The Board
During the year the Board was chaired by a Non-executive Director and comprised of three other Non-executive Directors and five Executive Directors.

All of the Non-executive Directors are independent of management and free from any business or other relationship which could materially interfere with the exercise of their independent judgement, except for Mr K McDonald, a Non-executive Director until 10 March 2000, who was executive chairman of Polypipe plc prior to its acquisition by IMI. The Non-executive Directors are from varied backgrounds and bring with them a wide range of expertise and experience of senior management in other areas of commerce and industry. Biographical details are shown on pages 18 and 19. There is a clear division of responsibility between the Chairman and Chief Executive. Sir Chips Keswick is the senior Non-executive Director after the Chairman.

One third of the Board retire by rotation at each Annual General Meeting and each Director, including the Chief Executive, stands for re-election at least once every three years.

The Board meets regularly and special meetings are convened as and when matters require urgent consideration. The Board reviews detailed budgets, forecasts and plans for the businesses of the Group on an annual basis. Quarterly meetings of the Board consider detailed financial and management reports on the operational and strategic progress of the Group. There is regular communication between the Company and Non-executive Directors. The Board has a recognised procedure for any Director to obtain independent professional advice at the Company's expense and all Directors have access to the Company Secretary who is a solicitor.

Committees of the Board
The members of the Audit Committee and the Appointments and Salaries Committee during the year comprised the following Non-executive Directors: Sir Eric Pountain, Sir Chips Keswick, Mr I A N McIntosh and Mr B L Staples (with effect from 1 May 2000). Both of these Committees operate under written terms of reference which clearly set out their respective delegated responsibilities and authorities.

The Audit Committee is chaired by Mr B L Staples and meets at least twice a year. It receives reports from the auditor who also attends its meetings when required to so do. The Chief Executive, Finance Director and other Executive Directors are also invited to attend its meetings where the Committee considers that to be appropriate.

For non-audit work the Audit Committee reviews the Group policy to select the adviser appropriate to the task taking into account location and cost. The Group uses a number of advisers for services such as due diligence, consultancy and international tax advice.

The Appointments and Salaries Committee, which acts as the nominations and remuneration committee, meets at least four times a year and is chaired by Sir Chips Keswick. The Committee's main responsibilities are to determine, within the framework approved by the Board, the specific remuneration packages and terms of employment for each of the Executive Directors and to make recommendations to the Board concerning the composition of and appointments to the Board. The Chief Executive is consulted by the Committee about the remuneration of the other Executive Directors. The Committee also obtains independent advice and information on comparative remuneration packages and structures where it considers that to be appropriate.

The Executive Committee of the Board is chaired by the Chief Executive and consists of all of the Executive Directors. It meets monthly and more often as may be required in order to monitor performance and formulate proposals on strategy, policy and resource allocation for consideration by the Board.

Investor relations
The Annual General Meeting is regarded by the Board as an important opportunity to meet and communicate with shareholders. The 2000 Annual General Meeting was chaired by Sir Eric Pountain and attended by all of the other members of the Board including the chairmen of the Audit Committee and the Appointments and Salaries Committee.

Each substantially separate issue was put to the Annual General Meeting as an individual motion and the meeting was invited to adopt and approve the financial statements and the Directors' Report for 1999. Notice of the 2000 Annual General Meeting was despatched more than twenty working days in advance and the level of proxy votes lodged for and against each resolution were disclosed at the meeting together with details of any abstentions.

The Company has arranged a dealing service for shareholders with Cazenove & Co (contact details are shown on page 58).

In addition to the Annual Report, the Company issues an Interim Report to shareholders and has its own website at www.imi.plc.uk on the Internet.

Dialogue is maintained with shareholders and during the year the Executive Directors regularly met with investors.

Internal control
The Board has overall responsibility for the Group's system of internal control which is designed to manage rather than eliminate risk and can provide only reasonable assurance against material misstatement or loss. The Board confirms that the system of internal control accords with the guidance issued in September 1999 by the Institute of Chartered Accountants in England and Wales (the "Turnbull Committee Guidance").

