Directors Report

The directors submit to shareholders their one hundred and eleventh annual report, together with the audited accounts of the group for the year ended 31st March 2002. Pages 1 to 33 are an integral part of the report.

Principal Activities
The group’s principal activities are summarised on page 11.

Dividends
The interim dividend of 7.5 pence per share, up 0.5 pence, was paid in February 2002. A final dividend, which will be paid as an ordinary dividend, of 17.1 pence per share, up 0.8 pence, is being proposed to shareholders as Resolution 2 at the Annual General Meeting (AGM), making a total for the year of 24.6 pence, an increase of 6% over last year. Dividends for the year total £53.2 million.

A low cost Dividend Reinvestment Plan is in place for the benefit of shareholders. This allows them to purchase additional shares in Johnson Matthey with their dividend payment. Further information and a mandate can be obtained from the Company Secretary at the company’s registered office.

Share Capital
Allotments of ordinary shares of £1 each of the company were made during the year as set out in note 24 on page 57.

The board will again seek shareholders’ approval to renew the annual authority for the company to make purchases of its own ordinary shares through the market. Pursuant to the directors’ authority renewed at the 2001 AGM, Johnson Matthey has in the financial year ended 31st March 2002 purchased an aggregate of 4,931,000 ordinary £1 shares (representing 2.25% of the called-up share capital as at 31st March 2002) for an aggregate consideration of £45.9 million. The purchases were made between 9th August 2001 and 30th January 2002. The shares were cancelled and the company’s issued share capital reduced accordingly. The directors consider that these purchases were in the best interests of the shareholders generally and have resulted in an increase in earnings per share.

Employee Share Schemes
2,730 current and former employees, representing approximately 40% of employees worldwide as at 31st March 2002, are shareholders in Johnson Matthey through the group’s employee share schemes, which held 1,898,888 shares (0.87% of ordinary share capital) at 30th May 2002. A total of 825 current and former executives hold options over 4,919,025 shares through the company’s executive share option schemes.

Directors
Details of the directors of the company are shown on pages 22 and 23. Mr I C Strachan, appointed to the board on 23rd January 2002, offers himself for election at the forthcoming AGM. In accordance with the company’s Articles of Association, Mr J N Sheldrick and Mr C D Mackay retire by rotation and, being eligible, offer themselves for re-election at the AGM.

Directors’ Material Interests in Contracts
Other than service contracts, no director had any interest in any material contract with any group company at any time during the year.

Substantial Shareholdings
The company has been advised of the following notifiable interests in its ordinary share capital as at 30th May 2002:

Auditors
In accordance with section 384 of the Companies Act 1985, a resolution is to be proposed at the forthcoming AGM for the reappointment of KPMG Audit Plc as auditors of the company.

Policy on Payment of Commercial Debts
The group’s policy in relation to the payment of all suppliers (set out in its Group Control Manual, which is distributed to all group operations) is that payment should be made within the credit terms agreed with the supplier. At 31st March 2002, the company’s aggregate level of ‘creditor days’ amounted to 4 days. Creditor days are calculated by dividing the aggregate of the amounts which were owed to trade creditors at the end of the year by the aggregate of the amounts the company was invoiced by suppliers during the year and multiplying by 365 to express the ratio as a number of days.

Donations
During the year the group donated £298,000 (2001 £301,000) to charitable organisations, of which £274,000 (2001 £242,000) was in the UK. There were no political donations made in the year (2001 £ nil).

This report was approved by the directors on 30th May 2002 and is signed on their behalf by:

Simon Farrant
Company Secretary