Exhibit 14.1

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ICI Group summary



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

|ICIs
        specialty products and paints businesses comprise National Starch, Quest,
        Uniqema and ICI Paints. These businesses serve diverse consumer and industrial
        markets through some 70 strategic business units, with an array of market
        leadership positions around the world. In addition, a number of Regional
        and Industrial businesses remain in ICIs
portfolio. |  | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|                                                                                                                                                                                                                                                                                                                                                                                                               | 
|The
        businesses are supported by Group functions that provide expertise in
        the disciplines of information technology, procurement, human resources,
        operations, finance, sustainability, safety, health and the environment
    (SHE), and applied technology.                                                                                                                          | 





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      ICI Annual Report and Accounts 2005 | ICI
      Group summary
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History and activities









HistoryICI
celebrates its 80th year in 2006. The Company was formed in 1926 by the merger
of four UK chemical companies: Brunner Mond, Nobel Industries, British Dyestuffs
and United Alkali. ICI is one of a small number of companies listed continuously
on the leading UK stock index  originally the FT 30, now the FTSE 100  since
the 1930s. During the course of its
    history, ICI has been an acknowledged leader in diverse disciplines, including
    fundamental science, engineering, manufacturing and human
resources. The
Groups major inventions have been equally diverse, ranging from the plastics
polythene and Perspex to beta blockers and the antimalarial treatment Paludrine. In 1993, ICI demerged its
    bioscience businesses to a publicly listed company, Zeneca Group PLC (now
    AstraZeneca PLC). In 1997, ICI began its transformation
from regional manufacturer of bulk chemicals to a global specialty chemicals
and paints leader with the acquisition of Unilevers Speciality Chemicals
businesses. Over the last decade, ICI
    has transformed its portfolio through a number of acquisitions and divestments
    worth more than £12bn. Divestment proceeds have been used
to repay debt and improve balance sheet strength. Today, four specialty chemicals
and paints businesses form the core of ICI  National Starch, Quest, Uniqema
and ICI Paints. Spread and balance of activitiesICI
is headquartered in the UK, where it also has a number of major manufacturing
activities. Outside the UK, the Groups activities are geographically diverse with growing
businesses in Asia and Latin America and a significant presence in North America. Around one third of ICIs activities are in Europe. Typically, ICIs International Businesses are staffed almost entirely by local nationals and, in total,
86% of ICIs 31,910 employees are located outside the UK. The Group has operations
    in over 50 countries around the world and its customers are spread across
    a diverse range of product sectors. More than 60% of ICIs
revenue is in sectors the Group believes are relatively non-cyclical, for example,
food and beverages, decorative coatings, personal and household care products,
and water treatment. Other sectors with a greater degree of cyclicality include
automotive, industrial adhesives and construction materials, as well as semi-conductors.
ICI believes this spread and balance of activities provides a manageable exposure
to higher growth markets, for example in Asia, and to emerging products and technologies
including
food nutrition and electronics. Overall, no one market sector
    dominates ICIs customer base and no one customer
represents a material proportion of Group revenue.




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    Annual Report and Accounts 2005 | History
          and activities
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Strategy



ICIs
strategic matrixICIs
vision is to become the leader in formulation science, creating complex mixtures
that deliver the effects valued by consumers and customers. To achieve this leadership
goal, and through this create superior returns for shareholders, the Group is
building a portfolio of businesses that are leaders in their respective industries,
bringing together consumer understanding, outstanding knowledge of customer needs
and processes, and leading edge technology platforms to provide a distinctive,
competitive
advantage for its customers. At the last strategic review,
    ICIs business units were evaluated in terms
of market attractiveness (e.g. financial strength and sustainability) and competitive
position (e.g. quality of products, technology and market share). Reflecting
their different strengths and weaknesses, each business was then mapped onto
the two by two matrix shown below. This matrix is fundamental to the strategic
development of the business. For example, ICI intends to invest to support growth
in businesses with strong positions in high-growth markets  the grow
aggressively segments which are more attractive in the long term.
In contrast, ICI will invest to improve cost and capital effectiveness in its
businesses in relatively low growth markets  the maintain selectively segments  with
the aim of continued cost effectiveness and resilient financial performance.
Examples of this approach can be found in the section that follows on page 8,
entitled Strategic Progress in 2005. ICIs strategy is to
    create and capture additional value from three principal
sources: •
    Differentiated
      resource allocationInvesting
          in technology and marketing in those businesses where sustainable,
        competitive advantage can be
created;•
    Cost
      and capital effectivenessAchieving
          a step-change in cost and capital effectiveness for ICI overall  in
          the near
          term through the successful delivery of restructuring, and sustainably
          through changing
    the organisation, culture, and behaviour in ICI to consistently deliver improvements;
      and•
    Strategy
      executionA
          greater focus on strategy execution, upgrading operational capabilities
          and enhancing
          rewards for short to
medium-term performance delivery. Examples of what was achieved in 2005 can be found in the section that follows, entitled Strategic Progress in 2005, as well as in the business commentaries.









|ICIs strategic
    matrix           |  | 
|------------------------------------ |  | 
|                                     |  | 
|                                     |  | 
|                                     |  | 
|Only
    major business units shown. |  | 



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        Annual Report and Accounts 2005 7
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ICI Group and its businesses



Group OrganisationICI is organised around five operating businesses: National Starch on pages 9 and 10, Quest on pages 10 and 11, Uniqema on page 12, ICI Paints on pages 13 and 14 and Regional and
Industrial on page 14. These are supported by Group
    functions that provide expertise in information technology, procurement,
    human resources, manufacturing, finance, sustainability,
    safety, health and the environment (SHE), and applied technology, where real
    value can be created for ICIs customers through the application of
  advanced technology across the Group. A number of senior management boards leverage the combined skills and experiences
    of the functional teams. The functional boards are also responsible for establishing
    functional
strategies and ensuring Group-wide implementation of best practice. In addition, the Business Development Board, chaired by a member of the Executive
    Management Team, aims to accelerate the commercial exploitation of technology
    opportunities within ICI, and reflects the desire to develop continuously
  and strengthen the links between market needs and technology capability. National Starch Background
National
Starch, which accounted for 32% of the Groups sales in 2005, is a leading
player in specialty chemicals, with important positions in specialty industrial
adhesives, specialty food starches, specialty polymers and electronic materials.
It provides many specialty ingredients and formulations to consumer-oriented
markets that, with the exception of electronic industries, tend to be relatively
non-cyclical in
nature.
National Starch operates an international network of 147 manufacturing and customer
    service centres, located in 39 countries on six continents. National Starch
    believes that its position in these markets has been achieved through a strong
    combination of natural and synthetic polymer technology, application understanding
  and a high degree of technical support for customers.
National Starch is headquartered in Bridgewater, New Jersey, USA, with regional
    offices in the UK (Europe) and Singapore (Asia). Major manufacturing facilities
    are located in the USA, Germany, Mexico, Japan, Thailand, Korea, China and
    Brazil, with further manufacturing facilities in 25 other countries around
  the world.
Strategy
National
Starchs strategy focuses on delivering value through three main activities: •
    building
          on strengths in areas where it has good opportunities for
      profitable growth;•
    delivering
      innovative new products to customers; and•
    continually
          improving cost efficiency, particularly in its more mature
      businesses. Consistent with the ICI
    strategic matrix, National Starch allocates resources preferentially to those
    businesses within the grow aggressively segment.
    These include the Electronic and Engineering Materials business and the National
  Starch businesses in Asia.


Brief description of activitiesNational Starch is one of the largest producers of specialty industrial adhesivesin the world based on both natural and synthetic polymers, including water-borne, hot melt and pressure sensitive products. Products from the Adhesives division are used to seal cases and cartons and to
    fix labels to bottles and cans. Paper applications include laminating, bag
    making, paper tissue, paper tube winding and box manufacturing. Adhesives
    are also used in bookbinding, disposable nappies/diapers, personal sanitary
  products and disposable hospital supplies. National Starchs adhesives
    and primers are used in the assembly of sports shoes and for assembly operations
    in the woodworking, construction, recreational
vehicle and
transportation industries. National Starch also manufactures a wide range of specialty starches,focused
principally on food and industrial applications. The National Starch Food Innovation
business concentrates on modifying food formulations to enhance texture, appearance
and flavour delivery. Certain products provide effects which enable end-consumer
products to withstand the rigours of ultra-high temperature processing, microwave
cooking, freeze/thaw cycles and extended storage. The
nutritional content of food can be improved by National Starchs products
which add health-enhancing ingredients such as dietary fibre. National Starch
helps its customers develop new food concepts to satisfy growing consumer needs
for new, wholesome and nutritious food. National Starch has multiple capabilities in specialty polymersfor markets as diverse as personal care, construction, water treatment, detergents, paper coatings and apparel. Specialty polymers for personal care provide the holding power in hair sprays and
gels, and add manageability and softness to mousses, conditioners, shampoos and other styling aids. They are also used to thicken and emulsify cosmetic and beauty products and increase the functionality of sunscreens, hand and body creams and
lotions. Products from the Specialty
    Synthetic Polymers divisions Alco Chemical business include dispersants, antiscalants for water treatment and detergent builders, as well as
thickeners for the carpet, adhesive and detergent industries. The divisions
Elotex business manufactures redispersible powder polymers, which improve the
adhesion, strength, insulation properties and shrink-resistance of cements, grouts,
adhesives and other construction products. National Starch manufactures, markets and sells a range of electronic and engineering
materials,particularly adhesives, encapsulants and specialty coatings used in the assembly of semiconductor packages and the production of electronic, automotive,
medical and aerospace devices. Within the Electronic and
    Engineering Materials division, Ablestik supplies adhesives and encapsulants
    used for semiconductor packaging and microelectronic assembly.
    Products include adhesive pastes, printable paste and films, and underfill
    encapsulants. Emerson & Cuming supplies adhesives, encapsulants, and
    coatings used in circuit assembly and in fabrication of electronic, electrical,
    and electromechanical components. Acheson supplies process lubricants and
  application systems used in metalworking and casting. Strategic developments in 2005National Starch made good progress in 2005 in developing its businesses. It acquired the Celanese redispersible powder polymers business in Frankfurt, Germany. The acquisition will
help expand its Elotex business portfolio of emulsion powders as additives for applications such as tile adhesives and grouts, external thermal insulation composite systems and gypsum-based systems.




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        Group and its businesses | ICI
        Annual Report and Accounts 2005 9
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ICI Group and its businessescontinued

National Starch also announced plans to build a state-of-the-art
  customer applications and process simulation centre at its site in Kleve, Germany.
  The centre will house more than 20 R&D and technical service specialists
  focused on adhesive technologies for the pressure sensitive, woodworking and
  building components markets. Also in 2005, National Starch increased production of adhesives used in transdermal
    medicine delivery systems at their expanded manufacturing facility in Salisbury,
    North Carolina in
the USA. The National Starch Food
    Innovation business entered into an agreement with Limagrain Céréales Ingrédients, of France, to collaborate in the creation of
wholesome natural ingredient solutions for the food industry. The collaboration combines National Starchs long history of expertise in food applications with Limagrains
capability in providing premium quality cereal
ingredients. The Electronic and Engineering
    Materials division opened a new full service facility in Shanghai, China
    in May 2005 for both Ablestik and Emerson & Cuming.
    The facility will produce a wide range of electronic materials products and
  be a centre for technical and sales support to customers in China. The disposal of the Vinamul
    emulsion polymers business, a maintain selectively business,
was completed in 2005. A number of important new products and technologies were developed and launched
  during 2005. The Adhesives division introduced
    Cool 200, a 200°F packaging hot melt developed
for case and carton sealing applications. The lowest temperature general packaging
hot melt on the market, Cool 200 represents a significant breakthrough in providing
packaging line uptime efficiency and employee safety. The National Starch Food Innovation business introduced a new functional flour
  ingredient developed under the alliance with Limagrain. New technology introduced
    by the Specialty Synthetic Polymers division includes the Personal Care business new dissolvable film technology that allows pre-measured single-unit
doses of products to be delivered in portable films for face cleansing, hair styling and conditioning, shaving, moisturisers, acne treatment and anti-aging films. Product launches included four dissolvable films for well-known fast moving consumer
goods customers: two in the USA, one in Europe and one in Japan. The divisions
biopolymers innovation platform is accelerating the development of natural polymers
(starch, other polysaccharides, proteins or lipids) and biopolymer-synthetic
hybrids, which offer significant cost-performance advantages versus synthetic
polymers, with the added feature of being based on renewable raw materials.


National Starch already has a wide range of biosynthetic products based on starch, hydroxyethylcellulose, xanthan and other polysaccharides. Within the Electronic and
    Engineering Materials division, Emerson & Cumings new XE-1219 underfill adhesives technology is being used in the latest generation of handheld
portable music players. The underfill helps extend the products life by
helping to protect it from impact damage. Quest Background
Quest
is a global leader in the creation, application and production of flavours and
fragrances for a wide variety of consumer brands. In 2005 Quest accounted for
10% of the
Groups sales. The business is headquartered in Naarden, the Netherlands, and has two operating divisions, Flavours and Fragrances. Each division accounts for around half of Quests
revenue.
Major manufacturing facilities are located in the Netherlands, UK, USA, Mexico,
    France, Australia and Indonesia, with smaller manufacturing facilities in
    eight other countries. Quest has its own sales distribution network in 31
  countries and is represented elsewhere by sales agents.
Science and creativity are the key
    pillars of Quests research effort, putting innovation at the heart of the business. It designs and develops new flavour and fragrance
ingredients, compounds and delivery technologies that create a distinctive, sensory impact. This demands a complex artistic and technical process, combining the knowledge and skill of Quests
perfumers and flavourists with the expertise of its application and research
chemists. Quest has research centres at Ashford in the UK and Naarden, and product
development teams at six other sites around the world. Quest also benefits from
being part of the ICI Group and the science base that is
available to support innovation.
Strategy
Within
the ICI strategic matrix, both the Flavours and Fragrances businesses are positioned
in the grow aggressively segment, as the market segments are particularly
attractive. Quest believes that its competitive position is robust, based on
four distinctive strengths: •
    quality
      of its customer relationships and consumer understanding;•
    creative
      skills of its perfumers and flavourists;•
    technological
      advances resulting from R&D; and•
    customer
          service and support provided by its marketing and application
          groups as well as its global network
of servicing units.




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        Annual Report and Accounts 2005 | ICI
    Group and its businesses
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These strengths
         enable Quest to assist customers in making their brands and products
        successful.
        Within the Group strategy, Quests strategy is to continue to build
    on these strengths while: •
      focusing
        on growth with key customers in the markets it chooses to
        prioritise;•
      investing
        in consumer understanding and creativity;•
      creating
        and making best use of an effective and efficient innovation process;
        and•
      ensuring
        excellence in service and costs by focusing on appropriate parts
        of the value chain and by continuous process improvement. Brief
    description of activitiesQuests
    innovative flavour and fragrance products consist of compounds of blended
    ingredients created by expert flavourists, perfumers and scientists. Certain
    compounds contain molecules which have been created by Quests chemists
    and which add distinctive characteristics to its products. Quest also has
    a strong position in nature-identical flavours for sweet and culinary applications. In addition, Quest manufactures and sells a range of fragrance ingredients that are the scented building blocks of fragrance formulae. They can also contribute additional technical
characteristics to the finished compound such as deodorisation or insect repellence. In both divisions finished products are manufactured through a compounding process that, while relatively non-capital intensive, demands high degrees of precision in dosage control,
ingredient traceability and cleanliness. Proprietary knowledge of formulae and processes is retained by the business and secures strong product differentiation. Critical to the success of the business is researching consumer trends, developing successful molecules and ingredients and delivering the expertise of the flavourist or perfumer to
the customer in the finished product. The Flavours division is organised around several key markets and global customer accounts. The principal markets are sweet and savoury foods and beverages. Similarly, the Fragrance division is organised around product applications and key accounts. The principal markets are fine fragrance, personal care, home care products and oral
care. Strategic
      developments in 2005Following
  the divestment of food ingredients in 2004, Quest was able to focus on its Flavour
  and Fragrance businesses. During 2005 Quest invested in developing its growth
  platform in Asia, including starting an investment in a new regional technical
  centre in Shanghai, China, and several efficiency investments in Europe and
  North America.


In June,
      the Flavours business launched a significant flavour development platform, ImpaQ
      Taste Technology. ImpaQ is the result of a long-term R&D programme
      to offer food and beverage producers unique solutions to reduce salt, fat and
      sugar content in their products without compromising on taste. Continuing customer
      and consumer trials using ImpaQ in major brands are providing positive results.
      During the second half of the year ImpaQ secured its first orders and products
      were shipped to customers in Europe and Latin America. The successful Quisine flavour
      collection, launched in 2004, was extended with a range of vegetable and
  herb flavours.
  Flavours
      R&D, working with NIZO food research B.V., a prominent food research institute
      in Europe, was the force behind the worlds first artificial throat,
      a new scientific instrument that will speed flavour development and allow
      better
      understanding of the complex science of flavour release after the human
  swallowing process.
  The Fragrance
      division celebrated the opening of its new creative centre for fine fragrances
      in Paris in January with a number of major customers attending the inauguration.
      The centre has extensive laboratories and specially designed facilities for
  consumer insight and testing.
  Quests
  BioCaptive research programme into novel fragrance ingredients
    included an expedition to the largest freshwater wetlands in the world, the
    Pantanal
      region of central southern Brazil. A large variety of plants and flowers,
    completely unfamiliar to perfumery, were found. Unique scents captured by
  this non-invasive
      technology have been recreated in the Quest laboratories and presented
  to fine fragrance clients.
  Aquacoral,
      a BioCaptive fragrance accord developed from one of the previous
      expeditions, featured in Zirhs Corduroy, a fragrance for men, launched
  in 2005.
  The deoperfume
      portfolio, which holds fragrances created to have deodorising effects,
          has been extended to applications for home care products. Quests Neutrozone malodour
          technology allowed a leading air freshener producer to launch the first
  air freshener that can claim odour elimination. Quest maintained
  its good position in fine fragrances and secured a number of the major fine
  fragrance brands launched in 2005, including Gaultier2,
  Miss Dior Cherie, Tumulte from Christian Lacroix, and Silver Shadow from Davidoff. In June,
  Quest and National Starch jointly announced a US$500,000 contribution,
  spread over five years, towards funding an expansion of the Monell Chemical
  Senses
  Center in Philadelphia, USA, to create a 17,000 sq ft area devoted to human
chemosensory research.




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            Group and its businesses | ICI
      Annual Report and Accounts 2005 11
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ICI
  Group and its businessescontinued

Uniqema BackgroundUniqema
    is a leading manufacturer of surfactants, oleochemicals and related derivatives
    with major operations in North America and Europe. In 2005, Uniqema accounted
    for 11% of ICIs sales. Uniqemas headquarters and one of its major operating centres
are in Gouda in the Netherlands. Other major operating centres are in Wilton
in the UK, New Castle, Delaware in the USA, and Kuala Lumpur in Malaysia. Uniqema
has a total of 13 manufacturing sites in Europe, North America and Asia Pacific. The business supplies a broad range of base and specialty chemicals into a wide range of end markets and applications. Its markets include polymers, lubricants, personal care,
healthcare, process intermediates, crop protection, oilfield, textiles, polymer additives and cleaning. StrategyUniqema
  believes its strength is in the strong market positions it holds in synthetic
lubricants, personal care, and the European and US oleochemicals sectors. Within
the ICI Group strategy, the Uniqema business is within the maintain selectively
  segment of the strategic matrix. As such, Uniqemas strategy includes
  growth in selected, niche markets, but focuses on improving its cost base through
  operational
  effectiveness and reducing overhead costs. Brief
      description of activitiesUniqema
  manufactures and markets a wide range of synthetic base-stocks and ingredients
  which are formulated into engine, compressor, gear hydraulic and process oils
  and fluids, where high performance or environmentally friendly characteristics
  are required. Products are frequently tailored to specific customer requirements.
  Uniqema believes it is a leader in synthetic refrigeration lubricants, to which
  it provides worldwide technical support. As a prominent player in the personal care market, Uniqema provides ingredients for skin care, hair care, oral care and toiletries. These include new vegetable-based products for
skin care formulations, mild ingredients for cleansing formulations and functional ingredients for skin repair products and UV protection products. Uniqema also supplies process intermediates based on natural fats and oils such as coconut, palm kernel and rape seed, which are split to yield fatty acids and, as a by-product,
glycerine. Further processing of fatty acids yields a range of higher added-value products such as surfactants, soaps, lubricants and polymers.


Strategic
        developments in 2005Uniqema
    made good strategic progress in 2005, despite significantly lower glycerine
    prices and difficult trading conditions. The restructuring programme launched
    in 2003 continued to yield significant benefits from improved manufacturing
    efficiencies and reduced operating costs. The business completed a plant rationalisation
    programme in 2005 with the closure of a manufacturing site in New Jersey in
    the USA and the relocation of its production to a larger Uniqema site in Delaware. A rationalisation of Uniqemas product range started in 2005
and yielded good returns, reducing the complexity of the product portfolio. Work
was also completed on developing a new channel strategy for supplying customers
across Europe, with the principal benefits expected in 2006. During the year Uniqema reached a significant milestone in its synthetic
refrigeration lubricants business with the shipment of compressor lubricants
for its 500 millionth refrigerator. Selected new products were also launched
during the year, reflecting the differentiated resource allocation strategy applied
to the business. This included enhancing a range of high performance ingredients
for skin care applications
where Uniqemas technology provides competitive advantage. Where opportunities
exist, because of proprietary knowledge and patented products, Uniqema believes
further value can be created within the portfolio. In February 2006, ICI announced that it was evaluating its options with regard to Uniqema. ICI believes that Uniqema is a market leading oleochemicals and derivatives business with a
good product portfolio and a strong management team. The restructuring programme announced in 2003 has generated significant savings, resulting in improved profitability. The Uniqema team has identified a range of further restructuring opportunities
that could further improve overall profitability, but which would require significant additional investment. In this context, and in the light of other investment opportunities available to ICI across the Group, in particular in those areas where
there is the prospect of greater strategic and financial returns, ICI is evaluating its options, with a view to divesting the business, subject to a deal realising value for shareholders.