In response to the Turnbull Committee Guidance, the Board assigned responsibility for the continuous review of risk management and strategy to the Executive Committee. During the year the Board received reports on risk issues from the Executive Committee and reviewed the effectiveness of the Group's system of internal control in relation to financial, operational and compliance controls and risk management. In addition, the Audit Committee considered and reported to the Board on the financial aspects of internal control including the nature and scope of independent audit and internal financial reviews.

In relation to business risk, each operating unit is required to undertake a continuous process of risk assessment and reporting. This is reviewed by the most senior executive for the relevant business area and any major risk issues are referred to the Executive Committee at least quarterly. The Executive Committee makes regular reports to the Board on major business risks faced by individual operations and by the Group and how it is proposed that those risks be managed. Through this process business risks are identified, assessed and ranked according to their nature and urgency and the Board considers what would be an appropriate response.

The Board has clearly defined those matters which are reserved to it and the respective delegated authorities of its Committees and the Executive Directors.

The Group has a clear organisational structure and well established reporting and control disciplines. Managers of operating units exercise a high degree of autonomy in running day-to-day trading activities within a framework of clear rules and policies regarding business conduct and approval of proposals for investment or material changes in operations.

All operating units prepare forward plans annually which make projections for the following two years. These plans are reviewed in detail by Executive Directors and consolidated for review by the Board. Performance against forecast is continuously monitored by the Executive Directors, reviewed at monthly meetings of the Executive Committee and on a quarterly basis by the Board.

Minimum standards for accounting systems and controls, which are documented and monitored, are promulgated throughout the Group. Certified quarterly reports are required from senior executives of operating units, confirming compliance with Group standards. There is also a centrally managed rolling programme of internal financial reviews which are documented and reported. These are co-ordinated with the external audit process and additional annual reviews of selected operating units are carried out by Group finance personnel in conjunction with the external auditors.

Capital investments are subject to a clear process for investment appraisal, authorisation and post-investment review, with major investment proposals referred for consideration by the Executive Committee or the Board as appropriate according to their materiality.

In addition, the Executive Committee regularly reviews the operation of corporate policies and controls in relation to treasury activities, environmental, health and safety, human resources, taxation, insurance, legal and regulatory compliance. Reports are made to the Board at least annually and more often as appropriate to keep the Board informed and enable it to consider internal control issues and developments.

Through the procedures outlined above the Board has considered all significant aspects of internal control for the year 2000 and up to the date of this Annual Report.

Non-Executive Directors’ remuneration
The remuneration of the Non-executive Directors is determined, after reference to external comparisons, by the Board. Non-executive Directors do not participate in, or vote on any discussion relating to their own remuneration, nor do they participate in any bonus, pension or employee share schemes of the Company. No other benefits are provided for the Non-executive Directors and they do not have service contracts. Non-executive Directors are normally appointed for an initial period of three years subject to re-election on retirement by rotation or removal under the Company's Articles of Association.

The Chairman receives total remuneration of £75,000 per annum and each of the other Non-executive Directors receives £25,000 per annum.

Executive Directors’ remuneration
The key objectives of the Company's executive remuneration policy are to provide a competitive remuneration package to attract, motivate, reward and retain individuals of the calibre required, and to align executives' interests with those of shareholders by relating a significant element of the remuneration package to the Company's performance. Remuneration comprises salaries, annual performance bonuses, benefits in kind, pension arrangements and participation in an executive share option scheme.

When setting the remuneration of each Executive Director, the Appointments and Salaries Committee takes into account their skills and individual performance and has reference to market rates, as evidenced by comparisons with companies of a similar type, size and complexity, and periodic reports from external consultants. Reviews are carried out annually or when a change of responsibilities occurs. Factors taken into account in determining the package include the increasingly international nature of the businesses and the achievement of strategic objectives.

