Koninklijke DSM N.V. Annual Report 2014

FY2014 Annual Report · Koninklijke DSM N.V.

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Royal DSM Integrated
Annual Report 2014

Life 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, medical devices, automotive,
paints, electrical and electronics, life protection, alternative energy and bio-based materials. DSM has around 21,000 employees and delivers annual net sales of more
than € 9 billion. The company is listed on Euronext Amsterdam. More information can be found at www.dsm.com.

Bright Science. Brighter Living. 2014

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Key data for 2014

Net sales, total DSM
(x million)

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

Net profit, total DSM
(x million)

Capital expenditure (cash
based), total DSM
(x million)

€ 9,283

€ 1,166

€ 145

€ 628

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

Core earnings per ordinary
share, continuing
operations2

Dividend per ordinary
share3

ROCE, continuing
operations
(in %)

€ 808

€ 2.85

€ 1.65

7.8

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)

21,351

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

0.47

Energy use, total DSM
(in petajoules)

Water use, total DSM
(in million m3)

ECO+ solutions as % of
running business, total
DSM

4.2

118

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

1,956

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. 2014

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Table of contents

3 Key data

4 DSM at a glance

14 Letter from the Chairman

18 Report by the Managing Board
18 DSM in motion: driving focused growth
22 Growth Driver: High Growth Economies
23 Growth Driver: Innovation
25 Growth Driver: Sustainability
27 Growth Driver: Acquisitions & Partnerships
28 Stakeholder engagement
40 DSM Code of Business Conduct
43 People in 2014
50 Planet in 2014
57 Profit in 2014

62 Review of business in 2014
64 Life Sciences
66 Nutrition
72 Materials Sciences
74 Performance Materials
80 Polymer Intermediates
82 Innovation Center
85 Corporate Activities
86 Pharma Partnerships

88 Financial and reporting policy
88 Financial policy
89 Reporting policy

90 Corporate governance and risk management
90 Introduction
92 Dutch corporate governance code
93 Governance framework
95 Risk management

100 Statements of the Managing Board

102 Report by the Supervisory Board
102 Supervisory Board report
106 Remuneration policy for the Managing Board and the

Supervisory Board

112 Supervisory Board and Managing Board Royal DSM

114 Sustainability statements

116 What still went wrong in 2014

118 Information about the DSM share

120 Consolidated financial statements
120 Summary of significant accounting policies
126 Consolidated statements
133 Notes to the consolidated financial statements of Royal

DSM

188 Parent company financial statements
189 Notes to the parent company financial statements

200 Other information
200 Independent Auditor's Report on the Financial Statements
204 Assurance report of the independent auditor
205 Profit appropriation
206 Special statutory rights
206 Important dates

208 DSM figures: five-year summary

212 Explanation of some concepts and ratios

216 List of abbreviations

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. Additional factors that could cause results to differ materially from those
described in the forward-looking statements can be found in the 'Risk Management' chapter.

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. 2014

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 pipeline3

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)4

Operating profit, continuing operations (EBIT)4

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

Cash provided by operating activities

Dividend for DSM shareholders

Capital expenditure, cash-based

Net debt

Shareholders' equity

Total assets

Capital employed, continuing operations

Market capitalization at 31 December5

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

20141

2013R2

21,351

27/73

1,713

0.47

118

4.2

3.9

9,181

1,956

1,168

619

145

808

296

628

2,420

5,723

12,126

8,105

9,187

2.85

1.656

12.7

20.7

7.8

29.0

49.0

8.7

23,485

26/74

1,822

0.38

150

4.2

4.3

4.8

8,858

1,693

1,261

761

271

998

297

629

1,841

5,908

11,899

7,643

10,370

3.19

1.65

14.2

21.2

10.1

23.2

51.2

10.6

1 Key data presented relate to total DSM (= continuing operations + discontinued operations), unless explicitly stated otherwise
2 Restated due to retrospective application of amendments to IFRS 10: ‘Consolidated Financial Statements' and IFRS 11 'Joint Arrangements' that came into effect from 1 January

2014

3 For a definition of ECO+ see page 213
4 Before exceptional items
5 Source: Bloomberg
6 Subject to approval by the Annual General Meeting of Shareholders

Bright Science. Brighter Living. 2014

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Bright Science. Brighter Living. 2014
Bright Science. Brighter Living. 2014

4
4

www.dsm.com

DSM at a glance

Bright Science. Brighter Living. 2014
Bright Science. Brighter Living. 2014

5
5

www.dsm.com
www.dsm.com

DSM at a glance Life Sciences Materials SciencesHigh Growth Economies SustainabilityInnovationAcquisitions & Partnerships

Bright Science. Brighter Living. 2014

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DSM Bio-based Products &Services started a joint venture in 2012 with POET for clean energy from corn crop residue.It opened Project Liberty, its ﬁ rstcommercial cellulosic ethanolplant in Emmetsburg (Iowa, USA) in 2014. It produces a cost-competitive fuel that cutsemissions, creates jobs andimproves energy security.DSM Biomedical has over 25 years experience in working closely with medical device companies to help increase performance and contribute to lower healthcare costs. DSM Biomedical has achieved attractive EBITDA margins of around 25 percent.In 2014 DSM concluded theintegration of its acquisition ofTortuga, the Brazilian marketleader in trace minerals for animalnutrition and health with a focuson pasture-raised beef and dairycattle.In 2014 the 21,351 employees of DSM have worked hard to create brighter lives for people today and generations to come. Here are some of the highlights of the year.North America: 3,583 employeesLatin America: 1,891 employeesHighlights of the year

DSM at a glance

Highlights of the year
Life Sciences
Materials Sciences
Innovation Center
Pharma Partnerships

Bright Science. Brighter Living. 2014

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DSM opened its new center forresearch and development ofhigh-performance materials in theNetherlands. Over 400 people are employed at the center, which combines important technological skills and expertise for use in applications the world over.DSM inaugurated its new premix plant for human nutrition & health in Vadodara (India). It supplies food, beverage and pharmaceutical manufacturers looking for fortiﬁ cation to diﬀ erentiate their products from the competition.DSM announced its intention toacquire Aland, one of the leadingvitamin C producers in China, to further strengthen its position. With Aland, DSM will increase its global footprint in vitamins for human nutrition, animal nutrition and personal care.DSM announced its intention toacquire Aland, one of the leadingvitamin C producers in China, to further strengthen its position. With Aland, DSM will increase its global footprint in vitamins for human nutrition, animal nutrition DSM inaugurated its new premix plant for human nutrition & health in Vadodara (India). It supplies food, beverage and pharmaceutical manufacturers looking for fortiﬁ cation to diﬀ erentiate their products from the competition.DSM announced its intention toacquire Aland, one of the leadingvitamin C producers in China, to further strengthen its position. With Aland, DSM will increase its global footprint in vitamins for human nutrition, animal nutrition and personal care.Europe: 10,663 employeesAsia: 4,974 employeesAfrica: 73 employeesOceania: 167 employeesAfrica: 73 employeesOceania: 167 employees

Bright Science. Brighter Living. 2014

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DSM Nutritional Products is one of the world’sleading suppliers of essential nutrients such as vitamins,carotenoids, nutritional lipids and other ingredients to thefeed, food, pharmaceutical and personal care industries.Among its customers are the world’s largest food andbeverage companies. DSM is uniquely positioned thanks to the combination of its broad portfolio of active ingredients; maximum diﬀ erentiation through formulation; local presence; a global premix network; and a strong focus on innovation.DSM Nutritional Products consists of the following business units:• Animal Nutrition & Health addresses the nutritional additives segment of the global feed ingredients market. DSM is active in vitamins, feed enzymes, carotenoids, minerals and eubiotics.• Human Nutrition & Health primarily addresses the nutritional ingredients markets, but is also active in coloration and preservation in the global food ingredients market.• Personal Care focuses on the active and performance ingredients such as vitamins, UV-ﬁ lters and bio-actives for the skin care, sun care and hair care market segments. DSM Food Specialties is a leading global supplier offood enzymes, cultures, yeast extracts, savory ﬂ avors and other specialty ingredients for the food and beverage industries. DSM Food Specialties’ advanced ingredients make a considerable contribution to the success of the world’s favorite brands for the dairy, baking, beverages and savory segments.Life Sciencesand other specialty ingredients for the food and beverage world’s favorite brands for the dairy, baking, beverages and • Human Nutrition & Health primarily addresses the nutritional ingredients markets, but is also active in coloration and preservation in the global food ingredients market.• Personal Care focuses on the active and performance ingredients such as vitamins, UV-ﬁ lters and bio-actives for the skin care, sun care and hair care market segments. DSM’s i-Health business is committed to improving the lives of consumers through innovative and eﬀ ective consumer health products including Estroven® sold among others in supermarkets and drugstores across North America.AquacultureTaste enhancers

DSM at a glance

Highlights of the year
Life Sciences
Materials Sciences
Innovation Center
Pharma Partnerships

Bright Science. Brighter Living. 2014

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Stevia is a non-artiﬁ cial, high-intensity sweetener, answeringconsumer demand for naturalsweetness without the calories.DSM’s fermentation-based stevia innovation platform addresses health, sustainability and quality concerns. To educate farmers aboutthe beneﬁ ts to the health andgrowth of animals when addingmicronutrients to feed, and tooﬀ er access to premix products,DSM has established a networkof more than 150 franchisers ofsmall distributors in rural areas,selling to local farmers in China.Everyone knows the importance of UV protection from the sun. As one of the leading ingredient suppliers to the cosmetics industry, DSM hasdeveloped ﬁ lters that deliver highlyeﬀ ective UV protection for skin andhair.Stevia is a non-artiﬁ cial, high-intensity sweetener, answeringintensity sweetener, answeringconsumer demand for naturalsweetness without the calories.sweetness without the calories.DSM’s fermentation-based stevia DSM’s fermentation-based stevia innovation platform addresses innovation platform addresses health, sustainability and quality health, sustainability and quality Everyone knows the importance of Everyone knows the importance of UV protection from the sun. As one UV protection from the sun. As one of the leading ingredient suppliers of the leading ingredient suppliers to the cosmetics industry, DSM hasto the cosmetics industry, DSM hasdeveloped ﬁ lters that deliver highlydeveloped ﬁ lters that deliver highlyeﬀ ective UV protection for skin andeﬀ ective UV protection for skin andhair.To educate farmers aboutTo educate farmers aboutTo educate farmers aboutTo educate farmers aboutthe beneﬁ ts to the health andthe beneﬁ ts to the health andthe beneﬁ ts to the health andthe beneﬁ ts to the health andthe beneﬁ ts to the health andgrowth of animals when addinggrowth of animals when addinggrowth of animals when addinggrowth of animals when addinggrowth of animals when addingmicronutrients to feed, and tomicronutrients to feed, and tomicronutrients to feed, and tomicronutrients to feed, and tooﬀ er access to premix products,oﬀ er access to premix products,oﬀ er access to premix products,DSM has established a networkDSM has established a networkDSM has established a networkof more than 150 franchisers ofof more than 150 franchisers ofof more than 150 franchisers ofsmall distributors in rural areas,small distributors in rural areas,small distributors in rural areas,selling to local farmers in China.selling to local farmers in China.selling to local farmers in China.selling to local farmers in China. Fruit drinks and beverages Premix productsWine and beer Infantnutrition Personal care Savory ingredientsDairy productsRuminants Animal feedDietary supplements Cultures and enzymesBaking enzymes Poultry / eggs Sweetener innovations

Materials SciencesDSM develops smart coatingsthat enable and enhance thecapture of solar energy and nowhas a portfolio of proprietaryinnovative materials to increaseeﬃ ciency of solar panels.The Performance Materials cluster consists of DSMEngineering Plastics, DSM Dyneema and DSM Resins &Functional Materials. These business groups are active intechnologically sophisticated high-quality products and oﬀ erspecialized value propositions.• DSM Engineering Plastics is a global player in developing, manufacturing and marketing specialty plastics used in components for the electrical and electronics, automotive, ﬂ exible food packaging and consumer goods industries.• DSM Dyneema is the inventor, manufacturer and marketer of Dyneema®, the world’s strongest ﬁ berTM. This product, based on ultra high molecular weight polyethylene is produced by means of DSM’s proprietary processes. The Dyneema® brand enjoys very high recognition in the value chains served.• DSM Resins & Functional Materials is a global player in developing, manufacturing and marketing high-quality resins solutions for paints and coatings, composites and ﬁ ber-optic coatings. DSM Resins & Functional Materials generates value with and for its global customer base through continuous innovation so that they meet regulatory needs and respond better to consumer demands for more sustainable materials.The Polymer Intermediates cluster comprises DSM FibreIntermediates, the global market and technology leader incaprolactam and the leading acrylonitrile supplier in Europe.Coatings for solar energyFiber optic materials
DSM at a glance

Highlights of the year
Life Sciences
Materials Sciences
Innovation Center
Pharma Partnerships

Bright Science. Brighter Living. 2014

www.dsm.com

With Arnitel® VT, DSM hasdeveloped high-performancemembranes for outdoor clothing.Containing no perﬂ uorinatedchemicals, it is waterproof in allcircumstances despite beingonly a few microns thick. It is highly breathable and 100 percent recyclable.Stanyl® is DSM’s high-performancepolyamide 46 used in automotive,electronics and other applications.Even at temperatures above 200˚Cit keeps its properties, allowingfor instance its use in car enginesand phone chargers.Cut-resistant gloves made withDSM’s Dyneema® ﬁ ber are light,comfortable and cool to the touch,adapting to the body’s heat. It provides 50 times greater cut-resistance than alternativematerials.Nearly half of all paint is basedon traditional oil-derivedsolvents. Consumers areincreasingly concerned aboutpossible health risks of thesesolvent-based paints. DSMoﬀ ers an alternative withwaterborne coating resins. VT, DSM hasdeveloped high-performancemembranes for outdoor clothing.membranes for outdoor clothing.Containing no perﬂ uorinatedchemicals, it is waterproof in allchemicals, it is waterproof in allcircumstances despite beingonly a few microns thick. It is highly breathable and 100 percent highly breathable and 100 percent Cut-resistant gloves made withDSM’s Dyneema® ﬁ ber are light,comfortable and cool to the touch,comfortable and cool to the touch,adapting to the body’s heat. It provides 50 times greater cut-resistance than alternativematerials. Composite resins Membranes Packaging Paints and coatingsAutomotive Leisure goods Display covers Halogen-free products Consumer electronics Electronic devicesis DSM’s high-performance Sailing equipment Cut-resistant gloves

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The DSM Innovation Center serves as an enabler and accelerator of innovation within DSM. With itsEmerging Business Areas, the Business Incubator and DSM Venturing & Licensing, the DSM InnovationCenter has a general business development role, focusing on areas outside the current scope of the business groups.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 (solar materials)Innovation CenterDSM’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 (solar materials)DSM is at the forefront of buildinga more sustainable, bio-basedeconomy with its clean fuel fromcorn crop residue and in renewablechemical building blocks such asbio-based succinic acid.DSM has designed innovativebiomedical materials that enablemedical device manufacturersto make more minimally invasivedevices. These can speed up recovery, shorten hospital stays and minimize reoperations, lowering health costs and helping people to lead longer, healthier and more active lives.The DSM Innovation Center serves as an enabler and accelerator of innovation within DSM. With itsEmerging Business Areas, the Business Incubator and DSM Venturing & Licensing, the DSM InnovationCenter has a general business development role, focusing on areas outside the current scope of the business groups.serves as an enabler and Emerging Business Areas, the Business Incubator and DSM Center has a general business development role, focusing on areas outside the current scope of the business groups.DSM’s 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 (solar materials)DSM has designed innovativeDSM has designed innovativebiomedical materials that enablebiomedical materials that enablemedical device manufacturersmedical device manufacturersto make more minimally invasiveto make more minimally invasivedevices. These can speed up devices. These can speed up recovery, shorten hospital stays and recovery, shorten hospital stays and minimize reoperations, lowering minimize reoperations, lowering health costs and helping people health costs and helping people to lead longer, healthier and more to lead longer, healthier and more active lives.active lives. FiBiomedical Knee implantsSpine implants Drug delivery systemsBio-based Products & ServicesAdvanced SurfacesCoatings for solar energyCoatings for greenhouses Hipimplants

DSM at a glance

Highlights of the year
Life Sciences
Materials Sciences
Innovation Center
Pharma Partnerships

Bright Science. Brighter Living. 2014

www.dsm.com

DPx Holdings (DPx) is a global leader in contractdevelopment and manufacturing services with customersacross the pharmaceutical industry, sales ofaround USD 2 billion and more than 8,000 employeesspread over 24 locations across North America,Europe, Latin America and Australia.DSM Sinochem Pharmaceuticals (DSP) is the globalmarket leader in beta-lactam active pharmaceutical ingredients (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. DSP, 50 percent owned by DSM, manufactures nearly all its beta-lactam APIs and the related intermediates using proprietary biotechnology.Pharma Partnershipsleader in other active ingredients such as nystatin and next generation statins. DSP, 50 percent owned by DSM, manufactures nearly all its beta-lactam APIs and the related intermediates using proprietary biotechnology.Since March 2014, DSM owns 49 percent of DPx, a joint venture with JLL Partners that provides pharmaceutical companies a unique breadth of oﬀ erings from ﬁ nished dosage to active substances with a wide range of technologies. PharmaceuticalsFinished dosage

Letter from the Chairman

Dear reader,

The year 2014 was characterized by volatile macro-economic
developments. European economies barely grew and continued
to struggle with their competitiveness. Growth slowed down in
several emerging or high growth economies. The US showed
remarkable resilience and growth, thanks in part to its
competitive energy position. Adding to the uncertainty were
lower oil prices in the second half of the year, volatility in some
of the world’s most important currencies and increasing
geopolitical tensions. On top of these challenges, our world
continued to face unprecedented environmental and social
pressures. It is clear that the tried and tested formulas of
yesterday must make way for newer and more sustainable
solutions as a matter of urgency.

In this context, DSM stands significantly transformed and
uniquely positioned to demonstrate resilience through the
portfolio we have developed over the years. We are able to
benefit from the contributions our company makes to help
address the challenges unfolding around us, including climate
change and access to nutrition. That is not to say that DSM is
immune to the repercussions of economic volatility in the short
term, as our results of 2014 show.

In the long term, the megatrends that drive our business are
more significant than ever before. They are: Global Shifts, which
account for the large-scale demographic changes such as
population growth, urbanization and increased wealth of the
middle class in high growth economies; Climate and Energy,
which refers to the rising pressures on our planet, the scarcity of
resources and the need for alternative energy sources; and
Health and Wellness, which points to dietary and nutritional
concerns and opportunities, as well as the effects that rapidly
aging populations with greater healthcare and dietary needs are
having on our end-markets.

The reported year 2014 was the fourth year of our DSM in
motion: driving focused growth strategy that has transformed
our company since 2010. Where necessary, we have sought to
sharpen and refine this roadmap to meet the needs of changing
global circumstances. As we enter the fifth year of
implementation, we will continue to create sustainable value by
making progress against the growth drivers of High Growth
Economies, Innovation, Sustainability, and Acquisitions &
Partnerships.

In 2014 we achieved more than € 9 billion sales and an EBITDA
of nearly € 1.2 billion. This is a decrease in EBITDA compared to
2013 of seven percent. This decline was driven by a negative
currency effect and tough market conditions in Nutrition and
caprolactam. The organic growth in 2014 was three percent.

Our current strategy of focusing on high growth economies has
continued to pay off with approximately 43 percent of our sales
coming from these countries in 2014. Although growth in several
of these countries slowed down in the year, it is clear that their
expanding populations and growing urban middle classes will
continue to drive growth in the long term.

At DSM, we are well positioned to capture that growth and we
have continued to expand our reach in these countries, not only
in sales but also in terms of our own organization and members
of our top management. Interestingly, some of the world’s
strongest economic growth in 2014 was seen in the US, DSM’s
largest market, where we have expanded significantly in recent
years, amongst others through acquisitions and partnerships.

Our focus on innovation resulted in almost 18 percent of our
sales in 2014 coming from newly introduced, higher margin
products. In addition, we made steady progress in the
development of our three Emerging Business Areas: Biomedical,
Bio-based Products & Services and Advanced Surfaces.

Biomedical now delivers around € 140 million in sales and strong
EBITDA margins, with highly innovative products in the fast-
growing global medical devices market. These include
biomedical materials, technologies and capabilities in
orthopedics, sports medicine, ophthalmology, general surgery
and cardiology.

In Bio-based Products & Services, which includes clean energy
from corn crop residue, and bio-chemicals (such as bio-succinic
acid), we are proud to have opened the first second-generation
cellulosic bio-ethanol factory in North America, located in
Emmetsburg (Iowa, USA), with our partner POET. Also in other
parts in the world, including Brazil, we are looking at
opportunities. Our revolutionary technology produces a fuel
made from corn crop residues, which has 85-95 percent lower
CO2 emissions than conventional gasoline measured over the
value chain, and promises to further reduce North America’s
reliance on fossil fuels. The plant’s grand opening took place in
September, and was attended by Willem-Alexander, King of the
Netherlands, and the US Secretaries of Agriculture and Energy
as well as the Governor of Iowa, among other dignitaries.

In Advanced Surfaces, our anti-reflective coating KhepriCoat® is
making inroads into the solar market, while we are also a first
mover in ‘light trapping’ film technology, both of which enhance
the yield of solar panels. We believe that these new businesses
have the potential to create substantial value.

