SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 20-F
(Mark one)
(  )REGISTRATION STATEMENT PURSUANT TO SECTION 12 (b) OR (g) OF THE SECURITIES
    EXCHANGE ACT OF 1934
    or
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
    For the fiscal year ended December 31, 2002
    or
(  )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
    Commission file number 0-17444

                                AKZO NOBEL N.V.
            (Exact name of registrant as specified in its charter)

                                THE NETHERLANDS
                (Jurisdiction of incorporation or organization)

                         76 VELPERWEG, 6824 BM  ARNHEM
                   (Address of principal executive offices)


  Securities registered or to be registered pursuant to Section 12 (b) of the
                                     Act:
  Title of each class             Name of each exchange on which registered
  --------------------            -----------------------------------------
  AMERICAN DEPOSITARY SHARES                    NASDAQ/NMS
  COMMON SHARES OF EUR 2 EACH                   NASDAQ/NMS*

  * Not for trading, but only in connection with the registration of American
                              Depositary Shares,
    pursuant to the requirements of the Securities and Exchange Commission

  Securities registered or to be registered pursuant to Section 12 (g) of the
                                   Act: NONE

Securities for which there is a reporting obligation pursuant to Section 15 (d)
                               of the Act: NONE

 Indicate the number of outstanding shares of each of the issuer's classes of
 capital or common shares as of the close of the period covered by the annual
                                    report:

              COMMON SHARES, PAR VALUE EUR 2 PER SHARE 286,147,260
              PRIORITY SHARES, PAR VALUE EUR 400 PER SHARE 48

    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
   1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
                   filing requirements for the past 90 days.
                               Yes X      No {box}

   Indicate by check mark which financial statement item the registrant has
                              elected to follow.
                          Item 17 {box}          Item 18  X


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                                                                               1

                                Akzo Nobel N.V.
                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                    Page
<S>      <C>                                                                          <C>
PART I
        Introduction                                                                   3
Item 1  Identity of directors, senior management and advisors                          4
Item 2  Offer statistics and expected timetable                                        4
Item 3  Key information                                                                4
Item 4  Information on the company                                                    14
Item 5  Operating and financial review and prospects                                  54
Item 6  Directors, senior management and employees                                    77
Item 7  Major shareholders and related party transactions                             86
Item 8  Financial information                                                         87
Item 9  The offer and listing                                                         90
Item 10 Additional information                                                        91
Item 11 Quantitative and qualitative disclosure about market risk                     97
Item 12 Description of securities other than equity securities                        99

PART II
Item 13 Defaults, dividend arreages and delinquencies                                 99
Item 14 Material modifications to the rights of security holders and use of proceeds
                                                                                      99
Item 15 Disclosure Controls and Procedures                                            99
Item 16 Reserved                                                                      99

PART III
Item 17 Financial statements                                                          99
Item 18 Financial statements                                                         100
Item 19 Exhibits                                                                     145

        Signatures and Certifications                                                146



</TABLE>

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2

<PAGE>

                                                                               3


                                    PART I

INTRODUCTION

The consolidated financial statements of Akzo Nobel N.V. and subsidiaries
appearing in this annual report are prepared in accordance with accounting
principles generally accepted in the Netherlands ("NL GAAP"). NL GAAP differ in
certain respects from accounting principles generally accepted in the United
States ("US GAAP"). The significant differences between NL GAAP and US GAAP
affecting Akzo Nobel's net income and shareholder's equity are discussed in
Note 21 of the Notes to the Consolidated Financial Statements of Akzo Nobel.

The terms "Akzo Nobel" or "the Company" are sometimes used herein for
convenience in contexts where reference is made to the consolidated companies
of Akzo Nobel N.V. in general. Such terms are also used for convenience in
referring to individual groups and subsidiaries.

In this annual report, unless otherwise specified or the context otherwise
requires, references to "dollars", "U.S. dollars" and "USD" are to the United
States currency. For convenience only (except where noted otherwise), certain
euro figures have been translated into dollars at the rate of EUR 0.955 =
USD 1.00, the noon buying rate in The City of New York for cable transfers in
foreign currencies as announced by the Federal Reserve Bank of New York for
customs purposes (the "Noon Buying Rate") on December 31, 2002. These
translations should not be construed as a representation that the euro amounts
actually represent such dollar amounts or could be converted into dollars at
the rate indicated. On April 17, 2003, the Noon Buying Rate was EUR 0.9156 =
USD 1.00.

In order to utilize the "Safe Harbor" provisions of the United States Private
Securities Litigation Reform Act of 1995, Akzo Nobel is providing the following
cautionary statement. This document contains certain forward-looking statements
with respect to the financial condition, results of operations and business of
Akzo Nobel and certain of the plans and objectives of Akzo Nobel with respect
to these items. These statements may generally, but not always, be identified
by the use of words such as "anticipate", "assume", "intend", "plan",
"project", "should", "expect", "estimate", "believe" or similar expressions. In
particular, among other statements, certain statements in Item 4 "Information
on the Company" with regard to strategy, management objectives, including
return on investment targets, market trends, market standing, market share
estimates based on management's estimates, the product volumes, (future
spending on) environmental compliance or remediation, Health, Safety and
Environment targets, and the Pharma pipeline, and the statements in Item 8
"Financial Information" with regard to the outcome of disputes with tax
authorities, pending or future legal or regulatory proceedings, including the
antitrust investigations and other potential related lawsuits and their effect
on the Company and those in Item 5 "Operating and Financial Review and
Prospects" with regard to trends in results of operations, margins, overall
market trends, risk management, exchange rates and objectives such as return on
capital are forward-looking in nature as are all statements under "Forward
looking statement on 2003" and Item 11 "Quantitative and Qualitative
Disclosures about Market Risk".

By their nature, forward-looking statements involve risk and uncertainty
because they relate to events and depend on circumstances that will occur in
the future. There are a number of factors that could cause actual results and
developments to differ materially from those expressed or implied by these
forward looking statements. These factors include, but are not limited to,
levels of business spending in major economies (as well as other developments
in the economies of the


<PAGE>
4


Company's markets in Asia, Latin America, North America and Western Europe),
the development in market value of pension plan assets, governmental
regulations, changes in customer needs, the levels of marketing expenditures by
Akzo Nobel and its competitors, the introduction of new products by
competitors, raw materials and employee costs, future foreign exchange and
interest rates, changes in tax rates and product regulation, future business
combinations, acquisitions or dispositions, environmental liabilities, and the
outcome of tax disputes, antitrust investigations and potential product
liability claims and other lawsuits, and wars and acts of terrorism or
sabotage.

Statements made in Item 4 "Information on the Company", referring to Akzo
Nobel's competitive position are based on the Company's belief, and in some
cases rely on a range of sources, including analyst's reports, independent
market studies and Akzo Nobel's internal assessment of market share based on
publicly available information about the financial results and performance of
market participants unless otherwise noted. Such references to the Company's
positioning generally refer to its market share based on sales.

Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable.

Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

Item 3. KEY INFORMATION

A. SELECTED CONSOLIDATED FINANCIAL INFORMATION

The selected financial data set forth on the following pages are derived from
previously published financial information of Akzo Nobel, including the
consolidated financial statements, which appear elsewhere in this annual report
and which have been translated into euros using the exchange rate fixed for
Netherlands guilders and the euro on January 1, 1999. The selected financial
data should be read in conjunction with, and are qualified in their entirety by
reference to, such financial statements, including the notes thereto.

The audited consolidated financial statements of Akzo Nobel as of and for each
of the five years in the period ended December 31, 2002, have been audited by
KPMG Accountants N.V., independent auditors. Reference is made to Note 21 of
the Notes to the Consolidated Financial Statements regarding differences
between NL GAAP and US GAAP that affected Akzo Nobel's net income and
shareholders' equity.


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                                                                               5
<TABLE>
<CAPTION>

<S>                                                                      <C>     <C>     <C>     <C>      <C>     <C>
----------------------------------------------------------------------------------------------------------------------
                                                              Selected financial data for the years ended December 31,
In millions, except per share amounts                                    2002   2002    2001    2000     1999     1998
----------------------------------------------------------------------------------------------------------------------
                                                                       USD(a)    EUR     EUR     EUR      EUR      EUR
Consolidated Income data:
Amounts in accordance with NL GAAP:*

Net sales                                                             14,662  14,002  14,110  14,003   14,432   12,482

Operating income before nonrecurring items (b)                         1,562   1,492   1,571   1,641    1,238    1,147

Operating income, after nonrecurring items (b)                         1,426   1,362   1,122   1,557    1,197      982

Income before nonrecurring and extraordinary items, less income taxes    971     927     966     999      722      677

Extraordinary items less income taxes (c)                                (77)    (74)   (259)     (9)    (508)    (129)

Net income after nonrecurring and extraordinary items                    857     818     671     947      189      532

Basic earnings per share / ADS (d)                                      3.00    2.86    2.35    3.31     0.66     1.86

Amounts in accordance with US GAAP (e):

Net income / (loss)                                                      901     860     448     745     (627)     391

Basic earnings / (loss) per share / ADS (d)                             3.15    3.01    1.57    2.61    (2.20)    1.37

Diluted earnings / (loss) per share / ADS (d)                           3.14    3.00    1.56    2.60    (2.20)    1.37

Consolidated Balance Sheet data:

Amounts in accordance with NL GAAP*:
Total assets                                                          13,392  12,789  12,925  12,707   12,643   12,528

Long-term borrowings                                                   2,160   2,063   1,941   2,137    2,459    2,490

Shareholders' equity                                                   2,197   2,098   2,878   2,694    2,082    2,101

Shareholders' equity in accordance with US GAAP:                       5,712   5,455   6,362   6,368    5,987    6,254
----------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) - (e): see accompanying notes on next page

* Prior years have been restated for changes in accounting principles.
  Reference is made to "Item 5. Operating and Financial Review and Prospects -
  Changes in Accounting Principles".


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6



(a)  Amounts in this column have been translated solely for the convenience of
     the reader at the Noon Buying Rate on December 31, 2002, of EUR 0.955 =
     USD 1.00.

(b)  Nonrecurring items relate to income and expenses resulting from normal
     business operations, which, because of their size or nature, are disclosed
     separately to give a better understanding of the underlying result for the
     period. These include items such as restructuring and impairment charges,
     and significant gains and losses on the disposal of businesses, not
     meeting the requirements for extraordinary items.

(c)  The extraordinary items for NL GAAP would not be considered extraordinary
     under US GAAP. The pre-tax effect of such items would have been included
     as part of operating income for US GAAP.

(d)  American Depositary Shares.

(e)  Earnings per share amounts under US GAAP are calculated after deducting
     priority and preferred dividends from earnings.

The table below sets forth the number of common shares outstanding and the
amounts of interim, final and total dividends declared (and the U.S.-dollar
equivalents) on the common shares in respect of the fiscal years indicated.
<TABLE>
<CAPTION>

<S>             <C>            <C>        <C>     <C>    <C>      <C>     <C>   <C>
------------------------------------------------------------------------------------

                Number of shares           Dividends per common share
Year ended                                       EUR                    USD*
December 31,   Average   End of period  Interim  Final  Total  Interim  Final  Total
------------------------------------------------------------------------------------
1998        285,296,603    285,320,200     0.30   0.68   0.98     0.34   0.79   1.14
1999        285,441,344    285,885,524     0.30   0.70   1.00     0.30   0.70   1.00
2000        285,902,574    285,937,700     0.30   0.90   1.20     0.28   0.84   1.11
2001        285,888,385    285,854,813     0.30   0.90   1.20     0.26   0.79   1.06
2002        285,827,092    285,691,957     0.30   0.90   1.20     0.32   0.94   1.26
------------------------------------------------------------------------------------
</TABLE>

* Dividends per common share in U.S. dollars are based on the Noon Buying Rate
  at December 31 of each year.

The following table sets forth for the fiscal periods indicated the average
exchange rates for U.S. dollars into euros per dollar based on the applicable
Noon Buying Rate. The 1998 figure has been converted into euros using the fixed
conversion rate, which became effective on January 1, 1999 (EUR 1 = NLG
2.20371).
<TABLE>
<CAPTION>

<S>                                 <C>
------------------------------------------
Year ended                      Average*
December 31,
------------------------------------------
1998                                0.90
1999                                0.94
2000                                1.08
2001                                1.14
2002                                0.96
------------------------------------------
</TABLE>

* The average of the Noon Buying Rates on the last day of each month during the
period.


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                                                                               7


The following table sets forth for the months indicated the high and low rates
for U.S. dollars expressed in euros per dollar.
<TABLE>
<CAPTION>
---------------------------------------------
<S>                      <C>              <C>
                        High             Low


October 2002             1.03            1.01
November 2002            1.08            0.98
December 2002            1.01            0.95
January 2003             0.97            0.92
February 2003            0.94            0.91
March 2003               0.95            0.90
---------------------------------------------
</TABLE>

On April 17, 2003, the noon buying Rate was EUR 0.9156 = USD 1.00.

As dividends, if any, will be paid in euros, exchange rate fluctuations may
affect the USD amounts received by holders of ADS's upon conversion by the
depositary of such dividends.

B. CAPITALIZATION AND INDEBTEDNESS

Not applicable.

C. REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

D. RISK FACTORS

This section describes some of the risks that could affect the Company's
business. The factors below should be considered in connection with any
forward-looking statements in the Company's Annual Report on Form 20-F and the
cautionary statements contained in the introduction on pages 3 and 4. Forward
looking statements can be identified generally as those containing words such
as "anticipate", "assume", "intend", "plan", "project", "should", "expect",
"estimate", "believe", and words and terms of similar substance in connection
with any discussion of future operating or financial performance.

The risks below are not the only ones that Akzo Nobel faces. Some risks are not
yet known to Akzo Nobel and some that Akzo Nobel does not currently believe to
be material could later turn out to be material. All of these risks could
materially affect Akzo Nobel's businesses, revenues, operating income, net
income, net assets and liquidity and capital resources.

The factors that could cause actual results to differ materially include the
following:

The Company may face intense competition from new products and from lower-cost
generic products.

The Company's products that are under patent protection face competition from
competitors' proprietary products. This competition may increase as new
products enter the market. The Company faces increasing competition from lower-
cost generic products after patents on its products expire. Loss of patent
protection typically leads to loss of sales in the product's markets and could
affect the Company's future results.


<PAGE>
8


In 2002, the Company lost an important court case on its major product
Remeron(R) in the United States. This will lead to increased
competition in the United States from generic pharmaceutical companies who will
produce and distribute generic versions of this product. U.S. revenues from
Remeron(R) accounted for approximately 11 percent of revenues from Akzo Nobel's
Pharma business in the financial year 2002.

As new products enter the market, the Company's products may become obsolete or
competitors' products may be more effective or more effectively marketed and
sold than its own products. If Akzo Nobel fails to maintain its competitive
position, this could have a material adverse effect on its business and results
of operations.

The Company's research and development efforts may not succeed or its
competitors may develop more effective or successful products.

In order to remain competitive, the Company must commit substantial resources
each year to research and development through its dedicated resources as well
as through various collaborations with third parties. Ongoing investments in
new product launches and research and development for future products could
produce higher costs without a proportional increase in revenues. Especially in
the Pharma businesses, the research and development process can take from six
to fourteen years, from discovery to commercial product launch. This process is
conducted in various stages, and during each stage there is a substantial risk
that the Company will not achieve its goals and accordingly may abandon a
product for which it has spent substantial amounts. In this context it should
be noted that the 2001 report prepared for the European Commission, entitled
"Global Competitiveness in Pharmaceuticals, a European Perspective," concluded
that European pharmaceutical companies have not only been losing
competitiveness to their U.S. peers, but also that this trend has intensified.
Unlike the U.S.-based multinationals, the European pharmaceutical companies
still lack the background and leverage of a single domestic (European) market.
The report also concluded that Europe has been less effective than the United
States in encouraging growth of new technology suppliers and innovation
specialists in such fields as combinatorial chemistry, genomics, and high-
throughput screening.

If the Company fails to continue developing commercially successful products,
this could have a material adverse effect on the Company's business and results
of operations. If its competitors develop more effective products or a greater
number of successful new products, or if the competitive position of its
European operations changes in a negative way, this could also have a material
adverse effect on the Company's business and results of operations. So far, the
introduction of two new FDA-approved Organon products, Arixtra(R) and
NuvaRing(R), in the US market have taken off slower than expected.
It can also be the case that due to unwanted side effects of pharmaceutical
products, in particular, which appear at a later stage after introduction of a
product, the Company may decide or may be forced to withdraw a certain product
from the market. This also could have a material adverse affect on its business
and results of operation.

Product regulation may adversely affect the Company's ability to bring new
products to market.

The Company and its competitors are subject to strict government controls on
the development, manufacture, labeling, distribution and marketing of products.
The Company must obtain and maintain regulatory approval for its pharmaceutical
and other products from regulatory agencies before certain products may be sold
in a particular jurisdiction. The submission of an application to a regulatory
authority does not guarantee that a license to market the product will be
granted. Each authority may impose its own requirements and delay or refuse to
grant approval, even though a product has been approved by another country. In
the Company's principal markets, the approval process for a new product is
complex, lengthy


<PAGE>
                                                                               9


and expensive. For pharmaceutical products, the time taken to obtain approval
varies by country but generally takes from eight months to several years from
the date of application. Regulatory delays, the inability to complete clinical
trials successfully, claims and concerns about safety and efficacy, new
discoveries, patents and products of competitors and related patent disputes
and claims about adverse side effects are only a few of the factors that could
adversely affect the realization of product registration. This increases the
Company's cost in developing new products and increases the risk that it will
not succeed in selling them successfully. In this respect, the Company's
planned introduction of the new CNS product Variza(TM) (gepirone ER) was
delayed as it did not yet receive FDA approval.
In light of the current uncertainties in the Hormone replacement therapy (HRT)
area, a delay of the FDA filing of Xyvion(TM) into 2006 is to be expected.

Akzo Nobel's business will continue to expose it to risks of environmental
liabilities

The Company uses hazardous materials, chemicals, viruses and toxic compounds in
its product development programs and manufacturing processes, which have
exposed it, and in the future could expose it, to risks of accidental
contamination and events of noncompliance with environmental laws and
regulatory enforcement, and personal injury and property damage claims
resulting therefrom. If an accident occurred or if the Company were to discover
contamination caused by prior operations, it could be liable for cleanup
obligations, damages or fines, which could have an adverse effect on its
business and results of operations.

The environmental laws of many jurisdictions impose actual and potential
obligations on the Company to remediate contaminated sites. These obligations
may relate to sites:

- that the Company currently owns or operates;
- that the Company formerly owned or operated; or
- where waste from the Company's operations was disposed.

These environmental remediation obligations could significantly reduce the
Company's operating results. In particular, the provisions and accruals for
these obligations may be insufficient if the assumptions underlying the
accruals prove incorrect or if the Company is held responsible for additional,
currently undiscovered contamination.

Stricter environmental, safety and health laws and enforcement policies could
result in substantial costs and increase potential liabilities of the Company,
and could subject the Company's handling, manufacture, use, reuse or disposal
of substances or pollutants to more rigorous scrutiny than is currently the
case. Consequently, compliance with these laws could result in significant
capital expenditures as well as other costs and liabilities, thereby harming
Akzo Nobel's business and operating results.

The Company will be responsible for any liabilities arising out of antitrust
litigation.

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 certain 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 had
a provision and accrual at December 31, 2002, amounting to EUR 102 million
(2001: EUR 111 million).


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10


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, these 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.

The outcome of tax disputes, litigation and regulatory action could adversely
affect Akzo Nobel's business and results of operations.

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 pursue further any actions and to withdraw all pending cases
based on infringement of the above reference patent against the generic drug
manufacturers.

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 the Company is contesting. 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.

Risks in production processes can adversely affect the Company's results of
operations.

Certain chemical production processes are hazardous, and natural disasters,
operator error or other occurrences could result in explosions, fires, or
equipment failure, which could result in injury or death, or damage to property
or the environment. Losses and liabilities arising from such events, in so far
as not covered by insurance, would significantly reduce the Company's revenues
or increase costs and could have a material adverse effect on its operations or
financial condition.


<PAGE>
                                                                              11


Inability to access raw materials, growth in cost and expenses for raw
materials, petroleum and natural gas and changes in product mix may adversely
influence the future results of the Company.

Important raw materials or auxiliary materials for the Company's production
processes are salt, petroleum and petroleum derivatives, natural gas, titanium
dioxide and electricity. Some of these components are available only from a
small source of suppliers. The Company cannot assure that it will be able to
establish or maintain good relationships with such suppliers or that such
suppliers will continue to exist or be able to supply ingredients in conformity
with regulatory requirements. In addition, growth in the costs and expenses of
these components resulting from a shortage or a change in Akzo Nobel's product
mix may adversely influence the Company's business and financial results. Akzo
Nobel is sensitive to price movements in raw materials. In particular, energy
prices pose a risk, presently aggravated by the armed conflict in the Middle
East.

Seasonality may adversely affect the operating results of the Company's
Coatings business.

A portion of the Company's Coatings business is seasonal, with sales and
earnings being relatively higher during the outdoor season and lower during the
indoor season. The operating results may be harmed if bad weather delays the
outdoor season in the major markets in which the Company operates and the
Company is not able to offset during the corresponding financial year the lag
in earnings resulting from such delay.

A failure to manage expansion effectively could adversely affect the Company's
business.

Management of the Company's growth, as well as the commencement of commercial
manufacturing and marketing of the Company's forthcoming products, will require
continued expansion of the Company's systems and internal controls and an
increase in the Company's manufacturing, marketing and sales operations. In
addition, the Company intends to continue to add new personnel. Any failure to
manage growth effectively and integrate new personnel on a timely basis could
adversely affect the Company's business.

Akzo Nobel may not be able to identify future acquisitions or may not be
successful in integrating acquired businesses.

As part of its business strategy, the Company periodically reviews acquisition
prospects and strategic alliances that it expects to complement its existing
businesses or increase its revenues. The Company does not know if it will be
able to identify any future acquisitions, joint ventures or alliances. A
failure to identify future transactions may impair the Company's future growth.

If the Company is unable to retain key personnel or attract new personnel, it
could have an adverse effect on the Company's business.

The Company's future operating results depend in part upon its ability to
attract and retain qualified management, scientific, technical, marketing, and
support personnel. Competition for such personnel is intense, and there can be
no assurance that the Company will be able to continue to attract and retain
such personnel.

Regulations which limit the prices we may charge for our products can reduce
the Company's revenues and adversely affect its business and results of
operations.


<PAGE>
12


In addition to normal price competition in the marketplace, the prices of Akzo
Nobel's pharmaceutical products are restricted by price controls imposed by
governments and health care providers in most countries. Price controls operate
differently in different countries and can cause wide variations in prices
between markets. Currency fluctuations can aggravate these differences. The
existence of price controls can limit the revenues Akzo Nobel earns from its
products and may have an adverse effect on its business and results of
operations.

About half of the Company's earnings are derived from the healthcare markets.
In many of these countries the prices for our products are regulated. In the
United States, Medicare reform could result in de facto price controls on
prescription drugs. In Europe, the Company's operations are also subject to
price and market regulations. Many governments are introducing healthcare
reforms in an attempt to curb increasing healthcare costs. In Japan, where Akzo
Nobel also operates, governmental price cut rounds are introduced biannually.
In response to rising healthcare costs, many governments and private medical
care providers, such as HMOs, have instituted reimbursement schemes that favor
the substitution of generic pharmaceuticals for more expensive brand-name
pharmaceuticals. In the United States, generic substitution statutes have been
enacted by virtually all states and permit or require the dispensing pharmacist
to substitute a less expensive generic drug instead of the original brand-name
drug. As a result, the Company expects pressures on its pricing and operating
results to continue.

Bad publicity and damage to the Company's brands could adversely affect its
business and results of operations.

The reputation of the Company's brands is critical to its business. The success
in promoting and enhancing its brands is dependent on providing safe high-
quality products, particularly in the pharma business. If it fails to
successfully promote its brands, or if it receives bad publicity as a result of
a product liability case or publicized health or other risks associated with
its products, the value of the Company's brands will be diminished. This could
have a material and adverse effect on the business and results of operations.

Product liability claims could adversely affect Akzo Nobel's business and
results of operations.

Given the widespread impact that brand-name drugs have on the health of patient
populations, pharmaceutical and medical devices companies have historically
been subject to large product-liability claims and settlements caused by the
use of their products. The Company also runs the risk of product liability
claims from its Coatings and Chemicals products. The Company is currently
involved in a number of product liability cases claiming damages as a result of
its products. It believes that any reasonably foreseeable unaccrued costs and
liabilities associated with such matters will not have a material adverse
effect on the Company's consolidated financial position but could be materially
adverse to its results of operations. There can, however, be no assurance that
a future product liability claim or series of claims that are not fully covered
by insurance would not have an adverse effect on the Company's business or
results of operations.

Exchange rate fluctuations can have a harmful impact on the Company's financial
results.

The Company has operations in more than 80 countries throughout the world. As a
result, a substantial portion of its assets, liabilities, revenues and expenses
are denominated in various currencies other than the euro, principally the U.S.
dollar, the British pound, the Swedish krona, the Japanese yen, and Latin
American and Asian currencies. Because the Company's financial statements are
denominated in euro, fluctuations in currency exchange rates could have a
material impact on its reported results.



<PAGE>
                                                                              13


The Company's financial condition and results of operations could be adversely
affected if the Company does not successfully mitigate risks associated with
interest rate changes.

A substantial portion of the Company's investments, loans and borrowings bear
interest on a non-fixed basis. Accordingly, changes in interest rates can
affect the cost of these interest-bearing investments, loans and borrowings.
The Company mitigates interest risk by financing noncurrent assets and a
certain portion of current assets with equity, long-term liabilities and long-
term borrowings with fixed interest rates. In the event that this strategy is
not successful, the business, financial condition and operating results of the
Company could be materially and adversely affected as a result of changes in
interest rates.

Adverse stock market developments may affect assets of pension funds, causing
higher pension charges and pension premiums payable.

The Company has a number of defined benefit pension plans, covering the
majority of its employees. Plan assets principally consist of long-term
interest-earning investments, quoted equity securities, and real estate. The
performance of stock markets could have a material impact on the Company's
financial statements as some 40 percent of plan assets are equity securities.
The poor performance of the stock markets in 2001 and 2002 had a negative
influence on the investment results of Akzo Nobel's pension funds, resulting in
additional pension charges, pension premiums and payments to such funds. The
pension charges in 2002 were EUR 80 million higher than in 2001, while pension
charges for 2003 will be EUR 130 million higher than in 2002. Furthermore, the
Company recognized an additional minimum unfunded pension liability of
approximately EUR 1.8 billion (pre-tax), at December 31, 2002

A downgrading by credit rating agencies could result in higher financing costs
or reduced availability of credit

At present the Company's long-term credit rating form Standard & Poor's is A-
with a short-term rating of A-2. The current long-term credit rating from
Moody's is A3 and their short-term rating is P-2. All ratings mentioned have a
so-called "negative outlook" to them.
The present rating is 3 notches above the so-called high-yield zone. However,
if the Company's rating, due to whatever circumstances would approach or enter
the high-yield zone, this will not only result in increased financing cost for
the Company, but could also reduce availability of credit, especially at
commercially acceptable rates.

A security rating is not a recommendation to buy, sell or hold securities. The
rating may be subject to revision or withdrawal at any time by the rating
organization. Each rating should be valued independently of any other rating.

Because the Company conducts international operations, it is exposed to a
variety of risks, many of them beyond its control, that could adversely affect
its business.

Akzo Nobel is a global company with operations in Europe, North America, Latin
America, Asia, the Middle East and Africa. In addition to general business risk
and the risks described in this section, the Company's international operations
are subject to a variety of potential risks including: political and economic
instability, the risk of hyperinflation in some countries, currency and
interest-rate fluctuations, lack of local business experience, difficulty in
enforcing property rights, local security concerns, and language and other
cultural barriers. In addition, changes in the tax laws of some countries where
the Company does business can affect the Company's net income.



<PAGE>
14


Item 4. INFORMATION ON THE COMPANY

Akzo Nobel is a corporation organized under the law of the Netherlands for an
indefinite period. The principal executive offices of Akzo Nobel N.V. are
located at Velperweg 76, 6824 BM Arnhem, the Netherlands. Its telephone number
is +31 (26) 366 4433 and the fax number is +31 (26) 366 3250.
The E-mail address is ACC@akzonobel.com. Any correspondence regarding this
Annual Report on Form 20-F should be directed to the Company Secretary.

The name and address of the person authorized to receive notices and
communications from the U.S. Securities and Exchange Commission is:
  A. Jan A.J. Eijsbouts, General Counsel
  Akzo Nobel N.V.
  Velperweg 76, 6824 BM  Arnhem
  The Netherlands

  Copies to:
  Edwin D. Williamson, Esq.
  Sullivan & Cromwell LLP
  1701 Pennsylvania Avenue, N.W.
  Washington, D.C. 20006
  202-956 7505

OVERVIEW

Akzo Nobel is an international company that serves customers around the world
with healthcare products, coatings, and chemicals.

Headquartered in the Netherlands, Akzo Nobel had activities in more than 80
countries and employed 67,000 people during 2002. Sales in 2002 were EUR 14.0
billion, with Pharma, Coatings, and Chemicals accounting for EUR 4.0 billion,
EUR 5.5 billion, and EUR 4.6 billion, respectively.

In the pharmaceutical industry, Akzo Nobel is smaller than many of its
competitors, but it has significant positions in products for female
reproductive therapy and anesthesiology. Akzo Nobel believes that based on
sales it is the largest coatings producer in the world; its products and
markets vary widely from architectural paints in some countries to industrial
and automotive coatings in others. In the chemical products industry, Akzo
Nobel is a significant competitive factor in a number of markets, and on a
global basis the Company competes with a number of larger chemical companies.

Demand for Akzo Nobel's products, particularly its chemical and coatings
products, is generally reflective of the overall health of industry in Western
Europe and the United States and is, except for certain Coatings activities,
generally not seasonal in nature.

It is Akzo Nobel's objective to develop or acquire new and defend existing
leading positions in its markets, while maintaining structural long-term
profitability. In addition to its core business, the Company focuses on the
development of new and improved products in major growth sectors that draw on
the Company's technological and marketing know-how. The Company is pursuing
expansion in Eastern Europe, South-East Asia and Latin America. Where the
Company cannot achieve leading positions on its own, management may seek
acquisitions, alliances or divestments, thus striving for structural, long-term
increases in shareholder value.



