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The following is an excerpt from a 20-F SEC Filing, filed by AKZO NOBEL NV on 4/22/2003.
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AKZO NOBEL NV - 20-F - 20030422 - FINANCIAL_STATEMENTS

Item 17. FINANCIAL STATEMENTS

Akzo Nobel has responded to Item 18.


100

Item 18. FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS                                      Page

Report of independent auditors                                      101

Financial Statements:
- Summary of significant accounting policies used in preparing
    the consolidated financial statements                           102

- Consolidated balance sheets at December 31, 2002 and 2001         106

- Consolidated statements of income for the years
    ended December 31, 2002, 2001 and 2000                          107

- Consolidated statements of cash flows for the
    years ended December 31, 2002, 2001, and 2000                   108

- Notes to the consolidated financial statements                    109

FINANCIAL STATEMENT SCHEDULE*
IIValuation and qualifying accounts                                 145

Item 19. Exhibits index                                             145

* Schedules other than the one listed under this heading are omitted for the reason that they are not required or are not applicable.


101

REPORT OF INDEPENDENT AUDITORS

To the Board of Management of Akzo Nobel N.V. and Supervisory Board:

We have audited the consolidated financial statements of Akzo Nobel N.V. and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and the financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Akzo Nobel N.V. and subsidiaries at December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2002, in conformity with generally accepted accounting principles in the Netherlands. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As more fully discussed in the Summary of Significant Accounting Policies beginning on page 102, during 2002, the Company changed its methods of accounting for the Dividend Proposal, and the Akzo Nobel Employee Share Plan.

Generally accepted accounting principles in the Netherlands differ in certain significant respects from accounting principles generally accepted in the United States of America. Application of generally accepted accounting principles in the United States would have affected consolidated results of operations for each of the years in the three-year period ended December 31, 2002 and consolidated shareholders' equity at December 31, 2002 and 2001 to the extent summarized in Note 21 to the consolidated financial statements.

Arnhem, the Netherlands
February 10, 2003 KPMG Accountants N.V.


102

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USED IN PREPARING THE CONSOLIDATED FINANCIAL STATEMENTS

General

The consolidated financial statements of Akzo Nobel N.V. ("Akzo Nobel") and subsidiaries have been prepared in conformity with generally accepted accounting principles in the Netherlands ("NL GAAP"), which differ in certain significant respects from accounting principles generally accepted in the United States of America ("US GAAP"). See Note 21 for a description of the differences between NL GAAP and US GAAP affecting Akzo Nobel's net income and shareholders' equity.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Change in Accounting Principles

In line with recently issued directives of the Netherlands Accounting Standards Board, the Company changed its accounting for the final dividend proposal and for the Akzo Nobel Employee Share Plan, effective January 1, 2002.

Dividend Proposal
The Company used to recognize the proposal for the final dividend as a liability under current liabilities. Under the new standard, of which early adoption is encouraged, a dividend shall not be recognized as a liability until it has been approved by the General Meeting of Shareholders.

Comparative figures have been restated. The effect of this new principle on shareholders' equity at December 31, 2001, was an increase of EUR 257 million.

Akzo Nobel Employee Share Plan
Under the Akzo Nobel Employee Share Plan, Akzo Nobel N.V. common shares are granted for free to the employees after a certain vesting period. In accordance with the new standard, effective for rights granted from 2002 onwards, the value of the shares on the date of the grant is recognized as a charge in the statement of income spread over the vesting period, which in general is 3 years. For 2002, the net charge to income amounted to EUR 2 million.

Consolidation

The consolidated financial statements include the accounts of Akzo Nobel N.V. and its subsidiaries. Subsidiaries are companies of which Akzo Nobel directly and/or indirectly has control.
All of the assets, liabilities, and results of the consolidated companies are included. Minority interest in equity and earnings is shown separately. Transactions between consolidated companies are eliminated.

Joint ventures where Akzo Nobel has joint control are proportionally consolidated. Interests in companies where Akzo Nobel can exercise significant influence are treated as nonconsolidated companies.


103

Valuation

The principles of valuation and determination of income used in the consolidated financial statements are based on historical costs.

Translation of Foreign Currencies

In the balance sheet, amounts in foreign currencies are translated into euros at year-end exchange rates. Foreign exchange differences are included in income. Results on currency hedging contracts are also recognized in income to offset the foreign exchange differences on the related hedged items. Exchange differences on anticipatory hedges of firm commitments regarding sales and purchases are deferred on the balance sheet until the hedged transactions have been reflected in the accounts. The capitalized or accrued amount is included in receivables or current liabilities.

Statements of income in foreign currencies are translated into euros at average exchange rates. Foreign exchange differences resulting from translation into euros of shareholders' equities and of intercompany loans of a permanent nature with respect to affiliated companies outside the Euro region are directly added to, or deducted from, equity.

Before being consolidated, the financial statements of affiliated companies established in hyperinflationary countries are adjusted for the effects of changing prices.

Principles of Valuation of Assets and Liabilities

Intangible Assets

Purchased goodwill is capitalized and amortized on a straight-line basis over the estimated useful life, up to a maximum of 20 years. Goodwill is determined as the difference between the fair value of the consideration paid for new interests and the fair value of the purchased net assets at the date of acquisition. Development costs are capitalized if it is probable that sufficient future economic benefits will be generated by the intangible asset arising from development, and amortized on a straight-line basis over the estimated useful life, which in the majority of cases is 5 years.
Other intangible assets, such as licenses, know-how, and intellectual property rights, are capitalized and amortized on a straight-line basis over their estimated useful life, which in the majority of cases is 10 to 15 years. In cases where the book value so computed permanently exceeds the value to the business additional write-downs are made.

Property, Plant and Equipment

Property, plant and equipment are valued at cost less depreciation. Cost includes the financing charges of capital investment projects under construction. Capital investment grants are deducted from property, plant and equipment.
Depreciation is computed by the straight-line method based on estimated useful life, which in the majority of cases is 10 years for plant equipment and machinery, and which ranges from 20 to 30 years for buildings. In cases where the book value so computed permanently exceeds the value to the business additional write-downs are made.


104

Financial Noncurrent Assets
Investments in nonconsolidated companies are stated at the amount of Akzo Nobel's share in shareholders' equity. The calculation of shareholders' equity is based as much as possible on the Akzo Nobel principles of valuation.

Loans to nonconsolidated companies are carried at face value less such provisions as are considered necessary.

For the valuation of deferred tax assets reference is made to Deferred Taxes.

Other financial noncurrent assets are stated at face value, at cost, or at lower market value. For pension prepayments reference is made to Pensions and Other Postretirement Benefits.

Inventories
Inventories are stated at the lower of cost or net realizable value. Cost, defined as the full manufacturing costs related to the stage of processing, is determined by the first-in first-out (FIFO) method. Provisions are made for obsolescence.

Receivables
Receivables are stated at face amounts less such provisions as are considered necessary.

Cash and Cash Equivalents
Cash and cash equivalents are carried at face value, with the exception of marketable private borrowings and marketable securities, which are valued at the lower of cost or market value.

Provisions
Provisions are recorded when it is probable that a liability has been incurred, and the amount involved is reasonably estimable. Provisions are stated at face value, except for certain long-term provisions, which have been discounted.

Pensions and Other Postretirement Benefits The Company accounts for the costs of pension plans and postretirement benefits other than pensions in accordance with U.S. accounting standards SFAS 87 and SFAS 106, respectively.

Most of the Company's defined-benefit pension plans are funded with plan assets that have been segregated in a trust or foundation. For plans, which are not separately funded, the Company recognizes a provision for such amounts. Valuations of both funded and unfunded plans are carried out by independent actuaries. Pension costs primarily represent the increase in the actuarial present value of the obligation for projected pension benefits based on employee service during the year and the interest on this obligation in respect of employee service in previous years, net of the expected return on plan assets. In the event, however, that at any date the accumulated benefit obligation, calculated as the present value of the benefits attributed to employee service rendered prior to that date and based on current and past compensation levels, would be higher than the market value of the plan assets and/or the existing level of the pension provision, the difference is, pursuant to SFAS 87, added to provisions by means of recognition of an intangible asset for prior service costs with the balance, net of taxes, being charged to shareholders' equity.

In certain countries the Company also provides postretirement benefits other than pensions to various employees. These plans are generally not funded. Valuations of the obligations under these plans are carried out by independent actuaries. The costs relating to such plans primarily consist of the present value of the


105

benefits attributed on an equal basis to each year of service and the interest on this obligation in respect of employee service in previous years.

Deferred Taxes
Deferred tax assets and liabilities are based on timing differences between the valuation of assets and liabilities for accounting purposes and the valuation for tax purposes. Measurement of deferred tax assets and liabilities is based upon the enacted tax rates expected to apply to taxable income in the years in which those timing differences are expected to be reversed. Deferred tax assets, including assets arising from losses carried forward, are recognized if it is more likely than not that the asset will be realized. Nonrefundable dividend taxes are taken into account in the determination of provisions for deferred taxes to the extent of earnings expected to be distributed by affiliated companies.

Long-Term Borrowings and Short-Term Debt Long-term borrowings and short-term debt are stated at face value.

Principles of Determination of Income

The determination of income is closely associated with the valuation of assets and liabilities. In addition, the following principles are observed in the preparation of the statement of income:

- Net sales is defined as the revenue from the sale and delivery of

goods and services, net of rebates, discounts,  and similar allowances,
and net of  sales tax. Net sales  are recognized  upon delivery of  goods
or when services are rendered.

- Cost of sales comprises the manufacturing costs of the goods and services sold and delivered, and any inventory write-downs to lower net realizable value. Manufacturing costs include such items as:

- the costs of raw materials and supplies, energy, and other materials;

- depreciation and the costs of maintenance of the assets used in production;

- salaries, wages, and social charges for the personnel involved in manufacturing.

- Research costs and preparation and start-up expenses are charged to income as incurred.

- Royalty income is recognized on an accrual basis under Other Results.

- Interest on interest swaps and forward rate agreements is included in the statement of income under Financing Charges.

- Taxes on income comprise both current and deferred taxes, including effects of changes in tax rates.

- Income from nonconsolidated companies consists of Akzo Nobel's equity in earnings of these companies and interest on loans granted to them, with due allowance being made for taxes relating to these items.

Earnings per Share

Earnings per common share are calculated by dividing net income by the weighted average number of common shares outstanding during the year. The weighted average number of shares outstanding used in the calculation for the basic earnings per share was 285,827,092 for 2002 and 285,888,385 and 285,902,574 for 2001 and 2000, respectively. For the calculation of the diluted earnings per share the weighted average number of shares was 286,331,205 for 2002 and 286,328,864 and 286,155,360 for 2001 and 2000, respectively.


106

AKZO NOBEL

CONSOLIDATED BALANCE SHEETS

--------------------------------------------------------------------------------
                                                                  December 31,
Millions of euros, except per share amounts                    2002         2001*
--------------------------------------------------------------------------------
Assets
Current assets
  Cash and cash equivalents (Note 3)                           520          455
  Receivables (Note 4)                                       2,629        3,011
  Accounts receivable from nonconsolidated companies            43           73
  Inventories (Note 5)                                       2,206        2,270
  Prepaid expenses                                             143          145
                                                        ----------   ----------
Total current assets                                         5,541        5,954

Intangible assets (Note 6)                                     629          508
Property, plant and equipment, net (Note 7)                  4,402        4,568
Nonconsolidated companies (Note 8)                             491          575
Deferred tax assets                                            405          419
Deferred tax assets for minimum pension liability              503           26
Other assets                                                   818          875
                                                        ----------   ----------
Total assets                                                12,789       12,925
                                                        ==========   ==========

Liabilities and shareholders' equity
Short-term liabilities
 Short-term borrowings (Note 9)                                979        2,267
 Current liabilities (Note 10)                               2,944        2,971
 Payables to nonconsolidated companies                           5            6
 Current portion of long-term borrowings (Note 11)             734          294
                                                        ----------   ----------
Total short-term liabilities                                 4,662        5,538

Long-term borrowings (Note 11)                               2,063        1,941

Long-term liabilities (Note 12)                              3,829        2,430

Minority interest                                              137          138

Shareholders' equity (Note 13)

  Priority shares:
  48 shares authorized and outstanding of EUR 400 per share
  Common shares:
  Authorized 600,000,000 shares of EUR 2 per share
  Outstanding at December 31, 2002: 286,147,260 shares         572          572
  Outstanding at December 31, 2001: 286,044,300 shares
  Additional paid-in capital                                 1,803        1,799
  Foreign currency translation adjustments                    (896)        (721)
  Retained earnings                                          1,655        1,185
  Statutory reserves                                            82           83
                                                        ----------   ----------
  Capital and reserves                                       3,216        2,918
  Minimum pension liability                                 (1,118)         (40)
                                                        ----------   ----------
Total shareholders' equity                                   2,098        2,878
                                                        ----------   ----------
Total liabilities and shareholders' equity                  12,789       12,925
                                                        ==========   ==========

See accounting policies and notes to consolidated financial statements.

* Prior years have been restated for changes in accounting principles.
Reference is made to Changes in Accounting Principles on page 102.


107

AKZO NOBEL
CONSOLIDATED STATEMENTS OF INCOME

-----------------------------------------------------------------------------------------------------------------------------------
                                                                                              for the years ended December 31,
Millions of euros, except per share amounts                                                   2002            2001             2000
-----------------------------------------------------------------------------------------------------------------------------------
Net sales                                                                                   14,002          14,110           14,003
Cost of sales                                                                               (7,301)         (7,393)          (7,436)
                                                                                        ----------      ----------     - ----------
Gross margin                                                                                 6,701           6,717            6,567

  Selling expenses                                                                          (3,549)         (3,565)          (3,468)
  Research and development expenses                                                           (912)           (847)            (790)
  General and administrative expenses                                                         (801)           (798)            (756)
  Other results, net (Note 18)                                                                  53              64               88
                                                                                        ----------      ----------       ----------
                                                                                            (5,209)         (5,146)          (4,926)
                                                                                        ----------      ----------       ----------
Operating income before nonrecurring items                                                   1,492           1,571            1,641
Nonrecurring items (Note 19)                                                                  (130)           (449)             (84)
                                                                                        ----------      ----------       ----------
Operating income, after nonrecurring items                                                   1,362           1,122            1,557

  Interest income                                                                               15              21               26
  Interest expense                                                                            (219)           (278)            (271)
                                                                                        ----------      ----------       ----------
Financing charges, net (Note 16)                                                              (204)           (257)            (245)
                                                                                        ----------      ----------       ----------
Operating income less net financing charges                                                  1,158             865            1,312
Income taxes (Note 17)                                                                        (335)           (281)            (440)
                                                                                        ----------      ----------       ----------
Earnings of consolidated companies less income taxes                                           823             584              872
Earnings from nonconsolidated companies                                                         38              69               65
Nonrecurring gain/(loss) nonconsolidated company                                                (8)            (14)              78
                                                                                        ----------      ----------       ----------
                                                                                                30              55              143
Earnings before minority interest                                                              853             639            1,015

Minority interest                                                                              (35)            (31)             (43)
                                                                                        ----------      ----------       ----------
Net income before extraordinary items                                                          818             608              972
Extraordinary items after taxes (Note 19)                                                                       63              (25)
                                                                                        ----------      ----------       ----------
Net income                                                                                     818             671              947
                                                                                        ==========      ==========       ==========
Basic earnings per share                                                                      2.86            2.35             3.31
                                                                                        ==========      ==========       ==========
Diluted earnings per share                                                                    2.86            2.34             3.31
                                                                                        ==========      ==========       ==========

See accounting policies and notes to consolidated financial statements.


108

CONSOLIDATED STATEMENTS OF CASH FLOWS

-----------------------------------------------------------------------------------------------------------------------------------
                                                                           For the years ended December 31,
Millions of euros                                                       2002                       2001                        2000
-----------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities
Net income                                                               818                        671                         947
Adjustments to reconcile net income to net cash
provided by operating activities:
 Minority interest                                                        35                         31                           4
 Depreciation and amortization, including write-downs                    791                        846                          73
Book (gains) / losses on divestments                                     (94)                      (114)                       (125)
 Nonconsolidated companies                                                42                        (18)                       (122)
 Changes in deferred tax, pensions and other
long-term liabilities                                                   (172)                       166                         252
 Changes in working capital net of effect of
 acquisitions and disposals:
    Receivables and prepaid expenses                       172                        (165)                      (127)
    Inventories                                           (102)                        (79)                      (122)
    Current liabilities exclusive of dividends,
    borrowings and current portion of long-term
    liabilities                                             47                         103                       (118)
                                                      --------                    --------                  ---------
                                                                         117                       (141)                       (367)
Other                                                                     11                         (4)                          2
                                                                    --------                   --------                    ---------
Net cash provided by operating activities                              1,548                      1,437                       1,367

Cash flows from investing activities
Purchase of intangible assets                                            (19)                       (59)                        (33)
Expenditures for property, plant and equipment                          (689)                      (822)                       (725)
Proceeds from sale of property, plant and
equipment                                                                 14                         10                         114
Investments in nonconsolidated companies                                 (16)                        (4)                        (13)
Repayment of loans by nonconsolidated companies                            5                         92                          83
Acquisition of consolidated interests net of cash
acquired
                                                                        (257)                      (314)                       (270)
Proceeds from sale of interests                                          208                        376                         244
Other                                                                    (25)                       (25)                          9
                                                                    --------                   --------                    ---------
Net cash used in investing activities                                   (779)                      (746)                       (591)

Cash flows from financing activities

Cash dividends paid                                                     (363)                      (376)                       (313)
Purchase of shares                                                        (6)                       (10)
Issuance of shares                                                         4                          3                           1
Increase of long-term borrowings                                       1,044                        142                         155
Repayment of long-term borrowings                                       (213)                      (668)                       (222)
Short term borrowings exceeding three months:
 Increase                                                                454                      3,477                       4,269
 Repayment                                                            (1,389)                    (3,563)                     (4,629)
Changes in other short-term borrowings                                  (186)                       347                        (557)
                                                                    --------                   --------                    ---------
Net cash (used for) / provided by financing activities                  (655)                      (648)                     (1,296)

Effect of exchange rate changes on cash                                  (49)                        (4)                          4

Cash and cash equivalents:
 At beginning of year                                                    455                        416                         932
 At end of year                                                          520                        455                         416
                                                                    --------                   --------                    ---------
Increase / (decrease)                                                     65                         39                        (516)
                                                                    ========                   ========                    ========

For supplemental disclosures see Note 22.

See accounting policies and notes to consolidated financial statements.


109

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

(1) Industry Segment Information and Geographic Data

Akzo Nobel, headquartered in Arnhem, the Netherlands, is a market-driven and technology-based company, serving customers throughout the world with healthcare products, coatings, and chemicals.

(a) Industry Segment Information

The information presented below illustrates the relative importance of the individual groups.

-----------------------------------------------------------------------------------------------------------------------------------
                                                                        Net sales             Operating income     Operating income,
                                                                                         before nonrecurring   after nonrecurring
                                                                                                items                 items
Millions of euros                                        2002        2001      2000     2002    2001   2000    2002    2001    2000
-----------------------------------------------------------------------------------------------------------------------------------
Pharma                                                  4,008       4,044     3,839      768     831    765     747     790     767
Coatings                                                5,521       5,591     5,568      465     426    447     446     226     434
Chemicals                                               4,598       4,604     4,740      344     340    445     248     122     368
Miscellaneous products, intragroup deliveries,
  non-allocated items and eliminations                   (125)       (129)     (144)     (85)    (26)   (16)    (79)    (16)    (12)
-----------------------------------------------------------------------------------------------------------------------------------
Total                                                  14,002      14,110    14,003    1,492   1,571  1,641   1,362   1,122   1,557
===================================================================================================================================

------------------------------------------------------------------------------------------------------------------------------------

                                                             Identifiable assets          Capital                 Depreciation
                                                                                       expenditures
Millions of euros                                        2002        2001      2000     2002    2001   2000    2002    2001     2000
-----------------------------------------------------------------------------------------------------------------------------------
Pharma                                                  3,195       3,333     2,964      297     317    214     152     148      146
Coatings                                                3,338       3,372     3,381      131     181    170     150     156      149
Chemicals                                               3,557       3,837     3,953      248     310    329     311     320      323
Miscellaneous products and nonallocated and
eliminations, including cash and cash
equivalents                                             2,208       1,808     1,736       13      14     12       9      11       13
-----------------------------------------------------------------------------------------------------------------------------------
                                                       12,298      12,350    12,034      689     822    725     622     635      631
Nonconsolidated companies                                 491         575       673

-----------------------------------------------------------------------------------------------------------------------------------
Total                                                  12,789      12,925    12,707      689     822    725     622     635      631
===================================================================================================================================


110

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL
(b) Geographic Data

Below geographic information for Akzo Nobel is presented for net sales, operating income, identifiable assets and expenditures for property, plant and equipment.

