As reported sales
  were 2% below 2001 and as reported trading profit 7% ahead with foreign exchange
  effects accounting for the difference from the comparable performance.
  The following commentary on the four geographical
    regions where Paints operates refers to performance measured on a comparable
    basis.
In Europe, sales were 3% ahead, with particularly
  good performances in the UK retail and trade markets during the second half
  of the year. There was also strong growth in the businesses in France and Poland,
  offsetting lower sales in Germany where a slow economy affected business. Trading
  profit was ahead for the year, with sales growth and lower raw materials costs
  offsetting weaker sales mix and higher fixed costs.
In North America, sales were 1% ahead of 2001.
  Sales growth in the US domestic housing and Canadian markets was partially offset
  by lower sales in the US non-residential construction sector. Trading profit
  for the North American business as a whole was significantly up, aided by benefits
  from the 2001 restructuring programme.
Sales growth in Asia exceeded 10% for the second
  year in succession with strength in India, China, Thailand and Indonesia being
  partially offset by Singapore and Taiwan. Strong sales and lower raw material
  costs combined to deliver trading profit well ahead of 2001.
Latin America had a significant negative impact
  on Paints overall sales and profit growth for the year. The major devaluation
  in the Argentinean Peso during the first quarter was followed by devaluations
  in the other currencies in the region and a slowdown in economic
activity. As a result, sales declined from
  2001 by 24% in US$ terms, and this, together with the higher cost of imported
  raw materials from the currency devaluation, resulted in a trading loss for
  the year.
The Packaging business delivered comparable
  sales growth of 1% but trading profit was lower, mainly due to weaker sales
  mix.
  Regional and IndustrialRegional and Industrial sales for 2002, at
  £615m, were 25% below 2001, mainly due to divested businesses and a reduction
   in nil margin sales from £275m in 2001 to £209m in
   2002.  2001 sales included sales of methanol under a tolling agreement which
   ceased
  in April 2001 and supply contracts involving businesses that have been divested.
    Higher profits from Pakistan and Argentina were offset by the loss of profits

  from divested businesses and the impact of a £5m provision in relation
   to a continuing European court case involving ICIs former Soda Ash business.
    Consequently, the Regional and Industrial business recorded a trading loss
   of
  £10m, £14m lower than 2001.
  PakistanThe world and Asian PTA markets experienced
  significant price fluctuation during the year with markets improving rapidly
  during the middle of the year, but falling away towards the end of the year
  as new capacity came on stream in Asia. The PTA business delivered a satisfactory
  trading performance for the year. Sales and trading profit were lower in polyester
  fibre, although the Soda Ash business continued to perform well. Overall, trading
  profit in Pakistan was above 2001.
  IndiaTrading profit for the regional businesses
  in India was below 2001 mainly due to the divestment of the pharmaceuticals
  business during the period. The explosives and nitrocellulose businesses continued
  to perform well.
  ArgentinaWhilst sales in Argentina for 2002 were below
  2001 due to the effect of the Peso devaluation, trading profit improved as the
  wine chemicals and performance chemicals businesses benefited from significant
  hard currency exports.
  Discontinued operationsNo businesses became discontinued in 2002.




Back to Contents
Review of 2001 business results
operating and financial review
Review of 2001 business results
  Continuing operations
  National StarchNational Starchs sales in 2001 of £1,853m
    were 4% behind 2000 with trading profit of £218m, 12% lower for the
    same period, both on a comparable basis. Both sales and profit declines reflected
    the effects of the continued economic downturn in the US, and the sharp downturn
    in the electronics industry which impacted from early in 2001. However, profit
    improvement programmes, including an 8% reduction in headcount during 2001,
    reduced the rate of profit decline versus 2000 to only 3% for the second half,
    and improved trading margins compared with the first half of 2001. In the
    fourth quarter of 2001, a restructuring programme was announced that intended
    to further reduce the cost base and improve competitiveness. In total, £37m
    was intended to be spent on restructuring programmes over 2002 and 2003, which
    included the closure or sale of several sites in the US, Europe, Asia and
    Australasia, and a further significant headcount reduction. The programme
    was focused on Specialty Polymers and Adhesives in North America and Europe.
  Foreign exchange translation effects largely
    accounted for the difference between comparable and as reported performance
    in 2001 with as reported sales and trading profits 2% and 11% lower than 2000
    respectively.
  The following commentary on the four
    business groupings within National Starch refers to performance measured on
    a comparable basis.
  AdhesivesAdhesives sales in 2001 were 3% behind 2000,
    and trading profit was also lower as good performances in Europe and Asia
    were offset by the impact of the economic downturn in the US. In the US, price
    increases and aggressive cost control efforts partially offset lower sales
    volumes, while the European business was more robust, recovering from a slow
    start to deliver both sales and profit growth for the full year. The Asia
    Pacific region continued to be a strong performer. While the downturn in Japan
    had a significant impact, growth continued in other parts of Asia, most notably
    in China and in the Dongsung-NSC business. During 2001, Dongsung-NSC expanded
    its shoe adhesives business into Vietnam and Mexico.
  StarchSales for Starch were slightly below 2000,
    and trading profit also declined, as Food Starch growth was more than offset
    by the decline in the papermaking sector in North America. Food Starch sales
    were strong in all regions, including North America, with its focus on customer
    needs through technology application continuing to distinguish this business
    from its competitors. Tapioca-based starch products produced in Thailand maintained
    their sales growth, both in Asia and in other regions of the world, but margins
    were squeezed by higher tapioca costs, especially in the latter part of 2001.
    The papermaking starch business, which was under severe pressure in North
    America, continued to grow in Asia.
  Specialty Synthetic PolymersSpecialty Synthetic Polymers sales for 2001
    were 2% below 2000. Margins were impacted early in the year by high raw material
    costs, but improved as the year progressed as a result of aggressive cost
    reduction efforts and more favourable raw material costs. Trading profit in
    2001 was well ahead of the previous year. The Vinamul polymers business experienced
    lower demand in many applications,
and pressure on pricing remained strong.
    Alco Chemical, which supplies low molecular weight chemistries for water treatment
    and other applications, continued its strong growth in North America and sustained
    its expansion in Europe and Asia. The Elotex powders business suffered from
    lower sales due to the decline in construction in Western Europe, especially
    Germany, and from high raw material costs early in the year.
  The personal care business continued to progress
    in 2001 with broad geographic sales growth, building on the recovery of sales
    that commenced in the second half 2000.
  Electronic and Engineering Materials
  Electronic and Engineering Materials in 2001
    suffered from the effects of a major downturn in the semiconductor and electronics
    industry, and, as a result, sales for that year were 13% below 2000. Ablestik,
    which supplies materials for semiconductor packaging and microelectronic assemblies,
    was most severely impacted by this downturn, but continued to work closely
    with customers throughout the period and is expected by Group management to
    be well positioned to benefit from a future upturn in this sector. Acheson
    sales of coatings for cathode ray tubes slowed, reflecting sluggish demand
    for computer monitors and television sets. Emerson & Cuming was also affected
    by the downturn, although it was able to maintain its strong relationships
    with key ink jet customers, while the Circuit Assembly Materials business
    unit developed significant new business in the aerospace sector, particularly
    within satellite components. Costs were reduced throughout the division to
    offset the industry slowdown, and, despite the decline in sales, the division
    generated a positive trading profit.
  QuestQuest delivered sales of £727m, 3%
    growth in 2001 on a comparable basis, with high single digit growth outside
    Europe and North America. Improvements in Fragrance offset an adverse sales
    mix in Food, and trading profit of £107m was in line with 2000 on a
    comparable basis.
  As reported sales were up 6% and trading
    profit up 4%, with the effect of foreign exchange, +2%, and the Quest India
    acquisition, +1% (sales) and +2% (trading profit), accounting for the improvement
    over comparable performance.
  During 2001, Quest initiated a major programme
    to rationalise its cost base through the closure of surplus manufacturing
    sites, restructuring and redesign of the supply chain and the streamlining
    of management and support services. In addition, business systems, processes
    and capabilities will be upgraded in order to drive supply chain improvements,
    significantly enhance customer service levels and create e-connectivity. The
    estimated total exceptional cash expenditure of £41m was expected to
    be incurred within the period 2002 to 2004.
  During 2001, ICI, mainly via ICI India, acquired
    a 51% stake in Quest India from Hindustan Lever Limited for $33m.
  FragranceFragrance had a strong year in 2001 with
    5% comparable sales growth, despite more difficult market conditions in the
    second half of the year. The introduction of new products, most notably in
    personal care, contributed to the growth, with higher sales also achieved
    in fragrance ingredients. Fine fragrance sales were up significantly in the
    first half of the year but slowed in the second half, reflecting the market
    downturn. Improved sales mix and supply chain improvements contributed to
    improved gross margin percentages, and, as a result, trading profit was well
    ahead for the year. Trading profit growth was achieved in all the major regions.




