The directors submit to shareholders their one hundred and thirteenth annual report, together with the audited accounts of the group for the year ended 31st March 2004. Pages 1 to 38 are an integral part of the report.

Principal Activities
The group’s principal activities are summarised in the Divisional Structure.

Dividends
The interim dividend of 8.2 pence per share, up 0.4 pence, was paid in February 2004. A final dividend, which will be paid as an ordinary dividend, of 18.2 pence per share, up 0.5 pence, is being proposed to shareholders as Resolution 3 at the Annual General Meeting (AGM), making a total for the year of 26.4 pence, an increase of 4% over last year. Dividends for the year total £57.4 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 25.
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. No shares were purchased under this authority during the year ended 31st March 2004.

Employee Share Schemes
4,636 current and former employees, representing approximately 63% of employees worldwide as at 31st March 2004, are shareholders in Johnson Matthey through the group’s employee share schemes, which held 3,507,288 shares (1.59% of ordinary share capital) at 31st March 2004. A total of 834 current and former executives hold options over 6,183,642 shares through the company’s executive share option schemes.

Directors
Details of the directors of the company are shown in the Board of Directors section. Dr P N Hawker and Mr L C Pentz, both appointed to the board on 1st August 2003, offer themselves for election at the forthcoming AGM. In accordance with the company’s Articles of Association, Mr M B Dearden, Mr C D Mackay, Mr J N Sheldrick and Mr I C Strachan 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 interest in its ordinary share capital as at 28th May 2004:

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 2004, the company’s aggregate level of ‘creditor days’ amounted to 5 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 £313,000 (2003 £323,000) to charitable organisations, of which £279,000 (2003 £299,000) was in the UK. There were no political donations made in the year (2003 £ nil).

Going Concern
The directors have a reasonable expectation that the group has sufficient resources to continue in operational existence for the foreseeable future and have, therefore, adopted the going concern basis in preparing the accounts.

This report was approved by the directors on 1st June 2004 and is signed on their behalf by:

Simon Farrant
Company Secretary