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      Group and its businesses
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ICI Paints BackgroundICI
  Paints is a leading international paint business and accounted for 40% of the
  Groups sales in 2005. It concentrates primarily on decorative paint (90%
  of ICI Paints sales in 2005) and packaging coatings for food and beverage
  cans. ICI Paints global
      business headquarters is located in Slough, UK. Major manufacturing facilities
      are located in the USA, UK, Brazil, Argentina, Germany, the Netherlands,
      France,
  China, India and Malaysia. Additional manufacturing facilities are in 14 other
      countries. ICI Paints maintains its own sales distribution network in over
      30
  countries. The business also sells through agents and distributors. StrategyThe
  strategy of ICI Paints is to develop its leading market positions in the global
  paints and coatings industry, particularly where it benefits from strong retail
  brands. ICI Paints expects to develop its strategy further by: •
    differentiated
           resource allocation  channelling scarce resource (revenue
      expenditure, capital and people) to those areas which will
      generate the highest rewards;•
    innovation  driving
          for new major differentiated products and services,
      linking marketing insights with world leading technical skills;•
    cost
      and capital effectiveness  implementing key restructuring plans
        and improving
      planning/operating processes to reduce costs and inventory
      while improving customer delivery reliability; and•
    people
      and organisation capability development.Key
      competencies, which ICI Paints employs across its businesses, include:•
    marketing  identifying
        areas of significant potential through marketunderstanding
      and exploiting these through highly professional category
      and brand management skills;•
    research
      and development  supporting the increased emphasis on innovation
      in products, packaging and services, and targeting high impact
      cost reductions through leading edge colour, polymer and formulating science;•
    operations  implementing
          process improvements and improved delivery
      reliability by sharing expertise and best practice across its businesses;
      and•
    procurement  optimising the mix of central contracts using ICIs total
      purchasing power and local contracts, bringing the advantages of
      tailored solutions and flexibility.


The regional markets for decorative paint are at different stages of growth and maturity and the ICI Paints strategy reflects this. The Asia region is one of generally high growth. Paint markets tend to be fragmented, with a large number of country-specific competitors. Obtaining competitive advantage across the
region requires leveraging marketing and manufacturing capabilities and transferring best practice in innovation, purchasing, marketing and channel development. The key focus of the business is to maintain accelerated, profitable growth, with
particular focus on China, India, Indonesia, Thailand and Vietnam. The European region has some large mature markets and a number of
developing growth markets in Eastern and Central Europe. ICI Paints has a leading
position in the UK, with strong brands underpinned by a focus on innovation.
There is significant brand equity with Dulux, Hammerite, Cuprinol and Polycell.
The focus of the European business is on improvement of product range, expansion
in developing markets, reduction of the cost-base and the improvement of operational
efficiency and profitability of the Continental European operations. The Latin American business has strong positions in Brazil, Argentina and Uruguay where brand strength is maintained through capability in marketing and a focus on
innovation. North American markets are generally mature and ICI has a significant presence in both trade and retail channels. In trade markets, the strategy is to establish insights into end
user needs that can create competitive advantages, and in securing distribution density within metropolitan areas. In the retail business, the route to market is highly consolidated with a few major retailers controlling around 80% of distribution.
ICI Paints has a significant relationship in this market with The Home Depot, a leading retailer. ICI Paints is also a leader in internal and external coatings for food and beverage cans. It manufactures and distributes a broad product offering of packaging coatings with
significant market positions in the established markets of Europe and North America and the emerging markets of Asia and Latin America. The strategy of this business is to focus on profitable growth in South East Asia and Latin America, to explore
opportunities for growth in non-metal packaging, in particular with PET (polyethylene terephthalate) bottle coatings, and to optimise the supply chain. Technology and innovation are also important factors in the growth of ICI Paints. Success is enhanced by being first to the market with innovative, value-adding products and services
that meet market needs. ICI Paints benefits technologically from the colloid, polymer and particle related science base and research carried out by other parts of the ICI Group.




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ICI Group and its businessescontinued



Brief description of activitiesThe
decorative paints business has well-established brands in paint, woodcare, metalcare,
adhesives and fillers. These include Dulux, Glidden, Devoe, Valentine, Coral, Alba, Xyladecor, Hammerite, Polycell, Polyfilla and Alabastine. Paint is manufactured through a mixing process that requires a high degree of
control over product measurement, quality control and continuous assessment.
Typically manufacturing operations are not capital intensive and are relatively
responsive to changes in demand. Strategic developments in 2005ICI
Paints continued to focus on strengthening its brands and developing innovative
products and services which meet and anticipate customers needs around
the world. In 2005, the business launched many new and innovative products and services
to strengthen its brands across all key markets. These included: •
    Cuprinol
          Sprayable, an award winning water-based spray system for
    fence treatment;•
    UK
          Trade Sterishield, a revolutionary new water-based hygiene
          paint utilising a silver
bactericide;•
    UK
          Trade Metalshield, giving eight-year protection for ferrous
          and non-ferrous
          metals in a
simple system requiring fewer coats than competitive
systems;•
    This
          Old House range in the USA  a premium exterior paint building
          on ICIs exterior coating
formulation expertise;•
    Hammerite direct-to-galvanised-metal
      paint in Brazil; and•
    Dulux Supergloss
          5-in-1, launched in India, offering 300 glossy, clean
          colours, with long-life,
anti-yellowing and good coverage properties. ICI Paints
also generated incremental benefits in 2005 from the cost savings initiatives
under the restructuring programme announced in 2003. The business maintained
its investment in developing its growth activities in Asia by starting projects
to develop new facilities in China and Vietnam. During the year ICI Paints reorganised its activities in Europe to provide a
greater focus on two regional markets: the UK and Ireland, and Continental Europe.
The new structure brings together the trade and retail organisations in each
region, providing opportunities to simplify manufacturing and supply chain management.


Regional and Industrial BackgroundRegional
and Industrial comprises several businesses which are essentially local in their
scope, the most significant of which are located in Pakistan and Argentina. The
businesses
accounted for 7% of the Groups sales in 2005. In Pakistan, ICI operates
through non wholly-owned subsidiary companies, quoted on the local stock exchange. StrategyICI
has divested many of the Regional and Industrial businesses in recent years,
and further divestments will be made if they enhance value. The strategies of
most of the businesses are focused on selective areas of growth, with an emphasis
on improving cost and capital effectiveness. Brief description of activitiesICI
Pakistan Limited has interests in a number of different market sectors. The more
important of these are the manufacture of polyester staple fibre for the textile
industry and soda ash for soaps, detergents, glass and paper. Other businesses
of ICI Pakistan Limited include pharmaceuticals and specialty products. Pakistan PTA Limited, located at Port Qasim near Karachi, manufactures pure terephthalic
acid (PTA) for the fibre industry. ICI Argentina manufactures a range of products of which wine chemicals and sulphur
related products are the most important. The wine chemicals business is located
near Mendoza, while the sulphur related products are manufactured at San Lorenzo,
near Rosario. Strategic developments in 2005In
December 2005, ICI India transferred the rubber chemicals business to a joint
venture company in line with its strategy to divest its interests in bulk chemicals. Following reviews of all manufacturing operations within Regional and Industrial,
a series of continuous improvement programmes are being implemented. This is
resulting in increases in productivity, improved raw material efficiencies and
reduced energy usage.




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Research and developmentThe
Technology Board, comprising the senior business R&D managers, and led by the Group Vice President of R&D, is responsible for the development of the Groups
technology strategy and its implementation by the R&D staff employed by the Groups businesses. In 2005, expenditure on R&D, excluding Technical Service, amounted to £147m (2004 £146m).
This expenditure represented 2.5% of
sales in 2005 (2004 2.6%) . Each of the Groups businesses is responsible for its own R&D resources
and for driving innovation to meet the needs of its customers and markets. The
business R&D teams
are complemented by a central R&D resource that aims to provide world-class
capabilities that are common to all the businesses. The Groups distributed
technology network draws on the expertise across ICI, allowing new products and
processes to be developed and exploited by individual businesses more rapidly,
and stimulating new options from the combination of the technical capabilities
of the Groups different businesses. The Business Development
    Board aims to accelerate the commercial exploitation of technology opportunities
    within ICI, and reflects the desire to develop continuously
and strengthen the links between market needs and technology capability. In 2005,
the board continued to focus on the exploitation of the Groups capabilities
in delivery systems to control the in-use release of products in the personal
care, flavours and fragrances markets. The board has also been working with the
Technology Board in managing the portfolio of projects undertaken by the central
technical resources, and in directing the Groups networks on food and on
personal care. Since 2003, the Group has
    had a Science Advisory Board which includes four leading external scientists
    who work with ICIs senior research executive. The boards
remit is
to help challenge and develop the Groups expertise across the breadth of
rapidly changing science and technology needed in its businesses. The Science
Advisory Board has been closely involved in developing strategy in key capability
areas such as high throughput experimentation, delivery systems, nutrition, fillers/resins
and sensory science. The Groups prime technology areas of biosciences, molecular sciences and
materials have been established to support its goals in selected growth markets
and to help establish its position as a leader in formulation science. Within
each of these areas is a portfolio of projects that is intended to accelerate
the Groups long-term technology development. Bioscience has key areas of knowledge and expertise which the Group applies to
the development of personal care, food and beverage products. Products to combat
the rise in human obesity are an opportunity that ICI is addressing and show
good potential. Molecular sciences underpin
    much of the Groups product development, focusing
in particular on high throughput R&D to explore novel molecules, formulations
and processes. In addition to growing capabilities in the ICI businesses, a centre
of excellence has been established with corporate funding to apply the high throughput
experimentation methodologies in developing ICIs position in formulation
science and technology. Projects have been completed in areas such as personal
care, lubricants, paint, materials development and sensory attributes of food
and of beverages. Current projects in the
    materials area are directed towards increasing the Groups
ability to fabricate at the nanoscale for macroscale effects. From such research
has come the
rapidly growing Dulux Diamond range, where exceptional hardness and
durability is achieved at a highly competitive price through the control of polymer
structure at the molecular level. Fundamental research on transport properties
in filled polymer systems is carried out by the central resources and underpins
the growth of the Electronic and Engineering Materials business of National Starch.


The prime technology areas
    mentioned above are underpinned by strong capabilities in measurement science
    and in modelling, both critical elements of ICIs
strong formulation science base. Efficient formulation is a multi-functional
business process, and investment in knowledge management tools and processes
is a priority. The competitive edge of the Group comes from the combination of
these capabilities, not merely the
demonstration of excellence in any one area. With the steady growth of
    ICIs business in China, the provision of technical
capabilities in that region is of increasing importance. Existing applications
laboratories are being developed, and it is planned to add local product development
capability for growth businesses such as paints, adhesives and electronics. Common
infrastructure needs in the businesses for measurement science and for emulsion
polymerisation are being co-located in Shanghai. As part of the capability development
plan six Chinese post-doctoral research employees joined the central research
facility at Wilton in the UK in 2005. Regulation, safety, security, health and the environmentICIs
businesses are subject to the normal regulatory framework applicable to a specialty
products and paints company, notably various health, safety and environmental
rules both at national and local levels in each of the jurisdictions in which
it operates. The scope of these laws varies across the different businesses and
jurisdictions. The various manufacturing processes require consents and licences,
including relevant emission permits. The Group requires full compliance by its
businesses with all relevant Safety, Security, Health and Environment (SSHE)
laws and regulations
wherever it operates. ICIs businesses also
    voluntarily conform to many international and national
codes of best practice. ICI attaches great importance to safety and health, to reducing any adverse environmental
impact of its activities year-on-year and to developing products and services
with improved
environmental features. The main process by which the Group manages SSHE issues and seeks to meet its
objectives is the Responsible Care Management System (RCMS). This sets out standards
along with guidelines, training, auditing and procedures for reviewing and reporting
performance, all of which are essential to continuous improvement.




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The system covers operations on site as well as security, product
stewardship and community relations. During 2005, Lloyds Register Quality Assurance Limited independently
verified that RCMS complies with the American Chemistry Councils new Responsible
Care Management System (2004) and Security Code of Management Practices (2002)
as well as the UK Responsible Care Codes, the certifiable international standards
for environmental and occupational health and safety management systems, ISO
14001 and OHSAS18001, and the ICC (International Chamber of Commerce) Business
Charter for Sustainable Development. ICI works to manage and minimise the risks associated with the soil and groundwater
on its sites and has developed further procedures to enable the ranking of priorities
for management attention. ICI is engaged in research aimed at developing and
implementing more cost effective environmental remediation technologies, some
of which is being undertaken in collaboration with other companies and academic
institutes. The raw materials which
    the Groups businesses use and the products that
they produce are subject to demanding regulations concerning product safety in
all parts of the world. These regulations, which also cover product testing and
risk assessment requirements, are subject to review and revision, as is currently
happening in Europe with the proposed REACH (Registration, Evaluation and Authorisation
of Chemicals) regulations. The Group is assessing the potential impact of these
proposals on its businesses and planning to ensure compliance when the new European
Union regulations come into force. In addition, there is constant
    pressure from legislators, customers and the general public to reduce the
    environmental and health impacts of products throughout
their life cycle. To
meet these requirements, ICI has a product stewardship programme
in place within each business. This voluntary programme embraces, through robust
business practices, product regulatory requirements, societal pressures, reducing
the risk of harm to people and the environment, and the provision of relevant
information to enable correct use and disposal of products. Anticipating external pressures and concerns and providing speedy, innovative
solutions with lower environmental and societal impact is becoming a key aspect
of sustaining competitive advantage. ICI recognises these pressures and is responding
with the introduction of new processes, products and services that improve the
efficiency of use of raw materials and utilities and reduce adverse effects. Processes are in place for regular reviews of environmental liabilities, and
provisions held at 31 December 2005 were in accordance with the accounting policy
described in the Group accounts on page 57. ICI believes that, within the existing
legislative framework and taking account of the provisions already established,
the cost of addressing currently identified environmental obligations (as ICI
currently views these obligations) is unlikely to have a material adverse effect
on its financial position or results of operations. During 2005 there were nine
    instances of breaches of environmental or product regulations which resulted
    in prosecutions or fines totalling £0.1m. Each
was investigated and
appropriate action taken.







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EnvironmentICIs
  environmental performance was ahead of target in the majority of areas for
  the five-year Challenge 2005 period, which includes the impact of its operations
  on land, air and water as well as product stewardship activities. Baseline
  levels and results are adjusted for portfolio changes. Of particular note are:
  13% energy reduction per tonne of production (target 5%), 18% reduction in
  greenhouse gas emissions per tonne (target 5%) and 17% reduction in water use
  per tonne (target 10%). Since 1990 ICI has reported reductions in energy use
  per tonne of 40%. The latest improvements have been achieved through efficiency
  improvements, asset rationalisation and redesigned production processes. These
  three indicators remain on the priority list for 2006-2010 as energy price
  rises and global
warming issues and regional water scarcity become more prevalent. Employee and employment principlesAs at 31 December 2005, ICI employed 31,910 people in more than 50 countries. An analysis of employee numbers by business and geographical area may be found
in note 5 relating to the Group accounts. ICI has a mixture of unionised and
non-unionised operations around the world. ICI considers its relations with its
employees to be generally good. ICI employment principlesICI manages
its global organisations through both its International Businesses and its Regional
and Industrial Businesses, each of which is responsible for determining its own
employees terms and conditions and employment policies within the framework
of the following Employment Principles agreed by the ICI Executive Management
Team. These Employment Principles are fully consistent with the commitments given in
both the ICI Sustainability Report and the ICI Code of Conduct.


Health and safety of employeesThe health
and safety of employees is a core value of ICI. Our policy is to ensure that
all activities are conducted safely and that the health of our employees is protected.
ICI sets demanding targets and monitors progress to ensure continuous progress
in this area. We require every employee, and those who work on our behalf, to
exercise personal responsibility in preventing harm to themselves and others.
We communicate openly with our employees about our health and safety activities
and performance and provide them with training to drive continuous improvement. Development of peopleICI is committed
to providing support to help release the full potential of all its employees,
whilst recognising that the ultimate responsibility for personal development
must rest
with the individual. The Company seeks to help every individual understand the personal strengths
they can leverage whilst providing the support they need to grow and develop
further, in line with the
needs of the business. DiversityOur ability
to become a high-performing organisation depends on our inclusion of people who
come from diverse backgrounds and who think in different ways about creating
value for our customers and stakeholders. The individuality and creativity that
every person brings to the work place is welcomed and appreciated and it is our
policy that everyone should be treated in a fair, open and honest manner. ICI will provide equal opportunities for all employees, irrespective of their
race, colour, creed, religion, gender, ancestry, citizenship, sexual preference,
marital status, national origin, age, pregnancy, or any other reason prohibited
by the laws of the individual countries in which it operates. This will apply
with respect to recruitment, promotion, compensation, transfer, retention, training,
benefits, and other
employment actions. Respect for the individualIt is the
right of all people to be treated with dignity and respect. ICI is committed
to providing and fostering a working environment that is free from harassment,
discrimination, victimisation or bullying, and where all employees are treated
with dignity and respect. Verbal or physical conduct that unreasonably interferes
with another individuals work performance, creates an intimidating, hostile,
or offensive working environment, or adversely affects opportunities, will not
be tolerated. Allegations of bullying or harassment will be taken seriously at
all levels and will be dealt with in a sensitive manner. Work/life balanceICI aims
to create a more productive and efficient workforce that will meet business requirements
while supporting employees in successfully managing their personal and family
commitments. We aim to exploit the opportunities offered by new technologies to improve our
ability to accommodate more flexible patterns of working, where the nature of
the work makes this
possible. Our success in achieving this relies on the co-operation and shared responsibility
of the Company and its employees, who are partners in the process of managing
the balance of
work/life issues. Organisational changeChange is
an important and inevitable feature of the world in which we live, and responding
positively to change is vital to our success and growth as an organisation and
as individuals. From time to time, this will also include changes to the structure
of our businesses. ICIs
commitment is to: •
    ensure
          that employees are kept informed about the issues and challenges
    facing the business;


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•
    be
          sensitive to the implications of change from the perspective of
    our employees; and•
    be
          understanding and supportive of their needs and to seek to mitigate
          the effects of necessary business
restructuring. Communication and consultationThe
Company is committed to effective consultation. It believes that knowledgeable
and well-informed employees are critical to its success and that there should
be clear channels of communication and opportunities for dialogue on issues which
affect employees working
lives. The principal aims of communication and consultation are to: •
    improve
        employees understanding
of the business and its goals;•
    increase
      mutual trust and commitment;•
    highlight
          any concerns which might have an adverse impact on the
    business; and•
    allow
      people to contribute their opinion and experience. Performance and rewardPay
structures for employees at all levels should be designed to reinforce the link
between performance and reward. Employees will, wherever possible, be set performance
objectives which support the achievement of overall team and business goals,
and their individual reward will reflect their performance against these objectives. Reward will also recognise the prevailing business climate and the circumstances
of the relevant local labour market. ICI disability discrimination policyThe
working environment of a disabled person may often contain barriers that affect
equal integration and participation within the workplace. These barriers may
take the form of unadapted equipment, physical access, or discriminatory attitudes
and behaviour. By attempting to create an accessible and non-discriminatory working
environment, the Company seeks to assist disabled people to achieve equality
alongside their
colleagues, and to make a full and positive contribution. Unfair discrimination of any disabled worker or visitor is unacceptable and will
not be tolerated by ICI. Allegations of disability discrimination will be taken
seriously at all levels and will be dealt with in a confidential manner. Appropriate
disciplinary action, including summary dismissal for serious offences, may be
taken against any employee who discriminates unfairly against a disabled person. In order to ensure that
    people with disabilities in ICI obtain equality of opportunity alongside
    others, and that they are actively encouraged to contribute and realise
their potential, ICI is undertaking the commitments set out by the UK Employment
Service
to become a Disability Symbol (the Symbol) user and is subscribing
to the initiative Positive About Disabled People, a nationally-recognised
framework for developing good practice in relation to disabled people. As a Company,
ICI is committed to improving work and career opportunities for all its employees,
and the Symbol supports this for both current and future employees, some of whom
may have a disability. ICIs commitments to disabled people include: a guaranteed job interview
for applicants with a disability who meet the minimum criteria for a vacancy;
regular consultation on what can be done to ensure that they can develop and
use their abilities at work; wherever possible retaining employees if they become
disabled; improving employee knowledge, awareness and understanding of disability
to make our commitments work;
and measuring the Groups achievements against these commitments, planning
ways of improving our performance and communicating future initiatives to employees.