Back to Contents
Reconciliation Table 
      Comparable to As Reported Sales and Trading profit*2001 vs 2000National
        Starch
    
    Quest
    
    Performance
        Specialties
    
    Paints
    
    International
        BusinessesSales
    %
    
    %
    
    %
    
    %
    
    %Comparable change (2001 vs
      2000)
    (4
    )
    3
    
    (2
    )
    2
    
    Foreign exchange translation effect
    2
    
    2
    
    2
    
    3
    
    2Divestment effect
    (1
    )
    
    
    (1
    )
    (2
    )
    (1
    )Acquisition effect
    1
    
    1
    
    
    
    1
    
    As Reported change (2001 vs
      2000)
    (2
    )
    6
    
    (1
    )
    4
    
    1Trading profit*Comparable change (2001 vs
      2000)
    (12
    )
    
    
    (10
    )
    1
    
    (6
    )Foreign exchange translation effect
    1
    
    2
    
    1
    
    
    
    1Divestment effect
    
    
    
    
    
    
    (1
    )
    (1
    )Acquisition effect
    
    
    2
    
    
    
    (1
    )
    1As Reported change (2001 vs
      2000)
    (11
    )
    4
    
    (9
    )
    (1
    )
    (5
    )*   before goodwill amortisation
      and exceptional itemsFoodFood had a more difficult year in 2001 but
    comparable sales grew by 2%. Food ingredients grew, particularly in Asia Pacific,
    while Flavours did well in North America and there was continued strong sales
    growth with most key customers. Flavour sales were slower in Europe. Culinary
    sales were lower, but this was offset, in particular, by strong growth in
    snacks and dairy. The associated adverse sales mix effects and higher raw
    material prices, partially offset by cost containment programmes during the
    year, caused trading profits to be lower than in 2000.
  Performance SpecialtiesOverall, 2001 was a disappointing year for
    Performance Specialties, with sales of £832m, 2% lower on a comparable
    basis and trading profit of £68m, 10% lower on a comparable basis. The
    extent of the profit decline was, however, considerably limited by cost saving
    initiatives in Uniqema.
  As reported sales were 1% lower with foreign
    exchange effects partially offsetting the 2% lower comparable performance.
    As reported profits 9% lower, were similarly affected.
  UniqemaUniqema experienced the effects of the global
    economic downturn, particularly in industrial sectors in North America. These
    were heightened by the impact of significantly lower glycerine prices after
    the first quarter, particularly in Europe and North America, which reduced
    profits by some £8.5m worldwide. Sales were down 5% on a comparable
    basis, although the Health and Personal Care business continued to grow. Overall,
    comparable fixed costs were 3% below 2000 levels with reductions taking effect
    in the second half, but the savings were insufficient to make up for the sales
    shortfall, and profits were well down on the previous year. Demand in the
    process intermediates sector remained strong in Europe in the first half of
    the year, but weakened somewhat in the second half. Market conditions in the
    US were difficult throughout 2001. Synthetic lubricants showed strong volume
    growth year on year despite competitive pressures, but the polymers sector
    slowed with industrial markets generally, particularly in Europe in the second
    half of the year.
  As announced in November 2001, Uniqema in
    Europe is implementing programmes to improve supply chain efficiencies and
    undertake site restructuring at an estimated cash expenditure of £25m.
    In July 2001, Uniqema also completed the sale of its ester manufacturing plant
    at Baleycourt, France to Ineos Chlor.
SynetixSynetix had an excellent year in 2001. Higher
 sales and improved gross margins delivered significant trading profit growth

    and the total business sales were ahead by 13% on a comparable basis. In
January  2001, Synetix completed the acquisition of the CelActiv catalyst
 business from Celanese Chemicals Europe GmbH, and this business has performed

    well since acquisition.
  Other Specialty BusinessesWithin other businesses, Security Systems
    increased its sales and profits in 2001.
  PaintsComparable sales growth of 2% was achieved
    for 2001 despite a slowdown in the US and economic difficulties in parts of
    Latin America. Performance in Asia was excellent, with 11% comparable sales
    growth and trading profit well ahead over prior year. Trading profit for Paints
    of £176m was up 1% on 2000 on a comparable basis, with a halving of
    trading profits in Latin America more than offset by profit growth in all
    other regions.
  As reported sales were up 4% with foreign
    exchange effects, +3%, less divestments, 2% and acquisitions +1%, accounting
    for the differences from the comparable performance. Trading profits as reported
    were 1% lower with divestment effects 1% and acquisition effects 1%,
    accounting for the differences from the comparable performance.
  The worldwide spend on media and publicity
    for the year was up 3%.
  The following commentary on the four
    geographical regions where Paints operates refers to performance measured
    on a comparable basis.
  In Europe, sales were 1% ahead in a slowing
    European economy, with growth in the UK, France and Ireland offsetting lower
    sales in Germany. Trading profits were also ahead as a result of both the
    growth in sales and the benefits of successful restructuring in France.
  In North America, the business delivered
    sales growth of 5%, with the US Consumer business doing well, and sales from
    the businesss US Stores returning to modest levels of growth towards
    the end of 2001. The business was significantly impacted in the short-term
    by events of September 11th but recovered early in the fourth quarter. Profits
    for the year were ahead of 2000. During the fourth quarter, the next phase
    of restructuring the North American Decorative business was announced. Cost
    reduction projects included the closure of a




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operating and financial review
manufacturing facility as well as a number
    of loss-making stores at an estimated cash expenditure of £15m. This
    simplification of supply chain infrastructure is expected by management to
    deliver both cost and working capital reductions.
  Sales growth in Asia of 11% was achieved
    despite slowing economic growth in the region. There were strong performances
    in China, India and Thailand. Selling and marketing resources were increased,
    particularly in India and China, and overall profits were still well up. The
    divestment of the India Motors business was completed in April 2001.
  In Latin America, sales declined 18% in 2001
    compared with 2000 and profit was well down. The major influence on sales
    was the significant devaluation of the Real in Brazil, which continued to
    impact results throughout the year, particularly by inflating imported raw
    material costs. In the second half, the deteriorating economic situation in
    Argentina depressed the paint market, reducing sales and causing a significant
    reduction in profits for the year overall.
  The Packaging business delivered comparable
    sales growth of 3% and comparable profits in line with prior year. Sales growth
    was good in Europe. Investments in projects to improve the supply chain in
    Europe resulted in higher costs in the year, but were expected by management
    to deliver benefits in 2002.
  Regional and IndustrialRegional and Industrial sales for 2001, at
    £821m, were 8% below 2000 due to several small disposals during the
    year. Trading profits were £4m, £13m below 2000. Turnover included
    £275m of nil margin sales (2000 £328m) and also included
    sales of methanol under a tolling agreement which ceased in April 2001 and
    supply contracts involving businesses that have been divested.
  PakistanThe world and Asian PTA markets showed no
    improvement, and the PTA business made a small trading loss during the year.
    Sales and trading profits were also lower in polyester fibre, although the
    Soda Ash business continued to perform well. Overall, trading profits were
    slightly below the prior year.
  IndiaTrading profits for the regional businesses
    in India were down 8% in 2001, compared to 2000, due to the divestment of
    the polyurethanes business during the year, and costs associated with the
    restructuring of the rubber chemicals business. The explosives and nitrocellulose
    businesses continued to do well.
  ArgentinaSales in Argentina for 2001 were significantly
    below 2000, with the performance of both the wine chemicals and performance
    chemicals businesses adversely affected by the difficult economic conditions.
    Consequently, a trading loss was recorded for 2001.
  Discontinued operationsNo businesses became discontinued in 2001.



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board of directors

Lord TrotmanChairmanAppointed a Non-Executive Director in 1997,
he became Chairman in 2002. He was Chairman and Chief Executive Officer of Ford
Motor Company until his retirement in 1998. He joined Ford in the UK in 1955
and was appointed to the Board of Directors in 1993. He is a member of the Board
of Directors of IBM. Aged 69.
Brendan R ONeill  Chief ExecutiveAppointed a Director and Chief Operating Officer
in 1998 and Chief Executive in 1999. He has been invited to join the board of
Tyco International Ltd as a Non-Executive Director. He was formerly Chief Executive
of Guinness Limited and a Director of Diageo Plc. He is also a member of the
Council of Cancer Research UK. Aged 54.
Paul J Drechsler  DirectorAppointed a Director in 1999. He is Chairman
and Chief Executive of Quest International. He joined the Company in 1978 and
has held senior positions in Brazil, USA and Europe. He is Chairman of ICI Pensions
Trustee Ltd, has Board responsibility for Sustainable Development within ICI
and is a member of the Council of the World Business Council for Sustainable
Development. Aged 46.
John D G McAdam  DirectorAppointed a Director in 1999. He is Chairman
and Chief Executive of ICI Paints and has Board responsibility for Research,
Development and Technology. He joined the Company in 1997 following the acquisition
of the Speciality Chemicals business from Unilever, where he held a number of
senior positions. He is also a Non-Executive Director of Severn Trent Plc and
a member of the University of Surrey Business Advisory Board. Aged 54.
William H Powell  DirectorAppointed a Director in 2000. He is Chairman
and Chief Executive Officer of National Starch and Chemical Company and has Board
responsibility for Group Safety, Health and the Environment. He joined the Company
in 1997 following the acquisition of the Speciality Chemicals business from Unilever,
where he held a number of senior positions. He is a past Chairman of the Corn
Refiners Association and currently an Honorary Director. He is a member of the
Institute of Food Technologists and the American Institute of Chemical Engineers.
He is also a member of the Board of Overseers of the New Jersey Institute of
Technology and a member of the Board of Trustees of the State Theater of New
Jersey. Aged 57.
Timothy A Scott  Chief Financial OfficerAppointed a Director and Chief Financial
    Officer in 2001. He is Chairman of the ICI Charity Trust and Appeals Committee.
    He joined Unilever in 1983 and held a variety of senior roles in their Speciality
    Chemicals business and group headquarters. He worked subsequently for ICI
    as Chief Administrative Officer for ICI Paints in North America and as Vice
    President, Strategy and Performance. Aged 40.
Adri Baan  Non-Executive DirectorAppointed a Non-Executive Director in 2001.
    He is a Director of PSA Corporation Limited, (Port of Singapore Authority);
    and Hesse-Noord Natie, Port of Antwerp; Wolters Kluwer N.V.; ASM International
    N.V.; Koninklijke Volker Wessels Stevin nv; International Power plc and the
    Trust Office of KAS BANK NV. Until his retirement in March 2001, he was Executive
    Vice President of Royal Philips Electronics and President and Chief Executive
    Officer of their Consumer Electronics Division. Aged 60.
Lord Butler  Senior Non-Executive DirectorAppointed a Non-Executive Director in 1998.
He is the Senior Non-Executive Director of ICI. He is Master of University College,
Oxford and a Non-Executive Director of HSBC Holdings plc. He was formerly Secretary
of the
Cabinet and Head of the UK Home Civil Service. Aged 65.
Joseph T Gorman  Non-Executive DirectorAppointed a Non-Executive Director
in 2000. He is Chairman of the ICI Audit Committee. He was formerly Chairman
and Chief Executive Officer of TRW Inc. He is also a Director of Alcoa, Inc.,
The Procter & Gamble Company and National City Corporation. He is a past
Chairman and current member of the US-Japan Business Council and served on the
Boards of the US-China Business Council and The Prince of Wales Business Leaders
Forum. He is active in numerous
business and community organisations. Aged 65.
Richard N Haythornthwaite  Non-Executive DirectorAppointed a Non-Executive Director in 2001.
He is Chairman of the ICI Remuneration and Nomination Committee. He is Group
Chief Executive of Invensys plc and a Non-Executive Director of Lafarge S.A.
and Cookson Group plc and a Director of the National Museum of Science and Industry.
He previously held senior positions with Blue Circle Industries plc, BP plc and
Premier Oil plc. He is also Chairman of the Centre for Creative Communities and
the Almeida Theatre
Company. Aged 46.
Company Secretary
Debjani JashAppointed Company Secretary in 2000. She joined
ICI as a solicitor in 1995 and was previously with the law firms Mayer, Brown,
Rowe & Maw and Jones Day Gouldens in the City of London specialising in corporate
finance and mergers and acquisitions. She is a member of the Jesus College Cambridge
Campaign Committee. Aged 38.



