Koninklijke DSM N.V. Annual Report 2013

FY2013 Annual Report · Koninklijke DSM N.V.

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Royal DSM Integrated
Annual Report 2013

Tinashe Ndoro (left) and Wenjing FuLife Sciences and Materials Sciences

DSM, the Life Sciences and Materials Sciences company

Our purpose is to create brighter lives for people today and generations to come. We connect our unique competences in Life
Sciences and Materials Sciences to create solutions that nourish, protect and improve performance.

DSM uses its Bright Science to create Brighter Living for people today and for generations to come. Based on a deep understanding
of key global trends that are driving societies, markets and customers, DSM creates solutions to some of the world’s biggest
challenges, thus adding to both its own and its customers’ success.

DSM believes that its continued success will be driven by its ability to create shared value for all stakeholders, now and in the future.
It creates sustainable shared value by innovating in ways that allow its customers to provide better People, Planet and Profit
solutions − solutions to the challenges facing society, the environment and end-users. In this way, DSM’s customers derive value
from being able to offer end-users improved products; society and the planet derive value from the impact of more sustainable,
longer-lasting, safer, healthier and more nutritious alternatives; and, as a result, DSM and its shareholders derive value from stronger
growth and profitability. Finally, DSM’s employees feel engaged and motivated both through the contribution they make to a better
world and the success this creates for the company in which they work.

DSM – Bright Science. Brighter Living.™

Royal DSM is a global science-based company active in health, nutrition and materials. By connecting its unique competences in Life Sciences and Materials Sciences
DSM is driving economic prosperity, environmental progress and social advances to create sustainable value for all stakeholders simultaneously. DSM delivers innovative
solutions that nourish, protect and improve performance in global markets such as food and dietary supplements, personal care, feed, pharmaceuticals, medical devices,
automotive, paints, electrical and electronics, life protection, alternative energy and bio-based materials. DSM’s 24,500 employees deliver annual net sales of
around € 10 billion. The company is listed on NYSE Euronext. More information can be found at www.dsm.com.

Bright Science. Brighter Living. 2013

www.dsm.com

Key data for 2013

Net sales, total DSM
(x million)

Operating profit plus
depreciation and
amortization, total DSM1
(x million)

Net profit, total DSM
(x million)

Capital expenditure, total
DSM
(x million)

€ 9,618

€ 1,314

€ 271

€ 793

Net sales, continuing
operations
(x million)

Operating profit plus
depreciation and
amortization, continuing
operations1
(x million)

Net profit, continuing
operations1
(x million)

Capital expenditure,
continuing operations
(x million)

€ 9,051

€ 1,263

€ 499

€ 752

Cash provided by
operating activities, total
DSM
(x million)

Core earnings per ordinary
share, continuing
operations2

Dividend per ordinary
share3

ROCE, continuing
operations
(in %)

€ 889

€ 3.19

€ 1.65

9.7

Workforce
(at year-end)

Number of nationalities
(at year-end)

Employee engagement -
favorable score
(in %)

Frequency Index of
recordable injuries
(per 100 DSM employees
and contractor employees)

24,349

Greenhouse-gas
emissions, total DSM
(x million tons)

0.38

Energy use, total DSM
(in petajoules)

Water use, Total DSM
(in million m3)

ECO+ solutions as % of
running business, total
DSM

4.3

152

ECO+ solutions as % of
innovation pipeline, total
DSM

Innovation sales as % of
total sales

China sales, continuing
operations
(x USD million)

Sales to High Growth
Economies as % of total
sales

1,714

1 Before exceptional items
2 Before exceptional items and excluding amortization of intangible assets related to purchase accounting
3 Subject to approval by the Annual General Meeting of Shareholders

Bright Science. Brighter Living. 2013

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Table of contents

3 Key data

4 DSM at a glance

6 Letter from the Chairman

10 Report by the Managing Board
10 DSM in motion: driving focused growth
15 Growth Driver: High Growth Economies
18 Growth Driver: Innovation
20 Growth Driver: Sustainability
24 Growth Driver: Acquisitions & Partnerships
28 Stakeholder engagement
39 External recognition
41 Sustainability Governance Framework
43 People in 2013
56 Planet in 2013
69 Profit in 2013

74 Review of business in 2013
77 Life Sciences
79 Nutrition
87 Pharma
91 Materials Sciences
93 Performance Materials
101 Polymer Intermediates
105 Innovation Center
109 Corporate Activities

110 Financial and reporting policy
110 Financial policy
110 Reporting policy

112 Corporate governance and risk management
112 Introduction
114 Dutch corporate governance code
115 Governance framework
116 Risk management
121 Statements of the Managing Board

122 Report by the Supervisory Board
122 Supervisory Board report
126 Remuneration policy for the Managing Board and the

Supervisory Board

136 Supervisory Board and Managing Board

138 What still went wrong in 2013

140 Information about the DSM share

144 Consolidated financial statements
144 Summary of significant accounting policies
150 Consolidated statements
157 Notes to the consolidated financial statements of Royal

DSM

204 Parent company financial statements
205 Notes to the parent company financial statements

212 Other information
212 Independent Auditor's Report on the Financial Statements
213 Independent Assurance Report on Sustainability

Information
214 Profit appropriation
215 Special statutory rights
215 Important dates

216 DSM figures: five-year summary

220 Explanation of some concepts and ratios

224 List of abbreviations

226 Royal DSM - Bright Science. Brighter Living.

Forward-looking statements
This document may contain forward-looking statements with respect to DSM's future (financial) performance and position. Such statements are based on current
expectations, estimates and projections of DSM and information currently available to the company. Examples of forward-looking statements include statements made
or implied about the company’s strategy, estimates of sales growth, financial results, cost savings and future developments in its existing businesses as well as the
impact of future acquisitions, and the company’s financial position. These statements can be management estimates based on information provided by specialized
agencies or advisors.

DSM cautions readers that such statements involve certain risks and uncertainties that are difficult to predict and therefore it should be understood that many factors
can cause the company's actual performance and position to differ materially from these statements. These factors include, but are not limited to, macro-economic,
market and business trends and conditions, (low-cost) competition, legal claims, the company's ability to protect intellectual property, changes in legislation, changes
in exchange and interest rates, changes in tax rates, pension costs, raw material and energy prices, employee costs, the implementation of the company’s strategy,
the company’s ability to identify and complete acquisitions and to successfully integrate acquired companies, the company’s ability to realize planned divestments,
savings, restructuring or benefits, the company’s ability to identify, develop and successfully commercialize new products, markets or technologies, economic and/or
political changes and other developments in countries and markets in which DSM operates.

As a result, DSM’s actual future performance, position and/or financial results may differ materially from the plans, goals and expectations set forth in such forward-
looking statements. DSM has no obligation to update the statements contained in this document, unless required by law. The English language version of this document
is leading.

Bright Science. Brighter Living. 2013

www.dsm.com

Key data

People

Workforce at 31 December (headcount)

Female/male ratio

Total employee benefits costs in € million

Frequency Index of recordable injuries (per 100 DSM employees and contractor employees)

Employee engagement - favorable score (in %)

Planet

Energy use (in petajoules)
Water use (in million m3)

Greenhouse-gas emissions in CO2 equivalents (x million tons)
Emission of volatile organic compounds (x 1000 tons)

COD (Chemical Oxygen Demand) discharges (x 1000 tons)

ECO+ solutions as % of innovation pipeline2

ECO+ solutions as % of running business

Profit (in € million, unless otherwise indicated)

Net sales, continuing operations

China sales in USD million, continuing operations

Operating profit plus depreciation and amortization, continuing operations (EBITDA)3

Operating profit, continuing operations (EBIT)3

Net profit attributable to equity holders of Koninklijke DSM N.V.

Cash provided by operating activities

Dividend for DSM shareholders

Capital expenditure

Net debt

Shareholders' equity

Total assets

Capital employed, continuing operations

Market capitalization at 31 December4

Per ordinary share in €

Core earnings, continuing operations

Dividend

Ratios (%)

Sales to High Growth Economies / net sales

Innovation sales / net sales

EBITDA / net sales (continuing operations)

Operating working capital / annualized fourth quarter net sales (continuing operations)

ROCE (continuing operations)

Gearing (net debt / equity plus net debt)

Equity / total assets

Cash provided by operating activities / net sales

1 Key data presented relate to total DSM (= continuing operations + discontinued operations), unless explicitly stated otherwise
2 For a definition of ECO+ see page 221
3 Before exceptional items
4 Source: Bloomberg
5 Subject to approval by the Annual General Meeting of Shareholders

20131

20121

24,349

26/74

1,845

0.38

152

4.3

5.1

5.4

9,051

1,714

1,263

749

271

889

297

793

(1,862)

5,908

12,017

7,864

10,370

3.19

1.655

14.0

21.1

9.7

23.4

50.7

9.2

23,498

26/74

1,761

0.44

149

4.2

3.5

5.5

8,588

1,692

1,073

651

278

730

263

715

(1,668)

5,874

11,966

7,480

8,307

2.80

1.50

12.5

20.7

10.1

21.6

50.5

8.0

Bright Science. Brighter Living. 2013

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DSM at a glance

DSM’s activities have been grouped into
business groups representing coherent
product/market combinations. The
business group directors report directly to
the Managing Board.

For reporting purposes, the activities are
grouped into five clusters. In addition, DSM
reports on a number of other activities,
which have been grouped under Corporate
Activities.

Life Sciences

Nutrition

Pharma

Continued value growth
The Nutrition cluster comprises the business groups DSM
Nutritional Products and DSM Food Specialties. They serve the
food and beverage, feed, personal care, dietary supplements
and pharmaceutical industries. DSM offers the world’s widest
range of nutritional ingredients, addressing existing markets
based on fermentation and chemical synthesis as well as key
niches of active compounds derived from plant extracts. DSM
has particularly strong positions in vitamins, nutritional lipids
(polyunsaturated fatty acids), enzymes, cultures and
carotenoids. New nature-identical or natural ingredients as well
as the expansion of the premix footprint in high growth
economies are important drivers in the areas of human and
animal nutrition and health.

Leveraging partnerships for growth
The Pharma cluster includes the business group DSM
Pharmaceutical Products (DPP), one of the world's leading
custom manufacturing organizations to the pharmaceutical
industry, biopharmaceutical and crop protection industries, and
DSM's 50 percent interest in the DSM Sinochem
Pharmaceuticals (DSP) joint venture, the global market leader in
beta-lactam anti-infectives. In 2013, DSM announced the
formation of a new entity together with JLL Partners, combining
DPP and the US-based company Patheon to create a leading
global contract development and manufacturing company in
which DSM will retain a 49 percent interest. From 2014 onwards
DSM will discontinue the use of proportionate consolidation for
joint ventures and account for both DPP and DSP in accordance
with the equity method.

Materials Sciences

Performance Materials

Polymer Intermediates

Growing via sustainable, innovative solutions
The Performance Materials cluster comprises three business
groups: DSM Engineering Plastics (a global supplier of high-
performance engineering thermoplastic solutions), DSM
Dyneema (the global supplier of Dyneema®, the world’s
strongest fiber™) and DSM Resins & Functional Materials (a
global supplier of innovative high-quality resins solutions for
paints and coatings, composite materials and optical fiber
coatings). End-use markets include automotive, aviation,
electrical and electronics, marine, sports and leisure, paint and
coatings, and construction. Sustainability is a business driver as
well as an innovation driver for this cluster. DSM's materials
portfolio is shifting towards a higher value-added mix by
introducing innovative, more sustainable solutions, leveraging
the megatrend Climate and Energy.

Strengthening backward integration for DSM Engineering
Plastics
The Polymer Intermediates cluster contains the business group
DSM Fibre Intermediates (DFI), a producer of caprolactam and
acrylonitrile. These products are raw materials for synthetic fibers
and plastics. Caprolactam is a key feedstock for DSM
Engineering Plastics’ polyamide production. Globally, DFI is the
largest merchant caprolactam supplier and the third largest
merchant acrylonitrile supplier.

Bright Science. Brighter Living. 2013

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Innovation Center

The Innovation Center is an enabler and accelerator of
innovation. It facilitates DSM's strategic transition towards
becoming an intrinsically innovative organization. The cluster
also includes the three Emerging Business Areas (EBAs), growth
engines that focus on new business areas outside the current
scope of the company's business groups. DSM Biomedical
produces novel materials-based solutions for the medical device
and biopharmaceutical industries with coatings, drug delivery
platforms and a wide range of biomedical materials for use in
implantable medical devices. DSM Bio-based Products &
Services creates solutions for bioconversion of feedstocks for
the production of bio-energy including cellulosic biofuels as well
as bio-based chemicals and materials. DSM Advanced Surfaces
provides smart coatings and surface technologies to the solar
industry.

Sales per cluster in 2013,
continuing operations

EBITDA per cluster in 2013,
continuing operations

Workforce per cluster in 2013,
continuing operations

net sales in € million

■ Nutrition
■ Pharma
■ Performance Materials
■ Polymer Intermediates
■ Innovation Center

EBITDA in € million
excl. Innovation Center (-€ 17 million)
■ Nutrition
■ Pharma
■ Performance Materials
■ Polymer Intermediates

headcount at year-end 2013

■ Nutrition
■ Pharma
■ Performance Materials
■ Polymer Intermediates
■ Innovation Center

149

1,579

2,746

184

4,195

113

324

914

664

1,456

5,128

857

10,548

Bright Science. Brighter Living. 2013

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Letter from the Chairman

Dear reader,

The megatrends that shape our world and markets became even
more pronounced in the year, while the uncertainty regarding
global economic growth persisted. This offers the context for our
company to develop and grow our business with the portfolio
we have created over the years. We live in extraordinary times;
the race to find sustainable solutions to the world’s most
pressing economic, social and environmental challenges has
only intensified.

At DSM our strategy has been to focus on the unmet needs we
have identified, and translate them into compelling growth
drivers for our business. To this end, we have undertaken a
successful transformation of our portfolio in recent years, offering
innovative and sustainable solutions, while expanding our global
presence. Today, we are uniquely positioned to create value for
all stakeholders by contributing to our customers' success in
meeting the challenges they increasingly face.

The megatrends that steer our roadmap for growth stem from a
globally expanding and aging population, which is increasingly
moving to urban areas. The trends we address are broadly
divided into three categories: (1) global shifts, which account for
the sharp demographic changes and the emergence of a multi-
speed global economy; (2) increased attention to climate and
energy, which encompasses the world's growing efforts to
reduce pollution, achieve a more balanced consumption of
resources and energy, and develop new energy forms; and (3)
focus on improving health and wellness for all, which refers to
the care for people's health, especially through nutrition.

vitamin E. Despite the exchange rate effects and the current
unrelated market headwinds, our Nutrition business remains well
positioned to benefit from the structural global megatrends with
its unique, broad, integrated and global offering across the value
chain. As said, our Pharma business is repositioned in two new
ventures and will be deconsolidated as per 2014. Our
Performance Materials business performed well over the year in
all its businesses. We will continue to upgrade the portfolio in the
period ahead to further improve performance. In Polymer
Intermediates, we continued to work on options to reduce our
exposure to the merchant market for caprolactam, where there
is greater volatility.

We are pleased to report that in 2013 DSM delivered significant
increases in profitability across all its business clusters, resulting
in an EBITDA of € 1,314 million (€ 1,263 million from continuing
operations), an 18 percent increase over 2012. We achieved this
against a backdrop of challenging macro-economic conditions
and adverse currency movements, especially in the fourth
quarter of 2013. Growth remained stubbornly low in Europe,
while the modest recovery in the US continued and economic
activity in Asia remained at a relatively good level.

Our expansion into High Growth Economies (HGEs) has made
us a truly global company, with almost 40 percent of our sales
originating from high growth economies, a proportion that will
continue to rise in the years ahead. At the same time, we have
increased our physical presence in these areas, with many of our
global business group headquarters and R&D facilities located
there.

In 2013, we continued to implement our DSM in motion: driving
focused growth strategy which we launched in 2010 to deliver
profitable and sustainable growth by addressing the above-
mentioned trends. Although we still have much to achieve, we
can say that our strategy has served us well.

While HGEs experienced a slowdown in the second half of 2013
compared to previous periods, they will continue to be the
primary engines of global growth in the years ahead and an
investment focus area for DSM via its products and businesses.

In the year, we continued to make good progress against our
stated targets in our four business growth drivers: High Growth
Economies, Innovation, Sustainability, and Acquisitions &
Partnerships. These drivers remain unchanged for the years
ahead, and we have set ourselves new sales and profitability
targets for 2015 to measure the success of our approach.

Our Nutrition business clearly increased its profit during the year
and has shown its resilience as well. Acquisitions, organic
growth and harvesting synergies were the main drivers. In the
last quarter(s) of the year the results were negatively influenced
by the strong euro. In addition, Nutrition was impacted by
weakness in the US dietary supplements market, soft demand
in Western food and beverage markets, and price pressures in

In Innovation we are underway to deliver on our 20 percent
innovation sales target for 2015. Innovation sales, which are
sales of products and solutions brought to the market within the
last five years, will strongly contribute to our growth in years
ahead. They also enjoy significantly higher than average EBITDA
margins, contributing not only to our sales growth but also to the
quality of our profitability. We have a balanced approach
between incremental and process innovations on the one hand,
and more radical innovations on the other. We are also focusing
more on local applications developed in our regional innovation
centers around the world.

We have also continued to invest heavily in our Emerging
Business Areas (EBAs), three important growth areas that tap

Bright Science. Brighter Living. 2013

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Letter from the Chairman

into attractive and fast-growing end markets. In DSM
Biomedical, we are making good progress with our product
portfolio and have completed the integration of Kensey Nash. In
DSM Bio-based Products & Services, we are demonstrating
technologies through strategic investments and partnerships,
such as the POET-DSM cellulosic bio-ethanol plant in
Emmetsburg (Iowa, USA), which has begun to explore its
licensing activities as we plan to become the leader in
bioconversion technologies, capitalizing on our knowledge and
capabilities in industrial biotechnology, for example in enzymes
and yeast. In DSM Advanced Surfaces we have increased our
production capacity of anti-reflective solutions for the fast
growing solar panels market, resulting in good growth rates.

Sustainability continues to be an important business driver in
addition to being our core value and responsibility. Our ECO+
solutions, which provide customers with clear ecological benefits
over more conventional products, are growing faster and more
profitably than non-ECO+ sales. They now account for 45
percent of all DSM sales and over 90 percent of our innovation
pipeline. In the year, we also began developing a comparable
People+ strategy for those products that improve the lives of
people. With the People+ program, we make the people element
of People, Planet and Profit more tangible, transparent and
comparable, as we have done for planet with ECO+.

Over the recent years we have made significant progress in the
development of our portfolio through Acquisitions &
Partnerships. Our acquisition of Fortitech at the end of 2012 has
strengthened our Human Nutrition & Health business, and once
again expanded our value chain presence. This is in addition to
earlier value creating acquisitions including Martek, Ocean
Nutrition Canada, the enzymes business of Verenium and the
Enzymes and Cultures activities of Cargill. In April, we concluded
our acquisition of Tortuga, the Brazilian market leader in organic
chelates and other feed ingredients, which has boosted DSM’s
position in one of the world’s leading ruminant markets. These
steps have been decisive in establishing DSM as a global leader
in the field of human and animal nutrition.

In November 2013, we announced our much anticipated
strategic partnership for DSM Pharmaceutical Products with
Patheon via a joint ownership with the private equity firm JLL
Partners to enable this Pharma business to accelerate growth
and create a global top Contract Development and
Manufacturing Organization (CDMO). This combination is
consistent with our strategy to maximize value for this business
as a standalone company and represents another major step in
the strategic transformation of our Pharma activities. After
completion of the partnership we will have put both our Pharma
businesses in joint ventures, following the joint venture we
established with Sinochem in the area of antibiotics in 2011.

Having concluded the transformation of our portfolio, our focus
in the coming years will be on realizing its full potential through
operational performance and harvesting important synergy
benefits. This work is already well underway and will continue in
2014. Consequently, major acquisitions are not expected for the
coming year.

The almost € 3 billion we have spent on acquisitions since 2010
has allowed us to create and strengthen our portfolio to a large
degree in North America but also in the high growth economies,
balancing our global presence and increasing our
resilience. Today we are stronger and more stable, with more
sustainable growth and profitability. Overall the performance of
the acquired companies was clearly satisfactory.

In addition to the delivery of synergies from acquisitions, our
success has also been due to our ongoing Profit Improvement
Program (PIP). This initiative has continued to optimize functional
and business cost infrastructures across our company.

An equally important part of our organizational transformation
has been the attention to our culture, values, and mission that
drive our strategy. These efforts are embodied in the ONE DSM
Culture Agenda to optimize our company by developing the
culture we require to achieve our strategic ambitions, mirror the
world that we operate in, and become a high performance
organization. In the year, we continued to roll out the ONE DSM
Culture Agenda throughout the organization, at all levels and in
all regions. While much more remains to be done, we are
encouraged by the progress we have made to date.

Bright Science. Brighter Living. 2013

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In the year, we conducted our sixth worldwide Employee
Engagement Survey, achieving a very high response rate of over
85 percent. This survey measures DSM’s Employee
Engagement Index, the percentage of employees scoring
favorably on a combination of four attributes: commitment,
pride, advocacy and satisfaction. The index level reached in
2013 was 71 percent (2012: 72 percent). This is higher than the
global average benchmark. We can be proud of such a result.
We will take the feedback and use this as input for making further
improvements in order to become a truly high-performing
company.

We also achieved important improvements in the area of Safety
and Health. The Frequency Index of Recordable injuries for 2013
was 0.38 (a decrease of 14 percent), which for the second
consecutive year is the lowest ever. This means that fewer
people were injured in their work for DSM. Our ultimate aim is
that DSM be an injury and incident-free working environment.

We have also continued to make steady progress towards our
Inclusion & Diversity goals by addressing the geographical
distribution of management and other key functions, looking to
achieve a representative balance of DSM’s leadership group in
gender and nationality. The number of women in executive
positions increased from 10 percent to 11 percent in 2013, and
we saw as well a further growth in the number of non-European
executives.

We are very proud that in 2013 we were once again named
among the leaders in the Dow Jones Sustainability World Index.
We are also proud that during 2013 we won several prestigious
awards and received a great deal of recognition for our
achievements regarding our integrated Triple P approach. We
continue to further develop our integrated reporting based on the
guidelines of the Global Reporting Initiative. Once again this
integrated annual report, our fourth, merits the GRI A+ rating,
representing a high level of transparency. We stay committed to

aligning our strategy and operations with the principles of the
United Nations Global Compact.

I would like to thank all those who have helped to make 2013
another successful year for DSM. I would like to take this
opportunity to show my sincere appreciation and gratitude to
Nico Gerardu, our valued Board member for 7 years who retired
on 1 September 2013, and Claudio Sonder, who retired from
our Supervisory Board in May 2013.

As we look ahead, we are confident to further build on the
strategic progress we have made so far contributing amongst
others to a further improvement of our profitability. Our Nutrition
business will continue to grow and we will take steps to further
broaden and deepen our position, becoming ever closer to
customers and to end users. In Performance Materials, our aim
is to accelerate in markets where we have strong positions and
restructure those parts where we are weaker. In both cases, our
emphasis will be on operational improvements, organic growth,
innovations, sustainability and high growth economies.

Our mission at DSM is to create brighter lives for people today
and for generations to come by connecting our unique
competences in Life Sciences and Materials Sciences. This is a
collective endeavor that would not be possible without the
enormous talent and dedication of our employees around the
world and the continued support and trust of our customers, our
shareholders and other stakeholders for which we are grateful. I
look forward to reporting further progress as we continue to
create value for all our stakeholders.

Feike Sijbesma
CEO/Chairman of the Managing Board

feike.sijbesma@dsm.com

Bright Science. Brighter Living. 2013

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Letter from the Chairman

Bright Science. Brighter Living. 2013

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Report by the Managing Board

DSM in motion: driving focused growth

In 2013, DSM completed the third year of its successful strategy
DSM in motion: driving focused growth, which it launched in
2010 to become a global leader in health, nutrition and materials.
The strategy has provided the necessary framework to drive
sustainable and profitable growth in the company’s core
activities, following the profound transformation of its portfolio of
businesses in the preceding years.

The transformation of DSM has been strengthened by its
determined effort to cultivate organic growth, while tapping the
synergy potential of acquisitions and partnerships. These actions
have been supported by cultural and structural integration efforts
that have made it a truly global company. Today, the company
enjoys greater resilience in the face of macro-economic
movements, and higher quality and stability in its earnings.

DSM is uniquely positioned to deliver on its mission of creating
brighter lives for people today and for generations to come. At
the heart of this mission is the core value of sustainability, a
fundamental business driver that defines DSM’s position in the
market and determines its ability to shape a stable and
prosperous future for the benefit of People, Planet and Profit.

Strategic focus

With its focus on Life Sciences and Materials Sciences, and the
key growth drivers of High Growth Economies, Innovation,
Sustainability and Acquisitions & Partnerships, DSM’s strategy

is an effective response to the world’s most pressing social,
environmental and economic challenges.

It is a strategy that has served the company well since 2010,
supported by a stakeholder engagement process and a risk and
issue assessment that enabled it to determine how it could best
help meet the world’s most pressing needs.

Many of the world’s social, environmental and economic
challenges stem from the world’s rapidly expanding population,
which is expected to reach 9 billion by 2050. Societies are also
experiencing fundamental changes in their demographics with
people becoming older and increasingly urbanized and wealthy.
These trends will put unprecedented pressure on the planet’s
resources and on the food chain, while also creating new
consumption patterns and having an impact on the environment.

These megatrends can be summarized into three distinct
categories: Global Shifts, Climate and Energy, and Health and
Wellness. Through its innovative and sustainable solutions, DSM
is able to address these areas and benefit from the opportunities
that are arising from the increased spending that will result on a
global scale.

Global Shifts
The accelerating shift of wealth in a multiple-speed global
economy is the basis for a series of global shifts that are creating
a more urban, more prosperous and more connected world, but
one that faces huge resource and cultural challenges as a result.

The DSM Managing Board (from left to right): Rolf-Dieter Schwalb (CFO), Stefan Doboczky, Feike Sijbesma (Chairman/CEO), Stephan Tanda and Dimitri de Vreeze

Bright Science. Brighter Living. 2013

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Report by the Managing Board

DSM in motion: driving focused growth
Growth Driver: High Growth Economies
Growth Driver: Innovation
Growth Driver: Sustainability
Growth Driver: Acquisitions & Partnerships
Stakeholder engagement
External recognition
Sustainability Governance Framework
People in 2013
Planet in 2013
Profit in 2013

These changes are influencing where demand comes from, how
and where people live, and how they interact with each other.
Urbanization and economic prosperity are promoting dietary
changes and increased spending on housing, transport, lifestyle
and energy. The advent of new technology is also having a major
impact on societies and their behavior.

performance of its business groups. It has set itself ambitious
targets for accelerated growth (above GDP growth levels) and
for increased profitability during the current strategy period.
These were formulated based on an assessment of
opportunities in each of the growth drivers.

Climate and Energy
The reality of man-made climate change must translate into
increased efforts to reduce fossil fuel dependencies and bring
down harmful levels of greenhouse-gas emissions. This is
accelerating the adoption of renewable energy sources and the
use of chemicals and materials that are more sustainable. These
actions will help protect the planet’s limited resources, as the
world enters an era of resource scarcity.

Efficiency is an important part of this focus, as customers look
to create more sustainable value chains through higher yields,
less waste, lower energy use and less pollution.

Health and Wellness
The impact of a growing, aging, increasingly urban population is
becoming visible in remarkably different ways. On the one hand,
living standards are steadily rising, and there is a drive to improve
well-being and increase life spans. On the other, the daily
struggle to effectively nourish populations in the most
impoverished areas of the world, especially children below the
age of three, continues.

Following the rapid expansion of its global portfolio in recent
years, the company is now fully focused on operational
performance, organic growth and improved profitability. It is also
concentrating on regional R&D and innovations for local
applications that are better tailored to the needs of customers in
its fastest growing markets, and which capture more
opportunities and synergies.

Financial targets
Despite the ongoing macro-economic challenges, DSM
increased its EBITDA for 2013 to € 1.314 billion, representing a
considerable increase of 18 percent over the previous year. In
2013, DSM formulated profitability targets for 2015, including an
EBITDA margin of 14-15 percent.

Progress on the target for Return on Capital Employed (ROCE)
of more than 15 percent was delayed as a result of the
company’s accelerated acquisition strategy and the
deterioration of global macro-economic conditions. In 2013,
ROCE from continuing operations reached 9.7 percent
compared to 10.1 percent in 2012.

There is an increasing need to address core health issues,
whether through nutrition, medicines or lifestyle improvements,
especially in high growth economies. In the West, healthcare
cost pressures are rising because of aging populations. Nutrition
security and access are also growing in importance, and there
is a growing demand for safer and healthier solutions.

Sales in High Growth Economies reached 39 percent of total
sales in 2013, bringing the company closer to its stated goal of
having about 45 percent of total net sales from these markets.
Innovation sales, which are measured as sales from products
and applications introduced within the last five years, reached
19 percent of total net sales in 2013, putting the company well
on track to deliver on its 2015 target of 20 percent.

There has been steady progress in the three Emerging Business
Areas (EBAs), DSM Biomedical, DSM Bio-based Products &
Services, and the new area of DSM Advanced Surfaces. All three
areas provide significant growth potential for DSM. The 2020
target for these areas is € 1 billion in sales with a high EBITDA
margin.

By providing its customers with the innovations and sustainable
products they need to meet the demands arising from these
trends, DSM stands to capitalize on these trends for many years
to come.

Strategic progress and aspirations

It is DSM’s ambition to leverage unique opportunities in Life
Sciences and Materials Sciences by using the four growth
drivers of High Growth Economies, Innovation, Sustainability and
Acquisitions & Partnerships. It aims to maximize the potential of
these drivers so they reinforce each other and generate further
business opportunities.

The company relies on regional organizations, functional
excellence groups and shared services to enhance the

Bright Science. Brighter Living. 2013

www.dsm.com

Targets and aspirations as updated in September 2013

Financial targets

Profitability targets 2015

- EBITDA margin

- ROCE

Sales targets 2015

14%-15%

11%-12%

- Organic sales growth

5%-7% annually

- China sales

towards USD 3 bn

- High growth economies sales

about 45% of total sales

- Innovation sales

- ECO+ sales

20% of total sales

towards 50% of total sales

Cluster targets 2015

- Nutrition

EBITDA margin 20%-23%

Sales growth GDP +2%

- Performance Materials

EBITDA margin 13%-15%

Sales growth at double GDP

Aspiration regarding Emerging Business Areas for 2020

- EBA sales

> € 1 bn

Sustainability aspirations 2011-2015

Dow Jones Sustainability Index

Top ranking (SAM Gold Class)1

ECO+ (innovation)

At least 80% of pipeline is ECO+2

ECO+ (running business)

From approximately 34% towards 50%

Energy efficiency

20% improvement in 2020, compared to 2008

Greenhouse-gas emissions

25% reduction (absolute) by 2020, compared to 2008

Employee Engagement Survey

Towards High Performance Norm3

Diversity 4

Increase percentage of women in executive positions

Increase percentage of BRIC+ nationals in executive positions

People+4

DSM People LCA

People+ framework defined

1 This means a total score within 1% of the SAM sector leader.
2 See page 221 for a definition of ECO+.
3 The High Performance Norm (80% favorable) is the composite of the top 25%

employee responses of the selected external benchmark organizations.

4 See also the chapter People in 2013 on page 43

Sustainability aspirations
DSM is on track with its sustainability aspirations, which are
central to its strategy. In 2013, DSM's ECO+ solutions as a
percentage of running business reached 45 percent (46 percent

after deconsolidation of DSM Pharmaceutical Products (DPP)),
which is a considerable increase compared to the approximately
34 percent in 2010.

ECO+ solutions accounted for approximately 95 percent of the
innovation pipeline (97 percent after deconsolidation of DPP),
well on track for the 2015 aspiration of at least 80 percent. In
2013 about 90 percent of ECO+ innovation launches were
supported by comparative LCAs.

Data from the business groups DSM Engineering Plastics and
DSM Resins & Functional Materials show that ECO+ sales have
grown by around 10 percent each year since 2010, while non-
ECO+ sales have slightly declined. Moreover, ECO+ sales have
higher margins compared to non-ECO+ sales in both Materials
Sciences and Life Sciences businesses.

In 2013, DSM once again featured among the chemical industry
leaders in the Dow Jones Sustainability World Index (SAM Silver
Class status). DSM improved its ranking and returned to SAM
Gold Class status for 2014.

From an operational standpoint, good progress has been made
in terms of energy efficiency, which DSM is aiming to improve by
20 percent by 2020 compared to 2008 levels. Between 2008
and 2013, energy efficiency improved by 13 percent.

The company is also committed to a 25 percent reduction in
greenhouse-gas emissions by 2020 compared to 2008. Total
emissions in 2013 came to 4.3 million tons of CO2 equivalents,
a 1 percent increase compared to 2008. However, on a like-for-
like basis the total greenhouse-gas emissions of DSM decreased
by 19% when comparing 2013 with 2008.

The sixth worldwide Employee Engagement Survey took place
in the year to measure engagement levels for the DSM Employee
Engagement Index. This Index determines how employees score
on a combination of the following attributes: commitment, pride,
advocacy and satisfaction. In 2013, the Employee Engagement
Index was measured at 71 percent (2012: 72), which is above
the global standard of 69 percent. The score keeps DSM within
a 9 percentage point range of the external benchmark of high
performing companies (scoring 80 percent favorable), which
DSM aims to be part of.

DSM’s People+ strategy is to deliver products with a measurable
positive impact on people. In 2013, considerable progress was
made towards this aim. Through the People+ program DSM
engaged with suppliers and customers in a number of joint
projects.

Bright Science. Brighter Living. 2013

www.dsm.com

Report by the Managing Board

Organization and culture
In support of its global integration efforts, DSM continued to
implement its ONE DSM Culture Agenda in 2013. This agenda
is based around the themes of External Orientation,
Accountability for Performance (and learning), Collaboration with
Speed, and Inclusion & Diversity, and aims to develop the culture
and organization the company requires to fulfill its strategic
ambitions. The ONE DSM Culture Agenda introduction week
took place in the first quarter and was followed by four ‘theme
weeks’ in the second half of the year. These events were
attended by thousands of employees. In December, a week-long
event entitled Glass Half Full Week allowed employees to review
the year, focusing on the many positives and on lessons learned.

The cultural and organizational identity was further supported
through the new corporate brand that DSM introduced in 2011.
This brand has become a symbol of the company’s transition in
recent years and demonstrates to stakeholders how the
company has evolved. During 2013, the global roll-out of the
brand was successfully completed.

Within DSM, the business groups are the primary building blocks
of the organization with their focus on customers and markets.
Infrastructure and capabilities are provided by the regional
organizations which also support local innovation in select
countries and represent DSM to external stakeholders.

These efforts are supported and optimized by shared services,
which provide efficient, high quality services in designated areas,
and functional excellence groups that offer functional expertise
and implementation capabilities. Corporate staff departments
are responsible for supporting the Managing Board in running
the company.

In 2013, the regional organizations were given a stronger
mandate to support R&D and innovation with local applications,
bringing DSM closer to its key markets and customers. There is
clear board level accountability for regional performance.

Bright Science. Brighter Living. 2013

www.dsm.com

Bright Science. Brighter Living. 2013

www.dsm.com

My bright ideas help create a sustainable futureJacqueline Hazewinkel, Business Controller DSM Bio-based Products & ServicesDSM focuses its efforts on further developing biotechnological routes to make fuels, chemicals and materials from cellulosic biomass, rather than sugar or starch. This technology goes a long way to ensuring that demand for biofuel and chemicals can be met without any meaningful impact being made on food production or availability.

Report by the Managing Board

Growth Driver: High Growth Economies

From 'reaching out' to becoming truly global

A key element of the DSM in motion: driving focused growth
strategy has been for DSM to broaden its international presence
to capture greater megatrend opportunities in high growth
economies such as Brazil, Russia, India and China. Although no
longer growing at historical highs, these countries continue to be
the main growth engines for the world economy, with rapidly
expanding urban populations and increasing domestic
consumption.

The share of sales in high growth economies as a portion of
DSM’s total sales has increased significantly in recent years, and
accounted for around 39 percent in 2013. It is DSM's aim to
increase this share to about 45 percent by 2015. So far, these
economies have accounted for around 60 percent of DSM’s
organic growth since the launch of the strategy.

The transition to becoming a truly global company has been
marked by a shift of DSM’s operations (including four global
business group headquarters, and Innovation and R&D centers)
from Europe into other regions. Today more than 30 percent of
DSM employees live and work in high growth economies.

With a structure of country presidents in China, India, Russia and
Latin America, as well as in Japan and North America, DSM is
also facilitating regional decision making and strengthening local
R&D. Regional innovation centers have been established in India
and China, while at Managing Board level, clear accountability
has been established for regional growth.

Sales in high growth economies
as % of total sales

2009

2010

2011

2012

2013

China
China has continued to be an important strategic investment
focus area, as DSM establishes promising opportunities for
growth in the years ahead. In 2013, DSM Nanjing Chemical
Company doubled its capacity for caprolactam, with a new

facility that will begin commercial production in early 2014. It also
began construction on a new state-of-the-art animal nutrition
R&D center near Beijing that will significantly contribute to the
nation’s food safety program for swine and poultry. The 29
percent stake acquired in Yantai Andre Pectin Co. Ltd, the
producer of texturing ingredients, was another important step
towards harvesting opportunities from this megatrend.

Sales in China continued to represent an important contribution
to DSM’s total sales in high growth economies. The company
has stated its ambition to increase sales in China towards USD
3 billion by 2015, and it continues to invest there. In 2013, DSM’s
sales in China remained stable at USD 1.7 billion, although they
were still affected by lower prices for caprolactam in the Polymer
Intermediates cluster.

China sales
in billion USD

2.0

1.5

1.0

0.5

2.0

1.6

1.7

1.2

2009

2010

2011

2012

2013

Latin America
DSM has also grown in other high growth economies, mostly
through acquisitions and partnerships. It seeks to double or even
triple sales in Latin America, India and Russia, where domestic
consumption has become the biggest contributor to growth.

In Brazil, DSM finalized its acquisition of Tortuga, a leading
company in nutritional supplements with a focus on pasture
raised beef and dairy cattle, which has doubled DSM's
workforce in Latin America to approximately 2,000 people. In
human nutrition in Brazil, DSM expanded its forward integration
capabilities for customers including packaging and branding and
plans are underway for a new innovation center in 2015.

DSM's presence in Latin America was also strengthened
through the acquisition in late 2012 of Fortitech, which generates
about 16 percent of its revenues in Latin America and 13 percent
in Asia. Similarly, the 2012 acquisition of Ocean Nutrition
Canada, which has a production site in Peru, in addition to
Canada and the United States, has further expanded DSM's
presence there.

Bright Science. Brighter Living. 2013

www.dsm.com

China Triple P Supplier project
DSM initiated the China Triple P Supplier Engagement and
Development project in July 2013, in partnership with
Solidaridad and Manpower. The aim of the project is to use the
People, Planet and Profit angle to engage suppliers to create a
more sustainable supply chain. A related goal is that suppliers in
China who sign on to the project start to apply the same
approach to their own supply base and set up their own
sustainability programs. See also Sustainability Program on
page 35.

Great Place to Work® award in Brazil
In 2013 DSM’s Tortuga was recognized as one of the best
companies to work for in Brazil. The Great Place to Work® award
is a prize recognized all over the world with international and
regional dimensions. The Great Place to Work Institute partners
with many of the most successful and innovative businesses
around the world to create, study, and recognize great
workplaces. In Brazil, Epoca Magazine does research into and
awards the most trustworthy companies.

Sustentar
In 2013 DSM Brazil participated in a large regional event on
sustainability: Sustentar 2013. With an agenda consisting of 22
simultaneous events, 240 speakers and 6,000 participants,
Sustentar is the largest event about sustainability in Latin
America. It is renowned for bringing together specialists and
executives, leaders and national and international authorities. Its
scope is promoting substantial improvements of social and
environmental issues.

Sustainability
In 2013 DSM set up its Latin America Sustainability Forum. This
internal sustainability committee consists of representatives from
DSM companies in Latin America. They meet quarterly to
discuss the latest developments and initiatives in the areas of
People, Planet and Profit in the world and how these affect their
region and their business.

DSM India has defined a sustainability roadmap with specific
focus areas and these are being driven by an India Sustainability
platform comprised of the different business groups led by the
DSM India president. DSM India has defined six areas to
positively impact via sustainability initiatives: energy efficiency,
supply chain, water, innovation, marketing and sales, and
external stakeholder engagement.

As part of the strengthening of the regional organizations, DSM
established a regional China Sustainability Committee in 2012,
which helps to create more awareness of sustainability as a
business driver at DSM China.

Biogas
Biogas derived from anaerobic fermentation of biodegradable
materials such as biomass, manure or sewage and green waste
can be used to generate electricity and heat. In India DSM has
invested in a biogas plant in the province of Punjab. The year
2013 was the second year of association between DSM and the
Punjab Energy Development Agency, an organization that
promotes renewable energy in Punjab. The plant generates
7,000 to 10,000 m3 of biogas a day from 235 tons of cow waste.
The biogas is converted into electricity (1 MW) and fed into the
state electricity grid. In 2013 DSM signed a special
Memorandum of Understanding with the Punjab government for
collaborative actions in the bio-energy space.

With the demand for energy increasing around the world, DSM
strives for alternative energy solutions. In 2013 the DSM
Engineering Plastics site in Pune (India) entered into an
agreement with a local wind energy producer that will supply 25
percent of the plant’s total energy need via wind power.

In Pune DSM produces compounds of polyesters and
polyamides and has established a strong track record of highly
efficient water management systems. Thanks to increased
process water recycling and rigorous monitoring of potential
water leakages, the operation’s water footprint was reduced by
two-thirds in 2013 in comparison to 2012.

Bright Science. Brighter Living. 2013

www.dsm.com

Report by the Managing Board

Bright Science. Brighter Living. 2013

www.dsm.com

Our bright ideas provide products that improve patient careDSM Biomedical has been working with medical device companies for over 25 years. By offering the broadest portfolio of biomaterials and process manufacturing in the industry, we help our partners increase the performance of their medical devices. Cheng Wei, Senior Scientist, Product Development, DSM Biomedical Sanna Severins, Senior Marketing Manager (left) and

R&D expenditure (including associated IP expenditure),
continuing operations

Growth Driver: Innovation

From building the machine to doubling the output

At DSM, innovation aims to turn ‘Bright Science’ into ‘Brighter
Living’. It goes beyond having great ideas, state-of-the-art
technology and high-tech laboratories. It is about discovering
and integrating the best, the most sustainable, and commercially
viable solutions, in order to meet market needs and create
profitable growth and future value.

x € million

Nutrition

Pharma

Performance Materials

Polymer Intermediates

Innovation Center

Corporate Activities

DSM creates innovative solutions that nourish, protect and
improve performance, by combining its unique competences in
Life Sciences and Materials Sciences. In doing so, it delivers on
its mission of creating brighter lives for people today and for
generations to come.

Total

Total as % of net sales

Staff employed in R&D activities

2013

2012

209

132

470

5.2

2,256

202

131

438

5.1

2,392

Innovation sales
as % of total sales

2010

2011

2012

2013

By 2015, DSM wants innovative products and solutions to
account for 20 percent of its total sales. The company is well on
track to deliver on this ambition. Innovation sales are defined as
sales of products and applications that have been introduced
over the last five years. In 2013, these products and services
accounted for 19 percent of total sales and strongly contributed
to DSM’s sales and EBITDA growth with gross margins over 5
percent higher than the average of the running business.

DSM aims to foster and sustain its innovative practices on an
ongoing basis. A benchmark of innovation processes developed
with McKinsey that compared DSM’s innovation practices to
those of its peers during the 2006-2012 period showed that the
company has consistently increased its innovation score. It now
ranks in McKinsey’s Top Quartile benchmark for best innovation
practices within its peer group. Looking to 2014 and 2015, DSM
will further intensify its innovation and R&D activities and seek to
generate more opportunities for open innovation, especially
radical innovations that offer higher returns and will come to
represent around one quarter of its total innovation efforts.

Governance
DSM has established best practices in innovation and manages
its major innovation activities at a platform level. The platforms
are chosen within specific areas, such as food and nutrition
security, health, sustainable manufacturing and energy security.

This structure provides the basis for an effective management of
company-wide competence building programs in Research and
Development that is directed by the team of the Chief
Technology Officer. It also guides the exploratory activities for
DSM’s Business Incubator.

The platform-based approach to innovation aims to develop
larger initiatives. It also enables the company to improve
coordination between the various competences, projects and
business development activities, and give its efforts greater
focus.

Within the Innovation Center, DSM’s Emerging Business Areas
(EBAs) are instrumental in turning innovations into major
businesses. The current EBAs are DSM Biomedical, DSM Bio-
based Products & Services and DSM Advanced Surfaces. The
EBAs provide exciting growth platforms within the
Innovation Center that focus on new business areas outside the
scope of the company’s business groups. DSM aspires to
achieve EBA sales of up to € 1 billion by 2020. In 2013, combined
EBA sales reached € 148 million.

Research and Development (R&D) is instrumental to the
realization of DSM’s innovation strategy, and most of the
expenditure in this area is directed toward business-focused
programs. DSM also has a Corporate Research Program that
helps build and strengthen technological competences within
the company to execute development projects.

Bright Science. Brighter Living. 2013

www.dsm.com

Report by the Managing Board

Key technological competence areas are Materials Sciences,
Nutritional Sciences, Process Technology, Biotechnology,
Chemistry & Catalysis, Materials Chemistry and Analysis &
Characterization. These form the scientific basis for the
overarching innovation platforms.

Collaboration
The DSM science network is globally spread and consists of
approximately 2,250 internal scientists who cooperate
extensively with external R&D institutions. Academic
collaboration efforts are normally specific and bilateral, while
DSM is also active in broader public-private partnerships that
increase its scientific scope.

pool of ideas, know-how and expertise that are available outside
the company, DSM is better able to develop and discover
solutions.

DSM is keen to continuously improve the quality of its Open
Innovation practices and the licensing of its know-how and
expertise is one example of how this is driving new business
models. The company aims to accelerate its venturing and
partnering activities, not only in its key business areas but also
in technology, so that it can broaden and further strengthen its
technological competence base. Also see DSM Venturing on
page 107 of this report.

The Dutch Polymer Institute (DPI) is an example of a public-
private partnership. Founded in 1997, this partnership is
between polymer producing and processing industries and
knowledge institutes involved in polymer research. A new
partnership that was shaped in 2013 is the Bio-based Industries
Consortium, a public-private partnership between European
industries, scientific institutes and the EU.

DSM Bright Science Awards
As part of its commitment to promoting pioneering research that
leads to products or solutions that help enhance people’s quality
of life, DSM has put in place the Bright Science Awards program.
The program recognizes the achievements of DSM scientists as
well as those working outside the company that have
demonstrated excellence in innovative research. The program is
an integral part of the company’s open innovation approach.

Patents
DSM filed more than 400 patents in 2013 (2012: 319).

Value creation through best practices
In 2013 DSM continued its Excellence in Innovation program.
This program aims to optimize DSM’s innovation infrastructure
by working to improve key innovation behaviors, including
leadership and teamwork skills, in order to secure an even more
favorable innovation culture at DSM. The company will continue
the Excellence in Innovation program in order to maintain its
leading position as an innovator (as indicated by its top ranking
in the McKinsey innovation diagnostic assessment) and to
improve its capabilities.

Licensing
The company approaches licensing as an effective way of
creating shared value with partners. The company’s center of
excellence for creating value from intellectual property (IP) assists
the business groups and EBAs with the initiation and
management of collaboration that is based on IP (patents,
trademarks and know-how).

Licensing is a fundamental aspect of the EBA business models,
helping to enhance their value proposition and increasing the
speed with which products can be brought to the market.

Open Innovation
An essential element of DSM’s approach to innovation is Open
Innovation, which seeks to combine internal and external ideas
and capabilities. By combining its own capabilities with the vast

The DSM Science & Technology Awards recognize outstanding,
innovative PhD research. In 2013, DSM granted Science &
Technology Awards in three regions: Europe, the Americas and
Asia.

In April, Stijn van de Vyver from the Katholieke Universiteit Leuven
(Belgium), received the Science and Technology Award Europe
for his PhD research entitled ‘Rethinking the design of
heterogeneous catalysts for the conversion of cellulose’. In May,
the Science and Technology Award Asia was handed to Li
Songtao from the Harbin Medical University (China). He received
the award for his PhD research entitled ‘The effect of calcium
supplementation on the endogenous cholesterol metabolism in
estrogen deficiency’. In September, the Science and Technology
Award Americas was won by Christopher M. Bates from the
University of Texas in Austin (USA) with his PhD research on
block copolymer thin film orientation.

Each year, DSM also grants a major award to an established
scientist who has made a significant, peer-acknowledged
contribution to the advancement of science. This award
alternates between Nutritional Sciences and Materials Sciences.
In 2013, DSM granted a Nutritional Sciences Award for research
in human nutrition to Professor Maret G. Traber, Director,
Oxidative & Nitrative Stress Laboratory, Linus Pauling Institute,
College of Public Health and Human Sciences in Corvallis
(Oregon, USA). Professor Traber received the distinction for her
lifetime commitment and scientific achievements in the field of
vitamin E research.

Bright Science. Brighter Living. 2013

www.dsm.com

Growth Driver: Sustainability

From responsibility to a strong business driver

At the heart of DSM's mission is the core value of sustainability
and a commitment to helping to create a more sustainable world.
As part of its 2010-2015 strategy DSM in motion: driving focused
growth, the company has taken sustainability to the next level.
In addition to fulfilling its own responsibilities toward society,
DSM has successfully developed sustainability as a strategic
growth driver. DSM believes that achieving sustainability means
pursuing activities that create value in the areas of People, Planet
and Profit. They must meet the needs of the present generation,
without compromising the ability of future generations to meet
their own needs.

By 2050 the world’s population will reach an estimated 9 billion
people, which will place an unprecedented pressure on societies
to develop innovative solutions to meet their needs, while
protecting the planet’s environment and its natural resources.
Over this hangs the cloud of climate change, which is already
having huge consequences. Scientific consensus is that the
world faces the risk of even more severe floods and droughts. In
order to avoid economic, human and ecological damage the
world needs to keep global warming under two degrees Celsius
compared to the pre-industrial level. The global society also
needs to address food and water security, for it is unacceptable
that 2 billion people are malnourished.

The growing impact of business activities must lead to an
increased responsibility to contribute to the real, higher goal of
the economy − to serve society. The primary goal for business
should be to create societal, ecological and economic value. For
DSM, sustainability is a key differentiator and a value driver in its
markets. The company is uniquely positioned to capitalize on the
many opportunities that this presents across the value chain. As
an integral part of the company's operations, strategic actions
and decisions, sustainability guides the activities of its global
business groups. These are charged with continuously
developing innovative science-based products and solutions
that contribute to a brighter future for people, while helping to
increase the company’s profitability.
See Review of business in 2013 on page 74 to page 109.

ECO+

ECO+ is DSM’s program for the development of sustainable,
innovative products and solutions with ecological benefits.
Products qualify as ECO+ when their environmental impact is
better compared with competing mainstream products fulfilling
the same function. When considered over their entire life cycle,
ECO+ solutions offer superior performance and a lower eco-

footprint. The ecological benefits can be created at any stage of
the product life cycle, from the raw materials through to
manufacturing and potential re-use and end-of-life disposal.
DSM uses comparative Life Cycle Assessments to determine
whether a solution should be considered ECO+.

Sustainability aspirations 2011-2015

Realization 2013

Dow Jones Sustainability Index

Top ranking (SAM Gold Class)

SAM Silver Class1

ECO+ (innovation)

At least 80% of pipeline is ECO+2

95%

ECO+ (running business)

From approximately 34% towards 50%

45%

Energy efficiency

20% improvement in 2020, compared

13% improvement

to 2008

Greenhouse-gas emissions

25% reduction (absolute) by 2020,

1% increase4

compared

to 2008

Employee Engagement Survey

Towards High Performance Norm3

71% favorable

Diversity 5

Women in executive positions

BRIC+ nationals in executive positions

11%

10%

People+5

DSM People LCA

Draft framework

in place

1 DSM returned to Gold Class for 2014
2 See page 221 for a definition of ECO+
3 The High Performance Norm (80% favorable) is the composite of the top 25%

employee responses of the selected external benchmark organizations

4 On a like-for-like basis the total greenhouse-gas emissions of DSM decreased by 19%

when comparing 2013 with 2008

5 See People+ and Inclusion & Diversity in the chapter People in 2013 on page 43

It is DSM’s ambition that at least 80 percent of its innovation
pipeline be comprised of ECO+ solutions by 2015, and that they
generate approximately 50 percent of total net sales. At the end
of 2013, the innovation pipeline contained 95 percent ECO+
solutions (97 percent after deconsolidation of DSM
Pharmaceutical Products (DPP)). ECO+ solutions as a
percentage of running business increased to 45 percent in
2013 (46 percent after deconsolidation of DPP). DSM is on its
way towards the 50 percent aspiration for 2015. In 2013 about
90 percent of ECO+ innovation launches were supported by
comparative LCAs.

ECO+ solutions can be found across all of DSM's business
groups with many more under development. For example, in

Bright Science. Brighter Living. 2013

www.dsm.com

Report by the Managing Board

Animal Nutrition, a product under development reduces
methane emissions from livestock, one of the world’s largest
contributors to greenhouse-gas emissions responsible for
climate change.

DSM is also investing in solutions for renewable energy. In 2010
the DSM Innovation Center developed KhepriCoat™ anti-
reflective glass coating. It is applied on the cover glass of solar
modules and strongly reduces the reflection of sunlight. The
result is an increase in the energy output of these modules of up
to 4 percent. In 2013 KhepriCoat™ was subjected to a
comparative life cycle assessment and was added to the
portfolio of ECO+ products. The fast growing market for solar
energy has increased the need for additional coating supply. In
April DSM opened a new manufacturing plant for KhepriCoat™
at the Chemelot site in Sittard-Geleen (Netherlands).

People+

combination with ECO+, DSM makes its mission ‘Bright
Science, Brighter Living’ more tangible. People+ offers new
perspectives beneficial for new product development, value
propositions and customer engagement. In the absence of a
ready to use methodology to assess the impact of products on
people’s lives, DSM started to develop a new methodology in
consultation with stakeholders in 2011. The methodology that
has been developed to define and quantify the impact that DSM
solutions have on people, the DSM People Life Cycle
Assessment (LCA) tool, was further road tested and improved in
2013 in close connection with different stakeholders. DSM
actively strives to create a harmonized and broadly accepted
methodology, with the Products Social Metrics Roundtable
(PSMR) with participants from a variety of industries and the
World Business Council for Sustainable Development (WBCSD).
PSMR consists of close industry partners of DSM.

The DSM People LCA tool enables the business groups to
identify new levers for innovation, develop value propositions,
and engage with partners in the value chain, by concentrating
on the impact that DSM products have on the lives of people
involved in making and using the product. This tool is now an
incentive for innovation and research and development across
the company.

For example, DSM’s waterborne resins for paints reduce the
health risks for professionals and do-it-yourself painters, in
comparison with solvent-based paints on the market. By a
continued focus on replacing less sustainable technologies and
enlarging the applications for which waterborne resins can be
applied, DSM continues to push the boundaries in this area in
order to improve end-users' health and well-being without
compromising on functionality and performance. A
comprehensive description of the People+ program can be
found in the 'People in 2013' chapter on page 43 of this
report.

Social entrepreneurship

For DSM, social entrepreneurship means finding solutions to
major societal challenges by encouraging entrepreneurialism
and innovation through new business models and partnerships.
Besides profits, DSM generates social value by playing an
important role in fighting malnutrition and hidden hunger. In this
complex world where billions are still undernourished, DSM
believes companies, governments, academia, NGOs and
international institutions must work together in finding innovative
solutions and scaling up production.

People+ is DSM’s sustainability program to develop solutions
that measurably improve the lives of consumers, employees and
communities across the value chains. With People+, in

The Nutrition Improvement Program (NIP) aspires to make DSM
the partner of choice in the global fight against hidden hunger.
To this end, the company offers nutritious, safe and affordable

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solutions and sustainable business models tailored to the needs
of local communities in the developing world, with a special focus
on women and children. This initiative is underway in Latin
America, Africa and Asia where it is aimed at the most
disadvantaged sectors of society.

In 2013 NIP focused on developing new sustainable and
inclusive business models. One example is the cooperation with
Mercy Corps to expand and improve Indonesia’s healthy food
cart program KeBAL. Together with Rabobank Foundation, NIP
is growing KeBAL to transform it into a viable franchise concept
of affordable and more nutritious meals for children of low-
income households in Jakarta. The business will be scalable for
replication in other parts of Indonesia and across the world.

momentum for a circular economy and actively contributing, in
partnership, to the design of a more sustainable future. DSM
believes CE100 is the right platform to scale up the circular
economy as a real alternative to existing economic models.
DSM's diverse knowledge of materials and compounds offers
valuable insights into the sector for the conversion and
capitalization of agricultural and other organic waste, the
development of materials free of hazardous substances, and the
promotion of the use of recycling technologies.

One example of environmental entrepreneurship and a move
forward to a circular economy is the foundation of Reverdia.
Reverdia is a joint venture of DSM and Roquette Frères and has
been set up for the production, commercialization and market
development of Biosuccinium™ sustainable succinic acid.
Biosuccinium™ is one of the new bio-based building blocks of
the last decade. It allows customers in the chemical industry to
choose a bio-based alternative with a lower eco-footprint for a
broad range of applications, from packaging to footwear. At the
end of 2012 Reverdia began operations in Cassano Spinola
(Italy) in a plant which has a capacity of about 10,000 tons per
year.

Sustainability in manufacturing

In DSM’s manufacturing organization, sustainability is
embedded in Functional Excellence programs and expert
networks for maintaining and improving specific competences.
Functional Excellence programs help make DSM’s pooled
manufacturing expertise available wherever and whenever it is
needed throughout the global organization. Competence
networks have been set up to develop shared solutions to DSM-
wide issues. The programs and networks help DSM achieve its
objectives in the areas of People, Planet and Profit.

Environmental entrepreneurship

Sustainability in supply chains

As a result of its various stakeholder engagements, DSM has
developed a broad understanding of societal needs in relation to
environmental challenges. It is well positioned to develop
products that help grow its business in the long term and
address immediate sustainable needs.

In 2013, DSM joined the Circular Economy 100 (CE100)
platform, an initiative of the Ellen McArthur Foundation. A circular
economy is an economic system in which resources in the value
cycle can be used and re-used again and again. This requires a
different way of thinking compared to linear value chains, since
resource, production and waste management are integral parts
in the design. Through engagement and cooperation with the
other participating companies, DSM is committed to building

Together with its suppliers, DSM works to create value in the
areas of People, Planet and Profit simultaneously. In the People
area, this means actively pursuing better working conditions and
a safe and healthy working environment for DSM's own and
supplier and customer employees, as well as promoting local
community development and education across the world as part
of the People+ program. In the Planet area, it means creating
products which, compared to alternative products in the market,
perform at least as well but have a lower eco-footprint as part of
the ECO+ program. In the Profit area it means conducting
business in an ethical and fair way and providing products that
are not just carbon, energy and cost efficient but also of a high
quality and added value.
See also: Sustainable value chains (3) and Suppliers on page
35.

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Our bright ideas help to produce better feed and better foodFrom chicken and ﬁ sh to swine and cows, DSM is unique in animal nutrition. We provide the highest quality ingredients and additives for animal feed to produce healthier animals and better meat and eggs.Elkin Amaya, Global Regulatory Affairs Manager, DSM Animal Nutrition & HealthDoerte Laue, Global Marketing Manager, Promotions & Launches (left) and

Growth Driver: Acquisitions & Partnerships

From portfolio transformation to growth

Accelerating growth through acquisitions and partnerships is a
fundamental element of the DSM in motion: driving focused
growth strategy announced in 2010. Since the beginning of the
strategy period, DSM has successfully invested some € 2.85
billion in new businesses, primarily in Nutrition, and radically
transformed its portfolio. It has also completed a number of
partnerships that have met the company’s strict criteria.

The company is now poised to capture the opportunities in the
global megatrends it has identified in its main markets. While it
remains mindful of new opportunities in the years ahead, it is
focusing its efforts on integrating its latest acquisitions to
enhance their operational performance and realize the full
synergy potential in terms of growth and profitability.

All acquisitions and partnerships are based on stringent strategic
and financial criteria. The screening process begins with an initial
selection based on strategic fit, which results in a shortlist to
which DSM applies financial criteria. A key consideration is that
the business or partner must add or improve a leadership
position and create value for DSM in terms of technological and/
or market competences.

The key financial criteria for acquisitions are:

- Acquisitions should enable DSM to remain within the

boundaries defined for maintaining its Single A credit rating.
- They should contribute to cash earnings per share from the

- They should contribute to earnings per share from year two.
- They should support DSM’s other financial targets.

In the exceptional case that a uniquely attractive acquisition
opportunity arises that would put pressure on financial metrics,
DSM may consider a temporary deviation from its credit metrics
that is commensurate with its ratings objectives. DSM considers
its Single A rating to be the optimum way of ensuring the
company enjoys sufficient financial and strategic flexibility.
Therefore, after completing such an acquisition, DSM would
seek to manage its balance sheet and underlying financials to
realign ratios with Single A ratings within a short period of time.

In 2013, DSM was involved in partnerships that serve clear
strategic objectives, in addition to regular contract arrangements
with suppliers and customers. These business partnerships
sometimes involve long-term supply agreements and are
material to DSM's business performance.

New acquisitions and partnerships in 2013
In November 2013, DSM announced its much-anticipated
strategic partnership for DSM Pharmaceutical Products via a
joint venture with private equity firm JLL Partners via their
majority-owned business Patheon. The combination will enable
this Pharma business to accelerate growth and create a top
global contract development and manufacturing organization.
This is consistent with DSM’s strategy to maximize value for this
business as a standalone company and represents another
major step in the strategic transformation of the company’s
Pharma activities.

beginning.

Acquisitions since 2010

Company

Martek

Ocean Nutrition Canada

Cultures and Enzymes business of Cargill

Fortitech

Kensey Nash

Tortuga

Unitech

Other acquisitions

Total enterprise value

Business group / EBA

DSM Nutritional Products

DSM Food Specialties

DSM Nutritional Products

DSM Biomedical

DSM Nutritional Products

Enterprise

value in € m

790

420

495

275

465

285

approx. 2,850

Year

2011

2012

2013

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Value creation via Acquisitions & Partnerships since 2010

Acquisitions & Partnerships

Leadership

Market

Position

Geographic

Ambition

Innovation/

Technology

Microbia

Martek

DSM Sinochem Pharmaceuticals

Vitatene

Premix plants

AGI Taiwan

KuibyshevAzot

Shandong ICD

C5 Yeast Company

POET-DSM Advanced Biofuels

Kensey Nash

Verenium assets

Ocean Nutrition Canada

Tortuga

Enzymes and Cultures business of Cargill

Fortitech

Unitech

Andre Pectin

SolarExcel

DSM Pharmaceutical Products joint venture1

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•Materials Sciences

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Andre Pectin
DSM has acquired a 29 percent stake in this China-based
manufacturer of apple and citrus pectin, a key food hydrocolloid
providing texture, as well as pectin related food products. Andre
Pectin is the only significant pectin manufacturer in Asia with
premier access to the world’s fastest growing specialty food
ingredients market. DSM’s investment in Andre Pectin
synergistically combines with the previously acquired gellan gum
assets based in China and creates a China-based hydrocolloids
growth platform, in line with DSM's Continued Value Growth
strategy for the Nutrition cluster.

Animal health premix businesses in Philippines and China
DSM acquired Bayer’s animal health premix business for feed
mills in the Philippines. DSM also acquired Bayer’s China custom
and standard vitamin premix business in Chengdu (China). Both
acquisitions further strengthen DSM’s position as a leader in
vitamin premixes. In China, DSM's animal nutrition business
currently operates five vitamin blending facilities.

Unitech
DSM acquired Unitech Industries Limited (Unitech), a New
Zealand-based producer of nutritional products for both human
and animal markets. Unitech mainly focuses on the manufacture
and sale of micronutrient premixes and macronutrient blends for
the rapidly growing Asian human nutrition and health markets. It
is also active in the animal nutrition and health markets including
premixes for pet food. This acquisition fits in the strategy for
DSM’s Nutrition cluster as Unitech adds to DSM’s already strong
geographic footprint and value chain presence.

SolarExcel
DSM acquired Netherlands-based SolarExcel, which has
developed a proprietary light trapping technology that can
significantly increase the efficiency of solar panels. With the
acquisition, DSM expanded its growing portfolio of solar energy
enabling technologies. The company will be integrated into DSM
Advanced Surfaces, part of the DSM Innovation Center. DSM
Advanced Surfaces was established in 2010 to build a portfolio
of technologies to enable and improve the capture of solar
energy.

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Tortuga
DSM finalized its acquisition of Tortuga Companhia Zootécnica
Agrária (Tortuga), a privately held Brazilian company with a
leadership position in nutritional supplements with a focus on
pasture-raised beef and dairy cattle. The company is
headquartered in São Paulo (Brazil) with approximately 1,050
employees. Tortuga has three production sites in Brazil.

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Our bright ideas make plastics safer, lighter and greenerDSM is a global supplier of high-performance engineering thermoplastic solutions. The most innovative developments in this ﬁ eld are new bio-based polymers and bio-based building blocks. Ali Kök, Customer Service & Supply Assistant (left) and Marilyn Raat, HR Assistant, DSM Engineering Plastics

Stakeholder engagement

DSM seeks to address some of the world’s most pressing social,
environmental and economic challenges by offering highly
innovative and sustainable solutions. By reaching out to all its
stakeholders – customers, investors, employees, partners and
public and private organizations – DSM engages in an ongoing
dialogue to exchange thoughts and views. Stakeholder
consultations help to deepen the company’s insights into the
drivers of its business and the needs of society across different
regions in the world. By working together, DSM and its
stakeholders can create shared value and contribute to a more
sustainable world.

In its more than 100 years of existence DSM has always been
able to transform itself in response to societal changes, and its
focus has always been on innovation and the long-term
perspective, in response to stakeholder needs. Without
innovation there can be no fundamental shift towards
sustainability. That is why for DSM innovation is an essential
starting point for a sustainable business model.

Materiality

Beyond the economic wealth they help create, major
corporations have a responsibility to serve society. To do so,

companies must focus their efforts on material issues that have
a direct or indirect impact on their ability to create or preserve
economic, environmental and societal value for stakeholders
and society at large.

In 2012, DSM mapped its material issues according to their
relevance to society and their impact on the company. The
matrix plots the societal interests/concerns against the impact
these issues have on DSM and indicates the level of influence
the company can have on an issue through its operations,
products and solutions.

DSM's first materiality matrix was published in its Integrated
Annual Report 2012. In 2013 this matrix was updated through
new research and a stakeholder consultation process. Twenty
issues emerged as being material to the company from a
sustainability perspective. The twenty issues were positioned in
this materiality matrix using an external and internal ranking
process, DSM’s corporate risk and issue assessment, feedback
from stakeholders and opinion leaders, and a media scan.

The twenty issues have been clustered into four categories:
Societal shifts, Eco limits, Business enablers and Trust and
accountability. They are described below by category (the
number in brackets after each issue indicates its ranking in the
matrix).

Societal shifts
Growing populations, aging societies, increased urbanization,
growing middle classes, and the ‘rise of the rest’ are important
shifts leading to new societal needs in terms of nutrition, health,
and safety, as well as a heightened focus on human rights.

