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The directors submit their report and
the audited accounts for the year ended 31 March 2003 as set out on pages
30 to 64.
Activities and review for the
year
The principal activities and review for the year are contained on pages
8 to 12.
Reserves and dividends
During the year the carrying value of the Company’s investments in subsidiaries
was evaluated and an impairment of £5,579 million recorded as set out
in note 15 on page 50. Of this write-down, £4,057 million was offset against
an existing merger reserve with the balance recorded against the profit
and loss account as set out in note 24 on page 57. At the year end, £1,343
million of the profit and loss reserves was unrealised and therefore not
available for distribution.
The directors do not recommend a final dividend (2002 1.0p). An interim
dividend of 1.0p was paid on 4 March 2003 making a total for the year
of 1.0p (2002 2.0p).
Board of directors
The current directors of the Company and their biographical details are
given on page 17. A statement of their remuneration and interests in the
ordinary shares of the Company are set out in the remuneration report
on pages 22 to 28. Mr R P Bauman, Ms K A O’Donovan and Sir Graham Hearne
retired from the Board of directors on 24 July 2002, 31 December 2002
and 31 March 2003 respectively. In addition, Mr P Scaroni joined the Board
on 1 May 2002, and subsequently resigned on 14 June 2002, following his
appointment as Chief Executive of ENEL SpA in Italy. Lord Marshall has
announced that he will retire at the Company’s annual general meeting
in July, to be succeeded as Chairman of the Company by Mr M Jay, when
Sir Philip Beck will also retire from the Board. Mr A N Hennah, Mr J-C
Guez, Mr Jay and Mr A E Macfarlane joined the Board on 23 October 2002,
21 January 2003 (Mr Guez and Mr Jay) and 19 March 2003 respectively. All
other directors served throughout the year.
In accordance with the Articles of Association, Mr R L Börjesson retires
by rotation and, being eligible, offers himself for re-election at the
annual general meeting. In addition, Mr Guez, Mr Jay, Mr Macfarlane and
Mr Hennah, who were appointed during the year, retire in accordance with
the Articles of Association and offer themselves for election at the annual
general meeting. Mr Hennah has a service contract, details of which are
given on pages 23 and 24. Mr Guez, Mr Jay and Mr Macfarlane are non-executive
directors and as such do not have service contracts. Mr Jay’s letter of
appointment is described on page 24.
Acquisitions and disposals
During the year the Group made no material acquisitions. The following
disposals have taken place in the year to 31 March 2003:
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Proceeds £m
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Proportion disposed
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Effective date
of disposal
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| Rexnord |
560
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100%
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Nov 2002
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| Flow Control |
362
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100%
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May 2002
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| Sensor Systems |
267
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100%
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Oct 2002
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| Fasco Motors |
236
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100%
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Dec 2002
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| Drive Systems |
92
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100%
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Nov 2002
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| Australian Transmissions |
33
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100%
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Apr 2002
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| Alemite |
21
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100%
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Jun 2002
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| Other disposals |
38
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1,609
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The discontinued businesses contributed sales of £760 million and operating profit of £80 million in the year.
Substantial shareholders
As at 28 May 2003 the Company had been notified of the following interests in its ordinary shares:
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| Name |
Number of ordinary
shares
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% of issued share
capital
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| Aviva plc |
175,173,461
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5.01
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| Brandes Investment Partners, LP |
485,131,884
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13.86
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| Legal & General Group plc |
110,482,897
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3.16
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| The Capital Group Companies, Inc |
240,432,923
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6.87
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Supplier payment policy
It is the policy of the Group that subsidiary companies should develop long-term relationships with suppliers and establish terms of trade consistent with established practice in their country of operation, and to ensure that suppliers are aware of the terms of payment and that such terms are followed. The Company is a holding company and has no trade creditors.
Employee policy and development
Information concerning employees and their remuneration is given in note 5 to the accounts on page 41. The Group seeks to ensure that fair consideration is given to applications for employment received from disabled persons and to ensure continued employment, training and advancement where possible of employees who are, or become, temporarily or permanently disabled.
The Company also recognises the need to provide information on matters of concern to employees and, to satisfy that need, the Company provides employees with published financial and economic information through its consultative procedures.
General information
Group donations to charities and community causes world-wide were £1.0 million (2002 £1.6 million) with UK charities receiving £0.3 million (2002 £0.4 million). No donations were made to political parties (2002 £nil). The Group carries out research and development in support of its activities. During the year expenditure on the development of new products and processes amounted to £222 million (2002 £265 million).
Auditors
Ernst & Young LLP have expressed their willingness to continue in office as auditors and resolutions proposing their reappointment and to authorise the directors to determine their remuneration will be proposed at the forthcoming annual general meeting.
Annual general meeting
The annual general meeting of the Company will be held at The Queen Elizabeth II Conference Centre, Broad Sanctuary, Westminster, London SW1P 3EE on Wednesday 23 July 2003 at 11am. The separate circular including the notice of meeting sent to all shareholders gives full details of the meeting and the resolutions to be proposed.
By order of the Board
J R W Clayton
Company Secretary
28 May 2003