[Non-English content]
Good afternoon, ladies and gentlemen. Good to see you. It's a pleasure to open this general meeting of shareholders, once again, I would like to welcome everybody. As you've been able to see in this agenda, this afternoon, we will be discussing, amongst other items, the annual report 2014, the auditor's report, our external auditor is present here today to that effect, and the final dividend. Given that Mrs. Bruzelius' current term of office expires this month, as this will be Mr. Bufe's final meeting as a member Supervisory Board before he steps down at the end of the month, we'll be addressing a number of Supervisory Board appointments. First, some announcements as usual. We would like to kindly request you to switch off your mobile phones. Don't switch off your hearing aids, no need for that.
The official language of today's meeting is Dutch, you can follow the meeting in the English language. We have headphones available for you. Channel number 2 is for the English language. Channel number 2 is English. Channel number 1 is Dutch, you may raise your questions either in English or in Dutch. As you know, only shareholders and their proxy holders, ADR holders, usufructuaries, holders of pledges on shares, members of the Board of Management, and members of Supervisory Board have a right to address the general meeting today. Please address your questions to me, use the microphones here in the aisles, clearly state your name and place of residence. Should you be unable to reach the microphone placed in the aisle, you can ask the hostesses to bring you a microphone.
Please be concise in your questions to raise all your questions on the same item of the agenda in one go. Please be concise, raise all your questions in one go. Why am I saying this twice, you probably wonder. Please be concise in your questions. Questions will be answered by one of the Board members, Board of Management, Supervisory Board questions on the audit report and the external audit process. To that effect, we have our external auditor of KPMG present here today, Mr. Van Leeuwen, Niemer will be present here today, they will be able to address such questions. The gentlemen may be able to stand, we can see them. Thank you very much. Before we start, I'd like to ask Ms. Van Amer, our Corporate Secretary, to address some procedural matters. Good afternoon.
For the voting process, you will have received a handset, chip card, and voting card. The voting card also gives you concise instructions on the electronic voting system. Should you have any questions about the voting procedure, one of the hostesses will come and help you should you raise your hand. Shareholders have been given the opportunity to vote by remote voting through ABN AMRO, and Ms. Verkerk, civil law notary of [R&M], will cast the votes as a proxy holder. This meeting, Wednesday, March 25, 2015, is the record date. This entails that for this meeting, the following people are entitled to cast vote, the shareholders that were registered on that date. Explanation of how to register prior to the record date has been explained in the notice of the meeting.
It is acknowledged that the shareholders have been convened in accordance with the relevant provisions of the articles of association. The notice and the agenda were published on the Akzo Nobel and securities info websites. A copy of the advertisement, a complete agenda, and notes of the agenda have been placed on the information desk here today. The meeting has been properly convened and is entitled to adopt legally valid resolutions. The chairman will be informing you how much capital is represented here today and the number of votes that can be cast. Thank you, Ms. Van Amer. Proceeding to item two, the report of the management board on the financial year 2014.
I would like to ask Mr. Büchner to take the floor and to inform us of the proceedings of this past year.
Thank you, Antony, and thank you, and welcome. Ladies and gentlemen, shareholders, welcome. It is a great pleasure to stand before you to present the year 2014 for Akzo Nobel. A lot has transpired in this year. It's been a very busy year, eventful year, I can highlight a number of items and issues here today, and that in the market in which that hasn't really grown. Despite the fact that we have done a lot, and it's been a tough market, we have been able to show a good performance, something our staff members have worked very hard at. Looking at the first slide, actually what you see is something you will recognize, about EUR 14.5 billion in revenues last year, 2014.
The currency effects were to our disadvantage, just over 47,000 employees, 44% of our revenue is generated in our high-growth markets. These high-growth markets aren't growing as quickly as before, but it is outside the developed markets that we do generate a great deal of our revenues. We're an enormous producer of paints, coatings, and Specialty Chemicals. We are a leading producer in all these respects, and we have incredible leadership positions in many of our markets, products, and services. You see the breakdown here in terms of revenue and also in terms of profit, which here is reflected as operating income, and also the areas in the businesses that we invest in. This gives you a good picture of what Akzo Nobel has achieved by year-end 2014. What is it that we have achieved in 2014?
Clearly, we have shown that the strategy of organic growth and operational excellence, as we call it, is actually very successful. Working very hard and improving many, many things, it has become clear that Akzo Nobel, quarter after quarter, has been able to show better performance, and by year-end 2014, it was the seventh consecutive quarter that we were able to show a better performance than a year before. Yesterday, we added yet another quarter to this excellent performance. We are implementing major changes in Akzo Nobel. We have introduced new processes, both in the three business areas, the coatings, Specialty Chemicals, and Decorative Paints, but also group level, corporate level. We're working on entirely new processes. The first results were already visible in 2014. We're absolutely sure that in 2015, we will constantly be showing these results.
Something that we're very pleased about is that in 2014, once again, we ranked number one in the Dow Jones Sustainability Index, which is one of the most respected indexes. In our category alone, about 40 companies are compared with each other. People don't look at the brochures. They don't look and take into account what it is that you say, but they look at how you behave, what your conduct is. Over the past nine years, we see that we've been in the top three, which is fantastic, and just goes to show that sustainability is extremely important in our company. This, of course, thanks to a great deal of dedication of our staff. We have an initiative, Human Cities, we'll be talking about that later on, and we're on track to deliver the results and the targets that we've defined for 2015.
We are getting closer and closer, but we're still very confident and trust that we are absolutely on track in this respect. Looking at the markets of Akzo Nobel, you'll see four marvelous pictures. Top left-hand side, the buildings and infrastructure. This is what we call buildings and infrastructure, but it's building, it's renovation, as well as new buildings and new construction. These are buildings where people work in or live in, or also infrastructure, bridges, or other forms of infrastructure. This is our largest segment, 42% of our revenue. Obviously, it is a segment that has determined great deal of the dynamics in the market. It's been tough in the U.S. and in Europe. In China, we see that this same market is picking up.
There are issues, this is a market that will require a bit of time to recover entirely from the deep crisis 2008, 2009. Anything that flies, drives, or sails can be served by Akzo Nobel Coatings in some way or other. That is a sector that accounts for 16% of our revenues, quite visible for most people. The same applied to consumer goods, whether it's salt, table salt or coatings. The table, people enjoy their foods at the table. Consumer goods, including mobile phones, and undoubtedly, you'll all have a mobile phone, and most people in this world touch an Akzo Nobel product without even knowing. That would be particularly in these two segments, consumer goods and building, obviously. Industrial segment is the number two segment, 25% of our revenues, and many of our Specialty Chemical products go into this segment.
This segment behaves slightly differently as compared to the other segments, but is doing very well for Akzo Nobel. Here you'll see the 42% revenue transport, 16, consumer goods, 17%, and industry, 25%. If we travel the world, you'll see that 2014 Europe hasn't really been able to recover in a substantial way, and the problems that we've seen occurring in Russia in August, with all the implications, have made things tougher for the second half of the year. Everybody had hoped that Europe in the second half of 2014 would start growing again so that everybody would be able to benefit from that. This is something that never happened. Now what we see is that there is hope again. We hope that this will happen in 2015.
