Annual Report 2008-2009 - Holland Colours

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Annual Report 2008-2009 - Holland Colours

Canada

USA

Mexico

The Netherlands

Hungary

Annual report

2008/2009

HOLLAND COLOURS NV

United Kingdom

China

Japan

Indonesia


Our emplOyees (as of March 31, 2009)

The Netherlands: Ria van Aartrijk, Salad Abdullaahi, Kwassi Aidam, Marcel Albers, Joan Alfring,

Stijn van Asselt, Murat Aydogan, Tom Bandsma, Lammert van Beek, Dick Beekman, Nico

Beekman, Dennis, Beekman, Marco Berentsen, Jocintha van den Berg, Aladin Berkovic, Thérèse

Besselink, Peter Bleumink, Wendy Bonestroo, Marlies Bontje, Gerard Boom, Patrick Bos, Mariët

Bos, Gert Bosgoed, Gerrit Bredenhoff, Matijs Brouwer, Niels Bruggeman, Jan van Buggenum,

Wim van Bussel, Lieva van Bussel, Pascal Buthod-Girard, Tunghai Chiang, Agnes Csajbók,

Tomica Cutunic, Anet Davids, Maris Delhaas, Peter Docter, Fernando Dos Santos Chaira,

Sophie Durand, Mark Edwards, Astrid Eikelenboom, Walter Elderink, Wilfred van Essen, Hennie

Evers, Tim Gaasbeek, Alex Gallas, Jan Gerritse, Eelco Gerritsen, Ernst Goedhart, Alies Gonlag,

Arnold de Groot, Dick ter Halle, Debby van den Handel, Lex van der Heide, Tinka Hendriks,

René Hoetink, Rob, Hölsgens, Rob Horstman, Marcel Huisman, Miranda Hulsteijn, John

Hurenkamp, Henri Jacobs, Hans Jager, Belinda Jansen, Marco de Jong, Marcel Jonker, Jovo

Jovic, Paul Karrenbeld, Gerrie Keetman, Martijn Kersten, Monir el Khatib, Thomas Klehr, John

Kleiboer, Maroesja Klomp. Linda van ’t Klooster, Michelle Kok, Wouter Koldenhof, Zivko Kolev,

Maarten Kool, Paul Koopmans, Ineke Lammerse, Ming Sang Lau, Monique Laurens, Ferdinand

Leito, Chris Lesilolo, Sjaak Leurein, John van Lohuizen, Danoes Luhukaij, Gert Jan Luiten,

Jeroen Marissen, Ruud Memelink, Urving Morales, Manon Mos, Johan Neuteboom Spijker,

Melinda Niederer, André van Nieuwkoop, Marijke van Norel, Edsard Nusz, Thijs Oussoren, Eric

Ouwekerk, Martijn Paape, Felix Pam, Marga Platje, Sara Popping, Bianca Post, Jan Put, Wim Put,

Marcello Riveros, Jules Roelofs, René Ruben, Margriet Rutgers, Jennie Rutte, Bernard van Schaik,

Erik Scheper, Martijn Schinkel, Paul Scholten, Robin Schoorlemmer, Jan Schrauwen, Daniël Siek,

Jolande Steenwoerd, Jolien Stevels, Jeroen Stoop, Jeroen Straathof, Mabel Termaat, Harry

Tiemens, Sylvie Tirmarche, Herman Treels, Lesley Tromp, Marten Ubbink, Daniël Ursepuny,

Wilco van Veen, Wendelina van der Veen, Maarten Vegelin, Frank Veldhuis, Gert van Vemde,

Piet Vermolen, Marcel Visch, Sija Vlot, Sacha Vos, Theo Voskamp, Roelie Vreeburg, Pascal de

Vries, Jan Willen Wassink, Hans Werink, Pascal Weulen Kranenbarg, Henk Wilbrink, Annemarie

Winterman, Arnold Zegers, Mladen Zivkovic, Jan Zomer, Erika van Zuiden, United Kingdom:

Damen Brazier, Mark Burch, Paul Clinch, Diane Collins, Joseph Fishlock, Jamie Gilfillan, Matthew

Holyoake, Steven Large, William Riches, Robert Williams, Hungary: Agocs Karoly, Antal Zoltan,

Bagi-Kerenyi Csilla, Balogh Florian, Barta Janos, Barany Jozsef, Bardos Sandor, Berko Zoltan,

Borbely Ditta, Boros László, Borsos Jozsef, Bozso Gabor, Bugyi Janos, Bugyi Laszlo, Csapo

Laszlone, Csapo Laszlone, Csapo Tamás, Csak Tünde, Debreczeni Zsigmond, Dudas Istvanne,

Falusi Kalman, Farkas Nandor, Ferhezly Livia, Foldiné Korga Szilvia, Gazso Jozsef, Gereben

Laszlo, Golya Andras, Gulcsik Istvanne, Hajbin Judit Ilona, Hegedus Ildiko, Jano Laszlo, Jandi

Mihaly, Cornelis Pieter Janse, Kajtar Tibor, Kallay Gábor, Kekezi Arber, Kelemen Zoltán, Kerekes

Zoltán, Kiraly Krisztina, Kissne Kovacsics Agnes, Koleszar Istvan, Laszlo Balint, Laszlo Zsolt,

Lendvai Attila, Majorszki Szvetlana, Marodi-Horvath Katalin, Markus Zoltan, Meresz Zoltan,

Mihalyi Peter, Molnar Csilla, Nadasne Szikszai Agnes, Németh Veronika, Olah Laszlo, Patone

Mezei Erzsebet, Pusztai Mihaly, Samu Mate, Scheftsik Jeno Oliver, Simon Erika, Sipos Erika,

Sipos Ferenc, Subicz Csaba, Szalai Imre, Szanyi Zoltan, Szeleczki Zita, Szentmartoni Bela, Szeles

Imre, Sztrunga Bela, Tamasi Anita, Timpfel Attila, Toth Gabor, Toth-Fekete Istvan, Varga Janos,

Vereb Zsuzsanna, Volter Tibor, Zsemlye Gyorgy, Zsuppan Miklos, United States: Valerie Arnold,

James Atkinson, Willis Austerman, Christina Baker, Brian Barker, Joyce Bitner, Sharon Bowen,

Hilary Brockman, Glenn Cairns, Yvon Carudel, Ronald Casey, Kimberly Chaplin, Mark Collins,

Ronald Crabtree, Justin Creviston-Smith, Kathy Daniels, Johan DeJong, Charles Depew, Paul

Justin Driskill, William Drook, Lola Feaselman, Charles Frye, George Fudge, William Gabbard,

Julie Gibbons, Joseph Gleeson, Annette Goble, Kevin Harvey, Richard Hetisimer, Richard Hoke,

Craig Hopkins, Emily Horner, Gene Jackson, Matthew Johnson, Nick Jones, Kimberly Lawrence,

Robert Leversedge, Michael Mayberry, Brian Mays, Michelle McAllister, John McGuire, Mark

Mikesell, Anthony Miller, David Morrison, Michael Muldoon, Tamara Musser, Dennis Nicholson,

Antony Obrien, Jason Owens, Pamela Parker, Stephen Parry, Primsam Patalinghug, Chad

Pennington, Luke Peters, Marty Peters, Lora Phillips, Brent Plankenhorn, Anthony Rump, Brian

Schwab, Connie Smith, Michele Smith, Tracy Snyder, Jennifer Spencer, Mercedes Townsend,

Angela Tracy, Christopher Tully, Keith Ulm, Tineke Veldhuis, Carlo Walker, Lynn Ward, Robert

Ward, Gary Welsh, Aida Wesseldine, J Michael Whirley, Theodore Lee Williams, Canada: Glen

Ewing, Wendy Janoki, Pamella McWhinnie-Porembschi, Anne Wagner, Mexico: Erika Carranco

Paulino, Juan Carlos Morales Martinez, Juan Jimenez Moreno, Juan Penagos Vargas, Juan

Villar Cortes, Humberto Juarez Saucedo, Magnolia Guzman Peña, Indonesia: Abineri, Hafid

Sustantyo Bima, Afandi, Achmad, Ahmad, Mohammad Naim, Arifin, Muhammad, Candra,

David, Chandra, Edy, Chua, Vincent, Coenraad, Venny Astrid, da Costa, Johny, Darmadji,

Efendi, Achmad, Effendi, Satrio, Go, Andi Satria, Harijanto, Endik, Hariyanto, Hartanto, Sukmono

Dadang, Hertanto, Mei Herawati, Hetharia, Wendy Willsemyn, Hoo, Tjoen Hok (Roy), Hudojo,

Amanda Atma, Imam, Turmudzi, Ispoernomo, Eko Wahyudi, Jarwanto, Kandiawan, Andre,

Kardianto, Inneke Indriati, Kho, Roland Andreas Hauw Beng, Kho, Tiong Lae, Koesuma, Licke

Boedy, Kojin, Mat, Kusdardjanto, Andri Gugus, Lestyowati, Indra, Maisaroh, Marhaenti, Fransiska

Dusapto, Nasir, Muhammad, Njoo, Kiat Kiep, Nurkholifah, Pangestu, Fredy, Pangkey, Sylvia,

Priyanto, Gisan, Purwanto, Qodri. As’ad, Rianto, Joko, Rihantono, Rochim, Erfin Ainur, Sahulata,

Magdalena Paulina, Setiawan, Andre, Setiawan, Feri, Setiawan, Linda Ivonne, Setyaningsih,

Deni, Sidharta, Indahwati, Simanjuntak, Peniel Ginda Ricardo Oktavianus, Soemarsono, Eddy,

Soetedjo, Nono Adrianto, Solikin, Karjani, Subakri, Untung, Sueb, Ribut, Sugianto, Sugianto,

Pontianus Sugiyono, Suhartono, Franky, Sumarno, Suparman, Senen, Suprayitno, Surahman,

Maman, Surono, Joko, Suryadi, Suryono, Susanto, Hadi, Sutedjo, Santoso, Sutono, Marjuki,

Tai, Harry Christian, Trikaryanti, Daswari Budi, Veronica, Wahyuni, Endang Sri, Wahyuningsari,

Ike, Wardana, Putu Ngurah Raditya Kusuma, Widjasena, Justina Lily, Wiranta, Budi, Wiyono,

Yahya, Ibenu, Yudharini, Danti, China: Bin Xu, Casey Xiong, Feng Gu, Flynn Tan, Hongjiang Guo,

Lianhong Zhang, Listiani Kartiha Sari, Qing Mei, Shumai Li, Zhihua Yan.

HOllAnd COlOurs enlivens:

Building & COnstruCtiOn mAteriAls

Wood Plastics Composite, Roofing sheets, Sheeting, Drain pipes, Electrical conduit, Fittings,

Siding, Rain gutters, PVC-window profiles, Sewerage pipes

pACkAging

PET-containers for Beer, Carbonated Soft Drinks, Water, Dairy products, Liquor, Wine, Edible oil,

Sauses, Pharmaceuticals, Cosmetics, Personal and Household care

siliCOnes & elAstOmers

Sealants, Sealing rings, Flexible baking trays, Cables, Sanitary silicone sealants

using tHe prOduCts:

Holcobatch, Holcoflex, Holcolan, Holcolest, Holcolex, Holcolex A, Holcolor, Holcomax, Holcomer,

Holcomer UHT, Holcomix, HolcoPET, Holcoplast, Holcopol, Holcopox, Holcoprill, Holcoride,

Holcosil, Holcosil HTV, Holcosil LSR, Holcosil NS, Holcovinyl LQ

FOr Our CustOmers in:

Algeria, Argentina, Australia, Bahrain, Bangladesh, Belgium, Bosnia-Herzegovina, Brazil, Bulgaria,

Canada, Chile, China, Columbia, Costa Rica, Denmark, Dominican Republic, Germany, Ecuador,

Egypt, Estonia, Fiji, The Philippines, Finland, France, Greece, Guatemala, Hong Kong, Hungary,

Ireland, India, Indonesia, Iran, Israel, Italy, Japan, Yemen, Jordan, Kazakhstan, Kuwait, Croatia,

Lebanon, Lithuania, Luxembourg, Macedonia, Malaysia, Mexico, Morocco, The Netherlands, New

Zealand, Nigeria, Norway, Ukraine, Oman, Austria, Pakistan, Panama, Peru, Poland, Portugal,

Romania, Russia, Saudi Arabia, Serbia and Montenegro, Singapore, Slovakia, Slovenia, Spain,

Sudan, Suriname, Syria, Taiwan, Thailand, Czech Republic, Trinidad and Tobago, Tunisia, Turkey,

Venezuela, United Arab Emirates, United Kingdom, United States of America, Vietnam, Belarus,

South Africa, Sweden, Switzerland

Profile

• Approximately 380 employees;

• 2,000 customers in 80 countries;

• 10 locations;

• Worldwide network of agents;

• Each employee is shareholder.

Holland Colours NV is an independent Dutch company with offices in the

United States, Europe and Asia. The company was founded in 1979 and

is listed on the NYSE Euronext Amsterdam Stock Exchange since 1989.

Holland Colours makes products for colouring plastics, the main products

being Holcobatch and Holcoprill. Both these products have the advan-

tage of being free flowing dust-free and thus easy to dose. Furthermore,

Holland Colours makes pastes for colouring silicones, elastomers, PET-

packaging and other applications.

Holland Colours concentrates worldwide on three focus markets:

• Building & Construction (especially PVC-applications);

• Packaging (especially PET-applications);

• Silicones & Elastomers.

Approximately 80% of turnover is realised in these three markets.

Virtually the entire production is generated by our four principal plants in

the Netherlands, Hungary, the United States and Indonesia. The turnover

of the new production site in China is growing fast.

Holland Colours is organised in three regional divisions that operate as

profit centres in each specific region: Europe (including the Middle East

and Africa), North and South America and Asia. Turnover is distributed

between Europe (60%), North and South America (30%) and Asia (10%).


Annual report 2008/2009

Content

Profile

Key figures

Customers, costs, cash and innovation key elements

Vision, mission, strategy and objectives

Course of business

Turnover

New products / Research & Development

Results

Investments

Cash flow and financing

Developments per division

Personnel

Sustainability

Risk management

Profit appropriation

Outlook

Corporate Governance

Management information

report of the Supervisory Board

The Holland Colours share

Annual accounts

The Annual Report of Holland Colours is also available in Dutch

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holland colours 08/09 1


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Profile

Holland Colours NV is an independent Dutch

company with offices in North America and Mexico,

Europe and Asia. The company was founded in 1979

and has been listed on the NYSE Euronext Amsterdam

Stock Exchange since 1989. Approximately 46% of the

shares is owned by an investment company, in which

amongst others all 380 Holland Colours employees

participate. Besides focusing on entrepreneurship, the

company's corporate culture also revolves around

respect and responsibility towards society and staff.

Products

Holland Colours makes products to colour synthetic

materials, the main products being Holcobatch and

Holcoprill. Both these products have the advantage

of being free flowing, dust-free, and very easy to

dose, allowing the colour to merge quickly into the

required material. Holland Colours preparations are

particularly suitable for PVC and PET. Furthermore,

Holland Colours makes pastes for colouring Silicones

& Elastomers, PET packaging and other applications.

Markets

Holland Colours concentrates worldwide on three

focus markets:

• Building & Construction (especially PVC

applications);

• Packaging (especially PET applications);

• Silicones & Elastomers.

Around 80% of turnover is realised in these three

markets. Its substantial global market share makes

Holland Colours a key player in each of these markets.

Holland Colours' worldwide presence means it is never

far away, and is able to supply national and international

companies with solutions promptly and efficiently.

Building & Construction

Holland Colours has been a specialist in colouring

PVC ever since its foundation. Its colouring systems

are used in:

• Pipes and fittings;

• Cladding/siding;

• Window profiles;

• (Foam) sheeting / roofing materials;

• Fencing and decking.

Manufacturers of the above products are Holland

Colours' customers. The Building & Construction

holland colours 08/09

market is well established, follows construction cycles

and is subject to large regional variations.

Packaging

Holland Colours' colour preparations are well suited

to PET applications. The market for PET bottles

and packaging materials is expanding fast, much

faster than that for glass and cans. This is a global

market driven by specifiers, viz. the major soft-drink,

food- and personal care brands. Holland Colours

customers are the manufactures of these bottles and

packaging materials.

In addition to water and soft drinks, PET is

increasingly being used to package beer, wine and

milk. Holland Colours' colour preparations play a key

role in these new market segments.

Silicones & elastomers

The market for Silicones & Elastomers comprises a

number of different segments. Sealants are used in

the Building & Construction industry in particular.

Silicone rubber products (elastomers) are mainly used

in the automobile and electronics industry, but also

increasingly in textiles (prints on shirts).

The major producers of silicone oil operate across the

globe and play a key role as both suppliers and

customers. End users increasingly require coloured

products, and Holland Colours is well-placed to meet

this need.

organisation and locations

Holland Colours is organised in three regional

divisions that operate as profit centres in each

specific region: Europe (including the Middle East

and Africa), Americas and Asia. Distribution of

turnover: Europe 60%, Americas 30% and Asia 10%.

Virtually the entire production is generated by the

four principal plants in the Netherlands, Hungary,

the United States and Indonesia (Surabaya). Sales

from the new production site in China are growing

fast. Furthermore, Holland Colours has locations in

Mexico, Canada, England, Indonesia (Jakarta) and

Japan. Local agents are used in many countries to

ensure closer relations with customers. The functions

organised at corporate level are Purchasing, Research

& Technology, Business Processes & ICT and Legal

Affairs.