Bright Science. Brighter Living. 2014

www.dsm.com

Letter from the Chairman

Sustainability, a key value and area of responsibility for the
company, has become a strong business driver. ECO+
solutions, which offer our customers more value with less
environmental impact than mainstream alternatives, now
account for close to 50 percent of our sales and 95 percent of
our innovation pipeline. We are applying a similar approach with
People+, where we are at the forefront of developing a new
methodology to measure the impact of a product on people’s
lives throughout its entire life-cycle. Today, our ECO+ sales are
growing faster than non-ECO+ sales and with higher margins,
demonstrating the good growth opportunities that sustainable
innovations can offer our company.

DSM has an active approach to portfolio management with the
aim of reducing volatility and cyclicality and focusing on higher
margin businesses. In the second half of 2014, we stated our
intention to pursue strategic actions for our caprolactam,
acrylonitrile and composite resins businesses, which will enable
us to further sharpen our company’s focus. Combined, these
businesses account for more than 20 percent of DSM’s sales,
but represent a substantially lower proportion of our profit.

Next to pursuing these strategic actions, we are fully focused on
integrating and reaping the synergies of the value-contributing
acquisitions we have made in recent years, while refraining from
large acquisitions for the moment. Since 2010, we have
allocated more than € 2.8 billion to acquisitions, primarily in
Nutrition in high growth economies and in North America.

In Nutrition, the underlying fundamentals remain strong. In the
long term, the business is driven by population growth,
urbanization, rising standards of living and the desire for health
and convenience by an increasingly aging population.
Notwithstanding these drivers, we were confronted with several
headwinds in the year. These included a sluggish Western food
and beverage market, decreases in the US market for dietary
supplements containing our ingredients, continued price
pressures in vitamin E, which is mainly used in our animal
nutrition business, and the negative impact of a strong euro for
a large part of the year compared to other currencies.

We have developed specific responses to these headwinds,
which we have communicated to the market. We remain
focused on operational improvements and working capital
reductions. These actions should enable us to grow our
business, also by protecting and gaining market share in our
nutrition business, as we have done in recent years, while
generating quality earnings. In 2014, organic growth for the
cluster was 2 percent and the EBITDA margin was just below
20 percent.

In Nutrition we are well positioned for the medium and long term,
with an expanded presence across the value chain, operating
globally with a broad portfolio of products across diverse end-
markets, driven by strong structural growth drivers.

Our Performance Materials business is continuing to upgrade its
product portfolio towards more sustainable and higher-margin
products and solutions. Despite currency weaknesses and
volatility across a number of sectors, the business saw gradual
margin improvements and found new opportunities to leverage
its operations and assets. This resulted in 2014 in an organic
growth for the cluster of 2 percent and the EBITDA margin was
just above 12 percent.

Our joint venture with Sinochem, DSM Sinochem
Pharmaceuticals (DSP), was deconsolidated following new
accounting rules for joint ventures. DSP improved its
performance thanks to solid organic growth. We also formed
DPx in partnership with JLL, combining DSM Pharmaceutical
Products and Patheon into a leading pharma services company.
DSM owns 49 percent of this joint venture. We are pleased to
report that the integration of DPx progressed well and we expect
the strong value generation of the company to continue next
year.

To support the integration of our acquisitions we have continued
to implement the ONE DSM Culture Agenda in conjunction with
our Leadership Model. This will support our ability to align with
the world around us, while creating a common language and a
stronger performance culture across our organization. We
introduced the initiative in late 2012 and have since rolled it out
across the company, finding different ways of applying its
themes in our everyday work.

Bright Science. Brighter Living. 2014

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We held our seventh worldwide Employee Engagement Survey
in the year, with over 85 percent of our employees and
contractors completing the questionnaire, which is considered
an excellent response rate. The Employee Engagement Index,
at 70 percent, is high and comparable to previous years. We will
move this survey into a two-year cycle in order to have more time
to follow up on actions, with the next full survey in 2016.

In Safety and Health, we regret that we cannot report an
improvement. The Frequency Index of Recordable Injuries
increased to 0.47, compared to 0.38 in 2013. This is due in part
to the shift in our portfolio, which has seen newly acquired units
phased in and more mature units phased out. Safety and Health
is of primary importance to us, so we work very hard to bring
newer units up to our standard in the months and years ahead,
coming closer to our goal of having an injury and incident-free
working environment.

We continued to make good 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 11 percent to 12 percent in 2014, and we also
saw further growth in non-European executives. A number of
senior appointments in 2014 significantly improved our diversity
ratio in top management, which included our first female board
member/CFO.

Regarding the reduction in greenhouse-gas emissions and
improvement in energy efficiencies, we are pleased to report that
we remain on track to achieve our long-term goals. We are very
proud that in 2014 we were once again named among the
leaders in the Dow Jones Sustainability World Index. We are also
proud that we have continued to receive a great deal of external
recognition, including awards, for our achievements in our
integrated sustainability approach. Our integrated reporting,
which is based on the guidelines of the Global Reporting
Initiative, also developed in the year with the implementation of
G4, the fourth generation of sustainability reporting guidelines.
We remain committed to aligning our strategy and operations
with the principles of the United Nations Global Compact.

We are already taking steps to address the challenging external
environment. Our key short-term priority is to take strategic
actions regarding non-core businesses and to continue to focus
on operational performance of our Nutrition and Performance
Materials businesses. This will be complemented by accelerated
actions to improve efficiency and reduce costs, specifically in
Nutrition and across all functions of the company, including ICT,
HR, Finance and Purchasing. In 2015 we will update our
company strategy. Among other things we will address our

steering of our businesses, functions and regions, and we will
define new long-term targets for our core businesses.

In March, we announced the retirement of Rolf-Dieter Schwalb
as CFO and member of the Managing Board, who stepped down
in December but has remained involved with DSM until the
completion of this report. I would like to take this opportunity to
thank him for his significant contribution to DSM and his role in
the transformation of our company over several years. I am very
pleased that Geraldine Matchett has joined us as a member of
the Managing Board per 1 August 2014 and as our CFO per
1 December 2014. During her short time with the company, she
has already demonstrated her value for DSM.

It is a tribute to the enormous efforts − not only of our employees,
but of the many people we cooperate with, including
shareholders, customers, suppliers, civil society at large and
local communities specifically − that we have so many reasons
to be confident about our future. It is to all of them who have
contributed to DSM’s success that we extend our most sincere
thanks and appreciation and with whom we look forward to
working in the years ahead.

Today we can proudly say that DSM has become a truly global
organization, with significant operations in most regions where
there are growth opportunities. We are using innovation to
develop a younger and more sustainable product portfolio, while
unlocking the potential of new platforms that will drive growth
and margins in the years ahead. Our emphasis remains on
driving performance through operational improvements and
ongoing portfolio management for shareholder value creation.
Our ability to leverage unique opportunities in our businesses for
the benefit of People, Planet and Profit, enables us to deliver on
our mission of creating brighter lives for people today and for
generations to come.

Feike Sijbesma
CEO/Chairman Managing Board Royal DSM

feike.sijbesma@dsm.com

Bright Science. Brighter Living. 2014

www.dsm.com

Letter from the Chairman

Bright Science. Brighter Living. 2014

www.dsm.com

Report by the Managing Board

DSM in motion: driving focused growth

In 2014, DSM completed the fourth year of its strategy DSM in
motion: driving focused growth. This strategy has provided the
company with a framework to drive sustainable and profitable
growth in the company’s core activities. Launched in 2010, it
marked the shift from a period of intensive portfolio management
to a strategy of maximizing this growth as a global leader in
health, nutrition and materials.

This transformation is strengthened by DSM’s determined efforts
to cultivate organic growth across the company, while tapping
the synergy potential of acquisitions and partnerships. These
steps have been taken alongside integration efforts and culture
change initiatives that have made DSM a company with
increased global reach and a stronger presence in high growth
economies. Today, the company enjoys greater resilience in the
face of macro-economic challenges and higher quality and
stability in its earnings. DSM also aims to deliver value creation
through its sustainable innovations, new business platforms
(Emerging Business Areas, EBAs) and its established
pharmaceutical partnerships.

Through its focused strategy and attractive portfolio with more
resilient Nutrition and Performance Materials businesses, DSM
has the right growth profile to create long-term value for its
stakeholders and to deliver on its mission of creating brighter
lives for people today and for generations to come.

DSM in motion: driving focused growth will be evaluated in 2015
and an updated strategy and accompanying targets will be
announced towards the end of the year.

Strategic focus

In light of current market conditions, DSM’s focus is on improving
the operational performance of its Nutrition and Performance
Materials businesses, while continuing to pursue strategic
actions for Polymer Intermediates and Composite Resins.

Since announcing its strategy in 2010, DSM has significantly
expanded its global reach. North America now represents 19
percent of sales (2010: 15 percent) and the high growth
economies account for 43 percent of sales (2010: 32 percent).
The strategy is supported by a stakeholder engagement process
and a risk and issue assessment that enables the company to
determine how it can best help meet the world’s most pressing
needs.

Many of the world’s social, environmental and economic
challenges stem from its rapidly expanding population, which is
expected to reach nine billion by 2050. At the same time,
societies are experiencing fundamental demographic changes
as people become older, more urbanized and wealthier. DSM
addresses the following three megatrends through its innovative
and sustainable solutions, and benefits from the increased
attention they receive on a global scale.

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

Bright Science. Brighter Living. 2014

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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
DSM Code of Business Conduct
People in 2014
Planet in 2014
Profit in 2014

Global Shifts
An accelerated shift of wealth and population growth is
underway, most notably in high growth economies. This is
rapidly creating a more urban, prosperous and connected world,
but also one that faces huge resource and cultural challenges.

These changes are greatly influencing global demand, the way
people live and how they interact with each other. Urbanization
and prosperity are promoting dietary changes and increased
spending on housing, transport, lifestyles and energy.
Technological change is also having a major impact on societies
and their behavior.

Climate and Energy
The rapid pace of climate change is translating into increased
efforts to reduce fossil fuel dependencies and bring down levels
of greenhouse-gas emissions. This is accelerating the adoption
of renewable energy sources and the use of chemicals and
materials that have less environmental impact.

These actions will help reduce the use of non-renewable
resources and create increased attention for the circular
economy concept. Efficiency is an important part of this focus,
as customers look to create more sustainable value chains
through higher yields, less waste and pollution and lower energy
use.

Health and Wellness
A growing, aging and increasingly urban and more prosperous
population seeks to improve its well-being and to increase
longevity. By contrast, people from the most impoverished areas
of the world face a daily struggle for adequate nutrition.

There is a growing focus on health issues, whether in relation to
nutrition, medicines or lifestyle improvements, especially in high
growth economies. In the West, healthcare costs are rising and

access to good quality nutrition is growing in importance. There
is also a growing demand for safer and healthier solutions.

Strategic progress and aspirations

DSM will leverage its unique position in Life Sciences and
Materials Sciences to capitalize on the key global megatrends
that are more significant than ever. By creating value along the
four growth drivers of High Growth Economies, Innovation,
Sustainability and Acquisitions & Partnerships, the company
maximizes their potential, so that they reinforce each other and
generate further business opportunities and synergies. Through
its regional organizations, functional excellence groups and
shared services, DSM is also able to enhance the performance
of its business groups.

Following the rapid expansion of its global portfolio, DSM is now
focused on operational performance, organic growth and
improved profitability.

During the current strategy period, DSM has set itself ambitious
targets for accelerated sales growth that are above GDP growth
levels, and for increased profitability. These have been
formulated based on an assessment of opportunities in each of
the growth drivers.

Financial targets
DSM's organic sales growth amounted to 3 percent in 2014
compared to 2 percent in 2013. Negative foreign exchange
effects and tough market conditions in Nutrition and
caprolactam resulted in a decline of EBITDA from
€ 1,261 million to € 1,168 million. The EBITDA margin amounted
to 12.7 percent compared to 14.2 percent in 2013. Return on
Capital Employed (ROCE) was 7.8 percent compared to 10.1
percent in 2013.

Sales in High Growth Economies reached 43 percent of total
sales in 2014. Innovation sales, which are measured as sales
from products and applications introduced within the last five
years, reached 18 percent of total net sales in 2014.

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

Bright Science. Brighter Living. 2014

www.dsm.com

Global ShiftsClimate andEnergyHealth andWellnessLifeSciencesMaterialsSciencesAcquisitions &PartnershipsHigh Growth EconomiesInnovationSustainabilityPeople - Planet - Proﬁt: creating value along three dimensions

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 (RobecoSAM 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

Diversity4

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 RobecoSAM sector leader
2 See page 213 for a definition of ECO+
3 The High Performance Norm (over 80% favorable) is the composite of the top 25%

employee responses of the selected external benchmark organizations

4 See also the chapter People in 2014 on page 43

ECO+ solutions account for around 50 percent of its running
business in 2015. ECO+ products are those that offer greater
quantifiable environmental advantages over mainstream
alternatives on the market. In 2014, ECO+ sales accounted for
49 percent of all sales, which puts the company on track towards
its 2015 aspiration.

ECO+ solutions also accounted for 95 percent of the innovation
pipeline, which is already above DSM's 2015 aspiration of at
least 80 percent. In 2014, approximately 40 percent of ECO+
innovation launches were supported by comparative Life Cycle
Assessments (LCAs).

In 2014, DSM took important steps towards the finalization of its
People+ strategy, which aims to deliver products that have a
measurable positive impact on people. DSM is part of a group
of European industry leaders that announced the publication of
the 'Handbook for Product Social Impact Assessment', which is
the first practical and broadly accepted methodology for
assessing a product’s social impact throughout its life cycle.

For the seventh time, DSM held its worldwide Employee
Engagement Survey. This survey measures engagement levels,
determining how employees score on a combination of the
following attributes: commitment, pride, advocacy and
satisfaction. In 2014, the Employee Engagement Index was
measured at 70 percent (2013: 71). This is in line with the global
standard of 70 percent. DSM aims to be part of an external
benchmark of high performing companies with index scores of
over 80 percent favorable. The survey will now be run on a two-
year cycle that will help DSM focus its efforts on follow-up
improvements.

Organization and culture
DSM has continued to implement its ONE DSM Culture Agenda
in 2014, to promote greater cohesion and a stronger company
culture. The agenda centers on four themes that are applied
across the company’s daily operations: External Orientation,
Accountability for Performance (and learning), Collaboration with
Speed, and Inclusion & Diversity.

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

Sustainability aspirations
Sustainability remains a core value for the business as well as a
key growth driver that enables DSM to deliver higher margin
products. DSM is on track with its sustainability target to make

The business groups and regional organizations are supported
and optimized through shared services, which aim to provide
efficient, high-quality services in designated areas, and
functional excellence groups that offer functional expertise and
implementation capabilities. The corporate staff departments are

Bright Science. Brighter Living. 2014

www.dsm.com

Report by the Managing Board

responsible for supporting the Managing Board in running the
company.

Throughout 2014, the regional organizations were given a strong
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. 2014

www.dsm.com

In Latin America, DSM has established a solid platform for its
Animal Nutrition & Health business, especially in Brazil,
Argentina, Uruguay and Colombia, with good growth in exports.
There is now a growing trend towards greater food security that
favors DSM’s Human Nutrition & Health business in the long
term. The region also presents an exciting opportunity for clean
energy, which links to DSM's ambition to expand in sustainable
technologies. Mexico and Colombia are looking to attract
investment in renewable energy through public incentives.

In Russia, the geopolitical tensions and stagnating economy
have created a difficult business climate. Notwithstanding,
DSM's business in Russia, which accounts for around one
percent of total sales, continued to grow in 2014, among others
via its joint venture in Tatarstan. This contributed to Russia’s goal
of reaching higher self-sufficiency in animal protein production
and supply through better animal nutrition.

As DSM transitions from being a highly European-based
enterprise to becoming a truly global company, it is also seeing
a dramatic shift in its operations. Over 60 executive positions are
no longer in the Netherlands but in other parts of the world.
Furthermore, regional innovation centers have been established
in India and China, while at Managing Board level there is clear
accountability for regional performance.

From 'reaching out' to being truly global
Net sales by destination in %
■ Netherlands ■ Rest of Western Europe ■ Eastern Europe
■ North America ■ Latin America ■ China ■ India ■ Japan
■ Rest of Asia ■ Rest of the world

2014

2013R

Growth Driver: High Growth Economies

From 'reaching out' to being truly global

As a key element of its strategy, DSM has successfully
transformed its international presence to capture global growth
opportunities in High Growth Economies. Due to its strong global
presence, DSM’s share of sales in High Growth Economies as
a proportion of total sales has continued to increase significantly
in recent years.

In 2014, sales to High Growth Economies accounted for around
43 percent of total sales, compared to 32 percent at the start of
the strategic period in 2010. While some of the High Growth
Economies grew below historical averages in 2014, this is not
considered a structural slowdown for the end-markets relevant
to DSM and its customers. DSM expanded its sales significantly
in China and India with double-digit growth rates. Latin America
and Eastern Europe showed mid-single-digit growth.

High Growth Economies will clearly be growth engines for the
world economy in the future with their rapidly expanding urban
populations and increasing domestic consumption. DSM will
continue to actively expand its presence in High Growth
Economies, including Africa, in the coming years, in the same
way its customers are also doing. It will drive growth with locally
tailored products and services; and an expanded local presence
in research, innovation, production, and marketing and sales.

It is notable that in the past year, the US, a mature economy of
the developed world, has seen stronger growth than several
High Growth Economies. This too has benefitted DSM because
of its strong position in the country. North America is DSM’s
largest market, accounting for 19 percent of total sales.

In China, where GDP growth is estimated at around seven
percent, policy makers are increasingly focused on sustainable
growth levels and on domestic consumption. The country’s
leadership appears determined to tackle some of the nation’s
most pressing problems such as environmental degradation and
corruption. The focus on sustainability, clean energy and food
safety and security is favorable for DSM in China and offers good
growth opportunities. Sales in China reached USD 2.0 billion
compared to USD 1.7 billion in 2013.

In India, DSM has seen a fast expansion of its business. It has
invested in its Nutrition, Engineering Plastics and Innovation
Center businesses locally, and created a Global Service Delivery
center. It also recently opened the company's first solar
technology demonstration center at its plant in Pune. DSM is
now focused on introducing more locally made products for
markets in India.

Bright Science. Brighter Living. 2014

www.dsm.com

Total

Total as % of net sales

Staff employed in R&D activities

Report by the Managing Board

Growth Driver: Innovation

From building the machine to doubling the output

At DSM, innovation turns ‘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 that meet market needs and create profitable
growth and future value.

Innovation sales
as % of total sales

2010

2011

2012

2013R

2014

DSM's target is that by 2015 innovative products and solutions
will account for 20 percent of its total sales. Innovation sales are
defined as sales of products and applications that have been
introduced over the last five years. The company is well on track
to deliver on its target as these products accounted for 18
percent of total sales in 2014. They have strongly contributed to
DSM’s sales and EBITDA growth with margins higher than the
average of its running business. In Nutrition, innovation sales
accounted for 17 percent of the total, while in Performance
Materials they accounted for 24 percent.

DSM works to foster and sustain its innovative practices on an
ongoing basis. It does this throughout its established businesses
in Nutrition and Performance Materials. At the same time, the
Innovation Center, with its Emerging Business Areas (EBAs), is
focusing on developing new growth platforms outside of the
current scope of the company’s business groups.

One of these is DSM Biomedical, which is achieving attractive
EBITDA margins around 25 percent on 2014 sales of € 138
million. Another EBA with significant value potential is DSM Bio-
based Products & Services, which focuses on clean energy from
crop residues as well as bio-chemicals. Its key value drivers are
the licensing of intellectual property (IP) and the
commercialization of enzymes and yeast. The business is
developed through partnerships. DSM’s third EBA, DSM
Advanced Surfaces, aims to accelerate the uptake of solar

energy production through smart coatings and surface
technologies.

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

x € million

Nutrition

Performance Materials

Polymer Intermediates

Innovation Center

Corporate Activities

2014

2013R

206

143

475

5.2

2,208

209

132

461

5.2

2,240

Research & Development
DSM has established best practices in innovation and manages
its major innovation activities at a platform level. The platforms
are selected from specific areas that are known as Science and
Innovation themes. These are: Food and Nutrition Security,
Health, Sustainable Manufacturing and Energy Security.

Directed by the team of the Chief Technology Officer, this
structure provides the basis for an effective management of
company-wide competence-building programs in Research &
Development (R&D). 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.

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. In addition, DSM also has
a Corporate Research Program that helps build and strengthen
technological competences across the company.

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.

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Collaboration
The DSM science network is globally spread, with over 30
laboratories, and consists of approximately 2,200 DSM
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, including the
Dutch Polymer Institute and the Bio-based Industries
Consortium.

Open innovation is an important element of DSM's approach to
innovation and a business enabler. By combining its own
capabilities with the vast pool of ideas, know-how and expertise
that are available outside the company, DSM is better able to
develop and discover solutions. See also Stakeholder
engagement on page 28.

Patents
DSM filed more than 400 patents in 2014 (2013: >400).

Value creation through best practices
DSM continued its Excellence in Innovation program in 2014.
Established in 2006, this program aims to optimize DSM’s
innovation infrastructure by working to improve key innovation
behaviors, including leadership and teamwork skills, in order to
foster a stronger innovation culture across the business. The
company will continue the Excellence in Innovation program in
order to maintain its leading position as an innovator 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 assists the
business groups and EBAs with the initiation and management
of collaboration in patents, trademarks and know-how.

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

Bright Science. Brighter Living. 2014

www.dsm.com

Report by the Managing Board

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 responsibilities toward society, it has
successfully developed sustainability as a strategic growth
driver. For DSM, achieving sustainability means pursuing
activities that create value in the areas of People, Planet and
Profit. These must meet the needs of the present generation,
without compromising the ability of future generations to meet
their own needs.