At each Annual General Meeting of the Companys
shareholders one third of the Directors (being those longest in office since
their last election) retire and are eligible for re-election. 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 also
eligible
for election.
Mr J T Gorman, Mr R N Haythornthwaite and Mr T A Scott retire under Article 96
of the Companys
Articles of Association. All are
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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executive management team

The Executive Management Team comprises the Executive Directors and the following:
     Leonard J BerlikAppointed a member of the Executive Management Team in 2000. He is Executive Vice President Performance Specialties. 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 Performance Specialties) in
    2000, served as Executive Vice President of the Adhesives Division. He represents ICI on the Consultative Assembly of Member Companies of the European Chemical Industry Council. Aged 55.
     Michael GardnerAppointed a member of the Executive Management Team in 2000. He is Executive Vice President Regional and Industrial
      Businesses. He joined the Company in 1968 and was formerly Chief Executive Officer of the Petrochemicals Business. Aged 56.
    Michael H C HerlihyAppointed a member of the Executive Management Team in 1996. He was appointed General Counsel in 1996 and Executive Vice
      President Mergers and Acquisitions in 2000. He joined the Company in 1979. Aged 49.     Rolf DeusingerAppointed a member of the Executive
          Management Team in 2002. He is Executive Vice President Human Resources.
          He joined ICI 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 over 18 years
          international experience in the field of Human Resources, predominantly
          in consumer businesses, including PepsiCo covering the Americas, Europe
          and Central Asia. Aged 45.*
   The persons listed above and the Company Secretary, who was first appointed on 1 January 2000 and whose biographical details are set out on the previous page, are regarded as the Officers of the
Company for the purposes of the Annual Report and Accounts and Form 20-F.
Date first appointed as an Officer*1 April 2000
  


1 July 2000

1 January 1996

  1 July 2002



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corporate governance

Membership
          of the Board Committees and a summary of their terms ofreference are as follows:Audit CommitteeMembers:Mr J T Gorman (Chairman)Mr A BaanLord ButlerMr R N HaythornthwaiteTerms of reference:To assist the Board in the discharge of its responsibilities
          for corporategovernance, financial reporting and corporate control.Remuneration and Nomination CommitteeMembers:Mr R N Haythornthwaite (Chairman)Mr A BaanLord ButlerMr J T GormanLord Trotman (when meeting as the Nomination Committee)Terms of reference:To recommend to the Board the remuneration policies for Executive
          Directorsand the most senior management in the Company. To determine theremuneration of these executives and to exercise the powers of
          the Directorsunder the share option schemes. To propose to the Board new appointmentsof Directors.


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remuneration report

Remuneration policy
    Executive DirectorsThe Companys ongoing remuneration
    policy for Executive Directors is to provide remuneration in a form and amount which will attract, retain, motivate and reward high calibre individuals. To achieve this, the remuneration package is based upon the following principles:
   Incentives should align the interests of executives and shareholders, reward the creation of long-term value and minimise risk for shareholders.
   Reward elements should be designed to reinforce the link between performance and reward. Performance related elements should form a significant proportion of the total remuneration
package.
   The total remuneration package for on-target performance should be fully competitive in the relevant market.
   Packages can be structured flexibly to meet critical resource needs and retain key executives.Personal shareholdingsIn order to align the interests of our most senior employees with those of shareholders, our Executive Directors and
senior executives are expected to build up personal shareholdings of ICI Ordinary Shares
through the retention of shares
      acquired via Company share-based plans. For Executive Directors this shareholding
    is as follows:Target value of shareholdingChief Executive
   Two times base salaryExecutive Directors
   One times base salaryExternal
          directorshipsExecutive Directors are encouraged
          to take an external Non-Executive Directorship. In order to avoid any
          conflict of interest all appointments are subject to the approval of
          the Remuneration Committee and the Board. Directors retain payments
          received in respect of these appointments.
        Non-Executive DirectorsThe remuneration policy for Non-Executive
          Directors is determined by the Board, within the limits set out in the
          Articles of Association. Remuneration comprises an annual fee for acting
          as a Non-Executive Director of the Company and an additional fee for
          acting as the Chairman of a Board Committee or as the Senior Non-Executive
          Director. Non-Executive Directors are not eligible to participate in
          incentive plans.
        ICI operates a scheme which enables
          Non-Executive Directors to receive payment of part of their fees in
          the form of ICI Ordinary Shares.
        Remuneration packages for Executive
        DirectorsThe remuneration package for Executive
        Directors comprises five elements:
      base salary;
      Annual Incentive Plan;
      Performance Growth Plan;
      share option schemes; and
      post-retirement and other
        benefits.The performance
          related elements, when valued at target performance levels, comprise
          more than 50% of the package (excluding post-retirement benefits).
        Each of the above elements is explained
        in the pages which follow.
        Base salariesBase salaries are a fixed annual sum recognising ongoing market value.
          The Companys policy is to set the salary for each Executive Director
          within a range around the market median for similar positions in large,
          international, publicly quoted companies. Salaries for individual Directors
          are reviewed each year by the Remuneration Committee, recognising the
          individuals performance and experience, and developments in the
          relevant employment market.
        Annual Incentive PlanThe Annual Incentive Plan rewards Executive Directors for the achievement
          of annual financial and strategic goals of ICI and its businesses.
        The financial targets which are set
          under the Annual Incentive Plan are derived from the strategic and annual
          planning processes for ICI and its businesses. During 2002, bonus targets
          focused on the delivery of Economic Profit, cash generation and the
          achievement of key strategic objectives. Targets are established by
          the Board and approved by the Remuneration Committee.Economic Profit is
        ICIs key internal financial measure. This measure is based on profit
        after tax, less a charge for the use of capital. Economic Profit encourages
        both profitable growth and the efficient use of capital to generate sustainable
        shareholder value. Within ICI Economic Profit is referred to as Net Contribution
        to Value (NCV).



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Annual Incentive Plan (continued)The performance measures are set by the Remuneration
Committee on an annual basis and it is the intention to set targets on this basis
for 2003.
  The bonus opportunity available to Executive
    Directors for 2002 for the achievement of on-target performance was 50% of
    base salary. A maximum bonus opportunity of 100% of base salary was possible
    for the significant over-achievement of the defined targets.
In the difficult economic climate of 2002, all of ICIs
International Businesses achieved comparable sales growth over 2001 with
both Paints and National Starch also growing their trading profit. Strong cash
generation and excellent management of working capital enhanced the operating
performance of most businesses during the past year. ICI Group targets for Economic
Profit improvement and cash flow were exceeded. In some cases, the level of incentive
payments additionally reflects delivery against key strategic objectives to strengthen
individual businesses and the balance sheet of ICI.
Directors emoluments(audited)
Base salary
   and fees
   (note 7)
   
   Annual incentive
   payments
   
   Benefits and other
   emoluments (note 8)
   
   Total
   (note 9)2002
   
   2001
   
   2002
   
   2001
   
   2002
   
   2001
   
   2002
   
   2001Notes
   
   £000
   
   £000
   
   £000
   
   £000
   
   £000
   
   £000
   
   £000
   
   £000Lord Trotman
   1
   
   200
   
   39
   
   
   
   
   
   
   
   
   