We're not seeing it yet. We still see concerns in Eastern Europe and some issues in Western Europe, particularly in the segment that you see at the top right-hand side. I think that things feel slightly better than one or two years ago, but really, we're waiting for the growth that people are hoping for. Now we go to Asia, we see that China is slowing down quite clearly, especially as compared to previous years. China has experienced an excellent growth process over the past few years. It's not surprising to see a slowdown, but obviously, as a business, we are impacted by that in almost all segments. We also see weaknesses in South America, which is why it's such a good thing that we have a strategy and we're trying to improve ourselves.
We're not going to wait for the market that is going to help us. You've seen this in the performance of 2014. This is a strategy that is bearing fruit. You see this in the numbers, you see it on the sales side that we have negative figures here, but this was particularly driven by currency. 2014 is contrary to 2015. We see that the currencies were a headwind, not a tailwind. The first quarter euro became weaker as compared to all major currencies in the world, the dollar, the pound, the Chinese currency. 2014, it was still a negative effect on our revenues. Despite the fact that the effect was negative, we were able to improve our profits, and particularly if you look at the profit that we generate inherently, we improved by 20% as compared to the previous year.
If you then take into account what the additional effects were that we saw in 2014, you see that in 2013, we had positive non-recurrent effects. In 2014, we had negative incidentals or non-recurring effects. The performance of the company, we should really zoom in on the second graph on the left-hand side. That is where you see the 20% increase of operating income. Cash flow also improved by 3%. Very, very healthy signs, I would say, that we are well on track. Here you see, you don't really see it in the numbers, but you see that in profitability, the profitability in 2014 was 6.9%. Here you see it, if you'd adjust for incidentals, it's 7.5%. Then if you adjust for restructuring costs that we took charge of in 2014, we're in excess of 9%.
Of course, we will always have incidentals and restructuring effects, but you see that the underlying revenues, Akzo Nobel, has improved quite consistently. Last year, in volume side, there's been a growth that was offset by headwind in currency effects. We see the opposite for a few months in this year. This is what we have accomplished and the actual goals that we have for return on sales and return on investment, which is actually profit on capital invested, also our targets, our goals regarding the balance sheet of Akzo Nobel, the way we want to be healthy, the net debt to EBITDA ratio, net debt under two, we're doing better than that, better than our goals, our targets. We're absolutely convinced, as a management team present here today, we're absolutely convinced that we're on track to hit these targets.
Here you see the Akzo Nobel cash flow profile. This is something that was quite worrying at the beginning. Just to compare things in a simple way, the left-hand side should be higher. The dark blue are our operational cash flows. From that, we actually want to create a situation in which any liabilities we have, any obligations we have, can be paid with our operational cash flow, not by divesting, not by doing anything else. Know that we can foot the bill ourselves from our own operational strength. The dark blue section in 2012 was less good. We saw that in 2013 as well. 2014, we came close. We came close, but not entirely. Slightly cash negative in 2014.
We're convinced that in 2015, we will be able to hit a cash positive level, and that way, we'll be able to fund any liabilities we have from our own operational cash flow. We have been able to reduce our costs of borrowing money in the market. In the past, we had bonds in which we had very high interest percentages that we needed to pay. Prior to that, 2013, 2014, we paid in excess of 8% in terms of interest. Now, these interest percentages have gone down for everyone. For us in 2007, 2008, they were extremely high, the 7% bonds were replaced by replacing them or paying them off and not issuing them again, but also by introducing new bonds with lower interest. Our average funding costs are clearly being reduced, you see this in these low graphs, low bars.
We're constantly capable of reducing our financing charges and costs. On the other hand, we're trying to improve our operational performance, this is an excellent balance. We're doing this with the strategy which we introduced in 2013, the beginning of 2013. Very important strategy, the first results of which became visible in 2014. Actually, this is a very straightforward way of depicting the strategy. It's a strategy of organic growth and operational excellence, it's a nice, sleek way of carrying out your processes, but also of managing organic growth that we generate ourselves, along with sustainability, which is part and parcel of everything we do within this strategy. The strategy has been set out in this block. The behavior principles, which is the foundation, core principles and values, very important.
We look at what we do, the strategic focus areas, the processes, capabilities, the real strategic areas that we want to focus on. This is a strategy that we are delivering right now. We're in the third year, we have set our objectives for 2015. That doesn't mean that this is going to change. I think that we're going to continue on the path of this strategy for a while now. These are the goals for 2015. As I said, the entire Executive Committee is absolutely convinced that we are on track and that these goals will be achieved.
We have done a great deal in the different areas. This presentation is not going to do justice to the work our employees, our staff has done in this change process of the individual operations, paints, Specialty Chemicals and coatings, and what it is that we're doing at a group level at Akzo Nobel. In Decorative Paints, we have developed an entirely new way of working. There are certain elements that have been pushed by the market, other things have been centralized, procurement, planning, the plants, supply, logistics, we've also managed brands of our Decorative Paints, the centralization linked with increased freedom in the market itself to serve the market. This is a new model that we moved towards in 2014. Of course, the old model was managed differently according to the different countries, this is really generating synergies.
We have a different way of organizing things, clearly different way of organizing things. We have also been able to take out layers as we've done in Performance Coatings. We clearly see this reflected in the performance 2014. Performance Coatings, the coatings department of Akzo Nobel, has also experienced an extraordinary change by removing a number of layers from the organization, have a flatter organization, being closer to management, being able to respond with much more agility. Of course, we're still going through this process. We believe that it'll take until the second quarter 2015 until we finalize everything. All these three divisions or business areas have gone through fundamental business changes, the same applies to the group head office, we call it Global Business Services here. Here we have introduced a fundamentally different way of managing and supporting the different functions and businesses.
The combination of this large and substantial transformation process is reflected every quarter in our performance. It's not only about transformation plans and processes, it is also about people at Akzo Nobel. People who do everything in their power, have an incredible degree of commitment and dedication, have shown this throughout the reorganizations, the transformation. We've lost many, many people. We've had to take leave of many employees. That always hurts, the team at Akzo Nobel has continued to fight, to focus on core principles, delivering on the commitments, focusing on clients. This is what we require from our people, living up to our commitments, the passion for excellence, the fact that we have to do everything together, we absolutely want to win together, not as individuals.
Living these values has been so incredibly important to, on the one hand, introduce and carry through the transformation process, and on the other hand, hold on to the heart and spirit of Akzo Nobel. I was already talking about Human Cities. In 2014, we introduced it, and I'm going to say very little about it. I think it's much better for me to show you some footage that will explain itself.
Estimates suggest that by 2050, around 70% of the world's population will live in cities. Coping with the demands that this will create is one of the biggest challenges of our age. At Akzo Nobel, around 60% of our business goes into buildings, infrastructure, and transportation. We have a big role to play in helping cities to meet the challenge they face. That's why we've introduced our Human Cities initiative, which was officially launched at the 2014 Venice Architectural Biennale. It's designed to help the world's cities become more inspiring, more livable, and more enjoyable places for people to live and work. We're focusing on six main areas where our products and expertise can make the biggest difference. Bringing color to cities, embracing urban heritage, connecting people and places, encouraging education, promoting healthier lifestyles, inspiring more sustainable living.