<PAGE>
                                                                              15


A. HISTORY AND DEVELOPMENT OF THE COMPANY

Akzo was created in 1969, out of the merger between AKU N.V. ("AKU") and
Koninklijke Zout-Organon N.V., and in 1994 it was renamed Akzo Nobel, after the
merger with Nobel Industries AB ("Nobel").

AKU N.V. was founded in 1911 under the name of N.V. Nederlandsche
Kunstzijdefabriek. Over the years this company grew into an international
concern with interests in the field of cellulose fibers and, following the
Second World War, synthetic textile and carpet fibers as well as industrial
fibers. At the time of the 1969 merger, AKU's principal countries of operation
were the Netherlands, Germany, the United States, the United Kingdom, Spain and
several Latin American countries, where activities were often carried out
through joint ventures with local partners.

Koninklijke Zout-Organon N.V. was set up in 1967 as a holding company in
connection with the merger between Koninklijke Zout-Ketjen N.V. and
N.V. Koninklijke Zwanenberg-Organon. Koninklijke Zout-Ketjen N.V. had interests
in companies active in salt refining, basic chemicals, specialty chemicals and
coatings. While these companies were mainly active in the Netherlands, they had
built up major export positions at the time of the merger. N.V. Koninklijke
Zwanenberg-Organon consisted of companies active in food/nonfood products and
chemical products and of pharmaceutical companies producing brand-name drugs,
nonprescription products and raw materials for the pharmaceutical industry.

Nobel was formed in 1984 through the merger of Bofors (established in 1646) and
KemaNobel, founded in 1871. At the time of the merger with Akzo in 1994, Nobel
was a leading European producer of chemicals (pulp and paper chemicals and
surfactants) and coatings (paints for professional and consumer markets,
industrial coatings and industrial products). Nobel had operations in more than
30 countries.

In July 1998, Akzo Nobel acquired Courtaulds plc ("Courtaulds"), an
international chemical company with leading positions in high-tech industrial
coatings and man-made fibers. Its best known brands, International Paints,
Courtelle acrylic fibers, and Tencel(R), a new cellulosic fiber, were included
in the acquisition. Courtaulds, which was founded in 1816 as a silk weaving
company, pioneered the global man-made fiber industry at the beginning of the
20th century. In the 1960s Courtaulds acquired International Paint and Pinchin
Johnson.

In November 1999, the Company acquired Hoechst Roussel Vet ("HR Vet"), the
veterinary business of Hoechst AG. Through this acquisition, Intervet, the
veterinary business of Akzo Nobel became a significant player in the veterinary
business.

After the Courtaulds acquisition, the fibers operations of Akzo Nobel and
Courtaulds were combined into a separate organization, named Acordis. At
December 31, 1999, Acordis was sold to a newly established company. Akzo Nobel
retained a 21 percent stake in this company.

In June 2001, Covance Biotechnology Services Inc (CBSI), North Carolina was
acquired for EUR 223 million. Through this acquisition, Diosynth established
the critical mass to play a leading role in the strongly developing
biopharmaceutical market segment.

At the end of June 2001, the diagnostic business of Organon Teknika was
divested to bioMerieux for EUR 334 million. In addition, the activities of the
business unit Printing Inks were divested for EUR 75 million, effective
October 31, 2001.


<PAGE>
16


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

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.

At the end of September 2002, the liquid pharmaceuticals manufacturing business
Rosemont Pharmaceuticals Ltd in the United Kingdom was divested for EUR 102
million, and effective September 2002, Ferro's powder coatings businesses in
the Americas and Asia Pacific were acquired for EUR 70 million.

B. BUSINESS OVERVIEW

Akzo Nobel has a two-layer organization, with the Board of Management as the
highest executive authority. Operations are carried out in business units
clustered in three groups on the basis of affinity between activities: Pharma,
Coatings and Chemicals.

At the corporate level, key tasks are coordinated in the fields of strategy;
finance and control; human resources; technology; legal affairs and
intellectual property; communications; health, safety, and environment;
information management; and risk and insurance management.

STRATEGY

Akzo Nobel is a diversified multinational group of companies. We focus on
leadership positions in selected markets on the strength of our entrepreneurial
spirit and Business Principles. We consider our diversity an asset, the real
value of which lies in our organization philosophy of strongly decentralized
operating companies, combined with optimal use of our financial power, cyclical
resilience, and collective know-how. Concentrating on sustained growth, we
strengthen our market positions through a targeted investment policy,
complementary acquisitions and, if necessary, restructuring measures.

We continuously aim at striking a proper balance between overall size and the
focus on our diverse activities. We strive to maintain strong growth in Pharma,
further strengthen and expand our Coatings business-the world's largest in its
industry-and concentrate on improving Chemicals' returns and cash flow. Our
strategy is constantly being fine-tuned to optimize value creation, while a
solid balance sheet structure and sound financial ratios are maintained.

Pharma
Pharma aims to continue its pattern of primarily organic growth, based on its
strong commitment to R&D and its pipeline, which has created substantial value
over the years. In addition, growth momentum will be supported by intensively
pursuing opportunities for collaborations and product acquisitions. Our present
portfolio enables us to exploit our extensive knowledge base, capitalize on our
pipelines of innovative products, and harness critical mass in selected
markets.

Actions
Our strategy is reflected in a double-digit average annual organic growth on an
ongoing basis and an equally strong earnings gain over the last five years.
Under a scenario of a temporary slowdown, we strive to bolster growth through
new product launches-for example Arixtra(R) and NuvaRing(R)-from our pipeline.
Simultaneously, cost cutting programs to safeguard our earnings level are
implemented. Organon also moved its Executive Office to the United States, its
most important market. Organic growth and acquisitions in the last few years
have made Intervet the world's third largest supplier of veterinary products.
Diosynth


<PAGE>
                                                                              17


strengthened its position through CBSI acquired in 2001 and invested heavily in
upstream and downstream processing capacity. In 2001 and 2002, Rosemont's
generics activities in the United States and the United Kingdom were divested.

Pharma's long-term financial targets are a return on sales of around 20 percent
and return on investment of 40 percent.

Coatings
Major acquisitions in the last few years, combined with organic growth, has
lifted Coatings to the world's number one position. We aim to strengthen this
position through further organic growth and bolt-on acquisitions. Growth in
mature markets is expected to remain in line with GDP. Opportunities are in
emerging markets and in technology switches often driven by environmental
considerations. In the fragmented worldwide coatings market, we, as the world
leader, only represent 8 percent. This market is in a process of consolidation,
in which our global positions in many fields should enable us to play a leading
role.

Actions
In line with this strategy, Coatings' expansion efforts and investments in Asia
resulted in improved positions and strong growth, particularly in China. The
acquisitions of Ferro's powder coatings businesses in the Americas and Asia,
the aerospace activities of U.S. Paint, a marine and protective coatings
factory in Korea, and U.S. Paint Yacht bolstered our positions in these areas.
Major restructuring programs, including some divestments and plant closures,
and strong efforts to reduce working capital are geared to lift profitability.

Coatings' long-term financial target is to achieve a 30 percent return on
investment.

Chemicals
For Chemicals critical mass and leading positions in chosen segments are
essential in the quite fragmented chemical industry. Our strategy is based on
three cornerstones: concentrate on fewer growth areas, drive innovation, and
inspire and develop our people. Our primary efforts focus on structural
improvement of margins and cash flow through ongoing cost savings programs.
Divestments, selective acquisitions, and generating sufficient cash flow to
upgrade the portfolio are the leading principles. Growth efforts are directed
at North America and Asia.

Actions
The acquisition of the Crompton Industrial Specialties business in the United
States, Europe, and Asia and the start-up of a grassroots monochloroacetic acid
plant in China represent two important steps to support Chemicals' leading
positions in these areas. Base Chemicals strengthened its position in the German
market by increasing its participation in ECI Elektro-Chemie from 50 percent to
100 percent. In order to improve performance and cash flow, extensive
restructurings, including plant closures such as the Stade, Germany, salt plant,
are being implemented, combined with a working capital reduction program.

Chemicals is targeting a return over the business cycle of 2.5 percent over the
cost of capital, which corresponds to a return on investment of about 17
percent.


<PAGE>
18


BUSINESS UNITS

The business units and their products (as at December 31, 2002) are summarized
below:


PHARMA

Organon
- Brand-name prescription pharmaceuticals in the fields of contraceptives and
  infertility treatment, hormone replacement therapy (HRT) and osteoporosis,
  antidepressants and antipsychotics, antithrombotics and muscle relaxants.

Intervet
- Veterinary products: vaccines, antiparasitics, and antiinfectives, specialty
  products for pets and livestock, and feed additives for livestock,
  endocrinological fertility products, corticosteroids, antibiotics and
  anti-mastitis products.

Diosynth
- Complex active pharmaceutical ingredients based on chemicals and biochemical
  processes and generic medicines.

COATINGS

Decorative  Coatings
- Coatings for decoration and protection of architectural structures for
  professional uses and the do-it-yourself sector.

Industrial  Coatings*
- Liquid coatings for industrial application; aerospace coatings

Industrial  Finishes
- Coatings for industrial applications on wood and sheet metal (coil coatings)

Powder  Coatings
- Powder coatings for industrial application in architectural automotive,
  domestic appliance and other industrial markets such as coatings for pipes.

Marine & Protective  Coatings
- Antifouling and other high-performance coatings for the shipbuilding, ship
  repair and yacht markets; protective coatings and fire- retardant products for
  heavy-duty applications, such as on oilrigs.

Car  Refinishes
- Products and services for the automotive aftersales market and for commercial
  vehicles.

Industrial  Products
- Industrial adhesives, resin-impregnated paper, and expandable microspheres.

* As per January 1, 2003, the business unit Industrial Coatings has been
dissolved. Aerospace activities have been transferred to Marine & Protective
Coatings. Transportation Coatings were transferred to Car Refinishes.


<PAGE>
                                                                              19

CHEMICALS

Pulp and Paper Chemicals
- Pulp bleaching chemicals, notably sodium chlorate and hydrogen peroxide;
  wet-end paper chemicals, such as sizing and retention agents and wet strength
  resins.

Functional Chemicals
- Monochloroacetic acid and derivatives, such as carboxymethyl cellulose; methyl
  amines, choline chloride; ethylene amines; chelates; organophosphorus-based
  derivatives, notably flame-retardants for plastics and hydraulic fluids;
  carbon disulfide and thiocyanates; acid chlorides and lubrican chemicals.

Surface Chemistry
- Cationic, nonionic, and anionic surfactants for detergents, biocides, wood
  preservation, personal care, and industrial cleaners; cellulosic surfactants
  for paint and concrete; asphalt additives, viscose agents, animal feed
  additives and fatty acids.

Polymer Chemicals
- Initiators such as organic peroxides, metal alkyls, and Ziegler-Natta
  catalysts for the production of polymers, optical monomers and polymer
  additives.

Resins
- Synthetic resins for coatings and printing inks.

Catalysts
- Refinery catalysts, technology and related services; catalysts for the
  petrochemical industry and custom-made catalysts.

Base Chemicals
- Electrolysis products: notably chlorine, hydrochloric acid, methylen chloride,
  chloroform. Other products: sulphur products and dimethylether.

Salt
- High quality salts for food processing, consumer, agriculture, water
  softening, pharmaceuticals, electrolysis, de-icing and other industries.

Energy
- Supply of energy (cogeneration) and other utilities.



ACTIVITIES OF AKZO NOBEL

Industry segment information

Prior years have been restated for changes in accounting principles. Reference
is made to "Item 5. Operating and Financial Review and Prospects - Changes in
Accounting Principles".

Nonrecurring items relate to income and expenses resulting from normal business
operations, which, because of their size or nature, are disclosed separately to
give a better understanding of the underlying result for the period. These
include items such as restructuring and impairment charges, and significant
gains and losses on the disposal of businesses, not meeting the requirements
for extraordinary items.


<PAGE>
20


Akzo Nobel's financial reporting and industry segment information consists of
results from the following groups: "Pharma", "Coatings" and "Chemicals". The
information presented below illustrates the relative importance of the
individual groups.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                         Net sales           Operating income
                                                                                                        before nonrecurring* items
<S>                                                                                 <C>      <C>     <C>     <C>     <C>      <C>
Millions of euros                                                                   2002     2001    2000    2002     2001    2000
-----------------------------------------------------------------------------------------------------------------------------------
Pharma                                                                             4,008    4,044   3,839     768     831     765
Coatings                                                                           5,521    5,591   5,568     465     426     447
Chemicals                                                                          4,598    4,604   4,740     344     340     445
Miscellaneous products, intragroup deliveries, non-allocated items and
eliminations                                                                        (125)    (129)   (144)    (85)    (26)    (16)
-----------------------------------------------------------------------------------------------------------------------------------
Total                                                                             14,002   14,110  14,003   1,492   1,571   1,641
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Nonrecurring items relate to income and expenses resulting from normal
business operations, which, because of their size or nature, are disclosed
separately to give a better understanding of the underlying result for the
period. These include items such as restructuring and impairment charges, and
significant gains and losses on the disposal of businesses, not meeting the
requirements for extraordinary items.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                   Nonrecurring* items    Operating income,
                                                                                                      after nonrecurring* items
<S>                                                                                 <C>     <C>   <C>     <C>    <C>      <C>
Millions of euros                                                                   2002   2001  2000    2002    2001    2000
-----------------------------------------------------------------------------------------------------------------------------------
Pharma                                                                                21     41    (2)    747     790     767
Coatings                                                                              19    200    13     446     226     434
Chemicals                                                                             96    218    77     248     122     368
Miscellaneous products, intragroup deliveries, non-allocated items and
eliminations                                                                          (6)   (10)   (4)    (79)    (16)    (12)
-----------------------------------------------------------------------------------------------------------------------------------
Total                                                                                130    449    84   1,362   1,122   1,557
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Nonrecurring items relate to income and expenses resulting from normal
business operations, which, because of their size or nature, are disclosed
separately to give a better understanding of the underlying result for the
period. These include items such as restructuring and impairment charges, and
significant gains and losses on the disposal of businesses, not meeting the
requirements for extraordinary items.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                     Property, plant and equipment
<S>                                                                               <C>    <C>    <C>    <C>  <C>  <C>  <C>  <C>  <C>
                                                                                 Identifiable assets  Expenditures  Depreciation
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, 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 comp.                                                               491    575    673
-----------------------------------------------------------------------------------------------------------------------------------
Total                                                                            12,789 12,925 12,707  689  822  725  622  635  631
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>



<PAGE>
                                                                              21


<TABLE>
<CAPTION>
Percent (%) of total net sales and total operating income
--------------------------------------------------------------------------------------------------------
<S>                                    <C>   <C>    <C>     <C>    <C>   <C>    <C>    <C>     <C>
                                          Net sales         Operating income      Operating income
                                                          before nonrecurring*   after nonrecurring*
                                                                  items                 items
                                       2002   2001   2000   2002  2001   2000   2002    2001   2000
--------------------------------------------------------------------------------------------------------
Pharma                                  29    29     27      51    53    47      55     70      49
Coatings                                39    39     40      31    27    27      33     20      28
Chemicals                               33    33     34      23    22    27      18     11      24
Miscellaneous products and nonallocated (1)   (1)    (1)     (5)   (2)   (1)     (6)    (1)     (1)
--------------------------------------------------------------------------------------------------------
Total                                  100   100    100     100   100   100     100    100     100
--------------------------------------------------------------------------------------------------------
</TABLE>

* Nonrecurring items relate to income and expenses resulting from normal
business operations, which, because of their size or nature, are disclosed
separately to give a better understanding of the underlying result for the
period. These include items such as restructuring and impairment charges, and
significant gains and losses on the disposal of businesses, not meeting the
requirements for extraordinary items.

Below a summary of the activities of each group is given. For more details on
Akzo Nobel's activities, reference is made to "Business Review and Developments
at Business Units". See Item 5 "Operating and Financial Review and Prospects"
for a discussion on factors affecting comparability between periods.

Description of Pharma's business

Akzo Nobel's healthcare activities extend around the world. It engages in
research, development, manufacturing, sales, and service in strategic areas of
human and animal healthcare. These include prescription medicines, veterinary
products, as well as complex active pharmaceutical ingredients.

<TABLE>
<CAPTION>
<S>                                 <C>                                                                   <C>
Major Product Lines                   Key Products/Applications                              Competitive Position*

Prescription drugs,               -   Contraceptives, infertility treatment,                 - Among top four suppliers of hormonal
veterinary products, and              hormone replacement thereapy (HRT)                       contraceptives, second largest in
complex active pharmaceutical         and ostoporosis, CNS produts                             infertility products; among top five
ingredients.                          (antidepressants, antipsychotics),                       players in HRT; building up positions
                                      antithrombotics, and muscle relaxants                    in CNS and osteoporosis. World leader
                                                                                               in neuromuscular relaxation;
                                                                                               entering the antithrombosis segment
                                  -   Veterinary vaccines, and pharmaceuticals               - The third- largest world supplier
                                                                                               of veterinary products; leading
                                                                                               in veterinary vaccines
                                  -   Complex active pharmaceutical                          - Leading supplier of steroids and
                                      ingredients                                              synthetic peptides, strong
                                                                                               in heparins, oligosaccharides, and
                                                                                               biopharmaceuticals


</TABLE>

* See the cautionary statements under introduction on pages 3 and 4.

Akzo Nobel's business unit Organon has an international reputation based on
quality products and innovative R&D. It is among a very few international
companies conducting research into contraception.


<PAGE>
22


Sold as Desogen(R) in the United States, Marvelon(R) is one of the world's most
prescribed contraceptive pills. However, sales of our oral contraceptives have
been adversely affected by generic competition in the United States.
NuvaRing(R), our contraceptive vaginal ring, was launched in the United States
and Europe in 2002. The Company also produces fertility products and medicines
for the treatment of menopausal complaints and, as innovator in the field of
psychiatric drugs, is marketing a new-generation antidepressant (Remeron(R)).
However, in December 2002 an unfavorable court ruling in the Remeron(R) case
paved the way for our competitors to produce and distribute in the United
States generic versions of this important Organon product.

Together with Sanofi-Synthelabo, the Company developed the new antithrombotic
(pentasaccharide) Arixtra(R), which has been approved and launched in the U.S.
and Europe. Arixtra(R) is currently approved for the prevention of thrombosis
following hip and joint surgery. The process of hospital formulary approval for
the introduction of Arixtra in the United States is time consuming. In March
2003, the FDA granted a six-month priority review for a supplemental new drug
application for Arixtra(R) for Prophylaxis of deep venous thrombosis, which may
lead to pulmonary embolism, in patients undergoing hip fracture surgery,
including extended prophylaxis.

In the United States, additional data requests by the FDA regarding Variza(TM)
(Gepirone ER) has delayed its registration.

Intervet focuses on the veterinary medicine market, with vaccines for cattle,
pigs, sheep, horses, poultry, fish and pets, endocrine fertility products,
corticosteroids and antibiotics, including injectors for treating mastitis and
metritis. The acquisition of Hoechst Roussel Vet, in November 1999,
complemented the product range with specialty medical products for both pets
and livestock, and feed additives for livestock. Intervet has an international
reputation and works closely with leading research institutes, universities,
and other companies. In 2003, a new vaccine production facility near Kansas
City is expected to be opened.

Diosynth is a leading manufacturer of complex active pharmaceutical
ingredients, with production facilities in several countries. The company is
active in biochemical extraction and purification, fermentation, industrial
cell culture, and organic synthesis. Diosynth's main products are heparin,
insulin, gonadotropic hormones, steroids, synthetic peptides, carbohydrates,
and opiate analogs. Through the acquisition of CBSI, the Company believes that
Diosynth now has sufficient size and products to play a leading role in the
developing biopharmaceutical market segment.

In 2002, we also decided to enter the human vaccine business because it is a
growth market and because we can benefit from our experience in vaccines and
biotechnology in general. Based on doses, Intervet is the largest vaccine
producer in the world and in terms of sales it is number five. The start-up
business, Nobilon, will be housed in a new vaccine production facility in
Boxmeer, which is scheduled to be operational in mid-2003. Nobilon will focus
initially on human vaccines. Sales by Nobilon from its own products, however,
are not anticipated until after 2007. In the interim, it is expected the
facility will be able to produce certain vaccines for third parties.

The current research and development pipeline of Akzo Nobel Pharma is stated
below. The content of the drug development portfolio will change over time as
new compounds progress from research to development and from development to
market. Owing to the nature of the drug development process, it is not unusual
for some compounds, especially those in the early stages of investigation, to
be terminated as they progress through development. The following is the
current pipeline.


<PAGE>
                                                                              23



<TABLE>
<CAPTION>
<S>                            <C>                          <C>                  <C>
                               Products in the pipeline    (Phase II and later)
Project                        Application                  Phase

Human healthcare
Implanon(R)                    contraceptive implant        market              Europe
                                                            III                 USA
Org 33628                      contraceptive                II
Male contraception             contraceptive                II
Puregon(R) Pen(TM)             infertility                  market              Europe
                                                            filed               USA
FSH-CTP                        infertility                  II
Xyvion(TM)                     osteoporosis                 III
Andriol(R) Testocaps(TM)       male HRT                     filed               Europe
                                                            II                  USA
Variza(TM) (gepirone ER)       depression                   filed               USA
                                                            III                 Europe
Org 5222                       psychosis                    III
Org 24448                      psychosis                    II
Arixtra(R) new indications     thrombosis                   III/filed
SanOrg 34006                   thrombosis                   III
Org 39141                      rheumatoid arthritis         II

</TABLE>


Veterinary products            Numerous new products (vaccines and
                               pharmaceuticals) in various stages of
                               development
Active pharmaceuticals         Many products, in general on a contract
ingredients                    manufacturing basis in the areas of
                               biotechnology, synthetic peptides and
                               pharmaceuticals steroids, in various stages of
                               development

Explanatory remarks

Phase II                Determination of close and initial evaluation of
                        efficacy, conducted in a small number of patients.
Phase  III              Large comparative study (compound versus placebo and/or
                        established treatment) in patients to establish clinical
                        benefit and safety.
Filed                   Marketing authorization application (Europe) or new drug
                        application (United States) filed with regulatory
                        authorities.
Market                  The product is approved by regulatory authorities and
                        sold in the market.



<PAGE>
24


Description of Coatings' business

Akzo Nobel is a leading producer of paints, finishes, stains, and synthetic
resins for industrial applications, professional painters, and the do-it-
yourself sector. Product areas are decorative/architectural paint, car
refinishes, liquid and powder coatings for industrial use (on wood, plastics
and metal), marine and yacht coatings, protective coatings, aerospace coatings,
industrial and consumer adhesives and impregnated paper.



<TABLE>
<CAPTION>
<S>                         <C>                                                                          <C>
Major Product Lines         Key Products/Applications                                                    Competitive Position*


Coatings and related       - Coatings for decoration and protection of architectural structures         - Market leader in Europe
products                   - Industrial coatings such as powder coatings, coatings for wood, metal,     - World leader in selected
                             coil, and plastics, and non-stick coatings e.g. for construction and         markets
                             products for building components, automotive, aircraft, appliances,
                             furniture, mirrors, cookware, and agricultural equipment
                           - Coatings for protection and decoration                                     - World leader
                             of hulls, interiors, and superstructures for ships and yachts; protective
                             coatings and fire retardant products for large plants and offshore
                             installations
                           - Car refinishes, finishes for passenger cars, commercial vehicles, and      - Among top three global
                             graphic products for decals                                                  suppliers
                           - Resin impregnated paper for surfacing of wood panels and flooring          - World leader in the
                                                                                                          noncaptive market
                           - Adhesives and resins for wood-based board, panels, furniture, floors,      - Leader in selected market
                             and doors.                                                                   niches




</TABLE>

* See the cautionary statements under introduction on pages 3 and 4.

Akzo Nobel's global strategy for its coatings business is to extend leading
positions in clearly defined product areas and specialist niche markets, which
demand high levels of technical expertise and customer service. Major
acquisitions in the last few years, combined with organic growth, lifted
Coatings to the world's number one position. We aim to strengthen this position
through further organic growth and bolt-on acquisitions. Growth in mature
markets is expected to remain in line with GDP. Opportunities exist in emerging
markets and in technology switches often driven by environmental
considerations. In the fragmented worldwide coatings market, we, as the world
leader, only represent 8 percent. This market is in a process of consolidation,
and we believe that our global positions in many fields will enable us to play
a leading role.


<PAGE>
                                                                              25


The Company supports the international initiative of Coatings Care(R)-a program
for continuous improvement in Safety, Health, and the Environment-and is
constantly seeking optimal ways to match the principles of eco-efficiency with
those of high performance.

Within the field of decorative coatings, Akzo Nobel has a number of top-quality
professional and do-it-yourself brands, which target national markets (e.g.
Crown(R) (United Kingdom) and Flexa(R) (the Netherlands)), multinational markets
(e.g. Nordsjoe(R) and Trimetal(R)) and truly international markets (e.g.
Sikkens(R), Levis(R), and Sadolin(R)). The strength of these brands reflects the
Company's color know-how and customer orientation, as well as the excellent
performance and high environmental profile of its waterborne and high-solids
paints.

Another prominent area is industrial coatings, especially volatile organic
compounds ("VOC")-compliant waterborne paints, high solids, and powder
coatings, which are used to beautify and protect metal, plastic, and wooden
substrates. Applications range from home appliances to wooden furniture and
heavy-duty goods vehicles. The Company is the market leader in powder coatings
and is strong in industrial wood finishes, coil coatings, and plastic coatings.

The Car Refinishes business includes the car repair and commercial vehicles
sector. With Sikkens(R), Akzo Nobel Coatings has been a world market leader for
years, ensuring a fast, efficient, and top-quality result for every type of
repair. Combined worldwide expertise enables it to develop new technologies and
products of the highest quality continually. The Company also offers the
equipment and expertise to go with these products, such as the revolutionary
Automatchic system, which permits bodyshops to measure and match colors on the
spot, or the CarInfo II system, which automates administrative processes in the
bodyshop and produces a wealth of management information that can greatly
improve bodyshop profitability.

The Company offers a wide range of VOC-compliant coatings and other products
qualified by the world's major aircraft manufacturers and used for aircraft
maintenance.

The Company is an international market leader in marine, yacht, and protective
coatings for heavy-duty applications, such as oil rigs. The Company's tradename
International(R) is well known all over the world. The Company supplies
antifouling coatings that keep ships' and yachts' hulls free of barnacles,
making it easier for them to travel through the water thereby saving fuel costs
for owners. The Company also provides paints for ships' superstructures, such
as Interfine(R), which transforms rust stains into colorless deposits.

Under the tradename Casco(R), the Company produces resin-impregnated papers for
markets around the world. These are mostly used as decorative surfacing
materials for kitchen cabinets, laminated floors, and furniture made from
particleboard. In addition, the Company supplies adhesives and resins to the
woodworking industry (for furniture, parquet flooring, and laminated beams). It
also supplies world markets with Expancel(R) microspheres, additives that
reduce the weight and improve the properties of printing inks, nonwoven
fabrics, paper, polyester, and underbody coating.




<PAGE>
26


Description of Chemicals' business

The portfolio of Akzo Nobel Chemicals is a mix of specialty, functional, and
commodity chemicals based upon leading positions in selected segments of the
chemical industry.

<TABLE>
<CAPTION>
<S>                 <C>                                                                                                     <C>
Major Product       Key Products/Applications                                                              Competitive Position*
Lines

Specification,     - Pulp bleaching chemicals and chemicals for the manufacture of paper and             - World leader in  pulp
functional, and      board; specialty resins for adhesives and polymer manufacturing; high performance     bleaching chemicals, and
specialty            separation products for pharmaceuticals                                               strong worldwide
chemicals                                                                                                  position in paper
                                                                                                           chemicals
                   - Functional chemicals such as chelates, micronutrients, flame retardants, animal     - Leading or strong
                     feed additives, PVC additives, and intermediates such as carbon disulfide,            worldwide positions
                     monochloroacetic acid, methyl amines and thylene amines
                   - Surfactants and fatty acids used in detergents, cleaning, and personal care, as     - Leading or strong
                     well as in asphalt poduction and the agro, oil, mining, and textile industries;       worldwide positions
                     cellulosic specialties as thickeners and additives for coatings, building materials,
                     pharmaceutical products, food, mining and oil
                   - Polymerization catalysts such as organic peroxides, metal alkyls and custom         - Leading or strong
                     manufactured Ziegler-Natta systems for the polymer-producing industry; high-purity    worldwide positions
                     metal organics for the electronic industry, and intermediates for pharmaceutical
                     products
                   - Resins for coatings and printing inks                                               - Leading in selected
                                                                                                           market niches
                   - Chlorine and caustic soda for industrial applications                               - Leading positions in
                                                                                                           Northwest Europe
                   - Salt for electrolysis, other chemical industries, food applications and consumer    - Leading position  in
                     use                                                                                   Northwest Europe, and
                                                                                                           global leader in vacuum
                                                                                                           salt
                   - Catalysts for the oil refining and chemical industries                              - Leading global supplier
                                                                                                           of the most extensive
                                                                                                           range of refinery
                                                                                                           catalysts
</TABLE>


* See the cautionary statements under introduction on pages 3 and 4.



<PAGE>
                                                                              27


Akzo Nobel is a leader in environmentally compatible pulp bleaching chemicals,
notably with sodium chlorate worldwide, and is strong in hydrogen peroxide. The
Company is also a prominent producer of chemicals for the wet-end manufacture
of paper and board, notably retention and drainage agents, wet-strength resins,
and sizing agents.

The Company is the market leader in polymerization catalysts and additives for
the processing and manufacturing of plastics worldwide. It produces organic
peroxides for thermosetting and cross-linking applications, UV Cure Chemicals
for the Graphic Arts, coatings and other industries, and polysulphide chemicals
for the aerospace, marine and construction industries. The Company's catalysts
are used in petroleum refining and petrochemical processes, and in
hydroprocessing and fluid cracking catalysts, Akzo Nobel ranks among the top
three suppliers of these products in the world.

