Imperial Chemical Industries (ICI)

Taxation of dividends paid to US Holders

An individual shareholder who is resident in the UK for UK tax purposes and who receives a dividend from the Company is entitled to claim a tax credit (the “UK Tax Credit Amount”) in the UK against his/her income tax liability attributable to the dividend.

Under the Old Convention, certain US Holders of Ordinary Shares or ADSs are entitled to the payment of an amount equal to the UK Tax Credit Amount, although the US Holder will not actually receive any payment because the United Kingdom is entitled to deduct withholding tax in an amount equal to the payment. Dividends (including the associated UK Tax Credit Amount if a US Holder elects to apply the Old Convention to dividends received on or prior to April 30, 2004) received by a US Holder with respect to the Ordinary Shares or ADSs, other than certain pro rata distributions of Ordinary Shares, will constitute foreign-source dividend income for US federal income tax purposes to the extent paid out of the Company’s current or accumulated earnings and profits, as determined in accordance with US federal income tax principles. The amount of the dividend which is includible in taxable income of a US Holder is the US dollar value of the dividend, converted using the exchange rate on the date the Depositary receives the dividend in the case of ADSs, or the date the US Holder receives the dividend in the case of Ordinary Shares, regardless of whether the payment is converted into US dollars on the date of receipt. If a US Holder realises gain or loss on a sale or other disposition of sterling, it will be US-source ordinary income or loss.

If a US Holder elects to apply the Old Convention and claim a foreign tax credit for dividends received on or prior to April 30, 2004, the UK withholding tax will be treated as a foreign income tax which may, subject to certain limitations and restrictions and the discussion above regarding concerns expressed by the US Treasury, be eligible for credit against the US Holder’s US federal income tax liability. The limitation on foreign taxes eligible for the foreign tax credit is calculated separately with respect to specific classes of income. The rules governing foreign tax credits are complex and, therefore, US Holders should consult their own tax advisers regarding the availability of foreign tax credits in their particular circumstances.

Under the New Convention, there is no UK withholding payable on dividends and, therefore, no US foreign tax credit is available.

A dividends-received deduction is not allowed to corporate US Holders with respect to dividends paid by the Company.

41