2011 MMXII. Holland Colours Annual Report 2011/2012

Transcription

1 ANNUAL REPORT MMXI 2011 MMXII 2012

2 HCA ANNUAL REPORT MMXI 2011 MMXII 2012

3 Contents Profile Key figures An eventful year Vision, mission, strategy and objectives Progress of business in 2011/2012 Sales New products / Research & Development Results Investments Cash flow and financing Developments per Division Information systems employees corporate social responsibility Risk management Profit appropriation Outlook for 2012/2013 Corporate Governance Report of the Supervisory Board The Holland Colours share Financial Statements Other information Audit opinion by the external auditor organisation chart as at 1 April 2012 Contact 1 The Annual Report of Holland Colours is also available in Dutch on our website

4 2 PRO- FILE Holland Colours NV was incorporated in 1979 and has been listed on the NYSE Euronext Amsterdam stock exchange since It is an independent Dutch company with offices in the United States, Mexico, Europe and Asia. Since April , just over 50% of the shares are held by the investment company Holland Pigments BV, in which all 383 employees of Holland Colours participate, among others. The employees collectively hold approximately 20% of the shares in Holland Pigments BV. The core values of the company's corporate culture are entre-preneurship, respect and responsibility towards society and staff. Products Holland Colours makes products for colouring 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 be absorbed quickly by the required material. Holland Colours' colour preparations are particularly suitable for Polyvinylchloride (PVC) and Polyethylene terephthalate (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. More than 80% of sales are realised in these three markets. Its substantial global market share means Holland Colours is 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 both promptly and efficiently. Building & Construction Holland Colours has been a specialist in colouring PVC since its incorporation. Its colouring systems are used in: Pipes and fittings; Cladding/siding; Window profiles; (Foam) sheeting / roofing materials; Fencing and decking. The manufacturers of these products are Holland Colours' customers, and form part of the Building & Construction market. This 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 is characterised by fierce competition, and is driven by brandowners, the major soft-drink, foodstuffs and cosmetics 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 market in particular. Silicone rubber products (elastomers) are mainly used in the automobile and electronics industry, but also increasingly in the textile industry (prints on shirts). The big siliconepolymer and compound manufacturers 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 sites Holland Colours is organised in three regional Divisions that operate as profit centres in each specific region, namely: Europe (including the Middle East, India and Africa), the Americas and Asia. The distribution of sales is as follows: Europe 55%, Americas 30% and Asia 15%. Virtually the entire production is generated by the four principal plants in the Netherlands, Hungary, the United States and Indonesia (Surabaya). Furthermore, Holland Colours has sites in Mexico, Canada, England, Indonesia (Jakarta), China and Japan. Local agents are used in many countries to ensure closer relations with customers. The functions that are centrally organised are: Procurement, Research & Technology, Business Processes & ICT, Finance and Legal Affairs.

5 ROFILE

6 KEY FIGURES Financial year as at March / / / / /08 RATIOS LINKED TO CORPORATE OBJECTIVES Sales growth from continuing operations 1 (%) (4.3) (11.4) 2.2 Return on average invested capital 6 (ROI) (%) (1.9) 8.4 Growth in earnings per share (%) (46.0) (178.3) (58.7) RESULTS ( million) Sales growth from continuing operations Operating result from continuing operations (0.6) 3.0 Net result from continuing operations (0.6) 1.4 Sales Operating result (0.6) 2.4 Net result (0.6) 0.8 CASH FLOW ( million) Cash flow Investments Depreciation BALANCE SHEET ( million) Working capital Invested capital Equity (excl. minority interest) Balance-sheet total RATIOS Total debt 4 / EBITDA Operating result / sales (%) (1.2) 5.0 Solvency 5 (%) Return on average invested capital 6 (ROI) (%) (1.9) 8.4 Return on average equity (%) (3.1) 6.5 Interest coverage ratio (0.7) 3.3 Current assets / current liabilities (current ratio) FIGURES PER SHARE ( ) Net result from continuing operations (0.72) 1.57 Total net result (0.72) 0.92 Cash flow Equity (excl. minority interest) Dividend Highest price Lowest price Closing price OTHER DATA Number of outstanding shares 860, , , , ,351 Average number of employees (FTE) ) The discontinued operations concern the activities of Holland Colours Pigment Kft, which were discontinued as of December 31, 2007, 2) Cash flow: net result + depreciation, 3) Working capital: inventory + accounts receivable -/- non-interest bearing liabilities, 4) Total debt: sum of interest-bearing liabilities, 5) Solvency: equity (incl. minority interest) / balance-sheet total, 6) Return on invested capital: operating result / (equity (incl. minority interest) + provisions + interest-bearing liabilities -/- cash), 7) Dividend proposal.

7 FIGURES

8 6 Facts of the CEO Rob Harmsen. Economist. Synthetic Resins Akzo Nobel. Chief Operating Officer Nuplex Resins. Five years in Sydney. Wonderful city: climate, people, multicultural. Fly. Fly. Fly. America. Europe. Asia. Yes Asia. China. Indonesia. Vietnam. Thailand. Malaysia. factories. Joint Ventures. Growth. Great. Reliving youth. Proud of results. Together with team. Customers. Building relationships. Valuable. Open mind. Show respect. Give way. Know the history. Cultural differences. Understanding cultures. Challenge. Know the Do s. Avoid the Don'ts. Be open. Feel at home. Look at things differently. See things from the customer's point of view. Broad vision. Bring things together. Listen. From both sides. Market focus. Innovation. Market launches. Holland Colours. Great business. Committed employees. Continuity. Growth. International. Still Dutch. Common sense. Rob Harmsen Rob Harmsen (1957), CEO since January 2012

9 An eventful year LOWER MARGIN 2011/2012 was an eventful year for Holland Colours, both commercially and administratively. In May 2011 three supervisory directors - Messrs Gerardu, Van der Lof and Zegger - announced they wished to step down which actually happened at the shareholders' meeting on July 11, Holland Colours is grateful to them for their efforts and their contribution to the company. Since then, the Supervisory Board has consisted of Messrs Van Luijk, Kleyn, Kemper and Mr De Heer, who did not step down. In October 2011 Bernard van Schaik announced he would be leaving the company as of November I would like to express my thanks to Bernard from here for the valuable contribution and commitment he devoted to the company during the five years in which he served as CEO. The uncertain economic outlook and the sharp rise in raw materials prices affected the result achieved by Holland Colours. Although sales grew slightly by 1% and costs remained under control, the operating result was more than 42% down compared to the previous year. As a result of the economic conditions in America and especially in Europe, it was difficult to pass on higher raw materials prices to customers in full and without delay, particularly in the Building & Construction market. The business development varied for each Division. After the first quarter there was a clear deterioration in Europe as a result of the euro crisis. This was especially evident in the third quarter of the financial year, when tension concerning the situation in Greece increased. The combination of higher raw materials prices and the worsened starting position led to a slight negative operating result in Europe. Unlike Europe, the year in the Americas began weakly, followed by a slight recovery in Building & Construction. A decline in margin also led to a lower result here. In percentage terms, the decline in the operating result was in line with the company average. The Asia Division, and especially Indonesia, saw a pleasing growth in sales which led to a higher operating result, with especially strong growth by our new masterbatch business Holcomaster. It was pleasing to note that our worldwide sales of innovative products (new products introduced during the last five years) more than doubled compared to the previous financial year. This was mainly due to growth by Holcomer (for UHT milk packaging) and Holcomaster. Regarding sustainability, further progress was made with measures to reduce energy usage. The Apeldoorn facility has now been admitted to the "Meerjarenafspraak 3" (MJA3) covenant, which involves among other things a commitment to the best of our ability to reduce energy usage by 2% per year. An investment project has also been implemented in Richmond, our facility in the United States, to reduce energy use. A Life Cycle Analysis was conducted for several products this year. The conclusion was the same as before: our products score well because they are based on vegetable and renewable materials. sustainable We expect the uncertain economic conditions and volatility in the raw materials markets to continue in 2012/2013. Our focus will be on achieving a permanent improvement to profitability in Europe, increasing our innovative strength, and further growth of our position in Asia. With our highly motivated staff, we are fully committed to moving the company forward. 7 innovative products R. Harmsen Chief Executive Officer Holland Colours

10 Vision, mission, strategy and objectives 8 The success of Holland Colours is based on its unique products for colouring PVC. As these products are free flowing, dustfree, and very easy to dose, they offer customers big advantages. The products were already launched worldwide at an early stage. Vision Technology has a major impact on the business of Holland Colours, whether this relates to the knowledge or processing of pigments, chemical technology or 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 innovation at 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 supplier in its focus markets around the world. 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 based on core competence; 4. Providing a good service; 5. Working efficiently. Concentrating on three focus markets Holland Colours focuses mainly on three selected plastics markets: Building & Construction (especially PVC applications), Packaging (especially PET applications) and Silicones & Elastomers. The company is striving to achieve market leadership in these markets. International presence Holland Colours has a number of large 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 (Surabaya)), small production locations (Japan and China), sales offices (United Kingdom, Canada, Mexico and Indonesia (Jakarta)), and agents and distributors in many countries. Innovation based on core competence 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. The core competence of Holland Colours is packing dusty materials, as a result of which the customers can easily and safely process them in synthetic materials. Innovation is aimed at using this core competence, even though the results thereof may go beyond the three focus markets. Providing a good service Customers are a key element at Holland Colours. Most of our sales concern customer-specific products that in many cases are developed in cooperation with the customer. Prompt delivery of the right products is a vital part of the company's policy. Furthermore, our products can make a considerable contribution to reducing the ecological footprint of our customers. Working efficiently Making and selling customer-specific products that are also often still subject to change makes a special demand on the ability to be efficient in terms of reliability of supply, cost control and working capital. Holland Colours has initiated various projects, including the Lean project, to achieve continuous improvements in this area.

11 We are well positioned to meet the increasing demand for functionality of colours due to our experience of light barriers and oxygen scavengers in PET packaging and the application of these products in coloured beer, wine and milk bottles. We have developed Holcomer UHT White specially for the packaging of long-life milk and flavoured milk in monolayer PET bottles. This is a very opaque white colouring that protects milk against light while retaining taste and nutrients. A number of leading dairy companies have now adopted this concept, and the list of successful market launches is continually growing. PET packaging looks good and performs well and offers many marketing benefits, in terms of design, user-friendliness, mechanical strength, recyclability and cost. 9

12 corporate objectives The mission and strategy of Holland Colours are focused on achieving the following objectives: Sales growth of 8-12% per year; ROI growth to a level of at least 15%; Growth of earnings per share, more than in proportion to the growth in sales. SWOT analysis Strengths of Holland Colours Strong focus and good positions in the three focus markets Global presence with own locations in nine countries, plus agents and distributors Unique technology and customer-specific products Customer-oriented corporate culture A naturally sustainable company in many different fields Points for improvement Reducing the time-to-market for innovations Extending the applicability of products beyond the current synthetic materials market combinations Further improving efficiency and cost control 10 Opportunities Growth through innovation on the basis of existing core competence (e.g. additive dispersions) Growth of the markets for PET packaging and Silicones Emerging markets such as Eastern Europe, South America, India, China and Southeast Asia Growth through new products Optimising and capitalising on the standard ERP system threats The cyclical nature of the Building & Construction market Higher prices for raw materials The nature of the tender process in certain markets Liquid and masterbatch alternatives to Holland Colours products Challenges facing Holland Colours Profitable innovation programme Taking advantage of innovations in the focus markets quickly and promptly with the right partners is the foundation for the future of Holland Colours. This is an important element for a profitable growth of the company. passing on higher raw materials prices The limited global supply of titanium oxide in particular and the higher prices as a result, as well as the exposure to variation in harvests of other commodities, also constitute a challenge for Holland Colours. It is vital that the effects of this are absorbed by good relationships with suppliers and customers. Efficient business operation Continuing the improvement processes in the fields of reliability of supply, working capital and cost management remains important to Holland Colours. The challenge is to make this happen while retaining our current customer orientation. Making the most efficient use of the possibilities offered by the standard ERP system play an important role therein. Management of the organisation Holland Colours operates with relatively small offices in a global market with a clear growth objective. An effective degree of autonomy of the operating companies, an efficient central management and actively looking for mutual collaboration are vital elements in the realisation of our objectives. Having or retaining the right person in the right position in the organisation is therefore essential for Holland Colours.

13 Progress of business in 2011/2012 Sales DIFFICULT year ( million) 2011/ / / / /2008 Focus markets Specialties Sales from continuing operations Pigments /2012 was a difficult year, as a result of the weakening economy and rising prices for raw materials. Sales rose by 1% to 61.2 million (2010/2011: 60.5 million). Volume growth was 2%. Currency effects had a negative impact of approximately 2%, mainly due to the lower US dollar in the first six months. After remaining steady during the first half of the year, sales rose in the second half to a higher level than in the same period a year previously due to positive developments in the last quarter. After falling 3% in the third quarter, sales rose 7% in the fourth quarter in comparison to the fourth quarter of 2010/2011. The only increase in sales in euros was in Asia ( million) 2011/ / / / /2008 Europe Americas Asia Sales from continuing operations The development of the business varied in each region. Sales increased in Europe in the first months of the financial year, but declined after the summer due to the deteriorating economy. Sales also fell in the Americas (by 2%), but this was due to a difficult start to the year and also to currency effects. Excluding currency effects, sales rose in this region by 2%. Asia was the only region to generate an increase in sales in euro terms compared to the previous financial year. The proportion of the sales of Holland Colours realised in Asia increased further to 15%. The increase in sales in this region this year amounted to 18% after currency effects. Without currency effects the increase was actually 24%. The markets developed differently Increase in sales 2011/ / / / /2008 Building & Construction -3% +18% -5% -13% 0% Packaging -2% +16% -3% -10% 0% Silicones & Elastomers +12% +18% +1% -6% +9% Total focus markets -1% +17% -4% -11% +1% Specialties +10% +26% -7% -12% +8% Currency effect -2% +4% -1% -2% -3% Total sales +1% +19% -4% -11% +2% Sales in the Building & Construction market fell 3% as a result of the decline in demand in Europe since the summer of This was partly offset by positive developments in North America, where sales managed to rise slightly despite the lower US dollar. The fall in sales was less than the fall in volume due to higher sale prices.

14 In the Packaging market, Holland Colours achieved lower sales on higher volume compared to the previous year. Although this market is less exposed to cyclical changes, it has become more competitive as a result of lower demand in other markets. Growth in the Europe and Asia divisions was cancelled out by a fall in sales in the Americas division. Sales in Silicones & Elastomers were up 12% compared to last year. Sales rose in all Divisions, with the highest growth being realised in the Americas. Sales in Specialties increased by 10%. This was achieved mainly in Asia, and in Europe to a lesser extent. In Europe the increase was partly due to innovative products sold outside our focus markets. In Asia, this mostly concerned sales of Holland Colours new masterbatch product Holcomaster and additional realised trade sales. New products / Research & Development Previously developed products made a good contribution to sales in 2011/2012. Sales of Holcomer UHT rose strongly in Europe in comparison to the previous financial year. This product protects long-life milk against the damaging effects of light on PET packages. A cladding product was introduced for the Building & Construction market in North America with a coloured acrylic copolymer top layer that enables customers to significantly reduce their colouring costs. The launch of the colour polymer concentrate Holcomaster in Asia is proving to be successful. New additive and colour concentrates for oxygen scavenger applications that provide additional protection and functionality have been successfully tested with customers. The first sales for these products are expected to occur in the coming financial year. A coloured product has been developed in collaboration with an auto manufacturer in Asia as a replacement for the normal roof or ceiling covering. A number of new applications were developed for the focus market Silicones & Elastomers, including colours for electrical and energy cabling and silicone coatings for use in demanding weather or chemical environments. Results Sharp decline in net profit Net profit fell from 3.2 million to 1.7 million in 2011/2012, despite a 1% rise in sales. The operating result declined from 5.4 million to 3.2 million. Higher raw material prices were the main cause of the lower result. As a result of the difficult economic climate, especially in Europe, higher raw material prices could in many cases only be passed on to customers partly and with a delay. This led to a fall in the gross margin, in both absolute and relative terms. Operating expenses remained below the level in the previous financial year. As usual, sales in the second six months were lower than in the first, due to seasonal fluctuations. After net profit of 1.5 million in the first half (2010/2011: 2.3 million), the second half of the year closed with a net profit of 0.2 million (2010/2011: 0.9 million). Return on investment declined over the year as a whole to 10.0% (2010/2011: 17.7%). Lower gross margin due to higher raw materials prices and product mix changes 12 Patent applications were converted into patents in various countries during the financial year. Two new patents were also applied for in relation to Holland Colours carrier technology and additive concentrates. New products were also launched in the field of additive concentrates and sustainable raw materials. The product that can give PET bottles a frosted glass appearance is now also available for packaging in the personal care products market, and for the alcoholic spirits segment. Colours based on natural materials are available for various types of biopolymers, including the recent addition of biopolymers based on potato starch. Additive concentrates for polypropylene are moreover being developed. The Stage Gate process introduced last year has led to increased flow of ideas and projects. Next year we will work on optimising the process in order to reduce project processing time and increase the likelihood of success. Further implementation of the Lean improvement programme has led to significant process improvements in all Divisions. Examples of this are the quantity of finished product per batch of Holcobatch and a sharp reduction in production losses for Holcoprill. The ratio between the gross operating result and revenue was 44.0% in 2011/2012, much lower than in the previous year (48.8%). The gross margin was pressured by higher raw materials prices throughout the financial year. In the first six months, a relative gross margin of 44.6% (2010/2011: 49.1%) was achieved. In the second half year, this was 43.3% (2010/2011: 48.5%). As far as possible, higher raw materials prices were reflected in the end product sale prices, albeit with a delay. Especially in the Building & Construction market in Europe, which is suffering from continuing weak economic conditions, it will take a long time to realise higher sale prices. Changes in the product mix are another important constituent of the lower relative gross margin, and were due mainly to the increase in Specialties sales in Asia and the decline of the share of Packaging in overall sales.