In surfactants, Akzo Nobel is the market leader in cationic (fatty amine-based)
surfactants in Europe and a major producer of non-ionic ethylene oxide-based
surfactants. The Company also makes specialty cellulose-based rheology
additives for paint and building applications.

Akzo Nobel is strong in functional chemicals. It is the world's principal
producer of chelates, which deliver micronutrients to plants, and make
organophosphorus-based fire retardants for plastics and hydraulic fluids. In
addition, Akzo Nobel is a leading global producer of ethylene amines.

Akzo Nobel is the largest producer of salt for electrolysis in Northwest
Europe, and manufactures high-quality evaporated salt with strong consumer
brands such as JOZO(R). The production and electrolysis of salt both require a
great deal of energy. By operating in joint ventures with Dutch electricity
distribution companies, the Company is able to make use of combined heat and
power (cogeneration). The Company has been active in cogeneration since the
1930s.

Akzo Nobel produces and markets specialty resins for the coatings and printing
ink industries, including a broad range of alkyds, polyesters, melamines,
acrylics, and waterborne products. End uses range from automotive coatings to
industrial coatings for plastics, wood, and metal. The resins are used
internally and are also sold outside the Company.

Other key products include monochloroacetic acid, in which the Company leads
the worldwide market, as well as carboxymethyl cellulose, which serve as water-
soluble thickening agents, and choline chloride, a food and feed additive.

In addition, the Company has established a strong presence, both globally and
regionally, through joint ventures. Joint ventures include Flexsys, with
Solutia (number one worldwide in the production of rubber processing
chemicals).




<PAGE>
28


GEOGRAPHIC DATA

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

<TABLE>
<CAPTION>

<S>                   <C>        <C>        <C>       <C>       <C>       <C>       <C>          <C>           <C>
--------------------------------------------------------------------------------------------------------------------
                      By region of destination          By region of origin            Operating income before
                              Net sales                     Net sales                    non recurring 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
====================================================================================================================
</TABLE>

* Nonrecurring items relate to income and expenses resulting from normal
  business operations, which, because of their size or nature, are disclosed
  separately to give a better understanding of the underlying result for the
  period. These include items such as restructuring and impairment charges, and
  significant gains and losses on the disposal of businesses, not meeting the
  requirements for extraordinary items.

<TABLE>
<CAPTION>

<S>                       <C>     <C>      <C>      <C>    <C> <C>   <C> <C>     <C> <C>
-------------------------------------------------------------------------------------------------------------------
                                                                   Expenditures for property,
                             Identifiable assets**                     plant and equipment
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
===================================================================================================================
</TABLE>

**Prior years have been restated for changes in accounting principles.
  Reference is made to "Item 5. Operating and Financial Review and Prospects -
  Changes in Accounting Principles".

See Item 5 "Operating and Financial Review and Prospects" for a discussion on
factors affecting comparability between periods.


<PAGE>
                                                                              29


INSURANCE

Akzo Nobel's insurance policy is part of a general risk management philosophy
emphasizing the importance of creation of risk awareness throughout the entire
organization and promotion of loss control efforts. Risk finance, normally in
the form of insurance, is seen as a last resort to provide financial coverage
for mainly catastrophe-like events. Events of frequent nature with limited
financial effect are self-insured with the use of 100-percent-owned captive
insurance companies.

The limits of insurance are based on loss scenarios as well as normal practice
in Akzo Nobel's type of industry. For property damage/ business interruption as
well as for general product liability, the current exposure retained in the
captive insurance arrangements is limited to EUR 11 million per event with an
aggregate retention for the whole of EUR 150 million over a five-year period.
When losses exceed these retentions, external insurers will provide coverage
from a deductible level of EUR 0.5 million.

The maximum amount of loss covered by external insurers is EUR 565 million for
property damage/ business interruption and EUR 656 million for general product
liability for the 5-year-period ending December 31, 2003.

HUMAN RESOURCES

Akzo Nobel's decentralized two-layer organizational structure supports its
ambitions and offers the Company's employees broad scope and responsibility in
various disciplines, permitting them to develop their talents at an early stage
of their careers. Akzo Nobel provides opportunities and resources; employees
can use these to develop their skills and to be ready for change even before it
becomes a necessity.

RESEARCH AND DEVELOPMENT

In 2002, R&D expenditures amounted to EUR 912 million, up 8 percent from 2001.
The main driver continued to be Pharma, which accounted for 66 percent of Akzo
Nobel's total R&D expenditures. Total R&D staff increased from 6,900 at year-
end 2001, to 7,200 at year-end 2002.

In all of our activities we want to be in the forefront through ambitious R&D,
exploring and innovating and always striving for optimization, sustainability,
and profitable growth.

<TABLE>
<CAPTION>
<S>       <C>       <C>       <C>       <C>          <C>
----------------------------------------------------------------------------------------------------------------------------
              EUR million          % of sales
            2002       2001      2002      2001
----------------------------------------------------------------------------------------------------------------------------
Pharma       600        535        15        13         In 2002, R&D expenditures were up 8% from the previous year, primarily
Coatings     166        160         3         3         reflecting Pharma's stepped up efforts.
Chemicals    135        142         3         3
----------------------------------------------------------------------------------------------------------------------------
</TABLE>




<PAGE>
30


R&D SPEARHEADS

Pharma
Discovering innovative therapies

In the last decade, the rapid pace of technological progress and scientific
discovery has brought about a radical revolution in industrial drug discovery.
With the human genomic map virtually completed, the expectation is that
diseases and their genetic causes will be better understood. This may lead to
novel drugs affecting target receptors with hitherto unknown mechanisms of
action. High-throughput screening of chemical structures in many recombinant
receptor assays has further increased the possibilities. Worldwide, innovative
pharmaceutical R&D is now facing the next challenge of finding connections
between the new, unknown targets and clinical practice. To that end, industrial
and academic scientists are teaming up to design new experimental methods in
clinical and animal pharmacology.

Organon R&D, too, is endeavoring to fully apply these new technological
developments and discover innovative therapies in its areas of interest:
contraception, infertility, osteoporosis, psychiatry, muscle relaxants, pain
management, and cardiovascular and immunological disorders. It is essential to
identify innovative drug candidates and keep Organon's drug pipeline well
filled in alliance with specialized companies and academic groups.

In a market where success is determined by broad and high quality product
ranges for various animal species, R&D is of utmost importance to Intervet. R&D
is conducted in two departments: one for vaccines and one for pharmaceuticals.
High-tech biotechnology is applied to develop state-of-the-art antigens for
vaccination. To further improve vaccines, the basic mechanisms of immune
stimulation are being explored. In the pharmaceuticals department, Intervet not
only develops existing human drugs for use in animals, but also new drugs for
parasitic and bacterial diseases exclusively for animals. Advanced techniques
such as genomics, proteomics, and bioinformatics are fully integrated in
Intervet's pharmaceutical R&D. R&D is further bolstered by teaming up with
government institutes and universities all over the world.

Process optimization and upkeep of chemical and biochemical synthesis routes,
biochemical extractions, and production of recombinant biologicals constitute
the main efforts of Diosynth R&D. Additionally, new processes are being
explored to secure the supply of bulk strategic starting materials.

In 2002, a new business entity, Nobilon, was set up to exploit the synergy
potential of biotech expertise available within the Pharma business units.
Currently, business opportunities are being evaluated which may lead to an
entry into the human vaccine field.

Coatings
Environmental adaptation and improved performance

The two main drivers for Coatings R&D are environmental adaptation and improved
performance, including the ability to provide new beautiful colors, outstanding
durability, and faster and easier application.
During 2002, the R&D efforts yielded several new frontline proprietary
technologies related to:
- the use of daylight in the paint curing process;
- antifouling coatings based on new chemistry;
- curing catalysts that are latent in the paint but are activated by moisture
  or light after paint application;
- new high performance polymers for water-based, solvent-free, and high-solids
  systems;
- improved thin layer powder technology; and
- faster and more efficient pigment evaluation, which is crucial for color
  matching and recipe evaluation.



<PAGE>
                                                                              31


The projects are undertaken by the individual business units in different
geographic locations. Several of the projects involve customer, supplier, or
university cooperation. The resulting technology base is made available to the
entire Coatings group.

Chemicals
Continuous upgrading of core technologies

For each business unit within Chemicals the preservation and continuous
upgrading of its core technologies are essential to secure competitive market
advantages. This requires the approach to be both customer and application
oriented and implies an appropriate balance in its technology program between
short-term and long-term innovation goals. An important driver for the
technology program is sustainability of both current and future operations and
products.

State-of-the-art R&D resources, embedded in the individual business units, are
instrumental in executing the technology program. R&D units are established in
all major markets.

In order to access, explore, and exploit the latest technologies originating
from the scientific world, business units also operate in shared development
platforms, often including university partners. These efforts are assisted by
Chemicals group centers of excellence. Typical issues studied in these
platforms are:
- reduction of energy and raw material consumption by applying front end
  separation technology;
- waste and energy reduction using modern solid catalysts;
- closed loop production through process intensification;
- low energy routes to high quality emulsions;
- more stable and safer processes by application of control room simulation;
- prospects of nanochemistry, and;
- shortening time to market and/or time to production by high throughput
  experimentation.

ENGINEERING

Akzo Nobel Engineering (AE) is globally active in improving the competitive
position of its business partners by contributing added value through integral
engineering solutions. AE is involved in major capital investment projects,
particularly at Chemicals and Pharma, and achieves a substantial part of its
sales outside of Akzo Nobel by supplying valuable expertise to steady business
partners, mainly in the fields of chemicals, paper and fibers. AE delivers a
sound technological and financial contribution to Akzo Nobel.

HEALTH, SAFETY AND ENVIRONMENT ("HSE")

Concern for health, safety, and the environment is an integral part of Akzo
Nobel's business policy. Akzo Nobel actively supports the guiding principles of
the Business Charter for Sustainable Development of the International Chamber
of Commerce, the Responsible Care(R) program of the chemical industry, and the
Coatings Care(R) program of the paint and printing ink industry. At the end of
the year a new Corporate Policy Statement on HSE was issued, now including a
paragraph on our emphasis on Product Stewardship.



<PAGE>
32


The Company has designated five parameters which have been translated into
specific targets for the operational plans.

<TABLE>
<CAPTION>

<S>                                        <C>            <C>               <C>
--------------------------------------------------------------------------------
                                            2001         2002      2005 Targets
--------------------------------------------------------------------------------
Frequency Rate Lost Time injuries (LTI)
per 1 million hours worked                   3.6          3.0               2.5
Total Illness Absence Rate (TIAR) in %       2.7          2.6               3.5
Chemical Oxygen Demand of discharge
to surface water, in tons                  4,000        3,600             3,000
Volatile Organic Compounds (VOC)
emission to air, in tons                   6,300        5,700             4,000
Nonreusable waste, in tons               126,000       97,000           115,000
================================================================================
</TABLE>


Coatings and Pharma have improved their safety performance, whereas Chemicals
remained stable at its relatively good level. The Frequency Rate for Akzo Nobel
as a whole therefore has dropped compared to the previous year, although it is
still above the target of 2.5. This improvement is, regrettably, overshadowed
by a total of five fatalities in work-related circumstances.

The Total Illness Absence Rate (TIAR) is already below the target set for 2005.
We now focus our attention on improvement for those sites where the TIAR is
still above 3.5.

Despite several acquisitions in 2002, all the values for the environmental
parameters have dropped compared to last year; we have confidence that we will
meet the 2005 targets.

Our latest Corporate Directive requiring implementation of a Product
Stewardship Management System by 2003 has already initiated many projects.
Examples of the approach some Akzo Nobel business units have adopted can be
found on our internet site. Pharma has taken an advanced approach toward
Product Stewardship by concentrating on Issue Management, resulting in action
plans that have been launched early in 2003 at all three Pharma business units.

SECURITY

Akzo Nobel pays continuous attention to security with the main objective to
provide a secure environment for employees, contractors, temporary staff,
visitors, and neighbors. As an example of these efforts, Akzo Nobel's Chemicals
operations in the United States play an active role in the development of
guidelines for the Chemical Industry aimed at improved security on sites and
during transportation. These guidelines form an integral part of the
Responsible Care(R) program, which Akzo Nobel endorses.



<PAGE>
                                                                              33


BUSINESS REVIEW AND DEVELOPMENTS AT BUSINESS UNITS

For financial details on acquisitions or divestments, reference is made to Note
2 of the Notes to the Consolidated Financial Statements.

PHARMA

Business review

Pharma's three business units each focus on a different segment of the
pharmaceutical industry. Organon is our human pharmaceutical business. Diosynth
concentrates on the manufacturing of active pharmaceutical ingredients for
Organon and for third parties as well. Intervet specializes in veterinary drugs
and vaccines. In 2002, Nobilon was established as a new activity into the areas
of human vaccines and biopharmaceuticals.

A number of factors in the pharmaceutical business environment made 2002 a very
challenging year. Competition from companies that produce generic drugs became
much more aggressive both in the courts and in the marketplace, while the
hurdles to obtaining new product licenses increased in Europe, the United
States, and Japan. The economic situation in Latin America and elsewhere
contributed to the turbulent and complex business situation.

Akzo Nobel Pharma was not immune to these difficulties. In late December 2002 an
unfavorable court ruling in the Remeron(R) case paved the way for our
competitors to produce and distribute in the United States generic versions of
this important Organon product. In Japan, our product licenses for Remeron(R)
and Xyvion(TM) were delayed by the regulatory authorities. In the United States,
additional data requests by the FDA regarding Variza(TM) (gepirone ER) delayed
its registration as well. Aside from these developments, Intervet and Organon
were also adversely affected by the depressed economic situation in Latin
America. The weaker U.S. dollar had a EUR 61 million negative influence on
Pharma sales as compared to 2001.

Despite these adverse conditions and higher pension costs, we were able to
maintain Pharma's operating income at a level of EUR 768 million (2001: EUR 831
million). We remain confident of our capabilities and business plans. In 2002,
we significantly increased R&D spending and invested in the launch of two new
products, Arixtra(R) and NuvaRing(R). Arixtra(R) is a novel pentasaccharide drug
used to prevent thrombosis following certain surgical procedures such as
orthopedic operations. The product has been developed and is marketed in
conjunction with our partner Sanofi-Synthelabo. NuvaRing(R) is an intravaginal
ring which releases a minimum amount of drug to prevent conception. We believe
that its unique features make it an attractive alternative to oral
contraceptives or contraceptive patches.

Pharma's capital expenditures were nearly twice the amount of depreciation.
These expenditures included major investments in GMP (Good Manufacturing
Practice) production facilities, laboratory improvements, and the completion of
the new Organon headquarters.

For several years now the Pharma group has been divesting noncore businesses in
order to focus on ethical pharmaceuticals. The last step in this process was the
sale of Rosemont, a company in the United Kingdom specializing in generic,
liquid, orally taken drugs.

The unfavorable ruling in the Remeron(R) patent case is likely to decrease sales
of the product in the United States. The EU patent is secure until 2004. Steps
were taken in 2002 to mitigate the impact of this patent expiration on operating
income. Further cost-saving measures are planned for 2003 to limit the financial
impact.


<PAGE>
34


Recent investments in downstream processing capacity at our Oss, Netherlands
site provided Diosynth with a very competitive base to grow within the a
commercially ttractive biotechnology production segment. Diosynth continues to
attract major pharmaceutical companies as well as biotech start-ups as customers
for its process development and active pharmaceutical ingredients (API)
production businesses.

During 2002, Intervet faced the challenge of the downturn of the economy in
Latin America, which is an important market for cattle and poultry production.
Compared to 2001, sales in the United States were flat in dollar terms, with
volume up slightly. A one-time inventory write-off also adversely impacted
operating income. In 2003 a new vaccine production facility near Kansas City is
expected to be opened. In 2002, a new virology R&D building was opened at
Boxmeer, the Netherlands, and the Pharmaceutical R&D facility in Schwabenheim,
Germany, became fully operational. We believe that Intervet is now in a good
position to continue its course of sustained growth in the veterinary market.

In 2002, we also decided to enter the human vaccine business because it is a
growth market and because we can benefit from our experience in vaccines and
biotechnology in general. Based on doses, Intervet is the largest vaccine
producer in the world and in terms of sales it is number five. The start-up
business, Nobilon, will be housed in a new vaccine production facility in
Boxmeer, which is scheduled to be operational in mid-2003. Nobilon will focus
initially on  human vaccines. Sales by Nobilon from its own products are not
anticipated until after 2007, however. In the interim, the facility can produce
certain vaccines for third parties.

Developments in the Pharma business units

Organon - Prescription drugs
Sales 2002: EUR 2,593 million; 2001: EUR 2,504 million

Despite a turbulent 2002, Organon was able to maintain 5 percent ethical drug
sales volume growth. Higher selling and distribution expenses, increased
spending on key development projects, and substantial currency translation
effects, however, resulted in an operating income that was slightly below the
previous year's level.

We achieved sales growth in both Europe and the United States, the two largest
pharmaceutical markets in the world. The weakening of the U.S. dollar and other
currencies, increased generic competition for our Mircette(R) oral
contraceptive, and the launch costs associated with our NuvaRing(R)
contraceptive vaginal ring and Arixtra(R) antithrombotic slowed sales growth.

Growth momentum was preserved in 2002 through sustained investment in our
existing products, continued support of our strong R&D pipeline, precise cost
containment efforts, and an ongoing commitment to strategic alliances. These
actions contributed to Organon's transformation into a more agile and responsive
global organization. Organon achieved several significant milestones in 2002,
including record sales of its antidepressants Remeron(R) and Remeron SolTab(R),
the introduction in the United Sates of NuvaRing(R) and Arixtra(R) and the
relocation of Organon's International Headquarters from Oss, the Netherlands, to
Roseland, New Jersey, in September 2002. On a more negative note, we were
confronted at the end of 2002 with the unfavorable court ruling on Remeron(R) in
the United States.

To help achieve Organon's growth objectives, we took specific measures designed
to improve both operation efficiency and financial performance. We announced the
restructuring and reduction of the U.S. field sales force, while in Japan staff
numbers will also be reduced, primarily through early retirement.



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The pharmaceutical industry is facing challenges from competition by producers
of generic drugs, while at the same time demands for additional drug efficacy
and safety data are being made by various public and government bodies. To help
meet these challenges a more global approach to the business is required.

Organon is well on its way toward becoming a truly global business. The
relocation of our headquarters to the United States is more than a symbolic
step. It places us at the center of the most dynamic, competitive, and R&D
intensive environment in the world. Organon is taking advantage of its
international strengths in its ongoing search for new development and marketing
alliances.

Sales development of the main product groups was as follows:
- Central Nervous System           + 11%       to EUR 800 million
- Contraception                     - 3%       to EUR 521 million
- Infertility                       + 5%       to EUR 402 million
- Hormone Replacement Therapy       + 5%       to EUR 330 million
- Hospital pharmaceuticals          + 3%       to EUR 282 million

The top four product groups accounted for EUR 2,053 million in sales in 2002 and
represented 79 percent of total sales. Sales of Remeron(R) (antidepressant) were
at an all-time high, up 14 percent to EUR 717 million. Sales of
Marvelon(R)/Mercilon(R)/Mircette(R) (oral contraceptives) declined 12 percent to
EUR 380 million. Puregon(R)/Follistim(R) (infertility) sales increased 8 percent
to EUR 356 million. Sales of Livial(R) (hormone replacement) gained 12 percent
to EUR 208 million.

Headcount increased by 500 to 13,300 in 2002.

February 2002 saw the U.S. launch of the antithrombotic Arixtra(R) by Organon
and our joint venture partner Sanofi-Synthelabo. Initial sales took off slowly
due to existing long-term contracts for competing drugs and the inherent inertia
of the hospital formulary system. Arixtra(R) is currently approved for the
prevention of thrombosis following hip and joint surgery. Planned label
expansions are expected to drive sales growth considerably.

In July 2002, we launched the contraceptive ring NuvaRing(R) in the U.S. market.
Corresponding launches are now underway in several European countries. Organon's
other novel form of contraception, Implanon(R), a single rod contraceptive
implant, is now being marketed in 15 European countries, Asia, Latin America,
and Australia.

The pharmaceutical industry grows and remains vital through successful research
and development programs. At Organon we are committed to improvements in the R&D
process that ensure more effective utilization of our R&D assets and people. We
seek to increase productivity while maintaining the required balance between
efficiency and quality needed to meet our R&D objectives.

At Organon we understand that R&D productivity is not directly proportional to
R&D budget or staff size. Essential factors to R&D success, like creativity and
the desire to succeed, are independent of size. We believe that our focus,
process efficiency, and talent management are relatively more productive,
compared to many of our larger competitors. This gives us confidence that we
will be able to maintain an attractive R&D pipeline and continue Organon's path
toward increasing growth over the long run.

A new antipsychotic drug, Org 5222 has entered Phase III of clinical
development. It has a promising pharmacological profile compared to drugs
currently prescribed for that condition.


<PAGE>
36


Product formulations for a new male contraceptive concept are being evaluated in
Phase IIb trials as part of a joint development with Schering AG (Germany). A
new estrogen-free female contraceptive is in Phase II testing as well. Organon's
CNS pipeline (antidepressants, antipsychotics) includes several Phase II
projects. All in all, we believe that our pipeline is promising, while we
continue to push for greater R&D productivity.

For Arixtra(R), studies are in progress to expand the number of thrombotic
indications for which it is approved, for example, treatment of venous and
arterial thrombosis. Research is also in progress on SanOrg 34006, a new
compound in our synthetic antithrombotic line to prevent and treat long-term
venous and arterial thrombosis.

At Organon we realize that we cannot rest on past performance success if we are
to meet the challenges ahead, but we can continue to build upon the strengths
that brought us to where we are today. We will put resources to work defending
and growing our market share in the female health market, including
contraception, infertility treatment, and hormone replacement therapy, and
maintaining our market share in depression and anesthesiology. We also plan to
continue our investments in the atherothrombosis, psychosis, and osteoporosis
areas, while working to expand our competencies in the areas of rheumatoid
arthritis and pain management.

We are taking operational steps that we believe will make us a more customer
friendly and focused company. In this context we moved from a six-region to a
four-region sales organization and plan to develop functional marketing support
at both the clinical and commercial development levels. Organon will continue
to focus on the basics in business, managing all business processes, including
manufacturing and inventory, in an effort to ensure the best possible outcome.

Intervet - Veterinary products
Sales 2002: EUR 1,081 million; 2001: EUR 1,096 million

Every day, throughout the world, hundreds of thousands of animals are treated
successfully with Intervet veterinary products. Intervet takes a diversified
approach to mirror the highly fragmented veterinary market, focus research on
emerging regional needs, and properly address local markets.

Key activities in 2002 included continued business consolidation and
streamlining the company structure. Intervet's excellent global coverage and
its broad range of products for farm and companion animals put the company in a
strong position to weather the stagnation in the veterinary market and partly
compensate for the challenging market conditions in some parts of the world.
Nevertheless, operating income was lower, also due to some inventory write-off.

Intervet's efforts to optimize value creation are driven by innovation and
application of state-of-the-art technology. Annual investment in R&D exceeds 10
percent of sales, and more than 15 percent of Intervet's total workforce is
engaged in R&D activities. In 2002, a new project management system for R&D was
implemented, creating an information interface for all functions involved in
the development of new products.

In April 2002, after a 15-month construction period, modern virology research
facilities were opened at the Boxmeer site in the Netherlands. Intervet's
strategy focuses on the development of proprietary antiparasitic drugs and new
antiparasitic vaccines. The modern pharmaceuticals research facility in
Schwabenheim, Germany, is now completely staffed and fully operational for
further expansion of R&D activities. The transfer of the research activities
from Vienna, Austria, to Schwabenheim was completed in 2002.


<PAGE>
                                                                              37


With its newly developed foot-and-mouth disease (FMD) diagnostic tool, Intervet
permits a new and comprehensive approach to combating FMD in Europe. In
addition, the World Organization for Animal Health (OIE) has adopted a number
of important changes to its provisions on FMD, especially in relation to
vaccination.

Intervet must respond quickly to a fast-changing, highly competitive
environment. For marketing purposes, extensive knowledge management databases
have been launched to connect those involved in the global marketing process.

The global rollout of the customer-oriented ordering and forecasting system
introduced in 2001 was successfully finalized in June 2002. A major logistics
and manufacturing initiative was started to design and implement the next
generation of business system platforms within Intervet's larger subsidiaries.

The construction of a state-of-the-art facility at the De Soto, Kansas, site
was completed on schedule in the fall of 2002. Regional R&D, distribution and
administrative activities have already begun at this Mid-West center.
Production is expected to come on stream by mid-2003 after finalization of the
validation phase. The addition of a molecular laboratory in the United States
in 2003 will enable researchers to take novel approaches in the development of
new generations of existing products and develop products for new diseases for
which conventional technology is inadequate.

Diosynth - Complex active pharmaceutical ingredients
Sales 2002: EUR 529 million; 2001: EUR 488 million

Although the decline of the world economy also impacted the pharmaceutical
industry, Diosynth again registered a strong performance, both in sales and
operating income. Compared to the previous year, sales showed an increase of 8
percent, while operating income was also clearly ahead. It should be noted that
a direct comparison of results for Diosynth between 2002 and 2001 is impacted
by Diosynth's focus on strategic shift, as is reflected by the divestment of
Rosemont Denver (Colorado) in August 2001, the divestment of Rosemont Leeds
(United Kingdom) in September 2002, and the acquisition of the former U.S.-
based Covance Biotechnology Services Inc. (now called Diosynth RTP, Inc.) in
June 2001. Excluding these divestments and acquisitions, Diosynth still shows
satisfactory sales and earnings gains, making 2002 a very good year for the
business unit.

In 2002, we spent much energy on the integration of Diosynth RTP and the
corresponding biotech activities in Oss, the Netherlands. As far as business
activities are concerned, integration has now been completed. Technical and
market integration should be completed in 2003, once the new Upstream
Processing plant (Diosource, Oss) has become operational.

For our chemical activities we are looking into possibilities of extending our
production, as capacity constraints are limiting further growth for this
strongly performing product group.


<PAGE>
38


COATINGS

Business review

The aim of our Coatings group remains to grow and strengthen our world leading
positions through a combination of organic growth and selective bolt-on
acquisitions. We will continue to play a leading role in the consolidation of
the still fragmented world coatings market in which we, as world leader, have
only 8 percent market share.

Since growth in the (mature) industrialized markets is limited to around GDP,
most of our efforts are geared toward emerging markets, especially Asia. In
2002, we increased ownership in our marine coatings joint venture in Korea to
60 percent, commissioned a powder coatings facility in Vietnam and a coil
coatings facility in Suzhou, China, inaugurated the newly built Car Refinishes
Research center in Bangalore, India, and formed a 65 percent-owned decorative
coatings joint venture in Indonesia. Furthermore, we are building another two
grassroots wood coatings sites in China and are investing in a nonstick
coatings facility in Dongguan City. During the year, we opened our first
decorative coatings factory in Moscow as well as a new building adhesives
factory in Germany.

We again stepped up our R&D efforts: expenditures rose 4 percent to EUR 166
million, reaching for the first time 3.0 percent of sales. The 2002 Akzo Nobel
Coatings Award for the most promising technical innovation went to Car
Refinishes for a new UV-A light assisted curing technology in two-component
paint products. We started preparing for the construction of a new Car
Refinishes Research Center in Pontiac, Michigan, and an extensive renovation of
our worldwide Marine and Yacht research and product development facilities in
Felling, United Kingdom.

During the year, Crazy Car Colours(R)-a unique, patented temporary finish-was
introduced. This finish can be removed easily with warm water without damaging
the original surface. The Decorative Coatings "Disney* Home Color" concept,
using Disney's famous cartoon figures as a basis for an innovative color
approach in designing children's rooms, was awarded during the DIYTEC 2002 Fair
in Cologne, Germany.

Car Refinishes created a new Accident Management Services (AMS) unit, aimed at
providing comprehensive accident management services to insurance companies,
bodyshops, and fleet owners, facilitating damage settlement within the total
repair chain.

In 2002, we continued our selective bolt-on acquisition strategy by acquiring
the Awlgrip(R) marine and aerospace coatings businesses, the high performance
specialty paint businesses of Plascon, United Kingdom, car paints distributors
in France and Finland, several decorative paint distributors in Germany,
Switzerland, and the Benelux, and by increasing our shareholding in the Greek
decorative coatings joint venture Vivechrom to 76 percent. We also strengthened
our position in the Korean marine coatings market by acquiring the Chilseo
manufacturing site and at the same time increasing our shareholding in the
marine coatings joint venture IPK to 60 percent. By acquiring the Ferro Powder
Coatings activities in the Americas we were able to resolve a major strategic
gap. Moreover, we fortified our global leadership position in powder coatings
with the Ferro businesses in Korea and China, the formation of a 50 percent
joint venture in Mexico, and the expansion of our powder coatings activities in
Italy.

Sales of EUR 5.5 billion were basically flat compared to 2001. Despite
difficult economic circumstances and increased pension costs in 2002, we have
been able to realize a quantum leap in performance through tight cost control
on all fronts, while some of the effects of the far-reaching restructuring
programs initiated by mid-2001 and accelerated during 2002 materialized.



<PAGE>
                                                                              39


Coatings' operating income before nonrecurring items of EUR 465 million was up
9 percent from 2001. Return on sales increased to 8.4 percent, against 7.6
percent in 2001. Return on investment, met the 20 percent threshold; 20.0
percent compared to 18.1 percent in 2001. Operating working capital (on a
quarterly moving average basis) dropped from 24.8 percent to 23.0 percent of
sales, while capital expenditures of EUR 131 million were only 87 percent of
depreciation.

Developments in the Coatings business units

Decorative Coatings
Sales 2002: EUR 1,915 million; 2001: EUR 1,875* million

Decorative Coatings Europe and Decorative Coatings International serve the
professional and do-it-yourself markets. Major brands include Sikkens(R),
Sadolin(R), Crown(R), Astral(R), Marshall(R), Trimetal(R), Nordsjoe(R),
Levis(R), Herbol(R), Vivechrom(R), and Flexa(R). The leading building adhesive
brand is Schoenox(R).

