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SECURITIES AND EXCHANGE COMMISSION
  WASHINGTON, D.C. 20549


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FORM20-F


| | REGISTRATION STATEMENT
          PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT
    OF 1934
| | --------------------------------------------------------------------------------------------------------------

OR

| | ANNUAL REPORT PURSUANT
          TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2003
| | -------------------------------------------------------------------------------------------------------------------------------------------

OR

| | TRANSITION REPORT PURSUANT
    TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | --------------------------------------------------------------------------------------------

Commission file number: 2-52441

IMPERIAL CHEMICAL INDUSTRIES PLC(Exact name of Registrant as specified in Its charter)

ENGLAND AND WALES(Jurisdiction of incorporation or organization)

20 Manchester Square, London
      W1U 3AN, England(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

|Title of each class                                                                         | Name of each exchange on which registered
|------------------------------------------------------------------------------------------- | -----------------------------------------
|                                                                                            |                                          
|American
          Depositary Shares, each representing four Ordinary Shares of £1
    each | New York Stock Exchange                  
|                                                                                            |                                          
|Ordinary
    Shares of £1 each                                                              | New York Stock Exchange*                 

*Not for trading, but only in connection
    with the registration of American Depositary Shares representing such Ordinary
Shares pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act.
  None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None

The number of outstanding shares
    in the capital of Imperial Chemical Industries PLC as of April 1, 2004

Ordinary Shares of £1
each 1,191,201,547





Indicate by check mark whether the
    registrant: (1) has filed all reports required to be filed by Section 13
    or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
    (or for such shorter period that the registrant was required to file such
    reports), and (2) has been subject to such filing requirements for the past
 90 days.Yes   No

Indicate by check mark which financial
statement item the registrant has elected to follow. Item 17   Item
18

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Pursuant to Rule 12b-23(a)
    of the Securities Exchange Act of 1934, as amended, certain information for
    the Annual Report on Form 20-F of Imperial Chemical Industries PLC (the Company) for the fiscal year ended December 31, 2003 (this Report) as set out below is
   being incorporated by reference from the Companys Annual Report and Accounts 2003, which was furnished to the Securities and Exchange Commission as a Report on Form 6-K on March 12,
2004.


References below to major headings include all information under such major headings, including subheadings, unless such reference is part of a reference to a subheading, in which case such references includes only the information contained under the subheading.
  Graphs are not included unless specifically identified below.


The information set forth under
      the heading Forward-looking statements on page 2 of the Companys Annual Report and Accounts 2003 contained in its Report on Form 6-K dated March 12,
  2004 is incorporated herein by reference.


Certain words and expressions used
      in this document shall, unless the context otherwise requires, have the
      meanings ascribed to them under the heading Definitions on pages 121 and 122 of the Companys Annual Report and Accounts 2003 contained in its Report on
  Form 6-K dated March 12, 2004 and incorporated herein by reference.


Words within single quotation marks,
      the letters ICI, the Roundel Device, The Vital Ingredient, the Face Logo,
      Dulux, Cuprinol, Glidden, Hammerite, National Starch, Quest, Uniqema, Alco,
      Bondmaster, Ablestik, Acheson, Emerson & Cuming, Permabond, Purbond,
  Tra-con, Elotex and Vinamul are all trademarks of the ICI Group.


Beyond Paradise, Still Jennifer Lopez, Glow, Narcisco Rodriguez are non-ICI trademarks.


PART I

|ITEM 1  IDENTITY
    OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
|------------------------------------------------------------------

Not applicable.

|ITEM 2  OFFER
    STATISTICS AND EXPECTED TIMETABLE
|----------------------------------------------------

Not applicable.

|ITEM 3  KEY INFORMATION
|------------------------

|   |                         
|-- | ------------------------
|A. | Selected financial data.

The Groups historical consolidated financial data presented in the table below has been derived from the Groups audited consolidated financial statements for the five years ended December 31, 2003. The following selected historical consolidated financial data should be read
   in conjunction with Item 5 Operating and Financial Review and Prospects and the Groups
 Audited Consolidated Financial Statements and notes included herein.

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|                                                                              |  | Year ended December 31 | 
|----------------------------------------------------------------------------- |  | ---------------------- | 
|                                                                              |  | notes                  | 
|                                                                              |  |                        | 
|Summary of Group profit and loss accounts                                     |  |                        | 
|Turnover                                                                      |  |                        | 
|Continuing operations                                                         |  |                        | 
|International Businesses                                                      |  | 2                      | 
|Regional and Industrial                                                       |  |                        | 
|                                                                              | 
|                                                                              |  |                        | 
|Discontinued operations                                                       |  | 3                      | 
|                                                                              | 
|Total                                                                         |  | 2                      | 
|                                                                              | 
|Operating profit before exceptional items and goodwill amortisation           |  | 4                      | 
|Continuing operations                                                         |  |                        | 
|Discontinued operations                                                       |  | 3                      | 
|                                                                              | 
|Total                                                                         |  |                        | 
|                                                                              | 
|Operating profit before exceptional items                                     |  | 2                      | 
|Continuing operations                                                         |  |                        | 
|International Businesses                                                      |  | 2                      | 
|Regional and Industrial                                                       |  |                        | 
|                                                                              | 
|                                                                              |  |                        | 
|Discontinued operations                                                       |  | 3                      | 
|                                                                              | 
|Total                                                                         |  | 2                      | 
|Exceptional items charged to operating profit                                 |  |                        | 
|                                                                              | 
|Operating profit after exceptional items                                      |  |                        | 
|Share of operating profits less losses of associates before exceptional items |  |                        | 
|Share of exceptional items of associates                                      |  |                        | 
|Amounts written off investments                                               |  |                        | 
|Fundamental re-organisation costs                                             |  |                        | 
|Profits less losses on sale or closure of operations                          |  |                        | 
|Profits less losses on disposal of fixed assets                               |  |                        | 
|Net interest payable                                                          |  |                        | 
|                                                                              | 
|Group                                                                         |  | 5                      | 
|Associates                                                                    |  |                        | 
|                                                                              | 
|Total                                                                         |  |                        | 
|                                                                              | 
|Profit before taxation                                                        |  |                        | 
|Taxation                                                                      |  | 5                      | 
|Attributable to minorities                                                    |  |                        | 
|                                                                              | 
|Net profit (loss) for the financial period                                    |  |                        | 
|                                                                              | 
|Continuing operations                                                         |  |                        | 
|Discontinued operations                                                       |  | 3, 5                   | 
|                                                                              | 
|Total                                                                         |  |                        | 
|                                                                              | 
|Profit before exceptional items, taxation and goodwill amortisation           |  | 6                      | 
|                                                                              | 
|Earnings
    per £1 Ordinary Share                                            |  | 8                      | 
|                                                                              | 
|Basic
    earnings (loss) per £1 Ordinary Share                               |  |                        | 
|Continuing operations                                                         |  |                        | 
|Discontinued operations                                                       |  | 3                      | 
|                                                                              | 
|Total
    basic earnings (loss) per £1 Ordinary Share                         |  |                        | 
|                                                                              | 
|Diluted
    earnings (loss) per £1 Ordinary Share                             |  |                        | 
|Continuing operations                                                         |  |                        | 
|Discontinued operations                                                       |  | 3                      | 
|                                                                              | 
|Total
    diluted earnings (loss) per £1 Ordinary Share                       |  |                        | 
|                                                                              | 
|Dividends
    per £1 Ordinary Share                                           |  |                        | 
|                                                                              | 

|* As restated  see
    note 1 to selected financial data.
|----------------------------------------------------------

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|                                                 |  | As at December 31 |  
|------------------------------------------------ |  | ----------------- | -
|                                                 |  | 2003              |  
|                                                 |  | £m                |  
|Summary of Group balance sheets                  |  |                   |  
|Fixed assets                                     |  |                   |  
|Intangible assets – goodwill                     |  | 532               |  
|Tangible assets                                  |  | 1,794             |  
|Investments in participating and other interests |  | 57                |  
|Current assets                                   |  | 2,825             |  
|                                                 | 
|Total assets                                     |  | 5,208             |  
|                                                 | 
|Creditors due within one year                    |  | (2,226            | )
|                                                 | 
|Total assets less current liabilities            |  | 2,982             |  
|                                                 | 
|Creditors due after more than one year           |  | 1,371             |  
|Provisions for liabilities and charges           |  | 1,092             |  
|Minority interests                               |  | 69                |  
|Shareholders funds – equity                     |  | 450               |  
|                                                 | 
|                                                 |  | 2,982             |  
|                                                 | 

|* As restated – see
    note 1 to selected financial data.
|----------------------------------------------------------
|                                                          

|                                                                      |  | As at December 31 |  
|--------------------------------------------------------------------- |  | ----------------- | -
|                                                                      |  | 2003              |  
|                                                                      |  | £m                |  
|Summary of statements Group cash flows                                |  |                   |  
|Net cash inflow from operating activities                             |  | 539               |  
|Dividends received from equity accounted associates                   |  |                  |  
|Net cash outflow from returns on investments and servicing of finance |  | (96               | )
|Taxation                                                              |  | (37               | )
|Capital expenditure and financial investment                          |  | (138              | )
|Acquisitions and disposals                                            |  | 84                |  
|Equity dividends paid                                                 |  | (86               | )
|                                                                      | 
|Cash inflow (outflow) before use of liquid resources and financing    |  | 266               |  
|Management of liquid resources                                        |  | (194              | )
|Financing                                                             |  | (84               | )
|                                                                      | 
|Increase (decrease) in cash                                           |  | (12               | )
|                                                                      | 

|* As restated – see
    note 1 to selected financial data.
|----------------------------------------------------------

The financial data on pages 2 to
    8 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 Form 20-F.
    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 Form 20-F. 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 note 1 to
 the Group financial statements).

The net profit (loss) for the financial
    periods in the Summary of Group profit and loss accounts and Shareholders funds – equity
    in the Summary of Group balance sheets, above, are stated in accordance with
    generally accepted accounting principles in the UK (UK GAAP). Refer to note
    41 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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|Notes to selected consolidated historical financial information
|---------------------------------------------------------------

|    |             
|--- | ------------
|(1) | Restatements

UITF Abstract 38Accounting for ESOP Trusts

To the extent noted in the paragraph below, these selected financial data have been restated in respect of UITF Abstract 38 Accounting for ESOP Trusts which was implemented in 2003.

This standard requires the assets
    and liabilities of the Groups ESOP trust to be recognised in the Groups financial statements where there is de facto control of those assets and liabilities. The companys own shares held by the ESOP trust should be deducted from
   shareholders funds until they vest unconditionally with employees. Prior to the adoption of UITF 38, the companys own shares held by the ESOP trust were recognised as an asset on the balance sheet at the lower of cost and estimated net realisable value. The new standard
   is effective for periods ending on or after June 22, 2004, but the Group
   has elected to apply this standard in these financial statements. All primary
 statements and notes relating to the accounts have been restated accordingly.

Compliance with UITF 38 has reduced
    the 2002 investments and shareholders funds by £36m (2001 £30m, 2000 £54m, 1999 £54m). The net profit for 2002 was unaffected (2001 increase £22m, 2000 and 1999 unaffected). The estimated impact on the current years profit if
   UITF 38 had not been adopted would be to reduce net profit by £19m.
 The new standard has no impact on cash flows.

|(2) | International Businesses
|--- | ------------------------

ICI management refers to National
    Starch, Quest, Performance Specialties and Paints collectively as International Businesses. The use of this term is a non-UK GAAP measure. A detailed explanation of managements reasons for finding this non-UK GAAP financial
   measure to be useful is provided in the Basis of Presentation section of Managements
   Discussion and Analysis of Financial Condition and Results of Operations under
 the heading of International Businesses on page 14.

Analyses of turnover and operating profit before exceptional items for the International Businesses and a reconciliation of this sub-total to the respective totals for the Group are shown in the tables below.

|Turnover                    |  | Year ended December 31 | 
|--------------------------- |  | ---------------------- | 
|                            |  | 2003                   | 
|                            |  | £m                     | 
|Continuing operations       |  |                        | 
|National Starch             |  | 1,866                  | 
|Quest                       |  | 691                    | 
|Performance Specialties (1) |  | 669                    | 
|Paints                      |  | 2,163                  | 
|                            | 
|International Businesses    |  | 5,389                  | 
|Regional and Industrial     |  | 481                    | 
|Inter-class eliminations    |  | (21)                   | 
|Discontinued operations     |  | —                      | 
|                            | 
|Total Group                 |  | 5,849                  | 
|                            | 

| | (1) | Performance Specialties turnover for 2002 and earlier years includes the results for the Synetix and Security Systems businesses, which were sold in 2002. The turnover of the business for 2003 comprises only Uniqema.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|Operating profit before exceptional items (1) |  | Year ended December 31 |  
|--------------------------------------------- |  | ---------------------- | -
|                                              |  | 2003                   |  
|                                              |  | £m                     |  
|Continuing operations                         |  |                        |  
|National Starch                               |  | 182                    |  
|Quest                                         |  | 44                     |  
|Performance Specialties (2)                   |  | 7                      |  
|Paints                                        |  | 186                    |  
|                                              | 
|International Businesses                      |  | 419                    |  
|Regional and Industrial                       |  | (25                    | )
|Discontinued operations                       |  |                       |  
|                                              | 
|Total Group                                   |  | 394                    |  
|                                              | 

|(1) | Operating 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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Performance Specialties operating profit for 2002 and earlier years includes the results for the Synetix and Security Systems businesses, which were sold in 2002. The operating profit before exceptional items of the business for 2003 comprises only Uniqema.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|    |                        
|--- | -----------------------
|(3) | Discontinued operations

The 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 sold or terminated in 2001 or before. Discontinued operations for 2000 and 1999
 comprised the Polyurethanes business, the Tioxide business, selected petrochemicals businesses (Olefines and Aromatics), the Acrylics business, the Fluropolymers business, the Chlor-Chemicals, Klea and Crosfield businesses and Methanol businesses.

|(4) | Operating profit before exceptional items and goodwill amortisation
|--- | -------------------------------------------------------------------

Operating profit before exceptional items and goodwill amortisation is presented before the charge for goodwill amortisation. This is a non-UK GAAP measure for which the most directly comparable UK GAAP financial measure is operating profit before exceptional items. A
 detailed explanation of managements reasons for believing this non-UK GAAP financial measure to be useful is provided in the Basis of Presentation section of Managements Discussion and Analysis of Financial Condition and Results of Operations under the heading of
 Trading profit on page 12.

A reconciliation between the UK GAAP financial measure of operating profit before exceptional items and operating profit before exceptional items and goodwill amortisation for each of the five years ended December 31, 2003 inclusive is shown in the table below:

|                                                                    |  | Year ended December 31 | 
|------------------------------------------------------------------- |  | ---------------------- | 
|                                                                    |  | 2003                   | 
|                                                                    |  | £m                     | 
|Operating profit before exceptional items (1)                       |  | 394                    | 
|Goodwill amortisation (2)                                           |  | 36                     | 
|                                                                    | 
|Operating profit before exceptional items and goodwill amortisation |  | 430                    | 
|                                                                    | 

|(1) | Operating 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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Goodwill amortisation relates
          solely to continuing operations.
|--- | ------------------------------------------------------------------------

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|(5) | Net interest payable and taxation
|--- | ---------------------------------

Net interest payable and taxation has been allocated to Discontinued operations to reflect the legal entity incidence of these items within the business divested.

Net interest includes exceptional interest income of £16m in 2000 and interest expense of £54m in 1999.

|(6) | Profit before exceptional items, taxation and goodwill amortisation
|--- | -------------------------------------------------------------------

Profit before exceptional items, taxation and goodwill amortisation is presented before the charge for goodwill amortisation. This is a non-UK GAAP measure for which the most directly comparable UK GAAP financial measure is profit before exceptional items and taxation. A
 detailed explanation of managements reasons for believing this non-UK GAAP financial measure to be useful is provided in the Basis of Presentation section of Managements Discussion and Analysis of Financial Condition and Results of Operations under the heading of
 Profit before exceptional items, taxation and goodwill amortisation on page 13.

A reconciliation between the UK GAAP financial measure of profit before exceptional items and taxation and profit before exceptional items, taxation and goodwill amortisation for the years ended December 31, 1999 to 2003 inclusive is shown in the table below.

|                                                                    |  | Year ended December 31 | 
|------------------------------------------------------------------- |  | ---------------------- | 
|                                                                    |  | 2003                   | 
|                                                                    |  | £m                     | 
|Profit before exceptional items and taxation                        |  | 305                    | 
|Goodwill amortisation                                               |  | 36                     | 
|                                                                    | 
|Profit before exceptional items, taxation and goodwill amortisation |  | 341                    | 
|                                                                    | 

|    |                                                        
|--- | -------------------------------------------------------
|(7) | Exceptional items  Continuing
              operations

Exceptional items relating to Continuing operations included in the Group profit and loss account were as follows:

|                                             |  | Year ended
          December 31 |  
|-------------------------------------------- |  | -------------------------------- | -
|                                             |  | 2003                             |  
|                                             |  | £m                               |  
|Continuing operations                        |  |                                  |  
|Exceptional items before taxation            |  | (211                             | )
|Taxation on exceptional items                |  | 52                               |  
|Exceptional items attributable to minorities |  | (1                               | )
|                                             | 
|Exceptional net profit (loss)                |  | (160                             | )
|                                             | 

|* | As restated  see note 1 above.
|- | -------------------------------

Note 3 to the Group financial statements gives details of exceptional items before taxation from 2001 to 2003.

Exceptional items disclosed separately in the UK GAAP Group profit and loss account would be incorporated in individual line items under US GAAP. Exceptional items under UK GAAP do not represent extraordinary items under US GAAP.

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|(8) | Earnings per £1 Ordinary Share
|--- | ------------------------------
|    |                               

|                                                                      |  | 2003    |   | 2002    |   | 2001    |   | 2000    |   | 1999    |  
|--------------------------------------------------------------------- |  | ------- | - | ------- | - | ------- | - | ------- | - | ------- | -
|                                                                      |  | million |   | million |   | million |   | million |   | million |  
|Average Ordinary Shares                                               |  |         |   |         |   |         |   |         |   |         |  
|Weighted average Ordinary Shares in issue during the year             |  | 1,191   |   | 1,123   |   | 876     |   | 876     |   | 876     |  
|Weighted average shares held by Groups employee share ownership plan |  | (9      | ) | (9      | ) | (7      | ) | (7      | ) | (8      | )
|                                                                      | 
|Basic weighted average Ordinary Shares in issue during the year       |  | 1,182   |   | 1,114   |   | 869     |   | 869     |   | 868     |  
|Dilutive effect of share options                                      |  |        |   | 2       |   |        |   |        |   | 2       |  
|                                                                      | 
|Diluted weighted average Ordinary Shares                              |  | 1,182   |   | 1,116   |   | 869     |   | 869     |   | 870     |  
|                                                                      | 

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 2) by, respectively, basic weighted average Ordinary Shares in issue during the period or diluted weighted average Ordinary Shares in issue during the period.

|Basic and diluted earnings per £1 Ordinary Share
|------------------------------------------------
|                                                

|Net profit (loss) for the financial year      |  |  | £m    |  | 20  |   | 179  |   | 102  | *  | (207  | )  | 331  |  
|--------------------------------------------- |  |  | ----- |  | --- | - | ---- | - | ---- | -- | ----- | -- | ---- | -
|                                              | 
|Basic earnings (loss) per £1 Ordinary Share   |  |  | pence |  | 1.7 | p | 16.1 | p | 11.7 | p* | (23.8 | )p | 38.1 | p
|                                              | 
|Diluted earnings (loss) per £1 Ordinary Share |  |  | pence |  | 1.7 | p | 16.0 | p | 11.7 | p* | (23.8 | )p | 38.0 | p
|                                              | 

|* | As restated  see note 1 to selected financial data.
|- | ----------------------------------------------------

|
|

US GAAP resultsThe
    financial statements of the ICI Group are prepared in accordance with UK
    GAAP. UK GAAP differs in certain
    respects from US GAAP. Net income from continuing and discontinued operations
    and shareholders equity calculated in accordance with US GAAP are set out
   in the table below. Note 41 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 December 31,
2003.

|                                                        |  | 2003  |    | 2002  |    | 2001  |    | 2000   |    | 1999   |  
|------------------------------------------------------- |  | ----- | -- | ----- | -- | ----- | -- | ------ | -- | ------ | -
|                                                        |  | £m    |    | £m    |    | £m    |    | £m     |    | £m     |  
|Net income (loss)                                       |  |       |    |       |    |       |    |        |    |        |  
|Continuing operations                                   |  | (167  | )  | (107  | )  | (4    | )  | (467   | )  | 4      |  
|Discontinued operations                                 |  | 1     |    | 116   |    | 17    |    | 11     |    | 49     |  
|Net income (loss)                                       |  | (166  | )  | 9     |    | 13    |    | (456   | )  | 53     |  
|                                                        | 
|Basic and diluted earnings (loss) per £1 Ordinary Share |  |       |    |       |    |       |    |        |    |        |  
|Continuing operations                                   |  | (14.1 | )p | (9.6  | )p | (0.5  | )p | (53.8  | )p | 0.5    | p
|Discontinued operations                                 |  | 0.1   | p  | 10.4  | p  | 2.0   | p  | 1.3    | p  | 5.6    | p
|                                                        | 
|Net earnings (loss) per £1 Ordinary Share               |  | (14.0 | )p | 0.8   | p  | 1.5   | p  | (52.5  | )p | 6.1    | p
|                                                        | 
|                                                        |  | £m    |    | £m    |    | £m    |    | £m     |    | £m     |  
|Shareholders equity                                    |  | 2,359 |    | 2,805 |    | 2,568 |    | 2,828  |    | 3,373  |  
|                                                        | 
|Total assets                                            |  | 8,118 |    | 8,739 |    | 9,779 |    | 10,344 |    | 10,348 |  
|                                                        | 

Under US GAAP, the net loss in 2003
    was £166m (2002 £9m net income; 2001 £13m net income) compared
    with net income of £20m (2002 £179m net income; 2001 £102m
    net income) under UK GAAP. Under US GAAP, shareholders equity at December 31,
    2003 was
 £2,359m, (December 31, 2002 £2,805m; December 31, 2001 £2,568m)
 compared to £450m (surplus) at December 31, 2003 (December 31, 2002 £463m surplus; December 31, 2001 £394m deficit) under
 UK GAAP. These differences primarily result from the differing  accounting treatment
 of purchase accounting adjustments, pensions, disposal accounting, capitalisation
 of interest, deferred tax, derivative instruments, and restructuring costs under
 US GAAP compared with UK GAAP.

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Dividends
  Dividends paid (including the related UK tax credit) on each American Depositary Share (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 2003 to be paid on
 April 16, 2004, the rate on February 4, 2004), were:

|                            |  | 2003      |  | 2002      |  | 2001      |  | 2000      |  | 1999      | 
|--------------------------- |  | --------- |  | --------- |  | --------- |  | --------- |  | --------- | 
|                            |  | $ per ADS |  | $ per ADS |  | $ per ADS |  | $ per ADS |  | $ per ADS | 
|                            |  |           |  |           |  |           |  |           |  |           | 
|Dividends declared per ADS* |  | 0.43      |  | 0.48      |  | 0.76      |  | 1.56      |  | 1.73      | 
|                            | 
|Dividends paid per ADS*     |  | 0.46      |  | 0.69      |  | 1.24      |  | 1.63      |  | 1.72      | 
|                            | 

|* | Each ADS represents four underlying Ordinary Shares of the Company.
|- | -------------------------------------------------------------------

|
|

Ratio of earnings to fixed
        charges  Continuing operations
        For 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.

|                                                               |  | 2003 |  | 2002 |  | 2001 |  | 2000 |  | 1999 | 
|-------------------------------------------------------------- |  | ---- |  | ---- |  | ---- |  | ---- |  | ---- | 
|Ratio of earnings to fixed charges                             |  |      |  |      |  |      |  |      |  |      | 
|For the Group (under UK GAAP)                                  |  | 1.5  |  | 2.3  |  | 1.7  |  | 2.4  |  | 1.6  | 
|                                                               | 
|For the Group with material adjustments to accord with US GAAP |  | 0.6  |  | 1.0  |  | 1.5  |  |     |  | 1.3  | 
|                                                               | 

The deficiency of earnings to fixed charges under US GAAP for the years ended December 31, 2003, and 2000 was £73m and £422m respectively.

Exchange rates
  The highest and lowest exchange rates for each period since February 2004 based on 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) are set out
 below:

|US$
            to pound sterling (£) 2004                 |  | Highest rate duringperiod |  | Lowest rate duringperiod | 
|---------------------------------------------------------- |  | ------------------------- |  | ------------------------ | 
|                                                           | 
|                                                           |  | $                         |  | $                        | 
|February                                                   |  | 1.90                      |  | 1.82                     | 
|March                                                      |  | 1.87                      |  | 1.79                     | 
|The noon buying rate on April 1,
    2004 was $ 1.86 = £1. |  |                           |  |                          | 



|B. | Capitalization and indebtedness.
|-- | --------------------------------

| |                
| | ---------------
| | Not applicable.

|   |                                                       
|-- | ------------------------------------------------------
|C. | Reasons for the offer
            and use of proceeds.

| |                
| | ---------------
| | Not applicable.

|   |              
|-- | -------------
|D. | Risk factors.

The information set forth under the heading Shareholder information  Risk Factors on pages 116 to 118 of the Companys Annual Report and Accounts 2003 contained in its Report on Form 6-K dated March 12, 2004, is incorporated herein by reference.


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|ITEM 4  INFORMATION ON THE COMPANY
|-----------------------------------

|   |                                        
|-- | ---------------------------------------
|A. | History and development of the company.

The information set forth under the headings Description of business  General, Description of business  Group Strategy and Description of business  Recent History on page 9, Notes relating to the accounts  Note 22  Disposal and legacy, and
 restructuring provisions  Disposal and legacy provisions on pages 81 and 82 , Notes relating to the accounts  Note 30  Disposals on page 88, Description of Business  Capital expenditure on page 15, including the table entitled Group expenditure on tangible
 fixed assets on page 15, Shareholder information  Incorporation of the Company and Shareholder information  Registered Office on page 119 of the Companys Annual Report and Accounts 2003 contained in its Report on Form 6-K dated March 12, 2004 is
 incorporated herein by reference.


|B. | Business overview.
|-- | ------------------

The information set forth under the headings Description of business  Geographic focus and Description of business  Business segments on page 10, Description of business  Continuing operations on pages 11 to 14, Description of business  Huntsman
 International Holdings LLC on page 14, Description of business  Markets and distribution, Description of business  Seasonality, Description of business  Sources and availability of raw materials, Description of business  Intellectual property, and
 Description of business  Competition on pages 14 and 15, and Description of business  Regulation, safety, health and the environment on pages 16 and 17 of the Companys Annual Report and Accounts 2003 contained in its Report on Form 6-K dated March 12,
 2004 is incorporated herein by reference.


|C. | Organizational structure.
|-- | -------------------------

The information set forth under the heading Principal subsidiary undertakings on page 112 of the Companys Annual Report and Accounts 2003 contained in its Report on Form 6-K dated March 12, 2004 is incorporated herein by reference.


|D. | Property, plants and equipment.
|-- | -------------------------------

ICI operates production, marketing and research and development facilities worldwide. The individual business descriptions set forth under the heading Description of business  Continuing operations on pages 11 to 14 of the Companys Annual Report and Accounts
 2003 contained in its Report on Form 6-K dated March 12, 2004 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.


|ITEM 5  OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|-----------------------------------------------------

|   |                   
|-- | ------------------
|A. | Operating results.

|        
|--------
|Overview

ICI is one of the worlds major specialty products and paints businesses with products and ingredients developed for a wide range of consumer and industrial markets.

Its specialty products and paints 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 80 strategic business units, comprising
 around some 180 operating units with an array of market leadership positions across the world. In addition, a number of Regional and Industrial businesses remain in ICIs portfolio.

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-six percent of the employees of
 ICIs businesses are located outside the UK.

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ICIs portfolio of business units is wide and the Group competes across a diverse range of geographic and product markets. To do so it must continue to develop innovative products and new technology while maintaining a competitive cost base. In addition to market demand,
 the Groups results are also subject to the price volatility of some of the raw materials it uses in significant quantities, particularly petrochemical based products such as vinyl acetate monomer. While the Groups diverse portfolio of value added products provides some
 opportunity to pass on higher input prices to its users, this ability is, to a large extent, dependent upon market conditions and there may be periods when this may not be possible due to weakness in demand or the action of competitors. The Groups customers rely on timely
 delivery of products and the Groups results are therefore particularly susceptible to operational problems including equipment and systems failures. The results of operations, cash flow and financial position of the Group have in recent years also been subject to the outcome of
 a programme of strategic disposals of businesses and these have particularly been affected by the amounts and dates of receipt of sale proceeds, costs associated with closures and the pension liabilities of those formerly employed in the discontinued businesses.

2003 was a challenging year, and while the Group experienced success in some areas, the results for the year overall were less than satisfactory. Trading conditions in 2003 were generally tough.

Although demand for ICI products grew in China and other large Asian markets, it was generally weak elsewhere in the world. Sales and profits during the first quarter of 2003 were particularly affected by a combination of sharp increases in raw material and energy costs,
 which especially affected National Starch, and lower sales by Quests Food business in Europe, mainly as a result of business lost following a customer service problem in 2002. It became plain in late March 2003 that profits for the first quarter of 2003 would fall well below
 expectations, prompting the ICI Board to issue a trading statement on March 25, 2003. National Starch responded by raising selling prices, which has since helped partially to offset the sharp cost increases. In Quest, there has been no obvious sign of a further significant
 erosion of business in its European foods unit during 2003, although equally, no obvious improvement in sales.

However, it was also clear that far-reaching changes were needed. Beginning within the senior management team, the Board appointed a new Chief Executive, John McAdam, in April 2003 and also named Charles Knott, formerly National Starchs Chief Operating Officer, to
 lead Quest. David Hamill joined the Board from Royal Philips Electronics in December as the new Chairman and Chief Executive of ICI Paints. Fulfilling the succession plan the Company had announced in June 2003, Lord Trotman retired as ICI Chairman on December 31,
 2003, and has been succeeded by Peter Ellwood.

The Board also decided on a course
    of action to improve ICIs performance, starting with measures to reduce
    costs and rebuild margins. These included a business-wide restructuring programme
    aimed to achieve more than £100m of benefit to operating profit in
    2005. The  programme includes planned productivity upgrades in ICI Paints
    and a series of operating efficiency improvements in National Starch, Quest
    and Uniqema, and at the Corporate Centre.

Performance improved after the first
    quarter, as a result of the above measures, and assisted by the tentative
    economic upturn in the US in the third and fourth quarters. Nevertheless,
    only the Paints business achieved an increase in operating profit before
    exceptional items and  goodwill amortisation* for the full year, and Group
    profit before exceptional items, taxation and goodwill amortisation* for
    the year, at £341m, was 15% below last year, underlining the need for
    the changes which have been initiated.

A number of significant uncertainties
    that faced the Group at the start of 2003 have been resolved or at least
    quantified. The triennial review of the ICI UK Pension Fund – by far
    the Companys largest – was completed, and a revised funding plan
    agreed with the Trustees.  The Group also completed a re-financing agreement
    with Ineos Chlor and completed the sale of its remaining interests in Huntsman
    International Holdings. ICIs net debt, which stood at £2.9 billion
    at the end of 2001, has been reduced to £1.3 billion at the end of
    2003,  following receipt of the proceeds from the rights issue in 2002 and
    the Synetix and Huntsman International divestments, and as a consequence
    of good cash generation.

|* See discussion relating to those terms on pages 12 and 13.
|------------------------------------------------------------

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|Trends / outlook
|----------------

|                 
|-----------------
|Operating results

Operating results for 2004 are subject to the outcome of many uncertainties, including those matters set forth under the heading Shareholder information – Risk Factors on pages 116 to 118 of the Companys Annual Report and Accounts 2003 contained in its Report on
 Form 6-K dated March 12, 2004. The following factors could also have an impact:

| |  | The economic environment:
          the development of the economic situation in North America (35% of
          sales in 2003) is important. Recent signs of economic improvement in
          this region are encouraging. Economies in Asia Pacific (23% of sales
          in 2003) generally performed  well in 2003; continued strong performance
          in 2004 could also benefit ICI.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |   |                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Raw material costs: petrochemical-based raw material costs, vinyl acetate monomer in particular, and US natural gas prices, increased sharply in the first quarter of 2003 and remained high throughout the year. Renewable raw material costs also increased generally in
 2003. The trend of these costs in 2004 is uncertain, and further rises in cost could adversely affect ICI.

| |   |                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Restructuring: the restructuring programmes announced in 2003 resulted in an exceptional charge of £201m. A further charge for these programmes of £18m is expected in 2004. Operating cost savings in 2004 from these programmes are expected to be around £70m.

| |   |                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Pensions costs: as a result of a triennial valuation of the Groups largest pension fund, the ICI UK Pension Fund, the charge for pensions in respect of this fund increased by £26m in 2003, when compared with the previous year. A further increase of £10m is expected in
 2004.

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Foreign exchange: results may be affected by currency movements when the profits and losses of overseas subsidiaries are translated from local currencies into sterling. Based on the currency mix of profits and losses in 2003, the adverse annual impact on the Groups
 operating profit of a 5% weakening of the US$ and related currencies against sterling, compared with the average rates prevailing in 2003, would be approximately £12m. If current exchange rates were to prevail throughout 2004, then there would be an adverse impact on
 results in 2004 compared to 2003.

|         
|---------
|Cash flow

Cash flow for 2004 is subject to the outcome of many uncertainties, including those matters set forth under the heading Shareholder information – Risk Factors on pages 116 to 118 of the Companys Annual Report and Accounts 2003 contained in its Report on Form 6-K
 dated March 12, 2004, and particularly the trend of operating results discussed
 above. Specifically as noted above, a triennial valuation of the ICI UK Pension
 Fund was completed
          in as
          at March 31, 2003. As at that date the Fund had a deficit for
          funding purposes of £443m and, in consequence, ICI agreed to
          make top-up contributions to the Fund of £62m per annum for nine
          years from 2004. This will be an increase of £32m compared with
 2003.

The following factors could also
    have an impact:

| |  | Capital expenditure: in 2003, capital expenditure of £154m was £61m lower than in 2002. Looking forward, the Group expects the level of its capital expenditure in the next few years to be of the order of £200m p.a.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |   |                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Restructuring: the restructuring programmes announced in 2003 are expected to result in a total cash cost of £157m. Of this, £22m was spent in 2003, with the remainder expected to be paid over the period 2004 to 2006.

| |   |                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Disposal provisions: payments against provisions established on the disposal of businesses amounted to £105m in 2003, and the total provision remaining at the end of 2003 amounted to £348m. Expenditure against these provisions is expected to reduce to around £70m in
 2004.

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| |  | Ineos: on July 31, 2003 ICI agreed to participate in the refinancing of Ineos Chlor – the company to which it had disposed of its former Chlor-Chemicals business. As part of this refinancing as at December 31, 2003, Ineos Chlor may borrow a further £50m from ICI
 and ICI is expected to make an additional cash contribution of £30m to that company. The timing of these cash flows is uncertain, but, for planning purposes, the Group is expecting an outflow of about £50m in 2004 and about £30m in 2005. The outflow of cash to Ineos
 Chlor in 2003 was £10m.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |   |                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Long term debt: during 2003 the Group incurred new long-term loan borrowings of £620m and made loan repayments of £483m. Long-term loans due for repayment in 2004 total £534m.

|                     
|---------------------
|Basis of Presentation

Non-UK Generally Accepted Accounting Principles financial measures

|UK GAAP and non-UK GAAP financial measures: generally
|-----------------------------------------------------

Investors should consider non-UK
    Generally Accepted Accounting Principles (GAAP) financial measures in addition
    to, and not as a substitute for or as superior to, measures of financial
    performance reported in accordance with UK GAAP. The UK GAAP results reflect
    all  items that affect reported performance and therefore it is important
    to consider the UK GAAP measures alongside the non-UK GAAP measures. In accordance
    with recent guidance from the UK Auditing Practices Board, the UK Listing
    Authority and the US Securities and
 Exchange Commission, where non-UK GAAP figures are discussed, the most directly
    comparable UK GAAP figures must also be presented and reconciled to the non-UK
    GAAP figures. The full statutory results are presented in the Group
    Profit and Loss Account on pages
 54 and 55 of the Companys Annual Report and Accounts 2003 contained in
 its Report on Form 6-K dated March 12, 2004 and UK GAAP segmental information
 is presented in the Notes relating to the accounts – Note 4 Segment
 information on pages 61 to 65 of the
 Companys Annual Report and Accounts 2003 contained in its Report on Form
 6-K dated March 12, 2004.

|Trading profit
|--------------

ICI defines trading profit as
    operating profit before exceptional items and goodwill amortisation. This
    is a non-UK GAAP financial measure for which the most directly comparable
    UK GAAP financial measure is operating profit before exceptional items. Due
    in particular to  the timing of acquisitions made by ICI between 1997 and
    2002 and a change in the accounting treatment under UK GAAP for goodwill
    on acquisitions made after December 31, 1997, management has chosen
    to present the results of the Group after excluding goodwill  amortisation,
    which it considers to be a non-operational item, in its discussion of Group
    and business performance. Management believes that the exclusion of goodwill
    amortisation is useful to investors because it provides a more meaningful
    comparison of underlying
 performance both between the results of individual ICI businesses and between
    the results of ICI and its businesses and of businesses and groups external
    to the ICI Group.

During 1997 ICI acquired businesses with related goodwill of £3.6 billion, at which time the Group adopted the permitted treatment under the then UK GAAP Standard of setting goodwill directly against reserves. In periods subsequent to the end of that year goodwill arising
 on acquisitions has totalled £0.7 billion and in accordance with a revised UK GAAP Accounting Standard ICI has capitalised this goodwill and amortised it over its anticipated life, which is generally 20 years.

Goodwill amortisation excluded from operating profit in managements discussion of business operating performance totalled £36m for 2003 (2002 £37m; 2001 £37m).

ICI management believes that the presentation of trading profit as a financial measure provides useful information to investors regarding the underlying performance of the businesses, in total and individually, excluding the inconsistent impact of goodwill on profit which may
 or may not be amortised based on the timing of the acquisition. Trading profit is also one of the key financial measures reported to ICIs Chief Executive for purposes of assessing segmental performance and making decisions about allocating resources to segments.



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Reconciliation between the UK GAAP financial measures of operating profit before exceptional items and trading profit for 2003, 2002 and 2001 are shown in the tables on pages 20 and 25.

|Profit before exceptional items, taxation and goodwill amortisation
|-------------------------------------------------------------------

Profit before exceptional items, taxation and goodwill amortisation is presented before the charge for goodwill amortisation . This is a non-UK GAAP financial measure and is one of the key financial measures reported to ICIs Chief Executive for purposes of assessing the
 underlying performance of the Group.

Management believes that the exclusion of goodwill amortisation is helpful for decision-making as management considers this to be a non-operational item. Management also believes that profit before exceptional items, taxation and goodwill amortisation is used by investors
 in their assessment of the underlying performance of the Group, as the exclusion of goodwill amortisation may facilitate comparison with other companies due to the changed treatment of goodwill under UK GAAP at December 31, 1997 explained above. Profit before
 exceptional items, taxation and goodwill amortisation is a key performance target for some senior members of the Groups Corporate Executive management team and all of the Groups incentive plans are based on before goodwill amortisation financial measures.
 Consequently, profit before exceptional items, taxation and goodwill amortisation is of interest to investors.

Reconciliation between the UK GAAP financial measure of profit before exceptional items and taxation and the non-UK GAAP financial measure of profit before exceptional items, taxation and goodwill amortisation is shown in the table below.

|     |  | Profit before exceptionalitems and taxation |     | Goodwillamortisation |  | Profit before exceptionalitems, taxation andgoodwill amortisation | 
|---- |  | ------------------------------------------- | --- | -------------------- |  | ----------------------------------------------------------------- | 
|     |  | £m                                          |     | £m                   |  | £m                                                                | 
|2003 |  |                                             | 305 |                      |  | 36                                                                | 
|2002 |  |                                             | 363 |                      |  | 37                                                                | 
|2001 |  |                                             | 364 |                      |  | 37                                                                | 

|                                                             
|-------------------------------------------------------------
|Net profit before exceptional items and goodwill amortisation

Net profit before exceptional items and goodwill amortisation is presented before the charge for goodwill amortisation. This is a non-UK GAAP financial measure and is one of the key financial measures reported to ICIs Chief Executive for purposes of assessing the
 underlying performance of the Group.

Management believes that the exclusion of goodwill amortisation from the most directly comparable UK GAAP measure is helpful for decision-making as management considers goodwill amortisation to be a non-operational item. Management believes that net profit before
 exceptional items and goodwill amortisation is used by investors in their assessment of the underlying performance of the Group, as the exclusion of goodwill amortisation may facilitate comparison with other companies due to the changed treatment of goodwill under UK
 GAAP at December 31, 1997 explained in the definition of trading profit on page 12. The Groups publicly announced dividend policy is also based on net profit before exceptional items and goodwill amortisation and is therefore of particular interest to both management
 and investors. Net profit before exceptional items and goodwill amortisation also forms the basis of long-term performance targets set for the Executive Directors and so is also of interest to both investors and management.

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A reconciliation between the UK GAAP financial measure of net profit before exceptional items and the non-UK GAAP financial measure of net profit before exceptional items and goodwill amortisation is shown in the table below.

|     |  | Net profit beforeexceptional items |  | Goodwillamortisation |  | Net profit beforeexceptional itemsand goodwillamortisation | 
|---- |  | ---------------------------------- |  | -------------------- |  | ---------------------------------------------------------- | 
|     |  | £m                                 |  | £m                   |  | £m                                                         | 
|2003 |  | 183                                |  | 36                   |  | 219                                                        | 
|2002 |  | 227                                |  | 37                   |  | 264                                                        | 
|2001 |  | 222                                |  | 37                   |  | 259                                                        | 

|                             
|-----------------------------
|Constant currency performance

In addition to the non-UK GAAP financial measures discussed above which adjust UK GAAP results for goodwill amortisation, ICIs management also assesses the underlying performance of its individual businesses by adjusting turnover and trading profit (as defined above) so as to exclude certain other items which
 would otherwise mask the underlying trend of the business performance. These adjustments relate to the impact of fluctuations in exchange rates used in translating results reported by subsidiaries in foreign currencies into pounds sterling.

Managements discussion of the performance of National Starch, Quest, Performance Specialties and Paints includes data referred to as constant currency and this excludes the effect of currency translation differences in each of the relevant periods. Management believes that the exclusion of these items provides a better
 understanding of the underlying operational performance of the Groups businesses during such periods. Fluctuations in exchange rates are outside of the control of management and may distort the underlying operating performance of the Groups businesses.

Constant currency performance is one of the key financial measures reported to ICIs Chief Executive for purposes of assessing segment performance and making decisions about allocating resources to the businesses comprising each segment.

|Calculation of constant currency results
|----------------------------------------

In the Operating and Financial Review for 2003 compared with 2002, and 2002 compared with 2001, constant currency results are derived by translating results of those subsidiaries which report in currencies other than sterling for both periods at a single average exchange rate for each currency. For this purpose ICI has
 used the average of the daily exchange rates for each particular currency for the first year included in the comparison (e.g. for the 2003 business review compared to 2002, both the 2003 and 2002 results are translated using the average of the daily exchange rates in 2002, whereas for the 2002 business review compared to
 2001, both the 2002 and 2001 results are translated using the average of the daily exchange rates in 2001).

The tables on pages 19, 20, 24 and 25 provide reconciliations between the UK GAAP performance measures of movements in turnover and operating profit before exceptional items and the non-UK GAAP performance measures that ICI uses of movements in constant currency sales and constant currency trading
 profit.

|International Businesses
|------------------------

ICI management refers to National Starch, Quest, Performance Specialties and Paints collectively as the International Businesses. The use of this term is a non-UK GAAP measure. Since ICIs transformation process began in 1997, ICIs management has found it useful to track the performance of the International
 Businesses, as most other parts of the ICI group were intended for divestment and have since been divested, with many of the remaining Regional and Industrial Businesses expected to be divested in the future. Consequently, management believes it is useful to provide investors with information regarding the collective
 performance of National Starch, Quest, Performance Specialties and Paints as these are the businesses that are planned to remain within ICI in the future and so management believes it is important that investors understand the performance of those businesses. ICI uses the financial measure International Businesses in
 Group reports that are used by management and ICIs Chief Executive Officer to assess the underlying performance, both past, present and future, of the parts of the Group which are not intended for divestment, and consequently, for making decisions about allocating resources to segments.

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Investors should consider this non-UK
    GAAP financial measure “International Businesses” in addition to,
    and not as a substitute for or as superior to, measure of financial performance
    reported in accordance with UK GAAP. The UK GAAP results for the Group include
    the  results from the Regional and Industrial businesses and therefore it
    is important to consider the results of the Group, which is a UK GAAP measure
    alongside the non-GAAP measure of “International Businesses” that
    excludes the Regional and Industrial businesses. The tables  on page 19,
    20, 24 and 25 present the reconciliation of Group turnover, operating profit
    before exceptional items and trading profit to International Businesses turnover,
    operating profit before exceptional items and trading profit.

|Group overview
|--------------

In the following commentary, the financial results and performance compared to the prior year is described as reported or constant currency. Reported relates to the figures included in the financial statements prepared under UK GAAP. Constant currency excludes the
 effect of currency translation differences and is a non-UK GAAP measure. Constant currency performance is one of the financial measures reported to ICIs Chief Executive for purposes of assessing segment performance and making decisions about allocating resources to
 the businesses comprising each segment. A more detailed description of constant currency performance, how it is calculated, why it is considered useful for investors and the limitations of non-UK GAAP measures is set out on page 14. Reconciliations detailing the amounts
 excluded from the most directly comparable UK GAAP measures are presented on pages 19, 20, 24 and 25.

|Turnover
|--------

Group sales, as reported for the year, were £5,849m, 5% lower than 2002 (£6,125m in 2002 and £6,425m in 2001). The lower sales in 2003 were the consequence of business divestments, principally the Synetix business in Performance Specialties which was sold in 2002,
 adverse impacts from foreign currency translation, and lower sales for the Regional and Industrial businesses.

International Businesses sales, as reported at £5,389m (2002 £5,543m; 2001 £5,645m), were 3% below 2002. On a reported basis National Starch sales were 1% ahead of last year but Quest, Performance Specialties and Paints sales were all below 2002. However, growth
 accelerated in the second half of the year for both National Starch and Paints. Sales growth in Asia was strong throughout the year, but sales in other regions were below last year, with challenging trading conditions for much of the year in North America, and in Europe, most
 notably during the third quarter.

Excluding the effects of foreign currency translation, constant currency sales for the International Businesses were 1% below 2002 with growth for National Starch (+4%) and Paints (+2%) offset by lower sales for Quest (-3%) and Performance Specialties (-19%), although
 Performance Specialties sales for 2002 included £135m (17%) of sales from the Synetix and Security Systems businesses which were sold in 2002.

|Operating profit
|----------------

Group operating profit before exceptional items for 2003 was £394m, 21% below the £496m for 2002 (2001 £536m). Group trading profit for the year was £430m, 19% below 2002 (2002 £533m; 2001 £573m). The Groups operating profit performance improved as the year
 progressed, compared with the first quarter of 2003, when Quest, National Starch and Performance Specialties experienced significant profit shortfalls compared to the first quarter of 2002.

Trading profit for the International Businesses for the year was £455m, (2002 £543m; 2001 £569m), 16% below 2002. Excluding the effects of foreign currency translation (adverse £13m), trading profit for the International Businesses was 14% below 2002 on a constant
 currency basis. Divestments in Performance Specialties accounted for £21m of the trading profit shortfall.

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Paints delivered 9% growth in operating profit before exceptional items and constant currency trading profit growth of 10% but National Starch was impacted by higher raw material costs and other operating cost increases. Its operating profit before exceptional items and constant currency trading profit for 2003 were 12%
 and 10% lower than for 2002 respectively. For Quest and Performance Specialties, operating profit before exceptional items were, respectively, 46% and 85% lower than 2002, and constant currency trading profits for the year were 36% and 83% lower, respectively. Quest suffered from lost business following 2002 supply
 chain problems in Food Europe, difficult market conditions for fragrances, and higher operating costs. Divestments accounted for £21m (-43%) of the trading profit shortfall in Performance Specialties, but Uniqema, the remaining business in Performance Specialties, was impacted, in particular, by lower levels of demand
 and adverse exchange rate movements.

Regional and Industrial reported
    a £25m
operating loss before exceptional items for the year, in comparison with a £10m
loss
for
2002,
including
a £26m
increase in the charge for UK pension costs, resulting from the triennial valuation
of the ICI UK Pension Fund.

|Associates
|----------

The Groups share of profits from associates before exceptional items for the year was £3m, £13m above last year (2002 £10m loss; 2001 £10m loss), largely due to the absence of losses from both Huntsman International Holdings LLC (which ceased to be accounted for as an associate from 17 June 2002) and Irish
 Fertilizer Industries Ltd (which went into liquidation in November 2002). This comprised the Groups share of operating profit before exceptional items from associates of £2m (2002 £18m; 2001 £57m) together with net interest receivable by associates of £1m (2002 £28m payable; 2001 £67m payable).

|Interest
|--------

The Group net interest charge for the year was £92m compared with £123m in 2002 (2001 £162m), benefiting from lower average net debt levels and lower interest rates.

|Profit before tax
|-----------------

Profit before tax, but after exceptional items and goodwill amortisation was £85m compared with £317m for 2002 (2001 £227m).

Profit before exceptional items and tax was £305m compared with £363m for 2002 (2001 £364m). Profit before exceptional items, tax and goodwill amortisation for the year was £341m, £59m below 2002 (2002 £400m; 2001 £401m). Lower trading profits for the International Businesses and an increased trading loss for
 Regional and Industrial, were partly offset by lower interest costs and the absence of losses from associates that are no longer part of the Group.

The adverse currency translation effect on the Groups profit before tax, goodwill amortisation and exceptional items in 2003 compared with 2002 was £9m.

|Taxation
|--------

Taxation on profit before exceptional items was £99m, £16m lower than last year (2002 £115m; 2001 £116m), reflecting the reduction in trading profit.

|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 Groups presentation of
    the Group profit and loss account for the three years ended December 31,
    2003, on pages 54 and 55 of the Companys Annual Report and Accounts
    2003 contained in its report on Form 6-K dated March 12, 2004, separately
    disclosing exceptional items, has been prepared in accordance with  FRS No.
    3. This presentation provides a sufficient degree of prominence in respect
    to the exceptional items necessary, under UK GAAP, to give a true and fair
    view of the results of the Group in the three years ended December 31,
    2003.

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Net exceptional items charged against operating profit before exceptional items for the year were £200m (2002 nil; 2001 £143m) and included a charge of £201m in relation to a significant restructuring programme announced during the year, and £11m related to a write-down of fixed assets in Quest, partly offset by £12m
 of provision releases in relation to prior year restructuring programmes.

The restructuring programme announced during 2003 is intended to improve cost effectiveness across each of the International Businesses and the Corporate Centre. The plans focus on manufacturing and supply chain rationalisation, and reductions in administrative support. The total exceptional charge for the programme
 is expected to be £219m, made up of £157m exceptional cash expenditure and non-cash asset write-downs of £62m. A total of £201m has been recorded in 2003, with the remaining charges to be to be taken during 2004 as the programmes progress. Overall these programmes are expected to payback in about 2.5 years
 and reduce headcount across the Group by around 2,100.

The exceptional charge in 2003 of £201m for the restructuring programmes comprised: National Starch £59m (including severance costs of £19m and asset write-downs of £30m), Quest £20m (including severance costs of £5m and asset write-downs of £6m), Performance Specialties £48m (including severance costs of
 £38m and asset write-downs of £8m), Paints £49m (including severance costs of £38m and asset write-downs of £2m) and Corporate Centre £25m (including severance costs of £11m and asset write-downs of £2m).

Also included in exceptional operating items is an £11m write-down of fixed assets in Quest following a review of the strategic direction of future ERP systems development. The review concluded that parts of the system developed during the Q-Star project in 2001 and 2002 would not be deployed. Consequently, the
 costs for those parts have been written off.

Exceptional items included after operating profit before exceptional items comprised a £32m profit from the sale or closure of operations (2002 £50m; 2001 £7m), a £5m profit on the disposal of fixed assets (2002 £3m; 2001 £8m) and £57m written off investments (2002 £99m; 2001 £nil).

During 2003, the Group completed the sale of its interests in Huntsman International Holdings LLC. £109m had been received on initial closing of this transaction in 2002, and the balance of £173m was received in May 2003. Profit before tax, of £50m, in relation to the transaction has been included in profit on sale or
 closure of continuing operations. In addition, profit from the sale or closure of businesses included a £19m loss on the divestment of National Starchs Permabond business, a charge of £30m in relation to a refinancing package for Ineos Chlor, and some increased provisions in relation to the divestment of the
 Polyurethanes, Tioxide and selected Petrochemicals businesses. These were partially offset by a £7m receipt from the Ineos Group in relation to a number of outstanding matters, profits on the sale of both the Groups explosives business in India (£4m) and National Starchs Cheese Coatings business (£5m) and a number
 of provision releases in relation to prior year divestments.

The amount of £57m written off investments in 2003 related to a provision to write-down the value of ICI ordinary shares which the Group is committed to buy under forward contracts to hedge employee share options.

In total, exceptional items before tax and minority interests for 2003 amounted to a loss of £220m (2002 £46m loss; 2001 £137m loss). Exceptional items after tax and minorities were a loss of £163m (2002 £48m loss; 2001 £120m loss).

Exceptional items under UK GAAP do not represent extraordinary items under US GAAP.

|Net profit
|----------

Net profit before exceptional items for 2003 was £183m (2002 £227m; 2001 £222m). Net profit before exceptional items and goodwill amortisation was £219m (2002 £264m; 2001 £259m). Net profit after exceptional items and goodwill amortisation was £20m, compared with £179m for 2002 and £102m for 2001.

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|Earnings per share
|------------------

Basic and diluted earnings per share
    before exceptional items were 15.5p for 2003 compared to basic earnings per
    share before exceptional items of 20.4p for 2002 (2001 25.5p) and diluted
    earnings per share before exceptional items of 20.3p for 2002 (2001: 25.5p).
    Basic and diluted earnings per share were 1.7p  compared with basic earnings
    of 16.1p for 2002 (2001 11.7p) and diluted earnings were 16.0p for 2002 (2001
    11.7p).

|Dividend and dividend policy
|----------------------------

The Groups dividend policy is that dividends should represent about one third of net profit before exceptional items and goodwill amortisation. In line with this policy, the Board has recommended a second interim dividend of 3.5p, to bring the total dividend for 2003 to 6.25p (2002 7.5p).

|Shareholders funds
|-------------------

The net profit for the year of £20m was reduced by dividends of £74m but increased by a favourable movement through reserves due to foreign exchange of £9m, movement in respect of own shares of £5m and goodwill items of £27m to give an overall net reduction in shareholders funds in 2003 of £13m. At the end of
 2003, shareholders funds were in surplus of £450m (2002 surplus £463m; 2001 deficit £394m). The prior year figures have been restated for the effect of UITF 38 Accounting for ESOP trusts.

|Cash flow
|---------

This commentary relates to the Statement of Group cash flow on page 57 of the Companys Annual Report and Accounts 2003 contained in its Report on Form 6-K dated March 12,
2004.

Net cash inflow from operating activities
    for 2003 was £539m, £84m lower than 2002 due to the lower operating
    profit before exceptional items and goodwill amortisation for the Group.
    However, returns on investments and servicing of finance, at £96m,
    was lower than 2002 by £89m, due to reduced interest payments.
 Capital expenditure and financial investment for 2003, at £138m, was £46m
 lower than the £184m
 outflow last year, due to lower spend on tangible fixed assets.Acquisitions
 expenditure was £20m, compared with £54m in 2002.

Net proceeds from disposals were £104m in 2003 compared to £290m in 2002, and comprised £215m gross disposal proceeds (2002 £423m) less expenditure against divestment provisions of £111m (2002 £133m). The completion of the sale of the Groups interests in Huntsman International Holdings LLC, with gross
 proceeds of £173m received in the second quarter 2003 was the major contributor to disposal proceeds.

Dividend payments of £86m (2002 £106m) related to the 2002 second interim dividend and the 2003 interim dividend. These payments were consistent with the policy announced in November 2000 whereby annual dividends are equivalent to about one third of net profit before exceptional items and goodwill amortisation.

