Compliance with the provisions of the original Combined Code
The Company complied with all the provisions set out in Section 1 of the original Combined Code issued in June 1998 throughout the year.

Application of the main and supporting principles set out in the Revised Combined Code
In this report, the heading to each of the main principles in the revised Combined Code issued in July 2003 is set out and the manner in which the Company has applied or intends to apply the main and supporting principles underlying each of the main headings is described.

The Board
The Company has a Board comprising Jonathan Fry, an independent non-executive Chairman, Geoff Gaywood, Chief Executive, two other executive directors and two independent non-executive directors. The senior non-executive director is Michael Hartnall. The Company considers Michael Hartnall to be an independent director notwithstanding the fact that he was appointed a non-executive director of Elementis Holdings Limited, a subsidiary of the Company, more than eleven years ago on 2 February 1993.

The Board operates within a framework of controls used to minimise risks, including a formal schedule of matters specifically reserved for its decision. The Board sets the strategic aims and objectives for the Company and regularly reviews its resources to ensure they are sufficient to meet the Company's needs. The Board regularly reviews management performance and sets values and standards to ensure that its obligations to its shareholders and others are understood and met.

The decisions reserved to the Board are of a strategic and material nature and include the approval of financial statements, circulars to shareholders and press releases, recommendation of dividends, significant changes in accounting policies, convening of shareholder meetings, membership of the Board and its committees, strategic management control matters including approval of Group strategy, annual operating plans, treasury policies, internal control structure and capital and revenue commitments above certain levels. Although the Board retains responsibility for major capital expenditure, disposal of significant fixed assets, material agreements, leases and contracts it delegates responsiblity for those items where they are not material in Group terms, to management committees.

During 2003, the Board met ten times. Richard McNeel, who is based in the US and ceased to be a director with effect from 30 December 2003, was unable to attend three of the meetings and Michael Hartnall was unable to attend one meeting.

The Remuneration Committee held four meetings during the year, all of which were attended by all the members of the Committee. Peter Russell, the Director of Human Resources, was also present at all the meetings and a representative from New Bridge Street Consultants, who have been appointed advisors to the Committee, were in attendance at three meetings.

The Chairman of the Company held a meeting during the year with the other non-executive directors without the executive directors present.

The non-executive directors intend to hold at least one meeting in 2004 without the Chairman present to appraise the Chairman's performance.

Chairman and Chief Executive
The Company has both a Chairman and a Chief Executive. There is a clear division of responsibility which the Board has agreed and is set out in writing, a copy of which can be obtained from the Company website. The Chairman is responsible for running the Board which includes setting the style and tone in which the Board operates, providing a forum for constructive discussion and ensuring receipt of accurate, timely and clear information. The Chairman also ensures that an effective process of communication with the Company's shareholders takes place on a regular basis and that shareholder concerns are made known to all members of the Board. During the year the Company commissioned a comprehensive investor perception survey. This provided existing investors in the Company with the opportunity to comment on an unattributable, anonymous basis on a wide range of issues relating to the Company. The Chief Executive is responsible for the development of strategy, the running of the Group's businesses and reporting on their performance accurately to the Board. Major decisions have to be made by the Board as a whole and no one individual has unfettered powers of decision.

Board balance and independence
The Board comprises three executive and, including the Chairman, three non-executive directors all of whom are considered to be independent. Each director has a vote and no individual or small group of individuals dominates the Board's decision making.

Michael Hartnall has served on the Board of the Company or a subsidiary for eleven years but in all other respects is considered by the Board to be an independent non-executive director whose views and input into Board related decisions are highly valued. Michael Hartnall is the senior non-executive director who is available to shareholders if they have concerns which contact through the usual routes of Chairman, Chief Executive or Finance Director has failed to resolve. A schedule of the names and contact telephone numbers of all directors will be made available to shareholders.

Only members of the Nomination, Audit and Remuneration Committees are entitled to attend such meetings and all other attendees, including the executive directors and advisors to such committees, may only attend by invitation.

Jonathan Fry, who is Chairman of the Company, is also Chairman of the Nomination and Remuneration Committees but is not a member of the Audit Committee. Michael Hartnall is Chairman of the Audit Committee and a member of the Nomination and Remuneration Committees. Edward Wilson, the other non-executive director, is a member of all three Committees.The Chief Executive is a member of the Nomination Committee.The other two executive directors are not members of any of the Committees.

Board report on corporate governance continues on the next page >
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