Retirement benefitsThe
  Groups policy objective since 2000 has been to provide retirement benefits for its new employees on a defined contribution basis. 75% of ICIs
  employee population works in countries which have now switched to defined contribution
  provision for new employees. In addition a further 14% of employees work in
  countries where the main retirement benefit provision is via state and other
  mandatory
  arrangements. ICI
  also has significant defined benefit retirement liabilities for its existing
  employees, principally in closed pension schemes. In addition, post-retirement
  healthcare benefits are provided, principally to employees within the US businesses,
  and from
  2006 these will be on a defined contribution basis for new employees. The main defined benefit
    schemes are in the UK (the ICI UK Pension Fund and ICI UK Specialty Chemicals
    Fund), the USA, the Netherlands, Germany, Belgium and
Canada. With the exception of the retirement benefit schemes in Germany and the
post-retirement healthcare plans, all the tax approved schemes are funded. The
funds are generally administered by fund trustees or fiduciaries under trust
deeds and legislation appropriate to the relevant jurisdictions. The ICI UK Pension
Fund is by far the largest scheme and makes up 80% of the total Groups
defined benefit pension plans; in addition to 1,228 employee members, this fund
has 59,737 pensioner members
and 15,033 deferred pension members. Investment and liability decisions for the funded defined benefit schemes are
based on underlying actuarial and economic circumstances with the objective of
ensuring that the schemes have sufficient assets to meet liabilities as they
fall due. Investment strategy is generally to ensure an appropriate balance between
risk and reward having regard to the maturity of the fund. For example, the ICI
UK Pension Fund has 82% invested in bonds and 18% in return seeking assets such
as equities. This mix of investments takes account of the proportion of liabilities
relating to pensioner members. The funds are valued regularly,
    with assistance from independent actuaries, for funding purposes and are
    valued at least annually for accounting purposes. Given
the size of the pension liabilities, changes in their value or in the value of
the assets in the funds due to fluctuations in investment conditions can result
in significant volatility in funding levels and can have a material impact on
the Group. During 2005, a valuation of the ICI UK Pension Fund was completed
and the deficit, measured for funding purposes, increased from £443m at
31 March 2003 to £657m at 31 March 2005, with the majority of the increase
being due to changed mortality assumptions, based on the experience of the fund
and allowance for further improvement in longevity. The Company has agreed to
make increased top-up payments to the ICI UK Pension Fund over the
next nine years, comprising annual payments
of £122m for the first four years starting in 2006 and payments of £62m
for the following five years. The total present value
    of the liabilities of the Groups post-retirement
benefit schemes, measured in accordance with IFRS, were £9,882m at 31 December
2005. The fair
value of scheme assets at the same date was £8,194m resulting in an overall
net deficit in respect of pensions and post-retirement healthcare liabilities
of £1,688m. This deficit comprises £817m in respect of the ICI UK Pension
Fund, £449m in respect of other funded pension schemes and £422m in
respect of unfunded pension schemes and post-retirement healthcare benefits. For accounting purposes, the Group has adopted the option in IAS 19 to recognise
in full each year any actuarial gains and losses. The net recognised deficit
at the balance sheet date is based on the assets valued at market rates on the
balance sheet date, and liabilities valued using discount rates also determined
from market rates. This net deficit is thus subject to considerable volatility
based on changes in market conditions. The detailed assumptions are disclosed
in note 25. In the income statement the Group has chosen to present separately
the net finance expense from current and past service costs which are included
within operating costs.




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Other Group information Markets and distributionICI
sells its products through an extensive network of subsidiaries, associates and
distributors. Specialty products manufactured by National Starch, Quest and Uniqema are sold
mainly by direct sales forces and distributors. Customers are primarily other
manufacturers in a range of markets from consumer-orientated manufacturers of
branded goods in the food, perfume and personal care sectors to those involved
in surfactants, lubricants, papermaking and chemicals. Paints are sold through
    a range of distribution channels. Branded architectural paints are sold through
    a combination of independent trade and retail outlets,
as well as the
Groups own trade stores, particularly in North America and the UK. Can
coatings are sold to packaging manufacturers but supplied directly to beverage
and food manufacturers in Europe, the Americas and Asia, where they are used
in the
production process. The Groups Regional
    and Industrial businesses sell into a wide range of industries including
    engineering, textiles, pharmaceuticals, aerospace, electronics
and the extractive industries. These products are either marketed directly or
through independent merchants, wholesalers and distributors who resell to small
users. Commodity products are sold through a direct sales force or through distributors,
primarily to other
operators in the chemical industry. CompetitionOwing
to the breadth and variety of the products and end markets served, the Group
encounters a wide range of competitors, from multinational companies to many
small local and
independent firms. National Starch does not compete with any one competitor in all of its markets.
However, multinational competitors in specific markets include H. B. Fuller,
Rohm and Haas, Henkel, Air Products and Chemicals and A. E. Staley. Similarly,
Uniqema does not compete with any one competitor in all of its markets, but competitors
in particular markets include BASF, Cognis, Croda, Degussa and Rhodia. Quest is a leader in the
    development, application and production of flavours
and fragrances. Quests main competitors are multinational flavour and fragrance
houses, including
International Flavors & Fragrances (IFF) and Givaudan.


ICI Paints principal
    competitors have regional strengths in decorative coatings and include Sherwin-Williams
    (North America), BASF (Latin America),
Akzo Nobel (Europe) and
Nippon Paint (Asia). SeasonalityDue
to the diversity of their product portfolios and broad international coverage,
seasonality within National Starch, Quest, Uniqema and the Regional and Industrial
businesses is not significant. ICI Paints, however, is affected, with trading
patterns influenced by prevailing weather conditions. With the geographic profile
of ICI Paints, this typically results in higher levels of activity in the second
and third quarters of
the year. Sources and availability of raw materialsThe
raw materials used by ICIs businesses are from a variety of sources, principally
comprising petrochemical-based raw materials, renewable resources and a range
of other materials. A brief description of the raw materials and respective sources
is provided for each business below. ICI has established a core capability in
procurement, embedded within its businesses but managed across the Group by a
Procurement Board. ICI believes that the cost savings generated by improving
its procurement capabilities have been significant and that there is still scope
for significant further improvement. The prices of raw materials are subject to normal conditions of supply and demand.
However, the prices of some raw materials are volatile and are affected by cyclical
movements in
commodity prices and the availability of such materials. The primary raw materials
    used by National Starch are petrochemical based or are derived from corn
    and tapioca. A wide range of suppliers are used, and materials
are generally available in most geographic markets. Specialty hybrid corns (high
amylase and waxy seeds) are planted under contract for National Starch to help
ensure supply of these special strains. Many of National Starchs products,
especially in the Electronic and Engineering Materials business, contain one
or more proprietary raw materials, developed and manufactured in-house. These
materials are not available to National Starchs competitors, therefore
providing a unique position in a
number of markets. Quest purchases thousands of different raw materials from sources around the
world. The main natural raw materials are extracts and concentrates from fruits,
vegetables and other flora, as well as animal-based products and essential oils.
Synthetic raw materials are mostly organic chemicals. The raw materials for Uniqema include a wide range of both renewable (palm oil,
rape-seed oil and tallows) and petrochemical-based (ethylene oxide and propylene
oxide) raw materials. Tallow is typically procured in Europe, North America and
Latin America, while palm oil is normally sourced from Asia. Key raw materials for ICI Paints include resins, solvents and pigments supplied
by major chemical companies. Materials are typically available worldwide, and
ICI Paints believes its strong global footprint provides commercial advantages
in securing the supply of essential materials. Intellectual propertyICI
has many patents and patent applications which help to protect its technology
and numerous trademark registrations which help to protect its brands. In addition,
ICI derives substantial competitive advantage from proprietary business knowledge
relating to formulae, products, processes and technical know-how. ICI uses appropriate terms of employment and management processes to identify
and protect its intellectual property. As necessary, it enters into confidentiality
agreements with customers, suppliers and other third parties to protect the confidentiality
of its proprietary, technical and business information.


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Liquidity and capital resources
Treasury policiesThe
Groups Treasury seeks to reduce financial risk, to ensure sufficient liquidity
is available to meet foreseeable needs and to invest cash assets safely and profitably.
It operates within policies and procedures approved by the Board, which include
strict controls on the use of financial instruments in managing the Groups
risk. The Group does not undertake any trading activity in financial instruments.
The Group reviews the credit quality of counterparties and limits individual
and aggregate credit exposures accordingly.
Financing and interest rate riskAt
31 December 2005, the Groups net debt was £745m (2004 £989m after
IFRS restatement).


Debt is principally sourced
    from bonds, medium-term notes, commercial paper,
securitised receivables
and bank debt. The Groups borrowings are primarily raised centrally by
Group finance companies and subsequently 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 target is to maintain interest cover above four times. It maintains
its debt book principally in floating rates, but fixes debt, selectively, to
support its policy of trying to ensure that interest cover does not fall below
four times. Notes 22 and 30 relating to the Group accounts show the overall interest
rate structure of the Groups borrowings at the end of 2005. 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 future business
disposal proceeds due to be received. 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 30
relating to the Group accounts. 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 22 relating to the Group accounts. The
Groups objective in determining borrowing maturity is to ensure a balance
between flexibility,
cost and the continuing availability of funds. Funding policy aims to produce a reasonably even maturity profile for long-term
debt up to five years maturity. The average maturity for long-term debt was 3.5
years at 31 December
2005.




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Foreign currency riskMost
of the Groups net assets are denominated in currencies other than Sterling with the result that the Groups
  Sterling balance sheet can be significantly affected by currency movements.
  The Group partially hedges this effect by borrowing in currencies other than
  Sterling. The Group does not hedge translation exposures other than by the
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 2005 currency
    mix of profits, the adverse annual impact due to translation exposures on
    the Group operating profit (before special items)
  of a 5% strengthening of Sterling against the US dollar and related currencies
  compared with the average rates prevailing in 2005 would be approximately £13m.
  The equivalent impact of a 5% strengthening of Sterling against the Euro would
  lead to an adverse impact of
approximately £4m. Counterparty credit riskThe
Groups counterparty credit risks arise mainly from non-central operating cash held on short-term bank deposit, the positive mark to market effect of swaps and
  counterparty risk arising from the liquidity of the Groups captive insurance
  company. The Group considers the risk of material loss in the event of non-performance
by a financial or non-financial counterparty to be low.


Quantitative disclosure about market riskThe
analysis below presents the sensitivity of the market value or the fair value
of the Groups financial instruments to selected changes in market rates and prices. The rates
  of change chosen reflect the Groups view of changes that are reasonably
  possible over a one-year period. Fair values are quoted values or, where these
  are not available, values obtained by discounting cash flows at market rates
  or using option valuation models. The fair values for interest rate risk are
calculated by using a standard zero coupon discounted cash flow pricing model. Market risk  Interest
rate sensitivity
  The sensitivity analysis in the table which follows assumes an instantaneous
  1% movement in interest rates of all currencies from their levels at 31 December
  2005, with all other
variables held constant. Market risk  Interest rate sensitivityFair value
        
        Fair value change31 December
        
        +1%
        
        1%2005
        
        2004
        
        movement in
        
        movement ininterest rates
        
        interest rates£m
        
        £m
        
        £m
        
        £mLoans
        (1,280
        )
        (1,355
        )
        35
        
        (38
        )Currency swaps
        
        
        (2
        )
        
        
        Interest rate swaps
        (8
        )
        12
        
        (5
        )
        5  An absolute
    increase in interest rates of all currencies of 1% would result in an increase
    of £11m
in the Group net finance expense before post-retirement benefit finance costs.
Market risk  Foreign
currency sensitivity
  The sensitivity analysis in the table which follows assumes an instantaneous
  10% change in foreign currency exchange rates against Sterling from their levels
  at 31 December 2005, with all other variables (including interest rates and
  currency option volatility) held constant. Market risk  Foreign currency sensitivityFair value
        
        Fair value change31
    December
        
        +10%
        
        10%2005
        
        
        2004
        
        strengthening
        
        weakeningof Sterling*
        
        of Sterling*£m
        
        
        £m
        
        £m
        
        £mLoans
        (1,280
        )
        
        (1,355
        )
        85
        
        (102
        )Currency swaps
        
        
        
        (2
        )
        29
        
        (35
        )Forward contractshedging
debt
        5
        
        
        (12
        )
        9
        
        (11
        )Forward contractshedging
 working capital
        
        
        
        1
        
        2
        
        (2
        )*
Against all currencies. The
  Groups
  debt after financial derivatives at the 2005 year-end was held 50% in US dollars,
39% in Euro, 9% in Yen and 2% in other currencies. Changes from movements in currency rates in loans, currency swaps and forward
  contracts hedging debt, and similar movements in the values of the investments
  being hedged, are taken through the Statement of Group recognised income and
  expense in accordance with IAS 21 and IAS 39. Changes due to exchange movements in forward contracts hedging working capital
  are recognised in trading profit immediately, but are offset by gains/losses
  on the working capital
they are hedging.




|Operating
    and financial review | ICI
    Annual Report and Accounts 2005 23
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Group expenditure on property, plant and equipment and intangible assets

2005
        
        2004£m
        
        £mNational Starch
        53
        
        64Quest
        22
        
        17Uniqema
        17
        
        18Paints
        45
        
        48Regional and Industrial
        18
        
        10Corporate and other
        3
        
        3Total
        158
        
        160Depreciation and amortisation
        171
        
        169


2005
    
    2004£m
    
    £mUnited Kingdom
        20
        
        23Continental Europe
        27
        
        38North America
        64
        
        59Latin America
        8
        
        9Asia
        37
        
        30Other countries
        2
        
        1Total
        158
        
        160




Capital expenditureThe
analysis in the table above summarises the Groups capital expenditure on
property, plant and equipment and intangible assets over the two-year period
ending 31 December
2005. Capital expenditure of £158m for 2005 was £2m below 2004. In 2005, capital expenditure
    was incurred on a large number of relatively minor projects aimed at achieving
    additional capacity, as well as for productivity
improvements through increased automation of manufacturing processes and the
relocation and consolidation of facilities. ICI also continued to invest preferentially
in its grow aggressively businesses with National Starch opening
a new technical and manufacturing centre in China and Paints starting two new
manufacturing projects in China and Vietnam. Commitments for capital
    expenditure not provided in the Groups consolidated
financial statements totalled £100m at 31 December 2005 (2004 £123m). These are analysed further in note 32 relating to the Group accounts between
those for which contracts have been placed and those authorised, but not yet
contracted.







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        Annual Report and Accounts 2005 | Operating and financial review
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1. Peter B Ellwood, CBEChairmanAppointed a Non-Executive Director and Deputy Chairman on 27 June 2003 and Chairman with effect from 1 January 2004. Peter Ellwood joined Barclays Bank in 1961 where he held a number of senior roles
including Chief Executive of Barclaycard from 1985 to 1989. In 1989 he joined TSB Bank as Chief Executive, Retail Banking, was appointed
a Director of TSB Group in 1990 and became Group Chief Executive in 1992. Following
the merger with Lloyds Bank in 1995, he became Deputy Group Chief Executive of
Lloyds TSB Group plc, subsequently becoming Group Chief Executive in 1997 until
his retirement in 2003. He was Chairman of Visa International from 1994 to 1999. Peter Ellwood was made a Commander of the Order of the British Empire for services
to banking in 2001 and is a Fellow of the Chartered Institute of Bankers. He
has received Honorary Doctorates from both Leicester University and the University
of Central England. He is Chairman of the UK Royal Parks Advisory Board, The
Royal Parks Charitable Foundation and The Work Foundation of Great Britain. He
is also a Director of the Royal Philharmonic Orchestra and Deputy Chairman of
the Royal College of Music. In September 2005 he was appointed a Non-Executive
Director of First Data Corporation, Inc. In his business career Peter Ellwood has been a leader in driving structural
change and efficiency improvement and he brings to his role as Chairman extensive
business experience,
energy and determination. Aged 62. 2. John D G McAdamChief Executive
Appointed a Director on 1 March 1999 and Chief Executive on 9 April 2003. He
joined the Company in 1997 following the acquisition of the Speciality Chemicals
businesses from
Unilever. John McAdam graduated from Manchester University with a first class honours degree
    in Chemical Physics and, after completing his doctorate, was awarded a research
    fellowship.
In 1974 he joined Unilever as a management
    trainee and held a variety of managerial positions within Birds Eye Foods
    before joining the Board of Unilevers
    flavours and fragrance business, PPF International, as Technical Director.
    In 1987, he joined the Board of Quest International as Senior Vice President
    in charge of Manufacturing, Logistics and Procurement before returning to
    Birds Eye Walls, where he assumed
Board responsibility for Manufacturing, Research and Development.
In 1993 he was appointed Chairman
    of Unichema International and, following ICIs acquisition of the Unilever Speciality Chemical businesses in 1997, became Chairman and Chief
Executive Officer of Quest and a member of the ICI Executive Management Team. In January 1998 he was appointed Chairman and Chief Executive of ICI Paints and the following year he was elected to the Board of ICI with additional responsibility for
Research, Development and Technology and ICIs activities in Asia.
John McAdam is a business leader
    with a strong focus on results and extensive knowledge of ICIs operations
    around the world. The Board believes that the combination of knowledge, drive
    and leadership he is bringing to bear
    on the issues facing ICI is serving both the Company and its shareholders
  well.
Until September 2005, John McAdam was a Non-Executive Director of Severn Trent
    Plc. He was appointed as Senior Independent Director of J Sainsbury plc on
    1 September 2005. In addition, he is a member of the University of Surrey
    Business Advisory Board and a member of the University of Cambridge Chemistry
  Advisory Board. Aged 57.


3. Alan BrownChief Financial Officer Appointed a Director and Chief Financial Officer on 14 November 2005. Alan Brown read law at Liverpool University and was called to the Bar in 1981.
    He is also a member of the Chartered Institute of Management Accountants.
He joined Unilever in 1980 and during
    the first seven years of his career worked in Birds Eye Walls in the UK.
    After four years in Mergers & Acquisitions,
    Treasury and Investor Relations at Unilever Head Office, Alan Brown returned
  to Birds Eye Walls as Finance and Commercial Director in 1991.
In 1994 he moved to Unilever Food & Beverages,
    Europe, as Senior Vice President, Finance and Information Technology. In
    1997 he moved to Asia as Executive Chairman,
Unilever Taiwan and then, in 2001, assumed the role of Executive Chairman, Unilever
China and, more recently, of Unilever Hong Kong, as well.
Alan Brown has had a distinguished career as a senior finance professional and
    general manager within Unilever and possesses a considerable breadth of commercial
    and international experience, having worked extensively in Asia and Continental
  Europe. Aged 49.
4. David C M HamillDirector
Appointed a Director on 8 December 2003. He is Chairman and Chief Executive of
ICI Paints.
David Hamill joined the Company from
      Royal Philips Electronics where he was a member of the Group Management
    Committee. A graduate in Production Engineering
      and Management from Strathclyde University, David Hamill worked for Honeywell
      and General Instruments before joining Philips Semiconductors as product
      manager in 1986. He held a number of senior positions within Philips Power
      Semiconductors and Lighting businesses, becoming President of Philips Lighting
      Asia Pacific
      in 1996 and Executive Vice President of Philips Lighting and Chief Executive
  Officer of the Lamps business group two years later.
In May 2001 he became President and Chief Executive Officer of Philips Lighting.
David Hamill has held senior management roles in Europe and Asia where he has
        gained considerable production, commercial, marketing and finance experience.
        Whilst his experience with large retail customers has specific relevance
        for ICI Paints, his broader business expertise, and in particular his understanding
  of Asian markets, is of value to the Group as a whole.
Until 7 December 2005, David Hamill was a Non-Executive Director of BPB plc.
  Aged 48.
5. Charles F KnottDirector
Appointed a Director on 1 September 2004. He is Chairman and Chief Executive
of Quest International and has regional oversight responsibilities for Group
activities in Europe, the
Middle East and Africa.
Charles Knott graduated from Newcastle
    University in 1976 with an honours degree in Mathematics and Statistics.
    He joined National Starch and Chemical
      Company in 1984 as Commercial Director of Laing-National in Manchester
    and subsequently served in Germany and the Netherlands before returning to
    the
  UK in 1990 as Managing Director of National Starchs UK Adhesives operations.
Charles Knott was appointed Divisional Vice President, Performance Adhesives,
        in the United States and in 1994 became Senior Divisional Vice President
  and General Manager for the US Adhesives business.
In 1995 he relocated to Singapore
    to lead National Starchs Asia-Pacific
      operations as Corporate Vice President. He was appointed National Starch
    Chief Operating Officer in January 2001. In March 2003 he became Chairman
    and Chief
      Executive of Quest International, and Executive Vice President and member
  of the Executive Management Team of ICI. Aged 51.




|Board
        of Directors and Executive Management Team | ICI
    Annual Report and Accounts 200531
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6.
  William H PowellDirectorAppointed
  a Director on 2 February 2000. He is Chairman and Chief Executive of National
  Starch and Chemical Company and has Board responsibility for Sustainability
  (which includes Group Safety, Health and Environment matters). William
  Powell joined National Starch and Chemical Company in 1976, gaining extensive
  experience in production, planning and general management. In 1981, he was appointed
  Divisional Vice President of Manufacturing for Adhesives and Resins. He was
  promoted to Corporate Vice President of the Resins and Specialty Chemical Division
  in 1984; Corporate Vice President, International in 1986; Group Vice President,
  Industrial Starch and Food Products division in 1989; and Executive Vice President
  in 1997. In 1999, he was appointed Chairman and Chief Executive Officer. William
  Powell has a degree in Chemistry and a Masters degree in Chemical Engineering
  from Case Western Reserve University. In addition he has a Masters in Business
  Administration from the University of North Dakota. He is a past Chairman of
  the Corn Refiners Association and currently an Honorary Director. He is a Non-Executive
  Director of Granite Construction Incorporated and a member of the Institute
  of Food Technologists and the American Institute of Chemical Engineers. He is
  also a member of: the Board of Directors of the American Chemistry Council;
  the Executive Committee of the Society of Chemical Industry, American Section;
  and the Board of Trustees of the State Theatre of New Jersey. William Powell
  is a US citizen. Aged 60. 7.
  Adri BaanNon-Executive
  DirectorAppointed
  a Non-Executive Director on 25 June 2001. He has a Masters degree in Physics
  from the University of Amsterdam and joined Philips as a project manager in
  1969. He
  has held a series of senior positions with Philips in Europe and North America.
  From 1984 to 1986 he was Vice Chairman of Philips Industrial Electronics in
  Eindhoven and two years later was appointed Executive Vice President, North
  American Philips. He was Managing Director of Philips Business Electronics from
  1993 to 1996 and Chief Executive Officer and a Member of the Group Management
  Committee from 1996 to 1998. In 1998 he was appointed Executive Vice President,
  Royal Philips Electronics and Member of the Management Board, a position which
  he held until 2001. In
  addition, he was formerly the Chairman of Integrated Production and Test Engineering
  NV, and a Director of Medquist, NPM Capital, PSA Corporation Limited (Port of
  Singapore Authority), Hesse-Noord Natie, Port of Antwerp and ASM International
  NV. He is currently a Director of Wolters Kluwer NV, Hagemeyer NV, International
  Power plc, the Trust Office of KAS BANK NV, OCE NV, PSA Europe Limited and Chairman
  of the Supervisory Board of AFM (the Authority for Financial Markets in the
  Netherlands). He is also on the Board of the University of Amsterdam and Vice
  Chairman of Koninklijke Volker Wessels Stevin NV. Adri Baan is a Dutch national.
  Aged 63. 8.
      Rt. Hon. Lord Butler of Brockwell, KG, GCB, CVOSenior
Independent DirectorAppointed
  a Non-Executive Director on 1 July 1998. Since 1 January 2002 he has been the
Boards Senior Independent Director. After
  graduating with a double first in Mods and Greats (Literae Humaniores) from
  University College, Oxford, Lord Butler joined the Treasury in 1961 where he
  held a succession of posts before becoming Private Secretary to the Financial
  Secretary in 1964 and Secretary of the Budget Committee from 1965 to 1969. He
  was seconded to the Bank of England in 1969 and subsequently acted as Private
  Secretary to three Prime Ministers (Rt. Hon. Edward Heath 1972-74, Rt. Hon.
  Harold Wilson 1974-75 and Rt. Hon. Margaret Thatcher 1982-85). In
  1985 Lord Butler became second Permanent Secretary, Public Expenditure, HM Treasury,
  and in 1988 he was appointed as Secretary of the Cabinet and Head of the Home
  Civil Service. He retired from the Civil Service in 1998.