Consequently, the Groups cash inflow for 2003 before the use of liquid resources and financing of £266m, was £83m lower than the cash inflow of £349m in 2002. The overall reduction in Group cash flow was due to lower operating profit and net disposal proceeds, with improvements as a result of lower capital
 expenditure, reduced interest payments, lower equity dividend payments and lower acquisition spend.

|Review of 2003 business results
|-------------------------------

Basis of presentation
The tables on pages 19, 20, 24 and 25 provide reconciliations between the UK
    GAAP performance measures of movements in turnover and operating
    profit before exceptional items and the non-UK GAAP performance measures
    that ICI uses of movements in constant currency turnover and constant
    currency  trading profit. The tables detail the amounts excluded from
    the most directly comparable UK GAAP financial measure. Reported relates
    to the figures included in the financial statements prepared under UK GAAP. Constant
    currency  excludes the effect of currency translation differences and
    is a non-UK GAAP  financial measure. ICI management use the constant
    currency  financial measure for purposes of making decisions about
    allocating resources across the business and assessing its underlying performance.
    A more detailed description of constant currency performance,
    how it is calculated, why it is considered useful for  investors and the
    limitations of non-UK GAAP financial measures are set out on pages 12 to
    14.

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|Reconciliation table  UK GAAP As reported turnover performance to non-UK GAAP Constant currency sales performance  2003 vs 2002
|-------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                     

|                                     |  | Turnover |       | As
            reportedchangeIncrease/(decrease) |  | ForeignexchangetranslationeffectsFavourable/(adverse) |   |   | ConstantcurrencychangeIncrease/(decrease) |   
|------------------------------------ |  | -------- | ----- | -------------------------------------------------- |  | ----------------------------------------------------- | - | - | ------------------------------------------- | --
|                                     |  | 2003     |       | 2002                                               |  | 2003 vs 2002                                          |   |   |                                             |   
|                                     |  | £m       |       | £m                                                 |  | £m                                                    |   | % |                                             | £m
|National Starch                      |  |          |       |                                                    |  |                                                       |   |   |                                             |   
|Adhesives                            |  |          | 757   |                                                    |  | 753                                                   |   |   | 4                                           |   
|Specialty Starches                   |  |          | 483   |                                                    |  | 475                                                   |   |   | 8                                           |   
|Specialty Synethetic Polymers        |  |          | 375   |                                                    |  | 361                                                   |   |   | 14                                          |   
|Electronic and Engineering Materials |  |          | 251   |                                                    |  | 252                                                   |   |   | (1                                          | ) 
|                                     | 
|Total                                |  |          | 1,866 |                                                    |  | 1,841                                                 |   |   | 25                                          |   
|                                     | 
|Quest                                |  |          |       |                                                    |  |                                                       |   |   |                                             |   
|Food                                 |  |          | 411   |                                                    |  | 426                                                   |   |   | (15                                         | ) 
|Fragrance                            |  |          | 280   |                                                    |  | 290                                                   |   |   | (10                                         | ) 
|                                     | 
|Total                                |  |          | 691   |                                                    |  | 716                                                   |   |   | (25                                         | ) 
|                                     | 
|Performance Specialties              |  |          |       |                                                    |  |                                                       |   |   |                                             |   
|Uniqema                              |  |          | 669   |                                                    |  | 669                                                   |   |   | –                                           |   
|Synetix and Security Systems         |  |          | –     |                                                    |  | 135                                                   |   |   | (135                                        | ) 
|                                     | 
|Total                                |  |          | 669   |                                                    |  | 804                                                   |   |   | (135                                        | ) 
|                                     | 
|Paints                               |  |          |       |                                                    |  |                                                       |   |   |                                             |   
|Decorative Europe                    |  |          | 688   |                                                    |  | 656                                                   |   |   | 32                                          |   
|Decorative North America             |  |          | 897   |                                                    |  | 981                                                   |   |   | (84                                         | ) 
|Decorative Asia                      |  |          | 224   |                                                    |  | 212                                                   |   |   | 12                                          |   
|Decorative Latin America             |  |          | 152   |                                                    |  | 136                                                   |   |   | 16                                          |   
|Packaging Coatings                   |  |          | 177   |                                                    |  | 170                                                   |   |   | 7                                           |   
|Other                                |  |          | 25    |                                                    |  | 27                                                    |   |   | (2                                          | ) 
|                                     | 
|Total                                |  |          | 2,163 |                                                    |  | 2,182                                                 |   |   | (19                                         | ) 
|                                     | 
|International Businesses             |  |          | 5,389 |                                                    |  | 5,543                                                 |   |   | (154                                        | ) 
|                                     | 
|Regional and Industrial              |  |          | 481   |                                                    |  | 615                                                   |   |   | (134                                        | ) 
|Inter-class eliminations             |  |          | (21   | )                                                  |  | (33                                                   | ) |   | 12                                          |   
|                                     |  |          |       |                                                    |  |                                                       |   |   |                                             |   
|Total Group                          |  |          | 5,849 |                                                    |  | 6,125                                                 |   |   | (276                                        | ) 
|                                     |  |          |       |                                                    |  |                                                       |   |   |                                             |   

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|Reconciliation table  UK
            GAAP As reported operating profit to non-UK GAAP Constant
            currency trading profit performance”- 2003 vs 2002
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                 

|                                                                            |  | NationalStarch |     | Quest |  | PerformanceSpecialties |    | Paints |     | InternationalBusinesses |  | RegionalandIndustrial |   | TotalGroup |    
|--------------------------------------------------------------------------- |  | -------------- | --- | ----- |  | ---------------------- | -- | ------ | --- | ----------------------- |  | --------------------- | - | ---------- | ---
|                                                                            |  | £m             |     | £m    |  | £m                     |    | £m     |     | £m                      |  | £m                    |   | £m         |    
|2003 operating profit after exceptional items                               |  |                | 123 |       |  | 15                     |    |        | (34 | )                       |  | 137                   |   |            | 241
|                                                                            | 
|2002 operating profit after exceptional items                               |  |                | 206 |       |  | 81                     |    |        | 48  |                         |  | 171                   |   |            | 506
|                                                                            | 
|2003 exceptional operating items                                            |  |                | 59  |       |  | 29                     |    |        | 41  |                         |  | 49                    |   |            | 178
|                                                                            | 
|2002 exceptional operating items                                            |  |                |    |       |  |                       |    |        |    |                         |  |                      |   |            |   
|                                                                            | 
|2003 operating profit before exceptional items                              |  |                | 182 |       |  | 44                     |    |        | 7   |                         |  | 186                   |   |            | 419
|                                                                            | 
|2002 operating profit before exceptional items                              |  |                | 206 |       |  | 81                     |    |        | 48  |                         |  | 171                   |   |            | 506
|                                                                            | 
|As reported changes (2003 vs 2002) increase/(decrease)                    |  |                | (24 | )     |  | (37                    | )  |        | (41 | )                       |  | 15                    |   |            | (87
|                                                                            | 
|As reported % change (2003 vs 2002) increase/(decrease)                   |  |                | (12 | )%    |  | (46                    | )% |        | (85 | )%                      |  | 9                     | % |            | (17
|                                                                            | 
|2003 goodwill amortisation                                                  |  |                | 17  |       |  | 1                      |    |        | 1   |                         |  | 17                    |   |            | 36 
|                                                                            | 
|2002 goodwill amortisation                                                  |  |                | 18  |       |  | 1                      |    |        | 1   |                         |  | 17                    |   |            | 37 
|                                                                            | 
|2003 trading profit                                                         |  |                | 199 |       |  | 45                     |    |        | 8   |                         |  | 203                   |   |            | 455
|                                                                            | 
|2002 trading profit                                                         |  |                | 224 |       |  | 82                     |    |        | 49  |                         |  | 188                   |   |            | 543
|                                                                            | 
|Trading profit change (2003 vs 2002) increase/(decrease)                    |  |                | (25 | )     |  | (37                    | )  |        | (41 | )                       |  | 15                    |   |            | (88
|                                                                            | 
|Trading profit % change (2003 vs 2002) increase/(decrease)                  |  |                | (11 | )%    |  | (45                    | )% |        | (84 | )%                      |  | 8                     | % |            | (16
|                                                                            | 
|Foreign currency translation effects                                        |  |                | 2   |       |  | 7                      |    |        | 1   |                         |  | 3                     |   |            | 13 
|                                                                            |  |                |     |       |  |                        |   
|Constant currency trading profit change (2003 vs 2002) favourable/(adverse) |  |                | (23 | )     |  | (30                    | )  |        | (40 | )                       |  | 18                    |   |            | (75
|                                                                            |  |                |     |       |  |                        |   
|Constant currency % change (2003 vs 2002) favourable/(adverse)              |  |                | (10 | )%    |  | (36                    | )% |        | (83 | )%                      |  | 10                    | % |            | (14
|                                                                            |  |                |     |       |  |                        |   

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

National Starchs sales of £1,866m were 1% ahead of 2002 on a reported basis and excluding foreign exchange translation effects sales were 4% ahead, although operating profit before exceptional items for 2003 was, at £182m, 24% below 2002 on a reported basis. Trading
 profit of £199m was 10% lower on a constant currency basis. While growth in sales improved as the year progressed, and sales in Asia were strong throughout, significantly higher raw material prices, in particular for vinyl acetate monomer and other petrochemical based
 products in North America, and to a lesser extent in Europe, offset the benefits of the sales growth. Sales price increases were implemented but did not fully recover the increased raw material costs, and overall gross margin percentages were lower than for 2002. Additionally,
 higher natural gas prices in the United States and increased healthcare and pension expenses resulted in higher operating costs, primarily for the Starch division.

A new restructuring programme was announced during 2003, aimed at improving operating efficiency, with an estimated cash spend of £32m by the end of 2006, together with £22m of capital expenditure. An exceptional charge of £59m was included in 2003 operating profit
 after exceptional items in relation to this programme.

The following commentaries relate to the four business groupings within National Starch: Adhesives (41% of National Starchs sales in 2003), Specialty Starch (26%), Specialty Synthetic Polymers (20%) and Electronic and Engineering Materials (13%). The geographic split of
 sales by customer location for National Starch in 2003 was Europe 27%, North America 40%, Asia 27% and Latin America and Rest of World 6%.



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|Adhesives
|---------

Adhesives reported sales were 1% ahead of 2002, but excluding foreign exchange translation effects constant currency sales were 3% ahead of last year. However, significantly higher raw material prices throughout the year resulted in gross margin percentages well below
 2002. Constant currency sales growth was strongest in Latin America and Asia, particularly in Mexico, China, and Japan. In the United States, sales were impacted by a weak manufacturing sector and a downturn in the market for recreational vehicles, although general market
 conditions did improve toward the end of the year. Sales in Europe were slightly ahead for the year on a constant currency basis, with improvement in Germany and Italy, partly offset by weakness in the UK and France. During the year the business in Europe divested its
 Cheese Coating business, and entered into a joint venture in engineered wood adhesives, called Purbond AG.

|Specialty Starches
|------------------

Specialty Starches reported sales for 2003 were 2% ahead of 2002, but excluding foreign exchange translation effects, sales were 6% ahead. However, the business was impacted by higher raw material costs and higher manufacturing costs in North America. Good constant
 currency sales growth continued in Asia, particularly in Thailand, Indonesia and in Australia, where the benefits of the 2002 acquisition of the Hi Maize resistant starch business from Penford Corporation were most apparent. In Brazil, imports of product to supplement the
 short supply of locally produced starch lowered margins. During the year, as part of a review of the global specialty starch supply chain, plans were announced to close one starch manufacturing plant in North America and one in Europe. In order to ensure continuity of supply
 following the closures, National Starch will commission a new starch modification facility in China in 2004, and will enhance the capability of three existing specialty starch manufacturing plants.

|Specialty Synthetic Polymers
|----------------------------

Specialty Synthetic Polymers reported sales were 4% ahead of 2002, but excluding foreign exchange translation effects, sales were 6% ahead. However, gross margin percentages were well below last year due to the impact of higher petrochemical based raw material costs
 throughout 2003. The Elotex redispersible powders business grew sales strongly, with expansion into Eastern Europe and growth continuing in the United States. The Personal Care polymers business and Alco Chemical both continued to perform well, but the Vinamul
 emulsion polymer business had a difficult year due to significantly higher raw material costs.

|Electronic and Engineering Materials
|------------------------------------

Electronic and Engineering Materials reported sales were in line with 2002, but excluding foreign exchange translation effects, sales were 2% ahead of last year, and gross margin was also up, with some recovery in the electronics sector, particularly towards the end of the
 year. Ablestik delivered very strong constant currency growth, with success with new technologies and improvements in its core semiconductor materials market. Emerson & Cuming also delivered constant currency sales growth, primarily in China and Taiwan. However,
 offsetting most of these gains were lower constant currency sales for Acheson, which reflected weak demand in CRT and automotive applications. During the year, the division divested its Permabond engineering materials business, retaining one small product line which, in
 future, will be reported in Adhesives.

|Quest
|-----

Quest had a poor year. Sales for 2003 of £691m were 3% below last year on both a reported and constant currency basis. Constant currency sales growth in North America and Latin America was offset by lower sales in Europe, primarily in Food. With lower gross margin
 percentages for both the Food and Fragrance businesses, operating profit before exceptional items for 2003 was £44m, 37% lower than 2002 on a reported basis. Excluding goodwill amortisation, trading profit of £45m was 36% lower on a constant currency basis.

During the year, Quest commenced a number of restructuring programmes in order to simplify its organisation and to deliver fixed cost savings. Cash spend of £17m by the end of 2005 is planned in relation to these programmes. An exceptional charge of £20m was included
 in 2003 operating profit after exceptional items in relation to these programmes.

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The following commentaries relate to Quests two major strategic businesses: Food (60% of Quests sales in 2003) and Fragrances (40%). The geographic split of sales by customer location in 2003 was Europe 41%, North America 26%, Asia 18% and Latin America and Rest
 of World 15%.

|Food
|----

Food had a difficult year, with reported sales 3% lower than 2002, and excluding foreign exchange translation effects, sales were 4% lower on a constant currency basis, due to a significant reduction in sales in Europe. This reflected a loss of market share in sweet flavours
 following customer service problems that resulted from 2002 systems changes at its Naarden facility in the Netherlands. Although much remains to be done, during 2003 progress was made in rebuilding certain customer relationships, supply chain performance improved
 substantially and the organization was streamlined. Sales outside Europe on a constant currency basis were ahead of last year, with strong performances for flavours in North America, and in China. Overall gross margin percentages were lower than last year, although there was
 some improvement as the year progressed.

|Fragrance
|---------

Reported sales for Fragrance were 4% below 2002. Excluding foreign exchange translation effects, sales were 1% lower. Strong constant currency sales growth in North America was offset by lower sales in other regions, reflecting difficult market conditions particularly in Fine
 Fragrances during the second half of the year. Gross margin percentages were lower, reflecting in part adverse changes in the sales product mix.

|Performance Specialties
|-----------------------

The sales and operating profit for Performance Specialties for 2003 included only the results of the Uniqema business, following the divestment of the Synetix and Security Systems businesses during 2002. As reported sales of £669m and operating profit before exceptional
 items of £7m were 17% (£135m) and 85% (£41m) below 2002 respectively, with all of the sales shortfall and £21m of the operating profit shortfall related to the businesses divested last year.

|Uniqema
|-------

Uniqema had another difficult year. Reported sales were £669m, in line with last year, but excluding foreign exchange translation effects, sales were 2% below 2002, with weak demand resulting in lower sales volumes of fatty acids, particularly in Europe and the Americas,
 only partially offset by increased prices. The relative strength of the Euro against the US dollar, affecting continental European exports to North America and Asia, adversely impacted gross margins by an estimated £10m for the year, and the business was also impacted by
 significant increases in energy costs in North America.

During the year, a major new restructuring programme was announced in order to reduce overheads, and in addition, two manufacturing sites will be closed in the US, with an estimated total cash spend of £40m by the end of 2005, together with £7m of capital expenditure. An
 exceptional charge of £48m was included in 2003 operating profit after exceptional items in relation to this programme.

|Paints
|------

Paints reported sales of £2,163m for the year were 1% lower than 2002 but excluding foreign exchange translation effects, sales were 2% ahead of 2002, with growth in Europe, Asia and Latin America. Overall gross margin percentages were similar to last year, and with the
 benefits of restructuring and good cost control, operating profit before exceptional items of £186m was 9% ahead of last year. Excluding the effects of foreign exchange translation, constant currency trading profit was 10% higher.

During the year, Paints commenced a number of restructuring programmes, mainly in Europe, to improve supply chain productivity. Cash expenditure of £45m in relation to these programmes is planned, mainly by 2005, together with £19m of capital expenditure. An
 exceptional charge of £49m was included in 2003 operating profit after exceptional items in relation to these programmes.

The following commentaries relate to the four geographical regions where Decorative Paints operates (91% of Paints sales for 2003) and to Packaging Coating business (8%). Other businesses represented 1% of sales. The geographic split for Paints by customer location in
 2003 was Europe 37%, North America 42%, Asia 12% and Latin America and Rest of World 9%.



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In Decorative Europe, reported sales were 5% ahead of 2002. Excluding favourable foreign exchange translation effects, sales were 1% ahead of 2002, with good performances in the UK retail and trade markets, Ireland and Poland offsetting lower sales in Germany where the
 weak economy continued to affect results.

In Decorative North America, reported sales were 9% below 2002. However, 7% of this decline was due to adverse foreign exchange transaction effects; excluding these effects sales were 2% below 2002, impacted by poor weather in the first half, which particularly affected
 sales of product for exterior use.

Decorative Asia continued to deliver
    excellent results. Reported sales for 2003 were 6% ahead of 2002, and excluding
    foreign exchange translation effects, sales were 12% ahead with notable performances
in China, India, Thailand, Vietnam and Pakistan.

Sales in Decorative Latin America recovered strongly, particularly in Argentina and Uruguay, following a very difficult 2002 where currency devaluation had a major impact on performance. For the region in total, 2003 reported sales were 12% ahead of last year, and
 excluding foreign exchange translation effects, sales were 22% ahead.

Reported sales for the Packaging Coatings business were 4% ahead, and excluding foreign exchange translation effects, sales were 3% above last year.

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

Sales for the Regional and Industrial businesses were £481m, 22% below 2002, including £55m of nil margin sales (2002 £209m). Excluding the impact of nil margin sales and sales from businesses divested, the Regional and Industrial businesses delivered 17% growth,
 with particularly strong growth for the businesses in Pakistan.

The operating loss before exceptional items for the year was £25m, compared with a loss of £10m in 2002, and included a £42m charge for pension costs, £26m more than 2002, following the triennial valuation of the ICI UK Pension Fund conducted earlier in the year
 (detailed in note 36). In addition, 2002 was impacted by a £5m provision in relation to ICIs former Soda Ash business.

The charge in respect of pension costs in relation to the ICI UK Pension Fund is included in Regional and Industrial for segmental reporting, as it largely relates to commitments to pensioners and deferred pensioners who worked for ICIs divested UK Industrial Chemical
 businesses.

Regional and Industrial operating profit after exceptional items, included £25m of exceptional operating charges related to the restructuring programme to reduce the scope of activities in ICIs Corporate Centre, with overall cash expenditure of £24m in relation to the
 programme by the end of 2006.

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|Review of 2002 business results
|-------------------------------

|                                                                                                                                     
|-------------------------------------------------------------------------------------------------------------------------------------
|Reconciliation table  UK GAAP As reported turnover performance to non-UK GAAP Constant currency sales performance  2002 vs 2001
|                                                                                                                                     

|                                     |  | Turnover |       | As
          reportedchangeIncrease/(decrease) |  | ForeignexchangetranslationeffectsFavourable/(adverse) |   | ConstantcurrencychangeIncrease/(decrease) |     
|------------------------------------ |  | -------- | ----- | ------------------------------------------------ |  | ----------------------------------------------------- | - | ------------------------------------------- | ----
|                                     |  | 2002     |       | 2001                                             |  | 2002
          vs 2001                                |   |                                             |     
|                                     |  | £m       |       | £m                                               |  | £m                                                    |   | %                                           |     
|National Starch                      |  |          |       |                                                  |  |                                                       |   |                                             |     
|Adhesives                            |  |          | 753   |                                                  |  | 771                                                   |   |                                             | (18 
|Specialty Starches                   |  |          | 475   |                                                  |  | 474                                                   |   |                                             | 1   
|Specialty Synethetic Polymers        |  |          | 361   |                                                  |  | 363                                                   |   |                                             | (2  
|Electronic and Engineering Materials |  |          | 252   |                                                  |  | 245                                                   |   |                                             | 7   
|                                     | 
|Total                                |  |          | 1,841 |                                                  |  | 1,853                                                 |   |                                             | (12 
|                                     | 
|Quest                                |  |          |       |                                                  |  |                                                       |   |                                             |     
|Food                                 |  |          | 426   |                                                  |  | 429                                                   |   |                                             | (3  
|Fragrance                            |  |          | 290   |                                                  |  | 298                                                   |   |                                             | (8  
|                                     | 
|Total                                |  |          | 716   |                                                  |  | 727                                                   |   |                                             | (11 
|                                     | 
|Performance Specialties              |  |          |       |                                                  |  |                                                       |   |                                             |     
|Uniqema                              |  |          | 669   |                                                  |  | 665                                                   |   |                                             | 4   
|Synetix and Security Systems         |  |          | 135   |                                                  |  | 167                                                   |   |                                             | (32 
|                                     | 
|Total                                |  |          | 804   |                                                  |  | 832                                                   |   |                                             | (28 
|                                     | 
|Paints                               |  |          |       |                                                  |  |                                                       |   |                                             |     
|Decorative Europe                    |  |          | 656   |                                                  |  | 632                                                   |   |                                             | 24  
|Decorative North America             |  |          | 981   |                                                  |  | 1,018                                                 |   |                                             | (37 
|Decorative Asia                      |  |          | 212   |                                                  |  | 198                                                   |   |                                             | 14  
|Decorative Latin America             |  |          | 136   |                                                  |  | 186                                                   |   |                                             | (50 
|Packaging Coatings                   |  |          | 170   |                                                  |  | 170                                                   |   |                                             |    
|Other                                |  |          | 27    |                                                  |  | 29                                                    |   |                                             | (2  
|                                     | 
|Total                                |  |          | 2,182 |                                                  |  | 2,233                                                 |   |                                             | (51 
|                                     | 
|International Businesses             |  |          | 5,543 |                                                  |  | 5,645                                                 |   |                                             | (102
|                                     | 
|Regional and Industrial              |  |          | 615   |                                                  |  | 821                                                   |   |                                             | (206
|Eliminations                         |  |          | (33   | )                                                |  | (41                                                   | ) |                                             | 8   
|                                     |  |          |       |                                                  |  |                                                       |   |                                             |     
|Total Group                          |  |          | 6,125 |                                                  |  | 6,425                                                 |   |                                             | (300
|                                     |  |          |       |                                                  |  |                                                       |   |                                             |     

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|Reconciliation table – UK
            GAAP As Reported operating profit to non-UK GAAP Constant
            currency trading profit” – 2002 vs 2001
|------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                      

|                                                             |  | NationalStarch |     | Quest |  | PerformanceSpecialties |    | Paints |     | InternationalBusinesses |  | RegionalandIndustrial |   | TotalGroup |    
|------------------------------------------------------------ |  | -------------- | --- | ----- |  | ---------------------- | -- | ------ | --- | ----------------------- |  | --------------------- | - | ---------- | ---
|                                                             |  | £m             |     | £m    |  | £m                     |    | £m     |     | £m                      |  | £m                    |   | £m         |    
|                                                             | 
|2002 operating profit before exceptional items               |  |                | 206 |       |  | 81                     |    |        | 48  |                         |  | 171                   |   |            | 506
|                                                             | 
|2001 operating profit before exceptional items               |  |                | 200 |       |  | 106                    |    |        | 67  |                         |  | 159                   |   |            | 532
|                                                             | 
|As Reported changes (2002 vs 2001)                         |  |                | 6   |       |  | (25                    | )  |        | (19 | )                       |  | 12                    |   |            | (26
|                                                             | 
|As Reported % change (2002 vs 2001)                        |  |                | 3   | %     |  | (24                    | )% |        | (28 | )%                      |  | 8                     | % |            | (5 
|                                                             | 
|2002 goodwill amortisation                                   |  |                | 18  |       |  | 1                      |    |        | 1   |                         |  | 17                    |   |            | 37 
|                                                             | 
|2001 goodwill amortisation                                   |  |                | 18  |       |  | 1                      |    |        | 1   |                         |  | 17                    |   |            | 37 
|                                                             | 
|2002 trading profit                                          |  |                | 224 |       |  | 82                     |    |        | 49  |                         |  | 188                   |   |            | 543
|                                                             | 
|2001 trading profit                                          |  |                | 218 |       |  | 107                    |    |        | 68  |                         |  | 176                   |   |            | 569
|                                                             | 
|Trading profit change (2002 vs 2001) increase/(decrease)     |  |                | 6   |       |  | (25                    | )  |        | (19 | )                       |  | 12                    |   |            | (26
|                                                             | 
|Foreign currency translation effects                         |  |                | 5   |       |  | 1                      |    |        | 1   |                         |  | 4                     |   |            | 11 
|                                                             | 
|Constant currency change (2002 vs 2001) favourable/(adverse) |  |                | 11  |       |  | (24                    | )  |        | (18 | )                       |  | 16                    |   |            | (15
|                                                             |  |                |     |       |  |                        |   
|Constant currency % (2002 vs 2001)                           |  |                | 5   | %     |  | (22                    | )% |        | (27 | )%                      |  | 9                     | % |            | (3 
|                                                             |  |                |     |       |  |                        |   

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

National Starchs sales of £1,841m for 2002 were 1% below 2001 on a reported basis but excluding foreign exchange translation effects, sales were 2% ahead of 2001. Operating profit before exceptional items for 2002 was £206m, 3% above 2001. Trading profit of £224m was 5% ahead on a constant currency basis. The
 growth in sales and profitability reflected both the modest recovery in economic conditions in North America in comparison with 2001 and continued growth from the Asian businesses. Investment in restructuring, announced during 2001, improved the competitiveness and profitability of the Specialty Synethetic Polymers
 and Adhesives businesses in both the US and Europe.

The following commentary relates to the four business groupings within National Starch : Adhesives (41% of National Starchs sales in 2002), Specialty Starch (25%), Specialty Synthetic Polymers (20%) and Electronic and Engineering Materials (14%). The geographic split of sales for National Starch by customer
 location in 2002 was Europe 25%, North America 43%, Asia 26% and Latin America and Rest of World 6%.

|Adhesives
|---------

Adhesives reported sales were 2% below 2001, but excluding adverse foreign exchange translation effects, sales were 1% ahead. 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
 in 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 constant currency sales remained slightly below 2001. In Europe, constant
 currency 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.

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|Speciality Starches
|-------------------

Reported sales for Starch were in line with 2001, but excluding adverse foreign exchange translation effects, sales were 4% ahead. Constant currency sales growth in Asia was strong, particularly for 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 for commodity food
 starches outpacing growth in specialty food starch. Papermaking starch constant currency 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, gross margin percentages in North America were lower. In Europe, constant currency sales and gross margins
 in both food and papermaking were ahead for the year.

|Specialty Synthetic Polymers
|----------------------------

Specialty Synthetic Polymers reported sales were in line with 2001, but excluding adverse foreign exchange translation effects, sales were 2% ahead, and with the benefits from lower raw material costs, gross margin percentages were 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 Materials reported sales were 3% ahead of 2001, and excluding adverse foreign exchange translation effects, sales were 6% ahead – a modest recovery from a weak 2001. Constant currency 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. Ablestik delivered good growth in the semiconductor materials market and Emerson & Cuming also delivered constant currency sales growth, particularly from strong sales in ink jet materials. Acheson constant currency sales were ahead for the year, primarily as a result of growth for its process lubricants business.

|Quest
|-----

Quest delivered reported sales for 2002 of £716m, 1% lower than 2001, but excluding foreign exchange translation effects, sales were 1% ahead of 2001 on a constant currency basis, with good overall constant currency sales growth in North America and Asia, offsetting lower Food sales in Europe and Fragrance sales in Latin America. Food delivered 2% constant currency sales
 growth whilst Fragrance sales were 1% lower on a constant currency basis. 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, operating
 profit before exceptional items for 2002 was £81m, 24% below 2001 on a reported basis, and trading profit of £82m was 22% lower on a constant currency basis.

During the year, Quest continued to implement the major programme announced in 2001 to rationalise its cost base and upgrade its business systems.

The following commentaries relate to Quests two major strategic businesses: Food (60% of Quests sales in 2002) and Fragrances (40%). The geographic split of sales for Quest by customer location in 2002 was Europe 41%, North America 26%, Asia 18% and Latin America and Rest of World 15%.

|Food
|----

Food had a difficult year but still delivered reported sales only 1% below 2001, and excluding adverse foreign exchange translation effects, delivered 2% sales growth, with particularly strong constant currency sales performances for both flavours and food ingredients in Asia and in North America. Constant currency sales in Europe were lower. Gross margin percentages were
 negatively impacted by the second quarter ERP implementation issues in the Netherlands and, consequently, gross margin percentages were well below 2001.

|Fragrance
|---------

Fragrance reported sales were 3% lower than 2001, and excluding adverse foreign exchange translation effects, 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 constant currency
 performances in Quests fine fragrance and personal care businesses, which largely compensated for more difficult conditions in aroma chemicals and other segments.

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|Performance Specialties
|-----------------------

The reported sales and operating 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 operating profit of £48m were 3% and 28% below 2001 respectively.

|Uniqema
|-------

Uniqema had a difficult year; reported sales of £669m were 1% ahead of 2001, and excluding adverse foreign exchange translation effects, sales were 2% ahead but 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 constant currency 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.

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.

|Synetix
Synetix sales were 19% below 2001 on a reported basis but for the 10 months up to the divestment and excluding foreign exchange translation effects were 8% ahead of 2001 with growth in all main markets. Gross margins were above 2001 due to improved sales mix.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|      
|------
|Paints

For 2002, Paints delivered reported sales of £2,182m, 2% below 2001, but excluding adverse foreign exchange translation effects, achieved constant currency sales which were very nearly the same as in 2001 despite the economic difficulties in Latin America, where sales were
 down 24% on a constant currency basis. Performance in Asia was excellent, with significant sales and trading profit growth. Operating profit before exceptional items for 2002 was £171m, 8% ahead of 2001. Trading profit for Paints of £188m, was 9% ahead on a constant
 currency basis, with a trading loss in Latin America more than offset by profit growth in other regions.

The following commentaries relate to the four geographical regions where Decorative Paints operates (91% of Paints sales for 2002) and the Packaging Coating business (8%). The geographic split of sales for Paints by customer location in 2002 was Europe 34%, North
 America 46%, Asia 12% and Latin America and Rest of World 8%.

In Europe, reported sales were 4% ahead of 2001. Excluding foreign exchange translation effects, 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.

In North America, reported sales were 4% below 2001 but excluding foreign exchange translation effects, sales were 1% ahead of 2001. Constant currency sales growth in the US domestic housing and Canadian markets was partially offset by lower sales in the US non-
 residential construction sector.

Reported sales in Asia were 7% ahead of 2001, and excluding foreign exchange translation effects, constant currency sales growth exceeded 11% for the second year in succession with strength in India, China, Thailand and Indonesia being partially offset by Singapore and
 Taiwan.

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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 of other currencies in the region and a slowdown in economic activity.
 As a result, reported sales were 27% below 2001 and in US$ terms sales declined from 2001 by 24%. This, together with the higher cost of imported raw materials from the currency devaluation, resulted in a trading loss for the year.

The Packaging Coatings businessdelivered reported sales which were the same as 2001, but excluding foreign exchange translation effects, constant currency sales growth was 1%.

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

Regional and Industrial reported 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 an operating loss before exceptional items 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 operating profit were lower in polyester fibre, although
    the Soda Ash business continued to perform well. Overall, operating profit
    in Pakistan was above 2001.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                                                                                                                                  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|India
Operating 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.

|                                                                                                                                                                                                                                             
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Argentina
Whilst sales in Argentina for 2002 were below 2001 due to the effect of the Peso devaluation operating profit improved as the wine chemicals and performance chemicals businesses benefited from significant hard currency exports.

The information set forth under the heading Description of business – Regulation safety, health and the environment on pages 16 and 17, and the graphs related to Turnover – continuing operations, Trading profit – continuing operations and Group profit before tax on
 page 18, Turnover and Trading profit and turnover by customer location of National Starch on page 26, Quest on pages 26 and 27, Performance Specialties on page 27 and Paints on page 28, of the Companys Annual Report and Accounts 2003 contained in its
 Report on Form 6-K dated March 10, 2004 is incorporated herein by reference.

|Treasury policies
|-----------------

The 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.

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|Financing and interest rate risk
|--------------------------------

At December 31, 2003, the Groups net debt was £1,326m (2002 £1,667m; 2001 £2,917m).

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 37 to the consolidated financial statements show the overall interest rate structure of the Groups borrowings at the end of 2003. 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. Consequently, a large part of the Groups borrowings (after taking account of swaps and forward contracts) are denominated in US Dollars. Details of the currency mix of borrowings are shown in note 37 to the
 consolidated financial statements. In addition, in determining currency mix, the Group 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 or longer, depending on relative cost. The average maturity for long-term debt was 4.0 years at December 31, 2003.

|Liquidity and investments
|-------------------------

At December 31, 2003 the Group had at its disposal $1,385m (sterling equivalent £777m) of committed borrowing facilities. These comprise $685m maturing October 2006 and $700m maturing May 2008. These facilities provide a back-stop for short-term funding as well as
 flexibility to supplement future cash flows. In addition, facilities of $179m (£100m) back-stop the two receivables securitisation programmes.

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 requirements arise principally from those
 increases in stocks and debtor balances related to operating activities of the Paints businesses in the second and third quarters of the year. This regular, seasonal demand coincides with the North American and European spring / summer months during which consumers tend to
 use Paints products on the exterior of their buildings to a greater extent than in the other months of the year. The Groups commercial paper programmes and other short-term borrowings are normally used to fund these working capital fluctuations. At December 31, 2003, the
 Group had £29m of short-term borrowings outstanding.

During 2003, the principal movements in long-term debt were the issuance of a $500m (£293m) 5 year note and a $500m (£293m) 10 year note in November 2003. There was a £100m 17 year bond maturity and a £125m 2.4 year note maturity. Also in 2003, the Group
 redeemed the remaining £100m in FRPS (fixed rate redeemable preference shares).

The Group runs two receivables securitisation programmes in the US, as referred to above. At December 31, 2003 there were no borrowings made against this facility. Any outstanding amount would have been reported in the Groups financial statements under current
 instalment of loans (note 20 to the consolidated financial statements).

During 2003 actions by the rating
agencies included the following:

On November 11, 2003, Moodys
    Investors Service (Moodys) lowered the credit ratings of
    ICI to Baa3/P-3 from Baa2/P-2. Moodys outlook for these ratings is
    stable. Moodys noted that the lowering of the ratings reflected its
    expectation of weaker than anticipated cashflow / debt protection metrics
    over the coming two years.

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On November 14, 2003, Standard & Poors
    Ratings Services announced that its ratings of ICI unsecured debt of BBB/Stable/A-2
    will remain unaffected by ICIs agreement with the ICI UK Pension Fund
    on October 16,
2003 which is described in “Notes relating to the accounts” on page
93 of the Company’s Annual Report and Accounts 2003 contained in its Report
on Form 6-K dated March 12, 2004.

The ratings downgrade by Moodys reduced the Groups funding options, in particular restricting access to its major commercial paper markets and increasing its cost of borrowings. The undrawn, committed borrowing facilities detailed earlier, together with undrawn amounts
 available under the receivables securitisation programmes provide more capacity than ICI has previously required from its commercial paper funding, which itself, currently remains available, albeit with a lower level of investor demand than prior to the ratings downgrade.

In 2004, there is a $750m (£421m) 7 year note maturing in September 2004. As necessary, this is expected to be refinanced through new debt issues. Access to the range of the debt markets which ICI currently enjoys requires ICI to maintain its investment grade credit rating.
 Any downgrade of ICIs credit rating would reduce its funding options, significantly increase its cost of borrowings and have an adverse effect on its results of operations and cash flow.

Under the arrangements with Ineos Chlor (described in note 39 to the consolidated financial statements), as at December 31, 2003, Ineos Chlor has the ability to borrow a further £50m from ICI, with ICI making an additional cash contribution of £30m.

|Off-balance sheet arrangements
|------------------------------

Off-balance sheet financing mainly comprises the leases described in note 34 to the consolidated financial statements and a series of forward contracts (total nominal amount of £126m as of December 31, 2003) used to hedge some of the obligations of the employee share
 ownership plans.

As regards the latter, the Group
    is committed to acquire under forward contracts, shares or ADSs of the Company
    to hedge its obligations under the Senior Staff Scheme, the Performance Growth
    Plan, and the Stock Appreciation Rights Plan.
    The trust has entered into forward  commitments to purchase 26.4 million
    shares at a weighted average cost of £4.78
 per share (total commitment £126m) in the period 2004 to 2005, these forward
 commitments include collateral requirements related to the prevailing share
 price of the Company. At December 31, 2003, no collateral payments have been
 made. These shares are intended to satisfy requirements for share options exercisable
 in the period 2004 to 2013. A provision of £70m has been made to write-down
 the shares under forward commitments to estimated net  realisable value having
 regard to the period over which the related options are exercisable.

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|Contractual obligations
|-----------------------

The following table summarises ICIs principal contractual obligations at December 31, 2003, including instalments, which are described in the consolidated financial statements and related notes. Further analysis of individual obligations can be reviewed by reference to the notes relating to the accounts indicated in the
 table below.

|                                     |  |                             |    |       |  | Payments
          due by period | 
|------------------------------------ |  | --------------------------- | -- | ----- |  | -------------------------------- | 
|                                     |  | Notesrelatingto theaccounts |    | Total |  | Lessthan1 year                   | 
|As
            at 31 December 2003   |  |                             |    | £m    |  | £m                               | 
|Loans                                |  |                             | 20 |       |  | 1,887                            | 
|Finance
          lease obligations  |  |                             | 34 |       |  | 4                                | 
|Operating
          leases           |  |                             | 34 |       |  | 334                              | 
|Capital
          expenditure        |  |                             | 39 |       |  | 28                               | 
|ICI
          UK Pension Fund top-up |  |                             | 36 |       |  | 558                              | 
|Purchase
          obligations       |  |                             |    |       |  | 1,285                            | 
|                                     | 
|Total                                |  |                             |    |       |  | 4,096                            | 
|                                     | 

|                     
|---------------------
|Foreign currency risk

Most 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.

Based on the 2003 currency mix of profits, the adverse annual impact due to translation exposures on the Group operating profit before exceptional items and goodwill amortisation of a 5% strengthening of Sterling against the US dollar and related currencies compared with the average rates prevailing in 2003 would be
 approximately £12m. The equivalent impact of a 5% strengthening of Sterling against the Euro would lead to an impact of approximately £2m.

|Critical accounting policies and estimates
|------------------------------------------

The Groups main accounting policies affecting its results of operations and financial condition are set out in Accounting policies on pages 52 and 53 of the Companys Annual Report and Accounts 2003 contained in its Report on Form 6-K dated March 12, 2004. Judgements and assumptions have been required by
 management in applying the Groups accounting policies in many areas. Actual results may differ from the estimates calculated using these judgements and assumptions. The following policies are considered to be the Groups critical accounting policies under UK GAAP as the judgements and assumptions made could
 have a significant impact on its results of operations and financial condition.

|Divestment provisions
|---------------------

As at December 31, 2003, the Group had divestment provisions of £348m. The divestment provisions have arisen as a result of the reshaping of the Groups portfolio of businesses and include amounts relating to long term residual obligations such as legacy management, pension administration and environmental costs
 and direct disposal costs such as termination costs, transaction costs and separation costs. 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 is based on best management judgement at the
 time. The provisions are regularly reviewed in the light of the most current information available. In 2003 this resulted in a release of £12m. The provisions will continue to be reviewed regularly.

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|Restructuring provisions
|------------------------

As at December 31, 2003, the Group had restructuring provisions of £148m, principally in respect of the restructuring programmes announced during 2003. The provisions were established in accordance with FRS No. 12, but include judgements on the costs of severance of the affected employees and of plant closure and
 other costs. In addition, management judgement is required in determining the asset impairments related to the programme. The provisions will be reviewed in future years. A review in 2003 of the provisions relating to prior years resulted in a release of £12m.

|Retirement benefits
|-------------------

A triennial valuation of the ICI UK Pension Fund was conducted at March 31, 2003 both for funding purposes and for accounting purposes in accordance with SSAP 24. The valuation, which was based on assumptions determined with advice from the Companys actuary, identified a deficit of £344m, compared with £4m
 at the previous valuation at March 31, 2000. The charge to the profit and loss account increased from £16m in 2002 to £42m in 2003. The size of the deficit is sensitive to the market value of the Funds investments and to actuarial assumptions, which include price inflation, pension and salary increases and the discount
 rate for accrued liabilities and for ongoing contributions. As there is a degree of inter-dependency between some of the assumptions, it would be impractical and potentially misleading to give any approximate impact on the annual Group operating profit of a change in any one assumption in isolation.

|Forward share purchase arrangements
|-----------------------------------

Included within exceptional items in 2003 was a charge of £57m as a provision against shares of the Company, which ICI is committed to buy under forward purchase agreements. The provision was based on the estimated net realisable value of the shares having regard to the period over which the related options are
 exercisable. The provision will be kept under review in the light of the trends in the Companys share price.

|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 Notes relating to the accounts  Note- 39 Commitments and contingent liabilities on pages 101 and 102 of the Companys Annual Report and Accounts 2003 contained in its Report on
 Form 6-K dated March 12, 2004.

|Investments
|-----------

Included within Investments in participating and other interests are the Groups loans to Ineos Chlor, with a cost of £109m. A provision of £99m is held against these loans as uncertainty exists as to the extent to which, and period over which, these amounts will be recovered. The recoverability of the loans will be
 regularly reviewed.

Additionally, the Group considers its goodwill accounting policy to be critical under US GAAP:

|Goodwill
|--------

The Group has capitalised goodwill under US GAAP of £3,173m at December 31, 2003. Goodwill is required to be tested for impairment at least annually (the fourth quarter for the Group) or more frequently if changes in circumstances or the occurrence of events indicated potential impairment exists. The Company uses
 the present value of future cash flows to determine fair value. In calculating the fair value, significant management judgement is required in forecasting cash flows of the reporting unit, in estimating terminal growth values and in selecting an appropriate discount rate. If alternative management judgements were adopted
 then different impairment outcomes could result. An impairment of £255m, representing all the US GAAP goodwill of the Uniqema business, was recognised in the year as a result of the difficult trading conditions faced by the business. No further impairment resulted from the annual impairment test. The headroom in the
 annual impairment test for the Quest reporting unit was £84m (total US GAAP goodwill of £736m at December 31, 2003); a 1% increase in the discount rate applied would have resulted in an impairment.

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|New Accounting Standards
|------------------------

UK Accounting Standards FRS No.17
    Retirement Benefits, which will affect future consolidated financial statements,
    and UITF 38 Accounting for ESOP Trusts and their impacts are discussed in
    note 1 to the consolidated financial statements; neither will have any impact
    on cash flows. New US Standards are outlined in
 Notes relating to the accounts  Note 41– Differences between
 UK and US accounting principles on pages 105 and 106 of the Companys
 Annual Report and Accounts 2003 contained in its Report on Form 6-K dated March 12,
 2004.

|International Financial Reporting Standards
|-------------------------------------------

The Group has established an IAS Project Steering Committee to oversee the transition to International Accounting Standards (IAS). Reporting to the Steering Committee are a number of workstreams covering the areas identified as being impacted by the move to IAS, ranging from considering the Groups accounting
 policies to reviewing the underlying processes, systems and controls. At this stage, the Group has not completed the work necessary to identify with sufficient certainty all the accounting policy differences that will arise from the transition to IAS.

|B. | Liquidity and Capital Resources.
|-- | --------------------------------

The information set forth in the third paragraph under the heading Description of business  Capital expenditure on page 15, in the table contained in Notes relating to the accounts  Note 39  Commitments and contingent liabilities on page 101 and under the heading Operating and financial review 
 Counterparty credit risk on page 23 of the Companys Annual Report and Accounts 2003 contained in its Report on Form 6-K dated March 12, 2004 is incorporated herein by reference


Also refer to the information set
    forth in this report in the heading Cash flow” on
    page 18, Treasury policies on
page 28, “Financing and interest rate risk on page 29, Liquidity
and
investments on page 29 and Foreign currency risk on page 31.

As noted in the fifth paragraph of Operating
    and financial review  Liquidity and investments on page 22 of
    the Companys Annual Report and Accounts contained in its Report on
    Form 6-K dated March 12, 2004 the Imperial Chemical Industries Employee
    Benefit Trust (the Trust) has entered into forward
 commitments to purchase shares in the Company, which include collateral requirements
    relating to the prevailing price of shares in the Company.

The operation of the Groups
    control procedures gives the Directors a reasonable expectation that the
    Group has adequate resources to continue in operation for the foreseeable
future.

|C. | Research and Development, Patents and Licenses, etc.
|-- | ----------------------------------------------------

The information set forth under the headings Description of business  Intellectual property on page 15 and Description of business  Research and development (R&D) on pages 15 and 16 of the Companys Annual Report and Accounts 2003 contained in its Report on Form 6-K dated March 12, 2004 is
 incorporated herein by reference.

|ITEM 6  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|---------------------------------------------------

|   |                                 
|-- | --------------------------------
|A. | Directors and Senior Management.

The information set forth under the heading Board of Directors on pages 30 and 31 and the information set forth under the heading Executive Management Team on page 32 of the Companys Annual Report and Accounts 2003 contained in its Report on Form 6-K dated March 12, 2004 is incorporated herein by
 reference.

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|B. | Compensation.
|-- | -------------

The information set forth under the headings Remuneration report  2003 Actual remuneration on pages 40 and 41, Remuneration report  Performance Growth Plan on page 39, Remuneration report  Awards under Performance Growth Plan on page 42 and the graphs relating to Five-year cumulative Total
 Shareholder Return: ICI and Peer Group Indices and Five year cumulative Total Shareholder Return: ICI and FTSE 100 Indices on page 40, the headings Remuneration report  Directors interests in share options on pages 43 and 44, Remuneration report  Retirement benefits on page 45, Remuneration report 
 Directors pension benefits, including the table thereunder on page 45, the first two sentences of the second paragraph of Notes relating to the accounts  Note 2  Directors and Officers remuneration and interests on page 59 and under the subheading Notes relating to the accounts  Note 23  Called-up share
 capital of parent company  Employees share option schemes and other share based plans on page 83 of the Companys Annual Report and Accounts 2003 contained in its Report on Form 6-K dated March 12, 2004 is incorporated herein by reference.

As of March 30, 2004, there were
    options
outstanding in respect of 42.8m Ordinary Shares of £1 each under the Senior
Staff and UK Sharesave Option Schemes normally
exercisable
in the period 2003 to 2014 at subscription prices of £1.34 to £10.08.

|C. | Board Practices.
|-- | ----------------

The information set forth under the
    headings Nomination Committee, Remuneration Committee and Audit
    Committee on page 34 and in the subheading Remuneration report  Directors service
    agreements and letters of engagement on page 47 of the Companys
    Annual Report and Accounts 2003 contained in  its Report on Form 6-K dated
    March 12, 2004 is incorporated herein by reference.

|D. | Employees.
|-- | ----------

The information set forth under the heading Description of business  Employees on page 17 and under the heading Notes relating to the accounts  Note 35  Employee numbers and costs on page 92 of the Companys Annual Report and Accounts 2003 contained in its Report on Form 6-K dated March 12, 2004
 is incorporated herein by reference.

|E. | Share Ownership.
|-- | ----------------

The information set forth under the
    headings Remuneration report – Directors interests in share
    options on
    pages 43 and 44 and Remuneration report  Directors interests
    in shares on page 46 and from the third sentence of the second paragraph
    onwards of Notes relating to the accounts  Note 2  Directors and
     Officers remuneration and interests on page 59 of the Companys
     Annual Report and Accounts 2003 contained in its Report on Form 6-K dated
     March 12, 2004 is incorporated herein by reference.

As of April 1, 2004, shares held by and options granted to Directors and Officers to subscribe for £1 Ordinary Shares in the Company were as follows:

|                                                                                                                                            |  | £1OrdinaryShares(1)     |         | Options granted(1)                       | 
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | ---------------------------------------- | 
|                                                                                                                                            |  |                         |         |                                          | 
|                                                                                                                                            |  | At April ,1, 2004Number |         | Optionsoutstanding atApril 1, 2004Number | 
|                                                                                                                                            |  |                         |         |                                          | 
|                                                                                                                                            |  |                         |         |                                          | 
|Directors (for further details see Remuneration Report pages 43, 44 and page 46 of the Annual Report 2003 incorporated herein by reference) |  |                         | 303,821 |                                          | 
|Officers                                                                                                                                    |  |                         | 133,103 |                                          | 

|    |                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------
|(1) | Includes ADRs disclosed in terms of £1 Ordinary Share equivalents/Ordinary Share option equivalents.

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As of April 1, 2004, no individual director or officer had interests in shares or options exceeding one per cent of the issued Ordinary Share Capital of the Company.

As of April 1, 2004, the total amount of the Companys voting securities owned by Directors and Officers of ICI, as a group, was:


|Title of Class  |  | Amount owned(number of shares) |         | Per centof class | 
|--------------- |  | ------------------------------ | ------- | ---------------- | 
|                | 
|Ordinary Shares |  |                                | 436,924 |                  | 

|                                                          
|----------------------------------------------------------
|                                                          
|ITEM 7 – MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

|   |                    
|-- | -------------------
|A. | Major Shareholders.

The information set forth in paragraphs
    (a), (b)(i) and (c) under the heading Shareholder
    information – Control of Company on page 114 of the Companys
    Annual Report and Accounts 2003 contained in its Report on Form 6-K dated
    March 12, 2004 is
 incorporated herein by reference.


Set out below is updated information regarding interests in the Companys £1 Ordinary Shares appearing in the Register of Interests in Shares maintained by the Company:


|                                        |  | As of March 31, 2004                   |      
|--------------------------------------- |  | -------------------------------------- | -----
|                                        |  |                                        |      
|                                        |  | Amount owned(number of shares)millions |      
|                                        |  |                                        |      
|Brandes Investment Partners LLC         |  |                                        | 111.8
|Barclays PLC                            |  |                                        | 110.6
|JPMorgan Chase Bank*                    |  |                                        | 107.1
|Artisan Partners LP                     |  |                                        | 85.0 
|Standard Life Investments Ltd           |  |                                        | 43.6 
|Legal and General Investment Management |  |                                        | 40.2 
|Capital International Group             |  |                                        | 36.2 
|                                        |  |                                        |      

| | 
| | 

|* | This interest relates to ADRs issued by JPMorgan Chase Bank, as Depositary, which evidence ADSs.
|- | ------------------------------------------------------------------------------------------------

As of March 31, 2004, 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.


|B. | Related Party Transactions.
|-- | ---------------------------

The information set forth under the heading Notes relating to the accounts – Note 42 – Related party transactions on page 101 of the Companys Annual Report and Accounts and Form 20-F 2001 contained in its Report on Form 6-K dated March 2002 Notes
 relating to the accounts – Note 41 – Related party transactions on page 106 of the Companys Annual Report and Accounts 2002 contained in its Report on Form 6-K dated March 11, 2003 and Notes relating to the accounts – Note 40 – Related party transactions on
 page 102 of the Companys Annual Report and Accounts 2003 contained in its Report on Form 6-K dated March 12, 2004 is incorporated herein by reference.


|C. | Interests of Experts and Counsel.
|-- | ---------------------------------

Not applicable.


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|ITEM 8 – FINANCIAL INFORMATION
|------------------------------

|   |                                                         
|-- | --------------------------------------------------------
|A. | Consolidated Statements and Other Financial Information.

See Item 18 for a full list of financial statements included as part of this report.


| | Export Sales.
| | -------------

The total amount of export sales from the United Kingdom and the total amount of export sales from the United Kingdom as a percentage of total sales by ICI companies located in the United Kingdom is set out below:


|                                                                                                                   |  | 2003 |       | 2002 |  | 2001  |  
|------------------------------------------------------------------------------------------------------------------ |  | ---- | ----- | ---- |  | ----- | -
|                                                                                                                   |  |      |       |      |  |       |  
|Exports from the United Kingdom                                                                                    |  |      | £456m |      |  | £516m |  
|Exports from the United Kingdom as a percentage of total sales made by ICI companies located in the United Kingdom |  |      | 40    | %    |  | 38    | %

| |                         
| | ------------------------
| | Subsidiary Undertakings.

The last sentence of the first paragraph
    under the heading Notes relating to the accounts – Note 39 – Commitments
    and contingent liabilities on page 101 of the Companys Annual
    Report and Accounts contained in its Report on Form 6-K dated March 12, 2003
    is  incorporated herein by reference.


| | Legal or Arbitration Proceedings
| | --------------------------------

Certain companies in the Group
      are defendants in various lawsuits. These lawsuits concern issues such
      as alleged product liability and contract disputes.


The Glidden Company (Glidden),
    a wholly owned subsidiary of ICI, is a defendant, along with former lead
    paint and pigment producers as well as other lead product manufacturers and
    their trade associations, in a number of law suits in the United States.
    These suits seek damages for alleged personal injury caused by lead-based
    paint or the costs of removing lead-based paint. An alleged predecessor of
    Glidden manufactured lead pigments until the 1950s and lead-based consumer
    paint until the 1960s. Glidden is unable to quantify the
 amount being claimed although the suits are likely to involve substantial claims
    for damages. Glidden is currently a defendant in six active suits and is
    also named in three unserved cases. Glidden continues to believe that it
    has strong
    defences to all of the pending cases and has denied all liability and will
  continue to defend all actions vigorously.


ICI Chemicals & Polymers Limited (C&P), a subsidiary, was involved in arbitration proceedings in Singapore regarding PTA technology exchange and licence arrangements with PT Polyprima Karyareksa (Polyprima). Fees due under these arrangements were being
 claimed by C&P against Polyprima who, in response, claimed damages for alleged breach of contract, fraud, deceit, misrepresentation and concealment. C&Ps claim against Polyprima was heard before an arbitration tribunal in Singapore in May 2002 and in June 2003 the
 arbitration tribunal ordered Polyprima to pay outstanding licence fees and dismissed the counterclaims against C&P.


In May 2003, the Kanagawa City Health and Medical Bureau in Japan required Quest Japan to recall flavours containing an ingredient known as WS3. The Japanese health authorities acknowledged that WS3 posed no risk to human health, but nevertheless argued that
 technically it was not approved for use in Japan. Three customers were affected by the recall, including Coca Cola (Japan) Company Limited (Coca Cola Japan). On 8 August 2003 The Coca Cola Company and Coca Cola Japan filed a lawsuit in the state court of Fulton
 County, Georgia USA seeking damages to be determined at trial for costs allegedly arising from their recall. Quest has denied liability and is contesting the claim vigorously. It is possible that the other two customers will also seek to recover alleged damages.


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Following ICIs trading statement
    on March 25, 2003, three purported class actions on lawsuits were filed in
    the US Federal District Court for the Southern District of New York on behalf
    of ICI shareholders who purchased ICI ADRs and Ordinary Shares between August
    2002 and March 2003. The lawsuits, which have now been consolidated into
    a single action, allege that prior to the trading statement ICI failed to
    disclose properly the extent of customer service problems at Quest following
    the implementation of new enterprise
 resource planning systems in 2002. At this point, the amount of the damages
    being claimed by the plaintiffs is unclear but could be substantial. ICI
  intends to contest the claims vigorously.


The Group is also involved in various other legal proceedings, principally in the United Kingdom and United States, arising out of the normal course of business or results of operations. The Directors do not believe that the outcome of these other proceedings will have
 a material effect on the Groups financial position.


The Groups 50% interest in
    Teesside Gas Transportation Ltd (TGT)
  was sold, during 1996, to a subsidiary of its other shareholder, Enron Europe
    Ltd (Enron) which is currently in administration. TGT contracted
    with the owners of a distribution network (the CATS parties) for pipeline
    capacity for North Sea gas and the commitment is guaranteed severally on
    a 50:50 basis by ICI and Enron (the  present value of the commitment guaranteed
    by ICI at December 31, 2003 was estimated at £146m). On the sale of
    the Groups
    interest in TGT to Enron, ICI received the benefit of a counter guarantee
    from Enrons
    parent, Enron Corp. Enron Corp. sought Chapter 11 bankruptcy protection in
    the USA  on  December 2, 2001.