Sustainability is a key differentiator and a driver of value in DSM's
markets. The company is uniquely positioned to create and
capture the many opportunities that these challenges present
across its value chains. It is therefore vital that sustainability
guides the activities of DSM's global business groups, as well as
its operations, strategic actions and decisions. By continuously
developing innovative science-based products and solutions
that contribute to a brighter future for people everywhere, DSM
is also creating a more sustainable and profitable future for itself.

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
lower than competing mainstream products that fulfill the same
function. When considered over their entire life cycle, ECO+
solutions offer superior performance with 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 (LCAs) and/or
expert opinions to determine whether a solution should be
considered ECO+.

Since the start of its ECO+ program, DSM has looked to
harmonize performance metrics in its industries. To this end, the
company has chaired the work of the World Business Council
for Sustainable Development (WBCSD) in its initiative for the
chemicals sector in the area of product life cycle metrics. In
2014, in collaboration with nine industry peers, DSM published
a key guidance for the consistent application of environmental
LCAs. This guidance is an important step for all participants in
the value chain and provides clear benefits to consumers.

Sustainability aspirations 2011-2015

Realization 2014

Dow Jones Sustainability Index

Top ranking (RobecoSAM Gold Class)

Gold Class1

ECO+ (innovation)

At least 80% of pipeline is ECO+2

95%

ECO+ (running business)

From approximately 34% towards 50%

49%

Energy efficiency

20% improvement in 2020, compared

17%

to 2008

Greenhouse-gas emissions

25% reduction (absolute) by 2020,

2% reduction3

compared to 2008

Employee Engagement Survey

Towards High Performance Norm4

70% favorable

Diversity5

Women in executive positions

BRIC+ nationals in executive positions

People+5

DSM People LCA

12%

On track

1 DSM returned to Silver Class for 2015
2 See page 213 for a definition of ECO+
3 Total reduction: in the calculation that accounts for changes in production volume,

DSM's GHG emissions decreased by 16% in 2014 compared to 2008

4 The High Performance Norm (over 80% favorable) is the composite of the top 25%

employee responses of the selected external benchmark organizations

5 See People+ and Inclusion & Diversity in the chapter People in 2014 on page 43

ECO+ solutions can be found across all of DSM's business
groups with many more under development. They now account
for 49 percent of total sales. With an average annual growth rate
of around ten percent, ECO+ sales are on track to achieve
DSM’s target of towards 50 percent of the running business by
2015. Across DSM's Life Sciences and Materials Sciences
businesses, ECO+ sales have higher margins compared to
non-ECO+ sales.

An example of an ECO+ product in the Life Sciences business
is MaxiBright®. This enzyme is used to remove cheese coloring
components from whey protein, making it suitable for use in
high-value food and beverage applications. At the same time,
the application of MaxiBright®, compared to competing
products on the market, uses ten times less hydrogen peroxide,
thereby reducing the carbon footprint of these processes by over
80 percent.

Bright Science. Brighter Living. 2014

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In 2014 DSM announced the DSM-Niaga joint venture, in which
Niaga’s carpet fiber binding technology is combined with DSM’s
engineered polyester lamination adhesives. This enables the
carpet industry to manufacture mono-material (polyester) carpet
systems or duo (polyester-polyamide) systems that are fully
recyclable, thereby contributing to a circular economy.

consumption of just three grams of oat beta-glucan per day can
reduce the risk of cardiovascular diseases. OatWell® also has
clinically proven health benefits in the areas of blood glucose
control and general gastrointestinal health. At the same time, the
oats that are used for OatWell® create benefits for communities
in the Nordic countries from where they are sourced, which
contributes to local employment and prosperity.

Another example of a People+ innovation are synthetic chains
used in harbors made of Dyneema® fiber. Synthetic chains made
with Dyneema® are much safer and more comfortable to use, as
they are up to eight times lighter than steel, feel more
comfortable and are 70 times less noisy. Compared to using
steel chains, the harbor workers suffer less from back pain and
injuries and experience less noise. These features contribute to
the well-being of the harbor workers. See also People in 2014
on page 43.

People+

People+ is DSM’s program to develop solutions that measurably
improve the lives of consumers, employees and communities
across the value chains. People+, in combination with ECO+,
makes DSM’s ‘Bright Science, Brighter Living’ mission more
tangible.

In 2014, DSM, together with a group of 12 European industry
leaders, launched the 'Handbook for Product Social Impact
Assessment'. This is the first practical and broadly accepted
methodology for assessing a product’s social impact throughout
its life cycle and has been formulated and tested based on input
from international standards and consultations with researchers,
industry hubs, development organizations and NGOs (non-
governmental organizations). This LCA methodology provides a
clear framework through which companies, including DSM, can
analyze life-cycle data and calculate the impact products have
on human health, development and well-being.

People+ enables DSM to identify new levers for innovation, to
develop value propositions and engage with partners in the value
chain. By concentrating on the impact that its products have on
the lives of people involved in making and using the product,
the People+ program is an incentive for innovation and research
and development across the company.

An example of a People+ product is OatWell®, which is made of
oat and added to cereals and porridge. Research shows that the

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ECO+ Life Cycle AssessmentProduct useEnd of lifeManufacturingAssemblyRaw materialextractionMaterialprocessingProduct useEnd of lifeManufacturingAssemblyRaw materialextractionMaterialprocessingCommunitiesPeople+ Life Cycle Assessment
Report by the Managing Board

Growth Driver: Acquisitions & Partnerships

supply agreements that are material to DSM's business
performance.

From portfolio transformation to growth

The combination of DSM Pharmaceutical Products and Patheon
in DPx Holdings in March has resulted in a leading pharma
services company in the Contract Development and
Manufacturing Organization (CDMO) market. DSM owns 49
percent of DPx. The integration has progressed quickly, with
pro-forma sales for the fiscal year ending 31 October 2014 of
around € 1.6 billion.

In July 2014, DSM announced its intention to acquire Aland, a
Hong Kong-based company producing vitamin C in China. This
transaction, expected to close in the first half of 2015, will allow
DSM to further strengthen its position in vitamin C.

Accelerating growth through acquisitions and partnerships has
been a fundamental element of the DSM in motion: driving
focused growth strategy. DSM has successfully invested
€ 2.8 billion in the acquisition of new businesses since 2010,
creating an unmatched value chain presence in Nutrition, and
radically transforming its portfolio. It has also completed a
number of value-enhancing partnerships.

All acquisitions and partnerships have been based on stringent
strategic and financial criteria that have remained unchanged
since 2010. 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 market leadership
position and create value for DSM in terms of technological
and/or market competences.

DSM has an active approach to portfolio management that aims
to capture opportunities from global megatrends. Over the
years, it has made more precise and sharper distinctions
between those parts of its portfolio that have the best overall fit
for the business. To reduce volatility in the Materials Sciences
business and to ensure a better strategic fit, strategic actions are
being pursued for Polymer Intermediates (caprolactam and
acrylonitrile) and Composite Resins.

The company is currently not planning any large acquisitions and
is focused on integrating the acquisitions completed in recent
years. It will harvest the full synergy potential of these businesses
in terms of growth and profitability, and by further enhancing
operational performance.

Acquisitions since 2010
Acquisitions have been the main vehicle for adding new growth
platforms, especially in high growth economies and North
America. Considering the largest four businesses acquired −
Martek in 2011, Ocean Nutrition Canada in 2012, Fortitech in
2012 and Tortuga in 2013 – DSM’s own estimates show that all
have contributed significantly to DSM’s value creation. Ocean
Nutrition Canada has not met the initial performance
expectations as it has faced unexpected weakness in the US fish
oil-based omega-3 dietary supplements market.

Acquisitions & Partnerships in 2014

In 2014, DSM formed new partnerships that serve clear strategic
objectives, in addition to its regular contractual arrangements
with suppliers and customers, which may involve long-term

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Stakeholder engagement

Materiality

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 its
stakeholders – customers, investors, employees, companies,
governments, academia and civil society – 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. By working together, DSM and its stakeholders can
create shared value and contribute to a more sustainable world.

In its more than 110 years of existence, DSM has always been
able to transform itself in response to societal changes, with a
focus on innovation and the long-term perspective,
acknowledging stakeholder needs. For this reason, DSM
focuses on four growth drivers that are important in supporting
and accelerating the transition towards more sustainable
economic development.

As a large multinational, DSM has many stakeholders from
different backgrounds and cultures with a variety of interests.
These may sometimes differ and create dilemmas. It is in the
interest of the company to find the right balance between
business interests and the demands that stakeholders make on
the company. In this chapter, DSM's stakeholder dialogue is the
starting point to explain its focus on the 20 materialities relevant
to the company.

Beyond the economic wealth that corporations help to create,
they have a responsibility to serve society, listen to their
stakeholders and be accountable for their activities. DSM values
its stakeholder engagement and maintains open discussions
with several parties on the topics related to its business activities
and its role in society.

A stakeholder dialogue is a continuous process in order to
refresh the material topics as required. Since 2013, when the
stakeholder engagement process formally began, DSM has
continued to assess whether major changes to its materialities
are needed. Some stakeholders provided updates on their
priorities in the year. At the same time, DSM kept abreast of
societal debates and topics discussed by international business
groups and other stakeholders. Research and media analyses
are also an important part of these efforts. On this basis, DSM
assessed whether changes were necessary to its materialities in
2014.

DSM's materiality matrix in 2014 represents the material topics
and their positioning as seen by the company’s stakeholders in
the year. There was no need to update the material topics,
although corporate income tax has become a stronger societal
concern and therewith a higher priority area for DSM, which it
expects will continue in 2015.

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Societal ShiftsEco LimitsBusiness EnablersTrust & AccountabilityPriority Top priorityInterestHigh interestSocietal interestBusiness impact 1 Health and wellness 2 Malnutrition 8 Food safety and security 9 High growth economies 12 Human rights 7 Open innovation 15 Careers and employment 17 Advocacy 18 Social media 20 Trade barriers 3 Sustainable value chains 4 Bio-based and circular economy 5 Climate change 6 Water management 10 Resource constraints 11 Biodiversity 13 Renewable energy and greenhouse-gas emissions 14 Sustainable animal protein 16 Tax 19 BioethicsMateriality matrix1251017151816201419116438791213
Report by the Managing Board

The 20 issues have been clustered into four categories: Societal
Shifts, Eco Limits, Business Enablers and Trust & Accountability.
These are described by category and in relation to their relevance
to People, Planet or Profit. All materialities and their location in
this report are listed below.

Materiality

1 Health and wellness

2 Malnutrition

3 Sustainable value chains

4 Bio-based and circular economy

5 Climate change

6 Water management

7 Open innovation

8 Food safety and security

9 High growth economies

10 Resource constraints

11 Biodiversity

12 Human rights

Where in this report?

page 43, 66, 82

page 36, 67, 70

page 33, 55, 76

page 53, 83

page 51, 75

page 54

page 24, 29, 84

page 38, 66, 76

page 22

page 53

page 55

page 40, 49

13 Renewable energy and GHG emissions

page 51, 55, 84

14 Sustainable animal protein

15 Careers and employment

16 Tax

17 Advocacy

18 Social media

19 Bioethics

20 Trade barriers

page 29, 69

page 46

page 29, 88

page 30

Open innovation
An important element of DSM's approach to innovation is open
innovation, which seeks to combine internal and external ideas
and capabilities. By combining DSM's own capabilities with the
vast pool of ideas, know-how and expertise that are available
outside the company, DSM is better able to develop and
discover solutions.

Open innovation is therefore a business enabler. 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. The fourth reason is that the demands of society are
such that companies often have no choice but to work together
to address them. DSM is well aware of these developments and

is working to find the right balance between open and closed
innovation.

DSM seeks to continuously improve the quality of its open
innovation practices. 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. In this way, it can broaden and further strengthen
its technological competence base.

Tax
Fair share tax contribution has become a prominent issue as
some multinational companies were subject to criticism by civil
society, the media and politicians because they have minimized
their tax contributions. The planning of DSM’s tax position is
consistent with its business operations, reflects the corporate
strategy and takes into account relevant initiatives, such as the
initiatives of the Organization for Economic Co-operation and
Development and other governments' advisory groups in relation
to the fair share of taxes.

DSM’s contribution to society includes the provision of
employment to more than 21,000 people around the world. In
addition to corporate income taxes, DSM pays many other taxes
including payroll taxes and social security contributions on the
wages of its employees, value added taxes, customs duties,
property taxes, etc. All these taxes are a significant source of
funding of public services by governmental institutions at several
levels worldwide. DSM sees it as its responsibility to contribute
to this.

A responsible tax approach is essential for DSM's sustainability
mission. That is why DSM regularly reviews and publishes its tax
principles, with specific references to the aspects that are the
subject of current interest and discussions. See DSM's tax
principles at www.dsm.com.

Sustainable animal protein
Population growth, combined with urbanization and growing
wealth, is resulting in increasing demand for animal protein,
especially in high growth economies. To meet this demand,
more food must be produced, while constraints in the use of
natural resources such as water and soil must be addressed.

With its product portfolio of vitamins, minerals, carotenoids,
eubiotics and feed enzymes for the global feed industry, DSM is
able to provide solutions for many types of species and animal
farming systems with a view to making them more resource
efficient and mitigating their environmental impact. This includes
making more efficient use of feed, providing alternatives to
antibiotic growth promoters, improving animal health and welfare

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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. See DSM's
position paper on sustainable animal protein at www.dsm.com.

Advocacy
The term advocacy refers to the efforts made by companies,
associations or individuals to increase awareness around
policies or causes. For DSM, advocacy also means increasing
awareness beyond governments and other policy makers. This
plays an important role in getting topics onto the agendas of
(non-)governmental organizations (NGOs). Malnutrition and
stunting are issues in which DSM aims to take a leading role by
bringing them to the attention of a broader audience. The
company 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.

Social media
DSM considers social media to be an essential instrument for
stakeholder engagement, reputation management and brand
building. The company uses social media to stimulate a dialogue
with its stakeholders and aims to increase the number of key
stakeholders acting as ambassadors for the company. The
company’s primary focus is on customers, governments, NGOs,
scientific institutions, local communities, potential employees
and its own employees. DSM tailors its conversations to appeal
to specific stakeholder groups and channels.

The company interacts with its stakeholders on social media
using a strategic combination of owned, earned and paid media.
The most important owned platforms the company uses include
corporate, regional and market-focused DSM channels on
Twitter, Facebook, YouTube, LinkedIn, Google+ and Weibo.

Earned platforms involve the company publishing editorial
opinions on relevant and influential sustainability subject areas.
Opinion leaders may provide platforms or join online Twitter
conversations and other public online debates with key
influencers on relevant societal themes.

Social media platform

Facebook

Twitter

Weibo

Followers year-end

2014

37,611

67,046

61,104

20,801

In terms of paid media, DSM has focused on increasing
engagement and influence by running targeted social media
campaigns on specific themes such as the bio-based and
circular economy, renewable energy, climate change, product
social impact assessment, malnutrition and hidden hunger.

Social media fosters collaboration and external orientation at
DSM. Consequently, the company actively supports and
encourages its workforce to join the conversation. To facilitate
this, at the end of 2014, DSM embarked on a program to help
make its workforce savvy about social media. DSM aims to
actively manage the level of engagement.

Trade barriers
DSM is aware of trade restrictions worldwide and has systems
in place to prevent illegal dealings with sanctioned parties
and/or embargoed countries. DSM is impacted by the sanctions
on Russia, particularly in its Performance Materials cluster. Sales
to Russia account for around one percent of total sales. The
company is aware of new European legislation to prevent the
misuse of chemicals for explosive precursors. During 2014, new
corporate requirements to ensure trade controls compliance
have been approved by the Managing Board; these are
applicable as from 1 January 2015.

Bioethics
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 with genetic material that has been altered via
biotechnological means. DSM’s latest consultations with
stakeholders show that the debate now focuses on the role
GMMs can play in nourishing the world's population by 2050.
New or unfamiliar technologies like genetic modification often
raise concerns in society about their possible implications for
public health or the environment, and may trigger ethical
discussions.

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Report by the Managing Board

DSM is aware that consumer acceptance of new technologies
cannot be taken for granted, and so it makes safety and other
concerns a top priority. It engages in an open dialogue on the
benefits and risks with its stakeholders, including the scientific
community, industry, NGOs, governments and the general
public. The company adheres to applicable regulations and
legislation and applies the highest standards. It is transparent
about its practices and uses science-based safety assessments,
thus enabling the competent authorities to assess and approve
its use of innovative strain development technologies and the
resulting GMMs. DSM believes biotechnology can offer unique
solutions to global challenges related to a growing and aging
population and the depletion of fossil resources. See DSM's
position paper on biotechnology on www.dsm.com.

Stakeholders

DSM is committed to creating value for its broad range of
stakeholders by leveraging unique opportunities in Life Sciences
and Materials Sciences for people today and generations to
come. It recognizes that in this ever more complex world,
companies, governments, academia, civil society and
international institutions must work together to solve the big
global issues of today. These include the question of how to deal
with major global demographic changes, and the rise of new
economies and an aging population. They also relate to climate
change and the development of alternative energy, and how to
secure health and well-being by resolving food and nutrition
security and water issues.

Stakeholders

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 this, DSM is using the Net Promoter Score (NPS),
a customer interaction cycle that has become the lead
performance indicator for loyalty and advocacy tracking. NPS
equips the company with the processes, tools, and expertise
needed to drive customer centricity across the business and to
achieve optimum results. In the chemical industry DSM is a
frontrunner in using the NPS methodology. 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 focused on enhancing the use of NPS as the lead
performance indicator of customer centricity in the organization.
A full DSM baseline has been developed, with an overall score
for DSM of 36 percent, putting it amongst the leading companies
in its sector. Furthermore, an e-learning tool was introduced to
train all relevant employees on the basics of NPS.

A customer sponsorship program was launched linking senior
executives to key DSM accounts to ensure commitment and
support to customer centricity throughout the organization.
Furthermore, DSM revisited its key account management
program and took important steps forward in its business
development approach with existing customers. This included a
selection of customers with whom DSM jointly builds strategic
plans for the future. This joint approach resulted in an innovation
award from DSM's strategic customer Bayer (consumer
healthcare division) in 2014. DSM also formed a strategic
partnership with Merck & Cie to bring folate vitamins to the
market. This allowed Merck & Cie to widen its target markets and
bring this innovative product to a larger number of people than
before.

A crucial part of DSM’s customer business development
approach is that the company focuses on working with the entire
value system, which includes partners within and across its value
chains. This way of collaborating is an effective way to drive
sustainability and to come up with innovative solutions that
benefit business and society. An example of this are the trawls
made from Dyneema® which help to reduce the environmental
impact of pelagic fishing and were developed in close
partnership with fishing companies.

DSM is also increasingly focusing on end-users to create more
value in its B2B activities. This is leading to a stronger focus on
the ‘human’ stories behind the product, rather than its technical
properties. This wider relevance creates stronger bonds with
customers and consumers.

One of DSM’s key performance indicators is the customer
complaint rate. In 2014, this rate fell to an all-time low due to
DSM's integrated complaint management process, which

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CustomersCivilsocietyEmployeesSuppliersScience institutionsInvestorsGovernment
stimulates relevant continuous improvements in products,
processes and services for the benefit of customers.

An example of this is the handling of a complaint from a Japanese
customer about a small amount of foreign particles in one of
DSM Nutritional Products’ vitamin batches. A technical expert
group conducted an immediate investigation to determine the
root cause. The particles appeared through the abrasion of parts
of the equipment in the manufacturing process. At no point were
the customer or the final consumer put at risk. The customer
appreciated DSM’s fast and accurate response.

Another example is an Indian customer manufacturing coated
packaging films, who filed a complaint about the stability of a
batch of resins. A thorough investigation at DSM laboratories in
the Netherlands revealed that the complaint was not related to
the resin itself but to the mixing process during the customer’s
formulation. A technical expert traveled to India to support the
customer in resolving the issue. The handling of this complaint
strengthened the customer relationship and contributed to the
growth of the business.

Employees
Every day, DSM's employees work in diverse areas of health,
nutrition and materials, creating value for customers by helping
them provide solutions to some of the world’s greatest
challenges. DSM encourages people to plan their career paths
and helps them to keep on developing their skills and knowledge.
It requires people who find different ways to add value and
contribute.

On 22 April, various DSM locations hosted the first DSM Earth
Day event to encourage employee action and awareness on
sustainability topics. With nearly 5,000 commitments to
sustainability made by employees at more than 80 sites and
online, supported by senior management, Earth Day was a great
success for employee engagement and awareness on
environmental challenges.

Since 2008, DSM has been measuring employee engagement
each year. This Employee Engagement Survey helps DSM to
manage and develop its human capital and stimulate growth
through people. The survey is an important external benchmark
to establish if DSM continues to be among high performing
companies that are attractive for talented people and are able to
keep employees energized and inspired. For a full description of
the survey and the index see People in 2014 on page 46.

such as acquisitions and divestments. In 2014, 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 2014, DSM
engaged with responsible investors and traditional investors with
a keen interest in the company's environmental, social and
governance performance and filled in general and specialized
sustainability questionnaires.

All relevant information was made publicly available via press
releases and on the DSM Investor Relations website and IR app,
ensuring that such information was equally and simultaneously
provided and accessible to all interested parties. For more
information see www.dsm.com.

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, thus supporting business success. DSM
encourages legislators to promote competitiveness and
innovation.