Health and wellness (1)
Health and wellness is seen as an area of opportunity for DSM,
with stakeholders consistently listing it as a high priority topic.
Some stakeholders have highlighted aging as a driver for growth,
as an older but still healthy population would be in need of more
high quality solutions that increase comfort and well-being.

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Health and wellness can be increased by better nutrition and
tasty food, a better environment and good healthcare solutions.
DSM is active in all these areas. Improving health and well-being
is for example an important driver for DSM’s biomedical
business. DSM Biomedical’s mission is to be the leading
development partner, trusted by the medical industry to shape
the future of biomaterials and regenerative medical devices that
improve and brighten patients’ lives throughout the world. It
produces materials for medical devices and it also manufactures
medical devices on behalf of its customers.

Hidden hunger (2)
Stakeholder engagement in 2013 showed that hidden hunger
and malnutrition remain high on the priority list. One third of the
world’s people, the majority of them in developing countries,
either do not have access to or cannot afford a nutritious and
healthy diet. Even a diet that provides sufficient calories may be
lacking important micronutrients (vitamins and minerals) – this is
what is called hidden hunger. Over time, hidden hunger has a
devastating impact, not only on the health and productivity of
individuals but also on the social and economic development of
countries. There is plentiful evidence that improving nutrition in
developing countries is fundamental to breaking the cycle of
poverty.

DSM contributes to solving the problem of malnutrition by
developing new products and combining technical and scientific
expertise with high-nutritional products to add much needed
micronutrients to the food baskets of organizations focused on
combating malnutrition and hidden hunger. DSM's research and
development on food fortification have created new nutritious
products such as micronutrient powders and fortified rice.

Food safety (8)
In 2013 different regions in the world were confronted with food
scandals. DSM stakeholders worldwide expressed their concern
about food safety. As a leading food ingredients supplier, DSM
considers it its duty to address concerns about issues related to
food safety and quality. The company helps to develop programs
together with various public and private stakeholders. DSM’s
Quality for Life™ seal is an example of such a program. The seal
reflects its commitment to create safer, fully traceable, reliable
and sustainable business processes and products. It
incorporates DSM’s commitment to the environment and
society, extending beyond products and services. Quality for
Life™ symbolizes DSM’s pledge to uphold ethical values in
relationships with customers, employees and other
stakeholders.

High growth economies (9)
Stakeholders indicated the importance for DSM to extend its
activities in high growth economies. A key element of the strategy

DSM in motion: driving focused growth is to broaden DSM's
international presence to capture greater megatrend
opportunities in fast-growing economies such as Brazil, Russia,
India and China, also known as the BRIC countries.

DSM focuses on sustainable economic development creating a
positive impact on the lives of people and the environment in high
growth and emerging economies. Both DSM China and DSM
India have sustainability committees and locally developed
programs which help to create awareness of sustainability as a
business growth driver. The sustainability committee of DSM
China reports quarterly about its sustainability progress.
The committee from DSM India has defined a sustainability
roadmap with specific focus areas such as water and energy
efficiency. In 2013 DSM Latin America installed its Sustainability
Forum. The forum consists of senior executives from the regional
DSM businesses, who will meet quarterly. See also Growth
Driver High Growth Economies on page 16.

Human rights (12)
DSM is committed to supporting the Universal Declaration of
Human Rights of the United Nations and commits to the UN
Framework and Guiding Principles on Business and Human
Rights. DSM follows United Nations guidance on embargoed
and sanctioned countries and adheres to national and
international legislation where relevant. The company blocks
customers and vendors from embargoed countries in its
bookkeeping systems to ensure that no transactions can be
made with blacklisted companies.

DSM has been a signatory to the United Nations Global Compact
since 2007. The company remains committed to aligning its
operations and strategy with the principles of the UN Global
Compact for human rights, labor, environment and anti-
corruption. By doing so, DSM helps ensure that markets,
commerce, technology and finance advance in ways that benefit
economies and societies everywhere. The company fully
supports the UN Global Compact’s principles and continues to
integrate them further into its business. For example, DSM will
refrain from any form of corruption, including active or passive
bribery and extortion, even if it loses business as a consequence.
See Table Principles of the UN Global Compact on page 42.

Eco limits
The societal trends outlined previously and the continued impact
of climate change put further pressure on the limited natural
resources (such as water, fossil fuels, land and biodiversity). New
business models and supply chain approaches to production
and consumption are required.

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Sustainable value chains (3)
Sustainability is at the heart of all DSM’s operations. However,
each DSM business is just one link in a large value chain. DSM
believes that true sustainability can only occur when all parts of
the value chain work together towards the same goals. DSM
works hard to make this a reality through continuous
improvements and it engages in a continuous dialogue with
suppliers, customers, NGOs and industry peers that seek to
increase the sustainability of the various value chains the
company operates in. With sustainability as a core value, DSM
is committed to continuously improving the eco-footprint of its
own operations and the eco-footprint of the entire value chains
in which the company operates. As part of this commitment, the
company (1) requires its suppliers to meet DSM’s sustainability
standards and to minimize their eco-footprint, and (2) focuses
on providing solutions that enable all downstream players, from
customers to end-users, to improve their eco-footprint as well.

BrewersClarex™ is an example of a DSM product that
decreases the eco-footprint of customers. It simplifies and
shortens the beer stabilization process while enabling breweries
to reduce their overall CO2 footprint by between 5 and 8 percent.
This equates to a potential energy cost saving of € 100,000 per
million hectoliters.

In 2013 a group of young DSM professionals explored the
possible monetization of sustainability. With their project they
built on DSM’s sustainability program ECO+ and carried out a
pilot on DSM Resins & Functional Materials products to find the
‘true’ cost and price of producing resins for the paint industry.
‘True’ cost means attaching a monetary value to environmental
impacts, such as energy and water usage. The team also

interviewed stakeholders to understand the value of
sustainability for DSM’s customers and end-users. They
developed a roadmap for 2014 and beyond, for how DSM can
start to use monetization for decision-making and
communications. See DSM's Supplier Sustainability Program on
page 35.

Bio-based and circular economy (4) and resource constraints
(10)
Significant steps are being taken around the world to move to a
sustainable economy and decrease the world's dependency on
finite resources and address climate change concerns. DSM
believes that the transition to a circular economy can make an
important contribution to those objectives. A circular economy
is an economic system in which resources in the value cycle can
be used and re-used again and again. This requires new
business models − for example a model where companies
remain the owner of the products − and a different way of
thinking compared to linear value chains: resource use,
production and end-of-life waste management all need to be
taken into account in the product design stage.

The bio-based economy, where production relies on the use of
natural inputs, thus ensuring renewability of the raw material,
contributes to the development of such a circular economy. Bio-
based products, such as biofuels, bio-based materials and bio-
based chemicals, will play an increasingly important role in the
world's energy, materials and chemicals supply: the world will
be ‘living off the land’ again. In addition, in order to really ‘close
the loop’ and move to a circular economy it will be critical to use
safer ingredients. DSM is committed to promoting these
developments.

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An example of the company’s contribution to the development
of a circular economy is the partnership of DSM Engineering
Plastics with the Ravago Group. This partnership combines
DSM's expertise in Akulon® polyamide 6 (PA6) with the recycling
know-how of Ravago to develop a portfolio of Akulon®
compounds with post-consumer recycle content. These grades
are well suited for e.g. automotive and furniture applications.
See examples of circular, safer ingredients and bio-based
solutions on page 20, page 64 and page 65.

See also DSM's position paper on Sustainable biomass at
www.dsm.com.

Climate change (5)
According to the International Energy Agency, the current
models are pointing to a long-term average global temperature
increase of 3.6 degrees Celsius above the pre-industrial level in
the coming decades, which is well above the two degrees
Celsius which the United Nations Framework Convention on
Climate Change has recognized as the upper limit to avoid
devastating and possibly irreversible natural and social
consequences. DSM believes there is an urgent need to
redesign the planet’s energy system from a fossil-based system
towards a more renewable energy mix and, at the same time,
secure a competitive energy supply. DSM supports efforts to
move to a circular economy where goods and services are used,
produced and recycled in a sustainable manner. A renewable
energy system will form an important part of this. Society’s
current path, with an expected increase in global energy demand
with an accompanying potential high increase in energy-related
CO2 emissions, is unsustainable.

Water management (6)
Many areas in the world are rapidly facing growing water stress:
too much, too little or too dirty. Sustainable water management
is therefore a must, and both individual and collective action are
needed to achieve the Millennium Development Goals for water.
DSM aims to achieve sustainable water management by
ensuring that its activities have no adverse effect on the
availability and quality of ground water and surface water in the
regions where it operates. DSM executes water risk
assessments at its sites in order to mitigate environmental,
societal, operational, regulatory, reputational and financial risks,
and promotes similar initiatives across the supply chains in which
it operates. DSM’s CEO Feike Sijbesma has endorsed the UN
Global Compact’s CEO Water Mandate, a public-private
initiative that helps develop and implement sustainable water
practices and policies. DSM also takes part in the water task
force of the World Business Council for Sustainable
Development (WBCSD).
See also the Water section in Planet in 2013 on page 62 and
Partnership with WBCSD on page 37.

Biodiversity (11)
Different stakeholder groups see biodiversity as an area of
growing importance. Biodiversity is the term given to the variety
of life on earth. The various life forms, and the ecosystems in
which they interact with each other and with their non-living
environment, significantly impact the world’s climate and vice
versa. DSM’s strategy to mitigate climate change and thus
preserve biodiversity, ecosystems and natural capital is first of all
aimed at improving the company’s own footprint impact (e.g.
energy efficiency, reduction of greenhouse-gas emissions,
waste and water use). But beyond that, DSM is also looking to
address the issue from a broader perspective by measuring and
mitigating the impact of all stakeholders involved in the value
chains in which DSM operates across the world. Together with
three other companies (partners in the Inspirational Program of
the Leaders for Nature platform of the International Union for the
Conservation of Nature), DSM is working on the design and
future development for a biodiversity-friendly business estate.
See also the Biodiversity section in Planet in 2013 on page
63 and the position paper on Biodiversity on www.dsm.com

Renewable energy use and greenhouse-gas emissions (13)
In the discussions with stakeholders it became clear that the
issue of renewable energy has three dimensions: the company’s
own consumption of renewable energy, DSM's development of
products that lead to a decrease in energy use and greenhouse-
gas emissions and its efforts to increase the overall production
of renewable energy through advocacy. DSM advocates for
consistent, longer-term global governmental policies that enable
a worldwide transition towards a more renewable energy mix.
Such policies should include (1) target setting at national,
regional and global level for renewable energy use; (2)
improvement of energy-efficiency and reduction of CO2
emissions for 2030 and beyond; and (3) stable, fair and
controlled CO2 pricing on which a cap and trading system can
be based. The development of new technologies and a right
balance between taxes on undesired practices and incentives
for desired practices regarding CO2 emissions and energy use
and development should be promoted. Such policies should
also stimulate the much needed investments by the private
sector in renewable energy. See also DSM's energy perspective
and its position paper on sustainable biomass as published on
www.dsm.com.

Sustainable animal protein (14)
The world will reach a population of 9 billion by 2050. This
population growth, combined with urbanization and growing
wealth, is resulting in increasing demand for animal protein,
especially in high growth economies. To meet this growing
demand, more food must be produced while at the same time
constraints on the use of natural resources such as water and
soil must be respected.

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With its product portfolio of vitamins, minerals, carotenoids,
eubiotics and feed enzymes for the global feed industry, DSM is
able to provide solutions for all types of species and animal
farming systems with a view to making them more resource
efficient and mitigating the environmental burden. This includes
making more efficient use of feed, providing alternatives to
antibiotic growth promoters, improving animal health and welfare
with the aid of micronutrients and reducing the environmental
impact of animal farming in terms of for example greenhouse-
gas emissions, air quality in stables and land use.

Business enablers
Proactive management of both internal engagement with the
workforce and external engagement with business partners and
other stakeholders (including advocacy with policymakers and
government authorities) can be beneficial to business and
society.

Open innovation (7)
Innovation is one of the four growth drivers of DSM's business
strategy. Innovations are the lifeline for the company as well as
for its stakeholders; innovative solutions keep DSM number one
with its customers and partners and contribute to the company’s
profitable growth.

There was a time when it was standard practice for large
industrial companies to keep their innovations to themselves in
order to maintain their competitive edge. However, this ‘closed
innovation’ model is increasingly giving way to open,
collaborative innovation. There are various reasons for this. One
is the increased availability and mobility of highly educated
people. Companies today are aware that there is a large pool of
knowledge available outside their own research laboratories,
and that it can be advantageous to tap into this pool. Another
reason is the significant growth of venture capital, which offers
large companies the opportunity to have their promising ideas
and technologies explored by start-ups. A third reason is that
other players in the value chain (suppliers, customers) play an
increasingly important role in the innovation process. And the
fourth reason is that the demands of society are such that
companies often have no choice but to work together in meeting
them. DSM is well aware of these developments and is working
to find the right balance between open and closed innovation.
See growth driver Innovation on page 19.

Careers and employment (15)
Attracting, developing and retaining bright talent worldwide is
very important for DSM. Finding talented employees is one of the
elements of its human resources strategy Passion for People. It
is also important to keep these employees engaged and ensure
they remain up to the challenges of a complex and volatile world.
One of the ways to achieve this is education and training. In 2013

DSM started its sustainable employability program to encourage
and enable employees based in the Netherlands to continue to
develop throughout their entire career in order to remain
employable. In this way DSM ensures that its employees use
their talents and strengths to the full and that they work in the
job that best suits them or are working towards such a job, so
that they make the best possible contribution to the organization.

DSM encourages employees to become actively involved with
some of the organizations in its partnership network, in particular
with the United Nations World Food Programme (WFP). For
example, an employee volunteer program offers DSM
employees the opportunity to take on WFP assignments. See
also People in 2013 on page 43.

Advocacy (17)
The term advocacy refers to the efforts made by companies,
associations or individuals to influence the political decision-
making process. It plays an important role in getting important
topics on the agenda of (non-)governmental organizations.
Malnutrition and stunting are issues where DSM wants to take a
leading role in bringing them to the attention of a broader
audience. DSM actively engages to build greater awareness
about the importance of improved nutrition, which is one of its
main businesses in both the developing and the developed
world. Through this active advocacy, DSM has emerged as one
of the industry leaders in this area, and it is often consulted by
United Nations agencies, governments and NGOs.

CFO Rolf-Dieter Schwalb has joined the Chief Financial Officer
Leadership Network on behalf of DSM. The CFO Leadership
Network was established by Accounting for Sustainability (A4S),
an initiative of HRH The Prince of Wales. A4S aims to put
sustainability at the heart of business decision making and
strategy. The network seeks to embed sustainability within
financial decision making and improve the modeling of future risk
and uncertainty.

Social media (18)
DSM is actively using social media for stakeholder engagement,
reputation management and brand building purposes. The
company wants to drive a proactive dialogue and conversation
with its stakeholders and wants to increase the number of key
stakeholders acting as advocates for the company. With its
social media efforts DSM is primarily focusing on customers,
governments, NGOs, local communities, its own employees and
potential employees. DSM tailors its messages and
conversations to stakeholder groups and specific channels. The
company is actively involved in a number of social media
platforms including DSM channels on Twitter, Facebook,
LinkedIn, YouTube, Google+, Flickr and regional platforms
including Weibo.

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Report by the Managing Board

DSM’s social media engagement activities build further on
creating awareness and understanding of, and generating an
active conversation and engagement with, its stakeholders on
key societal themes including hidden hunger, the bio-based
economy, the role of business in society, sustainable innovation,
diversity & inclusion and climate change. DSM actively measures
the level of engagement established and steers its actions
accordingly.

Trade barriers (20)
In 2013 the role of free trade in encouraging sustainable
innovation and development became clear when the European
Union imposed tariff barriers on the import of solar cells and
panels from China. With a looming solar trade war the
importance of a global level playing field became an issue that
could have an impact on DSM’s solar energy related business.

DSM is pleased that the World Trade Organization accomplished
an agreement on trade facilitation at the 9th ministerial
conference in Bali in December 2013. The implementation of this
agreement will encourage free trade to a large extent, which can
help improve the global economy.

Trust and Accountability
Any business must be trusted by its stakeholders in order for it
to function effectively. Transparency on company activities
around key issues is the only way in which stakeholders can hold
businesses to account and is a trend that is likely to grow.

GMMs and bioethics (16)
Biotechnology is a field of applied biology that involves the use
of cells and proteins derived from these cells in bioprocesses for
a broad range of applications such as pharmaceuticals, food,
agricultural products, bio-based chemicals and materials as well
as fuels. Genetically modified micro-organisms (GMMs) are
organisms whose genetic material has been altered via
biotechnological means. A few years ago genetic modification
was the subject of a societal debate, DSM’s latest consultations
with stakeholders show that the debate now focuses on the
question what role GMMs can play in nourishing the 9 billion
people that will be living on this planet in 2050. New or unfamiliar
technologies like genetic modification often raise concerns in
society about their possible implications for public health or the
environment, or trigger ethical discussions.

DSM is aware that consumer acceptance of new technologies
cannot be taken for granted, and therefore makes safety and
other concerns a priority. DSM believes in engaging in an open
dialogue and debate on benefits and risks with all stakeholders,
including the scientific community, industry, NGOs,
governments and the general public. DSM adheres to all
applicable regulations and legislation and applies the highest

standards. DSM is transparent about its practices and uses
science-based safety assessments, thus enabling the
competent authorities to assess and approve DSM’s use of
innovative strain development technologies and the resulting
genetically modified micro-organisms. DSM believes that
biotechnology offers unique solutions to global challenges
related to a growing and aging population and the depletion of
fossil resources.
For more information see DSM's position paper on
Biotechnology on www.dsm.com.

Tax (19)
Fair share tax became a prominent issue in 2013 as some
multinational companies came under attack by civil society, the
media and politicians because of the way they have minimized
their tax contributions. At DSM’s Annual General Meeting, the
Dutch Association of Investors for Sustainable Development
(VBDO) raised the topic of tax policies of multinationals. At the
meeting, DSM’s CEO Feike Sijbesma explained the company’s
global tax policy. The stakeholder consultation process shows
that taxation is seen as being related to broader issues under the
umbrella of ethical financial behavior, including remuneration,
transparency, and product prices.
See DSM tax principles on page 110.

Fast changing world
A materiality matrix is like a snapshot: it represents society's
interests and concerns at a certain moment in time. DSM's
materiality matrix of 2013 represents the material topics and their
positioning as seen by the company’s stakeholders in 2013. The
matrix is based on research and stakeholder engagement.
Customers, suppliers, investors, civil society, academia and
employees gave their opinion on what DSM should consider as
(top) priorities. They also assessed what issues had become less
important in 2013 and gave their insight into what they thought
would be emerging issues in the coming years. From an initial
list of 50 topics, 20 (three more than in 2012) found their way
into the materiality matrix because they were considered to be
the most pressing ones for the short term. Environmental
Labeling, Poverty Alleviation, Disease and Health and
Nanotechnology – topics from the 2012 materiality matrix– did
not make it into the top 20 and were replaced by Sustainable
Animal Protein, Open Innovation, Social Media, Sustainable
Value Chains, Tax and Trade Barriers. GMM and bioethics were
combined because of their overlap, as were Bio-based economy
and Circular economy.

DSM values its stakeholder engagement and open discussions
with various parties in society on the various topics related to its
business activities and its role in society. If any topics emerge
that might become material because of societal, environmental

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or ecological events or trends, DSM will take these into account
and assess their influence on and value for the company.

Stakeholders

DSM is committed to creating value for all stakeholders by fully
leveraging the unique opportunities in Life Sciences and
Materials Sciences for people today and generations to come.
DSM believes that in this ever more complicated world,
companies, governments, academia, NGOs and international
institutions have to work together to solve the big global issues
of today. These issues include the question of how to deal with
the big demographic changes in the world, including the rise of
new economies and an aging population, but also how to
address climate change and the development of alternative
energy, and how to secure the health and well-being of all by
resolving food and nutrition security and water issues.

Customers
DSM embraces true customer centricity in its focus on
excellence in marketing and sales. The company is committed
to becoming a part of the top quartile of customer-centric
companies and therefore has developed a detailed roadmap to
continuously improve its marketing and sales capabilities. To
support the movement towards greater customer centricity,
DSM is using the Net Promoter Score® (NPS), a customer
interaction cycle that has become the lead performance
indicator for loyalty and advocacy tracking. A better
understanding of what drives customer behavior helps DSM to
achieve its goals by securing longer lasting, more profitable
relationships and enabling growth. The essence of the NPS
methodology is creating a closed loop to continuously improve
the customer experience. DSM has developed a tailored NPS
program that is used by all its business groups.

In 2014, DSM will focus on enhancing the use of NPS as the lead
performance indicator of customer centricity in the organization.
An e-learning tool has been developed to train all relevant
employees on the basics of NPS. Additional initiatives have also
been undertaken to build customer management skills
throughout the organization. A new customer management
program focused on strengthening strategic relationships was
built using internal and external best practices. Furthermore, the
capabilities of over 1000 marketing and sales professionals were
assessed, resulting in a significant number of tailored
development plans.

Employees
DSM’s HR strategy is called Passion for People and stands for
the vision that the company wants its employees to reach their
full potential everywhere in the world. This strategy is also
important in supporting DSM’s internationalization goal, creating

a company that values diversity in all its aspects. The main
elements of its human resources approach are recruitment,
talent management, leadership development and performance
management supported by the implementation of DSM’s ONE
DSM Culture Agenda and the career management process. The
company’s performance is linked directly to the health and well-
being of its employees. That is why DSM has a single,
comprehensive health and safety policy that is consistent around
the world. The policy includes Safety, Health and Environment
(SHE) training programs and vitality programs that help
employees assess their health risks and set personal goals.
See also: People in 2013 on page 43.

Investors
DSM actively engages with investors and financial analysts. It
does this by organizing conference calls following the publication
of quarterly results and announcements of major transactions
such as acquisitions and divestments. In 2013 DSM participated
in investor conferences and interacted with investors in
roadshows in Europe, North America and Asia. The company
also organized a capital markets day with a special focus on
updating the markets on its 2015 targets. In 2013 DSM
experienced a growing interest from so-called socially
responsible investors and traditional investors with a larger
interest in companies' environmental, social and governance
performance.

All relevant information was made publicly available via
publication on the DSM Investor Relations website, ensuring that
such information was equally and simultaneously provided and
accessible to all interested parties.
See also Information about the DSM share on page 140.

Governments
DSM believes that dialogue between business and government
authorities is a constructive part of the legislative decision-
making process. An important goal of that dialogue is to create
a reliable regulatory framework and favorable conditions for
business activities, and thus promoting business success. DSM
encourages legislators to promote competitiveness and
innovation as DSM and its customers need to be competitive
and innovative to stay successful.

DSM is committed to acting with responsibility and transparency
when it comes to sharing its expertise with policymakers and
government authorities in all markets. The company is for
example registered in the European Commission's voluntary
register of lobbyists. DSM engages with policymakers worldwide
on various topics, including nutrition, energy and industrial
biotechnology.

Bright Science. Brighter Living. 2013

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Report by the Managing Board

Civil society
Throughout the year DSM engaged with a wider audience to talk
about the challenges the world is facing, for example hidden
hunger and climate change, and also about the opportunities for
sustainable development. DSM met with many non-
governmental organizations during the year. Greenpeace
launched a campaign in which it expressed its doubts about
DSM’s attitude towards renewable energy. This campaign led to
several meetings between representatives of Greenpeace and
DSM and to a revision of Greenpeace's assessment of DSM’s
renewable energy policy and a better mutual understanding. See
also Public-Private Partnerships on page 36.

Suppliers
DSM increasingly takes into account the impact of the value
chains in which it is active. This impact reflects the wider impact
of DSM's activities both upstream and downstream in the value
chains. DSM is looking for suppliers who can support the
company in the areas of ECO+ and People+.

Supplier Sustainability Program

DSM’s global Supplier Sustainability Program (SSP) has
changed in character over the last six years. Originally a
compliance driven process focusing on the integration of the
Supplier Code of Conduct, self-assessments and audits, it has
developed towards integration of the Triple P approach into
standard sourcing practices like strategic sourcing and supplier
selection and contracting processes.

People+ and Water are new topics that were added in 2013. The
SSP proactively focuses on dialogue with DSM’s suppliers. The
aim is to create shared value with suppliers and focus on true
supplier development, in the areas of leveraging capabilities and
creating efficiencies and new solutions. In 2013, progress was
made on these three areas of the program. It is important to note
that supplier requirements differ per business and there is a need
to focus on those elements where the greatest benefits can be
achieved in terms of sustainable business practices.

Compliance
Building on the work done in previous years, DSM continued with
its three step approach:
1. Supplier Code of Conduct
2. Questionnaires
3. Audits

The compliance program targets DSM’s 40,000 global
suppliers. Special focus is given to 1,200 of these because they
(1) are located in countries with high environmental, social and
governance risks; (2) supply high volumes; (3) are DSM’s single
source for a certain product or service; or (4) have a high potential

for creating shared value in the areas of innovation and
sustainability.

In 2013 changes were made to the compliance program: the
Supplier Code of Conduct was updated to include DSM’s Life
Saving Rules, the questionnaires used in compliance monitoring
were moved to a web-based platform hosted by a third party to
facilitate information gathering and sharing in DSM’s supplier
base, and the scope of the audit program was expanded.

The outcomes of self-assessments and audits continue to be
input for the improvement programs for suppliers. For example,
the Triple P project in China was initiated on the basis of audits
carried out over the last two years in China. In 2014, there will
be a continued focus on integrating sustainability compliance
into the standard Supply Risk Management and Supplier
Approval processes as well as in the Strategic Sourcing
Methodology and in Contracting.

Audit results / overview of supplier sustainability program

Sustainability audits

Quality audits

Supplier solution projects

299

China Triple P project
DSM initiated the China Triple P Supplier Engagement and
Development project in July 2013, in partnership with
Solidaridad and Manpower. The aim of the project is to use the
People, Planet and Profit angle to engage suppliers to create a
more sustainable supply chain. The idea is that suppliers in China
who sign on to the project will start to apply the same approach
to their own supply base and set up their own sustainability
programs. In the space of one year, veteran corporate social
responsibility, productivity, SHE and HR experts will organize
workshops and training courses for the participating suppliers,
and offer rounds of in-house technical support to achieve
genuine improvements in the areas of People, Planet and Profit.
In addition, to measure the potential impact and progress at
each plant, an on-site baseline assessment has been carried out
and a system has been set up for continuously monitoring
improvements.

Intermediate results indicate that the investments made in this
project (by DSM and the participating suppliers) have an
estimated payback time of six months. The evaluation to be
carried out in April 2014 will capture the final value.

In 2014 the project will move to a next stage, based among other
things on an evaluation of whether it fits into the context of
initiatives that the Dutch government has set up in China.

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Supplier Sustainability Program and ECO+
In 2012 and 2013 more than 220 DSM participants, mainly in
Purchasing but also in related disciplines, were trained in basic
and advanced sustainability topics. As a result, Life Cycle
Assessments, supplier solutions and sustainability topics rose
high on the agenda of standard supplier meetings in this period.
Among other things, this resulted in sustainability initiatives in
packaging and logistics as well as carbon footprint reduction
initiatives such as the replacement of petrochemical-based raw
materials by bio-based ones.

In 2013, 28 supplier projects in the area of ECO+ were executed.
The 20 by 2020 project of the Physical Distribution (PD) team
deserves a special mention. This project is a continuation of the
Green Tender initiative that began in 2012 and focuses on DSM
logistics and packaging suppliers. The goal of the project is to
steer supplier selection in order to achieve a 20 percent
reduction in emissions associated with logistics and packaging.
At year-end 2013 the cumulative volume corrected scope 3
reduction compared to 2010, the baseline year, was already 8
percent. The aim is to achieve 10 percent in 2014.

In addition, the PD team is continuously thinking of ways to
contribute to supply chain management from a People, Planet
and Profit perspective. Many projects reported in the Purchasing
Value Tracking System in 2013 contribute to one or more of the
three Ps. Another topic that the team worked on is Safety, which
is an important requirement at DSM. Safety is included in all
Sourcing tenders. The aim is to work towards an aggregated
overview of the safety performance of PD suppliers and report
this. Such an overview will help DSM to identify potential risks
and drive safety to a higher level.

Together with CO2 reporting, Green Tender continues to act as
an enabler to support data collection and steer supplier selection
and performance in the desired direction. In addition, ECO+ has
been integrated into strategic sourcing and supplier selection. In
2014, DSM Sourcing expects to focus on smart selection of raw
materials in terms of their contribution to the carbon footprint,
and to continue engaging with packaging and logistics providers
to minimize the impact of those activities.

In 2013, water was added to the Planet part of the Supplier
Sustainability Program. DSM has sought to identify suppliers in
water-scarce areas and set up an assessment of water scarcity
that can be completed by suppliers on the web-based platform
used for self-assessments and audits.

Supplier Sustainability Program and People+
As People+ is a new program to DSM, it is also new to DSM
Sourcing. During 2013 and 2014, the main focus is on working
conditions and safety improvements. These elements were an

integral part of the China Triple P project. In addition, eight
supplier projects were executed in this area in 2013. An example
is ‘Picking up the gauntlet’. This is an initiative started by the
Technical Goods and Services team that targets training and the
enforcement of Life Saving Rules and safety regulations on DSM
sites — not just for suppliers, but also for contractors and sub-
contractors. The goal of the project is to move from a passive
approach (such as the enforcement of safety standards via
contracting) towards a more proactive approach, to make sure
that only the right people with the right (safety) attitude get to
enter DSM sites. The active approach includes making safety
performance an integral part of supplier qualification and
selection; collecting and auditing track records on a continuous
basis; getting commitments from suppliers to do the same with
their sub-suppliers; and lastly, executing extensive know-how
and best-practice sharing workshops.

Public-Private Partnerships
DSM-WFP Partnership
DSM joined forces with the World Food Programme (WFP) in
2007 to form the Improving Nutrition, Improving Lives
partnership, lending its expertise to help improve the nutritional
value of the food WFP distributes to those in need through more
than 25 projects. With the partnership renewed in 2013 for an
additional three years, DSM and WFP will seek to double the
number of people who benefit from improved nutrition, from the
current annual reach of 16 million to 25-30 million by 2015. This
year, partnership projects included improving nutrition capacity
at WFP, scaling up Micronutrient Powder distribution and
continuing the roll-out of rice fortification in Bangladesh and
Cambodia.

In July and August 2013, WFP and DSM launched an online
campaign to grow WFP's Facebook community and raise
awareness about hunger − the world's greatest solvable
problem. More than 30,000 new likes were added, making it one
of WFP’s most successful Facebook campaigns.

Global Alliance for Improved Nutrition
The Global Alliance for Improved Nutrition (GAIN) is an alliance
driven by the vision of a world without malnutrition. Created in
2002 at a Special Session of the UN General Assembly on
Children, GAIN supports public-private partnerships to increase
access to the missing nutrients in diets necessary for people,
communities and economies to be stronger and healthier. GAIN
has the lead in the public-private partnership Amsterdam
Initiative against Malnutrition (AIM) together with the Ministry of
Foreign Affairs of the Netherlands, AkzoNobel, DSM, Unilever
and Wageningen University. The goal is to eliminate malnutrition
for 100 million people in Africa by 2015, focusing on six
countries: Ghana, Kenya, South Africa, Ethiopia, Mozambique
and Tanzania.

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Report by the Managing Board

Sight and Life
Through its continued support of the non-profit humanitarian
nutrition think tank Sight and Life, DSM is helping to improve the
world’s knowledge, understanding and awareness of hidden
hunger. Sight and Life promotes nutrition research, shares best
practices and mobilizes support for the world’s undernourished.
With a number of new public-private partnerships added to its
nutrition portfolio in 2013, DSM recognizes the need for an open
and transparent policy detailing its intentions with respect to
these relationships.

Vitamin Angels
Vitamin Angels is a non-profit, non-governmental organization
focused on bringing essential nutrition to children around the
world through vitamin supplementation. It helps at-risk
populations — specifically pregnant women, new mothers, and
children under five — gain access to micronutrients. Millions of
children worldwide are deprived of their childhood because their
diet lacks essential vitamins and minerals. Instead of seizing
opportunities, they are fighting diseases they may not survive.
According to DSM and Vitamin Angels vitamin supplementation
is a simple and cost-effective way to give those vulnerable
children a childhood and a future. In December 2013 Vitamin
Angels launched the Give Childhood campaign to raise
awareness for childhood undernutrition, a problem that is linked
to 45 percent of all childhood deaths worldwide, according to
the World Health Organization (WHO).

Partners in Food Solutions
Along with Cargill, an international producer and marketer of
food, agricultural, financial and industrial products and services,
DSM has become one of the first corporate partners of the non-
profit initiative Partners in Food Solutions. Linking the expertise
of Cargill and DSM employees – in research and development,
nutrition, engineering, marketing, finance and more − with small,
growing food processors throughout Africa, this non-profit and
volunteer initiative is designed to share knowledge and
strengthen the capacity of local food manufacturers in Africa to
help address the hunger problem. DSM’s collaboration with the
Partners in Food Solutions initiative emphasizes its longstanding
commitment to developing sustainable partnership-based
approaches that address the global problem of malnutrition and
hidden hunger, with a clear role for the private sector.

World Vision International
In May 2013, DSM signed a Memorandum of Understanding
with World Vision International, a global development
organization. By 2016, the DSM-World Vision partnership aims
to contribute to the reduction of the 165 million children under-
five across the globe who are stunted. The collaboration will see
both organizations jointly leverage their expertise, resources and
reach in order to address undernutrition – the root cause of

stunting and one-third of preventable child deaths. The
partnership will focus on fortifying staple foods like maize, wheat
and rice with essential micronutrients. The Miller’s Pride project
in Dar es Salaam (Tanzania) will fortify maize flour with essential
micronutrients, reaching a population of millions. In addition to
the fortification, DSM and World Vision will work with the millers
to build business expertise, improve food safety and increase
markets and profits for the millers.

UNICEF
In September 2013, DSM signed a one-year Memorandum of
Understanding with UNICEF with a focus on home fortification in
Africa. The partnership will focus on the delivery of micronutrients
to pregnant and lactating women, joint advocacy for the
importance of micronutrients, improved supply chain
management of high nutrition foods and capacity building with
African nutrition leaders.

Other partnerships
Through various partnerships DSM invests its scientific
expertise, employee capability, broad network and funds, and
benefits from greater credibility, access to new markets and
distribution channels and knowledge of consumer behavior.

World Economic Forum
DSM is an active member of the World Economic Forum, an
independent international organization based in Switzerland that
is committed to “improving the state of the world”. This Forum
brings together leaders from governments, businesses,
academia and non-governmental organizations to exchange
and synchronize thoughts and to work together on important
agenda topics to make the world a better place.

CEO Feike Sijbesma and Managing Board member Stephan
Tanda represented DSM at the World Economic Forum’s Annual
Meeting in Davos from 22 to 25 January 2013. They spoke on a
couple of occasions and participated in several sessions on
subjects including nutrition, sustainability, innovation, the bio-
based economy and the role of business in society.

World Business Council for Sustainable Development
DSM has a long-term relationship with the World Business
Council for Sustainable Development (WBCSD). In the last two
years DSM has chaired the work of the WBCSD Reaching Full
Potential project on product international metrics development.
This is a joint initiative of key global players of the chemical sector
aiming at developing consistent and harmonized guidance for
applying LCA to their products. This will help DSM to improve its
ECO+ and People+ assessments. The environmental guidance
is expected to be publicly released early 2014.

Bright Science. Brighter Living. 2013

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An example of a donation is the World of Life project. In 2007,
DSM entered into a partnership with WFP (see partnerships in
this chapter). DSM Purchasing contributed to this partnership by
adopting the World of Life Community School in Lusaka
(Zambia). DSM has already provided a water pump and eating
utensils, and will start building three classrooms in 2014. In 2013,
a container full of second-hand bikes donated by DSM
colleagues was shipped to the school, for the children to use to
travel to and from the school.

After the earthquakes in 2008, DSM China and its employees
donated € 122,000 (RMB 1 million) to help two schools, one in
the province of Sichuan and one in the province of Gansu, to
help the schools with their rebuilding efforts. DSM cooperated
with China Youth Development Foundation to help 1000
students return to school. DSM kept in contact with both
schools.

In 2013 the school in Gansu was opened and on that occasion
DSM donated 20 computers and laptops, more than 1000
books and sports equipment. At the end of 2013 a delegation
from DSM China visited the second school in Sichuan and on
that occasion 20 computers were donated for the school's
computer lab. DSM has a premix plant in Sichuan.

In 2013 DSM became co-chair of Action2020, the new program
of the WBCSD that strives to find business solutions that can
solve the societal and planetary needs described in its
Vision2020, the long-term goal setting plan developed in 2011.
DSM participates in three working groups: Food, Feed, Fiber and
Biofuels; Sustainable Lifestyles; and Basic Needs and Rights.

Dutch Sustainable Growth Coalition
In 2013 DSM participated in several activities of the Dutch
Sustainable Growth Coalition (DSGC). DSGC launched its
second publication, ‘Leadership and Corporate Governance for
Sustainable Growth Business Models’. DSM featured in this
publication with two best practices: Governance and Tone at the
Top. The launch of the publication was celebrated with a special
conference where DSM's CEO Feike Sijbesma gave a speech
on the developments in sustainability in relation to societal needs
and the role business can play in addressing those needs.
AkzoNobel, FrieslandCampina, Heineken, KLM, Philips, Shell
and Unilever are the other Dutch partners of the DSGC.

Science institutes
DSM works together with various science institutes and
universities. Some of these collaborations are based on long
term contracts, others are directly linked to special projects or
related to business development, such as the bio-based
economy or DSM’s People+ program.

To stimulate the nutrition science agenda, DSM engages with
the New York Academy of Sciences (USA), Johns Hopkins
University School of Public Health in Baltimore (Maryland, USA),
Tufts University in Medford (Massachusetts, USA), the University
of Groningen (Netherlands), Wageningen University
(Netherlands) and a number of other academic institutions.

Donations and sponsoring
By supporting special projects with money and expertise DSM
has the opportunity to share its mission of using its bright science
to create brighter living. Sponsoring is another means of showing
that DSM is a sustainable and innovative partner, both worldwide
and in local communities. In 2013, DSM donated more than
€ 2.8 million for a range of initiatives.

DSM’s Code of Business Conduct creates an agenda for making
a positive contribution not only to the world of business but also
to society as a whole. In line with this Code, DSM does not make
any payments nor donations in kind to political parties or their
institutions, agencies or representatives. DSM focuses its
donations and sponsorships on activities that are connected to
its know-how and competence base, its business position or its
present and future geographical presence. In some cases
donations and sponsorships are part of 'being an active
neighbor'.

Bright Science. Brighter Living. 2013

www.dsm.com

Report by the Managing Board

External recognition

Innovation

In August, DSM’s heart health ingredient OatWell® oat beta-
glucan was named one of the most innovative products of the
year at the prestigious Food Ingredients South America (FISA)
awards 2013. Beta-glucan is a soluble fiber found in oats.

In November, DSM was recognized for innovation with three
separate awards. DSM’s Chief Innovation Officer, Rob van Leen,
was named Innovator of the Year by Accenture. This year, the
award was presented for the first time to 'the person who has
made an extraordinary contribution to innovation in the
Netherlands over the past few years’. In the same month, DSM
received the Kristal Award for the most innovative sustainability
report. The prize is the outcome of a transparency benchmark
survey carried out by the Dutch Ministry of Economic Affairs.
Finally, DSM was recognized for the successful transformation
of the company by winning the Erasmus Innovation Award 2013
at the Annual Inscope Conference. Inscope is a research center
of Erasmus University Rotterdam (Netherlands).

Bio-based economy

In March, at the prestigious Sustainable Biofuels Awards 2013
ceremony held in Rotterdam, DSM and its joint venture partners
were presented with awards in two categories: the Global Deal
of the Year (POET-DSM Advanced Biofuels) and the Partnership
of the Year (Reverdia).

In August, at Sustentar 2013, the 6th International Forum for
Sustainable Development that took place in Minas Gerais
(Brazil), DSM was recognized as one of the companies that most
contributed to sustainable development. EcoPaXX® was
awarded third place in the category Sustainable Products and
Technologies 2013.

In October, DSM received top 10 honors in Biofuels Digest’s
prestigious ‘50 Hottest Companies In Bioenergy’ and ‘30 Hottest
In Renewable Chemicals’ polls, finishing in place 10 and 7
respectively. The polls are based on votes by biofuels and bio-
chemical industry professionals. In the same month, POET-DSM
Advanced Biofuels, the joint venture between DSM and US-
based POET, was named the ‘Bio-based Deal of the Year at the
World Bio Markets USA conference in San Francisco. The award
recognizes "a deal that is of particular relevance for the long-term
development of the bio-based industries".

Nutrition

In December, the dean of the Johns Hopkins Bloomberg School
of Public Health in Baltimore (Maryland, USA) awarded the
Dean’s Medal to DSM in recognition of its global corporate
leadership in efforts to mitigate food insecurity, prevent hidden
hunger and promote sustainable development in low-income
countries. The school’s highest honor recognizes significant
contributions to the field of public health. This is the first time the
medal honored an organization, rather than an individual.

In May, DSM was recognized by the Chinese Nutrition Society
for its outstanding contribution to nutritional science by
constantly enhancing and improving human nutrition and
offering strong support to the academic community in product
development and applications. DSM was also acknowledged for
its excellent contribution to providing innovative nutritional
solutions to meet the needs of specific groups.

In August, Feed & Food magazine (Brazil) awarded DSM a Troféu
Curuca de Sustentabilidade, the Brazilian ‘sustainability Oscar
for the agribusiness’. The award was given in recognition of the
technologies and solutions DSM has developed in the fight
against hunger around the globe, as published in the article
“Vitamins for human development” in the 68th edition of the
magazine.

Leadership

In January, the University of Maastricht in the Netherlands
conferred DSM's CEO, Feike Sijbesma, with an honorary
doctorate. Receiving the award, Mr. Sijbesma said: "DSM, the
company I represent, and to whom in fact my honorary doctorate
belongs, is using and developing technologies, based on
scientific work, to address the global challenges."

In June, Mr. Sijbesma joined the Global CEO Council (GCC) of
the Chinese People’s Association for Friendship with Foreign
Countries (CPAFFC). This prestigious committee, consisting of
14 CEOs from global, leading multinational companies, will
support the Chinese leadership on several topics, including
innovation, urbanization and sustainability.

In 2013, a group of young professionals of DSM participated in
Leaders for Nature, the International Union for Conservation of
Nature (IUCN) NL business network of twenty multinationals and
major Dutch enterprises working together on greening the
economy. The team won IUCN's Award for best Action Plan
2013 on how to incorporate natural capital into the business.

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Benchmarks

In September, DSM was once again named amongst the leaders
in the chemical industry sector in the Dow Jones Sustainability
World Index. Since 2004 DSM has ranked among the top leaders
in the sector four times and has held the worldwide sustainability
leader position in the Materials industry group (previously the
Chemicals super sector) six times. In 2013 DSM was ranked
Silver Class. Because of the improved results during the year
DSM returned to the Gold Class.

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Report by the Managing Board

Sustainability Governance Framework

Managing Board

Being both a core value and a business driver for the company,
Sustainability falls under the responsibility of the Managing
Board, with CEO Feike Sijbesma as the primary point of contact.
Other members of the Managing Board also chair sustainability
areas and initiatives. Mr. Sijbesma also oversees the Inclusion
and Diversity strategy. Managing Board member Stephan Tanda
is the primary point of contact for DSM’s partnership with the
World Food Programme and other sustainability issues in relation
to nutrition. Managing Board member Stefan Doboczky is
responsible for Safety, Health and Environment.

Supervisory Board

DSM’s Supervisory Board also recognizes sustainability as a
strategic value driver for the company and has appointed its own
Corporate Social Responsibility Committee to oversee progress
against targets and report on the embedding of sustainability
across the organization. For more details see the Supervisory
Board Report on Corporate Social Responsibility on page
124.

At a corporate level, sustainability is organized across a network
of employees and supported by the Corporate Sustainability

department, which is under the responsibility of the Executive
Vice President Corporate Affairs, who reports directly to Feike
Sijbesma, the Chairman of the Managing Board. The aim of the
corporate sustainability network is to support the business in
achieving its sustainability aspirations.

DSM also has a dedicated Corporate Operations & Responsible
Care department, which, among other areas, is responsible for
all corporate issues related to Safety, Health and Environment
(SHE). The Vice President Corporate Operations & Responsible
Care reports directly to Managing Board member Stefan
Doboczky.

External Sustainability Advisory Board

DSM’s Sustainability Advisory Board has been set up as a
sparring partner for the Managing Board and high level
executives in the company. It supports DSM in deepening its
understanding of stakeholder needs and strategic issues such
as the bio-based economy and malnutrition, sharpening its
focus, conducting advocacy efforts and handling dilemmas. The
board comprises a diverse international group of thought leaders
on key sustainability topics. The company's external
Sustainability Advisory Board met twice in 2013 and discussed
subjects such as the materiality matrix, renewable energy,
innovation and advocacy.

Sustainability Advisory Board

Member

Background

Amir Dossal (m)

Paul Gilding (m)

Chairman of the Global Partnerships Forum, a platform for innovation and entrepreneurship through
multi-stakeholder partnerships. From 1999 to 2010, he was executive director, United Nations Office for
Partnerships in New York. (Nationality: British)
Independent writer and corporate advisor on sustainability. Fellow at University of Cambridge (CPSL).
In 2011 he published his book “The Great Disruption”. In the 1990’s, he was executive director of
Greenpeace International. (Nationality: Australian)

David King (m)

Pamela Hartigan (f) Director of the Skoll Centre for Social Entrepreneurship at Saïd Business School and founding partner
of Volans Ventures. She has served as director of several programs and departments for multilateral
organizations. (Nationality: American)
Special representative for climate change of the current UK coalition government. From 2008 to 2012,
he served as the founding director of the Smith School of Enterprise and the Environment at the University
of Oxford. (Nationality: British)
Cheung Kong professor of Environmental Policy and director of Climate Policy Institute at Tsinghua
University. Before he joined Tsinghua, he taught at Beijing Normal University, and University of California
at Berkeley. (Nationality: Chinese)

Ye Qi (m)

Josette Sheeran (f) President and CEO of Asia Society. She has also served as vice chairman of the World Economic Forum.

From 2007 to 2012, Sheeran was executive director of the United Nations World Food Programme
(WFP). (Nationality: American)

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Global network

Reporting standards

An internal network of corporate staff members and business
managers dedicated to sustainability, known as Sustainability
Champions, support line management in all business and
functional groups and at the DSM Innovation Center. At the same
time, SHE managers provide support at business group level.
The DSM SHE Council, which includes all business group SHE
managers, is instrumental in sharing experiences and developing
practices and communications on SHE issues. DSM has set up
internal regional sustainability networks in India, China and Latin
America. See also: Sustainability in high growth economies on
page 16.

Approach to sustainability reporting

DSM has an extensive track record in sustainability reporting that
began in the 1980s when it published its first environmental
annual reports. In 2002, DSM launched its first annual Triple P
report, which provided details of its social and economic
performance together with its environmental results, according
to the triple bottom line (People, Planet and Profit).

In 2010, DSM decided to publish an integrated financial, social
and environmental report, reflecting the progress it has made
embedding sustainability in its business and making
Sustainability one of the four business growth drivers. Since then
DSM has also reported a number of sustainability metrics on a
semi-annual basis. This is DSM’s fourth Integrated Annual
Report.

Principles of the UN Global Compact1

DSM follows relevant best practice standards and international
guidelines when reporting on its sustainability performance. The
most important of these are the Global Reporting Initiative’s (GRI)
G3 Sustainability Reporting Guidelines. With regard to the GRI
Application Levels system, DSM assessed itself at the A+ level.
The GRI Index 2013 can be found on the website
www.dsm.com.

DSM's external auditor Ernst & Young Accountants LLP (EY) has
reviewed compliance of the Sustainability Information with this
application level. See also: Independent Assurance Report on
Sustainability Information on page 213.

In 2007, DSM became a signatory to the United Nations Global
Compact. Like thousands of ompanies from around the world,
as well as international labor and civil society organizations, DSM
strives to get broader support for the 10 universal principles in
the areas of human rights, labor, the environment and anti-
corruption. DSM’s sustainability mission and strategy, Code of
Business Conduct and global Supplier Sustainability Program
are the basis for meeting the standards set by the Global
Compact. These areas are closely monitored and reported, as
illustrated throughout this report, which is also the annual
Communication on Progress that DSM submits to the UN Global
Compact Office.

DSM Code of Business Conduct and relevant page(s) in the

Integrated Annual Report 2013

Principle 1

Principle 2

Principle 3

Principle 4

Principle 5

Principle 6

Principle 7

Principle 8

Principle 9

Support of human rights

Exclusion of human rights violation

Observance of the right to freedom of association

Abolition of all forms of forced labor

Abolition of child labor

Elimination of discrimination

page 43 to page 54

Precautionary environmental protection

page 18 to page 22, page 43 to page 65, page 226

Specific commitment to environmental protection

page 18 to page 22, page 43 to page 65, page 226

Diffusion of environmentally friendly technologies

page 18 to page 22, page 43 to page 65, page 226

Principle 10

Measures to fight corruption

page 29, page 43 to page 54

In 2013 DSM once again renewed its commitment to the UN Global Compact's CEO Water Mandate; see the Planet chapter on page 63

DSM strives for full adherence to the Greenhouse Gas Protocol, as defined in 2011 under the international Corporate Accounting
and Reporting Standard, Revised Edition. This means the company reports emissions not only from its production processes and
those related to the electricity and steam it purchases, but also the emissions present in value chains in which it operates.

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Report by the Managing Board

People in 2013

The People dimension of DSM’s Triple P strategy is about
improving people’s lives through the company’s activities,
solutions and innovations. ‘People’ includes consumers,
workers and communities across the value chains in which DSM
is active. This chapter includes both the People+ strategy, which
is the external component of the People dimension, and, under
'People at DSM', the human resources strategy as the internal
component. For DSM, sustainability provides both a growth
driver and a strong foundation for its human resources strategy.
See also Growth Driver: Sustainability on page 21.

People+

People+ is DSM’s program for the development of innovative
products and solutions which can measurably improve the lives
of end-users, employees and communities across the value
chains in which it is active. The benefits for consumers, workers
and/or communities can be created at any stage of the product’s
life cycle, from the sourcing of raw materials through to
manufacturing, distribution, use and disposal. The People+
program uses the DSM People LCA tool to measure the social
impact of each product.

The DSM People LCA tool is based on international standards
of the United Nations (UN), the World Health Organization (WHO)
and the International Labour Organisation (ILO) and has been
developed in cooperation with internal and external
stakeholders. With this tool, the social impact of a product on
people's lives can be assessed, from raw materials extraction
until end-of-life disposal. By using this methodology the
People+ program improves DSM’s ‘people’ performance, in the
same way that the ECO+ program already does for
environmental and ecological performance. Both programs
provide a measurable way to enhance DSM’s ability to address
sustainability as a business growth driver and strengthen its
leadership position in sustainability.
See also ECO+ on page 56.

In 2013, DSM’s People+ program made considerable progress
with the addition of several new products to the People+
portfolio. By engaging with peer companies and other
stakeholders, DSM has improved the tool that helps it to
measure a product’s impact on people’s lives. The tool has
proven to be highly effective in trials across a number of
innovations and value proposition projects. These tests have
also enabled it to be further refined and improved.

The DSM People LCA tool has four dimensions. It takes into
account the impact that the product has on (1) the health
condition of end-users, (2) the perceived comfort and well-being

of end-users, (3) the working conditions of employees that
produce it, and (4) the communities across the value chains in
which DSM operates.

The dimension Health Condition assesses how the product
contributes to maintaining, improving and regenerating people’s
health. For example vitamin D is vital to bone health and muscle
strength, and it can reduce the risk of falls and fractures linked
to osteoporosis. Comfort & Well-being measures whether a
product contributes to comfort and well-being. An example
might be a product that smoothens the skin or reduces
perspiration. Working Conditions focuses on employees.
People+ products are required to be made within a healthy and
safe working environment. This means that in every part of the
life cycle employees are not subject to excessive working hours
or other working conditions that can be detrimental to their health
or well-being. Community Development determines whether a
product contributes to local prosperity. Helping to improve
education, creating jobs and purchasing locally are examples of
community benefits that are measured as part of a People+
product assessment.

People+ examples

DSM’s Alpaflor®Edelweiss is based on edelweiss flower extract
that is used in personal care products, such as moisturizer. It
contributes to health, comfort and well-being because it
improves skin resistance and gives a better skin feel. It
contributes to local prosperity because of local cultivation and
harvesting practices that have a positive effect on alpine flora
diversity.

Waterborne resins for paints and coatings reduce the risk of
diseases amongst professional and do-it-yourself painters. In
doing so, they improve the comfort and well-being of consumers
in two ways and contribute to better working conditions of
professional painters.

DSM's Maxarome® is a yeast extract that can be used in food
products to reduce salt content without eliminating the taste that
people experience when they eat something salty. This
contributes to a healthier lifestyle with lower salt consumption.

DSM Sinochem Pharmaceuticals has a site in Toansa (India)
where it makes active pharmaceutical ingredients. It actively
engages with the local villages of Toansa and Bholewal where it
seeks to raise levels of health and education in a sustainable way,
with a focus on children and adolescents. The site has also
invested in and pays for streetlights along the 12 km highway

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that crosses the site between the two villages, making a
significant contribution to road safety.

ONE DSM Culture Agenda

The DSM People LCA tool makes it possible for DSM to quantify
the Brighter Living part of its brand promise in a measurable way.
In the coming years, it will continue to develop the methodology
in alignment with its stakeholders. The company is also looking
forward to continuing working closely alongside its customers
and suppliers to create further value across the chain.

People at DSM

DSM's human resources strategy contributes to the
development of inspiring and collaborative leaders, creates an
engaged and competitive workforce and fosters an inclusive
environment in which people trust and respect one another, and
where they encourage each other to achieve sustainable
focused business growth. The approach is supported by the
ONE DSM Culture Agenda.

DSM aims to further internationalize its business in order to bring
its organization closer to its key markets and customers,
strengthen the business and stimulate inclusion, diversity and
innovation. DSM combines a strong regional infrastructure with
clear board level accountability for regional growth. The
company’s human resources strategy supports its
internationalization goal.

In 2013, DSM further rolled out its ONE DSM Culture Agenda
across the organization. This initiative aims to ensure that DSM
remains aligned with the needs of an ever-changing world and
develops the behaviors and organization it requires to fulfill its
strategic ambitions and to become a high performing
organization. ONE DSM is based around the themes of External
Orientation, Accountability for Performance (and learning),
Collaboration with Speed, and Inclusion & Diversity.

A ONE DSM Culture Agenda introduction week took place in the
first quarter of 2013, followed by four additional theme weeks
during the year. Thousands of employees participated in the
events which focused on specific behaviors related to each of
the four themes, for example an online collaboration with
employees and selected customers to see how to leverage
social media to sustain DSM's business. This initiative led to
more than 120 ideas. In addition, it promoted a different way of
working.

The ONE DSM Culture Agenda emphasizes that employees are
bound together by the behaviors fostered by its four themes. The
four themes are the glue that connects the organization into ONE
DSM. More remains to be done, and the next focus is on ‘doing,
acting and owning’.

The ONE DSM Culture Agenda and its four themes remain a
focal point during 2014, and will continue to support DSM's
strategic business objectives. The themes of the ONE DSM
Culture Agenda are described as follows:

External Orientation

DSM is convinced that in order to execute its
growth strategy and adapt to changing customer
and industry requirements, its employees must be
aligned with the realities of a rapidly changing

world. This means not just anticipating customer needs to drive
marketing & sales and innovation priorities, but also being better
able to track, learn and compete across all functions. External
Orientation also helps to broaden DSM’s networks and engage
with stakeholder groups.

Accountability for Performance (and learning)

DSM expects its employees to set themselves
ambitious targets and to deliver on these.
Accountability for Performance (and learning) is
about people taking responsibility for their actions
and for the performance of their teams. It also means recognizing
and celebrating successes, while viewing problems and
mistakes as individual and collective learning opportunities.

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Report by the Managing Board

Collaboration with Speed

In an ever more connected world, collaboration has
become an important competitive advantage. DSM
encourages employees to actively (co-)create,
share and build on the ideas, information,

knowledge and expertise of their colleagues and the outside
world. By fostering collaboration, DSM taps the true potential of
its global workforce and promotes faster decision making and
execution.

Inclusion & Diversity

Fostering an inclusive culture that embraces
differences is consistent with DSM’s corporate
values and helps it to create the high-performance
organization it requires as a truly global company.

A more balanced DSM leadership group (in terms of gender,
nationality) is part of these efforts and will improve decision-
making processes and the implementation of its strategy.

DSM Employee Engagement Survey

DSM’s Human Resources strategy is about helping employees
to successfully deal with the challenges of a changing company
in a fast-moving global marketplace. The concept of employee
engagement is very important in this regard. An engaged
workforce is critical to DSM in realizing its ambitions.
Engagement is about creating an inclusive and high-energy
working environment, where employees are aligned and
energized to contribute to the company’s success.

In 2013, DSM executed its sixth worldwide Employee
Engagement Survey. A total of 19,259 employees, including 535
contractor employees, completed the questionnaire, which was
distributed online and on paper in 19 languages to all DSM
employees. This represents a very high response rate of 85
percent.

The main element in the survey is the measurement of DSM’s
Employee Engagement Index, the percentage of employees
scoring favorable on a combination of four attributes:
commitment, pride, advocacy and satisfaction. The Employee
Engagement Index measured in 2013 was 71 percent (2012: 72
percent). This is still above the global overall norm of 69 percent.
The score of 71 percent takes DSM within a 9 percentage point
range of the external benchmark of high performing companies
(scoring 80 percent favorable), which is the league DSM aspires
to be part of. The neutral responses amounted to 20 percent.

DSM continued to create a more inclusive working environment
for its employees. The Inclusion Index, a subset of survey items
to measure inclusion, improved for the fourth year in a row. Of
the respondents 69 percent scored favorable on this index in

2013 (2012: 68 percent). The 2013 results are in general at a
good level. DSM will continue to use the Employee Engagement
Survey to guide its ONE DSM Culture Agenda.

Talent management

DSM strongly believes that successful talent management
requires leaders who have the right focus, mindset and capability
to identify, develop, engage and share diverse talent. Leaders
who are inclusive and who are focused on growing their people,
the business and themselves. In addition, the company believes
in creating opportunities for its talented employees to maximize
their development. In 2013 the company continued the initiatives
aimed at (1) empowering employees to take ownership of their
career and (2) empowering leaders to take accountability for
both talent performance and talent development. This resulted
in a stronger focus on Individual Development Plans for DSM's
employees, as part of its yearly performance and development
cycle and more attention for succession planning and the
implications for the company's diversity footprint.

DSM Leadership Model
In 2012 DSM presented a new leadership model that specifies
the characteristics expected from leaders now and in the future
in a simple, understandable and compelling way. The DSM
Leadership Model provides a common vision and language
regarding the leadership DSM desires, and it describes an
inspirational mindset to raise the bar on the performance of
leaders and to grow people. The model sets out the expectation
for leaders to be role models and developers of a sustainable,
successful organization for the future. It is the basis for high
quality processes to hire people, to grow and develop talent and
build high performing teams.

In 2013 DSM implemented the Leadership Model via model
workshops for its executives, for them to internalize and

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personalize the Leadership Model. The Leadership Model is
integrated in many HR processes for the top of DSM's
organization. It is used in DSM's executive recruitment, and is
the basis for executive leadership assessments and 360°
feedback. It also forms the basis for DSM's executive leadership
programs. The leadership model forms an important element of
DSM's Performance Development Review.

In 2013, the regional Talent Management organization was
strengthened in order to build and develop DSM's talent base in
the regions. This has among other things resulted in more cross-
organizational transfers in the regions. Mentoring programs in
North America and Asia were successfully implemented.

Organizational learning

DSM strongly believes in the need to invest in the knowledge,
skills and experience of its employees to ensure their long-term
employability. The company provides its employees with various
kinds of learning opportunities, including classroom and virtual
programs, on-the-job training, coaching and mentoring. The
DSM Learning Architecture consists of four program clusters:
executive programs, management programs, functional
programs and e-learning programs.

This architecture creates a common and coherent concept of
learning and program design, facilitates the development of a
DSM learning culture and provides enhanced learning for talent.
The programs are designed and delivered in close cooperation
with leading international business schools and global training
providers (IMD, Wharton Business School, Babson College,
Erasmus University) and are supported by a diverse internal
faculty, primarily consisting of DSM’s top management. Other
learning methods such as round table discussions, business
simulations, virtual classrooms, webcasting and team
assignments are integrated into the programs. This enables

interactive knowledge sharing and stimulates peer-to-peer
networking in the organization.

In 2013 DSM made further progress in designing and rolling out
the Bright Talent Program in Asia. In 2014 a similar program will
be rolled out in North America.

Leadership Model workshops were conducted across the globe
for the executives population, and Project Management
programs were delivered throughout the organization to improve
employees’ project management skills. In 2014 these
workshops and programs will be offered to a wider population.

In order to better serve regional learning and development
needs, further progress was made consolidating available
learning and development interventions. As a result three
distinctive learning guides with global and regional offerings were
published. One for each geographical area: Europe, Asia and
North America.

Learning and development continues to be an important source
of innovation. However, in 2013 learning and development
budgets were under pressure due to the challenging business
environment. As a result, fewer programs were delivered in
2013, and fewer employees participated in them. A total of 2,188
DSM employees worldwide (from 27 different countries; 1509
male and 679 female) participated in the learning and
development programs organized by the DSM Business
Academy (2012: 3,706 participants from 35 countries, 2,239
male and 1,467 female). The total number of programs delivered
by the DSM Business Academy in 2013 was 145, which is a
decrease of 32 percent compared to the 212 programs delivered
in 2012.

Program portfolio

Available

programs

2013

Available

programs

2012

Executive programs

Management programs

Functional programs

e-Learning programs

Total

146

In addition to the DSM Business Academy offering, DSM
employees at all levels in the organization are offered a wide
variety of training opportunities (both on-the-job and classroom
training). The number of training hours per employee increased
from 24 in 2012 to 25 in 2013.

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Report by the Managing Board

Training per FTE
in hours

2009

2010

2011

2012

2013

The growth of the non-European executive population, relative
to the growth of DSM in high growth economies, will also
continue to demand full attention from the businesses and
regional organizations. The number of BRIC+ nationals in
executive positions (37) as a percentage of the total number of
executive positions increased from 9 to 10 percent in 2013.

DSM has defined inclusion and diversity aspirations (in terms of
gender and nationality) for its business groups for the period
2012-2015 to ensure that its organizational readiness is in line
with its stretched growth ambitions for 2015. DSM continues to
address the geographical distribution of management and other
key functions, with a keen eye on gender and nationality balance.

Workforce composition
Inclusion & Diversity1
The number of women executives (44) as a percentage of the
total number of executive positions increased from 10 percent
to 11 percent in 2013. This will require attention going forward.
In addition to recruiting female executives from the external
market, DSM also makes an effort to recruit female executives
from its internal pool of women candidates.

The role of the DSM Inclusion & Diversity Council, chaired by
DSM CEO Feike Sijbesma, is to facilitate inclusion and diversity
at DSM and to support all DSM businesses in creating a
sustainable inclusive environment, where diversity is fully
embraced. This Council is strongly aligned with DSM’s
internationalization efforts to make further progress with the
company-wide ONE DSM Culture Agenda.

Gender diversity
% women
■ 2009 ■ 2010 ■ 2011 ■ 2012 ■ 2013

Executives

Management

Other

Workforce diversity
% non-Dutch
■ 2009 ■ 2010 ■ 2011 ■ 2012 ■ 2013

100

Executives

Management

Other

1 Last year DSM formulated aspirations for 2015: women in executive positions 21% and BRIC+ nationals in executive positions 24%. In the coming period DSM will

redefine its targets in these areas.

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Executive hires
diversity in %
■ 2009 ■ 2010 ■ 2011 ■ 2012 ■ 2013

Professional hires
diversity in %
■ 2009 ■ 2010 ■ 2011 ■ 2012 ■ 2013

100

Non-Dutch

Women

100

Non-Dutch

Women

New hires by region
in %
■ 2009 ■ 2010 ■ 2011 ■ 2012 ■ 2013

Netherlands

Rest of Europe

North America

China

Rest of Asia-Pacific

New employees
The total inflow of new employees into DSM in 2013 was 1,834, not including the inflow of employees due to acquisitions. As a
result of acquisitions a total of 1,152 people were added to DSM's workforce in 2013.

In 2013, DSM recruited a total of 420 professionals (graduates and experienced hires), of whom 31 percent were women. The
company wants to keep its focus on the diversity of these hires (nationality/gender) and build a strong diverse talent pipeline to
achieve sufficient 'diverse critical mass' in the organization. DSM wants to improve its labor market positioning as an employer of
choice, to ensure that the company is an attractive career option for talented individuals across all groups of potential employees.

Employees by age category
in %
■ 2009 ■ 2010 ■ 2011 ■ 2012 ■ 2013

< 26 yrs

26-35 yrs

36-45 yrs

46-55 yrs

> 55 yrs

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Report by the Managing Board

Net sales per employee
x € 1000, based on weighted average headcount

400

300

200

100

405

410

399

402

340

2009

2010

2011

2012

2013

Outflow of employees
in % of total workforce
■ Resignations and other ■ Dismissed ■ Reorganization ■ Retirements
■ Divestments

2009

2010

2011

2012

2013

Outflow of employees
The total outflow of employees at DSM in 2013 was 1,968, excluding divestments. A total of 259 employees retired, 1,043 resigned
of their own will and, sadly, 34 employees passed away. In 2013, a total of 224 employees were requested to leave the company
for non-performance or non-compliance reasons. A further 408 were made redundant due to reorganizations that took place across
DSM in 2013. Divestments accounted for an outflow of 78 employees.

International labor standards

Respect for people is an essential part of the business principles outlined in the DSM Code of Business Conduct that DSM launched
in 2010. DSM supports and respects human values as outlined in the United Nations Universal Declaration of Human Rights. DSM’s
employees represent more than 80 different nationalities and the company supports the equal treatment of all employees
irrespective of race, nationality, ethnic background, age, religion, gender, sexual orientation or disability. Respect for human rights
is also integral to DSM’s sourcing policy and Supplier Code of Conduct. DSM utterly rejects and condemns any form of forced
labor or child labor. This is clearly stated in the DSM Code of Business Conduct. DSM conducts due diligence before making any
investment decisions in order to exclude, among other things, any relationships or practices which may be in contravention of
human rights. DSM is unaware of any cases of breach of human rights or the use of forced or child labor within its operations in
2013.

DSM is a Dutch signatory to the United Nations Global Compact. DSM also meets the recommendations made in the OECD
(Organization for Economic Cooperation and Development) Guidelines for Multinational Enterprises. Furthermore, DSM supports
the work-related rights defined by the ILO (International Labour Organisation) and recognizes the International Labour Standards.
In countries or businesses where employees have third-party representation via a works council or collective bargaining, DSM
respects these relationships and works with these third parties in a mutually respectful manner. See also: Stakeholder engagement
page 28.

In the event of an organizational restructuring that results in the loss of a significant number of jobs, DSM develops and implements
either a social program (aimed at assisting employees to continue in employment, whether inside or outside the company) or else
a severance program. DSM promotes employee empowerment and human rights protection and therefore seeks dialogue with its
employees and their representatives (works councils, labor unions). See also: People at DSM page 44.