He
  is currently Master of University College, Oxford, and a Non-Executive Director
      of HSBC Holdings plc. In 1999 he served on the Royal Commission on Reform
      of
  the House of Lords and in 2004 chaired the UK Review of Intelligence on Weapons
      of Mass Destruction. He is also a trustee of the Rhodes Trust, a Visitor
      of
  the Ashmolean Museum and a member of the Marsh & McLennan International
  Advisory Board. Aged 68. 9.
  Joseph T GormanNon-Executive
  Director
  Appointed
  a Non-Executive Director on 20 September 2000. He is Chairman of the ICI Audit
  Committee. A
  graduate of Kent State University and holding a doctorate from Yale Law School,
  Joseph Gorman practised law for five years before, in 1962, joining the legal
  department of TRW Inc., a multi-national, diversified company specialising in
  space, defense and automotive systems. He
  became Secretary of TRW in 1970 and Vice President in 1972. He served as Vice
      President and General Counsel from 1976 to 1980 when he was elected Executive
      Vice President and given responsibility for the Industrial & Energy
      business unit. In 1985 he was appointed President and Chief Operating Officer
      of the
  Company and three years later became Chairman and Chief Executive Officer. A
  past Chairman of the US-Japan Business Council, he received Japans 1994
  Prime Ministers Trade Award for his contribution to promoting improved
  US-Japan trade relations. He has served on the Boards of the US-China Business
  Council and the Prince of Wales Business Leaders Forum and was a member of the
  Presidents Export Council. He is a trustee of the Centre for Strategic
  and International Studies and also serves the Council on Competitiveness as
  a co-industry vice chair and member of the executive committee. Joseph
       Gorman is a Director of Alcoa, Inc., The Procter & Gamble Company,
       National City Corporation and TMG International AB. Joseph Gorman is a
       US citizen. Aged
  68. 10.
      Richard N HaythornthwaiteNon-Executive
DirectorAppointed
  a Non-Executive Director on 20 February 2001. He is Chairman of the ICI Remuneration
  Committee. A
  graduate of The Queens College, Oxford with a degree in Geology and a
  Sloan Fellow of the Massachusetts Institute of Technology, Richard Haythornthwaite
  has over 25 years of international industry experience covering a broad mix
  of strategic and operational roles. He
  has extensive experience in organisational and cultural change leadership, cost
  reduction programmes, results-driven performance initiatives and negotiating
  and executing acquisitions and divestments worldwide. Richard
      Haythornthwaites career began with BP plc where he held a variety
      of positions in its European and American operations from 1978 to 1995,
      including General
  Manager of the Magnus Oilfield and President of BP Venezuela. In
  1995 he joined the Board of Premier Oil, where he was responsible for corporate
  and commercial affairs, and two years later joined Blue Circle Industries plc
  as Chief Executive of Heavy Building Materials in Europe and Asia. He was appointed
  Group Chief Executive of Blue Circle in 1999. Following its acquisition of Blue
  Circle in 2001, he became a Non-Executive Director of Lafarge S.A., standing
  down from that Board in July 2003. From 1999 to 2003 he was a Non-Executive
  Director of Cookson Group plc. In addition, from 2001 until 2005, Richard Haythornthwaite
  was Group Chief Executive Officer of Invensys plc. He
  is currently Managing Director of Star Capital Partners and Chairman of the
  Better Regulation Commission. In addition, he is Chairman of the Almeida Theatre
  Company Limited, Trustee of NMSI and a Board Member of the British Council.
  Aged 49.




|32
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      of Directors and Executive Management Team
|-------------------------------------------- | ------------------------------------------------------

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11.
Baroness Noakes, DBENon-Executive
DirectorAppointed
a Non-Executive Director on 1 March 2004. A law graduate of Bristol University,
Baroness Noakes has extensive experience both in the City, as a senior partner
of KPMG, from which she retired in 2000, and as an adviser to the UK Government. She joined Peat Marwick Mitchell & Co (now KPMG) in 1970 and was made a partner
in 1983. Her experience was a combination of corporate and public sector work
and she led
KPMGs international government practice. From 1979 to 1981 she was seconded to HM Treasury. In a further secondment in
1988, she joined the Department of Health as Director of Finance and Corporate
Information on the NHS Management Executive, the Board chaired by the NHS Chief
Executive. She was a Director of the Bank of England from 1994 to 2001, becoming
the Senior Non-Executive Director in 1998. She was a Non-Executive Director of
John Laing plc from 2002 to 2004 and has also served as President of the Institute
of Chartered Accountants in England and Wales. Baroness Noakes is currently
      the Senior Independent Director at both Carpetright plc and SThree plc.
      She is also a Non-Executive Director of Hanson plc and the English National
      Opera and is also a trustee of the Reuters Founders Share Company. Aged
    56.     New
        Directors appointed between Annual General Meetings to fill casual vacancies,
        or as additional Directors, retire at the Annual General Meeting following
        their appointment and are eligible for election. At each Annual General
        Meeting one third of the other Directors, or if their number is not three
        or a multiple of three, the nearest to one third (being those longest
        in office since their last election or re-election), also retire and are
        eligible for re-election. In addition, any Director who has been in office
        for three years or more since his or her last re-election shall retire
        at the Annual General Meeting.
      Tim Scott died in
          August 2005. He was succeeded by Alan Brown as Chief Financial Officer
        who was appointed on 14 November 2005.
      Alan Brown retires
          under Article 102 of the Companys Articles of Association. He
        is recommended for election to the Board.
      Peter Ellwood, Richard
          Haythornthwaite and John McAdam retire under Article 96 of the Companys
        Articles of Association. All three Directors are recommended for re-election.
      In addition, Lord
          Butler retires in accordance with the policy set out on pages 35 and
        36. He is recommended for re-election.
      All Executive Directors
          are employed on rolling contracts, subject to no more than one years
        notice.
      No Director or Officer
        has a family relationship with any other Director or Officer.






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      of Directors and Executive Management Team | ICI
      Annual Report and Accounts 2005 33
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Executive
  Management Team The Executive
  Management Team comprises the Executive Directors and the following: 12.
        Leonard J BerlikAppointed
  a member of the Executive Management Team on 1 April 2000. He is Executive Vice
  President, Uniqema. He joined National Starch and Chemical Company in 1972 and,
  prior to his appointment with Industrial Specialties (now Uniqema) in 2000,
  served as Executive Vice President of the Adhesives Division. He is a Non-Executive
  Director of NIZO food research B.V. Leonard Berlik is a US citizen. Aged 58. 13.
        Rolf DeusingerAppointed
  a member of the Executive Management Team on 1 July 2002. He is Executive Vice
  President Human Resources. He joined the Company in October 1999 as Senior Vice
  President Human Resources for ICI Paints. Previously he was Head of International
  Human Resources for Messer Griesheim GmbH based in Germany. He has more than
  20 years of international experience in the field of Human Resources, predominantly
  in consumer businesses, including PepsiCo, covering the Americas, Europe and
  Central Asia. Rolf Deusinger is a German national. Aged 48. 14.
        Andy M RansomAppointed
  a member of the Executive Management Team on 1 July 2005. He is General Counsel,
  Executive Vice President Mergers and Acquisitions and Company Secretary. A graduate
  of the University of Southampton, Andy Ransom qualified as a solicitor in 1987
  and joined ICI in the same year, specialising as a senior mergers and acquisitions
  lawyer in the Corporate Centre. He was seconded to ICI Explosives in Toronto,
  Canada in 1996 and became Vice President and General Counsel for ICI in the
  Americas, based in New Jersey, USA, two years later. In 2000 he was appointed
  Group Vice President Mergers and Acquisitions, before being appointed to his
  current role. Aged 42. Officers of the CompanyThe
  persons listed above together with David J Gee, Executive Vice President, Regional
  and Industrial businesses, are regarded as the Officers of the Company for the
  purposes of the Annual Report and Accounts. Michael H C Herlihy was an Officer
  until his retirement on 30 June 2005, after which he was replaced by Andy M
  Ransom. Key management personnelFor
  the purposes of disclosure under IAS 24 Related
  Party Disclosuresas in note 2 relating to
  the Group accounts on page 64, key management personnel are considered to comprise
  the Directors and Officers of the Company.






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Nomination CommitteeThe Nomination Committee is responsible for proposing new appointments of Directors to the Board and reviews succession plans and arrangements for the Board and EMT. It met on two
occasions in 2005.


The Nomination
    Committee comprises the NonExecutive Directors, under the chairmanship
    of Mr Ellwood. In 2005, the Committee dealt with the appointment of a new Chief Financial Officer,
as described above. It also agreed the processes to be followed in relation to
future Board appointments and discussed succession planning arrangements for
NEDs. Remuneration CommitteeThe
Remuneration Committee determines, on behalf of the Board, the Companys
policy on the remuneration of the Chairman, Executive Directors and the most
senior management of the Company. The Committee determines the total remuneration
packages for these individuals, including any compensation on termination of
office. It met on five occasions in 2005. The Committee comprises
    the NEDs under the chairmanship of Mr Haythornthwaite. The Chairman of the
    Committee normally invites the Chairman, Chief Executive,
Executive Vice President
Human Resources and Vice President Performance & Reward to attend meetings,
to respond to specific questions raised by the Committee. This specifically excludes
any matter concerning their own personal remuneration. The work of the Remuneration Committee during 2005 has included consideration
of the following matters: •
    reviewing
          the peer group companies for the Total Shareholder Return
          (TSR) element of the Performance Growth
Plan (PGP) 2005- 2007
cycle;•
    testing
      performance conditions for share option grants;•
    approving
      the 2004 Remuneration Report;•
    reviewing
          and approving the restated annual incentive plan targets for
          the Chief Executive and EMT,
following the 2005 IFRS restatement
process;•
    reviewing
      and revising the Companys policy on Executive rewards;•
    conducting
    a review of the effectiveness of the Remuneration Committee;•
    reviewing
          and approving the death in service benefits to be paid to
    the estate of Mr Scott;•
    approving
      the remuneration package of the new Chief Financial Officer;•
    reviewing
          and approving revised fee and base salaries for the Chairman,
          Chief Executive and the EMT;
and•
    approving
          annual grants and awards under the Annual Incentive Plan,
          the Executive Share Option Scheme and
the PGP for the Chief Executive
and the EMT.


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        Annual Report and Accounts 2005 | Corporate
    governance
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The Remuneration Report on pages 42 to 52 includes details of remuneration policy
and practices, and the remuneration of Directors. Audit CommitteeThe Audit Committee assists the Board in the discharge of its responsibilities for corporate governance, financial reporting and corporate control. It met on four occasions in 2005.
The Committee comprises the NEDs under the chairmanship of Mr Gorman. The dates on which these individuals were first appointed to the Committee are as follows: J T Gorman
        September 2000A Baan
        June 2001Lord Butler
        July 1998R N Haythornthwaite
        February 2001Baroness Noakes
        March 2004 The Board has determined that Mr Gorman and Baroness Noakes are
the Audit Committees financial experts.


The Audit Committee has established a policy which is intended to preserve the
independence of KPMG Audit Plc, when acting as auditor of the Group Accounts.
This policy governs the provision of audit and non-audit services by the auditor
and its associates. It identifies certain non-audit services which the auditor
is prohibited from providing. Certain defined categories of permitted service
are approved by the Audit Committee on an annual basis and the Chairman of the
Audit Committee may approve additional categories, subsequently ratifying these
with the Audit Committee at its next meeting. Audit and non-audit engagements
are also subject to formal authorisation procedures based on the level of fees
involved, with major engagements requiring authorisation by the Committee. Audit and internal controlIn
accordance with the Turnbull Guidance on internal control, the Board confirms
that there is a process for identifying, evaluating and managing the significant
risks to the
achievement of the Groups strategic objectives. The process has been in
place throughout 2005 and up to the date of approval of the Annual Report and
Accounts, and accords with the Turnbull Guidance. The effectiveness of this process
has been reviewed by the Audit Committee, which reports its findings for consideration
by the Board. The processes used by the Audit Committee to review the effectiveness of the
system of internal control include: •
    discussions
          with management on risk areas identified by management
    and/or the audit process;•
    the
      review of internal and external audit plans;•
    the
          review of significant issues arising from internal and external
    audits;•
    the
          review of management processes for significant Group risks defined
          by the full Board on the basis of
proposals from the Group Risk
Committee (GRC); and•
    annual
    compliance statements from each business and major function. Normally,
    the Audit Committee reports to the Board the results of its review of the
    risk management process for the full Group risk register. The full Board
    then reviews the Group risk register and draws its collective conclusions
    as to the effectiveness of the system of internal control. However, in 2005
    the risk management process and performance was reviewed by the full Board,
    allowing Directors the opportunity
to review
the appropriateness of the Groups approach to risk. The GRC consolidates, reviews and prioritises input from the businesses and management
and reports its conclusions to the Audit Committee and the Board. The GRC comprises
the heads of major corporate functions, the Chief Internal Auditor and the Deputy
General Counsel. The Internal Audit function reviews internal controls in all key financial activities
of the Group, typically over a three-year cycle. It acts as a service to the
businesses by assisting with the continuous improvement of controls and procedures.
Actions are agreed in response to its recommendations and these are followed
up to ensure that satisfactory control is maintained. Quarterly reviews are also
conducted between internal audit management and the senior management of the
businesses to assess their current control status and to identify and address
any areas of concern. During 2005, as part
of the Groups programme to meet the requirements of Section 404 of the
US Sarbanes-Oxley Act 2002, the Internal Audit function has focused principally
on developing and implementing the plan to identify, document and test key controls
over financial reporting.


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|Corporate
        governance | ICI
        Annual Report and Accounts 200537

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The Board is responsible for maintaining and reviewing the effectiveness of
  the Groups system of internal controls. The internal control systems
  are designed to meet the
Groups particular needs and the risks to which it is exposed. They are
designed to manage, rather than eliminate, the risks to the achievement of business
objectives, and can only provide reasonable and not absolute assurance against
misstatement or loss. The Groups strategic direction is regularly reviewed by the Board. Annual
  plans and performance targets for each business are set by the Chief Executive
  and are reviewed in
total by the Board in the light of the Groups overall objectives. The processes to identify and manage the key risks to the success of the Group
  are an integral part of the internal control environment. Such processes include
  strategic planning, the appointment of senior managers, the regular monitoring
  of performance, control over capital expenditure and investments and the setting
  of high standards and targets for safety, health and environmental performance.
  Businesses are responsible for meeting the defined reporting timetables and
  compliance with Group accounting manuals, which set out accounting policies,
  controls and definitions. The Chief Executive receives
    a monthly summary of financial results from each business, and the Groups
    published quarterly financial information is based on a standardised and
timely reporting process. Responsibility for monitoring compliance with Group policies and guidelines
  rests with the chief executive officers of the businesses and with senior managers
  at the Corporate Centre. Annual statements of compliance are provided to the
  Board, and these statements are reviewed by the relevant functional leader
  for each policy area. In turn, there is an annual report to the Audit Committee,
  on behalf of the Board, on the degree of compliance with Group policies and
  guidelines. Corrections to any weaknesses found are monitored and controls
  are developed to match changing circumstances.


US corporate governance complianceAs
a consequence of its US listing, the Company is required to comply with the provisions
of the Sarbanes-Oxley Act 2002, as it applies to foreign issuers. The Company
continues to monitor its legal and regulatory obligations arising from Sarbanes-Oxley.
The Company has taken action to be compliant with those rules that have already
become effective, and has plans to address rules with effective dates in 2006
and beyond. In particular, the Group has developed and progressed its plans to
meet the requirements of Section 404 of the Sarbanes-Oxley Act. In accordance with recommendations issued by the SEC, the Company has established
  a Disclosure Committee comprising appropriate senior executives from the ICI
  Corporate Centre: the General Counsel and Company Secretary, the Chief Financial
  Officer, the Vice President, Investor Relations and Corporate Communications,
  and the Chief Internal Auditor and Group Financial Controller. The Disclosure
Committees responsibilities include: •
    designing,
          maintaining and evaluating the Companys disclosure controls
          and procedures and reporting
its evaluation to the Chief Executive
and Chief Financial Officer;•
    reviewing
          the Companys Annual Reports, interim results announcements
          and other materials disseminated
to shareholders before
they are released;•
    satisfying
            itself as to the verification processes for all announcements and
    the formal sign-off of related documents; and






|38
            ICIAnnual Report and Accounts 2005 | Corporate
    governance
|------------------------------------------------- | ------------------------

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•
    recommending
          appropriate employee training in respect of the handling
          of inside information and the ICI
Disclosure Policy. In accordance with the ICI Disclosure Policy, the Committee provides a formal
report to the Board on an annual basis, through the Company Secretary, stating
how the Committee has
performed its duties in respect of monitoring inside information. In November 2003, the SEC approved new NYSE corporate governance rules for listed
companies. Under these rules, as a NYSE-listed foreign private issuer, ICI must
disclose any significant ways in which its corporate governance practices differ
from those required to be followed by US companies under NYSE listing standards.
We believe the following to be the significant differences between our corporate
governance
practices and NYSE corporate governance rules applicable to US companies. Independent Directors
Under
NYSE listing rules applicable to US companies, independent directors must comprise
a majority of the board of directors. The NYSE rules include detailed tests for
determining director independence while the Combined Code prescribes a more general
standard for determining director independence. The Combined Code requires a
companys board to assess director independence by affirmatively concluding
that the director is independent of management and free from any business or
other relationship that could materially interfere with the exercise of independent
judgement. The ICI Board does not have
    a majority of independent Directors. However, the Board includes a balance
    of Executive Directors and independent Non-Executive
Directors such that no individual
or group can dominate the Boards decision making and the Company complies
with the Combined Code. The Board of ICI has assessed
    the independence of the NEDs against the criteria set out in the Combined
    Code and the NYSE corporate governance rules, save that
in the case of the latter, the Board has not sought to enquire into interests
of Directors family members other than their spouse and has concluded that
all the NEDs are independent and that ICI complies with the requirements of the
Combined Code. Nominating/Corporate
Governance Committee
US
companies
listed
on the NYSE are required to have a Nominating/Corporate
Governance Committee composed entirely of independent directors with a charter
that addresses the ttees purpose including the responsibility to develop
and recommend to the Board a set of corporate governance principles. ICI does not have
a Nomination/Corporate Governance Committee. ICIs Nomination Committee
comprises the Companys independent Non-Executive Directors and the Chairman
who was deemed, under the Combined Code, to be independent on appointment. The
responsibility for developing the Companys corporate governance principles
rests with the Board. Non-management directors'
meetings
Pursuant to NYSE listing standards for US companies, non-management directors
must meet on a regular basis without management present and independent directors
must meet separately
at least once per year. ICIs NEDs meet twice a year with the Chairman and
Chief Executive. These meetings include evaluation of Board and individual Director
performance and succession plans. The Chairman and Chief Executive both absent
themselves when their own performance is being assessed. Discussions are led
by the Chairman, except when his own performance and succession is discussed,
when the Senior Independent Director takes the chair.