15 Operating expenses under control The total operating expenses fell from 24.1 million to 23.8 million. Currency effects had a positive effect of approximately 0.2 million compared to the previous year. Contrary to the previous financial year, the employee expenses do not include a payment under the profit-sharing plan that applies to all Holland Colours staff (2010/2011: 1.0 million). Despite a slightly higher level of activity, the average number of employees remained more or less unchanged at 382 (FTE) compared to the previous year (2010/2011: 383). Depreciation fell by 0.1 million compared to the previous financial year, mainly because investment has remained well below the level of depreciation in recent years. Other operating expenses rose 0.3 million. Lower expenses for external consultants and energy were offset by an increase in other employee expenses, higher local taxation and additions to the provision for defaulting debtors. The change in management led to additional expenses of approximately 0.4 million. Lower financing costs Net financing costs fell from 0.7 million to 0.5 million. A number of the interest rates payable are related to the ratio between the interest-bearing debt and the operating result before interest, tax, depreciation and amortisation (Total Debt / EBIT- DA ratio). Partly due to a decline in the Total Debt / EBITDA ratio compared to the previous financial year, interest expense was considerably lower than in 2010/2011. Higher tax burden The effective tax burden rose from 33.2% in 2010/2011 to 34.6% in 2011/2012. Compared to the previous financial year, a larger part of the result was realised in countries with higher tax rates. The tax burden also increased due to the withholding tax due on dividend payments from foreign operating companies. The Dutch part of the company was moreover not profitable in 2011/2012. A deferred tax receivable has been included for the losses that can be deducted from future profits. Based on the forecast of the results for the Dutch part of the company in future years, we expect the losses eligible for deduction to be applied well before the carry-over period expires. The first deductible losses expire after the 2015/2016 financial year. Holland Colours signed an agreement with the Dutch Tax & Customs Administration in relation to Horizontal Supervision in January 2012 whereby both parties have confirmed their willingness to cooperate constructively to resolve tax issues. Investments Holland Colours has production facilities which are generally adequate to meet market demand. This made it possible to keep capital expenditure limited to 0.7 million during the past year (2010/2011: 1.0 million). As was the case in the previous year, this was well below the depreciation level of 2.2 million (2010/2011: 2.4 million). The investments made relate to regular replacement of production equipment, investments in safety precautions and energy saving, as well as a number of minor expansions to production. All of the investments were entirely funded from the cash flow from operating activities. Cash flow and financing Cash flow from operating activities fell from 3.0 million in 2010/2011 to 1.6 million in 2011/2012. The decline in the net result is the main reason for this. At the end of March 2012 the working capital amounted to 14.8 million, considerably higher than at the end of March 2011 ( 12.6 million). The increase in working capital was due to an increase in the operational working capital of 1.2 million (inventory was up 0.9 million, and trade receivables rose 0.3 million, while trade payables were unchanged), an increase in other receivables of 0.4 million and a decline in other liabilities of 0.8 million (unlike the previous year, there was no reserve for profit-sharing this year). The increase in inventory was due to the increase in inventory of raw materials in an amount of 1.2 million. This mainly concerned an increase in value as a result of the rise in raw materials prices. Additional inventory was also acquired, partly due to the announcement of a price increase for titanium dioxide. The inventory of finished product declined by 0.3 million. The increase in trade receivables was due to the higher activity level in the last quarter. Compared to sales, there was a small rise in trade receivables from 61.3 to 62.4 days, mostly due to the higher sales in Asia, where payment terms usually are longer. The positive cash flow from operational and investment activities of 0.9 million (2010/2011: 2.1 million) was not sufficient to compensate for repayments and dividend payments, and therefore the net cash flow was a negative 2.2 million (2010/2011: 1.8 million positive). The total interest-bearing debt rose from 9.1 million at end March 2011 to 9.6 million at the end of March The most important banking ratio (Total Debt / EBITDA) rose from 1.2 to 1.8, but remains comfortably below that level agreed with the bank of 3.0. The existing financing agreements were not changed in 2011/2012. The bank covenants and the collateral provided to secure the loans also remained the same. During the financial year, Holland Colours met all covenants agreed with the bank. The financial lease agreement regarding the head office expired in November 2011, and Holland Colours exercised the purchase option in the agreement for a sum of 0.5 million. No refinancing will be required during the forthcoming year. The company s solvency ratio increased to 55.3% compared to 54.9% at the beginning of the financial year. The increase in equity as a result of the positive net result and positive translation results was offset by a decline due to the dividend payment in July The positive translation results of 0.8 million (2010/2011: 0.6 million negative) were mainly due to the higher level of the US dollar at the end of the financial year compared to its level at the end of March The translation results are a result of equity holdings in subsidiary companies which report in foreign currencies. 13

16 Developments per Division 14 Europe Key figures 11/12 10/11 ( million) Sales % Operating result Investments % Depreciation % No. of employees (FTE) % Rising raw materials prices and a decline in sales in Building & Construction were the main reasons for the negative operating result of 0.2 million for the Division Europe (2010/2011: 1.2 million positive). The effects of the euro crisis became visible in the development of sales after the summer. The third quarter was particularly difficult, but this was followed by a mild recovery in the fourth quarter. Difficult year for Building & Construction After a recovery in 2010/2011, the market for Building & Construction in Europe worsened again after the summer due to the continuing poor state of the housing market in various European countries, in combination with and as a result of the euro crisis. The drop in sales was limited. The decline in sales was partly compensated by the successful introduction of a number of innovative products. One example is a product whereby PVC pipe are given a higher gloss. Given the difficult market conditions, higher raw materials prices could not be fully passed on to customers, and in any case only with a delay. Things improved in the fourth quarter, partly due to restocking by customers and also due to the mild winter in some European regions. Number of newly built houses in the Netherlands Source: Bouwend Nederland Number of newly built houses in the UK Source: UK Statistics Authority Limited growth in Packaging Sales in Packaging showed a limited growth compared to the previous year. This was almost entirely due to Holcomer, a product launched in the market several years ago (see also the section on New products / Research & Development). The market conditions are still precarious. For PET packaging manufacturers, the economic crisis was a reason to save costs where possible. A reduced use of colours was one of the consequences. The PET packaging market, which is less sensitive to economic fluctuations, has moreover attracted suppliers from other markets, as a result of which competition has increased. Marginal increase in sales of Silicones & Elastomers The difficult economic conditions also affected the market for Silicones & Elastomers. Realised sales were marginally up on the previous year, although the growth was less than expected. Sales fell in the traditional market for colouring products for sealants related to Building & Construction. On the other hand, sales of high-value Liquid Silicone Rubber (LSR) products rose, as did sales of the product Holcosil HTV. New products and applications in the pipeline Although we were already devoting a high level of attention to the development of new products and new applications for existing products, we further increased our efforts in this area. This led to various new projects, usually in collaboration with potential customers. Continuing efforts to improve efficiency The Lean improvement programme initiated several years ago continues to deliver results. During the last financial year, much attention was paid to increasing the productivity of the production lines for Holcoprill. A project team consisting of those directly involved has formulated and implemented proposals for improvements. The productivity of these production lines has been significantly increased due to technical applications and changed working procedures. Americas Key figures 11/12 10/11 ( million) Sales % Operating result % Investments % Depreciation % No. of employees (FTE) % Sales in the Americas Division rose by 2%, from USD 25.1 million to USD 25.7 million. In euro terms however, sales fell by 2% due to currency effects. Positive developments, including increased sales in Building & Construction and Silicones & Elastomers, were overshadowed by a decline in sales in Packaging and the effects of higher raw materials prices. The operating result therefore fell from 2.5 million in 2010/2011 to 1.6 million in 2011/2012. Modest growth in Building & Construction Although the economy showed signs of slight improvement during the financial year, there was still no lasting recovery in the housing market in the United States in 2011/2012. The number of new-build homes rose, but remained at a low level. As a result of people staying longer in their home, there was growth in the renovation market. Holland Colours was able to benefit from this and to increase its sales in the Building & Construction market. Both existing and new customers contributed to this rise in sales. Holland Colours moreover continued to devote much attention to innovation, for instance by developing products for the colouring of ASA, a thermoplastic material with excellent weatherresistant qualities.

17 Number of newly built houses in the US (x1000) 01/02 01/04 01/06 01/08 01/10 01/12 Source: Forecastchart.com Marked decline in sales in Packaging Sales fell in the market for Packaging. As in Europe, this market is experiencing strong competition and cutbacks on the use of colours in PET packaging. Furthermore, the number of customers is declining as a result of consolidation, especially in North America. Holland Colours is responding to this with an active programme designed to improve its relationships with brandowners, among other things. Positive developments in Silicones & Elastomers Silicones & Elastomers achieved a good increase in sales compared to the previous year, almost entirely due to products for the colouring of silicone sealants. However Silicones & Elastomers represents a relatively small proportion of the total sales of this Division. Lower gross margin despite efficiency improvements in the United States The rise in raw materials prices also clearly affected the Americas Division. This put the relative gross margin under pressure, particularly since the summer of As in Europe, passing on the higher prices to customers was difficult and time-consuming. Product mix changes, such as a reduction in the proportion of Packaging in sales, also had a negative effect on the relative gross margin. The gross margin was therefore well below that seen in the previous financial year, in both relative and absolute terms. Efficiency improvements, including increased production per man-hour as a result of the Lean improvement programme, were not able to compensate for this. Asia Key figures 11/12 10/11 ( million) Sales % Operating result % Investments % Depreciation % No. of employees (FTE) % The Asia Division once again performed well this year. Sales rose 24%, from USD 10.2 million to USD 12.6 million. The increase was lower in euro terms due to currency effects, coming to 18%. The rising sales of existing Holland Colours products were supplemented by substantial additional sales of the masterbatch product Holcomaster. Trade sales also rose strongly. The shift in product mix and the higher raw materials prices led to a decline in the relative gross margin. As a result of the lower relative gross margin and higher operating expenses, the increase in the operating result failed to match the increase in sales. Sales increase in all segments Sales rose in both the focus markets and Specialties. As usual in Asia, the Specialties segment accounts for a high proportion of sales. This mainly concerns pastes, masterbatch and trade sales. Sales in the Building & Construction market have traditionally been at a low level, although there was a substantial increase here. Despite unfavourable developments in the fourth quarter of the financial year, sales in Packaging were also higher than in the previous year. Silicones & Elastomers had a good year. Sales grew strongly, as a result of good sales of products for colouring silicone sealants in Thailand and higher sales of Liquid Silicone Rubber (LSR) products in China and Indonesia. Successful launch of masterbatch in Indonesia In the summer of 2010, the production capacity of the branch in Surabaya, Indonesia, was expanded with a number of production lines enabling the production of highquality masterbatches. An important part of the increase in sales in the past financial year was due to the successful launch of this technology, a new development for Holland Colours. This activity is expected to grow further in the coming year. Holcomer production in Indonesia A project was started in 2011/2012 designed to produce Holcomer in Indonesia, mainly for the Asian market. Holcomer was introduced to the European and American markets several years ago for the colouration of PET milk bottles and to provide protection against the damaging effects of light, meaning that milk and other dairy products will remain fresh for longer. The demand for milk in Asia is expected to rise strongly as a result of the growing middle class in the region. By setting up a production line for Holcomer, Holland Colours is positioning itself to take advantage of this trend. The project will be supported by a grant from the Dutch government. Growth of the production facility in China stalls The production facility in China opened in 2007 faced stagnating sales in 2011/2012, partly due to internal staff turnover. Nonetheless, work is continuing on expanding the local production and laboratory facilities so that demand from the market can be met more promptly. The sales team too was expanded further, enabling better market reach. Stalling sales, a slight decline in the relative margin and higher operating expenses led to only a small positive operating result for the facility. 15

18 16 Information systems During the 2011/2012 financial year, important steps were taken towards the further standardisation of the information systems used by Holland Colours. Standard reporting and consolidation software was taken into operation at all facilities at the beginning of the year. This software is directly linked to the standard ERP system used by the Group. Both systems are maintained centrally from Apeldoorn. The standard ERP system was taken into operation at the facility in Indonesia on February , finally making group-wide implementation of this system a reality. Standardisation and linking information systems will ensure clear and efficient working processes within the Group, will ensure the reliability of information and enable optimal realisation of synergy between the various businesses. employees Organisation At the end of the financial year, Holland Colours employed 383 members of staff (FTE) compared to 389 members of staff (FTE) a year ago. The average number of employees this financial year was 382 (FTE) and was thus more or less unchanged from the previous year (2010/2011: 383 (FTE)). Further improvements to efficiency, including by means of the Lean improvement programme, remain an important priority. The geographical distribution of the company's personnel is as follows: Own employees year-end 11/12 year-end 10/11 The Netherlands Hungary United Kingdom 6 6 United States Canada 4 4 Mexico 7 7 Indonesia China Total corporate social responsibility Sustainable business practice, sometimes also referred to as Corporate Social Responsibility (CSR), is a business practice in which the economic, social and environmental interests are carefully balanced. Ever since the foundation of Holland Colours in 1979, 'sustainability' has played an important role in the organisation. The vast majority of the products of Holland Colours are based on natural raw materials. Furthermore, all members of staff participate in Holland Pigments BV, the investment company that has held 50.03% of the shares of Holland Colours NV since April In addition, Holland Colours accepts its social responsibility, when and where possible. Holland Colours is continuously looking for a healthy balance between the three Ps: People, Planet and Profit, the three key areas in corporate social responsibility.

19 For People: sustainable deployability Terms of employment and training Employees play an important role in the successful execution of the company's strategy. The HR policy is aimed at developing talent and retaining critical knowledge and skills. The policy framework is based on offering specific training, and formulating and teaching work instructions. Holland Colours operates in various countries, each with their own laws and cultures. For that reason, the operating companies pursue their own HR policy that is geared to the local situation. The terms of employment are complete and competitive. All employees participate in a profit share scheme which depends on the Group's result as well as the result of the particular Division the employee is based at. On the basis of the results achieved in the 2011/2012 financial year, no profit-sharing payment was made to the employees. Employee share ownership All the employees of Holland Colours participate in Holland Pigments BV, the investment company that has held 50.03% of the shares of Holland Colours NV since April The employees are able to buy or sell shares in Holland Pigments shortly after the publication of the annual and semi-annual figures of Holland Colours NV. Insofar as profit can be distributed, part of it is paid out in Holland Pigments BV shares. At the moment, employees hold approximately 20% of the shares in Holland Pigments BV. Composition of the workforce A balanced composition of the workforce makes a positive contribution to the performance of the organisation. For many years, women have held managerial positions at all levels in the organisation and in all countries where Holland Colours is represented. Men/women Women Men breakdown Managerial 6 18 employees Other employees The average age of staff has risen in the past years. In 2011/2012, the average age rose from 40.3 to Health and safety Holland Colours staff around the world are professionals with a result-oriented entrepreneurial spirit, who are actually prepared to take on challenges. A safe and high-quality working environment is vital in that respect and has great priority. Holland Colours' policy is aimed at executing or structuring all work and processes in such a way that any form of personal injury and harm to a person's health can be prevented. This ambition forms the basic principle for the health and safety policy that is implemented at all companies. Thanks to and despite the extensive attention to safe working methods, the number of accidents at work was two, compared to four in the previous year. The incidents concerned a broken knee and bruising, and the loss of skin on fingers. Appropriate measures have been taken to prevent similar accidents in the future. These incidents led to 31 days lost (2010/2011: 13). Holland Colours uses the Lost Time Injury Rate (LTIR) method to measure its safety performance. This internationally utilised method gives the ratio between the number of accidents and the number of hours worked. The LTIR for 2011/2012 was three (outstanding) compared with five (good/ outstanding) last year. The table provides the interpretation of these data. LITR Result Action required 0-5 Outstanding No 5-10 Good No Fair Yes > 15 Poor Yes In the Netherlands, Holland Colours offers its staff preventive medical testing once every four years. The test consists of a questionnaire and a medical examination. Take-up has been generally high, and the recommendations arising from the examinations have been actively followed up. In addition, other specific measures are taken in order to secure proper working conditions. The other operating companies in the Group also focus on working conditions and the well-being of staff. Sick leave fell from 2.7% in 2010/2011 to 1.9% in 2011/2012. Social involvement Holland Colours is a responsible member of society. Local initiatives are developed to support less fortunate people. In those countries where Holland Colours is represented, projects supporting the local community are participated in. Holland Colours in Richmond USA contributes to supporting underprivileged children and various educational projects for local youngsters. On the occasion of the 25th anniversary of the establishment of the business in Richmond, Holland Colours made a donation to a museum enabling the restoration of a historic flag. In Indonesia, the company provides the children at a primary school in a poor district of Surabaya with a good hot meal twice a week. 17

20 For Planet: environmental results For Profit: economic results Sustainable products Corporate objectives 18 Ever since its formation, Holland Colours has been manufacturing sustainable products by using natural raw materials. A recently conducted Life Cycle Analysis (LCA), a method used to establish the impact products have on their surroundings during their lifecycle, demonstrates that the products of Holland Colours score well compared to those of its competitors. The introduction of products for colouring sustainable biopolymers demonstrates that Holland Colours is continuing in this direction. Green investments Holland Colours invests in solutions aimed at reducing the use of raw materials, energy and water. Examples include the replacement of existing factory lighting with new energy-efficient lighting, the replacement of propane powered fork-lift trucks with energy-efficient electrical trucks, automatic systems for switching off various equipment, and the deployment of a compressed air leak detection programme in the Netherlands. The company is working on energy-saving programmes at its large production facilities. Since last year, Holland Colours in the Netherlands is a participant through the industry organisation VNCI in the covenant known as 'Multi-Year Agreements 3. This imposes a best-effort obligation of saving 2% energy per year, having the company's energy consumption subjected to annual monitoring and implementing an energy care system within three years. The Municipality of Apeldoorn showed its appreciation to the participants in this initiative with a celebratory meeting. Holland Colours made a start on clearly measuring and consolidating its energy usage during the last financial year. The figure below gives an overview of our worldwide energy consumption in megajoules per kilogram of successfully produced product. The figure does not include adjustments for weather effects. Energy consumption in MJ per kg product The company's financial objectives are designed to contribute to a sustainable development of our business. A financially sound company generally has more scope to invest in sustainable innovation and energy-efficient production processes and buildings. Innovation Sustainability and innovation are closely connected at Holland Colours. First of all, one of the priorities in our innovation programme is to develop products specifically for sustainable applications, e.g. colour concentrates for biopolymers. In addition, sustainability is an important element in the choice of innovation projects, process routes and raw materials. From the earliest stages of product development, priority is given to products or solutions that contribute to saving energy, reducing waste, recyclability, use of renewable raw materials and longer life cycles for end products. Transparency and targets Care for the environment Holland Colours continuously strives to minimise the detrimental effects of production processes on the environment. Treating raw materials in a responsible manner, reducing breakdowns and reducing and recycling waste contribute to that. The production sites pay a lot of attention to managing and reducing waste streams. Apart from consistent separation of waste, a mass balance is maintained. Where possible and responsible to do so, Holland Colours will not limit its environmental care to the bare legal norms. Quality, Health & Safety and Environmental (QSHE) managers operate at the large production sites. They monitor the course of events at these sites and continuously work on improvements mrt-09 mei-09 jul-09 sep-09 nov-09 jan-10 mrt-10 mei-10 jul-10 sep-10 nov-10 jan-11 mrt-11 mei-11 jul-11 sep-11 nov-11 jan-12 mrt-12 A significant decrease in energy use has been achieved in recent years. The intention is to realise a further reduction with the measures already in place and the measures yet to be introduced. An audit was conducted at the facility in Hungary in June 2011 for ISO accreditation, the internationally acknowledged standard for good environmental management. All European facilities are therefore now operating in accordance with this standard. The facility in Indonesia is also ISO certified. Holland Colours aims to be transparent with regard to its environmental targets and the results attained in this field. However, this requires an expansion in internal reporting. Where possible, Holland Colours intends to bring environmental reporting in line with the Global Reporting Initiative (GRI) guidelines.