We've already made great progress with Human Cities, building on work we've done in Bergamo, Italy, at Gardens by the Bay in Singapore, and Malacca in Malaysia, to name just three. As a progressive company, we're also working closely with a number of influential partner organizations and NGOs. We have already made a commitment to the Clinton Global Initiative, which established a partnership with 100 Resilient Cities, pioneered by The Rockefeller Foundation. It's just one of many steps we're taking to help cities across the world become more human.
If you want to know more, you can have a look at the year report. They have a wonderful, beautiful introduction, and they have very good explanation what we're all doing, and including the Human Cities initiative. I do believe it has a very positive effect on the image of Akzo Nobel as a whole. It determines the image as a whole, and I do believe we can set this forward. This is something we do not just alone, but with our staff and with external companies, with ventures to help us to make Human Cities a reality, and to help us to make those real and essential. Sustainability is something that Akzo Nobel has kept in high esteem for a long time, including all my predecessors. A lot of energy has been devoted to that. Akzo Nobel is not just focusing on sustainability separately.
Sustainability is an integral part of everything we do. Become number one in the Dow Jones Sustainability Index. This is a wonderful performance. In this presentation, I cannot cover everything that Akzo Nobel staff do that to encourage sustainability. This is just the way we work.
It is quite clear that people outside Akzo Nobel recognize this. They praise us, they award us, they put us on number one. This is something we want to keep doing in the coming years, and maybe even decennium. Having a brief glance at different parts of our business, Decorative Paints in 2012 was really having hard time because the building market, both in Europe and in America and other countries, was going through hard times. It was not an easy going. As a consequence, all the principles, all the changes we introduced step by step in Decorative Paints, brought closer the better revenues and profitability. Our innovation and the way we approach our clients, we keep improving that. The paint business depends on the renovation market. You see that on the pie chart that looks so good.
The part of the business is renovation, so not building new premises, but renovating the existing one. In Europe, it is a bigger market, while in China, we concentrate more on building new buildings. That's why we have 50% of in Europe and the rest in the emerging markets. This reflects the growth in the last years. The emerging market, the growth markets are slowing down. Lately, they're plateauing off. In Europe, in 2015, it will be picking up speed. It will be tough going in those markets, so we cannot expect any presence on the Decorative Paints market. Therefore, we can only hope that the results as part of everything can become better. A brief video film here as well to illustrate what I've been saying.
As the world becomes increasingly urbanized, how can we make sure that the cities we live in have meaning and provide people with a sense of place and space? At Akzo Nobel, we believe that balancing old and new is key to creating more Human Cities and protecting our heritage. To fully appreciate the positive impact that safeguarding the past can have, you only need to look at Malacca in Malaysia. Declared a UNESCO World Heritage Site in 2008, the town's unique architecture is being preserved through a partnership with Akzo Nobel's Dulux Paint brand. The project, which will run till 2019, involves Dulux providing technical and design support, as well as supplying suitable paints and coatings to help preserve the uniqueness and originality of the colors on 26 heritage buildings and monuments.
Once a thriving center for trade and cultural exchange between East and West, Malacca is a remarkable example of an historic colonial town. It's easy to understand why local residents are so fiercely proud of its history and remain keen to preserve its architecture and culture.
My name is Serge Jardin. I'm French. I am living in Malaysia since the last 25 years. Malacca have attracted the merchant from all over the world. Each of these community, these traders, bring with them a little bit to an influence, architecture, cuisine, costume, the language, and is what we can still see today. I think it's what UNESCO wanted to preserve, this unique encounter of so many different culture in the port of Malacca. History is a living process. Each stone will tell you a story if you take time to listen. That's the reason it's important for the Malaysian to preserve that heritage for the younger generation to come to learn.
Awesome.
If we have a look at the Performance Coatings department, that you see that the revenue exceeds EUR 5.5 billion, and the profitability is almost 10%. As you see, the restructuring costs were quite sizable, and they're already included into those figures. The whole segment was quite broad and it covers a lot of different activities, and we're talking about buildings and transportation. However, we do cover consumer goods and some industrial parts. Performance Coatings is the business area that covers all different kind of segments. Geographically, it has been an even spread all over the world. A lot of activities were reported, and it reflects a lot of the way we work, fewer layers and straight reporting lines. People have worked hard to achieve that, and we'll talk about Performance Coatings more.
Performance Coatings are reflected in such a way that the costs are reduced and the flexibility has been increased. Another video film here, and just show what kind of different accents we have. This is the wonderful side of Akzo Nobel and of our geographic presence and the clients, the variety, people we come across every day.
Every day, more and more people and goods need to travel around the world, which means that global demand for safe and reliable transport has never been higher. We rely on modern transportation hubs like airports, bus terminals, and train stations to connect our cities and keep modern life moving. They help cities to function properly and ensure that people and cargo can get around quickly and efficiently. This places big demands on all areas of transport, ranging from daily wear and tear to the environmental challenges such as weathering and corrosion. Akzo Nobel's high-performance coatings products are designed to protect and enhance vehicles, buildings, and transport systems all over the world. We keep airports in Hong Kong, London, and Brazil safer and more comfortable for longer. We protect trains and metro systems in Dubai and Shanghai.
As our cities keep growing, we're helping to make transport more sustainable, better looking, and more affordable for everyone. At Akzo Nobel, we're committed to meeting the growing demands of a fast-changing world and making our cities better, more human places to live.
Together with our partners, we developed a concept to make cities more human. It's very nice that work not only with the local actors, but also mayors of those cities come to us, and they want to share these concepts. They would like us to make some parts of their cities more human, nicer, where people feel at ease. We have a different partner in dialogues, different from before we launched this initiative, Human Cities. Let's have a look at the Specialty Chemicals. We see the profitability has improved in 2014. We have very good results. Return on sales, 10.4%. This is a big step forward compared to the previous year. The return on investment is 14.8%. It used to be 8.2% in the past. You see the leap forward has been considerable.
This is the continuous improvements, both of the supply chain and customer service. You can see as a shareholder, the results of that and the figures. Again, a brief visual illustration.
Over the next few decades, the world's population is projected to reach 9 billion people. This will lead to more and more of us living in energy and resource-hungry cities. If we're to meet this growing demand, we have to learn to do more with less. Akzo Nobel is committed to developing sustainable solutions that promote efficient and sustainable living. That's why we put a strong focus on driving resource efficiency and lowering energy use. How does this benefit cities? Well, a great example is our fast increasing production of HPMOs, which are used in the manufacture of LEDs. LED bulbs help to significantly reduce energy consumption as well as maintenance costs. They also open up exciting new possibilities for smart urban lighting projects, making cities safer, more colorful, and more enjoyable places to live and work.
Human Cities is a very important initiative. Therefore, it has emerged four times here in the video footage, and each business area has an individual dedicated program in support of that. Specialty Chemicals focuses on that, including the product we deliver and our own energy consumption at Akzo Nobel facilities. Summing up, I would say that in 2014, it has become clear that a lot of things were achieved until now are reflected in the figures, in the year figures, and in our reports. We have the improved profitability and improved profitability if we look at the different capital areas. In spite of the fact that the market is very complicated, we are undergoing a transformation. A considerable part has already been achieved. In the coating department, we need to see the results because delays we've taken out have improved our overall structure.