DSM is committed to acting responsibly and transparently when
it comes to sharing its expertise with policymakers and
government authorities in all markets. The company is registered
in the European Commission's voluntary register of lobbyists. It
engages with policymakers worldwide on various topics,
including nutrition, energy and industrial biotechnology. It also
supports public-private collaboration as an essential part of its
engagement. This engagement involves both (semi-)
governmental organizations as well as NGOs. See also Public-
Private Partnerships on page 36.

Civil society
A company cannot be successful in a society that fails, which
means that working together with other organizations can be a
step towards finding solutions to societal challenges. DSM has
engaged with various NGOs during the year on topics like
malnutrition and stunting, food security, renewable energy, bio-
based solutions and the role of business in society. In November,
Kumi Naidoo, Executive Director at Greenpeace International,
was invited by Feike Sijbesma to talk to DSM employees in the
Netherlands.

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

Science Institutes
DSM works closely with the academic sector. It has long-
standing relationships with many academic institutions while
others are project-based. Partners in nutrition science research
include: the Swiss Federal Research Institute ETH (Zurich,

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Report by the Managing Board

Switzerland); the London School of Hygiene & Tropical Medicine
(London, UK); the Johns Hopkins Bloomberg School of Public
Health, Baltimore (Maryland, USA); the University of California
(California, USA); North-West University (Potchefstroom, South
Africa); and Wageningen University and Research Centre
(Wageningen, Netherlands).

Through the public-private partnership with the Dutch Polymer
Institute (DPI), DSM works together with more than 50 science
institutes worldwide, among which Delft University of
Technology (Netherlands), ESCPE-Lyon (France), Imperial
College London (UK), Japan Advanced Institute of Science and
Technology (Nomi, Japan) and Max-Planck Institute for Polymer
Forschung (Mainz, Germany). Founded in 1997, this partnership
is between polymer producing and processing industries and
knowledge institutes involved in polymer research.

DSM is also actively involved with the Bio-based Industries
Consortium, which has partnerships with Aalborg University
(Copenhagen, Denmark), Karlsruhe Institute for Technology
(Germany) and Chalmers University of Technology (Gotenburg,
Sweden).

Suppliers
With more than 40,000 suppliers, DSM looks to support efficient
engagement efforts. Following its inception in 2006, the DSM
Supplier Sustainability Program (SSP) has been implemented via
an annual plan that is approved by the DSM Purchasing
Leadership Team. Progress towards targets is shared on a
monthly basis within the purchasing community and quarterly
reports are shared with the Managing Board. The program
consists of two main parts: compliance and supplier solutions.

To further improve the maturity level of the SSP, it has been
important to benchmark against the practices of industry peers.
In 2014, an assessment of DSM’s maturity level on supplier
sustainability was made on four dimensions: Strategy/Plan;
Supply Risk & Opportunity; People, Infrastructure &
Measurements; and Processes. The maturity assessment was
used as a tool to assess where DSM is, and to define the
ambition level for the SSP.

Standard sustainability trainings are run every year and have
been incorporated into the overall purchasing training
curriculum. In 2014, 156 colleagues were trained. This means
that by the end of the year, over 90 percent of the purchasing
community had been trained. Customized training and
workshops for business group purchasing teams are also
organized to facilitate specific topics. The training not only
illustrates why sustainability matters for DSM, but also provides
ideas and practical tools on how to make sustainability an
integral part of daily work. DSM also established the Strategic

Sourcing Awards and Supplier Innovation Awards to recognize
its cross-functional purchasing teams. Of the eight finalists, five
of the projects showed clear sustainability benefits.

Externally, DSM was active in industry collaboration. In 2014, the
company joined the Together for Sustainability (TfS) initiative,
which becomes operational in 2015, with the aim of acquiring
broader knowledge of, and insight into its supplier base. The TfS
initiative was founded in 2011 by the Chief Procurement Officers
of six multinational chemical companies. The purpose of the
initiative is to develop and implement a global assessment and
audit program to assess and improve sustainability practices
within the supply chains of the chemical industry.

DSM was also a member of a group of companies organizing
the International Supply Management Congress in Amsterdam,
(Netherlands). The congress focused on sustainability in supply
chains. In 2014, DSM contributed to the theme of 'partnerships
in the supply chain' in a keynote by Managing Board member
Stephan Tanda. Around 750 participants from a wide range of
companies and NGOs joined the conference.

DSM is a member of the Roundtable for Sustainable Palm Oil
(RSPO), and has made a public commitment to being
transparent about how much palm oil is being used by the
company, and to increase its use of Certified Sustainable Palm
Oil. In the last two years, GreenPalm certificates under the 'Book
& Claim' scheme were used to cover almost all of the material
purchased at DSM Nutritional Products. DSM aims to progress
to full RSPO mass balanced certification.

Supplier compliance
In 2014, DSM continued with its three-step approach for its SSP
compliance program: Supplier Code of Conduct (SCoC);
questionnaires for self-assessment; and supplier audits. DSM
focuses on the performance of 1,200 so-called critical suppliers.
Critical suppliers are defined by each business group, taking into
consideration both business risks and sustainability risks.
Included in that definition are suppliers who are providing DSM
with critical components; are located in potentially high risk
countries; are non-substitutable or high volume suppliers; or
have potential for creating shared value in the areas of innovation
and sustainability.

In the year, 94 percent of spend was covered by the SCoC. The
outcomes of self-assessments and audits continued to provide
input for the improvement programs agreed to and followed up
with suppliers. Another focus for 2014 was the integration of
sustainability compliance into the standard Supply Risk
Management approach and the new supplier onboarding
process. In the new spend management system for indirect
sourcing, sustainability assessments became a mandatory step

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when onboarding new suppliers. This gives a clear message that
DSM wants to do business with suppliers that share similar
sustainability values.

With the adoption of TfS, DSM will move from its current self-
assessment and audit practices, to standardize and simplify the
inspection of its suppliers. This will be made possible by the
sharing of supplier sustainability assessments and audit data for
a common pool of suppliers through the TfS framework.
Resources can be employed more effectively to initiate
continuous improvements of sustainability standards in DSM’s
global supply chains, while the increased transparency on
sustainability standards will provide a sound basis for business
decisions.

Solutions
DSM Purchasing engages in a proactive dialogue with suppliers
to create joint value and to engage in areas related to ECO+ and
People+, as part of the supplier solutions projects.

In the context of its Purchasing Vision ’Beyond Savings', DSM
has made steady progress in connecting supplier solutions to
customer needs. Each business within DSM has to focus on
those specific elements and challenges that need to be
addressed in order to create sustainable business. DSM
Purchasing aligns as much as possible with the relevant topics
in the DSM materiality matrix: Sustainable value chains; Bio-
based and circular economy; Resource constraints; and Human
rights. In the supplier sustainability plan 2015, DSM Purchasing
will also address KPIs related to the relevant topics in the
materiality matrix.

Supplier sustainability program

2014

2013

2012

non-governmental organization specialized in sustainability
audits. In May 2014, phase I of the project closed successfully.
Each € 1,000 investment from DSM triggered initiatives that
brought in approximately € 8,000 in efficiency improvements at
the suppliers' side.

In July 2014, the roll-out of the Triple P project continued with
phase II. During the year, senior and experienced sustainability,
productivity and external human rights experts organized
workshops and offered rounds of in-house technical support to
factories interested in making genuine environmental, social and
economic improvements. On-site baseline assessments and
final evaluations were carried out to measure potential impact
and progress in performance. The project helped to identify and
create benefits related to DSM's ECO+ and People+ programs
at suppliers’ facilities. The project supported suppliers to benefit
from energy efficiency improvements and footprint reductions
(ECO+), Safety, Health and Environment (SHE) improvements,
and communication between employees and management
(People+).

Special trainings were offered to the staff of the six participating
Chinese suppliers to improve awareness on energy-efficiency
practices and in SHE management. In addition, DSM helped
suppliers include sustainability considerations and criteria in their
own supply chain management, providing them with the
knowledge and tools to set up their own supplier sustainability
programs.

ECO+ supplier solutions
DSM continued to engage in conversations with suppliers on
initiatives and solutions projects that have environmental
benefits. A significant number of initiatives are currently running
in, amongst others, packaging, logistics, recycling materials, and
carbon footprint reduction.

Spend coverage SCoC

Sustainability audits

Quality audits1

LCA/Supplier solution

projects

94%

294

95%

299

93%

In 2014, 27 Supplier Projects were carried out in the area of
ECO+. The Renewable Energy Movement (REMove) project
looked into DSM’s energy portfolio with the aim of increasing the
company’s use of renewable energy. Impact is expected to be
achieved via larger country projects and site-specific projects.

1 Reporting on a corporate level started in 2013

China Triple P project
In 2013, DSM initiated the ‘China Triple P Supplier Engagement
and Capability Building’ project. It aimed to use the People,
Planet and Profit (Triple P) approach to engage suppliers in a
more committed business collaboration and jointly create a more
sustainable supply chain in China. DSM Purchasing launched
this project through its partnership with Solidaridad, a global

The solar field at the Belvidere (New Jersey, USA) plant was one
such project that demonstrated significant ECO+ and economic
benefits. This project was in response to the Energy Master Plan
of the State of New Jersey, which has set itself the goal of having
20 percent of the energy used in the state coming from
renewable sources by the year 2025. The project entailed the
construction of a six Megawatt peak solar field on DSM property,
consisting of 19,954 solar panels, all coated with DSM’s anti-
reflective coating KhepriCoat®. This coating increases the
energy output of each panel by up to four percent. The field will

Bright Science. Brighter Living. 2014

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Report by the Managing Board

deliver approximately 30-40 percent of DSM Belvidere’s
electricity needs at peak sunshine, and provide over five percent
of the plant’s total power demand on an annual basis. The solar
field is built, owned and run by partners, from whom DSM
purchases the renewable energy generated. DSM anticipates
cost savings of more than € 250,000 annually in transmission
and distribution charges.

DSM is also actively looking into reducing its footprint in
scope 3 greenhouse-gas emissions (see page 51). The CO2
emission reduction initiative by the DSM Physical Distribution
(PD) team looks into supplier footprints in road and marine
transportation as well as packaging to explore opportunities for
improvement. The project is a continuation of the Green Tender
initiative that began in 2012, with the goal of steering supplier
selection to achieve a 20 percent reduction in emissions
associated with logistics and packaging. So far, over 23 percent
of global PD spend has been covered by Green Tender. The
cumulative CO2 emission reduction, compared to 2010, has
already reached ten percent.

People+ supplier solutions
DSM actively engages suppliers to improve their practices in the
People+ area by building supplier capabilities. The main focus of
People+ in the supply chain is on working conditions and safety
improvements. These elements are, for instance, an integral part
of the China Triple P project. In addition, the initiative ‘Picking up
the gauntlet’, which started in 2013, targets training in and the
enforcement of DSM's 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, so that only
people with the right safety knowledge and attitudes can enter
DSM sites. This 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 executing extensive know-how and best
practice sharing workshops.

In another case, the DSM Physical Distribution team looked for
alternative logistics solutions to ship ammonia sulfate for DSM
Fibre Intermediates in China. They decided to use bulk shipment
to replace old manual ways of shipping packaged material. The
use of machines instead of manual labor to deliver and unload
approximately 450,000 bags on an annual basis has led to a
reduced risk of SHE accidents. This resulted in better working
conditions, improved efficiency and reductions of up to 60
percent on packaging and logistics costs.

Collaboration with peers

Collaboration is an important characteristic of sustainable
development. Working together with NGOs, governments,
suppliers and customers to find solutions for societal needs and
environmental challenges is a well-established practice. In 2014,
DSM also collaborated with like-minded peers from other
sectors, not necessarily suppliers or customers, to create social
and environmental measuring and performance standards.
Together with cross-sector companies and business
organizations, DSM has been an advocate on urgent themes like
climate change, nutrition and the pricing of externalities.

World Economic Forum (WEF)
DSM expanded its collaboration with the World Economic Forum
to a strategic partnership. As a strategic partner, DSM is involved
in both the chemicals and the consumer industries as well as a
number of other initiatives, including the New Vision on
Agriculture platform. At the Annual Meeting of the World
Economic Forum in Davos in 2014, DSM sponsored the UN
World Food Programme tent, and organized events and
discussions on hunger, malnutrition and climate change. It was
also represented at various regional meetings, including the
Annual Meeting of the New Champions in Tianjin (China).

CE100
DSM supports and embraces the concept of the circular
economy, where products and systems are designed in such a
way that they can be returned and the materials recycled, re-
used or remanufactured. A circular economy is also about a shift
from fossil fuels to the use of cleaner energy, the eradication of
waste and the role of biodiversity as a characteristic of resilient
and productive systems. DSM is a member of the Ellen
MacArthur Foundation CE100, a group of companies working
together to create solutions for the circular economy. DSM’s

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Circular economyProduce & assemble productsRenewable energyCollect & disassemble productsBiosphere (decomposition & enrichment)Technosphere(recycle & re-use)
CEO/Chairman of the Managing Board Feike Sijbesma is a
member of the steering committee of Project Mainstream, an
initiative of the Ellen MacArthur Foundation and WEF aimed at
accelerating cross-sector engagement for a circular economy.

World Business Council for Sustainable Development (WBCSD)
DSM is a member of the WBCSD and is involved in the
Action2020 project, a platform for business to contribute
solutions to environmental and social challenges. DSM has a
leading role in Action2020 on the topics of sustainable lifestyle,
safe and sustainable materials and social impact.

Leaders for Nature
DSM supports the movement towards greater transparency
through valuing environmental and social impacts. In 2014, DSM
signed the Green Deal with the Dutch Government, which is a
collaboration on transparency of natural and social capital. An
initiative of the nature conservation organization IUCN
Netherlands, MVO Nederland and True Price, its purpose is to
share and develop knowledge on valuing natural and social
capital in 2014 and 2015. In line with this commitment, the DSM
Leaders for Nature team (a group of young professionals at DSM)
has been exploring the valuation of sustainability at a product
level over the past two years. In 2014, they extended their study
to valuing social impacts, with a product from the nutrition

sector. The benefits for the business and potential customer
engagement are also being explored by the team.

Dutch Sustainable Growth Coalition (DSGC)
The DSGC brings together a group of large Dutch multinational
enterprises: AkzoNobel, DSM, Friesland Campina, KLM, Philips,
Shell and Unilever. They are recognized for their leading role in
sustainable business development and seek to develop
innovative strategies, business models and products that
overcome societal challenges. In December, the DSGC
published its third report, which focused on innovations that
bring a sustainable economy closer. DSM contributed with its
anti-reflective coating KhepriCoat® and rice fortification. KLM
also showcased its lightweight air cargo nets made with DSM's
Dyneema® fiber.

Public-private partnerships

As a leading micronutrient provider, DSM develops innovative
solutions for improved nutrition. In order for these solutions to
have the broadest outreach, DSM works with partner
organizations that have a direct reach to beneficiaries. DSM’s
nutrition partnerships focus on the following objectives: wider
base of scientific evidence and endorsement; increased market
for nutrition products; and improved employee engagement.

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Report by the Managing Board

Organization
United Nations World Food Programme The DSM–United Nations World Food Programme (WFP) partnership ‘Improving

Partnership activities

UNICEF

GAIN (Global Alliance for Improved
Nutrition)

Partners in Food Solutions

Sight and Life

SUN (Scaling Up Nutrition) Business
Network

World Vision International

Vitamin Angels

Zero Hunger Challenge Initiative

Nutrition, Improving Lives’ aims to improve the nutritional value of the food that
the WFP distributes to its most vulnerable beneficiaries. The partnership reaches
over 20 million people and delivers improved nutrition. DSM and WFP jointly
advocate an increase in awareness and funding to help eradicate malnutrition.
DSM and UNICEF collaborated to support micronutrient programs in two sub-
Saharan African countries. The achievements during the first year of the
partnership included an evaluation of a market-based model for micronutrient
powders in Madagascar and support for the development of a public-sector
model for the same purpose in Nigeria.
GAIN supports public-private partnerships that help to increase access to missing
nutrients that are necessary for people, communities and economies to be
stronger and healthier. DSM collaborates with GAIN on several multi-stakeholder
projects in Kenya and Ethiopia under the Amsterdam Initiative against Malnutrition.
DSM Managing Board member Stephan Tanda is a member of GAIN's
Partnership Council.
Partners in Food Solutions is a non-profit organization that links the technical and
business expertise of volunteer employees from General Mills, Cargill, DSM and
Bühler to small food processors and millers in the developing world. DSM
contributes management time, technical assistance and volunteers to this multi-
stakeholder partnership.
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. A key focus of its work is in the field of
implementation science and leadership capacity development.
DSM’s CEO Feike Sijbesma co-chairs the Advisory Group of the SUN Business
Network. The 107 participating companies are asked to map their competences
and indicate where and how they can support global projects and actions to end
malnutrition and stop hidden hunger.
The DSM-World Vision International (WVI) partnership aims to contribute to the
reduction of the 165 million children under five across the globe who are stunted.
The partners launched a flagship project ‘Millers’ Pride’ that assists millers in Dar
es Salaam (Tanzania).
Vitamin Angels helps at-risk populations in need: mainly pregnant women, new
mothers, and children under five. Together with DSM, it helps them to gain access
to vitamins and minerals by providing contributions of vitamin A capsules and
multi-vitamin premix for chewable tablets.
At the United Nations Zero Hunger event in September, DSM reconfirmed its
commitment to help in the global fight against malnutrition and hunger. The UN
Secretary-General encouraged all partners of the initiative to turn the vision of an
end to hunger into reality.

Every Woman, Every Child commitment Multiple micronutrient supplements (MMS) have a major impact on maternal and
child health and are critical to breaking the cycle of malnutrition and poverty. DSM
piloted MMS distribution during the annual Maternal Newborn and Child Health
Week in Nigeria.

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Philanthropy and sponsorships

DSM supports causes and initiatives that relate to its mission of
using bright science to create brighter living. It does so by
providing products, expertise and funding. In 2014, DSM
donated more than € 3 million to a range of initiatives. DSM
makes no political donations, as outlined in its Code of Business
Conduct. See www.dsm.com.

DSM China
As a global partner of the WFP, DSM China has been taking part
in the Walk the World fundraising event since 2007. With a theme
of ‘Hunger is Solvable: Bright Experience’, the event in
September attracted more than 2,000 DSM employees and their
families, as well as partners from 14 sites in 10 Chinese cities.
The money collected at the event was donated to the WFP’s
School Feeding Programmes worldwide and the China
Foundation for Poverty Alleviation. The latter will use the money
for the school meal program it conducts in poor areas of China.
The approximately € 11,000 collected will provide 45,000 school
meals.

DSM North America
DSM’s North American organization partnered with Global
Health Corps (GHC), an organization co-founded by Barbara

Principles of the UN Global Compact1

Bush, the daughter of former US President George W. Bush, to
address nutritional challenges facing the population of the US.
The partnership specifically focuses on Newark (New Jersey,
USA). The issue of malnutrition, a recognized challenge in the
developing world, also exists in the US where a majority of the
population is vitamin and mineral deficient. These deficiencies
have long-term consequences with physical and cognitive
under-development, and lifestyle diseases, which increase
healthcare costs, lower productivity and create issues of health
and economic equity.

Global Compact
In 2007, DSM signed up to the United Nations Global Compact,
joining thousands of companies from all regions of the world as
well as international labor and civil society organizations to
advance ten universal principles in the areas of human rights,
labor, the environment and anti-corruption. DSM’s Code of
Business Conduct, its sustainability and SHE policies, and its
Supplier Sustainability Program are the foundations on which
DSM applies the standards of the Global Compact. These
activities are monitored and reported (see table below). This
Integrated Annual Report 2014 is also DSM’s annual
Communication on Progress (COP) submitted to the UN Global
Compact Office.

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

Integrated Annual Report 2014

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

Precautionary environmental protection

Specific commitment to environmental protection

page 34, 40, 49

page 40, 49

page 40, 42, 46, 48

page 50 to 56

Diffusion of environmentally friendly technologies

page 23 to 26, 50 to 56, 62 to 84

Principle 10

Measures to fight corruption

page 41, 42, 49, 95, 99

In 2014 DSM once again renewed its commitment to the UN Global Compact's CEO Water Mandate; see Planet in 2014 on page 54

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DSM was recognized in October with a Singapore Sustainability
Award in the prestigious Sustainable Business category. The
award showcases the most innovative and impactful sustainable
practices and green solutions among organizations in the
country. DSM Singapore has been recognized for efforts in
creating shared value for customers, employees, society and
shareholders.

In December, DSM Engineering Plastics India won the CII-ITC
Sustainability Award 2014 by the CII-ITC Centre for Excellence
for Sustainable Development in India, recognizing and honoring
innovative initiatives in the field of sustainability.

Marketing and sales
In early 2014, DSM was presented with the Netherlands Institute
of Marketing’s (NIMA) Marketing Award 2013 for best Marketing
Company in the Netherlands. This is the first time a B2B
company has received this recognition. According to the jury
“DSM has successfully transformed itself from a chemical giant
to a specialized multinational that translates technology into
value propositions in the areas of health, nutrition and materials”.

In June, DSM received the 2014 Europe Frost & Sullivan Award
for Customer Value Leadership for its work in enhancing value
for Tier 1 suppliers of passenger car steering systems, by
establishing a new benchmark in weight reduction.

Social media
DSM was presented with the EVMI Dutch Food Top 100’s Social
Media Award in May. DSM was praised for its consistency
across all channels, the integration with its websites, the use of
local channels and responsiveness.

Report by the Managing Board

External recognition

People at DSM are proud when DSM's sustainability and
innovation efforts, either as a company or individual products
and solutions, are recognized by the outside world. Here follow
some of the awards and other forms of recognition that DSM
received from non-governmental and trade organizations,
customers, suppliers and the academic world in 2014.