21 Risk management The company's strategy is subject to risks. External economic factors, erratic market developments, calamities and human factors may affect the realisation of the company's objectives. Holland Colours has implemented risk management and control measures, aimed at recognising and, with a reasonable degree of certainty, managing significant risks to which the company is exposed. Risk management, geared to the size and the entrepreneurial nature of Holland Colours, is an integral management task. The following overview of the most important specific risks is not necessarily exhaustive. It is possible that risks currently not being recognised or not regarded as substantial may at a later stage negatively affect the ability of Holland Colours to achieve its business objectives. The risk management and control measures are designed to identify these risks in good time. Principal strategic risks: Market Market risk varies for each focus market and market area. Some markets, such as Packaging, are subject to intensive competition and high price elasticity. In other market areas, such as Building & Construction, Holland Colours enjoys a technical lead coupled to a unique market position. However, this does not offer any guarantee for the future. Products at the end of their life cycle must be replaced by new, improved and distinctive versions in good time. Innovation Innovation is an important pillar of the company's strategy. Good cooperation between the different Divisions, the central Research & Technology department and the various disciplines (marketing, sales, production) is essential. Through project control by divisional management, a joint agenda and progress monitoring, Holland Colours ensures that the innovation process is managed as effectively as possible. Global presence Its global presence makes Holland Colours less exposed to developments in any one geographical region. 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 by making use of external expertise, where necessary. Macroeconomy Also in the last financial year, it was clearly demonstrated that macroeconomic developments, for instance the significant events in the eurozone, substantially affect demand for the products of Holland Colours. The company's geographical spread and its diversification across various focus markets cushion the effects of this risk. Principal operational risks: Raw materials Raw materials form an important part of the cost price of the products of Holland Colours. The prices of these raw materials may fluctuate considerably due to fluctuations in their availability. Price increases cannot always be passed on to customers, and even when this is possible, it is usually with some delay. This risk is reduced by coordinating strategic purchases centrally and by making price and delivery agreements at group level. Our order-driven production reduces our inventory risk. Product liability and safety Holland Colours has different production processes on a small to medium-size scale. Whenever production control has low levels of automation, the risk of human error increases. Incidents during the production process can never be eliminated. They may lead to a loss of quality, complaints from customers and disruptions to the production process. Holland Colours subjects its products to preventive checks and virtually all companies are ISO certified. Other instruments used by Holland Colours to improve its production processes include improvement measures from the Lean approach, a targeted production reporting process and clear standard work instructions. Product liability risks are also covered by agreements made with customers and suppliers, as well as by insurance contracts. Health and safety is also a major risk area and we therefore place great emphasis on working conditions, sick leave and accident prevention. Management and personnel Holland Colours has a decentralised organisation structure. Within the Group's strategy, the Division directors and operating company boards to a great extent determine the corporate policy and take business decisions themselves. Not having the right person in the right place forms a risk for the company. Another risk is dependency on key personnel. Managing this risk is an important focus area for Group Management. Continuity of information provision With a view to costs and risk management, information systems such as the ERP system are increasingly managed centrally. A breakdown of these systems may lead to a disruption to the business processes. This risk is limited as far as possible by means of information security and contingency measures. Environment Holland Colours tries to reduce environmental risks to a minimum. Environmental coordinators have been appointed on a local level. They know the specific situation and as such they implement local legislation. Principal financial risks: Financing and interest Most of the company's financing has been centralised. Financing is subject to a number of conditions, with the Total Debt / EBITDA ratio being the most important. As emerged in 2009, there is a major risk that the conditions will not be met during a deep recession. Such a situation may lead to costly refinancing, possibly linked to a strengthening of the company's equity. Holland Colours closely monitors the agreed ratios in order to reduce the threat of this occurring. Interest rates on longterm loans are usually fixed for the entire term of the loan. Overdraft facilities are generally based on Euribor and Libor plus an agreed surcharge. Currencies Holland Colours distinguishes between transaction risks and translation risks. When relevant, transaction risks are hedged by means of forward transactions or options. In addition, it is normal practice to hedge future currency flows for a period of six to twelve months, whereby the hedging percentage is reduced as uncertainty regarding these flows increases. A translation risk arises when operating companies outside the eurozone make a substantial contribution to profits or form a considerable part of the equity, while their currency weakens in relation to the euro. These translation risks are partially hedged by applying hedge accounting. Credit risk The risk that debtors are unable to fulfil their obligations is not insured. In addition to the fact that Holland Colours has a number of large (multinational) customers with relatively lower risk, debtors are monitored using credit limits and strict procedures are used if payments are not made on time. The creditworthiness of customers is checked on a regular basis. 19

22 20 Financial reporting 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. The standard accounting procedures have been laid down in the Holland Colours Accounting Manual. The monthend check list, an important part of the accounting process, was supplemented and tightened up during the past year, thus ensuring more far-reaching standardisation of the procedures used. Self-reflection, by conducting internal business evaluations for instance, is a primary monitoring tool to check these procedures. The evaluations are made on the basis of a structured questionnaire and conducted by controllers from different operating companies of the Group. Risk management Risk management is a responsibility of management at all levels. In 2009/2010, a start was made with a risk register, a system in which risks and control measures are recorded in a structural manner. The programme of internal business evaluations is supplemented with non-financial issues on the basis of meetings at which the risk register is discussed with the Supervisory Board, the external auditor and the controllers of the operating companies. During the past year, business evaluations were conducted at the facilities in Mexico, China, Canada and the United States. The results were discussed with local management and procedures have been adjusted, where necessary. The programme of internal business evaluations will be further expanded next year, and the risk register will be re-evaluated and supplemented as appropriate. Twice a year, all boards and controllers of operating companies sign a compliance declaration with regard to the financial reporting and internal audit. All financial regulations have been laid down in the Holland Colours Accounting Manual. In a letter of representation, the boards and controllers of the operating companies declare that the results were prepared in accordance with this manual. Each year, the external auditor assesses the design and operation of the administrative organisation and the internal audit, insofar as this is relevant to the audit of the financial statements, and reports to local management, the Management Board and the Supervisory Board. Any risks that are insurable, as in the case of fire and business interruption, third-party liability and product liability, are covered through insurance companies. The company regularly evaluates its insurance cover, the premium it pays and the policy excess that applies. Regarding the insurance of credit risk, this consideration has so far resulted in a negative conclusion. Evaluation of risk management and control systems The Management Board is of the opinion that: The risk management and audit systems offer a reasonable degree of certainty that the financial report does not contain any material misstatements; The risk management and audit systems performed satisfactorily during the reporting year; and There are no indications that the risk management and audit systems will not perform satisfactorily in the current reporting year. Good risk management is no guarantee Risk management is a dynamic process. Risks currently assessed as minimal may change in terms of 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 that the company's objectives will be realised. Management Board statement With reference to Section 5:25c, paragraph 2, under c, of the Financial Supervision Act, the Management Board confirms that to the best of its knowledge: the financial statements give a true and fair view of the company's assets, liabilities, financial position and result; and the annual report gives a true and fair view of the situation as at the balance sheet date, the course of events during the financial year; and the annual report describes the material risks the company faces.

23 Profit appropriation Outlook for 2012/2013 Dividend policy: annual assessment The dividend policy of Holland Colours is not based on the distribution of a fixed percentage of the profit. Instead, it is 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. Contributive factors may include additional working capital for growth, investments above the level of the depreciations and acquisitions of a limited size, if relevant. Total Debt / EBITDA ratio: in order to maintain access to external financing sources, the ratio between interestbearing debt and the operating result before depreciation and amortisation is taken into account. Dividend proposal The net result per share amounts to 1.97, compared to 3.65 in the previous year. It will be proposed to the General Meeting of Shareholders that a dividend of 1.10 per share be distributed in cash (2010/2011: 2.30). In formulating this dividend proposal, the following factors were taken into consideration: Due to the uncertain prospects for the economy, Holland Colours strives to achieve a solvency ratio around the upper end of its target bandwidth of 45%- 50%. The existing financing arrangements and the expected cash flow are expected to be sufficient to meet the company's financial requirements. Regarding the Total Debt / EBITDA ratio, the ambition is to achieve a level that is comfortably below the level of 3.0 as agreed with the bank. The economic climate is expected to remain uncertain in 2012/2013, particularly in Europe and in the United States. The Asian economies are generally developing more positively. At the start of the financial year, the order book is up compared to a year ago, although order intake is volatile. The housing markets in the regions of Europe and the United States important to Holland Colours are expected to show little or no structural recovery in 2012/2013. In Packaging and Silicones & Elastomers, Holland Colours expects organic market growth. Increased sales of new products such as Holcomer UHT and Holcosil HTV are expected to contribute to the sales development. A recovery of the gross margin will continue to be a key item of attention. Higher raw materials prices will be passed on to customers with continued effort. Efforts designed to increase operational efficiency will continue unabated. As of April , the number of employees was 383 (FTE). This number is expected to increase slightly over the course of the financial year, due to a higher activity level. Investments will be more or less equal to the level of depreciation in 2012/2013, and are expected to be fully financed from operating cash flow. The company s policy is aimed at remaining well within the bank covenants in the coming financial year. Due to the uncertain economic outlook and the cyclical nature of the markets in which Holland Colours operates, Holland Colours will not issue any forecasts regarding the 2012/2013 financial year. Holland Colours NV, May 25, 2012 The Management Board Rob Harmsen Jeroen Straathof Tineke Veldhuis - Hagedoorn 21

24 Corporate Governance 22 Accountability Holland Colours promotes responsible conduct in relation to society and the environment, while taking into account the interests of its various stakeholders: employees, shareholders, other capital providers and customers. The Management Board and Supervisory Board share the responsibility for giving due consideration to the interests of all those involved, focusing on the continuity of the company and the creation of shareholder value, both now and in the longer term. The internal risk management and audit systems play an important role therein. For a description of these systems, see the section on Risk Management on page 19. The Supervisory Board and the Management Board endorse the principles of Corporate Governance as established in the principles and best-practice provisions that currently apply to internationally operating publicly listed Dutch companies. In general terms, Holland Colours observes the recommendations of the Dutch Corporate Governance Code. The full version of Corporate Governance rules of Holland Colours, together with explanatory notes, can be found on the company's website. Certain recommendations in the Dutch Corporate Governance Code have not been adopted. These are: Management Board: Previously existing employment contracts of members of the Management Board, in which the term of their appointment is indefinite, will be respected. In the event of dismissal, existing terms of service and regulations are taken into account. The Dutch Corporate Governance Code states that the major elements of the contract between a director and the company must be published when the contract is concluded without delay. In derogation thereto and in accordance with the historical policy of Holland Colours, information on the new Chief Executive Officer will be published in the annual report. The contract with the current Chief Executive Officer states a term of appointment of four years (with an option of reappointment) and a severance payment which is in accordance with the recommendations of the Dutch Corporate Governance Code. The remuneration policy for the Management Board is formulated as a whole by the Supervisory Board and is further described in note 26 to the financial statements. Holland Colours does not offer any remuneration in the form of options. The provisions with respect to options are therefore not applicable. Within the framework of expatriation, a director has been granted a loan for home finance which is linked to the duration of the expatriation. Private investments need not be disclosed, but investments may not be made in competitor companies. Members of the Supervisory Board: For as long as Holland Pigments BV retains an interest of at least one third in the issued capital, it is entitled to appoint one Supervisory Board member. The General Meeting of Shareholders may revoke the binding nature of this right of appointment with a majority of at least two thirds of the votes cast, which votes must represent more than half of the issued capital. In view of the size of the Supervisory Board, no separate committees have been constituted. The duties of the remuneration, audit, selection and appointment committees are performed by the full Supervisory Board. The General Meeting of Shareholders determines the remuneration of the Supervisory Board. Proposals to change this remuneration are submitted to the General Meeting of Shareholders in order to achieve a competitive level of pay in view of the company's size. Private investments need not be disclosed, but investments may not be made in competitor companies.

25 Company Secretary: The size of Holland Colours is not such as to justify allocation of duties and appointment of a Company Secretary as formulated in the Code. Conflicts of interest: These provisions are observed and implemented in spirit, given the special position of Holland Pigments BV as investment company in which participation includes all employees of the Holland Colours Group worldwide. In line with the Dutch Corporate Governance Code, transations between Holland Pigments and the Company that are of material significance are subject to approval by the Supervisory Board. Shareholder powers: For practical reasons and because of the costs involved, the provision stipulating the possibility for shareholders to simultaneously attend meetings with investors, analysts, presentations and press conferences is not observed. All relevant information is of course immediately published on the company's website. With regard to the Dutch Corporate Governance Code, it is noted that substantial changes in the policy thereof will be submitted to the General Meeting of Shareholders. The General Meeting of Shareholders of July 2011 authorised the Management Board to acquire the company's own shares for a period of 18 months, i.e. up to January 11, 2013, other than for no consideration and subject to the approval of the Supervisory Board. The acquisition price must range between the amount equal to the nominal value of the shares and the amount equal to 110% of the share price, in which the share price will be: the highest average share price of each of the five trading days prior to the acquisition date in accordance with the Daily Official List of NYSE Euronext Amsterdam. All documents related to the implementation of the Dutch Corporate Governance Code can be found under Corporate Governance on the website Here you will find further information, including the profile, regulation and schedule of retirement by rotation for the Supervisory Board, the Articles of Association of the Company, the whistleblowers regulation, the regulation on ownership and transactions in shares and other financial instruments and the minutes of the General Meeting of Shareholders. Prevention of use of inside information In compliance with the Dutch Financial Supervision Act, Holland Colours has instituted a regulation relating to investment in the company's 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 in as far as applicable. This regulation applies to the Supervisory Board, the Management Board, Divisional and local directors and a wide circle of employees, as well as to a number of advisers. The Central Officer supervises compliance with the regulation and registration in this regard, and maintains contact with the Netherlands Authority for the Financial Markets (AFM). shareholdings of supervisory and management board members As of March 31, 2010, the Members of the Supervisory Board and the Management Board own the following shareholdings, which are held as long-term investments: 23 In Holland Colours NV: Supervisory Board 0.00 % 0.00 % Rob Harmsen 0.12 % 0.00 % Other members of the Management Board 0.00 % 0.00 % In Holland Pigments BV: Supervisory Board 1.58 % 1.35 % Rob Harmsen 0.00 % 0.00 % Other members of the Management Board % %

26 The Supervisory Board (from left to right) M.G.R. Kemper (1968) Dutch citizen. Director/owner of Flegado Group BV. Member since 2011; current term until Additional functions: None C.G. van Luijk (1949) Chairman Dutch citizen. Member since 2011; current term until Additional functions: Chairman SB of Intersafe Holding BV, Chairman SB of Pontmeyer NV, Supervisory Director of InterXion Holding NV J.D. Kleyn (1949) Dutch citizen, Lawyer at Allen & Overy, Member since 2011; current term until Additional functions: Chairman of SB of Dutch Institute Fashion and Design, Chairman of SB of U-Center, Chairman of MB of NSE NV, Supervisory Director of Transmark NV, Member of Advisory Board of EYE, Supervisory Director of Grachtenhuis NV, Member of Curatorium M&A Course VU Law Centre, Member of editorial staff of Vennootschap & Onderneming J.W. de Heer (1961) Dutch citizen. Managing Director of Victron UPS (Thailand) Co. Ltd. Member since 2010; current term until Nominated for appointment by Holland Pigments BV. Additional functions: Member of the Board of Stichting Administratiekantoor Aandelen Holland Pigments BV.