The launch of the Human Cities initiative has delivered a lot of positive reactions from the outside world. The absolute focus on sustainability has been the greatest team. In 2014, we kept developing that. In fact, we found the possibility to set forward this initiative, bringing to the wonderful results. We're on track to deliver 2015 targets. I've already mentioned that. Before I continue with the conclusions of the presentation, I would like to thank all of our staff who made all these results possible. I would like to thank the clients, who have been extremely loyal to us, and they do assist us in innovating and finding new product. I would like to thank you as shareholders. Of course, I would like to thank our colleagues and Uwe. Thank you.
Yes, thank you very much, Tom. Thank you for your presentation.
The registration of shareholders was closed at 2:15 P.M., and the attendance list has been verified. The share capital is EUR 349,300,243.856 , and it gives the total number of votes is 174.621928, and the level of attendance is therefore 70.73%. Now copies of Mr. Büchner's presentation will be available from the information desk free of charge. I would like to invite you now to ask your questions relating the financial year 2014 and about the report of the board of management. As I said earlier, please set your questions relating to the agenda item in one go, and also the corporate governance and the strategy item can be covered now. If you have questions about the remuneration policy, please keep them to agenda item 3A, and also questions related to the audit report will come after that. Who would like to start the ball rolling?
The lady Oh, yes. That's over there. Could you please state your name?
Thank you very much. I'm Carola van Lamoen. I work at Robeco, and I'm representing also MN Services. First of all, I would like to thank you and to express my compliments of the year results of 2014. We see that the efficiency in your management also gives results. We see the profitability growing and the result. We can only compliment that. I'd like to congratulate it with the Dow Jones Sustainability Index and your performance there, which is incredible. The results have a good quality. We understand that AkzoNobel has shown the value creation per different segment, and this shows also the reports, also the Pulp and Performance Chemicals business units in Brazil has been covered from four different aspects. My question is as follows.
We see that two out of three sustainability targets were performing less, so the carbon footprint and the high-performance chemicals performed worse. Can we imagine that the results in the coming year will be improved? Akzo Nobel also was confronted by external fraud case in the U.S., amounting totally to EUR 51 million. We understand that the steps have been taken by Akzo Nobel to prevent similar frauds happening in the future. Until now, we haven't seen a lot of transparency in that area. Are you planning to be more transparent as a result of the investigation into the fraud? If possible, also would like to have the improvements covered about concerning the management system and the so-called lessons learned from this case.
Okay. You've got two questions. The first one covers the sustainability index, where we've seen certain issues. Mr. Büchner.
Two out of three targets were reported in the sustainability area. Yes. Yes. Push the button again. Thanks. There are three targets talking about sustainability. One is going quite fine, and we've reached the target of 2020. We put all our effort into reaching this target. Two others in 2014 have plateaued off or haven't even taken a step backwards. As a company, of course, you off take your electricity, take the power from the local parties. You're trying to save all the time on the one hand. If a certain country switched over to coal or to another energy mix, you cannot compensate straight away. This is what you've seen. This is the so-called CO2 footprint reduction. This target has been doing worse than we had expected.
Internally, we've done our homework, and we've achieved some savings. For example, in Germany leads certain power areas, and the Netherlands have been more coal-oriented in energy production, we couldn't influence that. We had to work hard on our own efficiency to reduce the carbon footprint for us and for our partners. We see that the whole chain is much broader than just the CO2 emissions. The CO2 is also part of the Resource Efficiency Index, which is quite a normative index, which we've set for ourselves. Because it's had a certain step back, we see that in 2014, we haven't improved. Our committee have analyzed this in quite a detail, and we need to have a closer look at what we can do to get this target anyway. We're doing our best to improve this particular area.
The targets remain the way they are. Oh, yes. They remain out there the way they were set. The fraud in Chicago, this particular case. Maybe I can add that the financial director Maëlys, can you maybe add something? The CFO.
Yes. On this fraud end of 2014, the company has been subject to an external fraud in one of its location in the U.S. As soon as we detected this fraud, we took immediately action to contact the appropriate law enforcement authorities and also to name independent legal and auditor's advisor to look at the case. We also very quickly informed the market. We've been transparent, announcing with the press release that we had this external fraud. We have looked intensively at the case. We have been able to confirm that it was an isolated case in this subsidiary in Chicago. We have also been able to know that the amount was limited, and we took the whole amount lost in 2014, which at the end amount to EUR 51 million. I think we've been transparent in that.
We are now focusing very much on recovering the money to try to find who has done that and to recover the funds. This is really the concentration. You need to understand that this is what we think is best for the company and for the shareholder, is to be able to recover the money. That's why we have not disclosed more detail about the fraud. We have been very transparent about what happened. We've also been able to confirm with our extensive analysis that we had a customary and proper control in place, but they were breached. Of course, now what we're doing, on top of trying to recover the money, is to increase the awareness with the company. We have done extensive training in all our subsidiaries to ensure that people reinforce their carefulness.
Thank you.
Maybe something about lessons learned.
I think in terms of lessons, as we know right now, more and more companies are facing those types of risk of being targeted. That's why we have, as I mentioned, reinforced the awareness of people around the world about the fact they need to be very vigilant. They need to follow our procedure, our control. As I said, we are looking at it, and we have a proper control in place. Of course, we're also looking at reinforcing controls in certain areas. Our framework control, which is disclosed in your report, have been assessed very strong. Thank you.
Good. [Non-English content]
Right. Who would like to take the floor next? The gentleman there in the back.
My name is Ko Sennings. I'm from the VEB, the Dutch Association of Investors for Sustainable Development. I have several questions. I would like to bundle them all together. I represent 45,000 shares. My first question is about the volumes and the price mix. We've seen that the profitability has improved, and we've seen that with Akzo Nobel, and we only support that. In 2014, the sales have reached a small plus, and the price mix is 0. In Q1, the volumes have decreased, and they couldn't compensate that with the price mix effect. Could you please highlight why is it so complex, so difficult to compensate for the sales volumes, either by the high prices or the price mix? Next, the lower oil prices.
First, what is your vision on the whole issue? Here, we namely think that it's important to highlight if Akzo Nobel now gets in a more difficult situation, if the price goes up or down. What kind of impact to expect? Moreover, you were talking about the growth markets, that the growth markets are experiencing a difficult time. We see the spread per region, the geographical spread. Could you maybe go into more detail on the geographical spread and growing markets? My next question is, we see the explanation, the return on sales is on the operational loss from corporate and other. Those losses have grown in the last years from -EUR 170 million in 2011 to -EUR 314 million in 2014. Could you please explain these figures as well?
Okay. Right. Thank you very much for your question. We're not talking about us being locked, it's about you being locked in, about everybody's happiness. The sales volumes and prices, could you maybe explain that? In 2014, the volumes have grown, the markets, I've already pointed out, have given us very little tailwind. In 2015, in the first quarter, we'll see the same thing. We're not talking about 2015 here. All geographic areas, we see just like in North America, which is a growing area compared to the year before. All the other regions have remained the same growth-wise, or they're growing less than in other areas. South America, Russia, because the prices have grown less, as well as China. This is the result applying to the volume growth. The markets have remained challenging.