DSM Code of Business Conduct
Business principles
The DSM Code of Business Conduct, as introduced and rolled out in 2010-2011, contains the company’s business principles
across the three dimensions of People (11 principles), Planet (5 principles), and Profit (15 principles). These principles translate
DSM’s mission and core value − Sustainability − into daily practice of business operations. All DSM employees are expected to
act in accordance with the Code, and the Managing Board holds DSM’s unit management accountable for compliance with the
Code.

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Training and awareness
In 2013, Code of Business Conduct refresher courses were
rolled out to employees who had completed their first course two
years earlier. Code of Business Conduct classroom training
material was made available in 17 languages. This enabled
employees that do not have individual access to a personal
computer to participate in the training. The implementation of the
Code of Business Conduct training program also proceeded
well: at year-end more than 90 percent of all DSM employees
had completed their training. The remaining portion are, to a
large extent, employees of newly acquired businesses. The full
text of the DSM Code of Business Conduct is available at
www.dsm.com.

Umbrella function
The Code serves as an umbrella for several other DSM
requirements, which are often supported by e-learning programs
to train relevant people within the company. Depending on the
subject, this concerns all employees or selected employees that
have a specific role in the organization. These regulations are in
three dimensions:

People dimension: To support DSM’s ambition to create an
incident-free and injury-free workplace, the Life Saving Rules
specify the 12 most important rules that must be followed to
prevent serious and/or fatal incidents.

Planet dimension: In the basic course on Responsible Care®, the
basic elements of the Responsible Care Program, which is
aimed at all functions within the company, are addressed.

Profit dimension: DSM uses the e-learning tools Global Trade
Controls and Global Competition Law Principles and Practices.
Compliance on these subjects is structurally embedded in
DSM’s systems and processes. For example, as part of the
global trade controls process, DSM master data is screened to
check customers and suppliers against embargoes and lists of
sanctioned parties. Furthermore, compliance with competition
law and trade controls is addressed via regular classroom
training sessions and e-learning. In addition, refresher courses
are offered to all employees whose first e-learning course on
competition law and global trade controls dates back more than
two years.

Those employees who are most exposed to competition laws
have to complete an annual statement to confirm their
compliance with the rules set forth in the DSM Competition Law
Compliance Manual. In this statement they confirm that they are
not aware of any violation of competition laws by DSM. Alleged
breaches are reported to and discussed with DSM Legal Affairs.
Over the year no breaches were reported. In 2013 DSM was not
subject to any investigations by competition authorities related
to potential anticompetitive behavior.

DSM also has rules in place on the holding of and execution of
transactions in DSM financial instruments and certain other
financial instruments related to trading in DSM shares, and if
applicable, other company shares and related financial
instruments, which apply to all DSM employees, including
members of the Managing Board and Supervisory Board.

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Report by the Managing Board

Developments in 2013
In 2013, the DSM Key Security Behaviors were introduced,
accompanied by an extensive communication program. The roll-
out of a new e-learning course to all employees will take place in
2014.

An Anti-Bribery and Corruption (ABC) Policy and Compliance
Manual has also been developed, based on an internal risk
assessment and an external benchmark of peer companies. The
ABC Policy and Compliance Manual has been approved by the
Managing Board and will be rolled out to targeted DSM
employees in 2014.

Living the Code of Business Conduct can sometimes bring
dilemmas that do not have a quick or clear answer. For this
reason Dilemma Workshops were introduced in 2013, using the
UN Global Compact Dilemma Game as a tool. The workshops
build on DSM’s company culture, which is based on openness,
fairness and trust. The aim is to create an open-minded
atmosphere in which dilemmas can be discussed among
employees and/or management.

Consequence management
DSM applies zero-tolerance consequence management with
respect to deliberate violation of its Code of Business Conduct.
A whistleblower procedure (DSM Alert) and consequence
management practices are in place to support compliance with
the Code. The DSM Alert Officer responsible for dealing with
violations of the DSM Code of Business Conduct reports to the
CEO and is invited to report independently to the Supervisory
Board once a year. As of 2014 people who are not DSM
employees but wish to raise a concern regarding a violation of
the DSM Code of Business Conduct can also contact the Alert
Officer at www.dsm.com.

Proven serious violations of the Code can result in dismissal. In
line with this policy, 33 employees were dismissed in 2013, as a
result of breaches to the Code of Business Conduct or other
legal or local company regulations. Most of these cases related
to violation of the Life Saving Rules, inappropriate behavior, and
fraud or theft.

Code of Business Conduct violations leading to dismissal

People

Planet

Profit

Total

Europe / Africa

Americas

Asia / Pacific

Total

Safety and health
Occupational safety
The improvement in safety performance that was reported in
2012 continued in 2013. The Frequency Index of Recordable
Injuries for 2013 was 0.38 and in October 2013 DSM reached
the all-time low Frequency Index of 0.36. DSM’s safety
performance in 2013 means that 38 fewer people (DSM
employees or contractors) were injured in their work for DSM
than in 2010.

Notwithstanding this progress, the incidents that did occur (see
also: 'What still went wrong in 2013' on page 138 of this report),
and the severity of their consequences, remain a cause for
concern for DSM.

It is DSM's goal to have an injury and incident-free working
environment. DSM has set itself the target of reducing the
Frequency Index of Recordable Injuries by 50 percent or more
by the year 2020 compared to 2010. This will require an index
score that is less than or equal to 0.25 by 2020, compared to
the 0.57 achieved in 2010.

This Index measures Lost Workday Cases (LWC), Restricted
Workday Cases, Medical Treatment Cases and/or fatalities per
200,000 hours worked (based on 100 full-time equivalents
working 40 hours per week, 50 weeks per year) by DSM
employees and contractor employees in a single year. At the end
of 2013, the Frequency Index was 0.38 (2012: 0.44). The
Frequency Index of Lost Workday Cases for DSM employees
was 0.14 in the year (2012: 0.12).

DSM’s aim is that by 2020, the number of serious safety
incidents will be 65 percent lower than in 2010, when there were
15 such incidents. The figure for 2013 has given cause for
concern as there were 14 such incidents reported, while another
2 occurred in recently acquired units still undergoing integration
and not yet consolidated. Contact with moving parts of
machines or equipment and falls were the primary causes of
serious injuries.

The focus on preventing serious accidents and any potential
fatalities that began with the introduction of DSM's Life Saving
Rules has resulted in a significant improvement in safety
performance. The incidents that still occurred demonstrate that
a continued improvement of the company’s working practices is
needed and that 'near misses' still happen too often. Improving
these practices was one of the reasons behind the introduction
of mandatory standards for LOTOTO (Lock Out, Tag Out and Try
Out; a way of safeguarding workers from the release of
hazardous energy during equipment servicing or maintenance
activities) and for Confined Space Entry.

Bright Science. Brighter Living. 2013

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company that they implement the worldwide DSM approach to
SHE as quickly as possible, as part of the integration process.

A total of 31 new sites were added to DSM as a result of
acquisitions in 2012 and 2013, in North America (12), Asia (8),
South America (5), Europe (4) and the rest of the world (2). All
these sites are required to meet the DSM SHE requirements.

After the explosion at the AGI site in Taiwan in 2011, which took
place just 14 days after DSM had acquired it, the company’s
approach to the integration of new sites was evaluated. The
result was that all new sites are now visited shortly after the
acquisition by a specialized team to ensure there are no risks
requiring immediate action beyond the ones identified during the
acquisition process. This high risk assessment is now the first
step in the integration approach. The second and third steps
follow after some months once the management of the site has
been established.

The SHE leadership course and the zero SHE assessment are
executed by the corporate SHE department. In the SHE
leadership course, the management of the new sites is
familiarized with DSM’s values on SHE and its expectations from
them as SHE leaders. During the assessment, the conditions of
the site are compared with the SHE requirements to identify
potential gaps and required actions. Representatives of the site
and the SHE integration manager take part in this assessment,
to understand where the gaps are and what actions can be
taken. The integration manager on SHE is an experienced DSM
manager who guides and supports the new sites during the first
two years.

The zero SHE assessment results in an action plan aiming at
closing the gaps to DSM’s SHE requirements. Corporate
support is given where needed during the execution of the action
plan. Within 1.5 to 2 years after an acquisition, the Corporate
Operational Audit (COA) department will also assess the SHE
situation.

Process safety
DSM follows the European Chemical Industry Council (CEFIC)
guidance in defining which incidents qualify as process safety
incidents (PSI). Of the total number of incidents reported in 2013,
144 (2012: 162) have also been classified as process safety
incidents. This translates into a Frequency Index for PSI of 0.46
(2012: 0.55). DSM's targets for reducing the Frequency Index
for PSI are 50 percent in 2015 and 75 percent in 2020, starting
with a baseline Frequency Index of 0.68 (2010).

Contractor safety
Contractors that work at DSM are between two and three times
more likely to suffer a work-related accident than DSM
employees. Almost half the fatalities that have occurred at DSM
over the past 13 years have involved contractors. This can be
partly explained by the fact that contractors sometimes execute
more hazardous activities. For this reason, DSM has sought to
give special attention to the safety of contractors when they work
for DSM. The company strives for long-term partnerships with
its contractors as it sees this as the foundation for good SHE
performance. Contractors should be well informed about rules
to be followed and adequately trained, which is only possible
when contractors and DSM employees work closely together
over a long period. This approach is paying off. Many sites have
already started initiatives to achieve this. At its Sittard-Geleen
(Netherlands) site, DSM and contractors have launched an
initiative for coaching known as the Last Minute Risk Assessment
(LMRA). The LMRA is the final check to see if the job is safe to
start and whether everybody knows what to do, and it is also
used in cases of an emergency. This LMRA is actively coached
by someone who is not directly involved in the execution of the
job, thereby preventing ‘tunnel vision’. It also ensures that all
people are involved in the discussion.

This has resulted in a 70 percent reduction in such incidents in
Sittard-Geleen since 2010. At the Delft (Netherlands) site, all
contractors and DSM have signed a SHE alliance document
whereby they are committed to achieving zero SHE incidents. All
these actions have resulted in a reduction of 58 percent in the
accident rate of contractors over the past five years.

SHE integration of new sites
In recent years, DSM has acquired a number of new companies
with sites located in different countries. It is a high priority for the

In 2013, the main causes of process safety incidents were
analyzed. This led to the identification of several improvement
actions in operations, design and maintenance. Although the

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Report by the Managing Board

overall performance improvement in PSI is not yet on track, the
success of some of these efforts is already visible. One of DSM's
business groups already achieved its 50 percent reduction target
in 2013.

DSM continues to contribute to developing a globally
harmonized process safety performance reporting standard.
The primary objective of this standard is to enable companies to
measure their performance and drive improvements. It also
enables benchmarking across regions or companies, thus
creating better transparency on process safety performance.

Employee health management
Research shows that there is a direct link between employee
vitality and an organization’s performance. Healthy employees
allow for an organization that is more productive and sustainable.
To increase vitality levels across the company, DSM has
introduced a global employee health management program
called Vitality@DSM. This program encourages employees to
optimize their health by raising awareness about the importance
of healthy lifestyle choices that contribute to a greater well-being
and performance at work.

In addition to creating a personal lifestyle profile for every
employee, Vitality@DSM provides DSM with anonymous data on
its employees' health. This enables it to monitor progress
through performance indicators such as knowledge of BMI,
cholesterol and blood pressure. It compares results by region as
a basis for defining the content and priorities of health promotion
campaigns at site and regional levels, and creates scorecards
within relevant areas of the company.

Results of Vitality@DSM in 2013 showed a positive trend; the rise
in productivity, based on self-reported changes in lifestyle health
risk factors such as unhealthy eating and lack of exercise, and
extrapolated to 1,000 employees per region, came to a
combined USD 4.5 million for the three main regions (Europe,
Asia and North America).

"As a member of a DSM cycle team I’m required to have a
medical check-up. The results showed I had high blood
pressure and I was advised to have an ultrasound of my
heart. It transpired that I was suffering from a serious lack
of oxygen, even though I didn’t have any symptoms, not
even when running a half marathon only a couple of days
before the check-up. This is the sort of risk that the Vitality
Health Check can detect, and I was lucky it was discovered
in time to prevent it getting worse." Wil Fleurkens –
Process Manager Purchase to Pay

"When I participated in the Vitality Health Check a few years
ago there was a nurse who pointed out that I have a very
light skin with many birthmarks, which often means it is
more susceptible to skin cancer. She advised me to have
my skin checked regularly by a doctor and this is what I did
for several years. Eventually, my doctor found a birthmark
that was different in shape and color to the others. He
removed it and performed tests that found it was a severe
type of skin cancer. It was the most frightening time of my
life, but after further research and tests I was told that it
could be cured and that I had checked it just in time. I am
very grateful for being offered the possibility to participate
in the Vitality Health Check and my advice would be to have
your health and body checked out on a regular
basis." Werner Vliex – Director DSM Business
Information Systems

"For DSM, vitality connects to our SHE values and to
sustainable employability. In 2012 I was asked to take the
lead in implementing an improvement program based on
the recommendations of the Vitality check for DSM
Dyneema in Urmond. I have led the Vitality@Urmond
campaign since then with great enthusiasm and am part of
a great team of passionate people who value vitality and
also support the campaign. In 2013 we focused on
activities for individuals, while for 2014, the theme is to
‘team up on vitality'." Margot van Wunnik – Application
Development Specialist at DSM Dyneema

At the end of 2013, more than 7,800 DSM employees worldwide
had participated in the program. The year saw its roll-out in new
sites including Kaiseraugst (Switzerland) and Delft (Netherlands).
It also continues to be important at sites that already participate
in the program, and where it is used to spontaneously launch
health initiatives.

DSM in India and China are encouraging their employees to
make healthy lifestyle choices. In DSM North America, a
HealthyRoads system, which is similar to the Vitality@DSM

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program, aims to increase awareness about the benefits of
healthier habits. About 1,500 employees in North America
participated in the HealthyRoads system.

It is widely accepted that high BMI levels, a lack of exercise and
an imbalance between stress and job satisfaction contribute
towards an unhealthy lifestyle and potentially create future health
problems, absenteeism and even work disability. As a growing
number of employees become aware of their health parameters,
more are investing in their well-being. While this is a positive
development, there is considerable room for improvement.

Comparing the three regions (Asia, North America and Europe),
it is clear that stress risk (average 54 percent) is the largest

lifestyle risk factor in all three. This factor has the largest impact
on productivity and costs. Other high risks, according to
employees, relate to eating habits (40 percent), and a lack of
exercise (39 percent). There are also differences between the
three regions with regard to health risks. In Asia the stress and
exercise risks are significantly higher compared to North America
and Europe. In these last two regions, the BMI risk is higher than
in Asia. It is clear that further steps must include action plans and
programs to reduce these risks.

Occupational health
In 2013 a total of 6 (2012: 13) occupational health cases were
reported.

Absenteeism
in %
■ 2009 ■ 2010 ■ 2011 ■ 2012 ■ 2013

3.4

2.7

3.0

2.9

3.0

2.9

2.8

2.9

2.1

1.6

1.5

1.4

1.3

0.7

0.6

0.7

0.9

Netherlands

Rest of
Europe

North America

China

1.7

1.4

1.5

1.0

1.1

0.5

Rest of
Asia-Pacific

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Report by the Managing Board

Bright Science. Brighter Living. 2013

www.dsm.com

My bright ideas help to harvest solar energy more efﬁ cientlyDSM Advanced Surfaces provides solutions for the development and application of smart coatings. Our product, KhepriCoatTM, reduces the amount of sunlight that is reﬂ ected off solar panels. This is an important efﬁ ciency gain – and a great example of how DSM is using its technology to help address climate change.Hugo Schoot, Business Development Manager, DSM Advanced Surfaces

Planet in 2013

Within the Planet dimension of its Triple P approach, DSM
delivers activities, solutions and innovations that improve the
environmental footprint of its own business and that of its
external stakeholders in the value chains in which the company
operates (customers, suppliers and consumers). This approach
includes the ECO+ program, in which DSM defines sustainability
as a strategic business growth driver. This chapter also reports
on DSM’s environmental footprint and performance. See also:
Growth Driver: Sustainability on page 20 of this report.

ECO+

ECO+ is DSM’s program for the development of sustainable and
innovative products and solutions with measurable ecological
benefits. ECO+ solutions create greater value with less
environmental impact. The ecological benefits can be created at
any stage of the product’s life cycle, from the raw materials
through to manufacturing, potential re-use, and end-of-life
disposal. The ECO+ framework uses the Life Cycle Assessment
(LCA) methodology to measure the environmental benefits of
each product. For a full definition of ECO+, see page 221.

It is DSM’s ambition that at least 80 percent of its innovation
pipeline be comprised of ECO+ solutions by 2015, and that they
generate approximately 50 percent of total net sales. At the end
of 2013, the innovation pipeline contained 95 percent ECO+
solutions (97 percent after deconsolidation DSM Pharmaceutical
Products (DPP)). ECO+ solutions as a percentage of running
business increased to 45 percent in 2013 (46 percent after
deconsolidation of DPP). In 2013 about 90 percent of ECO+
innovation launches were supported by comparative LCAs.

The measurable benefits of ECO+ include lower requirements in
natural resources, such as water or minerals (including metals),
the reduction or valorization of waste, shelf life preservation, yield
improvement, energy saving, bio-based solutions, weight
reduction, raw material efficiency, and removal of hazardous
substances in the life cycle. ECO+ products can provide
solutions that benefit society at large by responding to major
societal issues such as climate change, resource constraints and
scarcity, water management and biodiversity. These qualities
can make an important difference across a number of industries.

For example, together with net manufacturer NET Systems and
the Cape Eleuthera Institute, a marine research center, DSM has
developed a shark-resistant netting material. This innovative
netting is called Predator-X and it combines Dyneema®
polyethylene fibers and stainless steel wire. Cages made with
Predator-X can be used in the open ocean to produce farmed

seafood with a lower environmental footprint. The product allows
fish farms to be located in areas with optimum currents and wave
motion that help to dissipate waste more efficiently, much in the
same way that free range animal farming does on land.

The ecological impact of these farms can be further reduced with
DSM’s innovative feed additives such as Ronozyme® phytase.
This additive increases the availability of phosphorus in vegetable
feed ingredients, with the result that less additional inorganic
phosphorus is required in the feed. This means that less
phosphorus is excreted into the environment.

These examples can be characterized as being more ‘eco-
efficient’ because they help minimize customers' environmental
impact. In the long term, DSM’s goal is to become fully ‘eco-
effective’, by providing solutions that have a truly positive, rather
than less negative, environmental impact. This is the principle
behind the creation of a truly circular economy. As such it is
essential that DSM continue to invest in the development of
products that are made from renewable, bio-based raw
materials, rather than fossil fuels.

DSM also develops safer alternatives to existing solutions. Many
products that are on the market today contain ingredients that
have specific benefits during usage but which may for instance
cause problems at the end-of-life stage of a product, or make it
more difficult to recycle. The use of safer alternatives to
mainstream materials creates business opportunities for DSM
that are not within the reach of companies that merely comply
with minimum requirements. Some examples of this are
BluCure™, the 100 percent cobalt-free curing technology for
composite resins, and Arnitel® XG and Stanyl® ForTii™, which
are halogen-free flame retardant plastics.

Some DSM ECO+ solutions also carry an Environmental Product
Declaration (EPD). An EPD is a standardized way of
communicating the environmental performance of a product or
system. It is based on ISO standard 14025/TR and Life Cycle
Assessment. Some examples of products with an EPD include
Pack-Age™ (2012), Brewers Clarex™ (2010) and Panamore®
(2009).

In addition to their environmental advantages, most ECO+
solutions also generate downstream cost benefits at various
stages in the value chain. These may include qualities such as
lower waste generation during the use phase, greater durability
of an application, and a reduction in the energy consumption
during the application or disposal phases.

In 2013 DSM launched new innovative ECO+ products. A
selection of ECO+ innovative solutions is given in the next table.

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Report by the Managing Board

Value chain benefits of innovative ECO+ solutions

Applications

Higher eco-

Renewable

Safer

Environmental

Downstream

efficiency1

content

alternative2

Product

cost

Declaration3

benefits

Materials
Akulon®
Akulon® Ultraflow
Akulon® Fuel Lock

Arnitel® VT
Arnitel® Eco
Arnitel® XG
EcoPaXX®

Stanyl® Diablo
Stanyl® ForTii™
Stanyl® ForTii™
Stanyl® ForTii™
Stanyl® ForTii™
Dyneema®Force MT
Dyneema®DT
Dyneema®

Air intake manifold

Oil sump

Gas tank

Small engine fuel tank

Breathable membrane

Pan liners

Electronic wire & cable

Engine covers

Crank shaft cover

Snowboard bindings

Film

Window profiles

Air ducts

LED lamp

DDR4, SDRAM modules

Connector

3D-MID Micro-electronics

Law enforcement ballistic vest

Comfortable cut resistant gloves

Air cargo pallet net

Cellulosic bio-ethanol

Biofuel

Biosuccinium™

Building block for broad range of

Decovery®
Somos®
Uralac®
NeoRez®
Hybrane®

materials

Waterborne paint

3D printing

Low temp. curing powder coating

Waterborne floor coating

Gas hydrate inhibitor

BluCure™ Technology

Marine, Building & Construction

Beyone™ 1

KhepriCoat™

Combined

Pack-Age™
Akulon® XS

Health & Nutrition

Puriclor™
Multirome®LS

Brewers Clarex™

Brewers Compass™
Panamore®
Delvo®Cid
Ronozyme® HiPhos
Alpaflor®Edelweiss

Building, Marine & Wind Energy

Solar panels

Cheese ripening

Food packaging

Antibiotics

Savory food

Beer

Bread

Food preservation

Animal feed

Organic bioactive for personal care

•
•
•

•
•
•
•

•
•
•
•
•
•
•
•
•
•

•
•
•
•
•

•
•

•
•
•
•
•
•
•
•

•

•
•
•
•
•

•
•

•

•
•
•

•

•
•
•
•
•
•
•
•
•

•

•
•
•
•
•

•

•
•
•
•
•

•

•
•
•
•

•
•
•
•
•

•

•
•
•

•

•
•

•
•
•
•
•
•
•

1 Better resource efficiency and/or circularity and/or reduced GHG emissions thanks to e.g. higher energy efficiency in the product life cycle; use of renewable raw materials
2 Product can replace existing products that may contain substances of concern.
3 When applicable.

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Environmental impact of DSM's operations

DSM improved its energy efficiency by 13 percent compared to the reference year 2008, which is slightly below the improvement
achieved in 2012 (14 percent). The benefits of energy saving initiatives at some sites were offset by non-recurring declines in energy
efficiency at several larger sites.

Greenhouse-gas emissions were slightly higher than in 2008 and amounted to 4.3 million tons in CO2 equivalents. This represents
an increase over 2012, when greenhouse-gas emissions reached 4.2 millions of tons in CO2 equivalents. The increase was caused
by higher production volumes at several units and the addition of recently acquired units. The N2O abatement system at DSM Fibre
Intermediates in Nanjing (China), which started up in September 2012, was operational throughout the year and resulted in lower
greenhouse-gas emissions at the site, despite its increased production volume.

VOC emissions increased significantly from 3,500 tons in 2012 to 5,100 tons in 2013. This was mainly caused by increases at
DSM Dyneema’s ICD facility in Laiwu (China) and process disturbances in the acrylonitrile plant in Sittard-Geleen (Netherlands).

Landfilling of non-hazardous waste was significantly reduced from 29,900 tons in 2012 to 26,600 tons in 2013. Several units found
alternative destinations for this material, such as composting, land farming or incineration.

Changes in the other environmental indicators were relatively limited and largely non-structural.

Key environmental indicators, total DSM

Energy use in petajoules (PJ)

Greenhouse-gas emissions in CO2 equivalents (x million tons)
Emission of volatile organic compounds (x 1000 tons)

Emission of NOx (x 1000 tons)
Emission of SO2 (x 1000 tons)
Chemical oxygen demand discharges to surface waters (x 1000 tons)
Water use (x million m3)

Landfilling non-hazardous waste (x 1000 tons)

2013

20121

43.0

4.3

5.1

1.7

0.16

5.4

152

26.6

40.6

4.2

3.5

1.7

0.15

5.5

149

29.9

In the 2012 column, differences compared to the numbers reported in the 2012 report are due to corrections that have been applied.

Environmental targets
In the framework of its corporate strategy, DSM has defined long-term Safety, Health and Environment (SHE) targets for the period
2010-2015, which include eco-efficiency targets. These targets are translated into plans and activities in a Corporate Multi-year
Plan Responsible Care (CMP). The CMP provides necessary guidance to rolling three-year plans of each business group.

The eco-efficiency targets for the period 2010-2015 are based on the principle that by 2015 all DSM sites in the world must meet
minimum standards applied within the European Union or the USA, via the use of Best Available Techniques. All new plants and
major plant modifications must meet this requirement right from the start, while existing plants have until 2015 to meet it. For an
overview of the eco-efficiency targets and the progress made towards them in 2013 see the table on page 20.

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Report by the Managing Board

Progress made in 2013 towards environmental reduction targets

Climate change

Emissions to air

Discharges to water

Energy efficiency

Greenhouse gases

VOC

SO2
NOx
COD

Water availability and use

Total water consumption

Landfilling non-hazardous

Waste

waste

% Reduction realized

compared to reference

Target

year1

2013

13%

(1%)2

24%

92%

42%

13%

(1%)

2010-2015

2008-2020

20%

25%

40%

70%

30%

20%

15%

1 Numbers between brackets represent a negative number, i.e. a deterioration in performance.
2 On a like-for-like basis the total greenhouse-gas emissions of DSM decreased by 19% when comparing 2013 with 2008

All environmental targets (except the target for greenhouse-gas
emissions) are relative targets. This means that increases or
decreases in the table above result from calculations that
account for changes in production volumes. Acquisitions and
divestments in the target period are excluded in order to create
like-for-like comparisons with the reference year.

aims to reduce the difference between progress on relative
targets and absolute DSM totals.

A distinction is made in the graphs between continuing and
discontinued operations in view of the upcoming
deconsolidation of DSM Pharmaceutical Products.

The target for greenhouse-gas emissions is an absolute target
for DSM’s direct CO2 and N2O emissions and other gases, as
well as for indirect CO2 emissions. The base year for this target
(and the energy target) is 2008. The divested units DSM Agro,
DSM Melamine, DSM Elastomers, Citrique Belge and DSM
Special Products were excluded from this base year, but the
impact of all other acquisitions and divestments is reflected in
the total GHG emissions reported by DSM.

The graphs in this chapter show absolute totals for the years
2009-2013. This can give rise to some apparent differences with
the numbers for relative target performance, as the latter are
corrected for changes in production volumes and do not include
companies that were acquired or divested in the target period
(like-for-like comparison).

In 2013 Kensey Nash, Ocean Nutrition Canada, Fortitech, the
Enzymes and Cultures business acquired from Cargill and AGI
Taiwan were included in the DSM total for the first time. For more
information, see Reporting policy on page 110.

DSM intends to adapt its methods to determine progress on
environmental targets to include the performance of units that
have been acquired or divested during the target-period. It also

In addition to the consolidated graphs shown in this section,
DSM publishes detailed information on the environmental
performance of all its production sites in the areas of emissions,
consumption and SHE highlights on www.dsm.com.

Data reporting by the sites is regularly audited by DSM’s
Corporate Operations Audit department. See also Reporting
policy on page 110.

Emissions to air
Volatile Organic Compounds
Emissions of Volatile Organic Compounds (VOCs) grew from
3,500 tons in 2012 to 5,100 tons in 2013. An increase in output
at the recently acquired DSM Dyneema plant in Laiwu (China)
accounted for 1,300 tons of the growth. A project to significantly
reduce these emissions began in 2013. Another portion of the
increase (500 tons) was attributable to process upsets at the
DSM Fibre Intermediates acrylonitrile plant in Sittard-Geleen
(Netherlands). A correction in the reported VOC data for DSM
Sinochem Pharmaceuticals at Santa Perpetua (Spain), was
applied for the period 2010-2013, causing relatively minor
changes compared to numbers reported previously.

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Reductions of around 100 tons each occurred at DSM Fibre
Intermediates in Augusta (Georgia, USA), as a result of
improvements in incinerator operation; at DSM Nutritional
Products in Dalry (UK), due to changes in the production
process; and at DSM Fibre Intermediates in Nanjing (China), with
the start-up of an improved incinerator. The recently acquired
plant at Tongxiang (DSM China) also reported a reduction but
this was the result of an over-estimation in 2012.

VOC
tons/year
■ continuing operations ■ discontinued operations

8,000

6,000

4,000

2,000

2009

2010

2011

2012

2013

Nitrogen oxide
Emissions of nitrogen oxide (NOx) remained almost constant at
1,700 tons. A structural reduction was achieved at DSM Fibre
Intermediates in Nanjing (China) with the closure of an organic
waste incinerator. Other changes were relatively small (<100
tons) and non-structural. The newly acquired unit in Piura (Peru),
part of DSM Nutritional Products, added 20 tons.

NOx
tons/year
■ continuing operations ■ discontinued operations

3,000

2,000

1,000

2009

2010

2011

2012

2013

Sulfur dioxide
Emissions of sulfur dioxide (SO2) remained relatively stable at
around 150 tons.

Small decreases in emissions at DSM Engineering Plastics Tai-
Young Nylon in Taiwan and DSM Sinochem Pharmaceuticals in

Toansa (India) were offset by increases from several newly
acquired units that contributed to emissions in the year.

SO2
tons/year
■ continuing operations ■ discontinued operations

1,500

1,000

500

2009

2010

2011

2012

2013

Discharges to water and landfill
Chemical oxygen demand
The discharge of Chemical Oxygen Demand (COD), which is an
indicator of wastewater pollution by organic substances,
decreased from 5,500 to 5,400 tons. Several non-structural
decreases were offset by increases at other sites. No significant
structural changes were realized.

COD
tons/year
■ continuing operations ■ discontinued operations

8,000

6,000

4,000

2,000

2009

2010

2011

2012

2013

Non-hazardous waste
The discharge of non-hazardous waste to landfill sites
decreased significantly, from 29,900 tons to 26,600 tons. A
reduction of 7,700 tons was achieved at DSM Nutritional
Products in Kingstree (South Carolina, USA) through the
introduction of composting to replace the discharge of organic
waste to landfill sites.

DSM Dyneema in Greenville (North Carolina, USA) achieved a
reduction of 600 tons through increased recycling and the re-
use of materials. Further reductions in landfilled waste were
achieved at DSM Nutritional Products in Belvidere (New Jersey,
USA), DSM Resins & Functional Materials in Frankfort (Indiana,

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Report by the Managing Board

USA), DSM Nutritional Products in Freeport (Texas, USA) and
DSM Resins & Functional Materials in Waalwijk (Netherlands),
mainly by replacing landfilling by alternatives such as land
farming or incineration.

Several newly acquired units reported for the first time in 2013,
leading to significant increases in landfill levels. These included
DSM Nutritional Products in Piura (Peru), DSM Nutritional
Products in Schenectady (New York, USA), DSM Nutritional
Products in Ontario (California, USA), DSM Resins & Functional
Materials in Zhangbin (China) and DSM Food Specialties in La
Ferté (France). Several other sites increased waste-to-landfill
levels through higher production, especially DSM Sinochem
Pharmaceuticals in Yushu (China).

At DSM Fibre Intermediates in Nanjing (China) a significant
correction was made to the number reported in previous years,
as the facility had erroneously included construction waste in this
category, which resulted in lower levels of landfill discharge being
reported.

Landfilling non-hazardous waste
tons/year
■ continuing operations ■ discontinued operations

40,000

30,000

20,000

10,000

2009

2010

2011

2012

2013

Energy and greenhouse gases
Energy consumption
DSM’s total energy consumption increased from 40.6 petajoules
(PJ) in 2012 to 43.0 PJ in 2013. The energy consumption at DSM
Fibre Intermediates in Nanjing (China) increased by 0.5 PJ.
Nevertheless, the energy-efficiency of this unit improved as the
increase in energy consumption was proportionally less than the
increase of the caprolactam output. A significant contribution
(0.6 PJ) to the increase in energy consumption comes from the
acrylonitrile plant of DSM Fibre Intermediates in Sittard-Geleen
(Netherlands), where operational issues and maintenance
shutdowns caused inefficiencies. The energy consumption of
DSM Fibre Intermediates in Augusta (Georgia, USA) increased
by 0.8 PJ, mainly because the energy consumption of the DSM
Engineering Plastics polyamide unit on this site has been
included in the results as of 2013. Higher production levels
resulted in increases at DSM Sinochem Pharmaceuticals in

Ramos Arizpe (Mexico) of 0.3 PJ while non-structural process
changes at the caprolactam plant of DSM Fibre Intermediates in
Sittard-Geleen led to increases of 0.4 PJ. The inclusion of several
new units caused a combined additional increase of 0.7 PJ. A
significant decrease of 1.0 PJ resulted from the deconsolidation
of DEXPlastomers, which was divested in early 2013. Relatively
small changes, of around 0.1-0.2 PJ, occurred at several other
units.

Energy consumption
PJ
■ continuing operations ■ discontinued operations

2009

2010

2011

2012

2013

Greenhouse-gas emissions
DSM’s total greenhouse-gas emissions (direct and indirect), for
continuing and discontinued operations, increased from 4.2
million tons of CO2 equivalents in 2012 to 4.3 million tons in 2013.
On a like-for-like basis the total greenhouse-gas emissions of
DSM decreased by 19% when comparing 2013 with 2008.

Most changes reflect the variations in energy consumption
described previously, but the relative increase is significantly less
than the increase in energy consumption. This is caused by the
fact that greenhouse-gas emissions at DSM Fibre Intermediates
in Nanjing (China) decreased by 0.1 million tons, even though the
production volume and energy consumption of the site
increased. This was the result of the new N2O-abatement system
that was operational through 2013.

Greenhouse-gas emissions, continuing operations
million tons
■ direct CO2 ■ indirect CO2 ■ N2O and other gases

2009

2010

2011

2012

2013

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Greenhouse-gas emissions, discontinued operations
million tons
■ direct CO2 ■ indirect CO2 ■ N2O and other gases

Water use, continuing operations
1000 m3, split between different sources
■ surface water ■ groundwater ■ potable water

0.3

0.2

0.1

160,000

120,000

80,000

40,000

2009

2010

2011

2012

2013

2009

2010

2011

2012

2013

Water use

DSM’s global water use is divided into surface water,
groundwater and potable (tap) water. Total water use for
continuing and discontinued operations increased from 149
million m3 in 2012 to 152 million m3 in 2013. The increase was
to a large extent due to higher production levels at DSM Fibre
Intermediates sites at Sittard-Geleen, Nanjing and Augusta. In
addition, re-starting production facilities at DSM Nutritional
Products in Belvidere (New Jersey, USA) and at DSM Sinochem
Pharmaceuticals in Ramoz Arizpe (Mexico), as well as the
inclusion of new reporting units, contributed to the increase.
Some sites achieved improvements in water efficiency by
executing specific projects. Examples are the projects carried
out at the DSM Nutritional Products sites in Dalry (United
Kingdom) and Sisseln (Switzerland) to prevent leakages of
underground water pipelines and reduce specific water
consumptions.

A significant part of DSM’s total water use is for 'once-through
cooling' (about 100 million m3), particularly at sites located next
to large rivers. These volumes fluctuate from year to year,
because the required amounts depend on incoming river water
temperatures and therefore on weather conditions. Water
assessments on sites with 'once-through cooling' water shows
that thermal pollution is within accepted levels, which has been
confirmed by local authorities.

Water use, discontinued operations
1000 m3, split between different sources
■ surface water ■ groundwater ■ potable water

40,000

20,000

2009

2010

2011

2012

2013

DSM’s water policy is to minimize the adverse effects that its
operations may have on the quality and quantity of available
water in the regions where it operates.

The water policy is the basis for the DSM roadmap to sustainable
water management. Water risk assessments began in 2012 and
continued in 2013, focusing on water scarcity areas, as well as
on locations with a relatively large contribution to DSM’s
discharge of pollutants (COD, nitrogen or phosphorus) or to
water consumption. In 2013, sites were included which use large
volumes of water for ‘once-through cooling’. These risk
assessments, which will continue in 2014, comprise a range of
factors, including water scarcity and pollution of the local river
basin, the water management system, local stakeholder
involvement, business risks related to existing and future
operations and value chain and ecosystem impacts. The water
risk assessments enable DSM to set priorities for local mitigation
efforts, such as projects to reduce consumption or discharges
of specific pollutants. Projects based on the results of the water
risk assessments are included within business group roadmaps
for 2015 - 2020.

Water risk assessments give DSM a clear overview of its impact
on water scarcity and pollution at a local level. They also provide

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Report by the Managing Board

indispensable insights into potential improvements that will
enable DSM to achieve its 'no adverse effect' policy. There are
a number of smaller sites where water scarcity may occur for a
few months each year, but the impact of these sites has been
shown to be relatively small, as they consume less than one
percent of available fresh water sources. On the other hand,
there are some larger sites where the risk of water scarcity is low,
but DSM’s potential impact is more significant. At these sites,
DSM has prepared reduction plans for water consumption.

DSM engages with its suppliers to gradually build more
sustainable value chains and consistently improve its eco-
footprint, including its water footprint. It increasingly requires
suppliers to commit to targets and assessments that are similar
to those it applies to itself. The recently developed ‘supplier water
performance and risk assessment tool’ is based on the same
tool that DSM uses internally for its water risk assessments. This
tool is already helping DSM suppliers to develop sustainable
water management.

DSM has also been a signatory to the CEO Water Mandate since
2009. In addition, it has voluntarily reported its water policy and
performance via the Carbon Disclosure Project since 2011.

DSM supports UN CEO Water Mandate

'Water availability is a concern of worldwide interest. Many
areas in the world are rapidly facing a growing water stress,
expressed in water scarcity, water pollution and water
damages by natural disasters. Sustainable water
management is therefore a must in our society. Both
individual and collective action in this respect is a necessity,
to have no adverse effect on water quality and quantity in
regions and businesses where we operate. DSM truly
values initiatives like the United Nations Global Compact
CEO Water Mandate, to which principles I express my
continued support. The topic of water and sustainable
water management has our continued full attention.'

Feike Sijbesma, CEO of Royal DSM

DSM has also completed a raw material water footprint analysis
that enables it to set priorities for potential improvements in its
water footprint.

the European Chemical Industry Council (CEFIC) water day in
Brussels in 2013.

In India, DSM supported and contributed to the development of
the India Water Tool, while making further contributions to the
World Business Council for Sustainable Development (WBCSD)
Action2020 agenda.

Biodiversity

Biodiversity and healthy ecosystems are key conditions for a
more sustainable world. They sustain human life by providing
what are known as ecosystem services, which meet essential
human needs: food, materials, clean water and fresh air. DSM
aspires to prevent the degradation of biodiversity and contribute
to its preservation wherever possible. It believes that all
companies have a central role to play in the conservation of
natural capital, ecosystems and biodiversity. This task includes:
(1) a continuous building of awareness about natural capital,
biodiversity and ecosystems; (2) the assessment and monitoring
of DSM’s impact on protected areas within its vicinity; (3) the
development of impact assessments with stakeholders; and (4)
the development of measures that help mitigate this impact.

DSM actively contributes to organizations that address and
develop awareness and methodologies to determine the impact
of activities on biodiversity, ecosystems and natural capital
employment. Biodiversity and ecosystem service reviews have
been promoted by industry bodies like CEFIC, the Association
of the Dutch Chemical Industry (VNCI), the governmental
organization platform Biodiversity Ecosystems and Economy in
the Netherlands and IUCN Leaders for Nature NL. DSM has
piloted studies to apply and develop ecosystem service reviews.
The studies qualitatively highlight the pressure factors from local
production facilities that impact the local (protected) neighboring
areas, including local emissions to air, water and soil. Further
alignment with stakeholders such as neighboring companies
and communities is still required in order to develop plans that
quantify measures to address or prevent local impact and
degradation.

Each year, DSM identifies and monitors the protected areas in
the vicinity of its sites and the impact that it has on them. Some
40 percent of DSM's sites have been identified as being located
in or adjacent to high biodiversity value areas. In all cases, DSM
production sites are operating within applicable permit levels
approved by local authorities.

To further improve its methodology in water footprinting, DSM
has continued to participate and collaborate with associations
and partnerships that address these issues. The methodology
used for water risk assessments was externally presented during

Together with partners from the Inspirational Programme of the
Leaders for Nature platform of the International Union for
Conservation of Nature (IUCN), DSM has worked on a 'business

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area of the future' concept. This includes assessing a company's
impact and dependency on biodiversity and ecosystem services.

Renewable raw materials
in % of total raw materials spend

Renewable energy

DSM acknowledges that the world must urgently shift its energy
mix from fossil-based fuels towards renewable energy, while
continuing to secure its energy supply. DSM aims to be a
frontrunner in combating global warming and resource depletion
and seeks to develop and promote products and solutions that
help to reduce GHG emissions and energy usage in its value
chain. DSM has also undertaken an advocacy role to cooperate
with energy suppliers, co-leaders in industry and regulatory
bodies, to bring about the necessary shift in the purchased
energy mix towards a more renewable mix.

In 2013, DSM published a paper outlining its perspective on
renewable energy on www.dsm.com. This paper is consistent
with the goals of its current strategy, in which it has defined long-
term environmental targets, including targets to increase energy
efficiency by 20 percent by 2020 compared to 2008, and to
reduce GHG emissions by 25 percent over the same period.

DSM aims to contribute to global GHG reductions in the most
efficient way, and to report its targets and achievements within
its Integrated Annual Report and as part of its commitment to
the Carbon Disclosure Project. At the same time, it supports its
customers’ efforts to reduce GHG emissions via innovative,
sustainable solutions and through various dedicated renewable
energy initiatives. These initiatives include the POET-DSM
Advanced Biofuels joint venture in the United States, and DSM's
business in solar panel coatings and composite resin-based
windmill blades, to name a few. DSM also encourages local
initiatives for on-site renewable energy generation, making
optimal use of local circumstances.

Raw materials

In 2013 approximately 10 percent of DSM’s total spending on
raw materials related to renewable raw materials. This represents
an increase over 2010, 2011 and 2012, which is in line with the
DSM portfolio changes. Further increases are expected in the
coming years, with programs in place to further develop
renewable raw materials.

2009

2010

2011

2012

2013

Fines and sanctions
A total of four environmental sanctions were paid by DSM sites,
totaling approximately € 62,500, which is higher than the fines
paid in 2012 (€ 45,000). To the best of DSM’s knowledge, no
further fines or non-monetary sanctions for environmental issues
were incurred in 2013.

Environmental incidents and complaints
The total number of registered environmental complaints was 45
(35 in 2012), of which 23 were about noise, 21 about odor and
1 related to water discharge.

The total number of environmental incidents was 271, compared
to 316 in 2012. Of these, 8 were rated as serious (2 in 2012).

Sharing information on the safe use of chemicals
REACH
REACH (Registration, Evaluation, Authorization and Restriction
of Chemicals) is a European regulation that aims to protect
human health and the environment from risks that can be posed
by chemicals, while enhancing the competitiveness of the EU
chemicals industry. Compliance with REACH provides a license
to operate, while failure to register can have a serious impact on
a company’s commercial interests and its ability to do business.
Manufacturers and importers of chemical substances, mixtures
and articles that contain chemical substances within the
European Economic Area must register these substances before
2018. Registration includes providing information on the safety
of the substances that are intended for use.

Within the scope of REACH, DSM is running a program to submit
relevant data on the presence or absence of hazardous effects
of all chemicals DSM produces and imports within the European
Union. The total number of substances involved exceeds 400.
DSM has successfully met all deadlines, thus contributing to the
security of supply for its customers. The company is currently
REACH compliant. DSM will now follow up on its 2010 and 2013

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Report by the Managing Board

dossiers and focus on the integration of REACH in its daily
operations.

journey towards a proactive ingredient policy for gaining
effectiveness in the design of better products, which was
published in June 2013.

Safe ingredients policy
DSM is bolstering its approach to safer ingredients by bringing
alternatives that are more environmentally friendly to the market
in substitution of more hazardous chemicals. These actions are
proactive and go beyond the legal requirements. They are
focused on substances that are expected to become reclassified
or that are less preferred by end customers because of their
anticipated health and safety risks.

In 2013, DSM brought several greener and safer alternatives to
the market:

- To make a significant contribution to solutions that reduce the
environmental impact of e-waste, DSM has developed a broad
portfolio of halogen-free materials for electronics and electrical
applications that do not release carcinogenic compounds into
the environment during manufacturing, use and disposal.
These materials meet performance and sustainability
requirements from regulators and consumers.

- DSM special grades of polyamide-6 provide producers of fuel
tanks for vehicles and appliances with small engines with the
simplest and most cost-effective way of cutting evaporative
emissions. Tanks made from these materials conform to newly
implemented regulations set by the US Environmental
Protection Agency and the California Air Resources Board,
and to guidelines from other parts of the world. The materials
are also more cost effective and reliable than comparable
solutions.

- DSM has developed a new material for ultrathin waterproof
and highly breathable membranes in outdoor clothing. The
material is PFC (perfluorinated chemicals) free and 100
percent recyclable.

- Anticipating the increasing concerns about cobalt toxicity,

DSM has been working for many years on the development of
cobalt-free resin curing systems. The company has
successfully scaled up this technology and filed a broad range
of patents covering many types of accelerator systems and
materials. The company introduced five new cobalt-free pre-
accelerated resins to the market in 2012-2013, and will deliver
more in the future.

DSM’s leading role in sustainability was also recognized by the
UK Royal Society of Chemistry, which invited the company to
contribute to their series Issues in environmental science and
technology with a chapter highlighting DSM’s sustainability

GHS
DSM continuously monitors developments that relate to the UN
Globally Harmonized System (GHS) and to related national
regulations on classification and labeling, and takes any
necessary actions to ensure timely implementation. Products
have been re-labeled and revised accordingly, and safety data
sheets are provided to reflect new requirements. National and
regional deadlines are respected in this process and DSM
employees are informed and trained on new systems of
classification and labeling.

Sustainable value chains

In 2012, DSM reported a first baseline for emissions from its
supply chain, according to the Greenhouse Gas Protocol for
scope 3 emissions issued by the WBCSD and the World
Resources Institute. The standard applies to 15 different
categories, of which 11 have been found to be relevant to DSM’s
operations, according to the Chemical Sector Working Group of
the WBCSD.

In 2013, this baseline was used as a starting point for
improvements in the methodology and data used for
calculations. There are a number of reasons for changes in the
reported values. Corrections were made in calculations for
categories 1 and 2. In several categories, DSM found ways to
increase data accuracy and specificity (categories 2, 3, 6, 12 and
15), and to better align with the Protocol (categories 1, 2, 4).
Furthermore, some numbers changed as a result of fluctuations
in activity data, such as less business travel and reduced waste
generation in operations.

In addition to DSM’s focus on improving the quality of the figures,
it conducted an analysis in 2013 to determine which suppliers
and raw materials contribute most to its scope 3 greenhouse-
gas emissions, in order to identify further opportunities for
reduction in the supply chain. DSM also intensified its efforts in
collecting supplier specific LCAs as a means of refining its
calculations and communicating DSM’s expectations and
aspirations to suppliers. DSM has sought to expand knowledge
about sustainable procurement across the organization,
particularly within the purchasing function, so that it becomes a
natural way of thinking for people in relevant positions. See also
DSM's Supplier Sustainability Program on page 35.

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Scope 3 emissions under Greenhouse Gas Protocol

Category

1 Purchased goods and services

2 Capital goods

3 Fuel and energy-related activities

4 Upstream transportation and distribution

5 Waste generated in operations

6 Business travel

7 Employee commuting

8 Upstream leased assets

9 Downstream transportation & distribution

10 Processing of sold products

11 Use of sold products

12 End-of-life treatment of sold products

13 Downstream leased assets

14 Franchises

15 Investments

Emissions (in kilotons of CO2 equivalent)
2012

2013

12,2501

300-6001

550

3952

159

431

40-60

311

192

not relevant4

<10,000

not relevant4

90-1502

13,5001

1,000-1,7501

250-500

1862

1713

771

40-60

291

10-252

not relevant4

3,000-4,000

not relevant4

10-30

1 From Q4 previous year to Q3 reporting year.
2 Reported figures with 1 year delay.
3 The number represents an update compared to the previously reported number.
4 These categories are considered to be not applicable or not relevant for DSM, or cannot be estimated at this time due to the wide array of applications, based upon the WBCSD

Guidance for Accounting & Reporting Corporate GHG Emissions in the Chemical Sector Value Chain.

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Report by the Managing Board

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My bright ideas help to reduce food waste DSM is at the forefront of developing solutions to limit the amount of food waste and bring measurable natural and human beneﬁ ts as a result. Our preservation ingedredients play an increasingly important role in reducing food waste.Loes Bevers, Associate Scientist Applied Biochemistry, DSM Food Specialties

Report by the Managing Board

Profit in 2013

Financial results
Within the Profit dimension of DSM’s Triple P approach, DSM delivers a sustainable financial return. This ensures business continuity
and allows the company to grow, while at the same time providing a good financial return to its shareholders. This chapter reports
DSM’s financial performance and provides an overview of the key financial metrics of the company.

Income statement

x € million, continuing operations

Net sales

Operating profit before depreciation and amortization (EBITDA)

Operating profit before exceptional items

Net finance costs

Share of the profit of associates

Income tax expense

Profit attributable to non-controlling interests

Net profit before exceptional items

Net profit from discontinued operations, excluding exceptional items

Net result from exceptional items

Total net profit attributable to equity holders of Koninklijke DSM N.V.

ROCE, continuing operations (in %)

EBITDA / net sales, continuing operations (in %)

2013

9,051

1,263

749

(142)

(2)

(108)

499

(237)

271

9.7

14.0

2012

8,588

1,073

651

(109)

(95)

(10)

439

(12)

(149)

278

10.1

12.5

Net sales
At € 9.1 billion, net sales from continuing operations in 2013 were
6 percent higher than in 2012 when they reached € 8.6 billion.
Volume development accounted for a 5 percent increase in net
sales. On average, selling prices were 3 percent lower than in
2012. Exchange rate fluctuations had a negative impact of 3
percent, while acquisitions contributed 6 percent.

Operating profit
Operating profit from continuing operations before exceptional
items increased by € 98 million (15 percent), from € 651 million
in 2012 to € 749 million in 2013. The EBITDA margin (operating
profit before depreciation and amortization as a percentage of
net sales) increased to 14.0 percent, compared to 12.5 percent
in 2012.

Net sales by business segment, continuing operations
in %
■ Nutrition ■ Pharma ■ Performance Materials
■ Polymer Intermediates ■ Innovation Center ■ Corporate Activities

2 2

1 3

2013

2012

EBITDA / net sales, continuing operations in 2013
in %

21.8

11.8

7.2

1.6

Nutrition

Pharma

Performance
Materials

Polymer
Intermediates

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Net profit
Net profit from continuing operations before exceptional items
increased by € 60 million to € 499 million. Expressed per ordinary
share, net earnings from continuing operations before
exceptional items increased from € 2.59 in 2012 to € 2.84 in
2013.

Net finance costs increased by € 33 million compared to the
previous year to a level of € 142 million. This increase was mainly
the result of unfavorable hedge results and higher interest
expenses due to higher net debt. The effective tax rate (before
exceptional items) of 18 percent in 2013 was in line with the
effective tax rate in 2012.

Net sales by origin, continuing operations
in %
■ Netherlands ■ Rest of Western Europe ■ Eastern Europe
■ North America ■ Latin America ■ China ■ Other

2013

2012

Total net profit for the full year came to € 271 million compared
to € 278 million in 2012. The higher operating profit in 2013 was
offset by higher finance costs and higher exceptional items (in
particular restructuring and acquisition costs).

Net sales by destination, continuing operations
in %
■ Netherlands ■ Rest of Western Europe ■ Eastern Europe
■ North America ■ Latin America ■ China ■ India ■ Japan
■ Rest of Asia ■ Rest of the world

Exceptional items
Full-year exceptional items before taxes resulted in a loss
of € 270 million (2012: loss of € 194 million), including an
impairment of € 152 million relating to the envisaged contribution
of DSM Pharmaceutical Products to a new entity that will be
majority owned by private equity company JLL Partners, € 76
million in restructuring costs, € 35 million in acquisition related
costs and € 10 million in costs for restructuring to capture
synergies.

2013

2012

Net sales by end-use market, continuing operations
in %
■ Health and nutrition ■ Pharmaceuticals ■ Metal / building and construction
■ Automotive/transport ■ Textiles ■ Agriculture ■ Electrical/electronics
■ Packaging ■ Other

2013

2012

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Report by the Managing Board

Cash flow
At € 889 million, cash provided by operating activities (total DSM) was 9 percent of net sales.

Cash flow statement

x € million

Cash, cash equivalents and current investments at 1 January

Current investments at 1 January

Cash and cash equivalents at 1 January

Operating activities:

- Earnings before interest, tax, depreciation and amortization

- Changes in working capital

- Interest and income tax

- Other changes

Cash flow provided by operating activities

Investing activities:

- Capital expenditure1

- Acquisitions

- Sale of subsidiaries

- Disposals

- Change in current investments

- Other

2013

1,133

1,121

1,314

(87)

(175)

(163)

889

(735)

(509)

(22)

2012

2,147

2,058

1,109

(17)

(163)

(199)

730

(686)

(1,262)

(31)

Cash from / used in investing activities

(1,170)

(1,856)

Dividend

Repurchase of shares

Proceeds from re-issued shares

Other cash from / used in financing activities

Cash used in financing activities

Effect of exchange differences

Cash and cash equivalents at 31 December

Current investments at 31 December

Cash, cash equivalents and current investments at 31 December

1 An amount of € 37 million included in capital expenditure was funded by customers

(160)

(73)

145

(62)

(2)

776

795

(210)

291

171

1,121

1,133

Balance sheet
The balance sheet total (total assets) reached € 12.0 billion at year-end (same as in 2012). Equity increased by € 56 million compared
to the position at the end of 2012. The increase was due to the net profit for the year and the proceeds from reissued shares, which
were partly offset by the dividend and the repurchase of shares. Equity as a percentage of total assets increased from 50 percent
at the end of 2012 to 51 percent at the end of 2013.

Compared to year-end 2012, net debt increased by € 194 million. The gearing was 23 percent at year-end.

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Capital expenditure on intangible assets and property, plant and equipment amounted to € 793 million in 2013 and was above the
level of amortization and depreciation.

The operating working capital (continuing operations before reclassification to 'held for sale') was € 66 million higher than in the
previous year and came to 21.1 percent of annualized fourth quarter net sales (2012: 20.7 percent). Cash and cash equivalents,
including current investments, decreased by € 338 million and came to € 795 million.

Capital employed by business segment at
31 December 2013, continuing operations x € billion

Equity at 31 December
as a % of balance sheet total

4.5

1.9

0.1

Nutrition

Pharma

0.6

0.2

Performance
Materials

Polymer
Intermediates

Innovation
Center

Corporate
Activities

Balance sheet profile

Intangible assets

Property, plant and equipment

Other non-current assets

Cash and cash equivalents

Other current assets

Total assets

Equity

Provisions

Other non-current liabilities

Other current liabilities

2009

2010

2011

2012

2013

2012

x € million

in %

x € million

in %

2,705

3,822

615

776

4,099

2,793

3,811

521

1,121

3,720

12,017

100

11,966

100

6,098

163

2,530

3,226

6,042

206

2,640

3,078

Total liabilities

12,017

100

11,966

100

Dividend
DSM’s dividend policy is to provide a stable and preferably rising dividend. DSM proposes to increase the dividend by 10 percent
from € 1.50 to € 1.65 per ordinary share. This will be the fourth consecutive increase. This will be proposed to the Annual General
Meeting of Shareholders to be held on 7 May 2014. An interim dividend of € 0.50 per ordinary share having been paid in August
2013, the final dividend would then amount to € 1.15 per ordinary share. The dividend will be payable in cash or in the form of
ordinary shares at the option of the shareholder. Dividend in cash will be paid after deduction of 15 percent Dutch dividend
withholding tax. The ex-dividend date is 9 May 2014.

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Report by the Managing Board

Dividend per ordinary share in €
2013 dividend subject to approval by Annual General Meeting of Shareholders

1.20

1.35

1.45

1.50

1.65

2009

2010

2011

2012

2013

Outlook
For 2014 DSM takes a prudent approach, assuming the
unfavorable January 2014 foreign exchange rates are
maintained for the year. Furthermore, DSM assumes a continued
challenging macro-economic environment, with low growth in
Europe, modest growth in the US, and a slowdown in the high
growth economies.

Based on the above, DSM targets for 2014 to improve its
business performance to at least offset the negative currency
impact of € 70 million at January 2014 exchange rates.

Comparable EBITDA in 2013 from continuing operations after
new accounting rules for joint ventures amounted to € 1,261
million.

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Review of business in 2013

In 2013 DSM's activities were grouped into five clusters: Nutrition, Pharma, Performance Materials, Polymer Intermediates and
Innovation Center. In addition, DSM reports separately on Corporate Activities. Results presented in this section (and elsewhere in
the management report) are before exceptional items.

Net sales

x € million

Nutrition

Pharma

Performance Materials

Polymer Intermediates

Innovation Center

Corporate Activities

Total continuing operations

Discontinued operations

Total DSM

EBITDA

x € million

Nutrition

Pharma

Performance Materials

Polymer Intermediates

Innovation Center

Corporate Activities

Total continuing operations

Discontinued operations

Total DSM

Operating profit (EBIT)

2013

2012

x € million

2013

2012

4,195

184

2,746

1,579

149

198

9,051

567

9,618

3,667

183

2,772

1,596

102

268

8,588

543

Nutrition

Pharma

Performance Materials

Polymer Intermediates

Innovation Center

Corporate Activities

Total continuing operations

Discontinued operations

9,131

Total DSM

679

(8)

185

(53)

(125)

749

759

613

(3)

146

(63)

(139)

651

(16)

635

Capital employed at 31 December

2013

2012

x € million

2013

2012

914

324

113

(17)

(74)

1,263

1,314

793

280

129

(38)

(94)

1,073

Nutrition

Pharma

Performance Materials

Polymer Intermediates

Innovation Center

Corporate Activities

Total continuing operations

Discontinued operations

4,494

146

1,910

570

561

183

7,864

439

4,122

162

2,026

447

507

216

7,480

604

1,109

Total DSM

8,303

8,084

EBITDA / net sales

ROCE

in %

Nutrition

Pharma

Performance Materials

Polymer Intermediates

Total continuing operations

Discontinued operations

Total DSM

2013

2012

in %

2013

2012

21.8

1.6

11.8

7.2

14.0

9.0

13.7

21.6

1.6

10.1

8.1

12.5

6.6

Nutrition

Pharma

Performance Materials

Polymer Intermediates

Total continuing operations

Discontinued operations

12.1

Total DSM

15.5

(5.1)

9.4

14.0

9.7

1.9

9.2

18.3

(2.1)

7.2

23.3

10.1

(2.5)

8.9

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Review of business in 2013

Life Sciences
Nutrition
Pharma
Materials Sciences
Performance Materials
Polymer Intermediates
Innovation Center
Corporate Activities

Capital expenditure

Workforce at 31 December

x € million

Nutrition

Pharma

Performance Materials

Polymer Intermediates

Innovation Center

Corporate Activities

Total continuing operations

Discontinued operations

Total, accounting based

Non-cash items

Customer funding

Total, cash based

2013

2012

headcount

2013

2012

Nutrition

Pharma

Performance Materials

Polymer Intermediates

Innovation Center

Corporate Activities

Total continuing operations

Discontinued operations

10,548

857

5,128

1,456

664

3,204

21,857

2,492

9,489

851

5,354

1,474

668

3,199

21,035

2,463

Total DSM

24,349

23,498

255

235

108

752

793

(58)

(37)

698

195

109

214

665

715

(29)

(13)

673

R&D expenditure (including associated IP expenditure)

x € million

as % of net sales

2013

2012

2013

2012

Nutrition

Pharma

Performance

Materials

Polymer

Intermediates

Innovation Center

Corporate Activities

Total continuing

operations

Discontinued

operations

209

202

132

131

470

438

Total DSM

515

490

5.0

3.3

4.8

1.1

53.7

13.1

5.2

8.0

5.4

5.5

2.2

4.7

1.1

59.8

8.2

5.1

9.6

5.4

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Review of business in 2013

Life Sciences
Nutrition
Pharma
Materials Sciences
Performance Materials
Polymer Intermediates
Innovation Center
Corporate Activities

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Review of business in 2013

Life Sciences
Nutrition
Pharma
Materials Sciences
Performance Materials
Polymer Intermediates
Innovation Center
Corporate Activities

Life Sciences

DSM’s Life Sciences activities are bundled
into two clusters: Nutrition and Pharma.
In 2013, these two clusters represented
48 percent of DSM’s total net sales from
continuing operations.

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My bright ideas provide innovative feed additivesRuminants and products derived from them are a major source of protein everywhere in the world. DSM enables increased efﬁ ciency of ruminant husbandry to go hand in hand with careful management of the environment.Fidelis Fru, Director Research & Development, DSM Animal Nutrition & Health

Review of business in 2013

Review of business in 2013:
Review of business in 2013:
Review of business in 2013:
Nutrition
Nutrition
Nutrition

Life Sciences
Nutrition
Pharma
Materials Sciences
Performance Materials
Polymer Intermediates
Innovation Center
Corporate Activities

Continued value
growth

Net sales

€ 4,195 m

x € million

Net sales:

DSM Nutritional Products:

- Animal Nutrition & Health

- Human Nutrition & Health

- Personal Care

DSM Food Specialties

2013

2012

1,934

1,690

152

3,776

419

1,717

1,407

174

3,298

369

Total

4,195

3,667

Organic sales development (in %)

Operating profit

Operating profit plus depreciation

and amortization (EBITDA)

Capital expenditure

Capital employed at 31 December

ROCE (in %)

EBITDA as % of net sales

R&D expenditure

679

914

255

4,494

15.5

21.8

209

613

793

195

4,122

18.3

21.6

202

Workforce at 31 December

(headcount)

10,548

9,489

Business

The Nutrition cluster consists of DSM Nutritional Products and
DSM Food Specialties. These businesses serve the feed, food
and beverage, pharmaceutical, dietary supplements and
personal care industries. With an in-depth knowledge of local
and global market needs, they apply their unique capabilities to
the benefit of customers and other stakeholders.

In 2013, Nutrition faced challenging market conditions with a
fragile macro-economic environment in Europe and to a lesser
extent the United States and price pressures in a number of
markets. EBITDA increased 15 percent, driven by the positive
impact of acquisitions, organic growth and operational
performance, despite a negative impact from currencies. The US
dollar and several currencies in high growth economies, which
DSM is increasingly exposed to, weakened against the euro.

The first half of the year saw continued weakness in demand in
Animal Nutrition & Health on the back of historically high grain
prices in 2012. Recovery of demand was further delayed by the
outbreak of animal diseases such as bird flu in China and Mexico
and Early Mortality Syndrome (EMS) in shrimp in South East Asia.
This demand weakness led to significant price pressures in
several Animal Nutrition & Health products, most notably in
vitamin E, which continued in the second half of the year. Overall,
the organic growth of Animal Nutrition & Health was almost flat.

In Human Nutrition & Health demand development was positive
in the first part of the year and through the summer. However,
weakness in omega-3 based supplements, Western Food &
Beverage markets and North American dietary supplements as
of late Q3 led to a disappointing performance with flat sales in
the fourth quarter. Infant Nutrition proved a strong driver of
growth throughout the year. Overall, the organic growth of
Human Nutrition & Health was 4 percent for the year.

In Personal Care, demand development was especially
impacted by weak sales for sun filters due to a very poor summer
in the US and Europe, considered one of the worst years ever
by the industry, and by increased competitive intensity. The unit
also focused on streamlining its distributor network and product
line-up in skin care.

In Food Specialties, growth was achieved in all market
segments, supported by contributions from business acquired
in cultures and enzymes. Demand was strong for innovative
yeast extracts and process flavors from high growth economies.

Total sales for 2013 of the Nutrition cluster came to € 4.2 billion,
compared to about € 3.7 billion in 2012, which represents a
compounded annual growth rate of 10 percent since the start of
the current strategic period.

The Nutrition cluster has confirmed its targets for 2015 as
organic sales growth of GDP +2 percent and an EBITDA margin
range of 20-23 percent.

Trends

Despite the challenges in the macro-economic environment in
2013, the key global societal trends that drive the company’s

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growth in nutrition and health remained intact and provided
resilience to the cluster. With more than half the world’s
population now living in cities, the need for convenience and
processed food has never been higher, which matches the
company’s ability to deliver tailor-made local applications and
blends.

At the same time, a rapid rise in living standards has continued,
particularly in high growth economies, where it is driving
increases in the demand for animal protein. This is boosting the
demand for more and better animal feeds, which, combined with
the rising scarcity of resources, is requiring more efficient feed
conversion processes and a reduction of undesirable waste
components. In this regard, DSM offers solutions that help make
industrial farming systems more sustainable and have a lower
impact on the environment.

Global megatrends are fueling demand for health and wellness
products such as infant nutrition products, dietary supplements,
and healthier choices in food and beverages. As populations
continue to age and awareness about hidden hunger increases,
health consciousness is also prompting governments and health
authorities to encourage the consumption of supplements and
fortified foods.

Public concerns are also increasing around issues of quality,
safety and sustainability, leading to a stronger regulatory focus
on these areas. Authorities prefer producers to work with
suppliers that, like DSM, are rigorous in their application of
science and have state-of-the-art quality assurance systems.
The growing awareness around environmental sustainability,

which is also notable in countries with low-cost producers, has
become an important differentiator for DSM.

In the period ahead, DSM expects more demanding
requirements from customers for deeper insights and
customized solutions. Growth will continue to shift towards high
growth economies where the business will increase its
development of products tailored to local consumer preferences
and market and channel structures.

Value chain

DSM's strategy for the Nutrition cluster, with a strong product
portfolio leveraged across the value chain addressing attractive
markets, has served the company well. The cluster has a unique
business model that aims to capture opportunities arising from
global megatrends by combining global production capabilities
in active ingredients and formulations with customized local
formulations, premix activities and distribution channels.

As a global producer, DSM delivers a broad portfolio of high
quality and competitive actives while offering maximum
differentiation through industry and segment specific
formulations. At the same time, as a local solutions provider, it is
increasingly focusing on customer-driven solutions and
segment-specific products. By successfully managing the
interdependencies between active ingredients, formulations,
premixes and macro blends, it is able to drive innovation,
optimize its logistics and ensure final value delivery to its
customers and their end consumers.

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Review of business in 2013

Life Sciences
Nutrition
Pharma
Materials Sciences
Performance Materials
Polymer Intermediates
Innovation Center
Corporate Activities

The cluster works from a strong base as a global market leader,
with a portfolio of key value-added nutritional ingredients that is
the broadest in the industry, with particularly strong positions in
vitamins, nutritional lipids, enzymes, cultures and carotenoids. It
then leverages the potential of the value chain and establishes
new growth platforms in adjacent areas that widen its global
presence.

The business addresses the needs of individual markets through
fermentation, chemical synthesis, and in key niches of active
compounds derived from plant extracts. Specialist teams work
closely with customers to jointly develop ingredient formulations
for a range of end products. All formulations are customized to
ensure the best ingredient characteristics for each specific end
product.

Over the years, DSM has expanded and strengthened its value
chain presence and business model downstream, adding macro
blends while strengthening its nutritional consultancy and
services. Its global footprint has grown to more than 60
countries, including a large number of high growth economies,
where it benefits from unparalleled customer access, a broader
product portfolio, and new skills and capabilities. The expansion
of DSM’s premix footprint in emerging economies has been one
of the most important business drivers in the areas of human and
animal nutrition and health.