Key figures

Financial year at March 31 2008/09 2007/08 2006/07 2005/04 2004/03

RESULTS (e million)

Turnover from continuing operations 1 53.3 60.2 58.9 57.7 53.1

Operating result from continuing operations (0.6) 3.0 3.8

Net result from continuing operations (0.6) 1.4 2.0

Turnover 53.3 64.7 63.9 62.6 59.2

Operating result (0.6) 2.4 3.8 3.9 3.5

Net result (0.6) 0.8 1.9 2.0 1.7

CASH FLOW (e million)

Cash flow (including discontinued operations) 2.5 4.0 5.1 5.1 4.7

Investments 2 1.2 3.4 3.6 3.0 4.3

Depreciation 2 3.1 2.9 3.0 3.1 3.0

GROWTH (%)

Turnover from continuing operations (11.4) 2.2 2.0 8.6 (0.5)

Operating result 2 (121.0) (21.7) (1.7) 10.9 (7.3)

Net result 2 (146.0) (31.9) (0.7) 19.6 (8.8)

BALANCE SHEET (e million)

Working capital 3 9.7 12.2 11.9 13.2 12.3

Invested capital 32.6 35.7 37.5 39.9 37.2

Shareholders' equity 18.6 19.6 22.4 22.5 20.9

Balance-sheet total 40.3 44.3 46.4 47.5 44.5

RATIOS

Operating result / turnover 2 (%) (1.2) 5.0 6.5 6.2 5.9

Shareholders' equity / balance-sheet total (%) 46.1 44.2 48.1 47.4 47.0

Return on average shareholders' equity 2 (%) (3.1) 6.5 8.9 9.2 7.9

Interest coverage factor 2 (0.7) 3.3 4.8 5.4 4.6

Return on average invested capital 2,4 (ROI) (%) (1.9) 8.4 10.3 9.8 9.5

Current assets / current liabilities (current ratio) 1.0 1.4 1.4 1.7 1.5

Dividend / net result (pay-out ratio) (%) - 108.0 62.8 68.9 51.5

FIGURES PER SHARE (e)

Net result from continuing operations (0.72) 1.57 2.31

Net result from discontinued operations - (0.65) (0.08)

Total net result (0.72) 0.92 2.23 2.32 1.95

Cash flow 2.88 4.64 5.90 5.89 5.47

Equity (excl. third-party interests) 21.60 22.74 25.93 26.10 24.28

Dividend - 5 1.00 1.40 1.60 1.00

Highest price 36.92 46.70 52.00 36.00 39.50

Lowest price 14.30 34.48 33.15 28.66 27.60

Closing price 14.99 35.50 45.99 33.50 34.00

OTHER DATA

Number of outstanding shares 860,351 860,351 860,351 860,351 860,351

Price / earnings ratio (20.8) 38.4 20.6 14.4 17.5

Average number of employees (FTEs) 433 445 441 435 431

1) The discontinued operations concern the activities of Holland Colours Pigment Kft, which were discontinued as of 31 December 2007.

2) The figures reported for the 2006/2007 financial year have been adjusted in accordance with IFRS 5 in terms of continuing and

discontinued operations, respectively.

3) Working capital: Inventories + amounts receivable -/- non-interest bearing liabilities

4) Return on invested capital: Operating profit / (equity + provisions + interest-bearing liabilities -/- liquid assets)

5) Dividend proposal

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Customers, costs, cash and innovation

key elements

Turnover and result under pressure

The economic crisis leaves a great mark on the

turnover and results of Holland Colours. The first

quarter was reasonably good, thanks to growth in

Europe and Asia. The availability and rising prices

of raw materials were a main theme back then.

How soon the world can change! From September

2008, turnover fell sharply and with that the results.

our policy

We immediately took action at a number of levels.

First we intensified our contacts with customers. No

customers lost and no bad debts, that is the motto.

So far we have succeeded in doing so, we have only

lost terrain, temporarily in our opinion, on the beer

market in Eastern Europe.

In addition, we have lowered the costs where possible

and given full priority to improving liquidity. The cash

flow from business and investment activities remained

positive thanks to tempering investments and by

decreasing the working capital.

When it became clear at the start of 2009 that the

crisis was going to last longer, we were forced to

reduce the number of jobs. Unfortunately, some

people had to take forced redundancy.

We implemented the reorganisations thoroughly and

quickly, in a way that is worthy of Holland Colours.

Strategy

Although the difficult market conditions badly affect

our results, we do not doubt our strategic course.

Existing innovation projects were transferred to the

Divisions to accelerate implementation and we started

new projects, based on our core competency. As the

growth in the focus markets is under pressure from

the entire economic crisis, the corporate objectives

will not be achieved for as long as the recession

continues.

holland colours 08/09

Starting position for 2009/2010

Under the current conditions, it is difficult to make

quantitative statements about next year's results.

We have therefore prepared ourselves for different

scenarios. We are ready to conquer the crisis at the

current low activities level, and we are ready for a

recovering market.

• The operating costs, excluding movements in

Finished Goods inventory and reorganisation

costs have reduced by 10-15% compared to

2008/2009, while the implemented production

capacity at least remained the same.

• Compared to March 2008, the working capital was

reduced by 21% due to the lower activity level and

better inventory management.

• The market shares in Building & Construction and

Silicones & Elastomers have remained at least the

same, no customers were lost.

In Packaging we expect growth to pick up thanks

to new cooperations and new products.

• The focus on innovation has increased partly

due to the pressure of today's conditions, not just

in the organisation, but also at the customers.

We can respond to that well thanks to our core

competency and our sustainable products.

A very important fact is that all of this turbulence has

created more intense relationships with employees,

customers, shareholders and other parties involved.

Commitment levels are high. This makes me confident

towards the future and I would like to thank everyone

for that.

Bernard van Schaik

President


Vision, mission, strategy and objectives

Vision

Technology has a major impact on the business of

Holland Colours, whether this relates to knowledge

of pigments, chemical technology or knowledge of

materials.

Our customer-specific products have to comply with

all the relevant functional, aesthetic and processing

requirements. These requirements are continuously

changing, and are influenced by social themes such as

recycling, fashion trends and product- and production

innovations of our customers. This demands close

contact with the market, from supplier to customer

and from regulator to brand owner, in combination

with the internal resources to reflect all developments

in Holland Colour's products and processes quickly

and adequately.

Mission

The mission of Holland Colours is to be the preferred

global partner of our focus customers. This requires

an internal culture based on entrepreneurship, respect

and commitment. Employee share ownership is an

important binding element.

Strategy

The strategy of Holland Colours to achieve this mission

is based on five elements:

1. Concentration on three focus markets;

2. International presence;

3. Innovation: developing high-quality and functional

solutions in collaboration with partners and

end-users;

4. Service;

5. Efficiency.

focus markets

Holland Colours concentrates on three plastics

markets for which its products are highly suitable:

Building & Construction, Packaging and Silicones &

Elastomers. The company is striving to achieve market

leadership in these markets.

international presence

Holland Colours has many multinational customers

that are serviced worldwide. An international network

has been constructed that consists of four components:

principal production locations (the Netherlands,

Hungary, the USA and Indonesia), small production

locations (Japan and China), sales offices (United

Kingdom, Germany, Canada, Mexico and Indonesia),

and agents and distributors in many countries.

innovation and service

The majority of the turnover consists of customer-

specific products. Quality is assured by ISO-certified

systems. Our knowledge, often in open partnership

with suppliers and customers, is focused on dispersion

technology, pigments, colouring systems, carrier

materials and customers' processing technology. This

combination of knowledge areas and collaboration in

the chain guarantees a continuous flow of new products

and solutions.

efficiency

Customer-specific products, which change frequently,

in particular require the efficient use of resources with

regard to delivery reliability, cost control and working

capital. Holland Colours has initiated various projects,

including the Lean improvement programme, to

achieve improvements in this area.

Corporate objectives

The mission and strategy of Holland Colours are

focused on the following objectives:

• Growth in turnover in the focus markets by

5 to 10% per year;

• Return on investment (ROI) of at least 15% as of

the 2010/2011 financial year;

• Growth in earnings per share.

So far the current economic crisis is no cause for a

change in strategy and/or objectives. Holland Colours

assumes this crisis is only temporary. As growth in

the focus markets is under pressure from the general

economic crisis, achieving the corporate objectives

becomes less likely the longer the recession lasts. As

a result it is unlikely that the targeted ROI of 15% as of

the financial year 2010/2011 can be achieved.

holland colours 08/09 5


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SWOT analysis Holland Colours

Strengths

• Strong focus and good positions in the three

focus markets

• Global presence with own locations in 10

countries, supplemented by agents and distributors

• Unique and customer-specific products

• Customer-oriented corporate culture

opportunities

• Growth of the PET packaging market (8-12% per

year) and the Silicones market (3-6% per year)

• Emerging markets such as Eastern Europe and Asia

• New products such as Holcomer UHT,

Wood Plastic Composites and Holcosil HTV

• Recycling

Challenges facing Holland Colours

Balanced innovation programme

Taking advantage of innovations in the focus markets

with the right partners on a timely basis is the foun-

dation for the future of Holland Colours. At the same

time, it is essential to make formulations of existing

products more price-efficient and to strengthen the

production processes on a continuous basis.

Perfect service

Customers can expect Holland Colours to develop

innovative products and deliver existing products in

an effective and reliable manner.

efficient business operations

Continuing the improvement processes in the fields

of delivery reliability, working capital and cost

management remains important for Holland Colours.

The challenge is to make this happen while retaining

our customer orientation.

holland colours 08/09

Points of Attention

• Continued increase of efficiency and reduction

of costs

• Management of working capital

• Implementation of ERP system worldwide

• Increased applicability of products outside the

current plastics market combinations of PVC, PET

and Silicones

Threats

• Cyclical Building & Construction market

• Emerging tender nature of certain markets

• Liquid and masterbatch alternatives to

Holland Colours products

• Recycling


Course of business in 2008/2009

Turnover

falling turnover as a result of economic crisis

(€ million) 2008/2009 2007/2008 2006/2007 2005/2006 2004/2005

Focus markets 44.3 50.0 49.4 48.6 44.5

Specialties 9.0 10.2 9.5 9.1 8.6

Turnover continued operations 53.3 60.2 58.9 57.7 53.1

Pigments 0.0 4.5 5.0 4.9 6.1

The global crisis on the financial and housing markets caused turnover to fall by 11% to € 53.3 million. Excluding

the exchange-rate effects, the drop amounts to 9%. In the previous financial year, we saw a growth of 5%.

The focus markets, Building & Construction, Packaging and Silicones & Elastomers showed a joint drop in turnover

of 11%. The underlying decline - excluding the exchange-rate effect - arrived at 9% (2007/2008: growth of 4%).

The production of pigments in Hungary was discontinued in the 2007/2008 financial year.

only Asia is experiencing growth

(€ million) 2008/2009 2007/2008 2006/2007 2005/2006 2004/2005

Europe 33.0 37.8 35.4 31.5 28.1

Americas 15.0 17.6 19.8 22.5 20.6

Asia 5.3 4.8 3.6 3.7 4.4

Turnover continued operations 53.3 60.2 58.9 57.7 53.1

Also Europe, where turnover fell by 13%, was badly affected by the crises in the financial and housing markets which

started in America. In 2007/2008, turnover in this region was increasing by 7%, thanks to the positive developments

in the Building & Construction market. The drop in Europe occurred entirely in the second half of the year. In the

Americas Division, turnover fell by 15%, mainly as a result of the continuous poor conditions in the North American

housing market. The dollar, which on average was weaker during the financial year, caused a 2% drop. Only Asia

managed a growth of 10% across the entire year, mainly as a result of a strong first six months.

focus markets: poor second half year for Building & Construction

Increase in turnover 2008/2009 2007/2008 2006/2007 2005/2006 2004/2005

Building & Construction -13% 0% +6% +5% -2%

Packaging -10% 0% -11% +22% 0%

Silicones & Elastomers -6% +9% +14% +1% +16%

Total focus markets -11% +1% +2% +9% 0%

Specialties -12% +8% +4% +6% -3%

Total turnover -11% +2% +2% +9% -1%

Exchange-rate effect -2% -3% -3% +1% -2%

Turnover in the Building & Construction market fell by 13% due to a poor second half year. In the first six months,

the decline in this market was limited to only 1%. The developments in Europe are the main reason for this

deterioration. In volume, the decrease was 15%. The increasing popularity of Holcoprill in the European market for

PVC profiles, a market with a slightly higher gross margin, managed to minimise the drop in turnover. Turnover in

Packaging fell by 10%, mainly as a result of a loss of turnover in the Eastern European beer market. The volume in

Packaging fell by 9%. Due to poor conditions in the markets for Building & Construction and Automotive, competition

in the Packaging market is increasing noticeably. Compared to the other focus markets, Silicones & Elastomers

did relatively better thanks to the growth in Asia. Although this market too is susceptible to the recession, the fall

in turnover was limited to 6%, while volume saw a 13% drop. An increase in sale prices explains the difference.

holland colours 08/09 7


8

New products / Research &

Development

implementing current projects

Holcomer UHT, a new product to colour PET packaging

for long-life milk, experienced a successful market

introduction. Various well-known dairy producers now

use the product in countries such as Germany, the

Netherlands and Greece. Each quarter, turnover

gradually rises. Countries outside Europe have also

shown a real interest. The fact that a patent has been

granted which will be allocated on a country-bycountry

basis, is an important step towards continued

distribution of this product.

All technical problems that hampered commercialisation

of the new Holcosil HTV / HCR product line for high

temperature silicone applications have been resolved.

The Division Europe will now start marketing it.

The R&D activities that concentrate on process

improvements and with that on more robust production

processes are being finalised and implemented. This

will facilitate further growth and lower production costs.

Starting new projects

During the past year new projects were started, which

should lead to:

• Increased applicability of our products outside the

current plastics market combinations PVC, PET and

Silicones

• Development and commercialisation of applications

in bio-plastics

• Development of additive concentrates in addition

to colour concentrates.

Results

Poor second half year due to economic crisis

The results of Holland Colours came under pressure

following the summer of 2008 due to the deteriorating

economic situation. The net result from continuing

operations was a negative € 0.6 million compared to a

positive € 1.4 million in 2007/2008. The loss occurred

in the second six months when, due to a disappointing

order income, turnover fell by 22% compared to the

same period in the previous year. The operating result

for the entire financial year, excluding exceptional

expenses for the reorganisation, was € 0.3 million,

while the operating result last year was € 3.0 million.

Various measures were taken during the second half

year in order to bring costs in line with the lower level

holland colours 08/09

of activities. The effects of those measures will manifest

themselves in the new financial year.

reorganisation

When it became clear that the recession was going to

last longer, Holland Colours decided in March 2009 to

cut 60 jobs. Unfortunately, some people had to take

forced redundancy.

The branches in the Netherlands, Hungary, the United

Kingdom and the United States were all affected by

the reorganisation. Following a careful procedure,

the reorganisation was finalised and the employees in

question have left employment. The one-off expenses

for this reorganisation amounted to € 0.9 million and

have been recognised as exceptional costs in the

2008/2009 financial year. This mainly concerns costs

related to severance packages. As a result of this

reorganisation, personnal costs dropped by about

€ 1.8 million on an annual basis. These savings will be

effectuated as from the new financial year.

Tax gain

In the 2008/2009 financial year certainty was gained on

a claim against the tax authorities in the Netherlands

as a result of the complete legal winding up of the

branch in Brazil a number of years ago. The income

arising from this amounts to € 0.7 million and has been

included in the income tax expenses for 2008/2009.

Gross margin maintained

In the financial year 2008/2009, the gross margin

remained with 46.8% at an approximately equal level

compared to last year (46.9%). During the first half

year the gross margin decreased. The availability of

raw materials was under pressure and purchase costs

were rising fast. The second half of the year showed a

different picture due to the economic decline. The

purchase prices of raw materials stabilized and partly

thanks to that the gross margin recovered. However,

some of the increase is also explained by the change in

the product mix in the second half year. After all, the

economic crisis has hit the Building & Construction

focus market harder than the Packaging market. In

addition, the Lean improvement programme continues

to contribute to an improvement of the gross margin.

lower operating costs and lean improvement

programme

The lower order income as a result of the economic

crisis prompted the company to increase its attention

for cost control. The Lean improvement programme

had already resulted in a number of projects which

lead to lower maintenance costs and less waste,

among other things. In addition, all other costs were


also scrutinised again. The lower activity level also

contributed to the decrease in costst. The total

operating costs declined by € 1.1 million, or nearly

5%, to € 24.3 million. The savings as a result of the

reorganisations implemented in March amount to

approximately € 1.8 million on an annual basis and

will be realised with effect from the next financial year.

Investments

In 2008/2009, the investments amounted to

€ 1.2 million (2007/2008: € 3.4 million) at a

deprecation level of € 3.1 million (2007/2008:

€ 2.9 million). Some of the large projects involved

were:

• Optimisation of the production location in Hungary

• Expansion of the silicones department in the

Netherlands

The investments were entirely financed from the

existing credit facilities.

Cash flow and financing

During the financial year, the working capital dropped

by € 2.6 million, from € 12.3 million to € 9.7 million.

Most of this drop can be attributed to the decrease in

inventory of € 2.4 million. The lower level of activities

and the efforts within the framework of the Lean improvement

programme form the basis of this decline.

Despite the drop, there were more raw materials in

stock at balance sheet date than needed as a result of

long-term purchasing obligations which could not be

postponed any longer. These stocks will be used in the

next few months, and the stock of raw materials will

return to a normal level.

The remainder of the € 0.2 million difference can

be explained by "trade and other receivables" which

saw a sharper fall compared to "trade creditors and

other payables". As a result of the realised loss and the

tax gain arising from the closure of the branch in Brazil

a number of years ago, a tax claim has arisen which

will be largely effectuated in the next financial year.

On the other hand, a reserve for the reorganisation

costs has been included, which will lead to payments,

mostly at the start of the new financial year.

Mainly as a result of the negative net result, the cash

flow (net profit plus depreciation) fell by 38%, from

€ 4.0 million to € 2.5 million. The cash flow from

business activities increased, from € 2.3 million in

2007/2008 to € 5.7 million in 2008/2009. The drop in

working capital is the main reason for this.