Once again, the reason for us having such a good time is because we did not rely on those markets helping us out.
We did not expect that. Talking about oil, if I may. It has two effects on Akzo Nobel. We have clients from the oil industry. Those clients have invested heavily, or they have frozen the investments, or as they restructured and delayed. We don't know if it is a permanent delay or a temporary delay. Some of our clients, companies, see the market becoming weaker because of the oil prices, and they purchase less from us. This is a slow-going reaction. On the other side, we buy a lot of products which are oil-based, and in that area, we expect partial effects.
We need to be quite clear that the clients know that the oil prices go lower, and the clients would say, "We need to have an economy effect." This has not been really thought through because the oil prices have been on this level for just three months. A lot of people are discussing and analyzing the situation and who would feel the greatest impacts. We at Akzo Nobel observe things. We follow the discussion. We take quite an active part with our suppliers about that, and we do realize it can have a great effect. It is a very complex structure from the point of view of clients and suppliers. These are parts of the puzzle which are connected to each other, and we do see certain movements in the price mix, what you talked about, because the oil price are part of that.
The last part may be corporate cost. Maëlys, maybe you could take that, from EUR 170 million to minus EUR 314. Could you maybe take this question?
As I just mentioned before, in 2014, we have been subject to this fraud case amounted to EUR 51 million, and this was recorded in the corporate cost. That explains the variation. Globally, as Ton mentioned, we are working really on transforming the function, and therefore, our costs are going down. The increase is unfortunately due to the loss into the fraud. Thank you.
Okay. [Non-English content]
Who would like to take the floor about this agenda item? A hand over there.
Yes, Mirella Tieleman-Klamer. I am from the Dutch Association of Investors for Sustainable Development. We have 70 institutional investors, 600 private, and EUR 16 billion investments. I would like to congratulate Akzo Nobel with the results. It is inspirational. It is the source of hope that the planet possible has been drawn as a plan to create more value. What we see is that your targets and Eco-Premium solutions in 2020 have almost been reached. It brings about the question, do you think that this ambition needs to be fine-tuned? In your report, you say that the eco-efficiency in 2050 needs to be four times better. It may be high time right now to increase your ambition in Eco-Premium. Can you commit? Can you improve the targets? What are the barriers?
Next, we see beautiful ambitions, and we see beautiful targets which we are trying to reach. However, it is not quite clear how. What is the way Akzo Nobel has chosen to achieve this? Would really appreciate more information and more specific targets about garbage. The World Business Council for Sustainable Development has also appealed to everyone to achieve a zero waste level by 2050. Having said that, I would like to express my appreciation of the renewable and sustainability index. We do need some targets on the renewable-based sources. Do you have plans in that area as well?
All right. It is a number of questions, actually. Can we become more ambitious in the area of eco targets?
Looking at the way we are going right now, well, Eco-Premium targets are, it is a very good English translation for projects that have certain competitive edge based on the sustainability for our clients. We can do a lot with our energy sources, but we can make products which bring about positive effect for our clients and can also become a competitive edge for us. We are a leader in a lot of innovations, but if you are standing still for a year, a lot of people want to catch you up, and it is very easy to copy other people, much easier than to renew. The Eco-Premium solution is not standing still.
If we need some more time to bring about innovation, if we want to take a breather in innovation, then those percentages we're losing, the 3% or 4% are just too low for us because this is a very dynamic process. As we've just explained, the targets are still very strong because we analyze a great number of criteria also concerning our competitors. If we say, well, there are targets, they need to stay at the same level, we cannot keep changing them. The Eco-Premium solution is the target, and we don't have plans on short-term to change that or to replace them. What about zero waste target? Are we planning to adopt new targets? We are participating in the World Business Council for Sustainable Development, and zero waste is a part of that overall program. If our operational eco-efficiency is implemented.
We have different targets in that area, different paints and coatings and Specialty Chemicals have done a lot to diminish the waste. Not very much has been brought to landfills. Of course, the production, the manufacturing process, has a lot to do with that. We have internal targets, and those internal targets have not been announced to the outside world, because we have our financial targets and we have a great number of sustainability targets. We have presented them, and we have committed ourselves to that. It is intrinsic to our work. Those are not short-term targets, I must say.
Right. Any other questions about the report?
You had a question, didn't you?
Y es, I was just curious. Are you going to publish those waste targets in the coming future? I have also the complaints procedure question.
The point is that our organization, the Dutch Association of Investors for Sustainable Development, appreciates this PCUP method. It is aimed at the internal process. If there are complaints from the society or from the NGOs, they're extremely important. I was wondering what kind of mechanisms are applied in your organization to deal with those complaints. Do you have any kind of procedure to handle complaints from the outside complainers? My last question is about taxes. Why can't you report country by country about the taxes? Because taxes are our own common responsibility in any society we're present at.
Let's start with the taxes. Maëlys, it's up to you. Could you maybe say a few words about tax?
Yes. Our tax rate is currently 29% in 2014, and for 2015, 31% for the first quarter. We are a good citizen paying our tax, and we disclose in our annual report our effective tax rate and the amount of tax we pay. Nevertheless, for the country by country, we're thinking that providing this amount of detail will provide to our competitors a lot of information about the actual result we're making in the different country. Therefore, it's more for the competitive disadvantage that you could create that we're disclosing it. For the rest, I think we're very transparent overall on the information we provide in the annual report. Thank you.
The complaints procedure next. Yes, we have quite a transparent complaint handling procedure, which is quite a low threshold, both for our staff and outsiders. They can come to us and put forward their complaints. This is a functioning procedure, and we always take them seriously. It is an institutionalized process in AkzoNobel running quite smoothly. It shows quite clearly that people make use of it. At this moment, we don't think we need to improve that considerably because the transparency is quite high, and people make use of this procedure, both internally and from the outside. Everything depends on the issue at hand. We can start discussing a certain issue, both at a meeting or personally. AkzoNobel is quite open and transparent for both its own staff and outside world, like NGOs.
Those NGOs and members of the public who want to tell us if something goes wrong. Who wants to take the floor? No one? I'd like to close this agenda item, and thank you very much for the compliments we've received here. It does not happen very often, but if you have any compliments, they're always welcome. We're moving on, discussing the implementation of the remuneration policy. It's my pleasure to give the floor to Ms. Baldauf, who is the head of the Remuneration Committee. She will present a report on the implementation of the remuneration policy in 2014 as laid down in the annual report. Sari, the floor is yours.
Good afternoon to all of you. From me, I apologize that my Dutch is not very well developed. I have really difficulty with this "gh" sound that you use in your language. I will very briefly go through first how our remuneration package is built. If I could get that slide on there. Here we go. The remuneration package of the members of the Board of Management consists of base salary, as you can see there, performance-related short-term incentive with share matching opportunity, performance-related long-term incentive in the form of shares, post-contract benefits, and then the other benefits. I'm not going to go deeper into details with this because there's not been changes with regards to this policy from last year. The only thing I will point out here has to do with the long-term incentive.