DSM’s uniquely integrated business model and strong global
position enables it to be a front-runner in quality and innovation,
regulatory and technical expertise, sustainability, and customer
and consumer understanding. In the years ahead, the business
will continue to provide solutions that capture macro-trend
opportunities, while strengthening its core by improving
operations and the supply chain. It will innovate and upgrade
delivery systems through application and formulation

technologies; expand premix networks and services through
nutritional science and advocacy; maintain its investments in
state-of-the-art quality management; and build on its ability to
deliver more value, more efficiently.

Acquisitions
Since the launch of the DSM in motion: driving focused growth
strategy in 2010, the company has acquired businesses in
Nutrition totaling € 2.4 billion in enterprise value. These have
created attractive shareholder value. The Nutrition cluster now
accounts for approximately half of total company sales with an
EBITDA margin target of between 20 and 23 percent.
Acquisitions have been the main vehicle for adding new growth
platforms, including high growth economies. In the period
ahead, DSM's primary focus will be on the full integration of its
newest companies, and on reaping the benefits of these in terms
of growth, synergies and costs.

Overall the acquisitions performed well in 2013. Martek,
Fortitech and Tortuga exceeded expectations. Ocean Nutrition
Canada was confronted with market headwinds towards the end
of the year. The integration of the acquisitions is well advanced,
and synergies are being delivered according to plan.

The 2012 acquisition of Ocean Nutrition Canada (ONC), together
with the fully integrated Martek business, has created a strong
leader in nutritional lipids. Significantly higher fish oil costs have
caused steep price increases in omega-3 based supplements at
retail level, which led to softness in consumer demand in the US
in the second half of the year. With ONC DSM has considerably
strengthened its presence in the US dietary supplements
market, while leveraging its global network to grow the dynamic
omega-3 market category for dietary supplements and food and
beverages outside the US.

Nutrition acquisitions 2010-2013

Company

Martek

Ocean Nutrition Canada

Cultures and enzymes business of Cargill

Fortitech

Tortuga

Unitech

Other acquisitions

Total enterprise value

Business group

Enterprise

value in € m

DNP

DFS

DNP

790

420

495

465

110

approx. 2,400

Year

2011

2012

2013

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The integration of Fortitech, acquired in late 2012, is well
underway with a new Human Nutrition & Health premix structure
in place that preserves the very successful Fortitech operational
model and its customer base. The business has added a strong
position to DSM’s customized food ingredient blends and
expanded its value chain presence with complete solutions
globally. In 2013, it achieved double digit growth and significant
cost and ingredient supply synergies in all regions.

The Cultures and Enzymes business acquired from Cargill in
2012 has now been fully integrated. It is offering a new
proposition in the attractive market for Dairy Enzymes & Cultures
to leading global dairy players. The integration of its portfolio has
led to a rationalization of brands and products, while synergies
have been achieved.

DSM completed the acquisition of Tortuga, the Brazilian market
leader in minerals for animal nutrition and health, in 2013. The
business has already delivered a strong contribution to DSM’s
growth and earnings and its integration is on track to be fully
completed in 2014. It fundamentally strengthens DSM’s footprint
in Latin America and its ruminants position globally. Product
registrations are now underway for expansion in Latin America,
while the company’s growing trace mineral program for
monogastric species is also underway.

DSM continues to implement further efficiency improvements in
support of its unique business model in Nutrition.

Sustainability
Sustainability is a significant growth driver for the Nutrition
cluster, and it creates opportunities to develop and market
solutions that are more efficient and have distinct environmental
advantages. The cluster contributes to the creation of ECO+
solutions within DSM, which is the term designated by DSM to
those products that provide a quantifiably better ecological
performance than comparable mainstream products in the
market.

DSM completed several assessments of the ecological and
carbon footprint of products, including vitamins C, B2 and B6.
Many of these products and processes not only contribute to a
reduction in DSM’s ecological footprint, but also look to improve
the ecological footprint of end products and their application and
use.

DSM believes that good nutrition is indispensable to unlocking
the physical and mental potential of every man, woman and
child. It views the elimination of malnutrition as a key priority and
a shared global responsibility that it supports wholeheartedly.

As an industry pioneer, DSM is also a key driver of the global
science agenda in the field of ingredients. As such, it is focused
on advancing the world's understanding of the intricate
relationships between nutrition, health, product development
and food production processes.

The company is increasingly recognized as a thought leader in
the field of nutrition and health, which has become a key element
in its development. Thought leadership enables DSM to engage
in discussions on nutrition guidelines, policies and practices with
high-level decision makers and authorities around the world. It
also helps DSM to build institutional knowledge and create
confidence among its customers and other stakeholders.

In 2013, its Sight and Life think tank published a book entitled
The Road to Good Nutrition, a part of its Vitamins in Motion
campaign to combat hidden hunger. The book was broadly
acclaimed by the UN and the development community. In the
year, Sight and Life also published a global hidden hunger index
to help raise global awareness about the magnitude of hidden
hunger around the world and its devastating consequences.

DSM Nutritional Products

DSM Nutritional Products is organized around three market-
facing entities: Animal Nutrition & Health, Human Nutrition &
Health and Personal Care. In 2013, DSM Nutritional Products
posted sales of € 3,776 million compared to € 3,298 million in
2012. EBITDA increased 15% in 2013, driven by the positive
impact of acquisitions, organic growth and operational
performance, despite a negative impact of currencies.

Despite challenges in several of its markets, the year saw
significant strategic progress for DSM Nutritional Products as it
continued to capture megatrend opportunities by leveraging its
broad range of active nutritional ingredients across the value
chain. Its global premix network expanded its development of
tailored customer and market solutions, and strengthened
DSM’s position as the innovation partner of choice for the food,
feed and personal care industries.

As a result of its steady growth, stable margins, and value
creating acquisitions, the business group is today twice the size
of what it was 10 years ago. The global product portfolio has
been significantly expanded around its core offering of vitamins
and carotenoids focusing on Human and Animal Nutrition &
Health. It now includes fish-oil based as well as vegetable PUFAs
(polyunsaturated fatty acids, i.e. omega-3 and omega-6) and
organic trace minerals.

The merger of DSM’s human premix network with the leading
blender Fortitech expands what was primarily a channel to

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During its first year as part of DSM, the Tortuga business in Brazil
fully delivered on expectations. The acquisition was concluded
in April 2013 and the integration program is firmly on track.
Tortuga provides high-quality nutritional supplements including
minerals for pasture-raised cattle as well as for dairy cows and
feedlots. It specializes on ruminants with products to match
specific requirements during the animal’s life cycle. With its vast
range of formulations and services, Tortuga has solutions for
ruminants at all phases of development and in different
environments, to help livestock farmers achieve greater
efficiency, profitability, health benefits and sustainability in their
operations. Tortuga has developed its own exclusive minerals
technology for ten different minerals (calcium, magnesium,
sulfur, chromium, zinc, manganese, copper, iron, cobalt,
selenium). This is a significant differentiator in the market, as
Tortuga is the only mineral feed producer in the world that is fully
integrated in the supply chain and can apply those minerals in
high inclusion. In addition, the business uses mineral technology
in products for dairy and feedlot-raised cattle, and for other
animals, such as swine, poultry, horses, sheep and goats. The
combination of the DSM and Tortuga portfolios supports DSM’s
strategy of becoming a global full solutions provider. It boosts its
access to a ruminants market of around 35,000 Brazilian cattle
farmers, and enables Tortuga’s minerals to reach other
geographies and segments worldwide.

In 2013, DSM opened two new premix plants, in Vietnam and
the Philippines. It also took over two other premix businesses in
China and the Philippines. In China, the construction of the new
Animal Nutrition Innovation and Science Application Center
close to Beijing is nearing completion and the inauguration is
planned for 2014.

Review of business in 2013

Life Sciences
Nutrition
Pharma
Materials Sciences
Performance Materials
Polymer Intermediates
Innovation Center
Corporate Activities

market DSM actives, towards one with more economies of
scale, flexibility and versatility. For both human and animal
applications, DSM’s premix network is by far the largest in the
industry.

The business group has emphasized customer proximity and
further developed its market approach and identity. For the first
time since 2003, it began building a new vitamin factory, in
Xinghuo, Shanghai (China), where it started work on its new
state-of-the-art vitamin B6 facility in the autumn.

Animal Nutrition & Health

Strategic progress 2013

- HGEs: new premix plants in Vietnam and the Philippines,

and other premix businesses acquired in China
- Innovation: construction of new Animal Nutrition

Innovation and Science Application Center in China nears
completion

- Sustainability: several assessments completed on the

ecological and carbon footprint of products

- Acquisitions & Partnerships: Tortuga business delivers

and integration is on track

The Animal Nutrition & Health (ANH) business achieved sales of
€ 1,934 million in 2013 compared to € 1,717 million in 2012.

This business holds a unique global position in the markets for
poultry, swine, aquaculture and ruminants. In all these species,
DSM is a full value chain player, providing active ingredients,
delivery systems, and nutritional and premix solutions globally
and at a local level. Its focus is on the nutritional ingredients and
additives segments of these markets.

Despite some regional constraints, the challenges in the macro-
economic environment, and the ongoing price pressures in the
animal protein market, the megatrends of population growth and
rising living standards continued to drive the business in 2013.
Demand in some high growth countries was impacted by
diseases, such as bird flu in China and Mexico and EMS in
shrimp in Asia.

In the animal protein markets, decreasing agricultural commodity
prices are supporting a steady but slow recovery in animal
protein production. This fragility has created some price
pressures, especially in vitamin E, which has led DSM to maintain
its value-over-volume strategy.

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leading innovation capabilities and the deepest portfolio of
nutritional ingredients, the integrated global premix business has
been recognized by customers as the leader in human nutrition
blends. The company’s goal is to provide industry leading
nutritional science-backed solutions and unmatched customer
service with the broadest global reach to help customers
differentiate and grow their brands.

The acquisition of Unitech Industries Ltd., located in Auckland
(New Zealand) completed the strengthening of the premix
business. Unitech is now ideally positioned to further penetrate
the rapidly growing market in Asia Pacific. It manufactures highly
targeted nutritional premixes with a focus on infant nutrition. It
also produces complete nutritional blends for global and regional
infant formula companies. This is a highly demanding market that
requires a total commitment to quality in all areas of the business.

The difficult market faced by DSM in Human Nutrition & Health
have enabled it to prove its unique capabilities and high
standards to customers. Its ongoing commitment to the four
pillars of Quality, Reliability, Traceability and Sustainability has
remained the foundation of the business and a significant
differentiator in the market.

Personal Care
DSM's sales in Personal Care in 2013 were € 152 million,
compared to € 174 million in 2012.

This market offers considerable long-term opportunities for DSM
to innovate for accelerated growth. Personal Care focuses on
creating mutual value with its customers through a unique
portfolio of transformational beauty care ingredients such as
peptides, natural bio-actives, vitamins, UV filters and polymers.

In 2013, DSM Personal Care launched a new identity entitled
Revealing the Power of Beauty. This brand aspires to connect
and leverage DSM’s scientific capabilities in skin, sun and hair
care products to develop transformational beauty care
ingredients and concepts with superior performance, quality and
reliability.

Human Nutrition & Health

Strategic progress 2013

- HGEs: leveraging global footprint to drive nutritional lipids
sales, while Unitech opens new channels for growth in
Asia Pacific

- Innovation: Oatwell® betaglucans receive EFSA

endorsement for health claims and new innovation center
designed for Brazil to open in 2015

- Sustainability: several assessments completed on the

ecological and carbon footprint of products

- Acquisitions & Partnerships: acquisition of Unitech

Industries Ltd. in New Zealand further strengthens the
premix business, while the previous acquisition of
Fortitech has created a recognized leader in human
nutrition blends

The Human Nutrition & Health (HNH) business reported 2013
sales of € 1,690 million compared to € 1,407 million in 2012.

This business largely addresses the nutritional ingredients part
of the food& beverage and dietary supplements market, with an
additional focus on infant nutrition and aroma ingredients. Its
fundamental drivers are the link between nutrition and a number
of global megatrends that have resulted from the world’s
growing population, rapid urbanization and the rise of living
standards in developing countries.

Overall conditions in 2013 were challenging, but remained
favorable for infant nutrition. In the Food & Beverage segment,
customers faced softer demand, particularly in Western markets.
In the dietary supplement market, fish-oil based omega-3 was
impacted by sharp price increases at retail level, as the entire
value chain pushed through higher crude fish oil costs.

As a result of the integration of Martek and Ocean Nutrition
Canada, a new integrated organization in DSM Nutritional
Products was implemented in the year. This organization now
has the ability to provide both algal and marine-based lipid
solutions to DSM’s customer applications in all market
segments. Additionally, DSM is leveraging its broad global
footprint to drive nutritional lipids sales in high growth
economies.

The combination of DSM and Fortitech in late 2012 has
strengthened DSM’s premix offer with the fastest and highest
quality customer-oriented capabilities in the industry, for which
Fortitech is widely recognized. Together with DSM’s industry-

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sustainable and more efficient production processes. The
market for cultures and probiotics is also expected to grow,
driven by health trends and the growing consumption of
fermented milk products. At the same time, the market for savory
ingredients is expanding alongside a rising demand for authentic
ingredients and reduced sodium products.

Strategy

In Enzymes, DSM focuses on the food and beverage industry
where it helps customers innovate their products and production
processes.

In Savoury Ingredients, DSM applies yeast and enzyme
technology to capture a unique position in the market with a
portfolio of yeast extracts and process flavors for authentic,
intense, natural tasting savory foods.

In Cultures, DSM’s unique cultures and enzymes toolkit for the
dairy industry helps manufacturers create the desired texture,
surface and flavor characteristics for their products while
increasing yields from their milk.

The business completed the acquisition of a 29 percent equity
interest in Yantai Andre Pectin Co., Ltd., the China-based
producer of texturing ingredients, and succeeded in increasing
its global footprint in the year, through the integration of the
Cultures and Enzymes business acquired from Cargill.

It also saw the completion of an additional dryer facility for the
savory business in Delft (Netherlands) and a new office and
laboratory opened in San Diego (California, USA) following the
acquisition of the Oils & Fats enzymes business from Verenium
in 2012.

Review of business in 2013

Life Sciences
Nutrition
Pharma
Materials Sciences
Performance Materials
Polymer Intermediates
Innovation Center
Corporate Activities

DSM Food Specialties

Strategic progress 2013

- HGEs: increased global footprint through the integration
with the Cultures and Enzymes business acquired from
Cargill

- Innovation: efforts are recognized by the industry

and major steps forward are taken in the production of
high purity steviol glycosides by means of fermentation
- Sustainability: Multirome® has 81 percent lower carbon
footprint than regular yeast extracts according to LCA
- Acquisitions & Partnerships: the acquisition of a stake in
Yantai Andre Pectin Co., Ltd. in China offers premier
access to the world’s fastest growing specialty food and
ingredients market

Global distribution network in the food value chain

In 2013, sales for DSM Food Specialties came to € 419 million,
compared to € 369 million in 2012. The business realized growth
in all market segments, supported by contributions from its
acquired cultures and enzymes business. Its position as a global
market leader in bio-ingredients for food and beverages was
further strengthened with high growth from emerging economies
in Latin America and Asia, and new opportunities in Africa.
Growth was especially fueled by a rising demand for innovative
yeast extracts and process flavors.

DSM Food Specialties is a leading global supplier of food
enzymes, cultures, taste and health ingredients and other
specialties for many of the leading global and local dairy, baking,
beverages and savory food brands. Its advanced ingredients
help customers differentiate their products to consumers in
terms of taste, texture and appearance, while helping to optimize
production processes and raw material and energy use.

Trends

The food industry is increasingly looking for sustainable and
higher value-added products that are healthier, better tasting
and more appealing to consumers. Producers are also looking
to improve production processes and save costs. Specialty food
ingredients represent approximately 2 percent of the cost of a
final product, but can have a significant, direct impact on the
end-product.

The use of food enzymes is expected to grow in the years ahead
as food manufacturers look for cost savings and more

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Our bright ideas improve the global pharmaceutical supply chainIn pharmaceuticals the challenges are many. Which means the industry needs to ﬁ nd new efﬁ ciencies and explore game-changing innovations like bio-pharmaceuticals. DSM is at the forefront of all these areas and more.Hernani Bernabela, Upstream Process Development Technician, DSM Pharmaceutical ProductsElham Zolghadr, Downstream Process Development Technician (left) and

Review of business in 2013

Review of business in 2013:
Review of business in 2013:
Review of business in 2013:
Pharma
Pharma
Pharma

Life Sciences
Nutrition
Pharma
Materials Sciences
Performance Materials
Polymer Intermediates
Innovation Center
Corporate Activities

Leveraging
partnerships for
growth

Net sales

€ 751 m

x € million

Net sales:1

DSM Pharmaceutical Products

DSM Sinochem Pharmaceuticals

Total

Organic sales development (in %)

Operating profit

Operating profit plus depreciation and amortization

(EBITDA)

Capital expenditure

Capital employed at 31 December

ROCE (in %)

EBITDA as % of net sales

R&D expenditure

Workforce at 31 December (headcount)

Continuing operations

Discontinued operations

Total

2013

2012

2013

2012

2013

2012

184

(8)

146

(5.1)

1.6

857

183

(3)

162

(2.1)

1.6

567

439

1.9

9.0

543

(16)

604

(2.5)

6.6

567

184

751

585

0.3

7.2

543

183

726

(19)

766

(2.3)

5.4

851

2,492

2,463

3,349

3,314

1 DSM Sinochem Pharmaceuticals is a joint venture for which proportionate consolidation was applied in 2013. From 2014 onwards DSM will have to apply IFRS 11, Joint

Arrangements and account for its interest in DSM Sinochem Pharmaceuticals in accordance with the equity method. In view of the contribution of DSM Pharmaceutical Products
to a new entity that will be majority owned by private equity company JLL Partners, that business is presented as discontinued operations in this report. After completion of the
transaction that is anticipated for the first half of 2014, DSM will also account for its interest in the new entity in accordance with the equity method. In both cases the companies
will no longer contribute to DSM EBITDA whilst the net results will continue to contribute to net income and earnings per share. From 2014 onwards the Pharma cluster will cease
to exist but DSM will continue to report on the financial performance of both companies in the notes to the financial statements and in earnings announcements.

Business

The Pharma cluster includes the business group DSM
Pharmaceutical Products (DPP), one of the world’s leading
custom manufacturing organizations to the pharmaceutical
industry, and DSM's 50 percent interest in the DSM Sinochem
Pharmaceuticals (DSP) joint venture.

In November 2013, DSM took a major step forward in its strategy
for the cluster, with the announcement of the formation of a new
entity together with JLL Partners, a New York-based private
equity company, combining DPP and the US-based company
Patheon to create a leading global contract development and
manufacturing company in which DSM will retain a 49 percent
interest.

DSM Pharmaceutical Products is a leading provider of high-
quality custom manufacturing and development services to the
pharmaceutical, biopharmaceutical and crop protection
industries. Many of today’s medicines around the world contain
ingredients produced by DPP. The business serves its
customers with clinical and commercial services from its two
research and development sites in the US and Europe. Its
customers include nine of the top ten pharmaceutical companies
as well as the leading crop protection companies. The business
also serves a large number of biotech, specialty and emerging
pharma companies across the globe. DSM Pharmaceutical
Products’ facilities have been approved by the US Food and
Drug Administration (FDA) and equivalent agencies in Europe,
the Middle East, Africa and Japan. DSM Pharmaceuticals, Inc.

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is licensed by the US Drug Enforcement Administration to
manufacture scheduled drugs.

In 2013, sales in the Pharma cluster rose to € 751 million
compared to € 726 million in the previous year. Full year organic
sales growth was 6 percent. Total Pharma EBITDA for the full
year increased to € 54 million, compared to € 39 million in 2012.

Trends

Business conditions in the pharmaceutical market continue to
be challenging with a number of underlying trends that are
shaping the industry in a fundamental way. These challenges
provide growth opportunities for companies with sufficient scale,
reach and sustainability capabilities.

For DPP’s customers, mainly large innovative pharmaceutical
companies, it is becoming more difficult to discover new active
molecules that offer sufficient patient benefits and an acceptable
risk profile. Achieving the necessary approvals from the FDA and
other regulatory bodies is a significant hurdle, and they have seen
a reduction in new product approvals over the last decade.

Cost pressures continue to be high, with rising costs in molecule
development, and healthcare spending by governments and
insurance companies continuing to be scrutinized. Medicines
typically account for around 10 percent of healthcare spending.
In response, pharmaceutical companies are reviewing their
business models and product ranges, and turning their attention
to specialist areas. These include biopharmaceutical products,
where volumes are typically lower.

The above offers opportunities for high quality Contract
Manufacturing Organizations (CMOs) and the market for
outsourcing which is growing above GDP levels, especially for
drugs nearing the end of their (patented) life cycle.
Pharmaceutical companies optimizing their asset base are
increasingly demanding experienced, cost-efficient and highly
qualified partners to take on manufacturing challenges as their
core supplier. It is a challenging environment that offers
opportunities for DSM, with its ability to provide innovative and
sustainable solutions.

The growing pharmaceutical outsourcing market is inherently
volatile, and often subject to severe fluctuations in demand. In
addition, there has been a steady rise in competition from Asian
players, which is particularly the case for DSM Pharma
Chemicals.

For DSP, leader in beta-lactam anti-infectives, growth is arising
primarily in high growth economies where infectious diseases
continue to be a major life threat. As the coverage and quality of

healthcare in these economies expands, and given that these
products are very safe and cost-effective choices, DSP
continues to grow in these markets. DSP is seen as an industry
leader with clear market advantages, communicated via the
DSMPureActives™ brand.

The Asian market accounts for only 7 percent of total global
pharmaceutical spend, but this proportion is expected to reach
20 percent by 2020 (Source: Credit Suisse/IMS). DSP is well
positioned to benefit from this trend, and has two anti-infectives
production sites in the region, one in China and the other in India,
which are supported by a network of sales offices.

Strategic context

DSP will continue to focus on strengthening its position in beta-
lactams while increasing the share of new product launches and
strengthening its presence in formulations. DPP focuses on the
upcoming integration with Patheon.

Sustainability
To further reduce their environmental footprint, both DPP and
DSP are deploying their technological toolbox to reduce the use
of scarce resources and energy where possible and are actively
implementing the use of renewable energy sources in their
operations.

The use of proprietary biotechnology makes DSP an industry
leader in terms of sustainability. Emissions are considerably
lower than with conventional technology, while product quality
is higher.

DSM Pharmaceutical Products

Strategic progress 2013

- Innovation: DPC enters collaboration agreement with

Chemtrix BV to augment DSM's expertise in microreactor
technology

- Sustainability: technological toolbox to reduce resource
and energy usage and increase the use of renewable
energy

- Acquisitions & Partnerships: joint venture with Patheon

DSM Pharmaceutical Products focuses on innovative and
generic pharmaceuticals, biologics and biosimilars, agro
chemicals, and markets for fine chemicals. The business group
includes DSM Pharma Chemicals (DPC) (custom chemical
manufacturing services for complex registered intermediates

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Review of business in 2013

Life Sciences
Nutrition
Pharma
Materials Sciences
Performance Materials
Polymer Intermediates
Innovation Center
Corporate Activities

and active pharmaceutical ingredients (APIs)); DSM Exclusive
Synthesis (which caters to various fine-chemical customers
outside of the pharma industry); DSM Biologics (focusing on
services and licenses for biopharmaceutical companies based
on unique technological strengths); DSM Pharmaceuticals, Inc.
(offering manufacturing services for final dosage with a strong
competence in sterile operations); and DSM BioSolutions
(focusing on custom manufacturing services based on microbial
fermentation).

Opthea of Melbourne (Australia) to manufacture Opthea’s lead
product for eye disease.

DSM BioSolutions experienced a setback with the lead CMO
product that had negative phase III clinical trial results, which
subsequently led to a substantial restructuring project. Actions
to further improve DPP's business performance have triggered
efficiency and cost reduction projects in the Capua (Italy)
operations.

In 2013 sales at DPP amounted to € 567 million compared to
€ 543 million in 2012. DPP's performance made significant
progress in 2013, which will support a good start for the value-
creating joint venture with JLL Partners.

Throughout the year, DPP strengthened its core business
through the Profit Improvement Program, which was
successfully implemented and resulted in an improved cost
position.

Developing new ways of working
In 2013, DPC strengthened its technology offering by entering
into a collaboration agreement with Chemtrix BV (Sittard-Geleen,
Netherlands) that augments DSM's expertise in microreactor
technology. The agreement with Chemtrix helps to provide
sustainable manufacturing solutions to customers.

DPP is focusing on serving customers with integrated and full
solutions. Shire Pharmaceuticals, one of the world’s leading
specialty biopharmaceutical companies, has transitioned the
manufacture of eight specialty pharma products, including
Vyvanse®, to DSM Pharmaceutical Products' facility in Greenville
(North Carolina, USA).

DSM Pharmaceuticals, Inc. (DPI) further strengthened its project
pipeline, working closely with a number of strategic partners. It
announced a 3-year master supply agreement with Eisai Inc. for
the production of sterile products. DPI became part of the
nation-wide Fill Finish Manufacturing Network established by the
Biomedical Advanced Research and Development Authority
within the US Department of Health and Human Services and to
be a supplier for the manufacture of influenza vaccine in the event
of a flu pandemic.

DSM Biologics strengthened its biopharmaceutical operations in
Groningen (Netherlands) and opened a new ‘biologics plant of
the future’ in Brisbane (Australia) in conjunction with the
government of Queensland and the federal government of
Australia. This site serves the unmet need of the region for large
scale cGMP (current Good Manufacturing Practice) mammalian
cell culture based manufacturing, and the global biopharma
markets.

During 2013, notable growth was experienced in
biopharmaceutical services, including agreements with
DecImmune Therapeutics of Cambridge (Massachusetts, USA)
to develop the nitrogen pathway blocking antibody, and with

Leveraging partnership for growth
On 19 November DSM and private equity firm JLL Partners
announced that they intend to combine the US-based company
Patheon and DSM Pharmaceutical Products into a new
company that will be a leading global contract development and
manufacturing organization (CDMO) for the pharmaceutical
industry. The formation of the new company is expected to be
finalized in the first half of 2014. With a global footprint of 23
locations across North America, Europe, Latin America and
Australia and about 8,300 employees, this new company will be
a new global leader in contract development and manufacturing
services for the pharmaceutical industry with anticipated sales
of around USD 2 billion.

DSM Sinochem Pharmaceuticals

Strategic progress 2013

- HGEs: captured additional value growth in the emerging

and developing economies of Asia
- Innovation: introduction of Puriclor™
- Sustainability: technological toolbox to reduce resource
and energy usage while increasing the use of renewable
energy

DSM Sinochem Pharmaceuticals is the global market leader in
beta-lactam APIs such as semi-synthetic penicillins (SSPs) and
semi-synthetic cephalosporins (SSCs), which represent the
biggest class of APIs in anti-infectives. It is also a leader in other
active ingredients such as nystatin and next generation statins.
The joint venture manufactures nearly all its beta-lactam APIs
and the related intermediates using proprietary biotechnology.

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1985, it has topped the list of best-selling drugs worldwide for
more than a decade.

Sales for DSP in 2013, on a 100 percent basis, increased
to € 368 million from € 366 million in the previous year, due to
higher prices, offset by negative exchange developments, which
intensified towards the end of the year. While results remained
under pressure due to increased raw materials and energy costs,
DSP has been able to strengthen its brand by supplying to the
premium segment of the market. It benefits from differentiators
in its value propositions that are based on unique product
characteristics and excellence in additional services, such as
technical after sales support.

Industry dynamics remained challenging due to significant
overcapacity, especially in China. The stronger focus of Chinese
authorities on the responsible use of antibiotics and the
environmental impact of production are expected to lower the
demand and increase compliance pressures for producers. With
its unique technology base and considerably smaller
environmental footprint, DSP is well equipped to meet such
requirements.

In 2013, DSP was able to continue leveraging its position as a
premium supplier, and capture additional value growth
especially in the emerging and developing economies of Asia
and Africa. DSP was able to convey the added value of high
quality APIs and services, which led to more robust pricing in
Asia, and to a lesser extent in Western markets where DSP is
already positioned as a premium supplier.

The year marked the introduction of Puriclor™, DSP’s first
second-generation SSC API produced in a new facility in China’s
Shandong province. The facility was opened in 2012 and uses
DSP’s proprietary technologies.

Generic pharmaceuticals other than beta-lactams showed
continuous strong growth in the year.

The new production base in Yushu (Jilin, China), which faced a
number of challenges during the start-up phase in the previous
year, made steady progress in 2013.

The business took an important step in its strategy to expand its
API portfolio with the start of construction work at a world class
multi-product plant in Toansa (India). The new facility will help to
meet the increasing demand for DSP’s existing high-quality
products in cardiovasculars while also driving further expansion
of its portfolio in defined therapeutic segments. To begin with,
the facility will produce Atorvastatin using DSP’s proprietary
biotechnology route that is already successfully in place at its
partner sites in India.

Atorvastatin is the most prescribed drug globally for high
cholesterol and cardiovascular disease. First synthesized in

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Review of business in 2013

Life Sciences
Nutrition
Pharma
Materials Sciences
Performance Materials
Polymer Intermediates
Innovation Center
Corporate Activities

Materials Sciences

DSM's Materials Sciences businesses
comprise the Performance Materials and
Polymer Intermediates clusters. In 2013 the
two clusters represented 48 percent of DSM’s
total net sales from continuing operations.

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My bright ideas create sustainable solutions for coatings Did you know that many of the ingredients for high-end decorative paints come from DSM? Or that our resins are the key component in paints for the very toughest of environments? And did you know that we’re creating successive generations of waterborne, powder and UV coating resins? Well, we are…Hans Zoontjens, Application Chemist Decorative, DSM Resins & Functional Materials

Review of business in 2013

Review of business in 2013:
Review of business in 2013:
Review of business in 2013:
Performance Materials
Performance Materials
Performance Materials

Life Sciences
Nutrition
Pharma
Materials Sciences
Performance Materials
Polymer Intermediates
Innovation Center
Corporate Activities

Growing via innovative
sustainable solutions

Net sales

€ 2,746 m

x € million

Net sales:

DSM Engineering Plastics

DSM Dyneema

DSM Resins & Functional

Materials

Total

Organic sales development (in %)

Operating profit

Operating profit plus depreciation

and amortization (EBITDA)

Capital expenditure

Capital employed at 31 December

ROCE (in %)

EBITDA as % of net sales

R&D expenditure

Workforce at 31 December

(headcount)

Business

2013

2012

1,261

252

1,260

235

1,233

1,277

2,746

2,772

185

324

1,910

9.4

11.8

132

(4)

146

280

109

2,026

7.2

10.1

131

for advanced performance materials. It delivered increased
volumes and profitability across all business groups, despite the
challenges it faced in the macro-economic environment and
foreign currency exchange effects.

The cluster has benefited from its investments and sales in high
growth economies, most notably China and India, where it is a
significant contributor to DSM’s growth in the region.

DSM has developed a portfolio of specialized performance
materials with higher value-added businesses. In doing so, it has
strengthened its global position as a leading provider of
sustainable innovations, meeting end-market demands for
greater energy efficiency and improved environmental
performance.

In 2013, sales in the Performance Materials cluster decreased to
€ 2,746 million compared to € 2,772 million in the previous year,
as organic growth of 2 percent was offset by unfavorable
exchange rates. Total EBITDA for the full year increased to € 324
million, compared to € 280 million in 2012.

5,128

5,354

Trends

This cluster comprises DSM Engineering Plastics, DSM
Dyneema and DSM Resins & Functional Materials. These
business groups manufacture technologically sophisticated
high-quality products, and meet the needs of customers through
specialized and sustainable value propositions.

DSM Engineering Plastics is a global player in polyamides and
polyesters. These materials are used in components for the
electrical & electronics, automotive, flexible food packaging and
consumer goods industries. DSM Dyneema is the global
manufacturer of Dyneema®, the world’s strongest fiber™. DSM
Resins & Functional Materials supplies innovative high-quality
resins solutions for paints and coatings, composite materials and
optical fiber coatings. The business has a global presence.

In 2013, the cluster continued to expand its presence and
leadership positions in selected segments of the global market

Concerns over resource scarcity and climate change have
become important macro drivers in the materials industry.
Customers in virtually every market are demanding products that
help to reduce energy consumption and harmful emissions, both
within their operations and across the value chain. DSM
addresses these needs through innovative materials that are
lighter than metals and other conventional materials. It also
provides customers with polymer solutions that are based on
bio-based raw materials, as an alternative to fossil-based
feedstocks.

The use of hazardous substances is another area of concern for
consumers and regulators, and is driving demand for safer
alternatives. In response to this concern, DSM Engineering
Plastics and DSM Resins & Functional Materials are offering
products and solutions that eliminate or reduce the use of
substances such as halogens, styrene, volatile organic
compounds (VOC) or cobalt.

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In 2013 macro-economic conditions remained weak across
several key markets. The European building and construction
and automotive sectors were hit particularly hard.

Sustainability

DSM is committed to creating innovative solutions that make a
positive difference to people’s lives and reduce the
environmental footprint. At the same time, sustainability has
become a significant driver of new business and innovations in
Materials Sciences.

This is leading to the development of new applications that
address key sustainability challenges. In recent years, the
company has shifted its materials portfolio towards a higher
added-value mix by introducing innovative and more sustainable
solutions, some examples of which are outlined elsewhere in this
chapter and the report.

Strategy

Against this backdrop, DSM is seeking to accelerate growth and
improve its performance in Performance Materials. It is
upgrading its portfolio and leveraging opportunities arising from
megatrends, implementing differentiated strategies for its
businesses to capture profitable growth. At the same time, it is
implementing its Profit Improvement Program to further offset
macro-economic headwinds and actively manage its margins
and costs.

The cluster’s differentiated strategy is based on a three-pronged
approach that aims to accelerate, strengthen or restructure the
businesses. It is accelerating growth by leveraging its existing
infrastructure to capture global megatrend opportunities with a
focus on fast sales growth and selective acquisitions and
partnerships. To strengthen the business it is combining sales
growth and margin optimization with cost management,
launching new applications and making selected and focused
investments. Finally, it is restructuring its Composite Resins
business, so that it is aligned with market requirements.

DSM has set its sales growth aspiration for the Performance
Materials cluster at double GDP growth level and has set an
EBITDA margin goal of 13-15 percent in 2015.

In addition to these activities, DSM's Emerging Business Areas
(EBAs) also provide long-term growth platforms. DSM
Biomedical enjoys one of the broadest portfolios of medical
materials, technologies and capabilities in the world. These
include biomedical polyurethanes, biomedical polyethylenes,
resorbable polymers, ceramics, collagens, extracellular
matrices, silicone hydrogels, device coatings, and drug delivery
platforms. DSM Advanced Surfaces is another important
Emerging Business Area, which provides solutions for the
development and application of smart coatings that enable and
enhance the capture of solar energy. See also: DSM Innovation
Center on page 105 of this report.

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Life Sciences
Nutrition
Pharma
Materials Sciences
Performance Materials
Polymer Intermediates
Innovation Center
Corporate Activities

DSM Engineering Plastics

Strategic progress 2013

- HGEs: new cooperation with the Electrical Research &

Development Association in India

- Innovation: halogen-free flame-retardant Stanyl® ForTii™
for next generation memory connectors and sockets and
new research center underway in Sittard-Geleen
(Netherlands)

- Sustainability: EcoPaXX® high-performance bio-based

polyamide 410 used in the Mercedes A-class engine and
in crankshaft covers of VW engines

- Acquisitions & Partnerships: agreement with Petropol

Polímeros in Brazil and partnership with Ravago Group

Sales for DSM Engineering Plastics in 2013 came to € 1,261
million compared to € 1,260 million a year earlier. The business
group delivered a strong underlying performance in its specialty
business. This, and strong cost control, was offset by negative
currency effects and lower results in polyamide 6.

The markets for engineering plastics increasingly demand
sustainable and innovative solutions that make people’s lives
safer, easier and healthier, while addressing climate change,
ingredient safety and food waste. DSM Engineering Plastics has
a focused portfolio with global leadership positions in many of its
products. It is the global number three in the overall market for
semi-crystalline engineering plastics and the global market
leader in high-performance polyamides. In polyamide 6 and
thermoplastic copolyester the business holds a global number
two position. DSM Engineering Plastics’ leadership is underlined
by its strong upstream integration in the polyamide 6 value chain
with DSM Fibre Intermediates. All innovations in DSM
Engineering Plastics launched in 2013 were classified as ECO+,
providing quantifiable environmental advantages to its
customers.

With its global headquarters and management based in
Singapore since 2012, DSM Engineering Plastics is uniquely
positioned to respond to the requirements of its customers in the
Asian market, which will account for the bulk of its growth in the
period ahead. In 2013, the focus on Asia also resulted in the
opening of a new application development technical center in
Japan and in a cooperation with the Electrical Research &
Development Association in India.

Belgium and Russia. These centers house a wide range of highly
specialized equipment for material and application testing and
support the collaboration of local experts with local, regional and
global customers.

In 2013, DSM Engineering Plastics further expanded its global
presence via an agreement with Petropol Polímeros in Brazil, a
leading engineering plastics compound producer in South
America with more than 20 years experience.

DSM Engineering Plastics targets four key industries:
automotive, electrical & electronics, flexible food packaging and
consumer goods. In each of these, it aims to create shared value
by providing high performance materials and solutions to help
lower footprints over the life cycle, eliminate the use of
substances of concern, use recycled content or offer improved
recyclability, and use content that is entirely or partly bio-based.

In the automotive sector, manufacturers are looking to reduce
vehicle fuel consumption and emissions by reducing weight and
friction, and through alternative propulsion technologies
(electrical, hybrid). They are also seeking to meet emerging
regulations on end-of-life vehicles, reduce vehicle footprints by
using bio-based or recycled materials and improve safety and
comfort. DSM meets this demand by providing a broad portfolio
of more sustainable and advanced solutions that reduce weight
and friction, allow footprint reduction and enable innovations
further downstream, such as the high-performance, bio-based,
EcoPaXX® polyamide 410 used in the Mercedes A-class engine
and in crankshaft covers of VW engines.

In the electrical and electronics industry, manufacturers
increasingly seek solutions that address the growing problem of
e-waste and offer improvements related to functionality,
miniaturization and productivity. DSM Engineering Plastics
addresses this need through its unique portfolio of high-
performance, halogen-free flame-retardant materials with high
flow, allowing lead-free soldering, thinner connectors and
sockets and offering a halogen-free alternative for consumer
electronics cables. An example is the high-performance
polyamide Stanyl® ForTii™ that is used in next generation
memory connectors and sockets.

In the flexible food packaging industry, where there are growing
demands for solutions that help reduce food waste, DSM’s
leadership in polyamide 6 for film and specialty packaging is
enabling customers to improve productivity, while better
protecting food and extending its shelf life.

In addition, the business has production and R&D facilities in the
Netherlands, the United States, Japan, China, Taiwan, India,

In consumer goods, where there is a growing requirement for
more sustainable performance and improved functionality, DSM
Engineering Plastics is moving towards a full range of innovative

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products with reduced content of substances of concern,
increased bio-based content, increased recyclability and/or
reduced environmental impact.

DSM Dyneema

Contributing to a more circular economy, in 2013 DSM
Engineering Plastics announced an extended partnership with
Ravago Group to develop high performance Akulon®
compounds with post-consumer recycled content for the
automotive and consumer goods industries.

Akulon® Fuel Lock™, a material used in small engine fuel tanks
or compressed natural gas tanks, provides a simple and cost-
effective way to reduce evaporative emissions from these tanks
by more than 99 percent.

In the year, DSM Engineering Plastics also established multiple
partnerships for the development of innovative thermoplastic
composites, the next generation materials to lightweight the
automotive and other performance-driven markets.

In an important step forward in its research capabilities, DSM
Engineering Plastics began building a new research center at the
Chemelot Campus in Sittard-Geleen (Netherlands). This center
will be an important hub for research and development activities
within DSM’s Materials Sciences. It will also become the most
important research center worldwide for DSM Engineering
Plastics. The focus of DSM’s advanced materials research has
historically been in Sittard-Geleen, which has led to a
concentration of important technological competences and
unique expertise in that area. In addition, being located at the
Chemelot Campus provides unique opportunities for open
innovation thanks to the proximity of other (start-up) companies
and research and educational institutions. The new building will
provide space for approximately 420 employees and will begin
its activities in 2014.

In the year, the business group also implemented the second
year of its Profit Improvement Program targeting reduced fixed
costs, improved operational efficiency and innovative growth.

Strategic progress 2013

- HGEs: good progress in establishing and commissioning

the Trevo™ brand in the Chinese market

- Innovation: completed construction and commissioning
of a regional technical development center in Singapore
- Sustainability: completed full value chain analyses of the
environmental impact of products in all major end-uses
- Acquisitions & Partnerships: cooperation with Air France-
KLM and DSM's customer AmSafe Bridport for rapid
adoption of new air cargo nets made from Dyneema®

DSM Dyneema reported sales of € 252 million in 2013 compared
to € 235 million in 2012. Solid growth was achieved in all end-
use markets driven by the accelerated adoption of new products
under the Dyneema® Diamond Technology, Dyneema® Max
Technology, and Dyneema® Force Multiplier Technology
platforms. In all cases, IP and brand licensing relationships were
extended to further secure business for the long term. DSM
Dyneema's results showed a strong improvement driven by
sales growth and operational performance.

The Dyneema® brand is licensed for use across a wide and ever-
increasing range of applications such as medical sutures,
commercial fishing and aquaculture nets, ropes, slings, vehicle
and personal ballistic protection, radomes and high-
performance fabrics such as cut-resistant gloves. In 2013, DSM
Dyneema moved decisively into performance and fashion
apparel, with new licensed applications at Reebok, Mammut and
Levi’s.

In all cases, the benefits of high strength, comfort and safety,
combined with low weight, make Dyneema® a key contributor
to DSM's customer and licensee products. Customer products
made with Dyneema® are inherently more sustainable than the
materials they replace. They weigh less, use less material, need
less energy to process and deploy in their final application, and
have longer lifetimes. By the end of 2013, DSM Dyneema had
completed full value chain analyses of the environmental impact
of its products in all the major end-uses. In every case, the
environmental footprints were lower than the competitive
alternatives.

The Dyneema® brand is well known and valued in the industries
it serves. DSM implements a comprehensive brand licensing
strategy, which results in new licensees and enhances the

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Review of business in 2013

Life Sciences
Nutrition
Pharma
Materials Sciences
Performance Materials
Polymer Intermediates
Innovation Center
Corporate Activities

control of the brand. This strategy is particularly targeted at
supporting key customers.

percent less material and are up to 30 percent lighter than the
previous best-in-class materials (also Dyneema®).

The completion of the new, state-of-the-art commercial scale
UHMwPE tape manufacturing facility in Greenville (North
Carolina, USA) is supporting the adoption of the product in
existing applications and in new ones, especially for the
telecommunications industry. An integral part of the value
proposition for radomes is the replacement of PVC with a
material that has a significantly lower environmental footprint
both in manufacture and in use.

In China, the ICD business unit of DSM Dyneema continues to
make progress in establishing the Trevo™ brand in the domestic
market. In addition to servicing customers in existing end-uses,
ICD is developing several innovative new applications which
support China’s drive towards a more sustainable future through
changes to food production, power generation and
telecommunications.

As part of DSM Dyneema’s commitment to innovation and
application development support in high growth economies, it
recently completed the construction and commissioning of a
regional technical development center in Singapore, which
supports the Global Technical Research and Development
Center in the Netherlands. This unique facility is providing crucial
support in the region by providing development and test services
for customers to evaluate their own products. Since the formal
opening ceremony in January 2013, the Singapore Technical
Center has hosted visits from over 30 regional customers and
end-users.

DSM is accelerating its innovations and bringing these to market
more quickly by extending its co-creation partnerships with
leading value chain players. For example, cooperation with Air
France-KLM and DSM's customer AmSafe Bridport, world
leader in aviation restraint technology, resulted in the rapid
adoption of new air cargo nets made from Dyneema® across the
consortium’s fleet. Each lightweight net deployed will on average
save 210 gallons of aviation fuel each year, reducing carbon
emissions by over 2.5 tons per net per year.

Building on a platform of high strength and low weight qualities,
DSM Dyneema is extending into new product applications (e.g.
performance apparel) and adding functionalities to better serve
existing customers and open up new markets. One example is
the recent launch of Dyneema® Force Multiplier Technology. This
leverages the company's unique backward-integration into UH
polymer, and is the result of innovation in the polymer, the fiber
produced from it and the unidirectional (UD) sheets to create a
major breakthrough in highly flexible ballistic vests that use 20

In the year, DSM Dyneema continued to support end-user
educational initiatives aimed at creating greater awareness
about key safety behaviors and the use of safety equipment
amongst law enforcement officers and manufacturing industry
workers, together with key representatives from industry, media
and educational sectors.

In 2013, DSM Dyneema implemented the second year of its
Profit Improvement Program, to re-align the business to meet
the changing needs of the market. It fully implemented the
changes to the organizational structure that it initiated in 2012,
resulting in a simplified functional organization with clearer
decision rights and interfaces between functions. This translated
into noticeable improvements in several areas, including
planning, inventory management, operational effectiveness,
quality management and innovation, while achieving significant
savings.

DSM Resins & Functional Materials

Strategic progress 2013

- HGEs: new state-of-the-art facilities in Zhangbin (Taiwan)

and Nanjing (China)

- Innovation: cooperation with China’s leading supplier of
dental aligners to gain efficiencies in production to serve
growing demand with the Somos® product line
- Sustainability: introduction of renewable materials in

existing product ranges, such as the Decovery® product
line, which reduces their environmental footprint

- Acquisitions & Partnerships: innovation partner of the
Nuon Solar Team, which won the 2013 World Solar
Challenge with their highly innovative solar powered
vehicle Nuna7

DSM Resins & Functional Materials reported 2013 sales of
€ 1,233 million compared to € 1,277 million in the previous year.
Through its business units, this business group is active across
a broad range of resins and functional materials.

Despite ongoing subdued market conditions, DSM Resins &
Functional Materials delivered improved results due to strong
cost control and a one-off book profit. Having concluded major
cost restructuring initiatives in previous years that enabled it to
navigate challenging market conditions, in 2013 DSM Resins &
Functional Materials continued to reap the benefits of its Profit

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Improvement Program. These measures, in combination with its
ongoing innovation efforts, yielded a significant improvement in
profits.

DSM Coating Resins measures the carbon footprint of its
innovations to validate its qualities and has conducted multiple
LCA studies. The data acquired by these studies helps to foster
cooperation across the value chain.

In the coating industry, DSM is a global leader in the
development and production of water-based coating resins and
powder coating resins that offer distinct sustainability
advantages. Since acquiring a majority stake in AGI Corporation
of Taiwan, DSM has also become an emerging player in the
market for UV curing coating resins.

In the functional materials area, DSM has a global leadership
position in fiber-optic coatings, which protect over a billion
kilometers of fiber-optic cables around the world. In the additive
manufacturing industry, DSM offers the most efficient and
effective prototyping technologies available, supporting the
industry to design and bring new products to market with an
increased speed.

DSM is the leading global innovator of high performance
sustainable composite solutions, beyond the capabilities of
traditional material solutions.

While market conditions remained challenging in the year, the
strong focus on innovation in sustainable technology made DSM
Resins & Functional Materials successful at addressing the
growing demand for more sustainable, efficient and
environmentally friendly materials, leading to a strong increase
of its ECO+ sales versus non-ECO+ sales.

DSM Coating Resins
DSM Coating Resins seeks to grow the market for sustainable
coating solutions with resins for three types of coatings: water-
based coatings, powder coatings and UV-curing coatings.
These resins are used in a wide range of coating applications,
such as architectural, industrial wood, flooring, graphic arts, can,
coil and powder coating applications.

The business has faced challenging macro-economic conditions
in recent years, which continued in 2013. It has partly overcome
these challenges by focusing on innovations developed in close
collaboration with its customers and other industry players. By
innovating in its core segments and technologies, DSM Coating
Resins is also increasing the sustainability qualities of its coating
solutions without compromising on quality and performance.

The demand for more sustainable products is highest in Europe
and the US, where it continues to rise, as awareness about the
negative effects of non-sustainable coatings increases. This
awareness is beginning to grow in high growth economies and
is expected to become a future driver of business.

In water-based coatings, DSM focuses on expanding its field of
properties to enlarge the range of applications in which its
technology can be used. In 2013, DSM made important steps
in the introduction of high performance, low (to zero) VOC resins
for primers and topcoats and secured innovative product
launches for its customers in the opening up of the water-based
coatings market in North America. In addition, it is further
reducing its footprint in this industry by the introduction of
renewable materials in its existing product ranges, such as the
Decovery® product line.

In powder coatings DSM is developing sustainable technologies
that cure at lower temperatures, increasing efficiency, reducing
energy consumption and, at the same time, enabling the
company to expand its portfolio of Uralac® applications to a
wider range of substrates.

UV-curing coating technology is another sustainable technology
with a low carbon footprint, creating excellent durability on a
variety of substrates. To support the growth of this rapidly
developing technology, DSM Coating Resins has invested in a
state-of-the-art facility in Zhangbin (Taiwan), producing coatings
and inks for wood, flooring, plastic and graphic arts applications.

DSM Functional Materials
DSM Functional Materials is a leading developer of formulated
coatings designed to address the growing demand for more
sustainable, environmentally friendly and lighter-weight
materials.

In the telecommunications market, DSM’s UV-curable optical
fiber materials set the standard for fiber protection and
identification worldwide, helping ensure greater signal reliability
and field performance within optical fiber networks. As
bandwidth demand surges worldwide, there is an increased
demand for performance from optical fiber networks.

Desolite® Supercoatings, the latest generation of optical fiber
coatings, helps network owners attain higher levels of signal
reliability and field performance from their optical fiber. In 2013,
DSM introduced several innovative products specifically
designed to meet the needs of global telecom providers.

In the additive manufacturing industry (often referred to as 3D
printing), DSM’s Somos® stereolithography materials enable
industries such as automotive, dental and consumer goods, to
create new and better performing products.

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Review of business in 2013

Life Sciences
Nutrition
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Performance Materials
Polymer Intermediates
Innovation Center
Corporate Activities

In 2013, the Somos® team worked with China’s leading supplier
of dental aligners to gain efficiencies in production which allowed
them to serve the growing demand in the region. The team also
supported the World Solar Challenge, by providing expertise and
support from design to manufacturing of the winning solar car
Nuna7. DSM was the innovation partner of the Nuon Solar Team,
who won the 2013 World Solar Challenge with their highly
innovative solar powered vehicle.

DSM Composite Resins
DSM Composite Resins provides resins solutions for lightweight
composites used in trucks and trains, bridges, building façades,
trenchless pipe renovation and wind-turbine blades.

Market conditions continued to be challenging in 2013 due to
ongoing declines in the transportation and construction markets
in the EU. The business partially offset the effects of lower
volumes by maintaining tight cost controls.

DSM’s new manufacturing plant in Nanjing (China), is the largest
of its kind in the world, and is helping to introduce the latest DSM
resins innovations in Asia. Operations commenced early 2013
in-line with plans and safety targets, yielding quality products for
local customers.

In the year, DSM Composite Resins presented Beyone™ 201-
A-01, a new styrene-free and cobalt-free resin (based on
BluCure™ Technology), consisting of 40 percent bio-based raw
materials. Because of its excellent fatigue resistance this resin is
highly suitable for making resilient windmill blades, additionally
bringing windmill manufacturers increased production output
and cost savings.

The business unit also introduced a new series of Daron® high
performance resins to support large volume production series in
automotive markets. A novel styrene-free Daron® resin was
applied in the Nuna7 solar-powered car.

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My bright ideas help customers to producetop class textilesOur contribution to textiles covers everything from sporting and leisure clothing, to wool substitution, to tough industrial yarn, to next-generation textile adhesives and coatings for the fabric and leather industry.Thijs Emck: Product Sales Manager Caprolactam, DSM Fibre Intermediates

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Polymer Intermediates
Polymer Intermediates
Polymer Intermediates

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Innovation Center
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Strengthening
backward integration
for DSM Engineering
Plastics

Net sales

€ 1,579 m

x € million

Net sales:

2013

2012

load and provides security of supply to DSM Engineering Plastics
and is an important element to DSM's Fibre Intermediates
operations.

DSM Fibre Intermediates

1,579

1,596

Total

1,579

1,596

Organic sales development (in %)

Operating profit

Operating profit plus depreciation

and amortization (EBITDA)

Capital expenditure

Capital employed at 31 December

ROCE (in %)

EBITDA as % of net sales

R&D expenditure

113

235

570

14.0

7.2

(16)

129

214

447

23.3

8.1

Workforce at 31 December

(headcount)

1,456

1,474

Business

The Polymer Intermediates cluster comprises DSM Fibre
Intermediates, the global market and technology leader in
caprolactam and the leading acrylonitrile supplier in Europe. Its
head office is in Shanghai (China).

DSM Fibre Intermediates has three operating companies for
caprolactam with a combined annual capacity of over 900 kt:

- DSM Caprolactam Europe: office and plant in Sittard-Geleen

(Netherlands).

- DSM Chemicals North America: office and plant in Augusta

(Georgia, USA).

- DSM Nanjing Chemical Company (DNCC): office and plant in
Nanjing (Jiangsu, China). DNCC is a 60/40 cooperation with
Sinopec Nanjing Chemical Industries.

The company’s acrylonitrile plants are located in Sittard-Geleen.

DSM Fibre Intermediates supplies key intermediates to DSM
Engineering Plastics. This backward integration secures a base-

In 2013, DSM Fibre Intermediates posted sales of € 1,579
million, compared to € 1,596 million in the previous year. Higher
volumes were offset by lower prices and negative currency
effects. EBITDA decreased compared to 2012 given the lower
caprolactam prices and higher benzene prices since the second
quarter of 2012. This impact could not be completely
compensated for by cost savings and license income. The
business achieved major sustainable savings in variable costs
and purchasing as part of its Profit Improvement Program.

Volumes in DSM Caprolactam Europe were affected by a fire at
the plant in Sittard-Geleen in April 2013, which interrupted
production for just over one month. Otherwise, plant utilization
rates were on track.

Ammonium sulfate (AS) is a co-product of caprolactam that
generates a cost credit. The value of this credit fell over the year,
following a decline in market prices for AS in the second half of
the year.

At acrylonitrile, net sales were slightly lower compared to 2012,
due to some one-off production issues.

DNCC saw the successful start-up of its 2nd line, which is part
of the expansion project to double capacity to 400 kt. The start-
up was achieved at premium grade product specifications and
was the fastest ever build and start-up of a 200 kt caprolactam
plant.

Also in the year, construction began on the next generation
ammonium sulfate plant in Sittard-Geleen, which will secure high
quality AS production in the most energy efficient way from 2015.

Caprolactam
Caprolactam is the raw material for polyamide 6 (PA6), also
known as nylon 6, of which about 4.5 million tons are produced
annually worldwide. The applications of PA6 are very diverse,
covering many end-markets, from carpets and textiles to car
parts, electrical devices and packaging film.

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DSM Fibre Intermediates is the major supplier to the merchant
caprolactam market. A major part of all caprolactam produced
globally is made using DSM’s proprietary technology, which it
actively licenses.

DSM Fibre Intermediates seeks to capitalize on the opportunities
in the caprolactam market by:

- increasing sales from the doubling of production capacity in

China;

The business has established a strong caprolactam position
thanks to its local production facilities, reinforced by its strong
partnership with customers in the downstream PA6 industries.

- implementing new sustainable technology;
- further improving competitive position; and
- reducing merchant exposure.

Acrylonitrile
DSM Fibre Intermediates is the leading supplier in the European
merchant acrylonitrile market with a share of approximately 25
percent. Globally, it ranks third.

Acrylonitrile is a raw material for acrylic fibers, plastics, rubber,
water treatment chemicals and a wide range of specialty
products. It is a key ingredient for bright, fashionable acrylic
textile and carpet fibers and for materials such as acrylonitrile-
butadiene-styrene (ABS) and styrene-acrylonitrile (SAN) that are
used for automotive components, electronic devices, toys and
sports equipment. The application of acrylonitrile across a wide
range of valuable specialty products like carbon fibers, water
treatment additives and detergents is rapidly growing.

Trends

DSM Fibre Intermediates expects global demand for
caprolactam and acrylonitrile to grow by approximately 3
percent each year in the coming period. The strongest growth
of up to 6 percent per year will be seen in China. By comparison,
demand from the US and Europe is expected to remain relatively
stable.

Strategic context

Strategic progress 2013

- HGEs: HPO™ licensing agreement for two 200 kt lines

of caprolactam in China with Shenyuan

- Innovation: new 2nd caprolactam line by DNCC, a

cooperation with Sinopec

- Sustainability: N2O abatement facility reducing

greenhouse-gas emissions in China

- Acquisitions & Partnerships: license agreement with

Univex

DSM is securing its technology leadership position by pursuing
an assertive approach to licensing its proprietary caprolactam
technology and protecting its patents. In the year, it finalized a
licensing agreement with Shenyuan for two lines of 200 kt each
for caprolactam, using HPO™ technology, and a license to
produce the main raw material for caprolactam, cyclohexanone,
from phenol. A license agreement was also reached with Univex
for improvements in the raw material consumption of their
existing plant in Mexico.

DSM expects to maintain its global leadership position in
caprolactam thanks to its focus on high growth economies,
sustainability and technological innovation, and an unwavering
commitment to its customers. In the period ahead, DSM will also
continue to work on options to reduce its exposure to the volatile
merchant caprolactam market.

In acrylonitrile, it will maintain its sustainable position as one of
the leading players in Europe.

Sustainability

Projects aimed at feedstock reduction, energy conservation and
recovery and waste abatement were implemented at DSM's
caprolactam sites. This helped to reduce variable costs and
improved sustainability, for example, through a more efficient
use of hydrogen and ammonia.

The new N2O abatement facility that DSM Fibre Intermediates
inaugurated in August 2012 reduced nitrous oxide emissions by
580 tons in 2013, which is equivalent to more than 170,000 tons
of CO2 or the annual emissions of approximately 30,000 cars.
Emissions reached 410 tons in the year, compared to 990 tons
in 2012. The innovative second production line in Nanjing,
designed for world class environmental performance, which
started up successfully in late 2013, has been classified as an
ECO+ innovation by DSM, due to its lower energy needs and
fewer emissions.

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My bright ideas help to create enjoyable foods Our range of enzymes help to create more efﬁ cient and sustainable food production, using less resources and cutting waste and energy consumption. By making better use of enzymes, food producers can create enjoyable foods that beneﬁ t People, Planet and Proﬁ t.Jan Kortes, Senior Process Flavorist, DSM Food Specialties

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Review of business in 2013

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Innovation Center
Innovation Center
Innovation Center

Life Sciences
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Innovation Center
Corporate Activities

Connecting bright
science to brighter
living

Net sales

€ 149 m

2013

2012

DSM Biomedical

x € million

Net sales

Organic sales development (in %)

Operating profit

Operating profit plus depreciation

and amortization (EBITDA)

Capital expenditure

Capital employed at 31 December

R&D expenditure

149

(53)

(17)

108

561

102

(63)

(38)

507

Workforce at 31 December

(headcount)

664

668

DSM Innovation Center

The DSM Innovation Center was originally set up in 2006 to help
facilitate the company’s strategic transition toward an intrinsically
innovative organization. It serves as an enabler and accelerator
of sustainable innovation within DSM. See page 19 for the
enabling activities within its Excellence in Innovation program.
With its Emerging Business Areas (EBAs) and the Business
Incubator, the Innovation Center has a business development
role, focusing on areas outside the current scope of the business
groups. The Innovation Center also includes DSM Venturing and
Licensing.

Emerging Business Areas

DSM’s Emerging Business Areas provide strong long-term
growth platforms based on the company’s core competences
in Life Sciences and Materials Sciences. The company has three
Emerging Business Areas:

- DSM Biomedical
- DSM Bio-based Products & Services
- DSM Advanced Surfaces

DSM aspires to realize € 1 billion in sales by 2020 in its combined
Emerging Business Areas.

DSM Biomedical is a leading development partner, trusted by
the medical industry to shape the future of biomaterials and
regenerative medical devices that improve and brighten patients’
lives throughout the world.

From its facilities in the United States and Netherlands, DSM
Biomedical provides a product portfolio with a wide range of
innovative biomedical materials that enable the replacement,
repair, enhancement and regeneration of tissue and organ
functions in the body. Its novel, proprietary materials-based
solutions are designed to meet the needs of the medical device
and pharmaceutical industries.

The global market for medical devices saw a compound annual
growth rate of 7 percent during 2008-2012 and is now worth an
estimated USD 170 billion. There is a growing demand for cost
effective devices that improve the lives of patients in developed
and emerging economies, while the need to contain rising
healthcare costs is also increasing. These trends give the global
biomedical market strong growth prospects in the period ahead.

DSM Biomedical's products comprise implant materials,
components and sophisticated drug delivery materials that are
used by customers to make medical devices. DSM Biomedical
also has a wide range of state-of-the-art capabilities to develop
and produce components, sub-assemblies or full medical
devices for its customers.

DSM entered the medical field more than a decade ago, starting
with R&D efforts to develop medical applications based on
Dyneema®, which led to Dyneema Purity® fiber, a material first
used in orthopedic sutures. DSM Biomedical was established in
2006 as an Emerging Business Area. Since 2006, it has been a
leading biomedical business with an annual growth rate of 35
percent in the last four years, which includes a significant
contribution through the 2012 Kensey Nash acquisition.

Today, DSM Biomedical enjoys one of the broadest portfolios of
medical materials, technologies and capabilities in the world,
which includes biomedical polyurethanes, biomedical
polyethylenes, resorbable polymers, ceramics, collagens,
extracellular matrices, silicone hydrogels, device coatings, and

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drug delivery platforms. Millions of products are produced each
year for applications in some of the most attractive high growth
markets, including orthopedics, sports medicine,
ophthalmology, general surgery and cardiology.

This Emerging Business Area applies materials sciences to
create solutions that help the human body heal. Its investments
are focused on research and product development, building
further opportunities for future growth. These products extend
the capabilities of physicians by providing tools that enhance
their skills and help them transform the quality of life for patients,
replenishing mobility and vitality. With each innovation, DSM
Biomedical provides new opportunities for collaboration with
business partners, to help physicians and patients across the
world.

In 2013, DSM Biomedical continued to benefit from increased
sales growth, EBITDA margins and synergies resulting from the
2012 acquisition of Kensey Nash and from previous acquisitions.

In 2013, DSM Biomedical signed new licenses to supply
Bionate® II PCU for use in SpineVision®’s Flex+2™ Dynamic
Lumbar Stabilization System. It also received clearance from the
US Food and Drug Administration (FDA) for two finished medical
devices: the Mesothelium Dental Membrane and the Meso
Bilayer Surgical Mesh. The business established a partnership
with San Antonio-based medical products company BiO2
Medical to provide ComfortCoat® Coating for the Angel®
Catheter, and extended its Dyneema Purity® product portfolio
with novel ultra high molecular weight polyethylene membrane
technology.

DSM Bio-based Products & Services

enabling them to convert biomass in a commercially viable and
sustainable way.

POET-DSM Advanced Biofuels
POET-DSM Advanced Biofuels, DSM's major strategic joint
venture partnership with POET LLC (one of the world's largest
bio-ethanol producers) to commercially demonstrate and license
cellulosic bio-ethanol, will begin producing cellulosic bio-ethanol
from corn crop residue through a biological process using
enzymatic hydrolysis followed by fermentation.

The first project (Project Liberty) will be a commercial-scale,
cellulosic bio-ethanol plant utilizing POET process technology
and DSM bio-conversion technology, and is scheduled to begin
operations in Emmetsburg (Iowa, USA) in 2014. The initial
capacity is expected to be 20 million gallons and is designed to
grow to approximately 25 million gallons per year. This plant will
serve as the commercial scale demonstration project for corn
crop residue to cellulosic bio-ethanol to be licensed by the joint
venture (POET-DSM Advanced Biofuels) to interested parties.

Most of 2013 was dedicated to the construction of the USD 250
million facility in Emmetsburg and preparing for the start-up.
POET-DSM Advanced Biofuels is expected to be profitable
within the first full year of production and to deliver substantial
revenues with an above-average EBITDA contribution in the mid
to long term.

POET-DSM Advanced Biofuels intends to replicate and license
the technology to additional plants built close to existing corn
ethanol facilities in the US, including the 26 corn ethanol facilities
in POET’s network. It will also look for licensing opportunities
elsewhere in the world.

DSM’s competences in industrial biotechnology are at the core
of its strategic focus on Life Sciences and Materials Sciences.
As the world increasingly moves away from its dependencies on
fossil raw materials and towards a more sustainable, bio-based
economy, there are significant opportunities for the company in
renewable energies such as cellulosic bio-ethanol, advanced
(microbial) biodiesel and biogas, and in renewable building
blocks like bio-based succinic acid.

Advanced biodiesel
In 2013, DSM met each of the program milestones for the year
for its partnership with BP on advanced biodiesel. It has greatly
expanded its intellectual property portfolio to support future
deployment of advanced biodiesel technology through the
partnership, and continued to develop relationships with key
technology providers that will be critical for future stages of the
program.

Drawing on DSM’s unique position in biotechnology, materials
sciences and chemistry, DSM Bio-based Products & Services is
pioneering advances in biomass conversion and seeks to
demonstrate the commercial viability of sustainable, renewable
technologies in collaboration with strategic partners in the value
chain. The development and supply of high value knowledge,
ingredients and expertise in the field of bio-conversion
technology are critical success factors. DSM’s strategy is to
license its technology and expertise to bio-based entrepreneurs,

The partnership has created a leading biotechnology platform
that produces high yields of biodiesel from plant sugars. Around
half of the world’s current demand for transport fuel is for diesel
and this proportion is expected to grow in the coming decades.
Innovative solutions such as the conversion of sugars into diesel
fuel, continue to represent a highly attractive business
opportunity. Today, most biodiesel is produced from vegetable
oils such as palm oil, soy bean oil and rape seed oil. These oils
are increasingly associated with concerns about sustainability,

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Review of business in 2013

Life Sciences
Nutrition
Pharma
Materials Sciences
Performance Materials
Polymer Intermediates
Innovation Center
Corporate Activities

which is driving a growing need to find alternative and more
responsible ways to produce diesel from renewable sources.

DSM Venturing

DSM Venturing invests in early to late stage innovative
companies in areas strategically relevant to DSM’s current and
future businesses. In 2013, four new direct and four follow-on
investments were made. DSM Venturing ended its participation
in four companies in 2013.

New investments in the year included bioagriculture company
Marrone Bio Innovation Inc. based in Davis (California, USA),
which has since gone public, and Arecor Ltd. (United Kingdom),
which is active in drug formulation methods. Follow-on
investments were made in biochemicals company Verdezyne,
based in Carlsbad (California, USA), and CO2-based polymer
developer Novomer in Waltham (Massachusetts, USA). An up-
to-date overview of the portfolio of published investments can
be found at www.dsm.com.

Building on more than a decade of corporate venturing
experience in Life Sciences and Materials Sciences, DSM
Venturing expects to step up its deal flow and portfolio
management in 2014 and beyond, and play an important part in
the company’s open innovation strategy.

Bio-succinic acid
The world’s first large scale plant for bio-based succinic acid that
was opened in Cassano Spinola (Italy) as part of the Reverdia
joint venture between DSM and Roquette successfully scaled up
its production in the year, using proprietary yeast technology that
was earlier tested and validated in the demonstration plant. The
first commercial shipments of Biosuccinium™ were realized.
Reverdia is now considering a second large scale plant and
application development work is underway to develop new
business and open future markets.