Executive Directors are only permitted to accept external appointments with the consent of the Board, and are normally allowed to retain fees from their external non-executive directorships.

Salaries
All of the Executive Directors' salaries were reviewed during the year with advice from external consultants and increased by 7 per cent.

Annual performance bonuses
Executive Directors are awarded non-pensionable annual performance bonuses, to encourage profitable growth dependent upon increasing earnings per share and the achievement of strategic objectives, of up to 50 per cent of salary (30 per cent in the case of Mr G J Allen and Mr R B Pointon whose bonuses are pensionable). The challenging performance criteria are set by the Appointments and Salaries Committee.

Non-pensionable bonus arrangements were agreed with and applied to the Executive Directors during the year except that Mr G J Allen and Mr R B Pointon elected to retain their existing pensionable bonus arrangements, to which they were entitled in the same way as all other participants in the IMI Pension Funds. It is the policy of the Company to seek to make all new appointments on the basis of non-pensionable bonus arrangements.

Benefits
The principal benefits in kind for Executive Directors relate to the provision of a fully expensed motor car, private health care arrangements and, where appropriate, relocation arrangements.

Service contracts
It is the policy of the Company to seek to make all new appointments on the basis of one year rolling service contracts. All of the Executive Directors will have one year rolling service contracts following the retirement of Mr N C Paul and Mr G J Allen as Executive Directors.

Pension entitlement
Executive Directors participate in the IMI Supplementary Pension Fund which provides a pension on retirement at age 60, guaranteed for 5 years, of up to two-thirds of final pensionable pay, together with a dependants' benefit of two-thirds of the members' pension in the event of their death after retirement. Unless an Executive Director has elected otherwise, pensionable pay no longer includes any allowance for bonuses in respect of pensionable service after 31 March 2000. Pensionable pay also excludes the taxable amount of benefits in kind except in relation to pensionable service prior to May 1996 for those Executive Directors who joined their current membership category prior to then.

An immediate pension based on service completed may be drawn on retirement from age 50, subject to certain service requirements and, if retirement precedes age 57, to a reduction if retirement is at the member's request. On death in service, in addition to a dependants' pension of two-thirds of the member's pension based on prospective service, a lump sum of four years pensionable pay is normally payable. Children's pensions are also paid in the event of death. An immediate pension based on prospective service is payable if ill-health forces retirement. Once in payment, pensions are guaranteed to increase each year in line with price inflation up to a maximum of 5 per cent. No contributions are payable by members of this Fund.

Details of the pension benefits earned during 2000 are summarised in the following table. This shows accrued pension benefits at the end of the year, and represents the annual deferred pension to which each Executive Director would have been entitled had he left service at the end of the year. This is based on completed service and earnings at the relevant date. Also shown is the increase in the accrued pension during the year, over and above the effects of inflation, which reflects the completion of further pensionable service and any increase in salary.

The above figures exclude any benefits from the Executive Directors' voluntary contributions.

Non-Executive Director's are not members of any Group pension scheme.

The Company operates an Inland Revenue approved savings-related share option scheme which is open to the majority of the Group's UK employees, including the Executive Directors, and allows the grant of options to all participants at a discount of up to 20 per cent below the market price although the discount was limited to 10 per cent for options granted in 2000.

The Executive Directors also participate in an employees' profit sharing scheme covering the majority of UK employees but, whereas employees may take up their entitlement in cash or shares, Executive Directors are required to take their entitlement in the form of shares.

Please refer to Note 20 for the respective scheme codes.

During the period 31 December 2000 to 12 March 2001 there were no changes in the interests of any current Director from those shown.
The closing price of the Company's ordinary shares at 31 December 2000 was 237p per share and the price range during the year was 190.25p to 292.25p.
The notional gains calculated as at the date of exercise of the share options by reference to the middle market price in the Stock Exchange Daily Official List were Mr G J Allen £2,179; Mr M J Lamb £1,494; Mr N C Paul £33,288; which in aggregate amounted to £36,961.