* Adjusted for regrouping of activities

Decorative Coatings Europe

Operating income for Decorative Coatings Europe in 2002 was better than in the
previous year. On a comparable basis, income improved considerably on the
previous year, despite a mixed season for outdoor painting. This favorable
performance was primarily attributable to our continued efforts to improve the
quality of the business, supported by a beneficial price development for
several key raw materials during most of the year. By implementing a number of
restructuring projects, we reduced operating costs and invested capital. During
the year we acquired Plascon in the United Kingdom and Ireland as well as a
number of paint merchant outlets in Germany.

Retail and Trade showed strong progress, and Specialties maintained good
profitability in the face of a slowdown in the construction of new buildings in
a number of countries.

We assigned high priority to adding value for our customers and transferring
best practices. Our R&D strongly focuses on creating innovative products and
improving their environmental performance. We set up test markets for a new
generation of waterborne products and systems and devoted R&D efforts to a
further reduction of VOC (volatile organic compounds) emissions. The first
pilot of the future new tinting machine for points of sale was set up in
preparation for a general rollout in the years to come. The Retail organization
won the Innovation Award at the DIYTEC 2002 Trade Show in Cologne, Germany, for
the Disney(R) Home Color product range. This range will be introduced in
several European countries. With the acquisition of Plascon in the United
Kingdom and Ireland we gained an attractive portfolio in specialty paints with
further add-on potential for other European markets through our existing
channels.

We also bolstered our strong European brand positions by making additional
marketing efforts in a number of countries including Spain, where a TV
commercial starring former soccer player Johan Cruijff and his son Jordi
supported a relaunch of our Bruguer(R) brand.

Decorative Coatings International

Despite the difficult economic climate in countries like Turkey and Argentina,
we registered satisfactory gains in operating income. Our niche concepts in the
United States and in Argentina (wood care products)


<PAGE>
40


proved successful, bringing further growth in sales and earnings compared to
the previous year. On a more negative note, good progress and performance in
Brazil were offset by the devaluation of the real. We achieved double-digit
volume growth in our growth markets in Asia (China, Vietnam, and Indonesia
where a new Jakarta-based joint venture was established) as well as in Russia
and Ukraine. Our new factory just outside Moscow, which opened in June 2002,
successfully produced its first batches of paint. Our facilities in Hungary and
Poland, where we are the number two paint producer, will serve as platforms for
further expansion in Eastern Europe. We achieved volume and earnings gains for
our European building adhesives. A new production plant for powder-based tile
adhesives and leveling compounds was opened in Germany during the year. In a
move to reduce costs and concentrate resources, we moved the laboratories for
liquid adhesives from Sweden to Germany.

Our North African operations in Morocco and Tunisia continue to deliver good
returns. We set up one head office in Casablanca and rationalized production
and warehousing activities. Rationalization efforts in Morocco will be
finalized in 2003.

The Paccess supply chain project, which offers huge potential savings through
more efficient electronic handling, has been implemented in a number of
operations.

We are continuing our product stewardship efforts, which mainly focus on lead,
chromates and APEO (alkylphenol polyethoxylate).

Industrial activities
Sales 2002 EUR 1,718 million; 2001: EUR 1,667* million

In 2002, Akzo Nobel's industrial coatings activities included three global
business units: Industrial Coatings, Industrial Finishes, and Powder Coatings.
In order to achieve the best possible synergies it was decided to dissolve
Industrial Coatings with effect from January 1, 2003, and to transfer the
activities to the other Coatings business units.

* Adjusted for regrouping of activities

Industrial Coatings

2002 was another year with weak market conditions in the United States and
Europe, while business activities in Asia Pacific increased considerably.
Operating income ended below the 2001 level.

Transportation Coatings continued implementing its restructuring program in
Europe. In line with this program, production is being concentrated in a
limited number of sites. Product development efforts led to substantial
improvements in product ranges, and a license agreement for ED (Electro
Deposition) primers was concluded with Japanese Kansai Paints. The start-up of
the activities in India showed satisfactory progress.

Specialty Coatings drastically restructured its product portfolio, focusing on
Non-Stick Coatings, Specialty Plastics, and Mirror and Building Components.
During the year, we divested General Industrial activities in the United
States, France, Scandinavia, and Poland. We also announced plans to establish a
Non-Stick production unit in Dongguan City, China, which will be ready by the
end of March 2003.

Aerospace Coatings benefited from the acquisition of the aerospace activities
of U.S. Paints. However, performance suffered from the downturn in overall
aerospace activities.


<PAGE>
                                                                              41


We continued our R&D efforts on the development of eco-efficient products,
placing a continued strong emphasis on reduction of VOC emissions.

Industrial Finishes

As a result of the steady pull from the North American market and buoyant
growth in Asia, worldwide demand for wood and coil coatings strengthened in
2002. In addition, we were able to capitalize on growth opportunities due to
the cost containment efforts and the strategic decisions taken in 2001.
Accordingly, the North American business gained market share as it proved to
have a leading edge on competition. Also, prior investments in frontier
markets, supported by local sourcing, contributed significantly to our results.
Developments in Europe presented a different challenge. Our European-based
businesses, faced with a dull market and overcapacity, focused on structurally
reducing costs, maintaining market share, and preparing for growth in Eastern
Europe. These factors resulted in a substantial improvement in both organic
growth and operating income.

In order to be both environmentally proactive and enhance the value of our
products to our customers, we further refined our portfolio of R&D projects. In
addition, we continued to leverage core technologies in developing markets at
an accelerated pace.

During the year, we bolstered our position in the rapidly growing Asian market
by constructing and commissioning a coil coatings facility at the Company's
production site in Suzhou, China.

Powder Coatings

2002 saw a continued weakening of the markets in Europe and the Americas, while
markets in Asia continued to grow, particularly China. Operating income was
ahead of the 2001 level, with an improving trend in the second half of 2002 as
the benefits of cost cutting began to emerge.

In September, we acquired Ferro's powder coatings businesses in the Americas
and Asia. This gives us a credible number three position in a U.S. market which
still has room to mature as customers reinvest in facilities and move from
liquid to powder as a coatings material. In October, we also acquired a 50
percent share in a growing powder coatings business in Mexico.

The acquisitions in Asia reinforce our number one position in the fastest
growing powder markets in the world. In addition, we opened our new plant in
Vietnam on time, and we are satisfied with our progress there.

Our sales of Interpon(R) products based upon our unique patented technologies
continued to grow, especially in Asia. The acquisition of the Ferro business
gave us further new technology, particularly in acrylic powder coatings. Our
growing global presence will allow international customers to purchase our full
range of products wherever they decide to invest in manufacturing facilities.

After two years of recession in the worldwide powder coatings market we are in
a stronger position than before to benefit from any upturn in market
conditions. However, we are not relying on a benign market scenario to improve
our financial performance.



<PAGE>
42


Marine & Protective Coatings
Sales 2002: EUR 759 million; 2001: EUR 729 million

This business is the worldwide market leader for Marine Antifouling and Heavy
Industry Anticorrosion Coatings under the International(R) brand.

2002 was another year of strong performance with growth in sales and operating
income across all market sectors and geographic regions.

Marine Coatings benefited from a high level of newbuilding activity, in
particular in Korea and China. In October, it strengthened its position in the
Korean market by increasing its shareholding in the joint venture with DPI to
60 percent and by acquiring the Marine Coatings factory from its partner.

During the year, the business has been phasing out tin-containing antifouling
in preparation for the IMO's (International Maritime Organization) ban on the
application of tin-based antifouling from January 1, 2003. With the patented
Ecoloflex(R) tin-free antifouling, the business has a good position with proven
technology going forward.

The Protective Coatings business had an excellent year with high activity in
the Heavy Industry market. In particular, supplies to the oil and gas offshore
industry were buoyant with new construction of platforms and FPSO (Floating
Production Storage and Offloading) units. Sales of the fire proofing material
Chartek(R) for offshore installations were excellent.

The Yacht business also had a strong year in the retail/maintenance market in
the United States and Europe. In May, we strengthened the business through the
acquisition of the U.S. Paint Yacht and Aerospace coatings under the Awlgrip(R)
brand. This acquisition added substantially to the product portfolio in the
topsides finishes segment of the professional superyacht market.

Car Refinishes
Sales 2002: EUR 713 million; 2001: EUR 708 million

Car Refinishes once again proved that its strategy of global presence, in all
relevant market segments, with leading innovative products, services and
software allows it to find the best response under any market conditions.
Despite a soft economy, we were able to maintain sales through intensified
market development efforts, restructuring, and rigorous cost containment.

In Europe West, sales improved despite a shrinking market, and Sikkens(R)
Autowave(R) became the leading waterborne basecoat in the market. In North
America, sales and operating income showed satisfactory growth, reflecting
successful product launches such as Sikkens(R) Autobase(R) Plus and Sikkens(R)
Autoclear(R) III. In Europe East, the financial crisis in Turkey is wearing
off. Asia experienced a real turnaround with income growing almost 50 percent,
spurred by multisegment sales and cost cutting. South America continued to be
affected by a failing economy, but market share grew. Earnings also improved in
Africa and the Middle East, where we are starting a multisegment market
approach and are building up the organization. We continue to strengthen our
position in the Commercial Vehicles market by building upon our extended
product range, including the Mason CT(R) and U-Tech(TM)-brands.

Sikkens(R) Autobase(R) Plus delivered on its promise of being the leading
solvent-borne basecoat in the industry with rapidly growing sales around the
world, particularly in North America.


<PAGE>
                                                                              43


We set up a new unit (AMS), aimed at providing comprehensive accident
management services to insurance companies, bodyshops and fleet owners,
facilitating damage settlement within the total repair chain.

We have created a dedicated global organization to strengthen our relationships
with car manufacturers and are making good progress in securing automotive
aftermarket approvals.

Industrial Products
Sales 2002: EUR 532 million; 2001: EUR 533 million

Volumes grew under market conditions that remained soft in most areas. Our
Asian wood adhesives activities showed the strongest growth, reflecting
increased demand from a booming furniture industry in China. Growth was also
seen in the Americas. Capacity expansion in North America to support growing
sales of impregnated paper to the flooring industry was well timed. Expancel(R)
microspheres show continued growth. In all major areas of activity better
margins based on more efficient production and purchasing processes in
combination with stringent cost control resulted in operating income that was
considerably higher than in the previous year. Better management of operational
working capital contributed to this positive development. The expected effects
of restructuring projects have materialized.

A continued strong focus on R&D enabled us to launch a number of new systems
within wood adhesives for the furniture and construction industry and within
impregnated papers to the flooring industry. New Expancel(R) qualities strongly
boosted sales to the shoe industry.

A greenfield investment in Brazil for the production of impregnated papers came
on stream toward the end of the year. Interquimec SA, Ecuador, which we
acquired in 2001, is now well integrated in our South American resins and
adhesives activities.

CHEMICALS

Business review

In the course of 2002 the Chemical Industry in general saw hardly any
performance improvement compared to a very difficult 2001. The Polymer Industry
and the Pulp & Paper Industry, two of our major customer segments, faced volume
and/or intensified price competition, which negatively impacted our
performance. Restructuring programs, already in place from 2001, to a certain
extent compensated for lower volumes or margins. In addition, higher pension
costs had a negative impact on our earnings.

During 2002 we implemented either growth-based or cash flow-based management
for our various business segments, following an earlier strategic review.
Simultaneously, we started a program to further inspire and develop our people.
A third effort was put in place to boost innovation throughout Chemicals in
order to enhance long-term growth and profit, and a small Innovation Unit was
formed. This unit will establish a network across business units to fully
exploit innovation opportunities, foster cross-fertilization, and set new rules
for the game. New business concepts will be placed in an "incubator" to ensure
rapid development and effective exploitation.

In 2002 we made some selective acquisitions. In acquiring the Industrial
Specialties from Crompton we boosted our North American position and improved
our presence in Asia, while providing a platform for further product
development and business growth. Mochem, a small start-up company, was acquired
to strengthen our High Purity Metal Organics business, which supplies the
electronics and telecommunication


<PAGE>
44


industries. Base Chemicals became full owner of ECI Elektro-Chemie GmbH by
acquiring TUI's 50 percent share. Further portfolio changes included the
divestment of the lead stabilizer business and our carbon disulfide plant in
Indonesia.

As a consequence of the strategic review we made some internal movements.
Plastics and Processing Additives lacked critical mass following the management
buyout of the lead stabilizer business, and PVC Additives was moved to
Functional Chemicals with Polysulfides going to the Innovation Unit. The CMC
business was transferred from Functional Chemicals to Surface Chemistry in
order to create a strong Cellulosic Specialties business together with Rheology
Additives.

A new silica sol plant started up in Wisconsin to support our growing retention
agent business for the American paper industry. A new Kromasil(R) production
plant came into operation in Sweden to reinforce this excellently developing
business of separation chemicals for pharmaceuticals. The first large-scale
monochloroacetic acid plant in China was inaugurated in June. Our Cellulosic
Specialties expanded production in the Netherlands and Italy and a new type of
methyl-based Bermocoll(R) thickener was introduced to the market.

Decisions were taken during the year to invest in a Resins plant in China to
support the fast growing market for coatings and to invest in state-of-the-art
hydroprocessing capacity in North America to more effectively supply their
growing market. In addition, we decided to expand Ethylene Amines capacity in
Sweden. To satisfy growing demand from pipeline customers in Rotterdam, we are
currently increasing chlorine capacity.

An agreement was reached with the Dutch government to cease regular chlorine
transportation in the Netherlands as of January 1, 2006. As a consequence
chlorine capacity in Rotterdam will be further expanded and chlorine and
monochloroacetic acid activities in Hengelo will be transferred to Delfzijl.

Restructuring efforts continued forcefully throughout Chemicals during 2002
concentrating on lowering production and administrative costs, improving supply
chain efficiency and product optimization. Several of these programs will
continue into 2003.

Most Chemicals business units managed to substantially lower their operating
working capital in 2002.

Overall, Chemical's sales of EUR 4.6 billion were flat compared to 2001.
Operating income increased by 1 percent to EUR 344 million, which is 7.5 percent
of sales (2001: 7.4 percent).

Chemicals will continue to focus on profitable growth, serving customers,
growing people, enhanced innovation throughout the group, and investing in line
with its portfolio strategy. This approach, combined with superior technology
and lowest cost, provides the basis for the targeted return over the business
cycle of 2.5 percent over the cost of capital, which corresponds to a return on
investment of about 17 percent.

Developments in the Chemicals business units

Pulp and Paper Chemicals
Sales 2002: EUR 969 million; 2001: EUR 1,020 million

During the year, Pulp & Paper Chemicals was confronted with a downturn in the
pulp and paper industry, particularly in Europe and North America. Overcapacity
and fierce competition forced down selling prices.


<PAGE>
                                                                              45


Operating income was lower, mainly due to lower margins in the first half of
the year. However, improvement occurred later in the year, which is expected to
continue into 2003.

North America registered the weakest performance for both pulp bleaching and
paper chemicals, reflecting paper machine shutdowns and total mill closures. By
the end of the year the situation for bleaching chemicals improved as European
and North American markets began to move toward a better balance between demand
and supply. In South America, particularly in Brazil and Chile, our bleaching
chemicals show promising growth, and further capacity expansion may be needed
there. The situation in Asia has improved considerably and our operations there
are making good progress.

As cost efficiency is an essential competitive tool, we initiated in 2001 a
comprehensive restructuring program covering most operations of Pulp & Paper
Chemicals in Europe and North America. This program primarily focuses on
administrative and production costs but also includes measures to improve
efficiency in the supply chain with key customers. These measures have affected
more than 300 jobs.

The chlorine dioxide concept, which involves on-site production of this
bleaching chemical at customers' plants managed from a Pulp & Paper Chemicals
Remote Operations Center, is very successful. Several new units have been
established at customer mills in Europe and South America, resulting in
improved efficiency and closer cooperation.

The development of remote process control is also a prerequisite for the
substantial restructuring measures we are now implementing at our own plants.
Integration of new IT and chemical process technology forms an essential part
of systems for the supply of chemicals on site. Such systems are now being
developed and will be provided by us as the chemicals supplier.

Demand for our new wet strength agents with improved properties and our
retention systems with several new components is growing. The opening of a new
plant for silica sols in Howard, Wisconsin, completed our supply structure for
retention agents to the North American paper industry.

Within our range of specialty products, separation chemicals for
pharmaceuticals are enjoying excellent market growth, and a new Kromasil(R)
factory came on stream in Bohus, Sweden. Restructuring measures and organic
growth resulted in improved performance for our electrochemicals equipment unit
Permascand and the water treatment projects Purate and MPP systems.

Functional Chemicals
Sales 2002: EUR 769 million; 2001: EUR 785 million

Functional Chemicals can look back on a challenging year, with sales slightly
below 2001. A decline in raw material prices for all product groups,
particularly earlier in the year, and restructuring efforts contributed to a
substantial improvement in operating income.

Under tight market supply conditions, the results for Ethylene Amines remained
favorable. Phosphorus Chemicals, benefiting from its restructuring efforts and
improving markets in polyurethane foams, recovered strongly from the previous
year. Led by monochloroacetic acid, Industrial Chemicals continued to perform
well. Adverse market conditions, particularly in North America and Asia
Pacific, prevailed in our Chelates business. Even though a strongly improved
cost structure and lower raw material prices had a positive effect on earnings,
the financial performance of this unit remained unsatisfactory. Sulfur Products
suffered from rapidly shrinking markets in the rayon industry and from poor
market conditions in general in Asia


<PAGE>
46


Pacific. As a consequence, we divested the Indonesian carbon disulfide plant.
On a more positive note, Lubricants posted a modest improvement.

The successful start-up of the grassroots monochloroacetic acid plant in China
and the capacity expansion on stream in carboxymethylcellulose in Arnhem and
Novara, Italy, considerably strengthened the Industrial Chemicals business. To
ensure continuity of supply when regular chlorine transports are discontinued
in the Netherlands in 2006, production of monochloroacetic acid will be
relocated from Hengelo to Delfzijl.

Commitment to the Ethylene Amines business was reinforced by the decision to
invest in new production capacity.

Surface Chemistry
Sales 2002: EUR 752 million; 2001: EUR 715 million

The slowdown in the world economy also impacted the three business areas within
Surface Chemistry, causing operating income to remain clearly below the
previous year's level.

Compared to 2001, growth rates and margins for our Surfactants declined in all
regions. In particular, industrial surfactants and surfactants for agro
applications were under pressure. The more consumer-related business (fabric
care and cleaning) performed well during 2002 as in previous years. The
Japanese joint venture Lion Akzo Corporation benefited from increased demand in
the fabric care segment.

The acquisition of the Industrial Specialties business of Crompton Corporation
considerably boosted our position in North America and is also a significant
step forward in our strategy to become well established in Asia. The
acquisition adds to our strong presence in fatty amine derivatives and provides
a platform for further product development and business growth. The integration
is progressing well.

Our Oleochemicals business recorded a steady sales volume in 2002, but margins
were clearly below 2000 and 2001 record levels, as prices of natural oils and
fats rose during the year. Selective investment projects initiated during 2002
will contribute to further growth in the years to come.

Rheology Additives (cellulosic specialties for the paint and building
industries) experienced a slowdown in growth, reflecting developments in the
large economies in Europe and South America, but overall performance was in
line with 2001. Our new methyl-based Bermocoll(R) thickener was introduced to
the market and is developing according to plan.

Polymer Chemicals
Sales 2002: EUR 560 million; 2001: EUR 584 million

Operating income in 2002 was disappointing as a consequence of a sluggish
economy, unfavorable currency developments (particularly the U.S. dollar
against the euro), and a further deterioration of margins due to fierce price
competition.

In the last quarter of 2002 we acquired Mochem, a small German start-up
company, strengthening our High Purity Metal Organics business, which supplies
the electronics and telecommunications industries.

Our 50 percent Japanese joint venture Kayaku Akzo Corporation continued to
suffer from the slow Japanese economy. The majority-owned Chinese joint
ventures TANP and CANP did well and benefited


<PAGE>
                                                                              47


from healthy growth in China and Asia in general. Our Russian joint venture
Ankorit also performed satisfactorily.

Polymer Chemicals has a transition program in place to restore the healthy
growth and profitability performance demonstrated in the 1996-2000 period.
Initiatives are already underway to achieve this. These involve four main
thrusts, starting with a reduction of the number of sites where Organic
Peroxides will be manufactured; two have already been discontinued, three more
will follow in the course of 2003. In addition, we are implementing a more
efficient global Supply Chain and Customer Relationship Management system,
based on one global SAP system, which is already operational. Innovation and
New Business Development are receiving heavy emphasis, as is the securing of a
gradual improvement in margins.

Base Chemicals
Sales 2002: EUR 464 million; 2001: EUR 357 million

Despite lower caustic prices, Base Chemicals' operating income improved due to
higher volumes and lower costs.

In order to meet increasing demand in the Rotterdam area, local membrane
electrolysis capacity will be expanded from 360,000 to 450,000 tons per annum.
The project will come on stream in the last quarter of 2003.

An agreement was reached with the authorities to cease regular chlorine
transportation in the Netherlands as of January 1, 2006. As a consequence,
membrane electrolysis capacity in Rotterdam will be further expanded to 500,000
tons per annum and the chlorine and MCA activities in Hengelo, the Netherlands,
will be transferred to Delfzijl, the Netherlands. This relocation will be
carefully aligned with the closure of the diaphragm electrolysis and
chloromethane plants in Delfzijl announced last year. The net effect will be a
reduction of the workforce by some 100 employees.

In the fourth quarter, Base Chemicals became full owner of ECI Elektro-Chemie
GmbH, Germany, by acquiring TUI's 50 percent share.

The results of the 30 percent joint venture Methanor decreased, mainly due to
lower prices and a maintenance stop.

Resins
Sales 2002: EUR 414 million; 2001: EUR 419 million

Despite volume growth, sales declined slightly. Nevertheless, operating income
improved significantly, aided by lower raw material prices and cost savings.

In 2002, we completed the integration of recent acquisitions and focused on
improving efficiencies in the production and supply chain. Emphasis on customer
relations supported by our technical problem-solving capabilities strengthened
our position in the generally stagnant Coating and Printing Ink markets.

Coatings Resins' volumes were up, but price pressure persisted, notably in
Europe and the Americas. Growth of the majority-owned joint ventures in
Malaysia and Indonesia continued. The new resins plant to be built in Suzhou,
China, is one of the first solvent-borne resins foreign investments in that
fast growing market.


<PAGE>
48


Printing Ink and UV Resins, facing tough competition and flat markets, managed
to increase volumes and results significantly. We restructured UV resins
manufacturing in Europe and intensified market development efforts in Europe
and the United States.

We took important initiatives to increase innovative power and improve
personnel development.

Catalysts
Sales 2002: EUR 375 million; 2001: EUR 367  million

Catalysts maintained its leadership position by delivering new and innovative
products to the fuels industry. Many of these new products allowed our
customers to avoid high capital expenditures that would otherwise have been
needed to meet new and future environmental regulations in the areas of
emission control and low sulfur fuels.

Operating income was up significantly, compared to 2001. Sales were only
slightly higher. This gain in performance was attributable to several factors.
In 2002, we reaped the full benefits from the consolidation of our North
American FCC production activities. We also benefited from our strengthened
positions in the performance segments of the HPC market and the FCC additives
market.

We recorded growth in both the HPC and the FCC markets, aided by new
transportation fuel specifications and the tendency of refiners to use heavier
feeds than in previous years. In these key areas, we were able to provide
product and service solutions for difficult challenges our customers were
facing in their businesses. We are currently investing in state-of-the-art HPC
capacity in Pasadena, Texas, to supply the growing North American market more
effectively.

The Nippon Ketjen joint venture did even better than in the record year 2001.
Our Eurecat joint venture had another good year. FCC-S.A. results were lower
than expected, in part due to the devaluation of the Brazilian real.

We continue to invest substantially in R&D. Our R&D units keep on producing
innovative technologies that bring immediate benefits to our customers in the
fuel industry.

Salt
Sales 2002: EUR 269 million; 2001: EUR 261 million

Salt delivered a solid performance in 2002. Sales and operating income improved
slightly on 2001, and costs were kept under tight control. Performance
reflected high sales to the chemical industry throughout the year, offset by
lower results for deicing salt. We continued to invest in technology in order
to strengthen our position as global leader in vacuum salt and solution mining.

The specialty salt business failed to meet financial targets in a market
characterized by overcapacity. A restructuring program-including closure of one
of the three production locations (Stade, Germany), reduction of headcount in
the Hengelo location (the Netherlands), and upgrading of the product
portfolio-is in full progress. The program is expected to be fully effective by
the end of 2003.

In its first fully operational year, the solar salt facility in Onslow, Western
Australia, performed above expectations both in production and sales.



<PAGE>
                                                                              49


Energy
Sales 2002: EUR 158 million; 2001: EUR 165 million

Operating income from our gas, electricity, and steam supply activities was on
par with the previous year, despite volatile oil and gas markets throughout
2002. Our cogeneration joint ventures operated reliably, and the future of
cogeneration in Europe will be better secured in a new European Council
directive.

Other Activities

Flexsys
Weak economic conditions during the second half of 2001 continued, resulting in
essentially flat volumes for our 50 percent rubber chemicals joint venture. Due
to lower prices caused by highly competitive market conditions, revenues in
2002 were substantially lower. Several cost savings and production
restructuring programs were implemented, which offset a significant part of the
lower revenues effect. Flexsys sold and exited from its nonstaining
antioxidants business (NSAO), which had been a minor activity based on
production at its Nitro, West Virginia plant.

Delamine
Sales volumes for this 50 percent ethylene amines joint venture were higher
than in the previous year but selling prices and results were lower. A major
maintenance stop at the Delfzijl, Netherlands plant and lower export revenues
due to strengthening of the euro in the second half of the year were offset by
lower overall raw material costs than in 2001.

SOURCES AND AVAILABILITY OF RAW MATERIALS

Raw materials essential to our business are purchased in the normal course of
business from numerous suppliers worldwide. In principal, these materials are
widely available from multiple sources. No serious shortages or delays were
encountered in 2002 and none are expected in 2003.

MARKETING AND DISTRIBUTION

The Company sells its products in more than 130 countries. The sales, marketing
and distribution functions are decentralized within the Company. Each business
unit has its own sales, marketing and distribution network for its products.
The organization of these functions varies from business unit to business unit.

For the geographical distribution of sales, see Item 5 "Operating and Financial
Review and Prospects".

Pharma
The Company sells its human-healthcare prescription medicines primarily through
medical representatives to wholesale drug distributors, independent and chain
pharmacies, hospitals, government entities and other institutions. The products
are dispensed to the public through prescriptions written by physicians.
Similar procedures generally apply for the animal-healthcare products, whereby
representatives of the Company visit veterinarians or farmers.

The Company deploys sales forces of representatives and supporting medical
staff to visit medical prescribers and healthcare purchasers or veterinarians
to promote the Company's (prescription) products.

However, the traditional relationship between the Company and its ultimate
customers is changing as a result of the Internet. Patients are better informed
and want to have more of a say in their treatment. The


<PAGE>
50


Internet is a unique tool for establishing contacts between the Company, the
prescribers of its products, and the end users. The Company is developing a
coherent e-business strategy focused on marketing aspects and knowledge
management, which fully covers all disciplines. The e-business opportunities
are also exploited in the veterinary business through Vetstream, an electronic
publishing company, providing high-quality subscription services to veterinary
professionals.
For Diosynth, the producer of active ingredients for the pharmaceutical
industry, 80 percent of the sales are to innovators in the United States and
the European Union.

Coatings
Coatings are sold through a range of distribution channels. The operations in
the Decorative sector are serving the Retail (Do-it-yourself), Trade
(Professionals) and Specialties markets. Due to concentration of retailers,
their purchasing power is increasing. The products of the other coatings
activities are mainly sold through a direct sales force.

Chemicals
Chemical products are sold in a wide range of industries. These products are
either marketed directly or through independent merchants, wholesalers and
distributors who resell them to smaller users. Commodity products are sold
through a direct sales force, or through distributors primarily to other
operators in the chemical industry.

INTELLECTUAL PROPERTY

The Company has numerous patent applications and patents, trademark
applications and registrations, domain names and trade secrets, which all help
to protect its products, know-how and technology. Where appropriate, the
Company covers its new products, processes, and other inventions by patent
applications in the relevant regional markets. Protection for individual
products lasts for periods depending on the date on which a patent application
was filed, and the legal lifetime of patents in the various countries,
including patent term extensions for pharmaceutical products. The protection of
intellectual property rights may also vary from country to country, depending
upon its scope and the various granting and registration systems. In most
industrial countries, patent protection exists for inventions in all areas of
technology in which the Company is active. The Company monitors its
competitors, enforces its own intellectual property rights whenever and
wherever advisable and challenges third party patents, trademarks and domain
names whenever appropriate. Intellectual property agreements are in force with
many of the Company's employees, and there are a number of confidentiality
agreements in force with customers and suppliers to protect the Company's know-
how.

GOVERNMENT REGULATION

Akzo Nobel's businesses are subject to the normal regulatory framework
applicable to a pharmaceutical and chemical company, notably various health,
safety and environmental rules both at national and local levels. The Company
also voluntarily conforms to international and national codes of best practice
appropriate to its business. In general, compliance with these existing
regulations and codes does not and should not materially affect the operations,
competitive position and earnings of any of the Company's businesses.

Besides the normal regulatory framework for chemical companies, the Company is
subject to more extensive regulations for the veterinary and human
pharmaceutical industry*. The international





* In this section, the term "pharmaceutical industry" encompasses both human
and animal healthcare, unless specifically indicated.


<PAGE>
                                                                              51


pharmaceutical industry is highly regulated. National and supranational
regulatory authorities administer numerous laws and regulations regarding the
testing, approval, manufacturing, importing, labeling and marketing of drugs,
and also review the safety and effectiveness of pharmaceutical products.
Further controls exist on the non-clinical and clinical development of
pharmaceutical products in particular. These regulatory requirements are a
major factor in determining whether a substance can be developed into a
marketable product and the amount of time and expense associated with such
development. The Company believes it is in material compliance with all
applicable regulations in the jurisdictions where it operates.

The introduction of new pharmaceutical products generally entails a lengthy
approval process. Of particular importance is the requirement in all major
countries that products be authorized or registered prior to marketing and that
such authorization or registration is maintained subsequently. The regulatory
process requires increased testing and documentation for clearance of new
drugs, and a corresponding increase in the expense of product development. To
register a pharmaceutical product, a registration file containing evidence
establishing the quality, safety and efficacy of the product must be submitted
to regulatory authorities. The registration process may take one to several
years, depending on the jurisdiction, the quality of the data submitted, the
efficiency of the registration authority's procedures and the nature of the
product.