For its financing, Holland Colours makes use of credit

facilities in the Netherlands, the United States and, to

a limited degree, Indonesia. In the United States and

Indonesia securities have been given in the form of

mortgage rights on buildings and in the United States

also on equipment. Both in the Netherlands and in

the United States some covenants apply. As a result

of the disappointing results Holland Colours does not

meet some of the agreed-upon covenants at the end

of the fiscal year. This means that the loans formally

have become repayable at call and they are therefore

presented as current liabilities. It is expected that in

consultation with external financiers agreement will be

reached upon a redefinition of the starting points on

which the financing is based, inclusive of the securities

that have to be given within this framework. The major

lenders have shown their faith in the outcome of the

negotiations by issuing a waiver on the current financing.

Expectations are that the continuation of the financing

is thus safeguarded. The new agreements will lead to

higher financing costs in the coming fiscal year. On the

basis of several calculated scenarios Holland Colours

does not foresee additional credit needs.

Partly due to positive translation results of € 0.7 million

(2007/2008: a negative € 2.2 million) and a lower

invested capital, the company's solvency ratio rose to

46.1 % (2007/2008: 44.2%) and as such came within

the target bandwidth. The translation results are due

to the shareholders’ equity at subsidiary companies

reporting in foreign currencies.

holland colours 08/09 9


10

Developments per Division

europe

Key figures (€ million)

(continuing operations) 08/09 07/08 Difference

Turnover 33.0 37.8 - 13 %

Operating result - 1.0 1.3 - 178 %

Investments 0.7 2.1 - 66 %

Depreciation 1.5 1.5 + 2 %

Average number

of employees (FTEs) 220 222 - 1 %

The sharply decreasing turnover in the Building &

Construction market in the second half year is the

main cause of the deterioration of the operating result

in Europe. The production issues, which heavily

affected last year's result, have now been resolved.

Partly thanks to the Lean improvement programme,

delivery times are now shorter and more reliable, and

production efficiency has also improved compared to

last year. The lower turnover did of course also play

a role in this, but structural improvements have been

implemented this year, laying the basis for future

growth.

Economic crisis hits Building & Construction

During the first half year, turnover in the Building &

Construction market still showed growth, despite

the deteriorated situation, particularly in the English

and Irish housing markets. The rising turnover in the

market for PVC profiles played an important role in

that respect. From September, the effects of the crisis

were beginning to make themselves felt in continental

Europe, and turnover fell sharply. Driven by uncertainty

about the future, customers are lowering existing

stocks and only order what they really need.

Disappointing turnover in Packaging

Fierce competition in the Eastern European beer

market negatively affected turnover in the Packaging

market. This competitive market demands products

that combine colour and oxygen barrier systems. Up

until the course of the past financial year, Holland

Colours has tried to serve this interesting market together

with Valspar, but did not succeed. As there are

now a number of other suppliers of oxygen barrier

systems in the market, Holland Colours has terminated

its exclusive contract with Valspar and now also

cooperates with other suppliers of oxygen barrier

systems to develop suitable combinations for,

holland colours 08/09

amongst others, the beer market. The effects of

these new cooperations will become visible during

the course of the next financial year.

The turnover of the new Holcomer UHT product,

a colour concentrate with protection against UV

radiation for (dairy) packaging, is still modest, but it

continues to rise. A number of interesting projects

are planned for the coming year.

Turnover in Silicones & Elastomers also drops,

introduction of Holcosil HTV

As part of the turnover in Silicones & Elastomers is

related to the Building & Construction market,

turnover in this segment fell too. The production

equipment for the promising Holcosil HTV product in

Hungary was successfully taken into operation after a

few teething problems. In the course of 2008/2009,

commercial activities were intensified and demand

for this product has been rising.

Optimisation of production capacity in Hungary

In 2007/2008, production capacity in Hungary was

expanded considerably, for Holcobatch, Holcoprill

and Holcosil HTV. Many of the employees from the

closed pigment factory found new jobs at the new

and relocated production lines. During the past year,

the old pigment factory was cleared out and prepared

for the producion of the other Holland Colours

products. The process flow was optimised, creating a

modern and efficiently producing factory.

The expansion of production capacity in Hungary

anticipated further growth in Europe. As turnover fell

instead of rose in 2008/2009, a temporary overcapacity

has arisen. Following the reorganisation in March 2009,

the workforce has been reduced.

Lean in Europe

The past financial year saw great efforts with regard

to projects defined within the framework of the Lean

improvement programme, both in the Netherlands

and Hungary. The projects are designed to achieve

shorter delivery times, improved delivery reliability,

improved production efficiency, less waste, a more

logical process flow, a clearer definition of service

levels, order and neatness, reduced costs and lower

commitment of working capital.


Americas

Key figures (€ million) 08/09 07/08 Difference

Turnover 15.0 17.6 - 15 %

Operating result - 0.2 0.6 - 143 %

Investments 0.1 0.5 - 75 %

Depreciation 0.6 0.7 - 8 %

Average number

of employees (FTEs) 98 102 - 4 %

Turnover in the Americas division fell by 13%, from

USD 24.8 million to USD 21.4 million. Due to the on

average slightly weaker US dollar, turnover in euro

terms declined 15% from € 17.6 million to € 15.1

million. The contraction in the Building & Construction

market in North America and Mexico had a negative

effect on the turnover development. Central and

South America on the other hand showed an increase

in turnover. The operating result fell from a positive

€ 0.6 million to a negative € 0.2 million. Considerable

cost savings at the United States location could not

compensate the effect of the disappointing turnover.

Renewed sharp drop in turnover in

Building & Construction

In the past year, the decrease in turnover in Building

& Construction continued, influenced by the worsening

crises in the financial and housing markets. In

contrast to Europe, the turnover in Building & Con- Con-

struction remained under last year's level throughout

the year, although here too the drop in the second

half year was stronger than in the first half year.

Jan 2000 Jan 2002 Jan 2004 Jan 2006 Jan 2008

Number of housing starts in the United States, in thousands

per month

Mixed picture in Packaging

Turnover in Packaging showed a mixed picture.

The United States experienced a drop that can be

attributed mainly to a decrease in turnover at one

specific customer. In Canada turnover increased,

while Mexico showed a slight decline.

2200

2000

1800

1600

1400

1200

1000

800

600

400

Decreasing turnover Silicones & Elastomers

The decreasing turnover in Silicones and Elastomers

can be explained by the economic decline in the United

States, particularly in the Building & Construction

market where most of these products are applied.

Lean in the United States

The past year is used for the execution of the defined

Lean improvement projects. This resulted, amongst

other improvements, in a reduction of Total Change

Over time in two production processes, adding

capacity of 45 and 60 hours per month respectively.

Addionally the various teams were succesfull in

achieving yield improvements and complete utilization

of certain by-products, generating a significant

efficiency gain.

ERP optimisation

The implementation of a new ERP system led to

much extra work, particularly in 2007/2008. The

system was optimised during the past year and it

provides increasingly better support to the logistic

business processes.

Asia

Key figures (€ million) 08/09 07/08 Difference

Turnover 5.3 4.8 10 %

Operating result 0.8 0.5 42 %

Investments 0.1 0.5 - 71 %

Depreciation 0.1 0.1 8 %

Average number

of employees (FTEs) 93 96 - 3 %

Turnover in Asia rose by 11%, from USD 6.7 million

to USD 7.5 million, despite the economic crisis.

Due to the weaker US dollar, turnover in euro terms

rose by 10%, from € 4.8 million to € 5.3 million.

The operating result increased from € 0.5 million to

€ 0.8 million. The higher turnover and a controlled

development of the operating costs are the drivers of

this positive development.

Good developments in turnover

As usual in Asia, the Specialties segment accounts

for a high proportion of turnover. This year, turnover

in US dollars rose by 1%. This mainly concerns pastes

and trading turnover. The turnover in pigments

produced under Holland Colours guidance in China

was particularly strong in the first six months.

holland colours 08/09 11


12

In the second half of the year the effects of the

recession manifested themselves, resulting in a slightly

lower turnover. Turnover for Building & Construction

stood at a traditionally low level, but turnover in

Packaging rose by 24%, thanks to positive

developments in Indonesia, Vietnam and China.

Thanks to strong sales in China, turnover for Silicones

& Elastomers has doubled compared to last year.

The turnover of the China production location,

opened in 2007, is growing according to plan.

This year, local production has expanded after the

commissioning of a number of new machines.

In 2008/2009, the rising turnover in Silicones &

Elastomers formed the basis of growth, but

Packaging too is showing positive evelopments.

The intention is to realise a further growth in turnover

by expanding the local sales team.

Expansion in Surabaya, Indonesia

Last year, preparations were made for the expansion

of the production location in Surabaya, Indonesia.

The construction of a factory building on the adjacent

plot bought last year is well underway. This investment

opens up the way for further future growth.

Personnel

reorganisations in the Netherlands, Hungary,

the United Kingdom and the United States

Due to the persistent crises in the financial and housing

markets in various countries, Holland Colours was

forced in March 2009 to adjust the organisations in

the Netherlands, Hungary, the United Kingdom and

the United States in accordance with the lower level of

activities. As a result, 60 jobs were lost in comparison

with the first six months of the financial year.

Unfortunately 41 employees were forced to take forced

redundancy. In April 2009, the total number

of jobs (FTE) will consequently stand at 380.

The reorganisations were thoroughly prepared, in a way

that is worthy of Holland Colours. It was a difficult and

emotional period for everyone involved. Management

would like to thank all (former) employees of Holland

Colours for their efforts before, during and after this

difficult process.

The organisational changes have had consequences

for both the production and other departments.

Where possible, tasks have been combined and

overheads reduced. In addition to changes to the

aforementioned operational organisations, the

number of jobs at the Holding were also reduced, by

integrating tasks with or moving them to the Divisions.

From now on, activities relating to marketing and

holland colours 08/09

process improvements will no longer be carried out

by the Holding, but by the Divisions themselves.

In addition to legal, financial and ICT matters, the

holding will continue to concentrate on strategic innovation.

organisation

Over the financial year, the Group had an average

workforce of 433 (FTE), compared with 445 in the

previous financial year. At the end of the financial

year, the company still employed 420 employees

(FTE). As a result of the reorganisation, this number

dropped to 380 in April 2009. The geographical

diversification of employees is as follows:

08/09 07/08

The Netherlands 143 150

Hungary 88 88

United Kingdom 10 10

United States 86 89

Canada 4 4

Mexico 8 8

Indonesia 83 83

China 11 13

Total 433 445

The average age rose from 37.2 to 39.1 year.

The figure for days lost sickdays decreased, from

3.8% to 2.3%.

Men/women breakdown women men

Employees in management functions 7 18

Other employees 111 284

Accidents

Despite the close attention paid to safe working

methods, the number of company accidents came

to seven, compared to five in the previous year.

The incidents concerned falls and cuts. In order to

avoid such accidents in the future, various bannisters

have been fitted and instructions have been modified.

These incidents led to 120 lost days (2007/2008: 217).

The announced risk assessments and inspections

have been carried out in the four large production

locations. Risk assessments and inspections are

intended to bring safety standards to a structurally

higher level.

lTir

Holland Colours uses the Lost Time Injury Rate (LTIR)

method to measure its safety performance. This internationally

used method gives a ratio between the number

of accidents and the number of hours worked. The

LTIR for 2008/2009 was eight (good) compared with


five (excellent) last year. The table below provides the

interpretation of these data.

LTIR Result Action required

0-5 Excellent No

5-10 Good No

10-15 Average Yes

> 15 Poor Yes

Attention to training

As result of the Lean improvement programme, a lot

of attention was paid to drawing up and improving

work instructions and implementing these instructions

in practice.

employee share ownership

All the employees in Holland Colours participate

in Holland Pigments BV, the investment company

that as of July 2007 holds 46.27% of the shares of

Holland Colours NV. The employees are able to

acquire shares in Holland Pigments via direct

purchase immediately after the publication of the

yearly and the half-yearly figures. In addition, in case

of a profit sharing programme, part of the profit share

is converted into shares Holland Pigments BV.

During the third quarter of the financial year, a survey

was held among all employee-shareholders at

Holland Colours. The vast majority of employees

is positive about the share ownership and has

confidence in the future of Holland Colours. It is

striking that there is hardly any difference between

employees with a shorter or a longer employment

where it concerns the survey outcome.

Sustainability

Care for the environment

Holland Colours continuously strives to minimise

any detrimental effects of production processes on

the environment. Where the available technologies and

techniques make this possible in an economically

responsible manner, Holland Colours will not limit

its environmental care to the bare legal norms.

Moreover: clean production, re-use of materials and

energy savings have a positive environmental impact as

well as a direct economic value.

Social involvement

Holland Colours feels responsible for more than simply

being a good employer and behaving responsibly as

regards the environment. In all countries where Holland

Colours is economically active, we take part in projects

in the field of health care, the disabled and well-being.

Risk management

Risk management within Holland Colours focuses on

identifying the significant risks to which the company

is exposed and effectively controlling them with a

reasonable degree of safety. Risk management,

geared to the size and the entrepreneurial nature of

Holland Colours, is an integral management task.

The following risks have been identified as being

important:

Principal strategic risks:

innovation and worldwide spread

The possibility of failure in innovation constitutes a

major risk. With a system of project management and

joint agenda-setting at the corporate level as well as

the division level – so that technology, market and

management are represented – we endeavour to

control this process using various lines of approach.

Global diversification makes Holland Colours less

sensitive to the trends in any individual geographic

market. International presence is therefore one of

Holland Colours’ strengths, but also a risk, given the

company’s size. Control is carried out via a stringent

process of budgeting and financial reporting,

emphasis on performance management, and - where

necessary - by making use of external expertise.

Principal operational risks: availability of raw

materials, product liability and safety

The availability of raw materials significantly affects

the cost price of the products. By coordinating the

strategic purchases centrally and by making price

and delivery agreements on a group level, this risk

is reduced. Product liability risks are covered by

documented agreements with customers and

suppliers, internal process control via ISO-certified

quality control systems, and insurance. Control of the

production process is also of importance in order to

remain competitive cost-wise. Production reporting

and continual improvement within our Lean manufacturing

approach are the tools Holland Colours uses in

this process. Our order-driven production reduces the

inventory risks. Health and safety are also major risk

areas and we therefore place great emphasis on

working conditions, sick leave and accident prevention.

holland colours 08/09 13


14

Principal financial risks: exchange rates and

interest rates

Financing is centrally driven. During this process,

continuous attention is paid to the conditions attached

to external financing and the compliance with these

conditions. Interest percentages on long-term loans

are generally fixed for the entire term of a loan.

Current account facilities are in general based on

EURIBOR/LIBOR plus an agreed surcharge. Where

relevant, currency risks are covered by entering into

forward transactions or options. In addition, the

present policy permits future streams of capital to

be covered for a period of six to twelve months,

with a decrease in the hedging percentage towards

the future in relation to the increasing uncertainty of

these streams. Conversion risks relating to investment

in foreign activities are partially hedged through hedge

accounting. In addition, on 1 April 2009, the

functional currency of the Hungary branch changed

from the local currency to the euro. Credit risks are not

insured. The majority of Holland Colour’s business is

conducted with low-risk large multinational customers.

Debtors are monitored on the basis of credit limits

and stringent procedures in case of overdue payments.

reporting: internal Business evaluations expanded

The internal financial reporting and the budgeting

process are structured to ensure clarity as to the

achievable results as well as to the timely, reliable

and sufficiently complete reporting on the course of

business. Self-assessment is the primary means of

control. A programme for internal business evaluations

was initiated in 2007/2008. The evaluations are

made on the basis of a structured questionnaire and

conducted by controllers from different operating

companies. During the past year, business evaluations

were carried out at the branches in Mexico, the

United States, the Netherlands and Hungary.

The results will be discussed with local management

and procedures will change, where necessary.

The programme of internal business evaluations will

be further extended during the coming year.

In the view of the Board of Management, the financial

risk management in force complies with all reasonable

requirements.

Referring to section 5:25c, paragraph 2c of the Dutch

Financial Supervision Act, the Board of Management

confirms that, as far as they know:

• the annual accounts give a reliable representation

of the assets, liabilities, the financial position and

the result; and

holland colours 08/09

• the annual report gives a reliable representation of

the conditions as at the balance sheet date,

the course of business during the financial year;

and

• the annual report describes the actual risks

that the company is confronted with.

Good risk management is no guaranty

Risk management is a dynamic process. Risks

currently assessed as minimal may change with

regard to profile and impact at a later stage.

New risks, which may possibly result in mistakes or

losses, cannot be excluded either. Risk management

can never provide an absolute guarantee for

achieving the company’s objectives.

Profit appropriation

Dividend policy: annual assessment

The dividend policy of Holland Colours is not based

on the distribution of a fixed percentage of the

profit. It is rather assessed each year on the basis

of the company’s financial position and prospects.

The following factors are considered:

• Capital structure: As an internationally operating

industrial company, Holland Colours aims at a

solvency ratio of between 45 and 50%.

• Future finance requirements: The dividend

proposal is partly determined by the future

finance requirements. Contributing factors

may include additional working capital for growth,

investment in excess of depreciation and any

acquisitions of a limited size.

• Interest coverage: To maintain access to external

financial sources, the target is an interest coverage

factor of at least 3.

In the last five years, Holland Colours has distributed

between 52% and 108% of its realised net profit to

shareholders.

Dividend proposal

The net result per share is a negative € 0.72 compared

to a positive € 0.92 last year. On the basis of the

company’s dividend policy, it will be proposed to the

General Meeting of Shareholders to pay no dividend

this year.


Outlook for 2009/2010

In 2009/2010 Holland Colours will operate within a

difficult economic climate. The main uncertainties

concern the developments in the financial and

housing markets, and the poor performance of the

world economy. Holland Colours keeps a sharp eye

on measures to manage its risks and to keep costs in

line with the new reality.

For now Holland Colours assumes that the slump in

the housing markets will continue, as a result of which

the turnover in Building & Construction will decrease

in both Europe and the United States.

In Packaging, Holland Colours expects an increase in

turnover, due especially to the success of Holcomer

UHT and a recovery of the market position within

Europe.

In Silicones & Elastomers, a decline is expected.

This market is related to Building & Construction and

therefore also experiences negative effects from the

adverse developments in the housing markets.

Operational efficiency campaigns will continue

unabated, whereby the development in turnover

will be closely monitored. In view of the current

economic conditions, Holland Colours pays extra

attention to the control of debtors and other working

capital positions.