27 Report of the Supervisory Board Composition On May 10, 2011 three of the four members of the Supervisory Board, Messrs Gerardu (chairman and a member since June 2006), Van der Lof (member since July 2007) and Zegger (member since June 2005), announced that they wished to relinquish their positions. The fourth Supervisory Board member, Mr J.W. de Heer, (a member since April 2010) remains in office. The reason for these three members of the Supervisory Board wishing to step down was a difference of opinion between the major shareholder Holland Pigments BV and the members of the Supervisory Board regarding further changes to the governance structure of Holland Colours NV after the dissolution of Stichting Prioriteit Holland Colours in 2010, including changes to the employee participation structure of Holland Colours NV through Holland Pigments BV. The following persons were appointed as new members of the Supervisory Board at the shareholders' meeting of July : Mr Van Luijk (for 4 years) Mr Kemper (for 3 years) and Mr Kleyn (for 2 years) The Supervisory Board is completed by Mr J.W. de Heer (Supervisory Board member since April 2010). Meetings The Supervisory Board met six times to discuss the general course of business during the past financial year. The following permanent agenda items were discussed: market developments, social aspects relevant to the company, development of the result and balance sheet, company financing, research and development, safety, the environment and working conditions, and the implementation and improvement of the ERP system. Between the various regular meetings, the Supervisory Board consulted with the Management Board by telephone about all these important issues on several occasions. Mr Van Schaik stepped down as the company's Chief Executive Officer on November 3, Mr Harmsen was appointed as his successor at an Extraordinary General Meeting of Shareholders on January 5, A difficult year The 2011/2012 financial year was a year in which the financial crisis in Europe began to affect the real economy, especially in the market for Building & Construction, which is both important to our business and highly cyclical in nature. The company was also hit by large increases in the prices of a number of critical raw materials around the world. Passing on higher prices to customers is usually subject to delay and in some cases was difficult to achieve in view of our competitive position. This led to a decline in both the absolute and the relative margin. Sales increased by 1% to 61.2 million. Despite successful cost control, the reduced margin led to a 46% decline in the net result to 1.7 million. The company remains comfortably within the agreements it has made with the banks. Relatively high levels of inventory of critical raw materials are being maintained in anticipation of price increases and limited availability of raw materials that have been announced. A further reduction in the working capital however is and will remain a focus of attention. Innovation too has been a regular topic of discussion, as it plays an important role in the profitable growth intended for the company. While the pipeline of new products continues to fill and sales of innovative products have risen sharply, the contribution made by new products is still below target. Risk management As far as can be established as a result of its supervisory role, the Board is of the opinion that the internal risk management and control systems are adequate and effective. Given the size of Holland Colours and the implementation of the tasks of the current controllers, the Supervisory Board considers that the appointment of an internal auditor is unnecessary. The management letter prepared by the auditor each year in which the auditor gives his opinion regarding the company's administrative organisation and internal controls was discussed in the presence of the auditor. There were no items in this management letter that were qualified as high risk. Evaluation of performance The Supervisory Board met prior to each meeting with the Management Board, discussing its own performance and that of the Management Board, among other things. With regard to its own performance, the Supervisory Board concludes that it is sufficiently balanced in its composition and that it has the necessary expertise at its disposal. All Supervisory Board members attended all Board meetings. In addition to the regular meetings, frequent informal discussions took place between Supervisory Board and Management Board members, during which specific issues were raised. Allocation of duties The Supervisory Board's duties and methods are recorded in a regulation. The profile required of the Board members and a schedule of retirement have also been established. These documents can be accessed on the Holland Colours website. The profile stipulates that the Supervisory Board pursues a mixed composition in terms of gender and age. The current Supervisory Board consists of four men. The future aim is to bring the composition of the Supervisory Board in line with the recommendation of the Dutch Corporate 25

28 26 Governance Code, in the event of equal suitability of candidates. In accordance with provision III 2.2 of the Dutch Corporate Governance Code, all Supervisory Board members are independent, with the exception of Mr J.W. de Heer. Mr De Heer is also a member of the Board of Stichting Administratiekantoor Aandelen Holland Pigments (AAHP). Together with several major shareholders, Stichting AAHP holds around 75% of the shares 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 committees are performed by the full Supervisory Board. The remuneration policy for the Management Board is set by the Supervisory Board as a whole. The remuneration consists of a fixed salary and a variable payment. The variable payment for the Chief Executive Officer concerns a bonus scheme based on financial and non-financial targets. The bonus amounts to three times the monthly salary in the event that 100% of the targets are achieved, and can rise to a maximum of six times the monthly salary in the event that 150% of the targets are achieved. For the other members of the Management Board, the variable payment consists of a profit share scheme which is the same for all employees in the Group, and, depending on the ROI and net operating result, could lead to a maximum payment of one and a half times the monthly salary. There is also a bonus scheme in place for the other members of the Management Board which applies only if all employees of the Group are paid a share of the profits. The extent of the bonus is determined by the degree to which the corporate objectives are realised and is capped at two times the monthly salary. No variable payment will be made for the past financial year since none of the corporate objectives were realised. Details of the remuneration of the Management Board and Supervisory Board can be found in note 26 to the financial statements. Auditor At the General Meeting of Shareholders held on July 6, 2009, Ernst & Young Accountants LLP was appointed as the company's external auditor for a term of three years. In the years before, the financial statements of Holland Colours were audited by PricewaterhouseCoopers. Based on the experience of the last three years, it will be proposed to the shareholders that Ernst & Young should be reappointed, this time for a term of one year. Annual report and dividend proposal The company s annual report, which we now submit to you, contains the financial statements for the financial year 2011/2012. These financial statements have been audited by Ernst & Young Accountants LLP, which has issued an unqualified audit opinion that is included on page 73 of this annual report. At its meeting of May 25, 2012, the Supervisory Board discussed the financial statements as well as the financial reporting and the findings of the external auditor in the presence of the Management Board and the external auditor. Based on this discussion, we are of the opinion that this annual report meets the requirements of transparency and forms a sound basis for the Supervisory Board's duty to give account of its supervisory activities. We submit the financial statements to the General Meeting of Shareholders and recommend that they be adopted in their present form. We further request approval for the dividend proposal of 1.10 per share. We also recommend that you approve the management conducted by the Management Board and the supervision carried out by the Supervisory Board, and that you discharge the Management Board and the Supervisory Board of their respective liability. The members of the Supervisory Board have signed the financial statements and as such they have fulfilled their statutory obligation by virtue of article 2:101, paragraph 2 of the Dutch Civil Code. We would like to thank the Management Board and all the employees for their efforts and achievements. 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 25, 2012 The Supervisory Board C.G. van Luijk, Chairman J.W. de Heer M.G.R. Kemper J.D. Kleyn Group Management The Group Management is formed by the Management Board, supplemented by the Division Directors, the Research & Technology Director and the Manager of Business Processes & ICT. The position of Research & Technology Director is currently vacant. S. Kho-Pangkey Dipl.Ing. MBA (1949), Director of the Division Asia R.P. Karrenbeld (1973), Director of the Division Europe G.J. Luiten (1962), Manager Business Processes & ICT An organisation chart is provided on page 75. Further information regarding the Members of the Management Board and the Supervisory Board of Holland Colours NV is available at

29 The Management Board as specified in the Articles of Association (from left to right) A.J. Veldhuis-Hagedoorn (1953) Director of the Division Americas R. Harmsen (1957) Chief Executive Officer J.J.G. Straathof (1965) Director Finance & Control. 27

30 The Holland Colours share 28 Investor Relations Share price-sensitive information is always announced via press releases and published on the website. The realised financial results are published every six months, while an interim statement is issued twice a year, providing information on important developments and events, as well as the company's financial position. SNS Securities is Liquidity Provider Holland Colours is a small cap stock with a low free float and generally a low number of share transactions. In order to increase marketability, SNS Securities in Amsterdam has been appointed as a liquidity provider. This means that SNS Securities acts in the market as a counterparty for buy or sell orders, whereby the bid and ask prices are set within a range around the last executed price. Smaller buy and sell orders can be executed through the Liquidity Provider, which results in a more fair and orderly market. Due to its focus on small and midcap stocks, SNS Securities has frequent contact with (professional) investors in the Netherlands and abroad who hold larger positions and who wish to buy or sell. It may therefore be advisable for investors wishing to trade larger positions to contact SNS Securities. Further information on Liquidity Providing and the trading of larger blocks of shares is available on the SNS Securities website: Price development Holland Colours - Historic chart (in%) Jul Oct 2010 Apr Jul Oct 2011 Apr Jul Oct 2012 Apr Holland Colours ASCX-Index Holland Colours - Historic chart (EUR) Jul Oct 2010 Apr Jul Oct 2011 Apr Jul Oct 2012 Apr Number of outstanding shares unchanged The number of outstanding shares has remained constant during the year. Shares traded on NYSE Euronext Amsterdam 428,265 Holland Pigments BV 429,667 Registered shares 2,419 Total 860,351

31 The newest product group developed for the silicones and elastomers market is known as Holcosil HTV, a pigment preparation based on silicone gum. The positive features of this product compared to existing preparations in the market include its ease of use, its higher concentration of pigment and its composition, which allows it to be used in numerous high-quality end products. Ease of use, colouring efficiency and a wide range of applications are the result for our customers. Holcosil HTV colours silicone products in industries such as food processing, automobile and electronics production and, as shown here, insulators in energy and high voltage applications. 29

32 30 Substantial interests As of May 25, 2012, the following substantial interests (>5%) were recorded in the registers of the AFM (Netherlands 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 Financial Supervision Act. Disclosures % Date ASZ Holding BV 6.74% Janivo Beleggingen BV 5.08% OtterBrabant Beheer BV 9.08% De Uyterwaerden Beleggingen BV 6.30% Via Finis Invest BV 4.83% Holland Pigments BV 50.03% Free Float 17.94% Total % A list of shareholdings that exceed 5% can be found on the AFM website. Around 75% of shares in Holland Pigments BV are held by Stichting Administratiekantoor Aandelen Holland Pigments (AAHP) and some major shareholders, 22% is held by (former) employees and the remainder by Supervisory Board members. The directors of Holland Pigments BV are Mrs A.A. Eikelenboom-de Groot and Stichting Administratiekantoor Aandelen Holland Pigments (AAHP). The Board of Stichting AAHP consists of: J.M. de Heer, Chairman J.W. de Heer Ms S. Kho-Pangkey Mr S.H. Veldhuis Stichting AAHP endorses the importance of the employee share ownership model within Holland Colours and supports this by facilitating the internal market in Holland Pigments shares. Holland Pigments BV share certificates issued by Stichting AAHP are held by: Beheersmaatschappij s-heerenhove-heerde BV Emco Belegging Nederland BV Sperlette BV Publications Since the start of the 2011/2012 financial year, Holland Colours published the following press releases: May 10, 2011 Three members of the Supervisory Board of Holland Colours to resign May 30, 2011 Result in 2010/2011 results stronger than expected July 11, 2011 Holland Colours shareholders' meeting adopts following resolutions August 17, 2011 Lower operating and net result despite turnover increase in first quarter of 2011/2012 October 4, 2011 New CEO Holland Colours NV November 3, 2011 Lower net result with comparable turnover January 5, 2012 Rob Harmsen appointed as CEO of Holland Colours NV February 13, 2012 Lower turnover in third quarter 2011/2012 Important dates July 10, 2012 General Meeting of Shareholders at the Company's offices at 13:30 hours July 12, 2012 Ex-dividend quotation July 16, 2012 Dividend record date July 18, 2012 Dividend available for payment August 16, 2012 Trading update November 1, 2012 Publication of semi-annual figures for 2012/2013 February 7, 2013 Trading update May 29, 2013 Publication of annual figures for 2012/2013 July 11, 2013 General Meeting of Shareholders at the Company's offices at 13:30 hours

33 FINANCIAL STATE MENTS MMXI 2011 MMXII 2012

34 Contents of the Financial Statements Consolidated income statement Consolidated statement of comprehensive income Consolidated balance sheet Consolidated statement of changes in equity Consolidated cash flow statement Notes to the consolidated financial statements 1. General information 2. summary of significant accounting principles 3. Financial risk management 4. Cash flow statement 5. Segment information 6. Employee expenses 7. Other operating expenses 8. Financial income and expense 9. INCOME TAX 10. Intangible FIXED assets 11. Property, plant and equipment 12. deferred tax receivables and liabilities 13. Other long-term receivables 14. Inventory 15. Trade and other receivables 16. Cash and cash equivalents 17. Share capital 18. OTHER reserves 19. Earnings per share 20. Minority interest 21. Long-term debt 22. Employee benefit obligations 23. Derivative financial instruments 24. Trade and other payables Other disclosures 25. Liabilities not reflected in the balance sheet 26. Related parties 27. Other disclosures

35 Company income statement Company balance sheet Notes to the company financial statements 28. General information 29. Summary of the significant accounting principles 30. Participating interests 31. Intangible FIXED assets 32. Property, plant and equipment 33. Financial FIXED assets 34. Equity 35. Long-term debt 36. Employee benefit obligations 37. Derivative financial instruments 38. Employees 39. auditor s fees 40. Other disclosures 33

36 Consolidated income statement for the financial year ended March 31, 2012 In thousands of euros note April 1, 11 / March 31, 12 April 1, 10 / March 31, 11 Revenue 61,241 60,506 Cost of sales and raw materials (34,160) (31,041) Changes in finished product (142) 87 Gross operating profit 26,939 29,552 Employee expenses 6 12,509 12,946 Amortisation and impairments Depreciation and impairments 11 2,011 2,109 Other operating expenses 7 9,060 8,792 Total operating expenses 23,782 24,106 Operating result 3,157 5,446 Financial income Financial expense 8 (561) (734) Net financial expense (549) (723) Result before tax on profits 2,608 4, Tax on profits 9 (903) (1,569) Net result 1,705 3,154 Attributable to: Shareholders of the company 1,697 3,144 Minority interest ,705 3,154 Earnings per share in euros Average number of shares issued , ,351 Earnings per share attributable to shareholders (ordinary and diluted) 1,97 3,65 Notes 1 to 27 form an integral part of these consolidated financial statements.

37 Consolidated statement of comprehensive income for the financial year ended March 31, 2012 In thousands of euros note April 1, 11 / March 31, 12 April 1, 10 / March 31, 11 Net result 1,705 3,154 Other comprehensive income Net value increase on net investment hedge 2 (100) 118 Effect of deferred tax on profits (4) - (104) 118 Net value increase on cash-flow hedge 2 (161) (10) Effect of deferred tax on profits 40 2 (121) (8) Total hedge reserves 18 (225) 110 Exchange-rate differences for conversion of foreign activities (600) Minority interest 2 5 Total exchange-rate differences 794 (595) Other comprehensive income after tax on profits 569 (485) Total comprehensive income after tax on profits 2,274 2,669 Attributable to: Shareholders of the company 2,264 2,654 Minority interest ,274 2, Notes 1 to 27 form an integral part of these consolidated financial statements.

38 Consolidated balance sheet as at March 31, 2012 In thousands of euros note March 31, 2012 March 31, 2011 Non-current assets Intangible fixed assets Property, plant and equipment 11 14,567 15,742 Deferred tax assets 12 2,321 1,838 Other long-term receivables ,413 18,182 Current assets Inventory 14 9,488 8,546 Trade and other receivables 15 12,167 11,458 Income tax receivables Cash and cash equivalents 16 1,313 1,934 23,261 22,224 Total assets 40,674 40, Equity Share capital 17 1,953 1,953 Share premium reserve 1,219 1,219 Other reserves 18 (2,007) (2,553) Retained earnings 21,276 21,537 Equity attributable to shareholders of the company 22,441 22,156 Minority interest Total equity 22,485 22,190 Non-current liabilities Long-term debt 21 3,995 4,461 Employee benefit obligations 22 1,064 1,220 Deferred tax liabilities Derivative financial instruments ,448 5,876 Current liabilities Credit institutions 21 4,971 3,440 Repayment obligations for long-term debt ,195 Trade and other payables 24 6,703 7,504 Income tax liabilities Employee benefit obligations ,741 12,340 Total equity and liabilities 40,674 40,406 Notes 1 to 27 form an integral part of these consolidated financial statements.

39 Consolidated statement of changes in equity for the financial year ended March 31, 2012 In thousands of euros Share capital Share premium Reserve conversion differences Hedge reserve Reserve intangible assets Retained earnings Total Minority interest As at April 1, ,953 1,219 (2,172) (204) ,898 19, ,986 Net result for the 2010/2011 financial year Equity attributable to shareholders of the company Total equity ,144 3, ,154 Other comprehensive income - - (600) (75) (490) 5 (485) Total comprehensive income - - (600) ,069 2, ,669 Change of capital (35) (35) Dividend for 2009/ (430) (430) - (430) As at March 31, ,953 1,219 (2,772) (94) ,537 22, ,190 As at April 1, ,953 1,219 (2,772) (94) ,537 22, , Net result for the 2011/2012 financial year ,697 1, ,705 Other comprehensive income (225) (21) Total comprehensive income (225) (21) 1,718 2, ,274 Dividend for 2010/ (1,979) (1,979) - (1,979) As at March 31, ,953 1,219 (1,980) (319) ,276 22, ,485 Notes 1 to 27 form an integral part of these consolidated financial statements.

40 Consolidated cash flow statement for the financial year ended March 31, 2012 In thousands of euros note April 1, 11 / March 31, 12 April1, 10 / March 31, 11 Operating activities Operating result 3,157 5,446 Adjustments for: Amortisation of intangible fixed assets and and impairments Depreciation of property, plant and equipment and impairments 11 2,011 2,109 Changes in provisions (44) Change in value of derivative financial instruments Exchange-rate differences 451 (208) Cash flow from operating activities before changes in working capital 5,918 7,570 Changes in working capital: Change in inventory (942) (1,280) Change in receivables (709) (1,130) Change in current liabilities (801) Cash flow from operating activities 3,466 5,709 Income tax paid (1,345) (1,980) Interest received Interest paid (561) (734) Cash flow from operating activities 1,572 3,006 Investing activities Gains from the sale of property, plant and equipment Investments in intangible fixed assets 10 (115) (123) Purchase of property, plant and equipment 11 (559) (866) Cash flow from investing activities (624) (901) Cash flow from operating and investment activities 948 2,105 Financing activities Dividend paid to shareholders (1,979) (430) Proceeds from borrowings - 4,466 Redemption payments 21 (1,202) (4,327) Cash flow from financing activities (3,181) (291) Change in cash and cash equivalents (2,233) 1,814 Net foreign exchange difference 81 (35) Net cash flow (2,152) 1,779 Net cash and cash equivalents as at April 1 (1,506) (3,285) Net cash and cash equivalents as at March 31 (3,658) (1,506) Net cash flow (2,152) 1,779 Notes 1 to 27 form an integral part of these consolidated financial statements.