   200
   
   39Dr B R ONeill
   2
   
   615
   
   615
   
   361
   
   120
   
   39
   
   39
   
   1,015
   
   774P J Drechsler
   3
   
   325
   
   325
   
   63
   
   93
   
   34
   
   27
   
   422
   
   445Dr J D G McAdam
   
   
   347
   
   347
   
   248
   
   98
   
   37
   
   22
   
   632
   
   467W H Powell
   4
   
   454
   
   474
   
   291
   
   78
   
   15
   
   14
   
   760
   
   566T A Scott
   1,3,7
   
   307
   
   152
   
   218
   
   28
   
   38
   
   11
   
   563
   
   191A G Spall
   1
   
   
   
   167
   
   
   
   22
   
   
   
   5
   
   
   
   194A Baan
   1,5,6
   
   30
   
   15
   
   
   
   
   
   
   
   
   
   30
   
   15Lord Butler
   5,7
   
   38
   
   30
   
   
   
   
   
   
   
   
   
   38
   
   30J T Gorman
   5
   
   40
   
   30
   
   
   
   
   
   
   
   
   
   40
   
   30R N Haythornthwaite
   1,5,6
   
   40
   
   30
   
   
   
   
   
   
   
   
   
   40
   
   30C Miller Smith
   1
   
   
   
   250
   
   
   
   
   
   
   
   22
   
   
   
   272Sir Roger Hurn
   1,5
   
   
   
   23
   
   
   
   
   
   
   
   
   
   
   
   23Lord Simpson
   1,5
   
   
   
   7
   
   
   
   
   
   
   
   
   
   
   
   7Total
   
   
   2,396
   
   2,504
   
   1,181
   
   439
   
   163
   
   140
   
   3,740
   
   3,083(1)
    Mr R N Haythornthwaite joined
      the Board on 20 February 2001, Mr T A Scott was appointed on 23 May 2001
      and Mr A Baan joined the Board on 25 June 2001. Lord Simpson, Mr A G Spall
      and Sir Roger Hurn retired on 20 February 2001, 23 May 2001 and 31 July
      2001, respectively. Mr C Miller Smith retired on 31 December 2001 and Lord
      Trotman was appointed Non-Executive Chairman of the Company with effect
      from 1 January 2002. All amounts reported for individuals are in respect
      of the part year for which they were employed as Directors.(2)
    A performance related retention
      arrangement linked to Annual Incentive Plan payments applies to Dr B R ONeill only. The Remuneration Committee has determined that for
      each of the years 2002 to 2005 inclusive an additional cash sum equal to
      50% of the earned annual bonus will be deferred and paid in 2006, normally
      subject to Dr ONeills
      continued employment with the Group. This arrangement will operate for the
      first time in 2002 and the deferred payment for 2002 is £180,810 (2001
      and prior years £nil). This is excluded from the table above and will
      be included when paid.(3)
    In 2002, Mr P J Drechsler
      and Mr T A Scott received matched shares provided by the Company as matched
      shares under the Bonus Conversion Plan in respect of their 1998 bonus. This
      plan was operated for the last time in respect of the 1999 financial year.
      A bonus recipient could elect to have shares purchased with part or all
      of their net bonus after tax. After three years, shares purchased in the
      plan are released, and matched by an equal number of shares by the Company,
      provided the individual remains employed by ICI. Directors took up their
      full entitlement under the Rights Issue in respect of shares held in the
      Plan. In accordance with the rules of the Plan the number of matched shares
      has been increased by an equal number to the new shares purchased by each
      Director. Mr Drechsler received 9,450 matching shares, with a market value
      of £29,200 (2001 1,954 shares with a market value of £7,992).
      Mr Scott received 4,621 matching shares with a market value of £14,279
      (2001 nil). The bonus shares for Mr Drechsler and Mr Scott were originally
      purchased on 29 April 1999 at £6.57 each (adjusted for the Rights
      Issue £5.45).(4)
    In 2002 Mr W H Powell received
      a base salary of US$682,500 (2001 US$682,500). The year on year change in
      the sterling value is due to translation at the average exchange rate for
      each year.(5)
    For 2002 the remuneration
      of Non-Executive Directors comprised an annual fee of £30,000 (2001
      £30,000). An additional £10,000 per annum (2001 £10,000)
      was paid to the Chairman of a Board Committee and, with effect from 1 April
      2002, to Lord Butler due to his position as Senior Non-Executive Director.(6)
    Mr A Baan and Mr R N Haythornthwaite
      elected to receive 50% of their fees for 2002 in the form of ICI Ordinary
      Shares.(7)
    For 2002 the figures reported
      are the annual base salary or fee in payment at 31 December 2002 except
      in respect of Mr T A Scott whose annual base salary at that date was £325,000
      and Lord Butler whose annual fee at that date was £40,000.(8)
    Includes non-cash benefits
      relating to medical insurance, company car, and life insurance (where not
      provided within pension benefit plans).(9)
    No payments were made during
      2002 or 2001 in connection with: (i) compensation for loss of office or
      termination of qualifying services,(ii)expense allowances paid in respect of qualifying services chargeable to
      UK income tax.


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remuneration report
Performance
        Growth PlanThe Performance Growth Plan (PGP) drives and rewards longer-term business
        performance improvement. The Plan strengthens the alignment with shareholders
        by placing a greater emphasis on sustained long-term value creation.For the Executive
        Directors, the Plan makes conditional awards of ICI shares 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 how the Total Shareholder Return (TSR) for
        ICI compares with the TSR of each of the companies in ICIs Peer
        Group over the performance period (see across). TSR is the change in the
        Companys share price plus reinvested dividends;
      for the other
        Executive Directors, who are responsible for the performance of ICIs
        International Businesses, reward will also be based on the performance
        of their own areas of responsibility;
      50% of their award will
        depend on the Economic Profit performance over three years of the business
        for which the Executive Director is responsible; and
      the other 50% of their award
        will be based on the relative TSR performance of the Company;
      in addition,
        the Remuneration Committee must be satisfied that the underlying performance
        of ICI justifies the receipt of any shares.TSR has been
        selected as a performance condition to align the interests of Executive
        Directors and shareholders. It rewards the relative out-performance of
        ICI versus its global competitors. TSR calculations are performed independently
        by Mercer Human Resource Consulting and are approved by the Remuneration
        Committee. For those Directors accountable for the International Businesses,
        Economic Profit is critical as a measure of profitable growth and efficient
        use of capital to generate sustainable shareholder value.The shares required
        to make awards under this Plan are provided via a trust funded by ICI.
        There is no dilution of ICIs issued share capital.

The maximum conditional award is 100% of
    base salary per annum (200% in the case of US Directors). For the maximum
    awards to be paid on the TSR element, performance must be at least upper quartile
    versus the Peer Group. For achieving median TSR performance, 40% of this maximum
    award will be paid and no award will be paid for below median performance.The targets which relate to Economic Profit
    growth are set at a level consistent with achieving the Companys TSR
    goals and ICIs strategic targets.
  Target Setting ProcessICI s financial objectives
        derive from a combination of top downgoals
        set by market expectations and a biennial strategic planning process.
        These strategic financial objectives then form the basis of all financial
        targets set under the PGP.The Peer Group for the TSR element represents
    ICIs key global competitors and has been selected on the basis of market
    location, size, diversity and performance. The Peer Group of companies for
    the conditional awards made in 2002 was: Air Products and Chemicals; Akzo
    Nobel; Clariant; Crompton Corporation; Cytec Industries; Ciba Specialty Chemicals;
    Danisco; Degussa; Engelhard Corporation; Givaudan; Henkel; H.B. Fuller Company;
    International Flavors & Fragrances; Rhodia; Rohm and Haas Company; The
    Sherwin-Williams Company. The Peer Group for the 2003 awards will comprise
    a similar set of companies.For the 2000  2002 performance period,
    ICIs TSR ranked 13 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 and these
    are shown on page 41.Details of the Ordinary Shares of the Company
    conditionally awarded to Executive Directors under the Performance Growth
    Plan and outstanding at 31 December 2002 are shown in the table below.Awards under the Performance
      Growth Plan(audited)Date of
      award
    
    Shares
        that would be awarded 
        for median TSR/on target 
        Economic Profit performance
    
    Maximum number
      of 
      Ordinary Shares that 
      could be awarded
    
    Performance
      periodNotes
    
    
    
    TSR
      measure
    
    Economic Profit
      measure
    
    TSR
      measure
    
    Economic Profit
      measureDr B R ONeill
    
    
    28.03.02
    
    75,786
    
    n/a
    
    189,463
    
    n/a
    
    1.01.0231.12.041
    
    05.03.01
    
    56,202
    
    n/a
    
    140,504
    
    n/a
    
    1.01.0131.12.031
    
    25.05.00
    
    44,165
    
    n/a
    
    110,414
    
    n/a
    
    1.01.0031.12.02P J Drechsler
    
    
    28.03.02
    
    19,409
    
    19,409
    
    48,521
    
    38,818
    
    1.01.0231.12.041
    
    05.03.01
    
    14,393
    
    14,394
    
    35,985
    
    28,787
    
    1.01.0131.12.031
    
    25.05.00
    
    10,984
    
    10,984
    
    27,462
    
    21,968
    
    1.01.0031.12.02Dr J D G McAdam
    
    
    28.03.02
    
    20,949
    
    20,949
    
    52,373
    
    41,898
    
    1.01.0231.12.041
    
    05.03.01
    
    15,536
    
    15,536
    
    38,841
    
    31,072
    
    1.01.0131.12.031
    
    25.05.00
    
    11,790
    
    11,791
    
    29,479
    
    23,581
    
    1.01.0031.12.02W H Powell
    2
    
    28.03.02
    
    65,316
    
    65,316
    
    159,664
    
    130,636
    
    1.01.0231.12.041,2
    
    05.03.01
    
    47,976
    
    47,976
    
    117,276
    
    95,952
    
    1.01.0131.12.031,2
    
    25.05.00
    
    34,934
    
    34,934
    
    85,408
    
    69,868
    
    1.01.0031.12.02T A Scott
    
    
    28.03.02
    
    40,050
    
    n/a
    
    100,123
    
    n/a
    
    1.01.0231.12.041
    
    05.03.01
    
    22,847
    
    n/a
    
    57,115
    
    n/a
    
    1.01.0131.12.03(1)
    Conditional share awards in
      the table above made on 25 May 2000 and 5 March 2001 are stated after an
      increase due to the impact of the Rights Issue, using an adjustment factor
      as determined by the Remuneration Committee. No other variations to the
      awards were made during the year.(2)
    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.