Innovation
DSM’s advanced cellulosic yeast product was named the
‘Breakthrough Technology of the Year’ at Green Power’s
Sustainable Bio Awards, presented during the World Bio
Markets 2014 Conference in March. The award recognizes a
“technology that resets the goal for bio-based production”.
DSM’s advanced cellulosic yeast product recently achieved
successful scale-up in an industrial production-sized trial at
DONG Energy’s Inbicon demonstration plant in Kalundborg
(Denmark).

At Frost & Sullivan's Best Practices Awards Banquet in May,
DSM's Maxipro HSP, a unique protease able to extract valuable
protein from existing animal by-products, was recognized with
an Innovation of the Year award by the organizers. This is the
second such award given recently to Maxipro HSP.

In November, DSM received the Society of Plastics Engineers
Automotive Division Innovation Award in recognition of the
numerous environmental and economic advantages of the new
crankshaft cover in Volkswagen Group diesel engines
manufactured with DSM’s bio-based polymer, EcoPaXX®.

In late November, at the ITMA Future Materials Awards, DSM's
Dyneema® was recognized with three awards based on its
Dyneema® Force Multiplier Technology platform; Best
Innovation – Industrial Textiles, Most Innovative Large Company
and Launch of the Year.

Sustainability
In February, DSM’s novel composite system for making wind
turbine blades based on the company's Beyone™ styrene-free,
cobalt-free and 40 percent bio-based resin, was announced as
the winner of the Sustainability category of the JEC Europe 2014
Innovation Awards. As well as being more environmentally
friendly, the new composite system offers simple processing,
superior strength and improved fatigue resistance. It is currently
being evaluated by Siemens Wind Power for its next generation
wind turbine blades.

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DSM Code of Business Conduct

Business principles

The DSM Code of Business Conduct ('the Code'), as introduced and rolled out from 2010, 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 across its 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. The Code is available to employees in 17 languages and the full text of the Code can be found on the
company's website www.dsm.com.

Umbrella function

The Code serves as an umbrella for several other DSM
regulations, 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: 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.

In 2014 the Human Rights project was initiated to further
elaborate the business principles on diversity and non-
discrimination, forced labor and child labor, fair remuneration
and standards of business partners. Its first aim is to develop an
overarching Human Rights Policy for DSM, in which existing

human rights-related policies and procedures are brought
together. See also Human Rights on page 49.

Planet: The basic course on Responsible Care addresses the
elements of the Responsible Care Program: Safety, Health,
Environment, Product Stewardship, Security and Sustainability.
Because of the importance of the Responsible Care principles
for all functions and roles within the company, this course is
mandatory for all DSM employees, as well as for selected
contractor employees.

Profit: DSM uses the e-learning trainings Global Trade Controls
and Global Competition Law Principles and Practices.
Compliance with these subjects is structurally embedded in
DSM’s systems and processes.

As part of the global trade controls compliance process, DSM
master data is screened to check customers and suppliers
against embargoes and lists of sanctioned parties.

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DSM Code of Business ConductCertiﬁcation viae-learning for:All employeesCode of BusinessConductBasic CourseResponsible CareSpeciﬁc targetaudiencesTo come ‘alive’ viadilemma discussionsCompetition Law2014: Anti-Bribery & CorruptionGlobal Trade Controls2015 (in progress):Human rightsDilemma Workshops(e.g. using UN Global Compact Dilemma Game)MissionCore Value:Sustainability (Triple P)Code of Business Conduct:31 principles along Triple P-dimensionsKey SecurityBehaviorsLife SavingRules
Report by the Managing Board

The DSM Anti-Bribery and Corruption (ABC) Policy and
Compliance Manual, which was developed in 2013, has been
communicated to targeted employees in commercial and
business roles in 2014. It is supported by a classroom training
and an ABC e-learning, which was launched in 2014.

In 2014, DSM rolled-out a new comprehensive Security
e-learning, covering all key security topics relevant to DSM’s
business, including DSM’s seven Key Security Behaviors. This
training replaces the previously used 'For Your Eyes Only'
training. To complete the e-learning, participants are required to
read and sign-off on the DSM Code of Conduct for Information
Security. For locations that do not have access to e-learning
facilities, a classroom version of the training is available.

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 relevant DSM employees,
including the members of the Managing Board and the
Supervisory Board.

Training and awareness

DSM employees must refresh their training on the Code every
two years. The implementation of this training program
proceeded well in 2014: at year-end more than 90 percent of all
DSM employees had completed (or refreshed) their training,
excluding employees of some of the newly acquired businesses.
The training program is also offered by the business units to
selected contractor employees as well as to employees in DSM's
joint ventures.

The implementation of the ABC program also proceeded well.
Employees belonging to the ABC target group have been
identified and invited to complete the ABC e-learning. Of this
target group, 71 percent completed the training within the first
half year after the roll-out.

Those employees who are most exposed to competition laws
must 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. In 2014,
no breaches were reported and DSM was not subject to any
investigation by competition authorities related to potential anti-
competitive behavior.

Dilemmas

Living the Code can sometimes result in dilemmas that do not
have a quick or clear answer. To prepare for these cases
Dilemma Workshops are held, 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. These discussions are used to calibrate 'what is
right' and 'what is wrong' in order to continuously improve
business integrity in daily operations. In 2014, a Dilemma App
was developed, which is currently being piloted.

Consequence management

DSM applies zero-tolerance consequence management to
violations of the Code. Most Code incidents are reported to, and
dealt with by, local line management. If reporting to line
management is not considered possible, the whistleblower
procedure (DSM Alert) is used. Complaints received by DSM
Alert are dealt with via the DSM Alert Officer. In all cases,
consequence management practices are in place (e.g. official
warning, temporary suspension, dismissal) to support
compliance with the Code.

The DSM Alert Officer 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 Code can also contact the DSM Alert
Officer via www.dsm.com. In 2014, two external reports of
potential violations were received.

The table on the next page gives an overview of all reported Code
of Business Conduct violations, with a breakdown per Triple P
dimension and per region. Proven serious violations of the Code
can result in dismissal. In line with this policy, 62 employees were
dismissed in 2014, as a result of breaches of the Code or other
legal or local company regulations. In addition, 76 cases were
reported that have led to other kinds of consequence
management (official warning or suspension). Overall, this is a
significant increase compared to 2013, which can be explained
by increased awareness of the Code, particularly in the Americas
and the Asia-Pacific region. As a result, the reporting of violations
has also improved. The decrease in the number of employees in
Europe in 2014 explains the decrease of cases in Europe &
Africa.

People: Most of the cases in the People dimension are related
to violations of the Life Saving Rules or inappropriate behavior.
The first category is most often directly reported to and resolved
by operational line management. The second category is more

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often dealt with by the DSM Alert Officer. One of the lessons
learned is that the growing globalization of DSM's workforce
demands more attention be given to cultural differences. This
subject has been discussed in the Code Review Team, and the
corporate ownership of this subject has been assigned to the
DSM North America regional president.

Planet: There were only a few violations of the Code in the Planet
dimension. Investigations of serious environmental incidents
have shown that hardly any of these occurred due to seriously
negligent or irresponsible behavior by employees. More details
on serious environmental incidents are provided in the chapter
What still went wrong in 2014 on page 116.

Therefore, in 2014, DSM introduced an additional online training
module to further emphasize the importance of the cultural,
diversity and non-discrimination aspects of the Code. This
module focused on effective employee relations,
communications, and non-discriminatory practices in the
workplace.

Profit: In the Profit dimension most cases are related to
unauthorized absence from work, inappropriate behavior in
relation to commission payments, and fraud or theft.

Code of Business Conduct

Training and awareness e-learning:

% of targeted employees trained

General

- Code of Business Conduct

Profit

- Anti-Bribery and Corruption (introduced 2014)

DSM Competition Law:

% of targeted employees signed-off

2014

2013

91%

71%

93%

- DSM Competition Law Compliance annual statement

100%

Violations of the Code:

Number of dismissals/other consequence management

Triple P breakdown

- People

- Planet

- Profit

Regional breakdown

- Europe & Africa

- Americas

- Asia-Pacific

Total

Alert cases (whistleblower procedure):

Number substantiated/not substantiated/under investigation

Triple P breakdown

- People

- Planet

- Profit

Regional breakdown

- Europe & Africa

- Americas

- Asia-Pacific

Total

32/64

3/2

27/10

10/38

30/26

22/12

62/76

6/11/1

0/1/4

2/5/1

2/5/2

2/2/2

6/12/5

26/66

0/1

7/9

14/49

15/24

4/3

33/76

4/15/0

2/4/0

2/7/0

2/8/0

6/19/0

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Report by the Managing Board

People in 2014

DSM encourages its people to develop and build their careers
by broadening their skills and knowledge. It seeks to attract
people who can add value and contribute in different ways. Most
importantly, DSM wants original thinkers and doers who can
stretch and move the company forward, in line with the
organizational needs. This means employees are encouraged to
do everything they can to nurture and realize their bright ideas,
in a working environment that promotes health, personal
initiative, an entrepreneurial mindset and inspirational leadership.

With 89 nationalities, more than 200 sites and offices in over 50
countries, it is important to create a shared culture that
embraces differences. DSM aims to grow collaboration to
harness the power of its global workforce.

DSM's human resources strategy contributes to the
development of inspiring and collaborative leaders. It 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 and
focused business growth. The approach is supported by the
ONE DSM Culture Agenda, which is explained further below in
this chapter.

DSM aims to become more international, in order to bring its
business closer to its key markets and customers and make it
stronger. To this end, it seeks to stimulate inclusion, diversity and
innovation. It also combines a strong regional infrastructure with
clear Managing Board-level accountability for regional
performance. The company’s human resources strategy
supports DSM's internationalization goals.

This chapter outlines the general internal elements of DSM's
people approach, which is embodied in the company's safety
and health and human resources policies, as well as the external
components contained in its People+ strategy and policies on
human rights. The performance elements of this strategy are
included in the Sustainability statements section of this report.
See also Growth Driver: Sustainability on page 25 and
Stakeholder engagement on page 28.

Safety and health
Occupational safety
DSM has been free of fatal accidents for several years, and has
made steady progress in this area. However, improvements in
safety performance did not continue in 2014. The Frequency
Index of Recordable Injuries for 2013 was 0.38 and in 2014 it
was 0.47.

The Frequency Index measures Lost Workday Cases, Restricted
Workday Cases, Medical Treatment Cases and/or fatalities. For
a full description of the Index see the Explanation of some
concepts and ratios on page 212. The Frequency Index of Lost
Workday Cases for DSM employees was 0.15 (2013: 0.14).

To a large extent, the result in 2014 can be explained by the shift
in DSM's portfolio of reporting units in 2014. Units from DSM
Sinochem Pharmaceuticals and DSM Pharmaceutical Products
were phased out and newly acquired units were phased into the
statistics. Although the newly acquired units have improved their
safety records, they are not yet at the level of those sites that
have belonged to DSM for a longer time; it takes longer than just
a few months for DSM's rigorous worldwide approach to Safety,
Health and Environment (SHE) to be completely assimilated and
for the full effect to be seen. This shift has therefore had a
significant impact. Of the total of 138 recordables, 56 (40
percent) are in units that have been with DSM for less than four
years. These units account for 17 percent of all working hours.

No fatalities occurred in the year, which means that DSM has
been fatality-free for three years in a row. Nevertheless, the
incidents that did occur and the severity of their consequences
remain a cause for concern for the company. It is DSM's goal to
have an injury and incident-free working environment. The
company 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. DSM aims for an index score that is
less than or equal to 0.25 by 2020, compared to the 0.57
achieved in 2010. A further goal is that by 2020 the number of
serious safety incidents will be at least 65 percent lower than in
2010, when there were 15 such incidents. In 2014 there were

Bright Science. Brighter Living. 2014

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REC-rate DSM allRate for Lost Workday Cases (LWC), DSM-own Frequency Index of Recordable Injuries 12-month moving average20052008201120122014201320102009200720061.000.750.500.251.250.000.15DSM Target FI REC All 2020: 0.250.47
seven such incidents reported. The weaker SHE performance in
2014 increases DSM's focus on achieving this target.

The focus on preventing serious accidents and any potential
fatalities that was renewed with the introduction of DSM's Life
Saving Rules, has resulted in a significant improvement in safety
performance in recent years. To create an even stronger focus
on preventing incidents that can result in severe injury, the
Serious Injury and Fatalities (SIF) concept was introduced in
2014. This concept utilizes a decision tree approach to identify
all incidents and near misses with the potential for severe injury,
so that improvement efforts can be concentrated on the
prevention of such incidents. After the pilot phase in 2014, the
concept is expected to be fully rolled out in 2015.

The incidents that still occurred and the results of the audits done
by the Corporate Operational Audit (COA) department
demonstrated that the introduction of the mandatory 'lockout-
tagout' and 'confined space entry' procedures were successful.
These practices improved the already existing requirements and
led to a renewed focus on the flawless execution of these
‘higher-hazard’ activities.

A third mandatory practice on ‘permit-to-work systems’ detailing
was developed in 2014 and will be implemented in 2015. This
new practice focuses on improving the existing work permit
requirements within DSM by fostering better cooperation
between DSM and contractors in the execution of work. This is
in line with the initiative to improve contractor safety that was
reported last year. Furthermore, the initiative to introduce an
improved Last Minute Risk Assessment (LMRA) methodology at
the Sittard-Geleen (Netherlands) site will be introduced at all
DSM sites in 2015. The LMRA is the final check to see whether
a job is safe to start and everybody knows what to do.

Also in 2014, traces of asbestos were found at the DSM site in
Delft (Netherlands). DSM has asbestos control protocols in place
for each of the buildings concerned and conducts regular
asbestos measurements. The asbestos traces were discovered
in a number of rooms, which were immediately vacated and
subject to air sampling. No asbestos was detected in the air
samples taken and a multidisciplinary task force was set up to
relocate the employees involved.

Contractors
The number of contractor incidents showed the same trend as
the incidents involving DSM employees. 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 partly be explained by the fact that
contractors sometimes carry out more hazardous activities.

For this reason, DSM pays 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. See also What still went
wrong in 2014 on page 116.

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
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 DSM SHE requirements. In
2014, the sites that were acquired in 2012 finalized the
integration program and were audited by COA, as the final step
in the integration process.

Process safety
DSM follows the European Chemical Industry Council (CEFIC)
guidance in defining which incidents qualify as Process Safety
Incidents (PSI). The total number of Process Safety Incidents
reported in 2014 was 118 (2013: 144).

Translated into a Frequency Index, PSIs totaled 0.40 in the year
(2013: 0.46), compared to a targeted reduction to 0.34 in 2015
and 0.17 in 2020. These represent improvements of 50 and 75
percent respectively, compared to a PSI Frequency Index of 0.68
in 2010.

As a result of improvement actions in operations, design and
maintenance, the number of Process Safety Incidents has

Bright Science. Brighter Living. 2014

www.dsm.com

PSI rateFrequency Index of Process Safety Incidents00.10.20.30.40.50.60.70.8201020112012201320142015PSI Target 2015: 0.34
Report by the Managing Board

started to come down consistently. Several business groups are
already performing ahead of the 2015 target. The focus for 2015
will be to ensure the continuous improvement of the units that
are already performing well and to further leverage actions in
businesses where improved performance cannot be
demonstrated yet.

A strategic review of process safety was conducted in 2014 to
support DSM's ambitions in this area. The result will be a broad
and renewed program of activities for the years to come
regarding the key elements of process safety management:
competence management, requirements and standards, and
performance monitoring.

SHE leadership development
DSM continuously focuses on the development of leadership
skills in SHE. In 2014, in addition to the dedicated SHE
leadership training programs, a global SHE Conference 'Living
our legacy, the journey continues' was organized for DSM's
leadership development. The conference drew attendance from
a very diverse group of more than 140 DSM colleagues from all
over the world. Speakers included peers, customers and leading
speakers in the areas of leadership, collaboration and health, as
well as a member of the DSM Managing Board. The main themes
on the agenda were: Incident and Injury-free DSM; health and
human performance solutions; and planet ambitions and
initiatives.

Employee health management
DSM provides healthy working conditions for its employees. This
ranges from controlling workplace risks (prevention) to health
promotion activities. For example, dedicated training programs
were organized in China to ensure sufficient competence in
industrial hygiene and ergonomics. Furthermore, health-related
impacts due to social and demographic trends (e.g. aging
workforce) are specifically addressed in the Health module of
DSM's SHE Leadership programs.

DSM aims to foster a sustainable culture of health among its
employees. Vitality@DSM is a global health management
program that provides employees with insights into their own
lifestyle profile and explains the consequences of unhealthy
lifestyle habits. It also stimulates them to take responsibility for
changing their habits.

Over the years, some 10,700 employees have participated in the
Vitality@DSM program. Last year, DSM boosted the program
through its DSM Health network initiative. In 2014 alone, more
than 1,000 employees participated in Asia and Europe.

Comparing the results in three DSM regions shows that the
stress risk in Asia is significantly higher (73 percent) than in
Europe (43 percent) and in the US (58 percent). Another high risk
in Asia is lack of exercise (67 percent). In North America, results
reflect concerns about weight and obesity (46 percent). On the
positive side, employees are willing to take action to improve
their health. It is therefore important to continue generating such
results so that management can work on action plans to create
a healthier work environment and help employees make
improvements. In 2015, some groups will be participating for the
second time, which will give insights into progress.

Results of Vitality@DSM up to 2014 have continued to
demonstrate a positive trend. The total rise in productivity that
resulted, based on self-reported changes in lifestyle health risk
factors (alcohol consumption, eating habits, lack of exercise,
smoking, stress and obesity) reached more than USD 1 million
for around 600 employees in Europe, North America and Asia.

Occupational health cases
In 2014, a total of 11 (2013: 6) occupational health cases were
reported.

ONE DSM Culture Agenda

The ONE DSM Culture Agenda was designed in conjunction with
DSM’s Leadership Model, and aims to support the company’s
strategic alignment with the needs of an ever-changing world. It
seeks to create a common language across the organization,
building greater cohesion and enhancing DSM’s culture.
Through its implementation, DSM aims to become a high
performance organization and achieve its business objectives.

Introduced to executives in late 2012 and to the larger employee
base in 2013, the focus in 2014 was on fostering different ways
of working by applying its four themes across the company’s
daily operations. Influenced by the results of the Employee
Engagement Survey in 2013, the 2014 approach sought to
address three main audience segments:

- Line managers and their ability to role model and champion

newly expected behaviors around External Orientation,
Accountability for Performance, Collaboration with Speed,
and Inclusion & Diversity;

- Employees and their ability to embed the four themes into daily
operations, thereby making the new behaviors their own; and

- Growing the Circles of Thoughts through highly active and
enthusiastic communities to create a bottom-up drive and
energy around the four themes.

Employee self-reported figures show that stress is still the largest
lifestyle risk factor (49 percent) among DSM employees.

Among the highlights in 2014 was the growth of the Circles of
Thoughts, which went from 50 to nearly 900 members. These

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regionally organized groups initiated a number of thought-
provoking and creative activities that led to a further embracing
of the themes, as well as quarterly conversations with managers.
This resulted in more visible role modeling, coaching and
guidance for their teams in the adoption of the four themes. It
also enabled employees to see the benefits of working
differently, and celebrating the champions among them.

Inclusion & Diversity

Fostering an inclusive culture that embraces
differences is consistent with DSM’s corporate
values and helps it create the high-performance
organization it requires as a truly global company.
A more balanced DSM leadership group in terms of gender and
nationality is part of these efforts and will improve decision-
making processes and the implementation of its strategy.

Frequent references to the four themes in daily communications
across all regions, and in the initiatives owned and led by the
regions and business groups, encouraged their adoption, even
while more remains to be done. This was particularly true for
DSM’s Inclusion & Diversity efforts. In 2015, DSM will continue
to emphasize the segmented approach to the three audiences,
transferring further ownership to regions and business groups,
and focusing also on an increased empowerment of the Circles
of Thoughts.

ONE DSM Culture Agenda themes
External Orientation

DSM recognizes 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.

Collaboration with Speed

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

DSM Employee Engagement Survey

An engaged workforce is critical for DSM to realize its ambitions.
The DSM Employee Engagement Survey is an effective tool for
understanding the requirements of employees. Its goal is to
create a company in which employees feel proud to work, and
where they feel they can excel.

In 2014, DSM held its seventh worldwide Employee Engagement
Survey. A total of 17,684 employees, including 408 contractor
employees, completed the questionnaire, which was distributed
online and on paper in 18 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, which is the percentage of
employees scoring favorably on a combination of the four
attributes: commitment, pride, advocacy and satisfaction.

The Employee Engagement Index measured in 2014 was 70
percent (2013: 71 percent). This is in line with the overall global
norm of 70 percent. For the highest performing companies
around the globe, the benchmark number is 81 percent. This is
the league DSM aspires to be part of. The neutral responses
came to 21 percent.

DSM has conducted its Employee Engagement Survey each
year since 2007 and will continue to use it to guide its ONE DSM
Culture Agenda to become a high performing company. DSM
will move this survey into a two-year cycle with a full survey in
one year and a pulse survey the next so that it has more time to
follow up on results and actions, with the next full survey in 2016.
The shortened survey to be held in 2015 requires less time from
respondents and is easier to manage and follow up on. The pulse
survey will be set up as a short questionnaire for all employees
to have the opportunity to express their opinions. At the same
time, all business groups will have insights into the engagement
progress.