In the United States, applications for drug registration are submitted to and
reviewed by the United States Food and Drug Administration ("FDA").
Registrations of veterinary vaccines are reviewed by the US Department of
Agriculture ("USDA") in a slightly different procedure. The FDA regulates the
testing, approval, manufacturing and labeling of pharmaceutical products
intended for commercialization in the United States, as well as the monitoring
of all pharmaceutical products currently on the U.S. market. The pharmaceutical
development and registration process is typically intensive, lengthy and
rigorous. A new drug application is filed with the FDA if the data demonstrate
sufficient quality, safety and efficacy. The new drug application must contain
all the specific information that has been gathered and typically covers all
subjects tested in clinical trials. Very similar requirements apply to field
trials for veterinary drugs and to vaccine registrations with the USDA.
Once the FDA approves the new drug application, the new pharmaceutical becomes
available for physicians or veterinarians to prescribe. Thereafter, the drug
owner must submit periodic reports to the FDA, including any cases of adverse
reactions. For some medications, the FDA requires additional studies to
evaluate long-term effects or to gather information on the use of the product
under special conditions. The FDA also requires compliance with standards
relating to laboratory, clinical and manufacturing practices.

In the European Union ("EU"), there are two main procedures for application for
marketing authorization, namely the Centralized Procedure and the Mutual
Recognition Procedure. In the Centralized Procedure, applications are made to
the European Medicines Evaluation Agency for review and a scientific opinion.
The EMEA's opinion is forwarded to the European commission for authorization,
which is valid across all EU member-states. The Centralized Procedure is
mandatory for all biotechnology products and optional for other new chemical
compounds or innovative medicinal products. In the Mutual Recognition
Procedure, a first authorization is granted by a single EU member-state.
Subsequently, mutual recognition of this first authorization can be sought from
the remaining EU member-states.
EU member-states also run their own pharmacovigilance systems to which post-
marketing adverse events are reported. A single pharmacovigilance system for
the entire EU is being developed.

In Japan, applications for marketing authorization are made to one of the
Prefectural Governments. For new drugs, applications are forwarded tot the
Pharmaceutical and Medical Devices Evaluation Center (the Evaluation Center),
from which it is forwarded to the Organisation for Pharmaceutical Safety and
Research


<PAGE>
52


("KIKO") for a check on GLP and GCP compliance and a reliability review of the
data. When KIKO has completed the review, the Evaluation Center performs a
scientific review of the application and prepares a review report. This review
report is forwarded tot the Ministry of Health, Labor and Welfare ("MHLW"). The
review report of the Evaluation Center is also forwarded to the Pharmaceutical
Affairs Food & Sanitation Council ("PAFSC") a consultative body to the MHLW.
After advice from the PAFSC, only the Minister of MHLW is authorized to issue a
license.


PRICE CONTROLS

In addition to the forms of regulation already referred to, in many countries
the prices of human pharmaceutical products are controlled by law and are
subject to drug reimbursement programs with varying price control mechanisms.
Governments may also influence the prices of pharmaceutical products through
their control of national healthcare organizations, which may bear a large part
of the cost of supplying such products to consumers. Generic substitution
becomes an increasingly important issue worldwide, and it is actively supported
by governmental and healthcare policies in several countries.
In the United States, debate over the reform of the healthcare system has
resulted in an increased focus on pricing. Although there are currently no
government price controls over private sector purchases in the United States,
federal legislation requires pharmaceutical manufacturers to pay prescribed
rebates on certain drugs to enable them to be eligible for reimbursement under
healthcare programs. In the absence of new government regulation, managed care
has become a potent force in the market place that increases downward pressure
on the prices of the pharmaceutical products. In addition, the current national
debate over Medicare reform could increase pricing pressures. If Medicare
reform results in the provision of outpatient pharmaceutical coverage for
beneficiaries, the U.S. government could use its enormous purchasing power to
demand discounts from pharmaceutical companies thereby creating de facto price
controls on prescription drugs. On the other hand, Medicare drug reimbursement
legislation may increase the volume of pharmaceutical drug purchases,
offsetting, at least in part, potential price discounts. As a result, we expect
that pressure on pricing and operating results will continue.

In the EU, governments influence the price of pharmaceutical products through
their control of national healthcare systems that fund a large part of the cost
of such products to consumers. The downward pressure on healthcare systems in
general, particularly prescription drugs, has become very intense. As a result,
increasingly high barriers are being erected to the entry of new products, as
exemplified by the National Institute for Clinical Excellence in the United
Kingdom, which evaluates the data supporting new medicines and passes
reimbursement recommendations to the government. In addition, in some countries
cross-border imports from low-priced markets (parallel imports) exert a
commercial pressure on pricing within a country.

In Japan, the National Health Ministry biannually reviews the pharmaceutical
prices of individual products. In the past, these reviews have resulted in
price reductions. The Japanese government intends a healthcare reform and the
pharmaceutical pricing system will be one of the issues closely looked at. Key
issues are the evaluation of innovative products and the pricing of long-listed
products, including the biannual reduction of reimbursement prices adjusted for
actual discounts given. The previously proposed reference price system has been
abandoned by the government.


C. ORGANIZATIONAL STRUCTURE

Reference is made to Exhibit 8 for a list of the Company's subsidiaries.


<PAGE>
                                                                              53


D. PROPERTY, PLANT AND EQUIPMENT

A substantial portion of Akzo Nobel's principal production plants and research
facilities are located in Europe and North America. Akzo Nobel's principal
production plants and research facilities are located in the Netherlands,
Germany, United Kingdom, Sweden, France, Italy, the United States and Brazil.
In total, Akzo Nobel has over 300 production plants throughout the world.

The most important production sites for Pharma are in Oss and Boxmeer, the
Netherlands; Dublin, Ireland; Unterschleissheim, Germany; and West Orange,
New Jersey. The major Coatings sites are based in Montataire, France;
Sassenheim, the Netherlands; Vilvoorde, Belgium; Cologne, Germany; Barcelona,
Spain; Cernobbio, Italy; Malmoe, Sweden; Darwen and Hull, United Kingdom;
Houston, Texas; Columbus, Ohio; High Point, North Carolina; Nashville,
Tennessee; Sao Paulo, Brazil; and Melbourne, Australia. For Chemicals, the
major production sites are located in Delfzijl, Hengelo, Rotterdam, and
Amsterdam, the Netherlands; Bohus and Stenungsund, Sweden; and Pasadena, Texas.

Akzo Nobel's policy is generally to acquire its own facilities. The net book
value of its property, plant equipment was EUR 4.4 billion at December 31,
2002. The book value of property, plant and equipment financed by installment
buying and leasing was EUR 42 million at December 31, 2002. Akzo Nobel has
rented certain offices and warehouses by means of operational leases.

Akzo Nobel believes that its production plants and research facilities are well
maintained and generally adequate to meet its needs for the foreseeable future.

Further discussions on relevant developments in property, plant and equipment
are included in Item 4.B under "Business Review and Developments at Business
Units".

For environmental issues affecting the Company's properties, reference is made
to Legal Proceedings in Item 8 "Financial Information".


<PAGE>
54


Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The comparative figures have been restated to reflect the changes in accounting
principles in 2002 as set forth below. Unless stated otherwise, net income and
operating income figures are exclusive of extraordinary and nonrecurring items.

Nonrecurring items relate to income and expenses resulting from normal business
operations, which, because of their size or nature, are disclosed separately to
give a better understanding of the underlying result for the period. These
include items such as restructurings and impairment charges, and significant
gains and losses on the disposal of businesses, not meeting the requirements
for extraordinary items. Operating income before nonrecurring items is one of
the key figures management uses to assess the performance of the Company, as
these figures better reflect the underlying trends in the results of the
activities.
In this Annual Report break downs of operating income before nonrecurring
items, of nonrecurring items, and of operating income, after nonrecurring
items, per segment are disclosed and reported on.

The following discussion is based on the consolidated financial statements of
Akzo Nobel included in this annual report under Item 18 and should be read in
conjunction with those statements and the other financial information included
herein, including the industry segment information and information by
geographical area.

The consolidated financial statements of Akzo Nobel appearing in this annual
report are prepared in accordance with NL GAAP, which differ in certain
respects from US GAAP. The significant differences between NL GAAP and US GAAP
affecting Akzo Nobel's net income and shareholders' equity are described in
Note 21 of the Notes to the Consolidated Financial Statements of Akzo Nobel.

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.



<PAGE>
                                                                              55


2002 COMPARED TO 2001

The economy in the year 2002 did not bring what we had hoped for. The
anticipated recovery in the second half of the year failed to materialize.
After a strong first quarter the economy slipped further back in almost all our
markets. At the same time, the euro strengthened relative to almost all
currencies. And to make matters worse, the continuing dramatic decline in stock
prices negatively affected pension assets, which translated into a pre-tax
provision for additional minimum pension liabilities of EUR 1.8 billion on the
balance sheet and a EUR 80 million increase in pension costs.

Against that difficult background, Akzo Nobel weathered the storm reasonably
well. Our results lagged only mildly behind the previous two years, which were
record years in the history of the Company.

Although our Coatings and Chemicals operations clearly did better than in 2001,
they could not fully compensate for the higher pension costs, negative currency
effects, and lower Pharma earnings.

In light of these adverse developments, we revised our plans in the course of
the year. Capital expenditures were cut to offset the negative influence of
additional cash payments into pension funds and adjust to changed market
expectations. In 2001, we had already embarked on an ambitious plan to promote
operational excellence. The associated program to reduce the number of jobs by
3,500 was accelerated and extended to 5,500.

Finally, we reduced our working capital and kept expenditures for acquisitions
and proceeds from divestments more or less in balance.

These actions have resulted in a reduction of net debt by EUR 0.8 billion and a
lean organization, which we believe will enable us to benefit from a potential
upturn in the market.
The investments and acquisitions that did take place were made in line with our
priorities. Pharma's investments were nearly twice the depreciation level and
focused on providing the high-quality conditions required for further growth.
Coatings and Chemicals reduced their investments to well below depreciation and
favored priority businesses and regions. Particularly China and Central and
Eastern Europe enjoyed their attention. In these areas, growth continued at a
high rate, and we opened several new factories to participate in this
development.


<PAGE>
56


SALES, COSTS AND INCOME

<TABLE>
<CAPTION>

<S>                                                   <C>      <C>   <C>    <C>
-------------------------------------------------------------------------------------
                                                     Condensed statement of income

Millions of euros                                            2002           2001
-------------------------------------------------------------------------------------
Net sales                                                  14,002         14,110
Cost of sales                                              (7,301)        (7,393)
                                                           -------        --------
Gross margin                                                6,701          6,717
Selling, R&D, and G&A expenses, other results              (5,209)        (5,146)
                                                           -------        --------
Operating income before nonrecurring items*                 1,492          1,571
Nonrecurring items*                                          (130)          (449)
                                                           -------        --------
Operating income, after nonrecurring items*                 1,362          1,122
Financing charges, net                                       (204)          (257)
                                                           -------        --------
Operating income less financing charges                     1,158            865
Income taxes                                                 (335)          (281)
                                                           -------        --------
Earnings of consolidated companies after taxes                823            584
Earnings from nonconsolidated companies                38            69
Nonrecurring* gain / (loss) nonconsolidated companies  (8)          (14)
                                                    ------        ------
                                                               30             55
                                                           -------        --------
Earnings before minority interest                             853            639
Minority interest                                             (35)           (31)
                                                           -------        --------
Net income before extraordinary items                         818            608
Extraordinary items after taxes                                 -             63
                                                           -------        --------
Net income                                                    818            671
                                                           =======        ========
Net income excluding extraordinary and
  nonrecurring items*                                         892            930
</TABLE>

*  Nonrecurring items relate to income and expenses resulting from normal
   business operations, which, because of their size or nature, are disclosed
   separately to give a better understanding of the underlying result for the
   period. These include items such as restructuring and impairment charges,
   and significant gains and losses on the disposal of businesses, not meeting
   the requirements for extraordinary items.


Sales
Net sales in 2002 aggregated EUR 14.0 billion, 1 percent down on previous year.
Autonomous growth was 3 percent, with 2 percent stemming from volume growth and
1 percent from higher selling prices. All groups received autonomous growth.
The negative currency translation impact of 3 percent predominantly related to
the weakening of the U.S. dollar, the Brazilian real, and various Asian
currencies.
Acquisitions added 2 percent, while divestments reduced sales with 3 percent.
Acquisitions mainly concerned Ferro's powder coatings business and Crompton's
Industriel Specialties, while divestments mainly related to the Diagnostics
activities and Printing Inks.



<PAGE>
                                                                              57


R&D expenses
R&D expenses were EUR 912 million, up EUR 65 million (8 percent), primarily
reflecting Pharma's continuously expanding research activities. Pharma's R&D
expenses as a percentage of sales were increased to 15 percent (2001: 13
percent). In 2002, Organon spent 18 percent of its sales on research (2001: 15
percent). For Coatings and Chemicals this ratio remained unchanged at 3
percent.

Operating Income
Operating income before nonrecurring items ended 5 percent below 2001, at
EUR 1,492 million. Coatings and Chemicals did better than in 2001, aided by cost
savings of EUR 65 million realized during 2002. This earnings increase however,
was more than offset by EUR 80 million higher pension costs, negative currency
translation effects of EUR 80 million, and lower Pharma earnings. Operating
income including nonrecurring items amounted to EUR 1,362 million (2001:
EUR 1,122 million).

Financing Charges, net
Financing charges decreased from EUR 257 million in 2001 to EUR 204 million in
2002. This was the result of a substantial reduction of net borrowings and
lower short-term interest rates. Furthermore, due to the weaker U.S. dollar,
interest denominated in this currency translated into lower financing charges.
Interest coverage improved from 6.1 to 7.3.

Income Taxes
The income tax charge for 2002 amounted to 29 percent, compared with 32.5
percent in 2001, reflecting changes in the geographic distribution of the
Company's results.

Earnings from Nonconsolidated Companies
Earnings from nonconsolidated companies decreased from EUR 69 million to EUR 38
million compared to 2001. Earnings for Acordis, Flexsys and Methanor were
principally responsible for the decline.

Nonrecurring Items

The net nonrecurring loss for consolidated companies in 2002 consists of the
following elements:
<TABLE>
<CAPTION>

<S>                                             <C>
--------------------------------------------------------
Millions of euros
--------------------------------------------------------
Gains on divestments                             91
Pension premium refund Sweden                    15
Asset impairments and restructurings at
- Pharma                                       (111)
- Coatings                                      (26)
- Chemicals                                     (99)
--------------------------------------------------------

Total                                          (130)
========================================================
</TABLE>

The nonrecurring restructuring and impairment charges mainly relate to the
Company's extended restructuring plans at all three groups, which affect 1,500
additional jobs worldwide. No charge has been recognized for the additional
global cost-saving plans at Pharma, as the details have not yet been completed.
The restructuring and impairment charges consist of provisions for severance
payments and other restructuring costs as well as asset write-downs.


<PAGE>
58


Pharma's nonrecurring items include a write-down of EUR 67 million for the
gepirone ER (Variza(TM)) know-how intangible asset. In view of the developments
in 2002, the chances of success have been reviewed. Although the Company has
good hopes for the future of this product, it still decided (also for prudence
reasons) to write down this intangible asset, in accordance with the accounting
standards.

The nonrecurring gain on divestments concerns the divestment of Rosemont
Pharmaceuticals Ltd in the United Kingdom and several other smaller
divestments.

The nonrecurring items at nonconsolidated companies principally relate to
charges for Acordis.


<TABLE>
<CAPTION>
Restructuring of Activities
<S>                                               <C>                   <C>           <C>
-----------------------------------------------------------------------------------------
                                                Termination            Exit         Total
Millions of euros                                  benefits           costs     provision
-----------------------------------------------------------------------------------------
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
=========================================================================================
</TABLE>

2002 movements
For the additions charged to income as nonrecurring item, reference is made to
the disclosure under nonrecurring items in 2002 compared to 2001. The additions
to termination benefits involve approximately 1,500 jobs at various sites all
over the world.

During 2002, the total amount paid and charged against the related liability
amounted to EUR 123 million for termination benefits and EUR 78 million for
exit costs. These payments and charges all concerned the execution of plans
decided upon during 2002 and prior years.

2001 movements
For the additions charged to income as nonrecurring item, reference is made to
the disclosures under nonrecurring items in 2001 compared to 2000. The
additions to termination benefits involve approximately 3,500 jobs at various
sites all over the world.

The other additions charged to income concern various relatively small
restructurings at several sites of Coatings and Chemicals.


<PAGE>
                                                                              59


During 2001, the total amount paid and charged against the related liability
was EUR 118 million for termination benefits and EUR 34 million for exit costs.
These concerned the execution of plans decided upon during 2001 and prior
years.

Sales and Operating Income by Activities
Akzo Nobel strives to maintain strong growth in Pharma, further strengthen and
expand its Coatings business - the world's largest in its industry - and
concentrate on improving Chemicals' return and cashflow.



<TABLE>
<CAPTION>

<S>                      <C>     <C>    <C> <C>           <C>          <C>    <C> <C>   <C> <C>     <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------
                               Net sales             Operating income       Nonrecurring*         Operating income
                                                          before                items            after nonrecurring*
                                                    nonrecurring* items                                 items
Millions of euros          2002         2001         2002        2001      2002       2001        2002           2001
---------------------------------------------------------------------------------------------------------------------
Pharma                    4,008        4,044          768         831        21         41         747            790
Coatings                  5,521        5,591          465         426        19        200         446            226
Chemicals                 4,598        4,604          344         340        96        218         248            122
Miscellaneous products,
  intragroup deliveries,
  and eliminations         (125)        (129)         (85)        (26)       (6)       (10)        (79)           (16)
---------------------------------------------------------------------------------------------------------------------
Total                    14,002       14,110        1,492       1,571       130        449       1,362          1,122
=====================================================================================================================
</TABLE>

*  Nonrecurring items relate to income and expenses resulting from normal
   business operations, which, because of their size or nature, are disclosed
   separately to give a better understanding of the underlying result for the
   period. These include items such as restructuring and impairment charges,
   and significant gains and losses on the disposal of businesses, not meeting
   the requirements for extraordinary items.

Pharma

<TABLE>
<CAPTION>

<S>           <C>          <C>                      <C>
-----------------------------------------------------------------------------
                    Percentage                                    Percentage
                  of net sales                                  of net sales
Business unit             2002     Country of origin                    2002
-----------------------------------------------------------------------------
Organon                     62     The Netherlands                        27
Intervet                    26     Germany                                 5
Diosynth                    12     United Kingdom                          4
                                   France                                  4
                                   Other European countries               24
                                   USA and Canada                         24
                                   Latin America                           5
                                   Asia                                    6
                                   Other regions                           1
============================================================================
</TABLE>

In 2002, Pharma's sales ended at EUR 4.0 billion, a slight decrease on 2001.
Autonomous growth of 6 percent was offset by a 4 percent negative currency
impact and a 3 percent negative influence of acquisitions and divestments.

Pharma's operating income decreased 8 percent, ending at EUR 768 million.
Diosynth achieved a strong performance in 2002, but Organon and Intervet are
under pressure.


<PAGE>
60


During 2002, competition from companies that produce generic drugs became more
aggressive. Also the economic situation in Latin America and elsewhere
contributed to the turbulent and complex business situation. The weaker U.S.
dollar and other key currencies had a growing impact on Pharma's earnings as
compared to 2001. Also higher pension costs had a strong impact on earnings.

In 2002, the Company significantly increased R&D spendings from 13 percent to
15 percent of sales, and invested in the launch of two new products, the
antithrombotic Arixtra(R) and the contraceptive ring NuvaRing(R). At the same
time, cost savings were actively pursued to protect margins.

Earnings of the animal healthcare activities were under pressure from soft
market conditions, particularly in Latin America, which is an important market
for cattle and poultry production. Also weak currencies and some inventory
write-offs adversely impacted operating income.

Diosynth achieved a strong performance with healthy sales and earnings growth.
Diosynth continues to attract major pharmaceutical companies as well as biotech
start-ups as customers for its process development and active pharmaceutical
ingredients production businesses.

Coatings

<TABLE>
<CAPTION>

<S>                          <C>              <C>                  <C>
--------------------------------------------------------------------------------
                            Percentage of                         Percentage of
                                 net sales                             net sales
Business unit                         2002    Country of origin            2002
--------------------------------------------------------------------------------
Decorative Coatings                     34    The Netherlands                  6
Industrial Coatings and Finishes        31    Germany                          9
Marine & Protective Coatings            13    Sweden                           8
Car Refinishes                          13    United Kingdom                  11
Industrial Products                      9    France                           9
                                              Other European countries        21
                                              USA and Canada                  19
                                              Latin America                    3
                                              Asia                            10
                                              Other regions                    4
================================================================================
</TABLE>

Sales of EUR 5.5 billion were basically flat, compared to 2001. Autonomous
growth of 3 percent was offset by a negative currency translation effect of
also 3 percent.

Despite difficult economic circumstances and increased pension costs in 2002,
Coatings achieved a significant improvement in performance through tight cost
control on all fronts and tight capital management, while some of the effects
of the far-reaching restructuring programs initiated in 2001 and extended
during 2002 materialized. The implementation of these restructuring programs is
on schedule. At December 31, 2002, the workforce has been reduced by 1,400
employees, relative to the increased target of 2,500. This resulted in cost
savings of EUR 25 million for 2002.

Coatings' operating income of EUR 465 million was up 9 percent from 2001.
Return on sales increased to 8.4 percent, against 7.6 percent in 2001. Return
on investment met the 20 percent threshold in 2002, compared to 18.1 percent in
2001. Invested capital was 5 percent lower due to tighter working capital
management and lower capital expenditures.



<PAGE>
                                                                              61


Earnings of Decorative Coatings were significantly up, mainly attributable to
cost savings and higher margins. The business in Turkey did better compared to
2001, but remains vulnerable. Earnings of the industrial activities improved,
although in general the business climate remains weak, especially in Europe.
Marine & Protective Coatings turned in an excellent performance, particularly
in Asia. Car Refinishes achieved a stable performance in the face of
deteriorating market conditions.

In 2002, we continued our selective bolt-on acquisition strategy. By acquiring
the Ferro Powder Coatings activities in the Americas, the Company was able to
resolve a major strategic gap. Moreover, it fortified its global leadership
position in powder coatings with the Ferro businesses in Korea and China, the
formation of a 50 percent joint venture in Mexico, and the expansion of the
powder coatings activities in Italy. Further bolt-on acquisitions concerned the
Awlgrip(R) marine and aerospace coatings businesses, the high performance
specialty paint businesses of Plascon, United Kingdom, car paints distributors
in France and Finland, several decorative paint distributors in Germany,
Switzerland, and the Benelux, and the increase of our shareholding in the Greek
decorative coatings joint venture Vivechrom to 76 percent. Coatings also
strengthened its position in the Korean marine coatings market by acquiring the
Chilseo manufacturing site and at the same time increasing our shareholding in
the marine coatings joint venture IPK to 60 percent.

Chemicals

<TABLE>
<CAPTION>

<S>                                       <C>                  <C>                    <C>
-----------------------------------------------------------------------------------------
                                   Percentage                                  Percentage
                                 of net sales                                of net sales
Business unit                            2002    Country of origin                   2002
-----------------------------------------------------------------------------------------
Pulp and Paper Chemicals                   20    The Netherlands                       28
Functional Chemicals                       16    Germany                                8
Surface Chemistry                          15    Sweden                                16
Polymer Chemicals                          11    UK                                     3
Base Chemicals                             10    Other European countries               6
Resins                                      8    USA and Canada                        29
Catalysts                                   8    Latin America                          3
Salt                                        3    Asia                                   6
Plastics and Processing Additives           6    Other regions                          1
Energy                                      3
=========================================================================================
</TABLE>

Overall, Chemicals' sales of EUR 4.6 billion were flat compared to 2001.
Autonomous growth was 2 percent, while currency translation had a negative
impact of 3 percent. Operating income in 2002 increased slightly to EUR 344
million, which is 7.5 percent of sales (2001: 7.4 percent). Benefits from the
restructuring programs and lower raw material prices were offset by the impact
of the weak economic conditions, lower exchange rates for key currencies, and
higher pension costs. Return on investment improved as a result of Chemicals'
tight capital management through control over working capital and lower capital
expenditures.

In the course of 2002 the chemical industry in general saw hardly any
performance improvement compared to a very difficult 2001. In particular, the
polymer industry and the pulp and paper industry, two of our major customer
segments, faced volume and/or fierce price competition, which negatively
impacted performance. Restructuring programs, already initiated in 2001,
resulted in cost savings of EUR 40 million and thereby to a certain extent
compensated for lower volumes and margins. During 2002 these programs were
accelerated and extended and now aim at a workforce reduction of 2,200 jobs, of
which 700 had been realized at the end of 2002. In addition, weakening of
certain key currencies exerted a negative impact on earnings.


<PAGE>
62


Catalysts turned in a substantially improved performance, reaping benefits from
cost savings and an improved product portfolio. Functional Chemicals benefited
from lower raw material prices. Base Chemicals and Salt also did better. At
Pulp & Paper Chemicals, results remained under pressure, mainly in the United
States. Polymer Chemicals and Surface Chemistry also suffered from weak market
conditions.

In 2002, Chemicals made some selective acquisitions. Crompton's Industrial
Specialties boosted the Company's North American position and improved its
presence in Asia. Mochem, a small start-up company, was acquired to strengthen
the High Purity Metal Organics business. Base Chemicals became full owner of
ECI Elektro-Chemie GmbH by acquiring TUI's 50 percent share. Further portfolio
changes included the divestment of the lead stabilizer business and our carbon
disulfide plant in Indonesia.

Capital expenditures are mainly focused on growth products and regions.

Sales by nonconsolidated companies, on a 100 percent basis, totaled EUR 1.5
billion. Chemicals' share in earnings of these companies was EUR 40 million,
after taxes.

Geographic Developments

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                    Net sales,            Net sales,   Operating income        Identifiable
                                                  by destination           by origin   before nonrecurring        assets
                                                                                              items
<S>                                               <C>         <C>       <C>       <C>     <C>      <C>        <C>        <C>
Millions of euros                                  2002      2001      2002      2001    2002     2001       2002       2001
------------------------------------------------------------------------------------------------------------------------------------
The Netherlands                                     816       720     2,662     2,533     191      219      2,618      2,595
Germany                                           1,084     1,052     1,051     1,070      78       82        819        931
Sweden                                              517       512     1,184     1,088      89       67        798        831
United Kingdom                                      963     1,036       911       924      13       38      1,134      1,365
Other European countries                          3,951     3,964     3,016     3,266     654      712      2,210      1,842
USA and Canada                                    3,723     3,802     3,318     3,263     149      190      2,772      3,090
Latin America                                       767       917       506       660      99      104        424        589
Asia                                              1,513     1,429     1,064     1,039     161      113        838        859
Other regions                                       668       678       290       267      58       46        306        345
Eliminations, cash and
cash equivalents, and nonconsolidated companies,
 net                                                                                                          870        478
------------------------------------------------------------------------------------------------------------------------------------
Total                                            14,002    14,110    14,002    14,110    1,492   1,571     12,789     12,925
====================================================================================================================================
</TABLE>

In 2002, sales in Latin America decreased to EUR 767 million as a result of
weaker currencies and soft market conditions, which placed the animal
healthcare activities of Intervet under pressure. In the United States,
Pharma's sales of oral contraceptives were affected by generic competition in
2002. Sales in The Netherlands were higher as a result of higher Chemicals'
sales, while sales in the United Kingdom decreased due to lower sales from both
Coatings and Chemicals. Asia sales grew mainly as a result of the strong
performance of Marine and Protective Coatings, but also Chemicals sales
increased, mainly in China.

Development of earnings more or less shows the same picture as sales, except
for The Netherlands, where operating income was down despite higher sales, due
to higher pension costs and lower Coatings'


<PAGE>
                                                                              63


operating income earnings. The downturn in the Other European Countries mainly
stems from lower Pharma earnings.

2001 COMPARED TO 2000

By many standards 2001 was a turbulent year. The brutal attacks on the United
States brought about an international war against terrorism and aggravated a
process of worldwide economic decline, which had previously set in. Against
this background the Company showed resilience and reported net income close to
the record earnings of 2000.

Our high growth in Pharma and the exit from the Fibers business (in 1999) have
certainly contributed to this performance.

Pharma's strong performance largely compensated for an earnings decline of 5
percent in Coatings and 24 percent in Chemicals. Although these declines were
moderate relative to their industrial peers, they only strengthened our
determination to upgrade further our activities, through internal
restructurings and portfolio improvements.

We also modified our portfolio to bring it further in line with our priorities.
We invested heavily in growth in Pharma; capital expenditures increased and
substantially exceeded depreciation in this segment. In addition, we acquired a
bridgehead in the United States for our Biotech business. Still, excellent
results and the divestment of our Diagnostics business created a positive net
cash balance at Pharma.

Our Coatings and Chemicals activities funded their investments and acquisitions
from their own generated cash flow. Emphasis was placed on a limited number of
targeted acquisitions and divestments in Europe and the United States and some
important greenfield investments in Asia, notably in China, and in Russia-two
countries where market growth remained remarkably high during 2001.


