Report and financial statements
The directors submit their report and the audited financial statements for the year ended 31 December 2003. For the purposes of this report, the expression "Company" means Elementis plc and the expression "Group" means the Company and its subsidiaries.

Results
The Group profit for the year attributable to shareholders amounted to £4.3 million (2002: loss of £30.8 million).

Distribution to Shareholders
At the Annual General Meeting held on 28 April 2000, shareholders conferred authority on the Board to issue redeemable B shares. The total nominal value of redeemable B shares issued to shareholders during the year was 2.2 pence per ordinary share. The Board intends to issue further redeemable B shares to ordinary shareholders on the register on 27 April 2004, such that they receive redeemable B shares with a total nominal value of 1.1 pence for each ordinary share held. This will be coupled with an offer to redeem these new shares for cash at their nominal value on 4 May 2004. A further offer will also be made to existing holders of redeemable B shares to redeem these shares for cash at their nominal value on 4 May 2004. Holders of redeemable B shares are entitled to a non-cumulative preferential dividend at a rate of 75 per cent of six month sterling LIBOR payable six monthly in arrears; the charge to the profit and loss account in 2003 in respect of these dividends was £nil (2002: £nil).

Principal activities, business review and future development
The Chairman's statement and the Chief Executive's review contains a description of the principal activities of the Group during 2003, references to recent events and likely future developments. Companies throughout the Group undertake, on a continuing basis, research and development of new products and improvement of existing products.

Group turnover and profit is analysed by activity and geographically in the notes to the financial statements.

Donations and contributions
During the year, the Group donated £5,161 for charitable purposes in the United Kingdom.

Political donations
Elementis has no affiliation to any political party or group in any country and makes no political donations.

Directors
The present directors of the Company are Jonathan Fry, Geoff Gaywood, Brian Taylorson, Philip Brown, Michael Hartnall and Edward Wilson, all of whom served throughout the financial year. Richard McNeel resigned as a director on 30 December 2003.

A statement of the directors' interests in the share capital of the Company is set out in the Directors' remuneration report.

Employee communications and involvement
It is Group policy to communicate with all employees on major matters to encourage them to take a wider interest in the affairs of their employing company and the Group. This is done in a variety of ways including in-house newspapers, bulletins and briefing sessions. The Company operates a savings related share option scheme allowing UK and US employees an opportunity to become shareholders.

Employment policies
The Group is committed to the principle of equal opportunity in employment, regardless of a person's race, creed, colour, nationality, gender, age, marital status or disability. Employment policies are fair, equitable and consistent with the skills and abilities of the employees and the needs of the Group's businesses.

These policies ensure that everyone is accorded equal opportunity for recruitment, training and promotion. Where an employee becomes disabled whilst employed by a Group company, every effort is made to allow that person to continue in employment.

Creditor days
Since the Company has no trade creditors, the disclosure of creditor days does not apply.

Policy on payment of suppliers
The Group applies a policy of agreeing payment terms with each of its major suppliers and abides by these terms, subject to satisfactory performance by the suppliers.

Substantial shareholders
The Company has been advised of the following notifiable interests in the issued ordinary capital of the Company as at the close of business on 23 February 2004:

	Ordinary shares	Percentage of issued ordinary share capital
Silchester International Investors Limited	64,388,539	14.9	%
Fidelity International Limited & FMR Corp	38,699,184	9.0	%
Brandes Investment Partners LLP	17,672,471	4.1	%
Legal and General Investment Management Limited	13,073,713	3.0	%

Auditors
A resolution to re-appoint PricewaterhouseCoopers LLP as auditors of the Company will be proposed at the forthcoming Annual General Meeting to be held on 22 April 2004.

By order of the Board
Philip Brown
Company Secretary
26 February 2004