DSM Advanced Surfaces

DSM Advanced Surfaces provides solutions for the development
and application of smart coatings that enable and enhance the
capture of solar energy. In April 2013, a newly constructed
manufacturing plant in Sittard-Geleen (Netherlands) for the unit's
flagship product, KhepriCoat™ anti-reflective coating, was
opened. The plant increases DSM’s production capacity and
enables it to meet the fast-growing market demand for solar
energy. KhepriCoat™ provides state-of-the-art anti-reflective
properties, allowing a higher amount of energy to pass through
to the solar modules, which increases the energy production of
solar cells by 4 percent.

In 2013, DSM acquired SolarExcel, an innovative light trapping
technology company based in Venray (Netherlands). This
technology uses a textured surface on foil to prevent light from
escaping the solar panel. The technology, which expands DSM’s
growing portfolio in solar energy enabling technologies, will be
scaled up and is expected to provide energy efficiency increases
of approximately 10 percent on solar panels.

Looking ahead, DSM Advanced Surfaces has identified potential
partnerships that could address innovative surface technologies,
which would help expand its product range. Partnerships and
acquisitions will remain a critical factor for accelerated growth in
advanced surfaces.

DSM Business Incubator

The DSM Business Incubator explores business opportunities in
adjacent areas and future markets for DSM, with a strong link to
DSM’s technologies and competence base. Platforms are
created within the scope of securing food, health and energy
requirements of society, in close collaboration with industry
partners and existing and potential customers. DSM’s Business
Incubator has been instrumental in feeding the pipeline with
opportunities that address customer needs.

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My bright ideas help to set new standards in food qualityThrough advanced ingredients we make an important contribution to the world’s favorite food brands – in dairy, baking, fruit juice, beer, wine and savory products. We do this by applying our knowledge, technology and experience to provide better value to our customers.Esteban Freydell, Associate Scientist Downstream Processing, DSM Food Specialties

Review of business in 2013

Life Sciences
Nutrition
Pharma
Materials Sciences
Performance Materials
Polymer Intermediates
Innovation Center
Corporate Activities

Corporate Activities

Any activities and businesses that are outside the five reporting
clusters are reported as Corporate Activities. These comprise
operating and service activities, as well as a number of costs that
cannot be allocated to the clusters. This segment normally has
a negative operating result.

Corporate Activities includes various holding companies and
corporate overheads. The most significant cost elements are
corporate departments and the share-based compensation for
the Group.

x € million

Net sales

Operating profit

Operating profit plus depreciation

and amortization (EBITDA)

Capital expenditure

R&D expenditure

2013

2012

198

(125)

(74)

268

(139)

(94)

Workforce at 31 December

(headcount)

3,204

3,199

Sitech Services
Sitech Services provides manufacturing services, park services
and Safety, Health & Environment services for the Chemelot
industrial site in Sittard-Geleen (Netherlands) and the DSM
Pharma Chemicals site in Venlo (Netherlands).

DSM Insurances
The company retains a limited part of its material damage and
business interruption and product liability risks via DSM
Insurances BV, a captive insurance company. In 2013, the total
retained damages were € 16 million.

Corporate Research
The total costs of the Corporate Research Program have been
reported under Corporate Activities since 2011.

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Financial and reporting policy

Financial policy

As a basis for and contribution to effective risk management and
to ensure that the company is able to pursue its strategies, even
during periods of economic downturn, DSM retains a strong
balance sheet and limits its financial risks.

The current strategy, DSM in motion: driving focused growth,
has ambitious strategic and financial targets that are outlined on
page 10. In addition DSM aims to maintain its Single A long-term
credit rating.

Most of DSM's external funding needs are financed through
long-term debt. Debt covenants are not included in the terms
and conditions of outstanding bonds and financing
arrangements. DSM aims to spread the maturity profile of
outstanding bonds in order to have adequate financial flexibility.

DSM has a commercial paper program of € 1,500 million that is
available and two committed credit facilities totaling € 1,000
million, consisting of € 500 million until September 2018 and
€ 500 million until March 2018, but with two extension options,
which can bring the final maturity to 2020.

An important element of DSM’s financial policy is the allocation
of cash flow. DSM primarily allocates cash flow to investments
aimed at strengthening its business positions and to dividend
payments to its shareholders. The cash flow is further used for
Acquisitions & Partnerships that strengthen DSM's
competences and market positions in Life Sciences and
Materials Sciences, supported by the other three strategic
growth drivers: High Growth Economies, Innovation and
Sustainability.

Should the occasion arise, the company may choose to return
cash to shareholders if excess cash is available over a longer
period to such an extent that the above-mentioned cash flow
priorities can be satisfied without affecting the credit rating. DSM
aims to provide a stable, and preferably rising, dividend. In order
to avoid dilution of earnings per share as a result of the exercise
of management and employee options, DSM buys back shares
insofar as this is desirable and feasible. In 2013 1,266,945
shares were repurchased (no shares were repurchased in 2012).

It is DSM’s policy to hedge 100 percent of the currency risks
resulting from sales and purchases at the moment of recognition
of trade receivables and payables. In addition, operating
companies may – under strict conditions – opt for hedging
currency risks from firm commitments and forecasted
transactions. The currencies giving rise to these risks are
primarily USD, CHF, JPY and GBP. The risks arising from

currency exposures are regularly reviewed and hedged when
appropriate.

The most important acquisition criteria are strategic fit and
financial condition. A business or partner should add value to
DSM in terms of technological and/or market competences.
Acquired companies are in principle required to contribute to
DSM's cash earnings per share from the very beginning and to
earnings per share from year two. In addition, they are required
to meet the company's profitability, sustainability and growth
requirements. There are, however, exceptions to this rule. For
instance, such requirements may not be appropriate in the case
of small innovative growth acquisitions, although the
sustainability requirement will be upheld at all times.

DSM is transparent towards all tax authorities and collaborates
with them to determine the amount of tax due. DSM believes its
obligation is to contribute the amount of tax owed to authorities
and to observe all applicable rules and regulations in the markets
where the company operates. Its tax reporting is fully compliant
with all applicable rules and regulations. DSM’s Managing Board
is responsible for securing the tax principles under the
supervision of the Audit Committee of the Supervisory
Board. The planning of DSM’s tax position is consistent with the
normal course of its business operations, reflects the corporate
strategy and is consistent with international best practice
guidelines, such as the OECD Guidelines for Multinational
Enterprises.The level of DSM’s effective tax rate as a percentage
of pretax profit reflects the geographic spread of the results over
the years, also as a result of acquisitions and divestments, and/
or the application of preferential tax regimes in countries where
DSM operates.

DSM's policy in the various sub-disciplines of the finance
function is strongly oriented toward solidity, reliability and
protection of cash flows. The finance function plays an important
role in business steering.

Reporting policy

Reporting policy and justification of choices made
In the sustainability information in this Integrated Annual Report,
DSM explains its vision and policy with respect to sustainable
enterprise and reports on its activities in this field during 2013.
Besides presenting developments and data for the three
categories of People, Planet and Profit, DSM reports on its
sustainability strategy, its stakeholder engagement activities,
and the organization of sustainability at DSM. Furthermore, DSM
discusses the global trends that drive its strategy.

It is DSM’s policy to proactively canvas the views of its
employees on issues of material importance to the company.

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Financial and reporting policy

Financial policy
Reporting policy

The preparation of this report was facilitated by experts who
were supported by a review group comprising employees
selected from across the DSM organization.

Global Reporting Initiative
DSM bases its sustainability reporting on the guidelines of the
Global Reporting Initiative (GRI). For this report, the company
used the GRI G3 guidelines (see www.dsm.com). DSM has
determined that this report once again merits GRI application
level A+, representing a high level of transparency. EY has
reviewed compliance of the Sustainability Information with this
application level. See also Independent Assurance Report on
Sustainability Information on page 213.

In its sustainability reporting DSM does not apply the framework
of the International Integrated Reporting Council.

on environmental targets but are included in absolute figures
(unless stated otherwise). ECO+ data for newly acquired
companies are reported in line with the policy for Safety, Health
and Environment data discussed above. Historical ECO+ data
are not restated for divestments.

Quality of data
The data for the DSM sites are based on these sites’ own
measurements and calculations, which are based on definitions,
methods and procedures established at corporate level. The
year-on-year comparability of the data can be affected by
changes in the portfolio as well as by improvements made in the
measurement and recording systems at the various sites.
Whenever impact is relevant, it is stated in the report. Details for
the individual sites are published on www.dsm.com, together
with an explanation of the definitions used.

Selection of topics
The topics covered in this report were selected on the basis of
input from stakeholders and the materiality analysis, GRI
guidelines and DSM’s own management systems and their
relevance and impact for DSM and its various stakeholders.
See also Stakeholder engagement on page 28.

Manner of reporting
Quantitative data are reported per business group. All data are
consolidated at corporate level by the relevant departments. The
qualitative reports on various subjects were provided by experts
throughout the organization.

On the basis of the principle of materiality (see the materiality
matrix in the Stakeholder engagement chapter), DSM
distinguishes between topics whose importance warrants
publication in this Integrated Annual Report (relevant to both
DSM and its stakeholders), and topics whose importance
warrants publication on the company website only (topics
important to either DSM or its stakeholders).

As in the 2012 report, DSM reports on its external recognition in
a separate section. DSM also reports separately on its progress
in implementing the principles of the UN Global Compact. See
also page 42.

Scope
The People, Planet and ECO+ data in this report cover all entities
that belong to the consolidation scope of the consolidated
financial statements. Offices and R&D facilities are excluded from
Planet reporting.

Acquisitions and divestments
The HR data (People) for newly acquired companies are reported
from the first full month after the acquisition date. Historical HR
data are not restated for divestments. The Safety, Health
(People) and Environment (Planet) data for newly acquired
companies are reported at the latest in the year following the first
full year after acquisition, because these companies’ reporting
procedures first have to be aligned with those of DSM. Acquired
and divested units are excluded from the evaluation of progress

Planet methodology
Environmental indicators are evaluated and established on a
yearly basis by the experts and process owners involved. Data
on these indicators are collected on a yearly basis, while an
additional mid-year measurement is done for the most relevant
indicators and reporting units. The methodology and
calculations can be found on www.dsm.com.

The site managers of reporting units are responsible for the
quality of the data. Data are collected based on measurements
in the production processes, information from external parties
(e.g. on waste and external energy) and estimates based on
expert knowledge. Reporting units have direct insight into their
performance compared to previous years and are required to
provide justifications for deviations above the threshold. For
most parameters the threshold is set at 10 percent.

People methodology
All People and HR data are collected per business group and
consolidated at corporate level.

ECO+
All financial ECO+ data are collected from the relevant financial
and innovation systems by the controllers of the business groups
and the Innovation Center. All assessments of ECO+ involve
internal LCA experts. All data are internally validated with the
Corporate Sustainability department and consolidated in DSM
ECO+ key performance indicators.

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Corporate governance and risk
management

Introduction1

Koninklijke DSM N.V. (Royal DSM) is a company limited by
shares listed on NYSE Euronext, with a Managing Board and an
independent Supervisory Board. Members of the Managing
Board and the Supervisory Board are appointed (and, if
necessary, dismissed) by the General Meeting of Shareholders.

The Managing Board is responsible for the company's strategy,
its portfolio policy, the deployment of human and capital
resources, the company’s risk management system, the
company's financial performance and its performance in the
area of sustainability.

The Supervisory Board supervises the policy pursued by the
Managing Board, the Managing Board's performance of its
managerial duties and the company's general course of affairs,
taking the interests of all the company's stakeholders into
account. The annual financial statements are approved by the
Supervisory Board and then submitted for adoption to the
Annual General Meeting of Shareholders, accompanied by an
explanation by the Supervisory Board of how it carried out its
supervisory duties during the year concerned.

The company is governed by Dutch law and by its Articles of
Association, which can be consulted at the DSM website
(www.dsm.comwww.dsm.com). The General Meeting of
Shareholders decides on an amendment to the Articles of
Association by an absolute majority of the votes cast. A decision
to amend the Articles of Association may only be taken at the
proposal of the Managing Board, subject to approval of the
Supervisory Board.

DSM fully informs its stakeholders about its corporate objectives,
the way the company is managed and the company's
performance. Its aim in doing so is to pursue an open dialogue
with its shareholders and other stakeholders.

DSM has a decentralized organizational structure built around
business groups that are empowered to carry out all short-term
and long-term business functions. At the operational level, the
business groups are the primary organizational and
entrepreneurial building blocks. The business groups are
grouped into clusters. Business groups within a cluster report to
one and the same member of the Managing Board. The clusters
are the main organizational entities for external strategic and
financial reporting. This structure ensures a flexible, efficient and
fast response to market changes.

DSM has a number of functional and regional organizations to
support the Managing Board and the business groups. Intra-
group product supplies and the services of a number of shared
service departments and research departments are contracted
by the business groups on an arm's length basis.

Managing Board
The Managing Board consists of three or more members, to be
determined by the Supervisory Board. The current composition
of the Managing Board can be found in the chapter Supervisory
Board and Managing Board on page 137. Since 2005,
members of the Managing Board have been appointed for a
period of four years.

The members of the Managing Board are collectively responsible
for the management of the company. Notwithstanding their
collective responsibility within the Managing Board, certain tasks
and responsibilities for business clusters and functional areas as
well as regional responsibilities have been assigned to individual
members. This distribution of tasks is published on the DSM
website.

The remuneration of the members of the Managing Board is
determined by the Supervisory Board based on the
remuneration policy approved by the General Meeting of
Shareholders. The remuneration policy for the Managing Board
can be found in the Supervisory Board report starting on page
126.

The functioning of and decision making within the Managing
Board are governed by the Regulations of the Managing Board,
which have been drawn up in line with the Dutch corporate
governance code and can be found on the company’s website.

In 2013 the Managing Board met 46 times. In eight meetings one
member was excused due to another commitment. In two
meetings two members were excused. In all cases, members
who were unable to attend provided their input to the meeting in
advance in writing.

Supervisory Board
The Supervisory Board consists of at least five members. The
current composition of the Supervisory Board can be found on
page 136. Members of the Supervisory Board are appointed for
a period of four years with a maximum of three four-year terms.

All current members of the Supervisory Board are independent
in accordance with the Best Practice provisions of the Dutch
corporate governance code. The remuneration of the members

1 This chapter contains, among other things, the information regarding corporate governance as referred to in Section 2 of the Dutch governmental decree of 23

December 2004 establishing further instructions concerning the content of the annual report (Besluit van 23 december 2004 tot vaststelling van nadere voorschriften
omtrent de inhoud van het jaarverslag, Staatsblad [Bulletin of Acts and Decrees] 2004, 747) as amended in April 2009 (Staatsblad 2009, 154) and December 2009
(Staatsblad 2009, 545).

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Corporate governance and risk management

Introduction
Dutch corporate governance code
Governance framework
Risk management
Statements of the Managing Board

of the Supervisory Board is determined by the General Meeting
of Shareholders. The functioning of and decision making within
the Supervisory Board are governed by the Regulations of the
Supervisory Board, which have been drawn up in line with the
Dutch corporate governance code and can be found on the
company’s website.

In line with the Dutch corporate governance code the
Supervisory Board has established from among its members an
Audit Committee, a Nomination Committee and a Remuneration
Committee. Given the strategic importance of sustainability, a
Corporate Social Responsibility Committee has also been set
up.

- release from liability of the members of the Managing Board

and the Supervisory Board;

- issuance of shares or rights to shares, restriction or exclusion

of pre-emptive rights of shareholders and repurchase or
cancellation of shares;

- amendments to the Articles of Association; and
- decisions of the Managing Board that would entail a significant
change in the identity or character of DSM or its business.

The Annual General Meeting of Shareholders is held within six
months of the end of the financial year in order to discuss and,
if applicable, approve the annual report, the annual accounts,
any appointments of members of the Managing Board and the
Supervisory Board and any of the other topics mentioned above.

The task of these committees is to prepare the decision making
of the Supervisory Board. The functioning and tasks of these
committees are governed by charters that have been drawn up
in line with the Dutch corporate governance code and can be
found on the company’s website.

The Annual General Meeting of Shareholders and, if necessary,
other General Meetings of Shareholders are called by the
Managing Board or the Supervisory Board. The agenda and
explanatory notes are published on DSM’s website.

Diversity
Since 1 January 2013 Dutch legislation requires that a large
company, when nominating or appointing members of the
Managing Board or Supervisory Board, should strive to achieve
a balanced composition of these Boards in terms of gender, to
the effect that at least 30 percent of the positions are held by
women and at least 30 percent by men.

According to the Articles of Association, shareholders who,
individually or jointly, represent at least one percent (1 percent)
of the issued capital have the right to request to the Managing
Board or the Supervisory Board that items be placed on the
agenda. Such requests need to be received in writing by the
chairman of the Managing Board or the Supervisory Board at
least sixty days before the date of the Annual General Meeting
of Shareholders.

The current composition of the Supervisory Board is in line with
this legislation.

The current composition of the Managing Board deviates from
the above-mentioned percentages. For the appointment of a
successor to Nico Gerardu, who retired on 1 September 2013,
candidates of both genders were considered for the position.
However, the Supervisory Board was unanimously of the opinion
that its nominated candidate Dimitri de Vreeze was the best
candidate to succeed Mr. Gerardu. Mr. De Vreeze was
appointed by the General Meeting of Shareholders on 3 May
2013.

General Meeting of Shareholders
The main powers of the General Meeting of Shareholders relate
to:

- the appointment, suspension and dismissal of members of the

Managing Board and the Supervisory Board;

- approval of the remuneration policy of the Managing Board;
- approval of the remuneration of the Supervisory Board;
- the adoption of the annual financial statements and

declaration of dividends;

On 3 May 2013 the Annual General Meeting of Shareholders was
held. The agenda was to a large extent similar to that of previous
years. Additional topics were the appointment of Dimitri de
Vreeze as member of the Managing Board, the re-appointment
of Pierre Hochuli as member of the Supervisory Board, the
adoption of an amendment to the remuneration policy of the
Managing Board and the evaluation of the Auditor. Further
details can be found on the company’s website.

External auditor
In accordance with the Dutch corporate governance code (V.
2.3), the Managing Board and the Audit Committee conducted
a thorough assessment of the functioning of the external auditor
EY in 2012. The main conclusions of the assessment were
presented to the General Meeting of Shareholders on 3 May
2013. Based on the outcome of the assessment, the company
decided to continue the audit services of EY. In 2013 a process
was started to select a new audit firm to provide audit services
as of 2015 in view of new legislation in the Netherlands with
regard to mandatory audit firm rotation.

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Article 10 of Directive 2004/25
With regard to the information referred to in the Resolution of
article 10 of the EC Directive pertaining to a takeover bid which
is required to be provided according to Dutch law, the following
can be reported:

- Information on major shareholdings can be found below

(Distribution of shares).

following shareholders had disclosed that they owned between
3 percent and 10 percent of DSM’s total share capital on
1 January 2014:

• ASR Nederland B.V.
• Rabobank Nederland Participatie B.V.
• Delta Lloyd N.V.
• Capital Research and Management Company and Capital

- There are no special statutory rights attached to the shares of

Group International

the company.

• Blackrock, Inc.

- There are no restrictions on the voting rights of the company’s
shares. When convening a General Meeting of Shareholders,
the Managing Board is entitled to determine a registration date
in accordance with the relevant provisions of the Dutch Civil
Code.

- The applicable provisions regarding the appointment and
dismissal of members of the Managing Board and the
Supervisory Board and amendments to the Articles of
Association are set forth above.

- The powers of the Managing Board regarding the issue and
repurchase of shares in the company can be found below
(Issue of shares, Repurchase of own shares).

- Other information can be found in the notes to the

consolidated financial statements (15 Equity, 18 Borrowings,
26 Share-based compensation) and in the chapters
Information on the DSM share and Other information.

Issue of shares
The issue of shares takes place by a decision of the Managing
Board. The decision is subject to the approval of the Supervisory
Board. The scope of this power of the Managing Board shall be
determined by a resolution of the General Meeting of
Shareholders and shall relate to at most all unissued shares of
the authorized capital, as applicable now or at any time in the
future. In the Annual General Meeting of Shareholders of 3 May
2013 this power was extended up to and including 3 November
2014, on the understanding that this authorization of the
Managing Board is limited to a number of ordinary shares with a
nominal value amounting to 10 percent of the issued capital at
the time of issue, and to an additional 10 percent of the issued
capital at the time of issue if the issue takes place within the
context of a merger or acquisition within the scope of DSM's
strategy as published on DSM’s website. The issue price will be
determined by the Managing Board and shall as much as
possible be calculated on the basis of the trading prices of
ordinary shares on the Euronext Amsterdam Stock Exchange.

Distribution of shares
Under the Dutch Financial Markets Supervision Act
shareholdings of 3 percent or more in any Dutch company must
be disclosed to the Netherlands Authority for the Financial
Markets (AFM). According to the register kept by the AFM the

Repurchase of own shares
The company may acquire paid-up own shares by virtue of a
decision of the Managing Board, provided that the par value of
the acquired shares in its capital amounts to no more than one
tenth of the issued capital. Such a decision is subject to the
approval of the Supervisory Board. In the Annual General
Meeting of Shareholders of 3 May 2013 the Managing Board
was authorized to acquire own shares for a period of 18 months
from said date. On 6 November 2013 DSM announced its
intention to repurchase 2,500,000 ordinary shares for the
purpose of covering the company’s commitments under existing
management and personnel option plans.

Dutch corporate governance code

DSM supports the Dutch corporate governance code adopted
in 2003 and amended in 2008, which can be found on
www.commissiecorporategovernance.nl.

DSM confirms that it applies all of the code’s 113 Best Practices.

With respect to the appointment of members of the Managing
Board for a period of at most four years (Best Practice II.1.1) it
should be noted that DSM has adhered to this Best Practice
since the introduction of the corporate governance code in 2004.

Since DSM respects agreements made before the introduction
of said code, the current chairman of the Managing Board will
remain appointed for an indefinite period.

With respect to the Dutch corporate governance code it should
be noted that any substantial change in the corporate
governance structure of the company and in the company's
compliance with the code shall be submitted to the General
Meeting of Shareholders for discussion under a separate agenda
item.

All documents related to the implementation at DSM of the Dutch
corporate governance code can be found in the Governance
section of the corporate website (www.dsm.com).

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Corporate governance and risk management

Introduction
Dutch corporate governance code
Governance framework
Risk management
Statements of the Managing Board

Governance framework

Business groups are the main building blocks of DSM’s
organization; they have integral long-term and short-term
business responsibility and have at their disposal all functions
that are crucial to their business success. The business groups
within a specific cluster report to one and the same member of
the Managing Board. This Board member manages the
coherence of operations and the leveraging of resources within
the cluster and is accountable for the overall performance of the
cluster within limits defined by the collective responsibility of the
total Managing Board for the overall management of the
company. The clusters are the main entities for external strategic
and financial reporting. In order to ensure sufficient
independence with regard to financial management, the Chief
Financial Officer has no business groups reporting to him.

The following figure depicts DSM's overall governance
framework and the most important governance elements and
regulations at each level.

For the sake of clarity, a short summary of the main aspects of
the framework at Managing Board / corporate level and
operational level is given here:

• The Managing Board adheres to the Regulations of the

Managing Board.

• In addition, the Managing Board works according to the

Management Framework for the corporate level. This implies
among other things that it adheres to the DSM Code of
Business Conduct and applicable corporate policies and
requirements.

• The Management Framework for the corporate level further
provides a description of the most important (decision-
making) processes, responsibilities and 'rules of the game' at
the Managing Board, functional and regional levels and
includes the governance relations with the next-higher levels
(Supervisory Board and shareholders) and the operational
units. In particular, the framework defines the roles of
corporate staff departments, functional excellence
departments and shared service departments as follows:

- Corporate Staff departments: small, high level groups,

supporting the Managing Board and reporting directly to a
Managing Board member (in most cases CEO or CFO);
- Functional Excellence departments: groups in which expert
capabilities in selected functions are concentrated and
which are steered by Functional Excellence Advisory
Boards, chaired by a Managing Board member; the Director
of a Functional Excellence department reports to a
Managing Board member; and

- Shared Service departments: groups in which selected

service functions are leveraged and which are steered by
Shared Service Boards, chaired by a business group
director. The director of a Shared Service department
reports to a Managing Board member, who is also a
member of that Shared Service Board.

The company’s strategic direction and objectives are set in a
Corporate Strategy Dialogue. In 2010 such a Corporate Strategy
Dialogue was held, resulting in the current strategy DSM in
motion: driving focused growth. As part of this strategy, the
regional functions have been further strengthened, especially in
the high growth economies. Regional management reports
directly to a Managing Board member.

Note: all internal regulations apply in addition to applicable national and international
laws and regulations. In cases where internal regulations are incompatible with
national or international laws and regulations, the latter prevail.

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The operational units conduct their business within the
parameters of the Management Framework for operational units.
This implies among other things that they:

- comply with the DSM Code of Business Conduct
- establish the strategy and objectives of their business

according to the Business Strategy Dialogue, aligned with the
Corporate Strategy Dialogue, in which process various
scenarios and related risk profiles are investigated;

- implement risk management actions according to an Annual
Risk Management Plan and in line with corporate policies and
multi-year plans in several functional areas;

- comply with the Corporate Requirements and Directives; and
- monitor the effectiveness of the risk management and internal
control system and regularly discuss the findings with the
Managing Board.

On average once every three years, the operational units are
audited by Corporate Operational Audit (COA). The director of
COA reports to the chairman of the Managing Board and has
access to the external auditor and the chairman of the Audit
Committee of the Supervisory Board. Furthermore, the director
of COA acts as the compliance officer with regard to inside
information and is the chairman of the DSM Alert Committee,
which is responsible for the DSM whistleblower policy, systems
and processes.

In the Fraud Committee, relevant corporate functions participate
under the chairmanship of the CFO. The objective of the
committee is to ensure structural follow-up of fraud cases with
the aim of reducing fraud risks.

Risk management

The Managing Board is responsible for risk management in the
company and, supported by the Corporate Risk Office, has
designed and implemented a risk management system and a
risk management organization. The system and the organization
are documented in the DSM risk management policy, the DSM
Code of Business Conduct, DSM policies in several functional
areas and the DSM Corporate Requirements and Directives. The
aim of the system is to ensure that the extent to which the
company’s strategic and operational objectives are being
achieved is understood, that the company’s reporting is reliable
and that the company complies with relevant laws and
regulations.

The DSM risk management system is based on the COSO-ERM
framework. It has been designed to achieve maximum
integration of the risk management process in the normal
business processes. It provides for risk assessment tools,
controls for risks that commonly occur in the company and

monitoring and reporting procedures and systems. The internal
controls for the goods and money flows have been ‘built into’
business processes, and tools have been developed to support
their implementation and to monitor their effectiveness in
operation. In this way, a high level of internal control is achieved
efficiently.

Upon the publication of this Integrated Annual Report, an
updated version of the full description of DSM’s risk
management system and process together with a description of
the identified risks will be placed on the company’s website.
These descriptions are to be considered an integral part of this
Integrated Annual Report.

The functioning of the system in 2013

The important events in risk management in 2013 are reported
below. This section is structured according to the elements of
the COSO-ERM risk management framework.

Internal environment for risk management
Values and business principles are an important element of the
internal environment for risk management. Directly related to its
mission to create brighter lives for people today and generations
to come, DSM has chosen sustainability as its core value.

DSM's business principles, which are defined in the DSM Code
of Business Conduct, are based on this core value. The DSM
Code of Business Conduct, which is available on the company’s
website, describes principles in the areas of People (social and
humanitarian standards), Planet (principles with regard to the
environment) and Profit (principles regarding fair and ethical
business practices). In 2013, the mandatory biennial e-learning
course on the Code of Business Conduct was completed by
more than 90 percent of all eligible employees, including the
personnel of newly acquired units. Classroom training is ongoing
for a limited group of employees who do not have access to e-
mail. A company-wide inventory was made of bribery and
corruption risks. This inventory has been used to complement
the general policy against corruption and bribery with business
and region specific actions and practices. The Anti-Bribery and
Corruption policy and the e-learning tool are ready to be
deployed to specific target groups in the various units.

Another important factor determining the internal environment
for risk management is the risk appetite. This risk appetite cannot
be captured in one figure or formula, but varies per category of
risks. The Managing Board has reviewed the company’s desired
risk appetite. The main characteristics can be described as
follows:

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Corporate governance and risk management

Introduction
Dutch corporate governance code
Governance framework
Risk management
Statements of the Managing Board

- To fulfill its strategic intent, DSM is prepared to accept

considerable risks in for example its drive to develop its people
and organizational base into a competitive advantage, its
innovation programs and its expansion to high growth
economies, and in that same context the company also
accepts risks in developing sustainability as a business driver.
Of course these risks will always be limited by defined hurdle
criteria and rigorous implementation programs.

- In risk areas such as intellectual property protection,

acquisitions and joint ventures, production-process reliability,
business continuity, reputation and product liability the
company is cautious to conservative.

- With regard to safety, health and environment, reporting
integrity and internal and external non-compliance the
company is risk averse.

This risk appetite gives guidance for the responses to the risks
identified in the Corporate Risk Assessment (see below). For
specific units, the risk appetite may deviate from the overall
company profile.

Objectives and risk identification, assessment and response
In line with the mandatory risk management process, business
groups that updated their strategy in 2013 performed a business
risk assessment to identify and assess the implementation risks
of the chosen strategy and agree on responses. At mid-year and
at year-end, all units reviewed and reported their risks and
incidents as part of the semi-annual risk reporting process, in
which risks are reported in terms of exposure (impact multiplied
by probability). Additionally, risk assessments were performed
by a number of units and regions, on major projects and as part
of the compliance programs of new acquisitions.

In 2013, the Managing Board updated the Corporate Risk
Assessment (CRA). Based on the results of the CRA conducted
in 2012, input from the directors of corporate staff departments
and shared service departments, internal risk and incident
reports and risk information from external sources, the Managing
Board, supported by the Corporate Risk Office, identified the

risks that are relevant in relation to the achievement of the targets
of the strategy DSM in motion: driving focused growth. Board
members individually identified and assessed risks, and during
a Managing Board session they reached consensus on these
risks and related risk appetites. They identified any necessary
responses to be made in addition to the mitigating actions
already in place in order to bring the risks within the defined risk
appetite.

The preliminary outcomes of the CRA were reported to and
discussed with the Audit Committee of the Supervisory Board in
the meeting of 9 December 2013. These 'top-down' outcomes
were compared with the risks and incidents as reported 'bottom-
up' by the operational units in their Letters of Representation and
with findings from internal and external audits. The final risk
profile was reported to and discussed with the Audit Committee
of the Supervisory Board on 24 February 2014. It is the basis for
the main risks and responses as reported on the following pages.

The company’s top risks
The CRA identifies the likelihood and impacts of events that
could jeopardize the achievement of the targets for 2014, 2015
and 2020 set in the DSM in motion: driving focused growth
strategy. In setting these targets, assumptions were made about
the macro-economic and global financial developments (basic
scenario).

The table on the next page shows the most important risks for
DSM achieving its targets under the basic scenario, and the
remedial actions to mitigate them.

Following the Corporate Risk Assessment 2013, 'Growth and
profitability in the Pharma cluster' no longer qualifies as a 'top
risk' or even an 'important risk'. As announced in November
2013, DSM and JLL Partners will create a new company which
will be a leading global contract development and manufacturing
organization for the pharmaceutical industry. This mitigates this
risk.

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Description of risks

Mitigating actions

The top risks and related mitigating actions

Exposure to merchant market for caprolactam
DSM has considerably reduced its exposure to cyclical and
commodity markets. Volatility, cyclicality and supply-demand
imbalance in the merchant market for caprolactam may cause
the profitability to deviate from the projected levels.

DSM will continue to work on options to reduce its exposure
to the volatile merchant caprolactam market.

Competition
Price pressure due to intensified competition may cause the
profitability of DSM's activities to deviate from the projected
levels.

Cost reductions in all businesses are being continued to
increase competitiveness. Further innovation is driving a focus
on high-end markets which will also mitigate this risk.

Risks related to High Growth Economies
In the current strategy, the relative importance of the High
Growth Economies has further increased. There is, however,
always a risk that the markets will not grow as expected and/
or that opportunities in these markets will be missed.

People, organization and culture
The implementation of the business strategy is supported by
organizational measures to enhance regional and functional
effectiveness. However, the organization may lack the
resources in terms of quantity and quality to execute all the
programs and projects.

DSM has further detailed its country and region specific
strategies. More power and freedom will be given to regions to
achieve the strategic goals.

DSM has launched the ONE DSM Culture Agenda focusing on:
- External Orientation
- Accountability for Performance (and learning)
- Collaboration with Speed
- Inclusion & Diversity
Attention will be given to the implementation of stronger
regional and functional talent efforts and career development.
Focus and priority setting will secure proper project execution
and implementation.

Global financial and economic developments (including
tax risks and currency effects)
A further economic downturn and a higher impact of currency
volatilities could have a significant detrimental effect on the
achievement of DSM's targets. Furthermore, changing tax
regimes may also impact the realization of DSM's targets.

DSM will proceed with its profit protection plans as well as with
the execution of its hedging policy. Regional changes in tax
regimes will be closely monitored.

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Corporate governance and risk management

Introduction
Dutch corporate governance code
Governance framework
Risk management
Statements of the Managing Board

Other important risks

- Business continuity risks

In addition to the top risks, the most recent risk assessment and
reports show the following risks as being the most important:

- Acquisitions & Partnerships

This risk has been reduced significantly by realizing several key
strategic acquisitions. The risk on Acquisitions & Partnerships
shifted from finding sufficient additional value adding
acquisitions to getting the recent acquisitions effectively
integrated. The company has developed good practices and
structured processes to mitigate this, whereas quarterly
tracking of the progress of the various integration programs is
also securing the targets set.

- Innovation

The Emerging Business Areas are developing well. The focus
and concentration of efforts, as well as the reinforcement of
the talent base, ensure that DSM capitalizes on talent. The
current outlook is that DSM is on track to realize the innovation
ambitions as set in its strategy. At the same time DSM further
invests in strengthening its innovation skills and competences
as well as its innovation portfolio.

- ICT complexity

High ICT complexity (especially against the background of the
large number of acquisitions in recent years) may hamper
DSM's competitive advantage. Decomplexing and leveraging
operations will mitigate this risk.

- Raw material and energy: price and availability risks
DSM implements various policies to avoid supply chain
disruptions (e.g. multiple supplier strategy) and decrease price
volatility (e.g. commodity hedging). Nevertheless, the
increasing complexity and interdependence of worldwide
supply streams as well as increasing (perceived) pressure on
the availability of resources may lead to price fluctuations and
availability issues, influencing DSM’s profitability. The Supplier
Relationship program, aiming to obtain a number of strategic
customer of choice positions, is another way to jointly optimize
the value chains DSM is involved in.

- Intellectual property (IP) risks

The policy of accelerated growth through speeding up
innovation and expansion in high growth economies holds the
risk of increased exposure in the IP area. Measures will
continue to be taken to contain these risks, but these may not
always be completely effective in mitigating IP risks.

- Security (including information security)

Especially in the area of the security of and access to data in
ICT systems, a continued focus on monitoring and
implementation of key security behaviors is required, given the
increasing tension between the growing professionalism of
cybercrime and widespread use of (mobile) IT and social
media.

Major disruptions, especially in the supply chain, in
manufacturing and in the ICT environment, remain a low
likelihood but possibly high impact risk. DSM recognizes these
risks and has implemented contingency measures to prepare
for the most important scenarios.

- Safety, Health and Environmental (SHE) risks

After a number of fatalities in prior years, DSM has enhanced
its already strict safety policies even further, among other
things by strengthening the implementation of the Life Saving
Rules. Nevertheless, SHE risks cannot be excluded altogether
and any accidents may have a deep impact in terms of human
suffering and (reputation) damage to the company.

- Product liability risks

To reduce product liability risks, product risk evaluations have
been carried out, contractual and quality procedures have
been updated and insurance policies have been reviewed.
Unexpected effects of or undetected flaws in DSM's products
or services may, however, still cause considerable product
liability exposures.

For the management of all these categories of risks, strategies,
controls and/or mitigating measures have been put in place as
part of DSM’s risk management practices. These nevertheless
involve uncertainties that may lead to the actual results differing
from those projected. There may also be risks that the company
has not yet fully assessed and that are currently classified as
‘minor’ but that could have a material impact on the company's
performance at a later stage. The company's risk management
and internal control system has been designed to identify and
respond to these developments on time, but 100 percent
assurance can never be achieved.

Control activities
Each business group and each major operational service unit
has an Audit Committee which, under the direction of the
director of the group or unit, sets up annual risk management
plans, monitors their implementation and reviews risk
management issues on a regular basis. During the year under
review, major risk management events, such as business risk
assessments, audits and the occurrence of control failures or
weaknesses, were discussed with the responsible Managing
Board member.

Commonly occurring risks are mitigated through the
implementation of the Corporate Requirements and process
controls in the business processes. The operational units
regularly test compliance with these requirements and the
effectiveness of the controls. Deviations from Corporate
Requirements are only allowed temporarily, if sufficient
alternative controls are in place and after approval by the

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Enhancements to the risk management system
During 2013, the enhanced focus on risk controls in the safety
area (Life Saving Rules) was continued. New and enhanced
controls were introduced in the field of security through the
launch of key security behaviors. The Corporate Requirements
in the field of Research, Technology and Development were
separated from those in the field of Innovation. For joint ventures
the governance and risk management approach was reviewed
and updated in line with DSM's interest in those partnerships.

Strategic developments within DSM were supported by risk
management actions as follows:

- High Growth Economies: Enhancement of regional risk

management capabilities with a focus in 2013 on India and
Russia.

- Sustainability: Further implementation of the control

framework for ECO+ solutions, implementation of actions
defined in the sustainability risk assessment and start of the
implementation of a framework for People+.

- Innovation: Improved risk assessment practices, including
Monte Carlo business simulations and value engineering.
- Acquisitions & Partnerships: Creation of best practices for

(risk) management in the integration and operation of
acquisitions and joint ventures. Enhancement of regional risk
management capabilities in high growth economies and in
North America, where many newly acquired businesses are
being integrated.

responsible Board member. A limited number of waivers have
been granted.

Information and communication
A continuous effort is being made to inform employees about the
DSM risk management system and train them in its use. In India
and Russia specific regional risk assessments were performed
in 2013. To increase general awareness of risk management,
internal webinars were held and dilemma discussions were
started.

Monitoring and reporting
Information on the functioning of the system was collected on a
continuous basis. Business groups tracked compliance with
Corporate Requirements and the follow-up of actions arising
from risk assessments. They conducted assessments on the
effectiveness of their internal controls and reported and
investigated incidents. Independent audits on the effectiveness
of risk management implementation were executed by the
Corporate Operational Audit department according to a program
agreed with the Audit Committee of the Supervisory Board.
Information coming in via the DSM Alert whistleblowing channel
was also used as a source for reviewing the effectiveness of the
risk management system. Any critical findings were addressed
immediately.

By signing an affidavit, the business group controllers confirmed,
among other things, that the quarterly financial statements had
been produced according to the internal accounting rules and
reporting procedures. The implementation of a financial shared
services center in line with DSM's strategy to leverage operations
has created a need for more explicit continuous control
monitoring (CCM) to support the units' statements. CCM for this
scope has been successfully implemented.

Based on developments within and external to the company, as
well as findings from the various risk assessments, audits and
monitoring and reporting efforts, the Corporate Risk Office drew
up a consolidated risk report, including recommendations for
further improvement of the risk management system. These
recommendations were integrated into an update of the
Corporate Risk Management Plan 2011-2015.

At the end of the second quarter, the operational units were
asked to provide an update of their material risks and incidents
over the first half of 2013 and the status of the mitigation of the
risks reported over 2012, and to specify any material risks or
uncertainties for the rest of the year. The consolidated overview
of these risks, incidents and mitigation measures was the basis
for the risk section and the statements of the Managing Board
as provided with the first-half figures in accordance with the
requirements of the Dutch Financial Markets Supervision Act.

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Corporate governance and risk management

Introduction
Dutch corporate governance code
Governance framework
Risk management
Statements of the Managing Board

Statements of the Managing Board

On the basis of the above and in accordance with best practice
II.1.5 of the Dutch corporate governance code of December
2008, and Article 5:25c of the Financial Markets Supervision Act,
the Managing Board confirms that internal controls over financial
reporting provide a reasonable level of assurance that the
financial reporting does not contain any material inaccuracies,
and confirms that these controls functioned properly in the year
under review and that there are no indications that they will not
continue to do so. The financial statements fairly represent the
company's financial condition and the results of the company’s
operations and provide the required disclosures.

It should be noted that the above does not imply that these
systems and procedures provide absolute assurance as to the
realization of operational and strategic business objectives, or
that they can prevent all misstatements, inaccuracies, errors,
fraud and non-compliances with legislation, rules and
regulations.

In view of all of the above, the Managing Board confirms that, to
the best of its knowledge, the financial statements give a true
and fair view of the assets, liabilities, financial position and profit
or loss of the company, and the management report includes a
fair review of the position at the balance sheet date and the
development and performance of the business during the
financial year together with a description of the principal risks and
uncertainties that the company faces.

Heerlen, 24 February 2014

The Managing Board

Feike Sijbesma, CEO/Chairman of the Managing Board
Rolf-Dieter Schwalb, CFO
Stefan Doboczky
Stephan Tanda
Dimitri de Vreeze

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Report by the Supervisory Board

Supervisory Board report

Introduction
The Supervisory Board is in charge of supervising and advising
the Managing Board in setting and achieving the company’s
objectives, strategy, policies and succession planning. In 2013
an important part of this task was focused on reviewing the
strategic progress, which, among other things resulted in an
update of the 2015 targets as published at the Capital Markets
Day held on 26 September 2013 and in this report on page
11, reflecting a transformed portfolio and market dynamics. The
update included a new group EBITDA margin target of 14-15
percent with a ROCE target of 11-12 percent. In addition,
strategic actions for DSM Pharmaceutical Products and Polymer
Intermediates were discussed as well as the integration of the
acquired companies to capture full synergies and to drive
organic growth. Furthermore, the Supervisory Board discussed
the top 5 risks as reported in the Integrated Annual Report.

In DSM's two-tier corporate structure under Dutch law, the
Supervisory Board is a separate body operating fully
independently of the Managing Board. Members of the
Supervisory Board and the Managing Board are (re-)appointed
by the General Meeting of Shareholders.

Composition of Supervisory Board
The composition of the DSM Supervisory Board is diverse in
gender (4 male, 3 female), nationality (4 Dutch, 1 Swiss and 2
American), background, knowledge and experience. The
Board's current members are Rob Routs (chair), Ewald Kist
(deputy chair), Pierre Hochuli, Tom de Swaan, Pauline van der
Meer Mohr, Victoria Haynes and Eileen Kennedy. For detailed
information on their background, see the DSM website under
Corporate Governance and page 136 of this report. The
targeted profile of the Supervisory Board is reflected in its
regulations, which are published on the DSM website under
Corporate Governance. Within the Supervisory Board four
committees have been established to cover four key areas in
more detail, being auditing, nominations (of the Supervisory
Board and Managing Board), remuneration (of the Supervisory
Board and Managing Board) and corporate social responsibility.
More information on these four areas is given below. The
charters of the committees are published on the DSM website
under Corporate Governance.

Composition of the Managing Board
The composition of the Managing Board is diverse in nationality
(2 Dutch, 2 Austrian and 1 German), background, knowledge
and experience, and provides a good foundation to support all
clusters and business groups in achieving their targets
contributing to the company strategy of driving focused growth.
For detailed background information on all Managing Board

members see the DSM website under Corporate Governance
and page 137 of this report.

Meetings and business topics
In 2013 the Supervisory Board had six meetings and three
conference calls with the Managing Board. On three occasions,
one member was excused due to other commitments. In
addition to the standard agenda items for the meetings, such as
the development of the financials and the running business
performance, including the benefits of the Profit Improvement
Program, the Boards had in-depth discussions on the progress
of the execution of DSM’s strategy, an update of the 2015
targets to reflect the transformed portfolio and market dynamics,
and the priorities for the coming two years.

For Nutrition the discussions were focused on the delivery of
good organic growth and the integration of acquired companies
such as Fortitech (global leader in food ingredient blends) and
Tortuga (Brazilian market leader in organic trace minerals for
animal nutrition and health), in such a way as to realize the full
synergy potential. In addition, new acquisitions were discussed,
such as the acquisition of Unitech (a New Zealand based
producer of nutritional products for both human and animal
markets) and the acquisition of a stake in Andre Pectin
(headquartered in Yantai (China) and active in the manufacture
and sale of apple and citrus pectin, a key food hydrocolloid
providing texture, as well as in pectin related food products).

For Pharma, discussions were focused on potential partnerships
for DSM Pharmaceutical Products. In the last quarter of 2013
this culminated in an approval to combine DSM Pharmaceutical
Products with US-based company Patheon, which resulted in
the announcement that DSM and private equity firm JLL Partners
intend to combine Patheon and DSM Pharmaceutical Products
into a new company that will be a leading global contract
development and manufacturing organization for the
pharmaceutical industry. This represents a key step in the
strategic transformation of DSM’s Pharma activities into
partnerships.

Discussions on Materials Sciences were focused on improving
the performance by upgrading the portfolio of Performance
Materials and reducing the volatility of the results of Polymer
Intermediates. Regarding Innovation, discussions were in
particular focused on the innovation pipeline and on the
Emerging Business Areas (EBAs). EBA discussions included
progress made with the cellulosic bio-ethanol plant (a joint
venture between DSM and POET), the integration of Kensey
Nash, accelerating progress in Biomedical and Advanced
Surfaces, and partnerships in Bio-based Products & Services.
Sustainability discussions were focused on sustainability
aspirations and the next steps to be taken in the company's

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Report by the Supervisory Board

Supervisory Board report
Remuneration policy for the Managing Board and the
Supervisory Board

positioning. It was established that the progress made was in
line with the aspirations.

The committee also discussed and evaluated cases submitted
under DSM’s whistleblower policy (DSM Alert), and mitigating
actions to prevent recurrence.

As High Growth Economies are also an important business
growth driver for DSM, one of the meetings was held in China
(Shanghai) as part of extensive site visits in the areas of
Shanghai, Nanjing and Beijing. During these site visits the
Supervisory Board learned about the progress made in the China
based business activities in both Life Sciences and Materials
Sciences. The visits included DSM’s Shanghai R&D and
Innovation Center, the new, second caprolactam line of DNCC
(DSM Nanjing Chemical Company Ltd., the venture between
DSM Fibre Intermediates and Sinopec) in Nanjing, a DSM
Engineering Plastics customer and the new Animal Nutrition R&D
Center near Beijing. During this China visit the Supervisory Board
also met a number of external DSM relations from Chinese
universities as well as people related to the Chinese government.
In China and in the subsequent meeting with the Managing
Board in the Netherlands, the Supervisory Board extensively
discussed DSM’s growth ambitions in China and the other high
growth economies and the work that is being done to achieve
these ambitions.

Financials and auditing
The Audit Committee met four times in 2013 and in addition had
four conference calls to discuss financial developments and
interim disclosures. On two occasions one member was
excused. As of 3 May 2013 the following Supervisory Board
members were a member of the Audit Committee: Tom de
Swaan (chair), Pierre Hochuli and Victoria Haynes. All
Supervisory Board members have a standing invitation to attend
Audit Committee meetings, which they used on a regular basis.
Besides the Supervisory Board members, the external auditor
and the CFO and CEO participated in these meetings and
whenever relevant, managers responsible for finance, internal
audit, risk management and compliance were invited to explain
their topics to the Audit Committee. All discussions were very
open and constructive. The highlights and the minutes of all
meetings were always shared with the full Supervisory Board in
its meetings with the Managing Board. This feedback included
advice and recommendations regarding topics to be approved
by the full Supervisory Board.

The committee had in-depth discussions on the financials, the
financing and guarantee plan, the capital expenditure plan, the
dividend proposals, financial statements, accounting policy
changes, internal risk management and control systems, all
potential risks (including safety, health and environment and
security risks), compliance with recommendations and
observations made by internal and external auditors, and the role
and functioning of the operational audit department, including
the endorsement of its proposed audit plan.

In addition to the audit work, the external auditor of the company
(EY) carried out non-audit work, to the extent allowed under
applicable legislation (including new legislation in the
Netherlands) and regulations and the internal procedures of the
company. Important areas where non-audit services were
provided by EY related to tax compliance work for certain foreign
subsidiaries and expatriate tax services. All audit and non-audit
work carried out by the external auditor for the company were
performed in line with the conditions and instructions approved
by the Supervisory Board on the recommendation of the Audit
Committee and after consultation with the Managing Board. For
work that is not within the scope of the audit of the consolidated
financial statements individual assignments require pre-approval
from the Audit Committee prior to execution. Fees and
conditions of the external auditor for audit and non-audit work
were approved by the Audit Committee.

With EY discussions were held about the financial statements for
2013. The Report by the Managing Board and the financial
statements for 2013 were submitted by the Managing Board to
the Supervisory Board, in accordance with the provisions of
Article 30 of the Articles of Association, and subsequently
approved by the Supervisory Board in its meeting on 25 February
2014. The financial statements were audited by EY, who issued
an unqualified opinion (see the Independent Auditor's Report on
the Financial Statements of this report). The Supervisory Board
established that the external auditor was independent of DSM.

In accordance with the Dutch corporate governance code
(V. 2.3), the Managing Board and the Audit Committee
conducted a thorough assessment of the functioning of the
external auditor following an extensive external review of the
activities of the external auditor in 2012 and reported the
outcome in the 2013 Annual General Meeting.

Based on a very positive outcome of the assessment of the
external auditor in 2012, the audit services provided by EY were
continued in 2013 under a revised contract. In view of new
legislation in the Netherlands with regard to the independence
of auditors (mandatory audit firm rotation by 2016 after eight
consecutive financial years of audit services), as well as
anticipated European legislation which may affect the audit
profession in the coming years, in 2013 a process was started
to select a new audit firm to provide audit services as of 2015.

Financial statements 2013
The Supervisory Board will submit the 2013 financial statements
to the 2014 Annual General Meeting of Shareholders, and will

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propose that the shareholders adopt them and discharge the
Managing Board from all liability in respect of its managerial
activities and discharge the Supervisory Board from all liability in
respect of its supervision of the Managing Board. The profit
appropriation as approved by the Supervisory Board is
presented in the Profit appropriation section of the 2013
Integrated Annual Report. The Supervisory Board wishes to
express its sincere appreciation for the results achieved and
would like to thank the employees and the Managing Board for
their efforts.

Board nominations
In 2013 nomination discussions were focused on the succession
planning of the Managing Board. The Board extensively
discussed the further succession planning of the entire
Managing and Supervisory Board. The succession of Nico
Gerardu, who retired from the Managing Board on
1 September 2013, was discussed in particular. Dimitri de
Vreeze was nominated on the basis of among other things his
broad experience in Materials Sciences, as demonstrated in his
successful tenure as Business Group Director DSM Resins &
Functional Materials. As usual, the composition of the Managing
Board was taken into account during the selection process,
which therefore included an effort to find female candidates. In
the end, the best candidate was nominated and appointed
during the Annual General Meeting on 3 May 2013.

Further, the Nomination Committee discussed in 2013 the
succession of Rolf-Dieter Schwalb (Managing Board member
and CFO) whose second term as Managing Board member
expires in 2014. In-depth discussions on the above were held
within the Nomination Committee, which consists of Rob Routs
(chair), Ewald Kist and Pauline van der Meer Mohr. Feike
Sijbesma and Chris Van Steenbergen, Executive Vice President
of the Corporate Human Resources department, were also
involved in these discussions.

Further, taking into account the Supervisory Board profile as laid
down in the Supervisory Board regulations, the Committee
started discussions on the succession of Claudio Sonder, who
retired from the Supervisory Board on 3 May 2013. It was
decided to postpone the appointment of a successor till later,
probably 2014. The Committee met three times in 2013; all
members attended all meetings. Recommendations and the
minutes of all Committee meetings were shared with the entire
Supervisory Board. The reappointment of Rob Routs and Tom
de Swaan as members of the Supervisory Board for another
term of four years will be proposed to the Annual General
Meeting of Shareholders to be held on 7 May 2014. A proposal
for the succession of Mr. Schwalb as Managing Board Member
and CFO will also be submitted for approval to the Annual
General Meeting.

Board remuneration
The Remuneration Committee had three meetings and three
conference calls in 2013. On one occasion, one member was
absent. Ewald Kist (chair), Rob Routs and Tom de Swaan are
members of this committee. Discussions were focused on the
performance and the related remuneration of the members of
the Managing Board and executives of DSM. Feike Sijbesma and
Chris Van Steenbergen were fully involved in these
discussions. Recommendations and minutes of the
Remuneration Committee meetings were shared with the full
Supervisory Board and used to determine the final remuneration
of the members of the Managing Board.

Furthermore, to align the Managing Board remuneration even
more with long-term stakeholder interests, the Supervisory
Board submitted to the Annual General Meeting of Shareholders
of 3 May 2013 an updated remuneration policy for the Managing
Board, as advised by the Remuneration Committee (with
support from an independent external global reward consultancy
firm) and the DSM Corporate Human Resources department.
The aim of the update was to align the remuneration policy even
more with long-term stakeholder interests, and be in line with
market practices and benchmarks. The Annual General Meeting
approved the policy as proposed. This policy is published on the
DSM website under Corporate Governance/Managing Board
and on page 127 of this report.

Corporate Social Responsibility
The Corporate Social Responsibility (CSR) Committee met twice
in 2013; on one occasion one member was excused. As of 3
May 2013 Pauline van der Meer Mohr (chair), Pierre Hochuli and
Eileen Kennedy were members of this committee. The Chair of
the Supervisory Board, who has a standing invitation,
participated in all meetings. In the first meeting the Sustainability
Information to be included in the Integrated Annual Report of
2012 including the auditors’ findings was extensively discussed,
partly in the presence of the external auditor. The second
meeting focused on the follow-up of the management letter of
the external auditor relating to the assurance on the
Sustainability Information in the Integrated Annual Report and
the progress made with the implementation of sustainability
aspirations set by the company as part of its strategy. Details of
the progress can be found on page 12 of this Integrated Annual
Report. In addition, DSM's safety performance, an important
focus area for the company, was discussed in the CSR
Committee meeting. The committee's view that DSM is doing
well when it comes to corporate social responsibility is supported
by the fact that the company has been named among the leaders
in the Dow Jones Sustainability World Index for several years in
a row. The chair of the CSR Committee also participated in one
of the meetings of DSM’s external Sustainability Advisory Board,

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which acts as an external sounding board and meets with
DSM's top management twice a year.

The CEO, the Managing Board member responsible for
Corporate Operations & Responsible Care, the Executive Vice
President Corporate Affairs, the Vice President Corporate
Operations & Responsible Care and the Director Sustainable
Development were present during both meetings of the CSR
Committee. The recommendations and minutes of both
meetings were shared and discussed with the entire Supervisory
Board during its meetings with the Managing Board.

In view of the Board's supervision of corporate social
responsibility issues relevant to the company, the sections 'DSM
in motion: driving focused growth', 'Growth driver:
Sustainability', 'Stakeholder Engagement', 'People in 2013' and
'Planet in 2013' (the Sustainability Information) in the Integrated
Annual Report 2013 were reviewed and subsequently discussed
by the full Supervisory Board in its meeting of 25 February 2014,
based on the advice of the CSR Committee. Taking into
consideration the Independent Assurance Report on the
Sustainability Information by EY on page 213 of this Integrated
Annual Report, the full Supervisory Board approved the reporting
in these sections. The Sustainability Information is in compliance
with the sustainability reporting guidelines of GRI (G3) and the
internal reporting criteria of DSM included in this Integrated
Annual Report.

Supervisory Board meetings and performance evaluation
As in previous years, an extensive Board evaluation was carried
out in 2013 which this year was facilitated by an external
consultant on the basis of written questionnaires and interviews.
The review assessed the collective performance of the Board
and its Committees and the performance of the Chairman. The
consultant presented the results during the December meeting
of the Supervisory Board. The overall feedback from the self-
evaluation was that the Board is operating well and has acted
on the outcomes of previous evaluations. The Board agreed on
the recommendations to be followed up in 2014. The Board
established that all of its members are committed to allocating
sufficient time and attention to the Board's duties of supervising
and advising the DSM Managing Board.

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Remuneration policy for the Managing
Board and the Supervisory Board

This chapter comprises two parts. The first part outlines the
remuneration policy as approved by the Annual General Meeting
of Shareholders. The second part contains details of the
remuneration in 2013 and changes expected in 2014.

Remuneration policy
The objective of DSM’s remuneration policy is to attract,
motivate and retain qualified and expert individuals that the
company needs in order to achieve its strategic and operational
objectives, whilst acknowledging the societal context around
remuneration and recognizing the interests of DSM's
stakeholders. The following elements are taken into
consideration:

- The remuneration policy reflects a balance between the

interests of DSM’s main stakeholders as well as a balance
between the company’s short-term and long-term strategy.
As a result, the structure of the remuneration package for the
Managing Board is designed to balance short-term
operational performance with the medium and long-term
objective of creating sustainable value within the company,
while taking into account the interests of its stakeholders. DSM
strives for a high performance in the field of sustainability and
aims to maintain a good balance between economic gain,
respect for people and concern for the environment in line with
the DSM values and business principles as reflected in the
DSM Code of Business Conduct.

- To ensure that highly skilled and qualified senior executives

can be attracted and retained, DSM aims for a total
remuneration level that is comparable to levels provided by
other (Dutch and European) multinational companies that are
similar to DSM in terms of size and complexity.

- The remuneration policies for the members of the Managing
Board and for other senior executives of DSM are aligned.
- In designing and setting the levels of remuneration for the
Managing Board, the Supervisory Board also takes into
account the relevant statutory provisions and provisions of the
Dutch corporate governance code, societal and market trends
and the interests of stakeholders.

- DSM’s policy is to offer the Managing Board a total direct

compensation approaching the median of the labor-market
peer group.

Adjustments to remuneration policy for the Managing Board
During 2011 and 2012 the Royal DSM Supervisory Board and
its Remuneration Committee discussed and evaluated a number
of adjustments to the remuneration policy for the Managing
Board, supported by an external global reward consultancy firm
and by DSM’s Corporate Human Resources department.

During 2013 the Remuneration Committee discussed and
further fine-tuned the adjustments, also based on the input of a
number of external stakeholders. After due consideration, the
Supervisory Board proposed to the Annual General Meeting of
Shareholders to make a number of adjustments to the current
remuneration policy for the Managing Board. These proposals
were approved by the AGM on 3 May 2013.

The adjustments do not change the overall remuneration
model (philosophy) for the Managing Board.

This model is based on providing fair compensation approaching
the median, and consists of a base salary and a well-balanced
mix of Short-Term and Long-Term Incentives.

Both the Short-Term Incentive (STI) and the Long-Term Incentive
(LTI) consist of two equal parts, one of which is linked to financial
targets and the other to sustainability and – for STI only –
individual targets.

The aim of the adjustments is:

- to align the remuneration policy even more with long-term

stakeholder interests, in line with DSM's stated philosophy of
creating long-term value for all stakeholders;

- to update the policy in line with the most recent prevalent

market practices and benchmarks for executive and board
compensation; and

- to further strengthen pay for multi-dimensional, people-planet-

profit driven performance within DSM.

The adjustments can be summarized as follows:

- Strengthen the link between the Short-Term Incentive (STI)
and long-term value creation by requiring Managing Board
members to invest in conditional DSM shares 25 percent on
a mandatory basis and 25 percent (maximum) on a voluntary
basis of their yearly actual earned STI payment. These shares
are required to be held for at least three years. In return for this
commitment, the Managing Board members can, at the
discretion of the Supervisory Board, be granted on a one for
one basis (as a maximum) shares matching the number of
shares they have purchased, if over this three-year period a
number of long-term (LTI) performance conditions are met. As
a result, the annual STI outcome will be partly converted into
a long-term (risk taking) performance plan.

- Establish as the main sustainability parameters in the STI the
introduction of ECO+ products, Safety Performance and
Employee Engagement, in addition to individual targets. The
financial measures in the STI (EBITDA, gross free cash flow,
organic net sales growth) remain unchanged. The financial

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measures will amount to 50 percent of total STI and the non-
financial (sustainability and individual) measures also to 50
percent.

- Add a new provision to the policy, stating that no STI payout

will occur (regardless of the performance on all other
measures) if the company’s financial performance is below a
certain threshold. This threshold is to be determined annually
by the Supervisory Board.

- Introduce in the Long-Term Incentive (LTI) a second financial

measure, being Return on Capital Employed (ROCE), in
addition to total shareholder return (TSR), and introduce in the
LTI a second long-term sustainability measure, being Energy
Efficiency Improvement, in addition to the greenhouse-gas
emissions reduction measure already incorporated in the LTI.
Each measure will count for 25 percent.

- Align the Managing Board remuneration policy with current

market practices by (1) moving to a new relative TSR vesting
schedule that is based on relative ranking within the TSR peer
group, and (2) increasing transparency by adopting the face
value method to calculate the number of yearly LTI
performance shares (100 percent of base salary when on
target and 150 percent in the case of excellent performance),
rather than the currently used discounted fair value method.
With the introduction of the face value method, the actual
number of shares granted will be kept at a similar level as
today.

- Introduce minimum shareholding guidelines for Managing

Board members: a shareholding equivalent to three times the
base salary in the case of the CEO and a shareholding
equivalent to one time the base salary for the other Managing
Board members. These shareholdings can be built up over 5
years.

It should be noted that no adjustments to the base salary policy
were made.

The Annual General Meeting approved these proposals on
3 May 2013, for application as per performance year 2013
(except for the introduction of face value calculations which will
apply as of the 2014 LTI grant). However the new 3-year vesting
schedule for LTI will only have impact as of vesting in 2016
related to the 2013 grant (under the new measures). For 2013
(and also 2014 and 2015) LTI vesting will still be based upon the
previous measures and vesting schedules.

Adjusted Remuneration Policy for Managing Board
Labor-market peer group
In order to be able to recruit the right caliber of people for the
Managing Board and to secure long-term retention of the current
Board members, DSM will take external reference data into
account in determining adequate remuneration levels. For this
purpose, a specific labor-market peer group has been defined

which consists of a number of Dutch and European companies
that are more or less comparable to DSM in terms of size,
international scope and business portfolio. The Supervisory
Board regularly reviews the peer group to ensure that its
composition is still appropriate.

The labor-market peer group currently consists of the following
eleven companies:

Aegon
AkzoNobel
Clariant
Heineken
KPN
LANXESS

Nutreco
Solvay
Syngenta
TNT Express
Wolters Kluwer

As part of its remuneration policy DSM will benchmark its
remuneration package against the packages offered by the
labor-market peer group once every three years. In addition, the
company may apply a yearly increase to the base salary based
on the ‘general increase’ (market movement) for DSM executives
in the Netherlands. The remuneration policy was last
benchmarked against the peer group in 2011.

Total Direct Compensation (TDC)
The total direct compensation of the Managing Board consists
of the following components:

(I) Base salary
(II) Variable income

- Performance-related Short-Term Incentive (STI)
- Performance-related Long-Term Incentive (LTI)

In addition to this total direct compensation, the members of the
Managing Board participate in the Dutch pension scheme for
DSM employees in the Netherlands and are entitled to other
benefits, such as a company car and representation allowance.

Value in percent of Total Direct Compensation (on target):

A: Base Salary

B: Variable income (STI + LTI)1

Total Direct Compensation (TDC)

1 LTI at discounted fair value

50%

100%

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Base salary
On joining the Board, the Managing Board members receive a
base salary that is comparable with the median of the labor
market peer group. Every year, base salary levels are reviewed
based on a three-year remuneration benchmark. Adjustment of
the base salary is at the discretion of the Supervisory Board. In
addition, the company will, when appropriate, apply a yearly
increase to the base salary based on the ‘general
increase’ (market movement) for DSM executives in the
Netherlands.

Variable income
The variable income part of remuneration consists of the Short-
Term and Long-Term Incentives. The distribution between
Short-Term and Long-Term Incentives for (on target)
performance aims to achieve a proper balance between short-
term result and long-term value creation. The parameters relating
to the various elements of the variable income part of the
remuneration are established and where necessary adjusted by
and at the discretion of the Supervisory Board, taking into
account the general rules and principles of the remuneration
policy itself.

Target areas

Total

Shared

Individual

Financial

Sustainability and

individual

25%

15%

10%

Total

50%

40%

10%

Short-Term Incentive (STI) linked to financial targets
The part of the STI that is linked to financial targets (25 percent)
includes elements related to operational performance, being
EBITDA before exceptional items, gross free cash flow and net
sales growth (organic), reflecting short-term financial results. The
weighting given to the individual financial elements in the STI is
as follows: EBITDA 10 percent, gross free cash flow 7.5 percent
and organic net sales growth 7.5 percent of annual base salary
for on-target performance.

Target areas

On-target pay-out

(% of base salary)

Distribution of variable income (on target):

Financial targets

A: Short-Term Incentive (STI)

B: Long-Term Incentive (LTI)1

Total variable income as % of base salary

1 LTI at discounted fair value

- EBITDA before exceptional items

- Gross free cash flow

- Organic net sales growth1

Total

50%

100%

1 Excluding currency fluctuations, divestments and acquisitions

10.0

7.5

25.0

Short-Term Incentive (STI)
Managing Board members are eligible to participate in a Short-
Term Incentive (STI) scheme. The scheme is designed to reward
short-term operational performance with the long-term objective
of creating sustainable value, taking into account the interests of
all stakeholders.

The Short-Term Incentive opportunity amounts to 50 percent of
the annual base salary for on-target performance (100 percent
in the case of excellent performance). The part of the STI that is
related to financial targets accounts for 25 percent of base salary
and the other 25 percent relates to sustainability and individual
targets.

The three financial-target-related Short-Term Incentive elements
can be derived from the financial statements.

Short-Term Incentive (STI) linked to sustainability and individual
targets
The part of the STI that is linked to non-financial targets (25
percent) relates to sustainability and individual targets. On a
regular basis, following proper evaluation, further refinement/
adaptations of performance measures in the area of
sustainability and their weight will take place.

As from 2013 the following shared measures linked to
sustainability for the STI are applicable:

- ECO+: percentage of successful product launches that meet

ECO+ criteria

- Employee Engagement Index: related to the High

Performance Norm in industry

- Safety Performance (newly introduced in 2013)

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The STI measures on sustainability are defined as follows:

- ECO+ solutions

ECO+ solutions are products and services that, when
considered over their whole life cycle, offer clear ecological
benefits (in other words, a clearly lower eco-footprint)
compared to the mainstream solutions they compete with.
These ecological benefits can be created at any stage of the
product life cycle − from raw material through manufacturing
and use to potential re-use and end-of-life disposal. ECO+
solutions, in short, create more value with less environmental
impact.

- Employee Engagement Index

An Employee Engagement Survey is conducted annually,
focusing on a combination of perceptions that have a
consistent impact on behavior and create a sense of
ownership. Research has consistently shown that the four key
elements (satisfaction, commitment, pride and advocacy)
define engagement and link engagement to business
performance metrics.
- Safety Performance

Defined as Frequency Index (FI) for recordable injuries.

In addition to shared sustainability targets (15 percent), a limited
number of individual non-financial targets (10 percent) will apply.

132). This will be linked to a one-for-one matching award on the
total deferred amount under the condition that predefined
performance targets and measures are met over the three-year
vesting period. The performance measures are equivalent to the
measures under the Long-Term Incentive (LTI) Plan.

Long-Term Incentives (LTI)
The Managing Board members will be eligible to receive
performance-related shares. Under the performance share plan,
shares will conditionally be granted to Managing Board
members. Vesting of these shares is conditional on the
achievement of certain predetermined performance targets
during a three-year period.