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Performance Growth Plan (continued)
Awards under the Performance Growth
  Plan (continued)
(3)
    Prior to being appointed Directors,
      Mr W H Powell and Mr T A Scott participated in cash based long-term incentive
      plans operated by the Group. The performance period relating to these awards
      ended on 31 December 2002. Mr Powell will receive no payment in respect
      of his units. During 2003 Mr Scott will receive £9,773 in respect
      of his service as a Director during the performance period.(4)
    The number of shares comprising
      the awards is determined by the average share price of ICI Ordinary Shares
      for the month of December prior to the commencement of the performance period.
      In the case of the grant made on 28 March 2002 the December average share
      price was adjusted for the effect of the Rights Issue. However, in accordance
      with theDirectors
      Remuneration Report Regulations 2002the
      Company is required to state the market price of its shares on the date
      of the award and these were as follows: 25 May 2000 £5.24,5March 2001 £5.33
      and 28 March 2002 £3.42. Prices for 2000 and 2001 are not adjusted
      for the impact of the Rights Issue.Shares vested under the Performance
  Growth Plan(audited)
The following shares in respect of the performance
  period 1 January 2000 to 31 December 2002 vested on 10 February 2003.
Shares
      vested
    
    Percentage
      of maximum
      number of
      shares that
      could be
      awardedNumber
      of shares
      vested
    
    Price at
      date of
      vesting
    
    Value
      of shares
      at date of
      vesting£
    
    £
    
    %P J Drechsler
    
    2,527
    
    1.8375
    
    4,643
    
    5Dr J D G McAdam
    
    18,383
    
    1.8375
    
    33,779
    
    35Growth in Economic Profit was particularly
  strong in the Paints business and this is reflected in an above target award
  under this measure to Dr J D G McAdam. Mr P J Drechsler received a below target
  award and the award to Mr W H Powell lapsed. The award, based on the TSR condition,
  to Dr B R ONeill also lapsed.
Performance graphs(not subject to audit)
The first graph below shows indices of the
  TSR performances of ICI and of the Peer Group of companies for the Performance
  Growth Plan. The second graph, as required by theDirectors Remuneration Report Regulations 2002,illustrates
  the TSR 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.



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remuneration report


Share option schemes
(audited)
  The share option schemes reward Executive
    Directors for longer-term corporate performance as reflected in share price
    appreciation.
Options to purchase the Companys
Ordinary Shares may be granted each year. Individual option grants to Executive
Directors during 2002 were in a range of 125% to 200% of salary, reflecting market
practice (UK or US, as appropriate), and individual performance and potential
impact on longer-term business results. Grants are made subject to a performance
condition that over a three
year period in the life of the option the growth in ICIs earnings per share
(excluding both 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.
In the light of the Companys current business outlook and

the quantum of the grants involved, the Remuneration Committee considers this
to be an appropriately challenging condition for option grants made in 2002.
Options must be held for a minimum of three years from grant before they can
be exercised and lapse if not exercised within ten years.
The shares to meet rights granted do not dilute ICIs
issued share capital as they are bought in the market.
In the USA, grants are made as stock appreciation rights (SARs) and, on exercise,
the gain is delivered in the form of American Depositary Receipts (ADRs). Each
ADR represents four ICI Ordinary Shares. The grants are
subject to similar rules.
No gains were realised on the exercise of share options during 2002 or 2001.

Directors interests in share options
Options
   outstanding
   at 1 January
   2002
   
   Options granted
   during 2002
   Options lapsed
   during
         2002
   Options outstanding
    at 31 December 2002Directors at
   31 December 2002
   Number of
   shares
   (note1)
   
   Number of
   shares
   Number of
   shares
   Number of
   shares
   
   Exercise
   prices
   
   Earliest date
   from which
   exercisable
   Latest
   expiry
   date£
   
   
   (note 2)Dr B R ONeill
   123,474
   
   
   
   123,474
   
   10.077
   
   18.05.01
   17.05.08302,373
   
   
   
   302,373
   
   5.454
   
   29.04.02
   28.04.09270,957
   
   
   
   270,957
   
   4.242
   
   21.02.03
   20.02.10322,249
   
   
   
   322,249
   
   4.292
   
   05.03.04
   04.03.11324,823
   
   324,823
   
   2.840
   
   13.03.05
   12.03.126,991
   
   
   
   6,991
   
   2.366
   
   01.02.07
   31.07.07P J Drechsler
   45,554
   
   
   
   45,554
   
   5.039
   
   22.03.96
   21.03.0313,605
   
   
   
   13,605
   
   5.528
   
   24.06.96
   23.06.035,658
   
   
   
   5,658
   
   6.217
   
   09.05.98
   08.05.056,501
   
   
   
   6,501
   
   7.454
   
   07.05.99
   06.05.0611,919
   
   
   
   11,919
   
   8.466
   
   04.08.00
   03.08.0722,314
   
   
   
   22,314
   
   10.077
   
   18.05.01
   17.05.08100,790
   
   
   
   100,790
   
   5.454
   
   29.04.02
   28.04.0984,231
   
   
   
   84,231
   
   4.242
   
   21.02.03
   20.02.10128,375
   
   
   
   128,375
   
   4.292
   
   05.03.04
   04.03.11138,644
   
   138,644
   
   2.840
   
   13.03.05
   12.03.12931
   
   
   
   931
   
   3.038
   
   01.02.06
   31.07.065,592
   
   
   
   5,592
   
   2.366
   
   01.02.07
   31.07.07Dr J D G McAdam
   20,106
   
   
   (20,106)
   
   
   
   
   04.08.97
   03.08.0224,545
   
   
   
   24,545
   
   10.077
   
   18.05.01
   17.05.08108,121
   
   
   
   108,121
   
   5.454
   
   29.04.02
   28.04.0990,416
   
   
   
   90,416
   
   4.242
   
   21.02.03
   20.02.10138,564
   
   
   
   138,564
   
   4.292
   
   05.03.04
   04.03.11149,647
   
   149,647
   
   2.840
   
   13.03.05
   12.03.12532
   
   
   
   532
   
   3.038
   
   01.02.06
   31.07.066,319
   
   
   
   6,319
   
   2.366
   
   01.02.07
   31.07.07W H Powell (note 6)
   39,104
   
   
   
   39,104
   
   8.466
   
   04.08.00
   03.08.0731,284
   
   
   
   31,284
   
   10.077
   
   18.05.01
   17.05.0892,380
   
   
   
   92,380
   
   4.482
   
   08.03.02
   07.03.0998,708
   
   
   
   98,708
   
   5.690
   
   28.05.02
   27.05.09192,696
   
   
   
   192,696
   
   4.242
   
   21.02.03
   20.02.10272,816
   
   
   
   272,816
   
   4.292
   
   05.03.04
   04.03.11337,452
   
   337,452
   
   2.840
   
   13.03.05
   12.03.12


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Share option scheme (continued)
Directors interests in share options (continued)
Options
   outstanding
   1 January
   2002
   
   Options granted
   during 2002
   Options lapsed
   during 2002
   Options outstanding at 31 December 2002Directors at
   31 December 2002
   Number of
   shares
   (note 1)
   
   Number of
   shares
   Number of
   shares
   Number of
   shares
   
   Exercise
   prices£
   
   Earliest date
   from which
   exercisable
   Latest
   expiry
   date
   (note 2)T A Scott
   12,160
   
   
   (12,160)
   
   
   
   
   04.08.97
   03.08.029,863
   
   
   
   9,863
   
   10.077
   
   18.05.01
   17.05.0825,311
   
   
   
   25,311
   
   5.454
   
   29.04.02
   28.04.0946,386
   
   
   
   46,386
   
   4.242
   
   21.02.03
   20.02.10116,440
   
   
   
   116,440
   
   4.292
   
   05.03.04
   04.03.11143,045
   
   143,045
   
   2.840
   
   13.03.05
   12.03.122,412
   
   
   
   2,412
   
   3.943
   
   01.12.03
   31.05.041,367
   
   
   
   1,367
   
   4.092
   
   01.02.05
   31.07.05532
   
   
   
   532
   
   3.038
   
   01.02.06
   31.07.06
    Grants awarded under the UKsave-as-you-earnSharesave Scheme in which UK Executive Directors may participate.
      No performance conditions are attached to options granted under this scheme
      as it is an allemployee share option scheme.(1)
    The number of shares under
      option as at 1 January 2002 and their exercise prices are stated after adjustment
      for the impact of the Rights Issue using adjustment factors determined by
      the Remuneration Committee as detailed on page 86. No other variations were
      made to Directorsoptions or the terms and conditions of any Directorsoptions.(2)
  The earliest date from which
      an option is exercisable is subject to any outstanding performance condition
    being met.(3)
    The market price of the shares
      at 31 December 2002 was £2.30 and the range during 2002 was £2.03
      to £3.57 (£4.30 pre rights). The Register of DirectorsInterests (which is open to inspection by shareholders) contains full details
      of Directorsshareholdings and options to subscribe for shares.(4)
   Non-Executive Directors are
    not eligible for share option grants.(5)
   In accordance with the Listing
       Rules of the Financial Services Authority, the 1999 annual grant of share
       options to Executive Directors and certain individuals involved with the
       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 £4.333 (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.(6)
   Mr W H Powells
       options are awarded in the form of SARs, denominated in ADRs, but for
       the purpose of this table have been disclosed in terms of Ordinary Share
    option equivalents.(7)
   Since 1998, grants under share
       option schemes have been made subject to the earnings per share performance
    condition outlined on page 42.(8)
   During the period 1 January
       2003 to 10 February 2003 there were no changes in the interests of Directors
    in options.(9)
   No amount was paid for the
    award of any options.