There you see the three performance measures, total shareholder return on investment, and then Sustainability Index. These are valid for the programs since 2013. For the series 2012, 2014, we had two criteria, and those were total shareholder return and sustainability with 50/50 split. The reason I mention this is that when I come to implementation of the policy, that was the criteria used there. If we then turn to the implementation of the remuneration policy in 2014, first, I'd just like to mention that to ensure that remuneration is linked to performance, a significant proportion of the remuneration package is variable and dependent on short- and long-term performance of the individual board member and the company. The implementation of the policy is described in the annual report on the pages 130 and 134.
If I just briefly summarize some of the aspects here, as I already said, objectives for 2014 for the Short-Term Incentives remained unchanged, and payout for that program is well-aligned with the company performance. When the Supervisory Board reviewed company 2014 performance, there were no facts or circumstances that would have required adjustment of the STI payout. I'd like to point out, though, the fraud case in the U.S. has already been discussed here, so I would like to point out that impacted in a significant way, the outcome of the financial metrics in a negative way. For the long-term incentive, as I already said in the 2012-2014 series, the criteria were Total Shareholder Return on Sustainability Index. Even though the company's ranking in the relative Total Shareholder Return index moved up by one place, this did not result in payout.
The payout for that was zero. For the third consecutive year, the company ended up, as has been mentioned here already, in the first place in the Sustainability ranking, and this resulted in an award of 82% of shares granted. Finally, just one final comment. The same criteria that were used 2014 are also being used in 2015. During this year, the Remuneration Committee will proactively review the remuneration structure and incentive criteria in view of what is needed and relevant beyond 2015, when we go further into the future. This both in terms of alignment with the company's strategy from the point of view, and then also from the point of view of implementing remuneration at the median levels of external market as is defined in our remuneration policy.
That's what I wanted to say at this point, and I'll be happy to take questions. Thanks.
Thank you, Sari. [Non-English Content]
Thank you, Sari. Are there any questions? I can confirm that there is one question from the lady in the front. We actually have two questions.
Well, first of all, unfortunately, we see that Akzo Nobel still gives variable pay in performance below the median. We would like to call on you when you review the remuneration policy to implement a different policy in this respect. I'd like to hear from you. You also said that the fraud case had a negative impact on the financial targets. Could you be more explicit? Did it also have an impact on the personal targets of the members of the board, discretionary or not? Because the fraud took place under the ultimate responsibility of the board, obviously.
Chairman, the latter is clear. It has had an impact on all forms of remuneration, all quantitative remunerations, because it's a very quantitatively focused remuneration package, as you've been able to see in the explanatory note. Indeed, the answer is yes.
Paying below the median, Sari, maybe you would like to give an answer to that. This is TSR?
TSR, yeah. As I mentioned, the outcome was zero, and so it was below median and the outcome was zero. Actually, this policy was approved, I believe in the AGM, this use of the ranking system in 2013, if I recollect correctly. That's why it was in use 2014 and is in use now. As I said, we proactively look at the future requirements.
Thank you, Bill. Thank you.
Are there any other questions? If not, we can now proceed to the next item on the agenda, which is adoption of the financial accounts for the financial year 2014. Mr. Büchner's presentation has highlighted the most important financial elements of 2014, and this is the point in time in which you could, if you wish, ask any questions to the auditor, the external auditor. Who has any questions for the auditor? Yes.
Yes, once again, Ko Sennings , VEB, Association of Security Holders. First of all, I have a question on CapEx, and then two question to the external auditor. Questions about CapEx. One of the targets of Akzo Nobel is to reduce CapEx towards depreciation. Now, it was remarkable that the plant equipment machinery CapEx is much lower than write-offs, and the question is why is that? How come?
Why is it that car manufacturing plants, are they being closed, or are you investing less in technology? Then my questions to the auditor. Perhaps you can hold onto this, and we can first deal with the CapEx question.
Prior to 2012, we invested inordinate amounts in CapEx. CapEx amounts were far and far in excess, not only of write-offs but also write-off and amortization combined. Now we are trying to move towards this combined ratio, 4% of revenues if you look at revenue today, which means that we are still conducting excellent investments, in excess of write-offs. We're investing in growth. It's not that we're investing, we're just reducing it to a normalized, a normal amount, and that is mainly directed to property, plant, and equipment in the future. Now you have questions for the external auditor.
Yes, the mandate of KPMG will expire in 2015. Question therefore is how are they going to prepare PricewaterhouseCoopers to this new period of time? The annual report furthermore says that misstatements in excess of EUR 3 million are to be submitted to the supervisory board ordinarily, or minor misstatements that may be relevant. Question is, were there any such misstatements? If so, could you put them into perspective, and what or how did the supervisory board deal with these misstatements? Chairman, the last question is more of a question for the chairman of the audit committee, I would say, and the first question can be answered by the external auditor. How do you deal with the changeover from one auditor to the next?
Perhaps I can take the opportunity to say a few words about the audit because you've called on the auditor to tell you a bit more about the role of the auditor in carrying out the audit. By the way, my name is Eric van Leeuwen. I'm one of the external auditors of Akzo Nobel. The financial statements is drafted by the board of management, is signed by the supervisory board, and is put to you for approval as shareholders. It is up to me to audit the financial statements. The outcome of the audit has been reflected in the opinion. The opinion included on page 184-page 186 of the financial statements. Now, the audit focuses on making sure that the financial statements reflect the actual reality. In other words, our audit is also focused on determining any incorrectness, any material errors that would be relevant in this respect.
In our audit, we focus on the important elements of the financial statements, also processes and systems that are being used when drawing up the financial statements. This would be the equity position, cash flows, and so forth. We reviewed the management report to see whether there's any information that conflicts with the financial statements, any errors, and we've also determined that the financial statements complies with the generally accepted accounting principles and that all legal requirements have been met. We have also met our legal requirement by reporting our findings to the Supervisory Board and Board of Management, and in our opinion, in accordance with the law, we have indicated what our main findings have been, our main audit goals, and you've been able to read that we've been able to issue an unqualified statement.
The audit was carried out in conformity with the professionally accepted standards for auditors. We've taken into account the risk factors and the internal audit and internal control was evaluated and reviewed, and we determined what it is that we consider to be critical in the audit of the financial statements, the most important items, and we reported on that in our statement. During the interim audit, we focus on internal control and year-end. We mainly control on the work being done at year-end. Akzo Nobel is an internationally operating corporation with many subsidiaries, both in the Netherlands and abroad, and we have involved many of the subsidiaries in our audit. KPMG is the external auditor for the subsidiaries. We send them instructions to these auditors, we do internal reviews, and we talk to local management. This year we visited the U.S., the U.K., France, Germany, and China.
We audit the financial statements in terms of a certain materiality limit. Of course, it's not responsible to audit everything, it all depends on materiality, and you'll be able to find that in the statement. It is EUR 64 million in total for Akzo Nobel. That doesn't mean to say that we review everything with a materiality limit of EUR 64 million. EUR 64 million is what we apply to certain items on the balance sheet or to subsidiary companies, and anything that may have gone wrong in the course of the year, if it exceeds EUR 3 million, it'll be reported back to us, and we then discuss it with the Board of Management and the Audit Committee in detail, and we will then report to the Supervisory Board on that matter. Approach, findings of the audit, conclusions will be discussed in detail with the Audit Committee.