After the reorganization in April 2009 the number

of employees is approximately 380. It is expected

that this number will not change significantly in the

coming year.

The investments will be well below the level of

depreciation and are expected to be financed

entirely from the cash flow.

Because of the uncertain circumstances, Holland

Colours will not make any predictions regarding

the expected turnover and result for 2009/2010.

However, for the first half year of 2009/2010 we do

expect a lower turnover than for the first half year of

2008/2009.

Holland Colours NV, May 28, 2009

On behalf of the Board of Management

Bernard van Schaik

holland colours 08/09 15


16

Corporate Governance

Accountability

Holland Colours promotes responsible conduct in

relation to society and the environment, while taking

account of the interests of the various stakeholders:

staff, shareholders, other providers of capital and

customers.

The Board of Management and Supervisory Board

share the responsibility for giving due consideration

to the interests of all stakeholders, focusing on the

continuity of the company and the creation of

shareholder value, both now and in the longer term.

With a few exceptions, Holland Colours in general

follows the recommendations of the Dutch Corporate

Governance Code.

The Corporate Governance guidelines of Holland

Colours were adopted during the General Meeting of

Shareholders on June 23, 2005 and is available in its

entirety, with detailed explanation, on the company's

website. A few recommendations from the Dutch

Code have not been adopted. These relate to the

following points:

Board of Management: Previously existing employment

contracts of members of the Board of Management

will be respected. In these contracts, Board members

are appointed for an unlimited term, and severance

pay is unspecified. At termination of employment,

existing labour terms and regulations are taken into

account. The contract of the current President

stipulates an unlimited term and a severance pay of

one gross annual salary. Holland Colours does not

offer any remuneration in the form of options.

Provisions with respect to options are therefore not

applicable. Private investments need not be disclosed;

it is not permitted to invest in competitor’s companies.

Supervisory Board: In view of the size of the Supervisory

Board, no separate committees have been

constituted. With regard to the selection criteria and

appointment procedures of Executive Directors,

Stichting Prioriteit is responsible for the duties relating

to the Selection & Appointment Committee. The

duties of the Remuneration and Audit committee are

performed by the full Supervisory Board. The General

Meeting of Shareholders determines the remuneration

policy of the Supervisory Board. Stichting Prioriteit is

responsible for awarding individual remuneration to

Members of the Supervisory Board in accordance with

the established policies. The Chairman of the

Supervisory Board is also member of the Executive

holland colours 08/09

Board of a listed company. This is a temporary

situation pending the appointment of a successor as

Chairman of the Supervisory Board. Private investments

need not be disclosed; it is not permitted to invest in

competitor’s companies.

Company Secretary: Holland Colours is not big

enough to justify allocation of duties to and

appointment of a Company Secretary as stipulated

in the Code.

Conflict of interests: These provisions will be

implemented in spirit, given the special position of

Holland Pigments BV as investment company in

which all employees of the Holland Colours Group

worldwide participate. Transactions between the

Company and Holland Pigments that are of material

significance require the approval of the Supervisory

Board.

Shareholder's powers: At the General Meeting of

Shareholders of July 6, 2009, amendment of the

Articles of Association of Holland Colours NV will be

proposed, which will stipulate that nominations made

by the Stichting Prioriteit for the appointment of

Board members and/or members of the Supervisory

Board will be approved by the General Meeting of

Shareholders with an absolute majority.

Preventing the misuse of insider information

In compliance with the Dutch Financial Supervision

Act, Holland Colours has instituted a regulation

relating to investment in own shares, share ownership

and preventing the misuse of insider information.

Moreover, the duty of disclosure and the relevant best

practice provisions of the Corporate Governance

Code have been incorporated in this regulation as far

as applicable. This regulation is applicable to the

Supervisory Board, the Board of Management, a wide

circle of personnel, and a number of advisors. The

Compliance Officer supervises regulatory compliance

and maintains contact with the Dutch Authority for

the Financial Markets.

The website of Holland Colours will give you more

information, including the Supervisory Board’s profile,

regulation and schedule of retirement, the Company's

Articles of Association, the whistleblowers’ regulation,

the regulation on ownership and transactions

in shares and other financial instruments, and the

minutes of the General Meeting of Shareholders.


Shareholdings of the Supervisory Board, the Board

of Management and De Kolk Beheer BV

Holland Colours encourages employee participation

to increase involvement and to balance the interests

of employees and shareholders. Besides member of

the Supervisory Board of Holland Colours NV,

Mr H.H. van der Lof is also a Board member of De

Kolk Beheer BV, a company with a shareholding in

Holland Colours NV and Holland Pigments BV. As of

31 March 2009, the Supervisory Board and the Board

of Management own the following shareholdings,

which are held as long-term investments:

In Holland Colours NV

Supervisory Board 0.00 %

Board of Management 0.00 %

De Kolk Beheer BV 6.28 %

In Holland Pigments BV

Supervisory Board 0.00 %

Board of Management 10.94 %

De Kolk Beheer BV 8.07 %

Management

information

Supervisory Board

N.H. Gerardu (1951) Chairman

Dutch nationality

Member of Royal DSM NV Management Board

Member since 2006; current term to 2010.

Additional functions:

Member of Polynorm NV Supervisory Board

H.H. van der Lof (1962)

Dutch nationality

Director of De Kolk Beheer BV

Member since 2007; current term to 2011.

Additional functions:

Member of Royal Grolsch NV Supervisory Board

Member of Holland Pigments BV Supervisory Board

Member of TIIN Buy Out and Growth Fund BV Supervisory

Board

Committee member of Stichting Administratiekantoor

Aandelen Holland Pigments BV

M.H. Zegger (1957)

Dutch nationality

Director of Pemco International BV

Member since 2005; current term to 2009.

Additional functions:

Member of Fujitsu Services BV Supervisory Board

Member of Antea Participaties BV Supervisory Board

holland colours 08/09 17


18

Management information

Board of Management

B.P.M. van Schaik* (1951)

President

J.J.G. Straathof (1965)

Director Finance

A.J. Veldhuis-Hagedoorn* (1953)

Director Divison Americas

J.T. Stevels (1971)

Director Research & Technology

* Executive Directors Holland Colours NV

Group Management

Group Management consists of the Board of

Management complemented by the Divisional

Directors and the Manager Business Processes & ICT.

S. Kho-Pangkey MBA (1949)

Director of Division Asia

R.P. Karrenbeld (1973)

Director of Division Europe

G.J. Luiten (1962)

Manager Business Processes & ICT

Daily Management

You can find an organisation chart on page 64.

For more information on Holland Colours NV's

Management, please visit www.hollandcolours.com

holland colours 08/09

From left to right:

Jolien Stevels

Bernard van Schaik

Jeroen Straathof

Tineke Veldhuis


eport of the Supervisory Board

In the past financial year, the Supervisory Board met

five times to discuss the company’s course of

business, during which the regular agenda topics were

discussed: strategy and market developments, social

aspects relevant to the company, development of the

results and of the balance sheet, investments, progress

of the restructuring in Europe and the United States,

R&D, safety, the environment and working conditions,

and the implementation of the ERP system. Corporate

Governance was also a key item for discussion.

A sixth meeting was held at which the consequences

of the deteriorating economic situation were discussed.

Updates on the company's strategy were a major

topic, especially during the first few months of the

financial year. The effects on Holland Colours of

the crises on the financial and housing markets were

extensively discussed during the second half of the

year. The reorganisation, which resulted in a loss of

60 jobs, received ample attention. In addition, the

continuous implementation of the Lean improvement

programme, financing and the financing structure

of the company, working capital control and the

acceleration of the innovation programme were

important topics of discussion.

During the April 2009 meeting the structure and the

process of internal risk-management and control

systems during the financial year were discussed with

the Board of Management. In terms of its supervisory

role, the Board is of the opinion that these systems

are adequate and effective.

During the second half of the financial year, a selection

committee asked four accountancy firms and one

tax consultancy firm to prepare a quote for the audit

and/or the tax advice as from the 2009/2010 financial

year. At the end of the selection process, the selection

committee advised the Supervisory Board to appoint

Ernst & Young Accountants LLP as auditors and tax

consultants. The Supervisory Board has endorsed this

advice and will therefore nominate Ernst & Young

Accountants LLP for appointment at the next General

Meeting of Shareholders.

Prior to each meeting with the Board of Management,

the Supervisory Board discussed its own performance,

and that of the Board of Management, among other

things. In terms of its own performance the Board

has come to the conclusion that its composition is

balanced, comprising the required expertise.

Apart from two meetings, at which one Supervisory

Board member was absent, all members attended all

meetings. In addition to the regular meetings, many

informal discussions took place between Supervisory

and Management Board members, during which

specific issues were raised.

From left to right:

N.H. Gerardu

H.H. van der Lof

M.H. Zegger

holland colours 08/09 19


20

The allocation of tasks and working methods of the

Supervisory Board are laid down in a regulation.

The profile required for the Board members and a

schedule of retirement have also been laid down.

Both documents can be accessed at the Holland

Colours website.

In accordance with provision III 2.2 of the Dutch

Corporate Governance Code, all Supervisory Board

members are independent, with the exception of

Mr H.H. van der Lof. At the General Meeting of

Shareholders on July 9, 2007, Mr Van der Lof was

appointed member of the Supervisory Board of

Holland Colours NV, while he is also a member of

Holland Pigments BV's Supervisory Board.

This company has had a 46.27% stake in Holland

Colours NV since July 2007. Moreover, Mr Van der

Lof is Director of De Kolk Beheer BV, a company with

a 6.28% stake in Holland Colours NV. Additionally,

De Kolk Beheer BV has a 8.07% stake in Holland

Pigments BV.

In view of the regular size of the Supervisory Board,

no separate committees have been constituted: the

duties of the Remuneration and Audit committee are

performed by the full Supervisory Board.

In 2009, the first term of Mr M.H. Zegger will end.

At the next General Meeting of Shareholders to be

held on 6 July 2009, Mr Zegger will be nominated for

re-appointment.

Given the size of the company and the composition

of the Supervisory Board, the addition of a fourth

member is not considered an urgent matter.

The Company's Annual Report, which we now submit

to you, contains the financial statements for the

2008/2009 financial year. The financial statements

have been audited by PricewaterhouseCoopers

Accountants NV, registered accountants, who have

also issued an unqualified report. This report has

been included on page 62 of this Annual Report.

At its meeting of May 28, 2009, the Supervisory Board

discussed the financial statements as well as the

financial report and the findings of the external auditor

in the presence of the Management and the external

auditor. Pursuant to this, we are of the opinion that

this Annual Report meets transparency requirements

and forms a sound basis for the accountability

rendered by the Supervisory Board in regard to its

holland colours 08/09

supervision. We hereby submit the Annual Report to

the General Meeting of Shareholders and recommend

adoption without amendment. In addition we ask

approval for the proposal to pay no dividend for this

financial year.

We also recommend that you issue your approval

for the management pursued by the Board of

Management and for the supervision carried out by

the Supervisory Board, and to grant discharge to the

Board of Management and the Supervisory Board.

The members of the Supervisory Board have signed

the annual accounts and as such they have fulfilled

their legal obligation under article 2:101,

paragraph 2 of the Dutch Civil Code.

We would like to thank Management and all Holland

Colours employees for their efforts and achievements.

The strategy, which was re-formulated last year,

was overshadowed in the course of 2008/2009 by

the rapidily deteriorating economic developments.

The corporate objectives could not be achieved.

The low order income required an adjustment of

the cost structure at short notice. The reorganisation

that resulted from this was thoroughly prepared and

executed with the greatest possible care. We realise

this has been a drastic event for all employees of

Holland Colours and we would like to thank them for

the way in which they dealt with the consequences.

In addition to the cost-saving measures, we have

also taken measures that should lead to growth of

the company at the longer term. One example is the

acceleration of the innovation. With a view to the

economic climate, the 2009/2010 financial year will

be a trying one, during which ample attention will be

paid to restore the profitability. We wish Management

and employees every success in achieving the

objectives for the coming financial year and would

like to express our complete confidence in the policy

pursued by the Management.

Apeldoorn, May 28, 2009

The Supervisory Board

N.H. Gerardu, Chairman

H.H. van der Lof

M.H. Zegger


The Holland Colours share

investor relations

Holland Colours seeks open communication with its

shareholders and other stakeholders. As standard,

share-price sensitive information is announced in

press releases and published on the website.

The financial results realised are published every half

year, while an interim statement on important events

and the company's financial position will be issued

twice a year.

SNS Securities is liquidity Provider

Holland Colours is a small cap with a small free float

and a small number of share transactions. In order to

increase stock-exchange liquidity, SNS Securities

Amsterdam has been appointed liquidity provider.

They provide for continuous ‘supply and demand’

trades in the trading system. SNS Securities also

publishes reports on Holland Colours and maintains

relationships with existing and potential investors.

Jul

Oct

Jan

Apr

Jul

Share price development as of July 2006

= Holland Colours = Ams Small Cap Index

Number of outstanding shares constant

The number of outstanding shares has remained

constant during the year.

Shares traded on NYSE

Oct

Euronext Amsterdam 459,532

Holland Pigments BV 398,100

Registered shares 2,718

Stichting Prioriteit 1

Total 860,351

Jan

Apr

Jul

Oct

Jan

2006 2007 2008 2009

Apr

50

25

0

-25

-50

Stichting Prioriteit

Holland Colours’ protection mechanism is a

preference share conveying certain entitlements.

The preference share is held by “Stichting Prioriteit

Holland Colours”. A more detailed explanation is

given in the report by Stichting Prioriteit, on page 63.

Substantial interests

As of May 28, 2009, the following substantial

interests (>5%) were disclosed to the AFM (The

Dutch Authority for the Financial Markets) on the

basis of the Decree on the Disclosure of Major

Holdings and Capital Interests in Issuing Institutions

in accordance with the Act on Financial Supervision.

Disclosures % Disclosure date

ASZ Holding BV 6.74% 01-11-2006

Janivo Beleggingen BV 5.08% 01-11-2006

De Kolk Beheer BV 6.28% 30-05-2008

Monolith Investment 10.56% 29-09-2008

Management BV

OtterBrabant Beheer BV 11.61% 01-11-2006

P. Schoemaker 6.30% 23-03-2007

Holland Pigments BV 47.55% 01-11-2006

More than 75% of Holland Pigments BV is owned

by Stichting Administratiekantoor Aandelen Holland

Pigments (AAHP) and the remainder is for the larger

part owned by the (former) employees of the Holland

Colours Group. Director of Holland Pigments BV

Mrs A.A. Eikelenboom-de Groot.

The Board of Stichting AAHP consists of:

J.M. de Heer, Chairman

J.W. de Heer

Mrs S. Kho-Pangkey

Mrs N. Tampubolon-Pangkey

Y.R. Veldhuis

H.H. van der Lof

holland colours 08/09 21


22

Stichting AAHP endorses the importance of the

employee/shareholder model implemented in

Holland Colours and supports it by facilitating the

internal market in Holland Pigments shares.

The share certificates of Holland Pigments BV issued

by Stichting AAHP are owned by:

• Beheer- en Beleggingsmaatschappij

’s-Heerenhove Epe BV

• Emco Belegging Nederland BV

• Sperlette BV

• De Kolk Beheer BV

holland colours 08/09

Publications

Holland Colours published the following press

releases in the financial year under review:

June 2, 2008

Despite turnover increase to e 60.2 million

lower net result due to closure of pigments factory

and weak first half year.

October 30, 2008

Holland Colours NV half-year report 2008/2009.