41 Notes to the consolidated financial statements 1. General information Holland Colours NV ( the Company ) is a public limited liability company [ Naamloze Vennootschap ] having its registered office in Apeldoorn, the Netherlands. The Company and its subsidiaries ('the Group'), manufacture, distribute and sell colour concentrates. The Holland Colours Group operates through ten of its own facilities and a network of agents and distributors. Shares of the Company are listed on NYSE Euronext, Amsterdam. The Group's financial year commences on April 1 and closes on March 31 of the following year. The Company's consolidated financial statements comprise the financial statements of the Company and of its subsidiary companies. The consolidated financial statements were prepared by the Company's Management Board, and were discussed and approved at the meeting of the Supervisory Board and released for publication on May 25, The financial statements will be presented to the General Meeting of Shareholders for adoption on July 10, In accordance with article 402 of Title 2, Book 2 of the Dutch Civil Code, it suffices for the company income statement to state the net result from group companies, and the other income and expenses after tax. The latter item represents the balance of income and expenses of Holland Colours NV. The original financial statements were prepared in the Dutch language. This document is a version translated into English. In the event of any differences between the English and the Dutch text, the latter shall prevail. 2. Summary of significant accounting principles General 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 Book 2 of the Dutch Civil Code. The consolidated financial statements are presented in thousands of euros, rounded to the nearest thousand, unless stated otherwise. The consolidated financial statements are prepared on the basis of historical cost, except for derivative financial instruments, which are stated at fair value. Where necessary, adjustments have been made to the financial statements of subsidiaries to bring their accounting principles in line with those used by the Company. In the preparation of the financial statements, the Management has made estimates and assumptions in certain areas that affect the amounts stated in the consolidated financial statements. Changes in estimates and assumptions may affect the amounts to be reported in subsequent years, and actual outcomes may differ from the estimates made. The most important estimates are stated under the relevant policies, and chiefly concern the items of tax and impairments, as well as provisions. The accounting policies as detailed below are applied consistently for all periods presented in these consolidated financial statements. Accordingly, the Group applies IAS 1 and presents all changes in equity relating to shareholders in their capacity as shareholders in the consolidated statement of changes in equity, while all changes in equity that are not related to shareholders in their capacity as shareholders are recognised in the consolidated statement of comprehensive income. The Group also applies IFRS 8 Operating Segments. The segmentation required by IFRS 8 relates to the Group's management and internal reporting structure. As of April 1, 2011 the Group applies the revised standard IAS 24R regarding to related party disclosures. The improvements as a result of the annual IFRS improvements project have also been applied. This has had no effect on the Group's capital or its result. New and future standards that will take effect after the 2011/2012 financial year are not expected to have any material effect on the financial statements for 2012/2013 or subsequent years, and these will not be applied early. Consolidation principles The Company's consolidated financial statements for the 2011/2012 financial year include 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. Subsidiary companies are consolidated from date of acquisition, which is the date on which actual control of the acquired entity is obtained; consolidation continues until the date on which actual control ceases to exist. The majority of the financial statements prepared by the subsidiary companies are for the same reporting year as that of the parent company, with application of consistent accounting policies. The exceptions are the financial statements of the entities in Mexico and China, for which the financial year is the calendar year. An adjustment is made when consolidating these data so that the period corresponding to the parent company's financial year is consolidated, based on the same consistent accounting policies. 39

42 40 The consolidated financial statements include the financial data of the following companies: capital interest in percent Holland Colours Europe BV, Netherlands 100 Holland Colours UK Ltd, United Kingdom 100 Holland Colours Canada Inc, Canada 100 Holland Colours Americas Inc, United States 100 PT Holland Colours Asia, Indonesia 100 Holland Colours Hungária Kft, Hungary 100 Holland Colours Mexicana SA de CV, Mexico 100 HCA Japan Corporation, Japan 60 Holland Colours Deutschland GmbH, Germany dormant 100 Holland Colours China Ltd, China 100 A decision was made to dispose of the entity in France, Holland Colours France Sarl, during the 2010/2011 financial year. The settlement of this took place in the 2011/2012 financial year. The disposal had no material effect on the Company's result. A decision was taken to make the entity in Germany a dormant company. Otherwise, there were no changes to the consolidation group in comparison to the 2010/2011 financial year. Regarding the participating interest in Indonesia, another party holds 1% of the legal ownership. The participating interest in Japan, HCA Japan Corporation, in which Holland Colours NV has a capital interest of 60%, is fully consolidated. The minority interest in the equity and the Group result is recognised separately. In the consolidated financial statements, all inter-company receivables, payables and deliveries as well as unrealised income and expenses as a result of internal transactions and dividends are fully eliminated. Unrealised losses are eliminated in the same way as unrealised 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 the 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 presentation currency at the rate of exchange on the transaction date. All monetary assets and liabilities expressed in foreign currency are converted at the exchange rate that applies at balance sheet date. Foreign exchange differences arising from conversion and settlement are recognised 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 applies at balance sheet date. The income statements for these Group companies are converted at the average exchange rate during the financial year. The resulting differences are recognised in unrealised results and the reserve for translation differences. On sale or termination of an activity outside the eurozone, the amount concerned is transferred from equity to the income statement as part of the gain or loss on sale or termination. The rates of the main currencies against the euro are as follows: Exchange rates used At close Average In Euro March 31 '12 March 31 ' / /2011 US dollar British pound Canadian dollar Chinese yuan Mexican peso Japanese yen Derivative financial instruments Holland Colours uses derivative financial instruments to limit interest-rate 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 expenses, see note 7. Derivatives are measured at fair value. The treatment of the profits and losses arising from these instruments depends on the item to be hedged. The fair value of derivative instruments is the estimated amount that the Group would receive or would have to pay in order to terminate the instrument on the balance sheet date, taking into account current interest and exchange rates. Hedge accounting Where specific conditions are met (IAS 39), hedge accounting can be applied. Briefly, these specific conditions state that a demonstrable one-to-one relationship must exist between the variability of the future cash flows or balance sheet positions of the hedged item and the hedging instrument, that this relationship must be documented and that the hedge must be sufficiently effective. In such a situation, the gain or loss is stated directly in the consolidated statement of comprehensive income during the term of the risk and the hedge instrument. Cash flow hedge accounting is applied to interest-rate swaps. When hedge accounting is applied, a cash flow hedge reserve is formed in equity. The deferred tax on profits on the balance is deducted from the reserve. If the hedge instrument expires or is sold, terminated or exercised, without replacement, or if its designation as a hedge is revoked, any accumulated gain or loss initially included in the unrealised results will remain in the unrealised results of the hedge reserve until the expected transaction or agreed commitment takes place. At that time, the hedged transaction is recognised in the income statement and the transfer from equity to the income statement is effected. Cash flow hedge accounting is not applied to currency contracts. Gains or losses on these hedge instruments are therefore presented in the income statement under Other operating expenses. Hedging a net investment Hedges of net investments in foreign operations are treated in a similar way to cash flow hedges. A gain or a loss on the effective portion of the hedging instrument is recognised in the statement of other comprehensive income; the gain or loss on the ineffective portion is recognised immediately in the income statement under Other operating expenses. The Group utilises a loan to hedge the currency risks of investments in its foreign subsidiaries. See also note 23: derivative financial instruments.

43 Gains and losses accumulated in the statement of comprehensive income are recognised in the income statement at the time of the full or partial closure or sale of the foreign operation. The Management assesses the standpoints taken in the tax returns with regard to situations in which the applicable tax regulations can be variously interpreted from time to time. Provisions are formed if this is considered to be necessary. Revenue recognition Revenue is recognised as the difference between the revenue of the goods and services provided and the costs and other charges for the financial year. Results on transactions are accounted for at the time of delivery. The following policies are used: Revenue Revenue is defined as the income generated by the supply of goods to third parties, after deduction of discounts and value added taxes and elimination of all intra-group transactions. Sales of goods are recognised when products have been delivered to the customer, the customer has accepted the products, and collection of the related receivables is reasonably certain. Revenue from the supply of goods is only recognised if the main risks and rewards of ownership of the goods have been transferred to the buyer. No revenues are recognised if significant uncertainties remain with regard to the collection of the payment due, the associated costs or the possible return of goods. Cost of sales and raw materials Cost of sales represents the direct and indirect expenses attributable to sales. It also includes changes in the provision for obsolete inventory. Lease payments Operational leases Payments made under operational leases are charged to the period to which they relate. Subsidies Government subsidies to compensate for expenses incurred by the Group are systematically recognised as income in the income statement, if it is reasonably certain that the subsidy will be received and that all the conditions attached to the subsidy will be met. If the subsidy relates to an expense item, it is recognised as income over the period necessary in order to allocate this to the associated expenses which it is intended to compensate. Earnings per share The earnings 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. Principles for the valuation of assets and liabilities General The valuation methods are principally based on valuation of the assets and liabilities at historical cost, with the exception of (derivative) financial instruments. Offsetting financial instruments Financial assets and liabilities are only recognised on a net basis in the consolidated balance sheet if an actual legally enforceable right exists to net off the amounts recognised and the intention is to settle these amounts simultaneously or on a net basis. 41 Financial leases Leases of property, plant and equipment where the Group has virtually all the risks and rewards associated with the ownership of an asset are classified as financial leases. Financial leases are capitalised at the commencement of the lease at the fair value of the leased assets, or at the cash value of the minimum lease payments if lower. Each lease payment is split into repayments and financing expenses so as to achieve a constant interest rate on the balance of the liability outstanding. The corresponding lease obligations, net of financing expenses, are included under non-current liabilities. The interest element of the lease costs is charged to the income statement over the lease period. Intangible fixed assets Costs of development activities are capitalised if the product or process is technically and commercially feasible and the Group has sufficient resources to complete its development. The capitalised costs include direct labour 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 time that they are incurred. Capitalised development costs are valued at cost, less accumulated amortisation and impairments, if applicable. Development costs are amortised over their estimated useful life, which is five years. Financial income and expense Financial income and expense includes the interest charges on borrowings and interest charges on financial lease payments. Financial income and expense is recognised in the income statement using the effective interest method. Interest income is recognised in the income statement under financial income. Current tax on profits Current tax receivables and liabilities for the current period are measured at the amount expected to be reclaimed from or paid to the tax authorities. The amount of tax is calculated on the basis of the tax rates and tax legislation established by law on the reporting date as applying in the countries in which the Group operates and generates income subject to taxation. Current tax on profits relating to items recognised directly in equity is recognised in equity and not in the income statement. Intangible fixed assets are assessed for impairment if there are indications that an intangible asset might be subject to a loss in value. The amortisation period and method for an intangible asset with a measurable useful life is assessed, at the very least, at the end of each financial year. Changes in the expected useful life of an asset or in its expected pattern of future economic benefits are accounted for by changing the amortisation period or method and are treated as changes in accounting estimate. 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 between three and five years. Property, plant and equipment Property, plant and equipment is valued at historical cost, mean ing the price paid for obtaining or producing the asset, less ac-

44 cumulated depreciation and, if applicable, impairments. The costs of assets produced in-house comprise material costs, direct labour costs and an appropriate portion of the directly attributable overhead costs. Financing expenses are added to the costs of property, plant and equipment if these meet the conditions for recognition in the balance sheet. If significant parts of property, plant and equipment have to be replaced at regular intervals, the Group recognises these as separate assets with their own useful life and depreciation method. All other repair and maintenance costs are recognised in the income statement at the time they occur. Property, plant and equipment is assessed for impairment if there are indications that an item may have suffered a loss in value. The depreciation period and method for property, plant and equipment with a measurable useful life is assessed, at the very least, at the end of each financial year. Changes in the expected useful life of an asset or in its expected pattern of future economic benefits are accounted for by changing the depreciation period or method and are treated as changes in accounting estimate. Financial fixed assets Loans and receivables for which the maturity date is more than 12 months after the balance sheet date are presented as financial assets and on initial recognition are measured at fair value less directly attributable transaction costs. After initial recognition, interest-bearing loans are valued at amortised cost using the effective interest method, less any impairment. Gains or losses arising from changes in the amortised cost are accounted for in the income statement under financial expense. Leased assets Lease agreements in which the Group assumes all risks and benefits of ownership are classified as financial leases. Property, plant and equipment acquired by means of financial leases is measured at fair value or the cash value of the minimum lease payments at the inception of the lease, whichever is lower, less accumulated depreciation and, when applicable, impairments. Lease payments are stated as described under determination of the result. 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 items of property, plant and equipment. Depreciation is not applied to land. The estimated useful life is as follows: Buildings Fixtures and installations in buildings Plant and equipment Other fixed assets years 10 years 10 years 3 5 years 42 The remaining useful life, residual value and depreciation method are assessed on an annual basis. Impairment of fixed assets Fixed assets are assessed for indications of impairment on an annual basis. If there are such indications, the realisable value of the asset concerned is estimated. The realisable value is either the directly realisable value or the value in use to the company. An asset is written down if its realisable value is less than its carrying amount. An impairment loss is reversed if there is a change to the estimates used to determine the realisable value. An impairment loss is only reversed to the extent that the carrying amount of the asset does not exceed the carrying amount that would have been determined after deduction of depreciation if no impairment had been recognised. Deferred income tax A receivable is recognised or a provision is formed for deferred tax differences using the balance sheet method for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the carrying amount of these items for tax purposes. The carrying amount of deferred tax assets is assessed at reporting date and reduced, insofar as it is unlikely that sufficient taxable profit will be available against which these temporary differences can be fully or partially deducted. Deferred tax assets not included are reassessed at reporting date and included insofar as it is likely that future taxable profits will be available against which the deferred asset can be deducted. Deferred tax assets and liabilities are valued at the tax rates expected to apply in the period in which the asset is realised or the liability is settled, at the tax rates (and tax law) in force at the time the reporting process is definitively completed.

45 Deferred tax relating to items not included in the income statement are not recognised under profit or loss. Depending on the underlying transaction, deferred tax is recognised either in other comprehensive income or directly in equity. The Group has also formed a provision for other long-term obligations regarding employee benefits, including jubilee payments, which employees have earned for their service in the current and previous reporting periods. Deferred income tax assets and liabilities are netted off where it is legally enforceable to net off current income tax assets with current income tax liabilities and deferred taxes pertaining to the same taxable entity and the same tax authority. There is some uncertainty about the interpretation of complex tax regulations and the amount and timing of future taxable profits. Given the huge diversity of international business relations, discrepancies between the assumptions made and the actual outcomes, or future changes in such assumptions, could lead to future changes in the tax payments and returns already recognised. Inventory Inventory is valued at the average purchase price, or at market value if lower. Finished product is valued at production cost including costs of raw materials and a surcharge for direct and indirect production costs based on normal capacity, or at market value if lower. The direct market value comprises the estimated sales price in the normal course of business, less the estimated costs of completion and settlement of the sale. Trade and other receivables Trade and other receivables are recognised initially at fair value and subsequently at amortised cost. A provision for default is established when it is foreseen that a receivable cannot be collected in full. Cash and cash equivalents Cash and cash equivalents comprises cash balances and deposits that are available on call. Share capital Share capital is classified as equity. Dividend Dividend payable to shareholders is recognised as a liability to shareholders once the proposed profit appropriation has been 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 operated by the subsidiary companies all qualify as defined contribution plans. These involve payment of predetermined premiums to an insurance company. Under these pension plans Holland Colours has no legal or actual obligation to pay additional premiums if the insurance company has insufficient means to fund current or future pensions. The obligations are calculated using actuarial principles and based on a discount rate of 3.2% (2010/ %) in accordance with the C667 Bloomberg index of high-value corporatebonds, and are recognised under non-current liabilities. The expenses are reported in the income statement under employee expenses. All assumptions are reassessed at balance-sheet date. Provisions A provision is stated in the balance sheet when there is a legally enforceable or actual 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 this obligation. Interest-bearing loans Drawn down interest-bearing loans are recognised initially at fair value, less attributable transaction costs. Subsequent to initial recognition, interest-bearing loans are valued at amortised cost, whereby a difference between the cost and the repayment value is recognised in the income statement on the basis of the effective interest method over the term of the loan. Trade and other payables Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost. Determination of fair value For a number of accounting policies and the information provided by the Group, the fair value of both financial and non-financial assets and liabilities has to be determined. Further information is provided on the principles used for the determination of fair value in the note relating to the asset or liability in question for measurement and informative purposes. Interest-bearing receivables Interest-bearing receivables at fixed and variable interest rates are assessed by the Group on the basis of factors such as the applicable interest rate and the borrower's individual creditworthiness. A provision is formed for losses expected on these receivables on the basis of this assessment if this is considered necessary. As at March 31, 2012, the carrying amount of these receivables did not vary materially from their fair value. Trade and other receivables The fair value of trade debtors and other receivables is estimated as the cash value of the future cash flows based on market interest rates as at the reporting date. This fair value is determined for informative purposes. 43 Other employee benefits As a consequence of the termination of the early retirement plan (including the transitional arrangement) for the employees in the Netherlands, the originally agreed conditional financing of past service years was converted into an annual payment in the same amount, which is also conditional. The chief conditions for this payment are that an employee must still be in the Company's service at the time of the annual payment and that the Group's financial results are judged by the Management Board as being sufficient to cover this payment. The Group has formed a provision for this future liability, which will end in September 2035.

46 3. Financial risk management As part of the normal conduct of its business, the Group is exposed to currency, credit, liquidity, interest-rate and translation risks. In terms of risk management policy, it is recognised that the financial markets are unpredictable and that the aim should be to limit the potential negative effects of this on the Group's financial results as far as possible. The risk arising from fluctuations in foreign currency rates and interest rates is hedged using derivative financial instruments. The Management Board determines principles for overall risk management and provides policies for specific areas, such as currency risk, credit risk, liquidity risk, interest-rate risk and translation risk, and the use of derivative and non-derivative financial instruments. These principles or methods may vary per group company as a result of differing local market circumstances. 44 CURRENCY RISK The Group operates internationally and is exposed to currency risks, primarily in connection with the US dollar and the British pound. Currency risks arise from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. Currency 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 whose equity is exposed to currency translation 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 US and European interest rates, will influence the consolidated result and capital. A general increase in the value of the euro versus the US dollar by 10% would have had a negative effect on the profit before income tax in 2011/2012 of 260 (2010/2011: negative 242) as a result of movements in the value of the financial assets and liabilities. The net equity would have been impacted by minus 1,050 (2010/2011: 1,040 lower) with all other variables remaining unchanged. On March 31, 2012, if the British pound had weakened against the euro by 10%, also with all other variables unchanged, there would have been a negative effect on net profit of 195 (2010/2011: 191 lower). The negative effect on equity would have been 218 (2010/2011: 234 lower). The exchange rate differences recognised in the income statement under note 7: Other operating expenses in 2011/2012 came to a negative 137 (2010/2011: positive 11). In relative terms, the various foreign currencies affected the Group s revenue and expenses as follows: Sales Expenses in percent 2011/ / / /2011 Euro 50% 51% 57% 57% US dollar 37% 33% 30% 33% British pound 4% 5% 1% 3% Other 9% 11% 12% 7% Total 100% 100% 100% 100%

47 CREDIT RISK Credit risk is the risk of financial loss by the Group in the event a customer or counterparty to a financial instrument fails to meet their contractual obligations. Credit risk mainly arises from receivables from customers. Holland Colours follows an active policy to minimise credit risk. This policy includes strict internal guidelines regarding overdue payments, the use of sales information systems, the consultation of external sources and, where 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 risk. No credit risk insurance has been effected. The total carrying amount of the financial assets, 13,668 (March 31, 2011: 13,570), indicates the maximum exposure to credit risk. LIQUIDITY RISK Liquidity risk is the risk that Holland Colours is unable to meet its obligations when they fall due. Holland Colours policy with regard to liquidity risk is to ensure to the best of its ability that sufficient committed credit facilities are available to meet its payment obligations on time, in both normal and exceptional situations. The bank agreements and collateral provided in relation to the Group's financing agreement have not been changed since March 31, The most important ratio in the bank agreement is the ratio between debts to credit providers and the 12-month rolling earnings before interest, tax, depreciation and amortisation, known as the Total Debt / EBITDA ratio. This ratio may not exceed 3.0 at any time. Holland Colours complied with this agreement at all times during the 2011/2012 financial year. At the end of the 2011/2012 financial year this ratio stood at 1.8. The other agreements with the banks concern the Tangible Net Worth ratio, which must be at least 40%, and the Debt Service Cover ratio, which must be higher than or equal to 1.0. Holland Colours also complied with these financial covenants in the 2011/2012 financial year. On March 31, 2012 these ratios stood at 52.1% and 1.4 respectively. As at balance sheet date, the Group had access to credit facilities in an amount of 8,174 (March 31, 2011: 7,690). These commitments are provided by various international and local banks and have no expiry date. At balance sheet date, 4,971 (March 31, 2011: 3,440) of the credit facilities was drawn down. The interest margin depends on the Total Debt / EBITDA ratio. The contractual maturity of the financial liabilities as at March 31, including expected interest payments, can be specified as follows: 2011/2012 Carrying amount Contractual cash flow < 1 year 1-2 years 2-5 years > 5 years 45 Financial liabilities excl. derivatives Long-term debt 4,593 5, , Credit institutions 4,971 4,971 4, Trade and other payables 6,703 6,703 6, Total 16,267 17,266 12, , /2011 Carrying amount Contractual cash flow < 1 year 1-2 years 2-5 years > 5 years Financial liabilities excl, derivatives Long-term debt 5,656 6,806 1, ,261 1,253 Credit institutions 3,440 3,440 3, Trade and other payables 7,504 7,504 7, Total 16,600 17,750 12, ,261 1,253 On the basis of the carrying amounts stated in the financial statements, 13.0% of the Group's long-term debts will mature within one year as at March 31, 2012 (March 31, 2011: 21.1%). On the basis of the current situation, the Management assesses the risk that Holland Colours will not be able to meet its liabilities as low. INTEREST-RATE RISK Interest-rate risk is the risk that the fair value of future cash flows of a financial instrument will change as a result of movements in market interest rates. The risk incurred by the Group as a result of fluctuations in market interest rates mainly concerns its variable interest-rate credit facilities. The Group's interest-rate risk arises mainly from non-current borrowings and debts to credit institutions, as the Group has no significant interest-bearing assets. It is the Group's policy to hold the majority of its loans at fixed rates of interest. The Group does so by using variable-to-fixed interest-rate swaps for its long-term loans.

