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Akzo Nobel NV · 20-F · For 12/31/02

Filed On 4/22/03 10:43am ET · SEC File 0-17444 · Accession Number 1208646-3-72

  As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

 4/22/03  Akzo Nobel NV                     20-F       12/31/02    3:172                                    Imprima Debussy Ltd/FA

Annual Report of a Foreign Private Issuer · Form 20-F
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 20-F        Akzo Nobel 20f                                       149    742K 
 2: EX-8        Opinion re: Tax Matters                               22     91K 
 3: EX-10       Exhibit 10a                                            1      5K

20-F · Akzo Nobel 20f
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (RTF, XML, et al.) Additional Information Akzo Nobel Business Review and Developments at Business Units Change in Accounting Principles Chemicals Coatings Defaults, Dividend Arreages and Delinquencies Description of Securities Other Than Equity Securities Directors, Senior Management and Employees Disclosure Controls and Procedures Exhibits Financial Information Financial Statements Forward looking statement on 2003 Identity of Directors, Senior Management and Advisors Information on the Company Key Information Major Shareholders and Related Party Transactions Material Modifications to the Rights of Security Holders and Use of Proceeds Offer Statistics and Expected Timetable Operating and Financial Review and Prospects Pharma Quantitative and Qualitative Disclosures about Market Risk Reserved The Offer and Listing
1	1st Page
5	Item 1. Identity of Directors, Senior Management and Advisors
"	Item 2. Offer Statistics and Expected Timetable
"	Item 3. Key Information
15	Item 4. Information on the Company
17	Pharma
18	Coatings
"	Chemicals
34	Business Review and Developments at Business Units
55	Item 5. Operating and Financial Review and Prospects
"	Change in Accounting Principles
77	Forward looking statement on 2003
78	Item 6. Directors, Senior Management and Employees
87	Item 7. Major Shareholders and Related Party Transactions
88	Item 8. Financial Information
91	Item 9. The Offer and Listing
92	Item 10. Additional Information
98	Item 11. Quantitative and Qualitative Disclosures about Market Risk
100	Item 12. Description of Securities Other Than Equity Securities
"	Item 13. Defaults, Dividend Arreages and Delinquencies
"	Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
"	Item 15. Disclosure Controls and Procedures
"	Item 16. Reserved
"	Item 17. Financial Statements
108	Akzo Nobel
146	Item 19. Exhibits

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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 

                                                        [Enlarge/Download Table]

                                                                                    Page 
                                                                                         
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 


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                                                                               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                                                         

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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

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

(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.     

                                                                [Download Table]


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

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

* 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).                                                                       

                                                                [Download Table]


                                          
------------------------------------------
Year ended                      Average*  
December 31,                              
------------------------------------------
1998                                0.90  
1999                                0.94  
2000                                1.08  
2001                                1.14  
2002                                0.96  
------------------------------------------

* 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.                                 

                                                                [Download Table]

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

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.                                            

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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                                                                

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                                                                               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.                                                            

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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.                                                                     

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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.                                        

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                                                                              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.                  

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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.                                                 

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                                                                              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.                                                               

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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                                                                        

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                                                                              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.                                                                        

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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.           

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                                                                              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.                                                        

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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.                                                              

                                                        [Enlarge/Download Table]

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                                                                                         Net sales           Operating income      
                                                                                                        before nonrecurring* items 
                                                                                                                                   
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  
-----------------------------------------------------------------------------------------------------------------------------------
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* 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.                                           

                                                        [Enlarge/Download Table]

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                                                                                   Nonrecurring* items    Operating income,        
                                                                                                      after nonrecurring* items    
                                                                                                                                   
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      
-----------------------------------------------------------------------------------------------------------------------------------
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* 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.                                           

                                                        [Enlarge/Download Table]

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                                                                                                     Property, plant and equipment  
                                                                                                                                    
                                                                                 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 
----------------------------------------------------------------------------------------------------------------------------------- 
----------------------------------------------------------------------------------------------------------------------------------- 

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                                                        [Enlarge/Download Table]

Percent (%) of total net sales and total operating income                                               
--------------------------------------------------------------------------------------------------------
                                                                                                        
                                          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      
--------------------------------------------------------------------------------------------------------

* 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.                 

                                                        [Enlarge/Download Table]

                                                                                                                   
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                   


* 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.                               

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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 experie

Akzo Nobel NV · 20-F · For 12/31/02

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