Disappointing result due to lower turnover and

higher raw material prices

February 9, 2009

Holland Colours NV expects sharply lower result

March 5, 2009

Holland Colours reduces workforce

important dates

July 6, 2009

General Meeting of Shareholders at the Company

offices at 13.30 hours

October 30, 2009

Publication of the 2009/2010 half-year figures


fiNANCiAl STATeMeNTS 2008/2009

holland colours 08/09 23


24

fiNANCiAl STATeMeNTS

financial Statements 2008/2009

Holland Colours NV

Contents

Consolidated income statement 26

Consolidated balance sheet as of March 31, 2009 27

Consolidated cash flow statement 28

Consolidated statement of changes in equity 29

Notes to the consolidated financial statements 30

1. General information 30

2. Summary of the significant accounting principles 30

3. Revenue recognition 32

4. Balance sheet 33

5. Financial risk management 35

6. Cash flow statement 37

7. Segment information 37

8. Discontinued operations 37

Notes to the consolidated income statement 38

9. Segment information continuing operations 38

10. Discontinued operations 39

11. Personnel costs 39

12. Exceptional costs 39

13. Other operating expenses 40

14. Finance income and costs 40

15. Income tax 40

Notes to the consolidated balance sheet 41

16. Intangible fixed assets 41

17. Tangible fixed assets 42

18. Deferred tax assets and liabilities 43

19. Other long-term receivables 43

20. Inventories 43

21. Trade debtors 44

22. Other receivables and accrued income 45

23. Cash and cash equivalents 45

24. Assets discontinued operations 45

25. Equity 45

26. Named reserves 46

27. Earnings per share 46

28. Third party interests 46

29. Borrowings and long-term liabilities 47

30. Employee benefit obligations 49

holland colours 08/09


31 Financial instruments 50

32. Trade and other payables 50

33. Liabilities discontinued operations 50

other information 51

34. Liabilities not reflected in the balance sheet 51

35. Remuneration of the Board of Management and the Supervisory Board 51

36. Related parties 53

37. Other disclosures 53

Company financial statements 54

Notes to the company financial statements 55

38. General information 55

39. Summery of the significant accounting principles 55

40. Financial fixed assets 55

Notes to the company balance sheet 56

41. Intangible fixed assets 56

42. Tangible fixed assets 57

43. Financial fixed assets 58

44. Equity 59

45. Borrowings and long-term liabilities 59

46. Employee benefit obligations 60

47. Personnel 60

48. Accounting and audit costs 60

49. Liabilities not reflected in the balance sheet 61

other information 61

Auditor’s report 62

holland colours 08/09 25


26

fiNANCiAl STATeMeNTS

Consolidated income statement

In thousands of euros note April 1, 2008 / March 31, 2009 April 1, 2007 / March 31, 2008

Continuing operations

Net turnover 53,337 60,176

Cost of sales and raw materials 28,384 31,928

Gross operating profit 24,953 28,248

Changes in inventories 362 (195)

Personnel costs 11 12,471 12,167

Depreciation and impairments 2,760 2,602

Amortisation 336 311

Exceptional costs 12 920 -

Other operating costs 13 8,734 10,358

Total operating costs 25,583 25,243

Operating profit (630) 3,005

Finance income 8 32

Finance costs (921) (953)

Net finance costs 14 (913) (921)

Profit before income tax (1,543) 2,084

Income tax expense 15 922 (733)

Net result from continuing operations (621) 1,351

Discontinued operations

Net result from

discontinued operations 10 - (555)

Total net result (621) 796

Attributable to:

Equity holders of the company (623) 788

Minority interest 2 8

earnings per share in euros

(621) 796

Average number of shares issued 27 860,351 860,351

Net profit for the year per share

- from continuing operations (0.72) 1.57

- from discontinued operations - (0.65)

Total net profit per share attributable to shareholders

(ordinary and diluted) (0.72) 0.92

The notes on pages 30 to 61 are an integral part of these consolidated financial statements.

holland colours 08/09


Consolidated balance sheet as of March 31, 2009

In thousands of euros note March 31, 2009 March 31, 2008

Non-current assets

Intangible fixed assets 16 751 945

Tangible fixed assets 17 19,365 20,381

Deferred income tax assets 18 1,049 738

Other long-term receivables 19 331 360

Current assets

21,496 22,424

Inventories 20 7,661 10,017

Receivables

Trade debtors 21 7,057 8,921

Current income tax receivables 1,327 196

Other receivables and accrued income 22 1,035 1,379

Cash and cash equivalents 23 1,757 936

11,176 11,432

Assets discontinued operations 24 - 442

Total assets 40,333 44,315

equity

Share capital 25 1,953 1,953

Share premium reserve 1,219 1,219

Named reserves 26 (2,370) (2,841)

Retained earnings 17,784 19,233

18,586 19,564

Minority interest in equity 28 55 44

Total equity 18,641 19,608

Non-current liabilities

Borrowings 29 784 7,059

Employee benefit obligations 30 1,427 1,526

Deferred income tax liabilities 18 136 139

Derivative financial instruments 31 273 102

Current liabilities

2,620 8,826

Credit institutions 29 11,740 4,985

Repayment obligations 29 - 2,529

Current income tax liabilities 176 461

Trade creditors and other payables 32 7,156 7,774

19,072 15,749

Liabilities related to discontinued operations 33 - 132

Total equity and liabilities 40,333 44,315

The notes on pages 30 to 61 are an integral part of these consolidated financial statements.

holland colours 08/09 27


28

fiNANCiAl STATeMeNTS

Consolidated cash flow statement

including discontinued operations

In thousands of euros note April 1, 2008 / March 31, 2009 April 1, 2007 / March 31 2008

operating activities

Operating result (696) 2,449

Adjustments for:

Depreciation intangible fixed assets 16 336 311

Depreciation tangible fixed assets and 17 2,760 2,881

Financial instruments 31 171 176

Exchange rate differences 529 (1,105)

Cash flow from operating activities

before changes in work capital 3,100 4,712

Change in inventory 2,357 (425)

Change in receivables 2,555 191

Change in current liabilities (748) (583)

(excl. credit institutions and repayment obligations)

Cash flow from operating activities 7,264 3,895

Paid income tax (620) (580)

Paid interest (921) (1,032)

Cash flow from business activities 5,723 2,283

investing activities

Received interest 8 33

Gains from the sale of capital assets 17 - 82

Investments intangible fixed assets 16 (143) (173)

Investments tangible fixed assets 17 (1,080) (3,195)

Cash flow from investing activities 1,215 (3,253)

Cash flow from operating and investing activities 4,508 (970)

financing activities

Dividend paid to shareholders (860) (1,204)

Proceeds from borrowings and long-term liabilities 62 4,027

Redemption payments 29 (2,629) (3,112)

Third party interest 28 2 7

Cash flow from financing activities (3,425) (282)

Change in cash 1,083 (1,252)

Cash at April 1 (4,049) (2,797)

Cash at March 31 (2,966) (4,049)

The notes on pages 30 to 61 are an integral part of these consolidated financial statements.

holland colours 08/09

1,083 (1,252)


Consolidated statement of changes in equity

In thousands of euros Share Named Retained Minority Total

capital reserves earnings interest

Balance as at April 1, 2007 3,172 (525) 19,670 36 22,353

Dividend 2006/2007 - - (1,204) - (1,204)

Cash flow hedge, net of tax - (107) - - (107)

Reserve intangible fixed assets - 21 (21) - -

Currency translation differences - (2,230) - - (2,230)

Net profit for the year 2007/2008 - - 788 8 796

Total mutations - (2,316) (437) 8 (2.745)

Balance as at March 31, 2008 3,172 (2,841) 19,233 44 19,608

Balance as at April 1, 2008 3,172 (2.841) 19,233 44 19,608

Dividend 2007/2008 - - (860) - (860)

Cash flow hedge, net of tax - (229) - - (229)

Reserve intangible fixed assets - (34) 34 - -

Currency translation differences - 734 - 9 743

Net profit for the year 2008/2009 - - (623) 2 (621)

Total mutations - (471) (715) 11 (967)

Balance as at March 31, 2009 3,172 (2,370) 17,784 55 18,641

The notes on pages 30 to 61 are an integral part of these consolidated financial statements.

holland colours 08/09 29


30

fiNANCiAl STATeMeNTS

Notes to the consolidated financial statements

Statement of accounting standards

1. General information

Holland Colours NV (“the Company”) and its

subsidiaries (“the Group”) manufacture, distribute

and sell color concentrates.

The Holland Colours Group operates through ten

of its own facilities and a network of agents and

distributors.

The company is a “Naamloze Vennootschap”

(public corporation), incorporated and domiciled in

Apeldoorn, the Netherlands.

Shares of the Company are listed at NYSE Euronext,

Amsterdam.

On May 28, 2009, the Annual Report was discussed

at the meeting of the Supervisory Board and released

for publication. The Annual Report will be presented

to the General Meeting of Shareholders for adoption

on July 6, 2009.

Under article 402 of Title 2, Book 2 of the Dutch Civil

Code it suffices for the corporate income statement

to state the “net result from participations” and

the “other income and expenses after taxation”.

The latter item represents the balance of income and

expenses of Holland Colours NV.

2. Summary of significant

accounting principles

introduction

The consolidated financial statements are prepared in

accordance with the International Financial Reporting

Standards (IFRS), as adopted by the European Union

and with Title 9 of Book 2 of the Dutch Civil Code.

The financial statements are presented in euros, rounded

to the nearest thousand, unless stated otherwise.

The financial statements have been prepared on the

basis of historical cost, except for derivative financial

instruments, which are stated at fair value.

Where necessary, adjustments were made to the

financial statements of subsidiaries to bring their

accounting policies in line with those used by the

Company.

holland colours 08/09

In preparing the financial statements the management

of the Company have made some estimates and

assumptions, which influence the amounts included

in the consolidated financial statements. Changes

in estimates and assumptions may influence the

amounts to be reported in subsequent years.

After all, actual outcomes may differ from these

estimates. The most important estimates are stated

at the relevant policies.

The accounting policies as detailed below are

applied consistently for all periods presented in these

consolidated financial statements.

Developments in IFRS standards during the financial

year 2008/2009 and after the balance sheet date, but

before the annual accounts were completed, have

had no influence on these annual accounts and are

expected to have no or little effect on the annual

accounts for 2009/2010.

Consolidation

The Company’s consolidated annual accounts for the

financial year 2008/2009 contain the financial data of

the Company and all of the subsidiaries in which the

Company directly or indirectly has a controlling

interest. The Company has a controlling interest if it

can directly or indirectly determine the financial and

operational policy of a company in such a way that it

can derive benefits from the activities of that company.


The consolidated Annual Report incorporates the

financial data of the following subsidiary companies:

in percentages

Holland Colours Apeldoorn BV, The Netherlands 100

Holland Colours UK Ltd, United Kingdom 100

Holland Colours Canada Inc, Canada 100

Holland Colours Americas Inc, USA 100

P.T. Holland Colours Asia, Indonesia 100

Holland Colours Hungariá, Kft, Hungary 100

Holland Colours Mexicana SA de CV, Mexico 100

HCA Japan Corporation, Japan 60

Holland Colours Deutschland GmbH, Germany 100

Holland Colours France Sarl, France, dormant 100

Holland Colours China Ltd, China 100

Regarding the participation in Indonesia, another

party holds 1% of the legal ownership.

The third party share in equity and results is separately

stated.

In the consolidated annual accounts all inter-company

balances and transactions as well as unrealized profits

on such transactions are eliminated. Unrealized losses

are eliminated in the same way as unrealized profits,

but only insofar as there is no indication of impairment.

foreign currency

Items included in the financial statements of each of

the Group’s entities are measured using the currency

of the primary economic environment in which this

entity operates (“the functional currency”). The consolidated

financial statements are presented in euros,

the Company’s functional and presentation currency.

Transactions in foreign currency are converted to the

functional currency at the exchange rate on the trade

date. All monetary assets and liabilities expressed in

foreign currency are converted at the exchange rate

that applies at the balance sheet date. Foreign exchange

differences arising on transaction are recognized

in the income statement.

Assets and liabilities of group companies with a functional

currency other than the euro are converted at

the exchange rate that applied at the balance sheet

date. The profit and loss accounts for these group

companies are converted at the average exchange

rate during the financial year. Resulting exchange rate

differences are directly credited to or deducted from

the equity.

The rates of the main currencies against the euro are

as follows:

Exchange rates used

Closing rate Income statement

in euros March 31, ‘09 March 31, ‘08 2008/2009 2007/2008

Pound Sterling 1.07411 1.25470 1.20900 1.42446

Hungarian Forint 0.00323 0.00385 0.00387 0.00396

US Dollar 0.74957 0.63231 0.70298 0.71058

Canadian Dollar 0.59880 0.61920 0.62967 0.68315

Mexican Peso 0.05376 0.06006 0.06029 0.06578

Chinese Yuan 0.10996 0.09023 0.10195 0.09438

Japanese Yen 0.00763 0.00635 0.00706 0.00621

Derivative financial instruments

Holland Colours uses derivative financial instruments

to limit interest and currency risks arising from

operational, financing and investment activities.

Examples are interest rate swaps as well as currency

options and forward contracts. Derivative financial

instruments are not used for trading purposes. If

these derivative financial instruments do not meet

the requirements for hedge accounting, the profits

and losses on these instruments are included in the

income statement under other operating costs. The

market value of interest rate swaps is the estimated

amount that the Group would receive or would have

to pay in order to terminate the swap on the balance

sheet date, taking into account the current interest

rate. The market value of foreign exchange forward

contracts is the quoted market price (forward rate) on

the balance sheet date.

Hedge accounting

Where specific conditions are met (IAS 39), hedge

accounting can be applied. These specific conditions

entail that there must be a demonstrable one-on-one

relationship between the risk and the hedge instrument.

In such a situation, the profit or loss is stated

directly in shareholders’ equity during the term of the

risk and the hedge instrument. When the risk and/or

hedge instrument terminates, the result is stated in

the income statement. Cash flow hedge accounting

is applied to interest swaps. By applying hedge

accounting a cash flow hedging reserve is taken up in

the equity. This reserve is reduced with the tax on the

fair value of this reserve.

On currency contracts no cash flow hedge accounting

is applied. Profits or losses on these hedge instruments

are therefore presented in the income statement

under other operating costs.

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fiNANCiAl STATeMeNTS

Net investment hedge

Hedges of net investments in foreign operations are

treated in a similar way to cash flow hedges. A gain

or loss on the effective portion of the hedging

instrument is recognized in equity; the gain or loss on

the ineffective portion is recognized immediately in

the income statement under other income and

expenses.

Gains and losses accumulated in equity are included

in the income statement at the time of partial closure

or sale of the foreign operation.

3. Revenue recognition

Revenue is recognized as the difference between the

output value of the goods provided and the costs

and other charges for the year. Results on transactions

are accounted for at the time of delivery. The

following policies are used

Net turnover

Net turnover is defined as the income generated by

the supply of goods to third parties, after deduction

of discounts and taxes and elimination of all intragroup

transactions. Sales of goods are recognized

when products have been delivered to the customer,

the customer has accepted the products and

collection of the related receivables is assured within

reason. Revenue from the supply of goods is only

recognized if the main risks and rewards of ownership

of the goods have been transferred to the buyer. No

revenues are recognized if significant uncertainties

remain with regard to the collection of the remuneration

due, the associated costs or the possible return

of goods.

Costs of sales

Cost of sales represents the direct and indirect

expenses attributable to turnover. It also includes

movements in the provisions, with the exception of

provisions recognized under general administrative

expenses.

lease payments

Of operational lease

Payments made under operational leases are

charged to the income statements on a straight-line

basis over the period of the lease.

Of finance lease

Leases of tangible fixed assets where the Group has

virtually all the risks and rewards of ownership are

holland colours 08/09

classified as finance leases. Finance leases are

capitalized at the lease’s commencement at the fair

value of the leased assets or at the lower cash value

of the minimum lease payments. Each lease payment

is split up in liability charges and finance charges so

as to achieve a constant interest rate on the balance

outstanding. The corresponding lease obligations,

net of finance charges, are included under long-term

payables. The interest element of the lease costs is

charged to the income statement over the lease

period.

finance income and costs

The finance income and costs include the interest

charges on borrowings and interest charges on

financial lease payments. The finance income and

costs are charged to the income statement using the

effective interest method.

income tax

The tax on profit for the financial year includes the

taxation that is payable, available for set-off and

deferred in respect of the reporting period.

The tax is stated in the income statement, except

where it relates to items that are included directly in

shareholders’ equity, in which case the tax is stated

in the shareholders’ equity.

Tax that is payable and available for set-off in respect

of the reporting period is the tax that is expected to

be payable on the taxable result, calculated on the

basis of tax rates that have been set on the balance

sheet date, or on which a firm decision has been taken

by the balance sheet date, and corrections to tax

payable regarding previous years.

earnings per share

The result per ordinary share is calculated as the net

profit or loss attributable to holders of ordinary

shares divided by the weighted average number of

outstanding shares in the period concerned.


4. Balance sheet

Principles for the valuation of assets and liabilities

The valuation methods are principally based on

valuation of the assets and liabilities at a historical

cost price, with the exception of the (derivative)

financial instruments. The valuation methods are

explained in the notes to the individual balance

sheet items.

intangible fixed assets

Costs of development activities are capitalized if the

product or process is technically and commercially

feasible and the Group has sufficient resources to

complete its development.

The capitalized costs include direct labor costs and a

surcharge for directly attributable overhead costs.

All other research and development costs are stated

as an expense in the income statement at the moment

that they are incurred

The estimated useful lives are as follows:

Development costs 5 years

Other intangible fixed assets 3-5 years

The capitalized development costs are valued at cost,

less accumulated depreciation and, when applicable

impairments. Development costs are amortised over

their estimated useful life, not exceeding five years.

other intangible fixed assets

The other intangible fixed assets consist of the costs

of computer software and licenses, as well as the

external costs related to their implementation and

use. These costs are amortised over their estimated

useful life, which is five years.

Tangible fixed assets

The tangible fixed assets are valued on basis of the

historical cost price, meaning the price paid for

obtaining or constructing the asset, less accumulated

depreciation and, when applicable, impairments. The

costs of assets produced in-house comprise material

costs, direct labor costs and an appropriate portion

of the directly attributable overhead costs.

financial assets

Loans and receivables of which the maturity date is

greater than 12 months after the balance sheet date

are presented as financial assets and are included at

fair value. The loan granted to Holland Pigments is

included at fair value. Gains or losses arising from

changes in the fair value of the financial assets are

presented in the income statement under other

operating costs.

leased assets

Lease agreements in which the Group factually

assumes all risks and benefits of ownership are

classified as financial leases. Tangible fixed assets

that are acquired by means of financial leases are

valued at the lowest fair value and the cash value of

the minimum lease payments at the inception of the

lease, less accumulated depreciation and, when

applicable, impairments. Lease payments are stated

as described in note 3.

Depreciation

Depreciation is charged to the income statement

according to the straight-line method on the basis of

the estimated useful life of each component of a

tangible fixed asset. Land is not depreciated. The

estimated useful life is as follows:

Buildings 33 years

Fixtures and installations in buildings 10 years

Plant and equipment 10 years

Inventory 5 years

Computers and office equipment 3-5 years

The remaining useful life, residual value and depreciation

method are assessed on an annual basis.

impairment of fixed assets

Each year it is assessed whether there are any

indications of impairment of fixed assets. If there are

such indications, the realizable value of the assets is

estimated. The realizable value is the highest of the

net realizable value and the value to the company.

Assets are written down if their realizable value is less

than their book value. An impairment of assets is

reversed if there is a change in the estimates on

which the realizable value was based. An impairment

is only reversed to the extent that the book value of

the asset is no higher than the book value that would

have been determined upon deduction of depreciation

if no impairment had been recognized.

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fiNANCiAl STATeMeNTS

Deferred income tax

A provision is formed for deferred tax differences

using the balance sheet liability method for timing

differences between the book value of assets and

liabilities for the financial reporting and the fiscal

book value of the items concerned. The amount of

the provision for deferred tax liabilities is based on

the method by which the book value of the assets

and liabilities is expected to be realized or settled,

using tax rates that, on the balance sheet date, have

been specified by law or in respect of which an

effective legal decision has been taken.

Deferred tax assets are accounted for insofar as it is

probable that future taxable profit will be available in

which these timing differences can be used.

inventories

Stocks are valued at average purchase prices or at

net market value, if the latter is lower. Finished goods

are valued at manufacturing costs, inclusive of the

costs of raw materials and a surcharge for direct and

indirect production costs based on the normal

production capacity, or at market value if this is lower.