------------------------------------------------------------------------------------------------------------------------
                                     By region of destination       By region of origin
                                                                                                   Operating income
                                            Net sales                   Net sales              before nonrecurring items
Millions of euros                   2002      2001      2000      2002      2001      2000      2002      2001      2000
------------------------------------------------------------------------------------------------------------------------
The Netherlands                      816       720       787     2,662     2,533     2,214       191       219       360
Germany                            1,084     1,052     1,064     1,051     1,070     1,134        78        82        83
Sweden                               517       512       538     1,184     1,088     1,268        89        67        79
United Kingdom                       963     1,036     1,052       911       924       966        13        38        55
Other European countries           3,951     3,964     3,879     3,016     3,266     3,025       654       712       558
USA and Canada                     3,723     3,802     3,596     3,318     3,263     3,198       149       190       237
Latin America                        767       917       944       506       660       704        99       104        91
Asia                               1,513     1,429     1,466     1,064     1,039     1,132       161       113       122
Other regions                        668       678       677       290       267       362        58        46        56
------------------------------------------------------------------------------------------------------------------------
Total                             14,002    14,110    14,003    14,002    14,110    14,003     1,492     1,571     1,641
========================================================================================================================

------------------------------------------------------------------------------------------
                                      Identifiable assets           Capital expenditures
Millions of euros                   2002      2001      2000      2002      2001      2000
------------------------------------------------------------------------------------------
The Netherlands                    2,618     2,595     2,860       197       235       156
Germany                              819       931     1,599        36        52        51
Sweden                               798       831       762        36        71        74
United Kingdom                     1,134     1,365     1,198        25        36        56
Other European countries           2,210     1,842     2,017       136       104        96
USA and Canada                     2,772     3,090     2,324       177       220       193
Latin America                        424       589       592        31        33        35
Asia                                 838       859       865        41        54        35
Other regions                        306       345       308        10        17        29
------------------------------------------------------------------------------------------
                                  11,919    12,447    12,525       689       822       725
Eliminations and cash
  and cash equivalents               379       (97)     (491)
Nonconsolidated
  Companies                          491       575       673
------------------------------------------------------------------------------------------
Total                             12,789    12,925    12,707       689       822       725
==========================================================================================

(2) Acquisitions and Dispositions

In April 2002, the Awlgrip(R) marine and aerospace coatings business was acquired for EUR 27 million, including EUR 19 million goodwill.

At the end of June 2002, the Industrial Specialties business of Crompton Corporation, including operations in the United States, Europe, and Asia, was acquired for EUR 96 million, of which EUR 15 million will be paid in 2003. Goodwill was nil.


111

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

At the end of September 2002, the liquid pharmaceuticals manufacturing business Rosemont Pharmaceuticals Ltd, United Kingdom, was divested for EUR 102 million. The after-tax gain on this divestiture amounted to EUR 91 million.

Effective September 2002, Ferro's powder coatings businesses in the Americas and Asia Pacific were acquired for EUR 70 million, including goodwill of EUR 45 million.

On June 15, 2001, Covance Biotechnology Services Inc., North Carolina, was acquired for EUR 223 million, including goodwill of EUR 21 million.

At the end of June 2001, the Diagnostics business of Organon Teknika was divested for EUR 334 million, resulting in a gain of EUR 56 million after taxes.

Effective October 31, 2001, the activities of the business unit Printing Inks were divested for EUR 75 million. The deal was finalized in January 2002. The after-tax gain on this divestiture amounted to EUR 7 million.

At year-end 2000 Chefaro, Akzo Nobel's Over-The-Counter activity was divested for EUR 140 million. The gain on this divestment was EUR 90 million.

During 2002, 2001 and 2000, Akzo Nobel acquired and deconsolidated various other businesses, none of which were significant to the consolidated financial statements.

The acquisitions were accounted for by the purchase accounting method.

(3) Cash and Cash Equivalents

--------------------------------------------------
Millions of euros                   2002      2001
--------------------------------------------------
Cash in banks                        276       319
Short-term investments               244       136
--------------------------------------------------
Total                                520       455
==================================================

Short-term investments almost entirely consist of cash loans, time deposits, marketable private borrowings, and marketable securities immediately convertible into cash.

At December 31, 2002 and December 31, 2001, the amount of cash and cash equivalents was freely available.

(4) Receivables

--------------------------------------------------
Millions of euros                   2002      2001
--------------------------------------------------
Trade receivables                  2,064     2,340
Taxes                                293       345
Other receivables                    286       339
                                 -------    ------
                                   2,643     3,024

Discounted drafts with recourse      (14)      (13)
--------------------------------------------------
Total                              2,629     3,011
==================================================

Allowances for doubtful accounts
included as a deduction from
receivables                          182       180
==================================================


112

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

At December 31, 2001, other receivables included a receivable for the divestment of Printing Inks of EUR 75 million.

5) Inventories

--------------------------------------------------
Millions of euros                   2002      2001
--------------------------------------------------
Raw materials and supplies           684       672
Work in process                      441       467
Finished products and goods
for resale                         1,065     1,121
Inventory prepayments                 16        10
--------------------------------------------------
Total                              2,206     2,270
==================================================
Provisions for obsolescence
deducted from inventory
book values                          151       199
==================================================

(6) Intangible Assets

------------------------------------------------------------------------------------------------------------------------
                                   Total            Goodwill           Licenses,       Prior service         Development
Millions of euros                                                  know-how, and           costs for               costs
                                                                    intellectual             minimum
                                                                 property rights   pension liability
------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999
Cost of acquisition                  373                                     326                  47
Accumulated amortization             (47)                                    (47)
                                 -------             -------             -------             -------
Book value                           326                                     279                  47

Changes in book value
Acquisitions                         144                 124                  20
Investments                           33                                      33
Disinvestments                       (15)                                    (15)
Amortization                         (33)                 (3)                (30)
Change related to minimum pension    (29)                                                        (29)
liability
Reclassification                     (38)                                    (38)
Change in exchange rates               -                   -                   -                   -
                                 -------             -------             -------             -------
Total changes in 2000                 62                 121                 (30)                (29)

Balance at December 31, 2000
Cost of acquisition                  463                 124                 321                  18
Accumulated amortization             (75)                 (3)                (72)
                                 -------             -------             -------             -------
Book value                           388                 121                 249                  18
                                 =======             =======             =======             =======


113

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

------------------------------------------------------------------------------------------------------------------------
                                   Total            Goodwill           Licenses,       Prior service         Development
Millions of euros                                                  know-how, and           costs for               costs
                                                                    intellectual             minimum
                                                                 property rights   pension liability
------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000
Cost of acquisition                  463                 124                321                  18
Accumulated amortization             (75)                 (3)               (72)
                                 -------             -------             -------             -------
Book value                           388                 121                249                  18
                                 -------             -------             -------             -------
Changes in book value
Acquisitions                         105                  94                 11
Investments                           59                                     52                                       7
Write-downs                          (18)                 (2)               (16)
Amortization                         (39)                (10)               (28)                                     (1)
Change related to minimum pension
liability                              9                                                          9
Change in exchange rates               4                   -                  4                   -
                                 -------             -------             -------             -------             -------
Total changes in 2001                120                  82                 23                   9                   6

Balance at December 31, 2001
Cost of acquisition                  623                 218                371                  27                   7
Accumulated amortization            (115)                (15)               (99)                                     (1)
                                 -------             -------             -------             -------             -------
Book value                           508                 203                272                  27                   6
                                 =======             =======             =======             =======             =======
Changes in book value
Acquisitions                         127                 127
Divestments                           (4)                 (4)
Investments                           19                                     19                                       -
Write-downs                          (82)                 (8)               (74)
Amortization                         (59)                (19)               (39)                                     (1)
Change related to minimum pension
liability                            146                                                        146
Change in exchange rates             (26)                (21)                (5)
                                 -------             -------             -------             -------             -------
Total changes in 2002                121                  75                (99)                146                  (1)

Balance at December 31, 2002
Cost of acquisition                  758                 314                264                 173                   7
Accumulated amortization            (129)                (36)               (91)                                     (2)
                                 -------             -------             -------             -------             -------
Book value                           629                 278                173                 173                   5
                                 =======             =======             =======             =======             =======


114

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

(7) Property, Plant and Equipment

--------------------------------------------------------------------------------------------------------------
                                                                              Construction
                                                       Plant                   in progress         Assets not
                                                   equipment                           and        used in the
                                         Buildings       and     Other         prepayments         production
Millions of euros                  Total  and land machinery equipment         on projects            process
--------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999
Cost of acquisition                9,270     2,387     5,454       810                 477                 142
Accumulated depreciation          (4,835)     (820)   (3,399)     (546)                                    (70)
                                 -------   -------   -------   -------             -------             -------
Book value                         4,435     1,567     2,055       264                 477                  72
                                 =======   =======   =======   =======             =======             =======
Changes in book value
Acquisitions                          88        76         1        11
Divestitures                         (30)       (9)      (10)                           (4)                 (7)
Capital expenditures                 725       234       437        84                 (46)                 16
Depreciation                        (631)     (108)     (428)      (79)                                    (16)
Write-downs                          (73)       (4)      (67)       (2)
Disinvestments                       (92)       (7)      (11)       (6)                                    (68)
Changes in exchange rates             79        37        36                                                 6
                                 -------   -------   -------   -------             -------             -------
Total changes in 2000                 66       219       (42)        8                 (50)                (69)
                                 =======   =======   =======   =======             =======             =======

Balance at December 31,
2000
Cost of acquisition                9,863     2,744     5,712       884                 427                  96
Accumulated depreciation          (5,362)     (958)   (3,699)     (612)                                    (93)
                                 -------   -------   -------   -------             -------             -------
Book value                         4,501     1,786     2,013       272                 427                   3
                                 =======   =======   =======   =======             =======             =======
Changes in book value
Acquisitions                         165        54        97        14
Divestitures                        (151)      (63)      (30)      (33)                (23)                 (2)
Capital expenditures                 822       161       428        85                 131                  17
Disinvestments                       (10)       (5)       (3)       (1)                                     (1)
Depreciation                        (635)     (119)     (436)      (76)                                     (4)
Write-downs                         (154)      (65)      (75)      (13)                                     (1)
Changes in exchange rates             30         6        23         1
                                 -------   -------   -------   -------             -------             -------
Total changes in 2001                 67      (31)         4      (23)                 108                   9

Balance at December 31,
2001
Cost of acquisition               10,337     2,838     6,002       924                 535                  38
Accumulated depreciation          (5,769)   (1,083)   (3,985)     (675)                                    (26)
                                 -------   -------   -------   -------             -------             -------
Book value                         4,568     1,755     2,017       249                 535                  12
                                 =======   =======   =======   =======             =======             =======


115

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

----------------------------------------------------------------------------------------------------
                                                                         Construction
                                                       Plant              in progress     Assets not
                                                   equipment                      and    used in the
                                         Buildings       and     Other    prepayments     production
Millions of euros                  Total  and land machinery equipment    on projects        process
----------------------------------------------------------------------------------------------------
Balance at
December 31, 2001
Cost of acquisition               10,337     2,838     6,002       924            535             38
Accumulated depreciation          (5,769)   (1,083)   (3,985)     (675)                          (26)
                                 -------   -------   -------   -------        -------        -------
Book value                         4,568     1,755     2,017       249            535             12
                                 =======   =======   =======   =======        =======        =======
Changes in book
value
Acquisitions                         159        31       123         5              -              -
Divestitures                          (9)       (3)       (2)        -             (4)
Capital expenditures                 689       260       413        91            (81)             6
Disinvestments                       (34)      (17)      (11)       (4)             -             (2)
Depreciation                        (622)     (112)     (426)      (83)                           (1)
Write-downs                          (28)       (8)      (19)       (1)                            -
Changes in exchange rates           (321)     (137)     (130)      (13)           (41)             -
                                 -------   -------   -------   -------        -------        -------
Total changes in 2002               (166)       14       (52)       (5)          (126)             3

Balance at
December 31, 2002
Cost of acquisition               10,315     2,864     6,105       906            409             31
Accumulated depreciation          (5,913)   (1,095)   (4,140)     (662)                          (16)
                                 -------   -------   -------   -------        -------        -------
Book value                         4,402     1,769     1,965       244            409             15
                                 =======   =======   =======   =======        =======        =======

The total book value of land at December 31, 2002 was EUR 278 million (at December 31, 2001: EUR 293 million).

The book value of property, plant and equipment financed by installment buying and leasing was
EUR 42 million at December 31, 2002 (at December 31, 2001: EUR 17 million).

(8) Nonconsolidated Companies

------------------------------------------------------------
Millions of euros                             2002      2001
------------------------------------------------------------
Investments in nonconsolidated companies       466       561
Loans to nonconsolidated companies              25        14
------------------------------------------------------------
Total                                          491       575
============================================================

Dividends received from nonconsolidated companies in 2002, 2001 and 2000 amounted to EUR 82 million, EUR 67 million and EUR 32 million, respectively.

At December 31, 2002, consolidated retained earnings included EUR 261 million (2001: EUR 228 million) of undistributed earnings from Akzo Nobel's investments in nonconsolidated companies. Accounts receivable


116

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

from and payable to nonconsolidated companies are separately presented in the Consolidated Balance Sheet.

The most important nonconsolidated companies are the 50 percent interest in Flexsys, the 21 percent interest in Acordis and the 30 percent interest in Methanor.

Summarized information of nonconsolidated companies on a 100-percent basis follows:

--------------------------------------------------
Millions of euros                   2002      2001
--------------------------------------------------
Current assets                     1,208     1,386
Noncurrent assets                  1,472     1,902
                                 -------   -------
Total assets                       2,680     3,288
                                 =======   =======
Current liabilities                  683       926
Noncurrent liabilities               639       735
Shareholders' equity               1,358     1,627
                                 -------   -------
Total liabilities and equity       2,680     3,288
                                 =======   =======
--------------------------------------------------

------------------------------------------------------------
Millions of euros                   2002      2001      2000
------------------------------------------------------------
Net sales                          3,283     3,745     4,309
Income before tax                     34       223       699
Net income                            31       172       615
------------------------------------------------------------

The lower 2002 statement of income figures predominantly relate to lower earnings for Acordis, Flexsys and Methanor. The decrease of the 2001 statement of income figures predominantly relates to the divestments made by Acordis in 2000.

Certain nonconsolidated companies sell goods and provide services to consolidated Akzo Nobel companies. In addition, consolidated Akzo Nobel companies sell goods and provide services to certain nonconsolidated companies. Such transactions were not significant. Terms of these transactions were generally comparable to transactions with third parties.


117

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

(9) Short-term Borrowings

----------------------------------------------------------------------------------------------------


                                                Balance at end of year     Weighted average interest
                                                  in millions of euros           rate at end of year

----------------------------------------------------------------------------------------------------

Year ended December 31, 2000
Banks                                                              370                             7%
Commercial paper                                                 1,585                             6%
Borrowings from nonconsolidated companies                           12                             5%

Year ended December 31, 2001
Banks                                                              704                             5%
Commercial paper                                                 1,455                             4%
Borrowings from nonconsolidated companies                          108                             5%

Year ended December 31, 2002
Banks                                                              517                             6%
Commercial paper                                                   396                             3%
Borrowings from nonconsolidated companies                           66                             5%

----------------------------------------------------------------------------------------------------

Commercial paper relates to Akzo Nobel's commercial paper program in the United States, which at December 31, 2002, as at December 31, 2001, had a maximum of USD 1.0 billion (year-end 2002: EUR 1.0 billion; year-end 2001: EUR 1.1 billion), and to Akzo Nobel's Euro commercial paper program, which at December 31, 2002, as at December 31, 2001, had a maximum of EUR 1.5 billion. At December 31, 2002 and 2001, borrowings under the U.S. commercial paper were EUR 156 million and EUR 576 million, respectively, and under Akzo Nobel's Euro commercial paper EUR 240 million and EUR 874 million, respectively.

(10) Current Liabilities

------------------------------------------------------------------------------------------
Millions of euros                                                           2002      2001
------------------------------------------------------------------------------------------
Prepayments by customers                                                      21        23
Payable to suppliers                                                       1,277     1,411
Taxes and social security contributions                                      350       302
Amounts payable to employees                                                 351       301
Dividends                                                                      2         5
Pensions                                                                     198       197
Current portion of long-term liabilities related
to restructurings                                                            216       213
Current portion of other long-term liabilities                               137       132
Other                                                                        392       387
------------------------------------------------------------------------------------------
Total                                                                      2,944     2,971
==========================================================================================


118

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

(11) Long-term Borrowings

-------------------------------------------------------------------------------
Millions of euros                                2002                     2001
--------------------------------------------------------------------------------
Debentures                                     2,600                    1,970
Debt to credit institutions                       87                      153
Other borrowings                                 110                      112
                                              ------                    ------
                                               2,797                    2,235
Current portion                                 (734)                    (294)
------------------------------------------------------------------------------
Total                                          2,063                    1,941
==============================================================================

Debentures and other borrowings can be specified as follows:

Millions of euros                                                       2002       2001
---------------------------------------------------------------------------------------
Debentures
8      %     1992 maturing 2002                                                     136
6.38   %     1993 maturing 2003                                          136        136
7      %     1995 maturing 2005                                          227        227
5.38   %     1998 maturing 2008                                          512        512
5.63   %     2002 maturing 2009                                          924
6      %     1998 maturing 2003 (USD)                                    478        568
6.44   %     1997 maturing 2007 (USD)                                    100        120
6.54   %     1997 maturing 2012 (USD)                                    139        167
Other debenture loans with various currencies, rates approximately 6%
and various maturities                                                    84        104
                                                                      ------     ------
                                                                       2,600      1,970
                                                                      ------     ------
Debt to credit institutions
Debt with various currencies, and various rates                           87        153
                                                                       ------    ------
                                                                          87        153
                                                                       ======    ======
Other borrowings
Borrowings with various currencies, various rates and
various maturities, including capital lease obligations                   110       112
                                                                        -----     -----
                                                                          110       112
                                                                       ======     =====


119

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

Aggregate maturity is as follows:
--------------------------------------------------------------------------------

Millions of euros
--------------------------------------------------------------------------------
2003                                                                         734
2004                                                                          21
2005                                                                         278
2006                                                                           8
2007                                                                         102
Later                                                                      1,654
--------------------------------------------------------------------------------
Total                                                                      2,797
================================================================================

The average interest rate was 5.9 percent in 2002, 6.1 percent in 2001 and 5.8 percent in 2000.

Other borrowings and debt to credit institutions have been secured by mortgages aggregating EUR 7 million at December 31, 2002 (at December 31, 2001: EUR 10 million).

At December 31, 2002, the total amount of the committed standby multicurrency loan facility with floating interest rates arranged by Akzo Nobel was USD 1.0 billion (at December 31, 2002: EUR 1.0 billion, at December 31, 2001: EUR 1.1 billion), which expires on October 15, 2003. The total amount and the conditions of the facility were not changed in 2002. Both at the end of 2002 and 2001, the facility was not used. Furthermore, the Company has a EUR 1.0 billion short-term back-up facility, expiring on November 28, 2003.