Bright Science. Brighter Living. 2014

www.dsm.com

Report by the Managing Board

Talent management
DSM Leadership Model
The DSM Leadership Model specifies the characteristics
expected from leaders now and in the future in a simple,
understandable and compelling way. It provides a common
vision and language regarding the leadership that DSM requires
to succeed. The model sets out the expectation for leaders to
be role models and developers of a sustainable and successful
organization for the future. It is the basis for high quality
processes to hire people, grow and develop talent and build
high-performing teams.

In 2014, DSM made significant progress on the implementation
of the model. By the end of 2014 almost 90 percent of the
executive population had participated in DSM Leadership Model
awareness workshops around the globe, which resulted in very
positive evaluations. The Leadership Model is now embedded in
executive recruitment, appointments and promotions, and the
Executive Leadership Programs. In addition, in 2014, all
executives were assessed in their annual Performance and
Development Review on the five Leadership elements, with a
clear focus on strengths and development areas. The executive
leadership assessments and 360° feedback tool have also been
developed and are being implemented.

Evaluations performed in 2014 show that the model supports a
common vision regarding the type of leadership that DSM
requires. It was embraced by DSM executives as a common
language and a lens for talent discussions and decisions.

DSM decided to roll out the Leadership Model further across the
organization in 2014 to all managers and employees in senior
management roles. For this enlarged target group, DSM will use
the Leadership Model as a development framework. A group of
over 100 internal facilitators were trained across the globe to
support the workshops for this roll-out.

The DSM Leadership Model plays an important part in the
recruitment process. It gives the organization a guideline for the
profile it strives to hire and retain, through competency-based
interviewing techniques that increase objectivity and
effectiveness. To this end, a practical guide for interviewing and
selection has been introduced that is based on this model.

Mentoring

Regional mentoring programs have been rolled out in the US,
Asia and the Netherlands. The programs include a matching
process, and provide training for both mentors and mentees.
A regional intranet environment was created for each program,
providing practical support and guidance.

Programs included events and were followed up with evaluations
for both parties. The US has implemented the longest running
program. The Asia Connect program started in 2012 and the
overall satisfaction rate in 2014 was 88 percent. In the
Netherlands, 2014 was a pilot year. Based on its success,
follow-up programs will take place in 2015 for all three regions.

Participants Regional Mentoring Programs

Mentees

Mentors

139

140

113

Asia

Netherlands1

1 Pilot started in 2014

Organizational learning

To fulfill its mission of creating brighter lives for people today and
generations to come, DSM nurtures a culture of continuous
learning, discovery and improvement. It also strongly believes in
the need to invest in the knowledge, skills and experience of its
people to ensure their long-term employability.

Learning and development is key for the high-performance
culture that DSM requires in order to achieve its strategic
objectives, and gives people the chance to build their
capabilities, develop their careers and reach their full
professional potential. It is also vital for strengthening the talent
pipeline and for developing inspiring and collaborative leaders of
the future.

At DSM, learning goes beyond the classroom. The most valuable
lessons are often learned by employees on the job, from other
colleagues or from mentors and coaches. Learning together

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allows DSM to create communities across the breadth of the
organization, bringing people together, fostering collaboration
and promoting an inclusive working environment in which
everyone’s contribution is recognized, valued and rewarded.

The current composition of the Supervisory Board of Koninklijke
DSM N.V. is in line with Dutch legislation. Of the seven members,
three are female and four are male. Moreover, in the Supervisory
Board of DSM Nederland B.V., a subsidiary of Koninklijke DSM
N.V., one third of the members is female.

The DSM Learning Architecture consists of four program
clusters: executive programs, management programs,
functional programs and e-learning programs. These are
designed and delivered in close collaboration with leading
international business schools and global training providers
(IMD, Wharton School of the University of Pennsylvania, Babson
College, Erasmus University Rotterdam) and are supported by a
diverse internal faculty, primarily consisting of DSM’s top
management.

In 2014, DSM saw a further roll-out across the globe of its Bright
Talent Program, specifically designed for DSM’s high and top
potentials, as well as a number of key workshops geared
towards the implementation of the DSM Leadership Model and
ONE DSM Culture Agenda.

In addition, in order to better serve regional learning and
development needs, and in line with DSM's geographical
footprint, four new distinctive regional Centers of Excellent
Learning and Development were established: Europe, Asia,
North America and Latin America.

Program portfolio

Executive programs

Management programs

Functional programs

e-Learning programs

Total

Inclusion & Diversity

Available

programs

2014

151

Available

programs

2013

146

In order to better reflect the company's footprint, DSM continues
to engage in a targeted Inclusion & Diversity strategy.

Gender balance will continue to require attention going forward.
In addition to recruiting female executives from external talent
pools, DSM also focuses on developing female executives from
its internal pool of candidates, and engages in various activities
that foster new ways of working and changes in mindsets.

The expansion of the executive population from DSM's high
growth regions equally demands continued attention. The
number of BRIC+ nationals in executive positions as a
percentage of the total number of executive positions increased
from 10 to 12 percent in 2014. This is consistent with DSM's aim
to reflect the world in which it operates.

The number of North American executives decreased by 1
percent to 13 percent. The number of 'other nationals' in the
executive population amounted to 26 percent, and the number
of Dutch executives decreased from 50 percent to 49 percent
of the executive population in 2014. See also Sustainability
statements on page 114.

DSM's Inclusion efforts are reflected in an improving Inclusion
Index, which has continued to increase year on year, reaching
70 percent in 2014 (2013: 69 percent). The consistent
development of this index suggests that sustained progress is
being made in creating and maintaining inclusive environments
across the company.

Going forward, DSM continues to address the geographical
distribution of executives and other key functions, with a keen
eye on gender and nationality balance, as these remain, at this
stage, the key diversity aspects to foster.

To accelerate progress, new targets have been set for 2015 and
2016. In these two years, DSM aspires to an incremental growth
of between two and four percent for both gender and under-
represented nationalities. The introduction of an Inclusion &
Diversity program will provide the necessary support for the
business and service groups to accomplish this. See also
Sustainability statements on page 114.

As for Diversity, the immediate focus is to increase the number
of women and under-represented nationalities in DSM's
executive positions. The number of female executives increased
from 11 percent in 2013 to 12 percent in 2014. In 2014, four
women were appointed to the DSM Leadership Team.

The role of the DSM Inclusion & Diversity Council, chaired by
DSM’s CEO Feike Sijbesma, is to facilitate Inclusion & Diversity
at DSM and to support all DSM businesses in creating a
sustainable inclusive environment, in which diversity is fully
embraced.

Bright Science. Brighter Living. 2014

www.dsm.com

developing a comprehensive human rights policy with the
support of an external human rights expert. The policy will form
the basis for embedding the responsibility to respect human
rights in all business functions. Furthermore, it underlines DSM’s
commitment to being a responsible corporate citizen and
provides stakeholders with more transparency to assess DSM’s
human rights performance. Together with 20 other
multinationals, DSM also contributed to a WBCSD issue brief on
a series of barriers and solutions to operationalizing the UN
Guiding Principles for Business and Human Rights. These
principles aim at authoritative global standards on the respective
roles of businesses and governments in helping to ensure that
companies respect human rights in their own operations and
through their business relationships.

Report by the Managing Board

People outside DSM

DSM is committed to improving people’s lives through its
products and its partnerships. It is important, for instance, that
the private sector plays a crucial role in addressing the problem
of malnutrition and hidden hunger in both the developed and the
developing world through new business models and nutritious
food and food supplements, tailored to the specific needs of
particular population groups.

DSM’s People+ program is an example of how DSM strives to
have a positive social impact. The four dimensions of People+
focus on people outside DSM:

- Health Condition assesses how a particular product

contributes to maintaining, improving and regenerating
people’s health. For example, vitamin D is vital to bone health
and muscle strength, and can reduce the risk of fractures
linked to osteoporosis.

- An example of Comfort & Well-being could be a product that

smoothens the skin or reduces perspiration.

- Working Conditions are applicable to DSM's own employees,
and also to the employees of the companies in its supply
chain.

- Community Development determines whether a product

contributes to local prosperity, within the boundaries of the
Anti-Bribery and Corruption Policy and Compliance Manual.
Helping to improve education, creating jobs and purchasing
locally are examples of community benefits that are measured
as part of a People+ product assessment. See also People+
on page 26.

Human rights
Respecting human rights is fundamental to all of DSM’s
activities, and the company has a longstanding commitment to
the United Nations Universal Declaration of Human Rights. DSM
is a signatory to the United Nations Global Compact and
recognizes the OECD (Organization for Economic
Co-operation and Development) Guidelines for Multinational
Enterprises. Furthermore, DSM supports the United Nations
Framework and Guiding Principles on Business and Human
Rights (the Ruggie Framework), as well as 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 respectful
manner.

In support of DSM’s codes of conduct and its commitment to
the international treaties and guidelines related to business
behavior and human rights, DSM has found it necessary to begin

Bright Science. Brighter Living. 2014

www.dsm.com

Planet in 2014

DSM recognizes the environmental impact of its business
operations and is committed to taking comprehensive measures
to protect the planet for future generations. Within the Planet
dimension of its Triple P (People, Planet and Profit) approach,
DSM delivers activities, solutions and innovations that improve
the environmental footprint of its business and that of its external
stakeholders in the value chains. This chapter describes the
material environmental issues and themes that have been
identified through DSM's stakeholder consultation, as well as
other topics DSM considers to be relevant and important in this
area.

This chapter addresses the following topics: Climate Change;
Bio-based and Circular Economy, and Sustainable Value
Chains. These headings are consistent with the top three
environmental materialities identified by the stakeholder
engagement process. The DSM materiality matrix on page 28
shows the ranking of all 20 material issues.

Targets

In the framework of its corporate strategy, DSM has defined
long-term sustainability aspirations, which include targets to
improve the eco-efficiency of its operations. These targets are
translated into plans and activities within a corporate multi-year
plan. The plan provides the necessary guidance to each of the
business groups.

The eco-efficiency targets for the period 2010-2015 are based
on the ambition that by the end of 2015, all DSM sites in the
world must meet minimum standards applied within the
European Union or the US, via the use of Best Available
Techniques. All new plants and major plant modifications must
meet these requirements from the start, while existing plants
have until the end of 2015 to comply.

Key environmental indicators, total DSM

Energy use in petajoules (PJ)

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

All of DSM's environmental targets, except for greenhouse-gas
(GHG) emissions, are efficiency targets in which performance is
related to production volumes. The target for GHG 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 for the overall energy target, is 2008. The
divested units DSM Agro, DSM Melamine, DSM Elastomers,
Citrique Belge and DSM Special Products were excluded from
this 2008 base year, but the impact of all other acquisitions and
divestments is reflected in the total GHG emissions (scopes 1
and 2) reported by DSM.

In 2014, DSM adapted its methodology for consolidating
performance data to include the performance of newly acquired
units. The new methodology also includes the performance of
units divested during the target period. All improvements and
deteriorations of deconsolidated units, such as DSM
Pharmaceutical Products (DPP) and DSM Sinochem
Pharmaceuticals (DSP), are also taken into account for as long
as they have been part of DSM.

DSM has compared the results of this new methodology to the
result of the previous one used, by applying a parallel process in
2013 and in the first half of 2014. This has shown a significant
difference in two target areas. The first of these is landfilling of
non-hazardous waste, in which the new methodology accounts
for the improvements made at the newly acquired site in
Kingstree (South Carolina, USA). The second area is volatile
organic compound (VOC) emissions, where improvements in
Laiwu (China) also led to a better performance.

The new methodology also reduced the difference between the
progress on relative targets and absolute totals as shown in the
Sustainability Statements on page 114. The performance on all
other targets was not significantly impacted by the introduction
of the new methodology. For more information on the new
methodology see www.dsm.com.

2014

2013R

39.1

4.2

1.5

0.08

3.9

118

18.2

41.1

4.2

4.3

1.6

0.07

4.8

150

22.7

Bright Science. Brighter Living. 2014

www.dsm.com

Report by the Managing Board

Progress made in 2014 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

2014

17%

2%2

36%

90%

42%

20%

(3)%1

51%

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

In the calculation that accounts for changes in production volume, DSM's GHG emissions decreased by 16% in 2014 compared to 2008

DSM publishes detailed information on the environmental
performance of all its production sites on www.dsm.com.

to enable the necessary shift in the purchased energy mix
towards more renewable energy.

Climate change

DSM’s approach to addressing climate change involves
quantifying and tracking GHG emissions, as well as monitoring
its energy consumption. Where possible, projects are initiated
that benefit the environment, and also have other positive
consequences, such as internal cost savings.

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. The company aims to be
a front-runner in combatting global warming and resource
depletion. To this end, it seeks to develop and promote products
and solutions that help reduce GHG emissions and energy
usage across its value chain.

The company's current strategy includes a long-term target to
increase energy efficiency by 20 percent by 2020 compared to
2008. To determine energy efficiency, DSM measures its energy
consumption in relation to the production volume of each
production site. In 2013, DSM published a paper outlining its
perspective on renewable energy, and in 2014 it announced its
support for strengthening energy, GHG and renewable energy
targets across the European Union.

In 2014, DSM's energy efficiency performance reached
17 percent and total energy consumption decreased from
41.1 to 39.1 PJ. The main improvements took place at the DSM
Fibre Intermediates plant in Nanjing (China), where the second
caprolactam line is far more energy efficient than the first, leading
to significant improvements in overall efficiency. Other structural
improvements were also achieved, for example, at DSM
Dyneema in Greenville (North Carolina, USA) where there were
cost savings of € 340,000. Improvements were also made at
DSM Nutritional Products in Kingstree, although these were
relatively minor. Energy efficiency was stable at other locations,
due to stable production volumes. See also DSM’s energy
perspective on www.dsm.com.

Greenhouse-gas emissions
There is scientific consensus that certain gases (e.g. carbon
dioxide, methane, nitrous oxide) have contributed significantly to
anthropogenic climate change. These gases, which are emitted
during the course of a wide range of human activities, magnify
the planet's natural greenhouse effect and cause the
atmosphere to retain more heat than it otherwise would. This in
turn results in a series of wide-ranging and inter-linked changes
to the earth's climate, some of which have negative
consequences for human health and well-being.

DSM has also undertaken an advocacy role to cooperate with
energy suppliers, co-leaders in industry and regulatory bodies,

According to the latest report by the Intergovernmental Panel on
Climate Change (IPCC) in 2014, a reduction of the cumulative
total of GHG emissions could avert an increase in average

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surface temperatures of between 2 and 4 degrees Celsius by the
end of the 21st century.

Reducing GHG emissions is therefore an imperative for all
organizations and individuals, including DSM. Since 2008, the

company has complied with the Greenhouse Gas Protocol’s
standards for measuring and reporting GHG emissions (scopes
1, 2 and 3). Crucially, DSM has an internal target to achieve a 25
percent reduction in GHG emissions by 2020, compared to its
2008 emission levels.

GHG emissions scope 1 & 2
In 2014, DSM emitted a total of 4.2 million tons of CO2
equivalents, which is a reduction of two percent compared to its
emissions in 2008 (the total reduction target is 25 percent). The
main change to DSM's performance in 2013 was related to the
deconsolidation of DPP. However, this reduction was offset by
mechanical issues in the N2O abatement system at DSM Fibre
Intermediates in Nanjing (China), which caused an increase in
N2O emissions. Other changes were the result of developments
in energy consumption.

GHG emissions scope 3
The Greenhouse Gas Protocol Corporate Value Chain Standard
defines scope 3 emissions as ‘all other indirect emissions that
occur in a company’s value chain’. DSM regards reporting on
scope 3 emissions as an essential complement to reporting on
scope 1 and 2 emissions. Taken together, they fully reflect all the
GHG emissions associated with its business activities. For more
information about the methodologies applied see
www.dsm.com.

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Greenhouse-gas emissions in DSM’s value chainPurchased goods and servicesEnergy-relatedactivitiesInvestmentsEnd of life treatment ofsold productsTransport & distribution≈12 million tons, CO2 eqN2O3 million tons CO2 eq> 6 million tons, CO2 eqCO21.2 million tons CO2 eqWaste generationBusinesstravelLeased assets Purchased electricity and steamTransport & distributionUpstream activitiesRoyal DSMDownstream activities© 2015 Royal DSMscopescopescopescopeindirectindirectdirectindirectEmployeecommutingCapitalgoods
Report by the Managing Board

DSM strives to improve the quality of its scope 3 reporting on an
ongoing basis. This includes periodically updating applied
emission factors and collecting more accurate and specific data
where possible. Inevitably, the calculation of DSM’s scope 3
emissions is partly based on estimates and assumptions. In
keeping with the chemicals sector guidelines of the World
Business Council for Sustainable Development (WBCSD), DSM
prioritizes reporting on 11 scope 3 categories that are relevant
and applicable to DSM's business, and for which data are
available. DSM's performance in 2014 is illustrated
in the table above.

Purchased goods and services accounted for DSM’s highest
scope 3 emissions in 2014, but declined by nine percent
compared to 2013. Although DSM strives to achieve a sustained
reduction of its carbon footprint, for example through the DSM
Supplier Sustainability Program, the decline in this category
cannot be attributed to specific initiatives at this stage. See also
DSM's Supplier Sustainability Program on page 33.

Bio-based and circular economy

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. For example, resource use, production and end-of-life
waste management would all be taken into account in the
product design stage.

In a bio-based economy, production relies on the use of natural
inputs, as is the case with renewable energy, biofuels and bio-
based chemicals. By ensuring the renewability of raw materials,
a bio-based economy makes a circular economy possible.
Another element of a circular economy is the use of safer
ingredients. DSM is committed to promoting these
developments.

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2014 CO2 eq, kilotonsDue to the inherent assumptions and uncertainties in calculating scope 3 GHG emissions, the above figures are estimates1 Q4 previous year-Q3 reporting year.2 Reported figures with one year delay.3 These categories are considered either not relevant or not applicable to DSM; or cannot be estimated at this time due to the wide array of applications of DSM products. This approach is in line with the WBCSD’s Guidance for Accounting & Reporting Corporate GHG emissions in the Chemical Sector Value Chain.DSM’s greenhouse-gas emissions (scope 3) in 201411,112160508142110346733177NRNR 6,049NRNR141123456789101112131415Purchased goods and services1 Capital goods1 Fuel and energy-related activities Upstream transportation and distribution2Waste generated in operations Business travel1 Employee commuting Upstream leased assets Downstream transportation and distribution2Processing of sold products3Use of sold products3 End of life treatment of sold products Downstream leased assets3 Franchises3 Investments2 category
Renewable energy and raw materials
DSM supports the development of innovative, sustainable and
renewable energy solutions. This includes DSM’s collaboration
with POET to produce cellulosic bio-ethanol at a new plant in the
US. POET-DSM Advanced Biofuels began production in 2014.
Also in the year, DSM opened its first Solar Technology
Demonstration Center to validate and showcase its solar
technology innovations, at a manufacturing site in Pune (India).
The site is partly powered by the renewable energy this
demonstration center generates.

In 2014, approximately 11 percent of DSM’s total spend on raw
materials related to renewable raw materials. This represents an
increase compared to 2013, which is in line with the DSM
portfolio changes. The decline in crude oil prices during the
second half of the year also limited the growth of spending on
petrochemicals.

Another reason for the increase in renewable raw materials
purchased was the growth in Reverdia, DSM’s joint venture with
Roquette Frères, that aims to develop bio-based products,
specifically bio-succinic acid. This partnership is consistent with
DSM’s sustainability objectives and is expected to further
contribute to the company’s ambitions in the future. A further
increase in the proportion of renewable raw materials used is
expected in the coming years. See also DSM's position paper
on sustainable biomass at www.dsm.com.

Water and waste water
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. DSM carries out 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. Water risk assessments give DSM a clear overview
of its impact on water scarcity and pollution at a local level.
Projects based on the results of the water risk assessments are
included within business group roadmaps for sustainable water
management.

DSM has been a signatory to the UN 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 worldwide concern. Many areas in
the world are increasingly facing water scarcity, water
pollution and water damages by natural disasters. A more
sustainable management of water is therefore a must in our
society. Individual and collective actions are necessary to
mitigate adverse effects on water quality and availability in
the regions and businesses where we operate. DSM truly
values initiatives like the United Nations Global Compact
CEO Water Mandate and its principles. The topic of water
and sustainable water management has our continued full
attention."

Feike Sijbesma, CEO/Chairman of the Managing Board

DSM’s global water use is divided into surface water,
groundwater and potable (tap) water. In 2014, total water
consumption decreased to 118 million m3, compared to 150
million m3 in 2013. As the reduction was largely caused by the
deconsolidation of DPP, this did not have an effect on the target
performance.

Performance against water consumption efficiency targets is
currently minus three percent, while the target is 15 percent. This
performance is mainly determined by the DSM Nutritional
Products plants in Grenzach (Germany) and Lalden
(Switzerland), which traditionally have high levels of surface water
consumption, part of which is used as 'once-through cooling'.
Relatively high water temperature has led to an increase in
surface water consumption at these plants. Further increases in
water consumption occurred because of incidental leakages and
higher production rates at other plants.

At the same time, reductions in water consumption occurred at
several plants throughout the organization. At DSM in Tongxiang
(China), all use of surface water for cooling was replaced by the
use of a cooling tower in which water is reused. More than half
of DSM's plants saw stable or improved water efficiencies due
to water pipe repairs, revisions to plant water systems or water
awareness projects.

A significant part of DSM’s total water use is for 'once-through
cooling' (approximately 85 percent), particularly at sites located
next to large rivers. Local authorities at these sites have
confirmed that any effects are within accepted levels.