Trade debtors and other receivables

The trade debtors and other receivables are

recognised initially at fair value and subsequently

at amortised costs. A provision for impairment is

established when it is foreseen that complete

collection of these receivables will be impossible.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances

and deposits that are available on call.

Dividend

Dividend distribution to the shareholders is recognised

as a liability in the financial statements at the

moment the proposal for profit appropriation is

approved by the General Meeting of Shareholders.

employee benefit obligations

Holland Colours has a variety of pension plans in

accordance with local regulations and conditions.

The pension plans of the foreign subsidiaries can all

be classified as defined contribution plans. These

involve payment of predetermined premiums to an

insurance company. In these pension plans Holland

Colours has no legal or factual obligation to pay

additional premiums when the insurance company

has insufficient means to pay current or future

pensions.

holland colours 08/09

The pension plan for the employees in the Netherlands

encompassed both an old-age pension as well

as a pre-pension. On basis of IAS 19 both plans were

classified as defined benefit plans. Starting January 1,

2006 the pre-pension plan was terminated and has

the old-age pension plan changed such that per the

end of the financial year it classifies as a defined

contribution plan.

The premiums of defined contribution plans are

recognised as personnel costs when payable. Prepaid

premiums are recognised as an asset, when they lead

to repayment or reduction of future payments.

other employee benefits

As a consequence of the termination of the pre-pension

plan (including the transitional arrangement) for the

employees in the Netherlands, the originally agreedupon

conditional financing of past service years was

converted into an annual payment to the same amount,

which is also conditional.

Moreover, the Group has other long-term obligations

regarding employee benefits including jubilee payments,

which employees have earned for their services in

the current and previous reporting periods.

The obligations were determined actuarially, based on an

interest rate of 4.0% (2007/2008: 5.2%) and presented

under long-term liabilities. The costs are reported in the

income statement under personnel costs.

Provisions

A provision is stated in the balance sheet when there

is a legally enforceable or factual obligation for the

Group as a result of an event in the past and it is

likely that an outflow of resources will be required to

settle such liability.

interest-bearing loans

Interest-bearing loans are recognized initially at fair

value, less attributable transaction costs. Subsequent

to their initial recognition, interest-bearing loans are

valued at amortised costs, whereby a difference

between the cost and the repayment value is

recognized in the income statement on the basis of

the effective interest method over the term of the

loans.

Trade creditors and other payables

Trade creditors and other payables are recognized

initially at fair value and subsequently measured at

amortised costs.


5. Financial risk management

Within the framework of its normal activities the

Group is exposed to liquidity, credit, interest rate and

currency risks. The risks of fluctuations in foreign

currency rates and interest rates are hedged using

derivative financial instruments. The management

determines principles for overall risk management

and provides policies for specific areas, such as

foreign exchange risk, interest rate risk, credit risk

and the use of derivative and non-derivative financial

instruments. These principles or work methods may

differ per group company as a result of different local

market circumstances.

CUrreNCY riSK

The Group operates internationally and is exposed to

foreign exchange risks, primarily in connection with

the US dollar, British pound and Hungarian forint.

Foreign exchange risks arise from future commercial

transactions, recognized assets and liabilities and net

investments in foreign operations. Foreign exchange

risks arise when future commercial transactions or

recognised assets or liabilities are denominated in a

currency that is not the entity’s functional currency.

The Group is responsible for managing the net

position in each foreign currency. In general, remaining

currency risks are hedged by using currency instruments.

The Group has foreign subsidiaries of which the net

equity is subject to currency risks. These risks are

partially hedged.

In the management of currency risks Holland Colours

aims to limit the effect of exchange rate fluctuations

on the group result. In the long-term, however, structural

changes, especially in the value of the US dollar

relative to the euro, and changes in the difference

between the US and European interest rates, will

influence the consolidated result and equity.

A general increase in the value of the euro versus the

US dollar by 10% would have impacted the profit

before income tax by negative e 6 (2007/2008:

negative e 32). The net equity at year-end would have

been impacted by negative e 1,049 (2007/2008:

negative e 911). On March 31, if the British pound

had weakened against the euro by 10%, with all other

variables held constant, the net profit would have

been impacted by negative e 29 (2007/2008: negative

e 90). The net equity at year-end would have been

impacted by negative e 50 (2007/2008: negative e 186).

The exchange differences included in the income

statement under other operating costs amounted to

e 183 in 2008/2009 (2007/2008: e 195).

In relative terms, the various foreign currencies

affected the Group’s net turnover and costs as follows:

Turnover Costs

in percentages 2008/2009 2007/2008 2008/2009 2007/2008

EUR 42% 41% 52% 41%

USD 30% 29% 33% 29%

GBP 7% 10% 8% 10%

Overige 21% 20% 7% 20%

Totaal 100% 100% 100% 100%

CreDiT riSKS

Holland Colours follows an active policy to minimize

credit risks. The ways in which this is achieved include

strict internal guidelines regarding overdue payment,

the use of sales information systems, the consultation

of external sources and, were necessary, requesting

security for payment. Thanks to the distribution over

a large number of customers and geographical areas,

there is no significant concentration of credit risks.

No credit-risk insurance has been effected.

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fiNANCiAl STATeMeNTS

liQUiDiTY riSK

The liquidity risk is the risk of Holland Colours being unable to meet its liabilities when they fall due. Holland

Colours’ policy on control of the liquidity risk is to guarantee to the best of its ability that sufficient liquidities are

available to meet its payment obligations on time, in both normal and exceptional situations.

The contractual term of the financial liabilities as at March 31, including expected interest payments, can be

specified as follows:

2008/2009 Contractual

financial liabilities excl. derivatives

Book value cash flow < 1 year 1-2 years 2-5 years > 5 years

long-term debts 7,801 7,928 7,072 856 - -

Banks, current accounts 4,723 4,723 4,723 - - -

Trade and other payables 7,156 7,156 7,156 - - -

Total 19,680 19,807 18,951 856 - -

2007/2008 Contractual

Financial liabilities excl. derivatives

Book value cash flow < 1 year 1-2 years 2-5 years > 5 years

Long-term debts 9,588 10,878 2,997 2,472 2,535 2,874

Banks, current accounts 4,985 5,286 5,286 - - -

Trade and other payables 7,774 7,774 7,774 - - -

Total 22,347 23,938 16,057 2,472 4,238 1,171

As a result of the disappointing results Holland Colours does not meet some of the agreed-upon covenants at

the end of the fiscal year. This means that the loans formally have become repayable at call and they are therefore

presented as current liabilities. It is expected that in consultation with external financiers agreement will be

reached upon a redefinition of the starting points on which the financing is based, inclusive of the securities that

have to be given within this framework. The major lenders have shown their faith in the outcome of the negotiations

by issuing a waiver on the current financing. Expectations are that the continuation of the financing is thus

safeguarded.

On basis of the current situation, the Management believes that the risk that Holland Colours cannot meet its

liabilities is low.

iNTereST rATe riSK

The Group’s interest rate risk arises mainly from non-current borrowings, as the Group has no significant

interest-bearing assets. It is the Group’s policy to maintain the majority of its borrowings in fixed rate instruments.

The Group does so by using floating-to-fixed interest rate swaps.

At the balance sheet date, the following interest rate instruments were outstanding:

• Interest rate swap through November 2012 USD 0.64 million received variable: payment 5.98% fixed

• Interest rate swap through June 2010 EUR 0.88 million received variable: payment 3.76% fixed

• Interest rate swap through October 2012 EUR 1.50 million received variable: payment 5.48% fixed

• Interest rate swap through October 2017 USD 1.75 million received variable: payment 6.03% fixed

holland colours 08/09


At March 31, 2009, if the interest levels for the euro

would have been 100 basis points higher, with all

other variables constant, the net result would have

been impacted by negative e 33 (2007/2008:

negative e 47), mainly as a result of higher interest

expenses on floating rate borrowings. The net equity

at year-end would have been impacted with the same

amount.

rAW MATeriAlS

Prices of raw materials (pigments and dyes) have

increased strongly in recent years. Holland Colours is

therefore constantly searching for alternative sources

to ensure a constant supply as well as prevent cost

increases as much as possible. In 2008/2009 no

future contracts on raw materials were closed.

6. Cash flow statement

The cash flow statement is presented using the indirect

method. Cash flows in foreign currencies are converted

at the exchange rate on the date of the cash flow or on

a basis of averages. A distinction is made in the cash

flow statement between cash flows from operating,

investment and financing activities.

7. Segment information

Segment information is provided for the Group’s

geographical and customer segments. The primary

segmentation basis, geographical division, is in line

with the Group’s management structure and internal

reporting structure. Moreover, the turnover per

customer segment is presented, which is in

accordance with the Group’s strategic targets.

The prices for transactions between the segments

are determined on a factual objective basis, the

so-called “arm’s length principle”.

The results, assets and liabilities of a segment

comprise items that can be attributed directly or on

reasonable grounds to the segment. Financial income

and expenses and profit tax are not allocated to the

segments.

8. Discontinued operations

A discontinued operational activity is a part of

Holland Colours representing a separate major

operational activity or a separate major geographical

area at the moment at which the decision to

discontinue the activity has been taken and

communicated. When an operation is classified as

a discontinued operation, the comparative figures in

the income statement are revised as if the operation

had been discontinued from the start of the

comparative period.

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fiNANCiAl STATeMeNTS

Notes to the consolidated income statement

9. Segment information continuing operations

Segments 2008/2009

North

europe America Asia other Totaal

Turnover 33,025 15,048 5,264 - 53,337

intersegmental transactions 512 158 148 - 818

Turnover including

intersegmental transactions 33,537 15,206 5,412 - 54,155

operating profit (1,039) (212) 779 (158) (630)

Assets 20,016 11,742 4,324 4,251 40,333

liabilities 8,898 2,969 1,063 8,762 21,692

investments 718 129 149 227 1,223

Depreciation 1,537 637 127 601 2,902

Average number of employees in fTes 220 98 94 21 433

focus markets Specialties Total

Turnover 44,342 8,995 53,337

Segments 2007/2008

North

Europe America Asia Other Totaal

Turnover 37,779 17,629 4,768 - 60,176

Intersegmental transactions 813 101 221 - 1,135

Turnover including

intersegmental transactions 38,592 17,730 4,989 - 61,311

Operating profit 1,339 604 515 547 3,005

Assets 25,619 11,388 3,933 2,747 43,687

Liabilities 12,549 3,205 1,579 7,044 24,377

Investments 2,142 515 507 204 3,368

Depreciation 1,506 691 118 598 2,913

Average number of employees in FTEs 222 102 96 25 445

Focus markets Specialties Total

Turnover 49,950 10,226 60,176

holland colours 08/09


10. Discontinued operations

On December 31, 2007, discontinuation took place of the production of pigments in Hungary. The effect of this

activity on the income statement for the financial year 2007/2008 was as follows:

April 1, 2008 - March 31, 2009 April 1, 2007 - March 31, 2008

Proceeds - 4,488

Operating expenses - 4,936

Result before tax - (448)

Tax - 58

Net result - (390)

Result after tax due

to impairments - (187)

Tax - 22

Result after tax (165)

due to impairments

- -

Net result from discontinued operations - (555)

In the financial year 2007/2008, the expenses of discontinued operations included an amount of e 92 for

depreciation of tangible fixed assets.

The cash flow in 2007/2008 of the discontinued operations was approximately e 1,307 from operating and

approximately e 44 from investment activities. The cash flow from financing activities was primarily of an

intercompany nature and was therefore not taken into account.

11. Personnel costs

The total of the personnel costs can be specified as follows::

April 1, 2008 – March 31, 2009 April 1, 2007 – March 31, 2008

Salaries and wages 10,400 10,305

Social security premiums 1,414 1,304

Pension costs 657 558

Personnel costs 12,471 12,167

The pension costs relate to defined-contribution payments (see note 30).

12. Extraordinary costs

The extraordinary costs relate to once-only expenses of e 920 regarding especially severance costs in connection

with the reduction in Group personnel that was announced at the end of the financial year 2008/2009. The cost

provision that was made for this is included under other current liabilities (see note 32).

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fiNANCiAl STATeMeNTS

13. Other operating expenses

The exchange rate differences included in the income statement under other operating costs amount to negative

e 183 in 2008/2009 (2007/2008: negative e 195). No amounts were booked with regard to ineffectiveness of

cash flow hedges.

14. Finance income and costs

April 1, 2008 – March 31, 2009 April 1, 2007 - March 31, 2008

Interest received 8 32

Interest paid (921) (953)

Net finance costs (913) (921)

15. Income tax

Payable income taxes

April 1, 2008 – March 31, 2009 April 1, 2007 - March 31, 2008

Payable income taxe this year 140 (596)

Corrections of previous years 845 (98)

Deferred income tax

985 (694)

Arising and settlement of timing differences (63) (39)

(63) (39)

Total income tax in the income statement (922) (733)

The company tax payable is computed on the result before taxation, taking into account untaxed profit items. The

difference between the taxation calculated in this way and the taxation payable in the short term is reflected in the

provision “deferred income tax”.

At the moment of complete judicial liquidation of the company facilities in Brazil in 2005 a potential claim of

maximally e 709 on the Dutch tax authority arose, regarding the sacrificed invested capital in this company. On the

basis of uncertainty concerning the granting this claim, it was chosen not to value this potential receivable up to and

including the financial year 2007/2008. The management is of the opinion that sufficient certainty has arisen in the

financial year 2008/2009 to justify valuing this claim now.

The effective tax in the various countries varies from 25.5% to 67.7%.

The tax burden in the year under review amounted to (57.3%); in the financial year 2007/2008 it was 35.2%.

in percentages April 1, 2008 – March 31, 2009 April 1, 2007 – March 31, 2008

Weighted average of statutory rates for tax result (8.7)% 28.6%

Change in deferred tax assets 3.9% (0.5)%

Charges over previous years (52.5)% 4.7%

Change in income tax rate 0% 2.4%

Total (57.3)% 35.2%

holland colours 08/09


Notes to the consolidated balance sheet

16. Intangible fixed assets

Situation at March 31, 2007

Development Other Total

projects

Costs 577 1,616 2,193

Cumulative amortisation (368) (741) (1,109)

Book value 209 743 1,084

Movements in the balance sheet value

Investments 82 91 173

Book value disposals - - -

Amortisation (61) (250) (311)

Exchange rate differences - (1) (1)

Balance 21 (160) (139)

Situation at March 31, 2008

Costs 660 1,636 2,296

Cumulative amortisation (430) (921) (1,351)

Book value 230 715 945

Movements in the balance sheet value

Investments 94 49 143

Book value disposals - - -

Amortisation (72) (264) (336)

Exchange rate differences - (1) (1)

Balance 22 (216) (194)

Situation at March 31, 2009

Costs 754 1,624 2,378

Cumulative amortisation (502) (1,125) (1,627)

Book value 252 498 751

In the year under review the total expenses for research and development were e 1,072 (2007/2008: e 1,055).

Of this amount e 94 (2007/2008: e 82) was capitalized, whereas the remainder is stated under personnel costs,

depreciation, amortisation and other operating costs.

The amortisation costs of e 336 (2007/2008: e 311) are included under depreciation and amortisation in the

consolidated income statement. The Group did not incorporate impairments in 2008/2009.

The other intangible fixed assets consist of the costs of computer software and licenses, as well as the external

costs related to their implementation and use. These costs are amortized over their estimated useful life, which is

five years.

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fiNANCiAl STATeMeNTS

17. Tangible fixed assets

Situation at March 31, 2007

Land- Machinery Other Assets Total

and and capital under

buildings installations assets construction

Costs 19,169 21,814 6,038 1,386 46,407

Cumulative depreciation (7,160) (14,781) (4,689) (264) (26,894)

Book value 12,009 7,033 1,349 1,122 21,513

Movements in the balance sheet value

Investments 1,317 2,344 407 (873) 3,195

Book value disposals

and impairments - (78) (1) - (79)

Depreciation (674) (1,685) (522) - (2,881)

Exchange rate differences (835) (383) (96) (53) (1,367)

Balance (192) 198 (212) (926) (1,132)

Situation at March 31, 2008

Costs 19,274 22,842 5,688 447 48,251

Cumulative depreciation (7,457) (15,611) (4,551) (251) (27,870)

Book value 11,817 7,231 1,137 196 20,381

Movements in the balance sheet value

Investments 211 736 238 (105) 1,080

Book value disposals

and impairments (62) (110) (22) - (194)

Depreciation (653) (1,464) (449) - (2,566)

Exchange rate differences 627 (13) 51 (1) 664

Balance 123 (851) (182) (106) (1,016)

Situation at March 31, 2009

Costs 20,183 21,779 5,815 301 48,078

Cumulative depreciation 8,242 15,400 4,860 211 28,713

Book value 11,941 6,379 955 90 19,365

In the financial year 2008/2009, the decreased level of activity has resulted in the retirement of a machine in the

United States. This machine was written down to nil prematurely, which has resulted in additional expenses of

approximately e 65.

In connection with the closing of the pigment production in Hungary, the Group has taken up an impairment of

machines of e 187 in the financial year 2007/2008. This amount is presented in the consolidated income statement

under net result from discontinued operations. No impairments were reversed in this financial year.

In the investments an amount of e 24 (2007/2008: e 13) is included for capitalized personnel costs.

Buildings are depreciated on a straight-line basis over a period of a maximum of 33 years, machines, installations

and other assets in a maximum of 10 years, fixtures, computers and office furniture and equipment in a maximum

of 5 years.

The depreciation charge of e 2,881 in the financial year 2007/2008 is inclusive of the depreciation charge of

the discontinued operations. At that point, e 2,602 of this amount was included in the income statement under

depreciation and amortisation. The depreciation charge of the discontinued operations of e 92 is included in the

expenses of discontinued operations (see note 10).

holland colours 08/09


Regarding the finance lease agreement of the head office building in the Netherlands, the net book value of

e 856 (2007/2008: e 977) is included under land and buildings. The leased building serves as collateral for the

lease liabilities (see note 29). No additional securities have been given.