(12) Long-term Liabilities

--------------------------------------------------------------------------------
Millions of euros                                           2002            2001
--------------------------------------------------------------------------------
Deferred taxes                                               513             560
Pension obligations                                        2,795           1,289
Restructuring of activities                                  116             187
Environmental costs                                          102             176
Other                                                        223             218
--------------------------------------------------------------------------------
Total                                                      3,829           2,430
================================================================================

For details on provisions for deferred taxes reference is made to Note 17. For details on provisions for pension obligations reference is made to Note 20.

Other long-term liabilities include provisions for antitrust cases of EUR 72 million. Reference is made to Note 14.

Restructuring of activities

Provisions for restructuring of activities comprise accruals for certain employee termination benefits and for costs which are directly associated with plans to exit specific activities, primarily related to costs associated with closing down facilities. The changes in these provisions (including the short- term portion) are summarized as follows.


120

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

---------------------------------------------------------------------------------------
                                                    Termination     Exit          Total
Millions of euros                                     benefits     costs      provision
---------------------------------------------------------------------------------------
Balance at December 31, 1999                               215      105            320
Changes in exchange rates                                    -        3              3
Additions charged to income as nonrecurring item            32        4             36
Other additions charged to income                           10       12             22
Consolidations                                              31        1             32
Utilization                                               (115)     (30)          (145)
---------------------------------------------------------------------------------------
Balance at December 31, 2000                               173       95            268
Changes in exchange rates                                    -        1              1
Additions charged to income as nonrecurring item           163      108            271
Other additions charged to income                            7        5             12
Utilization                                               (118)     (34)          (152)
---------------------------------------------------------------------------------------
Balance at December 31, 2001                               225      175            400
Changes in exchange rates                                   (3)     (11)           (14)
Additions charged to income as nonrecurring item            68       55            123
Other additions charged to income                           15        9             24
Utilization                                               (123)     (78)          (201)
---------------------------------------------------------------------------------------
Balance at December 31, 2002                               182      150            332
=======================================================================================

At December 31, 2002, the provision for termination benefits involves 3,300 employees that either already have been terminated or will be terminated in the near future (December 31, 2001: 3,500).

(13) Shareholders' Equity

Capital Stock

Authorized capital stock of Akzo Nobel N.V. is EUR 1,600,019,200 and consists of 48 priority shares of EUR 400, 600 million common shares of EUR 2 and 200 million cumulative preferred shares of EUR 2. Subscribed share capital consists of 48 priority shares, 286,147,260 common shares, and no preferred shares. In 2002, 102,960 common shares were issued in connection with the exercise of options.

In connection with Akzo Nobel's Employee Share Plan and stock option plan, the Company has purchased 295,479 common shares in 8 blocks during the period May- August 2002, at the prevailing stock market price at that time, which averaged EUR 34.55. During 2002, in total 29,663 common shares were transferred to outside trust funds of Akzo Nobel's employees in the United Kingdom and Denmark. Taking


121

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

into account the 189,487 common shares, which the Company held at December 31, 2001, the Company held 455,303 common shares at December 31, 2002.

The priority shares are held by "AKZO NOBEL STICHTING" (Akzo Nobel Foundation), an organization controlled by the Supervisory Board and the Board of Management of Akzo Nobel N.V. The meeting of holders of priority shares submits lists of nominees for the appointment to the Supervisory Board and the Board of Management of Akzo Nobel N.V. The general meeting of shareholders votes upon these lists of nominees. Amendment of the Articles of Association and dissolution of the Company shall require the approval of the meeting of holders of priority shares.

The Board of Management is authorized to determine, with the approval of the Supervisory Board, the share of the profits to be added to retained earnings. The remainder of the profits shall be available for dividends to shareholders as follows: first to priority shares at 6 percent or the statutory interest whichever is lower, of their par value, with the balance available to common shares.

In case of liquidation, from the balance remaining after payment of debts, the holders of priority shares and common shares shall in that order be repaid the par value of their shares. From the balance remaining thereafter, accrued and unpaid dividends, if any, shall be paid first on the priority shares. Any balance remaining thereafter shall be distributed among the holders of common shares, pro rata according to the number of common shares.

According to Netherlands law, each holder of common shares has a preemptive right to acquire any issue of shares pro rata to the aggregate amount of his shares.

Each common share is entitled to one vote.

2002 dividend proposal

A dividend of EUR 1.20 per common share (2001: EUR 1.20) was approved by the General Meeting of Shareholders on April 17, 2003. In November 2002 an interim dividend of EUR 0.30 was declared and paid. Adoption of this proposal resulted in a dividend payment of EUR 343 million, a payout ratio of 38 percent relative to net income excluding extraordinary and nonrecurring items, compared with 37 percent in 2001.

Statutory reserves

At the Annual Meeting of Shareholders of April 26, 2001, an amendment of the Articles of Association was approved whereby the par value of the priority shares was adjusted from NLG 1,000 to EUR 400 and of the common shares and the cumulative preferred shares from NLG 5 to EUR 2. As the revised par values are somewhat lower than the original par values, in accordance with section 67a of Book 2 of the Netherlands Civil Code, the Company recognized a statutory reserve of EUR 77 million for this reduction in subscribed share capital. Statutory reserves also include EUR 5 million for capitalized development costs, as well as the reserves relating to the earnings retained by affiliated companies after 1983. The latter statutory reserves have been calculated by the so-called collective method.


122

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

Stock Options/Stock Appreciation Rights

Stock Options

Options are granted to all members of the Board of Management, Senior Vice Presidents and Executives. The number of participants was approximately 775 in 2002 (2001: 760). The options for Senior Vice Presidents and Executives expire after five years; as options granted from 2002 expire after seven years. Options (conditional) granted to members of the Board of Management as from 2000 expire after ten years. The options issued under the plan in 1998 were exercisable immediately upon grant. Options issued as from 1999 cannot be exercised during the first three years.

No financing facilities exist for option rights or tax payable thereon. One option entitles the holder thereof to buy one Akzo Nobel N.V. common share of EUR 2 or one American Depositary Share (ADS).
The exercise price is the Euronext Amsterdam opening price on the first day that the Akzo Nobel share is quoted ex dividend, or the opening price for an ADS on NASDAQ/NMS on the first day that the Akzo Nobel ADS is quoted ex dividend.

Stock option activity during the periods indicated was as follows:

--------------------------------------------------------------------------------
                                                                      Weighted-
                                                   Number of             average
Number of options or EUR                              options     exercise price
--------------------------------------------------------------------------------
Balance at December 31, 1999                       1,799,552               41.89
Granted                                            1,057,420               44.82
Exercised                                            (55,584)              28.29
Forfeited                                            (33,700)              43.18
                                                  -----------
Balance at December 31, 2000                       2,767,688               43.27
Granted                                            1,193,170               46.82
Exercised                                           (103,412)              25.93
Forfeited                                            (50,600)              42.97
                                                  -----------
Balance at December 31, 2001                       3,806,846               44.86
Granted                                            1,217,420               45.73
Exercised                                           (106,056)              36.66
Forfeited                                            (44,520)              45.26
                                                  -----------
Balance at December 31, 2002                       4,873,690               45.25
================================================================================

At December 31, 2002, the range of exercise prices and weighted-average remaining contractual life of outstanding options was EUR 40.16 - EUR 47.40 and 3.6 years, respectively.


123

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

At December 31, 2002 and 2001, the number of options exercisable was 1,458,700 and 485,156, respectively, and the weighted-average exercise price of those options was EUR 43.88 and EUR 45.40, respectively.

In accordance with APB 25, the compensation expenses for these stock appreciation rights, including the change in the liability for the difference between the exercise and the market price, for 2002 amounted to EUR (21) million (2001: EUR (16) million), whereas the charge against shareholders' equity in 2002 in accordance with NL GAAP amounted to EUR 1 million (2001: EUR 2 million).
Under Dutch GAAP, stock compensation costs are charged to equity upon exercise of the stock appreciation rights.

No pro forma information is required, as the compensation expenses calculated pursuant to the provisions of FAS 123 are the same as those for APB 25, due to the cash settlement feature of the Company's stock option scheme.

Employee Share Plan

In 2001, the Company introduced the Akzo Nobel Employee Share Plan, whereby Akzo Nobel N.V. common shares are conditionally granted to the employees. Generally, these rights vest if the employee has remained in the Company's service for a period of three years. The number of shares granted varies from country to country. At December 31, 2002, the following conditional rights on shares were outstanding:

--------------------------------------------------------------------------------
                       Outstanding shares                     Date unconditional
                    conditional rights on
Year of issue                      shares
--------------------------------------------------------------------------------
         2001                      214,000                           May 1, 2004
         2002                      215,000             Various dates during 2005
================================================================================


124

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

Shareholders' equity
------------------------------------------------------------------------------------------------------------------------------------
             Thousands of euros  Millions of euros
------------------------------------------------------------------------------------------------------------------------------------
             Priority shares       Common shares
------------------------------------------------------------------------------------------------------------------------------------
               Number     Share    Number of    Share   Additional   Statutory       Foreign   Retained   Capital    Minimum   Total
                   of   capital       shares  capital      paid-in    reserves      currency   earnings       and    pension
               shares                                      capital               translation             reserves  liability
                                                                                 adjustments
------------------------------------------------------------------------------------------------------------------------------------
Balance at
  December 31,
  1999             48        22  285,885,524      649        1,795                      (586)       228     2,086        (4)  2,082
------------------------------------------------------------------------------------------------------------------------------------
Net income                                                                                          947       947               947
Dividends*                                                                                         (286)     (286)             (286)
Issuance of
  common stock
  due to
  Exercise
  of options                          52,176                     1                                              1                 1
Changes in
  minimum
  pension
  liability                                                                                                              (4)     (4)
Foreign
  currency
  translation
  adjustments                                                                           (30)                  (30)              (30)
Acquired
  goodwill                                                                                           (16)     (16)              (16)
------------------------------------------------------------------------------------------------------------------------------------
Balance at
December 31,
2000               48       22    285,937,700     649       1,796            -         (616)         873    2,702        (8)  2,694
------------------------------------------------------------------------------------------------------------------------------------
Net income                                                                                           671      671               671
Dividends**                                                                                         (343)    (343)             (343)
Issuance of
  common stock
  due to
  Exercise
  of options                          106,600                   3                                               3                 3
Purchase of
  common
  shares, net                                                                                        (10)     (10)              (10)
Reduction of
  par value                (2)                   (77)                       77
Changes in
  minimum
  pension
  liability                                                                                                             (32)    (32)
Capitalized
  development
  cost                                                                       6                        (6)
Foreign
  currency
  translation
  adjustments                                                                          (105)                 (105)             (105)
------------------------------------------------------------------------------------------------------------------------------------
Balance at
  December 31,
  2001             48      20    286,044,300    572         1,799           83         (721)        1,185   2,918       (40)  2,878
------------------------------------------------------------------------------------------------------------------------------------
Net income                                                                                            818     818               818
Dividends***                                                                                         (343)   (343)             (343)
Issuance of
  common stock
  due to
  exercise
  of options                         102,960                    4                                               4                 4
Purchase of
  common
  shares, net                                                                                          (6)     (6)               (6)
Reduction of
  par value
Changes in
  minimum
  pension
  liability                                                                                                          (1,078) (1,078)
Capitalized
  development
  cost                                                                      (1)                         1       -
Foreign
  currency
  translation
  adjustments                                                                          (175)                 (175)             (175)
------------------------------------------------------------------------------------------------------------------------------------
Balance at
  December 31,
  2002             48      20   286,147,260    572          1,803           82         (896)        1,655   3,216    (1,118)  2,098
------------------------------------------------------------------------------------------------------------------------------------

* EUR 0.70 per ordinary share and EUR 13.62 per priority share as final dividend for previous year, and EUR 0.30 and EUR 13.61, respectively, was declared as interim dividend for current year. ** EUR 0.90 per ordinary share and EUR 13.62 per priority share as final dividend for previous year, and EUR 0.30 and EUR 12.00, respectively, was declared as interim dividend for current year. *** EUR 0.90 per ordinary share and EUR 12.00 per priority share as final dividend for previous year, and EUR 0.30 and EUR 12.00, respectively, was declared as interim dividend for current year.


125

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

(14) Commitments and Contingent Liabilities

Environmental Matters

The Company is subject to extensive European Union, national and local laws and regulations governing discharges to the air and water as well as the handling and disposal of solid and hazardous wastes. In addition, the Company is subject to regulatory requirements governing the remediation of environmental contamination associated with past releases of hazardous substances. Governmental authorities have the power to enforce compliance with these requirements, and violators may be subject to civil or criminal penalties, injunctions, or both. Third parties also may have the right to sue to enforce compliance. The Company is involved in (legal) proceedings with regulatory authorities in various countries that may require the Company to pay fines relating to violations of environmental laws and regulations, comply with more rigorous standards or other requirements, and incur capital and operating expenses to meet such obligations.

The Company is subject to hazardous substance cleanup laws in various countries that impose liability for the costs of cleaning up contamination resulting from past spills, disposal or other releases of hazardous substances. In particular, the Company may be subject to liability under the United States Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA" or "Superfund") and similar laws that impose liability-without a showing of fault, negligence or regulatory violation-on the generators of hazardous substances that have caused, or may cause, environmental contamination. Pursuant to CERCLA, in certain circumstances, the United States Environmental Protection Agency ("EPA") may order one or more potentially responsible parties ("PRPs") to clean up environmental contamination. In other cases, the EPA may clean up a site and then seek reimbursement of expenditures of federal funds from PRPs. Courts have interpreted CERCLA generally to impose joint and several liability without regard to fault for cleanup (and certain other) costs on all PRPs. This means that each PRP conceivably could be held liable for the entire amount of necessary cleanup costs. As a practical matter, however, liability is often apportioned among PRPs based on the volume and/or toxicity of the wastes disposed by each PRP.

It is the Company's policy to accrue and charge against earnings environmental cleanup costs when it is probable that a liability has been incurred and an amount is reasonably estimable. These accruals are reviewed periodically and adjusted, if necessary, as assessments and cleanups proceed and additional information becomes available. Environmental liabilities can change substantially by the emergence of additional information on the nature or extent of contamination, the necessity of employing particular methods of remediation, actions by governmental agencies or private parties, or other factors of a similar nature. Cash expenditures often lag behind the period in which an accrual is recorded by a number of years.

In accordance with the aforementioned policies, as of December 31, 2002, the aggregate environmental related long-term liabilities and accruals accounted for amounted to EUR 204 million (December 31, 2001: EUR 211 million).

Although the Company believes that over the years it and its predecessors utilized operating practices that were standard in the relevant industry and were in compliance with existing environmental regulations, hazardous materials may have been released in or under currently-or previously-operated sites. Consequently, the Company may be required to remediate contamination at some of these sites. Although the Company does not have sufficient information to estimate its potential liability in connection with any potential future remediation, it believes that if any such remediation is required, it will occur over an extended period of time. The Company anticipates that there may be a need for future provisions for


126

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

environmental costs which, in management's opinion based on information currently available, would not have a material adverse effect on the Company's financial position and liquidity, but could be materially adverse to the Company's results of operations in any one accounting period. Environmental liabilities can change substantially by the emergence of additional information on the nature or extent of contamination, the necessity of employing particular methods of remediation, actions by governmental agencies or private parties or other factors of a similar nature.

While it is not feasible to predict the outcome of all pending environmental exposures, it is reasonably possible that there will be a need for future provisions for environmental costs which, in management's opinion based on information currently available, would not have a material effect on the Company's financial position but could be material to the Company's results of operations in any one accounting period.

Antitrust Cases

Akzo Nobel is involved in investigations by the antitrust authorities in the United States, Canada, and the European Union into alleged violations of the respective antitrust laws for some products in these jurisdictions. In addition, the Company is involved in civil damage claims in relation to some of these alleged antitrust violations. Fines, civil damage settlements, and legal costs incurred in 2002 in connection with these cases amounted to EUR 9 million (2001: EUR 59 million). Based on an estimate of the probable fines, civil damages, and costs to be paid over a number of years to come-taking into account legal advice and the current facts and circumstances-the Company has a provision amounting to EUR 102 million (2001: EUR 111 million).

However, it should be understood, that in light of future developments such as
(a) the outcome of the investigations of the various antitrust authorities, (b) potential additional lawsuits by (indirect) purchasers, (c) possible future civil settlements, (d) the failure to satisfy the conditions of any future class action settlement, and (e) adverse rulings or judgments in the pending investigations or in related civil suits, the antitrust matters could result in additional liabilities and related costs. The Company at this point in time cannot estimate any additional amount of loss or range of loss in excess of the recorded amounts with sufficient certainty to allow such amount or range of amounts to be meaningful. Moreover, the aforementioned liabilities are typically paid over a number of years and the timing of such payments cannot be predicted with confidence. The Company believes that the potential aggregate amount of any additional fines and civil damages to be paid will not materially affect the Company's financial position. The aggregate amount, however, could be material to the Company's results of operations in any one accounting period.

With regard to Flexsys, a 50/50 joint venture with Solutia Inc. for rubber chemicals, authorities in the USA, Canada and Europe are investigating past commercial practices in this industry. We have been informed by Flexsys management that it is fully cooperating with the authorities and will continue to do so. We are also aware of a number of purported class actions that have been filed against Flexsys in various state courts in the United States.

Other Contingent Liabilities (including Remeron(R) Cases)

The Company brought claims against certain generic drug manufacturers in the United States under the U.S. Hatch-Waxman Act, alleging infringement by such manufacturers of the Company's U.S. patent protecting the use of mirtazapine (Remeron(R)) in combination with one or more SSRI's for the treatment of depression. In two of the patent infringement cases brought by the Company, the Court granted summary judgment of noninfringement in favor of the defendants. In light of recent new case law in an unrelated case providing guidance regarding inducement to infringe issue under the Hatch-Waxman Act, the Company has decided not to further pursue any actions and to withdraw all pending cases based on infringement of the above reference patent against the generic drug manufacturers.


127

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

Some generic drug manufacturers sued by the Company have brought antitrust counterclaims against the Company in the United States. In addition, antitrust claims have been filed against the Company in the United States on behalf of classes of (in)direct purchasers of Remeron(R). The Company is aggressively defending these claims.

There are pending against Akzo Nobel N.V. and its subsidiaries a number of other claims, all of which are contested. The Company is also involved in disputes with tax authorities in several jurisdictions.

While the outcome of these claims and disputes cannot be predicted with certainty, management believes, based upon legal advice and information received, that the final outcome will not materially affect the consolidated financial position but could be material to the Company's result of operations in any one accounting period.

Commitments

Purchase commitments for property, plant and equipment aggregated EUR 127 million at December 31, 2002. At December 31, 2001, these commitments totaled EUR 140 million. In addition, the Company has purchase commitments for raw materials and supplies incident to the ordinary conduct of business.

Long-term liabilities contracted in respect of leasehold, rental, operational leases, research, etc., aggregated EUR 647 million at December 31, 2002 (at December 31, 2001: EUR 561 million). Payments due within one year amount to EUR 188 million (2001: EUR 141 million); payments due after more than five years amount to EUR 99 million (2001: EUR 167 million).

Expenses for non-cancelable operating leases and other commitments in 2002, 2001 and 2000 were EUR 141 million, EUR 143 million and EUR 168 million, respectively.

Obligations under long-term non-cancelable operating leases and other commitments for each of the next five years and thereafter are as follows.

---------------------------------------------
Millions of euros
---------------------------------------------
2003                                      188
2004                                      209
2005                                       75
2006                                       44
2007                                       32
Later                                      99
---------------------------------------------
Total                                     647
=============================================

Guarantees

In November 2002, the FASB issued interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of Indebtness to Others.

Akzo Nobel N.V. has declared in writing that it accepts joint and several liability for contractual debts of certain Netherlands consolidated companies. These debts, at December 31, 2002, aggregating EUR 1.8 billion (at December 31, 2001: EUR 1.2 billion), are included in the consolidated balance sheet.


128

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

Additionally, at December 31, 2002, guarantees were issued on behalf of consolidated companies in the amount of EUR 2.4 billion (at December 31, 2001:
EUR 3.2 billion). The debts and liabilities of the consolidated companies underlying these guarantees are included in the Consolidated Balance Sheet or in the amount of long-term liabilities contracted in respect of leasehold, rental, operational leases, research, etc.