We meet with the Audit Committee six times a year. At year-end, we attend a meeting of the Supervisory Board, in which the financial statements are discussed, and we will report on our work and the outcome and the content of the management letter, and our opinion is discussed. I wanted to use this opportunity to share more information on our work, our findings, and our interactions with the Audit Committee and the Executive Board of Management in order to point out what it is that we do. I'll be happy to answer any other questions you may have regarding the transition.
We have agreed with the Audit Committee that in the meeting in June, we will discuss with them, in consultation with the new auditor, PwC, and in consultation with the internal accounting service, what the transition this year will look like, and we have made arrangements with the new auditor. As per 1st October 2015, they have to be independent. From that point in time, we can start working on a transition, and we know from experience, and I have my own experience in other assignments, that a smooth transition, if you will, is indeed possible, and that we're going to do everything possible to ensure that it is a smooth transition. Auditing differences. Correct, you're quite right that audit differences in excess of 3 million are reported back to myself and are discussed with the Supervisory Board and the Audit Committee.
Akzo Nobel has such a quality of internal reporting and has such a clear ambition to report as best as possible and be as transparent as possible, that any auditing differences that we may have identified this year have been fully incorporated in the financial statement, so that as per year-end, there were no other auditing differences to be reckoned with.
That answers all the questions. Are there any other questions for the auditor?
No. I can confirm that there are no further questions. Now, allow me to explain how the voting procedure works. I will be announcing when it is that I'm opening the vote, and I will also inform you when it is that we're closing the vote. After the vote, you'll find the outcome on the screen with the number of votes and percentages.
This information, by the way, will also be posted on the website. I will be informing you whether a proposal has been carried or rejected. For voting instructions, they can be stated explicitly. Any votes against can indicate that they will be voting against. The vote is open.
Go through.
Right. Okay. Back. The voting is now closed. What you see here are the results. They are posted on the screen right behind me. The results are here. Please ask the secretary to make a note of it, and the proposal has been voted in favor. We are moving on to agenda item 3C, the dividend policy. Ms. Maëlys van der Meulen will comment briefly on the dividend policy. I would like to highlight that the dividend policy itself is not a voting point. Maëlys, the floor is yours.
Yes. It is Akzo Nobel policy to pay a dividend, stable to rising each year. The dividend, the interim one, the final, will be paid in cash unless the shareholder elect to receive a share dividend. Through a strategy that I liked Ton in his presentation, the management has been committed to really improve both profitability and cash generation. As you can see, during the past two years, we have really made strong progress into improving our ratio of profitability, and we also improved significantly our cash generation. Nevertheless, last year, 2014, we are still slightly cash negative. Therefore, we are proposing to maintain stable the dividend for this year at EUR 1.45 per share.
Okay.
I am sorry, yes. Thank you. Thank you very much.
Agenda item 3D. This is the profit allocation and the adoption of the dividend proposal. It was proposed at the financial 2014, a dividend of EUR 1.45 per nominal share, and of the nominal value of EUR 2. In 2014, EUR 0.33 have already been paid out as interim dividend. The remaining final dividend, EUR 1.12 per share, will be paid in cash under the terms published by Akzo Nobel. On May 19 will the payment take place until the shareholder opts for payment of the dividend in shares. The supervisory board recommends adoption of those resolutions. Are there any questions in relation to the dividend proposal? None. We will vote on the dividend proposal. The voting is now open. The voting has now been closed. The results of the vote are on the screen.
Secretary, please make a note of the numbers, and the proposal has been adopted. Agenda item four, discharge. The discharge from liability of the members of the Board of Management who held office in 2014 in relation to the performance of their duties during the financial year 2014. Are there any questions in relation to this proposal? None. I suggest we vote. The voting is now open.
[Non-English contnet]
The voting has been closed. The results are up on the screen. I'd like to request the secretary to make a note of that, we see that the proposal has been adopted. Item 4B, discharge from liability of the members of the Supervisory Board who held office in 2014 in relation to the performance of their duties in the financial year 2014. Are there any questions in relation to this proposal? None. I suggest we vote on this agenda item. The voting is now open.
[Non-English content]
The voting has now been closed. The results are on the screen. I would like to request the secretary again to make a note of the result the proposal has been adopted. Thank you very much. Agenda item four. The following agenda item concerns the appointment of one new member of the Supervisory Board, namely Mr. Sluimers, and the reappointment of Ms. Bruzelius as member of the Supervisory Board. Brief resumes of each, including relevant data such as the occupation, the value of the shares which they hold in the company's capital, and an overview of other present positions, can be found on our website. For Mrs. Bruzelius, this information is also summarized in the report for 2014. I can confirm that the priority shareholders have resolved to waive their option to make a binding recommendation for these positions.
Therefore, the nominations are non-binding, they're subject to the approval at today's meeting. First, the nomination under agenda item 5A, the appointment of Mr. Sluimers as a member of the Supervisory Board. Mr. Sluimers is the CEO of APG Group and a Supervisory Board member of Atradius, where he chairs the Supervisory Board of Atradius Credit Insurance. He has financial and commercial expertise of 35 years. He served at the Ministry of Finance, where his most recent position was the Director General of the Budget. Mr. Sluimers's financial credentials are recognized internationally, as demonstrated in his function as trustee of the IFRS Foundation, he's also Board of Governors of the State Academy of Finance and Economics. His deep-grained knowledge will contribute to the financial expertise, if he's appointed today, the Supervisory Board intends to include Mr. Sluimers in the Audit Committee.
Mr. Sluimers, could I ask you please to stand up? Thank you very much. Thank you can sit down. Are there any questions in relation to this proposed appointment? Thank you. Let us vote on this agenda item. The voting is now open. The voting has now been closed. The results of the voting are shown on the screen. I would like to request the secretary to record the result and establish that the resolution has been passed. Congratulations. We're moving on to our second nomination, 5B, the reappointment of Mrs. Bruzelius as a member of the Supervisory Board. Mrs. Bruzelius' current term of office ends this year, she has confirmed that she's available to be reappointed for a third term of four years. Mrs. Bruzelius has been a member of the Supervisory Board since May 2007, since March 2009, she's been a member of the Audit Committee.
Mrs. Bruzelius has a financial background, including membership of the Audit Committee of a number of international companies and chairing Board of Lancelot Asset Management AB. In these capacities, with her experience, she makes a major contribution to our Supervisory Board and the Audit Committee. It is proposed by the Supervisory Board to reappoint Mrs. Bruzelius. Are there any questions in relation to the proposed appointment? The floor is yours.
My question is about the number of members of the Supervisory Board. There were from nine merged to six, there would be eight. Is it the intention of Akzo Nobel to keep decreasing the number of members of the Board? We don't have an established policy concerning the numbers of the members, but in the coming years, we're planning to attract another member.
Of course, you do need a certain number of people, because there are a number of committees, we need to have them all filled in, one person can be a member of two or three committees. Around 10 is the most optimal and given number. Right. Let us vote, the voting is now open. The voting has now been closed. The results of the voting are presented on the screen. I request the secretary to make a note of the result and establish that the resolution has been carried. Thank you. Proposal to extend the authorization of the Board of Management to issue shares and to restrict or exclude the preemptive rights of shareholders. As you know, this agenda item is presented to you.