Group companies outside Europe have given securities for a maximum of e 5,760 (2007/2008: e 5,002) in the

form of mortgages rights on buildings in the United States and Indonesia

18. Deferred tax assets and liabilities

The deferred tax assets and liabilities stated in the balance sheet can be attributed to the following items:

March 31, 2009 March 31, 2008

Assets liabilities Assets Liabilities

Tangible fixed assets - 28 - 27

Financial fixed assets 41 136 44 123

Inventories 140 - 169 -

Other receivables 175 - 143 -

Employee benefits 121 - 393 -

Other liabilities 600 - - -

1,077 164 749 150

Balance of receivables and liabilities (28) (28) (11) (11)

Net deferred tax assets / liabilities 1,049 136 738 139

The deferred income taxes resulting from temporary differences between the fiscal and commercial value of assets

and liabilities are accounted for at the applicable nominal tax rate of the country concerned.

At March 31, 2009 no deferred tax receivable was included in respect of an amount of e 103 (March 31, 2008: e 108)

of losses available for set-off.

19. Other long-term receivables

Under the other long-term receivables a no interest bearing, five-year loan to Holland Pigments BV with a

remaining term of one year is included at fair value. Also included is the loan made to Mrs. Veldhuis-Hagedoorn

within the framework of her expatriation. This loan is included at amortised cost, see also note 35.

20. Inventories

March 31, 2009 March 31, 2008

Raw materials 3,970 4,518

Finished goods 3,691 5,499

inventories 7,661 10,017

The cost of inventories recognized as expense and included under cost of sales amounted to e 25,493 (2007/2008:

e 28,198). No inventories have been pledged as security.

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21. Trade debtors

The trade debtors can be specified as follows, according to age:

March 31, 2009 March 31, 2008

Not past due 5,418 6,444

Past due 0-30 days 953 1,786

Past due 31-60 days 398 574

Past due 61 days and over 517 255

Provisions (229) (138)

Total 7,057 8,921

Trade debtors according to currency

March 31, 2009 March 31, 2008

Euro 3,108 3,879

British pound 647 1,059

US dollar 1,855 2,135

Other currencies 1,676 1,986

Provision (229) (138)

Total 7,057 8,921

The trade debtors and other receivables are recognized initially at fair value and subsequently at amortised

costs.

A provision for impairment is established when it is foreseen that complete collection of these receivables will be

impossible.

Additions to the provision for doubtful debtors are included in the income statement under other operating

costs.

Movements in the provision for doubtful debtors were as follows:

March 31, 2009 March 31, 2008

Balance at year start (138) (173)

Add: additions to the provision (104) (18)

Less: write-off of trade debts 19 36

Exchange rate differences (6) 17

Balance at year end (229) (138)

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22. Other receivables and accrued income

March 31, 2009 March 31, 2008

Receivables on other taxes 214 399

Other receivables and pre-paid items 821 980

other receivables and accrued income 1,035 1,379

The receivables on other taxes concern mainly sales tax receivables.

23. Cash and cash equivalents

The liquid assets are freely available.

The credit risk on liquid assets is limited due to the fact that the counterparties usually are banks with high credit

ratings, as assigned by international credit ratings agencies.

24. Assets discontinued operations

In 2007/2008, the assets related to the pigment production in Hungary were presented as held for sale following

the decision of the Holland Colours Management to discontinue this operation as per December 31, 2007.

March 31, 2009 March 31, 2008

Trade debtors - 278

Other receivables - 164

Total - 442

25. Equity

issued share capital

The authorized capital of Holland Colours NV has a nominal value of e 6,810, divided in 2,999,999 ordinary

shares and one priority share with a nominal value of e 2.27 each, of which 860,350 ordinary shares and the one

priority share are fully issued and paid up. The total issued share capital amounts to e 1,953. The total number of

shares issued did not change in 2008/2009 and 2007/2008.

Share premium reserve

The share premium reserve of e 1,219 may be distributed free of taxation. This amount did not change with

respect to the previous financial year.

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26. Named reserves

Currency Cash flow Statutory Total

translation reserve reserve reserve

Balance at April 1, 2007 (786) 52 209 (525)

Cash flow hedge after taxation - (107) - (107)

Currency translation differences (2,230) - - (2,230)

Withdrawn from free reserves - - 21 21

Balance at March 31, 2008 (3,016) (55) 230 (2,841)

Cash flow hedge after taxation - (229) - (229)

Currency translation differences 734 - - 734

Withdrawn from free reserves - - (34) (34)

Balance at March 31, 2009 (2,282) (284) 196 (2,370)

Currency translation reserve

The currency translation reserve comprises all exchange rate differences created by the conversion of the annual

accounts of the Group companies with a functional currency other than the euro. Revaluations of this so-called

translation risk are directly debited or credited to equity. The generation of cumulative differences was started at

April 1, 2004 in correspondence with the exception allowed in IFRS 1.

Cash flow reserve

Holland Colours applies cash flow hedge accounting on interest contracts and the net investment hedge.

The cash flow hedge reserve consists of the effective part of the changes in value of the financial instruments

for which cash flow hedge accounting is applied and the net investment hedge. Moreover, the cash flow hedge

reserve is reduced by the inclusion of a deferred tax position.

Statutory reserve

A statutory reserve for development costs is formed in the company accounts. This is also shown in the consolidated

equity to maintain concurrence with the equity in the Holland Colours NV company accounts.

The above-mentioned reserves may not be distributed freely to shareholders.

27. Earnings per share

The calculation of the basic earnings per share at March 31, 2009 is based on a profit attributable to shareholders

of e (621), in 2007/2008: e 788, and an average number of outstanding ordinary shares of 860,350 as well as the

priority share during the financial year 2008/2009. The total number of issued shares did not change compared

with March 31, 2008.

28. Third party interests

This item concerns the interest of third parties in the net-equity value of HCA Japan Corporation at the balance

sheet date.

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29. Borrowings and long-term liabilities

The total of the borrowings and long-term liabilities can be specified as follows:

long-term

March 31, 2009 March 31, 2008

Bank loans - 6,134

Financial lease obligations 784 925

Total 784 7,059

Short-term

Bank loans 6,876 -

Bank balances 4,723 4,985

Repayment obligations bank loans - 2,396

Financial lease obligations 141 133

Total 11,740 7,514

Total borrowings and long-term liabilities 12,524 14,573

The company has a credit line in the Netherlands for a maximum amount of e 11,264 (March 31, 2008: e 11,364)

for which no security was provided. However, some covenants do apply.

As a result of the disappointing results Holland Colours does not meet some of the agreed-upon covenants at the

end of the fiscal year. This means that the loans formally have become repayable at call and they are therefore

presented as current liabilities. It is expected that in consultation with external financiers agreement will be

reached upon a redefinition of the starting points on which the financing is based, inclusive of the securities

that have to be given within this framework. The major lenders have shown their faith in the outcome of the

negotiations by issuing a waiver on the current financing. Expectations are that the continuation of the financing

is thus safeguarded.

Holland Colours NV has guaranteed loans given to foreign subsidiaries for a total of e 1,250 as security for the

payment obligations of these companies.

Lease liabilities are in effect secured, because under the lease agreement the rights to the leased asset revert to

the lessor in the event of default.

Group companies outside Europe have given security in the form of mortgage rights on buildings in the USA

and Indonesia for a maximum amount of e 5,760 (March 31, 2008: e 5,002.

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The maturity of the long-term borrowings can be divided as follows:

March 31, 2009 March 31, 2008

Between one and two years - 1,993

Between two and five years - 2,067

Longer than five years - 2,074

Total - 6,134

The annual repayment obligation for 2009/2010 is e 2,355 (2008/2009: e 2,396). This amount is presented

under short-term liabilities.

The long-term borrowings are subject to interest changes and contractual interest revisions as follows:

March 31, 2009 March 31, 2008

Six months or shorter - 619

Between six and twelve months - 95

Between one and five years - 5,167

Longer than five years - 2,649

Total - 8,530

The majority of all long-term borrowings have a variable interest. The risk associated with this variability is

hedged by means of a number of interest instruments (swaps). The weighted average interest rate on the longterm

borrowings was 4.1% as opposed to 5.2% in the financial year 2007/2008.

The effective interest rates at the balance sheet date were as follows:

interest rate in % March 31, 2009

eUr USD GBP

Bank loans 3.8% 4.4% 7.3%

Interest rate in % March 31, 2008

EUR USD GBP

Bank loans 4.5% 5.9% 7.2%

The obligations under finance lease contracts can be divided as follows:

March 31, 2009 March 31, 2008

Less than one year 141 133

Between one and five years 494 762

Five years and over - -

635 895

Less future interest expenses (127) (191)

Total 508 704

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The book values and fair values of the long-term liabilities are as follows:

Book value Fair value

March 31, 2009 March 31, 2008 March 31, 2009 March 31, 2008

Bank loans - 8,530 - 8,031

Financial lease obligations 925 1,058 964 1,029

Total 925 9,588 964 9,060

The fair values are based on cash flows, discounted at a loan interest rate of 4.1% (March 31, 2008 5.2%).

The book values of the short-term borrowings do not differ essentially from the fair values.

The book values of the long-term borrowings are in the following currencies:

March 31, 2009 March 31, 2008

Euro 925 6,498

US dollar - 2,776

British pound - 314

Total 925 9,588

30. Employee benefit obligations

As explained in note 4, the original agreed upon conditional financing of past service years in the pre-pension

plan has been converted into an annual payment to the same amount, which is also conditional. The resulting

liability amount to e 952 per March 31, 2009 (March 31, 2008: e 1,057).

The liabilities regarding employee benefits also include a provision for future jubilee payments of e 155 (March

31, 2008: e 153) and other future payments of e 320 (March 31, 2008: e 316).

The total pension costs in the financial year 2008/2009 amount to e 657 (2007/2008: e 558) and are presented

under personnel costs (also see note 11).

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fiNANCiAl STATeMeNTS

31. Financial instruments

March 31, 2009 March 31, 2008

Assets liabilities Assets Liabilities

Interest rate swaps – cash flow hedges - 273 - 102

Total financial instruments - 273 – 102

The total fair value of the derivative financial instruments used for hedging is included under long-term obligations.

The maximum credit risk at the reporting date is the fair value of the related assets in the balance sheet.

The notional principal amounts of the outstanding interest rate swap contracts at March 31, 2009 are e 4,168

(March 31, 2008 e 5,024). At March 31, 2009, the fixed interest rates vary from 3.31% to 7.50% (March 31, 2008:

3.31% to 7.50%); the main floating rates are EURIBOR and LIBOR.

32. Trade and other payables

March 31, 2009 March 31, 2008

Trade creditors 3,247 4,737

Payables regarding other taxes 549 592

Other liabilities and accruals 3,360 2,445

Trade creditors and other payables 7,156 7,774

The other tax payables concern mainly sales tax payables.

33. Liabilities discontinued operations

The liabilities related to the pigment production in Hungary were presented in 2007/2008 as liabilities from discontinued

operations following the decision of the Holland Colours Management to discontinue this operation

as per December 31, 2007.

March 31, 2009 March 31, 2008

Trade creditors and other payables - 132

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- 132


oVeriGe iNforMATie

34. Liabilities not reflected in the balance sheet

Capital commitments

As per the balance sheet date the capital expenditure commitments for tangible fixed assets amounted to e 100

(March 31, 2008: e 0) in total.

Purchase contracts

The total commitments resulting from purchase contracts were e 1,697 (March 31, 2008: e 1,593).

rent and operating lease commitments

At the balance sheet date the Group had outstanding commitments regarding rents and operating leases, which

fall due as follows:

March 31, 2009 March 31, 2008

Less than one year 142 289

Between one and five years 236 230

Total 378 519

35. Remuneration of the Board of Management and the Supervisory Board

reward policy

The remuneration policy for the Board of Management of Holland Colours is set by the Supervisory Board in its

entirety. There is no separate remuneration committee. The company strives for a remuneration that is market

conform in relation with the size of the company, and is in line with the overall salary structure of Holland Colours.

The remuneration consists of a fixed and variable part. The variable part consists of a profit share scheme that is

the same for all employees within the Group and, depending on ROI and net profit, could mean a profit share of

maximally two months of salary. Members of the Board of Management are paid 75% of this amount in shares Holland

Pigments. On basis of the results regarding the financial year 2008/2009 a profit share will not be paid.

In addition, a bonus scheme exists for the Board of Management of the Group, which only takes effect if a profit

share is paid to all of the Group’s employees.

The bonus amount depends on whether or not the following company targets are met:

Growth in the focus markets of between 5% and 10% two-thirds of gross monthly salary

Return (EBIT) on average invested capital (ROI) > 15% two-thirds of gross monthly salary

Growth of the earnings per share two-thirds of gross monthly salary

Maximal total two gross monthly salaries

This financial year no bonuses were paid, as was the case last year.

There is no separate pension plan for the Board of Management. Members of the Board take part in the local

pension plans.

There is no option plan.

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fiNANCiAl STATeMeNTS

The current contracts of the Board of Management do not stipulate a predefined term or a limitation of the

severance payment. These contracts will be respected. In addition to a once-only signing bonus, a severance

payment of one gross annual salary was agreed upon with Mr. Van Schaik upon appointment.

The remuneration of the (former) Board of Management and the Supervisory Board, as charged to the profit and

loss account, can be specified as follows:

Board of Management

B.P.M. van Schaik A.J. Veldhuis - G.J. Luiten

Hagedoorn

2008/2009 2007/2008 2008/2009 2007/2008 2008/2009 2007/2008

Fixed remuneration 235 227 175* 177* - 114

Pension costs 70 68 24 23 - 9

Variabele bonus - - - - - -

*) This amount includes an expatriation allowance

305 295 199 200 - 123

Mr. G.J. Luiten was Statutory Director from June 28, 2006 to April 1, 2008. Mr. G.J. Luiten accepted the function

of Manager Business Processes & ICT as per April 1, 2008.

Within the framework of her expatriation a 6% interest-bearing unsecured loan of USD 250 has been made to

Mrs. Veldhuis-Hagedoorn for home financing, on which no repayments were made yet. The loan is for the term

of her expatriation.

Supervisory Board

The “Stichting Prioriteit” sets the remuneration of the members of the Supervisory Board, within the boundaries

of the remuneration policy approved by the General Meeting of Shareholders. In this regard, the company strives

for a fixed remuneration that is market conform in relation with the size of the company.

2008/2009 2007/2008

N.H. Gerardu 26 23

H.H. van der Lof 16 12

M.H. Zegger 16 16

J.F. Ariëns 4 16

E.W.G.M. van Thiel 4 16

R.E. Selman - 6

Total 66 89

Mr. Ariëns and Mr. Van Thiel both resigned at the General Meeting of Shareholders held on July 7, 2008. Mr.

Van der Lof was appointed at the General Meeting of Shareholders on July 9, 2007. Mr. Selman resigned at that

meeting.

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36. Related parties

Holland Pigments BV is the investment company holding the shares in Holland Colours NV owned by the employees

of the Holland Colours Group. Holland Pigments BV stimulates employees of the Group to own shares

in the company. At the balance sheet date Holland Pigments held 398,100 (March 31, 2008: 398,100) shares in

Holland Colours NV. A five-year loan of e 156 has been made to Holland Pigments, with a remaining term of one

year. This loan is included under other long-term receivables at fair value. No securities have been given for this

loan.

37. Other disclosures

During the financial year 2008/2009 the company employed an average of 433 employees, expressed in full-time

equivalents. In the financial year 2007/2008 this figure was 445 (including discontinued operations).

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fiNANCiAl STATeMeNTS

Company income statement

April 1, 2008 April 1, 2007

in thousands of euros March 31, 2009 March 31, 2008

Net result from participations (784) 758

Other income and expenses after taxes 163 30

Net result (621) 788

Company balance sheet

before proposed appropriation of profits

in thousands of euros note March 31, 2009 March 31, 2008

fixed assets

Intangible fixed assets 41 741 925

Tangible fixed assets 42 2,652 2,840

Financial fixed assets 43 24,438 25,078

Current assets

Receivables

27,831 28,843

Amounts receivable from group companies 815 641

Income tax receivable 313 -

Other receivables and accrued income 355 378

1,483 1,019

Total assets 29,314 29,862

equity

Share capital 44 3,172 3,172

Named reserves 44 (2,370) (2,841)

Result this year (621) 796

Other reserves 44 18,405 18,437

long-term liabilities

18,586 19,564

Borrowings 45 784 5,047

Employee benefits 46 1,342 1,451

Derivative financial instruments 252 88

Short-term liabilities

2,378 6,586

Credit institutions 6,974 400

Repayment obligations long-term liabilities - 1,405

Amounts payable to group companies 28 684

Income tax payable - 322

Other liabilities and accruals 1,348 901

8,350 3,712

Total equity and liabilities 29,314 29,862

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Notes to the company financial statements

Statement of accounting standards

38. General information

The company financial statements are part of the financial statements of Holland Colours NV and are drawn up

in accordance with the legal requirements of Title 9, Book 2 of the Dutch Civil Code. Thereby use is made of the

possibility given in article 2:362 paragraph 8 of the Dutch Civil Code to apply the same standards of valuation

and revenue recognition to the company financial statements as those used in the consolidated financial statements.

39. Accounting principles

The standards of valuation and revenue recognition used for the company financial statements are the same as

those used for the consolidated financial statements. Unless other standards are stated, the reader is referred to

the standards stated in the consolidated financial statements.

40. Financial fixed assets

Participation in group companies

Participations in group companies and other companies in which the NV has dominating control or exercises

central management, are valued at net equity value. The net equity value is measured by valuing the assets,

provisions and liabilities and calculating the net profit in accordance with the accounting policies used in the

consolidated financial statements.

When determining the net equity value the transitional provisions for the measurement of the values and the accounting

policies as applied to the consolidated financial statements were taken into account

.

