Supervisory Board Chairman’s statement

For AkzoNobel, 2017 was a landmark year and one of the most eventful in its long history. During the year, significant changes were required to reshape the company and prepare for the future. The Supervisory Board made a substantial contribution to the new direction and strategy for AkzoNobel and was fully focused on ensuring the company acted in the best interests of all of its stakeholders, including shareholders.

The Supervisory Board is convinced AkzoNobel has a compelling new strategy that will build on the strong financial foundation which has been put in place in recent years. Now is the right time to create two focused, high performing businesses – Paints and Coatings, and Specialty Chemicals. This logical next step will generate superior value creation than the alternatives, with substantially fewer risks, uncertainties and social costs. It will enable AkzoNobel to thrive, both to the benefit of its shareholders and the communities in which it operates worldwide.

The unsolicited and non-binding proposals from PPG which were received during the year were carefully and thoroughly reviewed, in consultation with our internal and external financial advisors and legal counsel. The Supervisory Board and the Board of Management unanimously concluded that PPG’s proposals undervalued AkzoNobel, failed to reflect the value-creating opportunities unveiled at the investor update on April 19, 2017, and were not in the best interest of the company, its shareholders, employees and other stakeholders. The Supervisory Board held itself accountable for its decisions in an Extraordinary General Meeting held in September. In this meeting, and in many one-on-one meetings with shareholders, the company provided a platform to further explain and discuss our response to PPG’s proposals. In addition, our decision-making was scrutinized in court and upheld by the Enterprise Chamber of the Amsterdam Court of Appeal.

Shareholders subsequently approved the separation of the Specialty Chemicals business at an EGM held on November 30, 2017. Following this approval, a €1 billion special cash dividend was paid out in December 2017 as advance proceeds, which demonstrates AkzoNobel’s commitment to substantial shareholder returns.

The separation of Specialty Chemicals is being conducted via a dual-track process (resulting in either a private sale or legal demerger) and is on track for April 2018. Internal separation was completed by January 1, 2018. The Supervisory Board will make the final decision on whether to proceed with either a legal demerger or a private sale by assessing various factors, such as value creation and the interests of all our stakeholders, including shareholders. The Specialty Chemicals business is in a strong financial position and well placed to operate as a standalone business, with excellent opportunities to unlock further value in the future.

Moving forward, as the paints and coatings industry continues to consolidate, the company will focus on its strategy and delivering on the 2020 financial guidance. On a continuous basis, potential opportunities to grow and create value through M&A transactions will also be considered. During 2017, AkzoNobel held constructive discussions with Axalta about a possible merger, which ended without agreement. However, the company remains open to exploring relevant opportunities.

A vital part of achieving the goals and ambitions that have been set is the company’s sustainability agenda. It remains fundamental to AkzoNobel’s business strategy and is key to driving innovation and ensuring that customer needs and expectations are met – and often exceeded. The Supervisory Board continues to monitor the company’s contribution to the UN Sustainable Development Goals and has a constructive, advisory and analytical role in overseeing management’s formulation and implementation of the sustainability agenda. It was therefore pleasing to see AkzoNobel ranked in first place on the Dow Jones Sustainability Index in the Chemicals industry when the 2017 list was announced in September (our fifth number one ranking in six years).

A number of significant appointments were made on an executive management level during 2017. In September, shareholders officially approved the appointment of Thierry Vanlancker as the company’s new CEO, following Ton Büchner’s departure for health reasons. Ton was an outstanding leader for AkzoNobel, transforming the company and setting it up for future success. His focus on delivering for customers and operational excellence drove profitability and increased returns to shareholders. Ton’s passion for the business and personal commitment helped create a strong culture across the company. He will be greatly missed in the boardroom and by many AkzoNobel colleagues around the world. We wish him every success in the future.

In Thierry Vanlancker, we have a highly qualified chief executive who is well placed to continue building momentum for the company. His extensive experience in the chemicals and coatings industry provides him with the right background and qualifications to take AkzoNobel forward into a new era.

Other management changes during 2017 saw CFO Maëlys Castella take a leave of absence for health reasons. She has been an integral part of establishing the solid financial foundation and culture of operational excellence that AkzoNobel now has in place. We wish her a speedy recovery and look forward to welcoming her back in a senior management role once she is ready to return. Her successor, Maarten de Vries – who was appointed CFO as of January 1, 2018 – has more than 25 years of experience in finance and international business. We look forward to working with him as we continue to deliver sustainable growth and value creation for all our stakeholders.

We also welcomed three new Supervisory Board members during the year: Mrs. Sue Clark, Mr. Patrick Thomas and Mr. Michiel Jaski. They bring with them extensive experience, knowledge and insight, which will benefit the composition of our Board moving forward. The Supervisory Board would also like to thank Ms. Sari Baldauf – who decided to step down as of December 1, 2017 – for her significant contribution since being appointed in 2012.

The Supervisory Board values its relationship with shareholders and takes its responsibility in this respect very seriously. During 2017, this relationship was impacted. A range of additional measures was therefore taken to improve shareholder relations. These actions – including a significant number of meetings and calls – sought to strengthen and maintain a continued and constructive dialog with our shareholders. In addition, a shareholder survey was conducted to gather independent and structured feedback. The company appointed JP Morgan Cazenove as a special advisor to a newly established Supervisory Board committee on shareholder relations. The Supervisory Board and management team look forward to further enhancing the relationship with AkzoNobel’s shareholders as the company delivers on its strategy.

The transformation of the company has required careful and informed decision-making. The Supervisory Board held a total of 38 meetings in 2017 to analyze and discuss the many developments and was advised by legal counsel specifically retained by the Supervisory Board to ensure that our decisions met the highest standards in legal and corporate governance. I would like to thank my colleagues on the Supervisory Board for their contribution and commitment during this intense period.

Finally, I confirm that I will retire as planned from my position as Chairman of the Supervisory Board of AkzoNobel when my third term of office ends in April 2018. I am proud to have contributed to the company’s progress and development – particularly during such an historic time – and look forward to seeing AkzoNobel continue to grow and prosper. I would like to express my gratitude for the cooperation and teamwork demonstrated by my fellow Supervisory Board members throughout my time with the company. As a Board, we also thank the Board of Management, the members of the Executive Committee and all employees for their commitment and hard work during such a busy and historic year.

Antony Burgmans, Chairman of the Supervisory Board – signature (handwriting)

Amsterdam, March 7, 2018

Antony Burgmans
Chairman of the Supervisory Board