<PAGE>
64


SALES, COSTS AND INCOME

<TABLE>
<CAPTION>

<S>                                                        <C>          <C>    <C>          <C>
-------------------------------------------------------------------------------------------------
                                                                   Condensed statement of income
Millions of euros                                                      2001                2000
-------------------------------------------------------------------------------------------------
Net sales                                                            14,110              14,003
Cost of sales                                                        (7,393)             (7,436)
                                                                     -------             -------
Gross margin                                                          6,717               6,567
Selling, R&D, and G&A expenses, other results                        (5,146)             (4,926)
                                                                     -------             -------
Operating income before nonrecurring items*                           1,571               1,641
Nonrecurring items*                                                    (449)                (84)
                                                                     -------             -------
Operating income, after nonrecurring items*                           1,122               1,557
Financing charges, net                                                 (257)               (245)
                                                                     -------             -------
Operating income less financing charges                                 865               1,312
Income taxes                                                           (281)               (440)
                                                                     -------             -------
Earnings of consolidated companies after taxes                          584                 872
Earnings from nonconsolidated companies                      69                  65
Nonrecurring* gain / (loss) nonconsolidated companies       (14)                 78
                                                          -------             -------
                                                                         55                 143
                                                                     -------             -------
Earnings before minority interest                                       639               1,015
Minority interest                                                       (31)                (43)
                                                                     -------             -------
Net income before extraordinary items                                   608                 972
Extraordinary items after taxes                                          63                 (25)
                                                                     -------             -------
Net income                                                              671                 947
                                                                    ========             =======
Net income excluding extraordinary and nonrecurring items*              930                 956
</TABLE>

*  Nonrecurring items relate to income and expenses resulting from normal
   business operations, which, because of their size or nature, are disclosed
   separately to give a better understanding of the underlying result for the
   period. These include items such as restructuring and impairment charges,
   and significant gains and losses on the disposal of businesses, not meeting
   the requirements for extraordinary items.

Sales
Net sales in 2001 amounted to EUR 14.1 billion, up 1 percent from 2000. Higher
volume for Pharma was offset by lower volume for Coatings and Chemicals.
Average selling prices were 2 percent higher. The effect of acquisitions and
divestments, on balance, was nil, while currency translation had a negative
effect of 1 percent.

Operating Income
Operating income of EUR 1,571 million was 4 percent below the record year 2000.
Clear growth at Pharma, attributable to its successful product portfolio,
almost offset the lower results of Coatings and Chemicals. Chemicals was hit
especially by the economic downturn, particularly in the United States.
2001 operating income, including nonrecurring items, amounted to EUR 1,122
million (2000: EUR 1,557 million).



<PAGE>
                                                                              65


Financing Charges, net
Financing charges were somewhat higher than in 2000 due to higher short-term
interest rates in the first half of 2001, the strong U.S. dollar and less
capitalized interest, partially offset by the Company's lower debt level.

Income Taxes
The income tax charge for 2001 amounted to 32.5 percent, compared with 33.5
percent in 2000, reflecting changes in the geographic distribution of the
Company's results.

Earnings from Nonconsolidated Companies
Earnings from nonconsolidated companies increased from EUR 65 million in 2000
to EUR 69 million in 2001. Higher results for ECI Elektro-Chemie, the Brazilian
Catalysts joint venture FCC, and Nippon Ketjen Company were partially offset by
lower earnings of Methanor.

Minority Interest
Minority interest decreased by EUR 12 million, predominantly due to lower
results of the consolidated Coatings joint ventures in Turkey.

Extraordinary and Nonrecurring Items
The net nonrecurring loss of EUR 449 million for consolidated companies in 2001
consisted of the following elements:
<TABLE>
<CAPTION>

<S>                                                   <C>
----------------------------------------------------------
Millions of euros
----------------------------------------------------------
Gains on divestments                                   26
Pension premium refund Sweden                          19
Asset impairments and restructurings at
- Chemicals                                          (257)
- Coatings                                           (201)
- Pharma                                              (36)

----------------------------------------------------------
Total                                                (449)
==========================================================
</TABLE>

Asset impairments and restructurings at Coatings and Chemicals mainly related
to the Company's major restructuring plans.
Asset impairments were recognized for property, plant and equipment at various
sites worldwide, certain intangible assets, and inventories.

The net nonrecurring after-tax loss for nonconsolidated companies in 2001
mainly related to nonrecurring charges recognized for Acordis. In July 2001,
the Company announced major restructuring programs for Coatings and Chemicals.
The divestment of Diagnostics and Printing Inks resulted in a net extraordinary
gain of EUR 63 million.



<PAGE>
66


Sales and Operating Income by Activities
For Akzo Nobel the change to the new millennium coincided with the most
fundamental transformation in the Company's history. Fibers' exit in 1999
drastically changed the composition and face of Akzo Nobel.




<TABLE>
<CAPTION>

<S>                                           <C>          <C>       <C>        <C>     <C>       <C>          <C>         <C>
-----------------------------------------------------------------------------------------------------------------------------------
                                                 Net sales          Operating income       Nonrecurring*        Operating income,
                                                                  before nonrecurring*        items            after nonrecurring*
                                                                         items                                        items
Millions of euros                              2001       2000      2001        2000      2001      2000         2001        2000
------------------------------------------------------------------------------------------------------------------------------------
Pharma                                        4,044      3,839       831         765        41        (2)         790         767
Coatings                                      5,591      5,568       426         447       200        13          226         434
Chemicals                                     4,604      4,740       340         445       218        77          122         368
Miscellaneous products, intragroup
deliveries,
and eliminations                               (129)      (144)      (26)        (16)      (10)       (4)         (16)        (12)
------------------------------------------------------------------------------------------------------------------------------------
Total                                        14,110     14,003     1,571       1,641       449        84        1,122       1,557
====================================================================================================================================
</TABLE>

*  Nonrecurring items relate to income and expenses resulting from normal
   business operations, which, because of their size or nature, are disclosed
   separately to give a better understanding of the underlying result for the
   period. These include items such as restructuring and impairment charges,
   and significant gains and losses on the disposal of businesses, not meeting
   the requirements for extraordinary items.

Pharma

<TABLE>
<CAPTION>

<S>           <C>          <C>                      <C>
----------------------------------------------------------------------------------
                     Percentage                                         Percentage
                    of net sales                                      of net sales
Business unit               2001       Country of origin                      2001
-----------------------------------------------------------------------------------
Organon                       61       The Netherlands                          28
Intervet                      27       Germany                                   6
Diosynth                      12       United Kingdom                            4
                                       France                                    3
                                       Other European countries                 24
                                       USA and Canada                           21
                                       Latin America                             7
                                       Asia                                      6
                                       Other regions                             1
==================================================================================
</TABLE>

In 2001, Pharma's sales of EUR 4.0 billion increased 5 percent compared to
2000. Acquisitions and divestments had a 4 percent negative influence. Volumes
were up 9 percent while selling prices increased slightly by 2 percent.
Currency translation effects had a 1 percent negative effect.

Pharma's operating income rose 9 percent to EUR 831 million in 2001 compared to
2000, despite considerably higher marketing and R&D expenses to boost growth.
All three business units turned in strong performances.

Organon's healthcare activities achieved 12 percent autonomous growth and
distinctly higher results than in 2000. Remeron continued its very successful
performance with 51 percent sales growth. Organon's sales in the United States
were EUR 876 million, up 30 percent on previous year and accounted for more
than one


<PAGE>
                                                                              67


third of Organon's worldwide sales. Double-digit sales growth was achieved in
most of the other key-countries.

The animal healthcare activities continued their growth pattern with
considerable sales gains and improved margins.

Diosynth heavily invested in further organic growth, made a strategic
acquisition (the U.S. biotech company CBSI) and placed strong emphasis on the
U.S. market. As a result of these actions and boosted by the tendency of
pharmaceutical innovators to outsource the production of active ingredients,
2001 was a good year in terms of sales growth and profitability.

Return on sales of Pharma in 2001 was 20.5 percent against 19.9 percent in
2000. Return on investment amounted to 33.7 percent.

Coatings

<TABLE>
<CAPTION>

<S>                                        <C>                   <C>                     <C>
--------------------------------------------------------------------------------------------
                                Percentage of                                  Percentage of
                                    net sales*                                     net sales
Business unit                            2001     Country of origin                     2001
--------------------------------------------------------------------------------------------
Decorative Coatings                         34    The Netherlands                          5
Industrial Coatings and Finishes            30    Germany                                  9
Marine & Protective Coatings                13    Sweden                                   6
Car Refinishes                              13    United Kingdom                          11
Industrial Products                         10    France                                   9
                                                  Other European countries                23
                                                  USA and Canada                          20
                                                  Latin America                            4
                                                  Asia                                     9
                                                  Other regions                            4
============================================================================================
</TABLE>

* Ongoing activities

Despite increasing uncertainty and a significant deterioration of the business
climate, first in the United States but later also in Europe, the previous
year's sales level for Coatings of EUR 5.6 billion was maintained in 2001.
Volumes decreased 2 percent, but selling prices were 3 percent higher. Negative
currency translation effects were 2 percent, while acquisitions added 1
percent. Coatings' operating income before nonrecurring items of EUR 426
million was only 5 percent lower than 2000.

On balance, results of Decorative Coatings were somewhat better in 2001 than in
the previous year. Activities in Europe recovered, while the recession in
Turkey continued to have a negative impact. Car Refinishes succeeded in growing
sales and its profitability level in the face of deteriorating market
conditions. The industrial Coatings activities felt the impact of the economic
downturn in virtually all geographic markets, notably the United States and
Europe. Marine & Protective Coatings again achieved substantial growth in sales
and earnings, helped by the shipbuilding boom in Asia Pacific.
Return on sales dropped to 7.6 percent in 2001, against 8.0 percent in 2000.
Return on investment in 2001 was 18.1 percent compared to 19.8 percent in 2000.


<PAGE>
68


Chemicals

<TABLE>
<CAPTION>

<S>                                      <C>                       <C>                <C>
-----------------------------------------------------------------------------------------
                                   Percentage                                  Percentage
                                 of net sales                                of net sales
Business unit                            2001        Country of origin               2001
-----------------------------------------------------------------------------------------
Pulp and Paper Chemicals                   21        The Netherlands                   25
Functional Chemicals                       16        Germany                            8
Surface Chemistry                          15        Sweden                            17
Polymer Chemicals                          12        UK                                 3
Base Chemicals                              7        Other European countries           7
Resins                                      9        USA and Canada                    29
Catalysts                                   8        Latin America                      4
Plastics and Processing Additives           4        Asia                               7
Salt                                        5
Energy                                      3
=========================================================================================
</TABLE>

In 2001, the Chemical industry was impacted by recession, which started in the
United States and later extended to Europe and Asia. The general trend toward
globalization and concentration on core business created further customer
consolidation and intensified competition. While we achieved an acceptable
performance compared to our peers, we accelerated restructuring programs.

Sales for the year of EUR 4.6 billion were 3 percent below the previous year.
Volumes were down 3 percent, while prices increased 1 percent. Currency
translation effects had a negative impact of 1 percent.

Operating income fell 24 percent to EUR 340 million. Pulp & Paper Chemicals
maintained its market position and registered distinctly higher results. Salt
also turned in a strong performance. Despite the economic slowdown, Surface
Chemistry results came close to the record achieved in 2000. Base Chemicals'
earnings were below the previous year's record, largely due to a planned major
overhaul in its Rotterdam plant. Catalysts' results were lower, principally due
to higher raw material and energy costs in the United States; however,
performance improved in the second half of the year after the Los Angeles site
was closed. Functional Chemicals had a very difficult year with much lower
results. For Polymer Chemicals, four years of strong sales growth came to an
abrupt halt at the end of 2000, causing 2001 earnings to be considerably lower
than 2000. Resins and Plastics & Processing Additives also remained below their
2000 earnings level.

Return on sales was 7.4 percent in 2001 (2000: 9.4 percent). Return on invested
capital decreased from 15.2 percent in 2000 to 11.0 percent in 2001.

Sales by nonconsolidated companies, on a 100 percent basis, totaled EUR 1.7
billion.

Chemicals' share in earnings of these companies was EUR 55 million, after
taxes.


<PAGE>
                                                                              69


Geographic Developments

<TABLE>
<CAPTION>
<S>                                    <C>         <C>           <C>           <C>        <C>     <C>          <C>       <C>
---------------------------------------------------------------------------------------------------------------------------------
                                          Net sales,          Net sales,                Operating income   Identifiable assets
                                               by               by origin            before nonrecurring*
                                           destination                                       items

Millions of euros                     2001        2000          2001          2000       2001     2000        2001       2000
---------------------------------------------------------------------------------------------------------------------------------
The Netherlands                        720         787         2,533         2,214        219      360       2,595      2,860
Germany                              1,052       1,064         1,070         1,134         82       83         931      1,599
Sweden                                 512         538         1,088         1,268         67       79         831        762
United Kingdom                       1,036       1,052           924           966         38       55       1,365      1,198
Other European countries             3,964       3,879         3,266         3,025        712      558       1,842      2,017
USA and Canada                       3,802       3,596         3,263         3,198        190      237       3,090      2,324
Latin America                          917         944           660           704        104       91         589        592
Asia                                 1,429       1,466         1,039         1,132        113      122         859        865
Other regions                          678         677           267           362         46       56         345        308
Eliminations, cash and cash
equivalents, and nonconsolidated
companies, net                                                                                                 478        182
-------------------------------------------------------------------------------------------------------------------------------
Total                               14,110      14,003         14,110       14,003      1,571    1,641      12,925     12,707
===============================================================================================================================
</TABLE>
*  Nonrecurring items relate to income and expenses resulting from normal
   business operations, which, because of their size or nature, are disclosed
   separately to give a better understanding of the underlying result for the
   period. These include items such as restructuring and impairment charges,
   and significant gains and losses on the disposal of businesses, not meeting
   the requirements for extraordinary items.

In 2001, sales grew in the United States and Canada, while sales in other areas
decreased.
Operating income increased in other European countries and Latin America, while
earnings in all other areas decreased.
In the Netherlands, earnings for Pharma and Chemicals decreased significantly,
while Coatings' earnings were slightly up. Lower Swedish results were mainly
due to Coatings, while the lower United Kingdom earnings were mainly driven by
Chemicals.
The increased operating income in other countries was driven by an increase of
Pharma earnings in Switzerland and Ireland as well as an increased operating
income of Pharma and Coatings in France. As a result of the economic downturn,
strengthened by the events of September 11, the United States results
decreased, mainly in Chemicals, but also in Coatings and in Pharma.
Despite lower earnings for Argentina and Brazil, results for Latin America
increased due to Chemicals.
Asia earnings increased considerably in China, mainly Coatings, which was
offset by a decrease of Pharma earnings in Japan.

LIQUIDITY AND CAPITAL RESOURCES

To Akzo Nobel's knowledge, and other than as disclosed herin, there are no
trends or any demands, commitments, events or uncertainties that will result in
or that are reasonably likely to result in a material change in Akzo Nobel's
liquidity. As of the date of this Annual Report, Akzo Nobel has no material
commitments for capital expenditures other than arising from the normal course
of business, and other than as disclosed herin, and, to the knowledge of Akzo
Nobel, there are no material trends, favorable or unfavorable, in Akzo Nobel's
capital resources. Akzo Nobel believes that its capital resources and funds
generated by operations will be sufficient to satisfy future capital
expenditures and other commitments in connection with its ongoing business.
Akzo Nobel may, however, utilize other sources of funding, from time


<PAGE>
70


to time, as and when appropriate. For refinancing part of our short-term
borrowings and expiring long-term borrowings, early in May 2002 a EUR 1 billion
bond loan was issued, maturing in 2009.

Condensed Statement of Cash Flows

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Millions of euros                                                 2002       2001        2000
---------------------------------------------------------------------------------------------
<S>                                                                <C>        <C>         <C>

Cash inflow from operations                                      1,431      1,578       1,734
Working capital (decrease) / increase                              117       (141)       (367)
                                                                 -----      ------      ------
Net cash provided by operating activities                        1,548      1,437       1,367

Investments in noncurrent assets                                  (749)      (910)       (762)
Net cash effect of acquisitions                                   (257)      (314)       (270)
Proceeds from divestments/redemptions                              227        478         441
                                                                 -----      ------      ------
Net cash used in investing activities                             (779)      (746)       (591)

Cash dividends paid                                               (363)      (376)       (313)
Purchase of shares                                                  (6)       (10)
Issuance of shares                                                   4          3           1
Net (redemption) / increase of borrowings                         (290)      (265)       (984)
                                                                 -----      ------      ------
Net cash (used for) / generated by financing activities           (655)      (648)     (1,296)

Effect of exchange rate changes on cash and cash equivalents       (49)        (4)          4
----------------------------------------------------------------------------------------------
Change in cash and cash equivalents                                 65         39        (516)
==============================================================================================
</TABLE>


Net cash provided by operating activities amounted to EUR 1.5 billion in 2002,
EUR 1.4 billion in 2001 and EUR 1.4 billion in 2000. Earnings in 2002 were
higher as a result of lower provisions for restructurings and lower financing
charges. Also better control over working capital had a positive effect on net
cash provided by operations. However, this was partially offset by additional
pension premiums paid as well as higher payments from provisions, as a result
of the execution of restructuring programs.

Net cash used in investing activities amounted to EUR 0.8 billion in 2002,
EUR 0.8 billion in 2001 and EUR 0.6 billion in 2000. Acquisitions expenditures
mainly concerned Ferro's powder coatings activities, Awlgrip(R) marine and
aerospace coatings business, and Crompton's Industrial Specialties. Proceeds
from divestments principally related to the sale of Rosemont Pharmaceuticals
Ltd. and Printing Inks.
Net cash used for financing activities was principally the net effect of the
EUR 1 billion public bond in May 2002 and the redemption of short-term
borrowings. Of this bond, EUR 500 million was swapped into USD 445 million with
floating LIBOR-related interest.

During the year, the Company continued to use the money market, including the
euro and U.S. commercial paper markets for short-term funding requirements.

Akzo Nobel has a U.S. commercial paper program of USD 1.0 billion and a euro
commercial paper program of EUR 1.5 billion. At December 31, 2002, borrowings
under these commercial paper programs aggregated EUR 396 million. This short-
term financing is supported by Akzo Nobel's existing credit facility of USD 1.0
billion as well as its EUR 1.0 billion backup facility, both maturing in the
fourth quarter of 2003. As at the end of 2002, these facilities were not used.


<PAGE>
                                                                              71


At present the Company's long-term credit rating from Standard & Poors is A-
with a short-term rating of A-2. The current long-term credit rating from
Moody's is A3 and their short-term rating is P-2. All ratings mentioned have a
so-called "negative outlook" to them.

The present rating is 3 notches above the so-called high yield-zone. However,
if the Company's rating due to whatever circumstances, would approach or enter
the high-yield zone, this will not only result in increased financing cost for
the Company but could also reduce availability of credit, especially at
commercially acceptable rates.

It should be noted, however, that the Company's present loan documentation does
not include any rating covenants.

A security rating is not a reccommendation to buy, sell of hold securities. The
rating may be subject to revision or withdrawal at any time by the rating
organisation. Each rating should be valued independently of any other rating.

At December 31, 2002, the Company had a cash position of EUR 0.5 billion.

Equity went down EUR 0.8 billion, mainly the result of a EUR 1.1 billion after-
tax minimum pension liability charge, while net interest-bearing borrowings
decreased by EUR 0.8 billion as a consequence of our debt reduction program.
Gearing* increased from 1.34 to 1.46. Interest coverage** improved from 6.1 in
2001 to 7.3 in 2002.

* Net interest-bearing borrowings divided by equity
**Operating income before nonrecurring items divided by financing charges, net.

Contractual obligations

The following table summarizes our principal contractual obligations at
December 31, 2002.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Contractual obligations                                     Payments due by period
Millions of euros
<S>                                                <C>          <C>        <C>       <C>       <C>

                                                           Less than       1-3       4-5    After 5
                                                  Total       1 year     years     years      years
---------------------------------------------------------------------------------------------------
Long-term debt and capital lease obligations*     2,797          734       299       110      1,654
Operating leases and other commitments              647          188       284        76         99
---------------------------------------------------------------------------------------------------
Total Contractual Obligations                     3,444          922       583       186      1,753
===================================================================================================
</TABLE>

* of which capital leases total EUR 42 million.

Other Commercial 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.

Guarantees related to nonconsolidated companies totaled EUR 9 million (at
December 31, 2001: EUR 11 million). As general partners in several
partnerships, Akzo Nobel companies are liable for obligations


<PAGE>
72


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).

Certain Trading Activities

Although the Company hedges certain foreign currency, interest and raw material
pricing exposures, it does not actively trade in derivative financial
instruments. Furthermore, the Company does not hold any derivative financial
instruments where fair values are determined other than on an active trading
market.

Off-Balance Sheet Transactions

Other than the activities in nonconsolidated joint ventures with other
(industrial) partners, and operational leases of certain assets, the Company
does not utilize special-purpose entities or engage in other off-balance sheet
activities.


RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES

Research and development spending amounted to EUR 790 million in 2000, EUR 847
million in 2001, and EUR 912 million in 2002. The Company's research and
development policies are specific to each of its three groups. For additional
information regarding the Company's research and development policies for the
last three years, see Item 4 "Information on the Company" under B. Business
Overview.

CRITICAL ACCOUNTING POLICIES

For the financial years up to and including 2002, Akzo Nobel has presented its
financial statements on a basis consistent with generally accepted accounting
principles in The Netherlands ("NL GAAP"). The preparation of Akzo Nobel's
financial statements requires us to make estimates and judgments that affect
the reported amounts of assets and liabilities, revenues and expenses, and
related disclosure of contingent liabilities at the date of our financial
statements. The policies that management considers to be most important to the
presentation of Akzo Nobel's financial condition and results of operations and
to require the most significant demands on management's judgments and estimates
about matters that are inherently uncertain are discussed below. Management
cautions that future events often vary from forecasts and that estimates
routinely require adjustment.

Akzo Nobel believes that of its significant accounting policies (see Note 2 to
the consolidated financial statements), the following may involve a higher
degree of judgment and complexity, which in turn could materially affect net
income and the balance sheet if various assumptions were changed significantly.

A complete description of Akzo Nobel's accounting policies appears on pages 102
through 105 of this Report - Summary of Significant Accounting Policies Used in
Preparing the Consolidated Financial Statements ("Accounting Policies").

Impairment

The Company reviews long-lived assets for impairment when events or
circumstances indicate carrying amounts may not be recoverable. Assets subject
to this review include intangible and tangible fixed assets.


<PAGE>
                                                                              73


In determining impairments of intangible and tangible fixed assets, management
must make significant judgments and estimates to determine if the undiscounted
cash flows generated by those assets are less than their carrying value.
Determining undiscounted cash flows requires the use of judgments and estimates
that have been included in the Company's strategic plans and long-range
planning forecasts. The data necessary for the execution of the impairment
tests are based on management estimates of future cash flows, which require
estimating revenue growth rates and profit margins. Assets (except for
goodwill) are written down to their fair value when the undiscounted cash flows
are less than the carrying value of the assets. The fair value of impaired
assets is determined by taking into account these estimated cash flows and
using a net present value technique based on discounting these cash flows with
business specific discount rates. For goodwill the Company applies the
provisions of SFAS 141 and 142. For further details reference is made to Item
18 "Consolidated Financial Statements", Note 21(a).

Changes in assumptions and estimates included within the impairment reviews
could result in significantly different earnings than those recorded in the
financial statements.

Accounting for income taxes

As part of the process of preparing consolidated financial statements, the
Company is required to estimate income taxes in each of the jurisdictions in
which the Company operates. This process involves estimating actual current tax
expense and temporary differences between tax and financial reporting.
Temporary differences result in deferred tax assets and liabilities, which are
included within the consolidated balance sheet. The Company must then assess
the likelihood that deferred tax assets will be recovered from future taxable
income. A valuation allowance is recognized to reduce deferred tax assets if,
and to the extent, it is more likely than not that all or some portion of the
deferred tax assets will not be realized.

The Company has recorded a valuation allowance of EUR 65 million as of December
31, 2002, based on estimates of taxable income by jurisdiction in which the
Company operates and the period over which deferred tax assets are recoverable.
In the event actual results differ from these estimates in future periods, and
depending on the tax strategies that the Company may be able to implement,
changes to the valuation allowance could be required, which could impact our
financial position and results of operations.

Provisions

By their nature, provisions for contingent liabilities are dependent upon
estimates and assessments of whether the criteria for recognition have been
met, including estimates as to the probable outcome and the amount of the
potential cost of resolution. Contingent liabilities are recognized by a charge
against income when it is probable that a liability has been incurred and the
amount of such liability can be reasonably estimated. The low end of the range
is accrued for costs of future liabilities that may ultimately arise when such
a range of possible loss is known.

Contingent liabilities and provisioning for environmental matters, antitrust
cases, other litigation (including Remeron(R) cases), and tax disputes are
discussed in Note 14 - Commitments and Contingent Liabilities of the Notes to
the Consolidated Financial Statements of Akzo Nobel. For provisions for
environmental matters such estimates are based on the nature and seriousness of
the contamination as well as on the technology required for cleanup. The
provision for antitrust cases is based on an estimate of the probable costs,
fines and civil damages, taking into account legal advice and the current facts
and circumstances. Provisions for other litigation and tax disputes are also
based on an estimate of the probable costs, taking into account legal advice
and information currently available.


<PAGE>
74


Should the actual outcome differ from the assumptions and estimates, revisions
to the estimated provisions would be required, which could impact our financial
position and results of operations.

Accounting for pensions and other postretirement benefits

Retirement benefits represent obligations that will be settled in the future
and require assumptions to project benefit obligations and fair values of plan
assets. Retirement benefit accounting is intended to reflect the recognition of
future benefit costs over the employee's approximate service period, based on
the terms of the plans and the investment and funding decisions made by the
Company. The accounting requires management to make assumptions regarding
variables such as discount rate, rate of compensation increase, return on
assets, and future healthcare costs. Periodically management consults with
outside actuaries regarding these assumptions. Changes in these key assumptions
can have a significant impact on the projected benefit obligations, funding
requirements and periodic cost incurred. The Company's policies and key
assumptions are included Note 20 - Pensions and Postretirement Benefits other
than Pensions of the Notes to the Consolidated Financial Statements of Akzo
Nobel.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, Statement of Financial Accounting Standards No. 141, Business
Combinations, (SFAS No. 141) and Statement of Financial Accounting Standards
No. 142, Goodwill and Other Intangible Assets (SFAS No. 142) were issued. SFAS
No. 141 requires that the purchase method of accounting be used for all
business combinations. SFAS No. 141 specifies criteria that intangible assets
acquired in a business combination must meet to be recognized and reported
separately from goodwill. SFAS No. 142 will require that goodwill and
intangible assets with indefinite useful lives no longer be amortized, but
instead tested for impairment at least annually in accordance with the
provisions of SFAS No. 142. SFAS No. 142 also requires that intangible assets
with estimable useful lives be amortized over their respective estimated useful
lives to their estimated residual values, and reviewed for impairment in
accordance with SFAS No. 121 and subsequently, SFAS No. 144 after its adoption.

The Company adopted the provisions of SFAS No. 141 as of July 1, 2001, and SFAS
No. 142 is effective January 1, 2002.

Upon adoption of SFAS No. 142, the Company evaluated its existing intangible
assets and goodwill that were acquired in purchase business combinations, and
made necessary reclassifications in order to conform with the new
classification criteria in SFAS No. 141 for recognition separate from goodwill.
The Company reassessed the useful lives and residual values of all intangible
assets acquired. The intangible assets with an indefinite useful life were
tested for impairment in accordance with the provisions of SFAS No. 142. This
did not lead to additional charges in the Company's statement of income.

In June 2001, Statement of Financial Accounting Standards No. 143, Accounting
for Asset Retirement Obligations (SFAS No. 143) was issued. SFAS No. 143
requires the Company to record the fair value of an asset retirement obligation
as a liability in the period in which it incurs a legal obligation associated
with the retirement of tangible long-lived assets that result from the
acquisition, construction, development, and/or normal use of the assets. The
Company also records a corresponding asset that is depreciated over the life of
the asset. Subsequent to the initial measurement of the asset retirement
obligation, the obligation will be adjusted at the end of each period to
reflect the passage of time and changes in the estimated future cash flows
underlying the obligation. The Company is required to adopt SFAS No. 143 on
January 1, 2003. The Company has not yet determined the impact of adopting SFAS
No. 143.



<PAGE>
                                                                              75


In April 2002, Statement of Financial Accounting Standards No. 145, Rescission
of Statements of Financial Accounting Standards No. 4, 44 and 64, Amendment of
Statement of Financial Accounting Standard No. 13, and Technical Corrections
(SFAS No. 145) was issued. SFAS No. 145 amends existing guidance on reporting
gains and losses on the extinguishment of debt to prohibit the classification
of the gain or loss as extraordinary, as the use of such extinguishments have
become part of the risk management strategy of many companies. SFAS No. 145
also amends SFAS No. 13 to require sale-leaseback accounting for certain lease
modifications that have economic effects similar to sale-leaseback
transactions. The provisions of the Statement related to the rescission of
Statement No. 4 is applied in fiscal years beginning after May 15, 2002.
Earlier application of these provisions is encouraged. The provisions of the
Statement related to Statement No. 13 were effective for transactions occurring
after May 15, 2002, with early application encouraged. The adoption of SFAS No.
145 is not expected to have a material effect on the Company's financial
statements.

In June 2002, Statement of Financial Accounting Standards No. 146, Accounting
for Costs Associated with Exit or Disposal Activities (SFAS No. 146) was
issued. SFAS No. 146 addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies Emerging Issues Task
Force (EITF) Issue 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity. The provisions of this Statement
are effective for exit or disposal activities that are initiated after December
31, 2002, with early application encouraged. The Company will adopt SFAS No.
146 as of January 1, 2003.

In November 2002, Interpretation No. 45, Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to
Others, an interpretation of Statements of Financial Accounting Standards No.
5, 57 and 107 and a rescission of Statement of Financial Accounting Standards
Interpretation No. 34 was issued. This Interpretation elaborates on the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees issued. The Interpretation
also clarifies that a guarantor is required to recognize, at inception of a
guarantee, a liability for the fair value of the obligation undertaken. The
initial recognition and measurement provisions of the Interpretation are
applicable to guarantees issued or modified after December 31, 2002 and are not
expected to have a material effect on the Company's financial statements. The
disclosure requirements are effective for financial statements of interim or
annual periods ending after December 15, 2002, and are included in the notes to
these consolidated financial statements.

In December 2002, Statement of Financial Accounting Standards No. 148,
Accounting for Stock-Based Compensation - Transition and Disclosure, an
amendment of FASB Statement No. 123 (SFAS No. 148) was issued. This Statement
amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to
provide alternative methods of transition for a voluntary change to the fair
value method of accounting for stock based employee compensation. In addition,
this Statement amends the disclosure requirements of Statement No. 123 to
require prominent disclosures in both annual and interim financial statements.
Certain of the disclosure modifications are required for fiscal years ending
after December 15, 2002 and are included in the notes to these consolidated
financial statements.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51. This
Interpretation addresses the consolidation by business enterprises of variable
interest entities as defined in the Interpretation. The Interpretation applies
immediately to variable interests in variable interest entities created after
January 31, 2003, and to variable interests in variable interest entities
obtained after January 31, 2003. For public enterprises, such as the Company,
with a variable interest in a variable interest entity created before February
1, 2003, the Interpretation is applied to the enterprise no later than the end
of the first interim reporting period beginning after June 15, 2003. The


<PAGE>
76

application of this Interpretation is not expected to have a material effect on
the Company's financial statements.