The Groups interest in Teesside
    Power Ltd (TPL) was sold on 31 December 1998 to Enron Teesside
    Operations Ltd (ETOL). TPL had previously contracted with certain
    gas sellers for the purchase of gas. Enron Corp. and ICI had guaranteed on
    a several basis the  liability of TPL to the gas sellers in the proportions
    70% and 30% respectively. On the sale of the Groups interest in TPL
    to ETOL, ICI received the benefit of a counter indemnity from ETOL and a
    guarantee from Enron Corp. in respect of ICIs 30% guarantee commitment
     to the gas sellers. As mentioned above, Enron Corp. has sought Chapter 11
    bankruptcy protection in the USA. ETOL went into administrative receivership
    in April 2003, and sold its business and assets to Sembcorp Utilities Teesside
    Ltd (Sembcorp);
 however, the counter indemnity to ICI was not transferred to Sembcorp and remains
 a liability of ETOL. The present value of the gas purchase commitment guaranteed
 by ICI at December 31, 2003 was estimated at £247m. The numbers quoted
 above are ICIs
 current estimates of its maximum potential liability.


ICIs original disposal of the Chlor-Chemicals business to Ineos Chlor included an agreement for ICI to provide Ineos Chlor with a £100m loan facility. Ineos Chlor has currently drawn £80m under the facility. As part of an overall refinancing package for Ineos Chlor,
 ICI agreed on 31 July 2003 to make available new funding of £60m alongside £45m of new funding from the Ineos Group and £50m of Regional Selective Assistance from the UK Government. The new funding from ICI comprises a £30m cash contribution and additional
 loan finance of £30m. The terms of the £100m loan having been restructured, loan repayments are due by the end of 2010.


Following the completion of the refinancing the £65m claim previously notified to ICI by Ineos Chlor in connection with the original sale of the business has been withdrawn.


The only significant take-or-pay
    contract entered into by subsidiaries is for the purchase of electric power
    in the UK, which commenced in the second quarter of 1998, for 15 years. The
    present value of this commitment at December 31, 2003 was estimated at £137m.


The ultimate outcome of the matters described above is subject to many uncertainties, including future events and the uncertainties inherent in litigation. The Group has made provision in its financial statements for such matters to the extent losses are presently
 considered probable and estimable. However, these matters involve substantial sums, and an unfavourable outcome of one or more of these matters could have a material effect on the Groups results of operations, liquidity or financial position.


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| | Policy on Dividend Distributions.
| | ---------------------------------

The information set forth under the heading Operating and financial review – Dividend and dividend policy on page 19 of the Companys Annual Report and Accounts 2003 contained in its Report on Form 6-K dated March 12, 2004 is incorporated herein by
 reference.


B.      Significant Changes.


On March 2, 2004 the Company agreed to sell the Food Ingredients business of Quest International to Kerry Group plc for US$ 440m (£238m) in cash. Net proceeds after tax and other costs are expected to be approximately US$365m (£197m), and will be used to
 reduce indebtedness. Completion is expected in the second quarter of 2004 and is subject to regulatory approvals and employee consultation.


For the year ended December 31, 2003 the Quest Food Ingredients business had sales of £138m, operating profit of £16m and at December 31, 2003 had net operating assets of £84m. The transaction is expected to give rise to a loss after tax of about £50m which will
 be accounted for as an exceptional item. The loss includes attribution of goodwill previously written off £160m.


|ITEM 9 – THE OFFER AND LISTING
|------------------------------

A.      Offer and Listing Details.


Price History of the Stock.


The information set forth in the
    fourth paragraph and the related table under the heading Trading market
    for Ordinary Shares (beginning The following table shows,
    for the years and months indicated, the reported high and low middle market
    values for the  Companys Ordinary Shares etc.) on page 113 of
    the Companys Annual Report and Accounts 2003 contained in its Report
    on Form 6-K dated March 12, 2004 is incorporated herein by reference.


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) for each month since
 February 2004 are set out below:


|         |  | £1 Ordinary Shares |      | ADSs     | 
|-------- |  | ------------------ | ---- | -------- | 
|2004     |  | Monthhigh          |      | Monthlow | 
|         |  |                    |      |          | 
|         |  | £                  |      | £        | 
|February |  |                    | 2.45 |          | 
|March    |  |                    | 2.47 |          | 

The Companys share price as of April 1, 2004 was £2.30; the Companys ADS price as of April 1, 2004 was $16.95.

|B. | Plan of Distribution.
|-- | ---------------------

Not applicable.


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|C. | Markets.
|-- | --------

The information set forth in the second and third paragraphs under the heading Trading market for Ordinary Shares on page 113 of the Companys Annual Report and Accounts 2003 contained in its Report on Form 6-K dated March 12, 2004 (beginning  The principal trading market for the Companys
 Ordinary Shares is the London Stock Exchange ) is incorporated herein by reference.


|                                      |  | Total |         | In theUnited States | 
|------------------------------------- |  | ----- | ------- | ------------------- | 
|                                      |  |       |         |                     | 
|Number of record holders of:          |  |       |         |                     | 
|Ordinary Shares as at January 1, 2004 |  |       | 163,715 |                     | 
|ADSs as at March 26, 2004             |  |       | 2,704   |                     | 

As of March 26, 2004, the proportion of Ordinary Shares represented by ADSs was 9 % of the Ordinary Shares in issue.


D.Selling Shareholders.


Not applicable.


E.      Dilution.


Not applicable.


F.      Expenses of the Issue.


Not applicable.


|ITEM 10 – ADDITIONAL INFORMATION
|--------------------------------

A.      Share capital.


Not applicable.


B.      Memorandum and Articles.


The information set forth in Item 10 B Additional Information – Memorandum and Articles of the Companys Report on Form 20-F dated March 26,
  2003 and filed with the Commission on March 27, 2003, is incorporated
  herein by reference.


|C. | Material Contracts.
|-- | -------------------

The 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 April 5, 2004.

| | (a) | a Sale and Purchase Agreement dated June 14, 2002 among (1) the Company, (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 Huntsman
 International Holdings LLC (HIH), which comprise (A) a holding of subordinated loan notes in HIH (the HIH Notes) and (B) ICI Alta which held ICIs 30% equity interest in HIH and ICIs rights under an option agreement. The aggregate purchase price for the HIH Notes and ICI Alta was $440m before
 interest. Of this amount, $160m was received on June 14, 2002 and the remaining $280m was received on May 9, 2003 at which time ICIs 30% equity interest in HIH was transferred.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | an agreement dated September 23,
          2002 between (1) the Company and (2) Johnson Matthey Public Limited
          Company (Purchaser) for the sale of the Synetix Business
          of the Company 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 the Company received £241m on November 1, 2002 with £19m
           being paid to ICI India Limited on December 2, 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 the Company for the benefit of the Purchaser;

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| | (c) | an agreement dated July 31, 2003 between, amongst others, (1) the Company, (2) ICI Chemicals & Polymers Limited, (3) Ineos Chlor Holdings Limited and (4) Ineos Chlor Limited under which the parties agreed on an overall refinancing package for Ineos Chlor. The
 original disposal of ICIs Chlor Chemicals business to Ineos Chlor included an agreement for ICI to provide Ineos Chlor with a £100 million loan facility. The Company has agreed to make available new funding of £60m alongside £45m of new funding from the Ineos
 Group and £50m of Regional Selective Assistance (RSA) from the UK Government. The new funding from the Company comprises a £30m cash contribution and additional loan finance of £30m. The terms of the original £100m loan having been restructured, loan
 repayments are due by the end of 2010;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (d) | an Underwriting Agreement dated November 18, 2003 between (1) ICI Wilmington Inc. (2) the Company and (3) Barclays Capital Inc., Citigroup Global Markets Inc. and UBS Securities LLC (together the Underwriters), pursuant to which the Underwriters agreed to
 purchase debt securities from ICI Wilmington in the form of US$ 500 million 4.375% guaranteed notes due 2008 and US$ 500 million 5.625% guaranteed notes due 2013. The Underwriting Agreement contains warranties, undertakings and indemnities given by ICI in
 favour of the Underwriters; and

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (e) | a Sale and Purchase Agreement dated March 1, 2004 between the Company and the Kerry Group plc for the sale of Food Ingredients, a part of the Companys Quest International business for a purchase price of US$ 440 million (£238 million) in cash. The agreement
 contains various warranties, indemnities and covenants made by the Company for the benefit of the purchaser. Completion is subject to regulatory approvals and employee consultation.

|   |                   
|-- | ------------------
|D. | Exchange Controls.

The information set forth under the heading Shareholder information  Exchange controls and other limitations affecting security holders on page 114 of the Companys Annual Report and Accounts 2003 contained in its Report on Form 6-K dated March 12, 2004
 is incorporated herein by reference.


|E. | Taxation.
|-- | ---------

The information set forth under the heading Taxation, Taxation of dividends paid to US Shareholders, Taxation on capital gains, and UK inheritance tax on page 115 of the Companys Annual Report and Accounts contained in its Report on Form 6-K dated
 March 12, 2004 is incorporated herein by reference.


|F. | Dividends and Paying Agents.
|-- | ----------------------------

Not applicable.


|G. | Statement by Experts.
|-- | ---------------------

Not applicable.


|H. | Documents on Display.
|-- | ---------------------

The information set forth under the heading Shareholder Information  Documents on display  Securities and Exchange Commission on page 120 of the Companys Annual Report and Accounts 2003 contained in its Report on Form 6-K dated March 12, 2004 is
 incorporated herein by reference.


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|I. | Subsidiary Information.
|-- | -----------------------

The information set forth under the heading Principal subsidiary undertakings on page 112 of the Companys Annual Report and Accounts 2003 contained in its Report on Form 6-K dated March 12, 2004 is incorporated herein by reference.


|ITEM 11  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|-------------------------------------------------------------------

The information set forth under the headings Operating
    and financial review  Quantitative disclosure about market risk on page 23, including the subheadings Interest rate risk and Foreign currency risk, Operating and financial review  Financing and interest
 rate risk on page 21, and Operating and financial review  Counterparty credit risk on page 23 and paragraph five under the heading Employees share option schemes and other share based plans in note 23 of the Notes relating to the accounts on page 83 of the
 Companys Annual Report and Accounts 2003 contained in its Report on Form 6-K dated March 12, 2004 is incorporated herein by reference.


|ITEM 12  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|----------------------------------------------------------------

Not applicable.


Part II

|ITEM 13  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.
|----------------------------------------------------------

The information set forth under the heading Defaults, dividend arrearages and delinquencies on page 113 of the Companys Annual Report and Accounts 2003 contained in its Report on Form 6-K dated March 12, 2004 is incorporated herein by reference.


|ITEM 14  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|--------------------------------------------------------------------------------------

Not applicable.


|ITEM 15  CONTROLS AND PROCEDURES
|---------------------------------

The information set forth under the heading Audit and Internal Control on page 35 of the Companys Annual Report and Accounts contained in its Report on Form 6-K date March 12, 2004 is incorporated herein by reference.


The Companys Chief Executive and Chief Financial Officer have evaluated the effectiveness of the Companys disclosure controls and procedures (as defined in Rules 13a-14 (c) and 15d-14(c) of the Securities Exchange Act of 1934, as amended) as of
 December 31, 2003 and concluded that, as of the date of their evaluation, the Companys disclosure controls and procedures were adequate and effective and designed to ensure that material information relating to the Company, including its consolidated subsidiaries, is made
 known to them by others within those entities.


There has been no change in the Companys internal controls over financial reporting that occurred during the period covered by this Annual Report on Form 20-F for 2003 that has materially affected, or is reasonably likely to materially affect, our internal controls over
 financial reporting.


|ITEM 16A  AUDIT COMMITTEE FINANCIAL EXPERT
|-------------------------------------------

The Board of Directors has determined that Mr J T Gorman and Baroness Noakes are the audit committee financial experts for the purposes of the Sarbanes-Oxley Act of 2002.


|ITEM 16B  CODE OF ETHICS
|-------------------------

The information set forth under the heading Principles of Business Conduct on page 36 of the Companys Annual Report and Accounts contained in its Report on Form 6-K dated March 12, 2004 regarding the Companys Code of Business Conduct is incorporated
 herein by reference. The Code applies to all ICI employees including the Groups Chief Executive, Chief Financial Officer and Group Financial Controller.


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|ITEM 16C  PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------------------------------------------------

The information set forth in the
    third paragraph under the heading Audit Committee Report in the Corporate
    Governance section on page 35 of the Companys
    Annual Report and Accounts contained in its Report on Form 6-K dated March 12,
    2004 is incorporated herein by reference. Also incorporated is the information
    in note 45 “Remuneration of the Auditor” on page 111C under the
    heading “Notes relating to the accounts” in the financial statements
    under Item 18 of this Report, including the related table on the same page.


|ITEM 16D  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
|---------------------------------------------------------------------

Not applicable.


Part III

|ITEM 17  FINANCIAL STATEMENTS
|------------------------------

The Company has responded to Item 18 in lieu of this item.


|ITEM 18  FINANCIAL STATEMENTS
|------------------------------

The information set forth under the
    heading Independent Auditors report on the Financial Statements to
    the Members of Imperial Chemical Industries PLC and
    the financial statements (numbered pages 52 to 112) which begins on the page
  after the Contents to the accounts page (which is on the next page)
  constitutes the Companys
  response to this item.


42

---



Back to Contents

|Independent Auditors report
            to the Members and Board of Imperial Chemical Industries PLC
|-----------------------------------------------------------------------------------------------------

We have audited the accompanying
    consolidated balance sheets of Imperial Chemical Industries PLC and subsidiaries
    (the
    Group) as of 31 December 2003 and 2002, and the related consolidated
    profit and loss accounts, consolidated statements of total recognised gains
    and losses,  consolidated statements of cash flow and consolidated reconciliations
    of movements in shareholders funds for each of the years in the three-year
    period ended 31 December 2003. These consolidated financial statements are
    the responsibility of the Groups management. Our
 responsibility is to express an opinion on these consolidated financial statements
    based on our audits.

We conducted our audits in accordance
    with generally accepted auditing standards in the United Kingdom and the
    United States of America. Those standards require that we plan and perform
    the audit to obtain reasonable assurance about whether the financial statements
    are free from material misstatement. An audit includes examining, on a test
    basis, evidence supporting the amounts and disclosures in the financial statements.
    An audit also includes assessing the accounting principles used and significant
    estimates made by management, as well as
 evaluating the overall financial statement presentation. We believe that our
 audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Imperial Chemical Industries PLC and its subsidiaries as of 31 December 2003 and 2002 and the results of their operations and their cash flows
 for each of the years in the three-year period ended 31 December 2003 in conformity with generally accepted accounting principles in the United Kingdom.

As more fully described in note 1 to the financial statements, the Group has adopted UITF Abstract 38 Accounting for ESOP trusts in the year ended 31 December 2003. Consequently, the Groups consolidated financial statements as of 31 December 2002 and 2001, and for
 each of the years in the two year period ended 31 December 2002 referred to above have been restated.

Accounting principles generally accepted in the United Kingdom vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in note 41 to the
 consolidated financial statements.

KPMG Audit Plc
Chartered Accountants
Registered Auditor
London
11 February 2004

43

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Back to Contents
  contents
        to the accounts Accounting
                policies
      52Group
                profit and loss account
      54Statement
                of Group total recognised gains and losses
      54Balance
                sheets
      56Statement
                of Group cash flow
      57Reconciliation
                of movements in shareholders funds
      57Notes
              relating to the accounts1
      
      Basis
            of presentation of financial information
      582
      
      Directors and
            Officers remuneration and interests
      593
      
      Exceptional
            items before tax
      604
      
      Segment
            information
      615
      
      Operating
            profit (loss)
      666
      
      Share
            of operating profits less losses of associates
      677
      
      Net
            interest payable
      678
      
      Taxation
            on profit (loss) on ordinary activities
      689
      
      Dividends
      7010
      
      Earnings
            (loss) per £1 Ordinary Share
      7111
      
      Intangible
            fixed assets  goodwill
      7212
      
      Tangible
            fixed assets
      7313
      
      Investments
            in subsidiary undertakings  Company
      7414
      
      Investments
            in participating and other interests
      7515
      
      Stocks
      7616
      
      Debtors
      7617
      
      Current
            asset investments and short-term deposits
      7718
      
      Short-term
            borrowings
      7719
      
      Other
            creditors
      7720
      
      Loans
      7821
      
      Provisions
            for liabilities and charges
      8022
      
      Disposal
            and legacy, and restructuring provisions
      8123
      
      Called-up
            share capital of parent company
      8324
      
      Reserves
      8525
      
      Net
            cash inflow from operating activities
      8626
      
      Returns
            on investments and servicing of finance
      8727
      
      Capital
            expenditure and financial investment
      8728
      
      Acquisitions
      8729
      
      Management
            of liquid resources
      8730
      
      Disposals
      8831
      
      Financing
      8932
      
      Analysis
            of net debt
      9033
      
      Cash
            and short-term borrowings
      9034
      
      Leases
      9135
      
      Employee
            numbers and costs
      9236
      
      Retirement
            benefits
      9337
      
      Financial
            risk management
      9638
      
      Statutory
            and other information
      10039
      
      Commitments
            and contingent liabilities
      10140
      
      Related
            party transactions
      10241
      
      Differences
            between UK and US accounting principles
      103Principal
                subsidiary undertakings
      112  ICI
          ANNUAL REPORT AND ACCOUNTS 2003
      51   Back to Contents
  Contents to the Accounts
  accounting
        policies
  
  As
          used in the financial statements and related notes, the term Company refers
          to Imperial Chemical Industries PLC; the terms ICI and Group refer
          to the Company and its consolidated subsidiaries but not to its associates.
    The
          financial statements are prepared under the historical cost convention
          and in accordance with the Companies Act 1985 and applicable accounting
          standards. Accounting policies conform with UK Generally Accepted Accounting
          Principles (UK GAAP). The Group has elected to adopt the
          provisions of UITF 38Accounting
          for ESOP Trustsin
          2003 (see note 1). The following paragraphs describe the main accounting
          policies. The accounting policies of some overseas subsidiaries do
          not conform with UK Accounting Standards and, where appropriate, adjustments
          are made on consolidation in order to present the Group financial statements
          on a consistent basis. Note 41 describes the significant differences
          between UK GAAP and US Generally Accepted Accounting Principles (US
          GAAP) and presents a reconciliation of net income and shareholders equity
          from UK GAAP to US GAAP as a result of each difference.
    TurnoverTurnover
    excludes Intra-Group sales and value added taxes. Revenue is recognised at
    the point at which title passes.
    DepreciationThe
      Groups policy is to write-off the book value of each tangible fixed
      asset excluding land to its residual value evenly over its estimated remaining
      life. Reviews are made annually of the estimated remaining lives of individual
      productive assets, taking account of commercial and technological obsolescence
      as well as normal wear and tear. Under this policy it becomes impracticable
      to calculate average asset lives exactly; however, the total lives approximate
      to 31 years for buildings and 13 years for plant and equipment. Depreciation
      of assets qualifying for grants is calculated on their full cost. No depreciation
      has been provided on land. Impairment reviews are performed where there
      is an indication of potential impairment. If the carrying value of an asset
      exceeds its discounted estimated future cashflows the impairment is charged
      to the profit and loss account.
    Pension
            costsThe
    pension costs relating to Group retirement plans are assessed in accordance
    with the advice of independent qualified actuaries. The amounts so determined
    include the regular cost of providing the benefits under the plans which
    should be a level percentage of current and expected future earnings of the
    employees covered under the plans. Variations from the regular pension cost
    are spread on a systematic basis over the estimated average remaining service
    lives of current employees in the plans.
    Research
            and developmentResearch
    and development expenditure is charged to profit in the year in which it
    is incurred.
    Exceptional
            itemsExceptional
    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.
    Foreign
            currenciesProfit
    and loss accounts in foreign currencies are translated into sterling at average
    rates for the relevant accounting periods. Assets and liabilities are translated
    at exchange rates ruling at the date of the Group balance sheet. Exchange
    differences on short-term foreign
  
  currency
          borrowings and deposits are included with net interest payable. Exchange
          differences on all other balances, except relevant foreign currency
          loans, are taken to operating profit. In the Group accounts, exchange
          differences arising on consolidation of the net investments in overseas
          subsidiary undertakings and associates are taken to reserves, as are
          differences arising on equity investments denominated in foreign currencies
          in the Company accounts.Differences
          on relevant foreign currency loans are taken to reserves and offset
          against the differences on net investments in both Group and Company
          accounts.
    Financial
            derivativesHedge
      accountingThe
      Group uses various derivative financial instruments to reduce exposure
      to foreign exchange risks. These include currency swaps, forward currency
      contracts and currency options. The Group also uses interest rate swaps,
      forward rate agreements and interest rate caps derivatives to adjust interest
      rate exposures. The Group considers its derivative financial instruments
      to be hedges (i.e. an offset of foreign exchange and interest
      rate risks) when certain criteria are met. Under hedge accounting for currency
      options, the Group defers the instruments impact on profit until
      it recognises the underlying hedged item in profit. Other material instruments
      do not involve deferral since the profit impact they offset occurs during
      the terms of the contracts.
    Foreign
          currency derivative instruments:The
      Groups criteria to qualify for hedge accounting are:
    •
        The
            instrument must be related to a foreign currency asset or liability
            that is probable and whose characteristics have been identified;•
        It
            must involve the same currency as the hedged item; and•
        It
            must reduce the risk of foreign currency exchange movements on the
            Groups operations.Interest
          rate derivative instruments:The
      Groups criteria to qualify for hedge accounting are:
    •
        The
            instrument must be related to an asset or a liability; and•
        It
            must change the character of the interest rate by converting a variable
            rate to a fixed rate or vice versa.Derivative
              financial instruments reported in the financial statements:•
        The
            unamortised premium paid on purchased currency options is included
            in debtors in the balance sheet.Cash
          flows related to foreign currency derivative transactions are reported
          along with related transactions in net cash inflow from operating activities
          or returns on investments and servicing of finance, as appropriate,
          in the Statement of Group cash flow.
    Currency
          swapsPrincipal
    amounts are revalued at exchange rates ruling at the date of the Group balance
    sheet and included in the sterling value of loans. In accordance with SSAP20
    and FRS 3 exchange gains/losses are included in the Statement of Group total
    recognised gains and losses along with similar movements in the values of
    the investments being hedged.
    Forward
          currency contractsThose
    forward currency contracts hedging transaction exposures (purchases and sales
    held in the books of account) are revalued to balance sheet rates with net
    unrealised gains/losses being shown as debtors/creditors. Both realised gains
    and losses on purchases/sales and unrealised gains/losses on forward contracts
    are recognised in operating profit.
  
  52
      ICI
          ANNUAL REPORT AND ACCOUNTS 2003
  Back to Contents
  Contents to the Accounts
  Financial
            derivatives (continued)Forward
        currency contracts (continued)Those contracts used to change the currency mix of net debt are revalued
    to balance sheet rates with net unrealised gains/losses being shown as part
    of the debt they are hedging. The difference between spot and forward rate
    for these contracts is recognised as part of net interest payable over the
    period of the contract. Realised and unrealised exchange gains/losses are
    shown in the financial statements in the same place as the underlying borrowing/deposit.
    Currency
          optionsOption
        premia are recognised at their historic cost in the Group balance sheet
        as other debtors. At maturity, the option premia net of any
        realised gains on exercise, are taken to the financial statements as
        operating profit.
    Interest
          rate swaps and forward rate agreementsInterest
        payments/receipts are accrued with net interest payable. They are not
        revalued to fair value or shown on the Group balance sheet at period
        end. If they are terminated early, the gain or loss is spread over the
        remaining maturity of the original instrument.
    Interest
          rate capsThe
        option premia are recognised on the Group balance sheet as other
        debtors. The option premia, net of any realised gains on individual
        caplets, are taken to net interest payable and spread evenly over the
        lifetime of the cap.
    AssociatesAssociates
      are undertakings in which the Group holds a long-term interest and over
      which it actually exercises significant influence. The Groups share
      of the profits less losses from associates are included in the Group profit
      and loss account on the equity accounting basis. The holding value of associates
      in the Group balance sheet is calculated by reference to the Groups
      equity in the net assets of such undertakings, as shown by the most recent
      accounts available. Interests in joint arrangements that are not entities
      are included proportionately in the accounts of the investing entity.
    InvestmentsInvestments
        are held at cost less provisions for impairment.
    TaxationFull
    provision for deferred tax is made for timing differences between the recognition
    of gains and losses in the consolidated financial statements and their recognition
    in the tax computation, using current tax rates except as otherwise required
    by FRS 19. The Group does not discount these balances. No deferred tax is
    provided in respect of any future remittance of earnings of foreign subsidiaries
    or associates where no commitment has been made to remit such earnings. Taxation
    on exchange differences on relevant foreign currency loans used to finance
    net investments in subsidiary undertakings and associates is taken to reserves
    to be consistent with the treatment of the underlying exchange differences
    on the loans and net investments.
    Stock
            valuationFinished
        goods, raw materials and other stocks are stated at the lower of cost
        and net realisable value, the first in, first out or an average method
        of valuation is used. In determining cost for stock valuation purposes,
        depreciation is included but selling expenses and certain overhead expenses
        are excluded.
  
  Environmental
            liabilitiesThe
    Group is exposed to environmental liabilities relating primarily to its past
    operations, principally in respect of soil and groundwater remediation costs.
    Provisions 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.
    Disposal
            provisionsThe
    Group is exposed to certain liabilities when businesses are divested and
    disposal provisions are created as part of the gain or loss on disposal calculation.
    Typical costs include pension liabilities, environmental costs, transaction
    costs and separation costs.Provisions
    are only established when the Group has a present obligation (legal or constructive)
    as a result of a past event, it is probable that a transfer of economic benefits
    will be required to settle the obligation, and a reliable estimate can be
    made of the amount of the obligation. The Group reviews its disposal provisions
    regularly to determine whether they accurately reflect the present obligations
    of the Group based on the latest available facts.
    Contingent
            liabilitiesContingent
        liabilities are possible obligations that arise from past events and
        whose existence will be confirmed only by the occurrence of one or more
        uncertain future events not wholly within the Groups control or
        are present obligations arising from past events that are not recognised
        as it is not probable a transfer of economic benefits will occur or the
        amount cannot be measured with sufficient certainty. The Group reviews
        its obligations regularly and provides disclosures of its contingent
        liabilities in note 39.
    GoodwillOn
        the acquisition of a business, fair values are attributed to the net
        assets acquired. Goodwill arises where the fair value of the consideration
        given for a business exceeds the fair value of such net assets. For purchased
        goodwill arising on acquisitions after31
        December 1997 goodwill is capitalised and amortised through the profit
        and loss account over a period of 20 years unless the Directors consider
        it has a materially different useful life, either on acquisition or subsequently,
        if a shorter life is indicated. For goodwill arising on acquisitions
        prior to 31 December 1997 purchased goodwill was charged directly to
        reserves in the year of acquisition. On subsequent disposal or termination
        of a previously acquired business, the profit or loss recognised on disposal
        or termination is calculated after charging the amount of any related
        goodwill previously taken to reserves. Impairment reviews are performed
        where there is an indication of potential impairment. If the carrying
        value of goodwill exceeds it estimated recoverable amount, any impairment
        is charged to the profit and loss account. The estimated recoverable
        amount of goodwill is determined based on discounted projected future
        operating cash flows.
    Employee
            Share Ownership Plan (ESOP)The
        financial statements of the Group include the assets and related liabilities
        of the Imperial Chemical Industries PLC Employee Benefits Trust and Impkemix
        Trustees Limited, a subsidiary company of the Group, which acts as trustee
        for the Groups employee share ownership plan. The Group has elected
        to adopt early the provisions of UITF 38Accounting
        for ESOP Trustsin
        these financial statements. Under the requirements of UITF 38 the shares
        held by the ESOP are stated at cost and deducted from shareholders funds.
  
  ICI
          ANNUAL REPORT AND ACCOUNTS 2003
      53
  Back to Contents
  Contents to the Accounts
  group
      profit and loss account
  for the
      year ended 31 December 2003
  
  2003Continuing operations
      
      Discontinued
      
      TotaloperationsBefore
      
      Exceptionalexceptional
      itemsitemsnotes
      £m
      £m
      £m
      £mTurnover
      4,5
      
      5,849
      
      
      
      
      
      5,849Operating
              costs
      3,5
      
      (5,471
      )
      (200
      )
      
      
      (5,671
      )Other
              operating income
      5
      
      16
      
      
      
      
      
      16Operating
              profit (loss)
      3,4,5
      
      394
      
      (200
      )
      
      
      194After
              deducting goodwill amortisation
      4
      
      (36
      )
      
      
      
      
      (36
      )Share
          of operating profits less losses of associates
      3,6
      
      2
      
      
      
      
      
      2396
      
      (200
      )
      
      
      196Profits
          less losses on sale or closure of operations
      3
      
      
      
      41
      
      (9
      )
      32Profits
          less losses on disposals of fixed assets
      3
      
      
      
      5
      
      
      
      5Amounts
          written off investments
      3
      
      
      
      (57
      )
      
      
      (57
      )Profit
              (loss) on ordinary activities before interest
      4
      
      396
      
      (211
      )
      (9
      )
      176Net
          interest (payable) receivable
      7Group
      
      
      (92
      )
      
      
      
      
      (92
      )Associates
      
      
      1
      
      
      
      
      
      1(91
      )
      
      
      
      
      (91
      )Profit
              (loss) on ordinary activities before taxation
      
      
      305
      
      (211
      )
      (9
      )
      85Taxation
          on profit (loss) on ordinary activities
      8
      
      (99
      )
      52
      
      6
      
      (41
      )Profit
              (loss) on ordinary activities after taxation
      
      
      206
      
      (159
      )
      (3
      )
      44Attributable
          to minorities
      
      
      (23
      )
      (1
      )
      
      
      (24
      )Net
              profit (loss) for the financial year
      
      
      183
      
      (160
      )
      (3
      )
      20Dividends
      9
      
      
      
      
      
      
      
      (74
      )Profit
              (loss) retained for the year
      24
      
      
      
      
      
      
      
      (54
      )Earnings
              (loss) per £1 Ordinary Share
      10Basic
      
      
      15.5
      p
      (13.5
      )p
      (0.3
      )p
      1.7
      pDiluted
      
      
      15.5
      p
      (13.5
      )p
      (0.3
      )p
      1.7
      pSee
          accompanying notes to consolidated financial statements.
  statement
      of group total recognised gains and losses
  for the
      year ended 31 December 2003
  
  2003£mNet
              profit (loss) for the financial yearParent
            and subsidiary undertakings
      18Associates
      220Currency
          translation differences on foreign currency net investments and related
          loans
      2Taxation
          on translation differences on foreign currency loans
      79Total
              recognised gains and losses for the year
      29Prior
          year adjustment
      22Total
              gains and losses recognised since last annual report
      5154
      ICI
          ANNUAL REPORT AND ACCOUNTS 2003
  Back to Contents
  Contents to the Accounts
  2002
      
      
      2001
        (as restated  note 1)Continuing
            operations
      
      Discontinuedoperations
      
      Total
      
      
      Continuing
          operations
      
      Discontinued
      operations
      
      TotalBefore
      
      Exceptional
      
      
      Before
      
      Exceptionalexceptional
      items
      
      
      exceptional
      
      itemsitems
      
      
      
      items£m
      £m
      £m
      £m
      £m
      
      £m
      
      £m
      
      £mTurnover
      6,125
      
      
      
      
      
      6,125
      
      
      6,425
      
      
      
      
      
      6,425Operating
              costs
      (5,652
      )
      
      
      
      
      (5,652
      )
      
      (5,935
      )
      (143
      )
      
      
      (6,078
      )Other
              operating income
      23
      
      
      
      
      
      23
      
      
      46
      
      
      
      
      
      46Operating
              profit (loss)
      496
      
      
      
      
      
      496
      
      
      536
      
      (143
      )
      
      
      393After
              deducting goodwill amortisation
      (37
      )
      
      
      
      
      (37
      )
      
      (37
      )
      
      
      
      
      (37
      )Share
          of operating profits less losses of associates
      18
      
      
      
      
      
      18
      
      
      57
      
      (9
      )
      
      
      48514
      
      
      
      
      
      514
      
      
      593
      
      (152
      )
      
      
      441Profits
          less losses on sale or closure of operations
      
      
      40
      
      10
      
      50
      
      
      
      
      (11
      )
      18
      
      7Profits
          less losses on disposals of fixed assets
      
      
      3
      
      
      
      3
      
      
      
      
      8
      
      
      
      8Amounts
          written off investments
      
      
      (99
      )
      
      
      (99
      )
      
      
      
      
      
      
      
      Profit
              (loss) on ordinary activities before interest
      514
      
      (56
      )
      10
      
      468
      
      
      593
      
      (155
      )
      18
      
      456Net
          interest (payable) receivableGroup
      (123
      )
      
      
      
      
      (123
      )
      
      (162
      )
      
      
      
      
      (162
      )Associates
      (28
      )
      
      
      
      
      (28
      )
      
      (67
      )
      
      
      
      
      (67
      )(151
      )
      
      
      
      
      (151
      )
      
      (229
      )
      
      
      
      
      (229
      )Profit
              (loss) on ordinary activities before taxation
      363
      
      (56
      )
      10
      
      317
      
      
      364
      
      (155
      )
      18
      
      227Taxation
          on profit (loss) on ordinary activities
      (115
      )
      1
      
      3
      
      (111
      )
      
      (116
      )
      48
      
      (29
      )
      (97
      )Profit
              (loss) on ordinary activities after taxation
      248
      
      (55
      )
      13
      
      206
      
      
      248
      
      (107
      )
      (11
      )
      130Attributable
          to minorities
      (21
      )
      (6
      )
      
      
      (27
      )
      
      (26
      )
      (2
      )
      
      
      (28
      )Net
              profit (loss) for the financial year
      227
      
      (61
      )
      13
      
      179
      
      
      222
      
      (109
      )
      (11
      )
      102Dividends
      
      
      
      
      
      
      (88
      )
      
      
      
      
      
      
      
      (116
      )Profit
              (loss) retained for the year
      
      
      
      
      
      
      91
      
      
      
      
      
      
      
      
      (14
      )Earnings
              (loss) per £1 Ordinary ShareBasic
      20.4
      p
      (5.5
      )p
      1.2
      p
      16.1
      p
      
      25.5
      p
      (12.5
      )p
      (1.3
      )p
      11.7
      pDiluted
      20.3
      p
      (5.5
      )p
      1.2
      p
      16.0
      p
      
      25.5
      p
      (12.5
      )p
      (1.3
      )p
      11.7
      p
  2002
      
      
      2001(as
          restated  note 1
      )£m
      
      
      £mNet
              profit (loss) for the financial yearParent
            and subsidiary undertakings
      192
      
      
      94Associates
      (13
      )
      
      8179
      
      
      102Currency
          translation differences on foreign currency net investments and related
          loans
      (91
      )
      
      (59
      )Taxation
          on translation differences on foreign currency loans
      34
      
      
      (12
      )(57
      )
      
      (71
      )Total
              recognised gains and losses for the year
      122
      
      
      31ICI
            ANNUAL REPORT AND ACCOUNTS 2003
      55
  Back to Contents
  Contents to the Accounts
  balance
      sheets
  at 31
      December 2003
  Group
      
      Company2003
      
      2002
      
      2003
      
      2002(as
          restatednote
          1)notes
      
      £m
      
      £m
      
      £m
      
      £mAssets
            employedFixed
            assetsIntangible
          assets  goodwill
      11
      
      532
      
      574
      
      
      
      Tangible
          assets
      4,12
      
      1,794
      
      1,961
      
      68
      
      78InvestmentsSubsidiary
            undertakings
      13
      
      
      
      
      
      10,489
      
      11,357Participating
            and other interests
      14
      
      57
      
      33
      
      1
      
      12,383
      
      2,568
      
      10,558
      
      11,436Current
            assetsStocks
      15
      
      626
      
      651
      
      27
      
      29Debtors
      16
      
      1,605
      
      1,695
      
      2,438
      
      2,689Investments
          and short-term deposits
      17
      
      345
      
      285
      
      
      
      Cash
      33
      
      249
      
      267
      
      9
      
      212,825
      
      2,898
      
      2,474
      
      2,739Total
            assets
      
      
      5,208
      
      5,466
      
      13,032
      
      14,175Creditors
            due within one yearShort-term
          borrowings
      18
      
      (29
      )
      (226
      )
      
      
      Current
          installments of loans
      20
      
      (534
      )
      (500
      )
      
      
      (270
      )Other
          creditors
      19
      
      (1,663
      )
      (1,692
      )
      (4,725
      )
      (7,768
      )(2,226
      )
      (2,418
      )
      (4,725
      )
      (8,038
      )Net
            current assets (liabilities)
      
      
      599
      
      480
      
      (2,251
      )
      (5,299
      )Total
            assets less current liabilities
      4
      
      2,982
      
      3,048
      
      8,307
      
      6,137Financed
            byCreditors
            due after more than one yearLoans
      20
      
      1,353
      
      1,363
      
      133
      
      136Other
          creditors
      19
      
      18
      
      32
      
      3,450
      
      1,5731,371
      
      1,395
      
      3,583
      
      1,709Provisions
            for liabilities and charges
      21
      
      1,092
      
      1,121
      
      207
      
      171Minority
            interests  equity
      
      
      69
      
      69Shareholders funds  equityCalled-up
          share capital
      23
      
      1,191
      
      1,191
      
      1,191
      
      1,191ReservesShare
            premium account
      
      
      933
      
      933
      
      933
      
      933Own
            shares
      
      
      (53
      )
      (58
      )Associates reserves
      
      
      13
      
      11Profit
            and loss account
      
      
      (1,634
      )
      (1,614
      )
      2,393
      
      2,133Total
          reserves
      24
      
      (741
      )
      (728
      )
      3,326
      
      3,066Total
          shareholders funds (page 57)
      
      
      450
      
      463
      
      4,517
      
      4,2572,982
      
      3,048
      
      8,307
      
      6,137See
      accompanying notes to consolidated financial statements.
  Included
      within Group net current assets are debtors of £521m (2002 £545m)
      which fall due after more than one year. Included within the Company net
      current liabilities are debtors of £297m (2002 £327m) which
      fall due after more than one year.
  The
      accounts on pages 52 to 112 were approved by the Board of Directors on
      11 February 2004 and were signed on its behalf by:
  P
          B EllwoodCBEDirector
  T
          A ScottDirector
  56
      ICI
          ANNUAL REPORT AND ACCOUNTS 2003




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Contents to the Accounts

statement
      of group cash flow

for the
      year ended 31 December 2003



|                                                                                     |       |  | 2003 |   | 2002                   |   | 2001                   |  
|------------------------------------------------------------------------------------ | ----- |  | ---- | - | ---------------------- | - | ---------------------- | -
|                                                                                     | notes |  | £m   |   | £m                     |   | £m                     |  
|                                                                                     |       |  |      |   |                        |   |                        |  
|Net
          cash inflow from operating activities                                  | 25    |  | 539  |   | 623                    |   | 637                    |  
|                                                                                     |       |  |      |   |                        |   |                        |  
|Returns
          on investments and servicing of finance                            | 26    |  | (96  | ) | (185                   | ) | (207                   | )
|                                                                                     |       |  |      |   |                        |   |                        |  
|Taxation                                                                             |       |  | (37  | ) | (35                    | ) | (58                    | )
|                                                                                     |       |  |      |   |                        |   |                        |  
|                                                                                     |       |  | 406  |   | 403                    |   | 372                    |  
|                                                                                     |       |  |      |   |                        |   |                        |  
|Capital
          expenditure and financial investment                               | 27    |  | (138 | ) | (184                   | ) | (206                   | )
|                                                                                     |       |  |      |   |                        |   |                        |  
|                                                                                     |       |  | 268  |   | 219                    |   | 166                    |  
|                                                                                     |       |  |      |   |                        |   |                        |  
|Acquisitions
          and disposals                                                 |       |  |      |   |                        |   |                        |  
|                                                                                     |       |  |      |   |                        |   |                        |  
|Acquisitions                                                                         | 28    |  | (20  | ) | (54                    | ) | (109                   | )
|                                                                                     |       |  |      |   |                        |   |                        |  
|Disposals                                                                            | 30    |  | 104  |   | 290                    |   | 17                     |  
|                                                                                     |       |  |      |   |                        |   |                        |  
|                                                                                     |       |  | 84   |   | 236                    |   | (92                    | )
|                                                                                     |       |  |      |   |                        |   |                        |  
|Equity
          dividends paid                                                      |       |  | (86  | ) | (106                   | ) | (185                   | )
|                                                                                     |       |  |      |   |                        |   |                        |  
|Cash
          inflow (outflow) before use of liquid resources and financing         |       |  | 266  |   | 349                    |   | (111                   | )
|                                                                                     |       |  |      |   |                        |   |                        |  
|Management
          of liquid resources                                             | 29    |  | (194 | ) | (13                    | ) | 253                    |  
|                                                                                     |       |  |      |   |                        |   |                        |  
|Financing                                                                            |       |  |      |   |                        |   |                        |  
|                                                                                     |       |  |      |   |                        |   |                        |  
|Issues
            of shares                                                         |       |  |     |   | 807                    |   |                       |  
|                                                                                     |       |  |      |   |                        |   |                        |  
|Decrease
            in debt                                                         |       |  | (84  | ) | (1,151                 | ) | (77                    | )
|                                                                                     |       |  |      |   |                        |   |                        |  
|                                                                                     | 31    |  | (84  | ) | (344                   | ) | (77                    | )
|                                                                                     |       |  |      |   |                        |   |                        |  
|Increase
          (decrease) in cash                                                | 33    |  | (12  | ) | (8                     | ) | 65                     |  
|                                                                                     |       |  |      |   |                        |   |                        |  
|                                                                                     |       |  |      |   |                        |   |                        |  
|                                                                                     |       |  |      |   |                        |   |                        |  
|                                                                                     |       |  |      |   |                        |   |                        |  
|reconciliation
          of movements in shareholders funds                        
|                                                                                     |       |  |      |   |                        |   |                        |  
|for
          the year ended 31 December 2003                                        |       |  |      |   |                        |   |                        |  
|                                                                                     |       |  | 2003 |   | 2002                   |   | 2001                   |  
|                                                                                     |       |  |      |   | (as
          restated |   | (as
          restated |  
|                                                                                     |       |  |      |   | note
          1)      |   | note
          1)      |  
|                                                                                     | notes |  | £m   |   | £m                     |   | £m                     |  
|                                                                                     |       |  |      |   |                        |   |                        |  
|Net
          profit for the financial year                                          |       |  | 20   |   | 179                    |   | 102                    |  
|                                                                                     |       |  |      |   |                        |   |                        |  
|Dividends                                                                            |       |  | (74  | ) | (88                    | ) | (116                   | )
|                                                                                     |       |  |      |   |                        |   |                        |  
|Profit
          (loss) retained for the year                                        |       |  | (54  | ) | 91                     |   | (14                    | )
|                                                                                     |       |  |      |   |                        |   |                        |  
|Issues
          of ICI Ordinary Shares                                              |       |  |     |   | 807                    |   |                       |  
|                                                                                     |       |  |      |   |                        |   |                        |  
|Movement
          in respect of own shares                                          |       |  | 5    |   | (6                     | ) | 2                      |  
|                                                                                     |       |  |      |   |                        |   |                        |  
|Goodwill
          movement                                                          | 24    |  | 27   |   | 22                     |   | (8                     | )
|                                                                                     |       |  |      |   |                        |   |                        |  
|Other
          recognised gains and (losses) related to the year                    | 24    |  | 9    |   | (57                    | ) | (71                    | )
|                                                                                     |       |  |      |   |                        |   |                        |  
|Net
          increase (reduction) in shareholders funds                            |       |  | (13  | ) | 857                    |   | (91                    | )
|                                                                                     |       |  |      |   |                        |   |                        |  
|Shareholders funds
          at beginning of year  equity (as previously reported) |       |  | 499  |   | (364                   | ) | (249                   | )
|                                                                                     |       |  |      |   |                        |   |                        |  
|Prior
          year adjustment                                                      |       |  | (36  | ) | (30                    | ) | (54                    | )
|                                                                                     |       |  |      |   |                        |   |                        |  
|Shareholders funds
          at beginning of year  equity (as restated  note 1)   |       |  | 463  |   | (394                   | ) | (303                   | )
|                                                                                     |       |  |      |   |                        |   |                        |  
|Shareholders funds
          at end of year  equity                                |       |  | 450  |   | 463                    |   | (394                   | )
|                                                                                     |       |  |      |   |                        |   |                        |  

See
      accompanying notes to consolidated financial statements.

| | ICI
          ANNUAL REPORT AND ACCOUNTS 2003 | 57
| | --------------------------------------------- | --

---



Back to Contents

Contents to the Accounts

notes relating to the accounts

|1 | Basis
      of presentation of financial information
|- | ----------------------------------------------------

Implementation
  of UK Accounting Standards


New accounting
  standardsUITF
  Abstract 38 Accounting for ESOP trustsThis standard
  requires the assets and liabilities of the Groups ESOP trust to be recognised
  in the Groups financial statements where there is de facto control of
  those assets and liabilities. The companys own shares held by the ESOP
  trust should be deducted from shareholders funds until they vest unconditionally
  with employees. Prior to the adoption of UITF 38, the companys own shares
  held by the ESOP trust were recognised as an asset on the balance sheet at the
  lower of cost and estimated net realisable value. The new standard is effective
  for periods ending on or after 22 June 2004, but the Group has elected to apply
  this standard in these financial statements. All primary statements and notes
  relating to the accounts have been restated accordingly.


Compliance
    with UITF 38 has reduced the 2002 investments and shareholders funds
    by £36m (2001 £30m). The net profit for 2002 was unaffected (2001
    increase £22m). The estimated impact on the current years profit
    if UITF 38 had not been adopted would be to reduce net profit by £19m.
    The new standard has no impact on cash flows.


FRS
  No. 17 Retirement benefits (as amended)This Standard
  sets out revised requirements for the accounting and disclosure of an employers
  retirement benefit obligations and related funding. The Group has followed the
  transitional requirements of the Standard and has provided increasing levels
  of disclosure of amounts measured in accordance with the requirements of the
  Standard in its accounts for the years 2001, 2002 and 2003. With the exception
  of the recognition in the primary statements, which, with restated comparative
  data, is required for accounting periods commencing on or after 1 January 2005,
  the full extent of the requirements of FRS No. 17 are now disclosed in note
  36 to these financial statements. The requirements of the Standard will have
  no impact on cash flows.


Restatements
    arising in prior years FRS
    No. 19 Deferred TaxThe results
    reported in these financial statements for 2001 were restated in 2002 to reflect
    the requirements of FRS No. 19. The deficit on Shareholders funds at
    1 January 2001, originally reported in the accounts to 31 December 2001 at
    £216m, has been restated in these financial statements at a deficit
    of £249m. The taxation charge originally reported for 2001 has been
    restated and increased by £41m to £97m. The deficit on Shareholders
    funds at 31 December 2001 increased by £81m from £283m as originally
    reported, to £364m.


Rights
    IssueOn 4 February
    2002, the Company announced an issue of rights to purchase Ordinary Shares
    (the Rights Issue) and £463m new Ordinary Shares were issued
    at 180p per share on the basis of 7 new Ordinary Shares for every 11 existing
    Ordinary Shares. Comparative earnings per share and dividends per share figures
    for 2001 have been restated from the reported figures in 2001 (after adjusting
    for FRS No. 19 (see above)) by applying the factor (265/319) in order to adjust
    for the bonus issue within the Rights Issue.


Continuing
  and Discontinued Operations For UK reporting
  purposes, the results in these accounts differentiate between the Groups
  continuing and discontinued operations. As defined in FRS No. 3Reporting
  Financial Performance,discontinued
  operations are material, clearly separate operations which have been sold or
  permanently terminated. All other operations are classified as continuing operations.


Transactions
  in these financial statements which are identified as relating to discontinued
  operations comprise exceptional items (and associated tax effects) in respect
  of the following operations, all of which were sold or terminated either in
  2001 or before:


| | Polyurethanes
      business                        
| | ----------------------------------------------------
| | Tioxide
      business                              
| | Selected
      Petrochemicals businesses            
| | Fluropolymers
      business                        
| | Acrylics
      business                             
| | Chlor-Chemicals,
      Klea and Crosfield businesses
| | Methanol
      business                             

Non co-terminous
  year ends Owing to
  local conditions and to avoid undue delay in the presentation of the Group accounts,
  three subsidiaries made up their accounts to dates earlier than 31 December,
  but not earlier than 30 September; additionally five subsidiaries made up their
  accounts prior to 30 September but interim accounts to 31 December were drawn
  up for consolidation purposes.


Cash
  In the statement
  of Group cash flow and related notes cash includes cash at bank,
  deposits repayable on demand and overdrafts; deposits are repayable on demand
  if they are, in practice, available within 24 hours without penalty.