The issued shares and the restriction of exclusion of preemptive rights of shareholders by the Board of Management requires the authorization of the meeting of shareholders. This agenda item, two resolutions have to be adopted. As for the issuing shares, a simple majority of votes cast is required, whereas the restriction or exclusion preemptive right of shareholders, a two-thirds majority is required, and if less than half of the share capital is represented. First, the law stipulates that the Board of Management has a certain authority to prolong it for 18 months. April 22, 2015, and if the term is shorter, then on the day when the general meeting of shareholders is held.
This authorization and grant subscription rights to shares up to a maximum of 10% in case of mergers or acquisitions to be increased up to a maximum of 10% of the total number of shares outstanding on April 22, 2015, at the Board of Management discretion to be issued as common shares and/or preferred shares. Are there any questions on this agenda item? I suggest we vote on this proposal. The voting is now open. The voting is now closed, and the results are shown on the screen. The resolution has been passed. Moving on to item 6B. It may be in the interest of the company is that when shares are issued, preemptive rights are restricted or excluded.
In this respect, we also require to extend the authorization of the Board of Management for a period of 18 months, starting on April 22, 2015, or in case of a shorter period, until the day the authorization is extended by the AGM to restrict or exclude the preemptive rights of shareholders when shares are issued or subscription rights granted, which the Board of Management is authorized to do in accordance with the resolution just passed. Situation in which it may occur are the issue of shares in relation to acquisitions. However, we should note that the preemptive rights do not apply if shares are fully paid in kind, for example, in case of acquisition, as stipulated by law.
However, the exclusion of preemptive rights may be required for those acquisitions if the shares are fully paid up or if those acquired cash money is used to pay the purchase price of the company acquired wholly or in part. Are there any questions in relation to this proposal? There are none. We start the voting. The voting is now open. The voting has now been closed, and the results are showing on the screen. I can establish that the resolution has been passed. Proposal to authorize the Board of Management to acquire common shares in the share capital of the company on behalf of the company.
This proposal concerns the authorization of the Board of Management for a period of 18 months, starting on April the 22nd, 2015, or in case in a shorter period, until the day the authorization is extended by the AGM of shareholders to acquire common shares in the company's shareholder at any time during the 18th period. The number of common shares to be acquired is limited to the maximum number of shares in the company's share capital, as permitted within the limits of the law and the articles of association that the company may hold in its own share capital at any given moment.
Common shares may be acquired through the stock market or otherwise at a price between the par value and the Euronext Amsterdam N.V. price on the day of purchase, on condition that the share price is no higher than the opening price on the day of purchase. The proposal to allow the company to acquire shares also at a price up to 10% in excess of the opening price has been inspired by the desire to have more flexibility in case price fluctuation may occur during the day. The lower limit of the par value has been included in the proposal as the law stipulates that beside an upper limit, also a lower limit is required. Are there any questions? There are none. The voting is now open. We're going to vote. The voting has now been closed.
The results of the voting are presented on the screen behind me. I request the secretary to make a note of the result and establish that the resolution has been passed. We're coming to any other business in closing. Does anybody wish to ask any questions or make further comments? The floor is yours.
I am Mirella Tieleman-Klamer on behalf of the VBDO, the Association of Investors for Sustainable Development. Please receive my compliments for the sustainable profit and loss analysis which you've drawn up. We, as VBDO, had some questions about that. If we have some questions, well, we've been quite brief and concise. My request is to find some time after the meeting to answer our written questions presented by us. Could you answer them also in a written form?
Moreover, I do hope that you can try and bring in more transparency in setting the targets also for the outside world, because that helps to achieve those sustainability targets which are important for all of us.
Allow me to assure you that we're doing our best to be as transparent as possible. As far as the targeting is concerned, it's more efficient and effective to have just a couple targets, say two or three, and then you can be quite sure that all the attention would be given to those two targets, and there is more probability to achieve those targets. We are encouraged to set targets for everything and to publish them, but if you have 25 targets, that means that you have none. Certain discipline in setting the targets is a very good thing.
I do understand your ambition to try and spread it out as broadly as possible. On the other hand, we need to see how feasible it is. We have just 24 hours in a day, and we also must remember the efficiency aspect in setting the targets. I would love to ask the secretary, have we received your written questions? Are we going to answer them in written form as well? Right. Okay. I guess we can put it up on the website, and we'll keep in touch, and we'll get in touch. Thank you very much for answering my questions. Just one brief remark on my side. I'm not talking about 25 targets really, but we've seen that the renewable sources are a great part of the carbon footprint.
We believe that the Resource Efficiency Index can be quite an attractive indicator for future clearance and transparency. I do realize that you're not trying to ask us to set 25 targets, but you're not the only one who talks about targets, and you're not the only one who encourages to set targets. We are being approached from left, right, and center. I appreciate the value of targets, but we must think about efficiency in target setting. Right. Before we close the meeting. Oh, there is another question. It's just 3:30.
Yes, I have an essential question about pensions. In your report, I read that in 2015, EUR 313 million will be dedicated to top-ups, and in Q1, has such a payment been done? We don't have any insight in the arrangements, and there is the deficit of about EUR 800 million.
Two questions, how should investors interpret these figures? Are there any cash payments coming up? The second issue I would like to touch upon, the ROI and ROS targets. Are they going to be reached in 2015? What are the expectations? Let me guess. What is coming after that? Well, not just the amounts of the targets. I'm not going to present that, but we're just talking about, what's next? This is what I meant. These two questions, Ton, will you take those?
Pensions. Pensions are an incredibly complex issue, and we need to go into details and depth. We pay around EUR 330 million on top-ups per year, and this is due to the British pension funds which were acquired in our portfolio. They will be placed in the first quarter, most entirely, maybe to a considerable extent.
That's why we saw them. Those top-ups are negotiated every three years. Some shifts are possible, but the major part of top-ups have been paid in the first quarter for the whole year, and the possible fluctuations will be in the smaller part. As far as ROE and ROS are concerned, we've said, this is just 2015. Let's first get those targets and achieve those targets and then sit down and discuss those tasks because it will keep us focused on these targets, and we can start discussing new ones after that.
Right. Any other questions? None. Before we close today's meeting, I would like to take a moment to consider a very sad thing. We lost Dolf van den Brink, who passed away in December last year. He has been a supervisory board member for 10 years and was head of the audit committee.
Dolf was an extremely professional person, the integrity of his performance incredible. It's been a great loss for all of us, we still miss him on a daily basis. I would like to wish his family all the courage they can master. Then another point. It is not that sad, but it's not a happy thing. Mr. Dr. Uwe-Ernst Bufe, who is stepping down as a member of the Supervisory Board after 12 years. After 12 years, he cannot be reelected. Uwe has a great understanding of the chemical sector, he's also a great businessman, he's had a wonderful career. Akzo Nobel is very grateful for his performance and will miss him as well. Uwe, I wish you all the best. I officially close today's meeting and invite you all for refreshments in the hall.
Please hand back your headphones, voting controls, and the chip cards to the hostesses in the doorway. Please don't take them away with you.