Guarantees relating to nonconsolidated companies amounted to EUR 9 million (at December 31, 2001: EUR 11 million). As general partner in several partnerships, Akzo Nobel companies are liable for obligations incurred by these partnerships. At December 31, 2002, the risk ensuing from these liabilities was EUR 159 million (at December 31, 2001: EUR 156 million).

There are agreements to provide additional consideration in a business combination to the seller if contractually specified conditions related to the acquired entity are achieved. At December 31, 2002, we had recognized contingent liabilities for estimated payments amounting to EUR 21 million, which are included in the obligations under long-term non-cancelable operating leases and other commitments, as reported above under Commitments. The total exposure amounted to EUR 41 million.

(15) Information about Financial Instruments

For information on the commercial paper programs reference is made to Note 9. For information on the standby multicurrency loan facility reference is made to Note 11.

Foreign Exchange Risk Management

The Company routinely enters into forward exchange contracts to hedge transaction exposures.
These principally arise with respect to assets and liabilities or firm commitments related to sales and purchases. The purpose of Akzo Nobel's foreign currency hedging activities is to protect the Company from the risk that the eventual functional currency net cash flows resulting from trade transactions are adversely affected by changes in exchange rates.

At December 31, 2002, outstanding contracts to buy currencies totaled EUR 1.0 billion (at December 31, 2001: EUR 0.8 billion), while contracts to sell currencies totaled EUR 2.1 billion (at December 31, 2001: EUR 2.2 billion). These contracts mainly relate to pounds sterling, U.S. dollars, Canadian dollars, Swedish kronor, and Japanese yen.

The Company does not use financial instruments to hedge the translation risk related to equity, intercompany loans of a permanent nature, and earnings of foreign subsidiaries and nonconsolidated companies.

Interest Risk Management

In principle, the Company manages interest risk by financing noncurrent assets and a certain portion of current assets with equity, provisions, and long-term borrowings with fixed interest rates. The remainder of current assets is financed with short-term debt, including floating rate short-term borrowings. In line with this policy, a number of swap contracts and forward rate agreements have been entered into.


129

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

The Company swapped EUR 500 million fixed rate liabilities with an interest rate of 5.625 percent with floating rate LIBOR-related liabilities of USD 445 million and a remaining maturity of 6 years.

The Company concluded forward rate agreements covering USD 440 million whereby interest percentages are fixed in a range from 1.895 percent to 2.176 percent for the period January 1 - November 7, 2003, and covering EUR 50 million with an interest percentage of 3.17 percent for the period January 1 - March 6, 2003 and of 3.05 percent for May 6 - August 6, 2003.

Fixed rate liabilities with an interest rate of 6.3 percent were swapped with floating rate EURIBOR-related liabilities for an amount of EUR 145 million and a remaining maturity of 3 years. Floating rate EURIBOR-related liabilities were swapped with fixed rate liabilities with an interest rate of 5.3 percent for an amount of EUR 145 million and a remaining maturity of 3 years.

The Company has entered into interest rate cap agreements with a cap rate of 8.5 percent for an amount of USD 200 million (year-end 2002: EUR 191 million; year-end 2001: EUR 227 million) to protect itself against the risk of excessive increases in interest rates on short-term U.S. dollar borrowings. These contracts will expire in 2003.

Akzo Nobel has swap agreements related to a 9 percent pound sterling loan with an outstanding amount of EUR 7 million at December 31, 2002. Under the terms of these agreements Akzo Nobel will pay to financial institutions the euro equivalent of the original amount of the loan and interest on such amount at a fixed rate of 7.6 percent in exchange for its obligations under this loan agreement.

The above-mentioned Akzo Nobel financial instruments are accounted for as follows:
(a) In the balance sheet, amounts in foreign currencies are translated into euros at year-end exchange rates. Foreign exchange differences are included in income. Results on currency hedging contracts are also recognized in income to offset the foreign exchange differences on the related hedged items. Exchange differences on anticipatory hedges of firm commitments regarding sales and purchases are deferred on the balance sheet until the hedged transactions have been reflected in the accounts. The capitalized or accrued amount is included in receivables or current liabilities;
(b) interest swaps contracts: interest is accrued in the statement of income as part of interest expense.

Credit Risk

Under the agreements concluded for its financial instruments, the Company is exposed to credit loss in the event of nonperformance by the counterparty to any one of these agreements. In the event of a counterparty's default, the resulting exposure would equal the difference between (a) the prevailing market interest rate and exchange rate and (b) the agreed swap interest and exchange rate.
The Company has no reason to expect nonperformance by the counterparties to these agreements,
given their high credit ratings.

Commodities

In order to hedge the price risk of natural gas, the Company has entered into an accumulating swap for 100,000 barrels of petroleum for each month of 2003, whereby the price per barrel is fixed at USD 21.00, but only in case the market price is below USD 27.00.


130

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

Fair Value of Financial Instruments

The carrying values and estimated fair values of financial instruments do not differ materially with the exception of the following:

--------------------------------------------------------------------------------
                                   December 31, 2002         December 31, 2001
Millions of euros               Carrying     Estimated     Carrying    Estimated
Asset/(liability)                 amount    fair value       amount   fair value
--------------------------------------------------------------------------------
Foreign currency contracts           108           113         (35)         (30)
Interest rate currency swap           76           131
Interest swap contracts                -             4            -           6
Interest rate cap contracts            -             -            1           -
Forward rate agreements                -            (1)
Long-term borrowings              (2,797)       (2,947)      (2,220)     (2,262)
Petroleum swap                         -             -            -           1
================================================================================

The fair value of foreign currency contracts, swap contracts, and petroleum options is estimated by obtaining quotes from brokers.

The fair value of interest rate currency swaps is obtained from dealer quotes.

The fair value of interest swap contracts was estimated from discounted anticipated cash flows at prevailing market rates.

The fair value of interest rate cap contracts is obtained from dealer quotes. This value represents the estimated amount the Company would receive to terminate the contracts, taking into consideration current interest rates and the credit worthiness of the counterparties.

The fair value of the Company's long-term borrowings is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt with similar maturities.
The carrying amounts of cash and cash equivalents, receivables, short-term borrowings and other current liabilities approximate fair value due to the short maturity period of those instruments.

The Company has other financial instruments, which are not significant.

(16) Financing Charges

Interest expense was reduced by EUR 7 million, EUR 5 million, and EUR 9 million in 2002, 2001 and 2000, respectively, due to the capitalization of financing expenses of capital investment projects under construction.


131

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

(17) Income Taxes

The Company recognizes deferred tax assets in so far as their realization is more likely than not.

Tax charges/(benefits) are included in the statements of income as follows:

--------------------------------------------------------------------------------
Millions of euros                                    2002       2001        2000
--------------------------------------------------------------------------------
Operating income less financing charges               335        281         440
Nonconsolidated companies*                             (1)         9          (8)
Extraordinary items                                     -         13         (45)
--------------------------------------------------------------------------------
Total                                                 334        303         387
================================================================================

* Includes nonrefundable withholding taxes for dividends and income taxes relating to the Company's share in partnership earnings.

Pre-tax income (including extraordinary items and earnings from nonconsolidated companies) in the Netherlands and from foreign operations is as follows:

--------------------------------------------------------------------------------
Millions of euros                                     2002       2001       2000
--------------------------------------------------------------------------------
The Netherlands                                        122         46        231
Foreign                                              1,065        959      1,146
--------------------------------------------------------------------------------
Total                                                1,187      1,005      1,377
================================================================================

The tax charges/(benefits) in the Netherlands and from foreign operations were as follows:

--------------------------------------------------------------------------------
Millions of euros                                   2002        2001        2000
--------------------------------------------------------------------------------
The Netherlands
Current tax                                    48            7          85
Deferred tax                                   (6)           9         (51)
                                             ----         ----        ----
                                                     42           16          34
Foreign
Current tax                                   322          177         236
Deferred tax                                  (30)         110         117
                                             ----         ----        ----
                                                    292          287         353
--------------------------------------------------------------------------------
Total                                               334          303         387
================================================================================


132

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

The table below reconciles the normal corporation tax rates in the Netherlands to the effective consolidated rates.

--------------------------------------------------------------------------------------------------------------------
Percentages                                                                             2002        2001        2000
--------------------------------------------------------------------------------------------------------------------
Corporate tax rate in the Netherlands                                                     35          35          35
Nontaxable income from nonconsolidated companies (excluding partnerships)                 (4)         (1)         (1)
Effect of lower tax rates in specific countries                                           (4)         (3)         (2)
Tax exempt income/loss                                                                    (1)         (3)         (5)
Change in valuation allowance                                                              2           2           1
--------------------------------------------------------------------------------------------------------------------
Total                                                                                     28          30          28
====================================================================================================================

At December 31, 2002, losses carried forward amounted to EUR 786 million, of which EUR 123 million will expire within five years. For an amount of EUR 373 million of losses, there is no expiration date.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2002 and 2001, are presented below.

-----------------------------------------------------------
Millions of euros                         2002         2001
-----------------------------------------------------------
Net operating loss carry forwards          204         233
Provisions                                 393         387
Intangible assets                           85          86
Property, plant and equipment             (255)       (239)
Overfunding at pension funds              (162)       (182)
Others                                    (308)       (381)
                                          -----       -----
                                           (43)        (96)
Valuation allowance                        (65)        (45)
-----------------------------------------------------------
Net deferred taxes                        (108)       (141)
===========================================================

The valuation allowance for deferred tax assets as of January 1, 2002 and 2001, was EUR 65 million and EUR 45 million, respectively. The net change in the valuation allowance for the years ended December 31, 2002 and 2001, was an increase of EUR 20 million and of EUR 13 million, respectively. In assessing the valuation of deferred tax assets, management considers whether it is more likely than not that these deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which these temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences, net of the existing valuation allowances at December 31, 2002. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if future estimates of projected taxable income during the carry forward period are lower.


133

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

No taxes have been provided for approximately EUR 0.7 billion of unremitted earnings of certain foreign subsidiaries as of December 31, 2002 (2001: EUR 2.0 billion). The remittance of these amounts would not lead to an income tax charge in the Netherlands and, in case of nonrefundable withholding taxes, part of these withholding taxes would be available for tax credits.

(18) Other Results

The following items are included as other results:

Millions of euros                                2002          2001         2000
--------------------------------------------------------------------------------
Royalties                                          57            48           66
Results on sale of redundant assets                 5             3            2
Currency exchange differences                     (15)            4            2
Other items                                         6             9           18
--------------------------------------------------------------------------------
Total                                              53            64           88
================================================================================

(19) Extraordinary and Nonrecurring Items

Extraordinary items

In 2002, no extraordinary items were recognized.

In 2001, the following extraordinary items were recognized:

--------------------------------------------------------------------------------
Millions of euros                                Gross         Taxes        Net
--------------------------------------------------------------------------------
Divestiture
- Diagnostics business                             79            (23)         56
- Printing Inks                                    (3)            10           7

--------------------------------------------------------------------------------
Total                                              76            (13)         63
================================================================================

For information on the divestiture of the Diagnostics business and Printing Inks reference is made to Other Changes in Consolidated Interests in Note 2.

In 2000, the following extraordinary items were recognized:

--------------------------------------------------------------------------------
Millions of euros                                 Gross        Taxes        Net
--------------------------------------------------------------------------------
Divestiture
- Chefaro                                           90                        90
- Other                                             40         (5)            35
Antitrust cases                                   (200)        50           (150)
--------------------------------------------------------------------------------
Total                                              (70)        45            (25)
================================================================================


134

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

For information on the divestiture of Chefaro, reference is made to Other Changes in Consolidated Interests in Note 2. For information on the antitrust cases reference is made to Note 14.

Nonrecurring items

In 2002, 2001 and 2000, the following nonrecurring charges for consolidated companies were included:

--------------------------------------------------------------------------------
Millions of euros                                   2002        2001        2000
--------------------------------------------------------------------------------
Gains on divestments                                 91          26
Pension premium refund Sweden                        15          19           11
Asset impairments and restructurings at:
- Pharma                                           (111)        (36)
- Coatings                                          (26)       (201)         (18)
- Chemicals                                         (99)       (257)         (77)
--------------------------------------------------------------------------------
Total                                              (130)       (449)         (84)
================================================================================

The net nonrecurring after-tax gain for nonconsolidated companies in 2001 include a net profit on the gain of the divestment of the Company's participation in Akzo PQ-Silica and results relating to Acordis.

The net nonrecurring after-tax gain for nonconsolidated companies in 2000 related to the gain on the divestment of the Company's participation in Tosoh Akzo Corporation and the Company's share in the gain on the divestment of Twaron Products by Acordis, partially offset by the effect of the settlement for the Acordis divestment.

(20) Provisions for Pensions and Postretirement Benefits other than Pensions

Akzo Nobel has a number of defined benefit pension plans covering the majority of employees.
The benefits for these plans are based primarily on years of service and employees' compensation.
The funding policy for the plans is consistent with local requirements in the countries of establishment.

Obligations under the defined benefit plans are systematically provided for by depositing funds with trustees or separate foundations, under insurance policies, or by financial statement provisions. Plan assets principally consist of long-term interest-earning investments, quoted equity securities, and real estate.

Akzo Nobel also provides certain healthcare and life insurance benefits for most of the Company's retired employees in the United States and the Netherlands. The Company accrues for the expected costs of providing such postretirement benefits during the years that the employee renders the necessary service.

Below a table is provided with a summary of the changes in the pension benefit obligations and plan assets for 2002 and 2001. Also provided is a table with a summary of the changes in the accumulated postretirement benefit obligations and plan assets for 2002 and 2001.


135

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

 -------------------------------------------------------------------------------------------------
                                                          Pensions           Other postretirement
                                                                                     benefits
Millions of euros                                    2002          2001          2002         2001
--------------------------------------------------------------------------------------------------
Benefit obligation
Balance at beginning of year                      (7,950)        (7,507)        (412)        (334)
Acquisitions                                         (38)            (1)         (10)
Divestments/curtailments                              37             26            1           13
Service cost                                        (238)          (250)         (15)         (13)
Interest cost                                       (448)          (449)         (28)         (25)
Plan amendments                                        3             (1)                      (10)
Benefits paid                                        436            416           23           21
Actuarial gains and losses                          (436)          (107)        (142)         (50)
Changes in exchange rates                            279            (77)          59          (14)
                                                  ------         ------         ----         -----
Balance at end of year                            (8,355)        (7,950)        (524)        (412)

Plan assets
Balance at beginning of year                       6,707          7,380            2            2
Acquisitions                                          31              -
Divestments/curtailments                             (10)            (6)
Contribution by employer                             340            145
Contribution by employees                             12             23
Benefits paid                                       (393)          (361)           -            -
Actual return on plan assets                        (477)          (556)           -            -
Changes in exchange rates                           (228)            82            -            -
                                                  ------         ------         ----         -----
Balance at end of year                             5,982          6,707            2            2
                                                  ------         ------         ----         -----
Funded status                                     (2,373)        (1,243)        (522)        (410)

Unrecognized net loss/(gain)                       2,179            916          127           (9)
Unrecognized prior service costs                     170            203           11            5
Unrecognized net transition obligation                 -             (2)
Minimum pension liability                         (1,794)           (93)
--------------------------------------------------------------------------------------------------
Net balances                                      (1,818)          (219)        (384)        (414)
==================================================================================================

The net balance of the pension plans is recognized in the Consolidated Balance Sheet as follows:
--------------------------------------------------------------------------------------------------
Millions of                                          2002           2001
--------------------------------------------------------------------------------------------------
- Prepaid pension costs under other
 financial noncurrent assets                          579            656

- Provisions for pensions and other
postretirement benefits under provisions           (2,397)          (875)
--------------------------------------------------------------------------------------------------
                                                   (1,818)          (219)
==================================================================================================


136

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

The weighted average assumptions underlying the pension computation at December 31 were:

----------------------------------------------------------------------------------------------
Percent                                                                         2002      2001

Discount rate                                                                    5.6       6.0
Rate of compensation increase                                                    3.6       3.8
Expected return on plan assets                                                   6.8       7.2
----------------------------------------------------------------------------------------------

The 2002, 2001, and 2000 net periodic pension cost for the defined benefit pension plans was as follows:
----------------------------------------------------------------------------------------------
Millions of euros                                                       2002     2001     2000
----------------------------------------------------------------------------------------------
Service cost for benefits earned during the period
                                                                        226      227       199
Interest cost on projected benefit obligation
                                                                        448      449       418
Expected return on plan assets                                         (460)    (521)     (498)
Net amortization of unrecognized    net transition obligation
                                                                          -        -        (4)
Amortization of prior service cost                                       16       20        15
Net actuarial (gain) / loss
   recognized                                                            36       (2)       (2)
Settlement/curtailment loss                                               1        -         7
----------------------------------------------------------------------------------------------
Net pension cost                                                        267       173      135
==============================================================================================

The principal defined benefit plans referred to above cover approximately 60 percent of Akzo Nobel's employees. The remaining plans primarily represent defined contribution plans. Expenses for these plans totaled EUR 31 million in 2002, EUR 48 million in 2001 and EUR 44 million in 2000.

Due to the substantial decline in stock markets, at December 31, 2002, the accumulated benefit obligation for all pension plans exceeded the value of plan assets. As a consequence, the Company recognized additional provisions for minimum pension liabilities in 2002 of EUR 1,701 million, through a direct charge against shareholders' equity of EUR 1,555 million (EUR 1,078 million after taxes) and of intangible assets for prior service costs of EUR 146 million. The situation at December 31, 2001, resulted in additional provisions in 2001 of EUR 62 million, which were recognized by means of charge against shareholders' equity of EUR 53 million (EUR 32 million after taxes) and as intangible assets for prior service costs of EUR 9 million.


137

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

Net periodic other postretirement benefit costs are as follows:

----------------------------------------------------------------------------------------------
Millions of euros                                            2002           2001          2000
----------------------------------------------------------------------------------------------
Service cost for benefits
allocated                                                      15             13            12
Interest cost on accumulated
   postretirement obligation                                   28             25            22
Amortization of prior service cost                              -             (1)           (1)
Net actuarial (gain)/loss
   recognized                                                   -             (3)           (2)
Curtailment (gain)/loss                                         1            (13)            7
----------------------------------------------------------------------------------------------
Net other postretirement cost                                  44             21            38
==============================================================================================

For postretirement healthcare benefit plans in the United States, representing approximately 70 percent of the obligations, accruals have been calculated using a healthcare cost increase rate of 10.0 percent decreasing gradually to 5.0 percent over the next 4 years and remaining at that level thereafter (for December 31, 2001: 7.5 percent gradually decreasing to 5.5 percent over the next 4 years and remaining at that level thereafter; for December 31, 2000:
7.15 percent decreasing gradually to 5.0 percent over the next 4 years and remaining at that level thereafter). The discount rate was 6.75 percent for December 31, 2002, 7.5 percent at December 31, 2001 and 7.75 percent for 2000.

For the plans in the Netherlands a healthcare cost increase rate of 4.0 percent per year was used with a 5.25 percent discount rate for December 31, 2002 (December 31, 2001: 4.0 percent and 5.5 percent, respectively; 2000: 4.0 percent and 5.5 percent, respectively).

A 1-percent increase in the assumed healthcare cost increase rate would have increased the 2002 postretirement healthcare cost by EUR 7 million and the accumulated benefit obligation at December 31, 2002 by EUR 60 million.

(21) Application of Generally Accepted Accounting Principles in the United States of America

The accounting principles followed in the preparation of the consolidated financial statements (NL GAAP) differ in some respects from those generally accepted in the United States of America (US GAAP).

Those differences, which have an effect on net income and/or shareholders' equity, are as follows:

(a) For NL GAAP purposes, until 1999 goodwill was charged directly to shareholders' equity. Since 2000, goodwill is capitalized and amortized over its estimated useful life not exceeding 20 years.

For US GAAP, until 2001 goodwill was capitalized and amortized over its estimated useful life not exceeding 40 years.