Estimates
  The preparation
  of the financial statements of the Group in conformity with Generally Accepted
  Accounting Principles requires management to make estimates and assumptions
  that affect reported amounts and related disclosures. Actual results could differ
  from those estimates.




|58 | ICI
      ANNUAL REPORT AND ACCOUNTS 2003 | 
|-- | ----------------------------------------- | 

---



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Contents to the Accounts

|2 | Directors and
    Officers remuneration and interests                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  | Information
          covering Directors remuneration, interests in shares, debentures,
          share options and pension benefits is included in the Remuneration
          report on pages
38 to 48.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  | The
          aggregate remuneration paid to or accrued for all Directors and Officers
          of the Company for services in all capacities during the year ended
          31 December 2003 was £5.2m (2002 £6.0m; 2001 £4.8m);
          Directors £2.8m (2002 £4.0m; 2001 £3.2m); Officers £2.4m
          (2002 £2.0m; 2001 £1.6m). The aggregate amount set aside
          or accrued to provide pension, retirement and similar benefits for
          Directors and Officers of the Company during the year ended 31 December
          2003 was £0.7m (2002 £1.0m; 2001 £1.0m); Directors £0.4m
          (2002 £0.7m; 2001 £0.7m); Officers £0.3m (2002 £0.3m;
          2001 £0.3m). At 9 February 2004 shares held by and options granted
          to Directors and Officers to subscribe for £1 Ordinary Shares
    in the Company were as follows:

| |  |                                                                                    |                     |  |                       |  |                          |  |                       
| |  | ---------------------------------------------------------------------------------- | ------------------- |  | --------------------- |  | ------------------------ |  | ----------------------
| |  |                                                                                    | £1
        Ordinary |  |                       |  | Options
        granted |  |                       
| |  |                                                                                    | Shares             |  |                       |  |                          |  |                       
| |  |                                                                                    |                     |  |                      
| |  |                                                                                    |                     |  | Options               |  |                          |  |                       
| |  |                                                                                    | At                  |  | outstanding           |  |                          |  |                       
| |  |                                                                                    | 9
        February  |  | at
        9 February |  | Subscription             |  | Date
        latest   
| |  |                                                                                    | 2004                |  | 2004                  |  | prices                   |  | option
        expires
| |  |                                                                                    | Number              |  | Number                |  | £                        |  |                       
| |  |                                                                                    |                     |  |                       |  |                          |  |                       
| |  | Directors
       (for further details see Remuneration Report pages 43, 44 and 46) | 279,085             |  | 4,701,324             |  | £1.340 to £10.077        |  | 09.12.13              
| |  |                                                                                    |                     |  |                       |  |                          |  |                       
| |  | Officers                                                                           | 107,707             |  | 3,611,375             |  | £1.340 to £10.077        |  | 16.03.13              
| |  |                                                                                    |                     |  |                       |  |                          |  |                       
| |  |                                                                                    |                     |  |                       |  |                          |  |                       

| |  Includes
        ADRs disclosed in terms of £1 Ordinary Share equivalents/Ordinary
    Share option equivalents.                                          
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                             
| | No
        individual director or officer had interests in shares or options exceeding
    one per cent of the issued Ordinary Share capital of the Company.



| | ICI ANNUAL REPORT AND ACCOUNTS 2003 | 59
| | ----------------------------------- | --

---



Back to Contents

Contents to the Accounts

notes relating to the accounts

|3 | Exceptional
    items before tax
|- | --------------------------------



| |                                                                               |       |     |      |     |                      |    
| | ----------------------------------------------------------------------------- | ----- | --- | ---- | --- | -------------------- | ---
| |                                                                               | 2003  |     | 2002 |     | 2001                 |    
| |                                                                               |       |     |      |     | (as
        restated |    
| |                                                                               |       |     |      |     | note
        1)      |    
| |                                                                               | £m    |     | £m   |     | £m                   |    
| | Charged in arriving at operating profit (loss)                                |       |     |      |     |                      |    
| |                                                                               |       |     |      |     |                      |    
| | Continuing operations                                                         |       |     |      |     |                      |    
| |                                                                               |       |     |      |     |                      |    
| | Restructuring                                                                 | (189) | (a) |     |     | (143)                | (a)
| |                                                                               |       |     |      |     |                      |    
| | Other                                                                         | (11)  | (a) |     |     |                     |    
| |                                                                               |       |     |      |     |                      |    
| | Credited (charged) after operating profit (loss)                              |       |     |      |     |                      |    
| |                                                                               |       |     |      |     |                      |    
| | Continuing operations                                                         |       |     |      |     |                      |    
| |                                                                               |       |     |      |     |                      |    
| | Profits less losses on sale or closure of operations                          |       |     |      |     |                      |    
| |                                                                               |       |     |      |     |                      |    
| | Profits                                                                       | 64    | (b) | 114  | (c) | 16                   |    
| |                                                                               |       |     |      |     |                      |    
| | Losses                                                                        | (23)  | (d) | (74) | (e) | (27)                 | (f)
| |                                                                               |       |     |      |     |                      |    
| |                                                                               | 41    |     | 40   |     | (11                  | )  
| |                                                                               |       |     |      |     |                      |    
| | Profits less losses on disposals of fixed assets                              | 5     |     | 3    |     | 8                    |    
| |                                                                               |       |     |      |     |                      |    
| | Share of associates exceptional operating items                              |      |     |     |     | (9)                  | (g)
| |                                                                               |       |     |      |     |                      |    
| | Amounts written off investments                                               | (57)  | (h) | (99) | (i) |                     |    
| |                                                                               |       |     |      |     |                      |    
| | Discontinued operations                                                       |       |     |      |     |                      |    
| |                                                                               |       |     |      |     |                      |    
| | Profits less losses on sale or closure of operations                          |       |     |      |     |                      |    
| |                                                                               |       |     |      |     |                      |    
| | Profits                                                                       | 41    | (j) | 19   |     | 21                   |    
| |                                                                               |       |     |      |     |                      |    
| | Losses                                                                        | (50)  | (k) | (9   | )   | (3                   | )  
| |                                                                               |       |     |      |     |                      |    
| |                                                                               | (9    | )   | 10   |     | 18                   |    
| |                                                                               |       |     |      |     |                      |    
| | Exceptional items within profit (loss) on ordinary activities before taxation | (220  | )   | (46  | )   | (137                 | )  
| |                                                                               |       |     |      |     |                      |    

| |     |                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | A
        detailed description of those exceptional items charged/credited in arriving
        at operating profit (loss) is provided in note 22 and includes the following
        in respect of 2003 and 2001:                                                                                                                                                                                    
| |     | 2003                                                                                                                                                                                                                                                                                                                                                                                                
| |     | Exceptional
        items charged to operating profit include £201m in relation to
        a significant restructuring programme announced in 2003 to improve cost
        effectiveness across each of:                                                                                                                                                                                            
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                
| |     | (iii)                                                                                                                                                                                                                                                                                                                                                                                               
| |     | (iv)                                                                                                                                                                                                                                                                                                                                                                                                
| |     | (v)                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | The
        plans focus on manufacturing and supply chain rationalisation, and reductions
        in administrative support.                                                                                                                                                                                                                                                                        
| |     | Other
        items included within exceptional operating items in 2003 include a charge
        of £11m relating to the write-down of fixed assets in Quest following
        a review of the strategic direction of the future ERP systems development,
        and a credit of £12m relating to the release of prior year restructuring
        provisions.                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | 2001                                                                                                                                                                                                                                                                                                                                                                                                
| |     | A
        total exceptional charge of £143m across each of the following:                                                                                                                                                                                                                                                                                                                           
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                
| |     | (iii)                                                                                                                                                                                                                                                                                                                                                                                               
| |     | (iv)                                                                                                                                                                                                                                                                                                                                                                                                
| | (b) | The
        profits on sale or closure of continuing operations in 2003 relate primarily
        to the gain on sale of the Groups interest in Huntsman International
        Holdings LLC (£50m), the gain on sale of the Groups explosives
        business in India (£4m) and a gain on disposal of National Starchs
        Cheese Coatings business (£5m).                                  
| | (c) | The
        profits on sale or closure of continuing operations in 2002 relate primarily
        to the profit on the sale of the Groups catalyst business, Synetix,
        (£90m) and on the sale of the Security Systems business (£17m).                                                                                                                                                       
| | (d) | The
        losses on sale or closure of continuing operations in 2003 relate primarily
        to the loss on the sale of National Starchs Permabond business
        (£19m).                                                                                                                                                                                                                     
| | (e) | The
        losses on sale or closure of continuing operations in 2002 relate primarily
        to the loss on the sale of the UK Nitrocellulose and Energetic Technologies
        business (£32m) and the write-down of the Groups investment
        in its 49% associate, Irish Fertilizer Industries Limited, and the additional
        costs incurred in relation to its liquidation (£27m).
| | (f) | The
        losses on sale of closure of continuing operations in 2001 relate primarily
        to the loss on disposal of Eutech (£19m).                                                                                                                                                                                                                                                           
| | (g) | The
        share of associates exceptional operating items in 2001 related
        to the major restructuring of the Polyurethanes business of Huntsman
        International Holdings LLC.                                                                                                                                                                                                       

|   |                                    
|-- | -----------------------------------
|60 | ICI ANNUAL REPORT AND ACCOUNTS 2003

---



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Contents to the Accounts

|3 | Exceptional
    items before tax (continued)
|- | --------------------------------------------
|  |                                             

| | (h)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Amounts
       written off investments in 2003 relates to a provision to write-down the
       shares of the Company which it is committed to buy under forward contracts
       to hedge employee share options (see note 23). The provisions were made
       to write-down these shares to estimated net realisable value having regard
       to the period over which the related options are exercisable. The amounts
       written off investments in 2001 relating to shares of the Company held
       to hedge obligations granted under the employee share ownership plan has
       been restated following the adoption of UITF 38 (see note 1).
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Amounts
       written off investments in 2002 related to provisions for all ICIs
       existing investments in Ineos Chlor, where uncertainty existed as to the
       extent to which, and period over which, these amounts will be recovered
       (see note 39).                                                                                                                                                                                                                                                                                                                                                                                       
| | (j)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | The
       profits on sale or closure of discontinued operations in 2003 relate to
       a number of provision releases related to prior year divestments and a £7m
       receipt from the Ineos Group in relation to a number of outstanding matters.                                                                                                                                                                                                                                                                                                                                                                                                      
| | (k)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | As
       part of an overall refinancing package for Ineos Chlor, ICI has agreed
       to make available new funding comprising a £30m cash contribution
       expected to be made in 2004, and additional loan financing of £30m
       expected to be drawn during 2005 (see note 39). A £30m charge relating
       to the cash contribution element of the refinancing has been included
       within the losses on sale or closure of discontinued operations. In addition,
       a further charge was recognised in relation to prior year divestments,
       principally the Polyurethanes, Tioxide and selected Petrochemicals businesses.       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Under
       UK GAAP, 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. Under US GAAP, exceptional items would
       be included in operating income, unless they relate to discontinued operations,
       associated undertakings or provisions in respect of forward commitments
    to purchase shares to hedge employee share options.
|

|4 | Segment information                                                                                                                                                                                                                                                  
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                      
|  | The
        Group is managed in five business segments, or classes, differentiated
        primarily by the nature of products manufactured in each. An explanation
        of the basis on which operations are classified as discontinued is set
    out in note 1.
|  |                                                                                                                                                                                                                                                                      
|  | The
        major
products of each business segment are as follows:                                                                                                                                                                                                  

| |                         |                                                                                                                                                                                               
| | ----------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Business                | Products                                                                                                                                                                                      
| |                        
| | National Starch         | adhesives,
       sealants, specialty synthetic polymers, specialty food and industrial
       starches,electronic
       and engineering materials, specialty coatings and process lubricants
| |                        
| | Quest                   | flavours, food ingredients, fragrances and fragrance materials                                                                                                                                
| |                        
| | Performance Specialties | oleochemicals (process intermediates), polymers, base stocks and additives for lubricants, personal care,                                                                                     
| |                         | performance specialties for the manufacture of agrochemicals and coatings, oilfield chemicals, textile auxiliaries,                                                                           
| |                         | spin
       finish, polymer additives, specialty cleaning and catalyst and support
    services*                                                                                              
| |                        
| | Paints                  | decorative paint, and coatings for food and beverage cans                                                                                                                                     
| |                        
| | Regional and Industrial | polyester staple fibre, pure terephthalic acid, soda ash, agrochemicals, pharmaceuticals, nitrocellulose, rubber                                                                              
| |                         | chemicals and tartaric acid                                                                                                                                                                   
| |                        

| | * | Divested
    fourth quarter 2002.
| | - | ---------------------------------

The accounting policies for each segment are the same as those appearing on pages 52 and 53. The Groups policy is to transfer products internally at external market prices. Corporate overheads are allocated to each business segment on a consistent basis over the periods presented.



| | ICI ANNUAL REPORT AND ACCOUNTS 2003 | 61
| | ----------------------------------- | --

---



Back to Contents

Contents to the Accounts

notes relating to the accounts

|4 | Segment
      information (continued)
|- | -------------------------------------
|  |                                      
|  | Classes
      of business            



| |                                                                 | Turnover |   | Profit
          before exceptional items, |   | Profit
          before interest and taxation |  
| | --------------------------------------------------------------- | -------- | - | ------------------------------------------ | - | --------------------------------------------- | -
| |                                                                 |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| |                                                                 | 2003     |   | 2002                                       |   | 2001                                          |  
| |                                                                 |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| |                                                                 | £m       |   | £m                                         |   | £m                                            |  
| |                                                                 |          |   |                                            |   |                                               |  
| | Continuing
      operations                                     |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| | National
      Starch                                           | 1,866    |   | 1,841                                      |   | 1,853                                         |  
| |                                                                 |          |   |                                            |   |                                               |  
| | Quest                                                           | 691      |   | 716                                        |   | 727                                           |  
| |                                                                 |          |   |                                            |   |                                               |  
| | Performance
      Specialties                                   | 669      |   | 804                                        |   | 832                                           |  
| |                                                                 |          |   |                                            |   |                                               |  
| | Paints                                                          | 2,163    |   | 2,182                                      |   | 2,233                                         |  
| |                                                                 |          |   |                                            |   |                                               |  
| | Regional
      and Industrial                                   | 481      |   | 615                                        |   | 821                                           |  
| |                                                                 |          |   |                                            |   |                                               |  
| | Inter-class
      eliminations                                  | (21      | ) | (33                                        | ) | (41                                           | )
| |                                                                 |          |   |                                            |   |                                               |  
| |                                                                 | 5,849    |   | 6,125                                      |   | 6,425                                         |  
| |                                                                 |          |   |                                            |   |                                               |  
| | Discontinued
      operations                                   |         |   |                                           |   |                                              |  
| |                                                                 |          |   |                                            |   |                                               |  
| | Associates                                                      |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| | Share
      of operating profits                                |          |   |                                            |   |                                               |  
| | less
      losses                                               |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| | Interest
      receivable (payable)                             |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| | Group
      net interest payable                                |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| | Amounts
      written-off investments                           |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| |                                                                 | 5,849    |   | 6,125                                      |   | 6,425                                         |  
| |                                                                 |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| | *Goodwill
      amortisation charged in arriving at the results |         
| |                                                                 |          |   |                                            |   |                                               |  
| | National
      Starch                                           |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| | Quest                                                           |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| | Performance
      Specialties                                   |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| | Paints                                                          |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| | Continuing
      operations                                     |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| | National
      Starch                                           |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| | Quest                                                           |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| | Performance
      Specialties                                   |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| | Paints                                                          |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| | Regional
      and Industrial                                   |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  
| |                                                                 |          |   |                                            |   |                                               |  



|62 | ICI
      ANNUAL REPORT AND ACCOUNTS 2003 | 
|-- | ----------------------------------------- | 

---



Back to Contents

Contents to the Accounts



|4 | Segment
      information (continued)                                                                                                                                                                                                                                                                                                                      
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                            
|  | Geographical
      areas                                                                                                                                                                                                                                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                                            
|  | The
      information opposite is re-analysed in the table below by geographic area.
      The figures for each geographic area show the turnover and profit made by,
      and the net operating assets owned by, companies located in that area; export
      sales and related profits are included in the areas from which those sales
      were made.
|  |                                                                                                                                                                                                                                                                                                                                                            

| |                                         | Turnover |   | Profit
          before exceptional items, |   | Profit
          before interest and taxation |  
| | --------------------------------------- | -------- | - | ------------------------------------------ | - | --------------------------------------------- | -
| |                                         |          |   |                                            |   |                                               |  
| |                                         |          |   |                                            |   |                                               |  
| |                                         |          |   |                                            |   |                                               |  
| |                                         | 2003     |   | 2002                                       |   | 2001                                          |  
| |                                         |          |   |                                            |   |                                               |  
| |                                         |          |   |                                            |   |                                               |  
| |                                         | £m       |   | £m                                         |   | £m                                            |  
| |                                         |          |   |                                            |   |                                               |  
| | Continuing
      operations             |          |   |                                            |   |                                               |  
| |                                         |          |   |                                            |   |                                               |  
| | United
      Kingdom                    |          |   |                                            |   |                                               |  
| |                                         |          |   |                                            |   |                                               |  
| | Sales
      in the UK                   |          |   |                                            |   |                                               |  
| |                                         |          |   |                                            |   |                                               |  
| | External                                | 580      |   | 752                                        |   | 932                                           |  
| |                                         |          |   |                                            |   |                                               |  
| | Intra-Group                             | 104      |   | 100                                        |   | 122                                           |  
| |                                         |          |   |                                            |   |                                               |  
| |                                         | 684      |   | 852                                        |   | 1,054                                         |  
| |                                         |          |   |                                            |   |                                               |  
| | Sales
      overseas                    |          |   |                                            |   |                                               |  
| |                                         |          |   |                                            |   |                                               |  
| | External                                | 327      |   | 357                                        |   | 348                                           |  
| |                                         |          |   |                                            |   |                                               |  
| | Intra-Group                             | 129      |   | 159                                        |   | 155                                           |  
| |                                         |          |   |                                            |   |                                               |  
| |                                         | 456      |   | 516                                        |   | 503                                           |  
| |                                         |          |   |                                            |   |                                               |  
| |                                         | 1,140    |   | 1,368                                      |   | 1,557                                         |  
| |                                         |          |   |                                            |   |                                               |  
| | Continental
      Europe                |          |   |                                            |   |                                               |  
| |                                         |          |   |                                            |   |                                               |  
| | External                                | 1,217    |   | 1,200                                      |   | 1,165                                         |  
| |                                         |          |   |                                            |   |                                               |  
| | Intra-Group                             | 324      |   | 359                                        |   | 368                                           |  
| |                                         |          |   |                                            |   |                                               |  
| |                                         | 1,541    |   | 1,559                                      |   | 1,533                                         |  
| |                                         |          |   |                                            |   |                                               |  
| | USA                                     |          |   |                                            |   |                                               |  
| |                                         |          |   |                                            |   |                                               |  
| | External                                | 1,856    |   | 2,050                                      |   | 2,120                                         |  
| |                                         |          |   |                                            |   |                                               |  
| | Intra-Group                             | 149      |   | 152                                        |   | 156                                           |  
| |                                         |          |   |                                            |   |                                               |  
| |                                         | 2,005    |   | 2,202                                      |   | 2,276                                         |  
| |                                         |          |   |                                            |   |                                               |  
| | Other
      Americas                    |          |   |                                            |   |                                               |  
| |                                         |          |   |                                            |   |                                               |  
| | External                                | 592      |   | 583                                        |   | 671                                           |  
| |                                         |          |   |                                            |   |                                               |  
| | Intra-Group                             | 72       |   | 73                                         |   | 77                                            |  
| |                                         |          |   |                                            |   |                                               |  
| |                                         | 664      |   | 656                                        |   | 748                                           |  
| |                                         |          |   |                                            |   |                                               |  
| | Asia
      Pacific                      |          |   |                                            |   |                                               |  
| |                                         |          |   |                                            |   |                                               |  
| | External                                | 1,213    |   | 1,130                                      |   | 1,136                                         |  
| |                                         |          |   |                                            |   |                                               |  
| | Intra-Group                             | 168      |   | 147                                        |   | 127                                           |  
| |                                         |          |   |                                            |   |                                               |  
| |                                         | 1,381    |   | 1,277                                      |   | 1,263                                         |  
| |                                         |          |   |                                            |   |                                               |  
| | Other
      countries                   |          |   |                                            |   |                                               |  
| |                                         |          |   |                                            |   |                                               |  
| | External                                | 64       |   | 53                                         |   | 53                                            |  
| |                                         |          |   |                                            |   |                                               |  
| | Intra-Group                             |         |   | 1                                          |   |                                              |  
| |                                         |          |   |                                            |   |                                               |  
| |                                         | 64       |   | 54                                         |   | 53                                            |  
| |                                         |          |   |                                            |   |                                               |  
| |                                         | 6,795    |   | 7,116                                      |   | 7,430                                         |  
| |                                         |          |   |                                            |   |                                               |  
| | Inter-area
      eliminations           | (946     | ) | (991                                       | ) | (1,005                                        | )
| |                                         |          |   |                                            |   |                                               |  
| |                                         | 5,849    |   | 6,125                                      |   | 6,425                                         |  
| |                                         |          |   |                                            |   |                                               |  
| | Discontinued
      operations           |         |   |                                           |   |                                              |  
| |                                         |          |   |                                            |   |                                               |  
| | Associates                              |          |   |                                            |   |                                               |  
| |                                         |          |   |                                            |   |                                               |  
| | Share
      of operating profits        |          |   |                                            |   |                                               |  
| | less
      losses                       |          |   |                                            |   |                                               |  
| |                                         |          |   |                                            |   |                                               |  
| | Interest
      (payable) 
   receivable |          |   |                                            |   |                                               |  
| |                                         |          |   |                                            |   |                                               |  
| | Group
      net interest payable        |          |   |                                            |   |                                               |  
| |                                         |          |   |                                            |   |                                               |  
| | Amounts
      written off investments   |          |   |                                            |   |                                               |  
| |                                         |          |   |                                            |   |                                               |  
| |                                         | 5,849    |   | 6,125                                      |   | 6,425                                         |  
| |                                         |          |   |                                            |   |                                               |  
| | *
      Amortisation of goodwillcharged |          |   |                                            |   |                                               |  
| |                                         |          |   |                                            |   |                                               |  



| | ICI
      ANNUAL REPORT AND ACCOUNTS 2003 | 63
| | ----------------------------------------- | --

---



Back to Contents

Contents to the Accounts

notes relating to the accounts

|4 | Segment
      information (continued)     |       |  |                               |   |                      |   |                      |  
|- | ----------------------------------------- | ----- |  | ----------------------------- | - | -------------------- | - | -------------------- | -
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Classes
      of business                 |       |  |                               |   |                      |   |                      |  
|  |                                           |       |  | Total
          assets less   |  
|  |                                           |       |  | current
          liabilities |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  |                                           |       |  | 2003                          |   | 2002                 |   | 2001                 |  
|  |                                           |       |  |                               |   | (as
        restated |   | (as
        restated |  
|  |                                           |       |  |                               |   | note
        1)      |   | note
        1)      |  
|  |                                           |       |  | £m                            |   | £m                   |   | £m                   |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Net
      operating assets                |       |  |                               |   |                      |   |                      |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Continuing
      operations               |       |  |                               |   |                      |   |                      |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | National
      Starch                     |       |  | 1,317                         |   | 1,441                |   | 1,604                |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Quest                                     |       |  | 437                           |   | 447                  |   | 398                  |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Performance
      Specialties             |       |  | 431                           |   | 459                  |   | 577                  |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Paints                                    |       |  | 835                           |   | 864                  |   | 918                  |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Regional
      and Industrial             |       |  | 239                           |   | 297                  |   | 365                  |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Total
      net operating assets          |       |  | 3,259                         |   | 3,508                |   | 3,862                |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Net
      non-operating liabilities       |       |  | (277                          | ) | (460                 | ) | (1,194               | )
|  |                                           |       |  |                               |   |                      |   |                      |  
|  |                                           |       |  | 2,982                         |   | 3,048                |   | 2,668                |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  |                                           |       |  | Goodwill                      |  
|  |                                           |       |  | included
          above      |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  |                                           |       |  | 2003                          |   | 2002                 |   | 2001                 |  
|  |                                           |       |  | £m                            |   | £m                   |   | £m                   |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Goodwill                                  |       |  |                               |   |                      |   |                      |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | National
      Starch                     |       |  | 237                           |   | 266                  |   | 294                  |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Quest                                     |       |  | 17                            |   | 19                   |   | 22                   |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Performance
      Specialties             |       |  | 12                            |   | 14                   |   | 21                   |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Paints                                    |       |  | 252                           |   | 260                  |   | 273                  |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Regional
      and Industrial             |       |  | 14                            |   | 15                   |   | 3                    |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  |                                           |       |  | 532                           |   | 574                  |   | 613                  |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  |                                           |       |  | Net
          non-operating   |  
|  |                                           |       |  | liabilities                   |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  |                                           | notes |  | 2003                          |   | 2002                 |   | 2001                 |  
|  |                                           |       |  |                               |   | (as
        restated |   | (as
        restated |  
|  |                                           |       |  |                               |   | note
        1)      |   | note
        1)      |  
|  |                                           |       |  | £m                            |   | £m                   |   | £m                   |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Net
      non-operating liabilities       |       |  |                               |   |                      |   |                      |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Non-operating
      assets                |       |  |                               |   |                      |   |                      |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Fixed
      asset investments             | 14    |  | 57                            |   | 33                   |   | 344                  |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Non-operating
      debtors               | 16    |  | 90                            |   | 110                  |   | 217                  |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Investments
      and short-term deposits | 17    |  | 345                           |   | 285                  |   | 159                  |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Cash
      at bank                        | 33    |  | 249                           |   | 267                  |   | 301                  |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  |                                           |       |  | 741                           |   | 695                  |   | 1,021                |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Non-operating
      liabilities           |       |  |                               |   |                      |   |                      |  
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Short-term
      borrowings               | 18    |  | (29                           | ) | (226                 | ) | (418                 | )
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Current
      installments of loans       | 20    |  | (534                          | ) | (500                 | ) | (1,250               | )
|  |                                           |       |  |                               |   |                      |   |                      |  
|  | Non-operating
      creditors             | 19    |  | (455                          | ) | (429                 | ) | (547                 | )
|  |                                           |       |  |                               |   |                      |   |                      |  
|  |                                           |       |  | (1,018                        | ) | (1,155               | ) | (2,215               | )
|  |                                           |       |  |                               |   |                      |   |                      |  
|  |                                           |       |  | (277                          | ) | (460                 | ) | (1,194               | )
|  |                                           |       |  |                               |   |                      |   |                      |  



|64 | ICI
      ANNUAL REPORT AND ACCOUNTS 2003 | 
|-- | ----------------------------------------- | 

---



Back to Contents

Contents to the Accounts

|4 | Segment
          information (continued)
|- | -----------------------------------------
|  |                                          
|  | Geographic
          areas               

| |                                                    | Tangible
          fixed assets |  | Total
          assets less
current liabilities | 
| | -------------------------------------------------- | ------------------------------- |  | ----------------------------------------------- | 
| |                                                    |                                 |  |                                                 | 
| |                                                    | 2003                            |  | 2002                                            | 
| |                                                    |                                 |  |                                                 | 
| |                                                    |                                 |  |                                                 | 
| |                                                    | £m                              |  | £m                                              | 
| |                                                    |                                 |  |                                                 | 
| | Tangible
        fixed assets/Net operating assets |                                 |  |                                                 | 
| |                                                    |                                 |  |                                                 | 
| | Continuing
          operations                    |                                 |  |                                                 | 
| |                                                    |                                 |  |                                                 | 
| | United
        Kingdom                             | 228                             |  | 269                                             | 
| |                                                    |                                 |  |                                                 | 
| | Continental
        Europe                         | 434                             |  | 414                                             | 
| |                                                    |                                 |  |                                                 | 
| | USA                                                | 625                             |  | 711                                             | 
| |                                                    |                                 |  |                                                 | 
| | Other
        Americas                             | 100                             |  | 123                                             | 
| |                                                    |                                 |  |                                                 | 
| | Asia
        Pacific                               | 402                             |  | 440                                             | 
| |                                                    |                                 |  |                                                 | 
| | Other
        countries                            | 5                               |  | 4                                               | 
| |                                                    |                                 |  |                                                 | 
| | Total
        net operating assets                 | 1,794                           |  | 1,961                                           | 
| |                                                    |                                 |  |                                                 | 
| | Net
        non-operating liabilities              |                                 |  |                                                 | 
| |                                                    |                                 |  |                                                 | 
| |                                                    | 1,794                           |  | 1,961                                           | 
| |                                                    |                                 |  |                                                 | 
| |                                                    |                                 |  |                                                 | 
| |                                                    |                                 |  |                                                 | 
| | Turnover
          by customer location            |                                 |  |                                                 | 
| |                                                    |                                 |  |                                                 | 
| |                                                    |                                 |  |                                                 | 
| |                                                    |                                 |  |                                                 | 
| | Continuing
          operations                    |                                 |  |                                                 | 
| |                                                    |                                 |  |                                                 | 
| | United
        Kingdom                             |                                 |  |                                                 | 
| |                                                    |                                 |  |                                                 | 
| | Continental
        Europe                         |                                 |  |                                                 | 
| |                                                    |                                 |  |                                                 | 
| | USA                                                |                                 |  |                                                 | 
| |                                                    |                                 |  |                                                 | 
| | Other
        Americas                             |                                 |  |                                                 | 
| |                                                    |                                 |  |                                                 | 
| | Asia
        Pacific                               |                                 |  |                                                 | 
| |                                                    |                                 |  |                                                 | 
| | Other
        countries                            |                                 |  |                                                 | 
| |                                                    |                                 |  |                                                 | 
| |                                                    |                                 |  |                                                 | 
| |                                                    |                                 |  |                                                 | 

| |                                             |   
| | ------------------------------------------- | --
| | ICI
        ANNUAL REPORT AND ACCOUNTS 2003 | 65

---



Back to Contents

Contents to the Accounts

notes
    relating to the accounts

|5 | Operating
          profit (loss)
|- | ---------------------------------

| |                                                                                   | 2003   |   | 2002   |   | 2001   |  
| | --------------------------------------------------------------------------------- | ------ | - | ------ | - | ------ | -
| |                                                                                   | £m     |   | £m     |   | £m     |  
| |                                                                                   |        |   |        |   |        |  
| | Operating
          profit (loss) before exceptional items                        |        |   |        |   |        |  
| |                                                                                   |        |   |        |   |        |  
| | Continuing
          operations                                                   |        |   |        |   |        |  
| |                                                                                   |        |   |        |   |        |  
| | Turnover                                                                          | 5,849  |   | 6,125  |   | 6,425  |  
| |                                                                                   |        |   |        |   |        |  
| | Operating
          costs                                                         |        |   |        |   |        |  
| |                                                                                   |        |   |        |   |        |  
| | Cost
        of sales                                                             | (3,741 | ) | (3,819 | ) | (4,011 | )
| |                                                                                   |        |   |        |   |        |  
| | Distribution
        costs                                                        | (931   | ) | (971   | ) | (1,023 | )
| |                                                                                   |        |   |        |   |        |  
| | Research
        and development                                                  | (150   | ) | (148   | ) | (151   | )
| |                                                                                   |        |   |        |   |        |  
| | Administration
        and other expenses                                         | (649   | ) | (714   | ) | (750   | )
| |                                                                                   |        |   |        |   |        |  
| |                                                                                   | (5,471 | ) | (5,652 | ) | (5,935 | )
| |                                                                                   |        |   |        |   |        |  
| | Other
          operating income                                                  |        |   |        |   |        |  
| |                                                                                   |        |   |        |   |        |  
| | Royalties                                                                         | 2      |   | 2      |   | 4      |  
| |                                                                                   |        |   |        |   |        |  
| | Other
        income                                                              | 14     |   | 21     |   | 42     |  
| |                                                                                   |        |   |        |   |        |  
| |                                                                                   | 16     |   | 23     |   | 46     |  
| |                                                                                   |        |   |        |   |        |  
| | Operating
          profit                                                        | 394    |   | 496    |   | 536    |  
| |                                                                                   |        |   |        |   |        |  
| | Total
        charge for depreciation and amortisation of goodwill included above | (227   | ) | (233   | ) | (246   | )
| |                                                                                   |        |   |        |   |        |  
| | Gross
        profit, as defined by Companies Act 1985                            | 2,108  |   | 2,306  |   | 2,414  |  
| |                                                                                   |        |   |        |   |        |  
| |                                                                                   |        |   |        |   |        |  
| |                                                                                   |        |   |        |   |        |  
| |                                                                                   |        |   |        |   |        |  
| |                                                                                   |        |   |        |   |        |  
| | Operating
          profit (loss) after exceptional items                         |        |   |        |   |        |  
| |                                                                                   |        |   |        |   |        |  
| | Continuing
          operations                                                   |        |   |        |   |        |  
| |                                                                                   |        |   |        |   |        |  
| | Turnover                                                                          | 5,849  |   | 6,125  |   | 6,425  |  
| |                                                                                   |        |   |        |   |        |  
| | Operating
          costs                                                         |        |   |        |   |        |  
| |                                                                                   |        |   |        |   |        |  
| | Cost
        of sales                                                             | (3,856 | ) | (3,819 | ) | (4,027 | )
| |                                                                                   |        |   |        |   |        |  
| | Distribution
        costs                                                        | (943   | ) | (971   | ) | (1,032 | )
| |                                                                                   |        |   |        |   |        |  
| | Research
        and development                                                  | (156   | ) | (148   | ) | (155   | )
| |                                                                                   |        |   |        |   |        |  
| | Administration
        and other expenses                                         | (716   | ) | (714   | ) | (864   | )
| |                                                                                   |        |   |        |   |        |  
| |                                                                                   | (5,671 | ) | (5,652 | ) | (6,078 | )
| |                                                                                   |        |   |        |   |        |  
| | Other
          operating income                                                  |        |   |        |   |        |  
| |                                                                                   |        |   |        |   |        |  
| | Royalties                                                                         | 2      |   | 2      |   | 4      |  
| |                                                                                   |        |   |        |   |        |  
| | Other
        income                                                              | 14     |   | 21     |   | 42     |  
| |                                                                                   |        |   |        |   |        |  
| |                                                                                   | 16     |   | 23     |   | 46     |  
| |                                                                                   |        |   |        |   |        |  
| | Operating
          profit                                                        | 194    |   | 496    |   | 393    |  
| |                                                                                   |        |   |        |   |        |  
| | Total
        charge for depreciation and amortisation of goodwill included above | (286   | ) | (233   | ) | (263   | )
| |                                                                                   |        |   |        |   |        |  
| | Gross
        profit, as defined by Companies Act 1985                            | 1,993  |   | 2,306  |   | 2,398  |  
| |                                                                                   |        |   |        |   |        |  

|   |                                             | 
|-- | ------------------------------------------- | 
|66 | ICI
        ANNUAL REPORT AND ACCOUNTS 2003 | 

---



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Contents to the Accounts

|6 | Share
          of operating profits less losses of associates
|- | --------------------------------------------------------------

|  |                                                                          | 2003 |   | 2002 |   | 2001 |  
|- | ------------------------------------------------------------------------ | ---- | - | ---- | - | ---- | -
|  |                                                                          | £m   |   | £m   |   | £m   |  
|  |                                                                          |      |   |      |   |      |  
|  | Continuing
          operations before exceptional items                 |      |   |      |   |      |  
|  |                                                                          |      |   |      |   |      |  
|  | Share
          of operating profits less losses before interest and tax |      |   |      |   |      |  
|  |                                                                          |      |   |      |   |      |  
|  | Dividends
        and other income                                       |     |   |     |   |     |  
|  |                                                                          |      |   |      |   |      |  
|  | Share
        of operating profits less losses before exceptional items  | 2    |   | 18   |   | 57   |  
|  |                                                                          |      |   |      |   |      |  
|  |                                                                          | 2    |   | 18   |   | 57   |  
|  |                                                                          |      |   |      |   |      |  
|  |                                                                          |      |   |      |   |      |  
|7 | Net
          interest payable                                           |      |   |      |   |      |  
|  |                                                                          | 2003 |   | 2002 |   | 2001 |  
|  |                                                                          | £m   |   | £m   |   | £m   |  
|  |                                                                          |      |   |      |   |      |  
|  | Continuing
          operations                                          |      |   |      |   |      |  
|  |                                                                          |      |   |      |   |      |  
|  | Interest
          payable and similar charges                           |      |   |      |   |      |  
|  |                                                                          |      |   |      |   |      |  
|  | Group                                                                    |      |   |      |   |      |  
|  |                                                                          |      |   |      |   |      |  
|  | Loan
        interest                                                    |      |   |      |   |      |  
|  |                                                                          |      |   |      |   |      |  
|  | Bank
        loans                                                       | 15   |   | 38   |   | 28   |  
|  |                                                                          |      |   |      |   |      |  
|  | Other
        loans                                                      | 124  |   | 148  |   | 173  |  
|  |                                                                          |      |   |      |   |      |  
|  |                                                                          | 139  |   | 186  |   | 201  |  
|  |                                                                          |      |   |      |   |      |  
|  |                                                                          |      |   |      |   |      |  
|  |                                                                          |      |   |      |   |      |  
|  | Interest
        on short-term borrowings                                |      |   |      |   |      |  
|  |                                                                          |      |   |      |   |      |  
|  | Bank
        borrowings                                                  | 5    |   | 11   |   | 25   |  
|  |                                                                          |      |   |      |   |      |  
|  | Other
        borrowings                                                 | 21   |   | 35   |   | 52   |  
|  |                                                                          |      |   |      |   |      |  
|  |                                                                          | 26   |   | 46   |   | 77   |  
|  |                                                                          |      |   |      |   |      |  
|  |                                                                          | 165  |   | 232  |   | 278  |  
|  |                                                                          |      |   |      |   |      |  
|  |                                                                          |      |   |      |   |      |  
|  |                                                                          |      |   |      |   |      |  
|  | Amortisation
        of discounted provisions                            | 10   |   | 10   |   | 10   |  
|  |                                                                          |      |   |      |   |      |  
|  |                                                                          |      |   |      |   |      |  
|  |                                                                          |      |   |      |   |      |  
|  | Associates
          interest payable (receivable)                       | (1   | ) | 28   |   | 67   |  
|  |                                                                          |      |   |      |   |      |  
|  |                                                                          |      |   |      |   |      |  
|  |                                                                          |      |   |      |   |      |  
|  | Interest
          receivable and similar income                         |      |   |      |   |      |  
|  |                                                                          |      |   |      |   |      |  
|  | Group                                                                    | (83  | ) | (119 | ) | (126 | )
|  |                                                                          |      |   |      |   |      |  
|  |                                                                          |      |   |      |   |      |  
|  |                                                                          |      |   |      |   |      |  
|  | Net
          interest payable                                           | 91   |   | 151  |   | 229  |  
|  |                                                                          |      |   |      |   |      |  

| |                                             |   
| | ------------------------------------------- | --
| | ICI
        ANNUAL REPORT AND ACCOUNTS 2003 | 67

---



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Contents to the Accounts

notes relating to the accounts



|8 | Taxation
    on profit (loss) on ordinary activities
|- | ----------------------------------------------------
|  |                                                     

| |                                             | Continuing operations |   | Discontinued |   | Total      |  
| | ------------------------------------------- | --------------------- | - | ------------ | - | ---------- | -
| |                                             |                       |   |              |   | operations |  
| |                                             | Before                |   | Exceptional  |   |            |  
| |                                             | exceptional           |   | items        |   |            |  
| |                                             | items                 |   |              |   |            |  
| |                                             | £m                    |   | £m           |   | £m         |  
| |                                             |                       |   |              |   |            |  
| | 2003                                        |                       |   |              |   |            |  
| |                                             |                       |   |              |   |            |  
| | ICI and subsidiary undertakings             |                       |   |              |   |            |  
| |                                             |                       |   |              |   |            |  
| | United Kingdom taxation                     |                       |   |              |   |            |  
| |                                             |                       |   |              |   |            |  
| | Corporation tax                             | 60                    |   | (24          | ) | (5         | )
| |                                             |                       |   |              |   |            |  
| | Double taxation relief                      | (43                   | ) |             |   |           |  
| |                                             |                       |   |              |   |            |  
| | Deferred taxation                           | 18                    |   | (2           | ) |           |  
| |                                             |                       |   |              |   |            |  
| |                                             | 35                    |   | (26          | ) | (5         | )
| |                                             |                       |   |              |   |            |  
| | Overseas taxation                           |                       |   |              |   |            |  
| |                                             |                       |   |              |   |            |  
| | Overseas taxes                              | 85                    |   | 19           |   |           |  
| |                                             |                       |   |              |   |            |  
| | Deferred taxation                           | (22                   | ) | (45          | ) | (1         | )
| |                                             |                       |   |              |   |            |  
| |                                             | 63                    |   | (26          | ) | (1         | )
| |                                             |                       |   |              |   |            |  
| | Associates                                  | 1                     |   |             |   |           |  
| |                                             |                       |   |              |   |            |  
| | Tax on profit (loss) on ordinary activities | 99                    |   | (52          | ) | (6         | )
| |                                             |                       |   |              |   |            |  
| | 2002                                        |                       |   |              |   |            |  
| |                                             |                       |   |              |   |            |  
| | ICI and subsidiary undertakings             |                       |   |              |   |            |  
| |                                             |                       |   |              |   |            |  
| | United Kingdom taxation                     |                       |   |              |   |            |  
| |                                             |                       |   |              |   |            |  
| | Corporation tax                             | 9                     |   | (8           | ) | (3         | )
| |                                             |                       |   |              |   |            |  
| | Double taxation relief                      | (2                    | ) |             |   |           |  
| |                                             |                       |   |              |   |            |  
| | Deferred taxation                           | 62                    |   |             |   |           |  
| |                                             |                       |   |              |   |            |  
| |                                             | 69                    |   | (8           | ) | (3         | )
| |                                             |                       |   |              |   |            |  
| | Overseas taxation                           |                       |   |              |   |            |  
| |                                             |                       |   |              |   |            |  
| | Overseas taxes                              | 39                    |   |             |   |           |  
| |                                             |                       |   |              |   |            |  
| | Deferred taxation                           | 8                     |   | 7            |   |           |  
| |                                             |                       |   |              |   |            |  
| |                                             | 47                    |   | 7            |   |           |  
| |                                             |                       |   |              |   |            |  
| | Associates                                  | (1                    | ) |             |   |           |  
| |                                             |                       |   |              |   |            |  
| | Tax on profit (loss) on ordinary activities | 115                   |   | (1           | ) | (3         | )
| |                                             |                       |   |              |   |            |  
| | 2001
    (as restated  note 1)             |                       |   |              |   |            |  
| |                                             |                       |   |              |   |            |  
| | ICI and subsidiary undertakings             |                       |   |              |   |            |  
| |                                             |                       |   |              |   |            |  
| | United Kingdom taxation                     |                       |   |              |   |            |  
| |                                             |                       |   |              |   |            |  
| | Corporation tax                             | 34                    |   | (15          | ) | (16        | )
| |                                             |                       |   |              |   |            |  
| | Double taxation relief                      | (13                   | ) |             |   |           |  
| |                                             |                       |   |              |   |            |  
| | Deferred taxation                           | 41                    |   | 9            |   | 95         |  
| |                                             |                       |   |              |   |            |  
| |                                             | 62                    |   | (6           | ) | 79         |  
| |                                             |                       |   |              |   |            |  
| | Overseas taxation                           |                       |   |              |   |            |  
| |                                             |                       |   |              |   |            |  
| | Overseas taxes                              | 56                    |   | (22          | ) | 4          |  
| |                                             |                       |   |              |   |            |  
| | Deferred taxation                           | 5                     |   | (17          | ) | (54        | )
| |                                             |                       |   |              |   |            |  
| |                                             | 61                    |   | (39          | ) | (50        | )
| |                                             |                       |   |              |   |            |  
| | Associates                                  | (7                    | ) | (3           | ) |           |  
| |                                             |                       |   |              |   |            |  
| | Tax on profit (loss) on ordinary activities | 116                   |   | (48          | ) | 29         |  
| |                                             |                       |   |              |   |            |  

UK and overseas taxation has been provided on the profits (losses) earned for the periods covered by the Group accounts. UK corporation tax has been provided at the rate of 30% (2002 30%; 2001 30%). The exceptional tax charge (credit) in 2003, 2002 and 2001 were in respect of disposal and restructuring programmes, as discussed in note 3.




|68 | ICI ANNUAL REPORT AND ACCOUNTS 2003 | 
|-- | ----------------------------------- | 

---



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Contents to the Accounts

|8 | Taxation
    on profit (loss) on ordinary activities (continued)
|- | ----------------------------------------------------------------

| |                                                                              | 2003 |   | 2002 |   | 2001          |  
| | ---------------------------------------------------------------------------- | ---- | - | ---- | - | ------------- | -
| |                                                                              |      |   |      |   | (as restated  |  
| |                                                                              |      |   |      |   |  note
    1) |  
| |                                                                              | £m   |   | £m   |   | £m            |  
| |                                                                              |      |   |      |   |               |  
| | Profit (loss) on ordinary activities before taxation is analysed as follows: |      |   |      |   |               |  
| |                                                                              |      |   |      |   |               |  
| | United Kingdom                                                               | (74  | ) | 80   |   | 95            |  
| |                                                                              |      |   |      |   |               |  
| | Overseas                                                                     | 156  |   | 247  |   | 151           |  
| |                                                                              |      |   |      |   |               |  
| | Associates                                                                   | 3    |   | (10  | ) | (19           | )
| |                                                                              |      |   |      |   |               |  
| |                                                                              | 85   |   | 317  |   | 227           |  
| |                                                                              |      |   |      |   |               |  

The table below reconciles
the total and current tax charge (credit) at the UK corporation tax rate to the
Groups tax on profit (loss) on ordinary activities:


| | Taxation charge at UK corporation tax rate(2003 30%; 2002 30%; 2001 30%) | 26  |   | 95  |   | 68  |  
| | ------------------------------------------------------------------------ | --- | - | --- | - | --- | -
| |                                                                          |     |   |     |   |     |  
| | Movement on provisions                                                   | (7  | ) | 26  |   | 17  |  
| |                                                                          |     |   |     |   |     |  
| | Local taxes                                                              | 19  |   | 6   |   | 9   |  
| |                                                                          |     |   |     |   |     |  
| | Capital
         (gains) losses not taxable/deductible                   | 27  |   | (22 | ) | (6  | )
| |                                                                          |     |   |     |   |     |  
| | Taxable Intra-Group dividend income                                      | 6   |   | 15  |   | 21  |  
| |                                                                          |     |   |     |   |     |  
| | Depreciation permanently disallowed                                      | 2   |   | 5   |   | (13 | )
| |                                                                          |     |   |     |   |     |  
| | Overseas tax rates                                                       | (8  | ) | (13 | ) | (3  | )
| |                                                                          |     |   |     |   |     |  
| | Current year tax losses not relieved                                     | 24  |   | 25  |   | 23  |  
| |                                                                          |     |   |     |   |     |  
| | Prior year tax losses utilised                                           | (36 | ) | (10 | ) | (9  | )
| |                                                                          |     |   |     |   |     |  
| | Goodwill amortisation                                                    | 8   |   | 9   |   | 9   |  
| |                                                                          |     |   |     |   |     |  
| | Tax holidays/manufacturing exemptions                                    | (8  | ) | (7  | ) | (5  | )
| |                                                                          |     |   |     |   |     |  
| | Other                                                                    | (12 | ) | (18 | ) | (14 | )
| |                                                                          |     |   |     |   |     |  
| | Tax on profit (loss) on ordinary activities                              | 41  |   | 111 |   | 97  |  
| |                                                                          |     |   |     |   |     |  
| |                                                                          |     |   |     |   |     |  
| |                                                                          |     |   |     |   |     |  
| | Timing difference                                                        |     |   |     |   |     |  
| |                                                                          |     |   |     |   |     |  
| | Movement on provisions                                                   | (46 | ) | 33  |   | 62  |  
| |                                                                          |     |   |     |   |     |  
| | Pension and employee liabilities                                         | 10  |   | 11  |   | (3  | )
| |                                                                          |     |   |     |   |     |  
| | Depreciation                                                             |    |   | 16  |   | (29 | )
| |                                                                          |     |   |     |   |     |  
| | Other                                                                    | (16 | ) | 17  |   | 49  |  
| |                                                                          |     |   |     |   |     |  
| | Total timing differences                                                 | (52 | ) | 77  |   | 79  |  
| |                                                                          |     |   |     |   |     |  
| |                                                                          |     |   |     |   |     |  
| |                                                                          |     |   |     |   |     |  
| | Current tax charge                                                       | 93  |   | 34  |   | 18  |  
| |                                                                          |     |   |     |   |     |  

The main factors affecting the total tax charge in future periods will be any changes to the corporation tax rates in force in the countries in which the Group operates and the mix of profits between those territories. No taxes have been
provided for liabilities which may arise on the distribution of unremitted earnings
of subsidiaries and associates, except where distributions of such profits are
planned. Cumulative unremitted earnings of overseas subsidiaries and associates
totalled approximately £1,309m at 31 December 2003 (2002 £996m; 2001 £887m).
It is not practicable to calculate the tax which would arise on remittance of
these amounts: it would be substantially lower than statutory rates after giving
effect to foreign tax credits.




| | ICI ANNUAL REPORT AND ACCOUNTS 2003 | 69
| | ----------------------------------- | --

---



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notes relating to the accounts



|8 | Taxation
    on profit (loss) on ordinary activities (continued)                                                                    
|- | ------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                     
|  | Deferred
    taxation                                                                                                               
|  |                                                                                                                                     
|  | Deferred
          taxation accounted for in the Group financial statements and the potential
    amounts of deferred taxation were:

| |                                                                  | 2003 |   | 2002 |  
| | ---------------------------------------------------------------- | ---- | - | ---- | -
| |                                                                  | £m   |   | £m   |  
| |                                                                  |      |   |      |  
| | Deferred tax liabilities                                         |      |   |      |  
| |                                                                  |      |   |      |  
| | UK fixed assets                                                  | 25   |   | 38   |  
| |                                                                  |      |   |      |  
| | Non-UK fixed assets                                              | 180  |   | 179  |  
| |                                                                  |      |   |      |  
| | UK pension asset                                                 | 139  |   | 142  |  
| |                                                                  |      |   |      |  
| | Others                                                           | 89   |   | 188  |  
| |                                                                  |      |   |      |  
| |                                                                  | 433  |   | 547  |  
| |                                                                  |      |   |      |  
| | Deferred tax (assets)                                            |      |   |      |  
| |                                                                  |      |   |      |  
| | Restructuring provisions                                         | (25  | ) | (13  | )
| |                                                                  |      |   |      |  
| | Pensions                                                         | (48  | ) | (74  | )
| |                                                                  |      |   |      |  
| | Employee liabilities                                             | (65  | ) | (60  | )
| |                                                                  |      |   |      |  
| | Business provisions                                              | (60  | ) | (35  | )
| |                                                                  |      |   |      |  
| | Stock valuation                                                  | (9   | ) | (4   | )
| |                                                                  |      |   |      |  
| | Provisions on disposal of businesses                             | (41  | ) | (91  | )
| |                                                                  |      |   |      |  
| | Losses                                                           | (157 | ) | (140 | )
| |                                                                  |      |   |      |  
| | Intangibles                                                      | (44  | ) | (57  | )
| |                                                                  |      |   |      |  
| | Other                                                            | (12  | ) | (26  | )
| |                                                                  |      |   |      |  
| |                                                                  | (461 | ) | (500 | )
| |                                                                  |      |   |      |  
| | Less valuation allowances                                        | 107  |   | 93   |  
| |                                                                  |      |   |      |  
| |                                                                  | (354 | ) | (407 | )
| |                                                                  |      |   |      |  
| | Deferred tax liabilities accounted for at the balance sheet date | 79   |   | 140  |  
| |                                                                  |      |   |      |  
| | Analysed as:                                                     |      |   |      |  
| |                                                                  |      |   |      |  
| | Current                                                          | 64   |   | 92   |  
| |                                                                  |      |   |      |  
| | Non-current                                                      | 15   |   | 48   |  
| |                                                                  |      |   |      |  
| |                                                                  | 79   |   | 140  |  
| |                                                                  |      |   |      |  

Deferred tax assets
of £107m (2002 £93m) have not been recognised due to the degree of uncertainty over the utilisation of the underlying tax losses and deductions in certain tax jurisdictions. The change in valuation allowances during the year ended 31 December 2003 was £14m (2002 £4m) and the valuation allowance has been reduced by £2m
(2002 nil) by a change in circumstances. Operating losses
of £454m (2002 £442m) are carried forward and available to reduce future taxable income in a number of jurisdictions: these losses have given rise to deferred tax assets of £157m (2002 £140m) against which are set valuation adjustments of £83m (2002 £73m). £9m
of these losses, net of valuation allowances, have expiration dates through to
2008 and the balance can be carried forward indefinitely. The deferred tax adjustments to net income and net equity to conform with US GAAP are disclosed in note 41.


|9 | Dividends
|- | ---------
|  |          

| |                                          | 2003                            |  | 2002 |  | 2001  |  | 2003 |  | 2002 |  | 2001 | 
| | ---------------------------------------- | ------------------------------- |  | ---- |  | ----- |  | ---- |  | ---- |  | ---- | 
| |                                          | Pence
    per £1 Ordinary Share |  | £m   |  | £m    |  | £m   | 
| |                                          |                                 |  |      |  |       |  |      |  |      |  |      | 
| | Interim, paid 3 October 2003             | 2.75                            |  | 3.00 |  | 5.19  |  | 32   |  | 36   |  | 45   | 
| |                                          |                                 |  |      |  |       |  |      |  |      |  |      | 
| | Second interim, payable on 16 April 2004 | 3.50                            |  | 4.50 |  | 8.09  |  | 42   |  | 52   |  | 71   | 
| |                                          |                                 |  |      |  |       |  |      |  |      |  |      | 
| |                                          | 6.25                            |  | 7.50 |  | 13.28 |  | 74   |  | 88   |  | 116  | 
| |                                          |                                 |  |      |  |       |  |      |  |      |  |      | 

Comparative figures for 2001 have been restated for the Company Rights Issue which closed on 20 March 2002. Impkemix Trustees Limited, a wholly owned subsidiary which acts as a trustee for the Imperial Chemical Industries PLC Employee Benefit Trust (the Trust) has waived the right to receive dividends on shares held by the Trust in its own name. Dividends received on shares allocated to beneficiaries and shares held in the form of American Depositary Shares (ADSs) are distributed, respectively, to beneficiaries and ADS holders.




|70 | ICI ANNUAL REPORT AND ACCOUNTS 2003 | 
|-- | ----------------------------------- | 

---



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Contents to the Accounts

|10 | Earnings
            (loss) per£1
            Ordinary Share
|-- | ------------------------------------------------------------
|   |                                                             

| |                                                                               | Continuing |    | Discontinued |    | Total   |  
| | ----------------------------------------------------------------------------- | ---------- | -- | ------------ | -- | ------- | -
| |                                                                               | operations |    | operations   |    |         |  
| |                                                                               | £m         |    | £m           |    | £m      |  
| |                                                                               |            |    |              |    |         |  
| | 2003                                                                          |            |    |              |    |         |  
| |                                                                               |            |    |              |    |         |  
| | Net
        profit for the financial year before exceptional items            | 183        |    |             |    | 183     |  
| |                                                                               |            |    |              |    |         |  
| | Exceptional
        items after tax and minorities                            | (160       | )  | (3           | )  | (163    | )
| |                                                                               |            |    |              |    |         |  
| | Net
        profit (loss) for the financial year                              | 23         |    | (3           | )  | 20      |  
| |                                                                               |            |    |              |    |         |  
| |                                                                               | million    |    | million      |    | million |  
| |                                                                               |            |    |              |    |         |  
| | Weighted
        average Ordinary Shares in issue during year                 | 1,191      |    | 1,191        |    | 1,191   |  
| |                                                                               |            |    |              |    |         |  
| | Weighted
        average shares held by Groups employee share ownership plan | (9         | )  | (9           | )  | (9      | )
| |                                                                               |            |    |              |    |         |  
| | Basic
        weighted average Ordinary Shares in issue during year           | 1,182      |    | 1,182        |    | 1,182   |  
| |                                                                               |            |    |              |    |         |  
| | Dilutive
        effect of share options                                      |           |    |             |    |        |  
| |                                                                               |            |    |              |    |         |  
| | Diluted
        weighted average Ordinary Shares                              | 1,182      |    | 1,182        |    | 1,182   |  
| |                                                                               |            |    |              |    |         |  
| |                                                                               | pence      |    | pence        |    | pence   |  
| |                                                                               |            |    |              |    |         |  
| | Basic
        earnings (loss) per £1 Ordinary Share                           |            |    |              |    |         |  
| |                                                                               |            |    |              |    |         |  
| | before
          exceptional items                                            | 15.5       |    |             |    | 15.5    |  
| |                                                                               |            |    |              |    |         |  
| | after
          exceptional items                                             | 2.0        |    | (0.3         | )  | 1.7     |  
| |                                                                               |            |    |              |    |         |  
| | Diluted
        earnings (loss) per £1 Ordinary Share                         |            |    |              |    |         |  
| |                                                                               |            |    |              |    |         |  
| | before
          exceptional items                                            | 15.5       |    |             |    | 15.5    |  
| |                                                                               |            |    |              |    |         |  
| | after
          exceptional items                                             | 2.0        |    | (0.3         | )  | 1.7     |  
| |                                                                               |            |    |              |    |         |  
| |                                                                               |            |    |              |    |         |  
| | 2002                                                                          |            |    |              |    |         |  
| | £m                                                                            |            | £m |              | £m |        
| |                                                                               |            |    |              |    |         |  
| | Net
        profit for the financial year before exceptional items            | 227        |    |             |    | 227     |  
| |                                                                               |            |    |              |    |         |  
| | Exceptional
        items after tax and minorities                            | (61        | )  | 13           |    | (48     | )
| |                                                                               |            |    |              |    |         |  
| | Net
        profit (loss) for the financial year                              | 166        |    | 13           |    | 179     |  
| |                                                                               |            |    |              |    |         |  
| |                                                                               | million    |    | million      |    | million |  
| |                                                                               |            |    |              |    |         |  
| | Weighted
        average Ordinary Shares in issue during year                 | 1,123      |    | 1,123        |    | 1,123   |  
| |                                                                               |            |    |              |    |         |  
| | Weighted
        average shares held by Groups employee share ownership plan | (9         | )  | (9           | )  | (9      | )
| |                                                                               |            |    |              |    |         |  
| | Basic
        weighted average Ordinary Shares in issue during year           | 1,114      |    | 1,114        |    | 1,114   |  
| |                                                                               |            |    |              |    |         |  
| | Dilutive
        effect of share options                                      | 2          |    | 2            |    | 2       |  
| |                                                                               |            |    |              |    |         |  
| | Diluted
        weighted average Ordinary Shares                              | 1,116      |    | 1,116        |    | 1,116   |  
| |                                                                               |            |    |              |    |         |  
| |                                                                               | pence      |    | pence        |    | pence   |  
| |                                                                               |            |    |              |    |         |  
| | Basic
        earnings (loss) per £1 Ordinary Share                           |            |    |              |    |         |  
| |                                                                               |            |    |              |    |         |  
| | before
          exceptional items                                            | 20.4       |    |             |    | 20.4    |  
| |                                                                               |            |    |              |    |         |  
| | after
          exceptional items                                             | 14.9       |    | 1.2          |    | 16.1    |  
| |                                                                               |            |    |              |    |         |  
| | Diluted
        earnings (loss) per £1 Ordinary Share                         |            |    |              |    |         |  
| |                                                                               |            |    |              |    |         |  
| | before
          exceptional items                                            | 20.3       |    |             |    | 20.3    |  
| |                                                                               |            |    |              |    |         |  
| | after
          exceptional items                                             | 14.8       |    | 1.2          |    | 16.0    |  
| |                                                                               |            |    |              |    |         |  

| | ICI
        ANNUAL REPORT AND ACCOUNTS 2003 | 71
| | ------------------------------------------- | --

---



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Contents to the Accounts

notes
    relating to the accounts



|10 | Earnings
            (loss) per£1
            Ordinary Share (continued)
|-- | ------------------------------------------------------------------------
|   |                                                                         

| |                                                                               | Continuing |   | Discontinued |   | Total   |  
| | ----------------------------------------------------------------------------- | ---------- | - | ------------ | - | ------- | -
| |                                                                               | operations |   | operations   |   |         |  
| |                                                                               | £m         |   | £m           |   | £m      |  
| |                                                                               |            |   |              |   |         |  
| | 2001
        (as restated  note 1)                                           |            |   |              |   |         |  
| |                                                                               |            |   |              |   |         |  
| | Net
        profit for the financial year before exceptional items            | 222        |   |             |   | 222     |  
| |                                                                               |            |   |              |   |         |  
| | Exceptional
        items after tax and minorities                            | (109       | ) | (11          | ) | (120    | )
| |                                                                               |            |   |              |   |         |  
| | Net
        profit (loss) for the financial year (as restated  note 1)       | 113        |   | (11          | ) | 102     |  
| |                                                                               |            |   |              |   |         |  
| |                                                                               | million    |   | million      |   | million |  
| |                                                                               |            |   |              |   |         |  
| | Weighted
        average Ordinary Shares in issue during year                 | 876        |   | 876          |   | 876     |  
| |                                                                               |            |   |              |   |         |  
| | Weighted
        average shares held by Groups employee share ownership plan | (7         | ) | (7           | ) | (7      | )
| |                                                                               |            |   |              |   |         |  
| | Basic
        weighted average Ordinary Shares in issue during year           | 869        |   | 869          |   | 869     |  
| |                                                                               |            |   |              |   |         |  
| | Dilutive
        effect of share options                                      |           |   |             |   |        |  
| |                                                                               |            |   |              |   |         |  
| | Diluted
        weighted average Ordinary Shares                              | 869        |   | 869          |   | 869     |  
| |                                                                               |            |   |              |   |         |  
| |                                                                               | pence      |   | pence        |   | pence   |  
| |                                                                               |            |   |              |   |         |  
| | Basic
        earnings (loss) per £1 Ordinary Share                           |            |   |              |   |         |  
| |                                                                               |            |   |              |   |         |  
| | before
          exceptional items                                            | 25.5       |   |             |   | 25.5    |  
| |                                                                               |            |   |              |   |         |  
| | after
          exceptional items                                             | 13.0       |   | (1.3         | ) | 11.7    |  
| |                                                                               |            |   |              |   |         |  
| | Diluted
        earnings (loss) per £1 Ordinary Share                         |            |   |              |   |         |  
| |                                                                               |            |   |              |   |         |  
| | before
          exceptional items                                            | 25.5       |   |             |   | 25.5    |  
| |                                                                               |            |   |              |   |         |  
| | after
          exceptional items                                             | 13.0       |   | (1.3         | ) | 11.7    |  
| |                                                                               |            |   |              |   |         |  

There
      are no options, warrants or rights outstanding in respect of unissued shares
      except for the share option scheme for employees (note 23). Earnings per £1
      Ordinary Share before exceptional items have been calculated to show the
      impact of exceptional items as these can have a distorting effect on earnings
      and therefore warrant separate consideration.


On
      4 February 2002, the Company announced a Rights Issue and, following approval
      of the required resolutions at the subsequent Extraordinary
      General Meeting, 463m new Ordinary Shares were issued at 180p per share on
      the basis of 7 new Ordinary Shares for every 11 existing Ordinary Shares.


The
      actual cum rights price on 25 February 2002, the last day of quotation cum
      rights, was 319p per share and the theoretical ex rights price for an ordinary
      share was therefore 265p per share. The comparative earnings per share are
      shown after applying the factor 265/319 to the published figures for 2001
      in order to adjust for the bonus issue within the rights issue.