Adoption and
disclosure
of corporate governance guidelines
US companies listed on the NYSE are required to adopt and disclose corporate
governance guidelines. The Listing Rules of the UK Financial Services Authority
require each listed company incorporated in the United Kingdom to include in
its Annual Report and Accounts a narrative statement of how it has applied the
principles of the Combined Code and a statement as to whether or not it has complied
with the provisions of the Combined Code throughout the accounting period covered
by the Annual Report and
Accounts. As stated on page 35, ICI has applied the principles contained in Section I of
the Combined Code and has complied throughout 2005, and to the date of this Annual
Report and Accounts, with the provisions set out therein as they apply to the
Company. The Combined Code does not require ICI to disclose the full range of
corporate governance guidelines with which it complies. In August 2005, in compliance
    with the governance rules of the NYSE and Rule 10A-3 of the Securities Exchange
    Act of 1934, it was determined that each member
of the ICI Audit Committee satisfied the SEC independence requirements. As part
of this determination it was confirmed that no compensation from the ICI Group
had been received by any child or stepchild sharing a home with an Audit Committee
member. Subsequent to this determination, the Company filed with the NYSE a written
affirmation that
the Audit Committee complied with Section 303A of the NYSEs Listed Company
Manual. Principles
of business conductAs
a leading international
company, ICIs reputation for high ethical standards is central to its business
success. ICIs Code of Conduct (the Code) provides guidance
in this area and has been communicated throughout the Group. It applies to all
ICI employees, including Directors and Officers. A confidential, independently
operated, whistle-blowing service is also provided to enable staff to report
any
suspected non-compliance. The Code is published on ICIs corporate website
(www.ici.com) and is available in paper form from the Company Secretariat on
request.




|Corporate
    governance | ICI
          Annual Report and Accounts 2005 39
|------------------------ | ------------------------------------------------

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Performance
        Growth Plan (PGP)The
PGP makes conditional awards of ICI shares to Executive Directors which are linked
to performance over a fixed three-year period, measured as follows: •
        for the Chief
            Executive and Chief Financial Officer, the number of shares earned under
            the PGP will depend wholly on the Total Shareholder Return (TSR) for
            ICI
relative to the TSR of
each of the companies in ICIs Peer Group as set out below. TSR is the change
in share price plus reinvested dividends;•
        for the other
            Executive Directors, each of whom has responsibility for the performance
of one of ICIs International Businesses, reward will be based on the performance
of both
ICI and their Business:–
        50% of their award will be based on the TSR performance of the Company relative
to the Peer Group; and–
        the other 50% of their award will depend on the Economic Profit performance over
three years of the Business for which the Executive Director is responsible.
Economic Profit is based on profit after tax less a charge for the use of capital;
and•
        in addition, the Remuneration Committee must be satisfied that the underlying
profit performance of ICI is sufficient to justify the receipt of shares under
the PGP, notwithstanding
the relative TSR achieved. The Peer Group for the TSR
    element represents key competitors of ICIs International
Businesses and companies comparable to ICI, selected on the basis of market location,
size, portfolio and performance. The Peer Group is approved by the Remuneration
Committee with advice from external independent advisers. It is reviewed annually
and also on the occasion of a significant event impacting either ICI or one of
the Peer Group companies. The Peer Group companies for the conditional awards
to be made in 2006 are: Air Products and Chemicals, Akzo Nobel, BASF, Chemtura
(formerly Crompton Corporation), Ciba Speciality Chemicals, Clariant, Degussa,
Dow Chemical, DSM, DuPont,
Givaudan, International Flavors & Fragrances, Rohm and Haas, PPG Industries,
The BOC Group and Sherwin-Williams. This Peer Group remains unchanged from 2005. The Remuneration Committee considers that there are a sufficient number of comparators
to ensure that the basis for performance measurement is stable and robust. The maximum conditional award to be made in 2006 will be 100% of base salary
(200% in the case of US Directors). For the maximum awards to be paid on the
TSR element, performance must be at position 3 or higher out of the 17 companies
(including ICI) in the Peer Group. For achieving median TSR performance (position
9 out of 17), 40% of this maximum award will be paid. Awards are pro-rated between
positions 9 and 3. No award will be paid for below median TSR performance (below
position 9 out of 17).


TSR has been selected as a performance measure as it will reward any relative
out-performance of ICI versus its global competitors. TSR is calculated by independent
external advisers
and approved by the Remuneration Committee. Economic Profit has been selected as it is a measure of profitable growth and
efficient use of capital that are significant contributors to the generation
of sustainable shareholder value. The Economic Profit targets for each International
Business, which are set by the Remuneration Committee, are designed to be as
demanding as the TSR measure. The shares required to make
    awards under the PGP are provided via a trust funded by ICI. There is, therefore,
    no dilution of the Companys issued share capital
as the shares are
purchased in the market. The operation of the PGP is in accordance with the terms of the Plan approved
by shareholders at the AGM held on 28 April 2000. 2005 Actual
  remuneration Base
salariesSalaries
      for Executive Directors were reviewed and increased with effect from 1
January 2005 when individual increases ranged from 3.6% to 9.4% with an average
increase
      of 5.6% . Individual increases reflected both the performance of the individual
      executive and their base salary position relative to the external market.
Details are shown in the Directors emoluments table on page 45. Annual
        Incentive PlanThe
bonus opportunity available to Executive Directors for 2005 for the achievement
of on-target performance was 50% of base salary, with a maximum opportunity of
100% of base salary
for significant over-achievement.






|Remuneration
            report | ICI
        Annual Report and Accounts 200543
|------------------------------- | ---------------------------------------------

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2005 Actual remuneration (continued) The targets focused on the delivery of profit, cash flow, return on capital employed
(ROCE), sales and key strategic objectives, with greatest weighting on the financial
measures of profit and cash flow. For those executives responsible for the performance
of one of ICIs International Businesses, the heaviest weighting was on
the profit of the executives own business, with the other financial measures
being the cash flow, ROCE and sales performance of their business. On-target
performance and the ranges defining minimum and maximum payment were agreed by
the Remuneration Committee and were set to be appropriately challenging for the
ICI Group and for each International Business. Indicatively, the financial performance
required to achieve maximum payment in 2005 on the profit measures was 15% greater
than the level
for on-target performance. Bonus payments made to the executives in respect of ICIs performance in
2005 reflected the satisfactory progress made during the year in mixed trading
conditions. The on-target level of performance for the Group profit measure was
achieved and the on-target performance for cash flow before acquisitions and
divestments was comfortably exceeded, whilst return on capital employed was just
below the on-target level. Generally the International Businesses met or exceeded
targets, with cash flow generation being of particular note, achieved through
good working capital control and the effective management of capital expenditure.
Payments for the financial elements comprised, on average, approximately 80%
of the total bonus payments made for
2005. The key strategic objectives for 2005 focused on driving down operating costs,
development and retention of executive talent and, where required, developing
and executing focused improvement plans for specific business areas to ensure
they meet their strategic targets. The level of performance against the individual
objectives has been reviewed in detail by the Remuneration Committee which has
approved the appropriate levels
of payment. The payments under the 2005 Annual Incentive Plan are shown in the
Directors emoluments table on page 45. Long-term Incentives
For the 2003 to 2005 performance period of the Performance Growth Plan, ICIs
share price growth and dividend yields resulted in a Total Shareholder Return
that ranked ICI at Position 6 out of the 17 companies in the Peer Group. This
is between Median and Upper Quartile performance, at which level the performance
condition specifies that 70% of the TSR related awards made in 2003 will vest.
Details of the shares released to individual Executive Directors are set out
on page 46.


One Director received an award under the Economic Profit measure of the Performance
Growth Plan for the 2003 to 2005 performance period and this is shown on page
46 together with
details of the performance achieved. Details of the share option plan under which options were granted in 2005 are
laid out on page 43 and the performance conditions are set out on page 48. There
is no retesting of the
Performance Condition. There were no options exercised by Executive Directors during 2005.




|44
      ICI Annual Report and Accounts 2005 | Remuneration
  report
|-------------------------------------------- | ---------------------

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Directors emoluments(audited)

|                               |       |  | Base
      salary |  | Annual
      incentive |  | Benefits
      and other    |  | Compensation
      for loss |  | Total         
|------------------------------ | ----- |  | ----------------- |  | ---------------------- |  | --------------------------- |  | --------------------------- |  | --------------
|                               |       |  | and fees          |  | payments               |  | emoluments
      (note 2,3) |  | of office                   |  | (note
      4)
|                               |       |  | (note
      1)    |  |                        |  |                             |  |                             |  |               
|                               |       |  |                   |  |                        |  |                             |  |                             |  |               
|                               |       |  | 2005              |  | 2004                   |  | 2005                        |  | 2004                        |  | 2005          
|                               | notes |  | £000              |  | £000                   |  | £000                        |  | £000                        |  | £000          
|                               |       |  |                   |  |                        |  |                             |  |                             |  |               
|P B Ellwood                    | 6     |  | 260               |  | 240                    |  |                             |  |                             |  |               
|                               |       |  |                   |  |                        |  |                             |  |                             |  |               
|Dr J D G
      McAdam          |       |  | 700               |  | 640                    |  | 478                         |  | 609                         |  | 23            
|                               |       |  |                   |  |                        |  |                             |  |                             |  |               
|A J Brown                      | 1,3,5 |  | 54                |  |                        |  |                            |  |                             |  | 23            
|                               |       |  |                   |  |                        |  |                             |  |                             |  |               
|D C M Hamill                   | 3     |  | 406               |  | 390                    |  | 263                         |  | 289                         |  | 134           
|                               |       |  |                   |  |                        |  |                             |  |                             |  |               
|C F Knott                      | 3,5,7 |  | 381               |  | 124                    |  | 199                         |  | 99                          |  | 89            
|                               |       |  |                   |  |                        |  |                             |  |                             |  |               
|W H Powell                     | 8     |  | 414               |  | 397                    |  | 179                         |  | 206                         |  | 19            
|                               |       |  |                   |  |                        |  |                             |  |                             |  |               
|T A Scott                      | 1,5   |  | 268               |  | 375                    |  | 165                         |  | 340                         |  | 20            
|                               |       |  |                   |  |                        |  |                             |  |                             |  |               
|A Baan                         | 9     |  | 36                |  | 36                     |  |                             |  |                             |  |               
|                               |       |  |                   |  |                        |  |                             |  |                             |  |               
|Lord Butler                    | 9     |  | 46                |  | 46                     |  |                             |  |                             |  |               
|                               |       |  |                   |  |                        |  |                             |  |                             |  |               
|J T Gorman                     | 9     |  | 46                |  | 46                     |  |                             |  |                             |  |               
|                               |       |  |                   |  |                        |  |                             |  |                             |  |               
|R N Haythornthwaite            | 9     |  | 46                |  | 46                     |  |                             |  |                             |  |               
|                               |       |  |                   |  |                        |  |                             |  |                             |  |               
|Baroness
      Noakes          | 5,9   |  | 36                |  | 30                     |  |                             |  |                             |  |               
|                               |       |  |                   |  |                        |  |                             |  |                             |  |               
|Directors
      in prior years | 10    |  |                   |  |                        |  |                             |  |                             |  |               
|                               |       |  |                   |  |                        |  |                             |  |                             |  |               
|Total                          |       |  | 2,693             |  | 2,370                  |  | 1,284                       |  | 1,543                       |  | 308           
|                               |       |  |                   |  |                        |  |                             |  |                             |  |               
|                               |       |  |                   |  |                        |  |                             |  |                             |  |               

|(1)  | Base salaries and fees
        for 2005, included in the table, are the same as the annual rate of base
        salaries or fees in payment at 31 December 2005, except in respect of
        Mr T A Scott who died on 12 August 2005 and Mr A J Brown whose annual
      base salary at 31 December 2005 was £415,000.                                                                                                                                                                                                   
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(2)  | Benefits include company
        car, medical insurance and life and long-term disability insurance (where
        not provided within pension benefit plans) and, for UK based Directors,
      external advice provided to them on the new UK pension regime.                                                                                                                                                                                                                                                           
|    
|(3)  | Other emoluments comprise
        retirement benefit allowances payable in cash to Mr A J Brown and to
        Mr D C M Hamill (see notes 5 and 8 to pension benefits table on page
        49), a car allowance paid to Mr Brown in lieu of provision of a company
        car and an overseas allowance payable to Mr C F Knott.                                                                                                                                                                                        
|    
|(4)  | There are no itemised
        disclosures included in the Total figures in connection with expense
        allowances paid in respect of services chargeable to UK income tax as
        no such payments were made to any Directors in 2005 or 2004.                                                                                                                                                                                                                                                                     
|    
|(5)  | Mr A J Brown was appointed
        an Executive Director on 14 November 2005. Baroness Noakes was appointed
        a Non-Executive Director on 1 March 2004 and Mr C F Knott was appointed
        as an Executive Director on 1 September 2004. Mr T A Scott died on 12
        August 2005.All
      amounts reported for these individuals are in respect of the part of the
      year for which they were employed as Directors. This includes a pro-rated
      annual incentive payment to the estate of Mr Scott.
|    
|(6)  | During 2005, Mr P B
        Ellwood elected to receive 30% of his fees in the form of ICI Ordinary
      Shares (2004 30%).                                                                                                                                                                                                                                                                                                                                                                                               
|    
|(7)  | Mr C F Knott has service
        agreements with Quest in both the Netherlands and in the UK. Mr Knotts
        annual base salary as at 31 December 2005 under these agreements comprised392,000
          and £112,500 respectively. The base salary disclosed is the total
          sterling equivalent.The
          Euro denominated salary is translated at the average exchange rate
          (2005 £1 =1.462;
          2004 £1
      = 1.435).                                                             
|    
|(8)  | In 2005 Mr W H Powell
        received a base salary of US$754,500 (2004 US$728,000). The US
        dollar denominated salary is translated at the average exchange rate
      (2005 £1 = US$1.820; 2004 £1 = US$1.832).                                                                                                                                                                                                                                                                                                 
|    
|(9)  | For 2005 the remuneration
        of NonExecutive Directors comprised an annual fee of £36,000
        (2004 £36,000). An additional £10,000 per annum (2004 £10,000)
        was paid to the Chairmen of Board Committees and to Lord Butler in respect
        of his position as Senior Independent Director.                                                                                                                                                                                                         
|    
|(10) | The compensation for
        loss of office figure for Directors in prior years comprises payments
        in 2004 to Dr B R ONeill (£310,000) and Mr P J Drechsler (£108,000).
        These are as previously disclosed in the 2004 Remuneration Report. No
        payments were made in 2005 and no further payments are due to either
      former Director.                                                                                                                                                        
|    
|(11) | The aggregate emoluments
        paid or payable to Directors in respect of qualifying services, which
        comprises base salary and fees, annual incentive payments, benefits and
        other emoluments totalled £4,285,000 (2004 £4,108,000).                                                                                                                                                                                                                                                                    
|    



|Remuneration
  report | ICI
      Annual Report and Accounts 2005 45
|--------------------- | --------------------------------------------

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Awards under the Performance Growth Plan(audited)

|                      |       | Date of  | Share price          | Ordinary
      Shares that would be | Maximum
      number of Ordinary | Performance
      period
|--------------------- | ----- | -------- | -------------------- | ----------------------------------- | -------------------------------- | ------------------------
|                      |       | award    | determining          | awarded
      for median TSR/on     | Shares
      that                |                         
|                      |       |          | award (note
      1) | target
      Economic Profit        | could
      be awarded           |                         
|                      |       |          |                      | performance                         |                                  |                         
|                      |       |          |                      | TSR                                 | Economic
      Profit            | TSR                     
|                      | notes |          |                      | measure                             | measure                          | measure                 
|                      |       |          |                      |                                     |                                  |                         
|Dr J D G
      McAdam |       | 24.02.03 | 2.37                 | 63,292                              | n/a                              | 142,405                 
|                      |       |          |                      |                                     |                                  |                         
|                      |       | 11.08.03 | 2.37                 | 29,535                              | n/a                              | 89,662                  
|                      |       |          |                      |                                     |                                  |                         
|                      |       | 12.02.04 | 2.21                 | 115,837                             | n/a                              | 289,592                 
|                      |       |          |                      |                                     |                                  |                         
|                      |       | 18.02.05 | 2.81                 | 99,644                              | n/a                              | 249,110                 
|                      |       |          |                      |                                     |                                  |                         
|A J Brown             | 2     | 14.11.05 | 3.11                 | 35,584                              | n/a                              | 88,960                  
|                      |       |          |                      |                                     |                                  |                         
|D C M Hamill          |       | 12.02.04 | 2.21                 | 35,294                              | 35,294                           | 88,235                  
|                      |       |          |                      |                                     |                                  |                         
|                      |       | 18.02.05 | 2.81                 | 28,861                              | 28,861                           | 72,153                  
|                      |       |          |                      |                                     |                                  |                         
|C F Knott             |       | 10.05.03 | 2.37                 | 29,536                              | 29,536                           | 73,840                  
|                      |       |          |                      |                                     |                                  |                         
|                      |       | 12.02.04 | 2.21                 | 32,488                              | 32,488                           | 81,221                  
|                      |       |          |                      |                                     |                                  |                         
|                      |       | 18.02.05 | 2.81                 | 26,583                              | 26,583                           | 66,459                  
|                      |       |          |                      |                                     |                                  |                         
|W H Powell            | 3     | 25.02.03 | 2.37                 | 85,144                              | 85,144                           | 208,124                 
|                      |       |          |                      |                                     |                                  |                         
|                      | 3     | 12.02.04 | 2.21                 | 78,796                              | 78,796                           | 192,612                 
|                      |       |          |                      |                                     |                                  |                         
|                      | 3     | 18.02.05 | 2.81                 | 63,908                              | 63,908                           | 156,224                 
|                      |       |          |                      |                                     |                                  |                         
|T A Scott             | 4     | 24.02.03 | 2.37                 | 59,916                              | n/a                              | 149,789                 
|                      |       |          |                      |                                     |                                  |                         
|                      | 4     | 12.02.04 | 2.21                 | 67,873                              | n/a                              | 169,683                 
|                      |       |          |                      |                                     |                                  |                         
|                      | 4     | 18.02.05 | 2.81                 | 57,152                              | n/a                              | 142,882                 
|                      |       |          |                      |                                     |                                  |                         

|(1) | The number of shares
        comprising the PGP awards is determined by the average share price of
        ICI Ordinary Shares for the three days preceding the date of grant. Prior
        to 2004 it was determined by the average share price for the month of
        December prior to the commencement of the performance period. In accordance
        with the disclosure legislation the Company is required to state the
        market price of its shares on the date of the award and these were as
        follows: 24 February 2003 £1.57, 11 August 2003 £1.63, 12 February
      2004 £2.22, 18 February 2005 £2.77 and 14 November 2005 £3.15.                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) | The award to Mr A J
        Brown was made on appointment, at a level of two thirds of the standard
        annual grant to reflect his prospective service in the performance period
      relating to this award.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(3) | Mr W H Powells
        awards are in the form of ADRs, but for the purpose of this table have
        been disclosed in terms of Ordinary Share equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(4) | Vesting of the PGP
        awards to the estate of Mr T A Scott, following his death on 12 August
        2005, has been determined by the PGP Rules. For the award made to Mr
        Scott in 2003, in respect of the 2003 to 2005 performance period, the
        number of shares released to his estate is the 59,916 shares that would
        have vested at Median TSR performance. These shares were transferred
        to Mr Scotts estate on 19 October 2005 on which date the share
        price was £2.81. The award made in 2004, in respect of the 2004
        to 2007 performance period, was subject to revised rules and any shares
        vesting from that award will be released to the estate in 2007 to the
        extent that the performance condition is met, with any release being
        pro-rated to the period of Mr Scotts employment in the three-year
        performance cycle. In accordance with Plan Rules, no shares will be released
        from the award made in 2005 because, as at the date of death, less than
        12 months of the plan cycle had elapsed.
|   
|(5) | No variations to awards
      were made during 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   

Shares
  vested under the Performance Growth Plan(audited)

The following shares in respect of the performance period 1 January 2003 to 31
December 2005 vested on 13 February 2006.

|                      |       | Ordinary
      Shares vested | Percentage
      of maximum number of Ordinary
|--------------------- | ----- | ---------------------------- | ----------------------------------------------
|                      |       |                              |                                               
|                      |       | Number
      of              | Price at                                      
|                      |       | shares                       | date of                                       
|                      |       | vested                       | vesting                                       
|                      | notes |                              | £                                             
|                      |       |                              |                                               
|Dr J D G
      McAdam |       | 162,446                      | 3.51                                          
|                      |       |                              |                                               
|C F Knott             | 2     | 51,688                       | 3.51                                          
|                      |       |                              |                                               
|W H Powell            | 3     | 199,860                      | 3.51                                          
|                      |       |                              |                                               

|(1) | For comparative purposes,
        the value of shares vesting in 2004 was £217,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) | Mr C F Knott also received
        a PGP related payment in respect of a one-off incentive arrangement linked
        to the trading profit of Quest over the three-year period ending 31 December
        2005. This arrangement pre-dated Mr Knotts appointment as an Executive
        Director and was agreed in 2003 under the terms of his appointment as
        Chairman and Chief Executive of Quest. This was to adjust for the difference
        in expected remuneration from his long-term incentive awards as a result
        of his transfer from National Starch to Quest. Mr Knott will receive
        a sterling equivalent cash payment under this arrangement of £35,555
      relating to his service during this period as an Executive Director.
|   
|(3) | The award vesting to
        Mr W H Powell from the Economic Profit element of his 2003 to 2005 PGP
        award reflects the Economic Profit performance of National Starch. This
        was between the target and threshold level for vesting that was set at
        the start of the 2003 to 2005 performance cycle, on a consistent accounting
        basis. The PGP award to Mr Powell was made in the form of ADRs but for
        the purposes of this table have been disclosed in the form of Ordinary
      Share equivalents at the price of ICI shares on the date of vesting.                                                                                                                                                                            



|46 ICI
      Annual Report and Accounts 2005 | Remuneration
  report
|-------------------------------------------- | ---------------------

---



Back to Contents

Grants during 2005 were made subject to a sliding scale performance condition
    that determines the number of shares that could vest. The condition is set
    out on page 48.