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remuneration report
Retirement benefits ICI provides retirement benefit plans for its
    executives which take account of local practice in the countries in which
    it operates. These plans are designed, as part of the total remuneration package,
    to attract the quality of staff needed by the business and to aid mobility
    between countries where necessary. In keeping with the Groups philosophy
    on fixed elements of reward, they are normally positioned around
    the median of the local market.
Except where Defined Benefit plans already
     exist for current executives, retirement benefits are provided on a defined
      contribution basis so that Company costs are stable and predictable.
      Where  possible, plans provide flexibility and choice to increase employee
      commitment,
  and enable executives to make their own contributions as well as the Company.

In this way, ICI encourages and supports its
  executives to play an active role in planning for their individual retirement
  needs.
It is ICIs policy to match retirement
  benefit liabilities where possible by external funds rather than by Group assets.
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
      pension plansAdditional      pension      accrued      in 2002      (note 1)
    
    Accrued      pension at      31 December      2002      (note 2)
    
    Transfer value      of accrued      pension at      1 January      2002
    
    Transfer value      of accrued      pension at      31 December      2002
    
    Increase in      transfer value      of accrued      pension      during year      (net of      contributions      by Director)      (note 3)
    
    Contributions      2002
    
    Contributions      2001Notes
    
    £000 p.a.
    
    £000 p.a.
    
    £000
    
    £000
    
    £000
    
    £000
    
    £000Dr B R ONeill
    4
    
    2
    
    7
    
    66
    
    81
    
    10
    
    155
    
    156P J Drechsler
    5
    
    6
    
    138
    
    1,110
    
    979
    
    (150
    )
    
    
    Dr J D G McAdam
    6
    
    11
    
    228
    
    2,789
    
    3,011
    
    211
    
    
    
    W H Powell
    7
    
    24
    
    277
    
    3,210
    
    3,529
    
    688
    
    23
    
    22T A Scott
    6
    
    32
    
    117
    
    650
    
    715
    
    55
    
    
    
    (1)
   The additional annual pension accrued during the year, payable at normal retirement age (or date of retirement).(2)
   The accrued annual pension at the end of the year, payable at normal retirement age (or date of retirement).(3)
   The changes in transfer values over the year reflect any changes in pensionable pay and the service of each Director. They also take into account changes in the actuarial assumptions,
particularly those related to equity and bond returns. As a result, changes in transfer values may be positive or negative, depending on investment conditions.(4)
   Dr B R ONeill participates in the ICI Pension Fund in respect of salary up to the Inland Revenue
earnings cap (currently £97,200 for 2002/3). He also belongs to a funded unapproved retirement benefits scheme, in respect of salary above this cap, for which the contributions are subject to income tax and are set out above.(5)
   Mr P J Drechsler participates in the ICI Pension Fund.(6)
   Dr J D G McAdam and Mr T A Scott 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 J D G McAdam and 15% of base salary for Mr T A Scott.(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.(8)
   No Director received an enhancement to his contractual pension benefit during the year.(9)
    The Listing Rules
      of the Financial Services Authority are different from theDirectorsRemuneration
      Report Regulations 2002and require
      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 2002 (net of inflation): Dr B R ONeill £1,640; Mr P J Drechsler
£4,160; Dr J D G McAdam £8,060; Mr W H Powell £24,050; Mr T A Scott £31,170.
   Transfer values at 31 December 2002 of the increase in accrued pension (net of inflation and contributions by the Director):Dr B R ONeill £13,200; Mr P J Drechsler £10,200; Dr J D G McAdam £94,100; Mr W H Powell £678,230; Mr T A Scott £181,000.



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Directors interests
        in shares(audited)
Contingent interest
      in matched shares
      (note 6)ICI Ordinary Shares
    
    
    1 January
    
    31 December
    
    1 January
    
    31 December2002
    
    2002
    
    2002
    
    2002notesLord Trotman
    1
    
    46,500
    
    76,090Dr B R ONeill
    5
    
    104,193
    
    180,496
    
    31,193
    
    51,043P J Drechsler
    2,5
    
    59,542
    
    103,097
    
    21,326
    
    25,447Dr J D G McAdam
    5
    
    20,178
    
    33,018
    
    17,126
    
    28,024W H Powell
    3,5
    
    45,720
    
    76,012
    
    
    
    T A Scott
    5
    
    8,365
    
    28,308
    
    7,921
    
    8,340A Baan
    
    
    
    
    3,791Lord Butler
    
    
    1,000
    
    1,636J T Gorman
    4
    
    8,000
    
    13,088R N Haythornthwaite
    
    
    1,698
    
    6,666All Directors took up their full entitlement
  to new ICI Ordinary Shares under the Rights Issue. Consistent with the policy
  on personal shareholding, no Directors have disposed of shares acquired via
  Company share-based plans except to meet consequent income tax liabilities.
In addition to the interests in the table
    above,  on 10 February 2003 Mr P J Drechsler and Dr J D G McAdam became entitled
    to
  Ordinary Shares awarded to them under the Performance Growth Plan (PGP), as
     detailed in the table of Shares Vested on page 41. They also
     have  conditional interests in PGP awards made on 5 March 2001 and 28 March
     2002,
  see page 40.
All Directors shares are held beneficially.
(1)
    Lord Trotmans
      interest in shares at 1 January 2002 comprised 500 Ordinary Shares and 11,500
      ADRs (representing 46,000 Ordinary Shares). At 31 December 2002 his interest
      comprised 818 Ordinary Shares and 18,818 ADRs (representing 75,272 Ordinary
      Shares).(2)
    Mr P J Drechslers
      interest in shares at 1 January 2002 comprised 49,134 Ordinary Shares and
      2,602 ADRs (representing 10,408 Ordinary Shares). At 31 December 2002 his
      interest comprised 86,069 Ordinary Shares and 4,257 ADRs (representing 17,028
      Ordinary Shares).(3)
    Mr W H Powells
      interest in shares at 1 January 2002 comprised 10 Ordinary Shares and 11,427.5
      ADRs (representing 45,710 Ordinary Shares). At 31 December 2002 his interest
      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 2002 comprised 2,000 ADRs (representing
      8,000 Ordinary Shares). At 31 December 2002 his interest comprised 3,272
      ADRs (representing 13,088 Ordinary Shares).(5)
    These Directors 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 9.3m (2001
      5.6m) shares (including ADRs expressed as Ordinary Share equivalents) held
      by the trustee.(6)
    Certain Executive Directors
      have a contingent interest in matched shares under the Bonus Conversion
      Plan provided in respect of the 1999 bonuses, which was operated for the
      last time in respect of that financial yearas described in note 3 to the
      Directorsemoluments table on page 39. A bonus recipient could elect to have shares
      purchased at market value with part or all of his bonus after tax. After
      three years, shares purchased in the plan are released and matched by an
      equal number of shares by the Company, provided the individual remains employed
      by ICI.During the period 1 January 2003 to 10 February
  2003 there were no changes in the interests of Directors in shares.




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remuneration report
Directors service
      agreements and letters of engagement(not subject to audit)
It 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 dateDr B R ONeill
    01.98
    11.05.98
    Terminable on
      12 months noticeP J Drechsler
    10.03.99
    01.03.99
    Terminable on 12 months
      noticeDr J D G McAdam
    10.03.99
    01.03.99
    Terminable on 12 months
      noticeW H Powell
    17.02.00
    02.02.00
    Terminable on 12 months
      notice (note 1)T A Scott
    11.05.01
    23.05.01
    Terminable on 12 months
      notice (note 2)(1)
    The appointment as an Executive
      Director of ICI, which is non-remunerative, is terminable by either party
      giving not less than 12 monthsnotice in writing. Mr W H Powell is separately employed
      by National Starch and Chemical Company as Chairman and Chief Executive.
      Mr Powells
      employment with National Starch and Chemical Company is terminable on 12
      monthsnotice.(2)
    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 basic 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 39 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 as at
  the date of termination other than as detailed above.
The dates of the Chairmans and current
  Non-Executive Directors letters of engagement, the date on which their
  appointment took effect and the current expiry dates are as follows:
Chairman and Non-Executive Directors
    Date of letter of engagement
    Effective date
    Expiry dateLord Trotman
    31.01.02
    01.01.02
    Terminable on 12 months
      notice (note 1)A Baan
    24.07.01
    25.06.01
    (note 2)Lord Butler
    12.06.98
    01.07.98
    (note 2)J T Gorman
    25.10.00
    20.09.00
    (note 2)R N Haythornthwaite
    22.02.01
    20.02.01
    (note 2)(1)
   Lord Trotman was appointed as a Non-Executive Director on 1 July 1997 and, by an agreement dated 31 January 2002 between ICI and Lord Trotman, as Non-Executive Chairman with effect from 1 January
2002.(2)
   Non-Executive Directors are appointed for an unspecified term pursuant to letters of engagement. They stand for re-election at the first Annual General Meeting following appointment and stand for
re-election by rotation under Article 96 of the Articles of Association of the Company. It is the normal practice of the Company for Non-Executive Directors to serve two three-year terms. Non-Executive Directors, apart from Lord Trotman, have no
right to compensation on the early termination of their appointment.On behalf of the Board R N HaythornthwaiteChairman of the Remuneration Committee
  12 February 2003