Exceptional
      items after tax and minorities have been restated following the adopting
      of UITF 38 (see note 1).


|11 | Intangible
            fixed assets – goodwill
|-- | ----------------------------------------------
|   |                                               

| |                                      | £m  |  
| | ------------------------------------ | --- | -
| |                                      |     |  
| | Group                                |     |  
| |                                      |     |  
| | Cost                                 |     |  
| |                                      |     |  
| | At
        beginning of year         | 737 |  
| |                                      |     |  
| | Acquisitions                         | 3   |  
| |                                      |     |  
| | Exchange
        adjustments         | (12 | )
| |                                      |     |  
| | At
        end of year               | 728 |  
| |                                      |     |  
| | Amortisation                         |     |  
| |                                      |     |  
| | At
        beginning of year         | 163 |  
| |                                      |     |  
| | Charge
        for year              | 36  |  
| |                                      |     |  
| | Exchange
        adjustments         | (3  | )
| |                                      |     |  
| | At
        end of year               | 196 |  
| |                                      |     |  
| | Net
          book value at end 2003 | 532 |  
| |                                      |     |  
| | Net
        book value at end 2002   | 574 |  
| |                                      |     |  

Substantially
      all of the Groups goodwill arose on the purchase of Acheson Industries
      Inc. and of the European Home Improvement business of Williams Plc in 1998.
      The Directors estimate that the useful economic life of this goodwill is
      at least 20 years and it is amortised over 20 years in accordance with
      FRS No. 10Goodwill
      and Intangible Assets.


|72 | ICI
        ANNUAL REPORT AND ACCOUNTS 2003 | 
|-- | ------------------------------------------- | 

---



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Contents to the Accounts

|12 | Tangible
            fixed assets
|-- | ---------------------------------
|   |                                  

| |                                       | Land
        and |   | Plant
        and |   | Payments
        on |   | Total |  
| | ------------------------------------- | ---------------- | - | ----------------- | - | ------------------- | - | ----- | -
| |                                       | buildings        |   | equipment         |   | account
        and |   |       |  
| |                                       |                  |   |                   |   | assets
        in   |   |       |  
| |                                       |                  |   |                   |   | course
        of   |   |       |  
| |                                       |                  |   |                   |   | construction        |   |       |  
| |                                       | £m               |   | £m                |   | £m                  |   | £m    |  
| |                                       |                  |   |                   |   |                     |   |       |  
| | Group                                 |                  |   |                   |   |                     |   |       |  
| |                                       |                  |   |                   |   |                     |   |       |  
| | Cost                                  |                  |   |                   |   |                     |   |       |  
| |                                       |                  |   |                   |   |                     |   |       |  
| | At
        beginning of year          | 905              |   | 2,267             |   | 130                 |   | 3,302 |  
| |                                       |                  |   |                   |   |                     |   |       |  
| | Capital
        expenditure           |                  |   |                   |   | 154                 |   | 154   |  
| |                                       |                  |   |                   |   |                     |   |       |  
| | Transfers
        of assets into use  | 24               |   | 134               |   | (158                | ) |      |  
| |                                       |                  |   |                   |   |                     |   |       |  
| | Exchange
        adjustments          | (30              | ) | (54               | ) | (4                  | ) | (88   | )
| |                                       |                  |   |                   |   |                     |   |       |  
| | Disposals
        and other movements | (31              | ) | (101              | ) | (7                  | ) | (139  | )
| |                                       |                  |   |                   |   |                     |   |       |  
| | At
        end of year                | 868              |   | 2,246             |   | 115                 |   | 3,229 |  
| |                                       |                  |   |                   |   |                     |   |       |  
| | Depreciation                          |                  |   |                   |   |                     |   |       |  
| |                                       |                  |   |                   |   |                     |   |       |  
| | At
        beginning of year          | 242              |   | 1,099             |   |                     |   | 1,341 |  
| |                                       |                  |   |                   |   |                     |   |       |  
| | Charge
        for year               | 33               |   | 217               |   |                     |   | 250   |  
| |                                       |                  |   |                   |   |                     |   |       |  
| | Exchange
        adjustments          | (6               | ) | (26               | ) |                     |   | (32   | )
| |                                       |                  |   |                   |   |                     |   |       |  
| | Disposals
        and other movements | (31              | ) | (93               | ) |                     |   | (124  | )
| |                                       |                  |   |                   |   |                     |   |       |  
| | At
        end of year                | 238              |   | 1,197             |   |                     |   | 1,435 |  
| |                                       |                  |   |                   |   |                     |   |       |  
| | Net
          book value at end 2003  | 630              |   | 1,049             |   | 115                 |   | 1,794 |  
| |                                       |                  |   |                   |   |                     |   |       |  
| | Net
        book value at end 2002    | 663              |   | 1,168             |   | 130                 |   | 1,961 |  
| |                                       |                  |   |                   |   |                     |   |       |  

The
      Group depreciation charge of £250m comprises £191m charged in
      arriving at operating profit before exceptional items, £48m charged
      to exceptional items relating to the restructuring programmes (see note 22)
      and £11m charged to exceptional items relating to the write-down
      of fixed assets in Quest following a review of the strategic direction
      of future
      ERP systems development.


The
      cash expenditure on tangible fixed assets was £154m as there were
      no finance leases capitalised or movement in capital creditors.


The
      net book value of the tangible fixed assets of the Group includes capitalised
      finance leases of £6m (2002 £7m) comprising cost of £8m
      (2002 £9m) less depreciation of £2m (2002 £2m). The depreciation
      charge for the year in respect of capitalised leases was £1m (2002 £1m)
      and finance charges were £nil (2002 £nil).


Included
      in land and buildings is £137m (2002 £135m) in respect of the
      cost of land which is not subject to depreciation.


| | ICI
        ANNUAL REPORT AND ACCOUNTS 2003 | 73
| | ------------------------------------------- | --

---



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Contents to the Accounts

notes relating to the accounts

|12 | Tangible
    fixed assets (continued) |           |   |           |   |              |   |       |  
|-- | ------------------------------------- | --------- | - | --------- | - | ------------ | - | ----- | -
|   |                                       | Land and  |   | Plant and |   | Payments on  |   | Total |  
|   |                                       | buildings |   | equipment |   | account and  |   |       |  
|   |                                       |           |   |           |   | assets in    |   |       |  
|   |                                       |           |   |           |   | course of    |   |       |  
|   |                                       |           |   |           |   | construction |   |       |  
|   |                                       | £m        |   | £m        |   | £m           |   | £m    |  
|   |                                       |           |   |           |   |              |   |       |  
|   | Company                               |           |   |           |   |              |   |       |  
|   |                                       |           |   |           |   |              |   |       |  
|   | Cost                                  |           |   |           |   |              |   |       |  
|   |                                       |           |   |           |   |              |   |       |  
|   | At beginning of year                  | 35        |   | 173       |   | 11           |   | 219   |  
|   |                                       |           |   |           |   |              |   |       |  
|   | Capital expenditure                   |           |   |           |   | 12           |   | 12    |  
|   |                                       |           |   |           |   |              |   |       |  
|   | Transfers of assets into use          | 1         |   | 11        |   | (12          | ) |      |  
|   |                                       |           |   |           |   |              |   |       |  
|   | Disposals and other movements         | (4        | ) | (5        | ) |             |   | (9    | )
|   |                                       |           |   |           |   |              |   |       |  
|   | At end of year                        | 32        |   | 179       |   | 11           |   | 222   |  
|   |                                       |           |   |           |   |              |   |       |  
|   | Depreciation                          |           |   |           |   |              |   |       |  
|   |                                       |           |   |           |   |              |   |       |  
|   | At beginning of year                  | 13        |   | 128       |   |              |   | 141   |  
|   |                                       |           |   |           |   |              |   |       |  
|   | Charge for year                       | 3         |   | 15        |   |              |   | 18    |  
|   |                                       |           |   |           |   |              |   |       |  
|   | Disposals and other movements         |          |   | (5        | ) |              |   | (5    | )
|   |                                       |           |   |           |   |              |   |       |  
|   | At end of year                        | 16        |   | 138       |   |              |   | 154   |  
|   |                                       |           |   |           |   |              |   |       |  
|   | Net book value at end 2003            | 16        |   | 41        |   | 11           |   | 68    |  
|   |                                       |           |   |           |   |              |   |       |  
|   | Net book value at end 2002            | 22        |   | 45        |   | 11           |   | 78    |  
|   |                                       |           |   |           |   |              |   |       |  
|   |                                       |           |   |           |   |              |   |       |  

| |                                                     | Group |  | Company | 
| | --------------------------------------------------- | ----- |  | ------- | 
| |                                                     |       |  |         | 
| |                                                     | 2003  |  | 2002    | 
| |                                                     | £m    |  | £m      | 
| |                                                     |       |  |         | 
| | The net book value of land and buildings comprises: |       |  |         | 
| |                                                     |       |  |         | 
| | Freeholds                                           | 591   |  | 624     | 
| |                                                     |       |  |         | 
| | Long leases (over 50 years unexpired)               | 19    |  | 18      | 
| |                                                     |       |  |         | 
| | Short leases                                        | 20    |  | 21      | 
| |                                                     |       |  |         | 
| |                                                     | 630   |  | 663     | 
| |                                                     |       |  |         | 

|   |                                                      |        |   |        |   |        |  
|-- | ---------------------------------------------------- | ------ | - | ------ | - | ------ | -
|13 | Investments
    in subsidiary undertakings  Company |        |   |        |   |        |  
|   |                                                      | Shares |   | Loans  |   | Total  |  
|   |                                                      | £m     |   | £m     |   | £m     |  
|   |                                                      |        |   |        |   |        |  
|   | Cost                                                 |        |   |        |   |        |  
|   |                                                      |        |   |        |   |        |  
|   | At
        beginning of year                         | 5,710  |   | 5,722  |   | 11,432 |  
|   |                                                      |        |   |        |   |        |  
|   | New
        investments/new loans                    | 6      |   | 2,400  |   | 2,406  |  
|   |                                                      |        |   |        |   |        |  
|   | Disposals/loans
        repaid                       | (1,831 | ) | (1,257 | ) | (3,088 | )
|   |                                                      |        |   |        |   |        |  
|   | Exchange
        adjustments                         |       |   | (187   | ) | (187   | )
|   |                                                      |        |   |        |   |        |  
|   | At
        end of year                               | 3,885  |   | 6,678  |   | 10,563 |  
|   |                                                      |        |   |        |   |        |  
|   | Provisions                                           |        |   |        |   |        |  
|   |                                                      |        |   |        |   |        |  
|   | At
        beginning of year                         | (74    | ) | (1     | ) | (75    | )
|   |                                                      |        |   |        |   |        |  
|   | Exchange
        adjustments                         | 3      |   |       |   | 3      |  
|   |                                                      |        |   |        |   |        |  
|   | Additions                                            | (2     | ) |       |   | (2     | )
|   |                                                      |        |   |        |   |        |  
|   | At
        end of year                               | (73    | ) | (1     | ) | (74    | )
|   |                                                      |        |   |        |   |        |  
|   | Balance
          sheet value at end 2003            | 3,812  |   | 6,677  |   | 10,489 |  
|   |                                                      |        |   |        |   |        |  
|   | Balance
        sheet value at end 2002              | 5,636  |   | 5,721  |   | 11,357 |  
|   |                                                      |        |   |        |   |        |  
|   |                                                      |        |   |        |   |        |  

| |                                                                | 2003 |  | 2002 | 
| | -------------------------------------------------------------- | ---- |  | ---- | 
| |                                                                | £m   |  | £m   | 
| |                                                                |      |  |      | 
| | Shares in subsidiary undertakings which are listed investments |      |  |      | 
| |                                                                |      |  |      | 
| | Balance sheet value                                            | 4    |  | 4    | 
| |                                                                |      |  |      | 
| | Market value                                                   | 49   |  | 32   | 
| |                                                                |      |  |      | 

The Companys
  investments in its subsidiary undertakings, which are eliminated on consolidation,
  consist of either equity or long-term loans, or both. Normal trading balances
  are included in either debtors or creditors. Information on principal subsidiary
  undertakings is given on page 112.


|74 | ICI ANNUAL REPORT AND ACCOUNTS 2003 | 
|-- | ----------------------------------- | 

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Contents to the Accounts

|14 | Investments
    in participating and other interests |            |  |                   |   |        |   |        |  
|-- | ---------------------------------------------------- | ---------- |  | ----------------- | - | ------ | - | ------ | -
|   |                                                      | Associates |  | Other investments |   |        |   | Total  |  
|   |                                                      | Equity     |  | Non equity        |   | Own*   |   | Other  |  
|   |                                                      | accounted  |  | accounted         |   | shares |   | shares |  
|   |                                                      | shares     |  | shares            |   |        |   |        |  
|   |                                                      | £m         |  | £m                |   | £m     |   | £m     |  
|   |                                                      |            |  |                   |   |        |   |        |  
|   | Group                                                |            |  |                   |   |        |   |        |  
|   |                                                      |            |  |                   |   |        |   |        |  
|   | Cost                                                 |            |  |                   |   |        |   |        |  
|   |                                                      |            |  |                   |   |        |   |        |  
|   | At beginning
    of year  as previously reported    | 5          |  | 1                 |   | 58     |   | 18     |  
|   |                                                      |            |  |                   |   |        |   |        |  
|   | Prior year adjustment (see note 1)                   |           |  |                  |   | (58    | ) |       |  
|   |                                                      |            |  |                   |   |        |   |        |  
|   | At beginning
    of year  as restated               | 5          |  | 1                 |   |       |   | 18     |  
|   |                                                      |            |  |                   |   |        |   |        |  
|   | Additions                                            | 5          |  |                  |   |       |   | 2      |  
|   |                                                      |            |  |                   |   |        |   |        |  
|   | Reclassifications                                    |           |  |                  |   |       |   |       |  
|   |                                                      |            |  |                   |   |        |   |        |  
|   | Exchange adjustments                                 | 2          |  |                  |   |       |   | (2     | )
|   |                                                      |            |  |                   |   |        |   |        |  
|   | At end of year                                       | 12         |  | 1                 |   |       |   | 18     |  
|   |                                                      |            |  |                   |   |        |   |        |  
|   | Share of post-acquisition reserves less losses       |            |  |                   |   |        |   |        |  
|   |                                                      |            |  |                   |   |        |   |        |  
|   | At beginning of year                                 | 11         |  |                   |   |        |   |        |  
|   |                                                      |            |  |                   |   |        |   |        |  
|   | Retained profits less losses                         | 2          |  |                   |   |        |   |        |  
|   |                                                      |            |  |                   |   |        |   |        |  
|   | At end of year                                       | 13         |  |                   |   |        |   |        |  
|   |                                                      |            |  |                   |   |        |   |        |  
|   | Provisions                                           |            |  |                   |   |        |   |        |  
|   |                                                      |            |  |                   |   |        |   |        |  
|   | At beginning
    of year  as previously reported    |           |  | (1                | ) | (22    | ) | (1     | )
|   |                                                      |            |  |                   |   |        |   |        |  
|   | Prior year adjustment (see note 1)                   |           |  |                  |   | 22     |   |       |  
|   |                                                      |            |  |                   |   |        |   |        |  
|   | At beginning
    of year  as restated               |           |  | (1                | ) |       |   | (1     | )
|   |                                                      |            |  |                   |   |        |   |        |  
|   | At end of year                                       |           |  | (1                | ) |       |   | (1     | )
|   |                                                      |            |  |                   |   |        |   |        |  
|   | Balance sheet value at end 2003                      | 25         |  |                  |   |       |   | 17     |  
|   |                                                      |            |  |                   |   |        |   |        |  
|   | Balance sheet
    value at end 2002  as restated    | 16         |  |                  |   |       |   | 17     |  
|   |                                                      |            |  |                   |   |        |   |        |  
|   |                                                      |            |  |                   |   |        |   |        |  

| | * | Own shares relate to 8.8m (2002 9.8m) shares of the Company held by the Imperial Chemical Industries PLC Employee Benefits Trust which are under option to, or conditionally gifted to, employees under the arrangements described in note 23. Following the early adoption by the Group of UITF 38 during 2003, own shares are no longer recognised as an asset on the balance sheet but are deducted from equity (see note 1).                                                              
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ø | Loans to other investments principally comprise the Groups loans to its investment in Ineos Chlor. Provisions were made in 2002 to write down £99m of the loans to Ineos Chlor as uncertainty existed as to the extent to which, and period over which, these amounts will be recovered. A further £10m was advanced to Ineos Chlor in 2003 under the original loan facility, the terms of which have been restructured as part of an overall refinancing package of Ineos Chlor (see note 39).

| |                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The
        fair values of investments all of which are unlisted, are not materially
        different from their carrying values.The
    Groups principal associate at 31 December 2003 is:
| |                                                                                                                                                                                              

| |                      | Issued share and loan capital at date of | Held by      | Principal activities
| | -------------------- | ---------------------------------------- | ------------ | --------------------
| |                      | latest available audited accounts        | a subsidiary |                     
| |                      |                                          |              | of ICI              
| |                      | Class of capital                         | £m           | %                   
| |                      |                                          |              |                     
| | IC
    Insurance Ltd | Ordinary                                 | 20           | 49                  
| |                      |                                          |              |                     

IC Insurance Ltd is incorporated in England and its principal operations are carried out in the UK.


| | ICI ANNUAL REPORT AND ACCOUNTS 2003 | 75
| | ----------------------------------- | --

---



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Contents to the Accounts

notes relating to the accounts

|14 | Investments
    in participating and other interests (continued) |       |   |        |   |       |  
|-- | ---------------------------------------------------------------- | ----- | - | ------ | - | ----- | -
|   |                                                                  | Loans |   | Other  |   | Total |  
|   |                                                                  |       |   | shares |   |       |  
|   |                                                                  | £m    |   | £m     |   | £m    |  
|   |                                                                  |       |   |        |   |       |  
|   | Company                                                          |       |   |        |   |       |  
|   |                                                                  |       |   |        |   |       |  
|   | Cost                                                             |       |   |        |   |       |  
|   |                                                                  |       |   |        |   |       |  
|   | At the beginning of year                                         | 67    |   | 2      |   | 69    |  
|   |                                                                  |       |   |        |   |       |  
|   | Additions                                                        | 30    |   |        |   | 30    |  
|   |                                                                  |       |   |        |   |       |  
|   | Disposals                                                        | (98   | ) |        |   | (98   | )
|   |                                                                  |       |   |        |   |       |  
|   | Exchange adjustments                                             | 1     |   |        |   | 1     |  
|   |                                                                  |       |   |        |   |       |  
|   | At end of year                                                   |      |   | 2      |   | 2     |  
|   |                                                                  |       |   |        |   |       |  
|   | Provisions                                                       |       |   |        |   |       |  
|   |                                                                  |       |   |        |   |       |  
|   | At the beginning of year                                         | (67   | ) | (1     | ) | (68   | )
|   |                                                                  |       |   |        |   |       |  
|   | Disposals                                                        | 66    |   |        |   | 66    |  
|   |                                                                  |       |   |        |   |       |  
|   | Exchange adjustments                                             | 1     |   |        |   | 1     |  
|   |                                                                  |       |   |        |   |       |  
|   | At end of year                                                   |      |   | (1     | ) | (1    | )
|   |                                                                  |       |   |        |   |       |  
|   | Balance sheet value at end 2003                                  |      |   | 1      |   | 1     |  
|   |                                                                  |       |   |        |   |       |  
|   | Balance sheet value at end 2002                                  |      |   | 1      |   | 1     |  
|   |                                                                  |       |   |        |   |       |  
|   |                                                                  |       |   |        |   |       |  

|   |                                     |       |  |         |  |      |  |      | 
|-- | ----------------------------------- | ----- |  | ------- |  | ---- |  | ---- | 
|15 | Stocks                              |       |  |         |  |      |  |      | 
|   |                                     | Group |  | Company | 
|   |                                     |       |  |         |  |      |  |      | 
|   |                                     | 2003  |  | 2002    |  | 2003 |  | 2002 | 
|   |                                     | £m    |  | £m      |  | £m   |  | £m   | 
|   |                                     |       |  |         |  |      |  |      | 
|   | Raw materials and consumables       | 204   |  | 218     |  | 5    |  | 6    | 
|   |                                     |       |  |         |  |      |  |      | 
|   | Stocks in process                   | 14    |  | 21      |  |     |  | 1    | 
|   |                                     |       |  |         |  |      |  |      | 
|   | Finished goods and goods for resale | 408   |  | 412     |  | 22   |  | 22   | 
|   |                                     |       |  |         |  |      |  |      | 
|   |                                     | 626   |  | 651     |  | 27   |  | 29   | 
|   |                                     |       |  |         |  |      |  |      | 
|   |                                     |       |  |         |  |      |  |      | 

|   |                                                                                            |       |   |                       |   |                   |  |      |  |       |  |       | 
|-- | ------------------------------------------------------------------------------------------ | ----- | - | --------------------- | - | ----------------- |  | ---- |  | ----- |  | ----- | 
|16 | Debtors                                                                                    |       |   |                       |   |                   |  |      |  |       |  |       | 
|   |                                                                                            | Group |   | Non-operating debtors |   | Company           | 
|   |                                                                                            |       |   |                       |   | included in Group |  |      |  |       | 
|   |                                                                                            |       |   |                       |   |                   |  |      |  |       |  |       | 
|   |                                                                                            | 2003  |   | 2002                  |   | 2003              |  | 2002 |  | 2003  |  | 2002  | 
|   |                                                                                            | £m    |   | £m                    |   | £m                |  | £m   |  | £m    |  | £m    | 
|   |                                                                                            |       |   |                       |   |                   |  |      |  |       |  |       | 
|   | Amounts due within one year                                                                |       |   |                       |   |                   |  |      |  |       |  |       | 
|   |                                                                                            |       |   |                       |   |                   |  |      |  |       |  |       | 
|   | Trade debtors                                                                              | 818   |   | 877                   |   |                   |  |      |  | 14    |  | 14    | 
|   |                                                                                            |       |   |                       |   |                   |  |      |  |       |  |       | 
|   | Less: amounts set aside for doubtful accounts                                              | (47   | ) | (48                   | ) |                   |  |      |  |      |  |      | 
|   |                                                                                            |       |   |                       |   |                   |  |      |  |       |  |       | 
|   |                                                                                            | 771   |   | 829                   |   |                   |  |      |  | 14    |  | 14    | 
|   |                                                                                            |       |   |                       |   |                   |  |      |  |       |  |       | 
|   | Amounts owed by subsidiary undertakings                                                    |       |   |                       |   |                   |  |      |  | 2,065 |  | 2,310 | 
|   |                                                                                            |       |   |                       |   |                   |  |      |  |       |  |       | 
|   | Prepaid pension costs                                                                      | 54    |   | 15                    |   |                   |  |      |  | 30    |  | 8     | 
|   |                                                                                            |       |   |                       |   |                   |  |      |  |       |  |       | 
|   | Taxation recoverable                                                                       | 22    |   | 68                    |   | 22                |  | 68   |  |      |  |      | 
|   |                                                                                            |       |   |                       |   |                   |  |      |  |       |  |       | 
|   | Other prepayments and accrued income                                                       | 95    |   | 93                    |   | 21                |  | 31   |  | 27    |  | 25    | 
|   |                                                                                            |       |   |                       |   |                   |  |      |  |       |  |       | 
|   | Other debtors                                                                              | 142   |   | 145                   |   | 5                 |  | 2    |  | 5     |  | 5     | 
|   |                                                                                            |       |   |                       |   |                   |  |      |  |       |  |       | 
|   |                                                                                            | 1,084 |   | 1,150                 |   | 48                |  | 101  |  | 2,141 |  | 2,362 | 
|   |                                                                                            |       |   |                       |   |                   |  |      |  |       |  |       | 
|   | Amounts due after more than one year                                                       |       |   |                       |   |                   |  |      |  |       |  |       | 
|   |                                                                                            |       |   |                       |   |                   |  |      |  |       |  |       | 
|   | Prepaid pension costs                                                                      | 453   |   | 510                   |   |                  |  |     |  | 297   |  | 327   | 
|   |                                                                                            |       |   |                       |   |                   |  |      |  |       |  |       | 
|   | Other debtors                                                                              | 68    |   | 35                    |   | 42                |  | 9    |  |      |  |      | 
|   |                                                                                            |       |   |                       |   |                   |  |      |  |       |  |       | 
|   |                                                                                            | 521   |   | 545                   |   | 42                |  | 9    |  | 297   |  | 327   | 
|   |                                                                                            |       |   |                       |   |                   |  |      |  |       |  |       | 
|   |                                                                                            | 1,605 |   | 1,695                 |   | 90                |  | 110  |  | 2,438 |  | 2,689 | 
|   |                                                                                            |       |   |                       |   |                   |  |      |  |       |  |       | 
|   |                                                                                            |       |   |                       |   |                   |  |      |  |       |  |       | 
|   | Under
    US GAAP, the amounts due after more than one year would be shown as non-current.



|76 | ICI ANNUAL REPORT AND ACCOUNTS 2003 | 
|-- | ----------------------------------- | 

---



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Contents to the Accounts

|17 | Current
    asset investments and short-term deposits
|-- | -----------------------------------------------------
|   |                                                      
|   |                                                      

| |                                              | Group | 
| | -------------------------------------------- | ----- | 
| |                                              |       | 
| |                                              | 2003  | 
| |                                              | £m    | 
| |                                              |       | 
| | Unlisted investments and short-term deposits | 345   | 
| |                                              |       | 
| | Included in cash and cash equivalents        | 345   | 
| |                                              |       | 

Included
  in unlisted investments and short-term deposits and cash are amounts totalling £99m (2002 £109m) held by the Groups insurance subsidiaries. At 31 December 2003 £40m (2002 £30m) was readily available for the general purposes of the Group. Also included within current asset investments and short-term deposits in 2002 is an amount of £125m in relation to the sale of ICIs interests in Huntsman International Holdings LLC. During the year, ICI completed the sale of its interests in Huntsman International Holdings LLC, with the balance on the transaction of £173m received in May 2003. The transaction resulted in an overall profit before tax of £50m
  which is included as an exceptional item as part of profits less losses on
  sale or closure of operations (note 3).


The management of current asset investments is discussed in note 37.


|18 | Short-term
    borrowings
|-- | -------------------------
|   |                          
|   |                          

| |                                                       | Group |  | Average interest | 
| | ----------------------------------------------------- | ----- |  | ---------------- | 
| |                                                       |       |  | rate  Group*    | 
| |                                                       |       |  |                  | 
| |                                                       | 2003  |  | 2002             | 
| |                                                       | £m    |  | £m               | 
| |                                                       |       |  |                  | 
| | Bank borrowings                                       |       |  |                  | 
| |                                                       |       |  |                  | 
| | Secured  by floating charge                          | 1     |  | 5                | 
| |                                                       |       |  |                  | 
| | Unsecured                                             | 16    |  | 38               | 
| |                                                       |       |  |                  | 
| |                                                       | 17    |  | 43               | 
| |                                                       |       |  |                  | 
| | Other borrowings (unsecured)                          | 12    |  | 183              | 
| |                                                       |       |  |                  | 
| |                                                       | 29    |  | 226              | 
| |                                                       |       |  |                  | 
| | Maximum short-term borrowings outstanding during year | 755   |  | 1,021            | 
| |                                                       |       |  |                  | 

* Based on borrowings outstanding at 31 December.


Various short-term lines of credit, both committed and uncommitted, are available to the Group and are reviewed regularly. There are no facility fees payable on uncommitted lines nor is there a requirement for an equivalent deposit to be maintained with any of the banks.


|19 | Other
    creditors
|-- | -------------------
|   |                    
|   |                    

| |                                                   | Group |  | Non-operating creditors |  | Company           | 
| | ------------------------------------------------- | ----- |  | ----------------------- |  | ----------------- | 
| |                                                   |       |  |                         |  | included in Group | 
| |                                                   |       |  |                         |  |                   | 
| |                                                   | 2003  |  | 2002                    |  | 2003              | 
| |                                                   | £m    |  | £m                      |  | £m                | 
| |                                                   |       |  |                         |  |                   | 
| | Amounts due within one year                       |       |  |                         |  |                   | 
| |                                                   |       |  |                         |  |                   | 
| | Trade creditors                                   | 665   |  | 754                     |  |                   | 
| |                                                   |       |  |                         |  |                   | 
| | Amounts owed to subsidiary undertakings           |       |  |                         |  |                   | 
| |                                                   |       |  |                         |  |                   | 
| | Corporate taxation                                | 342   |  | 298                     |  | 342               | 
| |                                                   |       |  |                         |  |                   | 
| | Value added and payroll taxes and social security | 30    |  | 25                      |  |                   | 
| |                                                   |       |  |                         |  |                   | 
| | Dividends to Ordinary Shareholders                | 42    |  | 52                      |  | 42                | 
| |                                                   |       |  |                         |  |                   | 
| | Accruals                                          | 288   |  | 278                     |  | 61                | 
| |                                                   |       |  |                         |  |                   | 
| | Other creditors*                                  | 296   |  | 285                     |  | 10                | 
| |                                                   |       |  |                         |  |                   | 
| |                                                   | 1,663 |  | 1,692                   |  | 455               | 
| |                                                   |       |  |                         |  |                   | 
| | Amounts due after more than one year              |       |  |                         |  |                   | 
| |                                                   |       |  |                         |  |                   | 
| | Corporate taxation                                | 1     |  | 2                       |  |                   | 
| |                                                   |       |  |                         |  |                   | 
| | Amounts owed to subsidiary undertakings           |       |  |                         |  |                   | 
| |                                                   |       |  |                         |  |                   | 
| | Pension liabilities                               |      |  | 9                       |  |                   | 
| |                                                   |       |  |                         |  |                   | 
| | Other creditors*                                  | 17    |  | 21                      |  |                   | 
| |                                                   |       |  |                         |  |                   | 
| |                                                   | 18    |  | 32                      |  |                   | 
| |                                                   |       |  |                         |  |                   | 

* Includes obligations under finance leases (note 34).


Under US GAAP, provisions for liabilities and charges (note 21) would be shown under other creditors  amounts due after more than one year.


| |                                             |   
| | ------------------------------------------- | --
| | ICI
        ANNUAL REPORT AND ACCOUNTS 2003 | 77

---



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Contents to the Accounts

notes relating to the accounts

|20 | Loans
|-- | -----



| |                                                                                      |              |           |       | Group |       | Company |    
| | ------------------------------------------------------------------------------------ | ------------ | --------- | ----- | ----- | ----- | ------- | ---
| |                                                                                      |              |           |       |       |       |         |    
| |                                                                                      |              | Repayment |       | 2003  |       | 2002    |    
| |                                                                                      |              | dates     |       | £m    |       | £m      |    
| |                                                                                      |              |           |       |       |       |         |    
| | Secured loans                                                                        |              |           |       |       |       |         |    
| |                                                                                      |              |           |       |       |       |         |    
| | US dollars                                                                           |              | 2004      |       | 6     |       | 98      |    
| |                                                                                      |              |           |       |       |       |         |    
| | Other currencies                                                                     |              | 2004/2006 |       | 41    |       | 72      |    
| |                                                                                      |              |           |       |       |       |         |    
| | Total secured                                                                        |              |           |       | 47    |       | 170     |    
| |                                                                                      |              |           |       |       |       |         |    
| | Secured by fixed charge                                                              |  bank loans |           |       | 23    |       | 17      |    
| |                                                                                      |              |           |       |       |       |         |    
| |                                                                                      |  other      |           |       |      |       | 1       |    
| |                                                                                      |              |           |       |       |       |         |    
| | Secured by floating charge                                                           |  bank loans |           |       | 7     |       | 132     |    
| |                                                                                      |              |           |       |       |       |         |    
| |                                                                                      |  other      |           |       | 17    |       | 20      |    
| |                                                                                      |              |           |       |       |       |         |    
| | Unsecured loans                                                                      |              |           |       |       |       |         |    
| |                                                                                      |              |           |       |       |       |         |    
| | Sterling                                                                             |              |           |       |       |       |         |    
| |                                                                                      |              |           |       |       |       |         |    
| | 93/4% and 10% Bonds                                                                  |              | 2005      |       | 100   |       | 200     |    
| |                                                                                      |              |           |       |       |       |         |    
| | 7.625% Bonds                                                                         |              | 2007      |       | 299   |       | 298     |    
| |                                                                                      |              |           |       |       |       |         |    
| | 6.375%
    to 6.52% medium-term notes                                                | 2003         |           |       |       | 130   |         |    
| |                                                                                      |              |           |       |       |       |         |    
| | 3.649%
    to 5.054% short-term notes                                                | 2003         |           |       |       | 100   |         |    
| |                                                                                      |              |           |       |       |       |         |    
| | Variable
    rate medium-term notes                                                  | 2003         |           |       |       | 16    |         |    
| |                                                                                      |              |           |       |       |       |         |    
| | Others                                                                               |              | 2004      |       | 10    |       | 10      |    
| |                                                                                      |              |           |       |       |       |         |    
| |                                                                                      |              |           |       | 409   |       | 754     |    
| |                                                                                      |              |           |       |       |       |         |    
| | US dollars                                                                           |              |           |       |       |       |         |    
| |                                                                                      |              |           |       |       |       |         |    
| | 87/8% Debentures                                                                     |              | 2006      |       | 140   |       | 155     |    
| |                                                                                      |              |           |       |       |       |         |    
| | 71/20% Notes                                                                         |              | 2007      |       | 140   |       | 155     |    
| |                                                                                      |              |           |       |       |       |         |    
| | 619/20% Notes                                                                        |              | 2004      |       | 421   |       | 466     |    
| |                                                                                      |              |           |       |       |       |         |    
| | 55/8% Notes                                                                          |              | 2013      |       | 281   |       |         |    
| |                                                                                      |              |           |       |       |       |         |    
| | 43/8% Notes                                                                          |              | 2008      |       | 281   |       |         |    
| |                                                                                      |              |           |       |       |       |         |    
| | Variable
    rate medium-term notes                                                  | 2010         |           | 28    |       | 44    |         | 28 
| |                                                                                      |              |           |       |       |       |         |    
| | Others                                                                               |              | 2004/2008 |       | 50    |       | 56      |    
| |                                                                                      |              |           |       |       |       |         |    
| |                                                                                      |              |           |       | 1,341 |       | 876     |    
| |                                                                                      |              |           |       |       |       |         |    
| | Other currencies                                                                     |              | 2004/2012 |       | 37    |       | 48      |    
| |                                                                                      |              |           |       |       |       |         |    
| | Total unsecured                                                                      |              |           |       | 1,787 |       | 1,678   |    
| |                                                                                      |              |           |       |       |       |         |    
| | Total
         loans  before financial derivatives(see
    table on page 79)        |              |           | 1,834 |       | 1,848 |         | 133
| |                                                                                      |              |           |       |       |       |         |    
| | Financial derivatives                                                                |              |           |       | 53    |       | 15      |    
| |                                                                                      |              |           |       |       |       |         |    
| | Total
         loans after
         financial derivatives(see
    table on page 79) |              |           | 1,887 |       | 1,863 |         | 133
| |                                                                                      |              |           |       |       |       |         |    

The secured
  debt referred to in this note and the secured short-term borrowings referred
  to in note 18 were secured by property, plant and other assets with a net book
  value at 31 December 2003 of £167m.


An analysis reflecting
the effects of financial instruments on the Groups financial liabilities
at 31 December 2003 is set out in note 37.


| | 78 | ICI
        ANNUAL REPORT AND ACCOUNTS 2003 | 
| | -- | ------------------------------------------- | 

---



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Contents to the Accounts

|20 | Loans
    (continued)                                                                                                            
|-- | ---------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                  
|   | Effects
    of financial derivatives                                                                                             
|   |                                                                                                                                  
|   | The
          following analysis reflects the effects of financial derivatives on
    the Groups borrowings at 31 December 2003.
|   |                                                                                                                                  

| |                                  | Before      |  | After       | 
| | -------------------------------- | ----------- |  | ----------- | 
| |                                  | financial   |  | financial   | 
| |                                  | derivatives |  | derivatives | 
| |                                  | £m          |  | £m          | 
| |                                  |             |  |             | 
| | Sterling                         | 409         |  | 110         | 
| |                                  |             |  |             | 
| | US Dollar                        | 1,347       |  | 1,379       | 
| |                                  |             |  |             | 
| | Euro and Euro related currencies | 10          |  | 213         | 
| |                                  |             |  |             | 
| | Japanese Yen                     | 24          |  | 93          | 
| |                                  |             |  |             | 
| | Others                           | 44          |  | 92          | 
| |                                  |             |  |             | 
| |                                  | 1,834       |  | 1,887       | 
| |                                  |             |  |             | 
| | Fixed rate loans                 | 1,324       |  | 840         | 
| |                                  |             |  |             | 
| | Floating rate loans              | 510         |  | 1,047       | 
| |                                  |             |  |             | 
| |                                  | 1,834       |  | 1,887       | 
| |                                  |             |  |             | 
| |                                  |             |  |             | 
| |                                  |             |  |             | 

| |                                                                            | Group |  | Company | 
| | -------------------------------------------------------------------------- | ----- |  | ------- | 
| |                                                                            |       |  |         | 
| |                                                                            | 2003  |  | 2002    | 
| |                                                                            | £m    |  | £m      | 
| |                                                                            |       |  |         | 
| | Loan maturities                                                            |       |  |         | 
| |                                                                            |       |  |         | 
| | Bank loans                                                                 |       |  |         | 
| |                                                                            |       |  |         | 
| | Loans or installments thereof are repayable:                               |       |  |         | 
| |                                                                            |       |  |         | 
| | After 5 years from balance sheet date                                      |      |  | 8       | 
| |                                                                            |       |  |         | 
| | From 2 to 5 years                                                          | 32    |  | 44      | 
| |                                                                            |       |  |         | 
| | From 1 to 2 years                                                          | 13    |  | 19      | 
| |                                                                            |       |  |         | 
| | Total due after more than one year                                         | 45    |  | 71      | 
| |                                                                            |       |  |         | 
| | Total due within one year                                                  | 37    |  | 236     | 
| |                                                                            |       |  |         | 
| |                                                                            | 82    |  | 307     | 
| |                                                                            |       |  |         | 
| | Other loans                                                                |       |  |         | 
| |                                                                            |       |  |         | 
| | Loans or installments thereof are repayable:                               |       |  |         | 
| |                                                                            |       |  |         | 
| | After 5 years from balance sheet date                                      | 312   |  | 36      | 
| |                                                                            |       |  |         | 
| | From 2 to 5 years                                                          | 863   |  | 748     | 
| |                                                                            |       |  |         | 
| | From 1 to 2 years                                                          | 133   |  | 508     | 
| |                                                                            |       |  |         | 
| | Total due after more than one year                                         | 1,308 |  | 1,292   | 
| |                                                                            |       |  |         | 
| | Total due within one year                                                  | 497   |  | 264     | 
| |                                                                            |       |  |         | 
| |                                                                            | 1,805 |  | 1,556   | 
| |                                                                            |       |  |         | 
| | Total loans                                                                |       |  |         | 
| |                                                                            |       |  |         | 
| | Loans or installments thereof are repayable:                               |       |  |         | 
| |                                                                            |       |  |         | 
| | After 5 years from balance sheet date                                      | 312   |  | 44      | 
| |                                                                            |       |  |         | 
| | From 4 to 5 years                                                          | 287   |  | 470     | 
| |                                                                            |       |  |         | 
| | From 3 to 4 years                                                          | 427   |  | 187     | 
| |                                                                            |       |  |         | 
| | From 2 to 3 years                                                          | 181   |  | 135     | 
| |                                                                            |       |  |         | 
| | From 1 to 2 years                                                          | 146   |  | 527     | 
| |                                                                            |       |  |         | 
| | Total due after more than one year                                         | 1,353 |  | 1,363   | 
| |                                                                            |       |  |         | 
| | Total due within one year                                                  | 534   |  | 500     | 
| |                                                                            |       |  |         | 
| | Total loans                                                                | 1,887 |  | 1,863   | 
| |                                                                            |       |  |         | 
| | Aggregate amount of loans any installment of which falls due after 5 years | 319   |  | 98      | 
| |                                                                            |       |  |         | 

| |                                             |   
| | ------------------------------------------- | --
| | ICI
        ANNUAL REPORT AND ACCOUNTS 2003 | 79

---



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notes relating to the accounts

|21 | Provisions
    for liabilities and charges
|-- | ------------------------------------------
|   |                                           

|                    |                                      | Deferred   |            | Pensions |                      | Post                |            | Environmental |   | Disposal |   | Restructuring |   | Other |   | Total |  
|------------------- | ------------------------------------ | ---------- | ---------- | -------- | -------------------- | ------------------- | ---------- | ------------- | - | -------- | - | ------------- | - | ----- | - | ----- | -
|taxation            | (note
          36)                  | retirement | provisions | *        | and
          legacy | provisions          | provisions |              |  
|                    |                                      | healthcare |            |          | provisions           | (note
          22) |            |              
|(note
          36) | (note
          22)                  |           
|£m                  | £m                                   | £m         | £m         | £m       | £m                   | £m                  | £m        
|                    |                                      |            |            |          |                      |                     |            |               |   |          |   |               |   |       |   |       |  
|                    | Group                                |            |            |          |                      |                     |            |               |   |          |   |               |   |       |   |       |  
|                    |                                      |            |            |          |                      |                     |            |               |   |          |   |               |   |       |   |       |  
|                    | At beginning of 2003                 | 140        |            | 148      |                      | 205                 |            | 40            |   | 458      |   | 64            |   | 66    |   | 1,121 |  
|                    |                                      |            |            |          |                      |                     |            |               |   |          |   |               |   |       |   |       |  
|                    | Profit and loss account              | (52        | )          | 28       |                      | 14                  |            | (2            | ) | (6       | ) | 141           |   | 92    |   | 215   |  
|                    |                                      |            |            |          |                      |                     |            |               |   |          |   |               |   |       |   |       |  
|                    | Increase due to effluxion of time    |           |            |         |                      |                    |            |              |   | 10       |   |              |   |      |   | 10    |  
|                    |                                      |            |            |          |                      |                     |            |               |   |          |   |               |   |       |   |       |  
|                    | Net amounts paid or becoming payable |           |            | (38      | )                    | (15                 | )          | (2            | ) | (105     | ) | (54           | ) | (9    | ) | (223  | )
|                    |                                      |            |            |          |                      |                     |            |               |   |          |   |               |   |       |   |       |  
|                    | Movements due to acquisitions        |            |            |          |                      |                     |            |               |   |          |   |               |   |       |   |       |  
|                    | and disposals                        |           |            | (1       | )                    |                    |            |              |   |         |   |              |   |      |   | (1    | )
|                    |                                      |            |            |          |                      |                     |            |               |   |          |   |               |   |       |   |       |  
|                    | Exchange and other movements         | (9         | )          | (3       | )                    | (16                 | )          | (1            | ) | (9       | ) | (3            | ) | 11    |   | (30   | )
|                    |                                      |            |            |          |                      |                     |            |               |   |          |   |               |   |       |   |       |  
|                    | At end of 2003                       | 79         |            | 134      |                      | 188                 |            | 35            |   | 348      |   | 148           |   | 160   |  | 1,092 |  
|                    |                                      |            |            |          |                      |                     |            |               |   |          |   |               |   |       |   |       |  
|                    | Company                              |            |            |          |                      |                     |            |               |   |          |   |               |   |       |   |       |  
|                    |                                      |            |            |          |                      |                     |            |               |   |          |   |               |   |       |   |       |  
|                    | At beginning of 2003                 | 58         |            |         |                      |                    |            |              |   | 87       |   | 7             |   | 19    |   | 171   |  
|                    |                                      |            |            |          |                      |                     |            |               |   |          |   |               |   |       |   |       |  
|                    | Profit and loss account              | 30         |            |         |                      |                    |            |              |   | 4        |   | 46            |   |      |   | 80    |  
|                    |                                      |            |            |          |                      |                     |            |               |   |          |   |               |   |       |   |       |  
|                    | Net amounts paid or becoming payable |           |            |         |                      |                    |            |              |   | (27      | ) | (11           | ) | (1    | ) | (39   | )
|                    |                                      |            |            |          |                      |                     |            |               |   |          |   |               |   |       |   |       |  
|                    | Exchange and other movements         | (9         | )          |         |                      |                    |            |              |   | 3        |   |              |   | 1     |   | (5    | )
|                    |                                      |            |            |          |                      |                     |            |               |   |          |   |               |   |       |   |       |  
|                    | At end of 2003                       | 79         |            |         |                      |                    |            |              |   | 67       |   | 42            |   | 19    |   | 207   |  
|                    |                                      |            |            |          |                      |                     |            |               |   |          |   |               |   |       |   |       |  

Under US GAAP, provisions for liabilities and charges would be shown under other creditors (note 19).


| | * | Other than arising on disposal.                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------
| |  | Includes £70m
       relating to provisions for the write-down of shares under forward contracts
       to hedge employee share options.



|80 | ICI ANNUAL REPORT AND ACCOUNTS 2003
|-- | -----------------------------------

---



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Contents to the Accounts

|22 | Disposal
    and legacy, and restructuring provisions
|-- | -----------------------------------------------------
|   |                                                      

|     |                                             | Disposal
         and legacy provisions |    | Restructuring provisions |     
|---- | ------------------------------------------- | --------------------------------------- | -- | ------------------------ | ----
|     |                                             |                                         |    |                          |     
|2003 |                                             | 2002                                    |    | 2001                     | 2003
|£m   | £m                                          | £m                                      | £m | £m                       | £m  
|     |                                             |                                         |    |                          |     
|     | At beginning of year                        | 458                                     |    | 501                      |     
|     |                                             |                                         |    |                          |     
|     | Exceptional items before tax                | (6                                      | )  | 73                       |     
|     |                                             |                                         |    |                          |     
|     | Asset write-offs                            |                                        |    |                         |     
|     |                                             |                                         |    |                          |     
|     | Amounts paid                                | (105                                    | )  | (127                     | )   
|     |                                             |                                         |    |                          |     
|     | Movements due to acquisitions and disposals |                                        |    |                         |     
|     |                                             |                                         |    |                          |     
|     | Exchange and other adjustments              | 1                                       |    | 11                       |     
|     |                                             |                                         |    |                          |     
|     | At end of year                              | 348                                     |    | 458                      |     
|     |                                             |                                         |    |                          |     
|     | Reported as                                 |                                         |    |                          |     
|     |                                             |                                         |    |                          |     
|     | Provisions                                  | 348                                     |    | 458                      |     
|     |                                             |                                         |    |                          |     
|     | Creditors                                   |                                        |    |                         |     
|     |                                             |                                         |    |                          |     
|     |                                             | 348                                     |    | 458                      |     
|     |                                             |                                         |    |                          |     
|     | Comprising                                  |                                         |    |                          |     
|     |                                             |                                         |    |                          |     
|     | Severance costs                             | 20                                      |    | 33                       |     
|     |                                             |                                         |    |                          |     
|     | Other                                       | 328                                     |    | 425                      |     
|     |                                             |                                         |    |                          |     
|     |                                             | 348                                     |    | 458                      |     
|     |                                             |                                         |    |                          |     

Disposal
and legacy provisions ICI commenced reshaping its portfolio of businesses in 1997 consistent with plans to focus its resources on Paints and Specialty Products. In pursuit of this strategy, the Group announced that it intended to divest most of its Industrial Chemicals businesses. Prior to 2001 Between 1997 and
2001 the Group sold its Polyurethanes, Tioxide and selected Petrochemicals businesses,
Chlor-Chemicals, Klea and Crosfield businesses, Polyester polymer intermediates
business excluding operations in Pakistan, the Explosives operations in Canada,
Latin America and Europe and the explosives distribution business in the USA,
the Polyester film business, the Forest Products business based in Canada, the
UK based Fertiliser business, the Teesside Utilities and Services business, the
Acrylics business, the Automotive refinish business, the Fluoropolymers business,
Ethylene Oxide, the Methanol business and the Methylamines and derivatives businesses
and the Groups 50% interest in Phillips-Imperial Petroleum. Provisions were created
for both long term residual obligations resulting from the divestments and more
immediate and direct disposal costs. Total provisions created for the divestments
prior to 2001 were £1,524m mainly in respect of termination costs (£288m), pension costs relating to employees transferring to the purchaser (£282m), transaction costs (£90m), separation costs (£62m), IT related costs (£38m), site clearance (£48m), asset write-downs (£74m), and long-term residual costs (£285m). The long term residual
provisions were created to cover legacy management, legal, estates, pension administration
and environmental costs resulting from these divestments. The nature of the provisions
is such that expenditure is expected to occur over the period from 2004 to at
least 2030. During 2003 revisions were made to these provisions resulting in
a release of £8m. At 31 December 2003, £269m remained to
be spent. The direct disposal
provisions relating to the pre-2001 divestments were reviewed during 2003 resulting
in a net £4m release to exceptional profit. The release related to an additional charge of £20m offset by provision releases of £24m in relation to prior year divestments, principally the Polyurethanes, Tioxide and selected Peterochemicals businesses. At 31 December 2003, £56m remained to be spent, principally on termination costs (£18m) where some 38 jobs are still to be terminated, transaction costs (£17m), separation costs (£12m).
These provisions are expected to be substantially utilised by the end of 2004. 2001 Disposals announced
and completed in 2001 principally relate to the Groups Eutech engineering
consultancy. Provisions of £23m
were raised for those disposals, all of which were utilised by 2002. 2002 (i) Synetix The Group completed
the sale of its catalyst business, Synetix, in 2002. Provisions charged were £46m, mainly in respect of transition and separation costs (£19m), pension costs relating to employees transferring to the purchaser (£14m), termination costs (£2m) relating to 31 employees, transaction costs (£7m) and environmental costs (£2m). At 31 December 2003, £14m remained to be spent including separation costs (£4m) and IT costs (£3m) and termination costs (£2m).
The majority of the provisions are expected to be utilised by the end of 2004.




|ICI ANNUAL REPORT AND ACCOUNTS 2003 | 81
|----------------------------------- | --

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Contents to the Accounts

notes relating to the accounts

|22 | Disposal
    and restructuring provisions (continued)
|-- | -----------------------------------------------------
|   |                                                      

(ii) Other disposals The Group also divested
some smaller businesses including the 51% owned pharmaceutical business of ICI
India, its Security Systems business and the UK Nitrocellulose and Energetic
Technologies businesses. In addition, IFI, the Irish Fertilizer business in which
the Group has a 49% interest ceased trading. Provisions of £37m were raised for these transactions, mainly in respect of separation costs (£14m), costs relating to employees transferring to the purchaser (£13m) and transaction related costs (£5m). At 31 December 2003, £5m remained to be spent including separation costs (£3m), and transaction related costs (£1m).
The majority of the provisions are expected to be utilised by the end of 2004. 2003 During 2003 the Group
divested its Permabond and Cheese Coatings businesses from within National Starch
and the Explosives business of ICI India. Provisions of £6m were charged in respect of severance costs (£2m) relating to 50 employees, separation costs (£1m) and transaction related costs (£3m). At 31 December 2003, £4m
remained to be spent and full utilisation is expected by the end of 2004. Restructuring provisions Prior to 2001 In 1999 the Group undertook a series of restructuring actions across its portfolio, affecting the following segments: National Starch, Quest, Paints, Discontinued businesses, and reorganisation of the Corporate Centre. The total exceptional
provisions before tax of £172m for these restructuring programmes was charged against 1999 profits. A further £4m restructuring relating to the Corporate Centre was charged in 2000. The total included £80m related to termination of 1,030 employees, £31m to asset write-downs and £61m for other costs. During 2003 a review of restructuring provisions resulted in a release of £3m. At 31 December 2003, £7m of provisions remained to be spent, including £4m
relating to severance of 24 employees. The provisions are expected to be substantially
utilised by the end of 2004. 2001 In 2001 the Group
undertook a series of restructuring actions across National Starch, Quest, Performance
Specialties and Paints to rationalise operations, improve cost effectiveness
and to upgrade business systems, processes and capabilities. The total exceptional
charge before tax for these restructuring programmes was £143m, which was charged against 2001 profits. The total included £78m relating to the termination of some 1,300 employees, £17m for asset write-downs and £48m for other costs. During 2003, a review of restructuring provisions was conducted leading to a release of £9m. At 31 December 2003, £13m remained to be spent including £9m
relating to termination of some 59 employees. The majority of the provisions
are expected to be substantially utilised by the end of 2004. 2003 In 2003 the Group undertook a series of restructuring programs to improve cost effectiveness across the following segments: (i)
   National Starch staff
         reductions mainly in administration and the restructuring of manufacturing
    assets, predominately across the Natural Polymers Group.(ii)
   Quest staff
         reductions in the food business and in supporting administrative functions
    and the restructuring of manufacturing assets.(iii)
  Performance
        Specialties a
        major reduction in support overheads and the rationalisation and relocation
    of manufacturing capabilities in the US.(iv)
  Paints a
    programme to restructure supply chain activities in Europe and North America.(v)
  Corporate
        Centre staff
    reductions resulting in smaller and more focused corporate centre. The plans focus on
manufacturing and supply chain rationalisations and reductions in administrative
support. The total exceptional charge in 2003 included £111m relating to the termination of some 2,130 employees, £48m for asset write-downs and £42m for other costs. Further charges comprising £11m relating to the termination of employees and £7m of asset write-downs are expected in 2004, bringing the total exceptional charge for the programmes to £219m. A charge of £59m was incurred by National Starch with a further £11m expected in 2004, £20m was incurred by Quest with a further £4m expected in 2004, £48m was incurred by Performance Specialties with a further £2m expected in 2004, £49m was incurred by Paints and £25m was incurred by the Corporate Centre (included in the Regional and Industrial reporting segment) with a further charge of £1m expected in 2004. Spend of £22m was incurred during the year against the provision with the remainder to be substantially utilised in the period between 2004 and 2005. At 31 December 2003, £128m remained to be spent including £94m
relating to the termination of 1,500 employees.




|82 | ICI ANNUAL REPORT AND ACCOUNTS 2003
|-- | -----------------------------------

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|23 | Called-up
    share capital of parent company         |            |  |                | 
|-- | ----------------------------------------------------- | ---------- |  | -------------- | 
|   |                                                       |            |  |                | 
|   |                                                       | Authorised |  | Allotted,      | 
|   |                                                       |            |  | called-up      | 
|   |                                                       |            |  | and fully paid | 
|   | Ordinary
    Shares of £1 each                        | £m         |  | £m             | 
|   |                                                       |            |  |                | 
|   | At beginning of 2001                                  | 850        |  | 728            | 
|   |                                                       |            |  |                | 
|   | Employee
    share option schemes  options exercised |            |  |               | 
|   |                                                       |            |  |                | 
|   | At end of 2001                                        | 850        |  | 728            | 
|   |                                                       |            |  |                | 
|   | Rights Issue                                          |            |  | 463            | 
|   |                                                       |            |  |                | 
|   | Increase in authorised share capital                  | 550        |  |                | 
|   |                                                       |            |  |                | 
|   | Employee
    share option schemes  options exercised |            |  |               | 
|   |                                                       |            |  |                | 
|   | At end of 2002                                        | 1,400      |  | 1,191          | 
|   |                                                       |            |  |                | 
|   | Employee
    share option schemes  options exercised |            |  |               | 
|   |                                                       |            |  |                | 
|   | At end of 2003                                        | 1,400      |  | 1,191          | 
|   |                                                       |            |  |                | 

Rights
Issue In 2002, the Company
  completed an issue of rights to purchase Ordinary Shares. A total of 463m Ordinary
  Shares of £1 each were issued at 180p per share in a 7 for 11 rights issue. Of the total £807m raised, net of £27m expenses, £463m was credited to share capital and £344m
  to the share premium account. Employees share
option schemes and other share based plans ICI granted share
options and other market based units to Executive Directors, senior executives
and certain key employees under three main plans: the Performance Growth Plan,
the Share Option Scheme (Senior Staff Scheme), and the Stock Appreciation Rights
Plan (SARP). These schemes are described on pages 42 to 44. The Company also
operates a savings related share option scheme (UK  Sharesave) for all
UK employees meeting minimum service requirements. At 31 December 2003, the number of conditional awards of ordinary share equivalents outstanding under the Performance Growth Plan was 2,888,320 (2002 2,471,791). The number of conditional awards during 2003 was 1,851,255 (2002 1,151,150) with lapses during the year of 1,453,725 (2002 176,007). The prices at which
options are granted under the Senior Staff Scheme must not be less than the nominal
value of an Ordinary Share nor less than the average of the middle market quotation
of an ICI Ordinary Share on the London Stock Exchange on the five business days
immediately preceding the date on which the option is offered. Options under
this scheme expire after 10 years. Grants under the SARP are made on the same
terms as the Senior Staff Scheme. On exercise the participant receives the gain
payable in American Depositary Shares  ADSs (for grants prior to 1998 paid
two-thirds in cash and one-third in ADSs). The Bonus Conversion
Plan, which operated for the last time in respect of the 1999 performance year,
closed during 2003. Therefore, at 31 December 2003 there were no shares outstanding
representing the matched shares under the Bonus Conversion Plan to be delivered
as the Companys Ordinary Shares or in the form of ADSs. The Group has acquired,
or is committed to acquire under forward contracts, 35.2 million shares or ADSs
to hedge its obligations under the Senior Staff Scheme, the Performance Growth
Plan, and the Stock Appreciation Rights Plan. 8.8 million shares have been purchased
in the market by a trust (see note 14). In addition, the trust has entered into
forward commitments to purchase 26.4 million shares at a weighted average cost
of £4.78 per share (total commitment £126m) in the period 2004 to 2005, these forward commitments include collateral requirements related to the prevailing share price of the Company. At 31 December 2003, no collateral payments have been made. These shares are intended to satisfy requirements for share options exercisable in the period 2004 to 2013. A provision of £70m
has been made to write-down the shares under forward commitments to estimated
net realisable value having regard to the period over which the related options
are exercisable. Under the UK  Sharesave Scheme the price at which options are granted must not be less than the greater of the nominal value of an Ordinary Share, or 80% of the average market value of an Ordinary Share on the three business days preceding the day on which the offer of options is made. The total purchase cost in respect of options granted under the UK  Sharesave Scheme is deducted from salary over a period of three or five years at the choice of the employee. The maximum number of shares made available under this scheme for issue under option during a 10 year period is 5% of the Companys
Ordinary Share Capital in issue on 21 March 1994. Options granted to Directors are shown in the Remuneration report on page 43 and 44.