Prior to the 2013 grant, two performance measures were applied
for the vesting of performance shares:

- Comparable Total Shareholder Return (TSR) performance

versus a peer group

- Greenhouse-gas emissions (GHGE) reduction over volume-

related revenue

As from the 2013 grant two new measures will apply in addition
to TSR and GHGE:

Target area

Non-financial targets

- Sustainability

- Individual

Total

On-target pay-out

(% of base salary)

The targets are determined each year by the Supervisory Board,
based on historical performance, the operational and strategic
outlook of the company in the short term and expectations of
the company’s management and stakeholders, among other
things. The targets contribute to the realization of the objective
of long-term value creation.

The company does not disclose the actual targets, as they
qualify as commercially sensitive information. However, full
transparency will be given on target areas and definitions. Target
setting and realization are audited by external auditors.

Mandatory and voluntary deferral of STI
In 2014 (STI pay-out over 2013 performance) a mandatory and
a voluntary deferral of the yearly earned STI into DSM shares will
be introduced with a three-year vesting period (see also page

- Return on Capital Employed (ROCE)
- Energy Efficiency Improvement (EEI)

As a result, as from the 2013 LTI grant, four measures will apply
for the calculation of the vesting of the LTI performance shares.
Each of these four will count for 25 percent of total, with 50
percent of total on financial measures and 50 percent of total on
sustainability measures.

However, for the 2013 realization of the 2010 grant only TSR and
GHGE will be taken into account, and this will also be the case
(mutatis mutandis) for the 2014 and 2015 LTI realization (2011
and 2012 grant, respectively).

The LTI performance targets can be defined as follows:

- Total Shareholder Return (TSR)

This is used to compare the performance of different
companies’ stocks and shares over time. It combines share
price appreciation and dividends paid to show the total return
to shareholders. The relative TSR position reflects the market
perception of overall performance relative to a reference
group.

- Return on Capital Employed (ROCE)

This is the operating profit as a percentage of weighted
average capital employed.

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- Greenhouse-gas emissions (GHGE) reduction

The definition of greenhouse gases (GHG) according to the
Kyoto Protocol includes carbon dioxide (CO2), methane,
nitrous oxide (N2O), sulfur hexafluoride, hydrofluorocarbons
and perfluorocarbons. The scope for calculation of GHGE
reduction is as follows:

(I) DSM’s direct emissions (on site or from DSM assets)

mainly comprise CO2 and N2O (scope 1).

(II) DSM’s indirect emissions (emissions created on behalf
of DSM in the generation of electricity or the delivery of
energy via hot water or steam) relate to electricity from
the grid. DSM relies on local suppliers (scope 2).

- Energy Efficiency Improvement (EEI)

This is the reduction of the amount of energy that is used per
unit of product (known as energy efficiency) on a three-year
rolling average basis.

In determining the number of shares to be conditionally granted,
the Supervisory Board from the 2014 grant onwards takes into
account the face value of the DSM share instead of the
discounted value. This is in line with best practice and provides
total transparency to shareholders. The policy for the value of the
Long-Term Incentive is set as from 2014 at 100 percent of base
salary when on target and 150 percent in the case of excellent
performance. The number of conditionally granted shares is
set by dividing the policy level at maximum (150 percent of base
salary as from 2014) by a share price at the beginning of the year
of the conditional grant. The annual grant level will fluctuate as a
consequence of this mechanism. With the introduction of the
face value method, the actual number of shares granted will be
kept at a similar level as when calculated on the basis of the
discounted fair value method.

Granting date
As of 2014 the grant date of the conditional performance shares
will be the last working day of March.

TSR as a performance measure
DSM’s TSR performance is compared to the average TSR
performance of a set of predefined peer companies.

The TSR peer group currently consists of the following
companies:

AkzoNobel
Arkema
BASF
Christian Hansen
Clariant
DuPont

EMS Chemie Holding
Kerry
LANXESS
Lonza Group
Novozymes
Solvay

The TSR peer group reflects the relevant market in which DSM
competes for shareholder preference. It includes sector-specific
competitors that the Supervisory Board considers to be suitable
benchmarks for DSM.

The peer group is verified by the Supervisory Board each year
based on market circumstances (such as mergers and
acquisitions) that determine the appropriateness of the
composition of the performance peer group. No changes were
made to the TSR peer group for 2013.

GHGE reduction as a performance measure
GHGE reduction over volume-related revenues in percentage
points (over a 3-year period) is used as a basis for the vesting of
25 percent of the performance shares (versus 50 percent for the
2011, 2012 and 2013 LTI vesting).

ROCE and EEI as a performance measure
ROCE and EEI, too, each count for the vesting of 25 percent of
the performance shares.

Performance Incentive Zones
Up to and including the 2012 LTI grant, the number of shares
that become unconditional after three years ('vesting') is
determined on the basis of two equally weighted factors: DSM's
performance relative to the average TSR performance of the
peer group and DSM's GHGE reduction over volume-related
revenue. As from the 2013 grant (vesting in 2016) the vesting will
be based on four measures as outlined above.

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TSR vesting scheme

GHGE vesting scheme

Rank

% of

DSM GHGE reduction

% of

shares that

over volume-related

vest

revenue in % points

that vest

Notice period
Termination of employment by a member of the Managing Board
is subject to three months’ notice. A notice period of six months
will for legal reasons be applicable in the case of termination by
the company.

8-13

100

5.27

4.68

4.09

3.50

2.91

2.32

1.73

<1.73

100

Severance arrangement
There are no specific contractual exit arrangements for the
members of the Managing Board appointed before 1 January
2005. Should a situation arise in which a severance payment is
appropriate for these Board members, the Remuneration
Committee will recommend the terms and conditions. The
Supervisory Board will decide upon this, taking into account
usual practices for these types of situations, as well as applicable
laws and corporate governance requirements.

ROCE and EEI targets and vesting schemes are not being
disclosed given their business-sensitive nature.

The retention period for performance shares expires five years
after the three-year vesting period or at termination of
employment if this occurs earlier. The final TSR performance of
DSM versus its peers will be determined and validated by a bank
and audited by the external auditor at the end of the vesting
period.

Pensions
The members of the Managing Board are participants in the
Dutch pension fund Stichting Pensioenfonds DSM Nederland
(PDN). PDN operates similar pension plans for various DSM
companies. The pension scheme for the Managing Board is
equal to the pension scheme for the employees of DSM
Executive Services B.V. and DSM employees in the Netherlands.

Employment contracts
Term of employment
The employment contracts of the members of the Managing
Board appointed before 1 January 2005 have been entered into
for an indefinite period of time. Members of the Managing Board
appointed between 1 January 2005 and 1 January 2013 were
also offered an employment contract for an indefinite period of
time. Managing Board members appointed from outside the
company and after 1 January 2013 do not have a contract for
an indefinite period of time.

The employment contracts of newly appointed members of the
Managing Board (appointed after 1 January 2005) include an
exit-arrangement provision which is in accordance with the
Dutch corporate governance code (that is, a sum equivalent to
the fixed annual salary, or if this is manifestly unreasonable in the
case of dismissal during the first term of office, two times the
fixed annual salary).

Claw-back / change-of-control
As of January 2014 new legislation has entered into force
regarding the revision and claw-back of bonuses and profit-
sharing arrangements of board members of Dutch listed
companies. Part of this new legislation was already covered in
comparable rules of the Dutch corporate governance code and
consequently already included in the employment contracts of
the members of the Managing Board. This regards in particular
the possibility (1) to revise a bonus/incentive prior to payment, if
unaltered payment of the bonus/incentive would be
unreasonable and unfair, and (2) to claw back a bonus/incentive,
if payment took place on the basis of incorrect information on
the fulfilment of the bonus/incentive targets or the conditions for
payment of the bonus/incentive. In addition, it is enacted that in
the case of a change-of-control event a related increase in value
of the securities that have been granted to a board member as
part of his/her remuneration will be deducted from the
remuneration to be paid to the board member at the time of
selling these securities or when his/her board membership ends.

Term of appointment
Members of the Managing Board appointed before 1 January
2005 are appointed for an indefinite period of time. New
members of the Managing Board (appointed after 1 January
2005) are appointed for a period of four years. Newly appointed
members are eligible for reappointment by the General Meeting
of Shareholders after a period of four years.

Share ownership
The Supervisory Board will encourage the Managing Board to
hold shares in the company to emphasize their confidence in the
strategy and the company.

As of 2013 minimum shareholding guidelines for the members
of the Managing Board are applicable, equivalent to three times
the base salary in the case of the CEO and one time the base

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salary for the other MB members. These shareholdings can be
built up over five years.

Loans
DSM does not provide any loans to members of the Managing
Board.

The Supervisory Board has established the extent to which the
targets for 2013 were achieved. The realization of the 2013
financial STI targets has been reviewed by EY. Furthermore, EY
has reviewed the process with respect to the target realization
of the non-financial STI targets. The average realization
percentage was 55.5 percent of base salary.

Scenario analysis
The amended Dutch corporate governance code requires that
the Supervisory Board ‘shall analyze possible outcomes of the
variable income components and the effect on Managing Board
remuneration’. Within DSM this analysis is conducted at least
every three years.

See the next page for a tabular overview of the actual Short-Term
Incentive pay-out per individual Board member in 2013.

Performance shares in 2013
Performance shares were granted to the Managing Board on
7 May 2013. The following table shows the number of
performance shares granted to the individual Board members:

Managing Board remuneration in 2013

As part of its remuneration policy for the Managing Board, DSM
will benchmark its remuneration package against the packages
offered by the labor-market peer group once every three years.
Benchmarking of the Managing Board remuneration policy was
conducted in Q1 2011 and clearly showed that the remuneration
of the members of the Managing Board, particularly the variable
part, was well below the median at target level of the peer group.

Base salary in 2013
In view of the above-mentioned market comparison and given
the fact that the last salary increase dated from July 2011, the
base salaries of the Managing Board members were increased
with effect from 1 July 2013:
CEO: from € 840,000 to € 855,000 (+1.8 percent).
Other Managing Board members: from € 545,000 to € 560,000
(+2.8 percent).

Number of stock incentives granted

Feike Sijbesma

Stefan Doboczky

Nico Gerardu

Rolf-Dieter Schwalb

Stephan Tanda

Performance shares

2013

2012

24,000

16,000

31,000

20,000

For an overview of all granted and vested stock options and
performance shares see page 209 and page 210.

Revision and claw-back of bonuses
In 2013 no revision or claw-back of bonuses occurred.

Short-Term Incentives (STI) for 2013
STI targets are revised annually so as to ensure that they are
stretching but realistic. Considerations regarding the
performance targets are influenced by the operational and
strategic course taken by the company and are directly linked to
the company’s ambitions. The targets are determined at the
beginning of the year for each Board member.

Pensions in 2013
The members of the Managing Board are participants in the
Dutch pension fund Stichting Pensioenfonds DSM Nederland
(PDN). PDN operates similar pension plans for various DSM
companies. The pension scheme for the Managing Board is
equal to the pension scheme for the employees of DSM
Executive Services B.V. and DSM employees in the Netherlands.

Target STI level and pay-out
When they achieve all their targets, Managing Board members
receive an incentive of 50 percent of their annual base salary.
Outstanding performance can increase the STI level to 100
percent of the annual base salary.

As already mentioned in previous Integrated Annual Reports, a
new pension plan for DSM in the Netherlands has been agreed
with labor unions with effect from 1 January 2011. The plan,
which also applies to the Managing Board, comprises the
following elements:

The 2013 Integrated Annual Report presents the Short-Term
Incentives that have been earned on the basis of results achieved
in 2013. These Short-Term Incentives will be paid out in 2014.

• Career-average pay plan, with annual accrual of pension rights

(old-age pension) over base salary exceeding € 13,227
(reviewed annually) at a rate of 2 percent.

• Retirement age 66 years for accrual from 2012 onwards. Until
2011 the accrual was linked to a pensionable age of 65 years.

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Report by the Supervisory Board

Supervisory Board report
Remuneration policy for the Managing Board and
the Supervisory Board

• The scheme includes a partner pension as well as a disability

Short-Term Incentives

pension.

• Employee's contribution of 3.5 percent of base salary up to
€ 59,235 and 7.5 percent of pensionable salary above this
amount (reviewed annually).

• Collective defined contribution: indexation of pensions and

pension rights, depending on PDN's coverage ratio.
• For participants who started participating before 2006,

transitional arrangements related to the plan changes in 2006
apply as described in previous annual reports.

Purchasing shares
All members of the Managing Board have purchased shares in
the company to emphasize their confidence in the strategy and
the company. At 31 December 2013 the members of the
Managing Board together held 147,296 shares in Koninklijke
DSM N.V., compared to 139,012 at 31 December 2012. These
shares were bought through private transactions with private
funds, and obtained through vested performance shares.

Total remuneration
The remuneration and related costs of the Managing Board
(including pension costs and costs relating to the Dutch ‘crisis
levy’ of 16 percent imposed on employers for salary and bonus
payments made in the year to employees whose salary
exceeded € 150,000) amounted to € 9.6 million in 2013 (2012:
€ 6.6 million). The increase was mainly caused by costs in
relation to the early retirement of Mr. Gerardu to facilitate
succession planning for the Managing Board and the Dutch
crisis levy.

Overview of remuneration awarded to the Managing Board in
2013
The tables below show the remuneration awarded to the
Managing Board in 2013.

Fixed annual salary

in €

1 July 2013

1 July 2012

Feike Sijbesma

Stefan Doboczky

Nico Gerardu1

Rolf-Dieter Schwalb

Stephan Tanda

Dimitri de Vreeze2

855,000

560,000

492,500

840,000

545,000

1 Retired as of 1 September 2013
2 Board Member as of 1 September 2013

in €

20131

20122

Feike Sijbesma

Stefan Doboczky

Nico Gerardu3

Rolf-Dieter Schwalb

Stephan Tanda

Dimitri de Vreeze4

480,938

315,000

309,400

315,000

298,200

90,719

231,000

117,175

128,075

138,975

163,500

1 Based on results achieved in 2013 and therefore payable in 2014
2 Based on results achieved in 2012 and therefore payable in 2013
3 Retired as of 1 September 2013
4 Board Member as of 1 September 2013

Pensions

Pension costs (employer)

Accrued pension1

31 Dec.

in €

2013

2012

2013

2012

Feike Sijbesma

124,169

124,123

449,658

433,123

Stefan Doboczky

81,394

81,348

27,889

17,253

Nico Gerardu2

137.394

81,348

357.494

346,858

Rolf-Dieter Schwalb

Stephan Tanda

Dimitri de Vreeze3

81,394

17,240

81,348

74,887

92,879

134,074

64,252

82,244

1 Pensions built up in the Dutch Pension Plan. The accrual is linked to a retirement age

of 66 years.

2 Retired as of 1 September 2013
3 Board Member as of 1 September 2013

Long-Term Incentives (LTI)
For 2014, the number of conditionally granted ordinary shares
under the LTI program will be:
Chairman 24,000
Members 16,000

Loans
DSM did not provide any loans to members of the Managing
Board in 2013.

Adjustments to remuneration policy Managing Board in 2014
For 2014 no other adjustments will be implemented except the
introduction of the face value calculation method for the 2014
grant of performance shares.

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Supervisory Board remuneration in 2013

The remuneration package for the Supervisory Board comprises an annual fixed fee and an annual committee-membership fee.

The fixed fee for the Chairman of the Supervisory Board is € 70,000. The other members of the Supervisory Board each receive a
fixed fee of € 50,000. Audit Committee membership is awarded € 10,000 per member and € 12,500 for the Chairman. Nomination
Committee, Corporate Social Responsibility Committee and Remuneration Committee membership is awarded € 5,000 per
member and € 7,500 for the Chairman.

In addition, Supervisory Board members receive an intercontinental travel allowance of € 3,000 for each meeting that they attend
outside their continent of residence.

Overview of remuneration awarded to the Supervisory Board in 2013
The following table provides an overview of the remuneration awarded to the Supervisory Board in 2013.

Annual Supervisory Board remuneration in 2013

Fee in €

Supervisory

Audit

Corporate

Nomination

Remuneration

Total

Board

Committee

Social

Committee

Rob Routs, chairman

Ewald Kist, deputy chairman

Victoria Haynes

Pierre Hochuli

Eileen Kennedy

Pauline van der Meer Mohr

Claudio Sonder (retired

3 May 2013)1

Tom de Swaan

70,000

50,000

Responsibility

Committee

5,000

7,500

5,000

10,000

12,500

7,500

5,000

7,500

5,000

82,500

62,500

60,000

65,000

55,000

62,500

65,000

67,500

Total

420,000

42,500

22,500

17,500

520,000

1 Remuneration paid to Mr. Sonder covered the period up to his resignation and is specified in Note 9 Remuneration of key personnel in the Parent company financial statements

on page 208

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Report by the Supervisory Board

Supervisory Board report
Remuneration policy for the Managing Board and
the Supervisory Board

Shares and loans Supervisory Board

If any shares in DSM are held by Supervisory Board members, they serve as a long-term investment in the company. At year-end
2013 two members of the Supervisory Board held shares in Koninklijke DSM N.V.: Pierre Hochuli (7,210) and Victoria Haynes (300).
At year-end 2012 the members of the Supervisory Board held no shares in Koninklijke DSM N.V.

DSM does not provide any loans to its Supervisory Board members.

Heerlen, 25 February 2014

The Supervisory Board

Rob Routs, Chairman
Ewald Kist, Deputy Chairman
Victoria Haynes
Pierre Hochuli
Eileen Kennedy
Pauline van der Meer Mohr
Tom de Swaan

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Supervisory Board and Managing
Board

Supervisory Board

Ewald Kist (1944, m), deputy
chairman
First appointed: 2004. End of current term: 2016.
Position: retired; last position held: chairman of
the Managing Board of the ING Group.
Nationality: Dutch. Supervisory directorships and
other positions held: member of the Supervisory
Boards of Royal Philips Electronics N.V., Stage
Entertainment and Moody’s Investor Services.

Pierre Hochuli (1947, m)
First appointed: 2005. End of current term: 2017.
Position: retired; last position held: chairman of
the Board of Directors of Devgen N.V. Nationality:
Swiss. Supervisory directorships and other
positions held: member of the Board of Directors
of Domes of Silence Holdings Ltd.

Pauline van der Meer Mohr (1960, f)
First appointed: 2011. End of current term: 2015.
Position: President of the Executive Board of
Erasmus University Rotterdam. Nationality:
Dutch. Supervisory directorships and other
positions held: member of the Supervisory Board
of ASML N.V., chair of the Supervisory Board of
the Rotterdam School of Management, chair of
the Board of the Fulbright Center, director of the
Hollandsche Maatschappij van Wetenschappen,
member of the Economic Development Board of
Rotterdam and member of the Duisenberg
School of Finance Board.

Rob Routs (1946, m), chairman
First appointed: 2010. End of current term: 2014.
Position: retired; last position held: executive
director Downstream and member of the Board
of Royal Dutch Shell plc. Nationality: Dutch.
Supervisory directorships and other positions
held: chairman of the Supervisory Board of
Aegon N.V., member of the Supervisory Board of
Royal KPN N.V. (until April 2014), member of the
Board of Directors of Aecom Technology
Corporation, ATCO Group Ltd. and A.P. Moeller-
Maersk Group.

Victoria Haynes (1947, f)
First appointed: 2012. End of current term: 2016.
Position: retired; last position held: President and
CEO of the Research Triangle Institute
International. Nationality: American. Supervisory
directorships and other positions held: member
of the Board of Directors of PPG, Nucor and, as
of 2013, Axiall.

Eileen Kennedy (1947, f)
First appointed: 2012. End of current term: 2016.
Position: Professor of Nutrition Friedman School
of Nutrition Science and Policy at Tufts University
in Boston (USA). Nationality: American.
Supervisory directorships and other positions
held: Dean of Nutrition Friedman School of
Nutrition Science and Policy at Tufts University in
Boston (USA), Global Executive Director of the
International Life Sciences Institute, Washington
D.C. (USA), Deputy Under Secretary for
Research, Education and Economics at the US
Department of Agriculture.

Tom de Swaan (1946, m)
First appointed: 2006. End of current term: 2014.
Position: retired; last position held: member of
the Managing Board and Chief Financial Officer /
Chief Risk Officer ABN AMRO. Nationality: Dutch.
Supervisory directorships and other positions
held: non-executive director of the Board of
GlaxoSmithKline plc, chairman of the Board of
Zurich Insurance Group, chairman of the
Supervisory Board of Van Lanschot Bankiers,
chairman of the Board of Trustees of Netherlands
Cancer Institute-Antoni van Leeuwenhoek
Hospital and chairman Advisory Board
Rotterdam School of Management.

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Supervisory Board and Managing Board

Managing Board

Feike Sijbesma (1959, m), CEO/
chairman
Position: CEO/chairman of DSM’s Managing
Board since May 2007; member of DSM’s
Managing Board since July 2000.
Nationality: Dutch.
Supervisory directorships and other positions
held: member of the Supervisory Board of De
Nederlandsche Bank N.V. (Dutch Central Bank),
board member of CEFIC (European Chemical
Industry Council), member of the Supervisory
Board of the Dutch cancer institute/hospital NKI/
AVL, member of the CEO Council of the Chinese
Association for Friendship with Foreign Countries
e-mail: feike.sijbesma@dsm.com

Rolf-Dieter Schwalb (1952, m), CFO
Position: member of DSM’s Managing Board and
CFO since October 2006. End of current term:
2014.
Nationality: German.
Supervisory directorships and other positions
held: none.
e-mail: rolf-dieter.schwalb@dsm.com

Stephan Tanda (1965, m)
Position: member of DSM’s Managing Board
since May 2007. End of current term: 2015.
Nationality: Austrian.
Supervisory directorships and other positions
held: board member of EuropaBio (European
Biotechnology Industry Association), board
member of scienceindustries (Swiss association
for the chemical, pharmaceutical and biotech
industries) and BIO (US Biotechnology Industry
Organization).
e-mail: stephan.tanda@dsm.com

Stefan Doboczky (1967, m)
Position: member of DSM’s Managing Board
since May 2011. End of current term: 2015.
Nationality: Austrian.
Supervisory directorships and other positions
held: none.
e-mail: stefan.doboczky@dsm.com

Dimitri de Vreeze (1967, m)
Position: member of DSM’s Managing Board
since September 2013. End of current term:
2017.
Nationality: Dutch.
Supervisory directorships and other positions
held: board member of “Fonds voor de
topsport” (NOC*NSF; Dutch Olympic Committee
Fund for top sport).
e-mail: dimitri.vreeze-de@dsm.com

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What still went wrong in 2013

While DSM strives to continuously improve its performance in all
areas of its operations, sometimes things can still go wrong.

Despite its strong focus on Safety, Health and Environment
(SHE) and on learning from incidents, the company did not
succeed in lowering the number of serious incidents in 2013
compared to 2012. This emphasizes the need to continue
paying the utmost attention to SHE. See also: Safety and health
(page 51).

SHE incidents fall into five categories: safety, occupational
health, environment, containment and process safety. For each
category DSM has established detailed threshold criteria.
Examples are incidents leading to a fatality, occupational health
incidents leading to job transfer, incidents causing perceptible
damage to ecosystems or any SHE incident resulting in damage
of more than € 100,000.

The following overview summarizes the most important incidents
in 2013, across the three dimensions of People, Planet and
Profit. In line with DSM’s reporting policy, the company includes
in this overview some serious near-misses. These are incidents
that did not result in an injury, illness or damage, but had the
potential to do so and are therefore used as a learning
opportunity.

For the first time, the overview includes occurrences that are not
directly related to SHE but represent significant breaches of the
DSM Code of Business Conduct. See also: DSM Code of
Business Conduct (page 49).

People

- Despite DSM’s efforts to prevent safety incidents resulting in
serious hand injuries, five such incidents still occurred: at DSM
Sinochem Pharmaceuticals in Yushu (China), at DSM
Nutritional Products Animal Nutrition & Health Premix in North
America, at DSM Nutritional Products in Village Neuf (France),
at the newly acquired facilities of DSM Nutritional Products in
Mairinque (Brazil), and at DSM Nutritional Products Fortitech
(USA).

- At DSM Resins & Functional Materials in Filago (Italy), an

employee suffered second and third degree burns on his right
wrist, caused by hot resin.

- At DSM Pharmaceutical Products in Greenville (North

Carolina, USA), a contractor performing demolition work
moved a lift, which fell towards the glass wall of a building. No
injuries resulted, but it was a near-miss.

process, the change in the sequence of dosing into the reactor
led to an unidentified hazardous combination. The disc was
ruptured and the glass tube was broken, but fortunately there
were no injuries.

- At DSM Fibre Intermediates in Nanjing (China), an employee
was hit by a piece of steel falling from a height of 10 meters,
but was not injured.

- At DSM Nutritional Products Fortitech Premix EMEA in Isando
(South Africa), a contractor fell 8 meters from a concrete-slab
roof during the construction of a new warehouse. The injuries
were relatively minor, given the seriousness of the incident.
- At DSM Food Specialties in Germantown (Maryland, USA), a
liquid nitrogen supplier who was conducting a bulk unload
over-pressured the storage tank and piping, which caused a
cloud of N2 inside the manufacturing building. No injuries
resulted.

- In 2013 two serious traffic incidents occurred. At DSM

Nutritional Products Animal Nutrition & Health Sales in Latin
America, an employee got involved in a traffic incident while
returning from a business trip, resulting in injuries to his face,
arms and eye. At DSM Food Specialties in Delft (Netherlands),
an employee was involved in a road accident while returning
from a business trip during winter conditions. Fortunately this
incident did not lead to serious injuries.

- At DSM Sinochem Pharmaceuticals in Yushu (China), a dust

explosion occurred in the packaging area of the site.
Fortunately there were no injuries, but this incident has been
classified as a serious near-miss.

- At DSM Ahead in Sittard-Geleen (Netherlands), an employee
had his work restricted because his skin had been sensitized
by the substances he had been working with.

- An employee in Asia was sanctioned for sexual harassment.

Planet

- At DSM Pharmaceutical Products in Linz (Austria), a tanker hit
the rear of another truck, causing a fire and a spill of 6 tons of
maleic anhydride onto the highway. The spill was cleaned up
with no environmental consequences.

- At DSM Nutritional Products Manufacturing in Kingstree

(South Carolina, USA) a corn syrup train did not stop on time,
causing the last railcar to be pushed on top of the car stop.
This incident was classified as a near-miss, taking into account
the potential serious consequences.

Profit

- An employee who asked and accepted a personal loan from

- At DSM Resins & Functional Materials in Zhangbin (Taiwan),

an explosion occurred inside a reactor during the first trial of a
new recipe. Although none of the substances were new to the

a supplier was sanctioned because he had a conflict of
interest.

- DSM Sourcing procedures were not respected in the

purchase of a company car.

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What still went wrong in 2013

- Three potential new hires in Asia turned out to have submitted
falsified pay slips and other information about their previous
employers, in order to get a higher salary.

- At DSM Dyneema in Laiwu (China), a fire occurred during a
maintenance shutdown. The fire did not lead to injuries but
resulted in financial damage.

- DSM Engineering Plastics was confronted with a new

customer that did not pay for goods received. An on-site visit
in Italy showed that the customer had disappeared. The
money could not be recovered.

- At DSM Fibre Intermediates in Sittard-Geleen (Netherlands), a
fire occurred due to leakage of a pump. Nobody was injured,
but the fire resulted in financial damage.

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Information about the DSM share

Shares and listings
Ordinary shares in Koninklijke DSM N.V. are listed on the NYSE Euronext stock exchange in Amsterdam, the Netherlands (Stock
code 00982, ISIN code NL0000009827). Options on ordinary DSM shares are traded on the European Option Exchange in
Amsterdam, the Netherlands (Euronext.liffe). In the US a sponsored unlisted American Depositary Receipts (ADR) program is offered
by Deutsche Bank Trust Co. Americas (Cusip 780249108), with four ADRs representing the value of one ordinary DSM share.

Besides the ordinary shares, 44.04 million cumulative preference shares A (cumprefs A) are in issue, which are not listed on the
stock exchange; these have been placed with institutional investors. The cumprefs A have the same voting rights as ordinary shares,
as their nominal value of € 1.50 per share is equal to the nominal value of the ordinary shares. Transfer of the cumprefs A requires
the approval of the Managing Board, unless the shareholder is obliged to transfer his shares to a previous shareholder by virtue of
the law.

The average number of ordinary shares outstanding in 2013 was 172,183,369. All shares in issue are fully paid. On 31 December
2013 the company had 173,963,412 ordinary shares outstanding.

Development of the number of ordinary DSM shares

Balance at 1 January

Changes:

2013

2012

Issued

Repurchased

Outstanding

181,425,000

12,740,912

168,684,088

163,257,388

Reissue of shares in connection with exercise of option rights

Repurchase of shares

Dividend in the form of ordinary shares

(4,300,163)

4,300,163

3,049,509

1,266,945

(1,266,945)

(2,246,106)

2,246,106

2,377,191

Balance at 31 December

181,425,000

7,461,588

173,963,412

168,684,088

DSM share prices on Euronext Amsterdam (€ per ordinary share):

Highest closing price

Lowest closing price

At 31 December

Market capitalization at 31 December (€ million)1

1 Source: Bloomberg

59.75

43.93

57.16

10,370

46.29

36.33

45.79

8,307

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Information about the DSM share

Trading volume DSM shares 2013
x million shares as reported by NYSE Euronext

January

February

March

April

May

June

July

August

September

October

November

December

Geographical spread of DSM shares outstanding

in % (excl. cumprefs A)

2013

2012

Netherlands

United Kingdom

North America

Germany

Switzerland

France

Asia Pacific

Other countries

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Dividend program for shareholders of Koninklijke DSM N.V.
DSM offers shareholders the opportunity to receive dividends in cash or in the form of ordinary shares.

DSM proposes to the Annual General Meeting of Shareholders for the total dividend for the financial year 2013 to be € 1.65 per
ordinary share. An interim dividend of € 0.50 per ordinary share having been paid in August 2013, the final dividend would then
amount to € 1.15 per ordinary share. The dividend will be payable in cash or in the form of ordinary shares, at the option of the
shareholder. Dividend in cash will be paid after deduction of 15 percent Dutch dividend withholding tax. The ex-dividend date is 9
May 2014.

Managing Board holdings of DSM shares

Board member

Vested

Total

Vested

Total

31 December 2013

31 December 2012

purchased

performance

holdings

purchased

performance

holdings

with private

money

38,600

13,000

6,500

n.a.

8,000

140

35,900

23,600

n.a.

74,500

36,600

6,500

n.a.

21,556

29,556

140

money

33,000

10,000

5,000

8,556

8,000

24,500

16,000

20,000

13,956

57,500

26,000

5,000

28,556

21,956

66,240

81,056

147,296

64,556

74,456

139,012

Feike Sijbesma, CEO/chairman

Rolf-Dieter Schwalb, CFO

Stefan Doboczky

Nico Gerardu1

Stephan Tanda

Dimitri de Vreeze2

Total holdings

1 Retired as of 1 September 2013
2 Board Member as of 1 September 2013

At year-end 2013 two members of the Supervisory Board , Pierre Hochuli (7,210) and Victoria Haynes (300) held shares in Koninklijke
DSM N.V. At year-end 2012 the members of the Supervisory Board held no shares in Koninklijke DSM N.V.

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Information about the DSM share

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Consolidated financial statements

Summary of significant accounting
policies

Basis of preparation
DSM’s consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union. The accounting
policies applied by DSM comply with IFRS and the
pronouncements of the International Financial Reporting
Interpretation Committee (IFRIC) effective at 31 December 2013.

Consolidation
The consolidated financial statements include Royal DSM and
its subsidiaries as well as the proportion of DSM’s ownership of
joint ventures (together ‘DSM’ or ‘group’). A subsidiary is an
entity over which DSM has control. Control is the power to
govern the financial and operating policies of the entity so as to
obtain benefits from its activities. The financial data of
subsidiaries are fully consolidated. Non-controlling interests in
the group’s equity and profit and loss are stated separately. A
joint venture is an entity in which DSM holds an interest and
which is jointly controlled by DSM and one or more other
venturers under a contractual arrangement. Joint ventures are
included in the consolidated financial statements according to
the method of proportionate consolidation.

Subsidiaries and joint ventures are consolidated from the
acquisition date until the date on which DSM ceases to have
control or joint control, respectively. From the acquisition date
onwards, all intra-group balances and transactions and
unrealized profits or losses from intra-group transactions are
eliminated, with one exception: unrealized losses are not
eliminated if there is evidence of an impairment of the asset
transferred. In such cases a value adjustment for impairment of
the asset is recognized.

Business combinations
Business combinations are accounted for using the acquisition
method. The cost of an acquisition is measured as the aggregate
of the consideration transferred, including liabilities incurred
toward the former owners, measured at acquisition date fair
value, and the amount of any non-controlling interest in the
acquiree. Acquisition costs incurred are expensed.

As of the acquisition date identifiable assets acquired, liabilities
assumed and any non-controlling interest in the acquiree are
recognized separately from goodwill. Identifiable assets acquired
and the liabilities assumed are measured at acquisition date fair
value. For each business combination, DSM elects whether it
measures the non-controlling interest in the acquiree at fair value
or at the proportionate share of the acquiree’s identifiable net
assets.

Segmentation
Segment information is presented in respect of the group’s
operating segments about which separate financial information
is available that is regularly evaluated by the chief operating
decision maker. DSM has determined that the Nutrition, Pharma,
Performance Materials, Polymer Intermediates and Innovation
Center clusters represent reportable segments in addition to
Corporate Activities. The Managing Board decides how to
allocate resources and assesses the performance of the
clusters. Cluster performance is reported and reviewed down to
the level of operating profit before exceptional items. The clusters
are organized based on the type of products produced and the
nature of the markets served. The same accounting policies that
are applied for these consolidated financial statements are also
applied by the operating segments. Prices for transactions
between segments are determined on an arm’s length basis.
Segment results, assets and liabilities include items directly
attributable to a segment as well as those that can reasonably
and consistently be allocated. Selected information on a country
and regional basis is provided in addition to the information about
operating segments.

Foreign currency translation
The presentation currency of the group is the euro.

Each entity of the group records transactions and balance sheet
items in its functional currency. Transactions denominated in
currency other than the functional currency are recorded at the
spot exchange rates prevailing at the date of the transactions.
Monetary assets and liabilities denominated in a currency other
than the functional currency of the entity are translated at the
closing rates. Exchange differences resulting from the settlement
of these transactions and from the translation of monetary items
are recognized in the income statement.

Non-monetary assets denominated in a currency other than the
functional currency continue to be translated against the rate at
initial recognition and will not result in exchange differences.

On consolidation, the balance sheets of subsidiaries and joint
ventures whose functional currency is not the euro are translated
into euro at the closing rate. The income statements of these
entities are translated into euro at the average rates for the
relevant period. Goodwill paid on acquisition is recorded in the
functional currency of the acquired entity. Exchange differences
arising from the translation of the net investment in entities with
a functional currency other than the euro are recorded in Other
comprehensive income. The same applies to exchange
differences arising from borrowings and other financial
instruments in so far as they hedge the currency risk related to
the net investment. On disposal of an entity with a functional
currency other than the euro, the cumulative exchange

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

differences relating to the translation of the net investment are
recognized in the income statement.

Distinction between current and non-current
An asset (liability) is classified as current when it is expected to
be realized (settled) within 12 months after the balance sheet
date.

Intangible assets
Goodwill represents the excess of the cost of an acquisition over
DSM’s share in the net fair value of the identifiable assets and
liabilities of an acquired subsidiary, joint venture or associate.
Goodwill paid on acquisition of subsidiaries and joint ventures is
included in intangible assets. Goodwill paid on acquisition of
associates is included in the carrying amount of these
associates. Goodwill is not amortized but tested for impairment
annually and when there are indications that the carrying amount
may exceed the recoverable amount. A gain or loss on the
disposal of an entity includes the carrying amount of goodwill
relating to the entity sold.

Intangible assets acquired in a business combination are
recognized at fair value on the date of acquisition and
subsequently amortized over their expected useful lives, which
vary from 4 to 20 years.

Acquired licenses, patents and application software are carried
at historical cost less straight-line amortization and less any
impairment losses. The expected useful lives vary from 4 to 15
years. Costs of software maintenance are expensed when
incurred. Capital expenditure that is directly related to the
development of application software is recognized as an
intangible asset and amortized over its estimated useful life
(5-8 years).

Research costs are expensed when incurred. Development
expenditure is capitalized if the recognition criteria are met and
if it is demonstrated that it is technically feasible to complete the
asset, that the entity intends to complete the asset, that the entity
is able to sell the asset, that the asset is capable of generating
future economic benefits, that adequate resources are available
to complete the asset and that the expenditure attributable to
the asset can be reliably measured. Development expenditure is
amortized over the asset’s useful life.

Property, plant and equipment
Property, plant and equipment are measured at cost less
depreciation calculated on a straight-line basis and less any
impairment losses. Interest during construction is capitalized.
Expenditures relating to major scheduled turnarounds are
capitalized and depreciated over the period up to the next
turnaround.

Property, plant and equipment are systematically depreciated
over their estimated useful lives. The estimated remaining lives
of assets are reviewed every year, taking account of commercial
and technological obsolescence as well as normal wear and
tear. The initially assumed expected useful lives are in principle
as follows: for buildings 10-50 years, for plant and machinery
5-15 years, for other equipment 4-10 years. Land is not
depreciated.

An item of property, plant and equipment is derecognized upon
disposal or when no future economic benefits are expected to
arise from the continued use or the sale of the asset. Any gain
or loss arising on derecognition of the asset is recorded in the
income statement.

Leases
Finance leases, which transfer to the group substantially all the
risks and benefits incidental to ownership of the leased item, are
capitalized at inception of the lease at the fair value of the leased
property or, if lower, at the present value of the minimum lease
payments. All other leases are operating leases.

Lease payments for finance leases are apportioned to finance
charges and reduction of the lease liability so as to achieve a
constant rate of interest on the remaining balance of the liability.
Finance charges are included in interest costs. Capitalized
leased assets are depreciated over the shorter of the estimated
useful life of the asset or the lease term. Operating lease
payments are recognized as an expense over the lease term.

Associates
An associate is an entity over which DSM has significant
influence but no control, usually evidenced by a shareholding
that entitles DSM to between 20% and 50% of the voting rights.
Investments in associates are accounted for by the equity
method, which involves recognition in the income statement of
DSM’s share of the associate’s profit or loss for the year. DSM’s
interest in an associate is carried in the balance sheet at its share
in the net assets of the associate together with goodwill paid on
acquisition, less any impairment loss.

When DSM’s share in the loss of an associate exceeds the
carrying amount of the associate, including any other
receivables, the carrying amount is reduced to zero. No further
losses are recognized, unless DSM has responsibility for
obligations relating to the associate.

Other financial assets
Other financial assets comprise other participations, other
receivables and other deferred items.

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Other participations comprise equity interests in entities in which
DSM has no significant influence; they are accounted for as
available-for-sale securities. These other participations are
measured against fair value, with changes in fair value being
recognized in Other comprehensive income (Fair value reserve).
A significant or prolonged decline of the fair value of an equity
interest below cost represents an impairment, which is
recognized in the income statement. On disposal, the cumulative
fair value adjustments of the related other participations are
released from equity and included in the income statement. If a
reliable fair value cannot be established, the other participations
are recognized at cost. The proceeds from these other
participations and the gain or loss upon their disposal are
recognized in the income statement.

Loans and long-term receivables are measured at fair value upon
initial recognition and subsequently at amortized cost, if
necessary after deduction of a value adjustment for bad debts.
The proceeds from these assets and the gain or loss upon their
disposal are recognized in the income statement.

Impairment of assets
When there are indications that the carrying amount of a non-
current asset (an intangible asset or an item of property, plant
and equipment) may exceed the estimated recoverable amount
(the higher of its value in use and fair value less costs to sell), the
possible existence of an impairment loss is investigated. If an
asset does not generate largely independent cash flows, the
recoverable amount is determined for the cash generating unit
to which the asset belongs. In assessing the value in use, the
estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market interest
rates and the risks specific to the asset.

When the recoverable amount of a non-current asset is less than
its carrying amount, the carrying amount is impaired to its
recoverable amount and an impairment charge is recognized in
the income statement. An impairment loss is reversed when
there has been a change in estimate that is relevant for the
determination of the asset’s recoverable amount since the last
impairment loss was recognized.

All financial assets are reviewed for impairment. If there is
objective evidence of impairment as a result of one or more
events after initial recognition, an impairment loss is recognized
in the income statement. Impairment losses for goodwill and
other participations are never reversed.

Inventories
Inventories are stated at the lower of cost and net realizable
value. The first in, first out (FIFO) method of valuation is used
unless the nature of the inventories requires the use of a different

cost formula, in which case the weighted average cost method
is used. The cost of intermediates and finished goods includes
directly attributable costs and related production overhead
expenses. Net realizable value is determined as the estimated
selling price in the ordinary course of business, less the
estimated costs of completion and the estimated costs
necessary to make the sale. Products whose manufacturing cost
cannot be calculated because of joint cost components are
stated at net realizable value after deduction of a margin for
selling and distribution efforts.

Current receivables
Current receivables are measured at amortized cost, which
generally corresponds to nominal value, less an adjustment for
bad debts.

Current investments
Deposits held at call with banks with a remaining maturity
between 3 and 12 months are classified as current investments.
They are measured at amortized cost. Proceeds from these
deposits are recognized in the income statement.

Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand
and deposits held at call with banks with a maturity of less than
three months at inception. Bank overdrafts are included in
current liabilities. Cash and cash equivalents are measured at
nominal value.

Non-current assets and disposal groups held for sale
Non-current assets and disposal groups (assets and liabilities
relating to an activity that is to be sold) are classified as ‘held for
sale’ if their carrying amount is to be recovered principally
through a sales transaction rather than through continuing use.
The reclassification takes place when the assets are available for
immediate sale and the sale is highly probable. These conditions
are usually met as from the date on which a first draft of an
agreement to sell is ready for discussion. Non-current assets
held for sale and disposal groups are measured at the lower of
carrying amount and fair value less costs to sell. Non-current
assets held for sale are not depreciated or amortized. For the
sake of clarity, non-current assets and disposal groups that will
be contributed to joint ventures are reported separately from
other assets and liabilities held for sale.

Discontinued operations
Discontinued operations comprise those activities that were
disposed of during the period or which were classified as held
for sale at the end of the period, and represent a separate major
line of business or geographical area that can be clearly
distinguished for operational and financial reporting purposes.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

Royal DSM Shareholders’ equity
DSM’s ordinary shares and cumulative preference shares are
classified as Royal DSM Shareholders’ equity. The price paid for
repurchased DSM shares (treasury shares) is deducted from
Royal DSM Shareholders’ equity until the shares are cancelled
or reissued. Dividend to be distributed to holders of cumulative
preference shares is recognized as a liability when the
Supervisory Board approves the proposal for profit distribution.
Dividend to be distributed to holders of ordinary shares is
recognized as a liability when the Annual General Meeting of
Shareholders approves the profit appropriation.

Provisions
Provisions are recognized when all of the following conditions
are met: 1) there is a present legal or constructive obligation as
a result of past events; 2) it is probable that a transfer of
economic benefits will settle the obligation; and 3) a reliable
estimate can be made of the amount of the obligation.

The probable amount required to settle long-term obligations is
discounted if the effect of discounting is material. Where
discounting is used, the increase in the provision due to the
passage of time is recognized as interest costs. However, the
interest costs relating to pension obligations are included in
pension costs.

Borrowings
Borrowings are initially recognized at cost, being the fair value of
the proceeds received, net of transaction costs. Subsequently,
borrowings are stated at amortized cost using the effective
interest method. Amortized cost is calculated taking into account
any discount or premium. Interest expenses are accrued and
recorded in the income statement for each period.

Where the interest rate risk relating to a long-term borrowing is
hedged, and the hedge is regarded as effective, the carrying
amount of the long-term loan is adjusted for changes in fair value
of the interest component of the loan.

Other current liabilities
Other current liabilities are measured at amortized cost, which
generally corresponds to the nominal value.

Revenue recognition
Revenue from the sale of goods is recognized when the
significant risks and rewards of ownership are transferred to the
buyer. Net sales represent the invoice value less estimated
rebates and cash discounts, and excluding indirect taxes.

Royalty income is recognized in Other operating income or in Net
sales on an accrual basis in accordance with the substance of
the relevant agreements. Income that relates to the sale or out-

licensing of technologies or technological expertise is recognized
in profit or loss as of the effective date of the respective
agreement if all rights relating to the technologies and all
obligations resulting from them have been relinquished under the
contract terms. However, if rights to the technologies continue
to exist or obligations resulting from them have yet to be fulfilled,
the payments received are deferred accordingly. Interest income
is recognized on a time-proportion basis using the effective
interest method. Dividend income is recognized when the right
to receive payment is established.

Government grants
Government grants are recognized at their fair value if there is
reasonable assurance that the grant will be received and all
related conditions will be complied with. Cost grants are
recognized as income over the periods necessary to match the
grant on a systematic basis to the cost that it is intended to
compensate. If the grant is an investment grant, its fair value is
initially recognized as deferred income in Other non-current
liabilities and then released to the income statement over the
expected useful life of the relevant asset by equal annual
amounts.

Share-based compensation
The costs of option plans are measured by reference to the fair
value of the options on the date on which the options are
granted. The fair value is determined using the Black-Scholes
model, taking into account market conditions linked to the price
of the DSM share. The costs of these options are recognized in
the income statement (Employee benefits costs) during the
vesting period, together with a corresponding increase in equity
in the case of equity settled options or Other non-current
liabilities in the case of cash-settled options (Share Appreciation
Rights). No expense is recognized for options that do not
ultimately vest, except for options whose vesting is conditional
upon a market condition, which are treated as vesting,
irrespective of whether or not the market condition is satisfied,
provided that all other performance conditions are met.

Performance shares are granted free of charge and vest after
three years on the achievement of previously determined targets.
The cost of performance shares is measured by reference to the
fair value of the DSM shares on the date on which the
performance shares were granted and is recognized in the
income statement (Employee benefits costs) during the vesting
period, together with a corresponding increase in equity.

Emission rights
DSM is subject to legislation encouraging reductions in
greenhouse-gas emissions and has been awarded emission
rights (principally CO2 emission rights) in a number of
jurisdictions. Emission rights are reserved for meeting delivery

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obligations and are recognized at cost (usually zero). Revenue is
recognized when surplus emission rights are sold to third parties.
When actual emissions exceed the emission rights available to
DSM, a provision is recognized for the expected additional costs.

Exceptional items
Exceptional items relate to material non-recurring items of
income and expense arising from circumstances such as:

- write-downs of inventories to net realizable value or of

property, plant and equipment to recoverable amount, as well
as reversals of such write-downs

- acquisition costs incurred and integration costs in the first year

after a business combination

- non-recurring inventory value adjustments related to business

combinations

- restructurings of the activities of an entity
- releases of provisions
- disposals of property, plant and equipment
- disposals of associates or other financial assets
- book results on discontinued operations
- onerous contracts
- litigation settlements

To provide a better understanding of the underlying results of the
period, exceptional items are reported separately if the
aggregate amount of the event or project exceeds € 10 million.

Income tax expense
Income tax expense is recognized in the income statement
except to the extent that it relates to an item recognized directly
within Other comprehensive income or Shareholders’ equity.

Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted at the balance sheet date,
and any adjustment to tax payable in respect to previous years.
Deferred tax assets and liabilities are recognized for the
expected tax consequences of temporary differences between
the carrying amount of assets and liabilities and their tax base.
Deferred tax assets and liabilities are measured at the tax rates
and under the tax laws that have been enacted or substantially
enacted at the balance sheet date and are expected to apply
when the related deferred tax assets are realized or the deferred
tax liabilities are settled. Deferred tax assets, including assets
arising from losses carried forward, are recognized to the extent
that it is probable that future taxable profits will be available
against which the deductible temporary differences and unused
tax losses can be utilized. Deferred tax assets and liabilities are
stated at nominal value.

Deferred taxes are not provided for the following temporary
differences: the initial recognition of goodwill, the initial

recognition of assets or liabilities that affect neither accounting
nor taxable profit, and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in
the foreseeable future. Deferred tax assets and deferred tax
liabilities are offset and presented net when there is a legally
enforceable right to set off, and the assets and liabilities relate to
income taxes levied by the same taxation authority.

Financial derivatives
The group uses financial derivatives such as foreign currency
forward contracts and interest rate swaps to hedge risks
associated with foreign currency and interest rate fluctuations.
Financial derivatives are initially recognized in the balance sheet
at fair value and subsequently measured at their fair value on
each balance sheet date. Changes in fair value are recognized
in the income statement unless cash flow hedge accounting or
net investment hedge accounting is applied.

Changes in the fair value of financial derivatives designated and
qualifying as cash flow hedges are recognized in Other
comprehensive income (Hedging reserve) to the extent that the
hedge is effective. Upon recognition of the related asset or
liability the cumulative gain or loss is transferred from the
Hedging reserve and included in the carrying amount of the
hedged item if it is a non-financial asset or liability. If the hedged
item is a financial asset or liability, the cumulative gain or loss is
transferred to profit or loss. Changes in the fair value of financial
derivatives designated and qualifying as net investment hedges
are recognized in Other comprehensive income to the extent that
the hedge is effective and the change in fair value is caused by
changes in currency exchange rates. Accumulated gains and
losses are released from Other comprehensive income and are
included in the income statement when the net investment is
disposed of. Changes in the fair value of financial derivatives
designated and qualifying as fair value hedges are immediately
recognized in the income statement, together with any changes
in the fair value of the hedged assets or liabilities attributable to
the hedged risk.

Pensions and other post-employment benefits
DSM has both defined contribution plans and defined benefit
plans. In the case of defined contribution plans, obligations are
limited to the payment of contributions which are recognized as
Employee benefits costs. In the case of defined benefit plans,
the aggregate of the value of the defined benefit obligation and
the fair value of plan assets for each plan is recognized as a net
defined benefit liability or asset. Defined benefit obligations are
determined using the projected unit credit method. Plan assets
are recognized at fair value. If the fair value of plan assets
exceeds the present value of the defined benefit obligation, a net
asset is only recognized to the extent that the asset is available
for refunds to the employer or for reductions in future

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

contributions to the plan. Defined benefit pension costs consist
of three elements: service costs, net interest, and
remeasurements. Service costs are part of Employee benefits
costs and consist of current service costs, past service costs
and results of plan settlements. Net interest is part of Other
financial income and expense and is determined on the basis of
the value of the net defined benefit asset or liability at the start of
the year and the interest on high quality corporate bonds.
Remeasurements are actuarial gains and losses, the return on
plan assets excluding amounts included in net interest and
changes in the effect of the asset ceiling. These remeasurements
are recognized in Other comprehensive income as they occur
and not recycled through profit or loss at a later stage.

Effect of new accounting standards
The International Accounting Standards Board (IASB) and IFRIC
have issued new standards, amendments to existing standards
and interpretations, some of which are not yet effective or have
not yet been endorsed by the European Union. Those that are
relevant for DSM are discussed below. DSM has introduced
standards and interpretations that became effective in 2013.

The following new or amended standards became effective in
2013.

Amendments to IAS 1, ‘Presentation of Items of Other
Comprehensive Income’, which changed the grouping of items
presented in Other comprehensive income into items that will be
reclassified (or ‘recycled’) to profit or loss at a future point in time
and items that will never be reclassified. The amendment affects
presentation only and had no impact on DSM’s financial position
or performance in 2013.

Amendments to IAS 19, ‘Employee Benefits’, which, among
other things, resulted in the removal of the corridor mechanism
and the termination of the application of the expected return on
plan assets. The new requirements have been applied from
1 January 2013 onwards and had a limited impact on DSM’s
financial position and performance in 2013. Information on the
related changes is provided in note 23: Post-employment
benefits.

IFRS 13, 'Fair Value Measurement', became the single source
of guidance in IFRS for all fair value measurements. The standard
is effective from 1 January 2013. The impact of this standard on
DSM’s financial position and performance was not material
because the standard principally clarified requirements that
already existed.

The following amended standard was adopted early and applied
in 2013.

Amendments to IAS 36, ‘Impairment of assets’, which remove
the unintended consequences of IFRS 13 on the disclosures
required under IAS 36. In addition, these amendments require
disclosure of the recoverable amounts for the assets or CGUs
for which an impairment loss has been recognized or reversed
during the period. These amendments affect disclosure only and
had no impact on DSM’s financial position or performance in
2013.

Effect of forthcoming accounting standards not yet applied
The following new standards are not yet being applied by DSM.

Amendments to IAS 32, ‘Financial Instruments:
Presentation' address the offsetting of financial assets and
financial liabilities and clarify the meaning of ‘currently has a
legally enforceable right to set-off’ and the criteria for non-
simultaneous settlement mechanisms of clearing houses to
qualify for offsetting. The standard will be applied for annual
periods beginning on 1 January 2014 and is not expected to
have a material impact on DSM’s financial position or
performance.

IFRS 10, 'Consolidated Financial Statements', establishes a
single control model that applies to all entities, including special
purpose entities. DSM is in the process of verifying which entities
meet the new criteria for control and therefore have to be
consolidated. The standard will be applied for annual periods
beginning on 1 January 2014 and is not expected to have a
material impact on DSM’s financial position or performance.

IFRS 11, 'Joint Arrangements', removes the option to apply
proportionate consolidation for joint ventures and mandates the
use of the equity method for jointly controlled entities that meet
the new definition of a joint venture. The introduction of this new
standard will change DSM’s financial position and reported
performance because the equity method will replace
proportionate consolidation for these entities. Information on
joint ventures that are affected is provided in note 27: Interests
in joint ventures. The standard will be applied for annual periods
beginning on 1 January 2014.

IFRS 12, 'Disclosure of Interests in Other Entities', provides
disclosure requirements with respect to interests in subsidiaries,
joint arrangements, associates and structured entities. It is the
complement of the two new standards discussed in the
preceding paragraphs and will be applied at the same time as
these standards.

New IFRIC interpretations are not expected to have a material
effect on the consolidated financial statements.

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Consolidated statements

Consolidated income statement for the year ended 31 December 2013

x € million

Notes

Continuing operations

Discontinued

Total

Before

Exceptional

Total

operations

exceptional

items

(note 6)

Net sales

Cost of sales

Gross margin

Marketing and sales

Research and development

General and administrative

Other operating income

Other operating expense

Operating profit

Interest costs

Other financial income and expense

Share of the profit of associates

Profit before income tax expense

Income tax expense

Profit for the year

Reclassification of the net result from activities disposed of

Total

Of which:

- Profit attributable to non-controlling interests

- Net profit attributable to equity holders of Koninklijke DSM N.V.

Net profit attributable to equity holders of Koninklijke DSM N.V.

Dividend on cumulative preference shares

9,051

(6,565)

2,486

(987)

(351)

(458)

(34)

(1,737)

749

(126)

(16)

(2)

605

(108)

497

(2)

499

(10)

(12)

(18)

(74)

(39)

(92)

(104)

(4)

(108)

(77)

(160)

(237)

Net profit available to holders of ordinary shares

489

(237)

252

Earnings per share (in € ) (see note 16 Earnings per ordinary share):

- Basic

- Diluted

2.39

2.38

9,051

(6,577)

2,474

(987)

(369)

(532)

132

(73)

567

(505)

(24)

(162)

(25)

(15)

9,618

(7,082)

2,536

(1,011)

(531)

(557)

144

(88)

(1,829)

(214)

(2,043)

645

(130)

(16)

(2)

497

(77)

420

(160)

260

(2)

262

(10)

(152)

(151)

160

493

(130)

(16)

(2)

345

(76)

269

(2)

271

(10)

261

1.52

1.51

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

Consolidated income statement for the year ended 31 December 20121

x € million

Notes

Continuing operations

Discontinued

Total

Before

Exceptional

Total

operations

exceptional

items

(note 6)

Net sales

Cost of sales

Gross margin

Marketing and sales

Research and development

General and administrative

Other operating income

Other operating expense

Operating profit

Interest costs

Other financial income and expense

Share of the profit of associates

Profit before income tax expense

Income tax expense

Profit for the year

Reclassification of the net result from activities disposed of

Total

Of which:

- Profit attributable to non-controlling interests

- Net profit attributable to equity holders of Koninklijke DSM N.V.

Net profit attributable to equity holders of Koninklijke DSM N.V.

Dividend on cumulative preference shares

8,588

(6,220)

2,368

(924)

(372)

(457)

(32)

(1,717)

651

(117)

544

(95)

449

439

(10)

(21)

(2)

(57)

(94)

(150)

(171)

(133)

(16)

(149)

8,588

(6,241)

2,347

(924)

(374)

(514)

(126)

(1,867)

480

(117)

373

(57)

316

(16)

300

290

(10)

Net profit available to holders of ordinary shares

429

(149)

280

Earnings per share (in € ) (see note 16 Earnings per ordinary share):

- Basic

- Diluted

1.79

1.77

543

(507)

(28)

(9)

(38)

(12)

(75)

(39)

(28)

(12)

9,131

(6,748)

2,383

(952)

(383)

(552)

(138)

(1,942)

441

(117)

334

(46)

288

278

(10)

268

1.62

1.61

1 Restated due to retrospective application of amendments to IAS 19: ‘Employee Benefits’ which are explained in note 23: Post-employment benefits. This restatement also impacts
the Consolidated statement of comprehensive income, the Consolidated balance sheet, the Consolidated statement of changes in equity and the Consolidated cash flow statement
for 2012 as well as the Parent company income statement for that year.

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Consolidated statement of comprehensive income

in € million

2013

2012

Items that will not be reclassified to profit or loss

Remeasurements of defined benefit pension plans

(123)

Items that may subsequently be reclassified to profit or loss

Exchange differences on translation of foreign operations

- Change for the year

- Reclassification adjustment to the income statement related to discontinued operations

Fair value reserve

- Change for the year

- Reclassification adjustment to the income statement

Hedging reserve

- Change for the year

- Reclassification adjustment to the income statement

- Reclassification adjustment to the shares in subsidiaries

Other comprehensive income, before tax

Income tax expense

Other comprehensive income, net of tax

Profit for the year

Total comprehensive income

(248)

(28)

(10)

(171)

(14)

(185)

269

(27)

(8)

(45)

(180)

(133)

288

155

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

Consolidated balance sheet as at 31 December

x € million

Assets

Non-current assets

Intangible assets

Property, plant and equipment

Deferred tax assets

Associates

Other financial assets

Current assets

Inventories

Trade receivables

Other current receivables

Financial derivatives

Current investments

Cash and cash equivalents

Assets held for sale

Total

Equity and liabilities

Equity

Shareholders' equity

Non-controlling interests

Non-current liabilities

Deferred tax liabilities

Employee benefits liabilities

Provisions

Borrowings

Other non-current liabilities

Current liabilities

Employee benefits liabilities

Provisions

Borrowings

Financial derivatives

Trade payables

Other current liabilities

Liabilities held for sale

Total

Notes

2013

2012

2,705

3,822

369

179

7,142

1,675

1,526

116

126

776

4,238

637

4,875

12,017

5,908

190

6,098

376

326

1,750

2,627

843

190

1,328

601

3,062

230

3,292

12,017

2,793

3,811

340

141

7,125

1,803

1,569

230

1,121

4,797

4,841

11,966

5,874

168

6,042

236

388

125

1,922

2,765

642

299

1,453

628

3,145

3,159

11,966

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Consolidated statement of changes in equity (note 15)

x € million

Treasury

Other

Retained earnings

Total

Non-

capital

premium

reserves

Actuarial

Other

gains and

losses

controlling

interests

Total

equity

Balance at 1 January 2012

338

489

(686)

274

5,281

5,784

190

5,974

Dividend

Options / performance shares granted

Options / performance shares

exercised / cancelled and SARs cancelled

Proceeds from reissued shares

Change in DSM's share in subsidiaries

Total comprehensive income

207

(13)

(254)

(25)

(254)

182

(44)

(90)

278

144

(48)

(302)

182

155

Balance at 31 December 2012

338

489

(479)

235

(2)

5,293

5,874

168

6,042

Dividend

Options / performance shares granted

Options / performance shares

exercised / cancelled and SARs cancelled

Proceeds from reissued shares

Change in DSM's share in subsidiaries

Repurchase of shares

Total comprehensive income

258

(73)

(24)

(271)

268

(73)

(5)

(276)

268

(73)

(196)

271

(6)

Balance at 31 December 2013

338

489

(294)

5,327

5,908

190

6,098

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

Consolidated cash flow statement (note 25)1

x € million

Operating activities

Profit for the year

Income tax

Profit before income tax expense

Share of the profit of associates

Net finance costs

Exceptional items

Operating profit

Depreciation, amortization and impairments

Earnings before interest, tax, depreciation and amortization (EBITDA)

Adjustments for:

- (Gain) or loss from disposals

- Restructuring and other costs

- Change in provisions

- Defined benefit plans

Interest received

Interest paid

Income tax received

Income tax paid

Other

Changes, excluding working capital

Operating cash flow before changes in working capital

Changes in operating working capital:

- Inventories

- Trade receivables

- Trade payables

Changes in other working capital

Changes in working capital

Cash provided by operating activities

2013

269

345

142

270

7592

555

1,314

(338)

976

(87)

889

(18)

(45)

(75)

(21)

(159)

(203)

(89)

(4)

(95)

(13)

(74)

(13)

2012

288

334

(2)

109

194

635

474

1,109

(362)

747

(17)

730

(13)

(56)

(68)

(28)

(165)

103

(196)

(79)

(34)

(140)

(16)

(1)

1 The presentation of the cash flow statement has been amended to better reflect the cash flow consequences of EBITDA and exceptional items reported in operating activities.
This does not change the total cash provided by operating activities but the allocation of changes to individual line items. The presentation for the year 2012 has been aligned.
2 This consists of the operating profit from continuing operations before exceptional items (€ 749 million) and discontinued operations (€ 10 million; see also Assets and liabilities

held for sale in note 2 Change in the scope of the consolidation).

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Consolidated cash flow statement (note 25) continued

x € million

Cash provided by operating activities

2013

889

2012

730

Investing activities

Capital expenditure for:1

- Intangible assets

- Property, plant and equipment

Proceeds from disposal of property, plant and equipment

Acquisition of subsidiaries and associates

Cash from net investment hedge

Proceeds from disposal of subsidiaries and businesses

Change in fixed-term deposits

Other financial assets:

- Capital payments and acquisitions

- Change in loans granted

- Proceeds from disposals

Cash used in investing activities

Financing activities

Capital payments from/to non-controlling interests

Loans taken up

Repayment of loans

Change in debt to credit institutions

Repayment / issue of commercial paper

Dividend paid

Proceeds from reissued shares

Repurchase of shares

Cash used in / from financing activities

Change in cash and cash equivalents

Cash and cash equivalents at 1 January

Exchange differences relating to cash held

Cash and cash equivalents at 31 December

1 An amount of € 37 million included in capital expenditure was funded by customers

(85)

(650)

(509)

(30)

(9)

381

(152)

(89)

(150)

(160)

145

(73)

(82)

(604)

(1,262)

(12)

(19)

(1,170)

(1,856)

(114)

300

(210)

(62)

(343)

1,121

(2)

776

171

(955)

2,058

1,121

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

Notes to the consolidated financial statements of Royal DSM

1 General information

Unless stated otherwise, all amounts are in € million.

In conformity with article 402, Book 2 of the Dutch Civil Code, a condensed income statement is included in the separate financial
statements of the parent company.

A list of DSM participations has been filed with the Chamber of Commerce for Limburg (Netherlands) and is available from the
company upon request. The list can also be downloaded from the company’s website.

The preparation of financial statements requires estimates and judgments that affect the reported amounts of assets and liabilities,
revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements. The
policies that management considers to be the most important to the presentation of the financial condition and results of operations
are discussed in the relevant notes. The same holds for the issues that require management judgments or estimates about matters
that are inherently uncertain. Management cautions that future events often vary from forecasts and that estimates routinely require
adjustment. Areas of judgment that have the most significant effect on the amounts recognized in the financial statements relate
to the categorization of certain items as 'exceptional', the identification of cash generating units and the classification of activities
as 'held for sale' and 'discontinued operations'.

Key assumptions and estimates that need to be made by management relate to the useful lives of non-current assets (notes 8 and
9), the establishment of provisions for retirement and other post-employment benefits (note 23), the recognition and measurement
of income taxes (note 7) and the determination of fair values for financial instruments (note 22) and for share-based compensation
(note 26). Estimates are based on historical quoted market prices, experience and assumptions that are considered reasonable
under the circumstances.

Exchange rates
The currency exchange rates that were used in preparing the consolidated statements are listed below for the most important
currencies.

1 euro =

Exchange rate at balance sheet date

Average exchange rate

US dollar

Swiss franc

Pound sterling

Brazilian real

Chinese renminbi

2013

2012

2013

2012

1.38

1.23

0.84

3.22

8.40

1.32

1.21

0.82

2.69

8.29

1.33

1.23

0.85

2.87

8.23

1.29

1.21

0.81

2.51

8.11

Presentation of consolidated income statement
DSM presents expenses in the consolidated income statement in accordance with their function. This allows the presentation of
gross margin on the face of the income statement, which is a widely used performance measure in the industry. The composition
of the costs allocated to the individual functions is explained below.

Cost of sales encompasses all manufacturing costs (including raw materials, employee benefits, and depreciation and
amortization) related to goods and services captured in net sales. They are measured at their actual cost based on FIFO, or weighted
average cost.

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Marketing and sales relates to the selling and marketing of goods and services, and also includes all costs that are directly related
to the sale of goods, but that are not originated by the manufacturing of the goods (e.g. freight).

Research and development consists of:

- research, which is defined as original and planned investigation undertaken with the prospect of gaining new scientific or technical

knowledge and understanding;

- development, which is defined as the application of research findings or other knowledge to a plan or design for the production
of new or substantially improved materials, devices, products, processes, systems or services before the start of commercial
production or use.

General and administrative relates to the strategic and governance role of the general management of the company as well as
the representation of DSM as a whole in the financial, political or business community. It also relates to business support activities
of staff departments that are not directly related to the other functional areas.

2 Change in the scope of the consolidation

Acquisitions

2013
On 5 April 2013 DSM obtained control of Tortuga Companhia Zootécnica Agrária Z.A. (Tortuga) by acquiring 100% of the shares
in an all cash transaction. From that date onwards the financial statements of Tortuga have been consolidated by DSM and reported
in the Nutrition segment. The acquisition will strengthen and complement DSM’s position in nutritional supplements for animal
nutrition. Tortuga is a Brazilian company with a leading position in nutritional supplements with a focus on pasture raised beef and
dairy cattle. Tortuga has annual sales of approximately € 385 million and employs about 1,050 people. In accordance with IFRS 3
the purchase price of Tortuga needs to be allocated to identifiable assets and liabilities acquired. Goodwill paid for the acquisition
of Tortuga amounted to € 152 million. The goodwill primarily resulted from buyer specific synergies due to DSM’s unique value
chain proposition in animal nutrition and from the skills and knowledge of the workforce.

On 1 July 2013 DSM obtained control of Unitech Industries Limited (Unitech), by acquiring 100% of the shares in an all cash
transaction. From that date onwards the financial statements of Unitech have been consolidated by DSM and reported in the
Nutrition segment. Unitech, based in Auckland (New Zealand), was founded in 1970 and focuses primarily on the manufacture and
sale of micronutrient premixes and macronutrient blends for the rapidly growing Asian human nutrition and health markets. The
acquisition of Unitech helps DSM to expand its value chain presence, geographical reach and customer base in Asia. Unitech has
annual sales of approximately € 30 million and employs about 100 people. In accordance with IFRS 3 the purchase price of Unitech
needs to be allocated to identifiable assets and liabilities acquired. Goodwill paid for the acquisition of Unitech amounted to € 16
million. The goodwill primarily resulted from buyer specific synergies due to DSM’s broad portfolio of micronutrients, science-based
expertise, and customer relationships with multinational and regional infant nutrition and food customers.