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trading market for ordinary shares; defaults, dividend arrearages and delinquencies
Trading market for Ordinary Shares
  The authorised share capital of the Company
  comprises  1,400,000,000 Ordinary Shares of £1 each. At the close of
  business on  31 December 2002, 1,191,199,606 Ordinary Shares were in issue.
The 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 JPMorgan Chase Bank, as depositary, are
  listed on the New York Stock Exchange. Ordinary Shares are also listed on Euronext
  and in Frankfurt.
Total
    
    In
      the
      United StatesNumber of record holders of:Ordinary Shares
      as at 1 January 2003
    167,263
    
    722ADSs as at 10
      February 2003
    2,542
    
    2,487As of 10 February 2003 the proportion of Ordinary
Shares represented by ADSs was 9.3% 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, based on its Daily Official List
  and the reported high and low sale prices of ADSs, as reported by Dow Jones
  (ADR Quotations):
£1 Ordinary
      Shares
    
    ADSsYear/month
      high
      £
    
    Year/month
      low
      £
    
    Year/month
      high
      US$
    
    Year/month
      low
      US$Year1998
    
    12.40
    
    4.46
    
    80.50
    
    30.381999
    
    8.24
    
    4.60
    
    52.63
    
    31.002000
    
    6.74
    
    3.54
    
    45.19
    
    20.442001First quarter
    
    5.57
    
    4.26
    
    33.19
    
    24.61Second quarter
    
    4.69
    
    3.83
    
    26.31
    
    22.39Third quarter
    
    4.48
    
    2.83
    
    25.55
    
    17.16Fourth quarter
    
    4.29
    
    2.85
    
    24.72
    
    17.20Year
    
    5.57
    
    2.83
    
    33.19
    
    17.162002First quarter
    
    4.30
    
    2.68
    
    19.87
    
    16.39Second quarter
    
    3.39
    
    2.85
    
    19.90
    
    17.18Third quarter
    
    3.25
    
    2.03
    
    19.60
    
    12.85Fourth quarter
    
    2.61
    
    2.04
    
    16.56
    
    12.88Year
    
    4.30
    
    2.03
    
    19.90
    
    12.852002July
    
    3.25
    
    2.81
    
    19.60
    
    17.62August
    
    2.81
    
    2.43
    
    17.73
    
    15.50September
    
    2.53
    
    2.03
    
    15.95
    
    12.85October
    
    2.51
    
    2.04
    
    15.51
    
    12.88November
    
    2.61
    
    2.45
    
    16.56
    
    15.35December
    
    2.52
    
    2.25
    
    15.80
    
    14.292003January
    
    2.37
    
    2.00
    
    15.43
    
    13.00February (through to 10 February
      2003)
    
    2.04
    
    1.70
    
    13.50
    
    11.24The share price
      on 10 February 2003 was £1.84; the ADR price was $11.97.On 4 February 2002
      ICI announced a 7 for 11 Rights Issue. Dealings in nil paid Ordinary Share
      rights and ADS rights began on 26 February 2002.Defaults, dividend
      arrearages and delinquencies(a)
    There has been no material
      default in the payment of principal, interest, a sinking or purchase fund
      instalment, or any other material default with respect to any indebtedness
      for or in respect of monies borrowed or raised by whatever means of the
      Company or any of its significant subsidiaries.(b)
    There have been no arrears
      in the payment of dividends on and no material delinquency with respect
      to any class of preferred stock of any significant subsidiary of the Company.



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shareholder information
Control of
      Company(a)
    So far as the Company is aware,
      it is neither directly nor indirectly owned or controlled by one or more
      corporations.(b)
    (i) Set out below is information
      regarding interests in the Companys Ordinary Shares appearing in the
      Register of Interests in Shares maintained by the Company:As at 7 February
      2001
    
    As at 8 March
      2002
    
    As at 10 February
      2003Identity of Group
    Amount
    
    Per cent
    
    Amount
    
    Per cent
    
    Amount
    
    Per centowned
    
    of class
    
    owned
    
    of class
    
    owned
    
    of class(number
    
    
    
    (number
    
    
    
    (numberof shares)
    
    
    
    of shares)
    
    
    
    of shares)millions
    
    
    
    millions
    
    
    
    millionsJPMorgan Chase Bank*
    137.0
    
    18.82
    
    95.6
    
    13.13
    
    110.9
    
    9.31The Capital Group Companies
    48.0
    
    6.60
    
    n/a
    
    n/a
    
    n/a
    
    n/aBrandes Investment Partners LP
    41.0
    
    5.64
    
    88.3
    
    12.13
    
    103.7
    
    8.71Franklin Resources Inc
    29.2
    
    4.01
    
    35.4
    
    4.86
    
    44.9
    
    3.77Artisan Partners LP
    n/a
    
    n/a
    
    n/a
    
    n/a
    
    37.4
    
    3.14* This interest relates to ADRs issued by JPMorgan Chase Bank, as Depositary, which 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.
(iii)
    During the period from 31
      December 2002 to 10 February 2003 there were no changes in the beneficial
      or non-beneficial interests of the Directors in the Ordinary Share Capital
      of the Company.(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.



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RISK FACTORSICI 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
  expenditures 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, its 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 typical 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 2002, 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 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 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 £1.67bn as of 31 December 2002.
  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.



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shareholder informationcontinued
RISK FACTORS continued
    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 £1.5bn in committed and undrawn bank facilities
    as of 31 December 2002, any limitation on its ability to access short-term
    financing could increase its interest costs and could adversely affect its
    results of operations and cash flow.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.The Group is currently rated investment grade by the major U.S. rating agencies.
    A number of factors, some of which are not within its 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:
  
      the failure to receive sales proceeds
        from the disposal of non-core businesses or assets within a time period
        acceptable to the rating agencies,
      a significant deterioration in the
        Groups trading position,
      a significant deterioration in the
        economic environment in which the Group operates,
      the incurrence of substantial costs
        arising from the Groups contingent
        liabilities, or
      the occurrence of any of the events
        described in the other risk factors contained in this Annual Report and
        Accounts and Form 20-F.Any downgrade of the Groups
    credit rating would reduce its funding options, including a loss of access
    to the major commercial paper and money markets, significantly increase its
    cost of borrowings and have an adverse effect on results of operations and
    cash flow.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.
    In connection with the Groups disposal of its Chlor-Chemicals business
    to Ineos Chlor, Ineos Chlor has made a £65m claim against the Group
    relating to expenditures allegedly required on the Runcorn site, which the
    Group is disputing. As yet, legal proceedings have not been commenced by Ineos
    Chlor but it is possible that they will be in the near future. Ineos Chlor
    has also approached the UK Department of Trade and Industry to seek Regional
    Selective Assistance for certain capital projects and is also seeking financial
    support from its parent company and ICI. The Group has received reports that
    Ineos Chlor may seek to close part or all of its business if this financial
    support is not forthcoming. If such a closure were to occur, a number of Chlor-Chemicals
    contracts in ICIs name which have not yet been novated to Ineos Chlor
    and certain environmental liabilities could revert to ICI or be accelerated.
    In connection with the sale of ICIs interests 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 2002, the estimate of the Groups
          maximum potential liability under these guarantees was £448m.
          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.
          On 17 June 2002, ICI announced it had reached agreement with CSFB Global
          Opportunities Partners L.P. (now Matlin Patterson Global Opportunities
          Partners L.P.) for the sale of ICIs interests in Huntsman International
          Holdings LLC. US$160m has been received to date with a further US$280m
          due on or prior to 15 May 2003. Any delay or failure by Matlin Patterson
          Global Opportunities Partners L.P. in completing this purchase, or in
          the event of such a failure, any failure by Huntsman Specialty Chemicals
          Corporation to complete the purchase of ICIs 30% equity interest
          under the Option Agreement, could have an adverse effect on the Groups
          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, ICIs Regional and Industrial
  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


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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 it 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, contract disputes and property damage matters. For a more detailed
      discussion of these lawsuits, see note 40 to the consolidated financial
      statements. One of ICIs
      subsidiaries, Glidden, is a defendant, along with other former lead paint
      and pigment producers as well as other lead related products manufacturers
      and their trade associations, in a number of lawsuits in the United States,
      including a class action lawsuit and two lawsuits by municipal authorities.
      Lawsuits have been served on Glidden because an alleged predecessor company
      of Glidden manufactured lead pigments until the 1950s and lead-based
      consumer paints until the 1960s. Due to the nature of the suits,
      Glidden is unable to quantify the amount being claimed although the suits
      are likely
      to involve substantial claims for damages. These lawsuits relate to alleged
      injury caused by lead related products or for the costs of removing lead-based
      paint. 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. For example, the U.S.
Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA,
      imposes liability, without regard to fault or the legality
of a partys conduct, on
certain categories of persons
(known as potentially
    
    responsible
        parties) who are considered to have contributed to the release of
        hazardous substances into the environment.
        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,
        which is ICIs largest defined benefit scheme and which, at 31 December
        2002, had liabilities of approximately £6.5bn. This fund accounts
        for approximately 87% of ICIs retirement benefit schemes by asset
        value and projected benefit terms and covers approximately 82,000 former
        and current employees in the UK.ICI has guaranteed the solvency of the ICI UK
        Pension Fund. Based on the last actuarial valuation at 31 March 2000 which
        included funding shortfalls amounting to 2% of the liabilities ICI is
        currently making additional contributions to it of £30m per year
        until 31 March 2006 to cover past funding shortfalls. A further actuarial
        valuation is due to take place at 31 March 2003. At 31 December 2002,
        over 75% of the funds assets were invested in fixed-income securities,
        which should reduce volatility in the market value of the fund. The balance
        of the funds assets were invested almost exclusively 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 the event that the market value of the
        ICI UK Pension Funds
        assets declines in relation to its liabilities, ICI may be required, including
        as a consequence of the 31 March 2003 actuarial valuation, to increase
        its additional contributions to cover any further funding shortfalls in
        the ICI UK Pension Fund. This could have an adverse impact on the Groups
        results of operations and cash flow.