FORWARD LOOKING STATEMENT ON 2003

The business climate for 2003 is highly uncertain. Currencies will probably be
negative for us, especially during the first six months of 2003, and pension
charges will again go up. Furthermore, the Company will be confronted with
generic competition for Remeron(R).

We will continue to focus Company-wide on three critical priorities: Customers,
Costs, and Cash. We will use our imagination to serve our customers better than
our competitors.
Cost-cutting opportunities will be vigorously pursued; where needed, additional
restructuring programs will be implemented. We will also continue our debt
reduction program through strict cash discipline. Capital expenditures will be
restricted to the order of magnitude of 2002. On top of that, we will continue
to screen our activities and upgrade our portfolio based on value creation.

Nevertheless, at present we have to assume that net income for 2003, excluding
extraordinary and nonrecurring items, will be significantly below the level of
2002.

We plan to generate a financial surplus also in 2003 and therefore anticipate
that no additional funds will have to be raised for ongoing operations.
Excluding acquisitions and divestments, the number of employees is expected to
decrease due to the implementation of restructuring programs at all groups.



<PAGE>
                                                                              77


Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

At each general meeting of shareholders at least one-fourth of the total of the
membership of the Supervisory Board must resign. Such resignations are
designated by the Supervisory Board on a rotating basis. A Supervisory Board
member who resigns and is less than 70 years old is eligible for re-election.
The number of members of the Supervisory Board or the Board of Management shall
be determined by the general meeting of shareholders upon the proposal made by
the meeting of the holders of priority shares. The members of the Supervisory
Board and the Board of Management shall be appointed to and removed from office
by the general meeting of shareholders. A resolution to remove a member of the
Board of Management, other than by the proposal of the Supervisory Board, can
only be adopted by two-thirds of the votes cast at the general meeting of the
shareholders. Appointment of the members of the Supervisory Board and of the
Board of Management shall be made from a binding list of at least two nominees
for each vacancy to be filled. The nominees to fill any such vacancies shall be
selected by the meeting of holders of priority shares within three months
following the date on which the Board of Management by registered letter
invites the holders of priority shares to do so. If the nominees have not been
selected by the priority shareholders within such period, the general meeting
of shareholders shall be free to nominate and appoint members to the
Supervisory Board and the Board of Management. Nominees for any one vacancy may
not at the same meeting be nominated to fill any other vacancy.

The Supervisory Board and the Board of Management shall each appoint its own
secretary, which may be the same person.

<TABLE>
<CAPTION>
                                                                                                    Served in such or
Supervisory Board                                                                                 similar Supervisory
(At March 31, 2003)    Principal Occupation                                                      Board capacity since
---------------------------------------------------------------------------------------------------------------------
<S>                         <C>                                                                                       <C>
Aarnout A. Loudon           Former Chairman of the Board of Management of Akzo Nobel                                  1994
(1936, Dutch),              Chairman of the Supervisory Board of ABN AMRO Bank
Chairman                    Member of the Supervisory Board of Royal Dutch Petroleum Company

Frits H. Fentener van       Managing Director of Flint Holding, the Netherlands                                       1984
Vlissingen                  Advisory Director of Unilever
(1933, Dutch),              Deputy Chairman of the Supervisory Board of SHV Holdings, the Netherlands
Deputy Chairman             Chairman of the Supervisory Board of Draka, the Netherlands
                            Member of the Supervisory Board of CSM, the Netherlands

The Rt. Hon. Virginia       Former Secretary of State for Health and Member of the British Cabinet                    2000
Bottomley MP                Governor of the London School of Economics
(1948, British)             Partner of Odgers Ray & Berndtson

L. Paul Bremer, III         Former U.S. Ambassador to the Netherlands Chairman & CEO of Marsh Crisis                  1997
(1941, American)            Consulting
                            Nonexecutive Director of Air Products & Chemicals, Pennsylvania
                            Chairman of the U.S. National Commission on Terrorism
</TABLE>


<PAGE>

78

<TABLE>
<CAPTION>
Abraham E. Cohen       Former Senior Vice President of Merck & Co and President of Merck Sharp & Dohme               1992
(1936, American)       International Chairman of Vascomedical, New York, and Neurobiological
                       Technologies, California Nonexecutive Director of Smith Barney (Mutual Funds),
                       New York, and Teva Pharmaceutical Industries, Israel
<S>                    <C>                                                                                            <C>
Hilmar Kopper          Chairman of the Supervisory Board of DaimlerChrysler                                          1990
(1935, German)         Member of the Supervisory Board of Solvay
                       Advisory Director of Unilever
                       Nonexecutive Director of XEROX

Alain Merieux          Chairman of BioMerieux                                                                        2002
(1938, French)         Director of WENDEL Investissement, Eurazeo, Rue Imperiale de Lyon
                       Compagnie Plastic Omnium SA, and Lazard LLC

Lars H. Thunell        President and CEO of SEB Skandinaviska Enskilda Banken                                        1999
(1948, Swedish)        Member of the Board of Swedish Bankers Association
                       Member of the Board of b-business partners B.V., the Netherlands
                       Member of the Board of the Swedish Industry and Commerce Stock Exchange Committee
                       Chairman of the Board of IBX, Integrated Business
                       Exchange AB

Maarten C. van Veen    Former CEO Koninklijke Hoogovens, the Netherlands                                             1997
(1935, Dutch)          Chairman of the Supervisory Board of Koninklijke Volker Wessels Stevin, the Netherlands
                       Deputy Chairman of the Supervisory Board of ABN AMRO Bank
                       Deputy Chairman of the Supervisory Board of Imtech, the Netherlands
                       Nonexecutive Director of Corus Group

Karel Vuursteen        Former CEO of Heineken, the Netherlands                                                       2002
(1941, Dutch)          Member of the Supervisory Boards of Gucci Group, Heineken Holding, ING Group,
                       Koninklijke Ahold, and
                       Randstad Holding, the Netherlands
                       Member of the Supervisory Board of Henkel, Germany
                       Member of the Supervisory Board of Electrolux, Sweden
                       Vice Chairman of Nyenrode University, the Netherlands
</TABLE>

Mr. Loudon, Mr. Fentener van Vlissingen, Mr. Bremer, III and Mr. Van Veen are
the members of the Nomination and Remuneration Committee. The Audit Committee is
formed by Mr. Fentener van Vlissingen, Mr. Cohen,  Mr. Kopper and Mr. Thunell.
The  Supervisory  Board has  determined,  that Mr.Thunell is an Audit Committee
Financial Expert as defined in Section 10a (m)(3) of the Securities Exchange Act
of 1934.


<PAGE>

                                                                              79

Activities

During the year the Supervisory Board met five times. The September meeting was
held in the United States when the new Organon headquarters were opened. The
Board also had a meeting without the Board of Management being present. The
Board was regularly informed through business reports, rolling forecasts,
strategic and operational plans, and presentations by the Board of Management
and it periodically consulted with the Board of Management on strategy,
finance, and major actions.

Topics of discussion included:

- the Company's overall strategy

- economic and market developments

- Corporate Governance and compliance with the U.S. Sarbanes-Oxley Act of 2002

- risks and risk management

- Human Resources policy

- pensions

- the Company's financial structure

- restructuring measures

- major investment projects, acquisitions, and divestments.

The Nomination and Remuneration Committee prepared proposals for nomination and
reappointment to the Supervisory Board and the planning of succession within
the Board of Management. Furthermore, the Committee made remuneration proposals
for the members of the Board of Management, including the granting of stock
options and other benefits, for approval by the Supervisory Board.

The Audit Committee held consultations with the Chairman of the Board of
Management, the Chief Financial Officer, and the external and internal auditors
on such issues as accounting principles, internal control, administrative
organization, and risk management. The Audit Committee verified the external
auditors' independence, in particular with regard to nonauditing services
rendered. In addition, the Committee prepared the proposal to the Supervisory
Board for the succession of the lead audit partner in the context of the
desirability of periodic transfer of responsibility. In January 2003, the draft
2002 Financial Statements were extensively discussed with the Board of
Management, the external auditors, and the internal auditors. At the
recommendation of the Audit Committee the full Board approved the Financial
Statements.

Changes in the Supervisory Board
At the General Meeting of Shareholders of April 24, 2002, membership of the
Supervisory Board was raised by one and fixed at ten. Lo C. van Wachem, who had
served on the Board for ten years, stepped down, as he had reached retirement
age. The vacancies were filled by the appointment of Alain Merieux and Karel
Vuursteen. Also at that meeting, L. Paul Bremer, III and Maarten C. van Veen
stepped down as their terms of office were expiring. They were reappointed.

At the General Meeting of Shareholders of April 17, 2003, Hilmar Kopper, who
has served on the Board for thirteen years, stepped down as his term of office
is expiring. Mr. Kopper was not available for reappointment.

Also at that meeting, it was approved that membership of the Supervisory Board
be raised to eleven, and that Uwe-Ernst Bufe and Cees J.A. van Lede be
appointed as members. Until 2000, Mr. Bufe (58) was chairman of the board of
management of Degussa A.G.



<PAGE>
80

<TABLE>
<CAPTION>
<S>                           <C>                                                <C>
------------------------------------------------------------------------------------
Board of Management                                                Served in such or
(At March 31, 2003)           Position with Company           similar capacity since
------------------------------------------------------------------------------------
Cees J.A. van Lede            Chairman                                          1991
(1942, Dutch)

Fritz W. Froehlich            Deputy Chairman                                   1993
(1942, German)

A.T.M. (Toon) Wilderbeek      Pharma                                            2002
(1950, Dutch)

Rudy M.J. van der Meer        Coatings                                          1993
(1945, Dutch)

Dag Stroemqvist               Chemicals                                         2000
(1942, Swedish)

G.J. (Hans) Wijers                                                              2002
(1951, Dutch)

------------------------------------------------------------------------------------
Secretary to the Supervisory Board and the Board of Management        Served in such
(At March 31, 2003)                                                   capacity since
------------------------------------------------------------------------------------
G.H. (Han) Jalink                                                               2002
(1949, Dutch)
</TABLE>

Changes in the Board of Management
Effective May 1, 2003, Mr. van Lede will retire as Chairman of the Board of
Management to be succeeded by Hans (G.J.) Wijers, who joined the Board on
October 1, 2002. As from July 1, 2002, Mr. Wijers acted as advisor to the Board
of Management.

To provide for a gradual transition of management responsibilities, Dag
Stroemqvist will postpone his retirement date beyond May 2004 to the end of
that year, if so desired at that point in time.

B. COMPENSATION

Total Remuneration

Pursuant to the Dutch "Disclosure of Remuneration of Board Members Act," total
remuneration and shares held by members of the Supervisory Board and the Board
of Management is specified below.
In 2002, the aggregate remuneration of the Supervisory Board and Board of
Management was EUR 8.9 million. The aggregate amount set aside or accrued by
the Company in 2002 to provide pension, retirement or similar benefits for
those individuals was EUR 3.1 million.

<PAGE>

                                                                              81

Supervisory Board

In respect of their functions the members of the Supervisory Board received the
following remuneration:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
In euros                                                          2002      2001
--------------------------------------------------------------------------------
<S>                                                                <C>        <C>
Aarnout A. Loudon, Chairman (1)                                 52,000    52,000
Frits H. Fentener van Vlissingen, Deputy Chairman (1)(2)        45,500    45,500
Virginia Bottomley                                              41,000    41,000
L. Paul Bremer, III (3)                                         42,100    41,000
Abraham E. Cohen (2)                                            45,500    45,500
Hilmar Kopper (2)                                               45,500    45,500
Alain Merieux, from May 1, 2002                                 27,300
Lars H. Thunell (2)                                             45,500    45,500
Maarten C. van Veen (1)                                         45,500    45,500
Karel Vuursteen, from May 1, 2002                               27,300
Lo C. van Wachem (1), till May 1, 2002                          15,200    45,500
--------------------------------------------------------------------------------
(1) Member of the Nomination and Remuneration Committee.
(2) Member of the Audit Committee.
(3) From October 1, 2002, member of the Nomination and Remuneration Committee.
--------------------------------------------------------------------------------
</TABLE>

Board of Management

The service contracts of the members of the Board of Management are determined
by the Supervisory Board, which has delegated this task to the Nomination and
Remuneration Committee. The objective of the Company's remuneration policy is
to provide remuneration in a form that will motivate and retain the members of
the Board of Management as top executives of a major international company. In
the determination and differentiation of the remuneration level of the
Chairman, the Deputy Chairman, and the other members due allowance is made for
the individual's specific responsibilities. Remuneration is differentiated on a
basis comparable to that in other large international companies. To ensure that
remuneration is linked to performance, members of the Board of Management are
granted a variable remuneration component related to specific targets; as from
the year 2000, this component is primarily dependent on the Economic Value
Added realized.

<PAGE>

82

The salaries of the members of the Board of Management were increased by 4
percent on April 1, 2002 (the previous adjustment was made on January 1, 2001).
The members of the Board of Management received the following salaries,
performance-related bonuses and other emoluments:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
In euros                                                      2002   2001
--------------------------------------------------------------------------------
<S>                                         <C>                     <C>      <C>
Cees J.A. van Lede, Chairman
                                            Salary              623,100  605,000
                                            Bonus               377,200  447,700
                                            Other emoluments      5,600    5,700

Fritz W. Froehlich, Deputy Chairman
                                            Salary              533,500  525,900
                                            Bonus               316,700  370,800
                                            Other emoluments      7,800    7,900

Rudy M.J. van der Meer
                                            Salary              445,000  432,000
                                            Bonus               261,400  303,800
                                            Other emoluments      5,600    5,700

Dag Stroemqvist
                                            Salary              445,000  432,000
                                            Bonus               261,400  303,800
                                            Other emoluments      5,200    5,300

Paul K. Brons, till July 1, 2002
                                            Salary              220,300  432,000
                                            Bonus               130,700  303,800
                                            Other emoluments      3,000    5,300

A.T.M. (Toon) Wilderbeek, from July 1, 2002
                                            Salary              224,600
                                            Bonus               127,800
                                            Other emoluments      2,600

G.J. (Hans) Wijers, from October 1, 2002
                                            Salary              134,700
                                            Bonus                76,600
                                            Other emoluments      1,500

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

</TABLE>


Pension Plan
Different pension plans are provided for members of the Board of Management,
based on the salaries and local customs and rules in the countries of origin.
Members of the Board of Management normally retire in the year that they reach
the age of 62.

For the incumbent members on January 1, 2002, accrued pension benefits are
based on length of service and membership of the Board of Management. As from
January 1, 2002, the pension benefits for newly appointed members are based on
an income- and age-related defined contribution plan, which duly takes account
of the pension benefits accrued in the past. As a consequence, additional
provisions were made in the amount of EUR 485,800 for Mr. Wijers and in the
amount of EUR 584,600 for Mr. Wilderbeek.

<PAGE>

                                                                              83

Besides the aforementioned provisions and after deduction of any contributions
paid by the board members, pension expenses were as follows:

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------
Euros
--------------------------------------------------------------------------------
<S>                                                                          <C>

Cees J.A. van Lede                                                       455,900
Fritz W. Froehlich                                                       465,500
Rudy M.J. van der Meer                                                   402,700
Dag Stroemqvist                                                          277,100
Paul K. Brons                                                            118,500
A.T.M. (Toon) Wilderbeek                                                  47,500
G.J. (Hans) Wijers                                                        36,800
--------------------------------------------------------------------------------
</TABLE>

Arrangements

Effective July 1, 2002, Mr. Brons retired ten months before the retirement age
of 62.
Mr. van Lede will retire early on May 1, 2003. As a consequence, salary and
pension provisions were made in the amount of EUR 448,400 at June 30, 2002, and
in the amount of EUR 844,200 at December 31, 2002.

Of the allowance paid in 2000 to Mr. Stroemqvist in connection with his
relocation from Sweden to the Netherlands, an amount of EUR 30,500 was charged
to income in 2002.

Former Members of the Board of Management
Charges relating to former members of the Board of Management amounted to EUR
274,200, mainly due to pension expenses.

Stock Options
For a description of the option plan until 1998 and the revised option plan,
reference is made to not 13 of the Notes of the Consolidated Financial
Statement of Akzo Nobel. The conditional options granted in 2002 to members of
the Board of Management have an exercise price of EUR 46.53 and the expiry date
is April 25, 2012. After three years, the number of options granted can be
decreased by a maximum percentage of 50, if specific performance criteria are
not or not sufficiently met.

<PAGE>

84


The aggregate number of options held by the members of the Board of Management
is as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                Exercise       Outstanding                              Outstanding
                  Year of          price       at December     Granted    Exercised     at December               Expiry
                    issue         in EUR          31, 2001     in 2002      in 2002        31, 2002                 date

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

<S>                   <C>            <C>               <C>         <C>          <C>             <C>                  <C>
Cees J.A. van Lede   1997          28.10            11,592                   11,592
                     1998          47.40            36,000                                   36,000      April 28, 2003
                     1999          42.50            36,000                                   36,000      April 25, 2004
                     2000          44.82            39,600                                   39,600      April 27, 2010
                     2001          46.75            39,600                                   39,600      April 30, 2011
                     2002          46.53                       39,600                        39,600      April 25, 2012

Fritz W. Froehlich   1998          47.40            24,000                                   24,000      April 28, 2003
                     1999          42.50            27,000                                   27,000      April 25, 2004
                     2000          44.82            29,700                                   29,700      April 27, 2010
                     2001          46.75            29,700                                   29,700      April 30, 2011
                     2002          46.53                       29,700                        29,700      April 25, 2012

Rudy M.J. van der
Meer                 1997          28.10            10,060                   10,060
                     1998          47.40            24,000                                   24,000      April 28, 2003
                     1999          42.50            24,000                                   24,000      April 25, 2004
                     2000          44.82            26,400                                   26,400      April 27, 2010
                     2001          46.75            26,400                                   26,400      April 30, 2011
                     2002          46.53                       26,400                        26,400      April 25, 2012

Dag Stroemqvist      1998          47.40             6,000                                    6,000      April 28, 2003
                     1999          42.50             6,000                                    6,000      April 25, 2004
                     2000          44.82             3,300                                    3,300      April 27, 2005
                     2000          44.82            13,200                                   13,200      April 27, 2010
                     2001          46.75            26,400                                   26,400      April 30, 2011
                     2002          46.53                       26,400                        26,400      April 25, 2012

A.T.M. (Toon)        1998          47.40             4,400                                    4,400      April 28, 2003
                     1999          42.50             4,500                                    4,500      April 25, 2004
                     2000          44.82             6,600                                    6,600      April 27, 2005
                     2001          46.75             6,600                                    6,600      April 30, 2006
                     2002          46.53                        3,300                         3,300      April 25, 2009
                     2002          46.53                       13,200                        13,200      April 25, 2012

G.J. (Hans) Wijers   2002          46.53                       14,850                        14,850      April 25, 2012

Paul K. Brons*       1997          28.10             5,060                    5,060
                     1998          47.40            24,000                                   24,000      April 28, 2003
                     1999          42.50            24,000                                   24,000      April 25, 2004
                     2000          44.82            26,400                                   26,400      April 27, 2010
                     2001          46.75            26,400                                   26,400      April 30, 2011
                     2002          46.53                       26,400                        26,400      April 25, 2012

</TABLE>

* In early retirement per July 1, 2002

All the options with an expiry date after the year 2004 are conditional
options; the remainder is unconditional.

C. BOARD PRACTICES

Reference is made to information under Item 6.A.



<PAGE>
                                                                              85


D. EMPLOYEES

The tables below set forth the distribution of the number of employees per
group and geographical area for the last three fiscal years.

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------
                                   Number of employees per segment, December 31
<S>                                    <C>                <C>                <C>
                                      2002               2001               2000
--------------------------------------------------------------------------------
Pharma                              21,800             21,100             21,000
Coatings                            29,800             28,900             30,300
Chemicals                           15,100             15,100             15,800
Other                                1,200              1,200              1,300
--------------------------------------------------------------------------------
Total                               67,900             66,300             68,400
================================================================================
</TABLE>

The workforce expansion of 1,600 from acquisitions mainly related to Ferro's
powder coatings activities, the German decorative coatings distributor Wuemeg,
Crompton's Industrial Specialties, and ECI Elektro-Chemie.

In 2001, Coatings and Chemicals initiated restructuring programs for a
workforce reduction of 3,500. In 2002, additional programs in all three groups
were announced for a further reduction of 1,500. On top of that, the Company
announced in 2003 additional plans for further global workforce reduction at
Pharma of 500. So, in total the Company has workforce reduction plans of 5,500,
of which 2,200 have been realized ultimo 2002.
The Company expanded its workforce in those activities and regions where it is
growing, like in Asia.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                         Number of employees by country or region, December 31,
<S>                                    <C>                <C>                <C>
                                      2002               2001               2000
--------------------------------------------------------------------------------
The Netherlands                     13,000             12,700             12,800
Germany                              4,700              4,200              4,700
Sweden                               4,500              4,500              4,700
United Kingdom                       4,900              5,200              5,600
Other European countries            14,400             14,800             15,300
USA and Canada                      10,600             10,300             10,600
Latin America                        4,700              4,500              4,700
Asia                                 8,800              7,900              7,600
Other regions                        2,300              2,200              2,400
--------------------------------------------------------------------------------
Total                               67,900             66,300             68,400
================================================================================

</TABLE>

The Company generally has good relationships with the labor unions.

E. SHARE OWNERSHIP

Shares of Akzo Nobel N.V. held by the Members of the Supervisory Board and the
Board of Management
At March 31, 2003, the members of Supervisory Board held 47,529 Akzo Nobel N.V.
common shares and did not hold any other Akzo Nobel N.V. securities. The
ownership breaks down as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Number of shares
--------------------------------------------------------------------------------
<S>                                                                          <C>
Frits H. Fentener van Vlissingen                                          42,332
L. Paul Bremer, III                                                          500
Abraham E. Cohen                                                           4,000
Maarten C. van Veen                                                          297
Karel Vuursteen                                                              400
--------------------------------------------------------------------------------
</TABLE>

<PAGE>

86

At March 31, 2003, the members of the Board of Management held 17,468 Akzo
Nobel N.V. common shares. The ownership breaks down as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Number of shares
<S>                                                                          <C>
--------------------------------------------------------------------------------
Cees J.A. van Lede                                                         5,500
Fritz W. Froehlich                                                         1,000
Rudy M.J. van der Meer                                                     1,168
Dag Stroemqvist                                                            8,200
G.J. (Hans) Wijers                                                         1,600
--------------------------------------------------------------------------------
</TABLE>

Members of the Board of Management held no options other than the
aforementioned stock options. All members of the Board of Management
participate in the Akzo Nobel Employee Share Plan, whereby Akzo Nobel N.V.
common shares are conditionally granted and vest after three years. In 2002, 5
shares were granted (2001: 6 shares).

No member of the Supervisory Board or the Board of Management beneficially owns
more than 1 percent of Akzo Nobel N.V. common shares.

Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS

As required by the Disclosure of major Holdings in Listed Companies Act 1996,
the Netherlands Authority for the Financial Markets announced in July 2002 that
ING had acquired a position of 5 percent in Akzo Nobel common shares. ING does
not have any different voting rights from the rights of other common
shareholders.

At year-end 2002, Akzo Nobel estimates that there were approximately 38 percent
of its shares held in the United States, 20 percent in the Netherlands, 15
percent in the United Kingdom, and 27 percent in other countries. About 9
percent of the total number of shares were owned by private investors and 91
percent by institutional investors.

In February 1989, Akzo Nobel established a sponsored American Depositary
Receipt facility with Morgan Guaranty Trust Company of New York, as depositary,
pursuant to which American Depositary Receipts ("ADRs") representing American
Depositary Shares ("ADSs") are issued. In October 1999, Akzo Nobel terminated
its depositary arrangements with Morgan Guaranty Trust Company and appointed
Citibank, N.A., as depositary for its ADR facility. In connection with the
four-for-one stock split, which took effect on July 1, 1998, the ADSs were
redenominated so that one ADS represents one Akzo Nobel common share (until
July 1, 1998 each ADS represented one-half of a common share of Akzo Nobel).
Akzo Nobel has been informed by the depositary that in the United States as of
March 31, 2003, there were 35,193,970 sponsored ADSs (representing
approximately 12 percent of the outstanding common shares) which were held by
record holders.

B. RELATED PARTY TRANSACTIONS

The nonconsolidated companies of Akzo Nobel N.V. are shown in Exhibit 8, to
which reference is made. 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 on an
individual or aggregate basis. These transactions were generally conducted at
arm's length with terms comparable to transactions with third parties.



<PAGE>
                                                                              87


In the ordinary course of business the Company has transactions with various
organizations with which certain of its members of the Supervisory Board or
Board of Management are associated but no material transactions responsive to
this item have been entered into in the period commencing January 1, 2002 to
the date of this report.

C. INTEREST OF EXPERTS AND COUNSEL

Not applicable.

Item 8. FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION.

See Item 18 "Financial Statements" for the Consolidated Financial Statements of
the Company.

Legal Proceedings

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 generator 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


<PAGE>
88


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 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 a number of 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 numerous 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. 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 - at December
31, 2002, the Company had a provision amounting to EUR 102 million.

However, it should be understood, that in light of future developments such as
- by way of example only - (a) the outcome of the investigations of the various
antitrust authorities, (b) potential additional lawsuits by direct and/or
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,
present and future 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.


<PAGE>
                                                                              89

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 courts in the United States, one of which
is filed also against the joint venture parents.

Other Litigation (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.

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.

Dividend Policy

It is Akzo Nobel's intention to pay a dividend of 35 - 40 percent of (NL GAAP)
net income excluding extraordinary and nonrecurring items, but this is subject
to earnings, management's views on the business and allocation of capital, and
so could change at any time.

B. SIGNIFICANT CHANGES

For developments in the Company's results during the first quarter of 2003,
reference is made to Akzo Nobel's Report for the first Quarter of 2003
furnished to the U.S. Securities and Exchange Commission on Form 6-K, File No.
0-017444, on April 16, 2003, which is incorporated by reference herein.



<PAGE>
90


Item 9. THE OFFER AND LISTING

A. OFFER AND LISTING DETAILS

The tables below sets forth the high and low sales prices for Akzo Nobel common
shares on the EURONEXT stock exchange in Amsterdam during the periods indicated
and for the ADSs on NASDAQ/NMS. One ADS represents one Akzo Nobel common share.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                               Amsterdam                      NASDAQ/NMS
<S>  <C>         <C>       <C>       <C> <C>  <C>    <C>  <C>
                              High     Low                 High        Low
                           In euros per share            In U.S. dollars per ADS
--------------------------------------------------------------------------------
1997                         42.80   26.30                  47.38     31.81
1998                         58.90   25.90                  63.69     31.56
1999                         52.40   30.00                  52.25     33.63
2000                         59.15   37.30                  54.00     36.50
2001                         57.85   33.73                  54.50     31.00
2002                         54.50   27.25                  47.30     27.56

2001 1st quarter             57.85   44.26                  54.50     40.00
     2nd quarter             51.65   44.65                  44.65     40.13
     3rd quarter             49.99   33.73                  44.89     31.00
     4th quarter             52.20   42.06                  45.74     38.92
2002 1st quarter             54.50   47.60                  47.30     41.55
     2nd quarter             53.70   41.40                  47.25     41.00
     3rd quarter             46.53   31.20                  45.65     30.86
     4th quarter             36.45   27.25                  34.20     27.56


October 2002                 36.45   27.78                  34.20     27.56
November 2002                31.84   27.25                  31.60     27.66
December 2002                32.80   29.15                  32.41     29.81
January 2003                 32.44   23.10                  33.42     25.21
February 2003                25.50   18.17                  27.60     20.21
March 2003                   20.70   16.00                  22.08     18.12
--------------------------------------------------------------------------------
</TABLE>

B. PLAN OF DISTRIBUTION

Not applicable.

C. MARKETS

As of December 31, 2002, the Akzo Nobel common shares were listed on the
following stock exchanges:

The Netherlands; France; Belgium:  Euronext
United States of America:          NASDAQ/NMS, as American Depositary Shares

The EURONEXT stock exchange in Amsterdam is the principal trading market for
Akzo Nobel common shares. In 2002, listings in London, Frankfurt, and Stockholm
were terminated as the price of the Akzo Nobel share is predominantly set on
Euronext Amsterdam. In 2003 the listing in Paris was terminated.


<PAGE>
                                                                              91


D. SELLING SHAREHOLDERS

Not applicable.

E. DILUTION

Not applicable.

F. EXPENSES OF THE ISSUE

Not applicable.

Item 10. ADDITIONAL INFORMATION

A. SHARE CAPITAL.

Not applicable.

B. MEMORANDUM AND ARTICLES OF ASSOCIATION.

The following description sets out certain information concerning the Company's
common shares, EUR 2 per share, and summarizes certain provisions of the
Company's Articles of Association (the "Articles of Association") and the Dutch
Civil Code*. This summary does not purport to be complete and is qualified in
its entirety by reference to the Company's Articles of Association and the
Dutch Civil Code.

The Company's authorized capital is EUR 1,600,019,200, which is divided into 48
priority shares of EUR 400 each, 600,000,000 Common shares of EUR 2 each, and
200,000,000 cumulative preferred shares of EUR 2 each, divided into fifty
series numbered 1 through 50 of 4,000,000 shares each. As of December 31, 2002,
48 priority shares and 286,147,260 common shares were issued and fully paid up.

Principal Objects
Article 3 of the Company's Articles of Association provides that its objects
include participation directly or indirectly in partnerships, companies and
other legal entities, and to do all such things necessary to manage and finance
such entities, including the holding and administering of patents and other
intellectual property rights.