There were no options exercised by Executive Directors during 2005 or 2004.

|                |       |  | Options        |   | Options     | Options   |    |            |   |                                                  |          |               |         
|--------------- | ----- |  | -------------- | - | ----------- | --------- | -- | ---------- | - | ------------------------------------------------ | -------- | ------------- | --------
|                |       |  | outstanding at |   | granted     | lapsed    |    |            |   |                                                  |          |               |         
|                |       |  | 1 January 2005 |   | during 2005 | during    |    |            |   | Options outstanding at 31 December 2005 (note 1)
|                |       |  | or date of     |   | (note 3)    | 2005      |    |            |   |                                                  |          |               |         
|                |       |  | appointment    |   |             |           |    |            |   |                                                  |          |               |         
|                |       |  | (note 2,3)     |   |             |           |    |            |   |                                                  |          |               |         
|                |       |  | Number of      |   | Number of   | Number of |    | Number of  |   | Exercise                                         | Date of  | Earliest date | Latest  
|                |       |  | shares         |   | shares      | shares    |    | shares     |   | price                                            | grant    | from which    | expiry  
|                |       |  |                |   |             |           |    | (note 4,5) |   |                                                  |          | exercisable   | date    
|                | notes |  |                |   |             |           |    |            |   | £                                                |          | (note 6)      |         
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|Dr J D G McAdam |       |  | 24,545         |   |             |           |    | 24,545     |   | 10.077                                           | 18.05.98 | 18.05.01      | 17.05.08
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 7     |  | 108,121        |   |             |           |    | 108,121    |   | 5.454                                            | 29.04.99 | 29.04.02      | 28.04.09
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                |       |  | 90,416         |   |             |           |    | 90,416     |   | 4.242                                            | 21.02.00 | 21.02.03      | 20.02.10
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                |       |  | 138,564        |   |             |           |    | 138,564    |   | 4.292                                            | 05.03.01 | 05.03.04      | 04.03.11
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                |       |  | 149,647        |   |             |           |    | 149,647    |   | 2.840                                            | 13.03.02 | 13.03.05      | 12.03.12
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                |       |  | 465,251        |   |             |           |    | 465,251    |   | 1.340                                            | 17.03.03 | 17.03.06      | 16.03.13
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                |       |  | 654,761        |   |             |           |    | 654,761    |   | 1.680                                            | 11.08.03 | 11.08.06      | 10.08.13
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                |       |  | 831,168        |   |             |           |    | 831,168    |   | 2.310                                            | 30.06.04 | 30.06.07      | 29.06.14
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                |       |  |                |   | 747,330     |           |    | 747,330    |   | 2.810                                            | 18.02.05 | 18.02.08      | 17.02.15
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                |       |  | 8,145          |  |             |           |    | 8,145      |  | 1.580                                            | 11.12.03 | 01.02.09      | 31.07.09
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|C F Knott       |       |  | 10,909         |   |             |           |    | 10,909     |   | 10.077                                           | 18.05.98 | 18.05.01      | 17.05.08
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                |       |  | 40,825         |   |             |           |    | 40,825     |   | 4.333                                            | 08.03.99 | 08.03.02      | 07.03.09
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                |       |  | 47,535         |   |             |           |    | 47,535     |   | 4.242                                            | 21.02.00 | 21.02.03      | 20.02.10
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                |       |  | 138,564        |   |             |           |    | 138,564    |   | 4.292                                            | 05.03.01 | 05.03.04      | 04.03.11
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 8     |  | 154,448        |   |             |           |    | 154,448    |   | 2.840                                            | 13.03.02 | 13.03.05      | 12.03.12
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 8     |  | 394,288        |   |             |           |    | 394,288    |   | 1.340                                            | 17.03.03 | 17.03.06      | 16.03.13
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                |       |  | 466,233        |   |             |           |    | 466,233    |   | 2.310                                            | 30.06.04 | 30.06.07      | 29.06.14
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                |       |  |                |   | 398,754     |           |    | 398,754    |   | 2.810                                            | 18.02.05 | 18.02.08      | 17.02.15
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|D C M Hamill    |       |  | 386,138        |   |             |           |    | 386,138    |   | 2.020                                            | 10.12.03 | 10.12.06      | 09.12.13
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                |       |  | 506,493        |   |             |           |    | 506,493    |   | 2.310                                            | 30.06.04 | 30.06.07      | 29.06.14
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                |       |  |                |   | 432,918     |           |    | 432,918    |   | 2.810                                            | 18.02.05 | 18.02.08      | 17.02.15
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|W H Powell      | 5,8   |  | 39,104         |   |             |           |    | 39,104     |   | 8.466                                            | 04.08.97 | 04.08.00      | 03.08.07
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 8     |  | 31,284         |   |             |           |    | 31,284     |   | 10.077                                           | 18.05.98 | 18.05.01      | 17.05.08
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 8     |  | 92,380         |   |             |           |    | 92,380     |   | 4.482                                            | 08.03.99 | 08.03.02      | 07.03.09
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 8     |  | 98,708         |   |             |           |    | 98,708     |   | 5.690                                            | 28.05.99 | 28.05.02      | 27.05.09
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 8     |  | 192,696        |   |             |           |    | 192,696    |   | 4.242                                            | 21.02.00 | 21.02.03      | 20.02.10
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 8     |  | 272,816        |   |             |           |    | 272,816    |   | 4.292                                            | 05.03.01 | 05.03.04      | 04.03.11
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 8     |  | 337,452        |   |             |           |    | 337,452    |   | 2.840                                            | 13.03.02 | 13.03.05      | 12.03.12
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 8     |  | 820,808        |   |             |           |    | 820,808    |   | 1.340                                            | 17.03.03 | 17.03.06      | 16.03.13
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 8     |  | 778,608        |   |             |           |    | 778,608    |   | 2.310                                            | 30.06.04 | 30.06.07      | 29.06.14
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 8     |  |                |   | 639,104     |           |    | 639,104    |   | 2.810                                            | 18.02.05 | 18.02.08      | 17.02.15
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|T A Scott       | 1,9   |  | 9,863          |   |             |           |    | 9,863      |   | 10.077                                           | 18.05.98 | 18.05.01      | 17.05.08
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 1,7,9 |  | 25,311         |   |             |           |    | 25,311     |   | 5.454                                            | 29.04.99 | 29.04.02      | 28.04.09
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 1,9   |  | 46,386         |   |             |           |    | 46,386     |   | 4.242                                            | 21.02.00 | 21.02.03      | 20.02.10
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 1,9   |  | 116,440        |   |             |           |    | 116,440    |   | 4.292                                            | 05.03.01 | 05.03.04      | 04.03.11
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 1,9   |  | 143,045        |   |             |           |    | 143,045    |   | 2.840                                            | 13.03.02 | 13.03.05      | 12.03.12
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 1,9   |  | 440,438        |   |             |           |    | 440,438    |   | 1.340                                            | 17.03.03 | 17.03.06      | 16.03.13
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 1,9   |  | 487,012        |   |             |           |    | 487,012    |   | 2.310                                            | 30.06.04 | 30.06.07      | 29.06.14
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 1,9   |  |                |   | 428,647     |           |    | 428,647    |   | 2.810                                            | 18.02.05 | 18.02.08      | 17.02.15
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 1,9   |  | 1,367          |  |             | (1,367    | ) |            |   | 4.092                                            | 26.11.99 | 01.02.05      | 31.07.05
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 1,9   |  | 532            |  |             |           |    | 532        |  | 3.038                                            | 08.12.00 | 01.02.06      | 31.07.06
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         
|                | 1,9   |  | 4,694          |  |             |           |    | 4,694      |  | 1.580                                            | 11.12.03 | 01.02.09      | 31.07.09
|                |       |  |                |   |             |           |    |            |   |                                                  |          |               |         

|    |                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | Grants
      awarded under a UK all-employee Sharesave Scheme in which UK Executive
      Directors could participate. No performance conditions are attached to
      options granted underthis
    scheme as it is an all-employee share option scheme.
|(1) | Share options outstanding at the year end for Mr T A Scott are stated as at his date of death on 12 August 2005.                                                                                                                                         
|   
|(2) | No variations were made to Directors options or the terms and conditions of any Directors options
    during the year 2005 or the period ended 13 February 2006.                                                                                       
|   



|Remuneration
        report | ICI
    Annual Report and Accounts 200547
|--------------------------- | -----------------------------------------

---



Back to Contents

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

|(3) | No
    amount was paid for the award of any options.                                                                                  
|--- | --------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                       
|(4) | Grants under the Executive Share Option Plan in 2004 and 2005 were made subject to the following sliding scale performance conditions:
|   

| | Percentage of shares |  | Earnings per share in 2006 |  | Earnings per share in 2007 | 
| | -------------------- |  | -------------------------- |  | -------------------------- | 
| | vesting              |  | (for grants made in 2004)  |  | (for grants made in 2005)  | 
| |                      |  |                            |  |                            | 
| | nil                  |  | less than 25.0p            |  | less than 27.1p            | 
| | 33.3%                |  | 25.0p                      |  | 27.1p                      | 
| | 100%                 |  | 30.7p                      |  | 31.1p                      | 

|     | There
    is no retesting of the condition after the three-year performance period.
The percentage of shares vesting will be pro-rated, on a straight-line basis,
between points on the above scales. The EPS figures in the table above are shown
under UK GAAP. The testing of the conditions will need to take account of the
differences between UK GAAP, at the time the grants were made and the new International
Accounting Standards
under which EPS will be reported in the Groups accounts at that time. The
Remuneration Committee will ensure this testing is on an equitable basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(5)  | Grants made under the
            share option scheme prior to 2004 were made subject to an EPS performance
            condition which require that over a three-year period
    in the life of the option the
growth in ICIs EPS (excluding amortisation of goodwill and exceptional
items) must be equal to, or greater than, the increase in the UK Retail Prices
Index plus 3% per annum. Options granted in 2000, 2001, 2002 and 2003 have failed
to meet their performance condition to date. The performance conditions relating
to these options will be retested in 2007. The grant to Mr W H Powell in 1997
is an exception as it was made before he was appointed a Director and is not
subject to a
performance condition, in accordance with ICIs practice in the USA at that
time. The plan under which options were granted prior to 2004 has passed its
10-year approval period. The last grant under this plan was made in December
2003 and no further grants can be made. The shares to fulfil options granted
under this plan do not dilute ICIs issued share capital as they are bought
in the market.
|    
|(6)  | The earliest date from which an option is exercisable is subject to any outstanding
    performance condition being met.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    
|(7)  | In accordance with the
            Listing Rules of the Financial Services Authority, the annual grant of
            share options made on 29 April 1999 to Executive Directors
    involved with the then proposed disposal of businesses to Huntsman ICI Holdings
    LLC was delayed. As a result of this delay, those participants were granted
    fewer options at a higher exercise price than would have been the case had
    the grants been made to them at the same time as they were made to all other
    participants at an exercise price of £4.33. The Remuneration Committee
    decided that those individuals so affected should receive the same gross
    gain at the time they exercise their options as if the grant had not been
    delayed.                                                                                                                                                                                                                                                                                                                                                        
|    
|(8)  | Awards made under the US Stock Appreciation Rights plan and denominated in
    ADRs have been disclosed in terms of Ordinary Share option equivalents at
    the price of the ICI shares at the date of grant. Any gain on exercise of
    these awards is delivered in the form of ADRs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    
|(9)  | Under the Plan Rules for
            death in service that govern awards made to Mr T A Scott prior to 2004,
            the performance condition is waived and the options
    become exercisable in full by his estate. For the option grant made in 2004
    there is no automatic vesting of the full award. The Remuneration Committee
    took due account of the Groups progress towards the performance condition
    for that award and determined that 50% of the 2004 award should become exercisable
    by his estate. In accordance with the Plan Rules the 2005 option grant lapsed
    because as at the date of death less than 12 months of the plan cycle had
    been completed. During 2005 Mr Scotts estate has subsequently exercised
    options over a total of 826,989 shares at a weighted average option price
    of £1.89 with a weighted average share price on exercise of £2.86.                                                                                                                                                                                                           
|    
|(10) | The market price of the
            shares at 31 December 2005 was £3.32 and the
    range during 2005 was £2.31 to £3.36. The Register of Directors Interests
    (which is open to
inspection by shareholders) contains full details of Directors shareholdings
and options to subscribe for shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    
|(11) | There are limits on the
            number of newly issued shares that can be used to satisfy awards under
            the Groups employee share schemes in any 10-year
    period. The limits (which are in accordance with investor guidelines) and
    the Groups current position against
those limits are set out below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    

|Limit                                   | Current Position
|--------------------------------------- | ----------------
|                                        |                 
|5%
    of Groups share capital can be  | 0.6% used       
|used for discretionary share schemes    |                 
|                                        |                 
|10% of Groups
    share capital can be | 1.2% used       
|used for all share schemes              |                 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The
        total number of shares committed under all ICI share option schemes during
        the two years to 31 December 2005 is set out in note 7 relating to the
        Group accounts on page 75. Between 1994 and 2003 all discretionary share
        schemes have operated using shares purchased in the market by an employee
        benefit trust. Details of shares held in this trust are in note 26 relating
    to the Group accounts on page 99.



|48ICI
        Annual Report and Accounts 2005 | Remuneration
    report
|--------------------------------------------- | -----------------------

---



Back to Contents

Directors’ pension
      benefits(audited)

|                    |       |  |            | Defined benefit pension plans |             |  |                | Defined contribution
|------------------- | ----- |  | ---------- | ----------------------------- | ----------- |  | -------------- | --------------------
|                    |       |  |            |                               |             |  |                |                     
|                    |       |  |            |                               |             |  |               
|                    |       |  | Additional |                               | Accrued     |  | Transfer value |                     
|                    |       |  | pension    |                               | pension at  |  | of accrued     |                     
|                    |       |  | accrued    |                               | 31 December |  | pension at     |                     
|                    |       |  | in 2005    |                               | 2005        |  | 1 January      |                     
|                    |       |  | (note 1)   |                               | (note 2)    |  | 2005           |                     
|                    |       |  |            |                               |             |  |                |                     
|                    | notes |  | £000 p.a.  |                               | £000 p.a.   |  | £000           |                     
|                    |       |  |            |                               |             |  |                |                     
|Dr J
    D G McAdam | 4     |  | 59         |                               | 521         |  | 7,369          |                     
|                    |       |  |            |                               |             |  |                |                     
|D C M
    Hamill    | 5     |  | n/a        |                               | n/a         |  | n/a            |                     
|                    |       |  |            |                               |             |  |                |                     
|C F Knott           | 4     |  | 17         |                               | 199         |  | 2,008          |                     
|                    |       |  |            |                               |             |  |                |                     
|W H Powell          | 6     |  | 47         |                               | 339         |  | 3,975          |                     
|                    |       |  |            |                               |             |  |                |                     
|T A Scott           | 7     |  | 12         |                               | 170         |  | 1,239          |                     
|                    |       |  |            |                               |             |  |                |                     

|(1) | The additional annual pension accrued during the year (or since appointment as an Executive Director), payable at normal retirement age.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) | The accrued annual pension at the end of the year, payable at normal retirement age.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(3) | The transfer value calculations take into account the combined
    effect of notional interest and the individuals age which will typically
    increase transfer values by 8%-9% year on year. Additional factors that impact
    the transfer values (which are net of contributions by Directors) over the
    year are changes in pensionable pay and the service of each Director, as
    well as changes in actuarial assumptions, particularly for
equity and bond returns. The increases in transfer values are in accordance with
    the rules of the relevant pension fund.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(4) | Dr J D G McAdam, and Mr C F Knott participate in the ICI Specialty
    Chemicals Pension Fund. Pensionable salary under this plan includes annual
    bonus, subject to a maximum of 20% of base salary for Dr McAdam and 15% of
    base salary for Mr Knott. The pensionable element of bonus is particular
    to these two Executive Directors and reflects their terms of employment and
    continuous pensionable service prior to their transfer from
Unilever to ICI in 1997, on the acquisition of certain specialty chemicals businesses.
    This pensionable bonus element entitlement has been frozen since the time
    of transfer and has not been increased in line with promotion or increases
    in ICIs
bonus levels.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(5) | Mr D C M Hamill participates in the ICI UK Retirement Plan,
    a defined contribution plan, in respect of base salary up to the Inland Revenue
    earnings cap (currently £105,600 for
2005/6). He also receives a retirement benefit allowance, payable in cash and subject to income tax, in respect of base salary above this cap. This allowance is reported in the Directors emoluments table on page 45 and for the 2005 period
totalled £90,240 (2004 £86,625).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(6) | Mr W H Powell participates
            in the National Starch and Chemical Company Pension Plan for Salaried
            Employees and the SupplementaryRetirement
and Savings Plan of National Starch and Chemical Company. Under these Plans,
pension is based on average pay, including annual bonus, during the previous
five years, during which time Mr Powell was promoted to Chairman and Chief Executive
Officer of National Starch and Chemical Company. He also participates in two
defined contribution plans, for which the employers contributions are set
out above. Mr
Powells figures reflect not only the change in value of benefits but also
movements in exchange rates used for the translation to sterling. The actual
additional pension accrued in the year was US$20,636 and the actual transfer
value
increased over the year by US$447,868. When translated into sterling, the
resulting additional pension accrued was £46,941, comprising £11,338
translating the US Dollar additional pension into sterling and a £35,603
exchange gain
translating the closing accrual at a spot rate of £1 = US$1.7234 (2004 £1
= US$1.92975). Similarly, the sterling increase in transfer value of accrued
pension was £735,896, comprising £246,081 translating the US Dollar
movement into sterling and £489,815 exchange gain translating the accrual
at the differing spot rates at end 2004 and 2005.
|   
|(7) | Prior to his
    death on 12 August 2005, Mr T A Scott participated in the ICI Specialty Chemicals
    Pension Fund. His pensionable salary included annual bonus subject to a maximum
    of 15% of base salary. Further detail of the pensionable element of bonus
    payments are set out in note 4 above. The ICI Specialty Chemicals Pension
    Fund has made the standard benefit provision to his dependants in respect
    of his category of membership.
This comprises a lump sum death in service payment and ongoing payments in respect
    of a spouses and childrens pension.
    The disclosures
    in the table of Directors pension benefits for Mr Scott are subject to the following further notes. The additional pension in 2005 for Mr Scott is that accrued
between 1 January 2005 and Mr Scotts date of death on 12 August 2005. The accrued annual pension is at Mr Scotts date of death. The transfer value for Mr Scott is in respect of his accrued pension at 12 August 2005 but allows for current
market conditions. This amount has been updated at the year end to take account of market conditions at that time. The increase in transfer value during the year reflects any changes in Mr Scotts
pensionable pay and the service prior to his
death.                                                                                                                             
|   
|(8) | Mr A J Brown participates in the ICI UK Retirement Plan only
    in respect of life insurance benefits for base salary up to the Inland Revenue
    earnings cap (currently £105,600 for
2005/6). No pension contributions are paid on his behalf. Instead he receives a retirement benefit allowance, payable in cash and subject to income tax, in respect of full base salary. This allowance is reported in the Directors emoluments
table on page 45 and for the period from date of appointment on 14 November 2005 to 31 December 2005 totalled £15,374.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(9) | The Listing Rules of the Financial Services Authority require
    disclosure above and beyond that set out in the Companies Act. Specifically
    the following disclosures for defined benefit plans which are calculated
    on an alternative basis to those disclosed in the table above. Additional
    annual pension accrued in 2005 (net of inflation): Dr J D G McAdam £46,435; Mr C F Knott £11,780; Mr W H Powell £46,940; Mr T
A Scott £7,460. Transfer values at 31 December 2005 of the increase in accrued pension (net of inflation and contributions by the Director): Dr McAdam £786,200; Mr Knott £122,100; Mr Powell £735,900. For Mr Scott the figure in
respect of his accrued pension to his date of death on 12 August 2005 is £46,400.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                



|Remuneration
        report | ICI
        Annual Report and Accounts 200549
|--------------------------- | ---------------------------------------------

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Directors'
  pension benefits (continued)(audited)

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

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

This cash alternative
is in line with ICIs defined contribution benefits policy and the level
of retirement benefit allowance payable will be in line with existing Company
contribution rates to the ICI UK defined contribution plan. These arrangements
will not increase the cost to the Group of pension provision.

| |                                           | notes |  | 1 January   |  | 31 December | 
| | ----------------------------------------- | ----- |  | ----------- |  | ----------- | 
| |                                           |       |  | 2005        |  | 2005        | 
| |                                           |       |  | or date of  |  |             | 
| | ICI Ordinary
            Shares           |       |  | appointment |  |             | 
| |                                           |       |  |             |  |             | 
| | Directors at
            31 December 2005 |       |  |             |  |             | 
| |                                           |       |  |             |  |             | 
| | P B Ellwood                               |       |  | 25,241      |  | 41,104      | 
| |                                           |       |  |             |  |             | 
| | Dr J D G McAdam                           | 1,2   |  | 131,156     |  | 173,054     | 
| |                                           |       |  |             |  |             | 
| | A J Brown                                 | 1,2   |  | 1,305       |  | 1,305       | 
| |                                           |       |  |             |  |             | 
| | D C M Hamill                              | 1,2   |  |            |  | 3,000       | 
| |                                           |       |  |             |  |             | 
| | C F Knott                                 | 1,2   |  | 80,721      |  | 80,721      | 
| |                                           |       |  |             |  |             | 
| | W H Powell                                | 1,2,3 |  | 89,984      |  | 111,696     | 
| |                                           |       |  |             |  |             | 
| | A Baan                                    |       |  | 14,000      |  | 18,000      | 
| |                                           |       |  |             |  |             | 
| | Lord Butler                               |       |  | 1,636       |  | 1,636       | 
| |                                           |       |  |             |  |             | 
| | J T Gorman                                | 4     |  | 14,624      |  | 14,624      | 
| |                                           |       |  |             |  |             | 
| | R N Haythornthwaite                       |       |  | 12,791      |  | 12,791      | 
| |                                           |       |  |             |  |             | 
| | Baroness Noakes                           |       |  | 13,600      |  | 13,600      | 
| |                                           |       |  |             |  |             | 