Up to one year from the acquisition date the initial accounting for business combinations needs to be adjusted to reflect additional
information that has been received about facts and circumstances that existed at the acquisition date and would have affected the
measurement of amounts recognized as of that date. As a result of such adjustments the values of assets and liabilities recognized
may change in the one year period from the acquisition date.

On 18 December 2012 DSM obtained control of Fortitech, Inc. In 2013 the purchase price allocation for Fortitech was completed.
The value of assets and liabilities was adjusted to fair value and the final goodwill was established at € 265 million.

The impact of all acquisitions made in 2013, including adjustments to the initial accounting for Fortitech, on DSM's consolidated
balance sheet, at the date of acquisition, is summarized in the following table.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

2013

Tortuga

Unitech

Fortitech (final PPA)1 Other acquisitions

Total

Assets

Intangible assets

Property, plant and equipment

Other non-current assets

Inventories

Receivables

Cash and cash equivalents

Book

value

Fair

value

Book

value

Fair

value

Book

value

Fair

value

Change

in fair

value

Book

value

Fair

value

Fair

value

107

201

200

(1)

320

116

Total assets

224

355

133

342

209

629

Non-controlling interests

Liabilities

Non-current liabilities

Current liabilities

Total non-controlling interests and

liabilities

Net assets

Acquisition price (in cash)

Acquisition price (payable)

Consideration

Goodwill

Goodwill available for tax purposes

(included in the above)

Acquisition costs recognized in

exceptional items2

Contingent liabilities included in fair value

130

142

157

198

350

152

(10)

133

209

140

474

(1)

265

(141)

111

129

240

389

421

424

152

1 Due to the fact that Fortitech was acquired just before the end of the year in 2012, the unadjusted balance sheet of Fortitech in accordance with local GAAP was consolidated
at the end of 2012. Sales and profit or loss between the acquisition date and the end of 2012 were immaterial. In 2013 the purchase price allocation for Fortitech was performed
and fair values were allocated to the acquired assets and liabilities. The required changes are presented in the table above. These changes resulted in a € 141 million reduction
in goodwill, which was the net effect of additions to other intangible assets for an amount of € 200 million, to property plant and equipment for € 6 million, to other assets for € 3
million and to deferred tax liabilities for € 79 million, and a reduction in current liabilities of € 11 million. These changes were recognized at the beginning of 2013 and the closing
balance sheet of 2012 was not restated because the changes were deemed not material.
Included in General and administrative: other costs

The acquisition of Tortuga contributed € 242 million to net sales in 2013. If the acquisition had occurred on 1 January 2013,
additional net sales would have been approximately € 325 million. The acquisition contributed € 42 million to EBITDA; this would
have been approximately € 55 million if the acquisition had occurred on 1 January 2013. Tortuga related exceptional items
amounted to € 17 million before tax (see note 6: Exceptional items).

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The acquisition of Unitech contributed € 13 million to net sales in 2013. If the acquisition had occurred on 1 January 2013, additional
net sales would have been approximately € 26 million. The acquisition did not yet contribute to EBITDA; this would have been
approximately € 2 million if the acquisition had occurred on 1 January 2013. Unitech related exceptional items amounted to
€ 1 million before tax (see note 6: Exceptional items).

Other acquisitions comprise the Bayer vitamin premix business in China and the Philippines and SolarExcel (Netherlands).

Together, the acquisitions in 2013 contributed € 255 million to net sales. If all acquisitions had occurred on 1 January 2013,
additional net sales would have been approximately € 351 million. The acquisitions in 2013 contributed € 42 million to EBITDA; this
would have been approximately € 62 million if they had all occurred on 1 January 2013.

2012
On 22 June 2012 DSM obtained control of Kensey Nash Corporation by acquiring 100% of the shares. From that date onwards
the financial statements of Kensey Nash have been consolidated by DSM and reported in the segment Innovation Center. The
acquisition has strengthened and complemented DSM’s biomedical business, one of the Emerging Business Areas of DSM. Kensey
Nash is a US based, technology-driven biomedical company, primarily focused on regenerative medicine utilizing its proprietary
collagen and synthetic polymer technology. Kensey Nash has annual sales of approximately USD 90 million and employs about
325 people. In accordance with IFRS 3 the purchase price of Kensey Nash needs to be allocated to identifiable assets and liabilities
acquired. Goodwill paid for the acquisition of Kensey Nash amounted to € 128 million. The goodwill primarily resulted from the skills
and knowledge of the workforce, sales synergies in relation to the opportunities for cross-selling and certain fixed cost synergies
that are unique to DSM.

On 18 July 2012 DSM obtained control of Ocean Nutrition Canada (ONC) by acquiring 100% of the shares. From that date onwards
the financial statements of ONC have been consolidated by DSM and reported in the Nutrition segment. The acquisition has
expanded DSM’s Nutritional Lipids growth platform. ONC is a leader in fish-oil derived omega-3 fatty acids for dietary supplements,
highly complementary to DSM’s acquisition of Martek in 2011. ONC has annual sales of approximately CAD 190 million and employs
about 415 people. In accordance with IFRS 3 the purchase price of ONC needs to be allocated to identifiable assets and liabilities
acquired. Goodwill paid for the acquisition of ONC amounted to € 238 million. The goodwill primarily resulted from the skills and
knowledge of the workforce, sales synergies in relation to the opportunities for cross-selling and certain operating and variable cost
synergies that are unique to DSM.

On 18 December 2012 DSM obtained control of Fortitech, Inc. by acquiring 100% of the shares. From that date onwards the
financial statements of Fortitech have been consolidated by DSM and reported in the Nutrition segment. The acquisition has
strengthened DSM’s Human Nutrition & Health business, by expanding the company’s value chain presence and adding additional
capabilities. Fortitech has annual sales of approximately USD 270 million and employs about 520 people. The purchase price
allocation was completed in 2013.

The impact of all acquisitions made in 2012 on DSM's consolidated balance sheet, at the date of acquisition, is summarized in the
following table.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

2012

Kensey Nash

Canada

Fortitech, Inc.

acquisitions

Ocean Nutrition

Other

Total

Book

value

Fair

value

Book

value

Fair

value

Book

value

Fair

value

Book

value

Fair

value

Fair

value

Assets

Intangible assets

Property, plant and equipment

Other non-current assets

Inventories

Receivables

Cash and cash equivalents

136

114

Total assets

132

250

143

283

133

Non-controlling interests

Liabilities

Non-current liabilities

Current liabilities

Total non-controlling interests and

liabilities

Net assets

Acquisition price (in cash)

Acquisition price (payable)

Consideration

Goodwill

Goodwill available for tax purposes

(included in the above)

Acquisition costs recognized in exceptional

items

Contingent liabilities included in fair value

111

139

216

267

128

132

151

390

(1)

389

238

474

487

405

286

204

117

758

207

300

458

120

1,200

122

1,265

807

The acquisition of Kensey Nash contributed € 35 million to net sales in 2012. If the acquisition had occurred on 1 January 2012,
additional net sales would have been approximately € 67 million. The acquisition contributed € 14 million to EBITDA. Kensey Nash
related exceptional items amounted to € 8 million (see note 6: Exceptional items).

The acquisition of ONC contributed € 60 million to net sales in 2012. If the acquisition had occurred on 1 January 2012, additional
net sales would have been approximately € 131 million. The acquisition contributed € 15 million to EBITDA. ONC related exceptional
items amounted to € 20 million before tax (see note 6: Exceptional items).

Other acquisitions comprise Verenium, Cilpaz & Laba, the Cultures and Enzymes business of Cargill and Oatwell.

Together, the acquisitions in 2012 contributed € 103 million to net sales. If all acquisitions had occurred on 1 January 2012,
additional net sales would have been approximately € 253 million (excluding Fortitech). The acquisitions in 2012 contributed € 26
million to EBITDA; this would have been approximately € 53 million (excluding Fortitech) if they had all occurred on 1 January 2012.

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Disposals

2013
In the first quarter of 2013 DSM completed the sale of DSM's share in DEXPlastomers V.o.F. to Borealis for € 55 million on a cash
and debt-free basis. Furthermore the Euroresins business in Germany, Austria, Switzerland, Poland and the Baltic states was sold.
In view of the limited importance of the activities they are not presented as discontinued operations. These activities were reported
under Corporate Activities and DSM Resins & Functional Materials prior to disposal. The impact of the deconsolidation of these
activities on the DSM financial statements is presented in the following table:

DEX

Compact

Euroresins

Other

Total

Plastomers

Solution

Technology

(7)

(26)

(8)

(4)

(45)

(13)

(32)

(3)

(2)

(9)

(4)

(1)

(5)

(10)

(8)

(7)

(3)

(28)

(10)

(6)

(62)

(4)

(1)

(18)

(23)

(39)

x € million

Assets

Intangible assets

Property, plant and equipment

Other non-current assets

Inventories

Receivables

Cash and cash equivalents

Total assets

Non-controlling interests

Liabilities

Provisions

Non-current liabilities

Current liabilities

Total non-controlling interests and liabilities

Net assets

Consideration (net of selling costs, translation

differences and net debt)

Book result

Income tax

Net book result

2012
There were no material disposals in 2012.

Deconsolidation and other changes
In 2013 there were no material deconsolidations or material changes in the percentage of ownership of subsidiaries (same as in
2012).

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

Assets and liabilities held for sale

2013
In view of the contribution of DSM Pharmaceutical Products to
a new entity that will be majority owned by private equity
company JLL Partners, the related assets and liabilities of the
business have been classified as held for sale. DPP constitutes
a major line of business for DSM and is therefore presented as
discontinued operation upon held for sale classification. After
completion of the transaction that is anticipated for the first half
of 2014, DSM will account for its interest in the new entity in
accordance with the equity method. Upon reclassification, the
business was valued at fair value less costs to sell. This
represents the recoverable amount of the cash generating unit
(CGU) and is the basis for the determination of the book loss on
the transaction which is charged against the Catalytica goodwill
that is now reported in discontinued operations. After
impairment, the remaining value of the Catalytica goodwill is € 7
million. The fair value is based on the price that was agreed
between DSM and JLL Partners in an arms’ length transactions
that was publicly announced on 19 November 2013. The final
amount of the impairment loss will only be known when the
transaction is closed and the final net asset value can be
established. The impact of the reclassification of these activities
on the DSM financial statements is presented in the following
table:

x € million

Assets

Intangible assets

Property, plant and equipment

Other non-current assets

Inventories

Receivables

Cash and cash equivalents

Total assets

Liabilities

Provisions

Non-current liabilities

Current liabilities

Total liabilities

Net assets

Fair value

Transaction costs

Fair value less costs to sell

Impairment of intangible assets (against

goodwill Catalytica)

DSM Pharmaceutical

Products

(197)

(297)

(14)

(196)

(85)

(789)1

(8)

(55)

(167)

(230)

(559)

412

(5)

407

(152)

1 Assets held for sale in the balance sheet amount to € 637 million, which includes the

impairment of intangible assets of € 152 million

The impact of the business that has been reclassified to held for
sale on the cash flow statement is presented in the following
table:

Net cash provided by/used in:

- Operating activities

- Investing activities

- Financing activities

Net change in cash and cash

equivalents

2013

2012

247

291

159

(52)

(111)

(4)

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The impact of the business that has been reclassified as held for
sale on the income statement (before exceptional items), is
presented in the following table:

Net sales

Cost of sales

Gross margin

Marketing and sales

Research and development

General and administrative

Other operating income

Operating profit

EBITDA

2013

2012

567

506

(4)

542

498

(12)

(16)

2012
DSM stopped actively trying to dispose of the Maleic Anhydride
and Derivatives business of DSM Pharmaceutical Products in
Linz (Austria) in 2012 and this business is no longer classified as
‘assets/liabilities held for sale’. The activities were re-integrated
into the Pharma cluster and reported in that segment from the
first quarter of 2012 onwards. The activities are included in
assets and liabilities held for sale in 2013 because they are part
of DSM Pharmaceutical Products.

In view of the agreements reached regarding the sale of
DEXPlastomers and parts of Euroresins, these businesses were
reclassified as held for sale. Before reclassification these
activities were reported under Corporate Activities and DSM
Resins & Functional Materials, respectively.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

3 Segment information

Business segments1

2013

Financial performance

Net sales

Supplies to other clusters

Nutrition

Pharma

Perform-

Polymer

Inno-

Corpo-

Elimina-

Total

tinued

tions

Continuing operations

Discon-

Elimina-

Total

ance

Interme-

vation

rate

tions

Materials

diates

Center

Activities

opera-

tions

4,195

106

184

2,746

1,579

450

149

198

9,051

(577)

567

9,618

(38)

Supplies

4,301

190

2,768

2,029

152

198

(577)

9,061

595

(38)

9,618

EBITDA

Operating profit

Exceptional items (within

914

679

(8)

324

185

113

(17)

(53)

(74)

(125)

operating profit)

(71)

(21)

(10)

(14)

Operating profit including

exceptional items

Depreciation and amortization

Impairments

Impairments in exceptional

items

Additions to provisions

Share of the profit of

associates

R&D costs3

Wages, salaries and social

608

232

133

164

(4)5

135

100

security costs

743

317

Financial position

Total assets

Total liabilities

Capital employed at year-end

Capital expenditure

Share in equity of associates

5,501

1,344

4,494

255

329

131

146

1,976

1,082

604

1,910

482

570

235

EBITDA / net sales (in %)

21.8

1.6

11.8

7.2

(52)

(139)

673

103

561

108

329

1,819

3,025

183

Workforce4

Average in fte

Year-end (headcount)

10,376

10,548

851

857

5,076

5,128

1,450

1,456

697

664

3,120

3,204

1,263

749

(104)

(162)

645

(152)

502

351

1505

1,545

175

637

230

439

11,380

5,689

7,864

752

14.0

21,570

21,857

2,462

2,492

1,314

759

(266)

493

542

168

361

1,720

12,017

5,919

8,303

793

13.7

24,032

24,349

1 For a description of the types of products and services of each segment please refer to the Review of business in the Report by the Managing Board. Supplies from DSM Polymer
Intermediates to DSM Engineering Plastics were executed at cost. Transfers between other segments were fairly limited and were generally executed at market-based prices.

2 Corporate Activities also includes costs for regional holdings, corporate overhead and share-based compensation.
3 R&D costs relate to the functional area Research and development and exclude R&D cost included in the functional areas Cost of sales and Marketing and sales as well as R&D

expenditure capitalized.

4 The workforces of joint ventures have been included on a proportionate basis.
5

Including the reversal of previously recognized impairment losses of € 6 million at DSM Sinochem Pharmaceuticals and € 2 million at DSM Pharmaceutical Products

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Business segments1

2012

Financial performance

Net sales

Supplies

EBITDA

Operating profit

Exceptional items

Operating profit including

exceptional items

Depreciation and amortization

Impairments

Impairments in exceptional

items

Additions to provisions

Share of the profit of

associates

R&D costs3

Wages, salaries and social

Nutrition

Pharma

Perform-

Polymer

Inno-

Corpo-

Elimina-

Total

tinued

tions

Continuing operations

Discon-

Elimina-

Total

ance

Interme-

vation

rate

tions

Materials

diates

Center

Activities

opera-

tions

Supplies to other clusters

448

3,667

183

2,772

1,596

102

268

8,588

(550)

543

9,131

(56)

3,752

189

2,797

2,044

105

269

(550)

8,606

581

(56)

9,131

793

613

(85)

528

177

151

(3)

(6)5

280

146

(40)

106

128

105

129

(11)

(38)

(63)

(94)

(139)

(39)

964

446

447

214

(63)

(178)

559

507

327

2,061

3,079

216

security costs

657

338

Financial position

Total assets

Total liabilities

Capital employed at year-end

Capital expenditure

Share in equity of associates

5,157

1,324

4,122

195

295

135

162

2,174

666

2,026

109

EBITDA / net sales (in %)

21.6

1.6

10.1

8.1

Workforce4

Average in fte

Year-end (headcount)

9,208

9,489

871

851

5,359

5,354

1,444

1,474

622

668

3,012

3,199

1,073

651

(171)

(16)

(23)

480

(39)

408

122

372

1,468

168

756

199

604

11,210

5,725

7,480

665

12.5

20,516

21,035

2,410

2,463

1,109

635

(194)

441

451

122

381

1,636

11,966

5,924

8,084

715

12.1

22,926

23,498

2 Corporate Activities also includes costs for regional holdings, corporate overhead and share-based compensation.
3 R&D costs relate to the functional area Research and development and exclude R&D costs included in the functional areas Cost of sales and Marketing and sales as well as R&D

expenditure capitalized.

4 The workforces of joint ventures have been included on a proportionate basis.
5

Including the reversal of previously recognized impairment losses of € 12 million at DSM Sinochem Pharmaceuticals.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

Geographical information

2012

Net sales by origin

In € million

In %

Net sales by destination

In € million

In %

The

Rest of

Eastern

North

Latin

China

India

Japan

Rest of

Total

Continuing operations

Nether-

Western

Europe

America

lands

Europe

3,001

2,317

119

1,468

309

939

582

2,430

535

1,607

659

1,317

Asia

172

780

the

world

8,588

100

226

8,588

100

157

118

295

Workforce at year-end1

5,756

5,127

438

3,714

978

3,449

541

145

746

141

21,035

Intangible assets and Property, plant

and equipment

Capital expenditure

Carrying amount

220

105

1,527

1,251

117

2,373

174

672

Total assets (total DSM)

3,613

2,556

109

3,554

347

1,187

119

665

6,093

134

310

11,966

2013

Net sales by origin

In € million

In %

Net sales by destination

In € million

In %

2,943

2,257

122

1,707

581

1,033

644

2,444

520

1,777

932

1,291

166

234

237

821

9,051

100

222

9,051

100

Workforce at year-end1

5,484

5,068

388

3,684

1,948

3,376

633

153

884

239

21,857

Intangible assets and Property, plant

and equipment

Capital expenditure

Carrying amount

251

137

1,654

1,212

148

2,257

346

183

812

Total assets (total DSM)

3,438

2,528

114

3,209

776

1,337

138

752

6,527

328

12,017

1 The workforces of joint ventures have been included on a proportionate basis

DSM has no single external customer that represents 10 percent or more of revenues and therefore information about major
customers is not provided.

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4 Net sales and costs

Depreciation, amortization and impairments

Net sales

Continuing operations before

exceptional items

Goods sold

Services rendered

Royalties from ordinary activities

2013

2012

Continuing operations before

exceptional items

Amortization of intangible assets

Depreciation of property, plant

8,713

305

8,306

and equipment

Impairment losses

270

Total

2013

2012

150

352

514

105

303

422

Total

9,051

8,588

Total costs

In 2013 total operating costs of continuing operations before
exceptional items amounted to € 8.3 billion, € 0.4 billion higher
than in 2012, when these costs stood at € 7.9 billion. Total
operating costs in 2013 included Cost of sales to an amount of
€ 6.6 billion (2012: € 6.2 billion); gross margin in % of net sales
stood at 27% (2012: 28%).

The increase in amortization and depreciation in 2013 is mainly
due to acquisitions. These contributed € 38 million to
Amortization of intangible assets and € 19 million to Depreciation
of property, plant and equipment.

Other operating income

Employee benefits costs

Continuing operations before

exceptional items

Wages and salaries

Social security costs

Pension costs (see also note 23)

Share-based compensation (see

also note 26)

Total

Continuing operations before

exceptional items

Release of provisions

2013

2012

Gain on sale of assets and

activities

Gain on scrap, waste material,

emission rights, royalties and

1,320

202

116

1,256

187

114

licenses sold

Insurance benefits

Claims

Earn-out payments

Sundry

1,661

1,582

Total

2013

2012

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

Other operating expense

6 Exceptional items

2013

2012

2013

2012

Continuing operations before

exceptional items

Additions to provisions

Loss from the disposal or closure

of assets and activities

Exchange differences

Costs of financial instruments

Earn-out payments

Damages

Sundry

Total

5 Net finance costs

Continuing operations before

exceptional items

Interest costs

Interest expense

Interest relating to defined benefit

plans

Capitalized interest during

construction

Interest charge on discounted

provisions

Total

Other financial income and

expense

Interest income

Exchange differences

Result from other securities

Sundry

Total

Net finance costs

Cost of sales:

- Impairments of property, plant

and equipment and business

activities

- Other costs

Research and development:

- Impairment of intangible assets

- Other costs

General and administrative:

- Impairment of property, plant

and equipment

- Other costs

Other operating income:

- Release of provisions

2013

2012

- Book gain on disposals

- Other income

Other operating expense:

- Additions to provisions

- Other costs

Operating profit

Other financial income and

expense

Total, before income tax

122

(9)

107

(6)

126

117

expense

Income tax expense

(14)

(11)

(170)

(1)

(78)

(79)

(53)

(266)

(4)

(270)

(25)

(4)

(29)

(2)

(1)

(59)

(60)

(106)

(194)

(2)

142

Net result from exceptional

(12)

items

(237)

(149)

(1)

(8)

109

In 2013 the interest rate applied in the capitalization of interest
during construction was 5% (2012: 5%).

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2013

2012

The exceptional items in 2013 are listed below:

The exceptional items in 2012 are listed below:

- The impairments of property, plant and equipment and
business activities within Cost of sales relate to DSM
Nutritional Products for an amount of € 4 million. Also included
are the reversals of an impairment at DSM Sinochem
Pharmaceuticals of € 5 million and of an impairment at DSM
Pharmaceutical Products of € 2 million. For further information
see note 9 Property, plant and equipment.

- The impairments of property, plant and equipment and
business activities in Cost of sales mainly relate to DSM
Nutritional Products, DSM Pharmaceutical Products and DSM
Sinochem Pharmaceuticals. Also included is the reversal of an
impairment at DSM Sinochem Pharmaceuticals of € 12 million.
For further information see note 9 Property, plant and
equipment.

- The other costs in Cost of sales mainly relate to the inventory

- Other costs in Cost of sales mainly relate to restructuring

step up of the acquisitions.

costs.

- The impairment in Research and development mainly relates
to the impairment of the goodwill in DSM Pharmaceutical
Products of € 152 million (for details see Assets and liabilities
held for sale in note 2 Changes in the scope of the
consolidation). Furthermore an impairment of development
costs in DSM Nutritional Products of € 18 million has been
included. For further information see note 8 Intangible assets.

- Other costs in General and administrative relate to acquisition
and integration costs (€ 34 million) and restructuring costs
(€ 25 million).

- Additions to provisions relate to the costs of restructuring as
part of the Profit Improvement Program (€ 95 million) and to
legal costs (€ 11 million). For further information see note 17
Provisions.

- Other costs in General and administrative relate to

restructuring costs (€ 50 million) and acquisition, integration
and divestment costs (€ 27 million).

- The release of provisions in Other operating income relates to
restructuring provisions (€ 12 million) and other Provisions
(€ 6 million). For further information see note 17 Provisions.
- The book gain on disposals in Other operating income relates
to the disposal of DEXPlastomers. For further information see
note 2 Change in the scope of consolidation.

- Additions to provisions relate to restructuring provisions

(€ 41 million) and other provisions (€ 12 million).

- Other financial income and expense mainly relates to the

waiver of a loan.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

7 Income tax

The income tax expense on the total result was € 76 million,
which represents an effective income tax rate of 21.9%
(2012: € 46 million, representing an effective income tax rate of
13.8%) and can be broken down as follows:

Effective tax rate

in %

Domestic income tax rate

Tax effects of:

- Deviating rates

2013

2012

- Tax-exempt income and non-

Current tax expense:

- Current year

- Prior-year adjustments

Deferred tax expense:

- Originating from temporary

differences and their reversal

- Prior-year adjustments

- Change in tax rate

- Change in tax losses and tax

credits recognized

Total

Of which related to:

- The result from continuing

operations before exceptional

items

- The result from exceptional

items, continuing operations

- The result from discontinued

operations

(74)

(22)

(2)

(76)

(108)

The effective income tax rate on the result from continuing
operations before exceptional items was 17.9% in 2013 (2012:
17.5%). The tax rate for continuing operations for 2014 will be
about 18%. The relationship between the income tax rate in the
Netherlands and the effective tax rate on the result from
continuing operations is as follows:

2013

25.0

(1.2)

(5.5)

(0.4)

17.9

(0.2)

4.2

21.9

2012

25.0

(3.8)

(5.6)

1.9

17.5

(0.3)

(3.4)

13.8

deductible expense

- Other effects

(87)

Effective tax rate continuing

operations

(82)

Discontinued operations

Exceptional items

Total effective tax rate

(5)

(46)

(95)

The balance of deferred tax assets and deferred tax liabilities
decreased by € 111 million owing to the changes presented in
the table below:

Deferred tax assets and liabilities

2013

2012

Balance at 1 January

Deferred tax assets

Deferred tax liabilities

Total

Changes:

- Income tax expense in income

statement

- Income tax expense in other

comprehensive income

- Acquisitions and disposals

- Exchange differences

- Reclassification to held for sale

Balance at 31 December

Of which:

- Deferred tax assets

- Deferred tax liabilities

340

(236)

104

(2)

(17)

(96)

(13)

(7)

369

(376)

292

(192)

100

(78)

104

340

(236)

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In various countries DSM has taken standpoints regarding its tax position which may at any time be challenged, or have already
been challenged, by the tax authorities because the authorities in question interpret the law differently. In determining the probability
of realization of deferred tax assets and liabilities these uncertainties are taken into account.

The deferred tax assets and liabilities relate to the following balance sheet items:

Deferred tax assets and liabilities by balance sheet item

Intangible assets

Property, plant and equipment

Financial assets

Inventories

Receivables

Equity

Other non-current liabilities

Non-current provisions

Non-current borrowings

Other current liabilities

Tax losses carried forward

Set-off

Total

2013

2012

Deferred tax

assets

liabilities

assets

liabilities

276

265

(172)

369

(218)

(267)

(3)

(37)

(9)

(1)

(5)

(7)

(548)

172

(376)

320

286

(266)

340

(170)

(266)

(2)

(34)

(18)

(2)

(5)

(502)

266

(236)

No deferred tax assets were recognized for loss carryforwards amounting to € 111 million (2012: € 91 million). Unrecognized loss
carryforwards amounting to € 32 million will expire in the years up to and including 2018, (2012: € 32 million up to and including
2017), € 42 million between 2019 and 2023 (2012: € 29 million between 2018 and 2022) and the remaining € 37 million between
2024 and 2028 (2012: € 30 million between 2023 and 2027).

The valuation of deferred tax assets depends on the probability of the reversal of temporary differences and the utilization of tax
loss carryforwards. Deferred tax assets are recognized for future tax benefits arising from temporary differences and for tax loss
carryforwards to the extent that the tax benefits are likely to be realized. In the Netherlands tax losses may be carried forward for
9 years. For the entities in the Dutch tax consolidation, losses will start to expire in 2019. DSM has to assess the likelihood that
deferred tax assets will be recovered from future taxable profits. Deferred tax assets are reduced if, and to the extent that, it is not
probable that all or some portion of the deferred tax assets will be realized. In the event that actual future results differ from estimates,
and depending on tax strategies that DSM may be able to implement, changes to the measurement of deferred taxes could be
required, which could impact on the company’s financial position and profit for the year.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

8 Intangible assets

Balance at 1 January 2012

Cost

Amortization and impairment losses

Carrying amount

Changes in carrying amount:

- Capital expenditure

- Put into operation

- Acquisitions

- Amortization

- Impairment losses

- Exchange differences

- Other reclassifications

Balance at 31 December 2012

Cost

Amortization and impairment losses

Carrying amount

Changes in carrying amount:

- Capital expenditure

- Put into operation

- Acquisitions

- Amortization

- Impairment losses

- Exchange differences

- Reclassification to held for sale

- Other reclassifications

Balance at 31 December 2013

Cost

Amortization and impairment losses

Carrying amount

Goodwill

Licenses

Under

Development

Other

Total

and patents

construction

projects

1,281

169

1,112

807

(1)

(31)

776

2,052

164

1,888

(152)

(104)

(7)

134

(11)

(4)

(1)

185

(12)

(3)

(7)

(28)

115

(59)

(9)

131

124

(85)

(1)

(2)

(228)

(15)

(13)

1,660

164

111

(1)

(18)

(2)

841

363

478

278

(99)

(5)

(11)

(14)

2,393

607

1,786

1,093

(111)

(19)

(44)

180

1,007

1,123

465

3,519

726

658

2,793

285

(142)

(4)

(43)

(8)

355

(155)

(177)

(155)

(45)

155

(88)

1,356

543

3,350

645

813

2,705

In 2013 an impairment on Intangible assets of € 177 million was recognized. This mainly related to an impairment of € 152 million
at DSM Pharmaceutical Products against goodwill relating to Catalytica (for details see Assets and liabilities held for sale in note 2
Changes in the scope of the consolidation). Furthermore an impairment of development costs in DSM Nutritional Products of
€ 18 million has been included where certain new production techniques that had been developed were not been taken into
operation.

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Over the past few years DSM has acquired several entities in business combinations that have been accounted for by the acquisition
method, resulting in recognition of goodwill and other intangible assets. The amounts assigned to the acquired assets and liabilities
are based on assumptions and estimates about their fair values. In making these estimates, management consults independent,
qualified appraisers if appropriate. A change in assumptions and estimates could change the values allocated to certain assets
and their estimated useful lives, which could affect the amount or timing of charges to the income statement, such as amortization
of intangible assets.

The breakdown of the carrying amount of goodwill at year-end 2013 is as follows:

Goodwill

Acquisition

NeoResins

Martek

Fortitech1

Ocean Nutrition, Canada

Tortuga2

Kensey Nash

The Polymer Technology Group

Pentapharm

Cargill Culture and enzymes business

Shandong ICD

Unitech2

AGI Corporation

Novamid

Syntech Far East

Zhejiang Zhongken Biotechnology

C5 Yeast Company

Verenium

Crina

DSM Japan Engineering Plastics

Fatrom

Catalytica

Other acquisitions

Included under Assets held for sale

Catalytica

Total

2013

2012

Cash generating unit

Functional

Year of

currency

acquisition

DSM Resins & Functional Materials

DSM Nutritional Products

DSM Biomedical

DSM Nutritional Products

EUR

USD

CAD

BRL

USD

CHF

DSM Food Specialties

EUR/USD

DSM Dyneema

DSM Nutritional Products

DSM Resins & Functional Materials

DSM Engineering Plastics

DSM Resins & Functional Materials

DSM Food Specialties

DSM Bio-based Products & Services

DSM Food Specialties

DSM Nutritional Products

DSM Engineering Plastics

DSM Nutritional Products

DSM Pharmaceuticals, Inc.

CNY

NZD

TWD

JPY

HKD

CNY

EUR

USD

CHF

EUR

RON

USD

2005

2011

2012

2013

2012

2008

2007

2012

2011

2013

2011

2010

2005

2010

2011

2012

2006

2003

2011

2001

358

352

405

227

123

166

1,888

358

337

252

202

121

117

1,667

(7)

1,660

1,888

Including adjustment to Purchase Price Allocation of -€ 141 million (see also note 2 Change in the scope of the consolidation)

2 Goodwill related to the acquisition of Tortuga and Unitech is a provisional amount

The cash generating unit DSM Pharmaceutical Products including the goodwill relating to Catalytica has been reclassified to assets
held for sale and is discussed in note 2.

The annual impairment tests of goodwill are performed in the fourth quarter. The recoverable amount of the cash generating units
concerned is based on a value-in-use calculation. The cash flow projections for the first five years are derived from DSM’s business
plan (Corporate Strategy Dialogue) as adopted by the Managing Board. Cash flow projections beyond the five year planning period
are extrapolated taking into account the growth rates that have been determined to apply for the specific cash generating unit in

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

the Annual Strategic Review. The key assumptions in the cash flow projections relate to the market growth for the cash generating
units and the related revenue projections. DSM Nutritional Products, DSM Resins & Functional Materials and DSM Biomedical are
three cash generating units to which significant amounts of goodwill are allocated. The growth assumptions for these cash
generating units are based on the growth of the global food and feed markets, the demand for advanced coating resins that is
influenced by growth in the building and construction markets and the growth of the market for medical devices. Growth rates
generally are between 0 and 5 % (same as previous year) with the exception of DSM Biomedical where about 10 % growth is
expected.The terminal value for the period after ten years is determined with the assumption of no growth in all cases. The pre-tax
discount rate is between 8.5% and 11.5% (2012: between 7.5% and 11.5%) depending on the risk profile of the cash generating
unit.

A stress test was performed on the impairment tests of the cash generating units. This showed that the conclusions of these tests
would not have been different if reasonably possible adverse changes in key parameters had been assumed. The value-in-use of
cash generating units with significant amounts of goodwill clearly exceeded their carrying amount. The market capitalization of DSM
at 31 December 2013 amounted to € 10,370 million (31 December 2012: € 8,307 million) and was clearly above the carrying amount
of net assets, providing an additional indication that goodwill was not impaired.

The other intangible assets are listed in the following table:

Other intangible assets

Application software

Marketing-related

Customer-related

Technology-based

Other

Total

Total 2012

Cost

Amortization

Carrying

Of which

2013

2012

amount

acquisition-

191

437

564

(133)

(14)

(96)

(291)

(9)

1,356

(543)

1,123

(465)

341

273

813

658

328

235

692

566

245

236

566

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9 Property, plant and equipment

Balance at 1 January 2012

Cost

Depreciation and impairment losses

Carrying amount

Changes in carrying amount:

- Capital expenditure

- Put into operation

- Acquisitions

- Disposals

- Depreciation

- Impairment losses

- Impairment reversals

- Exchange differences

- Reclassification to held for sale

- Other reclassifications

- Other changes

Balance at 31 December 2012

Cost

Depreciation and impairment losses

Carrying amount

Changes in carrying amount:

- Capital expenditure

- Put into operation

- Acquisitions

- Disposals

- Depreciation

- Impairment losses

- Impairment reversals

- Exchange differences

- Reclassification to held for sale

- Other reclassifications

- Other changes

Balance at 31 December 2013

Cost

Depreciation and impairment losses

Carrying amount

Land and

Plant and

Other

Under

Not used

Total

buildings

machinery

equip-

construc-

for operating

ment

tion

activities

1,943

883

4,867

3,182

1,060

1,685

136

(20)

(68)

(10)

(8)

(1)

423

(3)

(256)

(29)

(13)

(3)

221

159

(16)

(1)

(3)

593

592

573

(593)

(2)

(4)

(3)

(6)

(3)

148

262

(24)

2,155

947

5,271

3,324

1,208

1,947

(2)

(75)

(3)

(45)

(69)

(1)

186

(2)

(292)

(8)

(46)

(169)

252

170

(20)

(1)

(3)

(10)

(1)

570

568

632

(303)

(21)

(49)

(9)

(3)

(229)

(4)

247

2,063

858

4,650

2,932

1,205

1,718

222

144

818

815

7,651

4,246

3,405

633

204

(23)

(340)

(42)

(25)

(7)

(5)

(1)

406

8,265

4,454

3,811

708

116

(4)

(387)

(12)

(115)

(297)

(4)

(2)

7,772

3,950

3,822

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

Property, plant and equipment includes assets acquired under
finance lease agreements with a carrying amount of
€ 17 million (31 December 2012: € 4 million). The related
commitments are included under Borrowings and amount to
€ 17 million (31 December 2012: € 4 million). The total of the
minimum lease payments at the balance sheet date amounts to
€ 17 million (31 December 2012: € 4 million) and their present
values to € 15 million (31 December 2012: € 3 million).

Overview of minimum lease payments in time:

2013

2014

2015-2018

After 2018

Total

2013

2012

In 2013 impairment losses on Property, plant & equipment of
€ 12 million were recognized. This mainly related to impairments
of € 6 million at DSM Nutritional Products and impairments of
€ 3 million at DSM Fibre Intermediates. Furthermore an
impairment of € 1 million was recognized in a cash generating
unit of DSM Sinochem Pharmaceuticals, which was more than
offset by a reversal of a previous impairment in another cash
generating unit of DSM Sinochem Pharmaceuticals of
€ 6 million. In all cases the recoverable amount was determined
on the basis of the value in use of the assets or cash generating
units.

In 2012 an impairment on Property, plant & equipment of € 42
million was recognized. This mainly related to an impairment of
€ 18 million at DSM Nutritional Products and an impairment of
€ 7 million at DSM Pharmaceutical Products. Furthermore an
impairment of € 6 million was recognized in a cash generating
unit of DSM Sinochem Pharmaceuticals, which was more than
offset by reversals of previous impairments in three other cash
generating units of € 12 million. In all cases the recoverable
amount was determined on the basis of the value in use of the
assets or cash generating units.

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10 Associates and other financial assets

Balance at 1 January 2012

170

Associates

Other

participations

receivables

Total

Other

deferred

items

Changes:

- Share of profits

- Charged to the income statement

- Acquisitions

- Capital payments

- Disposals

- Loans granted

- Repayments

- Exchange differences

- Transfers

- Changes in fair value

- Dividend received

- Other changes

Balance at 31 December 2012

Changes:

- Share of profits

- Charged to the income statement

- Acquisitions

- Capital payments

- Disposals

- Loans granted

- Repayments

- Exchange differences

- Transfers

- Changes in fair value

- Dividend received

- Other changes

Balance at 31 December 2013

(1)

(2)

(1)

(3)

(8)

(1)

(10)

(2)

(3)

(1)

(17)

(3)

(2)

(3)

(4)

(7)

(2)

(3)

(1)

(6)

(13)

(3)

(1)

(3)

(8)

(1)

(3)

181

(2)

(10)

(2)

(5)

(1)

246

DSM's share in its most important associates and the financial information on all associates on a 100% basis are disclosed in note
28: Interests in associates.

Other participations relate to equity instruments in companies whose activities support DSM’s business and which can be quoted
or unquoted. In Other participations an amount of € 29 million is included that relates to equity instruments whose fair value cannot
be measured reliably (2012: € 31 million). These instruments are therefore measured at cost.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

Other receivables include a deferred receivable of € 39 million
excluding accrued interest of € 1 million from Sinochem Group
(the joint venture partner in DSM Sinochem Pharmaceuticals)
that is due when the new Yushu factory is ready for full
commercial production. In 2012 this receivable was included
under Other current receivables. The receivable has been
reclassified to non-current assets in view of the fact that it is not
expected that the Yushu factory will be ready for full commercial
production in 2014. DSM has received confirmation from the
counterparty that the amount is owed and is confident that
technical specifications will be met in due course.

12 Current receivables

2013

2012

Trade receivables

Trade accounts receivable

1,502

1,544

Deferred items

Receivables from associates

Adjustment for bad debts

1,546

(20)

1,592

(23)

11 Inventories

Total Trade receivables

1,526

1,569

Raw materials and consumables

Intermediates and finished goods

2013

2012

Income taxes receivable

Other current receivables

346

1,379

1,725

Other taxes and social security

533

1,320

contributions

Government grants

Loans

1,853

Receivables from joint venture

Adjustments to lower net

realizable value

(50)

partners

Interest

Other receivables

Total

1,675

1,803

Deferred items

Total Other current receivables

116

230

Deferred items comprise € 32 million (2012: € 31 million) in
prepaid expenses that will impact profit or loss in future periods.

In 2012, receivables from joint venture partners included a
deferred receivable of € 39 million excluding accrued interest
from Sinochem Group (the joint venture partner in DSM
Sinochem Pharmaceuticals) that is due when the new Yushu
factory is ready for full commercial production. In 2013 this
receivable was included under Other financial assets.

The carrying amount of inventories adjusted to net realizable
value (before reclassification to held for sale) was € 186 million
(2012: € 161 million).

The carrying amount of inventories before reclassification to held
for sale was € 1,871 million.

Changes in the adjustment to net realizable value

Balance at 1 January

(50)

(43)

2013

2012

Additions charged to income

statement

Utilization / reversals

Exchange differences

Reclassification to held for sale

Acquisitions

Balance at 31 December

(48)

(1)

(50)

(57)

(50)

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With respect to trade accounts receivable that are neither
impaired nor past due, there are no indications that the debtors
will not meet their payment obligations. An aging overview of
trade receivables related to commercial transactions amounting
to € 1,379 million (2012: € 1,372 million) is provided below. The
remaining balance reported as trade receivables amounting to
€ 123 million (2012: € 172 million) is excluded from this analysis
because it principally concerns reclaimable VAT and accruals
that are not related to the payment behavior of customers.

13 Current investments

Fixed term deposits

Total

Aging overview

14 Cash and cash equivalents

in %

2013

2012

Neither past due nor impaired

1-29 days overdue

30-89 days overdue

90 days or more overdue

Deposits

Cash at bank and in hand

Payments in transit

Bills of exchange

The changes in the allowance for doubtful accounts receivable
are as follows:

Total

2013

2012

2013

2012

673

776

1,034

1,121

2013

2012

Cash at year-end 2013 was not being used as collateral (same
as in 2012). It was restricted for an amount of € 5 million (in 2012:
€ 5 million).

Balance at 1 January

(23)

(20)

Additions charged to income

statement

Deductions

Acquisitions

Exchange differences

Balance at 31 December

(8)

(3)

(20)

(11)

(23)

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

15 Equity

Balance at 1 January

Net profit

Net exchange differences

Net actuarial gains/(losses) on defined benefit obligations

Dividend

Proceeds from reissue of ordinary shares

Repurchase of shares

Other changes

Balance at 31 December

After the balance sheet date the following dividends were declared by the Managing Board:

Dividend

Per cumulative preference share A: € 0.23 (2012: € 0.23)

Per ordinary share: € 1.65 (2012: € 1.50)

Total

2013

6,042

269

(232)

(276)

268

(73)

2012

5,974

288

(26)

(90)

(302)

182

6,098

6,042

2013

287

297

2012

253

263

The proposed final dividend on ordinary shares is subject to approval by the Annual General Meeting of Shareholders and has not
been deducted from Equity. Shareholders will be provided with the opportunity to receive dividends in cash or in the form of ordinary
shares.

For a description of the rules of profit appropriation and of the statutory rights attached to preference shares B, see page 214.

Share capital
On 31 December 2013 the authorized capital amounted to € 1,125 million (2012: € 1,125 million), distributed over 330,960,000
ordinary shares, 44,040,000 cumulative preference shares A and 375,000,000 cumulative preference shares B. All shares have a
nominal value of € 1.50 each.

The changes in the number of issued and outstanding shares in 2012 and 2013 are shown in the following table.

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Overview shares

Issued shares

Treasury shares

Ordinary

Cumprefs A

Ordinary

Balance at 1 January 2012

181,425,000

44,040,000

Reissue of shares in connection with share-based payments

Repurchase of shares

Dividend in the form of ordinary shares

18,167,612

(3,049,509)

(2,377,191)

Balance at 31 December 2012

181,425,000

44,040,000

12,740,912

Number of treasury shares at 31 December 2012

(12,740,912)

Number of shares outstanding at 31 December 2012

168,684,088

44,040,000

Balance at 1 January 2013

181,425,000

44,040,000

12,740,912

Reissue of shares in connection with share-based payments

Repurchase of shares

Dividend in the form of ordinary shares

(4,300,163)

1,266,945

(2,246,106)

Balance at 31 December 2013

181,425,000

44,040,000

7,461,588

Number of treasury shares at 31 December 2013

(7,461,588)

Number of shares outstanding at 31 December 2013

173,963,412

44,040,000

The average number of ordinary shares outstanding in 2013 was 172,183,369 (2012: 165,543,091). All shares issued are fully
paid.

The cumulative preference shares A have been classified as equity because there is no mandatory redemption and distributions
to the shareholders are at the discretion of DSM.

On 31 December 2013 no cumulative preference shares B were outstanding.

Share premium
Of the total share premium of € 489 million (2012: € 489 million), an amount of € 110 million (2012: € 112 million) can be regarded
as entirely free of tax.

Treasury shares
On 31 December 2012 DSM possessed 12,740,912 ordinary shares (nominal value € 19 million, 5.7% of the share capital). The
average purchase price of the ordinary treasury shares was € 37.61. As at 31 December 2012, 3,869,841 of the total number of
treasury shares outstanding were held for servicing management and personnel share-option rights. The remainder, 8,871,071
shares, is the balance of shares that were purchased under the company's share buy-back program in 2007 and 2008 and shares
that were reissued as stock dividend in 2011 and 2012.

On 31 December 2013 DSM possessed 7,461,588 ordinary shares (nominal value € 11 million, 3.3% of the share capital). The
average purchase price of the ordinary treasury shares was € 39.43. As at 31 December 2013, 836,623 of the total number of
treasury shares outstanding were held for servicing management and personnel share-option rights. The remainder, 6,624,965
shares, is the balance of shares that were purchased under the company's share buy-back program in 2007 and 2008 and shares
that were reissued as stock dividend in 2011, 2012 and 2013.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

Other reserves in Shareholder's equity

Balance at 1 January 2012

271

(21)

(16)

274

Translation

Hedging

Reserve for

Fair value

Total

reserve

share-based

reserve

compensation

Changes:

Fair-value changes of derivatives

Release to income statement

Fair-value changes of other financial assets

Exchange differences

Options and performance shares granted

Options and performance shares exercised/cancelled

Income tax

Total changes

Balance at 31 December 2012

Changes:

Fair-value changes of derivatives

Release to income statement

Release to shares of subsidiaries (acquisition)

Fair-value changes of other financial assets

Exchange differences

Options and performance shares granted

Options and performance shares exercised/cancelled

Income tax

Total changes

Balance at 31 December 2013

(28)

(27)

244

(228)

(44)

(9)

(30)

(27)

(10)

(8)

(7)

(13)

(24)

(4)

(8)

(24)

(44)

(8)

(28)

(13)

(39)

235

(27)

(10)

(228)

(24)

(8)

(200)

(15)

The significant reduction in the translation reserve in 2013 amounting to € 228 million is the result of the strengthening of the Euro
in 2013. As a consequence the value of the US and Brazilian subsidiaries of DSM decreased which is the main cause of the negative
exchange difference.

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16 Earnings per ordinary share

in €

2012

Net profit available to holders of ordinary shares (in € million)1

- Basic earnings

- Impact of reclassification of net result from activities disposed of

- Basic earnings after reclassification of net result from discontinued

Continuing operations

Discontinued

Total

operations

Before

Exceptional

Total

exceptional

items

429

2.59

(149)

(0.80)

(0.10)

280

1.79

(0.10)

(12)

(0.17)

0.10

268

1.62

operations to exceptional items

2.59

(0.90)

1.69

(0.07)

1.62

- Diluted earnings

- Impact of reclassification of net result from activities disposed of

- Diluted earnings after reclassification of net result from discontinued

2.57

(0.80)

(0.10)

1.77

(0.10)

(0.16)

0.10

1.61

operations to exceptional items

2.57

(0.90)

1.67

(0.06)

1.61

- Dividend distributed in the period (including stock dividend)

- Dividend for the year

- Average number of ordinary shares outstanding (x 1000)

- Effect of dilution due to share options (x 1000)

- Adjusted average number of ordinary shares (x 1000)

2013

Net profit available to holders of ordinary shares (in € million)1

- Basic earnings

- Impact of reclassification of net result from activities disposed of

- Basic earnings after reclassification of net result from discontinued

489

2.84

(237)

(0.45)

(0.93)

252

2.39

(0.93)

(0.87)

0.93

operations to exceptional items

2.84

(1.38)

1.46

0.06

- Diluted earnings

- Impact of reclassification of net result from activities disposed of

- Diluted earnings after reclassification of net result from discontinued

2.82

(0.44)

(0.92)

2.38

(0.92)

(0.87)

0.92

operations to exceptional items

2.82

(1.36)

1.46

0.05

- Dividend distributed in the period (including stock dividend)

- Dividend for the year

- Average number of ordinary shares outstanding (x 1000)

- Effect of dilution due to share options (x 1000)

- Adjusted average number of ordinary shares (x 1000)

1 Reconciliation to profit for the year is provided in the consolidated income statement

1.48

1.50

165,543

1,345

166,888

261

1.52

1.51

1.52

1.65

172,183

1,200

173,383

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

17 Provisions

The total of non-current and current provisions decreased by € 43 million. This is the balance of the following changes:

Balance at 1 January 2012

Of which current

Changes in 2012:

- Additions

- Releases

- Uses

- Acquisitions

- Exchange differences

- Reclassifications from/to held for sale

- Other Reclassifications

Total changes

Balance at 1 January 2013

Of which current

Changes in 2013:

- Additions

- Releases

- Uses

- Acquisitions

- Exchange differences

- Reclassifications from/to held for sale

- Other Reclassifications

Total changes

Balance at 31 December 2013

Of which current

Restructuring

costs and

Other long-

termination

Environmental

term employee

Other

benefits

costs

benefits

provisions

Total

(2)

(51)

(26)

(54)

(1)

(28)

(5)

(1)

(3)

(1)

(2)

(3)

(4)

(8)

(6)

(1)

(23)

(11)

(6)

(22)

(2)

(7)

159

122

(3)

(82)

206

(33)

(83)

(4)

(8)

(43)

163

In cases where the effect of the time value of money is material, provisions are measured at the present value of the expenditures
expected to be required to settle the obligation. The discount rate used is based on swap rates for various terms, increased by 57
to 100 basis points depending on those terms. The balance of provisions measured at present value increased by € 1 million in
2013 in view of the passage of time and decreased by € 2 million due to the change in the discount rate.

The provisions for restructuring costs and termination benefits mainly relate to the costs of redundancy schemes connected to the
dismissal and transfer of employees and costs of termination of contracts. These provisions have an average life of 1 to 3 years.

The provisions for environmental costs relate to soil clean-up obligations, among other things. These provisions have an average
life of more than 10 years.

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The provisions for other long-term employee benefits mainly relate to length-of-service and end-of-service payments.

Several items have been combined under Other provisions, for example onerous contracts and legal settlements. These provisions
have an average life of 1 to 3 years.

The additions to the provisions for restructuring costs and termination benefits in 2013 mainly relate to the restructuring projects
in connection with the Profit Improvement Program.

18 Borrowings

2013

2012

Total

Of which

Total

Of which

The schedule of repayment of borrowings (excluding debt to
credit institutions and commercial paper) is as follows:

current

Borrowings by maturity

Debenture loans

Private loans

Finance lease

liabilities

Credit institutions /

commercial paper

2,040

245

500

1,734

320

135

291

506

Total

2,593

843

2,564

642

2013

2014

2015

2016

2017 and 2018

After 2018

2013

2012

552

655

779

307

136

544

618

751

In agreements governing loans with a residual amount at year-
end 2013 of € 2,149 million, of which € 500 million of a short-
term nature (31 December 2012: € 1,962 million, of which USD
150 million of a short-term nature), clauses have been included
which restrict the provision of security. The documentation of the
€ 300 million bond issued in November 2005 (which was
increased by € 200 million in September 2008), the
documentation of the € 750 million bond issued in October 2007,
the documentation of the € 500 million bond issued in March
2009 and the documentation of the € 300 million bond issued in
November 2013 include a change-of-control clause. This clause
allows the bond investors to request repayment at par if 50% or
more of the DSM shares are controlled by a third party and if the
company is downgraded below investment grade (< BBB-). In
November 2013 Moody's confirmed their A3 credit rating for
DSM with a positive outlook. Standard & Poor's reconfirmed
DSM's credit rating in 2013, being A with a stable outlook.

At 31 December 2013, there were € 307 million in borrowings
outstanding with a remaining term of more than five years (at
31 December 2012 there were no borrowings outstanding with
a remaining term of more than five years).

Total

2,302

2,058

A breakdown of the borrowings by currency (excluding debt to
credit institutions and commercial paper) is given in the following
table:

Borrowings by currency

EUR

USD

CNY

Other

Total

2013

2012

2,072

132

1,753

231

2,302

2,058

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

On balance, total borrowings increased by € 29 million owing to
the following changes:

Movements borrowings

2013

2012

Balance at 1 January

2,564

2,189

Loans taken up

Repayments

Acquisitions/disposals

Changes in debt to credit

institutions/commercial paper

Exchange differences

386

(152)

(239)

(18)

(114)

103

361

(10)

Balance at 31 December

2,593

2,564

The average effective interest rate on the portfolio of borrowings
outstanding in 2013, including hedge instruments related to
these borrowings, amounted to 4.2% (2012: 4.3%).

A breakdown of debenture loans is given below:

Debenture loans

4.00%

5.25%

5.75%

1.75%

EUR loan

Total

2013

2012

2005-2015

2007-2017

2009-2014

2013-2019

494

746

500

300

490

745

499

2,040

1,734

At the end of 2013 an amount of € 300 million (year-end 2012:
€ 325 million) of the 5.25% EUR loan 2007-2017 was swapped
into CHF to hedge the currency risk of net investments in CHF-
denominated subsidiaries. In 2006 and 2007 the loan had been
partly pre-hedged (cash flow hedge) by means of forward
starting swaps, leading to a lower effective fixed interest rate of
4.89% for the full loan.

Of the € 500 million 5.75% EUR loan 2009-2014, € 300 million
was swapped to floating rates in September 2009 by means of
an interest rate swap (fair value hedge). In August 2011 the swap
to floating was unwound and an interest advantage of 1.31% per
annum was locked in for the remaining life time. The effective
interest now amounts to 5.1% for the whole loan.

In November 2013 a new 1.75% EUR bond of € 300 million was
issued. The full amount of this bond has been swapped to USD.

In November 2010 pre-hedge contracts were concluded for an
intended refinancing in 2014 of the 5.75% EUR loan 2009-2014
at a 10 year interest rate of 3.42% excluding DSM spread.

In November 2011 pre-hedge contracts were concluded for an
intended refinancing in 2015 of the 4% EUR loan 2005-2015 at
a 10 year interest rate of 3.20% excluding DSM spread. At year-
end 2013 the fair value of the pre-hedge contracts amounted to
€ 77 million negative (year-end 2012: € 112 million negative),
which is recognized in the hedging reserve.

A breakdown of private loans is given below:

Private loans

TWD loan

floating

2013-2018

(1 month)

floating

(12 months)

5.51%

5.61%

2008-2014

2003-2013

2003-2015

All debenture loans have a fixed interest rate.

The original amount of € 300 million of the 4% EUR loan
2005-2015 was swapped into CHF to hedge the currency risk
of net investments in CHF-denominated subsidiaries. This
original amount of the loan was pre-hedged (cash flow hedge) in
2005 by means of a forward starting swap, which led to a lower
effective fixed interest rate of 3.66%. The loan increase of
€ 194 million (after discount and fair value adjustments), was
swapped to floating rates in August 2009 by means of an interest
rate swap (fair value hedge). In August 2011 the swap to floating
was unwound and an interest advantage of 1.54% per annum
was locked in for the remaining life time. The effective interest
rate for the increase now amounts to 3.67%.

CNY loan

USD loan

Other loans

Total

2013

2012

109

114

245

320

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The fixed interest rate of the 5.51% USD loan 2003-2013 was
swapped into a floating rate by means of an interest rate swap
(fair value hedge). During 2005 this interest rate swap was
unwound. The gain from this transaction is recognized in income
over the remaining life of the bond, leading to an effective fixed
USD interest rate of 4.29% for the loan. This 5.51% USD loan
was assigned as a net investment hedge to hedge the currency
risk of net investments in USD-denominated subsidiaries until
June 2013.

The currency component of the 5.61% USD loan 2003-2015
was swapped into euros (cash flow hedge). The resulting EUR
liability was swapped into CHF to hedge the currency risk of net
investments in CHF-denominated subsidiaries (net-investment
hedge).

DSM’s policy regarding financial-risk management is described
in note 22.

19 Other non-current liabilities

2013

2012

Deferred items

Investment grants

Deferred items

Other non-current liabilities

Total

The decrease in deferred items mainly relates to the
reclassification to held for sale.

20 Current liabilities

Trade payables

Received in advance

Trade accounts payable

Notes and cheques due

Owing to associates

2013

2012

1,269

1,374

Total Trade payables

1,328

1,453

Other current liabilities

Income taxes payable

Other taxes and social security

contributions

Interest

Pensions

Investment creditors

Employee related liabilities

Other liabilities

Total Other current liabilities

172

286

601

141

290

628

21 Contingent liabilities and other financial obligations

The contingent liabilities and other financial obligations in the
following table are not recognized in the balance sheet.

2013

2012

Operating leases and rents

Guarantee obligations on behalf of

associates and third parties

Outstanding orders for projects

under construction

Other

Total

151

256

158

259

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

Guarantee obligations are principally related to value added tax
and duties on the one hand and to financing obligations of
associates on the other. Most of the outstanding orders for
projects under construction will be completed in 2014. Property,
plant and equipment under operating leases primarily concerns
catalysts, buildings and various equipment items.

The commitments for operating leases and rents are spread as
follows:

effects of fluctuations in currency-exchange and interest rates
on its results in the short term and following market rates in the
long term. DSM uses financial derivatives to manage financial
risks relating to business operations and does not enter into
speculative derivative positions. DSM does not hold financial
instruments with embedded derivatives. DSM's financial policy,
including policies and processes for managing capital, is
discussed more extensively on page 110 of the Report by the
Managing Board.

Operating leases and rents

2013

2014

2015

2016

2017 and 2018

After 2018

Total

2013

2012

Litigation
DSM has a process in place to monitor legal claims periodically
and systematically.

DSM is involved in several legal proceedings, most of which are
related to the ordinary course of business. DSM does not expect
these proceedings to result in liabilities that have a material effect
on the company's financial position. In cases where it is probable
that the outcome of the proceedings will be unfavorable, and the
financial outcome can be measured reliably, a provision has
been recognized in the financial statements and disclosed in
note 17 Provisions.

22 Financial instruments and risks

Policies on financial risks
General
The main financial risks faced by DSM relate to liquidity risk and
market risk (comprising interest rate risk, currency risk, price risk
and credit risk). DSM’s financial policy is aimed at minimizing the

Liquidity risk
DSM has two committed credit facilities: one of € 500 million
maturing in April 2018 and one of € 500 million refinanced in
September 2011 and maturing in September 2016. The latter
had an extension option in 2012, which was utilized, bringing the
maturity to September 2017. In 2013 the second extension
option was executed (to extend the final maturity by another
year), which was accepted by all banks but one, i.e. the facility
amount in the last year will be € 445 million. Together, the
facilities amount to a total of € 1,000 million (2012: € 900 million).
Furthermore, DSM has a commercial-paper program amounting
to € 1,500 million (2012: € 1,500 million). The company will use
the commercial-paper program to a total of not more than
€ 1,000 million (2012: € 900 million). The agreements for the
committed credit facilities neither have financial covenants nor
material adverse changes clauses. At year-end 2013 no loans
had been taken up under the committed credit facilities. DSM
has no derivative contracts to manage currency risk or interest
rate risk outstanding under which margin calls by the
counterparty would be permitted.

Floating-rate and fixed-rate borrowings and short-term
monetary liabilities analyzed by maturity are summarized in the
following table. Borrowings excluding credit institutions are
shown after taking into account related interest rate derivatives
in designated hedging relationships. DSM manages financial
liabilities and related derivative contracts on the basis of the
remaining contractual maturities of these instruments. Therefore
the remaining maturities presented in the following table provide
an appropriate understanding of the timing of the cash flows
related to these instruments, and amounts are not expected to
differ from those reported. Financial assets are not linked to
financial liabilities in order to meet cash outflows on these
liabilities.

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Borrowings and short-term monetary liabilities by maturity

2012

Within 1 year

Within 1 to 2 years

Within 2 to 3 years

Within 3 to 4 years

Within 4 to 5 years

After 5 years

Total

2013

Within 1 year

Within 1 to 2 years

Within 2 to 3 years

Within 3 to 4 years

Within 4 to 5 years

After 5 years

Total

Fixed-rate

Floating-rate

Short-term

Subtotal

Interest

Cash at
1

Total cash

borrowings

monetary

payments

redemption

out

liabilities

2,587

2,724

543

618

751

121

505

618

751

2,819

614

684

786

1,996

2,587

4,645

288

4,949

508

612

762

307

2,220

2,772

655

768

307

2,850

728

811

314

2,200

102

2,220

4,522

245

4,777

1 Difference between nominal redemption and amortized costs

Interest rate risk
DSM’s interest rate risk policy is aimed at minimizing the interest rate risks associated with the financing of the company and thus
at the same time optimizing the net interest costs. This policy translates into a certain desired profile of fixed-interest and floating-
interest positions, including cash and cash equivalents, with the floating-interest position in principle not exceeding 60% of net
debt.

On 31 December 2013, DSM had no outstanding fixed-floating interest rate swaps other than the pre-hedges for refinancing in
2014 and 2015, respectively (see note 18).

The following analysis of the sensitivity of borrowings and related financial derivatives to interest rate movements assumes an
instantaneous 1% change in interest rates for all currencies and maturities from their level on 31 December 2013, with all other
variables held constant. A 1% reduction in interest rates would result in a € 4 million pre-tax loss in the income statement on the
basis of the composition of financial instruments on 31 December 2013 as floating-rate borrowings are more than compensated
for by floating-rate assets (mainly cash). The opposite applies in the case of a 1% increase in interest rates. The sensitivity of the
fair value of financial instruments on 31 December 2013 to changes in interest rates is set out in the following table.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

Sensitivity of fair value to change in interest rate

2013

2012

Carrying

Fair value

Sensitivity of fair value

Carrying

Fair value

Sensitivity of fair value

amount

to change in interest of:

amount

to change in interest of:

+1%

(1%)

+1%

(1%)

Current investments

Cash and cash equivalents

Short-term borrowings

Long-term borrowings

Interest rate swaps (fixed to floating and pre-

hedges)

776

(843)

776

(849)

(1,750)

(1,927)

(77)

(1)

(64)

(99)

1,121

(642)

1,121

(646)

(1,922)

(2,142)

(112)

(1)

(66)

(104)

Currency risk
It is DSM’s policy to hedge 100% of the currency risks resulting from sales and purchases at the moment of recognition of the
trade receivables and trade payables. In addition, operating companies may – under strict conditions – opt for hedging currency
risks from firm commitments and forecasted transactions. The currencies giving rise to these risks are primarily USD, GBP and
JPY. The risks arising from currency exposures are regularly reviewed and hedged when appropriate. DSM uses average-rate
currency forward contracts, currency forward contracts, spot contracts, and average-rate currency options to hedge the exposure
to fluctuations in foreign exchange rates. At year-end, these instruments had remaining maturities of less than one year.

To hedge intercompany loans, receivables and payables denominated in currencies other than the functional currency of the
subsidiaries, DSM uses currency swaps or forward contracts. Only for some larger internal loans with a total notional amount of
€ 1,414 million, hedge accounting is applied for these instruments. On 31 December 2013, the notional amount of the currency
forward contracts was € 3,713 million (2012: € 3,458 million).

In 2013 DSM hedged USD 707 million (2012: USD 919 million) of its projected net cash flow in USD in 2014, of which USD 257
million against EUR and USD 450 million against CHF by means of average-rate currency forward contracts at an average exchange
rate of USD 1.33 per euro and CHF 0.93 per US dollar, respectively, for the four quarters of 2014. In 2013 DSM also hedged
JPY 5,100 million (2012: JPY 5,100 million) of its projected net cash flow in JPY in 2014, of which JPY 4,000 million against
Swiss franc and JPY 1,100 million against the euro by means of average-rate currency forward contracts at an average exchange
rate of JPY 104 per Swiss franc and JPY 128 per euro, respectively, for the four quarters of 2014. DSM also continued the hedge
of projected GBP cash obligations against CHF: GBP 50 million at an average exchange rate of CHF 1.42 per British pound. These
hedges have fixed the exchange rate for part of the USD and JPY receipts and GBP payments in 2014. Cash flow hedge accounting
is applied for these hedges. As a result of similar hedges concluded in 2012 for the year 2013, in 2013 € 24 million positive
(2012: € 25 million negative) was recognized in the operating income of the segments involved in accordance with the realization
of the expected cash flows. There was no material ineffectiveness in relation to these hedges.

The currency risk associated with the translation of DSM's net investment in entities denominated in currencies other than the euro
was partially hedged at year-end 2013. CHF-denominated net assets have been partially hedged by currency swaps
(2013: CHF 994 million; 2012: CHF 1,061 million). With the redemption of the USD loan 2003-2013 USD-denominated net assets
are no longer being hedged (2012: USD 150 million). There was no material ineffectiveness in relation to these hedges.

The following analysis of the sensitivity of net borrowings and derivative financial instruments to currency movements against the
euro assumes a 10% change in all foreign currency rates against the euro from their level on 31 December, with all other variables
held constant. A +10% change indicates a strengthening of the foreign currencies against the euro. A -10% change represents a
weakening of the foreign currencies against the euro.

In 2013 no gains or losses relating to fair value hedges were included in Other financial income and expense (2012: no gains or
losses).

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Sensitivity of fair value to change in exchange rate

Carrying

Fair value

Sensitivity of fair value to

Carrying

Fair value

Sensitivity of fair value to

amount

change in all exchange

amount

change in all exchange

2013

2012

rates of:

+10%

(10%)

rates of:

+10%

(10%)

776

(843)

776

(849)

(1,750)

(1,927)

(77)

(73)

(77)

(73)

(12)

(20)

(236)

(89)

(17)

(38)

236

(13)

1,121

(642)

1,121

(646)

(1,922)

(2,142)

(112)

(53)

(112)

(53)

(113)

(24)

(20)

(216)

(92)

(28)

(56)

216

(29)

Current investments

Cash and cash equivalents

Short-term borrowings

Long-term borrowings

Interest rate swaps

Cross currency swaps

Currency forward contracts

Cross currency swaps related to net

investments in foreign entities1

Average-rate forwards used for economic

hedging2

1 Fair-value change reported in Translation reserve
2 Fair-value change reported in Hedging reserve

Fair-value changes on these positions will generally be recognized in profit or loss, with the exception of the instruments for which
cash flow hedge accounting or net-investment hedge accounting is applied. Cash flow hedge accounting is applied for the average
rate forwards and average-rate currency options used for economic hedging; the fair value changes of these derivatives are
recognized in the Hedging reserve in equity until recognition of the related cash flows. Net-investment hedge accounting is applied
for the cross currency swaps used to protect net investments in foreign entities; the fair-value changes of these derivatives are
recognized in the Translation reserve in equity until the net investment is disposed of, to the extent that the changes in fair value
are caused by changes in currency-exchange rates.

Price risk
Financial instruments that are subject to changes in stock exchange prices or indexes are subject to a price risk. At year-end 2013
price risks related to investments in securities were limited.

Credit risk
DSM manages the credit risk to which it is exposed by applying credit limits per institution and by dealing exclusively with institutions
having a high credit rating.

At the balance sheet date there were no significant concentrations of credit risk.

With regard to treasury activities it is ensured that financial transactions are only concluded with counterparties that have at least
a Moody's credit rating of A3 for long-term instruments. At business group level, outstanding receivables are continuously monitored
by the management of the operating companies. Appropriate allowances are made for any credit risks that have been identified
(as listed in note 12). It is therefore unlikely that significant losses will arise in relation to receivables that have not been provided
for.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

The maximum exposure to credit risk is represented by the carrying amounts of financial assets that are recognized in the balance
sheet, including derivative financial instruments. No significant agreements or financial instruments were available at the reporting
date that would reduce the maximum exposure to credit risk. Information about financial assets is presented in note 10 Associates
and Other financial assets, note 12 Current receivables, note 13 Current investments, note 14 Cash and cash equivalents and note
22 Financial instruments and risks.

