Imperial Chemical Industries (ICI)

The Directors of Imperial Chemical Industries PLC have pleasure in presenting their Annual Report and Accounts for the year ended 31 December 2005.

Principal activities
The principal activities of the Company are research, manufacture and sale of specialty chemicals and paints. A review of the Company and its subsidiaries’ businesses, including research and development and an indication of likely future developments is given on pages 4 to 29 of this Report.

Dividends
The Directors have declared the payment of a second interim dividend of 3.95 pence per Ordinary Share to be paid on 14 April 2006 to Ordinary shareholders on the Company’s Register on 3 March 2006. A first interim dividend of 3.75 pence per Ordinary Share was paid on 7 October 2005 making a total of 7.70 pence (2004 7.30 pence).

Share capital
Changes in the Company’s ordinary share capital during the year are given in note 26 to the Accounts.

Substantial shareholders
Details of parties holding significant interests in the ordinary share capital of the Company as at 13 February 2006 are given on page 153 of this Report.

Purchase of own shares
At the Annual General Meeting held on 25 May 2005, the Company was given authority to purchase up to 119,123,822 of its Ordinary Shares. This authority will expire at the 2006 AGM. Although no Ordinary Shares have been purchased by the Company during the period from 25 May 2005 until the date of this Report, a special resolution will be proposed at this year’s AGM to renew the authority to make market purchases up to a maximum of 10% of the issued share capital of the Company.

Directors
The names and biographies of the Directors of the Company at the date of this Report and details of Board changes that have occurred since the last Annual Report are given on pages 30 to 33 of this Report.

Corporate governance
A review of the Group’s corporate governance arrangements is given on pages 35 to 40 of this Report.

ICI employment principles
A summary of the Group’s employment principles is given on pages 17 and 18 of this Report.

ICI disability discrimination policy
A summary of the Group’s policy on disability discrimination is given on page 18 of this Report.

Financial risk policies
A summary of the Group’s Treasury policies relating to financial risk are given on pages 22 and 23 of this Report.

Payment to suppliers
The Company agrees terms and conditions for its business transactions with suppliers. Payment is then made to these terms,

subject to the terms and conditions being met by the supplier. Payment terms can differ in the many markets in which ICI trades. Trade creditors of the Company at 31 December 2005 were equivalent to 62 days (2004 61 days) purchases, based on the average daily amount invoiced by suppliers to the Company during this year.

Charitable and political donations
The Group’s worldwide charitable donations in 2005 amounted to £2.6m (2004 £2.1m) . Of this total, £0.5m was spent in the UK (2004 £0.2m) .

The Group made no donations for political purposes during 2005.

Auditor
KPMG Audit Plc has expressed its willingness to continue in office as Auditor of the Company and resolutions proposing its re-appointment and authorising the Directors to agree its remuneration will be submitted to the Annual General Meeting.

The remuneration and expenses of the Auditor in respect of the statutory report to the members of the Company for the year 2005 amounted to £66,000 (2004 £65,000). The total figure for the Group was £3.4m (2004 £3.1m) which includes fees for audits of subsidiary companies in the UK and overseas, both for the purposes of consolidation into the Group accounts and to meet statutory requirements of the countries in which subsidiaries operate.

Fees paid to the Auditor (and its associates) of the Company for services other than statutory audit supplied to the Group during 2005 totalled £2.1m (2004 £1.9m) of which £1.6m (2004 £1.2m) was for audit-related services, £0.5m (2004 £0.7m) was for taxation services and £nil (2004 £nil) was for other services. These fees have been fully reviewed by the Audit Committee.

Directors’ remuneration and interests
A statement of Directors’ remuneration and their interests in the shares, debentures and options of the Company and its subsidiaries is set out in the Remuneration Report on pages 42 to 52.

Going concern
The operation of the Group’s control procedures gives the Directors a reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Group accounts.

Annual General Meeting
The Annual General Meeting will be held on Wednesday 24 May 2006 at the Queen Elizabeth II Conference Centre, Broad Sanctuary, Westminster, London SW1. The Notice of Meeting, together with an explanation of the business to be dealt with at the Meeting, is set out in the separate letter from the Chairman accompanying this Annual Report and Accounts.

On behalf of the Board
Andy Ransom
Company Secretary

16 February 2006

Registered Office
20 Manchester Square
London W1U 3AN
Registered number: 218019