| | ICI ANNUAL REPORT AND ACCOUNTS 2003 | 83
| | ----------------------------------- | --

---



Back to Contents

Contents to the Accounts

notes relating to the accounts



|23 | Called-up share capital of parent company (continued) |                    
|-- | ----------------------------------------------------- | -------------------
|   |                                                       |                    
|a) | Transactions on Option Schemes                        |                    
|   |                                                       |                    
|   |                                                       | Senior Staff Scheme
|   |                                                       | Number             
|   |                                                       | of options         
|   |                                                       |                    
|   |                                                       |                    
|   |                                                       | 000                
|   |                                                       |                    
|   | Outstanding                                           |                    
|   |                                                       |                    
|   | At beginning of 2001                                  | 14,668             
|   |                                                       |                    
|   | Granted                                               | 5,632              
|   |                                                       |                    
|   | Exercised                                             |                   
|   |                                                       |                    
|   | Cancelled                                             | (1,858             
|   |                                                       |                    
|   | At beginning of 2002                                  | 18,442             
|   |                                                       |                    
|   | Granted                                               | 6,272              
|   |                                                       |                    
|   | Exercised                                             |                   
|   |                                                       |                    
|   | Cancelled                                             | (2,311             
|   |                                                       |                    
|   | At beginning of 2003                                  | 22,403             
|   |                                                       |                    
|   | Granted                                               | 15,193             
|   |                                                       |                    
|   | Exercised                                             | (227               
|   |                                                       |                    
|   | Cancelled                                             | (5,467             
|   |                                                       |                    
|   | At end of 2003                                        | 31,902             
|   |                                                       |                    
|   | Number of options exercisable at:                     |                    
|   |                                                       |                    
|   | 31 December 2001                                      | 5,035              
|   |                                                       |                    
|   | 31 December 2002                                      | 7,795              
|   |                                                       |                    
|   | 31 December 2003                                      | 7,674              
|   |                                                       |                    



|b) | Summary
            of share options outstanding at 31 December 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                      
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Total
            options outstanding
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | at
            31 December 2003      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Number                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | outstanding                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 000                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      
|   | Exercise
        price range                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      
|   | Senior
          Staff Scheme                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      
|   | £0  £10                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 30,979                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      
|   | £10  £20                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 923                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 31,902                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      
|   | UK  Sharesave                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      
|   | £0  £10                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 11,376                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      
|   | £10  £20                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 11,376                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      
|   | SARP
          (ADSs)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      
|   | $0  $20                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 3,218                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      
|   | $20  $40                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 1,999                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      
|   | $40  $60                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 81                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      
|   | $60  $80                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 116                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 5,414                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      
|   | At
          31 December 2003 there were options outstanding in respect of 43.3m
          (2002 34.7m) Ordinary Shares
of £1 each under the Senior Staff and UK  Sharesave Option Schemes normally
exercisable in the period 2004 to 2013 (2002: 2003 to 2012) at subscription prices
of £1.34 to £10.08 (2002 £2.07 to £10.08). Movements in the number of shares
under option during 2003 comprised new options 19.6m, options exercised 0.2m,
and options lapsed or waived 10.7m. The number of Ordinary Shares issued during
the year, wholly in respect of the exercise of options, totalled 0.2m (2002 0.01m;
2001 0.05m). The weighted average subscription price of options outstanding at
31 December 2003 was £2.83. |                                      





|84 | ICI ANNUAL REPORT AND ACCOUNTS 2003 | 
|-- | ----------------------------------- | 

---



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Contents to the Accounts

|24 | Reserves                                                 |                               |  |                   |   |                |    |        |   |     |    |        |  
|-- | -------------------------------------------------------- | ----------------------------- |  | ----------------- | - | -------------- | -- | ------ | - | --- | -- | ------ | -
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   |                                                          | Share
    premium
    account |  | Retained earnings |   | Own
    shares |    | Total  |  
|   |                                                          |                               |  |                   |   |                |    |        |  
|   |                                                          |                               |  | Associates        |   | Profit and     |    | Total  |   |     |    |        |  
|   |                                                          |                               |  |                   |   | loss account   |    |        |   |     |    |        |  
|   |                                                          | £m                            |  | £m                |   | £m             |    | £m     |   | £m  |    | £m     |  
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Group                                                    |                               |  |                   |   |                |    |        |   |     |    |        |  
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Reserves
    attributable to parent company shareholders |                               |  |                   |   |                |    |        |   |     |    |        |  
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | At beginning of 2001                                     | 589                           |  | 14                |   | (1,580         | )  | (1,566 | ) | (54 | ) | (1,031 | )
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Net profit for the financial year                        |                              |  | 8                 |   | 94             |   | 102    |   |     |    | 102    |  
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Dividends (note 9)                                       |                               |  |                   |   | (116           | )  | (116   | ) |     |    | (116   | )
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Transfer of goodwill                                     |                               |  |                   |   | (8             | )  | (8     | ) |     |    | (8     | )
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Movement in respect of own shares                        |                               |  |                   |   |                |    |        |   | 2   |   | 2      |  
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Amounts taken direct to reserves                         |                               |  |                   |   |                |    |        |   |     |    |        |  
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Share
    premiums  Share option schemes                |                              |  |                   |   |                |    |       |   |     |    |       |  
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Exchange adjustments                                     |                              |  |                  |   | (71            | )  | (71    | ) |     |    | (71    | )
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   |                                                          |                              |  |                  |   | (71            | )  | (71    | ) |    |    | (71    | )
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | At beginning of 2002                                     | 589                           |  | 22                |   | (1,681         | ) | (1,659 | ) | (52 | ) | (1,122 | )
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Net profit (loss) for the financial year                 |                              |  | (13               | ) | 192            |    | 179    |   |    |    | 179    |  
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Dividends (note 9)                                       |                               |  |                   |   | (88            | )  | (88    | ) |     |    | (88    | )
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Transfer of goodwill                                     |                               |  |                   |   | 22             |    | 22     |   |     |    | 22     |  
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Movement in respect of own shares                        |                               |  |                   |   |                |    |        |   | (6  | ) | (6     | )
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Movement in reserves                                     |                               |  | 2                 |   | (2             | )  |        |   |     |    |        |  
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Amounts taken direct to reserves                         |                               |  |                   |   |                |    |        |   |     |    |        |  
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Share
    premiums  Rights Issue                        | 344                           |  |                   |   |                |    |        |   |     |    | 344    |  
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Exchange adjustments                                     |                              |  |                  |   | (57            | )  | (57    | ) |     |    | (57    | )
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   |                                                          | 344                           |  |                  |   | (57            | )  | (57    | ) |    |    | 287    |  
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | At beginning of 2003                                     | 933                           |  | 11                |   | (1,614         | ) | (1,603 | ) | (58 | ) | (728   | )
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Net profit (loss) for the financial year                 |                              |  | 2                 |   | 18             |    | 20     |   |     |    | 20     |  
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Dividends (note 9)                                       |                               |  |                   |   | (74            | )  | (74    | ) |     |    | (74    | )
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Transfer of goodwill                                     |                               |  |                   |   | 27             |    | 27     |   |     |    | 27     |  
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Movement in respect of own shares                        |                               |  |                   |   |                |    |        |   | 5   |    | 5      |  
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Amounts taken direct to reserves                         |                               |  |                   |   |                |    |        |   |     |    |        |  
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Share
    premiums  Share option schemes                |                              |  |                   |   |                |    |        |   |     |    |       |  
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | Exchange adjustments                                     |                              |  |                  |   | 9              |    | 9      |   |     |    | 9      |  
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   |                                                          |                              |  |                  |   | 9              |    | 9      |   |    |    | 9      |  
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | At
    end of 2003                                       | 933                           |  | 13                |   | (1,634         | )  | (1,621 | ) | (53 | )  | (741   | )
|   |                                                          |                               |  |                   |   |                |    |        |   |     |    |        |  
|   | As
    restated  note 1.                               |                              



At the end of 2003, the cumulative goodwill offset against profit and loss account
amounted to £4,000m (2002 £4,027m; 2001 £4,049m). The transfer
of goodwill in 2001 and £8m of the amount shown for 2003 relates to adjustments
to the purchase price of the 1997 acquisitions, with the remainder of the amount
shown for 2003 representing the transfer of goodwill on disposal of National
Starchs Permabond business. Included in this figure was negative goodwill
the cumulative amount of which at 31 December 2003 was £1m (2002 £1m;
2001 £1m). In the Group accounts, £111m of net exchange gains on foreign currency
loans (2002 gains £157m; 2001 gains £8m) have been offset in reserves
against exchange losses (2002 losses; 2001 losses) on the net investment in overseas
subsidiaries and associates. The cumulative exchange gains and losses on the translation of foreign currency
financial statements into pounds sterling are taken into account in the above
statement of Group reserves.
US GAAP  SFAS No.52, Foreign Currency Translation, requires the separate
disclosure of the cumulative amount of the foreign currency translation effects
on shareholders funds,
as follows:


| |                      |      |   |      |   |      |  
| | -------------------- | ---- | - | ---- | - | ---- | -
| |                      | 2003 |   | 2002 |   | 2001 |  
| |                      | £m   |   | £m   |   | £m   |  
| |                      |      |   |      |   |      |  
| | At beginning of year | (459 | ) | (402 | ) | (331 | )
| |                      |      |   |      |   |      |  
| | Exchange adjustments | 9    |   | (57  | ) | (71  | )
| |                      |      |   |      |   |      |  
| | At end of year       | (450 | ) | (459 | ) | (402 | )
| |                      |      |   |      |   |      |  

There are no significant statutory or contractual restrictions on the distribution
of current profits of subsidiary undertakings or associates undistributed profits
of prior years are, in the main, permanently employed in the businesses of these
companies. The undistributed profits of Group companies overseas may be liable
to overseas taxes and/or UK taxation (after allowing for double taxation relief)
if they were to be distributed as dividends. No provision has been made in respect
of potential taxation liabilities on realisation of assets at restated or revalued
amounts or on realisation of associates at equity accounted value.




| | ICI ANNUAL REPORT AND ACCOUNTS 2003 | 85
| | ----------------------------------- | --

---



Back to Contents

Contents to the Accounts

notes relating to the accounts

|24 | Reserves
    (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The
        Articles of Association of Imperial Chemical Industries PLC state that
        borrowings after deducting cash, current asset investments and short-term
        deposits, must not exceed two and a
half times the shareholders equity after adding back sums, calculated in
accordance with US GAAP, equivalent to the unamortised balance of goodwill arising
on acquisitions made after 1 January 1986. Any borrowings, cash or short-term
investments held by subsidiaries in their capacity as trustee of a Group pension
fund are excluded from the calculation. For the purpose of calculating the basis
of the borrowing limits, in accordance with the Articles of Association, the
total of the sums standing to the credit of capital and revenue reserves of the
Company and its subsidiary undertakings, to be added to the nominal amount of
the share capital of the Company, was £2,543m at 31 December 2003 (2002
(restated  note 1) £2,934m; 2001 (restated  note 1) £2,663m).
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

|        |                                          | Share |       | Profit |   | 2003  |   | 2002  |  
|------- | ---------------------------------------- | ----- | ----- | ------ | - | ----- | - | ----- | -
|premium | and
        loss                         |       |      
|account | account                                  | Total | Total
|£m      | £m                                       | £m    | £m   
|        |                                          |       |       |        |   |       |   |       |  
|        | Company                                  |       |       |        |   |       |   |       |  
|        |                                          |       |       |        |   |       |   |       |  
|        | Reserves                                 |       |       |        |   |       |   |       |  
|        |                                          |       |       |        |   |       |   |       |  
|        | At
        beginning of year             | 933   |       | 2,133  |   | 3,066 |   | 2,541 |  
|        |                                          |       |       |        |   |       |   |       |  
|        | Net
        profit for the year          |       |       | 283    |   | 283   |   | 236   |  
|        |                                          |       |       |        |   |       |   |       |  
|        | Dividends                                |       |       | (74    | ) | (74   | ) | (88   | )
|        |                                          |       |       |        |   |       |   |       |  
|        | Amounts
        taken direct to reserves |       |       |        |   |       |   |       |  
|        |                                          |       |       |        |   |       |   |       |  
|        | Share
        premiums  Rights Issue    |      |       |       |   |      |   | 344   |  
|        |                                          |       |       |        |   |       |   |       |  
|        | Exchange
        and other adjustments   |      |       | 51     |   | 51    |   | 33    |  
|        |                                          |       |       |        |   |       |   |       |  
|        |                                          |      |       | 51     |   | 51    |   | 377   |  
|        |                                          |       |       |        |   |       |   |       |  
|        | At
        end of year                   | 933   |       | 2,393  |   | 3,326 |   | 3,066 |  
|        |                                          |       |       |        |   |       |   |       |  
|        |                                          |       |       |        |   |       |   |       |  

|   | By
        virtue of S230 of the Companies Act 1985, the Company is exempt from
        presenting
a profit and loss account.
|-- | -----------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                              
|25 | Net
    cash inflow from operating activities                                                                                
|   |                                                                                                                              

|   |                                                                                                                                                               | 2003 |   | 2002 |   | 2001 |  
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | - | ---- | - | ---- | -
|£m | £m                                                                                                                                                            | £m  
|   |                                                                                                                                                               |      |   |      |   |      |  
|   | Operating profit                                                                                                                                              | 194  |   | 496  |   | 393  |  
|   |                                                                                                                                                               |      |   |      |   |      |  
|   | Exceptional charges within operating profit                                                                                                                   | 200  |   |     |   | 143  |  
|   |                                                                                                                                                               |      |   |      |   |      |  
|   | Operating profit before exceptional items                                                                                                                     | 394  |   | 496  |   | 536  |  
|   |                                                                                                                                                               |      |   |      |   |      |  
|   | Depreciation and amortisation of goodwill                                                                                                                     | 227  |   | 233  |   | 246  |  
|   |                                                                                                                                                               |      |   |      |   |      |  
|   | Stocks decrease                                                                                                                                               | 2    |   | 11   |   | 7    |  
|   |                                                                                                                                                               |      |   |      |   |      |  
|   | Debtors (increase)/decrease                                                                                                                                   | 52   |   | (35  | ) | 65   |  
|   |                                                                                                                                                               |      |   |      |   |      |  
|   | Creditors increase/(decrease)                                                                                                                                 | (59  | ) | 23   |   | (120 | )
|   |                                                                                                                                                               |      |   |      |   |      |  
|   | Other movements                                                                                                                                               | (25  | ) | (37  | ) | (23  | )
|   |                                                                                                                                                               |      |   |      |   |      |  
|   |                                                                                                                                                               | 591  |   | 691  |   | 711  |  
|   |                                                                                                                                                               |      |   |      |   |      |  
|   | Outflow related to exceptional items                                                                                                                          | (52  | ) | (68  | ) | (74  | )
|   |                                                                                                                                                               |      |   |      |   |      |  
|   |                                                                                                                                                               | 539  |   | 623  |   | 637  |  
|   |                                                                                                                                                               |      |   |      |   |      |  
|   |                                                                                                                                                               |      |   |      |   |      |  
|   | Outflow
      related to exceptional items includes expenditure charged to exceptional
    provisions relating to business rationalisation and restructuring.



|86 | ICI ANNUAL REPORT AND ACCOUNTS 2003 | 
|-- | ----------------------------------- | 

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Contents to the Accounts

|26         | Returns on investments and servicing of finance                                                                                                                                                         |      |   |      |   |      |  
|---------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | - | ---- | - | ---- | -
|           |                                                                                                                                                                                                         | 2003 |   | 2002 |   | 2001 |  
|£m         | £m                                                                                                                                                                                                      | £m  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           | Interest received                                                                                                                                                                                       | 95   |   | 121  |   | 93   |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           | Interest paid                                                                                                                                                                                           | (177 | ) | (285 | ) | (280 | )
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           | Dividends paid by subsidiary undertakings to minority shareholders                                                                                                                                      | (14  | ) | (21  | ) | (20  | )
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           |                                                                                                                                                                                                         | (96  | ) | (185 | ) | (207 | )
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|27         | Capital expenditure and financial investment                                                                                                                                                            |      |   |      |   |      |  
|           |                                                                                                                                                                                                         | 2003 |   | 2002 |   | 2001 |  
|£m         | £m                                                                                                                                                                                                      | £m  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           | Purchase of tangible fixed assets                                                                                                                                                                       | (154 | ) | (219 | ) | (235 | )
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           | Sale of fixed assets                                                                                                                                                                                    | 16   |   | 35   |   | 29   |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           |                                                                                                                                                                                                         | (138 | ) | (184 | ) | (206 | )
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|28         | Acquisitions                                                                                                                                                                                            |      |   |      |   |      |  
|           |                                                                                                                                                                                                         | 2003 |   | 2002 |   |      |  
|Total      | Total                                                                                                                                                                                                  
|fair value | fair value                                                                                                                                                                                             
|£m         | £m                                                                                                                                                                                                     
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           | Subsidiary undertakings and operations                                                                                                                                                                  |      |   |      |   |      |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           | Fair value of net assets acquired                                                                                                                                                                       |     |   | 5    |   |      |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           | Goodwill acquired                                                                                                                                                                                       | 3    |   | 1    |   |      |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           | Consideration for subsidiary undertakings and operations acquired                                                                                                                                       | 3    |   | 6    |   |      |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           | Investments in associated undertakings                                                                                                                                                                  | 5    |   |     |   |      |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           | Investments in participating interests and other interests                                                                                                                                              | 10   |   | 44   |   |      |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           |                                                                                                                                                                                                         | 18   |   | 50   |   |      |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           | Cash
       consideration  current
    year                                                                                                                                                            | 18   |   | 50   |   |      |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           |  previous
    years acquisitions                                                                                                                                                                      | 2    |   | 4    |   |      |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           |                                                                                                                                                                                                         | 20   |   | 54   |   |      |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|29         | Management of liquid resources                                                                                                                                                                          |      |   |      |   |      |  
|           |                                                                                                                                                                                                         | 2003 |   | 2002 |   | 2001 |  
|£m         | £m                                                                                                                                                                                                      | £m  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           | Commercial paper                                                                                                                                                                                        |     |   | (2   | ) | 1    |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           | Bank deposits and certificates of deposit                                                                                                                                                               | (186 | ) | (12  | ) | 254  |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           | Floating rate notes, medium rate notes, treasury bills                                                                                                                                                  | (8   | ) | 1    |   | (2   | )
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           |                                                                                                                                                                                                         | (194 | ) | (13  | ) | 253  |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           |                                                                                                                                                                                                         |      |   |      |   |      |  
|           | Liquid
      resources are current asset investments held as readily disposable stores
      of value. In these accounts they comprise current asset investments and
    short-term deposits (note 17).



| | ICI ANNUAL REPORT AND ACCOUNTS 2003 | 87
| | ----------------------------------- | --

---



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notes relating to the accounts



|30 | Disposals                                                                                                                                                                                                                        
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                  
|£m | £m                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                  
|   | Subsidiary undertakings and operations                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                  
|   | Tangible fixed assets and investments                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                  
|   | Net current assets                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                  
|   | Creditors due after more than one year                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                  
|   | Provisions for liabilities and charges                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                  
|   | Minority interests                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                  
|   | Book value of net assets disposed                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                  
|   | Disposal costs and provisions                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                  
|   | Goodwill written back on disposal                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                  
|   | Investments in participating interests                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                  
|   | Profits less losses on disposals                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                  
|   | Consideration received on prior year disposals                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                  
|   | Non-cash consideration                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                  
|   | Outflow on divestment provisions                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                  
|   | Cash consideration                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                  
|   | Comprising inflow (outflow) arising on                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                  
|   | current
    years disposals                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                  
|   | previous
    years disposals                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                  
|   | During
      2003 the Group received gross cash consideration for disposals of operations
      of £215m (2002 £423m). Of this amount, £111m (2002 £133m)
    was paid against ongoing disposal costs and provisions.            
|   |                                                                                                                                                                                                                                  
|   | Disposals
      by the Group during 2003 included the sale of the remaining interests in
      Huntsman International
Holdings LLC, National Starchs Permabond and Cheese Coatings businesses
and the India Explosives business.



|88 | ICI ANNUAL REPORT AND ACCOUNTS 2003 | 
|-- | ----------------------------------- | 

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|31 | Financing
|-- | ---------
|   |          

| |                                                    |       | Financing  shares               |   | Financing  debt |   | Total |  
| | -------------------------------------------------- | ----- | -------------------------------- | - | ---------------- | - | ----- | -
| |                                                    |       |                                  |   |                  |   |       |  
| |                                                    |       | Shares
        issued by Company |   | Minorities*      |   | Total |  
| |                                                    |       |                                  |   |                  |   |       |  
| |                                                    |       | Share                            |   | Share            |   |       |  
| |                                                    |       | capital                          |   | premium          |   |       |  
| |                                                    | notes | 23                               |   | 24               |   |       |  
| |                                                    |       | £m                               |   | £m               |   | £m    |  
| |                                                    |       |                                  |   |                  |   |       |  
| | At beginning of 2001                               |       | (728                             | ) | (589             | ) | (38   | )
| |                                                    |       |                                  |   |                  |   |       |  
| | Exchange adjustments                               |       |                                  |   |                  |   |       |  
| |                                                    |       |                                  |   |                  |   |       |  
| | Financing                                          |       |                                  |   |                  |   |       |  
| |                                                    |       |                                  |   |                  |   |       |  
| | New
    finance                                    |       |                                 |   |                 |   |      |  
| |                                                    |       |                                  |   |                  |   |       |  
| | Finance
    repaid                                 |       |                                  |   |                  |   |       |  
| |                                                    |       |                                  |   |                  |   |       |  
| | Cash flow                                          |       |                                 |   |                 |   |      |  
| |                                                    |       |                                  |   |                  |   |       |  
| | Acquisitions
    and disposals                     |       |                                  |   |                  |   | 8     |  
| |                                                    |       |                                  |   |                  |   |       |  
| | Other movements                                    |       |                                 |   |                 |   | (1    | )
| |                                                    |       |                                  |   |                  |   |       |  
| | At beginning of 2002                               |       | (728                             | ) | (589             | ) | (31   | )
| |                                                    |       |                                  |   |                  |   |       |  
| | Exchange adjustments                               |       |                                  |   |                  |   | 3     |  
| |                                                    |       |                                  |   |                  |   |       |  
| | Financing                                          |       |                                  |   |                  |   |       |  
| |                                                    |       |                                  |   |                  |   |       |  
| | New
    finance                                    |       | (463                             | ) | (344             | ) |      |  
| |                                                    |       |                                  |   |                  |   |       |  
| | Finance
    repaid                                 |       |                                  |   |                  |   |       |  
| |                                                    |       |                                  |   |                  |   |       |  
| | Cash flow                                          |       | (463                             | ) | (344             | ) |      |  
| |                                                    |       |                                  |   |                  |   |       |  
| | Acquisitions
    and disposals                     |       |                                 |   |                 |   |      |  
| |                                                    |       |                                  |   |                  |   |       |  
| | Other movements                                    |       |                                 |   |                 |   | (3    | )
| |                                                    |       |                                  |   |                  |   |       |  
| | At beginning of 2003                               |       | (1,191                           | ) | (933             | ) | (31   | )
| |                                                    |       |                                  |   |                  |   |       |  
| | Exchange adjustments                               |       |                                  |   |                  |   | 2     |  
| |                                                    |       |                                  |   |                  |   |       |  
| | Financing                                          |       |                                  |   |                  |   |       |  
| |                                                    |       |                                  |   |                  |   |       |  
| | New
    finance                                    |       |                                 |   |                 |   |      |  
| |                                                    |       |                                  |   |                  |   |       |  
| | Finance
    repaid                                 |       |                                  |   |                  |   |       |  
| |                                                    |       |                                  |   |                  |   |       |  
| | Cash flow                                          |       |                                 |   |                 |   |      |  
| |                                                    |       |                                  |   |                  |   |       |  
| | Acquisitions
    and disposals                     |       |                                 |   |                 |   |      |  
| |                                                    |       |                                  |   |                  |   |       |  
| | Other movements                                    |       |                                 |   |                 |   | 2     |  
| |                                                    |       |                                  |   |                  |   |       |  
| | At end of 2003                                     |       | (1,191                           | ) | (933             | ) | (27   | )
| |                                                    |       |                                  |   |                  |   |       |  
| | * Share
    capital element of minority interests. |       |                                  |   |                  |   |       |  

| |                 |                               |  | Repayment |  | Currency |  | Rate    |  | Amount | 
| | --------------- | ----------------------------- |  | --------- |  | -------- |  | ------- |  | ------ | 
| |                 |                               |  | dates     |  |          |  | %       |  | £m     | 
| |                 |                               |  |           |  |          |  |         |  |        | 
| | †New finance    | Bank loan                     |  | 20042010 |  | Various  |  | Various |  | 232    | 
| |                 |                               |  |           |  |          |  |         |  |        | 
| |                 | Euro commercial paper         |  | 2003      |  | Various  |  | Various |  | 1,527  | 
| |                 |                               |  |           |  |          |  |         |  |        | 
| |                 | US commercial paper           |  | 2003      |  | US$      |  | Various |  | 1,146  | 
| |                 |                               |  |           |  |          |  |         |  |        | 
| |                 | Bond
    issue                |  | 2008      |  | US$      |  | 4.375   |  | 293    | 
| |                 |                               |  |           |  |          |  |         |  |        | 
| |                 | Bond
    issue                |  | 2013      |  | US$      |  | 5.625   |  | 293    | 
| |                 |                               |  |           |  |          |  |         |  |        | 
| |                 | Others                        |  |           |  |          |  |         |  | 13     | 
| |                 |                               |  |           |  |          |  |         |  |        | 
| |                 |                               |  |           |  |          |  |         |  | 3,504  | 
| |                 |                               |  |           |  |          |  |         |  |        | 
| | øFinance repaid | Bank loan                     |  |           |  |          |  |         |  | 443    | 
| |                 |                               |  |           |  |          |  |         |  |        | 
| |                 | Euro dollar medium-term notes |  |           |  | US$      |  | Various |  | 170    | 
| |                 |                               |  |           |  |          |  |         |  |        | 
| |                 | Euro commercial paper         |  |           |  | Various  |  | Various |  | 1,558  | 
| |                 |                               |  |           |  |          |  |         |  |        | 
| |                 | US commercial paper           |  |           |  | US$      |  | Various |  | 1,162  | 
| |                 |                               |  |           |  |          |  |         |  |        | 
| |                 | Others                        |  |           |  |          |  |         |  | 255    | 
| |                 |                               |  |           |  |          |  |         |  |        | 
| |                 |                               |  |           |  |          |  |         |  | 3,588  | 
| |                 |                               |  |           |  |          |  |         |  |        | 



|ICI ANNUAL REPORT AND ACCOUNTS 2003 | 89
|----------------------------------- | --

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notes relating to the accounts

|32 | Analysis
    of net debt
|-- | ------------------------
|   |                         

|      |                            |    | Cash       |            | Financing  debt |    | Current asset |    | Net debt |            
|----- | -------------------------- | -- | ---------- | ---------- | ---------------- | -- | ------------- | -- | -------- | -----------
|      |                            |    |            |            |                  |    |               |    |          | investments
|      |                            |    |            |            |                  |    |               |    |          |            
|      | Loans                      |    | Short-term |            | Finance          |    | Total         |    |          |            
|      | Due after                  |    | Due within | borrowings | leases           |    |               |   
|      | one year                   |    | one year   | other than |                  |    |               |   
|      |                            |    |            | overdrafts |                  |    |               |   
|notes | 1,33                       | 20 |            | 20         | 33               | 34 |               | 17 |         
|      | £m                         | £m |            | £m         | £m               | £m | £m            | £m | £m      
|      |                            |    |            |            |                  |    |               |    |          |            
|      | At beginning of 2001       |    | 209        |            | (2,231           | )  | (466          | )  | (719     | )          
|      |                            |    |            |            |                  |    |               |    |          |            
|      | Exchange adjustments       |    | (8         | )          | (32              | )  | (2            | )  | 42       |            
|      |                            |    |            |            |                  |    |               |    |          |            
|      | Cash flow                  |    | 65         |            | (161             | )  | (63           | )  | 300      |            
|      |                            |    |            |            |                  |    |               |    |          |            
|      | Acquisitions and disposals |    | (11        | )          |                 |    |              |    | 4        |            
|      |                            |    |            |            |                  |    |               |    |          |            
|      | Other non-cash changes     |    | 5          |            | 719              |    | (719          | )  | (4       | )          
|      |                            |    |            |            |                  |    |               |    |          |            
|      | At beginning of 2002       |    | 260        |            | (1,705           | )  | (1,250        | )  | (377     | )          
|      |                            |    |            |            |                  |    |               |    |          |            
|      | Exchange adjustments       |    | (5         | )          | 100              |    | 57            |    | (42      | )          
|      |                            |    |            |            |                  |    |               |    |          |            
|      | Cash flow                  |    | (8         | )          | (28              | )  | 963           |    | 215      |            
|      |                            |    |            |            |                  |    |               |    |          |            
|      | Acquisitions and disposals |    | (1         | )          |                 |    |              |    | (1       | )          
|      |                            |    |            |            |                  |    |               |    |          |            
|      | Other non-cash changes     |    |           |            | 270              |    | (270          | )  |         |            
|      |                            |    |            |            |                  |    |               |    |          |            
|      | At beginning of 2003       |    | 246        |            | (1,363           | )  | (500          | )  | (205     | )          
|      |                            |    |            |            |                  |    |               |    |          |            
|      | Exchange adjustments       |    | 11         |            | 63               |    | 48            |    | (38      | )          
|      |                            |    |            |            |                  |    |               |    |          |            
|      | Cash flow                  |    | (12        | )          | (580             | )  | 443           |    | 220      |            
|      |                            |    |            |            |                  |    |               |    |          |            
|      | Acquisitions and disposals |    | (2         | )          |                 |    | 2             |    |         |            
|      |                            |    |            |            |                  |    |               |    |          |            
|      | Other non-cash changes     |    |           |            | 527              |    | (527          | )  |         |            
|      |                            |    |            |            |                  |    |               |    |          |            
|      | At end of 2003             |    | 243        |            | (1,353           | )  | (534          | )  | (23      | )          
|      |                            |    |            |            |                  |    |               |    |          |            

|33 | Cash
    and short-term borrowings
|-- | ----------------------------------
|   |                                   

|        |                                                                                                                                                                                                                                           | Cash |              | Short-term
    borrowings |   | Net total |             | Cash  |  
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | ------------ | ------------------------- | - | --------- | ----------- | ----- | -
|at bank | (note 18)                                                                                                                                                                                                                                 |      | (at bank and
|        |                                                                                                                                                                                                                                           |      |              |                           |   |           | overdrafts)
|        |                                                                                                                                                                                                                                           |      |              |                           |   |           |             |       |  
|        |                                                                                                                                                                                                                                           |      |              | Overdrafts                |   | Other     |             | Total |  
|        |                                                                                                                                                                                                                                           | £m   |              | £m                        |   | £m        |             | £m    |  
|        |                                                                                                                                                                                                                                           |      |              |                           |   |           |             |       |  
|        | At beginning of 2001                                                                                                                                                                                                                      | 255  |              | (46                       | ) | (719      | )           | (765  | )
|        |                                                                                                                                                                                                                                           |      |              |                           |   |           |             |       |  
|        | Exchange adjustments                                                                                                                                                                                                                      | (4   | )            | (4                        | ) | 42        |             | 38    |  
|        |                                                                                                                                                                                                                                           |      |              |                           |   |           |             |       |  
|        | Cash flow                                                                                                                                                                                                                                 | 62   |              | 3                         |   | 300       |             | 303   |  
|        |                                                                                                                                                                                                                                           |      |              |                           |   |           |             |       |  
|        | Acquisitions and disposals                                                                                                                                                                                                                | (14  | )            | 3                         |   | 4         |             | 7     |  
|        |                                                                                                                                                                                                                                           |      |              |                           |   |           |             |       |  
|        | Other non-cash changes                                                                                                                                                                                                                    | 2    |              | 3                         |   | (4        | )           | (1    | )
|        |                                                                                                                                                                                                                                           |      |              |                           |   |           |             |       |  
|        | At beginning of 2002                                                                                                                                                                                                                      | 301  |              | (41                       | ) | (377      | )           | (418  | )
|        |                                                                                                                                                                                                                                           |      |              |                           |   |           |             |       |  
|        | Exchange adjustments                                                                                                                                                                                                                      | (5   | )            |                          |   | (42       | )           | (42   | )
|        |                                                                                                                                                                                                                                           |      |              |                           |   |           |             |       |  
|        | Cash flow                                                                                                                                                                                                                                 | (28  | )            | 20                        |   | 215       |             | 235   |  
|        |                                                                                                                                                                                                                                           |      |              |                           |   |           |             |       |  
|        | Acquisitions and disposals                                                                                                                                                                                                                | (1   | )            |                          |   | (1        | )           | (1    | )
|        |                                                                                                                                                                                                                                           |      |              |                           |   |           |             |       |  
|        | At beginning of 2003                                                                                                                                                                                                                      | 267  |              | (21                       | ) | (205      | )           | (226  | )
|        |                                                                                                                                                                                                                                           |      |              |                           |   |           |             |       |  
|        | Exchange adjustments                                                                                                                                                                                                                      | 10   |              | 1                         |   | (38       | )           | (37   | )
|        |                                                                                                                                                                                                                                           |      |              |                           |   |           |             |       |  
|        | Cash flow                                                                                                                                                                                                                                 | (26  | )            | 14                        |   | 220       |             | 234   |  
|        |                                                                                                                                                                                                                                           |      |              |                           |   |           |             |       |  
|        | Acquisitions and disposals                                                                                                                                                                                                                | (2   | )            |                          |   |          |             |      |  
|        |                                                                                                                                                                                                                                           |      |              |                           |   |           |             |       |  
|        | At end of 2003                                                                                                                                                                                                                            | 249  |              | (6                        | ) | (23       | )           | (29   | )
|        |                                                                                                                                                                                                                                           |      |              |                           |   |           |             |       |  
|        |                                                                                                                                                                                                                                           |      |              |                           |   |           |             |       |  
|        | In
      the Statement of Group cash flow and related notes, cash includes
      cash at bank, deposits repayable on demand and overdrafts; deposits are
    repayable on demand if they are available within 24 hours without penalty.



|90 | ICI ANNUAL REPORT AND ACCOUNTS 2003
|-- | -----------------------------------

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Contents to the Accounts

|34 | Leases
|-- | ------
|   |       

|   |                                                                                            | 2003 |  | 2002 |  | 2001 | 
|-- | ------------------------------------------------------------------------------------------ | ---- |  | ---- |  | ---- | 
|£m | £m                                                                                         | £m  
|   |                                                                                            |      |  |      |  |      | 
|   | Total rentals under operating leases, charged as an expense in the profit and loss account |      |  |      |  |      | 
|   |                                                                                            |      |  |      |  |      | 
|   | Continuing operations                                                                      |      |  |      |  |      | 
|   |                                                                                            |      |  |      |  |      | 
|   | Hire of plant and machinery                                                                | 11   |  | 10   |  | 11   | 
|   |                                                                                            |      |  |      |  |      | 
|   | Other                                                                                      | 51   |  | 54   |  | 58   | 
|   |                                                                                            |      |  |      |  |      | 
|   | Total                                                                                      | 62   |  | 64   |  | 69   | 
|   |                                                                                            |      |  |      |  |      | 

|     |                                                                                                                                                                                                            |                              | Land and buildings |  | Other assets | 
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------- | ------------------ |  | ------------ | 
|     |                                                                                                                                                                                                            |                              |                    |  |              | 
|2003 |                                                                                                                                                                                                            | 2002                         | 2003               |  | 2002         | 
|£m   | £m                                                                                                                                                                                                         | £m                           | £m                
|     |                                                                                                                                                                                                            |                              |                    |  |              | 
|     | Commitments
         under non-cancellable operating leases to pay rentals during the year
         following the year of these accounts, analysed according to the period
    in which each lease expires |                              |                    |  |              | 
|     |                                                                                                                                                                                                            |                              |                    |  |              | 
|     |                                                                                                                                                                                                            | Expiring
    within 1 year   | 8                  |  | 7            | 
|     |                                                                                                                                                                                                            |                              |                    |  |              | 
|     |                                                                                                                                                                                                            | Expiring
    in years 2 to 5 | 18                 |  | 15           | 
|     |                                                                                                                                                                                                            |                              |                    |  |              | 
|     |                                                                                                                                                                                                            | Expiring
    thereafter      | 19                 |  | 20           | 
|     |                                                                                                                                                                                                            |                              |                    |  |              | 
|     |                                                                                                                                                                                                            |                              | 45                 |  | 42           | 
|     |                                                                                                                                                                                                            |                              |                    |  |              | 

| |                                                                                                                                                                                                                                   |                                                 | Operating
        leases |      | Finance
        leases | 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | ------------------------ | ---- | ---------------------- | 
| |                                                                                                                                                                                                                                   |                                                 |                          |      |                        | 
| | Obligations
    under leases comprise                                                                                                                                                                                             | 2003                                            |                          | 2002 | 2003                   | 
| | £m                                                                                                                                                                                                                                | £m                                              | £m                       | £m  
| |                                                                                                                                                                                                                                   |                                                 |                          |      |                        | 
| |                                                                                                                                                                                                                                   | Rentals
    due within 1 year                   | 68                       |      | 64                     | 
| |                                                                                                                                                                                                                                   |                                                 |                          |      |                        | 
| |                                                                                                                                                                                                                                   | Rentals
    due after more than 1 year          |                          |      |                        | 
| |                                                                                                                                                                                                                                   |                                                 |                          |      |                        | 
| |                                                                                                                                                                                                                                   | From
    1 to 2 years                           | 55                       |      | 51                     | 
| |                                                                                                                                                                                                                                   |                                                 |                          |      |                        | 
| |                                                                                                                                                                                                                                   | From
    2 to 3 years                           | 43                       |      | 41                     | 
| |                                                                                                                                                                                                                                   |                                                 |                          |      |                        | 
| |                                                                                                                                                                                                                                   | From
    3 to 4 years                           | 31                       |      | 30                     | 
| |                                                                                                                                                                                                                                   |                                                 |                          |      |                        | 
| |                                                                                                                                                                                                                                   | From
    4 to 5 years                           | 23                       |      | 23                     | 
| |                                                                                                                                                                                                                                   |                                                 |                          |      |                        | 
| |                                                                                                                                                                                                                                   | After
    5 years from balance sheet date       | 114                      |      | 123                    | 
| |                                                                                                                                                                                                                                   |                                                 |                          |      |                        | 
| |                                                                                                                                                                                                                                   |                                                 | 266                      |      | 268                    | 
| |                                                                                                                                                                                                                                   |                                                 |                          |      |                        | 
| |                                                                                                                                                                                                                                   |                                                 | 334                      |      | 332                    | 
| |                                                                                                                                                                                                                                   |                                                 |                          |      |                        | 
| |                                                                                                                                                                                                                                   | Less
    amounts representing interest          |                          |      |                        | 
| |                                                                                                                                                                                                                                   |                                                 |                          |      |                        | 
| |                                                                                                                                                                                                                                   | Present
    value of net minimum lease payments |                          |      |                        | 
| |                                                                                                                                                                                                                                   |                                                 |                          |      |                        | 
| |                                                                                                                                                                                                                                   | Less
    current lease obligations              |                          |      |                        | 
| |                                                                                                                                                                                                                                   |                                                 |                          |      |                        | 
| |                                                                                                                                                                                                                                   | Non
    current lease obligations               |                          |      |                        | 
| |                                                                                                                                                                                                                                   |                                                 |                          |      |                        | 
| | Obligations
        under finance leases are included in other creditors (note 19).    The
            Group had no commitments under finance leases at the balance sheet
            date which were due to commence thereafter.

|ICI ANNUAL REPORT AND ACCOUNTS 2003 | 91
|----------------------------------- | --

---



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Contents to the Accounts

notes relating to the accounts



|35 | Employee
      numbers and costs
|-- | --------------------------------
|   |                                 

| | Average
      number of people employed by the Group                  |        |   |        |   |        |  
| | --------------------------------------------------------------------- | ------ | - | ------ | - | ------ | -
| |                                                                       |        |   |        |   |        |  
| | Classes
      of business                                             |        |   |        |   |        |  
| |                                                                       | 2003   |   | 2002   |   | 2001   |  
| |                                                                       |        |   |        |   |        |  
| | Continuing
      operations                                           |        |   |        |   |        |  
| |                                                                       |        |   |        |   |        |  
| | National
      Starch                                                 | 9,670  |   | 9,710  |   | 10,110 |  
| |                                                                       |        |   |        |   |        |  
| | Quest                                                                 | 4,590  |   | 4,690  |   | 4,720  |  
| |                                                                       |        |   |        |   |        |  
| | Performance
      Specialties                                         | 2,950  |   | 3,800  |   | 4,120  |  
| |                                                                       |        |   |        |   |        |  
| | Paints                                                                | 15,610 |   | 15,740 |   | 15,900 |  
| |                                                                       |        |   |        |   |        |  
| | Regional
      and Industrial                                         | 3,010  |   | 3,690  |   | 4,490  |  
| |                                                                       |        |   |        |   |        |  
| | Corporate                                                             |        |   |        |   |        |  
| |                                                                       |        |   |        |   |        |  
| | Board
      support                                                   | 110    |   | 130    |   | 150    |  
| |                                                                       |        |   |        |   |        |  
| | Group
      technical resources and other shared services             | 270    |   | 270    |   | 290    |  
| |                                                                       |        |   |        |   |        |  
| |                                                                       | 36,210 |   | 38,030 |   | 39,780 |  
| |                                                                       |        |   |        |   |        |  
| |                                                                       |        |   |        |   |        |  
| | Geographic
      areas                                                |        |   |        |   |        |  
| |                                                                       |        |   |        |   |        |  
| | Continuing
      operations                                           | 2003   |   | 2002   |   | 2001   |  
| |                                                                       |        |   |        |   |        |  
| | United
      Kingdom                                                  | 5,250  |   | 6,250  |   | 6,710  |  
| |                                                                       |        |   |        |   |        |  
| | Continental
      Europe                                              | 6,190  |   | 6,340  |   | 6,550  |  
| |                                                                       |        |   |        |   |        |  
| | USA                                                                   | 10,070 |   | 10,410 |   | 10,930 |  
| |                                                                       |        |   |        |   |        |  
| | Other
      Americas                                                  | 5,170  |   | 5,310  |   | 5,710  |  
| |                                                                       |        |   |        |   |        |  
| | Asia
      Pacific                                                    | 9,230  |   | 9,420  |   | 9,590  |  
| |                                                                       |        |   |        |   |        |  
| | Other
      countries                                                 | 300    |   | 300    |   | 290    |  
| |                                                                       |        |   |        |   |        |  
| | Total
      employees                                                 | 36,210 |   | 38,030 |   | 39,780 |  
| |                                                                       |        |   |        |   |        |  
| |                                                                       |        |   |        |   |        |  
| | Number
      of people employed by the Group at the year end          |        |   |        |   |        |  
| |                                                                       | 2003   |   | 2002   |   | 2001   |  
| |                                                                       |        |   |        |   |        |  
| |                                                                       |        |   |        |   |        |  
| | Continuing
      operations                                           | 35,030 |   | 36,660 |   | 38,600 |  
| |                                                                       |        |   |        |   |        |  
| |                                                                       |        |   |        |   |        |  
| | Employee
      costs                                                  |        |   |        |   |        |  
| |                                                                       | 2003   |   | 2002   |   | 2001   |  
| | Continuing
      operations                                           | £m     |   | £m     |   | £m     |  
| |                                                                       |        |   |        |   |        |  
| | Salaries                                                              | 958    |   | 1,009  |   | 1,016  |  
| |                                                                       |        |   |        |   |        |  
| | Social
      security costs                                           | 92     |   | 95     |   | 101    |  
| |                                                                       |        |   |        |   |        |  
| | Pension
      costs                                                   | 120    |   | 89     |   | 70     |  
| |                                                                       |        |   |        |   |        |  
| | Other
      employment costs                                          | 33     |   | 27     |   | 31     |  
| |                                                                       |        |   |        |   |        |  
| |                                                                       | 1,203  |   | 1,220  |   | 1,218  |  
| |                                                                       |        |   |        |   |        |  
| | Less
      amounts allocated to capital                               | (6     | ) | (4     | ) | (1     | )
| |                                                                       |        |   |        |   |        |  
| | Severance
      costs charged in arriving at profit (loss) before tax | 113    |   | 37     |   | 104    |  
| |                                                                       |        |   |        |   |        |  
| | Employee
      costs charged in arriving at profit (loss) before tax  | 1,310  |   | 1,253  |   | 1,321  |  
| |                                                                       |        |   |        |   |        |  

|92 | ICI ANNUAL REPORT AND ACCOUNTS 2003 | 
|-- | ----------------------------------- | 

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|36 | Retirement
      benefits
|-- | -------------------------

The Group
  accounts for employee retirement benefits in accordance with the UK Standard
  SSAP 24 Accounting
  for Pension Costsand,
  for post-retirement healthcare in compliance with UITF Abstract 6 Accounting
  for Post-Retirement Benefits other than Pensions.
  Additional analysis is also provided in accordance with FRS No. 17 Retirement
  Benefits.
  Although none of the amounts calculated in accordance with this Standard are
  required to be recognised in the primary statements until accounting periods
  beginning on or after 1 January 2005, full disclosure in accordance with this
  Standard, is included in this note. Analysis
  is also provided in note 41 of the aggregate net periodic benefits cost and
    funded status of the Groups major post-retirement schemes restated
    in accordance with US GAAP and in compliance with the requirements of SFAS
    No.87 Employers Accounting for Pensions,SFAS
  No. 88 Employers Accounting for Settlements
  and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,
  SFAS No.106 Employers Accounting for Post-Retirement Benefits other
  than Pensionsand
  SFAS No.132 Employers Disclosures about Pensions and Other Post-Retirement
  Benefits(revised
  2003). Pensions
      (SSAP 24)  GroupThe Company
  and most of its subsidiaries operate retirement schemes which cover the majority
  of employees (including Directors) of the Group. ICI policy, where practicable,
  is to provide retirement benefits for new employees on a defined contribution
  basis. The Company pays pension contributions for each employee into an individual
  retirement account which is used to provide pension benefits at retirement.
  This policy is now in place in the majority of countries in which ICI operates.
  However, retirement plans for most existing employees are generally of the defined
  benefit type under which benefits are based on employees years of service
  and average final remuneration and are funded through separate trustee-administered
  funds. Formal valuations of the Groups main defined benefit schemes are
  undertaken regularly, by independent qualified actuaries, normally at least
  triennially and adopting the projected unit method. The actuarial
  assumptions used to calculate the projected benefit obligation of the Groups
  defined benefit pension schemes vary according to the economic conditions of
  the country in which they are situated. For the Groups major plans the
  principal weighted average rates used were:


| |                                                                                                 | 2003  |  | 2002  | 
| | ----------------------------------------------------------------------------------------------- | ----- |  | ----- | 
| |                                                                                                 | %p.a. |  | %p.a. | 
| |                                                                                                 |       |  |       | 
| | Discount
      rate used in determining the actuarial present values of the benefit obligations | 5.7   |  | 6.0   | 
| |                                                                                                 |       |  |       | 
| | Expected
      long-term rate of return on investments                                          | 5.8   |  | 6.1   | 
| |                                                                                                 |       |  |       | 
| | Rate
      of increase of future earnings                                                       | 3.7   |  | 4.0   | 
| |                                                                                                 |       |  |       | 
| | Increase
      in pensions in payment                                                           | 2.1   |  | 2.4   | 
| |                                                                                                 |       |  |       | 

In arriving
     at the valuations of the Groups major defined benefit schemes, fund
     assets  were valued at market values on the date of valuation of each fund.
     The value
  of these assets was £7,083m (2002 £7,721m) and was sufficient
  to cover 91% (2002 99%) of the benefits that had accrued to members after allowing
   for expected future increases in earnings. The total
  pension cost for the Group for 2003 was £120m (2002 £89m;
  2001 £70m). Accrued pension costs, which are included in other creditors
  (note 19), amounted to £37m (2002 £9m). Provisions for the
  benefit obligations of a small number of unfunded plans amounted to £134m
  (2002 £148m) and are included in provisions for liabilities and charges
   pensions (note 21). Prepaid pension costs amounting to £507m
  (2002 £525m) are included in debtors (note 16). ICI
        Pension FundThe ICI Pension
  Fund accounts for approximately 85% of the Groups major plans in terms
  of asset values and projected benefit liabilities. Based on the actuarial valuation
  as at 31 March 2000, the Company agreed to make six annual payments into the
  Fund of £30m per annum from 2001 through 2006, subject to a review
  in 2003. The latest actuarial valuation of the Fund, as at 31 March 2003, disclosed
  a solvency ratio of 93% and the Company has agreed to make a further nine annual
  payments into the Fund of £62m per annum from 2004 to 2012, subject
  to a review at the next valuation, and to provide an asset-backed guarantee,
  via a wholly owned subsidiary specifically incorporated to provide the guarantee,
  for £250m to support its commitments to the Fund (see note 40). The
  deficit, together with the prepayment, is taken into account in arriving at
  the employers pension costs charged in the accounts by being amortised
  as a percentage of pensionable emoluments over the expected working lifetime
  of existing members. In 2003 this gave rise to a SSAP 24 charge of £42m
  (2002 £16m). Healthcare
      (UITF Abstract 6)The Group
  provides in North America, and to a lesser extent in some other countries, certain
  unfunded healthcare and life assurance benefits for retired employees. At 31
  December 2003 approximately 18,000 (2002 20,000) current and retired employees
  were eligible to benefit from these schemes. The liabilities in respect of these
  benefits are fully accrued over the expected working lifetime of the existing
  members. The total
     post-retirement healthcare cost for the Groups major post-retirement
     benefit  schemes for 2003 was £15m (2002 £12m; 2001 £10m)
      and the provision at the year end was £167m (2002 £179m). In accordance
  with UITF Abstract 6, the Group has adopted the measurement basis of the US
  Standard, SFAS No.106 as the basis of its UK GAAP reporting. Costs and provisions
  were determined on an actuarial basis. The assumptions relating to the schemes
  are set out in the table in note 41. The healthcare
     cost trend has a significant effect on the amounts reported. For the Group,

  increasing the assumed healthcare cost for the major schemes by 1% in every
     year would increase the accumulated post-retirement benefit obligation as
    of
  31 December 2003 by £11m (2002 £11m) and the aggregate of
  the service and interest cost components of net periodic post-retirement benefit
   cost for the year ended 31 December 2003 by £1m (2002 £2m).


| | ICI
      ANNUAL REPORT AND ACCOUNTS 2003 | 93
| | ----------------------------------------- | --

---



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Contents to the Accounts

notes relating to the accounts



|36 | Retirement
      benefits (continued)
|-- | -------------------------------------

Retirement
  benefits  Pensions and healthcare (FRS No. 17) The most
  recent actuarial valuations of the Groups major defined benefit pension
  schemes and post-retirement healthcare schemes have been updated to 31 December
  2003 to take account of the transitional requirements of FRS No. 17. Financial
  assumptions to calculate the projected benefit obligations of Group schemes The principal
  weighted average rates used were:


| |                                                                                  | 2003                |   | 2002              |   | 2001              | 
| | -------------------------------------------------------------------------------- | ------------------- | - | ----------------- | - | ----------------- | 
| |                                                                                  | %
          p.a.    |   | %
        p.a.    |   | %
        p.a.    | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Discount
      rate                                                              | 5.5                 |   | 5.7               |   | 6.0               | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Inflation
      rate                                                             | 2.4                 |   | 2.3               |   | 2.5               | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Long-term
      rate of increase in future earnings                              | 3.9                 |   | 3.8               |   | 3.9               | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Increase
      in pensions in payment                                            | 2.2                 |   | 2.1               |   | 2.2               | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Post-retirement
      healthcare cost inflation rate                             | 8.9                 |   | 8.0               |   | 7.4               | 
| |                                                                                  |                     |   |                   |   |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Expected
      rates of return, assets, liabilities and net (liabilities) assets |                     |   |                   |   |                   | 
| |                                                                                  | At
          31 Dec |   | At
        31 Dec |   | At
        31 Dec | 
| |                                                                                  | 2003                |   | 2002              |   | 2001              | 
| |                                                                                  | %                   |   | %                 |   | %                 | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Expected
      rates of return                                                   |                     |   |                   |   |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Equities                                                                         | 8.3                 |   | 8.6               |   | 7.8               | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Bonds                                                                            | 5.0                 |   | 4.7               |   | 5.4               | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Other                                                                            | 5.3                 |   | 5.5               |   | 6.9               | 
| |                                                                                  |                     |   |                   |   |                   | 
| |                                                                                  | £m                  |   | £m                |   | £m                | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Assets
      in schemes                                                          |                     |   |                   |   |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Equities                                                                         | 1,769               |   | 1,659             |   | 2,329             | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Bonds                                                                            | 5,312               |   | 5,216             |   | 5,191             | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Other                                                                            | 269                 |   | 177               |   | 59                | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Total
      fair value of assets                                                 | 7,350               |   | 7,052             |   | 7,579             | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Present
      value of scheme liabilities                                        | 8,337               |   | 7,866             |   |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Net
      (deficit) in the schemes                                               | (987                | ) | (814              | ) |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Less:
      Unrecognisable surpluses                                             | (3                  | ) |                  |   |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Net
      recognised (deficit)                                                   | (990                | ) | (814              | ) |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Deferred
      tax asset                                                         | 122                 |   | 126               |   |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Net
      liabilities                                                            | (868                | ) | (688              | ) |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Represented
      by                                                             |                     |   |                   |   |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | (Deficits)                                                                       | (874                | ) | (694              | ) |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Surpluses                                                                        | 6                   |   | 6                 |   |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Analysis
      of net recognised (deficit)                                       |                     |   |                   |   |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | ICI
      UK Pension Fund                                                        | (432                | ) | (257              | ) |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Other
      funded pension schemes                                               | (289                | ) | (307              | ) |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Total
      funded schemes                                                       | (721                | ) | (564              | ) |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Unfunded
      pension schemes                                                   | (77                 | ) | (75               | ) |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Post-retirement
      healthcare schemes                                         | (192                | ) | (175              | ) |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Total
      unfunded schemes                                                     | (269                | ) | (250              | ) |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Net
      recognised (deficit)                                                   | (990                | ) | (814              | ) |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Represented
      by                                                             |                     |   |                   |   |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | (Deficits)                                                                       | (999                | ) | (823              | ) |                   | 
| |                                                                                  |                     |   |                   |   |                   | 
| | Surpluses                                                                        | 9                   |   | 9                 |   |                   | 
| |                                                                                  |                     |   |                   |   |                   | 



|94 | ICI ANNUAL REPORT AND ACCOUNTS 2003 | 
|-- | ----------------------------------- | 

---



Back to Contents

Contents to the Accounts

|36 | Retirement
          benefits (continued)
|-- | -----------------------------------------

Retirement
        benefits  Pensions and healthcare (FRS No. 17) (continued)


Set
      out below is an analysis of the amounts that would be charged to the profit
      and loss account and the statement of total recognised gains and losses
      in respect of the Groups major defined benefit pension and post-retirement
      healthcare schemes in accordance with the transitional requirements of
      FRS No. 17.