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

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In addition to the interests
            in the table above, on 13 February 2006 Dr J D G McAdam, Mr C F Knott,
            and Mr W H Powell became entitled to shares awarded
    to them under the Performance
Growth Plan, as detailed in the table of Shares vested on page 46.
Dr J D G McAdam, Mr A J Brown, Mr D C M Hamill, Mr C F Knott, and Mr W H Powell
have conditional interests in PGP awards made in 2004 and/or 2005, as set out
on page
46.                              
|   
|(2) | Dr J D G McAdam, Mr A
            J Brown, Mr D C M Hamill, Mr C F Knott and Mr W H Powell are potential
            beneficiaries of the Companys employee benefit trust,
    which is used to satisfy awards under the senior staff share plans, and are
    therefore treated as interested in the 4.3m (2004 7.8m) shares, including
    ADRs expressed as Ordinary Share equivalents, held by the trustee at 31 December
    2005. Their interests at 13 February 2006
were 2.8m shares.
|   
|(3) | Mr W H Powells interest
            in shares at 1 January 2005 comprised 16 Ordinary Shares and 22,492 ADRs
            (representing 89,968 Ordinary Shares) and at 31 December
    2005 comprised 16 Ordinary Shares and 27,920 ADRs (representing 111,680 Ordinary
    Shares).                                                                                                                                                                                                          
|   
|(4) | Mr J T Gormans interest
            in shares at 1 January 2005 and at 31 December 2005 comprised 3,656 ADRs
    (representing 14,624 Ordinary Shares).                                                                                                                                                                                                                                                                                                                                      

During the period 1 January 2006 to 13 February 2006 there were no changes in
the interests of Directors in shares other than as set out above in respect of
the vesting of PGP shares
and the employee benefit trust.



|50 ICI Annual Report and Accounts 2005 | Remuneration
    report
|-------------------------------------- | -----------------------

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

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

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

| | Executive Directors | Date of service agreement | Effective date | Expiry date                                         
| | ------------------- | ------------------------- | -------------- | ----------------------------------------------------
| |                     |                           |                |                                                     
| | Dr J D G McAdam     | 14.10.03                  | 09.04.03       | Terminable
            on 12
months notice         
| |                     |                           |                |                                                     
| | A J Brown           | 02.11.05                  | 14.11.05       | Terminable
            on 12
months notice         
| |                     |                           |                |                                                     
| | D C M Hamill        | 28.10.03                  | 08.12.03       | Terminable
            on 12
months notice         
| |                     |                           |                |                                                     
| | C F Knott           | 02.09.04                  | 01.09.04       | Terminable
            on 12
months notice (note 1)
| |                     |                           |                |                                                     
| | W H Powell          | 17.02.00                  | 02.02.00       | Terminable
            on 12
months notice (note 2)
| |                     |                           |                |                                                     

|(1) | As set out in
    note 11 to the table of Directors Emoluments, Mr C F Knott has two Service Agreements, both dated as set out above. Mr Knotts
    appointment as an Executive Director of the Company is non-remunerative and
    is covered by a separate letter of appointment.    Mr Knotts
    employment is terminable on 12 months notice from the Company. To comply
    with statutory employment legislation in the Netherlands, Mr Knott is required
    to give
six months notice of termination of employment to the Company. An ICI subsidiary
company in the Netherlands has agreed to provide Mr Knott with certain protection
against any future loss on disposal of the house he has purchased as his residence
in the Netherlands. In the event that he ceases employment in the Netherlands
with an ICI Group company, other than by resignation or for a reason relating
to his conduct, during a period of 10 years from 31 August 2003 and in the event
the house is sold at a price less than the original purchase price, the ICI subsidiary
will reimburse him for 75% of the difference between the sale price and the original
purchase price. The exact amount of the benefit to him as a result of this arrangement
will not be known until the house is sold, but at the current valuation of the
property no reimbursement would require to be made.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Remuneration
        report | ICI
        Annual Report and Accounts 2005 51
|--------------------------- | ----------------------------------------------

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

Executive
        Directors(continued)

|(2) | Mr W H Powells appointment as an Executive Director of the Company, which
is non-remunerative, is terminable by either party giving not less than 12 months notice
in writing. Mr Powell is separately employed by National Starch and Chemical
Company as Chairman and Chief Executive and this employment is terminable on
12 months notice. These two notice periods may run concurrently.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

Mr T A Scott, who died on 12 August 2005, had a service agreement dated 11 May
2001 with an effective date of 23 May 2001.

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

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

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



|52 ICI
        Annual Report and Accounts 2005 | Remuneration
          report
|---------------------------------------------- | -----------------------------

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Risk
  factors



The following section comprises
    a summary of what ICI believes are the main risk factors that could potentially
    impact the Groups operating and financial performance. ICI
    operates in competitive markets. If the Group does not continue to compete
    in its markets effectively by developing innovative products and responding
    effectively to the activities of its competitors, it could lose customers
    and its results of operations could be adversely affected. ICI has a wide portfolio
    of business units competing across a diverse range of geographic and product
    markets. The Groups business may be adversely affected if it does not: •
      continue to develop
        innovative products that satisfy customer needs and
        preferences;•
      develop new technology
        or enhance existing technology that supports
        product development or provides cost or other advantages over
        its competitors; and•
      attract and retain skilled
        employees who are key to achieving these
        objectives. Because the Group is subject
    to price competition, it must also continue to satisfy these objectives while
    maintaining a competitive cost base. In addition, some of ICIs
    competitors in certain markets are larger and have greater financial resources
    than the Group. This may enable them to deliver products on more attractive
    terms or to invest larger amounts of capital into their businesses, including
    expenditure for research and development. If any of the Groups current
    or future competitors develop proprietary technology that enables them to
    produce new products or services or to deliver existing products or services
    at a significantly lower cost, the Groups products and services could
    be rendered uneconomical or obsolete. While some of the Groups
    product range comprises products and services that are protected by proprietary
    knowledge or patents, some of its businesses use technology that is widely
    available. Accordingly, certain product segments of the Groups business
    may be vulnerable to new competitors and may be adversely affected by increased
    price competition. Any of these developments could lead to a loss of customers
    and could adversely affect the Groups results of operations. The
    price volatility of some of the raw materials ICI uses could adversely affect
    its results of operations. ICI uses significant amounts
    of various chemicals and other materials as raw materials in manufacturing
    its products. Prices for some of these raw materials are volatile and are
    affected by cyclical movements in commodity prices, availability of such raw
    materials, demand for a variety of products which are produced using these
    raw materials, levels of price competition among local and global suppliers
    and general economic conditions. The Groups diverse portfolio of value
    added products provides some ability to pass on higher input prices to its
    customers, but this ability is, to a large extent, dependent on market conditions.
    There may be times when the Group is not able to recover increases in the
    cost of raw materials for some products due to weakness in demand for such
    products or the actions of its competitors. This could adversely affect the
    Groups results of operations.


The
    occurrence of major operational problems could have an adverse effect on the
    Groups results of operations and cash flow. The Groups revenues
    are dependent on the continued operation of its various manufacturing facilities.
    Operational risks include: •
      equipment
        and systems failures;•
      failure
        to comply with applicable regulations and standards and to
        maintain necessary permits and approvals;•
      raw
        material supply disruptions;•
      labour
        force shortages or work stoppages;•
      events
        impeding or increasing the cost of transporting products;•
      natural
        disasters; and•
      terrorist
        attacks. While the Group maintains
    insurance at levels that it believes are appropriate for its industry, some
    of these operational risks could result in losses and liabilities in excess
    of its insurance coverage or in uninsured losses or liabilities. The occurrence
    of major operational problems resulting from the above or other events may
    have an adverse effect on the results of operations of a particular manufacturing
    facility, or with respect to certain of these risks, the results of operations
    and cash flow of the Group as a whole. The
    Group undertakes a number of significant projects each year and poor execution
    or failure to complete such projects could have an adverse effect on results
    of operations. The Group, or any of the
    Groups business units, may undertake significant projects including
    restructuring, capital expenditure, disposals, acquisitions and outsourcing,
    all of which require significant project management from initiation through
    to implementation. Failure to manage such projects appropriately or to implement
    such projects may have an adverse effect on the results of operations of a
    particular business unit and/or the Group as a whole. Loss
    of a significant number of key personnel could adversely affect the Groups
    results of operations. The Group relies on key personnel
    such as business leaders and technical experts whose knowledge is important
    to the success of the Group. Although ICI has procedures in place to identify
    and retain key personnel, events beyond its control may lead to loss of such
    personnel. Where this happens, there are processes designed to enable the
    transfer of know-how from key personnel, however, failure to transfer such
    know-how prior to the loss of key personnel and an inability to replace such
    key personnel in a timely fashion could have an adverse effect on the Groups
    results of operations. ICI
    derives a significant percentage of its revenue in some of its businesses
    from sales to major customers, and if it is unable to retain these customers,
    its results of operations could be adversely affected. While no single customer
    accounted for more than 10% of Group sales in 2005, sales to major customers
    in some of its businesses, particularly in Paints and Quest, are significant.
    ICI believes that the wide selling range and nature of the specialty products
    it supplies reduce the potential adverse consequences of the loss of business
    from any one customer for any one of its products or in any one of its businesses.
    Nevertheless, the loss of major customers, without replacement, could have
    an adverse effect on the Groups results of operations.






|Risk factors | ICI
      Annual Report and Accounts 2005 149
|------------ | ---------------------------------------------

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Risk
  factorscontinued



The
    Groups reliance on key suppliers in some of its businesses could result
    in an adverse effect on results of operations. Some of the Groups
    business units rely on a small number of suppliers for their key raw materials.
    If any of these suppliers is unable to meet its obligations or increases its
    prices, the Group may not be able to find a replacement supplier that is able
    to provide such raw materials on similar terms. Consequently, the Group may
    be forced to pay higher prices to obtain raw materials, which it may not be
    able to pass on to its customers in the form of increased prices for its finished
    products. In addition, some of the raw materials used may become unavailable
    and there can be no assurance that the Group will be able to obtain suitable
    and cost effective substitutes. Furthermore, any consolidation in the industries
    that supply the Groups raw materials could further reduce the number
    of available suppliers. Any interruption of supply
    or price increases caused by these or other factors, which the Group is not
    able to mitigate by securing satisfactory replacement suppliers, could have
    an adverse effect on its results of operations. ICIs
    indebtedness and resulting leverage could reduce its operational and competitive
    flexibility, increase its vulnerability to adverse economic and industry conditions,
    increase its interest costs and adversely affect results of operations and
    cash flow. ICIs outstanding net
    indebtedness amounted to £745m as of 31 December 2005. ICIs indebtedness
    could affect the Group in adverse ways, in particular by requiring the Group
    to dedicate a significant portion of its operational cash flow to service
    payments on such indebtedness, and by limiting its ability to borrow additional
    funds or refinance existing indebtedness on attractive terms. Furthermore,
    its indebtedness could increase its vulnerability to adverse economic and
    industry conditions, limit its ability to fund future capital expenditures,
    research and development and other general corporate requirements and limit
    its flexibility to react to changes in its business and the industries in
    which the Group operates. In addition, like many other
    companies, ICI is dependent on its ability to obtain short-term financing
    to fund a portion of its financing requirements. While ICI has access to £769m
    in committed and undrawn bank facilities as of 31 December 2005, limitations
    on ICIs ability to access short-term financing could increase its interest
    costs and could adversely affect its results of operations and cash flow. A decision
    by the rating agencies to downgrade ICIs credit rating would reduce
    its funding options, increase its cost of borrowings and have an adverse impact
    on results of operations and cash flow. A number of factors, some
    of which are not within the Groups control, may, individually or in
    combination, affect the rating agencies view of the Groups credit
    profile and lead them to place the Group on credit watch or downgrade its
    credit rating, including: •
      a significant deterioration
        in the Groups operating performance;•
      the occurrence of material,
        unexpected additional cash charges leading
        to a weakening in cash flow/debt metrics;•
      a significant deterioration
        in the economic environment in which the
        Group operates;•
      the occurrence of any
        of the events described in the other risk factors
        contained in this Annual Report and Accounts; and•
      further significant
        increases in the deficit of the Groups pension funds
        or significant increases in the top-up contributions of such
        funds.


Recently
    disposed businesses may expose ICI to costs that could have an adverse effect
    on its results of operations, cash flow and financial condition. In recent years, ICI has
    carried out a programme of strategic disposals, in the course of which it
    has given to other parties in those transactions certain indemnities, warranties
    and guarantees, including indemnities, warranties and guarantees relating
    to known and potential latent environmental, health and safety liabilities.
    There are also a number of contracts relating to businesses that ICI exited
    as part of its disposal programme which have not been novated to the purchasers
    of these businesses. The extent to which ICI will
    be required in the future to incur costs under any of the indemnifications,
    warranties, guarantees or contracts referred to above or any similar contractual
    provision which the Group entered into in connection with its disposal programme,
    is not predictable and, if the Group should incur such costs, the costs could
    have an adverse effect on results of operations, cash flow and financial condition.
    For a more detailed description of these exposures see note 32 relating to
    the Group accounts. Risks
    associated with the Groups international operations could adversely
    affect its results of operations. ICI is an international business
    with operations in over 50 countries and conducts business in many currencies.
    These operations are subject to the risks associated with international operations
    which include: •
      slowdown or recession
        in global, regional or national economic
        growth;•
      tariffs and trade barriers;•
      exchange controls;•
      fluctuations in national
        currencies;•
      social and political
        risks;•
      national and regional
        labour disputes;•
      required compliance
        with a variety of foreign laws, regulations
        and standards; and•
      the difficulty of enforcing
        legal claims and agreements through
        some foreign legal systems. Furthermore, some of ICIs
    businesses are subject to cyclical fluctuations in the industries and economies
    in which they operate. Finally, like all international businesses, ICI faces
    the risk of exposure when costs arise in a different currency than sales and
    the risk arising from the need to translate foreign currency denominated profits
    into pounds Sterling, the Groups reporting currency. Any of the risks
    discussed above could adversely affect its results of operations. Economic,
    social and political conditions in developing economies could adversely affect
    the Groups results of operations and future growth. ICI has operations in many
    developing economies in Asia and Latin America, and its strategy includes
    continuing to expand its business in these regions. However, many developing
    economies have recent histories of economic, social and political instability
    brought about by a number of factors, including unexpected changes in local
    laws, regulations and standards, substantial depreciation and volatility in
    national currencies, the imposition of trade barriers, and wage and price
    controls. Any of these factors could adversely affect ICIs results of
    operations and future growth.




|150
      ICI Annual Report and Accounts 2005 | Risk
      factors
|--------------------------------------------- | ------------------

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ICIs
    exposure to consumer markets exposes it to legal risks, regulation and potential
    liabilities from product liability claims asserted by consumers, which could
    have an adverse effect on results of operations, cash flow and financial condition. A significant proportion
    of the Groups products is sold directly or indirectly to end-user consumers,
    even if the Group does not itself provide these products directly to consumers.
    This exposure to consumer markets exposes the Group to legal risks, regulation
    by relevant authorities and potential liabilities to consumers of these products,
    which may not be covered by the Groups existing insurance coverage or
    may exceed its insurance coverage. Any of these factors could have an adverse
    effect on the Groups results of operations, cash flow and financial
    condition. Certain
    companies in the Group are the subject of various claims and proceedings which,
    if successfully asserted against them, could have an adverse effect on its
    results of operations, cash flow and financial condition. Certain companies in the
    Group are the subject of various claims and proceedings. These concern issues
    such as alleged product liability and contract disputes. For a description
    of certain of these matters see note 32 relating to the Group accounts. The successful assertion
    of current or future claims and proceedings could have an adverse effect on
    the Groups results of operations, cash flow and financial condition. Violations
    of environmental, health and safety and other laws, regulations and standards
    could restrict the Groups operations, expose it to liability, increase
    its costs and have an adverse effect on its results of operations, cash flow
    and financial condition. ICI is subject to a broad
    range of laws, regulations and standards in each of the jurisdictions where
    it operates, including those relating to pollution, the health and safety
    of employees, protection of the public, protection of the environment and
    the generation, storage, handling, transportation, treatment, disposal and
    remediation of hazardous substances and waste materials. These regulations
    and standards are becoming increasingly stringent. In the ordinary course of
    business, ICI is subject to inspections and monitoring by the appropriate
    enforcement authorities. ICI also requires relevant permits and approvals
    for its operations which require compliance with their terms and which may
    be subject to renewal, modification and, in some circumstances, revocation. It is the Groups policy
    to require that its subsidiaries comply with relevant laws, regulations and
    standards. However, violations of applicable laws, regulations and standards,
    in particular provisions of environmental, health and safety laws (including
    spills or other releases of hazardous substances to the environment) or of
    permit or approval requirements, could result in restrictions on the operation
    of the Groups facilities, damages, fines or other sanctions, increased
    costs of compliance as well as reputational damage. ICI is also subject to
    environmental laws and regulations, principally in respect of soil and groundwater
    remediation, that in the future may require it to take action to correct effects
    on the environment of prior disposal or release of chemical substances by
    the Group or other parties. ICI has established provisions
    in respect of future environmental, health and safety liabilities that are
    not covered by enforceable indemnities from third parties, for which expenditure
    is probable and the cost of which can be estimated within a reasonable range
    of outcomes. These actual and potential liabilities, however, are inherently
    difficult to predict and to quantify. Existing provisions could therefore
    be inadequate to cover these liabilities, and additional costs to meet such
    actual and potential obligations could have an adverse effect on the Groups
    results of operations, cash flow and financial condition.


Failure
    to comply with corporate governance requirements could have an adverse effect
    on the Groups results of operations. The Group has in place a
    corporate governance framework which meets the requirements set out in the
    Combined Code. Processes are in place to ensure that this framework is complied
    with and maintained. The Groups corporate governance structure is more
    fully described in the Corporate Governance report on pages 35 to 40. Failure by the Group to implement,
    update, manage and maintain its corporate governance compliance and control
    framework or failure to comply with such a framework could have an adverse
    effect on the Groups results of operations. ICI
    has given undertakings and guarantees relating to pension funds, including
    the solvency of the ICI UK Pension Fund, which could have an adverse effect
    on its results of operations and cash flow. ICI provides retirement benefits
    for the majority of its former and current employees through a variety of
    defined benefit and, more recently, defined contribution schemes. These include
    the ICI UK Pension Fund (Fund), which is ICIs largest defined
    benefit scheme. At 31 December 2005 it had liabilities of £7,770m, offset
    by scheme assets with a market value of £6,953m, giving a net deficit
    of £817m which is recorded on the Groups balance sheet under international
    accounting standard IAS 19
    Employee Benefits. The Fund represents 79% of the Groups total
    post-retirement scheme liabilities and 85% of the Groups total post-retirement
    scheme assets at 31 December 2005. The most recent valuation
    of the Fund revealed an increase in the funding shortfall to £657m at
    31 March 2005. Given that the Fund is extremely mature, the funding deficit
    shortfall has to be rectified through funding from the Company. Factors such as the risk
    of poor future investment returns on scheme assets, changes in actuarial assumptions
    including mortality of scheme members, higher rates of inflation and/or falling
    bond-return rates used to discount the scheme liabilities, could all serve
    to increase the Fund deficit, thereby requiring increased future funding contributions
    from the Company with a resulting adverse effect on the Groups results
    of operations, cash flow and financial condition.




|Risk factors | ICI
      Annual Report and Accounts 2005 151
|------------ | ---------------------------------------------

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

|                                             | Total   |  | In
      the | 
|-------------------------------------------- | ------- |  | ------------ | 
|                                             |         |  | USA          | 
|                                             |         |  |              | 
|Number of
      record holders of:           |         |  |              | 
|                                             |         |  |              | 
|Ordinary
      Shares as at 13 February 2006 | 126,657 |  | 697          | 
|                                             |         |  |              | 
|ADSs as at
      13 February 2006            | 2,053   |  | 1,996        | 
|                                             |         |  |              | 

As of 13 February 2006 the
  proportion of Ordinary Shares represented by ADSs was 5.27% of the Ordinary
  Shares in issue.