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fiNANCiAl STATeMeNTS

Notes to the company balance sheet

41. Intangible fixed assets

Situation at March 31, 2007

Development Other Total

projects

Costs 577 1,132 1,709

Cumulative amortisation (368) (284) (652)

Book value 209 848 1,057

Movements in the balance sheet value

Investments 83 80 163

Book value disposals - - -

Amortisation (61) (234) (295)

Exchange rate differences - - -

Balance 22 (154) (132)

Situation at March 31, 2008

Costs 660 1,212 1,872

Cumulative amortisation (429) (518) (947)

Book value 231 694 925

Movements in the balance sheet value

Investments 94 46 140

Book value disposals - - -

Amortisation (72) (252) (324)

Exchange rate differences - - -

Balance 22 (206) (184)

Situation at March 31, 2009

Costs 754 1,258 2,012

Cumulative amortisation (502) (769) (1,271)

Book value 252 489 741

The amortisation costs of e 324 (2007/2008: e 295) are included under net other income and expenses in the

company income statement.

The other immaterial assets are depreciated over their estimated useful life, which does not exceed five years.

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42. Tangible fixed assets

Situation at March 31, 2007

Land Machinery Other Total

and and capital

buildings installations assets

Costs 3,710 1,391 328 5,429

Cumulative depreciation (1,336) (801) (191) (2,328)

Book value 2,374 590 137 3,101

Movements in the balance sheet value

Investments - 38 3 41

Book value disposals - - - -

Depreciation (177) (89) (36) (302)

Exchange rate differences - - - -

Balance (177) (51) (33) (261)

Situation at March 31, 2008

Costs 3,710 1,429 331 5,470

Cumulative depreciation (1,513) (890) (227) (2,630)

Book value 2,197 539 104 2,840

Movements in the balance sheet value

Investments - 78 9 87

Book value disposals - - - -

Depreciation (146) (92) (37) (275)

Exchange rate differences - - - -

Balance (146) (14) (28) (188)

Situation at March 31, 2009

Costs 3,710 1,455 331 5,495

Cumulative depreciation (1,658) (930) (255) (2,843)

Book value 2,051 525 76 2,652

Buildings are depreciated on a straight-line basis over a period of a maximum of 33 years, machines, installations

and other assets in a maximum of 10 years, fixtures, computers and office furniture and equipment in a maximum

of 5 years. The depreciation of e 275 (2007/2008: e 302) is stated in the company income statement under net

other income and expenses.

The Company recognized no impairment in the financial year 2008/2009.

Regarding the finance lease agreement of the head office building in the Netherlands, a net book value of e 856

(2007/2008: e 977) is included under land and buildings. The leased building serves as collateral for the lease

obligations (see note 29).

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fiNANCiAl STATeMeNTS

43. Financial fixed assets

Movements in the value of the group companies were as follows:

March 31, 2009 March 31, 2008

Balance at year start 23,325 25,906

Mutations:

- acquisitions and capital payments - -

- result from participations (784) 758

- dividend received (339) (1,109)

- exchange rate differences 734 (2,230)

Balance at year end 22,936 23,325

The movements in the loans to group companies were as follows:

March 31, 2009 March 31, 2008

Balance at year start 1,012 1,045

Mutations:

- loans granted this year 759 1,898

- loans repaid this year (1,064) (1,822)

- exchange rate differences (185) (109)

Balance at year end 522 1,012

The loans to group companies have varying terms. Loans with a term of more than 1 year total e 522

(March 31, 2008: e 1,012). The interest rates for the loans to group companies range from 5.0% to 7.0%

(March 31, 2008: from 4.0% to 9.0%).

The movements in the other financial fixed assets can be specified as follows:

Deferred Other long-term Total

tax receivables

Balance at March 31, 2007 428 454 882

Additions 39 31 70

Repayment of loans - (95) (95)

Withdrawn (86) - (86)

Currency translation differences - (30) (30)

Balance at March 31, 2008 381 360 741

Additions 560 - 560

Repayment of loans - (56) (56)

Withdrawn (293) - (293)

Currency translation differences - 28 28

Balance at March 31, 2009 648 332 980

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44. Equity

For details on the share capital and share premium reserve the reader is referred to note 25 of the consolidated

balance sheet.

The movements in the currency translation reserve, cash flow hedge reserve and other reserves are as follows:

Currency Cash flow Statutory Total

translation reserve reserve reserve

Balance at April 1, 2007 (786) 52 209 (525)

Cash flow hedge, net of tax - (107) - (107)

Currency translation differences (2,230) - - (2,230)

Withdrawn from free reserves - - 21 21

Balance at March 31, 2008 (3,016) (55) 230 (2,841)

Cash flow hedge, net of tax - (229) - (229)

Currency translation differences 734 - - 734

Withdrawn from free reserves - - (34) (34)

Balance at March 31, 2009 (2,282) (284) 196 (2,370)

45. Borrowings and long-term liabilities

The total of the Company’s long-term borrowings can be divided as follows:

long-term

March 31, 2009 March 31, 2008

Bank loans - 4,122

Financial lease obligations 784 925

Short-term

784 5,047

Bank loans 4,328 -

Bank balances 2,505 400

Repayment obligation bank loans - 1,272

Financial lease obligations 141 133

6,974 1,805

Total borrowings and long-term liabilities 7,758 6,852

The maturity of long-term borrowings can be divided as follows:

March 31, 2009 March 31, 2008

Between one and two years - 1,177

Between two and five years - 1,633

More than five years - 1,312

Total - 4,122

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The book values and fair values of the long-term liabilities are as follows:

Book value Fair value

March 31, 2009 March 31, 2008 March 31, 2009 March 31, 2008

Bank loans - 5,394 - 5,038

Financial lease obligations 925 1,058 964 1,065

Total 925 6,452 964 6,103

The fair values are based on cash flows, discounted at a loan interest rate of 4.1% (March 31, 2008: 5.2%).

The book values of the short-term borrowings do not differ essentially from the fair values.

The book values of the long-term borrowings are in the following currencies:

March 31, 2009 March 31, 2008

Euro 925 5,124

US dollar - 1,328

Total 925 6,452

46. Employee benefit obligations

For details on employee benefit obligations, the reader is referred to note 30 of the consolidated financial

statements.

47. Personel

In the year under review the average number of employees working for the Company, expressed in full-time

equivalents, was 21 (in 2007/2008: 25).

48. Accounting and audit costs

The following fees of PricewaterhouseCoopers Accountants NV and the other entities connected to the

PricewaterhouseCoopers network as well as other public accountants were charged to the Group, as meant in

article 382a, Title 2, Book 2 of the Dutch Civil Code.

March 31, 2009 March 31, 2008

Financial statement auditing 188 194

Other non-audit services 59 37

Total 247 231

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49. Liabilities not reflected in the balance sheet

Guarantees

For her subsidiary Holland Colours Apeldoorn BV, Holland Colours NV has given a guarantee in accordance of

article 403, Title 9, Book 2 of the Dutch Civil Code.

Holland Colours NV has issued letters of guarantee for an amount of e 1,198 on behalf of foreign operating

companies as security for payment obligations by these companies.

.

other information

The Company forms a fiscal entity with Holland Colours Apeldoorn BV with regard to income tax and sales tax.

Both the Company and its subsidiary are severally liable for indebted taxes from all companies that are part of the

fiscal entity.

Apeldoorn, May 28, 2009

Supervisory Board Management

N.H. Gerardu, chairman B.P.M. van Schaik

H.H. van der Lof A.J. Veldhuis-Hagedoorn

M.H. Zegger

other information

Statutory provisions regarding the appropriation of profits

regarding the appropriation of profits the following is determined in the articles of association:

Article 23:

1. From the profits established in the approved financial statement, such reserves are formed as will be determined

by the Board of Management with approval by the Supervisory Board and the holder of the Priority

share. The holder of the Priority share is never awarded more than the legal interest on the nominal amount of

this share at the end of the financial year in question, with a maximum of 5%.

2. That part of the profit that remains after transferring to the reserves and distribution, as stated in paragraph 1,

is at the disposal of the General Meeting of Shareholders with due regard for what is stipulated in article 105,

Book 2 of the Dutch Civil Code.

3. The Board of Management, with the approval of the Supervisory Board and the holder of the Priority share, is

authorized to decide to award an interim dividend with due regard for what is stipulated in article 105, Book 2

of the Dutch Civil Code.

4. The dividend is made payable within one month after it has been set, in the manner and at the place determined

by the Board of Management.

5. Claims for profit distribution expire after a period of five years as from the date on which the dividend was

made payable.

6. A decision regarding the disposal of any reserve may only be taken by the General Meeting of Shareholders

on the recommendation of the Board of Management and with approval of the Supervisory Board and the

holder of the Priority share, all of this with due regard to the legal provisions.

Proposal for the appropriation of profits

The negative result for the financial year 2008/2009 will be charged to the general reserves.

No dividend will be paid.

holland colours 08/09 61


62

fiNANCiAl STATeMeNTS

Auditors’ report

To the General Meeting of Shareholders of Holland Colours NV

report on the financial statements

We have audited the financial statements for the period from April 1, 2008 to March 31, 2009 of Holland Colours

NV, Apeldoorn, as set out on pages 23 to 61. The financial statements consist of the consolidated financial

statements and the company financial statements. The consolidated financial statements comprise the consolidated

balance sheet as at March 31, 2009, income account, statement of changes in equity and cash flow statement

for the period from April 1, 2008 to March 31, 2009, and a summary of significant accounting policies and

other explanatory notes. The company financial statements comprise the company balance sheet as at March 31,

2009, the company income statement for the period from April 1, 2008 to March 31, 2009 and the notes.

Directors’ responsibility

The Directors of the Company are responsible for the preparation and fair presentation of the financial statements

in accordance with International Financial Reporting Standards as adopted by the European Union and

with Title 9 of Book 2 of the Dutch Civil Code, and for the preparation of the management board report in

accordance with Title 9 of Book 2 of the Dutch Civil Code. This responsibility includes: designing, implementing

and maintaining internal control relevant to the preparation and fair presentation of the financial statements that

are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting

policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our

audit in accordance with Dutch law. This law requires that we comply with ethical requirements and plan and

perform the audit to obtain reasonable assurance whether the financial statements are free from material

misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the

assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In

making those risk assessments, the auditor considers internal control relevant to the company’s preparation and

fair presentation of the financial statements in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal

control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness

of accounting estimates made by the Directors of the Company, as well as evaluating the overall presentation

of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate

to provide a basis for our audit opinion.

opinion with respect to the consolidated financial statements

In our opinion, the consolidated financial statements give a true and fair view of the financial position of Holland

Colours NV as at March 31, 2009, and of its result and its cash flows for the period from April 1, 2008 to March

31, 2009 in accordance with International Financial Reporting Standards as adopted by the European Union and

with Title 9 of Book 2 of the Dutch Civil Code.

opinion with respect to the company financial statements

In our opinion, the company financial statements give a true and fair view of the financial position of Holland

Colours NV as at March 31, 2009, and of its result for the period from April 1, 2008 to March 31, 2009 in accordance

with Title 9 of Book 2 of the Dutch Civil Code.

report on other legal and regulatory requirements

Pursuant to the legal requirement under 2:393 sub 5 part f of the Dutch Civil Code, we report, to the extent of

our competence, that the management board report is consistent with the financial statements as required by

2:391 sub 4 of the Dutch Civil Code.

Zwolle, May 28, 2009

PricewaterhouseCoopers Accountants N.V.

P. Tieleman RA

holland colours 08/09


eport

Stichting Prioriteit Holland Colours

As regards the special statutory rights concerning the controlling interest in the Company, it is stated that the

priority share is owned by the “Stichting Prioriteit Holland Colours” (hereafter referred to as “Stichting”).

The special rights involve, amongst other things, the right to determine the number of members on the Board of

Management and the Supervisory Board and the right to make a binding nomination for Managing Directors and

Supervisory Board Members, as well as the right to elect the chairman of the Supervisory Board from amongst the

Members of that Board.

The tasks of the Selection and Appointment Committee as stated in the Dutch Corporate Governance Code are

the responsibility of the “Stichting”, with the exception of the supervision over the policy of the Board of Management

regarding the selection and appointment procedures for higher management, which task is executed by

the Supervisory Board. Moreover, the “Stichting” is authorized to determine the remuneration of the Supervisory

Board, within the boundaries of the policy approved by the General Meeting of Shareholders.

In addition the “Stichting” has the right to approve decisions relating to the purchase and issue of shares, and

of possible restrictions on priority rights for holders of ordinary shares in this regard, and decisions regarding

co-operation, mergers or closure of the company or its subsidiaries. Furthermore, any decision to amend the

articles of association or liquidate the Company may only be taken after approval by the “Stichting”.

The “Stichting” met four times in the year under review.

Upon consultation with the Board of Management and the Supervisory Board, the Board of the “Stichting” has

granted permission to the proposal for amendment of the articles of association of Holland Colours NV in such a

way that nominations for Managing Directors and/or Supervisory Board Members by the holder of the priority share

can be obstructed by an absolute majority of the General Meeting of Shareholders. This proposel will be submitted

for approval to the General Meeting of Shareholders to be held on July 6, 2009.

Moreover, a proposal was brought to the Board of the “Stichting” to amend the articles of association of the

“Stichting” in such a way that successors to the current chairman will have one vote, as have the other members

of the board, in the event of an equal division of votes. If there is an equal division of votes in the future, a second

board meeting will be held. If at that meeting the votes are equally divided again, the power of decision will be

transferred to the General Meeting of Shareholders of Holland Colours NV.

It is the Board’s intention to implement this amendment to the articles of association before the end of this

calendar year.

Apeldoorn, May 28, 2009

The Board*

J.M. de Heer, chairman

N.H. Gerardu

R.E. Selman

Dr. A.J. Vermaat

* The Supervisory Board and the Board of Management declare that it is their opinion that the requirements as stipulated in item 10 of appendix

X of the Listing and Issuing Rules of NYSE Euronext, Amsterdam, are met.

holland colours 08/09 63


64

organisation per April 1, 2009

Research & Technology

J.T. Stevels

Director Research & Technology

Legal Affairs

M.J. Bos-Westenenk

Manager Legal Affairs

Global Purchasing

W.B.J. elderink

Global Purchase Manager

Division Europe

r.P. Karrenbeld

Division Director

C.P. Janse

Manufacturing Manager

M.K. edwards

Sales manager Building & Construction

and Specialties

f. Balogh

Sales Manager Packaging

M. Albers

Sales Manager Silicones & Elastomers

T. Chiang

Technical Manager

holland colours 08/09

B.P.M. van Schaik*

President

Executive Board

A.J. Veldhuis-Hagedoorn*

Division Director

r. leversedge

Manager, New Markets

D.l. Marshall

Sales & Marketing Manager

(per May 2009)

r. Hetisimer

Plant Manager

J.K. Gleeson

Manager Business Processes

& Compliance

J. Bitner

Human Resource Manager

A. Wagner

Office Manager Canada

A. Wesseldine

General Manager Mexico

J.J.G. Straathof

Director Finance

Business processes & iCt

G.J. luiten

Manager Business Processes & ICT

Finance

H.M. Jacobs

Corporate Controller

Division Americas Division Asia

* Statutory Directors

S. Kho-Pangkey

Division Director

T.l. Kho

Technical Manager

T.H. Hoo

Export Manager

H. Guo

General Manager China


CoNTACT

HOLLAND COLOURS NV

Halvemaanweg 1

7323 RW Apeldoorn

P.O. Box 720

7300 AS Apeldoorn

The Netherlands

T (31) 55-368 0700

F (31) 55-366 2981

E info@hollandcolours.com

HOLLAND COLOURS APELDOORN BV

Halvemaanweg 1

7323 RW Apeldoorn

P.O. Box 720

7300 AS Apeldoorn

The Netherlands

T (31) 55-368 0700

F (31) 55-366 2981

E info@hollandcolours.com

HOLLAND COLOURS UK LTD

Unit 16/17/18, Sabre Court

Valentine Close, Gillingham Business Park

Gillingham, Kent ME8 0RW

United Kingdom

T (44) 1634-388 727

E uk@hollandcolours.com

HOLLAND COLOURS HUNGARIA KFT

Tószegi út 51

P.O. Box 8

5007 Szolnok

Hungary

T (36) 56-420 644

E szolnok@hollandcolours.com

Colophon

Design and realisation: Doorrood concept + creatie BV

Outline and text: Brody Creatieve Communicatie

Photography: Jeroen Jazet Photography

© Holland Colours NV, 2009

HOLLAND COLOURS AMERICAS INC

1501 Progress Drive

Richmond, Indiana, 47374

USA

T (1) 765-935 0329

Toll-free (1) 800-723-0329

E richmond@hollandcolours.com

HOLLAND COLOURS CANADA INC

1370 Don Mills Rd., Suite 201

Don Mills, Ontario, M3B 3N7

Canada

T (1) 416-449 4344

Toll-free (1) 800-361 3967

E canada@hollandcolours.com

HOLLAND COLOURS MEXICANA SA DE CV

Tezosomoc #4

(Bodega 3)

Col. Recursos Hidráulicos

Tultitlán, Edo de México

México

CP 54913

T 52 (55) 58-94-36-41

E mexico@hollandcolours.com

P.T. HOLLAND COLOURS ASIA

Jl. Berbek Industri II/2

(Surabaya Industrial Estate Rungkut)

Sidoarjo 61256-East Java

Indonesia

T (62) 31-849 3939

E surabaya@hollandcolours.com

Export department Surabaya:

T (62) 31-841 1 801

E exportasia@hollandcolours.com

Jl. Industri III/88 Blok A-3

Kompl. Industri Facto, Jatake

Tangerang 15136-West Java

Indonesia

T (62) 21-590 5135

HOLLAND COLOURS CHINA LTD

Factory Building 7#

No. 65 Baiyun Road,

Spark Development Zone,

Fengxian District, Shanghai 201206

China

T (86) 21-57505962, 57505963

E china@hollandcolours.com

HCA JAPAN CORPORATION

Ukima 5-3-33, Kita-Ku

Tokyo 115-0051

Japan

T (81)-3-5916-2887

E japan@hollandcolours.com


WWW.HOLLANDCOLOURS.COM