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shareholder information
continued
Material
      contractsThe following material contracts (not being contracts
      entered into in the ordinary course of business) have been entered into
      by a member of the Group within the period of two years to February 2003.(a) an agreement dated 20 December 2001 among (1)
      ICI, (2) ICI Alta Inc. (ICI Alta), and (3) Huntsman Specialty
      Chemicals Corporation (HSCC) amending certain terms of the option
      agreement dated 2 November 2000 (the Option Agreement) in relation
      to the completion of ICIs put option and providing that, subject to
      the satisfaction of certain conditions (principally regulatory), HSCC would
      acquire the 30% equity interest held by ICI Alta in HIH for a basic purchase
      price of $365m (together with an amount equivalent to interest from December
      2001 until completion), payable in the third quarter of 2003. An additional
      amount of $32.7m would be payable unless HSCC exercised its right to complete
      the purchase at the beginning of the third quarter of 2003. The amount payable
      may separately be reduced by up to $20m if HSCC makes advance payments.
      In support of its obligations under the Option Agreement, HSCC pledged to
      ICI half of its 60% equity interest in HIH;(b) an Underwriting Agreement dated 4 February 2002
      between ICI and UBS Warburg, Goldman Sachs and Merrill Lynch (together the
      Underwriters), pursuant to which the Underwriters agreed, subject
      to certain conditions, to underwrite the new ICI Shares to be issued pursuant
      to the Rights Issue up to a maximum amount of 463,277,500 new ICI Shares.
      The Underwriting Agreement contained warranties, undertakings and indemnities
      given by ICI in favour of the Underwriters;
      (c) a Sale and Purchase Agreement dated 14 June 2002 among (1) ICI, (2)
      ICI Americas Inc., (3) ICI Alta, (4) ICI Finance PLC, (5) BNAC,
      Inc. and (6) CSFB Global Opportunities Partners, L.P. (now Matlin Patterson
      Global Opportunities Partners L.P.) for the sale of ICIs interests in HIH, which comprise (A) a holding of subordinated
      loan notes in HIH (the HIH Notes) and (B) ICI Alta which holds
      ICIs 30% equity interest in HIH and ICIs rights under the Option
      Agreement. The sale of ICI Alta (and the indirect transfer of ICIs
      30% equity interest in HIH) is permitted by the Option Agreement and is
      subject to the satisfaction of certain conditions (principally regulatory).
      The aggregate purchase price for the HIH Notes and ICI Alta is $440m before
      interest. Of this amount, $160m has been received. The remaining $280m (with
      an amount equivalent to interest from 15 May 2002 to the date of payment)
      will be payable on 15 May 2003, with the purchaser having the option to
      pay all or part of the amount due prior to 15 May 2003 by means of instalment
      payments. Ownership of the HIH Notes has been transferred, subject to the
      pledge below, and ownership of ICI Alta will be transferred when the full
      purchase price has been received. As security for a portion of the outstanding
      purchase price, the HIH Notes have been pledged back to ICI, otherwise the
      agreement is effectively without recourse to Matlin Patterson Global Opportunities
      Partners L.P. This pledge will be released when ICI has received in aggregate
      at least $260m of the total purchase price. When ICI has received at least
      $350m of the total purchase price, ICI will release ICI Altas existing
      pledge over 21% of the 30% equity interest in HIH pledged to ICI by HSCC
      and reduce the amount due from HSCC to ICI Alta under the Option Agreement
      by approximately 50%. If no instalment payments are made, the Option Agreement
      will remain in place on its existing terms; and
    
    (d)an
        agreement dated 23 September 2002 between (1) ICI and (2) Johnson
        Matthey Public Limited Company (Purchaser)
        for the sale of the Synetix Business of ICI and its subsidiaries and the
        entire issued share capitals of ACMA Limited and Tracerco Radioactive
        Diagnostic Services Canada, Inc. The total consideration for the transaction
        was £260m of which ICI received £241m on 1 November 2002 with
        £19m being paid to ICI India Limited on 2 December 2002 in respect
        of that part of the Synetix Business which was operated by ICI India Limited.
        The agreement contains various warranties, indemnities and covenants made
        by ICI for the benefit of the Purchaser.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 3ANTelephone +44 (0)20 7009 5000


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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.The ADSs representing
        ICIs Ordinary Shares are listed on the New York Stock Exchange and
        ICIs Ordinary Shares are listed on the Official List of the Financial
        Services Authority and traded on the London Stock Exchange. Reports and
        other information about the Group that ICI has filed pursuant to the rules
        of the New York Stock Exchange, the Financial Services Authority and the
        London Stock Exchange may be consulted at those bodies.A copy of each report filed within the
        preceding 12 months can also be inspected by any shareholder or ADR holder
        during normal business hours at the offices of the Company at 20 Manchester
        Square, London, W1U 3AN.Exchange rates
      The 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):
  US$ to
        pound sterling (£) (1)
      Highest
        rate
        during
        period
      
      Lowest
        rate
        during
        period
      
      Average
        rate
        during
        period
      
      At
        31 DecYear
      
      
      
      
      (2) (3)
      
      (2)1998
      1.72
      
      1.61
      
      1.66
      
      1.661999
      1.68
      
      1.55
      
      1.62
      
      1.622000
      1.65
      
      1.40
      
      1.51
      
      1.502001
      1.50
      
      1.37
      
      1.44
      
      1.452002
      1.61
      
      1.41
      
      1.50
      
      1.612002August
      1.57
      
      1.52September
      1.57
      
      1.53October
      1.57
      
      1.54November
      1.59
      
      1.54December
      1.61
      
      1.572003January
      1.65
      
      1.60February (as of 19 February)
      1.65
      
      1.59The noon buying rate on 19 February 2003
    was $1.60 = £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 New York Stock Exchange. 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, page 23).



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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 ADSADS
    
    American Depositary Share representing
      four underlying Ordinary Sharesof Imperial Chemical Industries PLCbn
    
    billion  1,000 millionCompany
    
    Imperial Chemical Industries PLCComparable performance
    
    References to comparable performance
      excludes the effect of currency translation differences and the 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 results for both 2002 and 2001 are translated
      at constant exchange rates, which equate to the annual average exchange
      rates for 2000, and exclude the results of divested businesses and the impact
      of acquired businesses from the relevant periods.Demerger
    
    The Demerger of Zeneca Limited and its
      subsidiaries from the ICI GroupDepositary
    
    JPMorgan Chase Bank, as depositary under
      the deposit agreement pursuant to which the ADRs are issuedDirectors
    
    The Directors of Imperial Chemical Industries
      PLCEBIT
    
    Profit on ordinary activities before interest
      and taxationEarnings before interest, tax, depreciation
      and amortisation (EBITDA)
    
    ICI defines EBITDA as trading profit before
      interest, tax, depreciation and goodwill amortisation. ICIs total
      depreciation before exceptional asset write-downs was £196m (2001
      continuing operations £209m; 2000 continuing operations £199m
      and discontinued operations £34m). Management believes EBITDA and
      related measures of cash flow serve as important financial indicators. However,
      EBITDA should not be considered in isolation, or as an alternative to operating
      or net income or cash flows from 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
      goodwill amortisation and exceptional items.ESOP
    
    Employee Share Ownership PlanFRS
    
    Financial Reporting Standard (UK)ICI, ICI Group or the Group
    
    Imperial Chemical Industries PLC and its
      subsidiariesInterest cover
    
    Calculations of interest cover are based
      on the sum of ICIs trading profit before goodwill and exceptional
      items and net associate company income (associate trading profit less associate
      interest) divided by ICIs interest cost (excluding associate interest).London Stock Exchange
    
    London Stock Exchange plcm
    
    millionOrdinary Shares
    
    Ordinary shares of £1 each in the
      capital of Imperial Chemical Industries PLCpound sterling, £, pence
      or p
    
    Refers to units of UK currencySEC
    
    The United States Securities and Exchange
      CommissionSFAS
    
    Statement of Financial Accounting Standards
      (US)Trading margin
    
    Trading margin is calculated as trading
      profit (before goodwill amortisation, exceptional items, interest and share
      of profits of associates) divided by sales.UK or United Kingdom
    
    United Kingdom of Great Britain and Northern
      IrelandUS dollar, dollar, US$ or $
    
    Refers to units of US currencyUSA or US or United States
    
    United States of AmericaZeneca
    
    (a)  in relation to the period prior
      to the Demerger becoming effective, the pharmaceuticals, agricultural chemicals,
      seeds, specialty chemical and biological products businesses and companies
      transferred by the ICI Group to Zeneca Limited; and(b) in relation to the period after the
      Demerger becoming effective, Zeneca Group PLC and its subsidiariesFigures in parentheses in tables and financial statements are used to represent negative numbers.