48 At balance-sheet date, the following interest-rate instruments were outstanding: Interest-rate swap to end of August 2015 Interest-rate swap to end of August 2020 USD 2,500 received variable: payment 4.09% fixed EUR 2,313 received variable: payment 3.14% fixed At March 31, 2012, if the euro interest rate had been 100 basis points higher, with all other variables constant, the net result would have been 46 lower (2010/2011: 49 lower), mainly due to higher interest expense on variable-rate loans. The negative effect on equity would have been 35 (2010/2011: 37 lower). The assumed change in basis points of the interest-rate sensitivity analysis is based on currently observable market conditions, which are showing significantly higher volatility than in previous years. Fair value of financial instruments The fair value and book value of financial assets and liabilities included in the balance sheet are as follows: March 31, 2012 March 31, 2011 Carrying amount Fair value Carrying amount Fair value Assets measured at amortised cost Trade and other receivables 12,167 12,167 11,458 11,458 Cash and cash equivalents 1,313 1,313 1,934 1,934 13,480 13,480 13,392 13,392 Liabilities measured at fair value Interest-rate swaps for which hedge accounting is applied (373) (373) (186) (186) Liabilities measured at amortised cost Bank loans (4,593) (4,840) (5,022) (5,007) Financial lease obligations - - (634) (625) Credit institutions (4,971) (4,971) (3,440) (3,440) Trade and other payables (6,703) (6,703) (7,504) (7,504) (16,267) (16,514) (16,600) (16,576) 46 TRANSLATION RISK The translation risk relating to the result of operating companies outside the eurozone is, where possible, set off against sales of operating companies outside the eurozone in euros. 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 to prevent cost increases as far as possible. No forward contracts for raw materials were concluded in 2011/2012. CAPITAL MANAGEMENT The capital comprises issued Company shares and equity attributable to holders of equity instruments of the parent company. The chief aim of capital management for the Group is to retain the high level of creditworthiness and healthy solvency levels in support of the Group's operations and to maximise shareholder value. Net asset value Due to the significant difference between the market price of Holland Colours NV shares at balance sheet date and the net asset value per share, the Management has carried out a measurement calculation on the basis of IAS 36 (Impairment of assets). The measurement based on the present value of future cash flows shows that the present value of the Group's operating assets and liabilities is higher than the carrying amount. 4. 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 based on averages. A distinction is made in the cash flow statement between cash flows from operating, investing and financing activities.

49 5. Segment information The Group is divided into geographical segments for management purposes. The segment information in the financial statements is therefore presented on the basis of this division. The Management monitors the operating results of the geographic segments to facilitate the decision-making process in relation to the allocation of resources and the evaluation of results. The segment results are assessed on the basis of the operating result, which is determined in the same way as the operating result in the consolidated financial statements. The financing of the Group, including finance income and expense and income tax, is managed at Group level and is not allocated to the operating segments. Current tax on profits, deferred tax on profits and certain financial assets and liabilities are also not allocated to the segments since these items are managed at Group level. Internal settlement prices between the operating segments occurs on a commercial basis and similarly to transactions with third parties. Segments 2011/2012 Europe North America Asia Other Adjustments and eliminations Sales 33,436 18,660 9, ,241 Intersegmental transactions Sales including intersegmental transactions 34,062 18,812 9, ,023 Depreciation costs and amortisation 1, ,213 Operating result (229) 1,575 1,803 (103) 111 3,157 Net financing expense (549) (549) Tax (903) (903) Net result ,705 Assets 18,520 11,435 6,540 25,066 (20,887) 40,674 Liabilities 11,534 2,530 1,816 3,420 (1,111) 18,189 Total investments Average number of employees (in FTE) Total 47 Segments 2010/2011 North Adjustments and Europe America Asia Other eliminations Total Sales 33,743 19,071 7,704 (12) - 60,506 Intersegmental transactions ,110 Sales including intersegmental transactions 34,356 19,568 7,704 (12) - 61,616 Depreciation costs and amortisation 1, ,368 Operating result 1,169 2,474 1, ,446 Net financing expense (723) (723) Tax (1,569) (1,569) Net result ,154 Assets 20,010 11,423 5,117 23,927 (20,071) 40,406 Liabilities 10,330 2,891 1,331 4,611 (947) 18,216 Total investments Average number of employees (in FTE) Sales in the Netherlands amounted to 10% (2010/2011: 9%) of total revenue. Sales in the USA amounted to 20% (2010/2011: 21%) of total revenue. The group companies in the identified segments are to a limited extent dependent on certain large customers.

50 6. Employee expenses The total amount of employee expenses can be specified as follows: April 1, 2011 / March 31, 2012 April 1, 2010 / March 31, 2011 Wages and salaries 10,220 10,852 Social security 1,542 1,440 Pension costs Employee expenses 12,509 12,946 The item wages and salaries does not include a provision for the Group's profit-sharing scheme (2010/2011: 958) because the Group's result in 2011/2012 was not sufficient to generate a payment. The profit-sharing scheme is the same for all employees in the Group and payments depend on the Group's ROI and the operating result of the Division in which the individual employee works. The pension costs concern defined contribution plans. The remuneration of the Management Board and the Supervisory Board is shown in note 26: Related parties. The item wages and salaries in the 2011/2012 financial year includes recognition of 89 for government subsidies (2010/2011: 102). A total of 132 of the employee expenses is capitalised (2010/2011: 114), see also notes 10 and 11. In the 2011/2012 financial year, the average number of employees was 382 FTE (2010/2011: 383). 7. Other operating expenses The exchange-rate differences recognised in the income statement under other operating costs came to 137 negative in 2011/2012 (2010/2011: positive 11) Financial income and expense April 1, 2011 / March 31, 2012 April 1, 2010 / March 31, 2011 Interest income Interest expense (561) (724) Other finance costs - (10) Net financing expense (549) (723) The other financing costs in 2010/2011 relate to the fees and costs paid for extending the financing in that year. Interest expense includes a sum of 2 (2010/2011: 3) in relation to ineffective cash flow hedges.

51 9. income tax The main components of the tax burden in the 2011/2012 and 2010/2011 financial years are as follows: April 1, 2011 / March 31, 2012 April 1, 2010 / March 31, 2011 Consolidated income statement Income tax due this year Current tax burden 1,256 1,472 Other taxes Deferred tax In relation to the existence and reversal of temporary differences (440) 52 Income tax recognised in the consolidated income statement 903 1,569 Consolidated statement of other comprehensive income Deferred tax on items recognised directly in equity during the financial year: Net loss from revaluation of cash flow hedges (40) (2) Net value decrease on net investment hedge 4 - Income tax charged directly to other comprehensive income (36) (2) The corporate income tax payable is computed on the result before tax, taking account of exempted profit items. The difference between the tax calculated in this way and the tax payable in the short term is reflected in the receivable or provision for deferred income tax. Adjustment to applicable rate of tax on profits April 1, 2011 / March 31, 2012 April 1, 2010 / March 31, 2011 Result before tax on profits 2,608 4,723 At the rate legally applying in the Netherlands of 25% 25.0% % 1,200 (2010/2011: 25,4%) Effect of different tax rates in countries in which the Group operates 8.1% % 303 Adjustment of tax burden in previous years (2.6%) (67) 1.6% 75 Expenses not tax-deductible 0.8% 22 (0.3)% (15) Other differences 3.3% % 6 49 Tax burden in the income statement 34.6% % 1,569 The increase in the weighted average tax rate from 33.2% to 34.6% is mainly due to changes of the share of the various countries in the profit before tax. A higher proportion of the profit was realised in countries with a relatively higher tax rate in 2011/2012 in comparison to 2010/2011. The other taxes item of 87 (2010/2011: 45) relates to local withholding tax on the dividend distributed by the operating companies in Indonesia and Canada to the Company.

52 10. Intangible fixed assets Development costs Other Total Situation at April 1, 2010 Initial cost 909 1,597 2,506 Cumulative amortisation (588) (1,356) (1,944) Carrying amount Movements in balance sheet value Investments Other movements (26) - (26) Carrying amount of disposals Amortisation (89) (170) (259) Exchange-rate differences - (2) (2) Balance (8) (130) (138) Situation at March 31, 2011 Initial cost 990 1,637 2,627 Cumulative amortisation (677) (1,526) (2,203) Carrying amount Movements in balance sheet value Investments Carrying amount of disposals Impairments (42) - (42) Amortisation (94) (66) (160) Exchange-rate differences Balance (21) (66) (87) 50 Situation at March 31, 2012 Initial cost 1,105 1,637 2,742 Cumulative amortisation (813) (1,592) (2,405) Carrying amount The Company's total expenses for research and development were 1,009 in the financial year (2010/2011: 911). 115 of this amount is capitalised (2010/2011: 107), while the rest is included under employee expenses, depreciation, amortisation and other operating expenses. Research and development activities are also carried out by the Divisions. The costs of these activities are recognised in the income statements at local level. The total costs of R&D incurred by the Divisions came to 179 in 2011/2012 (2010/2011: 183). The amortisation costs and impairments amounting to 202 (2010/2011: 259) are recognised under amortisation in the consolidated income statement. A write-down of 42 was made in the 2011/2012 financial year in relation to impairment of capitalised development costs. No impairments occurred in the 2010/2011 financial year. 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 does not exceed five years.

53 11. Property, plant and equipment Buildings and land Machinery and equipment Other capital assets Assets under construction Total Situation at April 1, 2010 Initial cost 19,907 21,042 5, ,444 Cumulative depreciation (8,541) (15,742) (4,843) - (29,126) Carrying amount 11,366 5, ,318 Movements in balance sheet value Investments (9) 840 Other movements Carrying amount of disposals - (77) (14) (1) (92) Impairments Depreciation (683) (1,174) (252) - (2,109) Exchange-rate differences (183) (45) (6) (7) (241) Balance (792) (680) (87) (17) (1,576) Situation at March 31, 2011 Initial cost 19,668 21,293 5, ,246 Cumulative depreciation (9,094) (16,673) (4,737) - (30,504) Carrying amount 10,574 4, ,742 Movements in balance sheet value Investments (25) 559 Carrying amount of disposals (7) (43) - - (50) Impairments (23) (23) Depreciation (666) (1,098) (224) - (1,988) Exchange-rate differences Balance (337) (735) (82) (21) (1,175) Situation at March 31, 2012 Initial cost 20,052 21,648 5, ,978 Cumulative depreciation (9,815) (17,763) (4,833) - (32,411) Carrying amount 10,237 3, , Depreciation is applied to buildings on a straight-line basis over a period of a maximum of 40 years; plant and equipment and other assets over a maximum of 10 years; and fixtures, computers and office furniture and equipment over a maximum of 5 years. The investments item includes an amount of 16 (2010/2011: 6) in capitalised employee expenses. A write-down of 23 was made in the 2011/2012 financial year in relation to impairment of installations at the head office of Holland Colours. No impairments occurred in the 2010/2011 financial year. A financial lease agreement has been in force regarding the head office of Holland Colours that expired in November The contract included an option to purchase ( 546), which Holland Colours decided to exercise. This has not led to any change in the measurement and classification of the head office. The Group has provided collateral in an amount of up to 10,169 (2010/2010: 10,563) in the form of mortgage rights on buildings in the Netherlands, Hungary, the United States and Indonesia.

54 12. 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, 2012 March 31, 2011 Assets Liabilities Assets Liabilities Property, plant and equipment Financial fixed assets Inventory Other receivables (1) Employee benefits (5) Other liabilities Set-off losses 1, Borrowings and long-term liabilities , , Balance of receivables and liabilities (20) (20) (15) (15) Net deferred tax assets / liabilities 2, ,838 9 Deferred income tax resulting from temporary differences between the fiscal and commercial value of assets and liabilities is accounted for at the nominal tax rate applying in the country concerned. Realisation of the deferred tax receivables depends on the future taxable profits. Based on projections of the estimated taxable profit of the relevant parts of the Group, it is considered likely that sufficient taxable profit will be generated in future for the realisation of these deferred tax receivables. These projections are partly based on approved estimates. Part of these estimates concern the changes to the business model in Europe implemented in the 2010/2011 financial year, which are improving profitability in the Netherlands. The results expected for the Dutch part of the company in the coming years are sufficient for application of the deductible losses well before the end of the period in which deduction against tax is permitted. The first deductible losses expires after the 2015/2016 financial year. 52 Change in net deferred tax April 1, 2011 / March 31, 2012 April 1, 2010 / March 31, 2011 Opening balance 1,829 1,877 Recognised in profit or loss 440 (50) Recognised in other comprehensive income 36 2 Deferred tax receivables / liabilities 2,305 1,829 As at March 31, 2012 no deferred tax receivable has been recognised for an amount of 26 (March 31, 2011: 58) in deductible losses because at this point in time it is not likely that a future taxable profit will be generated against which the Group can offset it. On March 31, 2012 the deferred tax liability for tax that may be due on the undistributed profits of the subsidiaries in Canada, China and Indonesia amounted to 336 (March 31, 2011: 272). No deferred tax liability has been recognised for this. 13. Other long-term receivables The other long-term receivables includes a loan granted to Mrs Veldhuis in relation to her expatriation. This loan is included at amortised cost (see also note 26) Related parties.

55 14. Inventory March 31, 2012 March 31, 2011 Raw materials 5,172 3,965 Finished goods 4,316 4,581 Inventory 9,488 8,546 The income statement includes an amount of 31,547 (2010/2011: 28,653) under the cost of sales and raw materials for use of inventory. The inventory held by the facilities in the Netherlands and Hungary in an amount of 3,905 (March 31, 2011: 3,981) serves as security for the obligations arising from the finance agreements concluded with the banks. At March 31, 2012, the provision for obsolete inventory amounted to 923 (March 31, 2011: 725). Movements in the provision for obsolete inventory were as follows: April 1, 2011 / March 31, 2012 April 1, 2010 / March 31, 2011 Opening balance (725) (913) Plus: Additions to the provision (373) (137) Less: Write-off charged to the provision Exchange-rate differences (22) 5 Closing balance (923) (725) 15. Trade and other receivables March 31, 2012 March 31, Trade debtors 10,468 10,156 Receivables regarding other taxes Other receivables and prepaid items 1,608 1,141 Trade and other receivables 12,167 11,458 The specification of trade debtor items by age is as follows: March 31, 2012 March 31, 2011 Not yet due 8,654 8, days due 1,420 1, days due Due 61 days or more Provisions (324) (152) Total 10,468 10,156

56 Trade debtors by currency: March 31, 2012 March 31, 2011 Euro 5,367 5,969 British pound US dollar 3,965 3,063 Other currencies 1, Provision (324) (152) Total 10,468 10,156 Trade and other receivables with a term to maturity of less than one year are recognised initially at fair value and subsequently at amortised cost. A provision for default is established when it is foreseen that a receivable cannot be collected in full. Additions to the provision for default are included in the income statement under other operating expenses. Movements in the provision for default were as follows: April 1, 2011 / March 31, 2012 April 1, 2010 / March 31, 2011 Opening balance (152) (167) Plus: Additions to the provision (206) (31) Less: Write-off of trade debtors Exchange-rate differences (5) 2 Closing balance (324) (152) 54 An additional provision was formed during the financial year for a number of trade debtors in countries within the eurozone for which the level of risk had increased as a result of the euro crisis. The trade debtors of the facilities in the Netherlands and Hungary in an amount of 5,838 (March 31, 2011: 6,212) serves as security for the obligations arising from the finance agreements concluded with the banks. 16. Cash and cash equivalents The cash and cash equivalents are freely available. The credit risk on cash and cash equivalents is limited, since the counterparties are generally banks with high credit ratings as assigned by international credit rating agencies. 17. Share capital Issued share capital The nominal authorised share capital of Holland Colours NV is 6,810 divided into 3,000,000 ordinary shares with a face value of 2.27, of which 860,351 ordinary shares are issued and fully paid up. The total issued share capital is 1,953. As was the case in the 2010/2011 financial year, there were no changes to the issued capital in the 2011/2012 financial year. Share premium reserve The share premium reserve of 1,219 is available for distribution to shareholders and did not change with respect to the previous financial year.