DSM’s water pollution reduction programs aim to reduce total
water pollution, mainly through reductions in Chemical Oxygen
Demand (COD). In 2014, DSM reached its target of 20 percent

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Report by the Managing Board

improvement on the discharge of COD. A major contribution was
from DSM Fibre Intermediates in Augusta (Georgia, USA) and
from DSM Nutritional Products in Kingstree.

biodiversity and contribute to its preservation wherever possible.
The company does this by:

Waste
DSM is working to decrease its waste output. Its performance
against targets for reducing landfilling of non-hazardous waste
benefited from the application of the new consolidation
methodology. This is because the methodology includes the
performance of plants that were acquired after the reference year
(2010), most notably DSM Nutritional Products in Kingstree.
Since the acquisition, most of the waste from the plant in
Kingstree that was previously sent to landfill, is gradually being
recovered and used for soil improvements and other
applications. In Kingstree, this resulted in an estimated € 40,000
in cost savings.

At DSM Nutritional Products in Dalry (UK), the landfilling of non-
hazardous waste was reduced through the diversion of waste
into land restoration projects, which led to savings of
approximately € 81,000. There were also positive outcomes at
DNP sites in Vietnam and the US, and DSM Resins & Functional
Materials in the Netherlands. Although several other sites
reported temporary increases in the amount of waste landfilled,
the target of decreasing waste by 15 percent in 2015 was met
in 2014 with a 51 percent reduction.

Other emissions to air
Targets for emissions of volatile organic compounds (VOC) have
also benefited from the new consolidation methodology. The 35
percent reduction was largely due to improvements at DSM in
Laiwu, where there were several operational improvements. A
further reduction is expected in 2015 when the abatement
system becomes operational.

Other notable improvements included DSM Fibre Intermediates
in Nanjing, partly due to the start-up of a new waste gas
incinerator, and at DSM Nutritional Products in Kingstree and
Dalry. In Dalry, these improvements led to cost savings of
€ 75,000. Other changes were mainly due to changes in
production levels and the product portfolio.

The performance against reduction targets on emissions of
NOx was stable, at around 40 percent. The performance on
SO2 emissions was also stable at slightly above 90 percent. Both
targets were already achieved in previous years. See also the
Sustainability Statements on page 114.

Biodiversity
Biodiversity is the term given to the variety of life on earth.
Biodiversity and healthy ecosystems are key conditions for a
sustainable world. DSM aims to help prevent the degradation of

- building awareness about natural capital, biodiversity and

ecosystems;

- assessing and monitoring DSM’s impact on protected areas

within its vicinity;

- developing impact assessments with stakeholders; and
- developing measures that help mitigate this impact.

Each year, DSM identifies and monitors the protected areas in
the vicinity of its sites and the impact that it has on them. Some
52 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 limits, as defined
by local authorities.

Together with three other business partners in the Dutch branch
of the International Union for Conservation of Nature (IUCN),
DSM is working on the design of a future biodiversity-friendly
business estate.

Sustainable value chains

Measuring, reporting and managing scope 3 GHG emissions is
at the heart of DSM's efforts to create and support sustainable
value chains. The company adopts a multi-faceted approach to
sustainable value chains. DSM's other major complementary
initiatives are discussed in more detail below.

DSM is convinced that true sustainability can only occur when
all parts of the value chain work together towards the same
goals. DSM works to make this a reality through continuous
improvements. It engages in an ongoing dialogue with suppliers,
customers, NGOs and industry peers who also seek to increase
the sustainability of the value chains in which they operate. DSM
requires its suppliers to meet its sustainability standards and
minimize their eco-footprints. It also encourages them to focus
on providing solutions that enable all downstream players, from
customers to end-users, to improve their eco-footprints as well.

ECO+ program
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 the removal of hazardous
substances from the life cycle. ECO+ products help to 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.

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have tailor-made product stewardship programs for all products
or product clusters; a clearer definition of the role of DSM
employees in product safety management; the distribution of
responsibilities across all levels of the organization; and
methodologies to be applied in the risk characterization in a
product's life cycle, in alignment with DSM's ECO+ and
People+ programs.

To challenge the selection of potentially toxic raw materials and
end products, every business group within DSM has a program
in place to list its own potentially toxic substances on a DSM
Priority Substances List and to review their use.

REACH
DSM does not produce substances of very high concern
according to REACH, the Registration, Evaluation, Authorization
and Restriction of Chemical substances criteria. It also does not
allow the production and use of substances of high concern,
unless it can be demonstrated that there are no feasible
alternatives. DSM's ultimate goal is to phase out potentially toxic
compounds from its portfolio.

DSM constructively cooperates with national European
authorities during the REACH evaluation processes. The next
registration deadline is in 2018, and DSM is actively integrating
REACH into its daily operations. REACH registration implies
greater complexity and higher costs for DSM.

UN Globally Harmonized System
DSM continuously monitors developments in the UN Globally
Harmonized System (GHS) and related national regulations on
classification and labeling, and takes necessary actions to
ensure implementation. Products have been re-labeled and
safety data sheets revised according to new requirements.
National and regional deadlines are implemented as part of this
process.

In 2014, revisions to the GHS for China and Europe were
successfully implemented before the legal due dates. The roll-
out of GHS for the US is proceeding well and according to plan.

Avoided emissions
With a strong contribution from DSM, the WBCSD and ICCA
(International Council of Chemical Associations) published new
guidelines on reporting on avoided emissions for companies in
the chemicals sector in 2013. According to the guidelines,
avoided emissions are defined as the difference between the life
cycle emissions from the solution of the reporting company, and
the comparable solution (i.e. a conventional product or market
average). DSM supports the guidelines and is starting to
implement them across the business in order to credibly capture
the effects of its products in the value chain. Applicable DSM
products and solutions for which avoided emissions may be
evaluated include advanced surfaces for solar panels, cellulosic
bio-ethanol and enzymes.

DSM actively steers its product development along its strategy
of avoided emissions. DSM Coating Resins innovation efforts are
focused on the reduction of VOC emissions by replacing solvent-
borne systems with waterborne, UV or powder solutions.
Avoiding solvent usage reduces the CO2 equivalent emission by
50 percent. Other examples are a new, space-efficient
packaging for Dyneema®UD, currently in final testing, which
promises to reduce transportation-related emissions by up to
40 percent; and Brewers Clarex enzymes, which, when used in
beer production, result in avoided emissions of eight percent per
hectoliter of beer.

Safer alternatives
As an aspiring leader in safer products policies, DSM is
committed to bringing more sustainable alternatives to the
market, in place of chemicals of high concern. These actions are
proactive and go beyond legal requirements. They are focused
on substances that are expected to become reclassified or that
are less preferred by consumers because of their perceived
health and safety risks. Experience shows that the substitution
of substances of high concern can be complex, still, a number
of projects have been initiated and are at varying stages of
development.

DSM's efforts to adopt safer alternatives have been recognized
by its peers and external organizations, such as ChemSec.

Product stewardship
Since 2013, DSM has operated a Product Safety Network (PSN).
This network provides direction and internal alignment in the
areas of mandatory and voluntary industry initiatives for sound
chemical management. In 2014, the PSN governance and
communication plan was reviewed to strengthen its advisory role
for global policymaking in product safety-related issues.

DSM's updated SHE requirements describe several elements for
product stewardship in more detail, including the requirement to

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Report by the Managing Board

Profit in 2014

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

Net sales continuing operations

Operating profit before depreciation and amortization (EBITDA)

Operating profit before exceptional items

Net finance costs

Income tax expense

Share of the profit of associates

Profit attributable to non-controlling interests

Net profit continuing operations before exceptional items

Net profit from discontinued operations before exceptional items

Net result from exceptional items, continuing operations

Net result from exceptional items, discontinued operations

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

ROCE, continuing operations (in %)

EBITDA / net sales, continuing operations (in %)

2014

9,181

1,168

619

(118)

(89)

428

(2)

(311)

145

7.8

12.7

2013R1

8,858

1,261

761

(137)

(110)

(17)

499

(77)

(160)

271

10.1

14.2

1 DSM applied the new standards IFRS 10 'Consolidated Financial Statements' and IFRS 11 'Joint Arrangements' for the first time in 2014. Due to the abolishment of proportionate
consolidation for joint ventures DSM's financial position has changed. These changes are notably related to the joint ventures DSM Sinochem Pharmaceuticals Limited and POET-
DSM Advanced Biofuels. See page 158 for more information about joint ventures.

Net sales
At € 9,181 million, net sales from continuing operations in 2014
were four percent higher than in 2013 when they reached
€ 8,858 million. Volume development accounted for a
five percent increase in net sales. On average, selling prices
were two percent lower than in 2013. Exchange rate fluctuations
had on balance no impact, while acquisitions contributed
one percent.

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

2 2

2014

2 2

2013R

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Operating profit
Operating profit from continuing operations before exceptional
items decreased by € 142 million (19 percent), from
€ 761 million in 2013 to € 619 million in 2014.

Operating profit from continuing operations before depreciation
and amortization (before exceptional items) decreased
by € 93 million (seven percent), from € 1,261 million in 2013
to € 1,168 million in 2014. The EBITDA margin (operating profit
before depreciation and amortization as a percentage of net
sales) decreased to just below 13 percent.

EBITDA / net sales, continuing operations in 2014
in %

was recognized upon classification of the business as an asset
held for sale at the end of 2013.

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

2014

2013R

19.6

12.3

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

4.8

2 2

2014

2013R

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

2014

2013R

Nutrition

Performance
Materials

Polymer
Intermediates

Net profit
Net profit from continuing operations attributable to
shareholders DSM (before exceptional items) decreased by
€ 71 million to € 428 million. Expressed per ordinary share, net
earnings from continuing operations before exceptional items
declined from € 2.84 in 2013 to € 2.42 in 2014.

Net finance costs decreased by € 19 million compared to the
previous year to a level of € 118 million. This was mainly the
consequence of positive hedge results. The effective tax rate
(before exceptional items) of 18 percent in 2014 was in line with
the effective tax rate in 2013.

Total net profit for the full year came to € 145 million compared
to € 271 million in 2013. This was mainly caused by a lower
operating profit in 2014, and higher exceptional items due to the
impairment of the caprolactam business.

Exceptional items
Total exceptional items from consolidated companies for the full
year amounted to a loss of € 334 million (€ 252 million after tax)
including € 291 million impairment of the caprolactam business,
€ 59 million restructuring costs, € 12 million acquisition-related
and other costs as well as a reversal of € 28 million on the loss
of the contribution of DSM Pharmaceutical Products to DPx that

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Report by the Managing Board

Cash flow
At € 808 million, cash provided by operating activities (total DSM) was nine 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

- Income tax

- Other changes

Cash flow provided by operating activities

Investing activities:

- Capital expenditure1

- Acquisitions

- Sale of subsidiaries

- Disposals

- Change in current investments

- Interest received

- Other

Cash from / used in investing activities

Financing activities

- Dividend

- Interest paid

- Repurchase of shares

- Proceeds from reissued shares

- Change in commercial paper

- 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 € 25 million included in capital expenditure was funded by customers (2013: € 20 million)

2014

789

770

1,166

(74)

(82)

(202)

808

(653)

(7)

108

(70)

(515)

(175)

(302)

(189)

250

(29)

(419)

669

675

2013R

1,108

1,089

1,312

(83)

(63)

(168)

998

(649)

(509)

(84)

(1,057)

(160)

(200)

(73)

145

(150)

180

(258)

(2)

770

789

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Balance sheet
The balance sheet total (total assets) reached € 12.1 billion at year-end (2013: € 11.9 billion). Equity decreased by € 160 million
compared to the position at the end of 2013. This decrease was due to the net profit for the year, the net exchange differences
and the proceeds from reissued shares, which were more than offset by the dividend, the repurchase of shares and the net actuarial
losses on defined benefit obligations. Equity as a percentage of total assets declined from 51 percent at the end of 2013 to
49 percent at the end of 2014.

Compared to year-end 2013, net debt increased by € 579 million to € 2,420 million. The gearing was 29 percent at year-end.

Capital expenditure on intangible assets and property, plant and equipment amounted to € 616 million in 2014 and was above the
level of amortization and depreciation.

The operating working capital (continuing operations before reclassification to 'held for sale') was € 125 million higher than in the
previous year and came to 20.7 percent of annualized fourth quarter net sales (2013: 21.2 percent). Cash and cash equivalents,
including current investments, declined by € 114 million and came to € 675 million.

Capital employed per business segment at
31 December 2014, continuing operations x € billion

Equity at 31 December
as a % of balance sheet total

5.1

1.9

0.4

0.5

0.2

Nutrition

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

2010

2011

2012

2013

2014

2013R

x € million

in %

x € million

in %

2,867

3,673

1,319

669

3,598

2,690

3,611

811

770

4,017

12,126

100

11,899

100

5,936

147

2,562

3,481

6,096

162

2,501

3,140

Total liabilities

12,126

100

11,899

100

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Report by the Managing Board

Outlook
Macro-economic uncertainty and low consumer confidence
continue to impact market dynamics. DSM assumes low growth
in Europe, continued economic resilience and growth in the US
and a slowdown of growth in some of the high growth
economies.

The volatility in currencies with the weakening of the Euro against
the US Dollar and the strengthening of the Swiss franc against
the Euro could have an impact on DSM’s 2015 results. Based
on current rates and the 2015 hedge effects, the overall impact
of currencies on EBITDA in 2015 would be roughly neutral.

Spot prices in vitamin E have declined significantly in the second
half of 2014. Assuming the January 2015 prices persist, the
negative impact on DSM’s 2015 EBITDA will be around € 80
million.

DSM is addressing the current challenging external environment
by continuing its focus on operational performance and
commitment to enhancing profitability. The running programs will
be complemented by accelerated actions to improve efficiencies
and reduce costs, specifically in Nutrition and across all functions
in the company. In addition, in 2015 further focus will be given
to improve operating working capital management.

Taking the above into account, DSM aims to deliver an EBITDA
in 2015 that is slightly ahead of the result of 2014.

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Review of business in 2014

In 2014 DSM's activities were grouped into four clusters: Nutrition, 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

Performance Materials

Polymer Intermediates

Innovation Center

Corporate Activities

Total continuing operations

Discontinued operations

Total DSM

EBITDA

x € million

Nutrition

Performance Materials

Polymer Intermediates

Innovation Center

Corporate Activities

Total continuing operations

Discontinued operations

Operating profit (EBIT)

2014

2013R

x € million

2014

2013R

4,335

2,792

1,727

154

173

9,181

102

9,283

4,205

2,729

1,579

150

195

8,858

571

Nutrition

Performance Materials

Polymer Intermediates

Innovation Center

Corporate Activities

Total continuing operations

Discontinued operations

9,429

Total DSM

596

193

(45)

(149)

619

(2)

617

680

180

(43)

(127)

761

773

Capital employed at 31 December

2014

2013R

x € million

2014

2013R

850

343

(18)

(90)

1,168

(2)

914

319

113

(9)

(76)

1,261

Nutrition

Performance Materials

Polymer Intermediates

Innovation Center

Corporate Activities

Total continuing operations

Discontinued operations

5,034

1,928

419

523

201

8,105

4,496

1,902

570

469

206

7,643

417

Total DSM

1,166

1,312

Total DSM

8,105

8,060

EBITDA / net sales

ROCE

in %

Nutrition

Performance Materials

Polymer Intermediates

Total continuing operations

Discontinued operations

Total DSM

2014

2013R

in %

2014

2013R

19.6

12.3

4.8

12.7

(2.0)

12.6

21.7

11.7

7.2

14.2

8.9

Nutrition

Performance Materials

Polymer Intermediates

Total continuing operations

Discontinued operations

13.9

Total DSM

12.5

10.1

4.8

7.8

15.5

9.2

14.0

10.1

2.5

9.6

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Review of business in 2014

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

Capital expenditure

Workforce at 31 December

x € million

Nutrition

Performance Materials

Polymer Intermediates

Innovation Center

Corporate Activities

Total continuing operations

Discontinued operations

Total, accounting based

Non-cash items

Customer funding

Total, cash based

2014

2013R

headcount

2014

2013R

Nutrition

Performance Materials

Polymer Intermediates

Innovation Center

Corporate Activities

Total continuing operations

Discontinued operations

10,857

10,548

5,115

1,423

675

3,281

21,351

5,126

1,456

659

3,204

20,993

2,492

Total DSM

21,351

23,485

330

117

613

616

(25)

628

255

235

653

694

(45)

(20)

629

R&D expenditure (including associated IP expenditure)

x € million

as % of net sales

2014

2013R

2014

2013R

Nutrition

Performance

Materials

Polymer

Intermediates

Innovation Center

Corporate Activities

Total continuing

operations

Discontinued

operations

206

209

143

132

475

461

Total DSM

483

506

4.8

5.1

0.9

53.2

16.2

5.2

7.8

5.2

5.0

4.8

1.1

49.3

14.9

5.2

7.9

5.4

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Life Sciences Fruit drinks and beveragesWine and beerAquacultureTaste enhancers Personal care Savory ingredientsDairy productsRuminantsInfant nutrition Animal feedDietary supplements Cultures and enzymesBaking enzymes Poultry / eggs Sweetener innovations

Review of business in 2014:
Review of business in 2014:
Review of business in 2014:
Nutrition
Nutrition
Nutrition

Continued value
growth

Net sales

€ 4,335 m

x € million

Net sales:

DSM Nutritional Products:

- Animal Nutrition & Health

- Human Nutrition & Health

- Personal Care

DSM Food Specialties

2014

2013R

EBITDA for the cluster declined 7 percent in 2014, despite strong
volume growth in Animal Nutrition & Health. The decline was due
to the impact of negative currency effects, lower volumes in
Human Nutrition & Health and lower vitamin E prices.

2,084

1,626

152

3,862

473

1,935

1,690

152

3,777

428

DSM responded to the decline in the US dietary supplement
market by supporting science-based industry coalitions that
promote essential vitamins and omega-3 supplements through
dedicated communications initiatives in the US. It worked closely
with retailers to grow the category, and continued to see good
growth in dietary supplements markets outside the US.

Total

4,335

4,205

Organic sales growth (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

596

850

330

5,034

12.5

19.6

206

680

914

255

4,496

15.5

21.7

209

Workforce at 31 December

(headcount)

10,857

10,548

Business

The Nutrition cluster comprises DSM Nutritional Products and
DSM Food Specialties. These businesses serve the animal feed,
food and beverage, pharmaceutical, infant nutrition, dietary
supplement and personal care industries. With a global and
highly diversified portfolio of products, services and end-
markets, and a unique position across the feed and food value
chains, DSM applies its capabilities to the benefit of customers
and other stakeholders.

Total sales for 2014 of the Nutrition cluster came to
€ 4,335 million, compared to € 4,205 million in 2013. Organic
sales growth remained stable at 2 percent and EBITDA was
€ 850 million.

The company took a number of actions to drive further
improvements in operational performance. It further improved its
cost position, enhancing the competitiveness of its vitamins, and
upgraded and improved its cost position in nutritional lipids. In
addition to its share in the DSM Profit Improvement Program
(PIP), Nutrition is running cost-saving projects totaling
€ 50 million, which will be partly reinvested into external open
innovations and local, front-line support systems.

The business supported its customers with innovations and
used scientific expertise to increase differentiation in forms,
tailor-made products, solutions and premixes, while supporting
the growth of its i-Health consumer health and wellness
business. The company’s product and end-market
diversification acted as a strong natural hedge, providing
significant resilience in these difficult market conditions.

DSM Nutritional Products

DSM Nutritional Products is organized around three market-
facing entities: Animal Nutrition & Health, Human Nutrition &
Health and Personal Care. In 2014, DSM Nutritional Products
posted sales of € 3,862 million compared to € 3,777 million in
2013.

Trends

The fundamental growth drivers in nutrition and health remained
intact, despite the challenging macro-economic conditions in
2014. A steadily growing urban population in high growth
economies with rising standards of living are driving increased
consumption of fish, meat, poultry and dairy products. As the

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2015. The UN World Food Programme feeds and nourishes an
average of 90 million people in over 80 countries every year. See
Public-Private Partnerships on page 36.

Review of business in 2014

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average age increases, concerns about health and the
environment also drive demand for healthier processed foods.
The need for convenience and safe, processed food has never
been higher, which matches DSM’s ability to deliver tailor-made
local applications and blends.

Global megatrends are also fuelling demand for health, wellness
and convenience products such as dietary supplements, and
healthier choices in food and beverages, as well as infant
nutrition products. At the same time, growing awareness about
malnutrition in both the developing and the developed world is
prompting regulatory actions aimed to encourage the
consumption of healthy, balanced diets and, where needed,
fortified foods and supplements.

Quality, safety and sustainability are also issues of rising public
concern that are leading to greater attention from health
authorities. They 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. Another important
differentiator for DSM is environmental sustainability, most
notably in countries where there are low-cost producers.

In the period ahead, DSM expects customers to demand deeper
insights and customized solutions. DSM's nutrition business is
well positioned for growth and will continue to increase its focus
on high growth economies where the business will increase its
development of products tailored to local consumer preferences
and market and channel structures.

Sustainability

Sustainability is an important growth driver for DSM, as demand
increases for market solutions that are more efficient and have
distinctive environmental advantages.

DSM has undertaken environmental assessments of its
products, including vitamins C, B2 and B6. By lowering the
environmental impact of its production processes, DSM has
reduced its ecological footprint and that of its end-products.

One of the greatest challenges for society is the alleviation of
malnutrition. As an industry pioneer, DSM helps to address
malnutrition by advancing the world's understanding of the
intricate relationships between nutrition and health and by
assisting customers to improve the nutritional content of their
products through product development and improved food
production processes.