| | Analysis
          of the amounts that would be charged to profit and loss account in
          accordance with FRS No. 17 |      |   |      |  
| | -------------------------------------------------------------------------------------------------------------------------- | ---- | - | ---- | -
| |                                                                                                                            | 2003 |   | 2002 |  
| |                                                                                                                            | £m   |   | £m   |  
| |                                                                                                                            |      |   |      |  
| |                                                                                                                            |      |   |      |  
| |                                                                                                                            |      |   |      |  
| | Current
        service cost                                                                                               | (54  | ) | (60  | )
| |                                                                                                                            |      |   |      |  
| | Past
        service cost                                                                                                  | (14  | ) | (5   | )
| |                                                                                                                            |      |   |      |  
| | Previously
        unrecognised surplus from past service costs                                                            |     |   | 2    |  
| |                                                                                                                            |      |   |      |  
| | Losses
        on curtailments                                                                                             |     |   | (44  | )
| |                                                                                                                            |      |   |      |  
| | Gains
        on settlements                                                                                               |     |   | 18   |  
| |                                                                                                                            |      |   |      |  
| |                                                                                                                            | (68  | ) | (89  | )
| |                                                                                                                            |      |   |      |  
| |                                                                                                                            |      |   |      |  
| |                                                                                                                            |      |   |      |  
| | Other
        finance costs                                                                                                |      |   |      |  
| |                                                                                                                            |      |   |      |  
| | Expected
        return on assets in schemes                                                                               | 391  |   | 454  |  
| |                                                                                                                            |      |   |      |  
| | Interest
        on liabilities in schemes                                                                                 | (442 | ) | (468 | )
| |                                                                                                                            |      |   |      |  
| | Restriction
        relating to recoverable surplus                                                                        | (1   | ) | 1    |  
| |                                                                                                                            |      |   |      |  
| | Net
        finance cost                                                                                                   | (52  | ) | (13  | )
| |                                                                                                                            |      |   |      |  
| | Amounts
          charged to the profit and loss account                                                                   | (120 | ) | (102 | )
| |                                                                                                                            |      |   |      |  
| |                                                                                                                            |      |   |      |  
| | Analysis
          of amount that would be recognised in statement of total recognised
          gains and losses          |      |   |      |  
| | in
          accordance with FRS No. 17                                                                                    |      |   |      |  
| |                                                                                                                            |      |   |      |  
| | Actual
        return less expected return on assets (deficit)                                                             | 321  |   | (519 | )
| |                                                                                                                            |      |   |      |  
| | Experience
        gains and (losses) arising on liabilities                                                               | (36  | ) | 201  |  
| |                                                                                                                            |      |   |      |  
| | Changes
        in demographic and financial assumptions underlying                                                        |      |   |      |  
| | the
          present value of the liabilities (deficit)                                                                   | (458 | ) | (89  | )
| |                                                                                                                            |      |   |      |  
| | Adjustments
        to unrecognised scheme surplus                                                                         | (3   | ) | 7    |  
| |                                                                                                                            |      |   |      |  
| | Net
          actuarial (loss) recognised in statement of total recognised gains
          and losses                      | (176 | ) | (400 | )
| |                                                                                                                            |      |   |      |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |      |   |      |  
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | - | ---- | -
| | Movement
          in net deficit during the year in accordance with FRS No. 17                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |      |   |      |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 2003 |   | 2002 |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | £m   |   | £m   |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |      |   |      |  
| | Net
        recognised (deficit) at beginning of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | (814 | ) | (511 | )
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |      |   |      |  
| | Movement
          in year:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |      |   |      |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |      |   |      |  
| | Current
          service cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | (54  | ) | (60  | )
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |      |   |      |  
| | Past
          service costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | (14  | ) | (5   | )
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |      |   |      |  
| | Previously
          unrecognised surplus from past service costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |     |   | 2    |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |      |   |      |  
| | Losses
          on curtailments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |     |   | (44  | )
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |      |   |      |  
| | Gains
          on settlements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |   | 18   |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |      |   |      |  
| | Net
          finance cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | (52  | ) | (13  | )
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |      |   |      |  
| | Contributions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 122  |   | 161  |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |      |   |      |  
| | Actuarial
          loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | (176 | ) | (400 | )
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |      |   |      |  
| | Exchange
          adjustment gains                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 24   |   | 38   |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |      |   |      |  
| | Change
          in population                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | (26  | ) |     |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |      |   |      |  
| | Net
          (deficit) at end of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | (990 | ) | (814 | )
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |      |   |      |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |      |   |      |  
| | At
        31 December 2003 the difference between the expected and actual return
        on assets was a gain of £321m (2002 deficit £519m) or 4%
        (2002 7%) of the scheme assets. The experience losses arising on scheme
        liabilities at 31 December 2003 were £36m (2002 gains £201m)
        or 0% (2002 3%) of scheme liabilities. The net actuarial loss at 31 December
        2003, that would be charged in the statement of total recognised gains
        and losses, was £176m (2002 £400m) or 2% (2002 5%) of the
    scheme liabilities.



| | ICI
        ANNUAL REPORT AND ACCOUNTS 2003 | 95
| | ------------------------------------------- | --

---



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Contents to the Accounts

notes
    relating to the accounts



|37 | Financial
          risk management
|-- | -----------------------------------
|   |                                    

| | The
        Groups treasury objectives and policies are discussed in the Operating
        and Financial Review on pages 21 to 23.                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (a)                                                                                                                                                                                                                                                                                                                                                                                                                    
| | The
        interest rate profile of the Groups financial assets and financial
        liabilities at 31 December 2003, after taking into account the effect
        of interest rate and currency swaps, is set out in the tables below.
        Further quantitative analysis of the sensitivity to movements in interest
        rates is reported in the Operating and Financial Review on pages 21 to
        23.

|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ---- | --------------------- |  | ----------------------- |  | ----- | - | ---------------- | --- | ------------------- |  | --------------------- |  | ----- | -
|                                                                         | Financial
          assets                                                                                                                                                                                      |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         |                                                                                                                                                                                                                 | 2003               | 2002 |                      
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                    
|                                                                         |                                                                                                                                                                                                                 | At
          fixed |      | At
          floating |  | Interest
          free |  | Total |   | At
        fixed |     | At
        floating |  | Interest
        free |  | Total |  
|                                                                         |                                                                                                                                                                                                                 | interest           |      | interest              |  |                         |  |       |   | interest         |     | interest            |  |                       |  |       |  
|                                                                         |                                                                                                                                                                                                                 | rates              |      | rates                 |  |                         |  |       |   | rates            |     | rates               |  |                       |  |       |  
|                                                                         |                                                                                                                                                                                                                 | £m                 |      | £m                    |  | £m                      |  | £m    |   | £m               |     | £m                  |  | £m                    |  | £m    |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | Current
        asset investments, short-term                                                                                                                                                                   |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | deposits
          and cash                                                                                                                                                                                     |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | Sterling                                                                                                                                                                                                        |                   |      | 77                    |  | 15                      |  | 92    |   |                 |     |                    |  | 63                    |  | 63    |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | US
          Dollar                                                                                                                                                                                             |                   |      | 140                   |  | 40                      |  | 180   |   |                 |     | 16                  |  | 52                    |  | 68    |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | Euro                                                                                                                                                                                                            |                   |      | 3                     |  | 56                      |  | 59    |   |                 |     | 3                   |  | 38                    |  | 41    |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | Japanese
          Yen                                                                                                                                                                                          |                   |      | 1                     |  | 4                       |  | 5     |   |                 |     |                    |  | 2                     |  | 2     |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | Other
          currencies                                                                                                                                                                                      |                   |      | 39                    |  | 120                     |  | 159   |   |                 |     | 35                  |  | 109                   |  | 144   |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         |                                                                                                                                                                                                                 |                   |      | 260                   |  | 235                     |  | 495   |   |                 |     | 54                  |  | 264                   |  | 318   |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | Fixed
        asset investments and debtors                                                                                                                                                                     |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | due
        after more than one year                                                                                                                                                                            |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | Sterling                                                                                                                                                                                                        |                    |      |                       |  |                         |  | 11    |   |                  |     |                     |  |                       |  | 4     |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | US
          Dollar                                                                                                                                                                                             |                    |      |                       |  |                         |  | 40    |   |                  |     |                     |  |                       |  | 38    |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | Euro                                                                                                                                                                                                            |                    |      |                       |  |                         |  |      |   |                  |     |                     |  |                       |  | 2     |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | Other
          currencies                                                                                                                                                                                      |                    |      |                       |  |                         |  | 8     |   |                  |     |                     |  |                       |  | 4     |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | Total
        financial assets                                                                                                                                                                                  |                    |      |                       |  |                         |  | 554   |   |                  |     |                     |  |                       |  | 366   |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|At
        31 December 2003 the financial assets of the Group comprised: |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                 
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | Investments
        in participating and other investments                                                                                                                                                      |                    |      |                       |  |                         |  |       |   |                  |     |                    
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | Loans
          to associates                                                                                                                                                                                   |                    |      |                       |  |                         |  |      |   |                  |     |                     |  |                       |  |      |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | Other
          investments                                                                                                                                                                                     |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | Shares                                                                                                                                                                                                          |                    |      |                       |  |                         |  | 17    |   |                  |     |                     |  |                       |  | 17    |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | Loans                                                                                                                                                                                                           |                    |      |                       |  |                         |  | 15    |   |                  |     |                     |  |                       |  |      |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | Debtors
        due after more than one year                                                                                                                                                                    |                    |      |                       |  |                         |  | 27    |   |                  |     |                     |  |                       |  | 31    |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | Current
        asset investments and short-term deposits                                                                                                                                                       |                    | 345  |                       |  |                         |  |       |   |                  | 160 |                    
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | Cash                                                                                                                                                                                                            |                    |      |                       |  |                         |  | 249   |   |                  |     |                     |  |                       |  | 267   |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | Less
        financial assets of insurance subsidiaries                                                                                                                                                         |                    |      |                       |  |                         |  | (99   | ) |                  |     |                     |  |                       |  | (109  | )
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  | 554   |   |                  |     |                     |  |                       |  | 366   |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         |                                                                                                                                                                                                                 |                    |      |                       |  |                         |  |       |   |                  |     |                     |  |                       |  |       |  
|                                                                         | Floating
        rate financial assets comprise bank deposits bearing interest at rates
        fixed in advance for periods ranging from 1 month to 6 months by reference
    to the relevant inter-bank rate.



|96 | ICI
        ANNUAL REPORT AND ACCOUNTS 2003 | 
|-- | ------------------------------------------- | 

---



Back to Contents

Contents to the Accounts

|37 | Financial
          risk management (continued)
|-- | -----------------------------------------------
|   |                                                
|   | (a)Interest
            rate risk (continued)  
|   |                                                

| | Financial
          liabilities                                               |                    |  |                       |   |       |  |  |                  |  |                     |  |       | 
| | ----------------------------------------------------------------------------- | ------------------ |  | --------------------- | - | ----- |  |  | ---------------- |  | ------------------- |  | ----- | 
| |                                                                               | 2003               |  | 2002                 
| |                                                                               |                    |  |                      
| |                                                                               | At
          fixed |  | At
          floating |   | Total |  |  | At
        fixed |  | At
        floating |  | Total | 
| |                                                                               | interest           |  | interest              |   |       |  |  | interest         |  | interest            |  |       | 
| |                                                                               | rates              |  | rates                 |   |       |  |  | rates            |  | rates               |  |       | 
| |                                                                               | £m                 |  | £m                    |   | £m    |  |  | £m               |  | £m                  |  | £m    | 
| |                                                                               |                    |  |                       |   |       |  |  |                  |  |                     |  |       | 
| | Sterling                                                                      | 112                |  | (47                   | ) | 65    |  |  | 48               |  | 11                  |  | 59    | 
| |                                                                               |                    |  |                       |   |       |  |  |                  |  |                     |  |       | 
| | US
          Dollar                                                           | 431                |  | 622                   |   | 1,053 |  |  | 475              |  | 727                 |  | 1,202 | 
| |                                                                               |                    |  |                       |   |       |  |  |                  |  |                     |  |       | 
| | Euro                                                                          | 81                 |  | 434                   |   | 515   |  |  | 75               |  | 226                 |  | 301   | 
| |                                                                               |                    |  |                       |   |       |  |  |                  |  |                     |  |       | 
| | Japanese
          Yen                                                        | 212                |  | (63                   | ) | 149   |  |  | 257              |  | 93                  |  | 350   | 
| |                                                                               |                    |  |                       |   |       |  |  |                  |  |                     |  |       | 
| | Other
          currencies                                                    | 16                 |  | 135                   |   | 151   |  |  | 31               |  | 167                 |  | 198   | 
| |                                                                               |                    |  |                       |   |       |  |  |                  |  |                     |  |       | 
| |                                                                               | 852                |  | 1,081                 |   | 1,933 |  |  | 886              |  | 1,224               |  | 2,110 | 
| |                                                                               |                    |  |                       |   |       |  |  |                  |  |                     |  |       | 
| |                                                                               |                    |  |                       |   |       |  |  |                  |  |                     |  |       | 
| |                                                                               |                    |  |                       |   |       |  |  |                  |  |                     |  |       | 
| | At
        31 December 2003 the financial liabilities of the Group comprised: |                    |  |                       |   |       |  |  |                  |  |                    
| |                                                                               |                    |  |                       |   |       |  |  |                  |  |                     |  |       | 
| | Short-term
        borrowings                                                 |                    |  |                       |   | 29    |  |  |                  |  |                     |  | 226   | 
| |                                                                               |                    |  |                       |   |       |  |  |                  |  |                     |  |       | 
| | Current
        instalments of loans                                          |                    |  |                       |   | 534   |  |  |                  |  |                     |  | 500   | 
| |                                                                               |                    |  |                       |   |       |  |  |                  |  |                     |  |       | 
| | Loans                                                                         |                    |  |                       |   | 1,353 |  |  |                  |  |                     |  | 1,363 | 
| |                                                                               |                    |  |                       |   |       |  |  |                  |  |                     |  |       | 
| | Other
        creditors due after more than one year                          |                    |  |                       |   |       |  |  |                  |  |                     |  |       | 
| |                                                                               |                    |  |                       |   |       |  |  |                  |  |                     |  |       | 
| | Environmental
          liabilities                                           |                    |  |                       |   |      |  |  |                  |  |                     |  | 1     | 
| |                                                                               |                    |  |                       |   |       |  |  |                  |  |                     |  |       | 
| | Other
          creditors                                                     |                    |  |                       |   | 14    |  |  |                  |  |                     |  | 17    | 
| |                                                                               |                    |  |                       |   |       |  |  |                  |  |                     |  |       | 
| | Finance
          leases                                                      |                    |  |                       |   | 3     |  |  |                  |  |                     |  | 3     | 
| |                                                                               |                    |  |                       |   |       |  |  |                  |  |                     |  |       | 
| |                                                                               |                    |  |                       |   | 1,933 |  |  |                  |  |                     |  | 2,110 | 
| |                                                                               |                    |  |                       |   |       |  |  |                  |  |                     |  |       | 

The
      applicable weighted average interest rates for fixed rate financial liabilities
      are: Sterling 9.7% (2002 10.9%); US dollar 6.9% (2002 7.0%); Euro 4.3%
      (2002 4.3%); Japanese yen 0.5% (2002 0.6%); other currencies 12% (2002
      14.6%).


The
      applicable weighted average period for which rates are fixed are: Sterling
      3 years (2002 4 years); US dollar 3 years (2002 4 years); Euro 4 years
      (2002 5 years); Japanese yen 2 years (2002 3 years) and other currencies
      3 years (2002 2 years).


The
      figures shown above take into account various interest rate swaps, currency
      swaps and forward exchange contracts used to manage the interest rate and
      currency profile of financial assets and liabilities.


| | (b)Currency
          exposures on monetary assets and liabilities                                                                                                                                                                                                          
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As
        explained in the Operating and Financial Review, on page 22, the Groups
        policy is, where practicable, to hedge all exposures on monetary assets
        and liabilities. As a result there are no significant non functional
        currency exposures.
|

| | (c)Maturity
          of financial liabilities                                                                                                 
| | -----------------------------------------------------------------------------------------------------------------------------------------------
| | The
        maturity profile of the Groups financial liabilities, as defined
        in section (a) above, at 31 December 2003 was as follows:

| |                                                             |       |  |       | 
| | ----------------------------------------------------------- | ----- |  | ----- | 
| |                                                             | 2003  |  | 2002  | 
| |                                                             | £m    |  | £m    | 
| |                                                             |       |  |       | 
| | In
        one year or less                                 | 563   |  | 726   | 
| |                                                             |       |  |       | 
| | In
        more than one year but not more than two years   | 151   |  | 548   | 
| |                                                             |       |  |       | 
| | In
        more than two years but not more than five years | 907   |  | 792   | 
| |                                                             |       |  |       | 
| | In
        more than five years                             | 312   |  | 44    | 
| |                                                             |       |  |       | 
| |                                                             | 1,933 |  | 2,110 | 
| |                                                             |       |  |       | 



| | ICI
        ANNUAL REPORT AND ACCOUNTS 2003 | 97
| | ------------------------------------------- | --

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Contents to the Accounts

notes relating to the accounts

|37 | Financial
    risk management (continued)                                                                                                                            
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                      
|   | (d)   Borrowing
            facilities                                                                                                                               
|   | Committed
          facilities available to the Group at 31 December 2003 in respect of
    which all conditions precedent had been met at that date were as follows:



| |                                 |      |  |       | 
| | ------------------------------- | ---- |  | ----- | 
| |                                 |      |  |       | 
| |                                 | 2003 |  | 2002  | 
| |                                 | £m   |  | £m    | 
| |                                 |      |  |       | 
| | Expiring in one year or less    | 100  |  | 201   | 
| |                                 |      |  |       | 
| | Expiring in more than one year  |     |  | 883   | 
| |                                 |      |  |       | 
| | Expiring in more than two years | 777  |  | 425   | 
| |                                 |      |  |       | 
| |                                 | 877  |  | 1,509 | 
| |                                 |      |  |       | 
| |                                 |      |  |       | 
| |                                 |      |  |       | 

| | (e)   Net
            debt management                                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The
        Group manages the currency and interest rate exposure which arises on
        borrowings and cash not immediately required by the business on a net
        basis through the use of currency swaps, forward exchange contracts,
        interest rate swaps and interest rate caps.
| | The
        most significant consequences of this approach are:                                                                                                                                                                                                                                 
| |    to
        manage the currency exposures arising from loans by holding cash and
        through currency swaps.                                                                                                                                                                             
| |    to
        reduce the proportion of the Groups fixed interest rate liabilities
        arising from loans through the use of fixed to floating rate swaps.                                                                                                                                 
| | The
        financial instruments used in debt management are accounted for as described
        in the Groups accounting policies on pages 52 and 53.                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                 
| | The
        notional principal amounts and fair values, net of associated hedges,
        of the Groups financial assets and financial liabilities were as
        follows:                                                                                                                    
| |                                                                                                                                                                                                                                                                                                 

| |                                                                           | Notional          |   |                  |   |                |   |        |   |        |  
| | ------------------------------------------------------------------------- | ----------------- | - | ---------------- | - | -------------- | - | ------ | - | ------ | -
| |                                                                           | principal amounts |   | Carrying values* |   | Fair values*   |  
| |                                                                           | At 31 December    |   | At 31 December   |   | At 31 December |  
| |                                                                           |                   |   |                  |   |                |   |        |   |        |  
| |                                                                           | 2003              |   | 2002             |   | 2003           |   | 2002   |   | 2003   |  
| |                                                                           | £m                |   | £m               |   | £m             |   | £m     |   | £m     |  
| |                                                                           |                   |   |                  |   |                |   |        |   |        |  
| | Interests
    in participating and other investments  other investments | 32                |   | 17               |   | 32             |   | 17     |   | 32     |  
| |                                                                           |                   |   |                  |   |                |   |        |   |        |  
| | Current asset investments and short-term deposits                        | 260               |   | 54               |   | 260            |   | 54     |   | 260    |  
| |                                                                           |                   |   |                  |   |                |   |        |   |        |  
| | Cash                                                                     | 235               |   | 264              |   | 235            |   | 264    |   | 235    |  
| |                                                                           |                   |   |                  |   |                |   |        |   |        |  
| | Other financial assets                                                   | 27                |   | 31               |   | 27             |   | 31     |   | 27     |  
| |                                                                           |                   |   |                  |   |                |   |        |   |        |  
| | Short-term borrowings                                                     | (28               | ) | (224             | ) | (29            | ) | (226   | ) | (29    | )
| |                                                                           |                   |   |                  |   |                |   |        |   |        |  
| | Loans                                                                     | (1,836            | ) | (1,850           | ) | (1,834         | ) | (1,848 | ) | (1,940 | )
| |                                                                           |                   |   |                  |   |                |   |        |   |        |  
| | Other financial liabilities                                               | (18               | ) | (21              | ) | (17            | ) | (21    | ) | (18    | )
| |                                                                           |                   |   |                  |   |                |   |        |   |        |  
| | Currency swaps                                                            | (605              | ) | (814             | ) | (53            | ) | (15    | ) | (21    | )
| |                                                                           |                   |   |                  |   |                |   |        |   |        |  
| | Interest rate swaps                                                       | 3,215             |   | 3,485            |   |               |   |       |   | 17     |  
| |                                                                           |                   |   |                  |   |                |   |        |   |        |  
| | Total net liabilities                                                     |                   |   |                  |   | (1,379         | ) | (1,744 | ) | (1,437 | )
| |                                                                           |                   |   |                  |   |                |   |        |   |        |  
| | Financial assets                                                          |                   |   |                  |   | 554            |   |        |   |        |  
| |                                                                           |                   |   |                  |   |                |   |        |   |        |  
| | Financial liabilities                                                     |                   |   |                  |   | (1,933         | ) |        |   |        |  
| |                                                                           |                   |   |                  |   |                |   |        |   |        |  
| |                                                                           |                   |   |                  |   | (1,379         | ) |        |   |        |  
| |                                                                           |                   |   |                  |   |                |   |        |   |        |  

* ( ) = liability The Group has assumed that the fair value approximates to the carrying value.


The fair
  value of the Groups debt, all swaps, and caps have been estimated from
  discounted anticipated cash flows utilising a risk-adjusted zero coupon yield
  curve.


The total decrease
in the fair value of long-term debt net of associated hedges for the year ended
31 December 2003 of £70m arose from the net addition to loans (£102m), favourable movements on foreign exchange (£115m) and favourable movements due to changes in interest rates (£57m).


A portfolio approach
is adopted to create the Groups target proportion of fixed and floating
rate debt by currency. The maturity profile of the net fixed rate exposure is
spread over several years to reduce re-pricing risk. Short term borrowings include
balances relating to forward exchange contracts. These balances are further analysed
in section (g).


Where interest rate
and currency instruments are designated to a group of borrowings or cash and
cash equivalents with similar characteristics, altering their interest rate or
currency profile, the net cash amounts to be received or paid on the agreements
are accrued in current assets or liabilities and recognised as an adjustment
to interest income or expense (accrual accounting).


| | 98 | ICI
        ANNUAL REPORT AND ACCOUNTS 2003 | 
| | -- | ------------------------------------------- | 

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Contents to the Accounts

|37 | Financial
    risk management (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | (e)   Net
          debt management (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | The
        Group is exposed to credit related losses in the event that counterparties
        to off-balance-sheet financial instruments do not perform according to
        the terms of the contract. In the opinion of management, the counterparties
        to the financial instruments are creditworthy parties and the Group does
        not expect any significant loss to result from non-performance. The immediate
        credit exposure of financial instruments is represented by those financial
    instruments that have a positive fair value at 31 December 2003.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | At
        31 December 2003 the aggregate value of all financial instruments with
        a positive fair value (assets) was £57m for currency swaps, £54m
        for interest rate swaps, £17m for forward contracts, nil for interest
    rate caps and £6m for currency options.                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | (f)   Hedges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The
        table below analyses movements in the fair values of derivatives used
    to hedge financial assets and liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| |                                                                 | 2003   |   | 2002        |  
| | --------------------------------------------------------------- | ------ | - | ----------- | -
| |                                                                 |        |   |             |  
| |                                                                 | Fair   |   | Fair        |  
| |                                                                 | value  |   | value       |  
| |                                                                 | assets |   | liabilities |  
| |                                                                 | £m     |   | £m          |  
| |                                                                 |        |   |             |  
| |                                                                 |        |   |             |  
| |                                                                 |        |   |             |  
| | Unrecognised gains and losses on hedges at 1 January            | 172    |   | (106        | )
| |                                                                 |        |   |             |  
| | Gains and losses arising in previous years that were recognised |        |   |             |  
| | during the year                                                 | (44    | ) | 21          |  
| |                                                                 |        |   |             |  
| | Gains and losses arising before 1 January that were not         |        |   |             |  
| | recognised during the year                                      | 128    |   | (85         | )
| |                                                                 |        |   |             |  
| | Gains and losses arising in the year that were not              |        |   |             |  
| | recognised during the year                                      | 6      |   | (57         | )
| |                                                                 |        |   |             |  
| | Unrecognised gains and losses on hedges at 31 December          | 134    |   | (142        | )
| |                                                                 |        |   |             |  
| | Of which:                                                       |        |   |             |  
| |                                                                 |        |   |             |  
| | Gains and losses expected to be recognised within 1 year        | 47     |   | (64         | )
| |                                                                 |        |   |             |  
| | Gains and losses to be recognised after more than 1 year        | 87     |   | (78         | )
| |                                                                 |        |   |             |  
| |                                                                 | 134    |   | (142        | )
| |                                                                 |        |   |             |  

(g)   Currency
managementThe Group hedges its net transactional currency exposure arising on stocks, trade debtors and creditors (trade working capital) fully through the use of forward foreign exchange contracts. The Group selectively hedges its anticipated currency cash flow exposures for up to 12 months ahead through the use of forward foreign exchange contracts and selective purchase of currency options.


Surplus funds are invested in instruments in a variety of currencies. Forward foreign exchange contracts are used to hedge these back to the currencies that are appropriate for the net debt portfolio.


The financial instruments
used in currency management are accounted for as described in the Groups
accounting policies on pages 52 and 53.


The notional principal amounts and fair values of forward exchange and currency option contracts used in currency management are as follows:


| |                                     | Notional           |   |                  |   |                |  
| | ----------------------------------- | ------------------ | - | ---------------- | - | -------------- | -
| |                                     | principal amounts  |   | Carrying values* |   | Fair values*   |  
| |                                     | At
    31 December |   | At 31 December   |   | At 31 December |  
| |                                     |                    |   |                  |   |                |  
| |                                     | 2003               |   | 2002             |   | 2003           |  
| |                                     | £m                 |   | £m               |   | £m             |  
| |                                     |                    |   |                  |   |                |  
| | Hedging working capital             |                    |   |                  |   | 1              |  
| |                                     |                    |   |                  |   |                |  
| | Forward contracts to buy currency   | 118                |   | 99               |   |                |  
| |                                     |                    |   |                  |   |                |  
| | Forward contracts to sell currency  | (118               | ) | (96              | ) |                |  
| |                                     |                    |   |                  |   |                |  
| | Hedging anticipated cash flows      |                    |   |                  |   | 3              |  
| |                                     |                    |   |                  |   |                |  
| | Currency contracts to buy currency  | 92                 |   | 97               |   |                |  
| |                                     |                    |   |                  |   |                |  
| | Currency contracts to sell currency | (84                | ) | (88              | ) |                |  
| |                                     |                    |   |                  |   |                |  
| | Hedging debt                        |                    |   |                  |   | (12            | )
| |                                     |                    |   |                  |   |                |  
| | Forward contracts to buy currency   | 1,018              |   | 617              |   |                |  
| |                                     |                    |   |                  |   |                |  
| | Forward contracts to sell currency  | (1,030             | ) | (620             | ) |                |  
| |                                     |                    |   |                  |   |                |  
| |                                     |                    |   |                  |   |                |  
| | * ( ) = liability                   |                    |   |                  |   |                |  

| |                                             |   
| | ------------------------------------------- | --
| | ICI
        ANNUAL REPORT AND ACCOUNTS 2003 | 99

---



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Contents to the Accounts

notes relating to the accounts

|37 | Financial
    risk management (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | (h)   Management
    of current asset investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Surplus
        funds are invested in high quality liquid marketable investments, including
        money market instruments, government securities and asset backed securities.
        Investments are of a plain vanilla nature with no embedded interest rate
        options. The majority of asset backed securities have some risk of early
        redemption, but are of a floating rate nature and hence have minimal
        fixed interest rate risk. There are no investments of a fixed rate nature
        with maturity greater than one year and consequently the fair value of
        investments is considered to be materially the same as the value in the
        Groups balance sheet. Investments are classified as available
    for sale.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The
        Groups exposure to credit risk is controlled by setting a policy
        for limiting credit exposure to counterparties, which is reviewed annually,
        and reviewing credit ratings and limiting individual aggregate credit
        exposures accordingly. The Group considers the possibility of material
        loss in the event of non-performance by a financial counterparty to be
    unlikely.                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The
        notional amounts of financial instruments used in debt and currency management
        do not represent amounts exchanged by the parties and, thus, are not
        a measure of the credit risk to the Group arising through the use of
        these instruments. The immediate credit risk of these instruments is
    represented by the fair value of contracts with a positive fair value.                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|38 | Statutory
    and other information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Remuneration
    of the Auditor                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Remuneration
        of the Auditor for each of the three years ending 31 December 2003, 2002
    and 2001 was as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| |                                                                              |       |  |      |  |      |  |      | 
| | ---------------------------------------------------------------------------- | ----- |  | ---- |  | ---- |  | ---- | 
| |                                                                              |       |  | 2003 |  | 2002 |  | 2001 | 
| |                                                                              | notes |  | £m   |  | £m   |  | £m   | 
| |                                                                              |       |  |      |  |      |  |      | 
| | Statutory audit of the Group  Remuneration of Auditor                       | 1     |  | 3.1  |  | 2.8  |  | 2.8  | 
| |                                                                              |       |  |      |  |      |  |      | 
| |                                                                              |       |  |      |  |      |  |      | 
| |                                                                              |       |  |      |  |      |  |      | 
| | Services other than statutory audit  Remuneration of Auditor and associates |       |  |      |  |      |  |      | 
| |                                                                              |       |  |      |  |      |  |      | 
| | Audit related services                                                       | 2     |  | 0.9  |  | 2.1  |  | 0.9  | 
| |                                                                              |       |  |      |  |      |  |      | 
| | Tax services                                                                 | 3     |  | 0.8  |  | 1.1  |  | 1.8  | 
| |                                                                              |       |  |      |  |      |  |      | 
| | Other services                                                               |       |  | 0.1  |  | 0.1  |  | 0.4  | 
| |                                                                              |       |  |      |  |      |  |      | 
| |                                                                              |       |  | 1.8  |  | 3.3  |  | 3.1  | 
| |                                                                              |       |  |      |  |      |  |      | 
| |                                                                              |       |  |      |  |      |  |      | 
| |                                                                              |       |  |      |  |      |  |      | 

| | Notes
| | -----
| |      
| | 1.   
| |      
| | 2.   
| |      
| | 3.   

Loans and guarantees to officersIncluded in
debtors in 2001 was an interest free loan totalling £7,000 to Dr J D G McAdam. This was repaid during 2002. Also at 31 December 2003 an interest free housing loan to an officer of the Company amounting to £100,000 (2002 £nil; 2001 £nil)
was outstanding and became disclosable.


In accordance with
the Companys policy of providing housing assistance to staff on international assignment, a subsidiary has guaranteed a housing loan for an officer to the extent of £143,000 (2002 £131,000; 2001 £123,000).
The year on year movement in the sterling equivalent value of this loan is solely
due to translation at the spot exchange rate at the end of each year.


|100 | ICI
        ANNUAL REPORT AND ACCOUNTS 2003 | 
|--- | ------------------------------------------- | 

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Contents to the Accounts

|39 | Commitments
              and contingent liabilities          | Group |  | Company | 
|-- | ------------------------------------------------------------- | ----- |  | ------- | 
|   |                                                               |       |  |         | 
|   |                                                               | 2003  |  | 2002    | 
|   |                                                               | £m    |  | £m      | 
|   |                                                               |       |  |         | 
|   | Commitments for capital expenditure not provided for in these |       |  |         | 
|   | accounts (including acquisitions)                             |       |  |         | 
|   |                                                               |       |  |         | 
|   | Contracts placed for future expenditure                       | 28    |  | 23      | 
|   |                                                               |       |  |         | 
|   | Expenditure authorised but not yet contracted                 | 104   |  | 140     | 
|   |                                                               |       |  |         | 
|   |                                                               | 132   |  | 163     | 
|   |                                                               |       |  |         | 
|   |                                                               |       |  |         | 

Contingent liabilities
  existed at 31 December 2003 in connection with guarantees and uncalled capital
  relating to subsidiary and other undertakings and guarantees relating to pension
  funds, including the solvency of pension funds. There was no contingent liability
  in respect of guarantees of borrowings and uncalled capital for the Group at
  31 December 2003 (31 December 2002: £nil); the maximum contingent liability for the Company, mainly on guarantees by subsidiaries, was £1,357m (2002 £1,441m).
  In particular, the Company has fully and unconditionally guaranteed the debt
  securities of its wholly-owned subsidary ICI Wilmington, Inc.
 The Group is also
  subject to contingencies pursuant to environmental laws and regulations that
  in the future may require it to take action to correct the effects on the environment
  of prior disposals 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, however provisions have been established at 31 December
  2003 in accordance with the Groups accounting policy. It is believed that, taking account of these provisions, the cost of addressing currently identified environmental obligations is unlikely to impair materially the Groups
  financial position and results of operations.
 The Glidden Company
  (Glidden), a wholly owned subsidiary of ICI, is a defendant, along
  with former lead paint and pigment producers as well as other lead product
  manufacturers and their trade associations, in a number of law suits in the
  United States. These suits seek damages for alleged personal injury caused
  by lead-based paint or the costs of removing lead-based paint. An alleged predecessor
  of Glidden manufactured lead pigments until the 1950s and lead-based consumer
  paint until the 1960s. Glidden is unable to quantify the amount being claimed
  although the suits are likely to involve substantial claims for damages. Glidden
  is currently a defendant in four active suits and is also named in three unserved
  cases. Glidden continues to believe that it has strong defences to all of the
  pending cases and has denied all liability and will continue to defend all
  actions vigorously.
 ICI Chemicals & Polymers Limited (C&P), a subsidiary, was involved in arbitration proceedings in Singapore regarding PTA technology exchange and licence arrangements with PT Polyprima Karyareksa (Polyprima). Fees due under these arrangements were being claimed by C&P against Polyprima who, in response, claimed damages for alleged breach of contract, fraud, deceit, misrepresentation and concealment. C&Ps claim against Polyprima was heard before an arbitration tribunal in Singapore in May 2002 and in June 2003 the arbitration tribunal ordered Polyprima to pay outstanding licence fees and dismissed the counterclaims against C&P.
 In May 2003, the
  Kanagawa City Health and Medical Bureau in Japan required Quest Japan to recall
  flavours containing an ingredient known as WS3. The Japanese health authorities
  acknowledged that WS3 posed no risk to human health, but nevertheless argued
  that technically it was not approved for use in Japan. Three customers were
  affected by the recall, including Coca Cola (Japan) Company Limited (Coca Cola Japan).
  On 8 August 2003 The Coca Cola Company and Coca Cola Japan filed a lawsuit
  in the state court of




Fulton County, Georgia USA seeking damages to be determined at trial for costs allegedly arising from their recall. Quest has denied liability and is contesting the claim vigorously. It is possible that the other two customers will also seek to recover alleged damages. Following ICIs
  trading statement on 25 March 2003, three purported class actions on lawsuits
  were filed in the US Federal District Court for the Southern District of New
  York on behalf of ICI shareholders who purchased ICI ADRs and Ordinary Shares
  between August 2002 and March 2003. The lawsuits, which have now been consolidated
  into a single action, allege that prior to the trading statement ICI failed
  to disclose properly the extent of customer service problems at Quest following
  the implementation of new enterprise resource planning systems in 2002. At
  this point, the amount of the damages being claimed by the plaintiffs is unclear
  but could be substantial. ICI intends to contest the claims vigorously. The Group is also
  involved in various other legal proceedings, principally in the United Kingdom
  and United States, arising out of the normal course of business or results
  of operations. The Directors do not believe that the outcome of these other
  proceedings will have a material effect on the Groups financial position. In recent years, the Group has carried out a programme of strategic disposals, in the course of which the Group has given other parties 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 which the Group exited as part of its disposal programme which have not been novated to the purchasers of these businesses. The Groups 50% interest in Teesside Gas Transportation Ltd (TGT) was sold, during 1996, to a subsidiary of its other shareholder, Enron Europe Ltd (Enron) which is currently in administration. TGT contracted with the owners of a distribution network (the CATS parties) for pipeline capacity for North Sea gas and the commitment is guaranteed severally on a 50:50 basis by ICI and Enron (the present value of the commitment guaranteed by ICI is estimated at £146m). On the sale of the Groups interest in TGT to Enron, ICI received the benefit of a counter guarantee from Enrons
  parent, Enron Corp. Enron Corp. sought Chapter 11 bankruptcy protection in
  the USA on 2 December 2001. The Groups interest in Teesside Power Ltd (TPL) was sold on 31 December 1998 to Enron Teesside Operations Ltd (ETOL). TPL had previously contracted with certain gas sellers for the purchase of gas. Enron Corp. and ICI had guaranteed on a several basis the liability of TPL to the gas sellers in the proportions 70% and 30% respectively. On the sale of the Groups interest in TPL to ETOL, ICI received the benefit of a counter indemnity from ETOL and a guarantee from Enron Corp. in respect of ICIs
  30% guarantee commitment to the gas sellers. As mentioned above, Enron Corp.
  has sought Chapter 11 bankruptcy protection in the USA. ETOL went into administrative
  receivership in April 2003, and sold its business and assets to




| | ICI ANNUAL REPORT AND ACCOUNTS 2003 | 101
| | ----------------------------------- | ---

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Contents to the Accounts

notes relating to the accounts

39
    Commitments
      and contingent liabilities (continued)Sembcorp
          Utilities Teesside Ltd (Sembcorp); however, the counter
          indemnity to ICI was not transferred to Sembcorp and remains a liability
          of ETOL. The present value of the gas purchase commitment guaranteed
          by ICI is estimated at £247m. The numbers quoted above are ICIs
          current estimates
of its maximum potential liability.ICIs
          original disposal of the Chlor-Chemicals business to Ineos Chlor included
          an agreement for ICI to provide Ineos Chlor with a £100m loan
          facility. Ineos Chlor has currently drawn £80m under the facility.
          As part of an overall refinancing package for Ineos Chlor, ICI agreed
          on 31 July 2003 to make available new funding of £60m alongside £45m
          of new funding from the Ineos Group and £50m of Regional Selective
          Assistance from the UK Government. The new funding from ICI comprises
          a £30m cash contribution and additional loan finance of £30m.
          The terms of the £100m loan having been restructured, loan repayments
      are due by the end of 2010.Following
          the completion of the refinancing the £65m claim previously notified
          to ICI by Ineos Chlor in connection with the original sale of the business
      has been withdrawn.




The
          only significant take-or-pay contract entered into by subsidiaries
          is for the purchase of electric power in the UK, which commenced in
          the second quarter of 1998, for 15 years.The present value of this
      commitment is estimated at £137m.The
          ultimate outcome of the matters described above is subject to many
          uncertainties, including future events and the uncertainties inherent
          in litigation. The Group has made provision in its financial statements
          for such matters to the extent losses are presently considered probable
          and estimable. However, these matters involve substantial sums, and
          an unfavourable outcome of one or more of these matters could have
          a material effect on the Groups results of operations, liquidity
      or financial position.




40
      Related
      party transactionsRelated
            party transactionsThe
      following information is provided in accordance with FRS No. 8Related
      Party Transactions,
      as being material transactions with relatedparties
      during 2003.Related
          party: IC Insurance Ltd and its subsidiaries, disclosed as a principal
      associate on page 75.Transactions:a)
      Insurance
          claims settled by IC Insurance Ltd with ICI amounted to £nil
      (2002 £nil; 2001 £nil).b)
      Funds
          on deposit with ICI Finance PLC amounted to £10m (2002 £10m;
      2001 £10m).




Related
      party: ICI Pension Trustees LtdTransactions:In
          recognition of a deficit for funding purposes of £443m and a
          solvency ratio of 93% at 31 March 2003 concluded as a result of the
          completion of the triennial valuation of the ICI UK Pension Fund (the
          Fund) the Company has agreed to make top-up contributions to
          the Fund of £62m per annum for nine years from 2004, and to provide
          an asset-backed guarantee, via a wholly owned subsidiary specifically
          incorporated to provide the guarantee, for £250m to support its
          commitments to the Fund. Such asset-backed guarantee will be secured
          by way of fixed and floating charge over the assets of the subsidiary.
          These arrangements replace the previous schedule of six annual top-up
      payments of £30m that was agreed in 2000.




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41
    Differences
    between UK and US accounting principlesThe
          accompanying Group financial statements included in this report are
          prepared in accordance with United Kingdom Generally Accepted Accounting
          Principles (UK GAAP). The significant differences between UK GAAP and
          US Generally Accepted Accounting Principles (US GAAP) which affect
          the Groups net income and shareholders equity are set out
    below:(a)
    Accounting
    for pension costsThere
          are six significant differences between UK GAAP under SSAP 24 and US
    GAAP in accounting for pension costs that impact ICI:(i)
    SFAS
        No. 87Employers Accounting
        for Pensions,
        requires that pension plan assets are valued by reference to their fair
        or market related values, whereas UK GAAP permits an alternative measurement
        of assets, which, in the case of the main UK retirement plans, is on
        the basis of the discounted present value of expected future income streams
    from the pension plan assets.(ii)
    SFAS
        No. 87 requires measurements of plan assets and obligations to be made
        as at the date of financial statements or a date not more than three
        months prior to that date. Under UK GAAP, calculations may be based on
    the results of the latest actuarial valuation.(iii)
    SFAS
        No. 87 requires that each significant assumption necessary to determine
        annual pension cost reflects best estimates solely with regard to that
        individual assumption. UK GAAP does not mandate a particular method,
        but requires that the method and assumptions, taken as a whole, should
        be compatible and lead to the companys best estimate of the cost
    of providing the benefits promised.(iv)
    Under
        SFAS No. 87 a negative pension cost may arise where a significant unrecognised
        net asset or gain exists at the time of implementation. This is required
        to be amortised on a straight-line basis over the average remaining service
        period of employees. Under UK GAAP, the Groups policy is to not
        recognise pension credits in its financial statements unless a refund
    of, or reduction in, contributions is likely.(v)
    Under
        SFAS No. 87, where the unfunded accumulated benefit obligation (being
        the actuarial present value of benefits attributed by the pension benefit
        formula to employee service rendered prior to that date and based on
        current and past compensation levels) exceeds the fair value of plan
        assets, a liability must be recognised in the statement of financial
        position. If this liability exceeds the unrecognised prior service cost,
        the excess is recorded as a reduction in shareholders equity, net
        of tax. Under UK GAAP, this liability is usually recognised on a systematic
        basis over the remaining average service lives of the employees by way
    of increased contribution rates.(vi)
    SFAS
        No. 88Employers Accounting
        for Settlements and Curtailments
        of Defined Benefit Pension Plans and for Termination Benefits,requires
        immediate recognition of previously unrecognised gains or losses when
        certain events meeting the definition of a plan settlement or curtailment
        occur. Under UK GAAP, such gains or losses are recognised over the expected
    service life of the remaining employees.(b)
    Purchase
            accounting adjustments, including the amortisation and impairment
    of goodwill and intangiblesIn
        the Groups financial statements, prepared in accordance with UK
        GAAP, goodwill arising on acquisitions accounted for under the purchase
        method after 1 January 1998 is capitalised and amortised. Prior to that
    date such goodwill arising on acquisitions by the Group




was
          and remains eliminated against retained earnings. Values were not placed
          on intangible assets. Additionally, UK GAAP requires that on subsequent
          disposal or closure of a previously acquired asset, any goodwill previously
          taken directly to shareholders equity is then charged in the
    income statement against the income or loss on disposal or closure.Prior
          to the adoption of SFAS No. 142Goodwill
          and other Intangible Assets,on
          1 January 2002, under US GAAP all goodwill was capitalised and amortised
          through charges against income over its estimated life not exceeding
          40 years. Also, under US GAAP, it was normal practice to ascribe fair
          values to identifiable intangibles and for the purpose of the adjustments
          to US GAAP, included in the tables below, identifiable intangible assets
          of the Group were amortised to income over the lower of their estimated
          lives or 40 years. Provision under US GAAP was made where there was
          a permanent impairment to the carrying value of capitalised goodwill
          and intangible assets, based on a projection of future undiscounted
    cash flows.The
          Group adopted the provisions of SFAS No. 142 from 1 January 2002. The
          standard requires that intangible assets with finite lives be amortised
          over their estimated useful lives. Intangible assets with indefinite
          lives are tested for impairment annually in lieu of being amortised.
          Goodwill is no longer amortised on a straight-line basis over its estimated
          useful life but instead is tested for impairment annually and whenever
    indicators of impairment arise.At
          31 December 2003 the Group had intangible assets with a gross carrying
          amount of £300m less accumulated amortisation of £195m
          under US GAAP. The related amortisation expense for the period was £30m.
          The amortisation expense for the 5 succeeding years is estimated as
          follows: 2004 £30m, 2005 £30m, 2006 £30m, 2007 £15m
    and 2008 £nil.The
          goodwill balance under US GAAP at 31 December 2003 amounted to £3,173m
          (2002 £3,507m). The segmental analysis of this goodwill, based
          on the Groups defined segments is as follows: National Starch £1,915m
          (2002 £1,967m), Quest £736m (2002 £742m), Performance
          Specialties £nil (2002 £256m), Paints £504m (2002 £523m)
          and Regional and Industrial £18m (2002 £19m). The significant
          movements in the period include the impairment of the goodwill relating
    to Uniqema (£255m), as described below, and exchange.In
          the period to 31 December 2003, an impairment of £255m was recognised,
          representing the entire goodwill in Uniqema. Under UK GAAP, the majority
          of the goodwill related to acquisitions prior to 1998 and has been
          eliminated against reserves. This impairment resulted from the difficult
          trading conditions faced by the business and has been disclosed in
          the US GAAP reconciliation under the heading Purchase accounting
    adjustments.The
          fair value of the reporting unit, as required under the first stage
          of impairment in SFAS No. 142, was calculated using a present value
          technique. This involved discounting the future cash flows of the reporting
          unit at an appropriate risk adjusted discount factor. In calculating
          the fair value, significant management judgement was applied, for example,
          the quantification of the underlying cash flows of the reporting unit
          including applying an appropriate terminal growth value and the selection
          of an appropriate discount rate. As the fair value of the reporting
          unit was less than its book value, a second stage was performed which
          compared the fair value of the units goodwill to the book value
          of its goodwill. Fair value procedures similar to those used in a business
    combination were used in this stage.




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notes relating to the accounts



|41 | Differences
    between UK and US accounting principles (continued)
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If SFAS
    No. 142 had been applied in the year ended 31 December 2001 net income would
    have been £134m higher (EPS 15.4p higher basic and diluted). (c) Capitalisation of interest
There is no requirement in the UK to capitalise interest and the Group does not capitalise interest in its Group financial statements. Under US GAAP, SFAS No. 34Capitalization of Interest Costrequires interest incurred as part of the cost of constructing fixed assets to be capitalised and amortised over the life of the asset. (d) Derivative instruments and hedging activities
In June 1998 the Financial Accounting Standards Board (FASB) issued SFAS No. 133,Accounting for Derivative Instruments and Certain Hedging Activities.In June 2000 the FASB issued SFAS No. 138,
Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment of SFAS No. 133.SFAS
No. 133 and SFAS No. 138 require that all derivative instruments be recorded
on the balance sheet at their respective fair values. SFAS No. 133 and SFAS No.
138 are effective for all fiscal quarters of all fiscal years beginning after
30 June 2000; the Group adopted SFAS No. 133 and SFAS No. 138 on 1 January 2001.
In accordance with the transition provisions of SFAS No.133, the Group recorded,
at 1 January 2001, a net-of-tax cumulative-effect-type increase of £4m in accumulated other comprehensive income within shareholders equity to recognise at fair value all derivatives that were previously designated as cash flow hedging instruments. A fair value adjustment increased debt by £35m which was offset by a corresponding amount to record derivatives previously designated as fair value hedging instruments. All of the transition adjustment that was recorded in accumulated other comprehensive income has been reclassified into earnings as of 31 December 2001. The fair value adjustment to debt is being amortised over the period of the debt in accordance with the transitional rules. Upon adoption, the Groups
management decided not to designate any of its derivative instruments as hedges
for US GAAP accounting purposes. Derivatives previously designated as cash flow
and fair value hedges are now marked to market.
Consequently,
the Groups earnings under US GAAP may be more volatile because of the effect of derivative instruments. Under US GAAP, the forward contracts to purchase the Companys
Ordinary Shares by the employee share trust in order to hedge obligations in
respect of options issued under certain employee share option schemes are recognised
in the balance sheet at fair value, with changes in the fair value recognised
in net income. (e) Restructuring costs
The Group has incurred various restructuring costs that have primarily included costs such as employee termination benefits, contract termination costs and costs to consolidate or close facilities or relocate employees. Under UK GAAP, liabilities for restructuring costs are recognised once a detailed formal plan is in place and valid expectations have been raised in those affected that the restructuring will be carried out. A liability is recognised for voluntary redundancy payments to the extent that it is expected that volunteers will come forward. Under US GAAP, restructuring costs are accounted for as follows: (i) Prior to the
adoption of SFAS No. 146 on 1 January 2003, involuntary employee termination
benefits were recognised as a liability in accordance with EITF 943 in
the period management committed the Group to a plan contingent upon a number
of factors including the prior communication of termination benefits to affected
employees. SFAS No. 146 requires some one-time benefit arrangements to be recorded
as one-time charges following a fair




value model on the communication date to employees. Accretion expense is recorded for discounting over the payment period. Other one-time benefits are recognised rateably over the future service period. Ongoing benefit arrangements are accounted for under SFAS No. 88 or SFAS No. 112 and are accrued once they become probable and estimable. (ii) Under
US GAAP, voluntary termination benefits are accrued when the terms are accepted
by the individual employee. (iii) Prior to the
adoption of SFAS No. 146, other costs associated with an exit activity were recognised
as a liability in accordance with EITF 943 when the Groups management
committed to execute an exit plan that would result in costs that would have
no future economic benefit. Under SFAS No. 146 such costs are recognised as a
liability when they are incurred and are measured at fair value. (iv) Under UK GAAP,
assets to be abandoned are written down to the higher of net realisable value
and value in use. Under US GAAP assets to be abandoned are classified as held
for use. A preliminary review of tangible fixed assets is carried out using undiscounted
cash flows. If the undiscounted cash flows are less than the assets carrying
value, an impairment loss must be recognised. The impairment loss is calculated
using discounted future cash flows. The asset is subsequently depreciated over
its remaining useful economic life. An adjustment in this respect amounting to £39m
has been included in the US GAAP reconciliation under the heading Restructuring. (f) Foreign exchange
Under UK GAAP, on the sale of a foreign enterprise cumulative foreign exchange differences within reserves are not considered in arriving at a gain or loss on disposal. Under US GAAP, on the sale of a foreign enterprise the cumulative foreign currency differences within reserves are taken to net income in arriving at the gain or loss on disposal. (g) Discontinued operations
Under UK GAAP,
discontinued operations are defined as material, clearly separate operations
which have been sold or permanently terminated. UK GAAP further states that for
an operation to be classified as discontinued, its disposal should have a material
effect on the nature and focus of a reporting entitys operations and represent a material reduction in operating facilities. A list of businesses which have been treated as discontinued operations under UK GAAP is included in note 1. Under US GAAP prior to the adoption of SFAS No. 144 on 1 January 2002 discontinued operations were defined by APB Opinion No. 30 as a segment of a business that had been disposed of or, although still operating was subject to a formal plan for disposal. No businesses met the APB Opinion No.30 criteria for discontinued operations. Under SFAS No. 144 a discontinued operation is now defined as a component of an entity that has been disposed of or is classified as held for sale, subject to certain conditions. This component must have operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. Under US GAAP, the Synetix disposal met the SFAS No. 144 conditions and therefore, Synetix was classified as a discontinued operation. Accordingly, under US GAAP, the results of the operations and the gain on the disposal of Synetix are classified within discontinued operations. Prior period results have been restated. Under US GAAP, the gain on sale in 2002 amounted to £107m and Synetix sales were £121m and £143m
for 2002 and 2001 respectively. Under UK GAAP, the Synetix disposal did not have
a material effect on the nature and focus of operations nor did it represent
a material reduction in operating facilities. As a result, Synetix was classified
as continuing under UK GAAP.




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|41 | Differences
    between UK and US accounting principles (continued)
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|   |                                                                    

(h) Disposal adjustmentsIn
2000, the Group recorded the disposal of its Chlor-Chemicals business. The disposal,
for UK financial
reporting purposes, was classified as a discontinued operation. However, under
US GAAP Staff Accounting Bulletin (SAB) Topic 5E, due principally to the continuing
15% equity interest of the Group in the disposed operations and a commitment
by the Group to provide additional funding to finance the Ineos Chlor business,
the entity could not be deconsolidated. US GAAP accounting for the Chlor-Chemicals
business therefore differs from that under UK GAAP and involves applying a modified
equity method of accounting for any future losses that may arise up to the full
amount of the Groups investment and committed funding. The approximate gross assets and gross liabilities of Chlor-Chemicals are £223m and £243m
respectively under UK GAAP at 31 December 2003. In 2002, the Group
entered into an agreement to dispose of its investment in Notes and equity of
Huntsman International Holdings LLC (HIH) to Matlin Patterson Global Opportunities
Partners, for completion by 15 May 2003. Under UK GAAP, the Group discontinued
the application of the equity method of accounting on reaching this agreement
and deferred recognition of the loss on sale of the HIH Notes and gain on sale
of the equity until completion of the transaction on 9 May 2003, at which time
a profit before tax of £50m was recognised. Under US GAAP, the
Notes transaction and the equity transaction were accounted for as separate transactions
since they were not interdependent. Accordingly, under US GAAP, a pre-tax loss
was recognised on the sale of the HIH Notes (approximately £40m) in 2002, and the pre-tax gain on the equity transaction (approximately £121m) has been recognised in 2003. Additionally, under US GAAP, the Group has continued to account for its equity investment in HIH under the equity method of accounting, and therefore has continued to recognise its proportionate share of HIHs operating results until completion. The equity accounted results in 2003 up to the date of completion (a pre-tax loss of £14m) have been included in the US GAAP net income reconciliation. The adjustments in respect of HIH have been included in the US GAAP reconciliation under the heading Disposals and other adjustments. During 2003 the Group
disposed of its Permabond business. Under UK GAAP this gave rise to a loss on
disposal of £19m which included goodwill previously written off to reserves of £19m.
Under US GAAP the goodwill in respect of this business is included on the balance
sheet. SFAS No. 42 requires that, where part of a reporting unit is disposed,
the goodwill written off should be based on the relative fair values of the business
being disposed and the portion of the reporting unit to be retained. Consequently,
the loss reported under US GAAP amounted to £4m and the adjustment of £15m has
been disclosed in the US GAAP reconciliation under the heading Disposals
and other adjustments. (i) Ordinary dividendsUnder
UK GAAP, the proposed dividends on Ordinary Shares, as recommended by the directors,
are deducted
from shareholders equity and shown as a liability in the balance sheet at the end of the period to which they relate. Under US GAAP, such dividends are only deducted from shareholders equity
upon declaration of the dividend. (j) TaxationBoth UK and US GAAP require full provision for deferred tax, and consequently the adjustment in respect of taxation primarily relates to the deferred tax effect of other US GAAP adjustments.