Fair value of financial instruments
In the following table the carrying amounts and the estimated fair values of financial instruments are disclosed:

Assets

Other participations

Other non-current receivables

Current receivables

Financial derivatives

Current investments

Cash and cash equivalents

Liabilities

Non-current borrowings

Other non-current liabilities

Current borrowings

Financial derivatives

Other current liabilities

31 December 2013

31 December 2012

Carrying amount

Fair value

Carrying amount

Fair value

1,642

126

776

1,750

843

190

1,929

1,642

126

776

1,927

849

190

1,929

1,799

1,121

1,922

642

299

2,081

1,799

1,121

2,142

646

299

2,081

The following methods and assumptions were used to determine the fair value of financial instruments: cash, current investments,
current receivables, current borrowings and other current liabilities are stated at carrying amount, which approximates fair value in
view of the short maturity of these instruments. The fair values of financial derivatives and long-term instruments are based on
calculations, quoted market prices or quotes obtained from intermediaries.

The portfolio of derivatives consists of average rate forward contracts that are valued against average foreign exchange forward
rates obtained from Bloomberg and other derivatives that are valued using a discounted cash flow model, applicable market yield
curves and foreign exchange spot rates. All inputs for the fair value calculations represent observable market data that are obtained
from external sources that are deemed to be independent and reliable.

DSM uses the following hierarchy for determining the fair value of financial instruments measured at fair value:

- Level 1: quoted prices in active markets for identical assets or liabilities
- Level 2: other techniques for which all inputs that have a significant effect on the fair value are observable, either directly or

indirectly

- Level 3: techniques that use inputs that have a significant effect on the fair value that are not based on observable market data.

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The following table shows the carrying amounts of the financial derivatives recognized, broken down by type and purpose:

During the year there were no transfers between individual levels of the fair value hierarchy.

23 Post-employment benefits

Pension costs

Carrying amounts financial derivatives

Interest rate swaps

Currency swaps

Total financial derivatives related to borrowings

Currency forward contracts

Balance at 31 December 2012

Interest rate swaps

Currency swaps

Total financial derivatives related to borrowings

Currency forward contracts

Balance at 31 December 2013

The group operates a number of defined benefit plans and
defined contribution plans throughout the world, the assets of
which are generally held in separately administered funds. The
pension plans are generally funded by payments from
employees and from the relevant group companies. The group
also provides certain additional healthcare benefits to retired
employees in the US.

Post-employment benefits relate to obligations that will be
settled in the future and require assumptions to project benefit
obligations. Post-employment benefit accounting is intended to
reflect the recognition of post-employment benefits over the
employee’s approximate service period, based on the terms of
the plans and the investment and funding. The accounting
requires management to make assumptions regarding variables
such as discount rate, future salary increases, life expectancy,
and future healthcare costs. Management consults with external
actuaries regarding these assumptions at least annually for
significant plans.

Changes in these key assumptions can have a significant impact
on the projected defined benefit obligations, funding
requirements and periodic costs incurred.

The charges for pension costs recognized in the income
statement (note 4) relate to the following:

Fair value hierarchy

Assets

Liabilities

Total

Level 2

126

Defined benefit plans:

- Pension plans included in

operating profit

- Healthcare plans

- Other post-employment

benefits

Defined contribution plans

Total continuing operations

Discontinued operations

Pension plans included in financial

income and expense

Total

(112)

(182)

(294)

(5)

(299)

(77)

(106)

(183)

(7)

(190)

(112)

(166)

(278)

(237)

(77)

(15)

(92)

(64)

2013

2012

116

137

114

140

On 1 January 2013 accounting for defined benefit pension plans
changed as a result of the introduction of the revised IAS 19,
‘Employee Benefits’. The changes have been applied
retroactively and 2012 was restated in accordance with the
amended standard. The impact of the restatement on the
opening balance of the previous year is immaterial and therefore

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

not disclosed. Three important changes were introduced by IAS
19R.

- The application of the corridor mechanism was abolished,
which means that all actuarial gains and losses had to be
recognized in other comprehensive income immediately. This
change will not impact DSM because immediate recognition
of actuarial gains and losses has already been applied since
2006.

- The expected returns on pension assets were no longer used
for the determination of annual pension costs. Instead, interest
costs or benefits were calculated on the net balance of
pension assets and liabilities. Because the expected return on
plan assets was usually higher than the discount rate, this
change has increased the annual defined benefit pension
costs.

- Net interest expense which used to be presented in operating
profit is now reported in financial income and expense. As a
consequence € 12 million was included in financial income and
expense in 2013 (2012: € 15 million) which was previously
reported in operating profit.

For 2014, costs for the defined benefit plans relating to pensions
and healthcare will be € 46 million (2013: € 36 million).

Changes in Employee benefits liabilities recognized in the
balance sheet are disclosed in the following overview:

Employment benefits liabilities

The Employee benefits liabilities of € 360 million
(2012: € 430 million) consist of € 322 million (2012: € 386 million)
related to pensions, € 25 million (2012: € 31 million) related to
healthcare and other costs and € 13 million (2012: € 13 million)
related to other post-employment benefits.

Pensions
The DSM group companies have various pension plans, which
are geared to the local regulations and practices in the countries
in which they operate. As these plans are designed to comply
with the statutory framework, tax legislation, local customs and
economic situation of the countries concerned, it follows that the
nature of the plans varies from country to country. The plans are
based on local legal and contractual obligations.

Defined benefit plans are applicable to certain employees in
Germany, the UK, Switzerland and the US. The rights that can
be derived from these plans are based primarily on length of
service and the majority of the plans are based on final salary.
The majority of the obligations are funded and have been
transferred to independent pension funds and life-insurance
companies.

The most important unfunded plans are in Germany. They
amount to € 252 million (2012: € 250 million).

The changes in the present value of the defined benefit
obligations and in the fair value of plan assets of the major plans
are listed below:

2013

2012

Present value of defined benefit obligations

Balance at 1 January

(430)

(328)

2013

2012

Changes:

- Balance of actuarial

gains/(losses)

- Employee benefits costs

- Contributions by employer

- Exchange differences

- Reclassification from/to held for

sale

- Other changes

Total changes

Balance at 1 January

1,317

1,105

(39)

(133)

(24)

(2)

Changes:

- Service costs

- Interest costs

- Contributions by employees

- Actuarial (gains)/losses

- Past service costs

- Curtailments

- Exchange differences

(102)

- Benefits paid

(9)

(6)

(23)

(42)

183

(8)

(1)

(45)

Balance at 31 December

(360)

(430)

Balance at 31 December

1,316

1,317

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Fair value of plan assets

The changes in the net assets / liabilities recognized in the
balance sheet are as follows:

Balance at 1 January

931

817

2013

2012

Changes:

- Interest income on plan assets

- Actuarial gains/(losses)

Actual return on plan assets

- Contributions by employer

- Contributions by employees

- Exchange differences

- Benefits paid

Balance at 31 December

(20)

(42)

958

Balance at 1 January

Expense recognized in the

income statement

Actuarial gains/(losses)

recognized directly in Other

comprehensive income during the

year

Contributions by employer

Exchange differences

Balance at 31 December

(45)

931

2013

2012

(386)

(288)

(37)

(20)

(358)

(129)

(386)

The amounts recognized of these major plans in the balance
sheet are as follows:

In 2014 DSM is expected to contribute € 44 million (actual 2013:
€ 47 million) to its defined benefit plans.

2013

2012

The major categories of pension-plan assets as a percentage of
total plan assets are as follows:

Pension-plan assets by category

(1,031)

958

(1,036)

931

Present value of funded

obligations

Fair value of plan assets

Present value of unfunded

obligations

Funded status

Effect of asset ceiling

Net liabilities / net assets

Of which:

- Liabilities (Employee benefits

liabilities)

- Assets (Prepaid pension costs)

(73)

(285)

(358)

(105)

Bonds

Equities

Property

Other

(281)

(386)

2013

2012

54%

34%

59%

27%

The pension-plan assets include neither ordinary DSM shares
nor property occupied by DSM.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

The total expense recognized in the income statement is as
follows:

The main actuarial assumptions for the year (weighted averages)
are:

Costs major defined benefit plans

Actuarial assumptions

Current service costs

Net interest costs

Past service costs

(Gains)/losses on curtailments

Costs related to defined benefit

plans

2013

2012

(7)

(8)

(1)

Discount rate

Price inflation

Salary increase

Pension increase

2013

2012

Plans outside the

1 Plans outside the

Netherlands

3.14%

1.92%

2.72%

2,25-2,6%

2.80%

1.82%

2.69%

2.13%

In the Netherlands there is only one defined benefit plan which is immaterial for the
group

Year-end amounts for the current and previous periods are as follows:

Major defined benefit plans per year

2013

2012

2011

2010

2009

Defined benefit obligations

Plan assets

(1,316)

958

(1,317)

931

(1,105)

817

(5,543)

5,440

(4,942)

4,876

Funded status of asset/(liability)

(358)

(386)

(288)

(103)

(66)

Experience adjustments on plan assets, gain/(loss)

Experience adjustments on plan liabilities, gain/(loss)

Gain/(loss) on liabilities due to changes in assumptions

(25)

(27)

(157)

(18)

(8)

(12)

245

(466)

485

(40)

(336)

Sensitivities of significant actuarial assumptions
The discount rate, the future increase in wages and salaries and the pension increase rate were identified as significant actuarial
assumptions. The following impacts on the defined benefit obligation are to be expected:

- A 0.25% increase/decrease in the discount rate would lead to a decrease/increase of 3.1% in the defined benefit obligation.
- A 0.25% increase/decrease in the expected increase in salaries/wages would lead to an increase/decrease of 0.6% in the defined

benefit obligation.

- A 0.25% increase/decrease in the expected increase in the rate of pension increase would lead to an increase/decrease of less

than 0.9% in the defined benefit obligation.

The sensitivity analysis is based on realistically possible changes as of the end of the reporting year. Each change in a significant
actuarial assumption was analyzed separately as part of the test. Interdependencies were not taken into account.

Healthcare and other costs
In some countries, particularly in the US, group companies provide retired employees and their surviving dependants with post-
employment benefits other than pensions, mainly allowances for healthcare expenses and life-insurance premiums. Some of these
are unfunded; in these cases, approved expense claims are reimbursed out of the financial resources of the group companies
concerned. These plans are not sufficiently material to warrant the individual disclosures required by IAS 19.

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24 Net debt

The development of the components of net debt is as follows:

x € million

equivalents

Cash and

Current

Non-current

Current

Credit

Derivatives

Total

cash

investments

borrowings

institutions

Balance at 1 January 2012

2,058

(2,030)

(15)

(145)

(276)

(319)

Change from operating activities

730

Change from investing activities

(1,856)

(77)

Change from financing activities

Transfers

Dividend

Proceeds from reissued shares

Capital payments of non-controlling interests

Derivatives

Other

Change from financing activities

Exchange differences

276

(210)

171

(4)

(99)

114

(29)

(361)

(2)

112

(29)

(361)

758

(2,030)

(210)

(2)

(102)

Total changes

(937)

(77)

108

(121)

(361)

(1,349)

Balance at 31 December 2012

1,121

(1,922)

(136)

(506)

(237)

(1,668)

Change from operating activities

Change from investing activities

Change from financing activities

Reclassification from non-current to current

Transfers

Dividend

Proceeds from reissued shares

Repurchase of shares

Capital payments of non-controlling interests

Derivatives

Other

Change from financing activities

Exchange differences

889

(1,170)

(10)

(160)

145

(73)

(62)

(2)

(24)

(28)

539

(369)

(539)

140

239

(5)

165

(399)

239

107

919

(1,179)

(160)

145

(73)

107

(5)

Total changes

(345)

172

(416)

215

173

(194)

Balance at 31 December 2013

776

(1,750)

(552)

(291)

(64)

(1,862)

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

25 Notes to the cash flow statement

The cash flow statement provides an explanation of the changes in cash and cash equivalents. It is prepared on the basis of a
comparison of the balance sheets as at 1 January and 31 December. Changes that do not involve cash flows, such as changes
in exchange rates, amortization, depreciation, impairment losses and transfers to other balance sheet items, are eliminated.

Changes in working capital due to the acquisition or disposal of consolidated companies are included under Investing activities.

Most of the changes in the cash flow statement can be traced back to the detailed statements of changes for the balance sheet
items concerned. For those balance sheet items for which no detailed statement of changes is included, the table below shows
the link between the change according to the balance sheet and the change according to the cash flow statement:

Change in operating working capital

Operating working capital

Balance at 1 January

Balance at 31 December

Balance sheet change

Adjustments:

- Exchange differences

- Changes in consolidation (including acquisitions and disposals)

- Reclassification from / to held for sale

- Transfers / non cash value adjustments

Total change in operating working capital according to the cash flow statement

2013

2012

1,919

1,873

(46)

(84)

117

1,776

1,919

143

(169)

(2)

In 2013 the operating working capital of continuing operations, was € 1,873 million, which amounts to 21.1% of annualized fourth
quarter net sales (2012: 20.7%). Besides the business impact this increase was due to acquisitions, disposals and an exchange
rate effect.

26 Share-based compensation

Under the DSM Stock Incentive Plan, performance-based and non-performance-based stock options or Share Appreciation Rights
(SARs) are granted to senior management. Such a grant takes place on the first day on which the DSM stock is quoted ex-dividend
following the Annual General Meeting of Shareholders. The opening price of the DSM stock on that day is the exercise price of the
stock options and SARs.

Since 2011 only stock options have been granted, and Share Appreciation Rights are no longer used as share-based
compensation.

Stock Options and SARs have a term of eight years and are subject to a vesting period of three years. After this three-year period
one third of the stock options and SARs (non-performance-related) will vest and two thirds of the stock options and SARs that are
performance based will become exercisable in whole, in part, or not at all, depending on the total shareholder return (TSR) achieved
by DSM in comparison with a peer group. Non-vested performance based stock options and SARs will be forfeited. If employment
is terminated prior to the vesting date, specific rules regarding vesting and forfeitures apply. The exercise of stock incentives is
regulated.

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Since 2010 only performance shares have been granted to the members of the Managing Board (no longer stock options).
Performance shares vest after three years upon the realization of a predefined performance measure. The performance schedule
is the same as that for stock options.

All stock options and performance shares are settled by physical delivery of DSM shares, while SARs are settled in cash.

Overview of stock options and Share Appreciation Rights for management

Year of issue

Outstanding

In 2013

Outstanding

Fair value

Exercise

Expiry date

at 31 Dec.

Granted

Exercised

Average

price (€ )

Forfeited/

at 31 Dec.

expired

2013

on grant

date (€ )

price (€ )

2012

32,400

384,900

693,751

866,601

896,075

2,599,438

3,018,438

3,280,813

3,442,563

2005

2006

2007

2008

2009

20101,2

20111

20121

20131

(32,400)

(339,675)

(534,313)

(493,322)

(510,375)

(1,139,500)

(205,200)

(84,250)

(24,000)

45.65

50.44

51.23

50.57

50.87

50.39

52.24

53.15

57.77

(13,500)

45,225

159,438

373,279

372,200

(844,813)3

615,125

(251,125)3

2,562,113

(278,500)3

2,918,063

(110,500)3

3,308,063

6.15

8.95

7.69

5.73

2.83

6.07

9.60

6.88

9.23

29.05

8 Apr. 2013

38.30 31 Mar. 2014

33.60 30 Mar. 2015

29.79 28 Mar. 2016

21.10 27 Mar. 2017

33.10

6 Apr. 2018

46.20

2 May 2019

40.90 15 May 2020

48.91

7 May 2021

2013 Total

11,772,416

3,442,563

(3,363,035)

(1,498,438)

10,353,506

Of which

vested

3,382,177

at 31 Dec.

2011

1,823,017

at 31 Dec.

2012

2012 Total

12,546,766

3,304,813

(2,786,326)

43.23

(1,292,837)

11,772,416

Of which

vested

4,104,602

3,382,177

1 Stock options will partly vest, and may therefore be immediately exercised, upon termination of employment in connection with retirement or early retirement. The remaining term
to exercise stock options or SARs after their vesting as a result of retirement or early retirement is limited to three years (the remaining term to exercise in the case of regular
vesting is five years).

2 Based on TSR performance, the stock incentives tied to performance granted in 2010 did only partially vest; the remaining part has been forfeited.
3 Number of forfeited options: 844,813 (2010), 243,625 (2011), 267,250 (2012) and 99,250 (2013).

Certain employees in the Netherlands are entitled to employee stock options that are granted on the first day on which the DSM
stock is quoted ex-dividend following the Annual General Meeting of Shareholders. The opening price of the DSM stock on that
day is the exercise price of the stock options. Employee stock options can immediately be exercised and have a term of 5 years.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

Overview of stock options for employees

Year of issue1

Outstanding

In 2013

Outstanding

Fair value

at 31 Dec.

Granted

Exercised

2012

78,804

105,449

574,010

579,805

(69,741)

(63,397)

(301,185)

(360,835)

284,935

(81,770)

Average

price (€ )

Forfeited/

at 31 Dec.

expired

2013

on grant

date (€ )

45.68

50.95

53.11

51.39

56.05

(9,063)

(130)

(18,380)

(6,890)

(3,225)

41,922

254,445

212,080

199,940

3.27

2.31

10.35

6.79

6.51

2008

2009

2011

2012

2013

Exercise

price (€ )

Exercise

period

until

29.79

21.10

46.20

40.90

48.91

Mar. 2013

Mar. 2014

May 2016

May 2017

May 2018

2013 Total

1,338,068

284,935

(876,928)

51.93

(37,688)

708,387

2012 Total

1,015,276

636,810

(246,183)

43.18

(67,835)

1,338,068

1 Based on the 2009 result, no employee option rights were granted in 2010.

Measurement of fair value
The costs of option plans are measured by reference to the fair value of the options at the date at which the options are granted.
The fair value is determined using the Black-Scholes model, taking into account market conditions linked to the price of the DSM
share. Stock-price volatility is determined on the basis of historical volatilities of the DSM share price measured each month over
a period equal to the expected option life. The costs of these options are recognized in the income statement (Employee benefits
costs).

The following assumptions were used in the Black-Scholes
model to determine the fair value at grant date:

In the costs for wages and salaries an amount of € 23 million is
included for share-based compensation (2012: € 25 million). In
the following table the share-based compensation is specified:

Management options

Risk-free rate

Expected option life in years

Nominal option life in years

Share price

Exercise price

Volatility

Expected dividend

Fair value of option granted

Employee options

Risk-free rate

Expected option life in years

Nominal option life in years

Share price

Exercise price

Volatility

Expected dividend

Fair value of option granted

2013

2012

Share-based compensation

0.56%

0.80%

2013

2012

Stock options

Share appreciation rights

Performance shares

Total expense

48.91

29%

3.07%

9.23

40.90

28%

3.55%

6.88

0.13%

0.25%

2.5

48.91

27.5%

3.07%

6.51

2.5

40.90

34%

3.55%

6.79

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27 Interests in joint ventures

28 Interests in associates

DSM’s share in its most important joint ventures (joint ventures
with a net asset value higher than € 25 million on a 100% basis)
is disclosed below:

DSM’s share in its most important associates (associates with a
net asset value higher than € 25 million on a 100% basis) is
disclosed below:

Company

DSM interest

Company

2013

2012

DSM Sinochem Pharmaceuticals,

Xinhui Meida - DSM Nylon Chips

Ltd. (Hong Kong, China)

50%

Co., Ltd. (Guangzhou, China)

DEXPlastomers V.o.F. (Heerlen,

Netherlands)1

POET-DSM Advanced Biofuels

50%

(Yantai City, China)

Yantai André Pectin Co., Ltd.

LLC (Sioux Falls, US)

50%

DSM interest

2013

2012

25%

29%

25%

1 The stake in this joint venture was divested on 1 March 2013.

Investments in associates are accounted for by the equity
method. The following table provides summarized financial
information on all associates on a 100% basis.

Associates (100% basis)

The financial data of all joint ventures are included in the
consolidated financial statements according to the method of
proportionate consolidation. DSM’s interests in the assets and
liabilities, income and expense of all these joint ventures, are
disclosed below (on a proportionate basis):

Joint ventures (proportionate basis)

Non-current assets

Current assets

Non-current liabilities

Current liabilities

2013

2012

Net assets

2013

2012

169

128

(19)

(108)

170

420

145

(48)

(123)

460

Non-current assets

Current assets

Non-current liabilities

Current liabilities

Net assets

Net sales

Expenses

Net profit

243

161

(42)

(161)

201

211

(222)

(11)

168

233

(31)

(183)

187

256

(266)

(10)

From 2014 onwards proportionate consolidation for joint
ventures will be terminated and replaced by the equity method.
DSM’s interest in the net assets of the joint ventures will be
reported on the line Associates and DSM’s interest in profit and
loss will be reported in Share of the profit of associates.
Comparative information presented in 2014 will be adjusted
accordingly.

Net sales

Net result

29 Related parties

Koninklijke DSM N.V. is the group holding company that is listed
on the NYSE Euronext stock exchange in Amsterdam. The
financial statements of the company are included in the chapter
Parent company financial statements.

In the ordinary course of business, DSM buys and sells goods
and services to various related parties in which DSM has
significant influence. Transactions are conducted under terms
and conditions that are equivalent to those that apply to arm's
length transactions.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

Transactions and relationships with related parties are reported
in the table below.

Transactions with related parties

Sales to related parties

Purchases from related parties

Loans to related parties

Receivables from related parties

Payables to related parties

1 Relates to continuing operations.

20131

20121

170

244

147

266

DSM has provided guarantees to third parties for debts of
associates for an amount of € 82 million (2012: € 85 million).

Other related-parties disclosure relates entirely to the key
management of DSM, being represented by the company's
Managing Board and Supervisory Board.

The total remuneration and related costs (including pension
expenditures, other commitments, short-term and long-term

30 Service fees paid to external auditors

incentives) of the current members of the Managing Board
amounted to € 9.6 million (2012: € 6.6 million). The increase was
mainly caused by costs in relation to the early retirement of
Mr. Gerardu to facilitate succession planning for the Managing
Board and the Dutch crisis levy. Total remuneration and related
costs includes fixed annual salary including other items to the
amount of € 3.9 million (2012: € 3.3 million), short-term
incentives to the amount of € 1.8 million (2012: € 0.8 million),
pension expenditure amounting to € 0.5 million (2012: € 0.5
million) and long-term incentives amounting to € 2.2 million
(2012: € 1.3 million). In 2013 the costs included an amount of €
1.2 million in respect of the Dutch crisis levy (2012: € 0.7 million).
For further information about the remuneration of the members
of the Managing Board see note 9 to the Parent company
financial statements.

Members of the Supervisory Board received a fixed
remuneration (included in General and administrative) totaling
€ 0.5 million (2012: € 0.5 million).

Further information about the remuneration of Managing Board
members and Supervisory Board members and their share
option rights is given in the report by the Supervisory Board, from
page 122 onwards.

The service fees recognized in the financial statements 2013 for the service of EY amounted to € 8.0 million (2012: € 7.9 million).
The amounts per service category are shown in the following table.

Audit of the Group financial statements

Audit of other (statutory) financial statements

Other assurance services

Total assurance services

Tax services

Sundry services

Total

Total service fee

Of which Ernst & Young

Accountants LLP (Netherlands)

2013

2012

2013

2012

4.1

1.6

0.3

6.0

2.0

8.0

4.8

0.5

5.3

2.1

0.5

7.9

2.2

0.8

0.1

3.1

2.2

0.5

2.7

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Parent company financial
statements

Balance sheet at 31 December of Koninklijke DSM N.V.

x € million

Assets

Non-current assets

Intangible assets

Property, plant and equipment

Financial assets

Deferred tax assets

Other non-current assets

Current assets

Receivables

Cash and cash equivalents

Total

Shareholders' equity and liabilities

Shareholders' equity

Share capital

Share premium

Treasury shares

Other reserves

Retained earnings

Profit for the year

Non-current liabilities

Borrowings

Current liabilities

Borrowings

Financial derivatives

Other current liabilities

Total

Income statement

x € million

Share in results of subsidiaries, joint ventures and associates (after income tax expense)

Other income and expense

Net profit attributable to equity holders of Koninklijke DSM N.V.

Notes

2013

2012

432

9,980

129

10,566

424

12,335

114

12,893

131

172

10,595

13,065

338

489

(294)

5,068

271

5,908

1,649

650

185

2,203

3,038

338

489

(479)

439

4,809

278

5,874

1,848

414

262

4,667

5,343

10,595

13,065

2013

319

(48)

271

2012

405

(127)

278

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Parent company financial statements

Notes to the parent company financial statements

1 General

Unless stated otherwise, all amounts are in € million.

The Parent company financial statements are the financial statements of Koninklijke DSM N.V., which have been prepared in
accordance with accounting principles generally accepted in the Netherlands.

The accounting policies used are the same as those used in the consolidated financial statements, in accordance with the provisions
of article 362-8 of Book 2 of the Dutch Civil Code. In these separate financial statements investments in subsidiaries are accounted
for using the net asset value. The balance sheet presentation is aligned with the consolidated financial statements in order to
enhance transparency and facilitate understanding. In conformity with article 402, Book 2 of the Dutch Civil Code, a condensed
income statement is included in the separate financial statements of the parent company.

Information on the use of financial instruments and on related risks for the group is provided in the Notes to the consolidated
financial statements of Royal DSM.

2 Intangible assets

The carrying amount of intangible assets mainly comprises goodwill on the acquisition of NeoResins in 2005 (€ 358 million), Crina
in 2006 (€ 8 million) and Pentapharm in 2007 (€ 31 million). For further information on these assets including the discussion of the
related impairment tests please refer to note 8: Intangible assets in the Consolidated financial statements.

3 Property, plant and equipment

This item mainly relates to land and buildings and corporate IT projects. Capital expenditure in 2013 was € 2 million
(2012: € 9 million), while the depreciation charge in 2013 was € 2 million (2012: € 1 million). The historical cost of property, plant
and equipment as at 31 December 2013 was € 59 million (2012: € 57 million); accumulated depreciation amounted to
€ 41 million (2012: € 39 million).

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4 Financial assets

Subsidiaries

Other loans

Total

Share in equity

Loans

Balance at 1 January 2012

11,794

315

Changes:

- Share in profit

- Dividend received

- Capital payments

- Net actuarial gains/(losses)

- Change in Fair value reserve

- Change in Hedging reserve

- Exchange differences

- New loans

- Transfers

405

(557)

442

(100)

(7)

(23)

Balance at 31 December 2012

12,016

315

- Changes:

- Share in profit

- Dividend received

- Capital payments

- Net actuarial gains/(losses)

- Change in Fair value reserve

- Exchange differences

- New loans

- Transfers

319

(2,901)

1,854

(231)

(1,461)

Balance at 31 December 2013

9,620

315

(6)

12,118

405

(557)

442

(100)

(7)

(23)

(6)

12,335

319

(2,901)

1,854

(231)

(1,421)

9,980

Transfers and the main part of dividend received and capital payments relate to the restructuring of the legal set-up of financing
companies (Corporate Treasury) within DSM.

5 Receivables

Receivable from subsidiaries

Other receivables / deferred items

Total

2013

2012

113

131

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Parent company financial statements

Notes to the parent company financial statements

6 Shareholders' equity

The repayment schedule for borrowings (excluding commercial
paper) is as follows:

Balance at 1 January

5,874

5,784

2013

2012

2013

2012

Borrowings by maturity

Net profit

Exchange differences, net of

income tax

Net actuarial gains/(losses) on

defined benefit obligations

Dividend

Repurchase of shares

Proceeds from reissue of ordinary

Other changes

271

(228)

(271)

(73)

268

278

(27)

(90)

(254)

182

Balance at 31 December

5,908

5,874

For details see the consolidated statement of changes in equity
(note 15).

Legal reserve
Since the profits retained in Koninklijke DSM N.V.'s subsidiaries
can be distributed, and received in the Netherlands, no legal
reserve for retained profits is required. Profits attributable to joint
ventures and associates are not material and therefore any
related legal reserve is also not material. In Shareholders' equity
an amount of € 16 million (2012: € 244 million) is included for
Translation reserve, -€ 7 million (2012: -€ 30million) for Hedging
reserve and -€ 15 million (2012: -€ 24 million) for Fair value
reserve.

7 Borrowings

2013

2012

Total

Of which

Total

Of which

current

Debenture loans

Private loans

Commercial paper

2,040

109

150

500

150

1,734

228

300

114

300

Total

2,299

650

2,262

414

At 31 December 2013, there was one debenture loan (€ 300
million, maturing in 2019) with a remaining term of more than 5
years (none at 31 December 2012).

2013

2014

2015

2016

2017 and 2018

2019 through 2023

500

603

746

300

114

499

604

745

Total

2,149

1,962

In agreements governing loans with a residual amount at year-
end 2013 of € 2,149 million, of which € 500 million of a current
nature (31 December 2012: € 1,962 million, of which € 114
million of a current nature), clauses have been included which
restrict the provision of security. More information on borrowings
is provided in note 18 (Borrowings) to the consolidated financial
statements.

8 Other current liabilities

2013

2012

Owing to subsidiaries

2,133

4,585

Other liabilities

Deferred items

Total

2,203

4,667

The decrease of current liabilities, owing to subsidiaries, is mainly
caused by the restructuring of the legal set-up of financing
companies. See also note 4 Financial assets.

Contingent liabilities
Guarantee obligations on behalf of affiliated companies and third
parties amounted to € 164 million (31 December 2012:
€ 199 million). Koninklijke DSM N.V. has declared in writing that
it accepts several liabilities for debts arising from acts in law of a
number of consolidated companies. These debts are included
in the consolidated balance sheet.

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9 Remuneration of key personnel

Remuneration Managing Board
The remuneration of the members of the Managing Board is determined by the Supervisory Board within the framework of the
remuneration policy as approved by the Annual General Meeting of Shareholders. More details about the remuneration policy are
included in the Report by the Supervisory Board from page 122 onwards.

The remuneration and related costs (including pension expenditure and other commitments and costs related to long term
incentives) of the current members of the Managing Board amounted to € 9.6 million (2012: € 6.6 million). The remuneration of the
individual members of the Managing Board was as follows:

Remuneration Managing Board

x € thousand

Salary including other

1 Short-term incentive

Pension expenditure

Long-term incentives

Total

Feike Sijbesma

Stefan Doboczky

Nico Gerardu

Rolf-Dieter Schwalb

Stephan Tanda

Dimitri de Vreeze5

Subtotal

Crisis levy

Total

items

2012

2013

931

639

9613

587

589

177

9902

586

583

579

583

2013

2012

2013

2012

2013

2012

2013

2012

481

315

309

315

298

231

117

128

139

164

124

137

124

458

281

8524

302

388

166

258

1,994

1,316

2,259

1,285

1,270

285

1,733

950

1,050

1,057

1,086

3,884

3,321

1,809

779

521

448

2,195

1,328

8,409

5,876

1,215

698

9,624

6,574

1 Other items include company cars and expense allowance
2

Including a one-time payment in 2012 with respect to 25 years of service
Includes a payment of one year fixed salary to Nico Gerardu as a compensation for his willingness to retire early to facilitate succession planning for the Managing Board
Includes the impact of early vesting of performance shares

5 As of 1 September 2013

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Parent company financial statements

Notes to the parent company financial statements

Outstanding and exercised stock incentives
The following table shows the stock incentives of the individual members of the Managing Board and the rights exercised.

Overview of stock options

Year of issue

Outstanding

In 2013

Outstanding

Average

Exercise

Expiry date

at 31 Dec.

Granted

Exercised

Forfeited/

at 31 Dec.

share price at

price (€ )

Feike Sijbesma

Of which vested

Stefan Doboczky

Of which vested

Nico Gerardu

Of which vested

Rolf-Dieter

Schwalb

Of which vested

Stephan Tanda

Of which vested

Dimitri de Vreeze

Of which vested

2012

15,000

22,500

28,125

18,750

84,375

36,000

15,000

22,500

15,000

75,000

22,500

15,000

60,000

22,500

15,000

60,000

15,000

22,500

18,000

27,000

36,000

154,500

55,500

2006

2007

2008

2009

Total

2010

Total

2006

2007

2008

2009

Total

2007

2008

2009

Total

2007

2008

2009

Total

2007

2008

2009

2010

2011

2012

2013

Total

36,000

expired

2013

exercise (€ )

(15,000)

(22,500)

(37,500)

28,125

18,750

46,875

45.73

57.84

38.30 31 Mar 2014

33.60 30 Mar 2015

29.79 28 Mar 2016

21.10 27 Mar 2017

(24,000)

(12,000)

(15,000)

(22,500)

(60,000)

(22,500)

(15,000)

(9,000)

50.73

33.10

6 Apr 2018

48.72

53.24

57.16

38.30 31 Mar 2014

33.60 30 Mar 2015

29.79 28 Mar 2016

21.10 27 Mar 2017

15,000

55.95

33.60 30 Mar 2015

22,500

15,000

37,500

29.79 28 Mar 2016

21.10 27 Mar 2017

55.98

33.60 30 Mar 2015

22,500

15,000

37,500

29.79 28 Mar 2016

21.10 27 Mar 2017

56.03

33.60 30 Mar 2015

22,500

18,000

36,000

29.79 28 Mar 2016

21.10 27 Mar 2017

33.10

6 Apr 2018

46.20 2 May 2019

40.90 15 May2020

48.91 7 May 2021

(15,000)

(9,000)

166,500

58,500

Since 2010 the Managing Board has been granted performance shares instead of stock options.

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Overview of performance shares

Year of issue Outstanding

In 2013

Outstanding

Vested as of

Year of

Share price

at 31 Dec.

Granted

Exercised

Forfeited /

at 31 Dec.

31 Dec.

vesting

at date

Feike Sijbesma

< 2010

2010

2011

2012

2013

Total

2011

2012

2013

Total

Stefan Doboczky

Nico Gerardu

< 2010

2010

2011

2012

2013

Total

Rolf-Dieter Schwalb

< 2010

2010

2011

2012

2013

Total

Stephan Tanda

< 2010

2010

2011

2012

2013

Total

2012

24,500

28,500

24,000

31,000

108,000

16,000

20,000

36,000

20,000

19,000

16,000

20,000

75,000

16,000

19,000

16,000

20,000

71,000

13,956

19,000

16,000

20,000

68,956

24,000

16,000

expired

2013

of grant (€ )

(17,100)

24,500

11,400

24,000

31,000

24,000

24,500

11,400

< 2013

2013

(17,100)

114,900

35,900

16,000

20,000

16,000

52,000

20,000

< 2013

2013

< 2013

2013

< 2013

2013

(11,400)

(8,000)

7,600

8,000

(10,000)

10,000

(8,000)

8,000

(37,400)

53,600

(11,400)

16,000

7,600

16,000

20,000

16,000

75,600

13,956

7,600

16,000

20,000

16,000

73,556

7,600

8,000

10,000

8,000

53,600

16,000

7,600

23,600

13,956

7,600

21,556

33.10

46.20

40.90

48.91

46.20

40.90

48.91

33.10

46.20

40.90

48.91

33.10

46.20

40.90

48.91

33.10

46.20

40.90

48.91

Shares
In addition to the performance shares granted under the DSM Stock Incentive Plan, the current members of the Managing Board
have themselves invested in DSM shares. At year-end 2013 the current members of the Managing Board together held 66,240
shares (year-end 2012: 64,556) in Koninklijke DSM N.V., excluding vested performance shares.

Loans
The company does not provide any loans to members of the Managing Board.

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Parent company financial statements

Notes to the parent company financial statements

Remuneration of the members of the Supervisory Board
The total remuneration (annual fixed fee and annual committee membership fee) of the members of the Supervisory Board amounted
to € 0.5 million (2012: € 0.5 million).

The remuneration of the individual members of the Supervisory Board was as follows:

in €

Annual fixed fee

Committee fee

Other costs

Total

Rob Routs, chairman

Ewald Kist, deputy chairman

Victoria Haynes (from 11 May 2012)

Pierre Hochuli

Eileen Kennedy (from 11 May 2012)

Pauline van der Meer Mohr

Claudio Sonder (retired on 3 May 2013)

Tom de Swaan

Total

Total 2012

2013

2012

70,000

50,000

17,308

50,000

12,500

10,000

15,000

5,000

12,500

5,000

17,500

4,250

8,191

16,250

4,250

16,250

8,191

6,625

8,191

86,750

70,691

76,250

69,250

71,250

70,691

28,933

75,691

78,185

63,538

48,527

61,151

45,194

63,538

67,151

67,372

387,308

90,000

72,198

549,506

494,656

360,453

90,165

44,038

494,656

Heerlen, 24 February 2014

Heerlen, 25 February 2014

Managing Board,

Supervisory Board,

Feike Sijbesma, CEO/Chairman
Rolf-Dieter Schwalb, CFO
Stefan Doboczky
Stephan Tanda
Dimitri de Vreeze

Rob Routs, Chairman
Ewald Kist, Deputy Chairman
Victoria Haynes
Pierre Hochuli
Eileen Kennedy
Pauline van der Meer Mohr
Tom de Swaan

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Other information

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 Royal DSM as at 31
December 2013, its result and its cash flows for the year then
ended 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 Royal DSM as at 31 December
2013 and of its result for the year then ended in accordance with
Part 9 of Book 2 of the Dutch Civil Code.

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 Report by the
Managing Board as set out on page 10 to page 122, 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 Report by the Managing Board as set
out on page 10 to page 122, 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.

Eindhoven, 25 February 2014

Signed by G.A.M. Aarnink, Ernst & Young Accountants LLP

Independent Auditor's Report on the
Financial Statements

To the Shareholders and the Supervisory Board of Royal DSM

Report on the financial statements
We have audited the accompanying financial statements 2013
of Koninklijke DSM N.V. (hereafter: Royal DSM), Heerlen. The
financial statements include the consolidated financial
statements and the company financial statements. The
consolidated financial statements comprise the consolidated
balance sheet as at 31 December 2013, the consolidated
income statement, the consolidated statement of
comprehensive income, the consolidated statement of changes
in equity and the consolidated cash flow statement for the year
then ended, and notes, comprising a summary of the significant
accounting policies and other explanatory information. The
parent company financial statements comprise the company
balance sheet as at 31 December 2013, the company income
statement for the year then ended 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 Report by the Managing
Board 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. 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

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Other information

Independent Auditor's Report on the Financial
Statements
Independent Assurance Report on Sustainability
Information
Profit appropriation
Special statutory rights
Important dates

Independent Assurance Report on
Sustainability Information

The main procedures that we have performed with respect to
the Sustainability Information are:

To the Supervisory Board and shareholders of Royal DSM

- assessing the suitability of the reporting principles used and

its consistent application;

Engagement
We have reviewed the Sustainability Information in the
accompanying Integrated Annual Report 2013 of Koninklijke
DSM N.V. (hereafter Royal DSM). The Sustainability Information
comprises the following sections DSM in motion: driving focused
growth, Growth driver: Sustainability, Stakeholder engagement,
People in 2013 and Planet in 2013 (hereafter ’the Sustainability
Information‘), as included in the Report by the Managing Board
on page 10 to page 122 in the Integrated Annual Report 2013.

- reviewing the design and existence of systems and processes
for information management, internal control and processing
of the qualitative and quantitative data in the Sustainability
Information, at corporate level;

- interviews of relevant staff at corporate level responsible for

the reported information on specific issues including
sustainability strategy, employee engagement survey, ECO+
and safety;

- reviewing, on a test basis, whether the qualitative information

is supported by sufficient evidence;

- reviewing the environmental data submitted by all sites for
central aggregation, together with an assessment of the
quality of the data validation process at corporate level;

- reviewing the people data submitted by all Business Groups
for central aggregation, together with an assessment of the
quality of the data validation process at corporate level;

- reviewing the results of procedures performed as part of the

Operational Audits at key Royal DSM sites in 2013 with
respect to Sustainability Information carried out by the
Corporate Operational Audit department of Royal DSM;

- reviews on the results of people and environmental data trends
and the explanations provided in the Sustainability Information
and discussed these with management at corporate level;
- media and internet searches on environmental, safety and

social issues relating to Royal DSM, to obtain information on
relevant sustainability issues in the reporting period;

- evaluating the overall view presented in the Sustainability

Information and reviewing it against the GRI application level
declared by Royal DSM in the letter of the Chairman from page
6.

We believe that the assurance evidence we have obtained is
sufficient and appropriate to provide a basis for our conclusion.

Conclusion
Based on our assurance procedures performed to obtain limited
assurance on the Sustainability Information, nothing came to our
attention that causes us to believe that the Sustainability
Information is not, in all material respects, correctly presented in
accordance with the Sustainability Reporting Guidelines (G3) of
the Global Reporting Initiative and the internal reporting criteria
as described from page 110

The sustainability information contains forward-looking
information in the form of ambitions, strategy, plans, forecasts
and estimates. The fulfilment of such informaton is inherently
uncertain. For that reason, we do not provide assurance in
respect of the assumptions and the achievement of forward-
looking information.

Responsibility
The Managing Board of Royal DSM is responsible for the
preparation of the Sustainability Information, stakeholder
engagement and the selection of material topics in accordance
with the criteria applied. The decisions made by management in
respect of the scope of the Integrated Report and the internal
reporting guidelines are set forth in the section entitled Reporting
policy in the Integrated report from page 110. Our responsibility
is to provide limited assurance that the Sustainability Information
is correctly presented in accordance with the criteria applied.

Criteria applied
Royal DSM applies the G3 guidelines of the Global Reporting
Initiative supported with the internal reporting guidelines as
described in the Reporting Policy from page 110. It is important
to view the performance data in the context of these criteria. We
believe that these criteria are suitable in the view of the purpose
of our assurance engagement.

Procedures performed
We conducted our engagement in accordance with Dutch law,
including the Dutch Standards 3410N, Assurance Engagements
with respect to Sustainability Reports. This requires that we
comply with ethical requirements and plan and perform
procedures to obtain sufficient and appropriate evidence to
substantiate our conclusion. Procedures to obtain limited level
of assurance are less extensive in relation to both the risk
assessment procedures, including an understanding of internal
control, and the procedures performed in response to the
assessed risks, than those for a reasonable level of assurance
and therefore less assurance is provided.

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Other
We also report, to the extent of our competence, that information
on sustainability in other sections of the Integrated Annual Report
is consistent with the Sustainability Information.

Eindhoven, 25 February 2014

Signed by G.A.M. Aarnink, Ernst & Young Accountants LLP

Profit appropriation

According to article 32 of the Articles of Association of Koninklijke
DSM N.V. and with the approval of the Supervisory Board, every
year the Managing Board determines the portion of the net profit
to be appropriated to the reserves. For the year 2013 it has been
determined that no amount of the net profit of € 271 million will
be appropriated to the reserves. From the profit of € 271 million,
dividend is first distributed on the cumulative preference shares
B. At the end of 2013 no cumprefs B were in issue.
Subsequently, a 4.348% dividend is distributed on the
cumulative preference shares A, based on a share price of
€ 5.29 per cumulative preference share A. For 2013 this
distribution amounts to € 0.23 per share, which is € 10 million in
total. An interim dividend of € 0.08 per cumulative preference
share A having been paid in August 2013, the final dividend will
then amount to € 0.15 per cumulative preference share A.

The profit remaining after distribution of these dividends on the
cumulative preference shares A (€ 261 million) will be put at the
disposal of the Annual General Meeting of Shareholders in
accordance with the provisions of Article 32, section 5 of the
Articles of Association.

The Managing Board proposes a dividend on ordinary shares
outstanding for the year 2013 of € 1.65 per share to be paid from
the profit remaining after distribution (€ 261 million) and from the
distributable reserves in accordance with the provisions of Article
33, section 4 of the Articles of Association (€ 26 million).
With a total dividend of € 1.65 per ordinary share and an interim
dividend of € 0.50 per ordinary share having been paid in August
2013, the final dividend would then amount to € 1.15 per ordinary
share.

If the Annual General Meeting of Shareholders makes a decision
in accordance with the proposal, the net profit will be
appropriated as follows:

in € million

Net profit

Profit appropriation:

- To be paid from / added to the

reserves

- Dividend on cumprefs A

- Interim dividend on ordinary

- Final dividend distributable on

ordinary shares

2013

2012

271

288

(26)

200

173

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On 31 December 2013 the board of the Foundation was
composed as follows:

Gerard Kleisterlee, chairman
Cees Maas, vice-chairman
Mick den Boogert

Important dates

Annual General Meeting of Shareholders

The Annual General Meeting of Shareholders is to be held at the DSM

head office in Heerlen (Netherlands) on Wednesday, 7 May 2014 at

14.00 hours.

Important dates

Publication of first-quarter results

Tuesday, 6 May 2014

Ex-dividend quotation

Publication of second-quarter

Friday, 9 May 2014

results

Tuesday, 5 August 2014

Publication of third-quarter results

Tuesday, 4 November 2014

Full year results 2014

Wednesday, 11 February 2015

Other information

Independent Auditor's Report on the Financial
Statements
Independent Assurance Report on Sustainability
Information
Profit appropriation
Special statutory rights
Important dates

Special statutory rights

DSM Preference Shares Foundation
The DSM Preference Shares Foundation was established in
1989.

By virtue of DSM's Articles of Association, 375,000,000
cumulative preference shares B can be issued. The listing
prospectus of 1989 stated that if, without the approval of the
Managing Board and Supervisory Board, either a bid is made for
the ordinary shares or a significant participation in ordinary
shares is built up, or such an event is likely to occur, then these
preference shares B may be issued, which shares shall have the
same voting rights as the ordinary shares.

Under an agreement entered into in 1999, and subsequently
amended, between the DSM Preference Shares Foundation and
DSM, the Foundation has the right to acquire such preference
shares (call option) to a maximum corresponding to 100% of the
capital issued in any form other than preference shares B, less
one.

The objective of the Foundation is to promote the interest of
DSM, and the enterprise maintained by DSM and all parties
connected therewith, whereby influences that would threaten
the continuity, independence or identity, contrary to the
aforementioned interests, are resisted to the maximum extent
possible.

The purpose of the agreement with the Foundation is, among
other things, for the Foundation to allow DSM the opportunity to
determine its position, for example with regard to a possible
bidder for DSM shares or a party or parties tempting to obtain
(de facto) control, to examine any plans in detail and, to the
extent applicable, to look for (better) alternatives. Preference
shares B will not be outstanding longer than necessary. As soon
as there are no longer any reasons for the preference shares B
to remain outstanding, the Managing Board will convene a
General Meeting of Shareholders and recommend the
cancellation of the preference shares B that are still outstanding.

The Foundation acquired no preference shares B in 2013.

The DSM Preference Shares Foundation is an independent legal
entity within the meaning of article 5:71, first paragraph, under c
of the Dutch Act on Financial Supervision (Wet op het financieel
toezicht).

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DSM figures: five-year summary

Balance sheet

x € million

Assets

Intangible assets

Property, plant and equipment

Deferred tax assets

Prepaid pension costs

Associates

Other financial assets

Non-current assets

Inventories

Receivables

Financial derivatives

Current investments

Cash and cash equivalents

Assets to be contributed to joint ventures

Other assets held for sale

Current assets

Total assets

Equity and liabilities

Shareholders' equity

Non-controlling interests

Equity

Deferred tax liabilities

Employee benefits liabilities

Provisions

Borrowings

Other non-current liabilities

Non-current liabilities

Employee benefits liabilities

Provisions

Borrowings

Financial derivatives

Current liabilities

Liabilities to be contributed to joint ventures

Other liabilities held for sale

Current liabilities

2013

2012

2011

2010

2009

2,705

3,822

369

179

7,142

1,675

1,642

126

776

4,238

637

4,875

2,793

3,811

340

141

7,125

1,803

1,799

1,121

4,797

1,786

3,405

292

135

5,653

1,573

1,704

2,058

5,474

4,841

5,504

1,070

2,943

326

270

4,635

1,340

1,477

134

837

1,453

5,241

317

287

5,845

1,053

3,477

322

282

233

5,385

1,359

1,410

1,340

4,204

4,229

12,017

11,966

11,157

10,480

9,614

5,908

190

6,098

376

326

1,750

2,627

843

190

1,929

3,062

230

3,292

5,874

168

6,042

236

388

125

1,922

2,765

642

299

2,081

3,145

5,784

190

5,974

192

322

116

2,029

2,728

160

326

1,905

2,440

3,159

2,455

5,481

5,577

155

297

1,992

2,570

105

219

1,789

2,170

104

2,333

4,949

5,011

115

298

103

2,066

2,631

102

138

1,638

1,965

1,972

Total equity and liabilities

12,017

11,966

11,157

10,480

9,614

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DSM figures: five-year summary

Income statement

x € million

Net sales

2013

2012

2011

2010

2009

9,618

9,131

9,193

9,050

7,866

Operating profit plus depreciation and amortization (EBITDA)

1,314

1,109

1,325

1,278

Operating profit (EBIT)

Net finance costs

Income tax expense

Share of the profit of associates

Net profit before exceptional items

Net profit from exceptional items

Profit for the year

Profit attributable to non-controlling interests

Net profit attributable to equity holders of Koninklijke DSM N.V.

Dividend on cumulative preference shares

Net profit available to holders of ordinary shares

Key figures and ratios

Capital employed1

Capital expenditure:

- Intangible assets and Property, plant and equipment

- Acquisitions

Disposals

Depreciation, amortization and impairments

Net debt

Dividend

Workforce at 31 December, headcount

Employee benefits costs (x € million)

Ratios1

- ROCE in %

- Net sales / average capital employed

- Current assets / current liabilities

- Equity / total assets

- Gearing (net debt / equity plus net debt)

- EBIT / net sales in %

- Net profit / average Shareholders' equity available to holders

of ordinary shares in %

- EBITDA / net finance costs

1 Before reclassification to held for sale

759

(142)

(109)

(2)

506

(237)

269

271

(10)

261

635

(109)

(91)

437

(149)

288

(10)

278

(10)

268

895

(82)

(155)

661

199

860

(46)

814

(10)

804

838

(93)

(185)

565

(40)

525

(18)

507

(10)

497

917

443

(113)

(83)

(4)

243

336

337

(10)

327

8,303

8,084

6,581

5,468

5,673

793

424

555

(1,862)

297

24,349

1,845

9.2

1.16

1.48

0.51

0.23

7.9

4.4

9.3

715

1,265

474

(1,668)

263

528

974

742

430

(318)

247

427

377

440

108

234

472

(5)

287

474

(830)

205

23,498

1,761

22,224

1,655

21,911

1,566

22,738

1,532

8.9

1.29

1.53

0.50

0.22

7.0

4.8

10.2

14.3

1.53

2.24

0.54

0.05

9.7

14.9

16.2

15.0

1.62

2.42

0.53

(0.02)

9.3

10.0

13.7

7.2

1.29

2.14

0.52

0.14

5.6

7.2

8.1

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Information about ordinary DSM shares

per ordinary share in €

2013

2012

2011

2010

2009

Core earnings

Net profit before exceptional items

Net profit

Cash flow

Dividend:

- Interim dividend

- Final dividend

Pay-out including dividend on cumulative preference shares as

% of net profit before exceptional items

Dividend yield (dividend as % of average price of an ordinary

DSM share)

Share prices on NYSE Euronext Amsterdam (closing price):

- Highest price

- Lowest price

- At 31 December

(x 1000)

Number of ordinary shares outstanding:

- At 31 December

- Average

Daily trading volumes on NYSE Euronext Amsterdam:

- Average

- Lowest

- Highest

1 Subject to approval by the Annual General Meeting of Shareholders

3.24

2.89

1.52

5.83

1.651

0.50

1.15

3.2

2.72

2.52

1.62

4.82

1.50

0.48

1.02

3.7

3.66

4.86

7.89

1.45

0.45

1.00

3.6

2.97

3.27

3.03

5.62

1.35

0.40

0.95

3.8

1.52

1.44

2.01

6.05

1.20

0.40

0.80

4.8

59.75

43.93

57.16

46.29

36.33

45.79

46.82

30.54

35.85

42.85

30.43

42.61

34.84

16.93

34.46

173,963

172,183

168,684

165,543

163,257

165,567

166,468

164,047

163,037

162,364

728

3,049

823

225

2,720

1,028

191

3,512

995

3,629

1,270

4,376

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DSM figures: five-year summary

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Explanation of some concepts and
ratios

PEOPLE
Absenteeism
Absenteeism at DSM is determined by calculating the total
absence due to illness in hours as a percentage of the total
number of available working hours. The total number of available
working hours is calculated by multiplying the average actual
workforce in FTEs for the period in question by the number of
hours corresponding to one FTE (52 weeks multiplied by the
‘normal’ number of hours per week, not taking into account leave
of absence and holidays).

Eubiotics
Eubiotics is the science of hygienic and healthy living. The term
is used in the feed industry where it refers to a healthy balance
of the micro-flora in the gastrointestinal tract.

FI
Frequency Index: a way to measure safety performance. The
number of accidents of a particular category per 100 employees
per year.

LWC-rate DSM own
The LWC-rate DSM own is the number of lost workday cases
per 100 DSM employees in the past 12 months:
LWC-rate = 100 * (number of LWCs (past 12 months) / average
effective manpower (past 12 months)).

People+
DSM’s People+ strategy will deliver measurably better solutions
to improve the lives of people. The company has defined a new
People+ framework based on broad stakeholder analyses. The
dimensions of health, comfort and well-being, working
conditions and community development have been identified as
distinct and instrumental categories to measure People+ impact
at product level. Based upon the stakeholder input DSM has
designed a measurement tool, which will be further developed
in collaboration with The Sustainability Consortium, customers
and other stakeholders.

REC-rate DSM all
The REC-rate DSM all is the number of recordable injuries per
100 DSM employees and contractor employees in the past 12
months:
REC-rate = 100 * (number of RECs (past 12 months) / average
effective manpower including contractor employees (past 12
months)).

SHE
Safety, Health and Environment.

United Nations Global Compact
A strategic policy initiative for businesses that are committed to
aligning their operations and strategies with ten universally
accepted principles in the areas of human rights, labor,
environment and anti-corruption.

United Nations’ Universal Declaration of Human Rights
On 10 December 1948, the General Assembly of the United
Nations adopted and proclaimed the Universal Declaration of
Human Rights. Following this historic act, the Assembly called
upon all Member countries to publicize the text of the Declaration
and 'to cause it to be disseminated, displayed, read and
expounded principally in schools and other educational
institutions, without distinction based on the political status of
countries or territories'.

Zero SHE assessment
A zero SHE assessment is a step in the integration process of
newly acquired units or new joint ventures. A team led by a
corporate SHE manager visits the unit and identifies and
assesses the main SHE risks and compliance gaps with the DSM
corporate requirements, standards and practices. The team
provides recommendations to minimize and control these risks
and also identifies good practices that can be of use in other
DSM units. During the zero SHE assessment the team elucidates
the DSM SHE requirements and supports the unit in formulating
and prioritizing the actions in the SHE integration and
compliance plan.

PLANET
Biofuel
A fuel which is derived from renewable organic resources, as
distinct from one which is derived from non-renewable resources
such as oil and natural gas.

Carbon footprint
The impact of a certain activity in terms of the emission of non-
renewable CO2 to the atmosphere.

Circular economy
Circular economy refers to an economy that is restorative and in
which materials flows are of two types: biological nutrients,
designed to reenter the biosphere safely, and technical nutrients,
which are designed to circulate at high quality without entering
the biosphere throughout their entire lifecycle.

CO2
Carbon dioxide, a gas that naturally occurs in the atmosphere.
It is part of the natural carbon cycle through photosynthesis and
respiration. It is also generated as a by-product of combustion.
Carbon dioxide is a greenhouse gas.

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Explanation of some concepts and ratios

Chemical Oxygen Demand (COD)
COD is an indicator of the degree of pollution of wastewater by
organic substances.

ECO+
ECO+ solutions are products and services that, when
considered over their whole life cycle, offer clear ecological
benefits (in other words, a clearly lower eco-footprint) compared
to the mainstream solutions they compete with. These ecological
benefits can be created at any stage of the product life cycle −
from raw material through manufacturing and use to potential re-
use and end-of-life disposal. ECO+ solutions, in short, create
more value with less environmental impact. The qualification
ECO+ is based upon internal expert opinions where various
impact categories are evaluated. For a growing number of
products these expert opinions are supported by Life Cycle
Assessments.

Eco-efficiency
Eco-efficiency is a concept (created in 1992 by WBCSD) that
refers to the creation of more goods and services while using
less resources and creating less waste and pollution throughout
their entire life cycle. DSM applies the concept to its ECO+
program. In the context of DSM’s SHE targets, eco-efficiency
relates specifically to the reduction of emissions and energy and
water consumption, relative to the production volumes of DSM’s
plants.

Greenhouse-gas emissions (GHGE) reduction over volume
related revenue (VRR)
The GHGE definition is according to the Kyoto Protocol and
includes carbon dioxide (CO2), methane, nitrous oxide (N2O),
sulfur hexafluoride, hydrofluorocarbons and perfluorocarbons.
VRR is net sales adjusted for changes in selling prices, exchange
rates and the impact of acquisitions and divestments. GHGE/
VRR is one of the ratios in the Long-Term Incentive part of the
Managing Board remuneration and relates to a three-year
period.

GRI
The Global Reporting Initiative (GRI) has developed Sustainability
Reporting Guidelines that strive to increase the transparency and
accountability of economic, environmental, and social
performance. The GRI was established in 1997 in partnership
with the United Nations’ Environment Programme. It is an
international, multi-stakeholder and independent institution
whose mission is to develop and disseminate globally applicable
Sustainability Reporting Guidelines. These Guidelines are for
voluntary use by organizations for reporting on the economic,
environmental, and social dimensions of their activities,
products, and services.

LCA
Life Cycle Assessment (LCA) identifies the material, energy and
waste flows associated with a product or process over its entire
life cycle to determine environmental impacts and potential
improvements; this full life cycle approach is also referred to as
‘Cradle to Grave’. It is also possible to assess a partial life cycle
of a product or process with the most common type being
‘Cradle to Gate’ which assesses the environmental impacts of a
manufacturing process without accounting for use phase or end
of life impacts. There are many different environmental impact
categories that can be assessed using LCA; at DSM the
standard approach is to evaluate the carbon footprint
and eco-footprint.

N
Nitrogen. A mostly inert gas constituting 78% of the earth’s
atmosphere, nitrogen is present in all living organisms.

N2O
Nitrous oxide. A gas that is formed during combustion. When
emitted to the environment, it contributes to global warming.

NOx
Nitrogen oxides. These gases are released mainly during
combustion and cause acidification.

Renewable resources
A natural resource which is replenished by natural processes at
a rate comparable to, or faster than, its rate of consumption by
humans or other users. The term covers perpetual resources
such as solar radiation, tides, winds and hydroelectricity as well
as fuels derived from organic matter (bio-based fuels).

SO2
Sulfur dioxide. This gas is formed during the combustion of fossil
fuels and cause acidification.

VOC
Volatile organic compounds. The term covers a wide range of
chemical compounds, such as organic solvents, some of which
can be harmful.

PROFIT
General
In calculating financial profitability ratios, use is made of the
average of the opening and closing values of balance sheet items
in the year under review.

The financial indicators per ordinary share are calculated on the
basis of the average number of ordinary shares outstanding
(average daily number). In calculating Shareholders’ equity per

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ordinary share, however, the number of shares outstanding at
year-end is used.

Total shareholder return (TSR)
Total shareholder return is capital gain plus dividend paid.

In calculating the figures per ordinary share and the ‘net profit as
a percentage of average Shareholders’ equity available to
holders of ordinary shares’, the amounts available to the holders
of cumulative preference shares are deducted from the profits
and from Shareholders’ equity.

Capital employed
The total of the carrying amount of intangible assets and
property, plant and equipment, inventories, trade receivables
and other receivables, less trade payables and other current
liabilities.

Capital expenditure
This includes all investments in intangible assets and property,
plant and equipment as well as the acquisition of subsidiaries
and associates and related cash flows.

Cash flow
Cash flow is net profit plus depreciation, amortization and
impairments.

Core earnings
Core earnings represent profit or loss from continuing operations
excluding exceptional items and excluding amortization of
intangible assets recognized from the application of purchase
accounting for business combinations.

Disposals
This includes the disposal of intangible assets and property,
plant and equipment as well as the disposal of participating
interests and other securities.

Earnings before interest, tax, depreciation and amortization
(EBITDA)
EBITDA is the sum total of operating profit plus depreciation and
amortization.

Earnings per ordinary share
Net profit attributable to equity holders of Koninklijke DSM N.V.
minus dividend on cumulative preference shares, divided by the
average number of ordinary shares outstanding.

Operating working capital
The total of inventories and trade receivables, less trade
payables.

Return on capital employed (ROCE)
Operating profit as a percentage of weighted average capital
employed.

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Explanation of some concepts and ratios

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List of abbreviations

ADR

AFM

ANH

API

BIO

BMI

BRIC

CEFIC

American Depositary Receipts

Netherlands Authority for the Financial Markets

Animal Nutrition & Health

Active pharmaceutical ingredients

Biotechnology Industry Organization

Body mass index

Brazil, Russia, India and China

Conseil Européen des Fédérations de l'Industrie Chimique

(European Chemical Industry Council)

cGMP

Current Good Manufacturing Practice

CMO

CMP

COA

COD

CRA

CSR

DAI

DEP

DFI

DFS

Contract manufacturing organization

Corporate Multi-year Plan Responsible Care

Corporate Operational Auditing department

Chemical oxygen demand

Corporate Risk Assessment

Corporate Social Responsibility

DSM Anti-Infectives

DSM Engineering Plastics

DSM Fibre Intermediates

DSM Food Specialties

DNCC

DSM Nanjing Chemical Co., Ltd.

DNP

DPC

DPP

DSP

EBA

EBIT

DSM Nutritional Products

DSM Pharma Chemicals

DSM Pharmaceutical Products

DSM Sinochem Pharmaceuticals

Emerging Business Area

Earnings before interest and taxes (Operating Profit)

EBITDA

Earnings before interest, taxes, depreciation and amortization

FDA

FIFO

FTE

GAIN

GDP

GHG

The US Food and Drug Administration

First in, first out

Full-time equivalent

Global Alliance for Improved Nutrition

Gross domestic product

Greenhouse gas

GHGE

Greenhouse-gas emissions

Globally Harmonized System

HNH

HPO

IAS

IASB

IFRIC

IFRS

ILO

IOF

IUCN

KPI

LCA

LMRA

LTI

LWC

NGO

NIP

NPS

NYSE

OECD

PDN

PSI

PUFA

R&D

Human Nutrition & Health

Hydroxylamine phosphate oxime

International Accounting Standards

International Accounting Standards Board

International Financial Reporting Interpretation Committee

International Financial Reporting Standards

International Labor Organization

International Osteoporosis Foundation

Intellectual property

International Union for the Conservation of Nature

Key performance indicator

Life cycle assessment

Last Minute Risk Assessment

Long-Term Incentive

Lost workday case

Non-governmental organization

DSM's Nutrition Improvement Program

Net Promoter Score

New York Stock Exchange

Organization for Economic Cooperation and Development

Stichting Pensioenfonds DSM Nederland

Petajoule

Process safety incident

Polyunsatured fatty acid

Research & development

REACH

Registration, Evaluation, Authorization and Restriction of

ROCE

SAM

SAR

SHE

SSC

SSP

STI

TDC

TSR

Chemical substances

Return on capital employed

Sustainable Asset Management

Share appreciation rights

Safety, Health and Environment

Semi-synthetic cephalosporins

Supplier Sustainability Program

Short-Term Incentive

Total direct compensation

Total shareholder return

Genetically Modified (Micro-)organisms

UHMwPE

Ultra high molecular weight polyethylene

Good Manufacturing Practice

Global Product Strategy

Global Reporting Initiative

VNCI

VOC

Association of the Dutch Chemical Industry

Volatile organic compound

WBCSD

World Business Council for Sustainable Development

WEF

WFP

World Economic Forum

United Nations World Food Programme

GHS

GMM

GMP

GPS

GRI

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List of abbreviations

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Royal DSM - Bright Science.
Brighter Living.

DSM has transformed itself into a leading Life Sciences and
Materials Sciences company that is active in health, nutrition and
materials and creates value for its customers by helping them
provide solutions to the world’s great challenges. DSM uses its
bright science to create brighter lives for people today and
generations to come by providing the ingredients to develop
innovative, more sustainable, healthier, more nutritious and
better performing products.

Food security (access to nutritious food for all people at all times)
is one of the main themes to which DSM is contributing.

At the same time, a focus on healthy and active aging is driving
demand for fortified foods and supplements. And finally, an aging
population means increased healthcare spending, which DSM
addresses through its engagement in preventive health and
services to pharmaceutical companies.

DSM is committed to realizing its ambitious targets as set in its
strategy DSM in Motion: driving focused growth, all based on its
strong global market position (with close to 40 percent of its total
sales of € 10 billion coming from high growth economies), its
unique technological knowledge as a basis for innovation, its
strong track record in sustainability, its very solid balance sheet,
and the experience and expertise of its 24,500 people.

Performance and sustainability are key drivers impacting
demand in DSM’s Materials Sciences markets, where the
company is accelerating the transformation toward the
production and use of materials that are lighter, healthier, safer,
stronger and more durable and that have lower environmental
footprints throughout their value chains than traditional materials.

DSM believes that its continued success will be driven by
creating shared value for all stakeholders, now and in the future.
It creates shared value by innovating in ways that allow its
customers to provide better People, Planet and Profit solutions
to the challenges facing society, the environment and end-users.
In this way, DSM’s customers derive value from being able to
offer end-users improved products. Society and the planet
derive value from the impact of more sustainable, longer-lasting,
safer, healthier and more nutritious alternatives. DSM and its
shareholders derive value from stronger growth and profitability.

What's more, DSM’s employees feel engaged and motivated
through the contribution they make to a better world and the
success this creates for the company in which they work. In
short, DSM is a multi-stakeholder-oriented company with a triple
bottom line (People-Planet-Profit) creating value for its
customers, shareholders and employees as well as society at
large.

As a global company, DSM is actively engaged in addressing the
same key trends that face all its stakeholders: meeting changing
demands arising from global shifts in demographics and
technology, mitigating the impact of climate change while
searching for new forms of energy and trying not just to nourish
but also to improve the health of a growing population.

In DSM’s Life Sciences markets, these trends manifest
themselves through the related impacts of increasing personal
wealth, urbanization and expanding life expectancy.

Urbanization drives the consumption of processed foods and the
need for a more efficient food chain, while rising wealth translates
into increased demand for proteins from meat, fish, eggs and
milk – in turn driving demand for DSM’s food and feed products.

Bringing DSM’s Life Sciences and Materials Sciences
competences together offers new opportunities allowing further
advances. This is managed through DSM’s Emerging Business
Areas. A thorough understanding of how advanced materials
can be used in the human body to strengthen or replace body
parts and accurately deliver medicines is driving DSM’s
biomedical materials business. By merging its broad
biotechnology capability with its materials businesses, DSM is
able to find renewable solutions for the post fossil age by creating
bio-based materials and building blocks and by actively working
to create commercially viable cellulosic biofuels that do not
compete with the food value chain.

While DSM continues to meet the needs of customers in the
mature markets of North America and Western Europe − which
remain central to its core business – the company’s investment
focus is increasingly on the high growth economies such as Asia,
Central and Eastern Europe, and Latin America. DSM
consequently is becoming steadily more international, enabling
it to bring a global perspective to the challenges of all its
customers. In addition to achieving sustainable, innovative
organic growth, DSM will continue to take advantage of
opportunities to acquire exciting businesses and to partner with
others to the benefit of all its stakeholders. And finally, the
company will continue to improve its shareholder returns,
supported by its solid dividend policy.

In short, after having transformed itself into a Life Sciences and
Materials Sciences company, DSM now focuses on further
growing the company through an integrated strategy, using four
growth drivers: High Growth Economies, Innovation,
Sustainability and Acquisitions & Partnerships.

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Royal DSM - Bright Science. Brighter Living.

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Questions about or feedback on this report can be addressed
to:

Royal DSM
P.O. Box 6500
6401 JH Heerlen
The Netherlands
T +31 (0)45 578 8111
E media.relations@dsm.com
www.dsm.com