The Company adopted the provisions of SFAS No. 141 as of July 1, 2001, and of SFAS No. 142 effective January 1, 2002. As of January 1, 2002, goodwill is determined to have an indefinite useful life, and therefor no longer amortized. Annually goodwill is tested for impairment in accordance with the provisions of SFAS No. 142.


138

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

As a consequence, the unamortized goodwill balances per January 1, 2002, of pre 2000 acquisitions are to be capitalized for US GAAP and are no longer amortized. Starting in 2002, the NL GAAP amortization of goodwill related to post 1999 acquisitions has to be reversed for US GAAP. For 2002 this was an amount of EUR 19 million.

The impairment test in accordance with the provisions of SFAS No. 142 did not result in additional charges in the Company's statement of income, except for the items mentioned under caption (b).

An analysis of the change in goodwill under US GAAP during 2002, 2001 and 2000 is as follows:

------------------------------------------------------------------------------------
Millions of euros
------------------------------------------------------------------------------------
Balance at December 31, 1999                                                  3,802

NL GAAP goodwill written off against equity on companies acquired in 1999        16
Amortization for the year                                                      (147)
Additional write-downs (see (b) below)                                          (27)
Foreign currency translation adjustments                                         48
------------------------------------------------------------------------------------
Balance at December 31, 2000                                                  3,692

Amortization for the year                                                      (140)
Additional write-downs (see (b) below)                                         (102)
Foreign currency translation adjustments                                         26
------------------------------------------------------------------------------------
Balance at December 31, 2001                                                  3,476

Reversal of NL GAAP amortization                                                 19
Additional write-downs (see (b) below)                                          (17)
Foreign currency translation adjustments                                       (168)
------------------------------------------------------------------------------------
Balance at December 31, 2002                                                  3,310
====================================================================================

(b) The Company annually tests the US GAAP goodwill for impairment. This adjustment also includes the write-down of any remaining unamortized goodwill associated with businesses disposed of during the year. For 2002 the write down concerns the unamortized goodwill of a part of the Akcros business, which was divested in April 2002. For 2001 the write-down mainly concerns unamortized goodwill related to the Diagnostics business of Organon Teknika, and Printing Inks, divested at the end of June and the end of October, respectively. For 2000, the write down is mainly related to unamortized goodwill for Chefaro, divested at year-end 2000.

(c) During 1995, the Company transferred its rubber chemicals activities into a 50-50 joint venture, Flexsys, with Solutia Inc. Under NL GAAP the carrying value of the investment at December 31, 2002, was EUR 155 million and under US GAAP EUR 158 million, (at December 31, 2001: EUR 201 million and EUR 209 million, respectively). The higher carrying value under US GAAP is principally related to the goodwill associated with the Akzo Nobel businesses transferred into the joint venture. Such goodwill had been previously charged directly to equity for NL GAAP purposes.

(d) In accordance with NL GAAP, stock compensation costs are charged to equity upon exercise of the stock appreciation rights. In accordance with APB 25, compensation costs, including the change in the liability for the difference between the exercise and the market price, should be recognized as a charge/credit against income.


139

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

(e) In accordance with NL GAAP development costs are to be capitalized and amortized, if certain conditions have been met. US GAAP does not allow capitalization and amortization of development costs. For US GAAP purposes, these costs have to be expensed as incurred. During 2002, the Company did not capitalize additional development costs and recognized an amortization charge of EUR 1 million for NL GAAP purposes.

(f) In 2002, the Company extended restructuring programs at all three groups. Included in the charge were provisions for exit costs of EUR 8 million (EUR 5 million after taxes) for restructuring plans which were announced before the date of the financial statements, but after December 31, 2002, which is allowed under NL GAAP. In accordance with US GAAP, recognition of these provisions is reversed, since these are not allowed until restructuring plans are announced. In 2001, provisions for exit costs of EUR 27 million (EUR 16 million after taxes) were reversed, which have been taken into account in 2002 for US GAAP purposes.

(g) In accordance with the new standards under NL GAAP, the value of the shares granted under the Akzo Nobel Employee Share Plan on the date of the grant is recognized as a charge in the statement of income spread over the vesting period, which in general is 3 years. This standard is effective for rights granted from 2002 onwards. No charge was recognized for the shares granted under the Akzo Nobel Employee Share Plan in 2001. In accordance with US GAAP the fair value of these shares granted in 2001 (i.e. the share price at the date of grant) also has to be recognized as a charge against income over the vesting period of the grant. For 2002, the additional charge amounted to EUR 3 million (EUR 2 million after taxes).

(h) In accordance with NL GAAP, results on foreign currency forward hedging contracts (determined at year-end exchange rates) are recognized in income to offset the foreign exchange differences on the related hedged items. Exchange differences on anticipatory hedges of firm commitments regarding sales and purchases are deferred on the balance sheet until the hedged transactions have been reflected in the accounts. For interest swap contracts, interest is accrued in the statement of income as part of interest expense.

Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments ("SFAS 133"), as amended by SFAS's 137 and 138, is effective for all fiscal quarters of all fiscal years beginning after June 15, 2000 and was therefore adopted by Akzo Nobel in 2001. This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives), and for hedging activities. The Statement requires every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS 133 requires that changes in the derivatives fair value be recognized currently in earnings unless specific hedge accounting criteria are met. The Company does not designate its derivatives for hedge accounting in accordance with US GAAP. Accordingly, changes in fair value of derivative instruments are recognized currently in earnings.

The cumulative effect for US GAAP purposes at January 1, 2001 of the implementation of SFAS 133 on net income was a gain of EUR 3 million for the foreign currency forward contracts and a gain of EUR 15 million for interest-rate swap contracts, as well as a loss of EUR 1 million for the interest rate cap contract and a loss of EUR 2 million relating to certain futures contracts to purchase electricity, all figures before taxes. The net after-tax cumulative effect was a gain of EUR 10 million.


140

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

The effect on US GAAP net income for 2002 is nil for the foreign currency contracts, and the interest rate swap contracts, a gain of EUR 1 million for the interest rate cap contract and a gain of EUR 55 million on the interest rate currency swap, a loss of EUR 1 million for the forward rate agreements, nil for the future contracts to purchase electricity, and a loss of EUR 1 million for the petroleum options. The net after-tax effect was a gain of EUR 35 million.

The effect on US GAAP net income for 2001 is a gain of EUR 2 million for the foreign currency forward contracts, a loss of EUR 9 million for the interest rate swap contracts, nil for the interest rate cap contract, a gain of EUR 3 million for the futures contracts to purchase electricity, and a gain of EUR 1 million for the petroleum options. The net after-tax effect was a loss of EUR 5 million.

(i) Represents the income tax effects of the aforementioned adjustments.

(j) The Company holds or held 50 percent interests in the following companies:
- Akzo Nobel Chang Cheng Ltd, China;
- Akzo Nobel Chang Cheng Coatings (Beijing) Co. Ltd.;
- Akzo Nobel Chang Cheng (Vietnam) Ltd.;
- Interpon Powder Coatings Ltd.;
- Akzo Nobel Chang Cheng Ltd. (Powder);
- Akzo Nobel Chang Cheng (Taiwan) Ltd;
- Akzo Nobel Inda SA de CV; and.
- International Paint (Korea) Ltd., Korea (in 2002 interest increased to 60 percent).

The abovementioned companies have been fully consolidated into the consolidated financial statements of Akzo Nobel, taking into account the minority interest. This treatment is allowed for NL GAAP purposes, as these companies are considered so-called group companies. The effect of the difference with US GAAP-which requires accounting under the equity method of such interests-on shareholders' equity and net income is nil.

If these interests had been treated as nonconsolidated companies on a US GAAP basis the Consolidated Statement of Income for the year ended December 31, 2002 would have shown a decrease in net sales of EUR 122 million, in operating income of EUR 21 million, in earnings of consolidated companies less income taxes of EUR 16 million, and in minority interest of EUR 8 million. On the other hand earnings from nonconsolidated companies would have increased by EUR 8 million.

The Consolidated Statement of Income for the year ended December 31, 2001 would have shown a decrease in net sales of EUR 228 million, in operating income of EUR 41 million, in earnings of consolidated companies less income taxes of EUR 30 million, and in minority interest of EUR 15 million. On the other hand earnings from nonconsolidated companies would have increased by EUR 15 million.

The Consolidated Statement of Income for the year ended December 31, 2000, would have shown a decrease in net sales of EUR 191 million, in operating income of EUR 28 million, in earnings of consolidated companies less income taxes of EUR 24 million, and in minority interest of EUR 12 million. On the other hand, earnings from nonconsolidated companies would have increased by EUR 12 million.


141

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

The major effects on the Consolidated Balance Sheet as at December 31, 2002 would have been a decrease in current assets of EUR 70 million, in property, plant and equipment of EUR 28 million, in short-term liabilities of EUR 44 million, and in minority interest of EUR 28 million, and an increase in long-term borrowings of EUR 2 million. On the other hand, nonconsolidated companies would have increased by EUR 28 million.

The major effects on the Consolidated Balance Sheet as at December 31, 2001 would have been a decrease in current assets of EUR 119 million, in property, plant and equipment of EUR 44 million, in short-term liabilities of EUR 67 million, in long-term borrowings of EUR 8 million, and in minority interest of EUR 37 million. On the other hand, nonconsolidated companies would have increased by EUR 37 million.

(k) The Company holds a 50 percent interest in the joint venture with Sanofi- Synthelabo, which is included in the consolidated financial statements of Akzo Nobel on a proportional basis, which is allowed for NL GAAP purposes. The effect of the difference with US GAAP - which requires accounting as nonconsolidated companies of such interests - on shareholders' equity and net income is nil.

If Sanofi-Synthelabo had been treated as nonconsolidated company on a US GAAP basis the Consolidated Statement of Income for the year ended December 31, 2002 would have shown an increase in operating income of EUR 49 million, and in earnings of consolidated companies less income taxes of EUR 31 million. On the other hand earnings of nonconsolidated companies would have decreased by EUR 31 million.

The Consolidated Statement of Income for the year ended December 31, 2001 would have shown an increase in operating income of EUR 33 million, and in earnings of consolidated companies less income taxes of EUR 31 million. On the other hand earnings of nonconsolidated companies would have decreased by EUR 31 million.

The major effects on the balance sheet as at December 31, 2002, would have been a decrease in property, plant and equipment of EUR 2 million, in current assets of EUR 21 million and in short term liabilities of EUR 12 million. Provisions would have increased by EUR 11 million.

The major effect on the balance sheet as at December 31, 2001, would have been a decrease in current assets of EUR 14 million, and in short term liabilities of EUR 24 million. On the other hand provisions would have increased by EUR 10 million.


142

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

The reconciliation of net income is as follows:

---------------------------------------------------------------------------------------------
                                                          For the year ended     December 31,
Millions of euros                                        2002            2001           2000
---------------------------------------------------------------------------------------------
Net income in accordance with NL GAAP                     818             671            947
Adjustments to reported income:
US GAAP amortization of goodwill (a)                                     (140)          (147)
Reversal NL GAAP amortization of goodwill (a)              19
Goodwill write-downs (b)                                  (17)           (102)           (27)
Joint venture (c)                                           3              (6)           (10)
Stock compensation (d)                                     21              16            (27)
Development costs (e)                                       1              (6)
Restructuring provisions (f)                              (19)             27
Employee share plan (g)                                    (3)             (3)
Derivatives cumulative effect (h)                                          15
Derivatives effect 2002/2001 (h)                           54              (7)
Income taxes (i)                                          (17)            (17)             9
---------------------------------------------------------------------------------------------
Net income / (loss) in accordance with US GAAP            860             448            745
Per share and ADS in accordance with US GAAP, in euros:
Basic earnings / (loss) per share/ADS                    3.01            1.57           2.61
Diluted earnings / (loss) per share/ADS                  3.00            1.56           2.60
---------------------------------------------------------------------------------------------

Comprehensive income is as follows:

---------------------------------------------------------------------------------------------
Millions of euros                                        2002            2001           2000
---------------------------------------------------------------------------------------------
Net income / (loss) in accordance with US GAAP            860             448            745
Other comprehensive income / (loss), net of taxes
- Foreign currency translation adjustments               (348)            (72)            14
- Excess of minimum liability over unrecognized
  prior service cost, before taxes                     (1,555)            (40)            (8)
- Tax on excess of minimum liability over
  unrecognized prior service cost                         477               8              4
---------------------------------------------------------------------------------------------
Comprehensive income / (loss)                            (566)            344            755
=============================================================================================


143

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL
The accumulated other comprehensive income / (loss) balances are as follows:

-----------------------------------------------------------------------
                                   Foreign      Minimum     Accumulated
                                  currency      pension           other
                               translation    liability   comprehensive
Millions of euros              adjustments   adjustment          income
-----------------------------------------------------------------------
Balance at December 31, 1999         (346)          (4)           (350)
2000 change                            14           (4)             10
                              -----------------------------------------
Balance at December 31, 2000         (332)          (8)           (340)
2001 change                           (72)         (32)           (104)
                              -----------------------------------------
Balance at December 31, 2001         (404)         (40)           (444)
2002 change                          (348)      (1,078)         (1,426)
                              -----------------------------------------
Balance at December 31, 2002         (752)      (1,118)         (1,870)
=======================================================================

The reconciliation of shareholders' equity is as follows:

-------------------------------------------------------------------------
                                                           December 31,
Millions of euros                                      2002         2001
-------------------------------------------------------------------------
Shareholders' equity in accordance with NL GAAP       2,098        2,878
Adjustments to reported shareholders' equity:
Goodwill (a)                                          3,310        3,476
Joint venture (c)                                         3            8
Stock-compensation (d)                                               (22)
Development costs (e)                                    (5)          (6)
Restructuring provisions (f)                              8           27
Employee share plan (g)                                               (3)
Derivatives (h)                                          62            8
Income taxes (i)                                        (21)          (4)
-------------------------------------------------------------------------
Shareholders' equity in accordance with US GAAP       5,455        6,362
=========================================================================

An analysis of the change of shareholders' equity under US GAAP is as follows:

--------------------------------------------------------------------------------
Millions of euros                                         2002     2001     2000
--------------------------------------------------------------------------------

Balance at beginning of year                             6,362    6,368    5,897
Net income / (loss)                                        860      448      745
Dividends paid                                            (343)    (343)    (286)
Issuance of common shares                                    5        3        2
Purchase of common shares, net                              (3)     (10)
Foreign currency translation adjustments                  (348)     (72)      14
Excess of minimum liability over unrecognized prior
service cost, net of income taxes                       (1,078)     (32)      (4)
--------------------------------------------------------------------------------
Balance at end of year                                   5,455    6,362    6,368
================================================================================


144

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

The reconciliation of the elements of the earnings per share computation is as follows.

--------------------------------------------------------------------------------
                                               2002          2001          2000
--------------------------------------------------------------------------------
Shares for basic earnings per share     285,827,092   285,888,385   285,902,574
Effect of dilutive securities               504,113       440,479       252,786
--------------------------------------------------------------------------------
Shares for diluted earnings per share   286,331,205   286,328,864   286,155,360
================================================================================

(22) Supplemental Cash Flow Disclosures

--------------------------------------------------------------------------------
Millions of euros                              2002          2001          2000
--------------------------------------------------------------------------------
Cash paid during the year for:
Interest                                        208           284            315
Income taxes                                    231           246            362
================================================================================


145

Schedule II VALUATION AND QUALIFYING ACCOUNTS

------------------------------------------------------------------------------------------------------------------------
                                                                        Foreign
                                        Balance at     Additions        currency                                Balance
Millions of euros                     beginning of    charged to     translation                              at end of
                                            period        income         results      Deductions    Other*       period
------------------------------------------------------------------------------------------------------------------------


Reserves for doubtful accounts

Year ended
December 31, 2000                             165             35               1            (28)        3           176

Year ended
December 31, 2001                             176             44               1            (20)      (21)          180
2001
Year ended
December 31,                                  180             43             (17)           (25)        1           182
2002
-----------------------------------------------------------------------------------------------------------------------

* Other is principally due to divestments.

Item 19. EXHIBITS

(a) Financial statements filed as a part of this annual report. (See index to financial statements and schedule set forth in Item 18.)

(a) Exhibits filed as part of this annual report

1. Articles of Association of Akzo Nobel N.V. (incorporated by reference from the Form 6-K furnished to the U.S. Securities and Exchange Commission on July 25, 2001).
4.c Service contract of Board of Management of Akzo Nobel N.V. (incorporated by reference from the Form 20-F filed with the U.S. Securities and Exchange Commission on May 31, 2002.)
8. Subsidiaries.
10.a Consent of Independent Auditors.
10.b The Company's Report for the Quarter ended March 31, 2003 (incorporated by reference from the Form 6-K furnished to the U.S. Securities and Exchange Commission on April 16, 2003).

The amount of long-term debt securities of Akzo Nobel authorized under any individual instrument does not exceed 10 percent of the total assets of Akzo Nobel and its subsidiaries on a consolidated basis. Akzo Nobel agrees to furnish copies of any or all such instruments to the Securities and Exchange Commission upon request.


146

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

Akzo Nobel N.V.

By     :                               By      :
Name   :  C.J.A. van Lede              Name    : F.W. Froehlich
Title  :  Chairman of the Board        Title   : Deputy Chairman of the Board
          of Management                          of Management and Chief
                                                 Financial Officer

Dated: April 18, 2003


147

Certification CEO

I, C.J.A. van Lede, certify that:

1. I have reviewed this annual report on Form 20-F of Akzo Nobel N.V.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relatinG to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: 18 April, 2003               By:
      ---------------------                -----------------------------------
                                   Name:   C.J.A. van Lede
                                           -----------------------------------
                                   Title:  Chairman of the Board of Management
                                           -----------------------------------


148

Certification CFO

I, F.W. Froehlich, certify that:

1. I have reviewed this annual report on Form 20-F of Akzo Nobel N.V.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:   18 April, 2003             By:
        ----------------                  --------------------------------
                                   Name:  F.W. Froehlich
                                          --------------------------------
                                   Title: Deputy Chairman of the
                                          Board of Management and
                                          Chief Financial Officer
                                          --------------------------------


LIST AT DECEMBER 31, 2002
OF AFFILIATED COMPANIES IN
CONFORMITY WITH SECTIONS 379 AND 414,
BOOK 2 OF THE NETHERLANDS CIVIL CODE

BELONGING TO AKZO NOBEL N.V., ARNHEM

As filed with the Arnhem Trade Registry

Identified as being a statement to which our report dated February 10, 2003 refers.

KPMG Accountants N.V.


CONTENTS

                                                                           Page
                                                                           ----

1  Notes to the list                                                         3

2  List of consolidated legal entities and corporations                      4

3  List of nonconsolidated legal entities and corporations presented in     20
   conformity with Section 379, Book 2, of the Netherlands Civil Code

2

Notes to the list of legal entities and corporations presented in conformity with Sections 379 and 414, Book 2, Netherlands Civil Code.

1 With respect to the Dutch legal entities marked *, Akzo Nobel N.V. has declared in writing that it accepts joint and several liability for contractual debts of the relevant companies, in conformity with Section 403, Book 2, of the Netherlands Civil Code.
2 With respect to Irish legal entities marked ** Akzo Nobel N.V. has issued guarantees in relation to the exemption of the relevant companies under section 5(c) of the Companies (Amendment) Act 1986 Ireland.
3 The ownership percentage represents the interest Akzo Nobel N.V. or one or more of its majority subsidiaries singly or jointly have in the issued share capital of the participation.