(k) Share compensation expenseIn
the Groups consolidated financial statements prepared under UK GAAP, no compensation expense is recognised in respect of the Groups share option schemes. Under US GAAP, compensation cost has been recognised for all options, including arrangements under the Groups UK Sharesave scheme. The cost is calculated as the difference between the option price and the market price at the end of the reporting period for all option plans including performance related criteria. In the Groups UK Sharesave scheme, the cost is calculated as the difference between the option price and the market price at date of grant. The cost is amortised over the period from the date the options are granted to the date they are first exercisable, that is, the vesting date. Following the issue of EITF 0023,Issues Related to the Accounting for Share Compensationunder
APB Opinion No. 25 and FASB Interpretation No. 44, the cost of grants under the
Groups UK Sharesave scheme is treated in accordance with all other plans.
At 31 December 2003, the Group had a number of share based compensation plans,
which are described in note 23. The Group recognises compensation costs for US
GAAP purposes in accordance with the requirements of APB Opinion No. 25. (l) New US Accounting Standards implemented in the periodSFAS No. 143Accounting for Asset Retirement ObligationsSFAS
No. 143 was issued in June 2001 and addresses the financial accounting and reporting
for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. The standard applies to legal obligations
associated with the retirement of long-lived assets that result from the acquisition,
construction, development or normal use of the asset. SFAS No. 143 requires that
the fair value of a liability for an asset retirement obligation be recognised
in the period in which it is incurred if a reasonable estimate of fair value
can be made. Such estimates are generally determined based upon estimated future
cash flows discounted using a credit-adjusted risk-free interest rate. The fair
value of the liability is added to the carrying amount of the associated asset
and this additional carrying amount is depreciated over the life of the asset.
The liability is accreted at the end of each period through charges to operating
expense. If the obligation is settled for other than the carrying amount of the
liability, the Group will recognise a gain or loss on settlement. The adoption
of SFAS No. 143 has not had a material impact on the Groups financial statements. SFAS No. 146Accounting for the Costs Associated with Exit or Disposal ActivitiesSFAS
No. 146 was issued in July 2002 and requires that a liability for a cost associated
with
an exit or disposal activity be measured at fair value and first be recognised
when the liability is irrevocably incurred. The provisions of the new standard
are effective prospectively for exit or disposal activities initiated after 31
December 2002. The restructuring programmes announced during 2003 give rise to
a difference between UK and US GAAP in the amount of £8m in respect
of contract termination provisions that do not yet meet the criteria of a liability
under SFAS No. 146. FASB Interpretation No. 45,Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of OthersFIN No. 45 was issued in November 2002 and addresses the disclosure to be made by a guarantor in its financial statements about its obligations under guarantees. FIN No. 45 also requires the guarantor to recognise a liability for the non-contingent component of the guarantee, that is the obligation to stand ready to perform in




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|41 | Differences
    between UK and US accounting principles (continued)
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|   |                                                                    

the event that specified triggering events or conditions occur. The initial measurement of this liability is the fair value of the guarantee at inception. The Group adopted the disclosure requirements of FIN No. 45 in 2002 and has adopted the recognition and measurement provisions for all guarantees entered into or modified after 31 December 2002. Note 39 discloses
the nature and circumstances of the material guarantees together with their present
value. The maximum potential amount of future undiscounted payments under all
ICIs guarantees as defined by FIN No. 45, including those disclosed in note 39, with terms ranging between 1 to 15 years, amounted to £775m at 31 December 2003 (2002 £1,332m). After taking into account various mitigating and recourse factors, mainly the ability to procure products from other sources and to onward sell the various products and services, the maximum potential amount of future undiscounted payments is reduced to £150m (2002 £426m). No guarantees have been entered into or modified after 31 December 2002 that would require recognition of a liability under FIN No. 45. SFAS No. 148Accounting
for Stock Based Compensation  Transition and DisclosureFASB No. 148 was issued in December 2002 and amends SFAS No. 123 ,Accounting for Stock-Based Compensation. SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in financial statements about the method of accounting for stock based employee compensation and the effect of the method used on reported results. Pursuant to SFAS No. 123, the Group has elected to apply APB Opinion No. 25,Accounting for Stock Issued to Employees,and related interpretations in accounting for its stock-based compensation plans. The following table illustrates recorded compensation expense and the effect on net income and earnings per share if the Group had adopted the fair value based accounting method prescribed by SFAS No. 123:
 2003
   
   2002
   
   2001£m
   
   £m
   
   £mNet income (loss) as reported
   (166
   )
   9
   
   13Add: Stock-based employee compensationcost included in determining net income (loss)
   7
   
   3
   
   (1
   )Less: Stock-based compensation cost if thefair value based method had been applied
   (10
   )
   (9
   )
   (8
   )Pro-forma net income (loss)
   (169
   )
   3
   
   4Earnings per share:Basic
    diluted  as reported
   (14.0
   )p
   0.8
   p
   1.5
   pBasic
    and diluted  pro-forma
   (14.3
   )p
   0.3
   p
   0.5
   p The fair value of each option grant is estimated on the date of grant using a Black Scholes option pricing model with the following weighted average assumptions used for grants in 2003 and 2002, respectively: dividend yields of 4.1% and 3.3%; expected volatility of 72% and 45%, risk-free interest rates of 4.2% and 5.1%, and expected lives of 4 years and 4 years. FASB Interpretation No. 46, (revised December 2003)Consolidation of Variable Interest Entities,FIN No. 46 (revised) was issued in December 2003 and clarifies the application of the consolidated rules to certain




variable interest entities. This Interpretation establishes a new multistep model for the consolidation of variable interest entities when a company has a controlling financial interest based either on voting interests or variable interests. Consolidation based on variable interest is required by the primary beneficiary if the equity investors lack essential characteristics of a controlling financial interest or if the equity investment at risk is not sufficient for the entity to finance its activities without additional subordinate financial support from other parties. FIN No. 46 (revised) also provides disclosure requirements related to significant investments in variable interest entities, whether or not those entities are consolidated. The Interpretation contains exemptions for entities deemed to be a business subject to certain other criteria being met. The Interpretation
applies to reporting periods ending after 15 March 2004, except for entities
considered to be special purpose entities, to which this Interpretation applies
for reporting periods ending after 15 December 2003. The Group does not hold
an interest in any entities considered to be a special purpose entity. The Group
does not believe that the impact of any potential variable interest entities
in which the Group holds a variable interest will have a material impact on net
income and shareholders equity. SFAS No. 149Amendment of Statement 133 on Derivative Instruments and Hedging ActivitiesSFAS No. 149 was issued in April 2003 and amends and clarifies reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. This standard applies to contracts entered into or modified after 30 June 2003 and for hedging relationships designated after 30 June 2003. Adoption of this
standard has had no effect on the Groups results. SFAS No. 150Accounting for Certain Financial Instruments with Characteristics of both Liabilities and EquitySFAS
No. 150 was issued in May 2003 and amends the accounting and classification for
certain financial
instruments, such as those used in most share buy-backs that previously were
accounted for and classified as equity. SFAS No. 150 requires that certain types
of freestanding financial instruments that have characteristics of both liabilities
and equity be classified as liabilities with, in most cases, changes in fair
value recorded through the income statement. SFAS No. 150 could affect companies ratios, performance measures and certain share buy-back programmes. The statement is effective for financial instruments entered into or modified after 31 May 2003, and otherwise is effective at the beginning of the first interim period beginning after 15 June 2003. The adoption of SFAS No. 150 has not had an impact on the Groups
financial statements.




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|41 | Differences
          between UK and US accounting principles (continued)
|-- | -------------------------------------------------------------------------

The following
      is a summary of the material adjustments to net income and shareholders equity
      which would have been required if US GAAP had been applied instead of UK
      GAAP:


| |                                                                                                         | 2003  |   | 2002  |   | 2001                 |  
| | ------------------------------------------------------------------------------------------------------- | ----- | - | ----- | - | -------------------- | -
| |                                                                                                         |       |   |       |   | (as
        restated |  
| |                                                                                                         |       |   |       |   |  note
        1)    |  
| |                                                                                                         | £m    |   | £m    |   | £m                   |  
| |                                                                                                         |       |   |       |   |                      |  
| | Net
        income (loss) after exceptional items  UK GAAP                                             | 20    |   | 179   |   | 102                  |  
| |                                                                                                         |       |   |       |   |                      |  
| | Continuing
          operations                                                                         | 23    |   | 166   |   | 113                  |  
| |                                                                                                         |       |   |       |   |                      |  
| | Discontinued
          operations                                                                       | (3    | ) | 13    |   | (11                  | )
| |                                                                                                         |       |   |       |   |                      |  
| | Adjustments
        to conform with US GAAP                                                             |       |   |       |   |                      |  
| |                                                                                                         |       |   |       |   |                      |  
| | Pension
          expense                                                                               | (7    | ) | (14   | ) | (37                  | )
| |                                                                                                         |       |   |       |   |                      |  
| | Purchase
          accounting adjustments                                                               |       |   |       |   |                      |  
| |                                                                                                         |       |   |       |   |                      |  
| | Amortisation/impairment
          of goodwill and amortisation of intangibles                           | (249  | ) | (117  | ) | (127                 | )
| |                                                                                                         |       |   |       |   |                      |  
| | Disposals
          and other adjustments                                                               | 72    |   | (31   | ) | 10                   |  
| |                                                                                                         |       |   |       |   |                      |  
| | Capitalisation
          of interest less amortisation and disposals                                    | (5    | ) | (5    | ) | (2                   | )
| |                                                                                                         |       |   |       |   |                      |  
| | Derivative
          instruments and hedging activities                                                 | (15   | ) | (41   | ) | 49                   |  
| |                                                                                                         |       |   |       |   |                      |  
| | Restructuring
          costs                                                                           | 46    |   | (6    | ) | 5                    |  
| |                                                                                                         |       |   |       |   |                      |  
| | Share
          compensation expense                                                                    | (7    | ) | (3    | ) | 1                    |  
| |                                                                                                         |       |   |       |   |                      |  
| | Others                                                                                                  |      |   | (2    | ) | 2                    |  
| |                                                                                                         |       |   |       |   |                      |  
| | Tax
          effect of US GAAP adjustments                                                             | (21   | ) | 49    |   | 10                   |  
| |                                                                                                         |       |   |       |   |                      |  
| | Total
        US GAAP adjustments                                                                       | (186  | ) | (170  | ) | (89                  | )
| |                                                                                                         |       |   |       |   |                      |  
| | Net
          income (loss)  US GAAP                                                                   | (166  | ) | 9     |   | 13                   |  
| |                                                                                                         |       |   |       |   |                      |  
| | Continuing
        operations                                                                           | (167  | ) | (107  | ) | (4                   | )
| |                                                                                                         |       |   |       |   |                      |  
| | Discontinued
        operations                                                                         | 1     |   | 116   |   | 17                   |  
| |                                                                                                         |       |   |       |   |                      |  
| |                                                                                                         | pence |   | pence |   | pence                |  
| |                                                                                                         |       |   |       |   |                      |  
| | Basic
        and diluted net earnings (net loss) per Ordinary Share in accordance
        with US GAAP | (14.0 | ) | 0.8   |   | 1.5                  |  
| |                                                                                                         |       |   |       |   |                      |  
| | Continuing
        operations                                                                           | (14.1 | ) | (9.6  | ) | (0.5                 | )
| |                                                                                                         |       |   |       |   |                      |  
| | Discontinued
        operations                                                                         | 0.1   |   | 10.4  |   | 2.0                  |  
| |                                                                                                         |       |   |       |   |                      |  

The effect
      on earnings per £1 Ordinary Share of the exercise of all outstanding
      options (note 23) would not be material.


For US
      GAAP purposes, the segmentation follows that of UK GAAP. Adjustments have
      been made between Continuing and Discontinued operations so that the disclosure
      under US GAAP satisfies SFAS No. 144.


For the
      purposes of segmental disclosures under UK GAAP, reference should be made
      to page 61 where there is a description of each class of business.


Under
      US GAAP, sales and cost of sales/administrative expenses as reported under
      UK GAAP are reduced by £53m (2002 £55m; 2001 £50m) on
      application of EITF 01-09, which requires that certain advertising co-operative
      allowances paid to customers are deducted from sales.


| | ICI
        ANNUAL REPORT AND ACCOUNTS 2003 | 107
| | ------------------------------------------- | ---

---



Back to Contents

Contents to the Accounts

notes
    relating to the accounts



|41 | Differences
          between UK and US accounting principles (continued)
|-- | -------------------------------------------------------------------------
|   |                                                                          

| |                                                                                     | Balance
        sheet |  | 2003  |   | 2002                 |  
| | ----------------------------------------------------------------------------------- | --------------------- |  | ----- | - | -------------------- | -
| |                                                                                     | line
        item     |  |       |   | (as
        restated |  
| |                                                                                     | Note*                 |  |       |   |  note
        1)    |  
| |                                                                                     |                       |  | £m    |   | £m                   |  
| |                                                                                     |                       |  |       |   |                      |  
| | Shareholders funds  equity,
        as shown in the Group Balance sheet  UK GAAP |                       |  | 450   |   | 463                  |  
| |                                                                                     |                       |  |       |   |                      |  
| | Adjustments
        to conform with US GAAP                                         |                       |  |       |   |                      |  
| |                                                                                     |                       |  |       |   |                      |  
| | Pension
          costs                                                             | 2                     |  | (482  | ) | (525                 | )
| |                                                                                     |                       |  |       |   |                      |  
| | Pension
          costs  minimum pension liability                                 | 4                     |  | (601  | ) | (425                 | )
| |                                                                                     |                       |  |       |   |                      |  
| | Purchase
          accounting adjustments, including goodwill and intangibles       | 1                     |  | 2,778 |   | 3,109                |  
| |                                                                                     |                       |  |       |   |                      |  
| | Disposal
          accounting adjustments                                           | 4                     |  | (29   | ) | (71                  | )
| |                                                                                     |                       |  |       |   |                      |  
| | Capitalisation
          of interest less amortisation and disposals                | 1                     |  | 31    |   | 36                   |  
| |                                                                                     |                       |  |       |   |                      |  
| | Derivative
          instruments and hedging activities                             | 2                     |  | 25    |   | (14                  | )
| |                                                                                     |                       |  |       |   |                      |  
| | Restructuring  contract
          terminations                                     | 4                     |  | 8     |   | 1                    |  
| |                                                                                     |                       |  |       |   |                      |  
| | Restructuring  asset
          impairment                                          | 1                     |  | 39    |   |                     |  
| |                                                                                     |                       |  |       |   |                      |  
| | Ordinary
          dividends                                                        | 3                     |  | 42    |   | 52                   |  
| |                                                                                     |                       |  |       |   |                      |  
| | Deferred
          taxation and tax effects of US GAAP adjustments                  | 4                     |  | (421  | ) | (482                 | )
| |                                                                                     |                       |  |       |   |                      |  
| | Deferred
          taxation and tax effects of US GAAP adjustments                  | 2                     |  | 519   |   | 661                  |  
| |                                                                                     |                       |  |       |   |                      |  
| | Total
        US GAAP adjustments                                                   |                       |  | 1,909 |   | 2,342                |  
| |                                                                                     |                       |  |       |   |                      |  
| | Shareholders equity
          in accordance with US GAAP                           |                       |  | 2,359 |   | 2,805                |  
| |                                                                                     |                       |  |       |   |                      |  

| | * | Relevant
        balance sheet line items included above to facilitate comparison between
        UK GAAP and US GAAP: 1 Fixed assets; 2 Debtors; 3 Creditors; 4Provision
        for liabilities and charges.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The effect
      of applying US GAAP to items other than those directly affecting net income
      or shareholders equity is dealt with in other notes relating to the
      accounts. The disclosures required by SFAS No. 130Reporting
      Comprehensive Incomehave
      been made in the Groups financial statements in the statement of
      total recognised gains and losses, in note 24 and in the disclosure relating
      to pensions and other post-retirement benefits (US GAAP) on pages 109 to
      111.


Statement
        of Group cash flow: Basis of preparation


The
        Statement of Group cash flow is prepared in accordance with UK FRS No.1
        (Revised 1996) Cash
        Flow Statements,
        the objective of which is similar to that set out in the US Standard
        SFAS No. 95 Statements
        of Cash Flows.
        The two statements differ, however, in their definitions of cash and
        their presentation of the main constituent items of cash flow.


The
      definition of cash in the UK Standard is limited to cash plus deposits
      less overdrafts/borrowings repayable on demand without penalty. In the
      US, the definition in SFAS No. 95 excludes overdrafts but is widened to
      include cash equivalents, comprising short-term highly liquid investments
      that are both readily convertible to known amounts of cash and so near
      their maturities that they present insignificant risk of changes in value:
      generally, only investments with original maturities of 3 months or less
      qualify for inclusion. Calculated in accordance with SFAS No. 95, cash
      and cash equivalents at 31 December 2001, 2002 and 2003 and the movements
      during the years ending on those dates were as follows:


| |                                                                                                  | 2003 |   | 2002 |   | 2001 |  
| | ------------------------------------------------------------------------------------------------ | ---- | - | ---- | - | ---- | -
| |                                                                                                  | £m   |   | £m   |   | £m   |  
| |                                                                                                  |      |   |      |   |      |  
| | Cash
        and cash equivalents                                                                |      |   |      |   |      |  
| |                                                                                                  |      |   |      |   |      |  
| | Cash                                                                                             | 249  |   | 267  |   | 301  |  
| |                                                                                                  |      |   |      |   |      |  
| | Investments
        and short-term deposits which were within 3 months of maturity when acquired | 345  |   | 158  |   | 135  |  
| |                                                                                                  |      |   |      |   |      |  
| |                                                                                                  | 594  |   | 425  |   | 436  |  
| |                                                                                                  |      |   |      |   |      |  
| |                                                                                                  |      |   |      |   |      |  
| | Change
        in the balance of cash and cash equivalents                                       |      |   |      |   |      |  
| |                                                                                                  |      |   |      |   |      |  
| | At
        beginning of year                                                                     | 425  |   | 436  |   | 572  |  
| |                                                                                                  |      |   |      |   |      |  
| | Exchange
        adjustments                                                                     | 3    |   | (12  | ) | (3   | )
| |                                                                                                  |      |   |      |   |      |  
| | Cash
        inflow (outflow) during year                                                        | 168  |   | 2    |   | (119 | )
| |                                                                                                  |      |   |      |   |      |  
| | Acquisitions
        and disposals                                                               | (2   | ) | (1   | ) | (14  | )
| |                                                                                                  |      |   |      |   |      |  
| | At
        end of year                                                                           | 594  |   | 425  |   | 436  |  
| |                                                                                                  |      |   |      |   |      |  

The format
      of the UK GAAP statement employs some nine headings compared with three
      in SFAS No. 95. The cash flows within the UK GAAP headings of Operating
      activities, Returns on investments and servicing of finance and Taxation would
      all be included within the heading of Net cash provided by operating
      activities under SFAS No. 95. Likewise, the UK GAAP headings of Capital
      expenditure and financial investment and Acquisitions and disposals correspond
      with Cash flows from investing activities under SFAS No. 95,
      and Equity dividends paid, Management of liquid resources and Financing in
      UK GAAP, subject to adjustments for cash equivalents, correspond with Cash
      flows from financing activities under US GAAP.


|108 | ICI
        ANNUAL REPORT AND ACCOUNTS 2003 | 
|--- | ------------------------------------------- | 

---



Back to Contents

Contents to the Accounts

|41 | Differences
          between UK and US accounting principles (continued)
|-- | -------------------------------------------------------------------------
|   |                                                                          

Pensions
        and other post-retirement benefits  US GAAPFor the
            purposes of the disclosure in accordance with US GAAP, the pension
            cost of the major UK retirement plans and of the retirement plans
            of the Companys major non-UK subsidiaries have been presented
            in the following tables, on a Group basis, in accordance with the
            requirements of SFAS No. 87Accounting
            for Pensions,SFAS
            106 Employers Accounting for Post-Retirement Benefits other
            than Pensionsand
            of SFAS No. 132 (revised 2003)Employers Disclosures
            about Pensions and Other Post-Retirement Benefits.
            The actuarial liabilities of these plans comprise a substantial portion
            of the Group total.


AssumptionsAssumed
      weighted discount rates and rates of increase in remuneration used in calculating
      benefit obligations together with long-term rates of return on plan assets
      used in the Groups major pension plans for SFAS No. 87 purposes in
      the Group are shown in the table below, together with the assumptions relating
  to other post-retirement benefit plans for SFAS No. 106.


| |                                                                          | Pension
        benefits |  | Other
        post-retirement | 
| | ------------------------------------------------------------------------ | ------------------------ |  | ----------------------------- | 
| |                                                                          |                          |  | benefits                      | 
| |                                                                          |                          |  |                               | 
| |                                                                          | 2003                     |  | 2002                          | 
| |                                                                          | %                        |  | %                             | 
| |                                                                          |                          |  |                               | 
| | Weighted
        average assumptions used to determine                   |                          |  |                               | 
| | benefit
          obligations at 31 December                             |                          |  |                               | 
| |                                                                          |                          |  |                               | 
| | Discount
          rate                                                  | 5.5                      |  | 5.7                           | 
| |                                                                          |                          |  |                               | 
| | Long-term
          rate of increase in remuneration                     | 3.9                      |  | 3.8                           | 
| |                                                                          |                          |  |                               | 
| | Weighted
        average assumptions used to determine net cost for year |                          |  |                               | 
| |                                                                          |                          |  |                               | 
| | Discount
          rate                                                  | 5.6                      |  | 5.7                           | 
| |                                                                          |                          |  |                               | 
| | Expected
          long-term rate of return on assets                    | 6.2                      |  | 5.7                           | 
| |                                                                          |                          |  |                               | 
| | Long-term
          rate increase in remuneration                        | 3.9                      |  | 3.8                           | 
| |                                                                          |                          |  |                               | 
| | Assumed
        health care cost trend rates at 31 December              |                          |  |                               | 
| |                                                                          |                          |  |                               | 
| | Health
          care cost trend rate assumed for next year              |                          |  |                               | 
| |                                                                          |                          |  |                               | 
| | Rate
          that cost trend gradually declines to                     |                          |  |                               | 
| |                                                                          |                          |  |                               | 
| | Year
          that rate reaches the rate it is assumed to remain at     |                          |  |                               | 
| |                                                                          |                          |  |                               | 

The overall
      expected long-term rate of return on asset assumptions is determined on
      a country-by-country (and Euro-zone) basis. The rates are based on market
      expectations by asset classes, at the beginning of the period, for returns
      over the entire life of the related obligation. The assumption setting
      process is based on short and long term historical analysis and investment
      managers forecasts for equities, hedge funds and private equity,
      and the available market yields for bonds.


Components
        of net periodic benefit costThe
              net periodic benefit cost under SFAS No. 87 and SFAS No. 88 for
              the Groups major pension benefit plans, and under SFAS No.
  106 in respect of other post-retirement benefit plans comprised:


| |                                                                   | Pension
        benefits |   | Other
        post-retirement benefits |  
| | ----------------------------------------------------------------- | ------------------------ | - | -------------------------------------- | -
| |                                                                   |                          |   |                                        |  
| |                                                                   | 2003                     |   | 2002                                   |  
| |                                                                   | £m                       |   | £m                                     |  
| |                                                                   |                          |   |                                        |  
| | Components
        of net periodic benefit cost                   |                          |   |                                        |  
| |                                                                   |                          |   |                                        |  
| | Service
        cost                                              | 64                       |   | 59                                     |  
| |                                                                   |                          |   |                                        |  
| | Interest
        cost                                             | 429                      |   | 456                                    |  
| |                                                                   |                          |   |                                        |  
| | Expected
        return on plan assets for period                 | (400                     | ) | (458                                   | )
| |                                                                   |                          |   |                                        |  
| | Amortisation
        of prior service cost                        | 11                       |   | 15                                     |  
| |                                                                   |                          |   |                                        |  
| | Amortisation
        of unrecognised transition obligation        | 4                        |   | 3                                      |  
| |                                                                   |                          |   |                                        |  
| | Amortisation
        of net actuarial loss (gain)                 | (6                       | ) | 6                                      |  
| |                                                                   |                          |   |                                        |  
| | Recognised
        on termination/curtailment/settlement benefits | (3                       | ) | 28                                     |  
| |                                                                   |                          |   |                                        |  
| | Net
          periodic benefit cost                               | 99                       |   | 109                                    |  
| |                                                                   |                          |   |                                        |  

The net
      periodic benefit cost includes £nil (2002 £27m) for contractual
      terminations which are included within the relevant UK GAAP statutory headings.


The
      healthcare cost trend has a significant effect on the amounts reported.
      For the Group, increasing the assumed health care cost rates for the major
      schemes by 1% in every year would increase the accumulated post-retirement
      benefit obligation as of 31 December 2003 by £11m (2002 £11m)
      and the aggregate of the service and interest cost components of net periodic
      post-retirement cost for the year ended 31 December 2003 by £1m (2002 £2m).


Other
        comprehensive income


| |                                                                                      | 2003 |   | 2002 |   | 2001 |   |  |  |  |  |  | 
| | ------------------------------------------------------------------------------------ | ---- | - | ---- | - | ---- | - |  |  |  |  |  | 
| |                                                                                      | £m   |   | £m   |   | £m   |   |  |  |  |  |  | 
| |                                                                                      |      |   |      |   |      |   |  |  |  |  |  | 
| | Amounts
        included in other comprehensive income (arising from                 |      |   |      |   |      |   |  |  |  |  |  | 
| | change
          in additional minimum pension liability recognised) 
  (net of tax) | (216 | ) | (281 | ) | (192 | ) |  |  |  |  |  | 
| |                                                                                      |      |   |      |   |      |   |  |  |  |  |  | 

| | ICI
        ANNUAL REPORT AND ACCOUNTS 2003 | 109
| | ------------------------------------------- | ---

---



Back to Contents

Contents to the Accounts

notes
  relating to the accounts

|41 | Differences
      between UK and US accounting principles (continued)                                                                                                                                                                                  
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                        
|   | Pensions
      and other post-retirement benefits  US GAAP (continued)                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                        
|   | Obligations
      and funded status                                                                                                                                                                                                                    
|   | The
      funded status of the Groups major post-retirement defined benefit
      pension plans and other post-retirement benefit plans, covering both continuing
      and discontinued operations, under SFAS No. 87 and SFAS No. 106 is as follows:
|   |                                                                                                                                                                                                                                                        

| |                                                      | Pension
        benefits |   | Other
        post-retirement   |  
| | ---------------------------------------------------- | ------------------------ | - | ------------------------------- | -
| |                                                      | at
        31 December   |   | benefits
        at 31 December |  
| |                                                      |                          |   |                                 |  
| |                                                      | 2003                     |   | 2002                            |  
| |                                                      | £m                       |   | £m                              |  
| |                                                      |                          |   |                                 |  
| | Change
      in benefit obligations                  |                          |   |                                 |  
| |                                                      |                          |   |                                 |  
| | Benefit
      obligation at beginning of year        | 7,748                    |   | 7,970                           |  
| |                                                      |                          |   |                                 |  
| | Service
      cost                                   | 64                       |   | 59                              |  
| |                                                      |                          |   |                                 |  
| | Interest
      cost                                  | 429                      |   | 456                             |  
| |                                                      |                          |   |                                 |  
| | Participants
      contributions                    | 5                        |   | 5                               |  
| |                                                      |                          |   |                                 |  
| | Plan
      amendments                                | 3                        |   |                                |  
| |                                                      |                          |   |                                 |  
| | Actuarial
      loss (gain)                          | 489                      |   | (139                            | )
| |                                                      |                          |   |                                 |  
| | Divestitures                                         |                         |   | (16                             | )
| |                                                      |                          |   |                                 |  
| | Settlements                                          | (1                       | ) | (60                             | )
| |                                                      |                          |   |                                 |  
| | Termination
      benefits                           |                         |   | 46                              |  
| |                                                      |                          |   |                                 |  
| | Benefit
      payments                               | (529                     | ) | (518                            | )
| |                                                      |                          |   |                                 |  
| | Population
      change                              | 2                        |   |                                |  
| |                                                      |                          |   |                                 |  
| | Exchange                                             | (24                      | ) | (55                             | )
| |                                                      |                          |   |                                 |  
| | Benefit
      obligation at end of year              | 8,186                    |   | 7,748                           |  
| |                                                      |                          |   |                                 |  
| | Change
      in plan assets                          |                          |   |                                 |  
| |                                                      |                          |   |                                 |  
| | Fair
      value of plan assets at beginning of year | 7,049                    |   | 7,569                           |  
| |                                                      |                          |   |                                 |  
| | Actual
      return on plan assets                   | 712                      |   | (60                             | )
| |                                                      |                          |   |                                 |  
| | Business
      combinations                          |                         |   |                                |  
| |                                                      |                          |   |                                 |  
| | Divestitures                                         |                         |   | (9                              | )
| |                                                      |                          |   |                                 |  
| | Settlements                                          |                         |   | (39                             | )
| |                                                      |                          |   |                                 |  
| | Employers
      contributions                       | 105                      |   | 142                             |  
| |                                                      |                          |   |                                 |  
| | Participants
      contributions                    | 5                        |   | 5                               |  
| |                                                      |                          |   |                                 |  
| | Benefit
      payments                               | (529                     | ) | (518                            | )
| |                                                      |                          |   |                                 |  
| | Population
      change                              | 3                        |   |                                |  
| |                                                      |                          |   |                                 |  
| | Exchange                                             | (2                       | ) | (41                             | )
| |                                                      |                          |   |                                 |  
| | Fair
      value of plan assets at end of year       | 7,343                    |   | 7,049                           |  
| |                                                      |                          |   |                                 |  
| | Funded
      status                                  |                          |   |                                 |  
| |                                                      |                          |   |                                 |  
| | Funded
      status at end of year                   | (843                     | ) | (699                            | )
| |                                                      |                          |   |                                 |  
| | Unrecognised
      net actuarial loss (gain)         | 854                      |   | 684                             |  
| |                                                      |                          |   |                                 |  
| | Unrecognised
      transition amount                 | 23                       |   | 24                              |  
| |                                                      |                          |   |                                 |  
| | Unrecognised
      prior service cost                | 17                       |   | 25                              |  
| |                                                      |                          |   |                                 |  
| | Other                                                |                         |   | 3                               |  
| |                                                      |                          |   |                                 |  
| | Net
      amount recognised                          | 51                       |   | 37                              |  
| |                                                      |                          |   |                                 |  
| | Prepaid
      benefit cost                           | 22                       |   | 10                              |  
| |                                                      |                          |   |                                 |  
| | Accrued
      benefit cost                           | (676                     | ) | (509                            | )
| |                                                      |                          |   |                                 |  
| | Intangible
      assets                              | 32                       |   | 30                              |  
| |                                                      |                          |   |                                 |  
| | Accumulated
      other comprehensive income         | 673                      |   | 506                             |  
| |                                                      |                          |   |                                 |  
| | Net
      amount recognised                          | 51                       |   | 37                              |  
| |                                                      |                          |   |                                 |  



|110 | ICI
      ANNUAL REPORT AND ACCOUNTS 2003 | 
|--- | ----------------------------------------- | 

---



Back to Contents

Contents to the Accounts

|41 | Differences
      between UK and US accounting principles (continued)  
|-- | -----------------------------------------------------------------------
|   |                                                                        
|   | Pensions
      and other post-retirement benefits  US GAAP (continued)
|   |                                                                        

| |                                                                                     | Pension
        benefits           | 
| | ----------------------------------------------------------------------------------- | ---------------------------------- | 
| |                                                                                     | At
        31 December             | 
| |                                                                                     |                                    | 
| |                                                                                     | 2003                               | 
| |                                                                                     | £m                                 | 
| |                                                                                     |                                    | 
| | Supplementary
      analysis of pension plan                                        |                                    | 
| |                                                                                     |                                    | 
| | All
      plans                                                                     |                                    | 
| |                                                                                     |                                    | 
| | Accumulated
      benefit obligation                                                | 7,996                              | 
| |                                                                                     |                                    | 
| | Pension
      plans with an accumulated benefit obligation in excess of plan assets |                                    | 
| |                                                                                     |                                    | 
| | Projected
      benefit obligation                                                  | 8,124                              | 
| |                                                                                     |                                    | 
| | Accumulated
      benefit obligation                                                | 7,936                              | 
| |                                                                                     |                                    | 
| | Fair
      value of plan assets                                                     | 7,266                              | 
| |                                                                                     |                                    | 
| |                                                                                     |                                    | 
| |                                                                                     |                                    | 
| |                                                                                     | Percentage
        of fair value   | 
| |                                                                                     | plan
        assets at 31 December | 
| |                                                                                     |                                    | 
| |                                                                                     | 2003                               | 
| |                                                                                     | %                                  | 
| |                                                                                     |                                    | 
| | Equity
      securities                                                             | 24                                 | 
| |                                                                                     |                                    | 
| | Debt
      securities                                                               | 72                                 | 
| |                                                                                     |                                    | 
| | Property                                                                            |                                   | 
| |                                                                                     |                                    | 
| | Other
      assets                                                                  | 4                                  | 
| |                                                                                     |                                    | 
| |                                                                                     | 100                                | 
| |                                                                                     |                                    | 

ICI has
     established a set of best practice principles for pension fund investment
    so
  as to ensure a globally consistent approach. These principles, which have been
     determined and adopted by the fiduciaries of ICIs pension funds worldwide,
      include guidelines in the areas of governance, risk budgeting, strategic
     asset
  allocation and benchmarks, manager structure and selection, monitoring and
     other  investment issues (such as derivatives and self investment). The
     over-arching
  principle clearly states that strategic asset allocation should be determined
      through explicit consideration of each plans specific liability profile
       and funding level and and not by local common practice. Furthermore, all
      plans
  must establish a strategic asset allocation benchmark, a relevant total plan
       performance benchmark and a process for controlling deviations from the
      strategic
  asset allocation benchmark. Pension funds are expected to invest in a diversified
       range of asset classes and investment managers. These assets may include
      derivatives
  up to a maximum of 10% of the individual fund unless a higher percentage is
       agreed after consultation with the Company. However, no self-investment
      is
  permitted. Whilst the Company expects to be consulted on these strategic (and
       other) matters, it recognises that final responsibility for establishing
      investment
  strategy often rests with local fiduciaries, who do not publish target allocations
       to asset classes.


The best
    estimate of amounts expected to be contributed to pension plans during 2004
    is £141m.


The best
    estimate of amounts expected to be contributed to other post retirement benefit
    plans in 2004 is £12m.




| | ICI
      ANNUAL REPORT AND ACCOUNTS 2003 | 111
| | ----------------------------------------- | ---

---





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|41(a) Differences between UK and US accounting principles (continued)
|---------------------------------------------------------------------

|                                              
|----------------------------------------------
|Reformatted condensed UK GAAP income statement

The following income statement has been prepared in accordance with Article 10 of Regulation S-X using the Groups UK GAAP profit and loss account numbers.

|                                                                     |  | Year ended 31 December |       
|-------------------------------------------------------------------- |  | ---------------------- | ------
|                                                                     |  | 2003                   |       
|                                                                     |  | £m                     |       
|Net revenue                                                          |  |                        | 5,849 
|                                                                     |  |                        |       
|Operating expenses                                                   |  |                        |       
|Cost of sales                                                        |  |                        | (3,856
|Research and development                                             |  |                        | (156  
|Sales, general and administrative expenses                           |  |                        | (1,659
|Other general income                                                 |  |                        | 16    
|Profit (loss) on sale of businesses and fixed assets                 |  |                        | 46    
|                                                                     | 
|Operating income                                                     |  |                        | 240   
|                                                                     |  |                        |       
|Net interest                                                         |  |                        | (92   
|Associate income                                                     |  |                        | 3     
|Loss on investments                                                  |  |                        | (57   
|                                                                     | 
|Income from continuing operations before income tax expense          |  |                        | 94    
|                                                                     |  |                        |       
|Income tax expense                                                   |  |                        | (47   
|Minority interest                                                    |  |                        | (24   
|                                                                     | 
|Income(loss) from continuing operations                              |  |                        | 23    
|Discontinued operations                                              |  |                        | (3    
|                                                                     | 
|Income before cumulative effects of changes in accounting principles |  |                        | 20    
|                                                                     |  |                        |       
|Cumulative effects of changes in accounting principles               |  |                        | 22    
|                                                                     | 
|Net income                                                           |  |                        | 42    
|                                                                     | 
|                                                                     | 

|                                                       |  | pence |      | pence |  | pence | 
|------------------------------------------------------ |  | ----- | ---- | ----- |  | ----- | 
|Earnings per share                                     |  |       |      |       |  |       | 
|Basic                                                  |  |       |      |       |  |       | 
|Continuing operations                                  |  |       | 2.0  |       |  | 14.9  | 
|Discontinued operations                                |  |       | (0.3 | )     |  | 1.2   | 
|Cumulative effects of changes in accounting principles |  |       | 1.8  |       |  |      | 
|                                                       | 
|Net income                                             |  |       | 3.5  |       |  | 16.1  | 
|                                                       | 
|Diluted                                                |  |       |      |       |  |       | 
|Continuing operations                                  |  |       | 2.0  |       |  | 14.8  | 
|Discontinued operations                                |  |       | (0.3 | )     |  | 1.2   | 
|Cumulative effects of changes in accounting principles |  |       | 1.8  |       |  |      | 
|                                                       | 
|Net income                                             |  |       | 3.5  |       |  | 16.0  | 
|                                                       | 

* As restated  see note 1 to
    the financial statements of the Group.

111A       ICI ANNUAL REPORT AND ACCOUNTS
    2003

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The Groups presentation of the Group profit and loss account for the three years ended 31December 2003, on page 54 and 55 of the Companys Annual Report and Accounts 2003 contained in its report on Form 6-K dated March 12, 2004, separately disclosing exceptional
 items, has been prepared in accordance with FRS No. 3. This presentation provides a sufficient degree of prominence in respect to the exceptional items necessary, under UK GAAP, to give a true and fair view of the results of the Group in the three years ended December 31,
 2003.

|42 | Valuation and qualifying accounts
|-- | ---------------------------------
|   |                                  

|                                                               |  | Balance at1 January |     | Additionscharged tocost andexpenses |  | Deductions |  | Balance at31 December |     
|-------------------------------------------------------------- |  | ------------------- | --- | ----------------------------------- |  | ---------- |  | --------------------- | ----
|                                                               |  | £m                  |     | £m                                  |  | £m         |  | £m                    |     
|2001                                                           |  |                     |     |                                     |  |            |  |                       |     
|Allowance for stocks                                           |  |                     | 45  |                                     |  | 12         |  |                       | (14 
|Allowance for doubtful accounts                                |  |                     | 60  |                                     |  | 19         |  |                       | (12 
|Allowance for investments in participating and other interests |  |                     | 86  |                                     |  |           |  |                       | (84 
|                                                               | 
|                                                               |  |                     | 191 |                                     |  | 31         |  |                       | (110
|                                                               | 
|2002                                                           |  |                     |     |                                     |  |            |  |                       |     
|Allowance for stocks                                           |  |                     | 43  |                                     |  | 11         |  |                       | (21 
|Allowance for doubtful accounts                                |  |                     | 67  |                                     |  | 8          |  |                       | (27 
|Allowance for investments in participating and other interests |  |                     | 2   |                                     |  | 99         |  |                       |    
|                                                               | 
|                                                               |  |                     | 112 |                                     |  | 118        |  |                       | (48 
|                                                               | 
|2003                                                           |  |                     |     |                                     |  |            |  |                       |     
|Allowance for stocks                                           |  |                     | 33  |                                     |  | 27         |  |                       | (15 
|Allowance for doubtful accounts                                |  |                     | 48  |                                     |  | 4          |  |                       | (5  
|Allowance for investments in participating and other interests |  |                     | 101 |                                     |  |           |  |                       |    
|                                                               | 
|                                                               |  |                     | 182 |                                     |  | 31         |  |                       | (20 
|                                                               | 

Allowances for investments in participating and other interests have been restated upon the adoption by the Group of UITF 38. The effect has been to reduce the charge in 2001 by £22m and therefore the subsequent closing balances in 2001, 2002 and 2003 by £22m.

|43 | Differences
    between UK and US accounting principles : supplementary note
|-- | ----------------------------------------------------------------------------

As described in note 41 (g), for
    purposes of reporting US GAAP information the Group accounted for its 30%
    interest in Huntsman International Holdings LLC (HIH) by the equity method
     of accounting until 9 May 2003, the date of completion of the disposal
     of the Groups interests in HIH. Summarised consolidated balance sheet
    and profit and loss information of HIH as of 30 June (as disclosed in the
    HIH 10-Q for the quarterly period ended 30 June 2003) and  31 December 2002
    is as follows: current assets of $1,379m (31 December 2002: $1,233m) and
    non-current assets of $3,869m (31 December 2002: $3,811m) and current liabilities
    of $926m (31 December 2002: $912m) and non-current liabilities of $4,039m
    (31 December 2002:
 $3,794m). For the six months ending 30 June 2003 HIH reported total revenues
    of $2,605m (full year 2002: $4,518m, full year 2001: $4,575m), gross profit
    of $290m (full year 2002: $615m, full year 2001: $585m) and net loss of $135m
    (full year 2002: net loss of $69m, full  year 2001: net loss of $139m).

111B        ICI ANNUAL REPORT AND ACCOUNTS 2003

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|44 | Post balance sheet events (unaudited)
|-- | -------------------------------------

On 2 March 2004 the Company agreed to sell the Food Ingredients business of Quest International to Kerry Group plc for US$ 440m (£238m) in cash. Net proceeds after tax and other costs are expected to be approximately US$365m (£197m), and will be used to reduce
 indebtedness. Completion is expected in the second quarter of 2004 and is subject to regulatory approvals and employee consultation.

For the year ended 31 December 2003 the Quest Food Ingredients business had sales of £138m, operating profit of £16m and at 31 December 2003 had net operating assets of £84m. The transaction is expected to give rise to a loss after tax of about £50m which will be
 accounted for as an exceptional item. The loss includes attribution of goodwill previously written off £160m.

|45 | Remuneration of the Auditor
|-- | ---------------------------

Remuneration of the Auditor for each of the three years ending 31 December 2003, 2002 and 2001 set out in accordance with SEC Regulations was as follows:

|                       |  |       |   | Year ended 31 December | 
|---------------------- |  | ----- | - | ---------------------- | 
|                       |  | notes |   | 2003                   | 
|                       |  |       |   | £m                     | 
|Audit                  |  |       | 1 |                        | 
|Audit related services |  |       | 2 |                        | 
|Tax services           |  |       | 3 |                        | 
|Other services         |  |       |   |                        | 

Notes

|1. | Expenditure in 2003 related
          principally to remuneration of the Auditor for the statutory audit
          of the Group, the issuance of Guaranteed Loan Notes 2008 and 2013 and
          the review of interim financial statements. Expenditure in 2002 related
          principally to the remuneration of the  Auditor for statutory audit
          of the Group, the Rights Issue and the review of interim financial
          statements. Expenditure in 2001 related principally to the remuneration
          of the Auditor for statutory audit of the Group, and the review of
          interim financial statements
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|   |                                                                                                                                                                                                                                                                             
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Expenditure in 2003 related principally to the employee benefit plans. Expenditure in 2002 related principally to the employee benefit plans and divestment transactions. Expenditure in 2001 related principally to divestment transactions and the employee benefit plans.

|   |                                                                                                                                                                                                                                                                     
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3. | Tax services for 2003 comprised compliance services £0.6m and advisory services £0.2m. Tax services for 2002 comprised compliance services £0.9m and advisory services £0.2m. Tax services for 2003 comprised compliance services £0.9m and advisory services £0.9m.

111C        ICI ANNUAL REPORT AND ACCOUNTS
    2003

---

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  Contents to the Accounts
  principal
      subsidiary undertakings
  
  at
          31 December 2003Class
          of
      Held
          by ICI
      
      Principal
          activities in 2003capital
      %UNITED
            KINGDOMICI
              Finance PLC
      Ordinary
      100
      
      Financial
          servicesEnglandQuest
              International (Fragrances, Flavours,
      Ordinary
      100
      
      Manufacture
          of flavours, food ingredients and fragrancesFood
            Ingredients) UK LimitedEnglandCONTINENTAL
            EUROPEDeutsche
              ICI GmbH
      Ordinary
      100
      
      Manufacture
          of paints, adhesives and oleochemicalsGermanyQuest
              International Nederland BV
      Ordinary
      100
      
      Manufacture
          of flavours and food ingredientsThe
          NetherlandsUnichema
              Chemie BV
      Ordinary
      100
      
      Manufacture
          of specialty oleochemicals and derivativesThe
          NetherlandsTHE
            AMERICASICI
              American Holdings Inc
      Common
      100
      
      Holding
          companyUSAThe
              Glidden Company
      Common
      100
      
      Manufacture
          of paintsUSAIndopco
              IncUSA
      Common
      100
      
      Manufacture
          of adhesives, industrial starches, electronicmaterials,
          food ingredients and flavourings, fragrances,oleochemicals,
          resins and specialty chemicalsICI
              Canada Inc
      Common
      100
      
      Manufacture
          of paints; merchanting of ICI andCanada
      
      
      
      other
          productsTintas
              Coral Ltda
      Ordinary
      100
      
      Manufacture
          of paintsBrazilASIA
            PACIFICICI
              India Ltd
      Equity*
      51
      
      Manufacture
          of paints, surfactants, flavours andIndia
      
      
      
      fragrances,
          nitrocellulose, rubber chemicals(Accounting
          date 31 March;
      
      
      
      and
          adhesivesreporting
          date 31 December)ICI
              Pakistan LtdPakistan
      Ordinary*
      76
      
      Manufacture
          of polyester staple fibre, POY chips,soda
          ash, paints, specialty chemicals, sodiumbicarbonate,
          and polyurethanes; marketing of seeds,toll
          manufactured and imported pharmaceuticals andanimal
          health products; merchanting of general chemicalsPakistan
              PTA Ltd
      Ordinary*
      88
      
      Manufacture
          of pure terephthalic acidPakistanNippon
              NSC Ltd
      Common
      100
      
      Manufacture
          of adhesives and specialty syntheticJapan
      
      
      
      polymers;
          merchanting of starch productsNational
              Starch and Chemical(Thailand)
              LtdThailand
      Ordinary
      100
      
      Manufacture
          of food and industrial starches*
          ListedHeld
          by subsidiariesThe
      country of principal operations and registration or incorporation is stated
      below each company. The accounting dates of principal subsidiary undertakings
      are 31 December unless otherwise stated.
  The
      companies listed above are those whose results, in the opinion of the Directors,
      principally affected the profits or assets of the Group. A full list of
      subsidiary and associated undertakings at 31 December will be annexed to
      the next annual return of the Company to be filed with the Registrar of
      Companies.
  112
      ICI
          ANNUAL REPORT AND ACCOUNTS 2003


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|ITEM 19  EXHIBITS
|------------------
|                  

|1.1  | Memorandum and Articles of Association of Imperial Chemical Industries PLC incorporated herein by reference to Exhibit 1.1 to Form 20-F filed by
 Imperial Chemical Industries PLC on April 29, 2002.                                                                                                                                                                                                            
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.1  | Sale and purchase agreement among Imperial Chemical Industries PLC, Imperial Chemical Industries Americas Inc., ICI Alta Inc., ICI Finance PLC,
 BNAS Inc., and CSFB Global Opportunities Partners, L.P. (now Matlin Patterson Global Opportunities Partners L.P.) dated June 14, 2002
 incorporated herein by reference to exhibit 4.3 to Form 20-F filed by Imperial Chemical Industries PLC on March 27, 2003.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.2  | Sale and purchase agreement between Imperial Chemical Industries PLC, and Johnson Matthey Public Limited Company dated September 23, 2002
 incorporated herein by reference to exhibit 4.4 to Form 20-F filed by Imperial Chemical Industries PLC on March 27, 2003.                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.3  | An agreement among Imperial Chemical Industries PLC, Imperial Chemical Industries Chemicals and Polymers Limited, Ineos Chlor Holdings Limited
 and Ineos Chlor Limited dated July 31, 2003, detailing an overall refinancing package for Ineos Chlor.                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.4  | Underwriting agreement between ICI Wilmington
        Inc, Imperial Chemical Industries PLC, Barclays Capital Inc., Citigroup
        Global Markets Inc and UBS  Securities LLC dated November 18, 2003
        incorporated herein by reference to exhibit 4.3 to Form 6-K filed by
        Imperial Chemical Industries PLC on  December 11, 2003.                                                            
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.5  | A sale and purchase agreement between Imperial Chemical Industries PLC and Kerry Group plc dated March 1, 2004.                                                                                                                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.6  | Service agreement between Imperial Chemical Industries PLC and David C M Hamill dated October 28, 2003.                                                                                                                                                                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.7  | Agreement for Services between Imperial Chemical Industries PLC and John David Gibson McAdam dated October 14, 2003.                                                                                                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.8  | Letter agreement between Imperial Chemical Industries PLC and W H Powell dated February 17, 2000.                                                                                                                                                                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.9  | Letter Agreement between National Starch and Chemical Company and W. H. Powell dated October 21, 1997 incorporated herein by reference to
 Exhibit 4.13 to Form 20-F filed by Imperial Chemical Industries PLC on April 13, 2001.                                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.10 | Employment Agreement (Non-Sales) between National Starch and Chemical Corporation and William H. Powell dated June 24, 1986 incorporated
 herein by reference to Exhibit 4.14 to Form 20-F filed by Imperial Chemical Industries PLC on April 13, 2001.                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.11 | Employment Agreement (Technical) between National Starch and Chemical Corporation and William H. Powell dated August 11, 1976 incorporated
 herein by reference to Exhibit 4.15 to Form 20-F filed by Imperial Chemical Industries PLC on April 13, 2001.                                                                                                                                                        
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.12 | Compromise Agreement between Imperial Chemical Industries PLC and Dr B R ONeill dated May 22, 2003.                                                                                                                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.13 | Compromise Agreement between Imperial Chemical Industries PLC and Mr P J Drechsler dated June 18, 2003.                                                                                                                                                                                                                                                                                                          

44

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|4.14 | Service Agreement between Imperial Chemical Industries PLC and Lord Alexander James Trotman of Osmotherley dated January 1, 2002
 incorporated herein by reference to Exhibit 10.1 to Form 6-K filed by Imperial Chemical Industries PLC on February 4, 2002.                                                                      
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                    
|4.15 | Service Agreement between Imperial Chemical Industries PLC and Timothy A. Scott dated May 11, 2001 incorporated herein by reference to Exhibit
 10.2 to Form 6-K filed by Imperial Chemical Industries PLC on February 4, 2002.                                                                                                    
|     |                                                                                                                                                                                                                                                                                                                                    
|4.16 | Letter of Engagement between Imperial Chemical Industries PLC and Peter B Ellwood dated July 1, 2003.                                                                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                                    
|4.17 | Letter of Engagement between Imperial Chemical Industries PLC and Peter B Ellwood dated December 15, 2003.                                                                                                                                                                                                                         
|     |                                                                                                                                                                                                                                                                                                                                    
|4.18 | Performance Growth Plan dated April 28, 2000 incorporated herein by reference to Exhibit 4.21 to Form 20-F filed by Imperial Chemical Industries
 PLC on April 13, 2001.                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                    
|4.19 | Supplementary Retirement and Savings Plan of National Starch and Chemical Corporation, as amended December 23, 1988 incorporated herein by
 reference to Exhibit 4.22 to Form 20-F filed by Imperial Chemical Industries PLC on April 13, 2001.                                                                                    
|     |                                                                                                                                                                                                                                                                                                                                    
|7.1  | Statement explaining calculation of ratio of earnings to fixed charges  continuing operations.                                                                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                                                                    
|8.1  | List of significant subsidiaries.                                                                                                                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                    
|12.1 | Rule 13a-14(a) Certification of John D G McAdam.                                                                                                                                                                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                                    
|12.2 | Rule 13a-14(a) Certification of Timothy A Scott.                                                                                                                                                                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                                    
|13.1 | Rule 13a-14(b) Certification of John D G McAdam and Timothy A Scott.                                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                    
|14.1 | Pursuant to Rule 12b-23
        (a) of the Securities Exchange Act of 1934, as amended, the information
        incorporated into this report by reference to the  Companys Report
        on Form 6-K dated March 12, 2004, which
        contains its Annual Report and Accounts 2003, is attached as an exhibit
        hereto.
|     |                                                                                                                                                                                                                                                                                                                                    
|14.2 | Consent of KPMG Audit Plc.                                                                                                                                                                                                                                                                                                         

45

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SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.




| | IMPERIAL CHEMICAL INDUSTRIES PLC |                                                             
| | -------------------------------- | ------------------------------------------------------------
| |                                  |                                                             
| |                                  |                                                             
| | By:                              | /s/ Michael Herlihy
      Michael Herlihy
 Company Secretary

London, England

April 5, 2004

46

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|EXHIBIT INDEX
|-------------
|             

|1.1  | Memorandum and Articles of Association of Imperial Chemical Industries PLC incorporated herein by reference to Exhibit 1.1 to Form 20-F filed by
 Imperial Chemical Industries PLC on April 29, 2002.                                                                                                                                                                                                            
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.1  | Sale and purchase agreement among Imperial Chemical Industries PLC, Imperial Chemical Industries Americas Inc., ICI Alta Inc., ICI Finance PLC,
 BNAS Inc., and CSFB Global Opportunities Partners, L.P. (now Matlin Patterson Global Opportunities Partners L.P.) dated June 14, 2002
 incorporated herein by reference to exhibit 4.3 to Form 20-F filed by Imperial Chemical Industries PLC on March 27, 2003.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.2  | Sale and purchase agreement between Imperial Chemical Industries PLC, and Johnson Matthey Public Limited Company dated September 23, 2002
 incorporated herein by reference to exhibit 4.4 to Form 20-F filed by Imperial Chemical Industries PLC on March 27, 2003.                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.3  | An agreement among
          Imperial Chemical Industries PLC, Imperial Chemical Industries Chemicals
          and Polymers Limited, Ineos Chlor Holdings Limited and Ineos Chlor
          Limited dated July 31, 2003, detailing an overall refinancing
    package for Ineos Chlor.                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.4  | Underwriting agreement between ICI Wilmington
        Inc, Imperial Chemical Industries PLC, Barclays Capital Inc, Citigroup
        Global Markets Inc and UBS  Securities LLC dated November 18, 2003
        incorporated herein by reference to exhibit 4.3 to Form 6-K filed by
        Imperial Chemical Industries PLC on December 11, 2003.                                                              
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.5  | A sale and purchase
          agreement between Imperial Chemical Industries PLC and Kerry Group
    plc dated March 1, 2004.                                                                                                                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.6  | Service agreement
          between Imperial Chemical Industries PLC and David C M Hamill dated
    October 28, 2003.                                                                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.7  | Agreement for
          Services between Imperial Chemical Industries PLC and John David Gibson
    McAdam dated October 14, 2003.                                                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.8  | Letter agreement
          between Imperial Chemical Industries PLC and W H Powell dated February 17,
    2000.                                                                                                                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.9  | Letter Agreement between National Starch and Chemical Company and W. H. Powell dated October 21, 1997 incorporated herein by reference to
 Exhibit 4.13 to Form 20-F filed by Imperial Chemical Industries PLC on April 13, 2001.                                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.10 | Employment Agreement (Non-Sales) between National Starch and Chemical Corporation and William H. Powell dated June 24, 1986 incorporated
 herein by reference to Exhibit 4.14 to Form 20-F filed by Imperial Chemical Industries PLC on April 13, 2001.                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.11 | Employment Agreement (Technical) between National Starch and Chemical Corporation and William H. Powell dated August 11, 1976 incorporated
 herein by reference to Exhibit 4.15 to Form 20-F filed by Imperial Chemical Industries PLC on April 13, 2001.                                                                                                                                                        
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.12 | Compromise Agreement
          between Imperial Chemical Industries PLC and Dr B R ONeill dated May 22,
    2003.                                                                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.13 | Compromise Agreement
          between Imperial Chemical Industries PLC and Mr P J Drechsler dated
    June 18, 2003.                                                                                                                                                                                                                                                                                            



---



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|4.14 | Service Agreement between Imperial Chemical Industries PLC and Lord Alexander James Trotman of Osmotherley dated January 1, 2002
 incorporated herein by reference to Exhibit 10.1 to Form 6-K filed by Imperial Chemical Industries PLC on February 4, 2002.                                                                         
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                       
|4.15 | Service Agreement between Imperial Chemical Industries PLC and Timothy A. Scott dated May 11, 2001 incorporated herein by reference to Exhibit
 10.2 to Form 6-K filed by Imperial Chemical Industries PLC on February 4, 2002.                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                       
|4.16 | Letter
          of Engagement between Imperial Chemical Industries PLC and Peter B
    Ellwood dated July 1, 2003.                                                                                                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                                       
|4.17 | Letter
          of Engagement between Imperial Chemical Industries PLC and Peter B
    Ellwood dated December 15, 2003.                                                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                                       
|4.18 | Performance Growth Plan dated April 28, 2000 incorporated herein by reference to Exhibit 4.21 to Form 20-F filed by Imperial Chemical Industries
 PLC on April 13, 2001.                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                                       
|4.19 | Supplementary Retirement and Savings Plan of National Starch and Chemical Corporation, as amended December 23, 1988 incorporated herein by
 reference to Exhibit 4.22 to Form 20-F filed by Imperial Chemical Industries PLC on April 13, 2001.                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                       
|7.1  | Statement explaining
          calculation of ratio of earnings to fixed charges  continuing
    operations.                                                                                                                                                                                                                         
|     |                                                                                                                                                                                                                                                                                                                                       
|8.1  | List of significant subsidiaries.                                                                                                                                                                                                                                                                                                     
|     |                                                                                                                                                                                                                                                                                                                                       
|12.1 | Rule 13a-14(a) Certification of John D G McAdam.                                                                                                                                                                                                                                                                                      
|     |                                                                                                                                                                                                                                                                                                                                       
|12.2 | Rule 13a-14(a) Certification of Timothy A Scott.                                                                                                                                                                                                                                                                                      
|     |                                                                                                                                                                                                                                                                                                                                       
|13.1 | Rule 13a-14(b) Certification of John D G McAdam and Timothy A Scott.                                                                                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                       
|14.1 | Pursuant
          to Rule 12b-23 (a) of the Securities Exchange Act of 1934, as amended,
          the information incorporated into this report by reference to the Companys
          Report on Form 6-K dated March 12,
          2004, which contains its Annual Report and
    Accounts 2003, is attached as an exhibit hereto.
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|14.2 | Consent of KPMG Audit Plc.                                                                                                                                                                                                                                                                                                            



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