57 18. other reserves Reserve Hedge Reserve Total translation differences reserve intangible assets Situation at April 1, 2010 (2,172) (204) 238 (2,138) Cash flow hedge, net of tax Currency translation differences (600) - - (600) Added to (withdrawn from) free reserves Situation at March 31, 2011 (2,772) (94) 313 (2,553) Cash flow hedge, net of tax - (225) - (225) Currency translation differences Added to (withdrawn from) free reserves - - (21) (21) Situation at March 31, 2012 (1,980) (319) 292 (2,007) Currency translation reserve The currency translation reserve comprises all exchange-rate differences created by the translation of the financial statements of associate companies with a functional currency other than the euro. Revaluations of this translation risk are directly debited or credited to equity via other comprehensive income. The generation of cumulative differences was initiated on April 1, 2004, in accordance with the exception allowed in IFRS 1. Hedge reserve Holland Colours applies hedge accounting to its interest-rate contracts and the net investment hedge. The hedge reserve comprises 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. These are included in other comprehensive income, until the net investment is disposed of. At that time, the differences are recognised in the income statement. The hedge reserve is also reduced by the inclusion of a deferred tax item. Reserve for intangible assets A statutory reserve for development costs is formed in the separate financial statements. Formation of this reserve is not specifically required under IFRS. The reserve is therefore shown in equity via other comprehensive income to maintain concurrence with the classification of equity in the separate financial statements. 55 The above-mentioned reserves may not be distributed freely to shareholders. Negative amounts reduce the amount available for distribution and positive amounts are non-distributable. 19. Earnings per share Earnings per share in the 2011/2012 financial year came to 1.97 (2010/ ). The calculation of the earnings per share at March 31, 2012 is based on a profit attributable to shareholders of 1,697 (2010/2011: 3,144), and an average number of shares issued in the 2011/2012 financial year of 860,351. The total number of issued shares did not change compared with March 31, 2011, so there has been no dilution. 20. Minority interest This item concerns the minority interest of 40% in the net asset value of HCA Japan Corporation at balance sheet date.

58 21. Long-term debt The analysis of the long-term debt is as follows: March 31, 2012 March 31, 2011 Non-current Bank loans 3,995 4,461 Financial lease obligations - - Total non-current 3,995 4,461 Current Bank balances 4,971 3,440 Repayment obligations on bank loans Financial lease obligations Total current 5,569 4,635 Total borrowings and long-term liabilities 9,564 9,096 As at balance sheet date, the Group had access to credit facilities in an amount of 8,174 (March 31, 2011: 7,690). These commitments are provided by various international and local banks and have no expiry date. At balance sheet date, 4,971 (March 31, 2011: 3,440) of the credit facilities was drawn down. See also notes 11, 14 and 15. The total repayments by the Group in 2011/2012 amounted to 1,202 (2010/2011: 4,327). Holland Colours concluded a new finance agreement in July 2010, as a result of which a number of loans were redeemed early during the 2010/2011 financial year. The bank agreements and collateral provided in relation to the Group's financing agreement have not changed since March 31, The most important ratio in the bank agreement is the ratio between debts to credit providers and the 12-month rolling earnings before interest, tax, depreciation and amortisation, known as the Total Debt / EBITDA ratio. This ratio may not exceed 3.0 at any time. Holland Colours complied with this agreement at all times during the 2011/2012 financial year. At the end of the 2011/2012 financial year this ratio stood at 1.8. The other agreements with the banks concern the Tangible Net Worth ratio, which must be at least 40%, and the Debt Service Cover ratio, which must be higher than or equal to 1.0. Holland Colours also complied with these financial covenants in the 2011/2012 financial year. On March 31, 2012 these ratios stood at 52.1% and 1.4 respectively. The interest margin depends on the Total Debt / EBITDA ratio. 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. The Group has provided collateral in an amount of up to 10,169 (March 31, 2011: 10,563) in the form of mortgage rights on buildings in the Netherlands, Hungary, the United States and Indonesia. The trade debtor items and inventory of the facilities in the Netherlands and Hungary also serve as security for the obligations arising from the finance agreements concluded with the banks. The remaining term to maturity of the long-term loans can be classified as follows: March 31, 2012 March 31, 2011 Between 1 and 2 years Between 2 and 5 years 2,627 2,756 Longer than 5 years 875 1,125 Total 3,995 4,461 The repayment obligation as at March 31, 2012 stood at 598. On March 31, 2011 the repayment obligation stood at 1,194; this amount included obligations under financial lease agreements. A financial lease agreement has been in force regarding the head office of Holland Colours that expired in November The contract included an option to purchase ( 546), which Holland Colours decided to exercise. This has not led to any change in the measurement and classification of the head office. There are therefore no further obligations as a result of financial lease agreements.

59 The repayment obligations are accounted for under current liabilities. The long-term loans are subject to interest changes and contractual interest revisions as follows: March 31, 2012 March 31, months or less 4,002 4,152 Between 6 and 12 months - - Between 1 and 5 years Longer than 5 years - - Total 4,593 5,022 The majority of the long-term loans are at a variable interest rate. The risk associated with this variability is hedged by means of a number of interest instruments (swaps), see also note 23: Derivative financial instruments. The weighted average interest rate on the long-term loans was 5.6%, as opposed to 5.5% in the 2010/2011 financial year. The effective interest rates at balance sheet date were as follows: Interest rate in % March 31, 2012 EUR USD Loans from credit institutions 5.2% 6.1% Interest rate in % March 31, 2011 EUR USD Loans from credit institutions 5.3% 5.6% The carrying amounts and fair values of the non-current liabilities are as follows: March 31, 2012 March 31, 2011 Carrying amount Fair value Carrying amount Fair value 57 Bank loans 4,593 4,840 5,022 5,007 Financial lease obligations Total 4,593 4,840 5,656 5,632 The fair values are based on cash flows, discounted at a loan interest rate of 3.2% (March 31, 2011: 4.6%). The carrying amounts of the short-term loans are essentially the same as the fair values. The carrying amounts of the long-term debt are in the following currencies: March 31, 2012 March 31, 2011 Euro 2,125 3,010 US dollar 2,468 2,646 Total 4,593 5,656

60 22. Employee benefit obligations As explained in note 2, the originally agreed conditional financing of past service years in the early retirement plan has been converted into an equivalent annual payment, which is also conditional. At March 31, 2012, the resulting liability amounted to 774 (March 31, 2011: 760). This employee benefits provision relates to the obligation to issue a conditional annual payment. The liabilities regarding employee benefits also include an item Other employee benefits, which concerns a provision for future jubilee payments of 240 (March 31, 2011: 203) and other future payments of 386 (March 31, 2011: 367). During the 2011/2012 financial year it was decided to place a large proportion ( 208) of the other employee benefits for employees in the Netherlands with an insurer. Settlement of this transaction will take place in the 2012/2013 financial year, and this part of the provision is accordingly presented as current. The total pension costs in the 2011/2012 financial year amount to 747 (2010/2011: 654) and are recognised under employee expenses (see also note 6: Employee expenses). Movements in the employee benefit obligations were as follows: Employee benefits Other Employee benefits Total Situation at April 1, 2010 (827) (548) (1,375) Additions (30) (58) (88) Withdrawals Exchange-rate differences - (8) (8) Situation at March 31, 2011 (760) (570) (1,330) 58 Additions (126) (73) (199) Withdrawals Exchange-rate differences - (5) (5) Situation at March 31, 2012 (774) (627) (1,401) Of this, the following amounts are recognised under current liabilities: Employee Other Employee benefits benefits Total as at March 31, as at March 31,

61 23. Derivative financial instruments The Group held the following financial instruments measured at fair value at March 31, The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or Iiabilities Level 2: other methods whereby all variables significantly affecting the recognised fair value are directly or indirectly observable Level 3: methods whereby variables are used that significantly affect the recognised fair value but are not based on observable market data. March 31, 2012 Liabilities included at fair value Liabilities Level 1 Level 2 Level 3 Interest-rate swaps - cash flow hedges March 31, 2011 Liabilities included at fair value Liabilities Level 1 Level 2 Level 3 Interest-rate swaps - cash flow hedges Regarding the financial instruments in level 2, of the increase of 187 in the 2011/2012 financial year, 161 is recognised in the statement of comprehensive income and the remainder in the income statement. There were no transfers during the 2011/2012 financial year between valuations at fair value in levels 1 and 2, nor transfers to and from valuations at fair value in level 3. The total fair value of derivative financial instruments used for hedging is included under non-current liabilities. The notional principal amounts of the outstanding interest-rate swap contracts at March 31, 2012 are 4,002 (March 31, 2011: 4,152). At March 31, 2012, the fixed interest rates ranged between 5.1% and 5.8% (March 31, 2011: 5.1% to 5.8%); the main variable rates are EURIBOR and LIBOR. 59 The loans (see note 21: Long-term debt) include a loan of USD 2,500, which is intended to cover the net investments in the US subsidiary and is used to hedge the Group's currency risk on this investment. Gains or losses on the recalculation of this loan are transferred to equity to settle any conversion differences of the net investment in this subsidiary. As at March 31, 2012, a sum of 2 (2010/2011: 3) was included in relation to ineffective cash flow hedges. 24. Trade and other payables March 31, 2012 March 31, 2011 Trade creditors 4,383 4,402 Payables regarding other taxes Other liabilities and accruals 1,844 2,589 Trade and other payables 6,703 7,504 The other tax payables concern mainly sales tax payables.

62 OTHER INFORMATION 25. Liabilities not reflected in the balance sheet Capital commitments The Group had not entered into any capital commitments regarding property, plant and equipment as at balance sheet date (March : 0). Purchase contracts The total commitment resulting from raw material purchase contracts was 1,078 (March 31, 2011: 1,437). Rent and operating lease obligations At balance sheet date the Group had outstanding commitments regarding rents and operating leases, which can be classified as follows: March 31, 2012 March 31, 2011 Less than 1 year Between 1 and 5 years Longer than 5 years Total The Group rents buildings, vehicles and office equipment in the form of operational leases. The building leases have a maximum term of five years. The terms of the other lease contracts are also mostly up to five years. 26. Related parties 60 Identity of related parties The related parties can be divided into the relations between the Group and its subsidiary companies, the members of the Management Board and the Supervisory Board and the investment company Holland Pigments BV. Remuneration of key officers of the Group The key officers are the members of the Group Management Board. Details of their remuneration are given below. Remuneration policy The remuneration policy for the Management Board is set by the Supervisory Board as a whole. There is no separate remuneration committee. Holland Colours strives for a remuneration that is in line with the market for a company of its size, and in proportion to its overall salary structure. The remuneration package consists of a fixed element and a variable element. The fixed salary is increased annually in line with the general adjustment for inflation for the facility in the Netherlands. The variable payment for the Chief Executive Officer concerns a bonus scheme based on financial and non-financial targets. The bonus amounts to three times the monthly salary in the event that 100% of the targets are achieved, and can rise to a maximum of six times the monthly salary in the event that 150% of the targets are achieved. For the other members of the Management Board, the variable element is a profit-sharing scheme that is the same for all employees of the Group and, depending on the ROI and net profit, could mean a maximum payment of six weeks' salary. Members of the Management Board are paid 75% of this amount in Holland Pigments shares. In addition, a bonus scheme exists for the Group Management Board, which only takes effect if a profit share is paid to all of the Group's employees. No payments on the basis of the profit-sharing and bonus schemes were generated on the basis of the results in the 2011/2012 financial year. The amount of bonus depends on whether or not the following company targets are met: Sales growth of 8 12% Return (EBIT) on average invested capital (ROI) > 15% Growth of earnings per share more than proportionate to sales growth Maximum total two-thirds of gross monthly salary two-thirds of gross monthly salary two-thirds of gross monthly salary two months' gross salary No variable payment will be made to the Group Management Board for the 2011/2012 financial year because none of the company targets were met. A bonus of two months' gross salary was allocated to the Group Management Board in 2010/2011. There is no option plan.

63 The contract with the Chief Executive Officer states a term of appointment of four years (with an option of reappointment) and a severance payment which is in accordance with the recommendations of the Dutch Corporate Governance Code. The contracts of the other members of the Management Board do not stipulate a predefined term or a limitation of the severance payment. Mr Van Schaik stepped down as of November 1, Severance pay of one year's gross salary was agreed with Mr Van Schaik at the time of his appointment. Mr Harmsen was appointed as Chief Executive Officer of Holland Colours NV at the Extraordinary General Meeting of Shareholders on January 5, The remuneration of the former and current Management Board members and the Supervisory Board as charged to the result can be specified as follows: Members of the Management Board R. Harmsen** B.P.M. van Schaik A.J. Veldhuis-Hagedoorn J.J.G. Straathof 2011/ / / / / / / /2011 Fixed salary * 197 * Pension costs Variable bonus Non-recurring payment Total *) This amount includes an expatriation allowance **) Mr Harmsen was appointed as Chief Executive Officer at the Extraordinary General Meeting of Shareholders on January 5, An interest-free loan of USD 250 was provided to Mrs Veldhuis-Hagedoorn in connection with her expatriation in 1999 to finance her accommodation, on which no repayment has yet been made. No security has been provided for this loan. Transactions with key officers No transactions with key officers took place during the financial year. 61 Other interests of members of the Management Board No transactions were effected during the financial year with parties in which any of the supervisory directors, members of the Management Board or their partners have an interest. Supervisory Board The General Meeting of Shareholders determines the remuneration of the Supervisory Board members. The Company's policy is to pay a remuneration that is in line with the market for a company of its size, adjusted annually in line with the general adjustment for inflation for the facility in the Netherlands. Changes were made to the Supervisory Board at the General Meeting of Shareholders held on July 10, Messrs Gerardu, Van der Lof and Zegger stepped down at this meeting and were succeeded by three new supervisory directors, namely Messrs Van Luijk, Kemper and Kleyn. 2011/ /2011 C.G. van Luijk 17 - M.G.R. Kemper 12 - J.D. Kleyn 12 - J.W. de Heer N.H. Gerardu 6 23 H.H. van der Lof 5 16 M.H. Zegger 5 16 Total Holland Pigments BV As at March 31, 2012 the investment company Holland Pigments BV, in which among others all 382 employees of Holland Colours participate, owned nearly 50% of the shares in Holland Colours NV. At balance sheet date Holland Pigments held 429,667 (March 31, 2011: 429,667) shares in Holland Colours NV. On March 31, 2012, the Group had a claim of 17 on Holland Pigments (March 31, 2011: 0). The costs incurred by Holland Pigments BV in connection with the maintenance and administration of the employee participation are

64 partly reimbursed by Holland Colours NV to Holland Pigments BV. A payment of 76 was accordingly made to Holland Pigments BV in the 2011/2012 financial year (2010/2011: 86). Any claims on or liabilities to Holland Pigments BV are not covered by commercial collateral, are not interest-bearing and are settled in cash. 27. Other disclosures Share-based payment agreements Holland Colours Group operates a profit-sharing scheme for its employees. The scheme is the same for all Group employees and may, depending on the ROI and net profit, result in a payment of up to six weeks' salary. Depending on the individual employee's position, 25% to 75% of this payment is made in Holland Pigments BV shares. No profit-sharing payment will be made on the basis of the results in the 2011/2012 financial year. A payment of 958 was made to employees for the 2010/2011 financial year. This payment was settled in July 2011 after the financial statements for 2010/2011 had been drawn up and adopted. Settlement was made partly by payment to the employee and partly by conversion into shares in Holland Pigments BV. The conversion was made by paying the position-related part of the payment to Holland Pigments BV. Shares in Holland Pigments BV were subsequently purchased for the employee at the last calculated price of Holland Pigments BV shares. Settlement of the profit-sharing payments for the 2010/2011 financial year resulted in a net payment of 185 by Holland Colours NV to Holland Pigments BV. This sum was used to purchase Holland Pigments BV shares for the employees. The remainder of the profit-sharing payment was paid in cash by Holland Colours NV after the statutory deductions. The value of the interest held by Holland Pigments BV in Holland Colours NV is specified as follows: 2011/ /2011 Number of shares in Holland Colours NV held by Holland Pigments BV Situation at April 1 429, ,000 Purchased by Holland Pigments BV - 29,667 Situation at March , , In euro s Share price of Holland Colours NV at balance sheet date 17,00 26,01 Value 7,304,339 11,175,639 Employees of the Holland Colours Group hold 19.8% (March 31, 2011: 19.4%) of the shares in Holland Pigments BV and the indirect holding of the employees in Holland Colours NV after conversion amounts to 9.9% (March 31, 2011: 9.7%). Employees can buy and sell shares of Holland Pigments BV at a value per share calculated using an agreed formula. The value of Holland Pigments BV shares calculated on the basis of this formula differs from the value calculated on the basis of the market share price of Holland Colours NV. At balance sheet date, this difference for the shares in Holland Pigments BV held by employees was 712 positive; on March 31, 2011 the difference was 180 positive. Since the costs for Holland Colours are unaffected by this, this difference is not recognised. The costs for Holland Colours are equal to the amount paid out in Holland Pigments BV shares under the profit-sharing scheme. Events after the reporting period On April 2, 2012 the Company was notified by Holland Pigments BV that it had acquired a majority (50.03%) of the shares in Holland Colours NV. Employee numbers During the 2011/2012 financial year, the Company employed an average of 382 FTE. In 2010/2011 this was 383. Apeldoorn, May 25, 2012 Supervisory Board C.G. van Luijk, Chairman J.W. de Heer M.G.R. Kemper J.D. Kleyn Management Board R. Harmsen J.J.G. Straathof A.J. Veldhuis-Hagedoorn

65 Company income statement for the financial year ended March 31, 2012 April 1, 2011 / March 31, 2012 April 1, 2010 / March 31, 2011 Net result from group companies 1,959 3,469 Other income and expense after tax (262) (325) Net result 1,697 3,144 Company BALANCE SHEET before proposed profit appropriation In thousands of euros note March 31, 2012 March 31, 2011 Non-current assets Intangible fixed assets Property, plant and equipment 32 2,010 2,255 Financial fixed assets 33 22,431 23,414 24,770 26,080 Current assets Receivables from group companies Other receivables and prepayments Tax on profits receivables 59 - Cash and cash equivalents 2,442 1,983 3,462 2, Total assets 28,232 29,054 Equity Share capital 34 1,953 1,953 Share premium reserve 34 1,219 1,219 Statutory reserves 34 (2,007) (2,553) Result for the year 1,697 3,144 Other reserves 34 19,579 18,393 22,441 22,156 Provisions Employee benefit obligations Long-term debt Long-term debt 35 3,752 3,902 Deferred tax liabilities 6 1 Derivative financial instruments ,131 4,089 Current liabilities Credit institutions - - Repayment obligations for long-term debt Payables to group companies Other liabilities and accrued income ,470 2,409 Total equity and liabilities 28,232 29,054

66 Notes to the company financial statements 28. General information The company financial statements are part of the financial statements of Holland Colours NV and are prepared in accordance with the legal requirements of Title 9, Book 2 of the Dutch Civil Code. Use is thereby made of the possibility given in article 2:362 paragraph 8 of the Dutch Civil Code to apply the same standards of valuation and determination of the result to the company financial statements as those used in the consolidated financial statements, with the exception of accounting standards relating to participation in group companies. Participating interests in group companies are recognised at net asset value. The company financial statements are prepared by the Management Board, and were discussed and approved at the meeting of the Supervisory Board and released for publication on May 25, The financial statements will be presented to the General Meeting of Shareholders for adoption on July 10, In accordance with article 402 of Title 2, Book 2 of the Dutch Civil Code, it suffices for the company 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. 29. Summary of the significant accounting principles 64 The standards of valuation and determination of the result 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. 30. Participating interests Participating interests in group companies Participating interests in group companies and other companies over which the Company has dominant control or exercises central management, are measured at net asset value. The net asset 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.