3

LIST OF CONSOLIDATED LEGAL ENTITIES AND CORPORATIONS

Argentina
Akzo Nobel Coatings S.A. (Argentina)                                             Buenos Aires                          100.00
Akzo Nobel Quimica SA (Argentina)                                                Buenos Aires                          100.00
International Pine Products SA                                                   Acassuso                              100.00
Intervet Argentina S.A.                                                          Buenos Aires                          100.00
Organon Argentina S.A.Q.I.& C.                                                   Buenos Aires                          100.00

Australia
Akzo Nobel (Holdings) Pty Ltd                                                    Camellia                              100.00
Akzo Nobel Car Refinishes Australia Pty Ltd                                      Sydney                                100.00
Akzo Nobel Chemicals Pty Ltd                                                     Camellia                              100.00
Akzo Nobel Coatings (Holdings) Pty Ltd                                           Camellia                              100.00
Akzo Nobel Industries Ltd                                                        Camellia                              100.00
Akzo Nobel Pty Ltd                                                               Camellia                              100.00
Eka Chemicals (Australia) Pty Ltd                                                Melbourne                             100.00
Intervet Australia Pty Ltd                                                       Canberra                              100.00
Intervet Rural Co Pty Ltd                                                        Melbourne                             100.00
Onslow Salt Pty Ltd                                                              Perth                                  84.04
Organon (Australia) Pty Ltd                                                      Canberra                              100.00
Pinchin Johnson (Australia) Pty Ltd                                              Camellia                              100.00
Salt Asia Holdings Pty Ltd                                                       Perth                                  91.35

Austria
Akzo Nobel Coatings GmbH (Austria)                                               Salzburg                              100.00
Akzo Nobel Decorative Coatings GmbH                                              Salzburg                              100.00
Austro-Lesonal GmbH                                                              Salzburg                              100.00
Eka Chemicals Austria GmbH                                                       Purkersdorf                           100.00
Intervet GesmbH                                                                  Vienna                                100.00
Levis GmbH                                                                       Salzburg                              100.00
Organon GesmbH                                                                   Vienna                                100.00

Bangladesh
Organon (Bangladesh) Ltd                                                         Dhaka                                  83.09

Barbados
Akzo Nobel Fsc Ltd                                                               Christ Church                         100.00

Belgium
Akzo Invest N.V.                                                                 Brussels                              100.00
Akzo Nobel Car Refinishes NV                                                     Vilvoorde                              99.95
Akzo Nobel Chemicals SA (Belgium)                                                Mons                                  100.00
Akzo Nobel Coatings Nv/Sa                                                        Vilvoorde                             100.00
Akzo Nobel Decorative Coatings NV/SA                                             Brussel                               100.00
Akzo Nobel International Nv/Sa (in liquidation)                                  Brussels                              100.00
Akzo Nobel NV SA                                                                 Brussels                              100.00
Akzobel N.V.                                                                     Brussel                               100.00
Akzobelco NV                                                                     Brussels                              100.00
Auto Body Services CV (ABS)                                                      Brussel                                81.52
De Keyn Paint Nv/Sa                                                              Brussels                              100.00
International Paint (Belgium) NV                                                 Brussels                              100.00
Intervet Belgium N.V.                                                            Brussels                              100.00
Organon Belgie NV                                                                Brussel                               100.00
Salt Distribution Company N.V.                                                   Antwerpen                             100.00

4

LIST OF CONSOLIDATED LEGAL ENTITIES AND CORPORATIONS

Bolivia
Hoechst Roussel Vet de Bolivia Ltda (Proposed to be changed to La Paz                                                  100.00
Ltda)

Brazil
Akzo Nobel Ltda                                                                  Sao Paulo                             100.00
Akzo Nobel Participacoes Ltda                                                    Sao Paulo                             100.00
Casco Surface Ltda                                                               Sao Paulo                             100.00
Eka Chemicals Do Brazil S.A.                                                     Jundiai                                94.56
Eka Quimica Ltda                                                                 Rio de Janeiro                         51.00
Organon do Brasil Industria e Comercio Ltda                                      Sao Paulo                             100.00
Proquimio-Produtos Quimicos Opoterapicos Ltda                                    Sao Paulo                             100.00
Protequim Produtos Techno - Quimicos Ltda                                        Sao Paulo                             100.00

Bulgaria
Intervet Bulgaria EOOD                                                           Sofia                                 100.00

Canada
Akzo Nobel Chemicals Ltd (Canada)                                                Toronto                               100.00
Akzo Nobel Coatings Holdings Ltd (Canada)                                        Coburg                                100.00
Akzo Nobel Coatings Ltd (Canada)                                                 Ontario                               100.00
Casco Impregnated Papers Inc (Canada)                                            Cobourg                                82.00
Eka Chemicals Canada Inc                                                         Magog                                 100.00
Intervet Canada Ltd.                                                             Ontario                               100.00
Organon Canada Ltd.                                                              Ontario                               100.00

Chile
Alby Kemi Chile Ltda                                                             Talca                                 100.00
Eka Chemicals Chile S.A.                                                         Santiago                               99.99
Hormoquimica de Chile Ltda                                                       Santiago de Chile                     100.00
Intervet Veterinaria Chile Ltda                                                  Santiago                              100.00
MPC Chile                                                                        Santiago                              100.00

China
Akzo Nobel (Hong Kong) Ltd                                                       Hong Kong                             100.00
Akzo Nobel (Shanghai) Co. Ltd.                                                   Shanghai                              100.00
Akzo Nobel Car Refinishes (GZFTZ) Ltd                                            Guangzhou                             100.00
Akzo Nobel Car Refinishes (Suzhou) Co. Ltd                                       Suzhou                                100.00
Akzo Nobel Car Refinishes Hong Kong Ltd                                          Hong Kong                             100.00
Akzo Nobel Chang Cheng Coatings (Beijing) Co., Ltd                               Beijing                                50.00
Akzo Nobel Chang Cheng Coatings (Guangdong) Co Ltd                               Shenzhen                               50.00
Akzo Nobel Chang Cheng Coatings (Suzhou) Co Ltd                                  Suzhou                                 50.00
Akzo Nobel Chang Cheng Ltd (Powder)                                              Hong Kong                              50.00
Akzo Nobel Chemicals MCA (Taixing) Co. Ltd.                                      Taixing                               100.00
Akzo Nobel Coatings (Dongguan) Co. Ltd.                                          Dongguan City                         100.00
Akzo Nobel Decorative Coatings (China) Ltd                                       Guangzhou                             100.00
Akzo Nobel Decorative Coatings (Hong Kong) Ltd                                   Hong Kong                              99.99
Akzo Nobel Decorative Coatings (Shanghai) Ltd                                    Shanghai                               98.00
Akzo Nobel Fesco Ltd                                                             Hong Kong                              51.00
Akzo Nobel Protective Coatings (Suzhou) Co Ltd                                   Suzhou                                100.00
Akzo Nobel Resins (Suzhou) Co. Ltd.                                              Suzhou                                100.00
Casco Adhesives (Beijing) Ltd Co                                                 Beijing                               100.00
Casco Adhesives Hong Kong Ltd                                                    Hong Kong                             100.00

5

LIST OF CONSOLIDATED LEGAL ENTITIES AND CORPORATIONS

Coin Akzo Nobel Peroxides (Ningbo) Co. Ltd                                       Ningbo                                 55.50
Eka Chemicals (Suzhou) Ltd                                                       Suzhou                                100.00
Fengkai Eka Chemicals Co. Ltd                                                    Guangdong                              70.00
Ferro Ningbo Powder Coatings Limited                                             Ningbo                                 80.00
International Coatings Ltd                                                       Hong Kong                             100.00
International Paint of Shanghai Co Ltd                                           Shanghai                               51.00
Intervet (Hong Kong) Ltd                                                         Hong Kong                             100.00
Keum Jung Akzo Nobel Peroxides Ltd.                                              Seoul                                  80.00
Nanjing Organon Pharmaceutical Company Ltd                                       Nanjing                                83.00
Organon (Hong Kong) Ltd                                                          Hong Kong                             100.00
Tianjin Akzo Nobel Peroxides Co. Ltd                                             Tianjin                                87.50
Yixing Akzo Nobel Sanyuan Chemicals Company Ltd                                  Yixing City                            67.50

Colombia
Eka Chemicals de Colombia S.A.                                                   Cali - Dpto Valle                      99.97
Interquim S.A.                                                                   Medellin                              100.00
Intervet Colombia Ltda                                                           Bogota                                100.00
Organon de Colombia Ltda                                                         Santafe de Bogota                     100.00

Costa Rica
Intervet Holding Costa Rica SA                                                   San Jose                              100.00

Croatia
Budafestek Doo (Ltd)                                                             Zagreb                                100.00

Cyprus
Intervet Middle East Ltd                                                         Nicosia                                99.00
Organon Middle East Ltd. Cyprus                                                  Nicosia                               100.00

Czech Republic
Intervet S.R.O. (Czech Rep)                                                      Prague                                100.00
LNR Estaste S.R.O.                                                               Prague                                100.00
Organon Czech S.R.O.                                                             Prague                                100.00
Schonox S.R.O.                                                                   Karlovy-Vary                          100.00

Denmark
Akzo Nobel A/S (Denmark)                                                         Copenhagen                            100.00
Akzo Nobel Car Refinishes A/S                                                    Hoje Tastrup                          100.00
Akzo Nobel Chemicals Aps (Denmark)                                               Ballerup                              100.00
Akzo Nobel Deco A/S                                                              Copenhagen                            100.00
Akzo Nobel Industrial Coatings A/S                                               Kopenhagen                            100.00
Akzo Nobel Salt A/S                                                              Mariager                              100.00
Biometer International A/S                                                       Odense                                100.00
Casco A/S (Denmark)                                                              Fredensborg-Humlebak                  100.00
Focus A/S                                                                        Copenhagen                            100.00
International Farvefabrik A/S                                                    Herlev                                100.00
Intervet Denmark A/S                                                             Ballerup                              100.00
Mariager Energi A/S                                                              Mariager                              100.00
Organon A/S  (Denmark)                                                           Ballerup                              100.00
Rosemont Pharma AS                                                               Skovlunde                             100.00
Sadolin Farveland Marketing A.S.                                                 Copenhagen                             80.00

6

LIST OF CONSOLIDATED LEGAL ENTITIES AND CORPORATIONS

Dominican Republic
Intervet Dominicana S.A.                                                         Santo Domingo                          99.90

Ecuador
Interquimec S.A.                                                                 Quito                                 100.00
Intervet Ecuador S.A.                                                            Guayaquil                             100.00
Organon Ecuatoriana C.A.                                                         Guayaquil                             100.00

Egypt
Intervet Egypt for Animal Health SAE                                             Cairo                                 100.00
Organon Egypt Ltd                                                                Cairo                                 100.00

Estonia
ES Sadolin AS                                                                    Tallinn                                90.00
LLC Casco Liimid (Estonia)                                                       Tallinn                               100.00

Fiji
Taubmans Paints Fiji Ltd                                                         Suva                                   65.00

Finland
Akzo Nobel Coatings Oy                                                           Vantaa                                100.00
Akzo Nobel Deco Oy                                                               Vantaa                                100.00
Eka Chemicals Oy (Finland)                                                       Helsinki                              100.00
Intervet Oy                                                                      Vantaa                                100.00
Oy International Paint (Finland) AB                                              Helsinki                              100.00
Oy Organon AB                                                                    Helsinki                              100.00

France
Acoat Bodyshop Service SAS                                                       Senlis                                 65.86
Akcros Chemicals France S.A.                                                     Compiegne                              99.91
Akzo Nobel (Holding) SA                                                          Le Havre                              100.00
Akzo Nobel Aerospace Coatings SA                                                 Montataire                             99.99
Akzo Nobel Chemicals S.A.S.                                                      Venette                               100.00
Akzo Nobel Coatings S.A.                                                         Saint-Denis                            99.79
Akzo Nobel Industrial Coatings SA                                                Lyon                                   99.88
Akzo Nobel Nippon Paint SA                                                       Harfleur                               75.00
Akzo Nobel Powder Coatings SNC                                                   Evry                                  100.00
Akzo Nobel S.A.                                                                  Paris                                 100.00
Akzo Nobel Surface Chemistry SA                                                  Compiegne                              99.97
Boiro Nobel S.A.                                                                 Lyon                                  100.00
Casco Decor S.N.C.                                                               Arches                                100.00
Casco France S.A.                                                                Nanterre                              100.00
Casco Industrie SNC                                                              Antony Cedex                          100.00
Cegecol SNC                                                                      Antony Cedex                          100.00
Color Auto Expert S.A                                                            Montataire                             99.55
Diosynth France S.A.                                                             Eragny-Sur-Epte                        99.88
Distrireti S.A.                                                                  Riom                                   99.96
Eka Chimie S.A.                                                                  Ambes                                  99.98
International Paint France S.A.                                                  Sotteville les Rouen                   97.00
International Peinture S.A.                                                      Le Havre                              100.00
International Peinture SA                                                        Le Havre                              100.00
Intervet International SA                                                        Beaucouze                              99.99

7

LIST OF CONSOLIDATED LEGAL ENTITIES AND CORPORATIONS

Intervet Pharma R & D S.A.                                                       Angers                                 99.92
Intervet Productions SA                                                          Nanterre                               99.99
Intervet S.A.                                                                    Angers                                 99.99
Jouanne SA                                                                       Caen                                   99.79
Laboratoires R.E.T.E. S.A.                                                       Riom                                   99.99
Nord Couleurs Decoration SA                                                      Haubourdin                             99.42
Organon France Holding SA                                                        Riom                                  100.00
Organon S.A.                                                                     Eragny-sur-Epte                        99.68
Peintures Couleurs Decoration SA                                                 Sartrouville                           99.49
Prodeta S.A.                                                                     Vannes                                 99.99
Roll Centre S.A.                                                                 Brive                                  99.63
SIP SA                                                                           Le Havre                               99.79
Socoremo SA                                                                      Bordeaux                               99.41
SUD Est Decor S.A.                                                               Aubagne                                99.77
Toitot SA                                                                        Besancon                               99.09
Vachon S.A.                                                                      Lyon                                   99.79

Germany
Akcros Chemicals GmbH & Co, KG                                                   Greiz                                 100.00
Akcros Chemicals Verwaltung Gesellschaft GmbH                                    Greiz                                 100.00
Akzo Nobel Aerospace Coatings GmbH                                               Norderstedt                           100.00
Akzo Nobel Chemicals GmbH                                                        Dueren                                100.00
Akzo Nobel Chemicals Holding GmbH                                                Duren                                 100.00
Akzo Nobel Coatings GmbH                                                         Stuttgart                             100.00
Akzo Nobel Deco GmbH                                                             Koln                                  100.00
Akzo Nobel Farben Beteiligungs GmbH                                              Stuttgart                             100.00
Akzo Nobel Faser Pensionsverwaltungs-GmbH                                        Wuppertal                             100.00
Akzo Nobel GmbH                                                                  Duren                                 100.00
Akzo Nobel Information Services GmbH                                             Duren                                 100.00
Akzo Nobel Nippon Paint GmbH                                                     Nurnberg                               75.00
Akzo Nobel Oleochemicals GmbH                                                    Emmerich                              100.00
Akzo Nobel Salz GmbH                                                             Stade                                 100.00
Carbosulf Chemische Werke GmbH                                                   Koln                                   66.67
CarInfo Service GmbH                                                             Stuttgart                             100.00
Casco Products GmbH                                                              Essen                                 100.00
Degewop Arzneimittel GmbH                                                        Oberschleissheim                      100.00
ECI Elektro-Chemie GmbH                                                          Ibbenburen                            100.00
Farbe und Heimtex Sonnen Herzog GmbH                                             Reinsdorf                             100.00
Hydrochemie GmbH                                                                 Schwabenheim                          100.00
International Farbenwerke GmbH                                                   Geesthacht                            100.00
Intervet Deutschland GmbH                                                        Unterschleissheim                     100.00
Intervet Innovation GmbH                                                         Schwabenheim                          100.00
Intervet International GmbH                                                      Unterschleissheim                     100.00
Joh. Peters sen. GmbH                                                            Berlin                                100.00
Kerstin Wand und Boden GmbH                                                      Soest                                 100.00
Mochem GmbH                                                                      Marburg                               100.00
Nourypharma GmbH                                                                 Oberschleissheim                      100.00
Organon Development GmbH                                                         Waltrop                               100.00
Organon GmbH                                                                     Oberschleissheim                      100.00
Reparatur Partner Direkt GmbH                                                    Stuttgart                             100.00
Schonox GmbH                                                                     Rosendahl                             100.00
WUMEG Farbe & Heimtex GmbH                                                       Stuttgart                             100.00
Wupper AG i.L.                                                                   Wuppertal                              99.99

8

LIST OF CONSOLIDATED LEGAL ENTITIES AND CORPORATIONS

   Greece
   Akzo Nobel Coatings A.E. (Greece)                                                Athens                                100.00
   Akzo Nobel Powder Coatings A.E.                                                  Athens                                100.00
   International Paint (Hellas) S.A.                                                Piraeus                               100.00
   Intervet Animal Nutrition Products SA (in liquidation)                           Athens                                100.00
   Intervet Hellas A.E.                                                             Athens                                100.00
   Organon Hellas Commercial societe Anonyme                                        Athens                                100.00
   Vivechrom S.A.                                                                   Mandra                                 76.00

   Guernsey
   Oakwood Ltd                                                                      St. Peter Port                         76.92
   Windsor Ltd                                                                      St. Peter Port                         99.94

   Hungary
   Akzo Nobel Coatings Rt. (Hungary)                                                Tiszaujvaros                          100.00
   Akzo Nobel CR Car Refinishes Trading Company Ltd                                 Budapest                              100.00
   Akzo Nobel Representation and Services Kft (Ltd)                                 Budapest                              100.00
   A-Pigment Ltd                                                                    Zalaegerszeg                           51.00
   Budafestek Kft                                                                   Budapest                              100.00
   Intervet Hungaria Kft                                                            Budapest                              100.00
   Organon Hungary Kereskedelmi Kft/Org. Hungary Trading Ltd                        Budapest                              100.00
   Pigment Lim. Partnership                                                         Kecskemet                              75.00
   Profikolor Uzletlanc Ltd                                                         Budapest                              100.00

   India
   Akzo Nobel Car Refinishes India Pvt Ltd                                          Bangalore                             100.00
   Akzo Nobel Chemicals (India) Ltd                                                 Pune                                   95.85
   Akzo Nobel Coatings India Private Ltd                                            Bangalore                             100.00
   Akzo Nobel Non-Stick Coatings Ltd                                                Amhedabad                              99.90
   Intervet India Pvt. Ltd                                                          Hyderabad                             100.00
   Organon (India) Ltd                                                              Calcutta                               92.76

   Indonesia
   PT Akzo Nobel Car RefinishesIndonesia                                            Jakarta                               100.00
   PT Akzo Nobel Dekorina                                                           Jakarta                                65.00
   PT Akzo Nobel Raung Resins                                                       Surabaya                               80.00
   PT Akzo Nobel Satindo                                                            Jakarta                               100.00
   PT Casco Persada Indonesia                                                       Jakarta                               100.00
   PT Eka Kimia Inti Abadi                                                          Jawa Timur                            100.00
   PT Eka Nobel Indonesia                                                           Surabaya                              100.00
   PT International Coatings                                                        Bekasi                                100.00
   PT Intervet Indonesia                                                            Jakarta                               100.00
   PT Organon Indonesia                                                             Jakarta                                99.67

   Ireland
** Akzo Nobel Car Refinishes (Ireland) Ltd                                          Dublin                                100.00
** Akzo Nobel Decorative Coatings Ireland Ltd                                       Dublin                                100.00
** Intervet  (Ireland) Limited                                                      Dublin                                100.00
** Intervet Laboratories Limited (Ireland)                                          Dublin                                100.00
** Nourypharma Ireland Ltd                                                          Dublin                                100.00
** Organon Ireland Ltd                                                              Dublin                                100.00
** Organon Teknika Ltd (Rep Ireland)                                                Dublin                                100.00

9

LIST OF CONSOLIDATED LEGAL ENTITIES AND CORPORATIONS

Italy
Akcros Chemicals Italia Srl                                                      Milaan                                100.00
Akzo Nobel Chemicals SPA (Italy)                                                 Milano                                100.00
Akzo Nobel Coatings S.P.A.                                                       Cesano Boscone                        100.00
Akzo Nobel Nippon Paint Srl                                                      Fombio                                 75.00
Akzo Nobel Non Stick Coatings Srl                                                Fombio                                100.00
Akzo Nobel Wood Coatings Srl                                                     Milano                                100.00
Autolakken S.R.L                                                                 Monza                                 100.00
Farmaceutici Gellini SRL                                                         Milano                                100.00
Gellini International SRL                                                        Milano                                100.00
International Paint Italia SPA                                                   Genova                                 99.91
Intervet (Italia) S.R.L.                                                         Milano                                100.00
Nuova ICC SRL                                                                    Milano                                100.00
Organon Italia S.P.A.                                                            Rome                                  100.00
Therimas S.R.L.                                                                  Rome                                  100.00