General
All of the issued and outstanding common shares are fully paid and
nonassessable. Common shares are registered shares or bearer shares, at the
option of the shareholder concerned. Registered shares may be Model I shares
(no share certificate issued) or Model II shares (share certificate issued
without a dividend sheet). A shareholder may also elect to replace Model I
shares with Model II shares, and vice versa, subject to any minimum number of
shares established by the Board of Management. Model I registered shares may be
transferred by delivery to the Company of a signed deed of transfer in the form
made available by the Company. Model II registered shares may be transferred by
delivery of the certificate for such shares, if the form on its reverse, of a
similar instrument accompanying the certificate, has been signed by the
transferor.


* All references to the Articles of Association and the Dutch Civil Code are
based upon English translations of such documents and are qualified by the
original Dutch provisions.


<PAGE>
92


Voting Rights
The number of members of both the Supervisory Board and the Board of Management
is determined by the General Meeting of Shareholders on the proposal of the
meeting of the holders of priority shares. The members of both Boards are
appointed and removed from office by the General Meeting of Shareholders. The
holders of priority shares have the exclusive right to draw up binding lists of
nominees for appointment to the Supervisory Board and the Board of Management
of the Company. At least two persons must be nominated for each vacancy. If
less than half the subscribed capital is present, a two-thirds majority of the
votes cast is required in order for the General Meeting of Shareholders to
adopt a resolution to remove a member of the Supervisory Board, unless such
removal is proposed by the Supervisory Board itself. A two-thirds majority of
the votes cast is required for a resolution to remove a member of the Board of
Management, unless proposed by the Supervisory Board.

At shareholders' meetings each cumulative preferred share and each common share
is entitled to one vote. Each priority share is entitled to two hundred votes.
Attendance, whether by person or by proxy, for purposes of having the right to
vote at a general meeting is decided upon by the chairman of the general
meeting in accordance with the Articles of Association. Proposals may be
submitted by one or more persons entitled to attend shareholders' meetings and
vote thereat who alone or jointly represent at least one one-hundredth of the
total issued capital. Such a proposal may be rejected by the Board of
Management if it judges it to be not in the Company's interest. Unless the
Articles of Association stipulate otherwise, all resolutions of the general
meeting must be approved by a majority of the votes cast. The chairman of the
meeting shall decide the manner of voting, including the possibility of voting
by acclamation.

Proposals to amend the Articles of Association and dissolve the Company require
approval of the meeting of the holders of priority shares. Amendment to the
Articles of Association altering the special rights of the holders of preferred
shares must be approved at a meeting of the holders of those shares. Before the
General Meeting of Shareholders may alter the special rights of holders of
priority shares, a proposal to that effect must be approved by the vote of at
least three-fourths of the outstanding priority shares.

Dividends
Subject to the provisions of the Dutch Civil Code, with the approval of the
Supervisory Board, the Board of Management may make a payment of an interim
dividend if the profits so permit. The profits are allocated first to the
preferred shares in the manner described in Article 43 of the Articles of
Association. The Board of Management may then determine, with the approval of
the Supervisory Board, the portion of the profits that should be added to
capital reserves. The remaining profits, if any, are distributed to the
priority shares (up to EUR 24 per share) and then equally to the common shares,
all in conformity with Article 43 of the Articles of Association. Article 105
of Book 2 of the Dutch Civil Code provides that distribution of profits to
shareholders may be made only to the extent that shareholders' equity exceeds
the sum of the amount of the paid and the called up part of the capital and the
reserves which must be maintained under the law or Articles of Association.
Under Dutch law, a company may make interim distributions if it demonstrates
that it has fulfilled the above requirement by providing an interim statement
of assets and liabilities on a date no earlier than the first day of the third
month preceding the month in which the resolution to make a distribution is
published.

Liquidation Rights
Upon liquidation of the Company, the assets remaining after payment of all
debts and of the liquidation costs will be distributed as follows:
   -  first to the holders of preferred shares in the amount of the par value
      of his shares plus the excess over par paid at the time of issue, in
      addition to the amount of any shortfall in distributions as described in
      Article 43 of the Articles of Association plus a prorated amount of the
      annual distribution calculated in the manner described in paragraph (iii)
      of Article 58 of the Articles of Association;


<PAGE>
                                                                              93


  -  next, to the extent possible, the holders of priority shares will receive
     the aggregate par value amount of their shares;
  -  next, the holders of common shares will be repaid the par value of their
     shares; and
  -  next, accrued and unpaid dividends, if any, shall be paid on the priority
     shares.
Any balance remaining thereafter shall be distributed among the holders of
common shares, pro rata to the number of shares held by each of them.

Preemptive Rights
The Company may only issue authorized shares in accordance with a proposal of
the Board of Management and only after the General Meeting of Shareholders has
adopted a resolution to issue such shares or granted to the Board of Management
a general empowerment of a duration not greater than five years to issue such
shares. Such a resolution or empowerment is valid only if it has been approved
by every group of holders of shares of the same class whose rights the issue
will adversely affect. The Company may not issue shares without the approval of
the Supervisory Board. Generally, subject to certain limitations and
qualifications, Article 96 (a) of Book 2 of the Dutch Civil Code provides each
shareholder a preemptive right to acquire any issue of shares pro rata to the
aggregate amount of his shares. Under the Dutch Civil Code and Article 5 of the
Articles of Association, such preemptive rights may be restricted of excluded by
a resolution of the General Meeting of Shareholders.

Capital Reduction
The General Meeting of Shareholders may, upon the proposal of the Board of
Management which has been duly approved by the Supervisory Board, resolve to
reduce the issued capital of the Company by canceling shares or by reducing the
par value of shares by means of amendment of the Articles of Association.
Partial repayment may be made for all shares or exclusively for common shares,
preferred shares or any series of preferred shares.

C. MATERIAL CONTRACTS.

The Company has not entered into any material contracts (others than those
entered into in the ordinary course of business) in the past two years. For a
description of significant acquisitions and divestments in 2002, 2001 and 2000
reference is made to note 2 of the Notes to the Consolidated Financial
Statements in Item 18 "Financial Statements".

D. EXCHANGE CONTROLS

There are no legislative or other legal provisions currently in force in the
Netherlands or arising under the Articles of Association restricting remittance
to holders of securities of the Company not resident in the Netherlands. Cash
dividends payable in euros on the securities of the Company may be officially
transferred from the Netherlands and converted into any other convertible
currency.

There are no limitations, either by the laws of the Netherlands or in the
Articles of Association, which affect the rights of non-resident or foreign
owners to hold or vote Akzo Nobel common shares.

E. TAXATION

Netherlands Taxation

The statements below only represent a broad overview of the present Netherlands
tax laws and the present United States/Netherlands Tax Convention (the "Tax
Treaty") applicable to holding and disposing shares of Akzo Nobel, which are
both subject to change and are not to be read as extending by implication to
matters not specifically referred to herein.


<PAGE>
94

As to individual tax consequences, each investor in the common shares should
consult his own tax advisor.

Withholding Tax

In general, a dividend distributed by a company resident in the Netherlands
(such as Akzo Nobel) is subject to a withholding tax imposed by the Netherlands
at a rate of 25 percent. Stock dividends paid out of the Company's additional
paid-in capital recognized for Netherlands tax purposes are not subject to the
above withholding tax.

Pursuant to the provisions of the tax treaty between the United States of
America and the Netherlands (the "Tax Treaty"), dividends paid by the Company
to a shareholder that is a resident of the United States (as defined in the US
Tax Treaty), are generally eligible for a reduction in the rate of Netherlands
withholding tax to 15 percent unless (I) the beneficial owner of the dividends
carries on business in the Netherlands through a permanent establishment, or
performs independent personal services in the Netherlands from a fixed base,
and the common shares form part of the business property of such permanent
establishment or pertain to such fixed base, or (II) the beneficial owner of
the dividends is not entitled to the benefits of the Tax Treaty under the
"treaty-shopping" provisions thereof. Dividends paid to qualifying exempt US
pension trusts and certain qualifying exempt US organizations are exempt from
Netherlands withholding tax under the US Tax Treaty.

Capital Gains

Capital gains realized upon the sale or exchange of common shares by a non-
resident individual or by a non-resident corporation of the Netherlands are
exempt from Netherlands income tax, corporation tax or withholding tax, unless
(I) such gains are effectively connected with a permanent establishment in the
Netherlands of the shareholder's trade or business or (II) are derived from a
direct, indirect or deemed substantial holding of common shares of such company
(such substantial holding not being a business asset).

In general, an individual has a substantial holding if he holds either directly
or indirectly and either independently or jointly with his spouse, at least 5
percent of the nominal paid-up capital of any class of shares in a company.

Under the Tax Treaty, however, the Netherlands may tax a capital gain derived
from a substantial holding only if the alienator has been a resident of the
Netherlands at any time during the five-year period preceding the alienation
and at the time of the alienation owns, either alone or together with family-
related individuals, at least 25 percent of any class of shares of such
company.

Estate and Gift Taxes

No estate, inheritance or gift taxes are imposed by the Netherlands on the
transfer of common shares if, at the time of the death of the shareholder or
the transfer of the common shares (as the case may be), such shareholder or
transferor is not a resident of the Netherlands, unless such common shares are
attributable to a permanent establishment or permanent representative of the
shareholder in the Netherlands.

Inheritance or gift taxes (as the case may be) are due, however, if such
shareholder or transferor:
(a)  has Netherlands nationality and has been a resident of the Netherlands at
     any time during the ten years preceding the time of the death or transfer,
     or
(b)  has no Netherlands nationality but has been a resident of the Netherlands
     at any time during the twelve months preceding the time of transfer (for
     Netherlands gift taxes only).


<PAGE>
                                                                              95

United States Taxation

This section describes the material United States federal income tax
consequences of owning shares or ADSs. It applies to you only if you hold your
shares or ADSs as capital assets for tax purposes. This section does not apply
to you in all respects if you are a member of a special class of holders
subject to special rules, including:

-    a dealer in securities,

-    a trader in securities that elects to use a mark-to-market method of
     accounting for your securities holdings,

-    a tax-exempt organization,

-    a life insurance company,

-    a person liable for alternative minimum tax,

-    a person that actually or constructively owns 10 percent or more of the
     voting stock of Akzo Nobel,

-    a person that holds shares or ADSs as part of a straddle or a hedging or
     conversion transaction, or

-    a person whose functional currency is not the U.S. dollar.

This section is based on the Internal Revenue Code of 1986, as amended, its
legislative history, existing and proposed regulations, published rulings and
court decisions, all as currently in effect, as well as on the income tax
treaty between the United States of America and the Netherlands (the "Tax
Treaty"). These laws are subject to change, possibly on a retroactive basis. In
addition, this section is based in part upon the representations of the
Depositary and the assumption that each obligation in the Deposit Agreement and
any related agreement will be performed in accordance with its terms.

You are a U.S. holder if you are a beneficial owner of shares or ADSs, and you
are:

-    a citizen or resident of the United States,

-    a domestic corporation,

-    an estate whose income is subject to United States federal income tax
     regardless of its source, or

-    a trust if a United States court can exercise primary supervision over the
     trust's administration and one or more United States persons are authorized
     to control all substantial decisions of the trust.

--------------------------------------------------------------------------------
You should consult your own tax advisor regarding the United States federal,
state and local, and Dutch and other tax consequences of owning and disposing
of shares and ADSs in your particular circumstances.
--------------------------------------------------------------------------------

In general, and taking into account the earlier assumptions, for United States
federal income tax purposes, if you hold ADRs evidencing ADSs, you will be
treated as the owner of the shares represented by those ADSs. Exchanges of
shares for ADSs, and ADSs for shares, generally will not be subject to United
States federal income tax.

Taxation of Dividends

Under the United States federal income tax laws, if you are a U.S. holder, you
must include in your gross income the gross amount of any dividend paid by Akzo
Nobel out of its current or accumulated earnings and profits (as determined for
United States federal income tax purposes). You must include any Netherlands
tax withheld from the dividend payment in this gross amount even though you do
not in fact receive it. The dividend is ordinary income that you must include
in income when you, in the case of shares, or the Depository, in the case of
ADSs, receive the dividend, actually or constructively. The dividend will not
be eligible for the dividends-received deduction generally allowed to United
States corporations in respect of dividends received from other


<PAGE>
96

United States corporations. Distributions in excess of current and accumulated
earnings and profits, as determined for United States federal income tax
purposes, will be treated as a non-taxable return of capital to the extent of
your basis in the shares or ADSs and thereafter as capital gain.

Subject to certain limitations, the Netherlands tax withheld in accordance with
the Tax Treaty and paid over to the Netherlands will be creditable against your
United States federal income tax liability. Under a provision of the
Netherlands dividend tax act Akzo Nobel will apply a credit against the amount
of the dividend tax withheld before remittance to the Netherlands tax
authorities. This credit is the lesser of:
- 3 percent of the part of the gross dividend from which dividend tax is
withheld, and
- 3 percent of the gross amount of dividends received from qualifying non-
Netherlands subsidiaries.
Because of this credit, the US tax authorities may take the view that the
Netherlands withholding tax eligible for credit against United States Federal
income taxes should be limited accordingly.

Dividends will be income from sources outside the United States, but generally
will be "passive income" or "financial services income" which is treated
separately from other types of income for purposes of computing the foreign tax
credit allowable to you.

Taxation of Capital Gains

If you are a U.S. holder and you sell or otherwise dispose of your shares or
ADSs, you will recognize capital gain or loss for United States federal income
tax purposes equal to the difference between the U.S. dollar value of the
amount that you realize and your tax basis, determined in U.S. dollars, in your
shares or ADSs. Capital gain of a noncorporate U.S. holder is generally taxed
at a maximum rate of 20 percent where the property is held for more than one
year. The gain or loss will generally be income or loss from sources within the
United States for foreign tax credit limitation purposes.

F. DIVIDENDS AND PAYING AGENTS

Not applicable.

G. STATEMENT BY EXPERTS

Not applicable.

H. DOCUMENTS ON DISPLAY

The documents that are exhibits to or incorporated by reference in this Annual
Report can be read at the U.S. Securities and Exchange Commission's public
reference facilities at room 1024, 450 Fifth Street, NW, Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms and their copy charges. The Company's filings since
November 4, 2002, are also publicly available through the SEC's website located
at http://www.sec.gov.



<PAGE>
                                                                              97

Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Risk Management

Akzo Nobel has operations in more than 80 countries and, as a result, is
exposed to changes in foreign currency exchange rates. The Company manages most
of these exposures on a consolidated basis, which allows netting certain
exposures to take advantage of any natural offsets. To the extent the Company
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 would be
adversely affected by changes in exchange rates.

At December 31, 2002, the following contracts to buy and sell currencies were
outstanding, all having maturities within one year:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Currency                 Buy contracts    Sell contracts    Mark to market    Mark to market
                                                                     value             value
Millions of euros                                            buy contracts*   sell contracts*
--------------------------------------------------------------------------------------------
<S>                              <C>                 <C>               <C>               <C>
U.S. dollar                        212             1,433            (19.8)             142.0
Canadian dollar                    366               163            (10.6)               3.9
Pound sterling                     169               118             (4.4)               2.3
Swedish krona                       84               167             (0.8)               1.4
Japanese yen                         7               142             (0.8)               0.8
Swiss franc                         53                 3              0.4                  -
Australian dollar                   15                11             (1.3)               0.4
Norwegian krone                     17                27             (1.0)               0.4
Danish krone                         2                18                -                  -
Other                               31                32             (1.1)               1.5
--------------------------------------------------------------------------------------------
Total                              956             2,114            (39.4)             152.7
============================================================================================
</TABLE>

*     Asset/(Liability)

The table below summarizes information on instruments and transactions that are
sensitive to foreign currency exchange rates. For debt obligations, the table
presents principal cash flows and related weighted average interest rates by
expected maturity dates.

<TABLE>

<CAPTION>

----------------------------------------------------------------------------------------------------------
Financial Instruments (Balance Sheet)
<S>                          <C>         <C>     <C>         <C>     <C>          <C>     <C>          <C>
                                                  Expected maturity date
Millions of euros           2003        2004    2005        2006    2007   Thereafter   Total   Fair value
----------------------------------------------------------------------------------------------------------
Long-term borrowings (USD)   544                                     100          157     801          842
Average interest rate %     6.04                                    6.44         6.48    6.19

</TABLE>

The Company does not use financial instruments to hedge the translation risk
related to equity and earnings of foreign subsidiaries and nonconsolidated
companies.

Interest Rate Risk Management

In principle, the Company manages interest rate risk by financing noncurrent
assets and a certain portion of current assets with equity, long-term
liabilities and long-term borrowings with fixed interest rates. The


<PAGE>
98

remainder of current assets is financed with short-term liabilities, including
floating rate short-term borrowings. In line with this policy, a number of
interest rate swap contracts have been entered into.

The table below provides information about the Company's financial instruments
that are sensitive to changes in interest rates. For debt obligations the table
presents principal cash flows and related weighted average interest rates by
expected maturity dates. For interest rate swaps and interest rate caps, the
table presents notional amounts and weighted average interest rates by expected
maturity dates.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                             Expected maturity date
<S>                                  <C>        <C>         <C>       <C>     <C>         <C>      <C>          <C>
Millions of euros                   2003       2004        2005      2006   2007   Thereafter    Total   Fair value
-------------------------------------------------------------------------------------------------------------------
Liabilities
Long term borrowings
  Fixed Rate (EUR)

    Bond loan 93/03                  136                                                           136          139
    Average interest rate %         6.38                                                          6.38

    Bond loan 95/05                                         227                                    227          245
    Average interest rate %                                7.00                                   7.00

    Bond loan 02/09                                                                     1,000    1,000        1,064
    Average interest rate %                                                              5.63     5.63

  Fixed Rate (GBP swapped
  to EUR)

    Bond loan 93/03                    7                                                             7            7
    Average interest rate %         7.60                                                          7.60

  Fixed Rate (EUR)

    Bond loan 98/08                                                                       512      512          534
    Average interest rate %                                                              5.38     5.38

  Fixed Rate (USD)

    Bond loan 98/03                  478                                                           478          494
    Average interest rate %         6.00                                                          6.00

    Bond loan 03                      66                                                            66           69
    Average interest rate %         6.35                                                          6.35

    Bond loan 07                                                             100                   100          110
    Average interest rate %                                                 6.44                  6.44

    Bond loan 09                                                                           18       18           19
    Average interest rate %                                                              6.28     6.28

    Bond loan 12                                                                          139      139          150
    Average interest rate %                                                              6.54     6.54

Interest rate derivatives

Interest rate swaps

Fixed to variable (EUR)                                    145                                    145           13
 Average pay rate                                                                     Euribor 3 months
 Average receive rate %                                   6.325                                  6.325

Variable to fixed (EUR)                                    145                                    145           (9)
 Average pay rate                                                                     Euribor 3 months
 Average receive rate %                                    5.30                                   5.30

Interest rate currency swap
Fixed (EUR) to Variable (USD)                                                             500      500          131
Average pay rate                                                                        Libor 3 months
Average receive rate %                                                                           5.625

 Capping interest at 8.5% for a volume of USD 200 million (maturity 2003)                                         -
Forward rate agreements                                                                                          (1)

 Fixed interest in a range from 1.895% to 2.176% for a volume of USD 440 million (maturity 2003).
 Fixed interest of 3.17% for a volume of EUR 50 million (maturity 2003)
 Fixed interest of 3.05% for a volume of EUR 50 million (maturity 2003)

</TABLE>


<PAGE>
                                                                              99


Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

Item 13. DEFAULTS, DIVIDEND ARREAGES AND DELINQUENCIES

None.

Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS

None.

Item 15. DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with the participation of the Company's management,
including the Company's Chief Executive Officer and Chief Financial Officer,
the Company has evaluated the effectiveness of the design and operation of its
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14(c)
within 90 days of the filing date of this annual report. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that these disclosure controls and procedures are effective.

In designing and evaluating our disclosure controls and procedures, our
management, including the Chief Executive Officer and Chief Financial Officer,
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired
control objectives, and our management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been detected.

There were no significant changes in the Company's internal controls or in
other factors that could significantly affect controls subsequent to the date
of their most recent evaluation.

Item 16. RESERVED

PART III

Item 17. FINANCIAL STATEMENTS

Akzo Nobel has responded to Item 18.



<PAGE>
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.


<PAGE>
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.


<PAGE>
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.



<PAGE>
                                                                             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.



<PAGE>
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


<PAGE>
                                                                             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.


<PAGE>
106
                                  AKZO NOBEL
                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
<S>                                                            <C>           <C>
                                                                  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
                                                        ==========   ==========

</TABLE>

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.


<PAGE>
                                                                             107


                                  AKZO NOBEL
                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                              for the years ended December 31,
<S>               <C>                                                                         <C>              <C>             <C>
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.

</TABLE>

<PAGE>
108


                     CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>          <C>          <C>          <C>           <C>          <C>
                                                                           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.

</TABLE>

<PAGE>

                                                                             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.


<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>         <C>        <C>     <C>     <C>     <C>    <C>     <C>      <C>
                                                                        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
===================================================================================================================================
</TABLE>



<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>         <C>       <C>      <C>     <C>    <C>     <C>     <C>      <C>

                                                             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
===================================================================================================================================

</TABLE>




<PAGE>
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.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                     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
<S>                                  <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
------------------------------------------------------------------------------------------------------------------------
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
========================================================================================================================


</TABLE>


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
<S>                                  <C>       <C>       <C>       <C>       <C>       <C>
                                      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
==========================================================================================

</TABLE>

(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.


<PAGE>
                                                                             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

<TABLE>
<CAPTION>
--------------------------------------------------
<S>                                  <C>       <C>
Millions of euros                   2002      2001
--------------------------------------------------
Cash in banks                        276       319
Short-term investments               244       136
--------------------------------------------------
Total                                520       455
==================================================

</TABLE>

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

<TABLE>
<CAPTION>
--------------------------------------------------
<S>                                  <C>       <C>
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
==================================================

</TABLE>



<PAGE>

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

<TABLE>
<CAPTION>
--------------------------------------------------
<S>                                  <C>       <C>
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
==================================================

</TABLE>

(6) Intangible Assets

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                   Total            Goodwill           Licenses,       Prior service         Development
Millions of euros                                                  know-how, and           costs for               costs
                                                                    intellectual             minimum
                                                                 property rights   pension liability
<S>                                  <C>                 <C>                 <C>                 <C>
------------------------------------------------------------------------------------------------------------------------
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
                                 =======             =======             =======             =======

</TABLE>

<PAGE>
                                                                             113



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                   Total            Goodwill           Licenses,       Prior service         Development
Millions of euros                                                  know-how, and           costs for               costs
                                                                    intellectual             minimum
                                                                 property rights   pension liability
<S>                                  <C>                 <C>                 <C>                 <C>
------------------------------------------------------------------------------------------------------------------------
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
                                 =======             =======             =======             =======             =======
</TABLE>


<PAGE>

114

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

(7) Property, Plant and Equipment

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
<S>                                  <C>       <C>       <C>       <C>                 <C>                 <C>
                                                                              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
                                 =======   =======   =======   =======             =======             =======
</TABLE>


<PAGE>
115




NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL


<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
<S>                                  <C>       <C>       <C>       <C>            <C>            <C>
                                                                         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
                                 =======   =======   =======   =======        =======        =======
</TABLE>

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

<TABLE>

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

</TABLE>

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


<PAGE>
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:
<TABLE>
<CAPTION>
--------------------------------------------------
<S>                                  <C>       <C>
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
                                 =======   =======
--------------------------------------------------

</TABLE>

<TABLE>
<CAPTION>

------------------------------------------------------------
<S>                                  <C>       <C>       <C>
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
------------------------------------------------------------

</TABLE>

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.



<PAGE>
                                                                             117

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

 (9) Short-term Borrowings

<TABLE>

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

<CAPTION>

<S>                                                                <C>                           <C>
                                                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%

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

</TABLE>

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

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
<S>                                                                          <C>       <C>
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
==========================================================================================

</TABLE>

<PAGE>

118




NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

 (11) Long-term Borrowings

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
<S>                                               <C>                       <C>
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
==============================================================================
</TABLE>


Debentures and other borrowings can be specified as follows:
<TABLE>
<CAPTION>

<S>   <C>     <C>                                                        <C>        <C>
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
                                                                       ======     =====
</TABLE>


<PAGE>
119

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL


<TABLE>
<CAPTION>
Aggregate maturity is as follows:
<S>                                                                          <C>
--------------------------------------------------------------------------------

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

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

<TABLE>
<CAPTION>

<S>                                                          <C>             <C>
--------------------------------------------------------------------------------
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
================================================================================
</TABLE>

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.


<PAGE>
120

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

<TABLE>
<CAPTION>

<S>                                                      <C>         <C>            <C>
---------------------------------------------------------------------------------------
                                                    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
=======================================================================================
</TABLE>

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


<PAGE>
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.



<PAGE>
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:





<TABLE>
<CAPTION>

<S>                                                   <C>               <C>
--------------------------------------------------------------------------------
                                                                      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
================================================================================
</TABLE>

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.



<PAGE>
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:

<TABLE>
<CAPTION>
<S>                          <C>                                             <C>
--------------------------------------------------------------------------------
                       Outstanding shares                     Date unconditional
                    conditional rights on
Year of issue                      shares
--------------------------------------------------------------------------------
         2001                      214,000                           May 1, 2004
         2002                      215,000             Various dates during 2005
================================================================================
</TABLE>


<PAGE>
124


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL


<TABLE>
<CAPTION>
Shareholders' equity
------------------------------------------------------------------------------------------------------------------------------------
<S>               <C>       <C>          <C>     <C>          <C>          <C>         <C>         <C>       <C>        <C>      <C>
             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
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

*   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.

<PAGE>
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


<PAGE>

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.



<PAGE>
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.



<TABLE>
<CAPTION>
<S>               <C>
---------------------------------------------
Millions of euros
---------------------------------------------
2003                                      188
2004                                      209
2005                                       75
2006                                       44
2007                                       32
Later                                      99
---------------------------------------------
Total                                     647
=============================================
</TABLE>

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.


<PAGE>
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.


<PAGE>
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.



<PAGE>
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:

<TABLE>
<CAPTION>

<S>                                <C>             <C>        <C>         <C>
--------------------------------------------------------------------------------
                                   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
================================================================================
</TABLE>

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.



<PAGE>
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:

<TABLE>
<CAPTION>

<S>                                                   <C>        <C>         <C>
--------------------------------------------------------------------------------
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
================================================================================
</TABLE>

* 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:

<TABLE>
<CAPTION>

<S>                                                  <C>          <C>        <C>
--------------------------------------------------------------------------------
Millions of euros                                     2002       2001       2000
--------------------------------------------------------------------------------
The Netherlands                                        122         46        231
Foreign                                              1,065        959      1,146
--------------------------------------------------------------------------------
Total                                                1,187      1,005      1,377
================================================================================
</TABLE>

<TABLE>
<CAPTION>

<S>                                           <C>   <C>  <C>    <C>   <C>    <C>

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
================================================================================
</TABLE>



<PAGE>
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.
<TABLE>
<CAPTION>

<S>                                                                                      <C>         <C>         <C>
--------------------------------------------------------------------------------------------------------------------
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
====================================================================================================================
</TABLE>

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.

<TABLE>
<CAPTION>

<S>                                        <C>          <C>
-----------------------------------------------------------
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)
===========================================================
</TABLE>

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.


<PAGE>
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:

<TABLE>
<CAPTION>
<S>                                               <C>          <C>           <C>
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
================================================================================
</TABLE>


(19) Extraordinary and Nonrecurring Items

Extraordinary items

In 2002, no extraordinary items were recognized.

In 2001, the following extraordinary items were recognized:
<TABLE>
<CAPTION>

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

--------------------------------------------------------------------------------
Total                                              76            (13)         63
================================================================================
</TABLE>

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:
<TABLE>
<CAPTION>

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



<PAGE>
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:
<TABLE>
<CAPTION>

<S>                                                 <C>        <C>           <C>
--------------------------------------------------------------------------------
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)
================================================================================
</TABLE>
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.


<PAGE>
135


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL


<TABLE>
<CAPTION>

<S>                                                  <C>          <C>            <C>           <C>
 -------------------------------------------------------------------------------------------------
                                                          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)
==================================================================================================
</TABLE>



<PAGE>
136



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

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

<TABLE>
<CAPTION>

<S>                                                <C>                       <C>
----------------------------------------------------------------------------------------------
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
==============================================================================================
</TABLE>

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.



<PAGE>
137


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

Net periodic other postretirement benefit costs are as follows:



<TABLE>
<CAPTION>

<S>                                                           <C>            <C>           <C>
----------------------------------------------------------------------------------------------
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
==============================================================================================
</TABLE>

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.


<PAGE>
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:
<TABLE>
<CAPTION>

<S>                                                                       <C>
------------------------------------------------------------------------------------
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
====================================================================================
</TABLE>

(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.


<PAGE>
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.




<PAGE>
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.



<PAGE>
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.



<PAGE>
142

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

The reconciliation of net income is as follows:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
<S>                                                        <C>           <C>            <C>
                                                          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
---------------------------------------------------------------------------------------------

</TABLE>


Comprehensive income is as follows:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
<S>                                                       <C>             <C>            <C>
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
=============================================================================================
</TABLE>

<PAGE>
143

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

<TABLE>
<CAPTION>

<S>                                <C>         <C>            <C>
-----------------------------------------------------------------------
                                   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)
=======================================================================
</TABLE>

The reconciliation of shareholders' equity is as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------
                                                           December 31,
<S>                                                     <C>           <C>
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
=========================================================================

</TABLE>

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

<TABLE>
<CAPTION>

<S>                                                         <C>     <C>    <C>
--------------------------------------------------------------------------------
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
================================================================================

</TABLE>

<PAGE>
144

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AKZO NOBEL

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

<TABLE>
<CAPTION>

<S>                                             <C>           <C>           <C>
--------------------------------------------------------------------------------
                                               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
================================================================================

</TABLE>


(22) Supplemental Cash Flow Disclosures

<TABLE>
<CAPTION>

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

</TABLE>

<PAGE>
145

Schedule II VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>

<S>                                         <C>           <C>              <C>            <C>        <C>           <C>
------------------------------------------------------------------------------------------------------------------------
                                                                        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
-----------------------------------------------------------------------------------------------------------------------

</TABLE>

* 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.


<PAGE>
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


<PAGE>
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
                                           -----------------------------------


<PAGE>
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
                                          --------------------------------