Principal Activities
The group's principal activities are summarised on pages 12 and 13.

Dividends
The interim dividend of 5.7 pence per share, up 0.5 pence, was paid as a FID in February 1999. A final dividend, which will be paid as an ordinary dividend, of 13.3 pence per share, up 0.7 pence, is being proposed to shareholders as Resolution 2 at the Annual General Meeting (AGM), making a total for the year of 19.0 pence, an increase of 7% over last year. Dividends for the year total £41.3 million.

Share Capital
Allotments of ordinary shares of £1 each of the company were made during the year as set out in note 24 on pages 63 and 64.

Johnson Matthey's share capital includes 450,000 of 5.0% (prior to 6th April 1999, 3.5%) cumulative preference shares of £1 each (300,000 of which have been issued). These preference shares now represent a very small fraction of shareholders' funds. The board has decided, taking into account the expense and administrative burden of maintaining the preference shares, that the company would benefit from a simplified capital structure. Consequently the board is proposing a resolution to shareholders at the AGM to cancel and repay the preference shares at their nominal value of £1 plus accrued dividends up to the date of repayment.

The board has also decided to seek shareholders' authority for the company to make purchases of its own ordinary shares through the market. Johnson Matthey has no present intention to exercise this authority and would only do so in circumstances where the directors believe that it would result in an increase in earnings per share and is in the best interests of the shareholders generally.

The resolutions relating to the company's share capital to be proposed at the AGM are set out in the circular enclosed with this annual report.

Employment Policies
It is the policy of the group to train and develop employees at all levels so that group objectives can be met. We recruit, train and manage our employees regardless of sex, ethnic origin or religion. Employees who become disabled and disabled people are offered employment consistent with their capabilities. Close attention under the direction of the Management Development and Remuneration Committee is given to the group's recruitment and training procedures as well as career development to meet current and future group requirements. The group's Training and Development of People Policy is set out on page 25.

Johnson Matthey recognises the importance of effective employee communications. Information and comment is exchanged with employees through the company's in-house magazine, regular news bulletins, presentations to staff and team briefings.

47% of employees worldwide are shareholders in Johnson Matthey through the group's employee share schemes, which held 4,709,536 shares (2.16% of ordinary share capital) at 31st May 1999. A total of 891 current and former executives hold options over 7,139,843 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 C D Mackay, appointed to the board on 27th January 1999, and Mr M B Dearden, appointed to the board on 27th April 1999, offer themselves for election at the forthcoming AGM. In accordance with the company's Articles of Association, Dr M J Cleare and Mr J N Sheldrick (who are employed on service contracts subject to two years' notice) and Mr H E Fitzgibbons retire by rotation and, being eligible, offer themselves for re-election at the AGM. Mr I G Thorburn, who was a director throughout the financial year, will retire from the board at the conclusion of the AGM. Directors' interests in the company's shares are detailed in the Remuneration Report on pages 33 to 40.

Company Secretary
Mr I G Thorburn who, as stated above, will retire from the board at the conclusion of the AGM, resigned as company secretary on 1st May 1999. He was succeeded by Simon Farrant who is also the group's Senior Legal Adviser.

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 31st May 1999:

Schroder Investment Management Ltd	18.48%
Prudential Corporation group of companies (see note 1 below)	3.85%
Fidelity Investments	3.11%

The directors are not aware of any other notifiable holdings of 3% or more of the ordinary share capital of the company, but the following interests should also be noted:

1. The Prudential Corporation controls a number of non-material holdings which, when combined with the above notifiable material holdings, bring the total holding to 3.90% (1998 4.98%).
2. Legal & General and Phillips & Drew are interested in their capacity as fund managers in 3.06% and 4.56% respectively of the ordinary share capital of the company.

Auditor
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 auditor 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 1999, the company's aggregate level of "creditor days" amounted to 3 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 £267,000 (1998 £272,000) to charitable organisations, of which £198,000 (1998 £213,000) was in the UK. There were no political donations made in the year (1998 £26,000).

This report was approved by the directors on 8th June 1999 and is signed on their behalf by:

Simon Farrant
Company Secretary