Japan
Akzo Nobel Coatings K.K.                                                         Osaka                                 100.00
Akzo Nobel K.K.                                                                  Tokyo                                 100.00
Akzo Nobel Kashima K.K.                                                          Tokyo                                 100.00
Intervet K.K.                                                                    Tokyo                                 100.00
Nippon Organon K.K.                                                              Osaka                                 100.00
Nissan Eka Chemicals Co. Ltd                                                     Tokyo                                  80.00

Kenya
Intervet East Africa Limited                                                     Nairobi                               100.00

Korea (South)
Akzo Nobel Amides Co. Ltd                                                        Kyungju                               100.00
Akzo Nobel Car Refinishes Korea Co. Ltd.                                         Seoul                                 100.00
Akzo Nobel Ltd (Korea)                                                           Seoul                                 100.00
Eka Chemicals Korea Co. Ltd                                                      Seoul                                 100.00
International Paint (Korea) Ltd                                                  Ansan                                  60.00
International Paint (Research) Ltd                                               Geoje City                            100.00
Interpon Powder Coatings Limited                                                 Ansan                                  50.00
Intervet Korea Ltd.                                                              Seoul                                 100.00
LG Ferro Powder Coatings Limited                                                 Seoul                                  71.80
Organon Korea Ltd                                                                Seoul                                 100.00

Latvia
LA Sadolin SIA                                                                   Riga                                   90.00

Lebanon
Organon Middle East S.A.L. (Lebanon)                                             Beyrouth                               97.00

Lithuania
LI Sadolin                                                                       Vilnius                                90.00

Luxemburg
Compagnie de Reassurance Akzo Nobel S.A.                                         Luxemburg                             100.00

10

LIST OF CONSOLIDATED LEGAL ENTITIES AND CORPORATIONS

   Malaysia
   Akzo Nobel  (Malaysia) Sdn Bhd                                                   Kuala Lumpur                          100.00
   Akzo Nobel Car Refinishes (Malaysia) Sdn Bhd                                     Selangor                              100.00
   Akzo Nobel Coatings Sdn Bhd                                                      Selangor                              100.00
   Akzo Nobel Industrial Coatings Sdn Bhd                                           Petaling Jaya                         100.00
   Akzo Nobel Industries Sdn Bhd                                                    Selangor                               65.00
   Akzo Nobel Oleochemicals Sdn. Bhd.                                               Selangor                               65.00
   Casco Adhesives Sdn Bhd                                                          Selangor                              100.00
   Casco Decor Sdn Bhd                                                              Kuala Lumpur                          100.00
   International Coatings Sdn Bhd                                                   Johor                                  70.00
   Intervet (M) Sdn Bhd                                                             Selangor                              100.00
   Organon (Malaysia) Sdn. Bhd.                                                     Kuala Lumpur                          100.00
   Synthese (Malaysia) Sdn. Bhd.                                                    Melaka                                 62.00

   Mexico
   Akzo Nobel Chemicals S.A. de C.V.                                                Mexico DF                             100.00
   Akzo Nobel Coatings Servicios Profesionales S.A. de C.V.                         Mexico City                            55.00
   Akzo Nobel Comex S.A. de C.V.                                                    Mexico City                            55.00
   Akzo Nobel Industrial Coatings Mexico SA de CV                                   Mexico City                           100.00
   Compania Mexicana de Pinturas International SA de CV                             Mexico City                           100.00
   Industrial de Acabados S.A. de C.V.                                              Monterrrey                             50.00
   Intervet Mexico S.A. de C.V.                                                     Santiago Tianguistenco                100.00
   Interveterinaria SA de CV                                                        Santiago Tianguistenco                 99.70
   Organon Mexicana S.A. de C.V.                                                    Mexico DF                             100.00
   Organon Sanofi-Synthelabo Mexico, S.A. de C.V.                                   Mexico City                            50.00
   Pinturas Condor S.A. de C.V. Mexico                                              Mexico                                100.00
   Quimica Esteroidal S.A. de C.V.                                                  San Juan de Ixhuatep                  100.00
   Robena S.A.                                                                      Mexico City                           100.00
   Akzo Nobel Coatings S.A. (Morocco)                                               Casablanca                             73.62
   Intervet Maroc                                                                   Casablanca                             99.99
   Organon Maroc S.a.R.L.                                                           Casablanca                            100.00
   Sadvel SA                                                                        Casablanca                             70.60

   Myanmar
   Myanmar Organon Ltd                                                              Yangon                                100.00

   Neth. Antilles
   Akzo Nobel (Netherlands Antilles) NV                                             Bonaire                               100.00
   Akzo Nobel International Finance NV                                              Curacao                               100.00
   Eka Chemicals Antilles Holding N.V.                                              Willemstad                            100.00

   Netherlands
*  Akcros Chemicals B.V.                                                            Amersfoort                            100.00
*  Akzo Nobel (C) Holdings BV                                                       Woerden                               100.00
*  Akzo Nobel Aerospace Coatings BV                                                 Sassenheim                            100.00
*  Akzo Nobel Aerospace Coatings International B.V.                                 Sassenheim                            100.00
*  Akzo Nobel Asia BV                                                               Arnhem                                100.00
   Akzo Nobel Assurantie N.V.                                                       Arnhem                                100.00
*  Akzo Nobel Base Chemicals bv                                                     Amersfoort                            100.00
*  Akzo Nobel Car Refinishes BV                                                     Sassenheim                            100.00
*  Akzo Nobel Catalysts BV                                                          Amersfoort                            100.00
   Akzo Nobel Center Energie B.V.                                                   Arnhem                                100.00
*  Akzo Nobel Central Purchasing B.V.                                               Arnhem                                100.00
*  Akzo Nobel Central Research B.V.                                                 Arnhem                                100.00
*  Akzo Nobel Chemicals BV                                                          Amersfoort                            100.00

11

LIST OF CONSOLIDATED LEGAL ENTITIES AND CORPORATIONS

*  Akzo Nobel Chemicals International BV                                            Amersfoort                            100.00
*  Akzo Nobel China B.V.                                                            Arnhem                                100.00
*  Akzo Nobel China Beheer BV                                                       Arnhem                                100.00
*  Akzo Nobel China Trade BV                                                        Arnhem                                100.00
*  Akzo Nobel Coatings B.V.                                                         Sassenheim                            100.00
*  Akzo Nobel Coatings International B.V.                                           Arnhem                                100.00
*  Akzo Nobel Coatings Research bv                                                  Arnhem                                100.00
*  Akzo Nobel Decorative Coatings BV                                                Sassenheim                            100.00
*  Akzo Nobel Decorative Coatings Turkey B.V.                                       Arnhem                                100.00
*  Akzo Nobel Duitsland bv                                                          Arnhem                                100.00
   Akzo Nobel Energie Hengelo B.V.                                                  Hengelo                               100.00
*  Akzo Nobel Energy BV                                                             Amersfoort                            100.00
*  Akzo Nobel Engineering B.V.                                                      Arnhem                                100.00
*  Akzo Nobel Finance B.V.                                                          Arnhem                                100.00
*  Akzo Nobel Functional Chemicals B.V.                                             Amersfoort                            100.00
*  Akzo Nobel Holding Duitsland B.V.                                                Arnhem                                100.00
*  Akzo Nobel Industrial Coatings BV                                                Sassenheim                            100.00
*  Akzo Nobel Industrial Products Colombia B.V.                                     Arnhem                                100.00
*  Akzo Nobel Insurances B.V.                                                       Arnhem                                100.00
*  Akzo Nobel Management BV                                                         Arnhem                                100.00
*  Akzo Nobel Mpp Systems B.V.                                                      Arnhem                                100.00
*  Akzo Nobel Nederland B.V.                                                        Arnhem                                100.00
   Akzo Nobel Nippon Paint Holding B.V.                                             Arnhem                                 75.00
*  Akzo Nobel Pharma B.V.                                                           Oss                                   100.00
*  Akzo Nobel Pharma International bv                                               Oss                                   100.00
*  Akzo Nobel Pharma Ventures B.V.                                                  Arnhem                                100.00
*  Akzo Nobel Polymer Chemicals B.V.                                                Amersfoort                            100.00
*  Akzo Nobel Powder Coatings Holding bv                                            Arnhem                                100.00
   Akzo Nobel Representative Offices BV                                             Arnhem                                100.00
*  Akzo Nobel Research BV                                                           Arnhem                                100.00
*  Akzo Nobel Resins BV                                                             Bergen op Zoom                        100.00
*  Akzo Nobel Risk and Insurance Management B.V.                                    Arnhem                                100.00
*  Akzo Nobel Salt BV                                                               Amersfoort                            100.00
*  Akzo Nobel Sino Chemicals bv                                                     Arnhem                                100.00
*  Akzo Nobel Sino Coatings B.V.                                                    Sassenheim                            100.00
*  Akzo Nobel Surface Chemistry BV                                                  Amersfoort                            100.00
*  Akzo Systems BV                                                                  Arnhem                                100.00
*  Carelaa BV                                                                       Arnhem                                100.00
*  Casco BV                                                                         's-Hertogenbosch                      100.00
*  Cosmas BV                                                                        Oss                                   100.00
*  Degewop BV                                                                       Arnhem                                100.00
*  Diosynth BV                                                                      Oss                                   100.00
*  Diosynth Holding B.V.                                                            Arnhem                                100.00
*  Diosynth International BV                                                        Oss                                   100.00
*  Eka Chemicals BV                                                                 Maastricht                            100.00
*  EKA Chemicals Chile B.V.                                                         Amsterdam                             100.00
*  Eka Nobel B.V.                                                                   Maastricht                            100.00
*  Farmaas BV                                                                       Oss                                   100.00
*  Fibdis I BV                                                                      Ede                                   100.00
*  Fibdis II BV                                                                     Arnhem                                100.00
*  Fibdis III BV                                                                    Arnhem                                100.00
*  Fibdis Nederland bv                                                              Arnhem                                100.00
   Fonda bv                                                                         Arnhem                                 50.00

12

LIST OF CONSOLIDATED LEGAL ENTITIES AND CORPORATIONS

*  Handelmaatschappij Buya BV                                                       Arnhem                                100.00
*  Handelmaatschappij Chemie-Silk BV                                                Amsterdam                             100.00
*  Hermalinde B.V.                                                                  Arnhem                                100.00
*  Hollander's Verfhandel BV                                                        Zwolle                                100.00
*  Horus BV                                                                         Oss                                   100.00
*  International Paint (Nederland) BV                                               Rhoon                                 100.00
*  Intervet China B.V.                                                              Arnhem                                100.00
*  Intervet Holding B.V.                                                            Arnhem                                100.00
*  Intervet International BV                                                        Boxmeer                               100.00
*  Intervet Nederland BV                                                            Boxmeer                               100.00
*  J.L.H. Smits & Co Verffabrieken BV                                               Wapenveld                             100.00
*  Kloek Zout B.V.                                                                  Dordrecht                             100.00
*  Laboratoria Nobilis BV                                                           Boxmeer                               100.00
*  Levis BV                                                                         Waalwijk                              100.00
*  Makraba BV                                                                       Arnhem                                100.00
   Mcn Holding BV                                                                   Delfzijl                              100.00
*  Mycofarm International BV                                                        Boxmeer                               100.00
*  Mycofarm Nederland BV                                                            De Bilt                               100.00
   Nederlandse Verfhandel (Neveha) BV                                               Breda                                  60.00
*  Nobel Industries Holding BV                                                      Arnhem                                100.00
*  Nobel Industries Nederland BV                                                    Amsterdam                             100.00
*  Nobilon International b.v.                                                       Boxmeer                               100.00
*  Nourypharma Nederland BV                                                         Oss                                   100.00
*  NV Organon                                                                       Oss                                   100.00
*  Orgachemia BV                                                                    Boxtel                                100.00
*  Organon Agencies BV                                                              Oss                                   100.00
*  Organon China BV                                                                 Arnhem                                100.00
*  Organon Europe BV                                                                Oss                                   100.00
*  Organon Holding bv                                                               Oss                                   100.00
*  Organon Nederland BV                                                             Oss                                   100.00
*  Organon Participations bv                                                        Oss                                   100.00
*  Organon Teknika Holding B.V.                                                     Arnhem                                100.00
*  Panter BV                                                                        Hoofddorp                             100.00
*  Poviet Producten BV                                                              Amsterdam                             100.00
*  Remmert Holland BV                                                               Hoofddorp                             100.00
*  Ribaja BV                                                                        Hengelo (Ov)                          100.00
*  Rosemont BV                                                                      Oss                                   100.00
*  Sikkens Verkoop BV                                                               Sassenheim                            100.00
*  Syncoflex BV                                                                     Arnhem                                100.00
*  Theriak bv                                                                       Oss                                   100.00
*  Van Blommestein Powalky BV                                                       Arnhem                                100.00
*  Verfhandel Roozendaal BV                                                         Den Haag                              100.00
*  Verfhof BV                                                                       Arnhem                                100.00
*  Vetrex BV                                                                        Oss                                   100.00
*  Vlintex BV                                                                       Arnhem                                100.00
   Wemca Milieubeheer BV                                                            Arnhem                                100.00
*  Zoopharm BV                                                                      De Bilt                               100.00

   New Zealand
   Akzo Nobel Coatings Ltd (New Zealand)                                            Auckland                              100.00
   Akzo Nobel Investments (New Zealand) Ltd                                         Avondale                              100.00
   Eka Chemicals (N.Z.) Ltd.                                                        Mount Maunganui                       100.00
   Intervet Limited (New Zealand)                                                   Auckland                              100.00
   Wrightleft (New Zealand) Ltd                                                     Auckland                              100.00

13

LIST OF CONSOLIDATED LEGAL ENTITIES AND CORPORATIONS

Norway
Akzo Nobel Car Refinishes AS                                                     Kolbotn                               100.00
Akzo Nobel Chemicals AS (Norway)                                                 Oslo                                  100.00
Akzo Nobel Dekorativ AS (Norway)                                                 Kolbotn                               100.00
Akzo Nobel Industrial Coatings AS (Norway)                                       Kolbotn                               100.00
Akzo Nobel Surface Chemistry A/S                                                 Fredrikstad                           100.00
Eka Chemicals Norge A/S                                                          Skarer                                100.00
Eka Chemicals Norge Silika A/S                                                   Skarer                                100.00
Eka Chemicals Rana A/S                                                           Mo i Rana                             100.00
Eka Chemicals Rjukan A/S                                                         Rjukan                                100.00
International Maling A/S                                                         Begen                                 100.00
Intervet Norbio A.S.                                                             Bergen                                100.00
Intervet Norge AS                                                                Oslo                                  100.00
Organon A/S (Norway)                                                             Asker                                 100.00
Silinor A/S                                                                      Meloy                                 100.00
Thors Kemiske Fabrikker A/S                                                      Skarer                                100.00

Pakistan
Organon Pakistan (Private) Ltd                                                   Karachi                                99.90

Panama
International Paint (Panama) Inc.                                                Mercantil                             100.00

Papua New Guinea
Akzo Nobel Limited                                                               Geheru                                100.00

Paraguay
Intervet Paraguay SA                                                             Asuncion                               75.00

Peru
Intervet SA                                                                      Lima                                  100.00

Philippines
Akzo Nobel Car Refinishes Philippines Inc.                                       Makati City                           100.00
Intervet Phillipines Inc                                                         Mandaluyong                           100.00
Organon (Philippines) Inc.                                                       Manila                                 99.99

Poland
Akzo Nobel Car Refinishes (Polska) Sp. Z o.o.                                    Wloclawek                             100.00
Akzo Nobel Chemicals Representation & Services Sp. Z o.o.                         Warsaw                                100.00
Akzo Nobel Decorative Coatings Sp. Z o.o.                                        Wloclawek                             100.00
Akzo Nobel Industrial Coatings Sp. Z o.o.                                        Wloclawek                             100.00
International Coatings Sp. Z o.o.                                                Gdynia                                100.00
Nobiles, Kujawska Fabryka Farb i Lakierow Sp. z o.o.                             Wloclawek                             100.00
Organon Polska Sp. z o.o.                                                        Warsaw                                100.00

Portugal
Akzo Nobel Resinas  Lda                                                          Santo Varao                           100.00
Eka Chemicals Portugal Lda                                                       Parede                                100.00
Hacifar Portuguesa (Produtos Quimicos E Farmaceuticos) Lta                       Lisbon                                100.00
International Paint Iberia Ltda                                                  Setubal                                68.34
Intervet Portugal - Saude Animal, Lda                                            Cascais                               100.00
Nourifarma - Produtos Quimicos e Farmaceuticos Lda                               Lisbon                                100.00
Organon Portuguesa Produtos Quimicos E Farmaceuticos Ltda                        Lisbon                                100.00

14

LIST OF CONSOLIDATED LEGAL ENTITIES AND CORPORATIONS

Rumania
Eurocolor Ltd                                                                    Sfantu-Gheorghe                        51.00
Intervet Nutrition SrL                                                           Bucharest                              99.90
Intervet Romania SRL                                                             Bucharest                             100.00

Russian Federation
A.O. Ankorit                                                                     Moscow                                 51.00
Akzo Nobel Car Refinishes OOO                                                    Moscow                                100.00
Akzo Nobel Trading and Distribution Company Ltd                                  Moscow                                100.00
Intervet OOO                                                                     Moscow                                100.00
Marshall Paint Rus                                                               Moscow                                100.00
RU Sadolin                                                                       Moscow                                100.00
Zao Akzo Nobel Dekor (Russia)                                                    Moscow                                100.00
Zao Organon A/O                                                                  Moscow                                100.00
Zao Sadolin                                                                      St Petersburg                         100.00
Zao Sadolin-Nizhny Novgorod                                                      Nizhny Novgorod                       100.00

Singapore
Akcros Chemicals (Asia Pacific) Pte Ltd                                          Singapore                             100.00
Akzo Nobel Car Refinishes (Singapore)  Pte Ltd                                   Singapore                             100.00
Akzo Nobel Chemicals Pte Ltd                                                     Singapore                             100.00
Akzo Nobel Coatings (Asia Pacific) Pte Ltd                                       Singapore                             100.00
Akzo Nobel Coatings Pte Ltd                                                      Singapore                             100.00
Akzo Nobel South East Asia Pte Ltd.                                              Singapore                             100.00
Akzo Nobel Surface Chemistry Pte. Ltd.                                           Singapore                             100.00
Casco Adhesives (Asia) Pte Ltd                                                   Singapore                             100.00
Coin Akzo Nobel Peroxides Pte Ltd                                                Singapore                              55.50
International Coatings (Pte) Ltd                                                 Singapore                             100.00
Intervet (Taiwan) Pte Ltd                                                        Singapore                             100.00
Intervet Norbio Singapore Pte Ltd                                                Singapore                             100.00

Slovak Republic
Budafestek Slovakia Sro (Ltd)                                                    Nitre                                  98.00

South Africa
Eka Chemicals (Pty) Ltd                                                          Durban                                100.00
International Paint (Pty) Ltd                                                    Groterg                                51.00
Intervet South Africa (Pty) Limited                                              Johannesburg                          100.00
PJA (South Africa) (Pty) Ltd                                                     Alberton                              100.00

