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Condensed balance sheet


Impact of the ICI acquisition

A pro forma balance sheet for year-end 2007, reflecting the impact of the ICI acquisition on January 2, 2008, on our balance sheet as of December 31, 2007, is set out below.

The allocation of the purchase price of ICI to assets and liabilities was extended to include National Starch and was completed at year-end 2008. In total, we recognized an amount of €4.4 billion of goodwill at acquisition date, of which €1.2 billion has been impaired. The major intangibles recognized are acquired brands, the most significant being Dulux.

Several brands are expected to have an indefinite life. As a result, they will not be amortized but tested for impairment. Measuring ICI’s assets and liabilities at fair value increased amortization and depreciation for the assets with a definite useful life by €150 million in 2008 (in 2007: €176 million on a pro forma basis).

 

 

 

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In € millions

 

 

 

 

 

 

 

2008

2007 PF1

2007

1

Pro forma and unaudited.

 

 

 

 

 

 

 

Intangible assets

7,172

 

8,897

 

669

 

Property, plant and equipment

3,357

 

3,585

 

2,203

 

Other financial non-current assets

1,848

 

1,915

 

1,402

 

Total non-current assets

 

12,377

 

14,397

 

4,274

 

 

 

 

 

 

 

Inventories

1,781

 

1,799

 

1,177

 

Trade and other receivables

2,924

 

3,108

 

2,139

 

Cash and cash equivalents

1,595

 

1,454

 

11,628

 

Other current assets

57

 

4,448

 

25

 

Total current assets

 

6,357

 

10,809

 

14,969

 

 

 

 

 

 

 

Total assets

 

18,734

 

25,206

 

19,243

 

 

 

 

 

 

 

Total equity

 

7,913

 

12,091

 

11,129

 

 

 

 

 

 

 

Provisions and deferred tax liabilities

2,787

 

3,749

 

1,731

 

Long-term borrowings

2,341

 

2,326

 

1,954

 

Total non-current liabilities

 

5,128

 

6,075

 

3,685

 

 

 

 

 

 

 

Short-term borrowings

1,338

 

2,038

 

1,635

 

Trade and other payables

2,985

 

3,132

 

1,998

 

Other current liabilities

1,370

 

1,870

 

796

 

Total current liabilities

 

5,693

 

7,040

 

4,429

 

 

 

 

 

 

 

Total equity and liabilities

 

18,734

 

25,206

 

19,243

Invested capital

Invested capital at December 31, 2008, totaled €13.4 billion, €2.1 billion below the previous year (on a pro forma basis). The impairment of ICI intangibles and weakened foreign currencies – mainly the pound sterling – caused this decrease. Capital expenditure of €0.5 billion was at the same level as last year (on a pro forma basis) and is not expected to be higher in 2009.

Pension funding status improved – €115 million higher costs in 2009

The funded status of the pension plans at year-end 2008 was a deficit of €988 million, compared with €1,126 million at year-end 2007. The impact of the financial crisis on plan asset valuations, and the acquisition of ICI, was more than offset by additional contributions (mainly in the UK) and the effect of increased discount rates on the pension obligations.

However, a non-cash increase in pension costs of approximately €115 million is to be expected in 2009, as we have to take into account lower returns on plan assets due to their decrease in value in 2008.

Pension premiums to be paid by the company are based on local regulations and arrangements with AkzoNobel’s pension funds. For the defined contribution plans, premiums to be paid do not change as a consequence of the aforementioned developments. For the pension plans in the UK, additional payments of £197 million (€202 million) have already been agreed. Such contributions may change due to funding negotiations with the trustees of the plans involved.

Shareholders’ equity

Shareholders’ equity at year-end 2008 amounted to €7.5 billion. Foreign currencies adversely affected equity by €1,079 million, mainly due to the loss of the pound sterling, by 24 percent. A deferred loss of €551 million from hedging activities related to the ICI acquisition was transferred to goodwill. During 2008, shareholders received an amount of €1,895 million, consisting of a €1,437 million share buyback and €458 million dividend.

Share buyback program

In 2007, we embarked on share buyback programs totaling €4.6 billion. By the end of 2008, €3.0 billion had been completed, of which €1.4 billion was during 2008. Given the unprecedented volatility in the credit markets and the wider global economic uncertainty, we will not complete this share buyback program.

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