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

|                                             | £1
      Ordinary Shares |  | ADSs       | 
|-------------------------------------------- | ------------------------ |  | ---------- | 
|                                             |                          |  |            | 
|                                             | Year/month               |  | Year/month | 
|                                             | high                     |  | low        | 
|                                             | £                        |  | £          | 
|                                             |                          |  |            | 
|Year                                         |                          |  |            | 
|                                             |                          |  |            | 
|2001                                         | 5.57                     |  | 2.83       | 
|                                             |                          |  |            | 
|2002                                         | 4.30                     |  | 2.03       | 
|                                             |                          |  |            | 
|2003                                         | 2.38                     |  | 0.90       | 
|                                             |                          |  |            | 
|2004                                         |                          |  |            | 
|                                             |                          |  |            | 
|First
      quarter                          | 2.47                     |  | 1.94       | 
|                                             |                          |  |            | 
|Second
      quarter                         | 2.36                     |  | 1.93       | 
|                                             |                          |  |            | 
|Third
      quarter                          | 2.32                     |  | 2.05       | 
|                                             |                          |  |            | 
|Fourth
      quarter                         | 2.41                     |  | 2.07       | 
|                                             |                          |  |            | 
|Year                                         | 2.47                     |  | 1.93       | 
|                                             |                          |  |            | 
|2005                                         |                          |  |            | 
|                                             |                          |  |            | 
|First
      quarter                          | 2.83                     |  | 2.31       | 
|                                             |                          |  |            | 
|Second
      quarter                         | 2.78                     |  | 2.44       | 
|                                             |                          |  |            | 
|Third
      quarter                          | 3.08                     |  | 2.54       | 
|                                             |                          |  |            | 
|Fourth
      quarter                         | 3.36                     |  | 2.78       | 
|                                             |                          |  |            | 
|Year                                         | 3.36                     |  | 2.31       | 
|                                             |                          |  |            | 
|2005                                         |                          |  |            | 
|                                             |                          |  |            | 
|July                                         | 2.66                     |  | 2.54       | 
|                                             |                          |  |            | 
|August                                       | 2.98                     |  | 2.63       | 
|                                             |                          |  |            | 
|September                                    | 3.08                     |  | 2.88       | 
|                                             |                          |  |            | 
|October                                      | 3.02                     |  | 2.78       | 
|                                             |                          |  |            | 
|November                                     | 3.30                     |  | 2.89       | 
|                                             |                          |  |            | 
|December                                     | 3.36                     |  | 3.29       | 
|                                             |                          |  |            | 
|2006                                         |                          |  |            | 
|                                             |                          |  |            | 
|January                                      | 3.65                     |  | 3.35       | 
|                                             |                          |  |            | 
|February
      (through to 13 February 2006) | 3.67                     |  | 3.39       | 
|                                             |                          |  |            | 

The share price on 13 February
  2006 was £3.51; the ADR price was US$24.34.

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



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



|152
      ICI Annual Report and Accounts 2005 | Shareholder
      information
|--------------------------------------------- | -----------------------------

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Control of Company

|(a) | So far as the Company
      is aware, it is neither directly nor indirectly owned or controlled by one
      or more corporations.                                              
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                 
|(b) | (i) Set out below is
      information regarding interests in the Companys £1 Ordinary Shares
      appearing in the Register of Interests in Shares maintained by the Company:
|    |                                                                                                                                                                                 



|                                      | As
      at 9 February 2004 |  | As
      at 10 February 2005 |  | As
      at 13 February 2006 | 
|------------------------------------- | --------------------------- |  | ---------------------------- |  | ---------------------------- | 
|                                      |                             |  |                              |  |                              | 
|Identity
      of Group               | Amount                      |  | Per
      cent               |  | Amount                       | 
|                                      | owned                       |  | of
      class               |  | owned                        | 
|                                      | (number                     |  |                              |  | (number                      | 
|                                      | of
      shares)            |  |                              |  | of
      shares)             | 
|                                      | millions                    |  |                              |  | millions                     | 
|                                      |                             |  |                              |  |                              | 
|Barclays Bank PLC                     | 112.5                       |  | 9.45                         |  | 101.4                        | 
|                                      |                             |  |                              |  |                              | 
|Capital International Limited         | n/a                         |  | n/a                          |  | 46.3                         | 
|                                      |                             |  |                              |  |                              | 
|Citibank Shareholder Services*        | n/a                         |  | n/a                          |  | 101.7                        | 
|                                      |                             |  |                              |  |                              | 
|Legal & General Investment Management | 44.3                        |  | 3.72                         |  | 44.6                         | 
|                                      |                             |  |                              |  |                              | 
|Morley Fund Management Ltd            | n/a                         |  | n/a                          |  | 36.1                         | 
|                                      |                             |  |                              |  |                              | 
|Standard Life Investments Ltd         | 44.7                        |  | 3.75                         |  | 55.4                         | 
|                                      |                             |  |                              |  |                              | 
|Brandes Investment Partners LLC       | 102.0                       |  | 8.56                         |  | 94.3                         | 
|                                      |                             |  |                              |  |                              | 
|JPMorgan Chase Bank*                  | 107.4                       |  | 9.01                         |  | n/a                          | 
|                                      |                             |  |                              |  |                              | 
|Artisan Partners LP                   | 82.0                        |  | 6.89                         |  | n/a                          | 
|                                      |                             |  |                              |  |                              | 

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

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

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

|(c) | The Company
      does not know of any arrangements the operation of which might result in
      a change in control of the Company.
|--- | ------------------------------------------------------------------------------------------------------------------------------------

Exchange controls and other
  limitations affecting security holders

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



|Shareholder
      Information | ICI
      Annual Report and Accounts 2005153
|----------------------------- | --------------------------------------------

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Shareholder
  informationcontinued



TaxationThe following discussion is intended as a general
    guide only. Shareholders who are in any doubt with regard to tax matters,
    or who are resident in countries other than the USA should consult their own
    tax advisers. Taxation of US resident
    shareholdersThe following summary of the principal UK and certain federal US tax consequences
    of ownership of Ordinary Shares or ADSs, held as capital assets by US resident
    shareholders is based on current UK and US federal tax law and practice, as
    well as the current Double Taxation (Income) Convention (the Convention)
    between the UK and the USA which came into force on 31 March 2003. The following
    summary is also based in part on representations by JPMorgan Chase Bank as
    Depositary for the ADSs and assumes that each obligation in the deposit agreement
    among the Company, the Depositary and the holders of ADSs and any related
    agreement will be performed in accordance with its terms. Taxation of dividends
    paid to US resident shareholdersThe UK does not currently impose a withholding tax on dividends paid by
    a UK company, such as the Company. Distributions paid by the
    Company to a US resident shareholder will be treated for US federal income
    tax purposes as foreign source ordinary dividend income to the extent of the
    Companys current or accumulated earnings and profits for US federal
    income tax purposes. The amount of the dividend will be the US dollar value
    of the pounds Sterling received on the date the dividend is received by the
    Depository for US resident shareholders of ADSs (or in the case of Ordinary
    Shares, received by the US resident shareholder), regardless of whether or
    not the dividend is converted into US dollars. No deduction for dividends
    received is allowed for corporate US resident shareholders with respect to
    dividends paid by the Company. Subject to applicable limitations
    that may vary depending upon a US resident shareholders individual circumstances,
    dividends paid to non-corporate US resident shareholders in taxable years
    beginning before 1 January 2009 will be taxable at a maximum tax rate of 15%.
    Non-corporate US resident shareholders should consult their own tax advisers
    to determine whether they are subject to any special rules that limit their
    ability to be taxed at this favourable rate. Taxation of capital
    gains for US resident shareholdersUnder the Convention, each contracting state may, in general, tax capital
    gains in accordance with the provisions of its domestic law. Under present
    UK law, individuals who are neither resident nor ordinarily resident in the
    UK, and companies which are not resident in the UK, generally will not be
    liable to UK tax on capital gains made on the disposal of their Ordinary Shares
    or ADSs, unless such Ordinary Shares or ADSs are held in connection with a
    trade, profession or vocation carried on in the UK through a branch or agency. A US resident shareholder
    will recognise capital gain or loss for US federal income tax purposes on
    the sale or exchange of the Ordinary Shares or ADSs in the same manner as
    on the sale or exchange of any other shares held as capital assets. Any gain
    or loss will generally be US source capital gain or loss, which will be long-term
    if the Ordinary Shares or ADSs were held for longer than one year. UK inheritance taxUnder the current Double Taxation (Estates) Convention (the Estate Tax
    Convention), between the USA and the UK, Ordinary Shares or ADSs held by an
    individual shareholder who is domiciled for the purposes of the Estate Tax
    Convention in the USA, and is not for the purposes of the Estate Tax Convention
    a national of the UK, nor resident in the UK for seven out of the last ten
    tax years, will generally not be subject to the UK inheritance tax on the
    individuals death nor on a chargeable gift of the Ordinary Shares or
    ADSs during the individuals lifetime provided that any applicable US
    federal gift or estate tax liability is paid, unless the Ordinary Shares or
    ADSs are part of the business


property of a permanent
    establishment of the individual in the UK or, in the case of a shareholder
    who performs independent personal services, pertain to a fixed base situated
    in the UK. Where the Ordinary Shares or ADSs have been placed in trust by
    a settlor who, at the time of settlement, was a US resident shareholder, the
    Ordinary Shares or ADSs will generally not be subject to UK inheritance tax
    unless the settlor, at the time of settlement, was not domiciled in the USA
    or was a UK national. In the exceptional case where the Ordinary Shares or
    ADSs are subject both to UK inheritance tax and to US federal gift or estate
    tax, the Estate Tax Convention generally provides for double taxation to be
    relieved by means of credit relief. Stamp DutyIn practice, no UK stamp duty is payable on any issue or transfer of ADSs
    provided that the instrument of transfer is executed and remains at all times
    outside the UK. In practice, no stamp duty reserve tax is payable on an agreement
    to transfer ADSs. Capital gains tax information
    for UK shareholdersIn certain circumstances, when a shareholder in the UK sells shares, liability
    to tax in respect of capital gains is computed by reference to the market
    value of the shares on 31 March 1982. The market value of ICI Ordinary Shares
    at 31 March 1982, for the purposes of capital gains tax, was 309p. ICI demerged its bioscience
    business to Zeneca Group PLC on 1 June 1993. Post-demerger ICI shares inherited
    a base cost for capital gains equivalent to 0.50239 of their pre-demerger
    base cost. For the purposes of UK
    taxation of capital gains (CGT), the issue of new ICI shares in the 2002 rights
    issue was regarded as a reorganisation of the share capital of ICI. New shares
    acquired by taking up an entitlement under the rights issue were treated as
    the same asset as, and having been acquired at the same time as and at the
    same aggregate cost as, the prior holding of ICI shares. The subscription
    money for the new shares was added to the base cost of the existing holding.
    (In the case of shareholders within the charge to corporation tax, indexation
    allowance applies to the amount paid for the new shares only from the date
    the amount was paid or liable to be paid.) Incorporation of the
    CompanyImperial Chemical Industries PLC was originally incorporated in the UK
    and registered in England, under the Companies Acts, 1908 to 1917 on 7 December
    1926 as a limited company. It was re-registered under the Companies Acts,
  1948 to 1980 as a public limited company on 30 June 1981. Registered Office
    20 Manchester Square
    London W1U 3AN
    Telephone +44(0)20 7009 5000




|154
      ICI Annual Report and Accounts 2005 | Shareholder
      information
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Documents on display  Securities
    and Exchange Commission (SEC)ICI files annual, semi-annual and special reports and other information
    with the SEC. Any document that ICI files may be read and copied at the SECs
    public reference room at Headquarters Office, 100 F Street, N.E., Room 1580,
    Washington, D.C. 20549, USA. Please call the SEC at +1-800-732-0330 for further
    information or view reports filed since 4 November 2002 online at www.sec.gov
  The ADSs representing ICIs
    Ordinary Shares are listed on the New York Stock Exchange (NYSE) and ICIs
    Ordinary Shares are listed on the Official List of the Financial Services
    Authority and traded on the London Stock Exchange. Reports and other information
    about the Group that ICI has filed pursuant to the rules of the NYSE, the
    Financial Services Authority and the London Stock Exchange are available via
    those bodies.
  A copy of each report filed within
    the preceding 12 months can also be inspected by any shareholder or ADR holder
    during normal business hours at the offices of the Company at 20 Manchester
    Square, London, W1U 3AN. Exchange ratesThe following table sets forth, for the years, months and dates indicated,
    the noon buying rate in New York City for cable transfers in pounds Sterling
    as certified by the Federal Reserve Bank of New York for customs purposes
    (the noon buying rate): Highest
      
      Lowest
      
      Average
      
      Atrate
      
      rate
      
      rate
      
      Yearduring
      
      during
      
      during
      
      endUS$
        to pound sterling (£) (1)
      period
      
      period
      
      periodYear
      
      
      
      
      (2)
        (3)
      
      (2)2001
      1.50
      
      1.37
      
      1.44
      
      1.452002
      1.61
      
      1.41
      
      1.50
      
      1.612003
      1.78
      
      1.55
      
      1.64
      
      1.782004
      1.95
      
      1.77
      
      1.84
      
      1.922005
      1.93
      
      1.71
      
      1.81
      
      1.722005August
      1.81
      
      1.77September
      1.84
      
      1.76October
      1.79
      
      1.75November
      1.78
      
      1.71December
      1.77
      
      1.722006January
      1.79
      
      1.74February
        (as of 13 February)
      1.78
      
      1.74 The
        noon buying rate on 13 February 2006 was $1.74 = £1(1)
      All figures
        have been taken directly or derived from figures released  through
        the Public Information Office of the Federal Reserve in Washington, D
        C or New York City.(2)
      The noon
        buying rate on such dates differed from the rates used in  preparation
        of the Groups financial statements as of such dates.(3)
      The average
        is the average of the noon buying rate on the last day  of each month
        during the period indicated. Fluctuations in the exchange
    rate between the pound Sterling and the US dollar will affect the US dollar
    equivalent of the pound Sterling prices of the Ordinary Shares of Imperial
    Chemical Industries PLC on the London Stock Exchange and, as a result, will
    affect the market prices of ADSs on the NYSE. Cash dividends, if any, will
    be paid by the Company in respect of Ordinary Shares in pounds Sterling, and
    exchange rate fluctuations will affect the US dollar amounts received by holders
    of ADSs on conversion by the Depositary of such dividends. A substantial proportion
    of the Groups assets, liabilities, revenues and expenses are denominated
    in currencies other than pounds Sterling. Accordingly, fluctuations in the
    value of the pound Sterling relative to other currencies can have a significant
    effect on the translation into Sterling of non-Sterling assets, liabilities,
    revenues and expenses (see relevant sections of the Operating and financial
    review, on page 23).




|Shareholder
        Information | ICI
      Annual Report and Accounts 2005 155
|------------------------------- | ---------------------------------------------

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Definitions



|In
        this document the following words and expressions shall, unless the context
        otherwise requires, have the following meanings:
|-----------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                               
|ADR                                                                                                                                            
|                                                                                                                                               
|ADS                                                                                                                                            
|                                                                                                                                               
|As reported
      performance                                                                                                                  
|                                                                                                                                               
|bn                                                                                                                                             
|                                                                                                                                               
|Company                                                                                                                                        
|                                                                                                                                               
|Comparable
      performance                                                                                                                   
|                                                                                                                                               
|Depositary                                                                                                                                     
|                                                                                                                                               
|Derivative                                                                                                                                     
|                                                                                                                                               
|Directors                                                                                                                                      
|                                                                                                                                               
|EBITDA                                                                                                                                         
|                                                                                                                                               
|Effective
        tax rate                                                                                                                     
|                                                                                                                                               
|ESOP                                                                                                                                           
|                                                                                                                                               
|Fair
        value                                                                                                                             
|                                                                                                                                               
|Financial
        instrument                                                                                                                   
|                                                                                                                                               
|Hedging                                                                                                                                        
|                                                                                                                                               
|IAS/IASB                                                                                                                                       
|                                                                                                                                               
|ICI,
        ICI Group or the Group                                                                                                            
|                                                                                                                                               
|IFRS                                                                                                                                           
|                                                                                                                                               
|IFRIC                                                                                                                                          
|                                                                                                                                               
|Interest
        cover                                                                                                                         
|                                                                                                                                               
|International
      Businesses                                                                                                                 
|                                                                                                                                               
|London Stock
      Exchange                                                                                                                    
|                                                                                                                                               
|m                                                                                                                                              
|                                                                                                                                               
|NYSE                                                                                                                                           
|                                                                                                                                               
|Ordinary
      Shares                                                                                                                          
|                                                                                                                                               
|pound Sterling,
      £, pence or p                                                                                                            
|                                                                                                                                               
|Revenue                                                                                                                                        
|                                                                                                                                               
|SEC                                                                                                                                            
|                                                                                                                                               
|SFAS                                                                                                                                           
|                                                                                                                                               
|UK or United
      Kingdom                                                                                                                     
|                                                                                                                                               
|US dollar,
      dollar, US$ or $                                                                                                              
|                                                                                                                                               
|USA
        or US or United States                                                                                                             

Figures in parentheses in
  tables and financial statements are used to represent negative numbers.



|156
      ICI Annual Report and Accounts 2005 | Definitions
|--------------------------------------------- | -----------

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Definitions used in
  computation of Group Financial Targets

|Adjusted
      earnings per share      |  | Net profit
      before special items attributable to the equity holders of the parent, divided
      by weighted average number of shares in issue (less weighted average number
      of shares held by the Groups employee share plans) during the period.                                                                                                                                                                                     
|-------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Comparable sales growth                |  | Sales growth compared with the
        prior period excluding the effects of currency translation differences
        and the impact of acquisitions and divestments.                                                                                                                                                                                                                                                                              
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Comparable trading profit
      growth |  | Trading profit
      growth compared with the prior period excluding the effects of currency
      translation differences and the impact of acquisitions and divestments.                                                                                                                                                                                                                                                                         
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Earnings per share                     |  | Net profit
      after special items attributable to the equity holders of the parent, divided
      by the weighted average number of shares in issue (less the weighted average
      number of shares held by the Groups employee share plans) during the
      period.                                                                                                                                                                        
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Net debt                               |  | The borrowings
      of ICI (comprising loans and short-term borrowings other than overdrafts
      together with related derivatives, obligations under finance leases and
      the liabilities associated with the forward contracts for the acquisition
      of own shares (the extent that the contracts are out of the money))
      less cash (including overdrafts), cash equivalents and current asset investments.                    
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Net profit before special
      items  |  | Net profit
      attributable to equity holders of the parent before special items.                                                                                                                                                                                                                                                                                                                                                                
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Reporting segments                     |  | The Reporting
      segments comprise the Groups National Starch, Quest, Uniqema, Paints
      and Regional and Industrial businesses.                                                                                                                                                                                                                                                                                                            
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Return on capital employed (ROCE)      |  | Group trading
      profit after amortisation of intangibles, before special items, after restructuring
      amortisation* and after a tax chargefor the last twelve
      months divided by the average of capital employed for this current period
      end and that of the twelve months previously, expressed as a percentage.                                                                                                              
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                       |  | Notes:                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                       |  | *                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                       |  | †                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                       |  | Capital
        employed: Net operating assets plus net operating special items.                                                                                                                                                                                                                                                                                                                                                                   
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                       |  | Net operating
        assets: Property, plant and equipment plus goodwill on acquisitionsøplus operating working capital.                                                                                                                                                                                                                                                                                                                          
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                       |  | ø                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                       |  | Net operating
      special items: For financial ratio calculation purposes only, this is defined
      as: Asset write downs arising on restructuring plus cash cost of restructuring
      before tax and after amortisation: for financial ratio purposes only, cash
      expenditure is capitalised in each year that expenditure occurs and is then
      amortised over three years starting on 1 January following the year of expenditure.
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Segment assets                         |  | Segment
      assets are those operating assets that are employed by a segment in its
      operating activities and that are either directly attributable to the segments
      or can be allocated to the segment on a reasonable basis.                                                                                                                                                                                                         
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Segment liabilities                    |  | Segment
      liabilities are those operating liabilities that are employed by a segment
      in its operating activities and that are either directly attributable to
      the segments or can be allocated to the segment on a reasonable basis.                                                                                                                                                                                               
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Special items                          |  | Special items
      are those items of financial performance that should be separately disclosed
      to assist in the understanding of the financial performance achieved by
      the Group and in making projections of future results, as explained in IAS
      1 Presentation of Financial Statements. Special items includes items
      relating to both continuing and discontinued businesses.                                          
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Trading margin                         |  | Trading
        profit, expressed as a percentage of sales.                                                                                                                                                                                                                                                                                                                                                                                        
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Trading profit                         |  | Operating
        profit before special items.                                                                                                                                                                                                                                                                                                                                                                                                     



|Definitions | ICI
      Annual Report and Accounts 2005157
|----------- | --------------------------------------------

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Back to
  Contents

Forward-looking
  statements

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


The Company undertakes
    no obligation to release publicly the results of any revisions to these forward-looking
    statements that may be made to reflect events or circumstances after the date
    of this Annual Report and Accounts, including, without limitation, changes
    in the Groups business or acquisition or divestment strategy or planned
    capital expenditures, or to reflect the occurrence of unanticipated events. By their nature, forward-looking
    statements involve risk and uncertainty because they relate to events and
    depend on circumstances that will occur in the future. There are a number
    of factors that could cause actual results and developments to differ materially
    from those expressed or implied by these forward-looking statements. These
    factors include, among other things: •
      the impact of competitive
        products and pricing;•
      changes in the price
        of raw materials;•
      the occurrence of
        major operational problems;•
      the loss of major
        customers;•
      limitations imposed
        by the Groups indebtedness and leverage;•
      a credit rating
        downgrade by the rating agencies;•
      contingent liabilities,
        including those arising in connection with disposed businesses;•
      risks associated
        with the Groups international operations;•
      risks of claims
        and litigation;•
      financial performance
        of the Groups retirement benefit schemes; and•
      other factors described
        in the Companys filings with the US Securities and Exchange
        Commission. You should read Risk
         Factors on pages 149 to 151 for more information regarding factors
         that  could cause actual results and developments to differ from those
         expressed
    or implied by the forward-looking statements in this document.


|                                   |                                             
|---------------------------------- | --------------------------------------------
|Forward-looking
        statements | ICI
      Annual Report and Accounts 2005159

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