67 31. Intangible fixed assets Development costs Other Total Situation at April 1, 2010 Initial cost 909 1,265 2,174 Cumulative amortisation (582) (1,033) (1,615) Carrying amount Movements in balance sheet value Investments Other movements (26) - (26) Carrying amount of disposals Amortisation (95) (160) (255) Exchange-rate differences Balance (14) (134) (148) Situation at March 31, 2011 Initial cost 990 1,291 2,281 Cumulative amortisation (677) (1,193) (1,870) Carrying amount Movements in balance sheet value Investments Carrying amount of disposals Impairments (42) - (42) Amortisation (94) (61) (155) Exchange-rate differences Balance (21) (61) (82) Situation at March 31, 2012 Initial cost 1,105 1,291 2,396 Cumulative amortisation (813) (1,254) (2,067) Carrying amount The Company's total expenses for research and development were 1,009 in the financial year (2010/2011: 911). 115 (2010/2011: 107) of this amount is capitalised, whereas the remainder is included in the other income and expenses after tax in the company financial statements. The amortisation cost and impairments of 197 (2010/2011: 255) is included in the other income and expenses after tax in the company financial statements. A write-down of 42 was made in the 2011/2012 financial year in relation to impairment of capitalised development costs (2010/2011: 0). 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. The costs are amortised over the estimated useful life of the assets, which is five years.

68 32. Property, plant and equipment Buildings Machinery and Other Total and equipment capital land assets Situation at April 1, 2010 Initial cost 3,710 1, ,139 Cumulative depreciation (1,804) (647) (284) (2,735) Carrying amount 1, ,404 Movements in balance sheet value Investments Other movements Carrying amount of disposals Depreciation (146) (92) (9) (247) Exchange-rate differences Balance (144) 5 (9) (148) Situation at March 31, 2011 Initial cost 3,712 1, ,238 Cumulative depreciation (1,951) (739) (293) (2,983) Carrying amount 1, ,255 Movements in balance sheet value Investments Carrying amount of disposals Impairments (23) - - (23) Depreciation (148) (103) (3) (254) Exchange-rate differences Balance (172) (71) (3) (246) 66 Situation at March 31, 2012 Initial cost 3,712 1, ,270 Cumulative depreciation (2,122) (842) (296) (3,260) Carrying amount 1, ,010 Depreciation is applied to buildings on a straight-line basis over a period of a maximum of 40 years; plant and equipment and other assets over a maximum of 10 years; and fixtures, computers and office furniture and equipment over a maximum of 5 years. Depreciation of 254 (2010/2011: 247) is applied to the other income and expenses after tax in the company financial statements. A write-down of 23 was made in the 2011/2012 financial year in relation to impairment of installations at the head office of Holland Colours. No impairments occurred in the 2010/2011 financial year. A financial lease agreement has been in force regarding the head office of Holland Colours that expired in November The contract included an option to purchase ( 546), which Holland Colours decided to exercise. This has not led to any change in the measurement and classification of the head office.

69 33. Financial fixed assets The financial fixed assets can be specified as follows: March 31, 2012 March 31, 2011 Value of participating interests 20,481 21,565 Loans to group companies Other financial assets and deferred tax on profits receivables 1,868 1,721 Total 22,431 23,414 Movements in the value of the group companies were as follows: Movements in the loans to group companies were as follows: April 1, 2011 / March 31, 2012 April 1, 2010 / March 31, 2011 Opening balance 21,565 22,300 Movements: - capital payments to group companies result from participating interests 1,959 3,469 - dividends declared (4,116) (3,609) - exchange-rate differences 792 (595) Closing balance 20,481 21,565 April 1, 2011 / March 31, 2012 April 1, 2010 / March 31, Opening balance Movements: - loans granted this year repayments during the year (198) (700) - exchange-rate differences 1 (1) Closing balance The loans to group companies have varying maturities. Loans with a term to maturity of more than one year total 45 (March 31, 2011: 128). The interest rates for the loans to group companies vary between 4.0% and 7.4% (March 31, 2011: 4.5% and 7.4%).

70 The movements in the other financial fixed assets and deferred tax on profits receivables can be specified as follows: Deferred Other non-current Total tax receivables Situation at April 1, , ,652 Additions Repayment of loans Withdrawals (128) - (128) Currency translation differences - (7) (7) Situation at March 31, , ,721 Additions Repayment of loans Withdrawals (49) - (49) Currency translation differences Situation at March 31, , , Equity For notes on the share capital and share premium, see note 17 of the consolidated balance sheet. Movements in the foreign currency translation reserve, hedge reserve and other statutory reserves are as follows: 68 Reserve Hedge Statutory Total translation differences reserve reserve Situation at April 1, 2010 (2,172) (204) 238 (2,138) Cash flow hedge, net of tax Currency translation differences (600) - - (600) Withdrawn from free reserves Situation at March 31, 2011 (2,772) (94) 313 (2,553) Cash flow hedge, net of tax - (225) - (225) Currency translation differences Withdrawn from free reserves - - (21) (21) Situation at March 31, 2012 (1,980) (319) 292 (2,007)

71 35. Long-term debt The total of the Company's long-term debt can be divided as follows: March 31, 2012 March 31, 2011 Non-current Bank loans 3,752 3,902 Financial lease obligations - - Total non-current 3,752 3,902 Current Bank balances - - Repayment obligations on bank loans Financial lease obligations Total current Total borrowings and long-term liabilities 4,002 4,787 The Company has a credit facility in the Netherlands of 7,000 (March 31, 2011: 7,000) for which collateral has been provided. See also notes 11, 14 and 15. The bank agreements and collateral provided in relation to the Company's financing agreement have not changed since March 31, The most important ratio in the bank agreement is the ratio between debts to credit providers and the 12-month rolling earnings before interest, tax, depreciation and amortisation, known as the Total Debt / EBITDA ratio. This ratio may not exceed 3.0 at any time. The Company complied with this agreement at all times during the 2011/2012 financial year. This ratio stood at 1.8 at the end of the 2011/2012 financial year, meaning that the key condition agreed with the banks was met. The other covenants agreed with the banks concern the Tangible Net Worth ratio, which must be at least 40%, and the Debt Service Cover ratio, which must be higher than or equal to 1.0. Holland Colours also complied with these financial covenants in the 2011/2012 financial year. On March 31, 2012 these ratios stood at 52.1% and 1.4 respectively. The interest margin depends on the Total Debt / EBITDA ratio. 69 The maturities of the interest-bearing loans and borrowings can be specified as follows: March 31, 2012 March 31, 2011 Between 1 and 2 years Between 2 and 5 years 2,627 2,527 Longer than 5 years 875 1,125 Total 3,752 3,902 The carrying amounts and fair values of the non-current liabilities are as follows: March 31, 2012 March 31, 2011 Carrying amount Fair value Carrying amount Fair value Bank loans 4,002 4,244 4,153 4,134 Financial lease obligations Total 4,002 4,244 4,787 4,759

72 The carrying amounts of the non-current liabilities are in the following currencies: March 31, 2012 March 31, 2011 Euro 2,125 3,010 US dollar 1,877 1,777 Total 4,002 4,787 The fair values are based on cash flows, discounted at the interest rate of the loans of 3.2 % (March 31, 2011: 4.6%). The carrying amounts of the short-term loans do not differ materially from the fair values. 36. Employee benefit obligations As explained in note 22, the originally agreed conditional financing of past service years in the early retirement plan has been converted into an equivalent annual payment, which is also conditional. At March 31, 2012, the resulting liability amounted to 194 (March 31, 2011: 200). This employee benefits provision relates to the obligation to issue a conditional annual payment. The liabilities regarding employee benefits also include an item Other employee benefits, which concerns a provision for future jubilee payments of 33 (March 31, 2011: 18) and other future payments of 213 (March 31, 2011: 222). During the 2011/2012 financial year it was decided to place a large proportion ( 208) of the other employee benefits for employees in the Netherlands with an insurer. Settlement of this transaction will take place in the 2012/2013 financial year, and this part of the provision is accordingly presented as current. Movements in the employee benefit obligations were as follows: 70 Employee Other Employee benefits benefits Total Situation at April 1, 2010 (216) (256) (472) Additions (5) (2) (7) Withdrawals Situation at March 31, 2011 (200) (240) (440) Additions (30) (6) (36) Withdrawals Situation at March 31, 2012 (194) (246) (440) The following amounts have been accounted for under other liabilities and deferred charges: Employee Other Employee benefits benefits Total as at March 31, as at March 31, Derivative financial instruments March 31, 2012 March 31, 2011 Assets Liabilities Assets Liabilities Interest-rate swaps - cash flow hedges Total financial instruments The total fair value of derivative financial instruments used for hedging is included under non-current liabilities. The notional principal amount of the outstanding interest-rate swap contracts at March 31, 2012, was 4,002 (March 31, 2011: 4.152). At March 31, 2011, the fixed interest rates ranged between 5.1% and 5.8% (March 31, 2011: 5.1% to 5.8%); the main variable rates are EURIBOR and LIBOR.

73 38. Employees The average number of persons employed by the Company during the reporting year was 16 FTE. This number was unchanged from the 2010/2011 financial year. 39. auditor s fees In the 2011/2012 financial year, the following auditor fees were charged to the results in accordance with article 382a Title 9 Book 2 of the Dutch Civil Code. 2011/2012 Ernst & Young Accountants Audit of the financial statements 158 Other non-audit services 94 Total /2011 Ernst & Young Accountants Audit of the financial statements 182 Other non-audit services 138 Total Other disclosures Rent and operating lease obligations At balance sheet date the Company had outstanding commitments regarding rents and operating leases, which can be classified as follows: March 31, 2012 March 31, 2011 Less than 1 year Between 1 and 5 years Longer than 5 years - 28 Total The Group rents vehicles and office equipment in the form of operational leases. The terms of the lease contracts are generally up to five years. Events after the reporting period On April 2, 2012 the Company was notified by Holland Pigments BV that it had acquired a majority (50.03%) of the shares in Holland Colours NV. Guarantee declarations Holland Colours NV has given a guarantee for its subsidiary Holland Colours Europe BV in accordance with article 403, Title 9, Book 2 of the Dutch Civil Code. Holland Colours NV has not issued any guarantee declarations as security for the payment obligations of foreign companies. Other Information The Company forms a tax group together with Holland Colours Europe BV with regard to income tax and sales tax. Both the Company and its subsidiary are jointly and severally liable for tax payable by all companies that are part of the tax group. Apeldoorn, May 25, 2012 Supervisory Board C.G. van Luijk, Chairman J.W. de Heer M.G.R. Kemper J.D. Kleyn Management Board R. Harmsen J.J.G. Straathof A.J. Veldhuis-Hagedoorn

74 Other information Events after the reporting period On April 2, 2012 the Company was notified by Holland Pigments BV that it had acquired a majority (50.03%) of the shares in Holland Colours NV. Statutory provisions regarding the appropriation of profits Regarding the appropriation of profits, the following is determined in the Articles of Association: Article 21: 1. From the profit established in the approved financial statements, reserves are formed as determined by the Management Board with the approval of the Supervisory Board. 2. The profit remaining after the transfer to the reserves and distribution as stated in paragraph 1 is at the disposal of the General Meeting of Shareholders, with due regard to the provisions of Article 105, Book 2 of the Dutch Civil Code The Management Board, with the approval of the Supervisory Board, is authorised to resolve to distribute an interim dividend with due regard to the provisions of Article 105 Book 2 of the Dutch Civil Code. 4. The dividend will be made payable within one month after it has been set, in the manner and at the place determined by the Management Board. 5. Claims for profit distribution expire after a period of five years from the date on which the dividend was made payable has elapsed. 6. A decision regarding the disposal of any reserve may be taken by the General Meeting of Shareholders with due regard to the statutory provisions. Proposal for the appropriation of profit With due regard to Article 21 of the Articles of Association, it is proposed to distribute the profit as follows: A cash dividend of 1.10 per share of 2.27, which amounts to 946. Transfer to the other reserves: 751 The proposal for appropriation of profit has not been included in the balance sheet.

75 Independent auditor s report To the Annual General Meeting of Shareholders of Holland Colours N.V. Report on the financial statements We have audited the accompanying financial statements for the year ended March 31, 2012 of Holland Colours N.V., Apeldoorn (as set out on pages 31 to 71). The financial statements include the consolidated financial statements and the company financial statements. The consolidated financial statements comprise the consolidated statement of financial position as at March 31, 2012, the consolidated statements of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the period April 1, 2011 till March 31, 2012, and notes, comprising a summary of the significant accounting policies and other explanatory information. The company financial statements comprise the company balance sheet as at March 31, 2012, the company profit and loss account for the period April 1, 2011 till March 31, 2012 and the notes, comprising a summary of the accounting policies and other explanatory information. Management s responsibility Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Dutch Civil Code, and for the preparation of the management board report in accordance with Part 9 of Book 2 of the Dutch Civil Code. Furthermore management is responsible for such internal control as it determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. 73 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 entity 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 entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, 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 N.V. as at March 31, 2012, its result and its cash flows for the period April 1, 2011 till March 31, 2012 in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 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 N.V. as at March 31, 2012, and of its result for the period April 1, 2011 till March 31, 2012 in accordance with Part 9 of Book 2 of the Dutch Civil Code.

76 Report on other legal and regulatory requirements Pursuant to the legal requirement under Section 2:393 sub 5 at e and f of the Dutch Civil Code, we have no deficiencies to report as a result of our examination whether the management board report, to the extent we can assess, has been prepared in accordance with Part 9 of Book 2 of this Code, and whether the information as required under Section 2:392 sub 1 at b-h has been annexed. Further we report that the management board report, to the extent we can assess, is consistent with the financial statements as required by Section 2:391 sub 4 of the Dutch Civil Code. Zwolle, May 25, 2012 Ernst & Young Accountants LLP Signed by J. Hetebrij 74

77 Organisation chart as at April 1, 2012 R. Harmsen President Research & Technology Vacancy Director Research & Technology Legal Affairs M.J. Bos-Westenenk Manager Legal Affairs Executive Board A.J. Veldhuis-Hagedoorn Director Division Americas J.J.G. Straathof Director Finance Business Processes & ICT G.J. Luiten Manager of Business Processes & ICT Finance H.M. Jacobs Corporate Controller 75 Global Purchasing W.B.J. Elderink Global Purchase Manager Division Europe Division Americas Division Asia 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 D.G. Goudappel Division Controller A.J. Veldhuis-Hagedoorn Division Director D.L. Marshall Sales & Marketing Manager R. Hetisimer Plant Manager J.K. Gleeson Manager Business Processes & Compliance J. Bitner Human Resource Manager A. Wagner Office Manager Canada A. Wesseldine Office Manager Mexico S. Kho-Pangkey Division Director T.L. Kho Technical Manager T.H. Hoo Export Manager H. Guo General Manager China

78 contact 76 HOLLAND COLOURS NV Halvemaanweg RW Apeldoorn P.O. Box AS Apeldoorn The Netherlands T (31) F (31) E [email protected] Holland Colours EUROPE BV Halvemaanweg RW Apeldoorn P.O. Box AS Apeldoorn The Netherlands T (31) F (31) E [email protected] Holland Colours UK Ltd Unit 16/17/18, Sabre Court Valentine Close, Gillingham Business Park Gillingham, Kent ME8 0RW United Kingdom T (44) ,727 E [email protected] Holland Colours Hungaria Kft Tószegi út 51 P.O. Box Szolnok Hungary T (36) E [email protected] Holland Colours Americas Inc 1501 Progress Drive Richmond, Indiana, USA T (1) Toll-free (1) E [email protected] Holland Colours Canada Inc 1370 Don Mills Rd., Suite 201 Don Mills, Ontario, M3B 3N7 Canada T (1) Toll-free (1) E [email protected] Holland Colours Mexicana SA de CV Tezosomoc #4 (Bodega 3) Col. Recursos Hidráulicos Tultitlán, Edo de México México CP T 52 (55) E [email protected] P.T. Holland Colours Asia Jl. Berbek Industri II/2 (Surabaya Industrial Estate Rungkut) Sidoarjo East Java Indonesia T (62) E [email protected] Export department Surabaya: T (62) ,801 E [email protected] Jl. Industri III/88 Blok A1-3 Kompl. Industri Facto, Jatake Tangerang West Java Indonesia T (62) Holland Colours China Ltd Factory Building 7# No. 65 Baiyun Road, Spark Development Zone, Fengxian District, Shanghai China T (86) , E [email protected] HCA Japan Corporation Ukima , Kita-Ku Tokyo Japan T (81) E [email protected] Colophon Design and realisation: Doorrood Persuasive Agency Outline and text: Brody Creatieve Communicatie Photography: Fotostudio Rob Sas Holland Colours NV, 2012

79 ANNUAL REPORT MMXI 2011 MMXII 2012

80 MMXI 2011 MMXII 2012