Spain
Akcros Chemicals Iberica Sl                                                      Barcelona                             100.00
Akzo Nobel Car Refinishes SL                                                     Barcelona                             100.00
Akzo Nobel Chemicals SA (Spain)                                                  Barcelona                             100.00
Akzo Nobel Coatings S.A.                                                         Barcelona                             100.00
Akzo Nobel Distribucion, S.L.                                                    Barcelona                             100.00
Akzo Nobel Industrial Paints SL                                                  Barcelona                             100.00
Akzo Nobel Nippon Paint Espania SA                                               Badalona                               75.00
Akzo Nobel Resins S.L.                                                           Barcelona                             100.00
Casco Decor S.A. (Spain)                                                         Barcelona                             100.00
Eka Chemicals Iberica SA                                                         Barcelona                             100.00
Herpu Carrocerias S.A. (Spain)                                                   Barcelona                             100.00
Laboratorios Intervet S.A.                                                       Salamanca                             100.00
Laminados Iberia S.A.                                                            Burgos                                100.00
Organon Espanola S.A.                                                            Cornella de Llobregat                 100.00

15

LIST OF CONSOLIDATED LEGAL ENTITIES AND CORPORATIONS

Sweden
AB Alpinum                                                                       Nacka                                 100.00
Akzo Nobel AB                                                                    Stockholm                             100.00
Akzo Nobel Base Chemicals AB                                                     Skoghall                              100.00
Akzo Nobel Car Refinishes AB                                                     Tyresoe                               100.00
Akzo Nobel Chemicals Holding AB                                                  Nacka                                 100.00
Akzo Nobel Coatings AB                                                           Goteburg                              100.00
Akzo Nobel Coatings Holding AB                                                   Stockholm                             100.00
Akzo Nobel Deco International AB                                                 Nacka                                 100.00
Akzo Nobel Decorative Coatings AB                                                Malmo                                 100.00
Akzo Nobel Functional Chemicals AB                                               Stenungsund                           100.00
Akzo Nobel Industrial Coatings AB                                                Malmo                                 100.00
Akzo Nobel Nippon Paint AB                                                       Angered                                75.00
Akzo Nobel Production AB                                                         Nacka                                  75.00
Akzo Nobel Rexolin AB                                                            Gothenburg                            100.00
Akzo Nobel Salt AB                                                               Goteborg                              100.00
Akzo Nobel Scandinavia AB                                                        Stockholm                             100.00
Akzo Nobel Surface Chemistry AB                                                  Stenungsund                           100.00
Akzo Nobel Surface Chemistry Holding AB                                          Stenungsund                           100.00
Aqvarinse AB                                                                     Bohus                                 100.00
Casco Products AB                                                                Stockholm                             100.00
Cellchem AB                                                                      Stockholm                             100.00
Chemtronics AB                                                                   Bohus                                 100.00
Ejes Farghus AB                                                                  Sundsvall                             100.00
Eka Chemicals AB                                                                 Bohus                                 100.00
Eka Chemicals China AB                                                           Bohus                                 100.00
Ekoflock AB                                                                      Vetlanda                              100.00
Extensor AB                                                                      Angered                               100.00
Faerg AB Danab                                                                   Malmo                                 100.00
Faerghuset i Eskilstuna AB                                                       Eskilstuna                            100.00
Farghandelskompaniet i Malmo AB                                                  Malmo                                  91.00
Fastighets AB Jakob Mindre                                                       Nacka                                 100.00
Fastighets AB Stockvik                                                           Sundsvall                             100.00
Forvaltnings AB Sannegarden                                                      Goteborg                              100.00
Fribo Fastigheter AB                                                             Vetlanda                              100.00
Harnosands Farghus AB                                                            Harnosand                             100.00
International Farg AB                                                            Goteburg                              100.00
Intervet AB                                                                      Stockholm                             100.00
Kartongen Kemi och Forvaltning AB                                                Stockholm                             100.00
Kb Halstenen                                                                     Stockholm                             100.00
Kemanord Kraft AB                                                                Stockholm                             100.00
Kemi-Intressen AB                                                                Solna                                 100.00
Mscand Management Services AB                                                    Nacka                                 100.00
Nordsjo Butiker AB                                                               Malmo                                 100.00
Organon AB                                                                       Goteborg                              100.00
Permascand AB                                                                    Ljungaverk                            100.00
Permascand Laser AB                                                              Trollhatan                            100.00
Rosemont Pharma AB                                                               Goteborg                              100.00
Titan Service Center i Ljungaverk AB                                             Ljungaverk                            100.00

16

LIST OF CONSOLIDATED LEGAL ENTITIES AND CORPORATIONS

Switzerland
Akzo Nobel Coatings AG                                                           Luzern                                 97.00
Budapaint AG                                                                     Luzern                                100.00
Colorfilia I.P.C. S.A.                                                           Basel                                 100.00
Colorfina S.A.                                                                   Basel                                 100.00
Crina Centre de Recherches International De Nutrition S.A.                       Gland                                  97.00
Dr. Bommeli AG                                                                   Koniz                                 100.00
Multilan AG                                                                      Pfaffikon                              99.89
Organon (International) AG                                                       Pfaffikon                              99.95
Organon AG                                                                       Pfaffikon                              99.00
Sinova AG                                                                        Pfaffikon                              71.67
Veterinaria AG                                                                   Zurich                                100.00

Taiwan
Akzo Nobel Chang Cheng (Taiwan)  Ltd                                             Taipei                                 50.00
Eka Chemicals Corporation                                                        Taipei                                100.00
Hoechst Roussel Vet Co. Ltd                                                      Taipei                                 99.92
International Paint (Taiwan) Ltd                                                 Kaoshiung                             100.00
Organon Taiwan Ltd.                                                              Taipei                                100.00

Thailand
Akzo Nobel Coatings Ltd                                                          Nakornpathom                           95.06
Casco Adhesives Co Ltd (Thailand)                                                Patumthani                             99.97
Eka Chemicals (Thailand)  Ltd                                                    Bangkok                                73.98
Intervet (Thailand) Ltd                                                          Bangkok                                74.11
Organon (Thailand) Ltd                                                           Bangkok                                99.98

Tunisia
Soc. Tunisienne de Peintures Astral S.A.                                         Megrine Tunis                          60.00

Turkey
Akzo Nobel Boya Sanayi ve Ticaret A.S.                                           Izmir                                  75.00
Akzo Nobel Kemipol A.S.                                                          Izmir                                  51.00
Akzo Nobel Pharma Holding A.S.                                                   Istanbul                              100.00
International Coatings Pazarlama  Limited Sirketi                                Istanbul                               99.94
Intervet Veteriner Ilaclai Pazarlama ve Ticaret Ltd. Sirketi                     Istanbul                              100.00
Kapboy Kaplama Insaat Sanayi ve Ticaret AS                                       Gebze                                  79.59
Kempa Boya Ve Sinai Maddeler Pazarlama Ve Ticaret A.S.                           Izmir                                  50.59
Marshall Boya Ve Vernik Sanayii AS                                               Gebze                                  83.78
Organon Ilaclari A.S.                                                            Istanbul                              100.00
Tekyar Teknik Yardim S.A.                                                        Dilovasi                              100.00

U.S.A.
Akcros Chemicals America                                                         New Jersey                            100.00
Akzo Nobel Aerospace Coatings Inc.                                               South Carolina                        100.00
Akzo Nobel Asphalt Applications Inc.                                             Texas                                 100.00
Akzo Nobel Catalysts L.L.C.                                                      Wilmington                            100.00
Akzo Nobel Chemicals Inc. (America)                                              Delaware                              100.00
Akzo Nobel Coatings Inc.                                                         Delaware                              100.00
Akzo Nobel Finance United States Holdings LLC                                    Wilmington                            100.00
Akzo Nobel Finance United States Inc                                             Wilmington                            100.00
Akzo Nobel Functional Chemicals L.L.C.                                           Wilmington                            100.00
Akzo Nobel Holdings LLC                                                          Wilmington                            100.00
Akzo Nobel Inc.                                                                  Delaware                              100.00
Akzo Nobel Industrial Specialties Inc.                                           Greenwich                             100.00

17

LIST OF CONSOLIDATED LEGAL ENTITIES AND CORPORATIONS

Akzo Nobel Inks Corp.                                                            Delaware                              100.00
Akzo Nobel New Jersey Holdings Inc.                                              Delaware                              100.00
Akzo Nobel Non-Stick Coatings Llc                                                Des Plains                            100.00
Akzo Nobel Polymer Chemicals L.L.C.                                              Wilmington                            100.00
Akzo Nobel Properties Inc.                                                       Wilmington                            100.00
Akzo Nobel Rheology Additives Inc.                                               Delaware                              100.00
Akzo Nobel Salt America Inc                                                      Delaware                              100.00
Akzo Nobel Services Inc.                                                         Delaware                              100.00
Akzo Nobel Surface Chemistry L.L.C.                                              Wilmington                            100.00
Akzo Nobel Transportation Coatings Inc.                                          Texas                                 100.00
Casco Impregnated Papers America Co. LLC                                         Delaware                               82.00
Casco Nobel America Inc.                                                         Delaware                              100.00
Diosynth Inc.                                                                    Delaware                              100.00
Diosynth RTP Inc.                                                                Cary                                  100.00
Eka Chemicals Inc.                                                               Wilmington                            100.00
Expancel Inc.                                                                    Delaware                              100.00
Fiberco Inc.                                                                     Axis                                  100.00
Filtrol Corporation                                                              Delaware                              100.00
International Paint Inc.                                                         Kentucky                              100.00
Intervet Inc.                                                                    Delaware                              100.00
Organon Inc.                                                                     New Jersey                            100.00
Organon International Inc.                                                       Wilmington                            100.00
Organon Pharmaceuticals Inc.                                                     Wilmington                            100.00
Organon Sanofi-Synthelabo LLC                                                    Wilmington                             50.00
Organon Teknika Corporation                                                      Delaware                              100.00
Pharmacare Inc.                                                                  Wilmington                            100.00
Vetstream Inc.                                                                   Delaware                              100.00
Viking Construction Inc.                                                         Texas                                 100.00

Ukraine
Akzo Nobel Decorative Coatings (Ukraine) TzOV                                    Kiev                                  100.00


Akcros Chemicals Ltd                                                             Walton on Thames                      100.00
Akzo Nobel Aerospace Coatings Ltd                                                Leicester                             100.00
Akzo Nobel Chemicals Holdings Ltd                                                London                                100.00
Akzo Nobel Chemicals Limited                                                     London                                100.00
Akzo Nobel Coatings Ltd                                                          Abingdon                              100.00
Akzo Nobel Decorative Coatings Ltd (UK)                                          Darwen                                100.00
Akzo Nobel Holdings Ltd                                                          London                                100.00
Akzo Nobel Industrial Coatings Ltd (UK)                                          Darwen                                100.00
Akzo Nobel Investments Finance Limited                                           London                                100.00
Akzo Nobel Investments Ltd                                                       London                                100.00
Akzo Nobel Limited                                                               London                                100.00
Akzo Nobel Nippon Paint Ltd                                                      London                                 75.00
Akzo Nobel Overseas Limited                                                      London                                100.00
Akzo Nobel Powder Coatings Ltd. (UK)                                             Darwen                                100.00
Akzo Nobel Properties Ltd                                                        Darwen                                100.00
Akzo Nobel Services Limited                                                      London                                100.00
Akzo Nobel Surface Chemistry Ltd.                                                St. Albans                            100.00
Akzo Nobel UK Ltd                                                                London                                100.00
Cloudburst II Limited                                                            London                                100.00
Crina (UK) Ltd                                                                   St Albans                              97.00
Crown Berger Ltd                                                                 Darwen                                100.00
Diosynth Ltd                                                                     Cambridge                             100.00

18

LIST OF CONSOLIDATED LEGAL ENTITIES AND CORPORATIONS

Eighteen Hanover Square Limited                                                  London                                100.00
Eka Chemicals (AC) Ltd                                                           Somerset                              100.00
Eka Chemicals Ltd                                                                Weston Super Mare                     100.00
Fitbranch Limited                                                                London                                100.00
International Coatings Limited                                                   London                                100.00
International Paints (Exports) Limited                                           London                                100.00
International Paints (Holdings) Limited                                          London                                100.00
Intervet UK Ltd                                                                  Milton Keynes                         100.00
Intervet UK Production Ltd                                                       Milton Keynes                         100.00
Launchexport Limited                                                             London                                100.00
Ned-Int Holdings Ltd                                                             London                                100.00
Nourypharma Ltd                                                                  Cambridge                             100.00
Organon Laboratories Ltd                                                         Cambridge                             100.00
Poultry Biologicals Ltd                                                          Milton Keynes                         100.00
Resinous Chemicals Ltd                                                           Tyne and Wear                         100.00
Vetstream Ltd                                                                    Cambridge                             100.00

Uruguay
Intervet Uruguay SA                                                              Montevideo                            100.00
Organon Latin America S.A.                                                       Montevideo                            100.00

Venezuela
Eka Chemicals de Venezuela Ca                                                    Caracas                               100.00
Organon Venezolana S.A.                                                          Caracas                               100.00

Vietnam
Akzo Nobel Chang Cheng (Vietnam) Ltd                                             Dong Nai                               50.00
Akzo Nobel Coatings Vietnam Limited                                              Ho Chi Minh City                      100.00

19

LIST OF NONCONSOLIDATED LEGAL ENTITIES AND CORPORATIONS PRESENTED
IN CONFORMITY WITH SECTION 379, BOOK 2 OF THE NETHERLANDS CIVIL CODE

Belgium
Flexsys Coordination Centre N.V.                                      St. Stevens Woluwe              50.00
Flexsys NV                                                            St. Stevens Woluwe              50.00
Zoutbedrijf van Damme N.V.                                            Kalken                          28.86

Brazil
Fabrica Carioca de Catalisadores SA                                   Santa Cruz                      40.00
Flexsys Industria E Comercio Ltda                                     Sao Paolo                       50.00

China
Hangzhou Sino-French Chemical Company Limited                         Hangzhou                        25.00
Herberts-Akzo-Red Lion Automotive Coatings Corp. Ltd.                 Beijing                         25.00
Jinwu Eka Resin Co. Ltd                                               Long-Xu                         30.00

Denmark
Maricogen Komplementarselskab Aps                                     Mariager                        50.00
Maricogen P/S                                                         Mariager                        50.00

Egypt
South Egypt Drug Industries Co. (Sedico)                              Giza                            22.24

Finland
Eka Polymer Latex Oy                                                  Oulu                            50.00

France
Decorative Ouest SA                                                   Angers                          34.69
Eurecat SA                                                            La Voulte sur Rhone             50.00
Flexsys Sarl                                                          Sete                            50.00
Petroval S.A.                                                         Les 3 Pierres                   30.00

Germany
Akzo-Pq Silica GmbH & Co (Ohg)                                        Duren                           50.00
Akzo-Pq Silica Verwaltungs-GmbH                                       Duren                           50.00
Flexsys Distribution GmbH                                             Duren                           50.00
Flexsys Verkauf GmbH                                                  Hannover                        49.94
Flexsys Verwaltigungs und Beteiligungs GmbH                           Nienburg                        50.00
Industriepark Nienburg GmbH                                           Nienburg                        50.00
Perla Greek Salt Commercial Industrial L.L.C.                         Piraeus                         50.00

Hungary
Budafestek-Karolina Ltd                                               Budapest                        34.00

Italy
Eco-Rigen Srl                                                         Gela                            35.00
Flexsys S.P.A.                                                        Milano                          50.00
Rigel Srl                                                             Milan                           50.00

                                                                              20

       LIST OF NONCONSOLIDATED LEGAL ENTITIES AND CORPORATIONS PRESENTED
       -----------------------------------------------------------------
      IN CONFORMITY WITH SECTION 379, BOOK 2 OF THE NETHERLANDS CIVIL CODE
      --------------------------------------------------------------------

Japan
Denak K.K.                                                            Tokyo                           50.00
Flexsys K.K.                                                          Tokyo                           50.00

Japan Tygaflor Ltd                                                    Tokyo                           40.00
Kayaku Akzo Corporation Ltd                                           Tokyo                           50.00
Ketjen Black International Company Ltd                                Tokyo                           33.30
Kyushu Mitaka K.K.                                                    Kyusyu                          50.00
Lion Akzo Company Ltd                                                 Tokyo                           50.00
Mitaka Pharmaceutical Co. Ltd                                         Tokyo                           50.00
Nippon Ketjen Company Ltd                                             Tokyo                           50.00

Kuwait
International Warba Coatings WLL                                      Kuwait                          49.00

Malaysia
Flexsys Chemicals (M) Sdn Bhd                                         Selangor                        50.00

Netherlands
Acordis B.V.                                                          Arnhem                          23.87
Corval B.V.                                                           Sittard                         32.00
Delamine BV                                                           Delfzijl                        50.00
Delesto BV                                                            Delfzijl                        50.00
EasySwim b.v.                                                         Nunspeet                        25.00
Eijkelkamp Beheer B.V.                                                Goor                            24.00
Flexsys BV                                                            Deventer                        50.00
Flexsys Holding BV                                                    Deventer                        50.00
G. Kox en Zoon B.V.                                                   Wormerveer                      19.35
Kemax B.V.                                                            Delfzijl                        50.00
Methaholding V.O.F.                                                   Haren                           50.00
Methanor V.O.F.                                                       Haren                           30.00
Salinco V.O.F.                                                        Hengelo                         50.00
Servant International Trading B.V.                                    Breda                           39.06
Solar Dew bv                                                          Breda                           40.00
Verfgroothandel Limburg B.V.                                          Sittard                         32.00
Verfindustrie Jacq. Eyck B.V.                                         Heerlen                         32.00
Warmte/Kracht Centrale Akzo Nobel Center V.O.F.                       Arnhem                          50.00

Saudi Arabia
International Paint Saudi Arabia Ltd                                  Dammam                          49.00

Singapore
Flexsys Pte Ltd                                                       Singapore                       50.00

Spain
Flexsys Rubber Chemicals Srl                                          Barcelona                       50.00


Etenforsorning Stenungsund AB                                         Stenungsund                     20.00
Maintech i Stenungsund AB                                             Stenungsund                     50.00
Svensk Etanolkemi AB                                                  Ornskoldsvik                    50.00

                                                                              21

       LIST OF NONCONSOLIDATED LEGAL ENTITIES AND CORPORATIONS PRESENTED
       -----------------------------------------------------------------
      IN CONFORMITY WITH SECTION 379, BOOK 2 OF THE NETHERLANDS CIVIL CODE
      --------------------------------------------------------------------

Switzerland
Flexsys AG                                                            Zug                             49.87

Thailand
Akzo Nobel Coatings Trading Ltd                                       Nakornpathom                    46.96
Bangrak Marketing Co. Ltd                                             Bangkok                         49.32
Siam Paper Chemicals Ltd.                                             Bangkok                         48.99
Synthese (Thailand) Co Ltd                                            Bangkok                         41.82

Turkey
Dyo Printing Inks A.S.                                                Izmir                           43.50
Enfalt Emulsiyon Ve Asfalt Tesisleris AS                              Ankara                          40.00

U.S.A.
Collision Repair Business Management Services Llc                     Delaware                        49.00
Eurecat U.S. Inc.                                                     New Jersey                      57.50
Flexsys America Co.                                                   Akron, Ohio                     50.00
Flexsys America Lp                                                    Akron                           50.00

United Arab Emirates
International Paint (Gulf) Llc                                        Dubai                           49.00

United Kingdom
Flexsys Rubber Chemicals Ltd                                          Gillingham                      50.00
Reebor Ltd                                                            Darwen                          50.00
The Particol Partnership                                              Weston super Mare               50.00

Western Samoa
Samoa Paints Ltd                                                      Apia                            52.00


Exhibit 10a CONSENT OF INDEPENDENT AUDITOR

To the Board of Management of Akzo Nobel N.V.:

We consent to incorporation by reference in the Registration Statement on Form S-8 (File Nos. 033-36808, 333-06194 and 333-13280) of Akzo Nobel N.V. of our report dated February 10, 2003, relating to the consolidated balance sheets of Akzo Nobel N.V.and subsidiaries as of December 31, 2002 and 2001, and the related consolidated statements of income, and cash flows for each of the years in the three-year period ended December 31, 2002, and the related financial statement schedule, which report appears in the December 31, 2002 Annual Report on Form 20-F of Akzo Nobel N.V.

18 April, 2003

Arnhem, the Netherlands KPMG Accountants N.V.

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