DSM has been a proud partner of the United Nations World Food
Programme (WFP), the largest provider of food aid to the world’s
hungry, since 2007, and has extended this partnership until

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In the field of ingredients, DSM is increasingly recognized as a
thought leader in the areas of nutrition and health. Thought
leadership enables it to engage in discussions on nutrition
guidelines, policies and practices with high-level decision
makers and authorities around the world. It also helps the
business to build institutional knowledge and create confidence
among its customers and other stakeholders.

activities and distribution channels. As a global producer, it
delivers a broad portfolio of high quality and competitive actives
while offering maximum differentiation through industry and
segment specific formulations. As a local solutions provider, it is
focused on customer-driven solutions and segment-specific
products.

Sustainable animal protein production is of major importance for
the world and therefore for the feed and food value chains. The
greater demand for safer, more efficient, healthier and more
sustainable animal protein production, combined with a rising
scarcity of resources, is requiring efficient feed conversion
processes and a reduction of undesirable waste components.
DSM offers solutions to meet this demand and helps to make
industrial farming systems more sustainable with a lower impact
on the environment.

Strategy

DSM Nutritional Products 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

DSM has the broadest portfolio of nutritional ingredients in
diversified end-markets and benefits from an unparalleled
presence across the value chain. It has also developed high
levels of customer intimacy in its markets around the world.

By managing the interdependencies between active ingredients,
formulations, premixes and macro blends tailored for specific
applications, DSM drives innovation and ensures value delivery
to customers and consumers.

In recent years, DSM has grown to become one of the strongest
industry players by expanding and strengthening its value chain
presence wherever there are growth opportunities. Its footprint
of operations now comprises more than 60 countries, including
a large number of high growth economies, where it has
unparalleled customer access, the deepest and broadest
product portfolio, and new skills and capabilities.

With its uniquely integrated business model and strong global
position, DSM has become a front-runner in quality and
innovation, regulatory and technical expertise, sustainability, and
customer and consumer understanding. It is continuously
innovating and upgrading its delivery systems through
application and formulation technologies; expanding premix

networks and services through nutritional science and
advocacy; and maintaining its investments in state-of-the-art
quality management.

Acquisitions have been the main vehicle for adding new growth
platforms, especially in high growth economies and North

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Capitalizing on every step of the value chainSolutionsActiveingredientsForms & deliverysystemsPremixes+Broad portfolio providing resilience2014■■■■■■■■■■■■Global producerLocal solution providerBroadest portfolio of ingredientsFat soluble vitamins (e.g. A,D,E)Water soluble vitamins (e.g. B,C)Carotenoids Marine PUFAs Microbial PUFAs Cultures & EnzymesMinerals & DCP Savory/yeast extractsNutraceutical ingredientsAroma intermediatesOther blend ingredientsOtherSales, split over value chain steps■Active ingredients■Forms■Premixes■i-Health/B2C2014
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America. Considering the largest four businesses acquired −
Martek in 2011, Ocean Nutrition Canada in 2012, Fortitech in
2012 and Tortuga in 2013 – DSM’s own estimates show that all
have contributed significantly to DSM’s value creation. Ocean
Nutrition Canada has not met the initial performance
expectations as it has faced unexpected weakness in the US fish
oil-based omega-3 dietary supplements market.

In each case, the integration process has progressed
successfully and synergies are being delivered according to plan.
In the period ahead, DSM's focus will be on completing the
integration of its newest companies and reaping the benefits of
these in terms of growth, synergies and costs.

and continue to generate strong growth in nutritional solutions.
DSM also brought multiple innovations to the market, which
further cemented its position as a leading provider of value to its
customers.

Acquired in 2013, the Tortuga business has continued to
perform well and has enabled DSM to deliver greater value to its
Brazilian dairy and beef customers through the implementation
of new nutritional programs. In the year, DSM also invested
significantly in new application facilities in China. The new China
animal nutrition center will support the development of tailored
solutions to meet the needs of the fast growing poultry and swine
markets. Further investments were also made in the premix
business in the rest of Asia.

Animal Nutrition & Health

Highlights 2014

- Good sales growth with limited impact from diseases
- Significant price erosion in vitamin E, particularly in

second half of the year

- Opening of new animal nutrition research center in China

The Animal Nutrition & Health (ANH) business achieved sales
of € 2,084 million in 2014 compared to € 1,935 million in 2013.

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.

Significant price pressure occurred in vitamin E especially in the
second half of the year, while numerous other vitamins achieved
stronger prices and some suffered shortages. There was also a
continued drive for improved efficiency in animal production and
greater producer profitability, which led to increased demand for
specialty nutritional solutions.

Despite ongoing challenges in the macro-economic
environment, the megatrends of population growth and rising
living standards have continued to drive the business in 2014,
leading to overall increases in demand and higher prices for meat
and dairy products.

Although markets continued to be highly competitive, the
breadth of DSM’s portfolio, coupled with its nutritional
knowledge, has enabled it to bolster its customer relationships

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Human Nutrition & Health

Highlights 2014

- Challenging end-markets
- Steps taken to improve operational performance
- Opening new premix plant in India

DSM has also focused on its premix business model as a core
growth driver, by delivering the highest-quality customized
capabilities in the industry through the global Fortitech Premixes
network. With 14 sites in total, the newest of which was
inaugurated in 2014 in India, DSM is well positioned to help its
customers reduce operational complexity and accelerate new
product launches. DSM’s integrated global premix business is
now recognized by customers as the leader in human nutrition
premixes.

The Human Nutrition & Health (HNH) business reported 2014
sales of € 1,626 million compared to € 1,690 million in 2013.

Personal Care
Sales in Personal Care reached € 152 million in 2014, equal to
2013.

This business largely addresses the nutritional ingredients part
of the food and beverage and dietary supplements market, with
an additional focus on infant nutrition and aroma ingredients. Its
fundamental drivers are the link between nutrition and health,
supported by a number of global megatrends.

The business is driven by global megatrends, local consumer
beauty regime insights and uncovering growth opportunities in
emerging markets. It offers considerable long-term opportunities
for DSM to innovate for accelerated growth.

Some market headwinds impacted the performance in 2014,
including ongoing weakness in both multivitamin and fish oil-
based omega-3 markets for dietary supplements in the US. The
momentum for these dietary supplements outside the US
continued to be positive. DSM’s consumer business i-Health
again showed strong growth. Western food & beverage markets
remained sluggish; low consumer spending continued to weigh
on the growth in various end-markets. Food and beverage sales
in Asia continued to develop well.

DSM took steps to improve its operational performance, and to
protect and strengthen its market share. It supported Western
global and regional ‘A-label’ customers by introducing new
health and nutrition claims for their products, and by accelerating
innovations. In high growth economies, it tapped into the
increased need for good quality and safely processed
ingredients. In July DSM announced the intention to acquire
Aland (HK) Holding Limited (‘Aland’), a Hong Kong-based
company producing vitamin C in China.

In infant nutrition, the effect of the false botulism scare in China
and South-East Asian markets has generally resulted in strict
regulation and higher requirements. In dietary supplements, the
momentum outside the US was positive for vitamins and fish oil-
based omega-3. Demand for DSM's US based i-Health
consumer brands remained robust and international sales efforts
were launched. In North America, the multivitamin and fish oil-
based omega-3 market experienced decreased consumer
demand. DSM is leading the North American omega-3 industry
coalition and participating in a multivitamins coalition to promote
credible science and demonstrate the value of the dietary
supplements category to society.

In 2014, Personal Care saw growth in the skin care actives,
specialty UV-filters, and hair polymers business segments. It also
performed strongly in Asian and Latin American markets with
double-digit growth that offset weaker sales of the non-specialty
UV-filters in the mature North American market. The year saw
the launch of a portfolio of sensory modifiers, which received a
positive and rapid market acceptance.

DSM Food Specialties

Highlights 2014

- Strong organic growth driven by enzymes
- Progress made on fermentative stevia sweetener

innovation platform

- Strengthened enzymes joint venture reinforces presence

in China

In 2014, sales for DSM Food Specialties amounted to € 473
million, compared to € 428 million in 2013.

DSM Food Specialties is a leading global supplier of food
enzymes, cultures, yeast extracts, flavors 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, appearance and health and
wellness, while helping to optimize production processes and
raw material and energy use.

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In Enzymes, it focuses on the food and beverage industry where
it helps customers innovate 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, the business'
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.

During the year, DSM Food Specialties finalized its integration of
the acquired Cargill cultures and enzymes business and closed
its production facility in Logan (Utah, USA). It launched a new
generation of lactase, Maxilact® LGi and also launched
Maxiren® XDS. The business made good progress in the
development of its fermentative stevia sweetener platform and
strengthened its presence in China with a dedicated local
business organization and the opening of a new blending facility
in Yixing (China). Construction work began on the new innovation
center in Delft (Netherlands), which is expected to be completed
in late 2015.

Following the full consolidation of DSM’s investment in Andre
Pectin, the China-based hydrocolloids growth platform was
created. The unit combines Andre Pectin with the previously
acquired gellan gum assets.

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 two percent of the cost of
a final product, but can have a significant, direct impact on the
end-product and efficiency of the production process.

The use of food enzymes is expected to grow further in the years
ahead as food manufacturers look for cost savings and more
sustainable and more efficient production processes. The
market for cultures and probiotics is also expected to continue
growing, 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 products with reduced salt content.

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MaterialsSciences Membranes Packaging Paintsand coatingsAutomotive Leisuregoods Display covers Halogen-free products Consumer electronics Composite resinsBlades ElectronicdevicesCut-resistant glovesSailingequipmentCoatings for solar energyFiberopticmaterialsReview of business in 2014:
Review of business in 2014:
Review of business in 2014:
Performance Materials
Performance Materials
Performance Materials

Growing via innovative
sustainable solutions

Net sales

€ 2,792 m

2014

2013R

three business groups contributed to this growth, mainly due to
higher volumes and a continued cost control.

x € million

Net sales:

DSM Engineering Plastics

DSM Dyneema

DSM Resins & Functional

Materials

Total

1,324

264

1,261

252

1,204

1,216

2,792

2,729

Organic sales growth (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

193

343

1,928

10.1

12.3

143

180

319

1,902

9.2

11.7

132

Workforce at 31 December

(headcount)

5,115

5,126

Business

This cluster comprises DSM Engineering Plastics, DSM
Dyneema and DSM Resins & Functional Materials. DSM
Engineering Plastics is a global player in specialty plastics. 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 is a global player in innovative high-quality
resins solutions for paints and coatings, composite materials and
optical fiber coatings. The cluster has a global presence, with
significant sales originating in high growth economies.

In 2014, sales in the Performance Materials cluster increased
to € 2,792 million compared to € 2,729 million in 2013, with
organic growth of 2 percent. Total EBITDA for the full year
increased to € 343 million, compared to € 319 million in 2013. All

Throughout 2014, the cluster expanded its presence and
leadership positions in selected segments of the global market
for advanced performance materials. The cluster is well
positioned in terms of ECO+ innovation sales at 96 percent and
ECO+ sales from running business at 59 percent. The cluster
delivered increased volumes and gradual margin improvements
across all business groups. It achieved this despite ongoing
adverse macro-economic conditions in the European building
and construction sectors, and the negative impact of the
weakness in the caprolactam market, through backward
integration, on DSM Engineering Plastics.

The cluster benefited from its investments and sales in high
growth economies, which now account for 38 percent of total
sales. China and India were significant contributors to its growth
in 2014, while the business also reaped the benefits of the
recovery in the US, where all areas of the market grew for the
third year in succession.

With the continuous upgrade of its portfolio, the cluster is well
positioned for growth and cash generation by further leveraging
its higher added-value businesses. 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.

Trends

Performance Materials’ markets are increasingly driven by
concerns over resource scarcity and climate change. 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. These include high
performance plastics, solvent-free waterborne resins, bio-based
and renewable plastics and resins, and other new applications.

The use of hazardous substances is another area of growing
concern for consumers and regulators, leading to demands for
safer alternatives. DSM Engineering Plastics and DSM Resins &

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Functional Materials address these concerns by offering
products and solutions that eliminate or reduce the use of
substances such as halogens, styrene, volatile organic
compounds (VOC) or cobalt.

DSM inaugurated a Solar Technologies Demonstration Center
at the DSM Engineering Plastics facility in Pune, India. The center
will showcase DSM innovations in solar technology, and use the
solar energy generated to meet 25 percent of the site's electricity
needs.

The business groups manufacture technologically sophisticated
high-quality products that address key megatrends driving
DSM's end-markets. They meet the needs of customers across
a range of sectors through innovative and sustainable value
propositions.

Sustainability

DSM is creating innovative solutions that make a positive
difference to people’s lives and reduce the environmental
footprint. In Performance Materials, sustainability is a significant
driver of new business and innovations.

This is leading to the development of new applications that
address key sustainability challenges. The cluster has shifted its
materials portfolio towards a higher added-value mix by
introducing innovative and more sustainable solutions, some
examples of which are described in the business group sections
below.

Strategy

Performance Materials is applying a differentiated strategy based
on its positions in various market segments. This strategy aims
to accelerate, strengthen or restructure its businesses and will
enable it to further upgrade its portfolio in the years ahead.

The cluster is leveraging its existing infrastructure to accelerate
growth in highly innovative markets in order to fully benefit from
megatrends. It is also strengthening the business by combining
sustainable innovation sales growth with margin optimization
and cost control programs. At the same time, DSM is pursuing
strategic actions for its Composite Resins business.

Although not part of the cluster, DSM's Emerging Business
Areas (EBAs) represent promising long-term growth platforms
also related to Performance Materials, such as DSM Biomedical
and DSM Advanced Surfaces.

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LowHigh<2x GDP%>2x GDP%2x GDP%Market growthDSM’s capabilities to extract valueDSM Resins & Functional Materials 6 Composite resins 7 Powder coating resins 8 Specialty coating resins 9 Functional materialsDSM Engineering Plastics 1 PA6 ﬁlm & extrusion 2 PA6 compounds 3 High performance plastics 4 Dyneema® Life Protection 5 Dyneema® Fiber Solutions 10 Biomedical 11 Advanced SurfacesPerformance Materials strategy* Reported in Innovation CenterDSM DyneemaEmerging Business Areas*69784111051RestructureStrengthenAccelerate32
collaboration of local experts with local, regional and global
customers.

In the automotive sector, manufacturers are looking to reduce
vehicle fuel consumption and emissions by reducing weight and
friction, and through alternative propulsion technologies such as
electric and hybrid. They are also seeking to meet regulations on
end-of-time vehicles, while reducing vehicle footprints by using
bio-based or recycled materials and improving safety and
comfort. DSM offers solutions so that customers can meet these
requirements. It provides a broad portfolio of more sustainable
and advanced products that can reduce weight and friction,
allow reductions in footprint and enable innovations further
downstream.

DSM Engineering Plastics

Highlights 2014

- Good sales development, particularly in the specialty

segment

- Improved margins and successful Profit Improvement

Program

- New materials center opened in the Netherlands

Sales for DSM Engineering Plastics in 2014 came to € 1,324
million compared to € 1,261 million in 2013. The business group
delivered a strong underlying performance in its specialty
business, along with effective cost controls. These achievements
were partly offset by negative currency effects and lower
upstream results in the polyamide 6 value chain.

DSM Engineering Plastics targets four key industries:
automotive, electrical and 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.

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.

DSM Engineering Plastics has a strong position in semi-
crystalline engineering plastics, high-performance polyamides,
polyamide 6 and thermoplastic copolyester. All innovations in
DSM Engineering Plastics launched in 2014 were classified as
ECO+, providing quantifiable environmental advantages to its
customers.

With its global headquarters and management based in
Singapore, DSM Engineering Plastics is well positioned to
respond to the requirements of its customers in the fast-growing
Asian market, which are expected to account for the majority of
its growth in the period ahead.

The business has production and R&D facilities in the
Netherlands, the US, Japan, China, Taiwan, India, Belgium and
Russia. These centers house a wide range of highly specialized
equipment for material and application testing and support the

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In 2014, DSM launched the next generation of Diablo high-
temperature resistant polyamides. The new grades are part of
both DSM’s Stanyl® polyamide 46 and Akulon® PA6 and PA66
portfolios, and are aimed at applications in automotive engine
compartments where temperatures can reach as high as
260°C. DSM's EcoPaXX®, the 70 percent bio-based engineering
plastic, was selected by Dytech for Ferrari and Maserati fuel
vapor separators. The company gained share in the European
automotive market despite sluggish conditions, due to its early
stage collaboration with customers.

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 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 by offering a
halogen-free alternative for consumer electronics cables.

Demand for DSM's high performance polyamides from top
electronics companies for use in their latest generation of
memory connectors has grown in 2014. The introduction of new
products such as Stanyl® ForTii™ supported market growth in
electrical and electronics, especially in Asia.

In the flexible food packaging industry, with 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 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
products with reduced content of substances of concern,
increased bio-based content, increased recyclability and/or
reduced environmental impact.

The construction of a new materials center in Sittard-Geleen
(Netherlands) was completed in 2014. This facility brings the
marketing and business teams together with scientists in the
development center, to enable co-creativity and improve
response and service to customers in the materials field.

DSM Dyneema

Highlights 2014

- Steady sales growth in existing segments and through

new applications

- Improved operational efficiencies and cost controls
- More than 90 percent ECO+ products in running

business

DSM Dyneema reported sales of € 264 million in 2014 compared
to € 252 million in 2013. The business grew steadily in its existing
segments during the year and increased its attention on new
applications to create a broader and more resilient business
base. DSM Dyneema successfully added new applications by
leveraging its technical innovations and brand into new fields. It
also realized operational efficiency gains and achieved cost
controls.

DSM Dyneema maintained its focus on existing licensee and key
customer relationships, with careful targeting of new products to
increase loyalty. The DSM Dyneema business also undertook a
number of measures to enhance its product line through a
combination of new grade introductions, elimination of under-
performing grades and targeted price increases.

In the year, DSM Dyneema finalized two large environmental
footprint studies, which indicate that over 90 percent of its
products are ECO+.

The Dyneema® brand is licensed to selected customers 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 in apparel and cut-resistant
gloves.

In all cases, the benefits of high strength, comfort and safety,
combined with low weight, make Dyneema® a key contributor
to 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.

Bright Science. Brighter Living. 2014

www.dsm.com

DSM Coating Resins
DSM Coating Resins seeks to grow the market for sustainable
coating solutions with resins that are raw materials for three
types of coatings: water-based coatings, powder coatings and
UV-curable 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.

In China, new standards and legislation were introduced in 2014
with a focus on improved air quality. DSM anticipated this
development and actively participated in the establishment of the
Waterborne China Platform, which has resulted in significant
progress being made in the conversion from solvent-borne to
waterborne coatings.

The market launch of a powder coating technology, enabling fast
curing at low temperatures, took this segment beyond the typical
metal substrates market and allowed for application of this
technology on heat-sensitive substrates. This will enable it to
expand its portfolio of Uralac® applications to a wider range of
substrates.

DSM Resins & Functional Materials

Highlights 2014

- Good sales growth through ECO+ sales and new

introductions

- Continued attention to operational efficiency
- Joint venture DSM-Niaga focused on sustainable carpet
technology, to create and re-create carpets from waste

DSM Resins & Functional Materials reported 2014 sales
of € 1,204 million compared to € 1,216 million in the previous
year.

In 2014, DSM Resins & Functional Materials focused on
replacing non-sustainable products with sustainable solutions,
in close cooperation with its partners in the value chain. This
resulted in a higher growth rate of ECO+ sales versus
non-ECO+ sales. The business also further embedded a culture
of continuous improvement, including attention for operational
efficiency.

This business group is active across a broad range of resins and
functional materials through its various business units.

In the coatings 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. DSM is also an emerging player in the market for
UV-curable coating resins through its joint venture with AGI
Corporation of Taiwan.

In the functional materials area, DSM is a leading developer of
formulated coatings designed to address the growing demand
for more sustainable, environmentally friendly materials. It has a
global leadership position in optical fiber coatings. 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.

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

Innovations in all areas aim to create superior performance in
existing application areas, and enlarge the market for sustainable
technologies.

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Review of business in 2014

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

DSM Coating Resins measures the carbon footprint of its
innovations to validate its qualities and has conducted multiple
LCAs. The data acquired by these studies help to foster
cooperation across the value chain. An example of this is the
LCA study on the carbon footprint of coated cans; the new
Bisphenol A-free resins have a significantly lower environmental
footprint.

DSM Composite Resins
Market conditions remained challenging in 2014, with some
positive signs in the second half. While transportation, marine,
and construction markets were operating at lower levels,
infrastructure (bridges, relining) and industrial are showing
improvements. At the same time, markets in China continued to
grow, but at lower levels than before.

DSM Composite Resins worked to increase competitiveness by
reducing operating costs and de-bottlenecking its processes. It
collaborated closely with partners to speed up innovations.

DSM is pursuing strategic actions for the Composite Resins
business. In December, DSM announced that it had reached an
agreement for the sale of Euroresins to Cathay Investments. The
company also announced an agreement to sell its solvent-borne
coating business Synres to Standard Investment.

The business is also setting a new standard in sustainable paint
resins with the introduction of Decovery®. These resins are
based on novel plant-based building blocks, combining reduced
reliance on fossil fuels with a safer indoor air quality environment,
opening a new era of high performance sustainable paint
production with a reduced environmental impact.

DSM announced a joint venture with Niaga, a Netherlands-
based provider of sustainable solutions for the carpet industry.
DSM-Niaga will further develop and commercialize sustainable
technology for recyclable carpets. Based on proprietary and
complementary technologies, the venture will enable the industry
to create and re-create carpets from waste in order to close the
carpet materials loop.

DSM Functional 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 fiber-optic networks as bandwidth
demand surges worldwide.

DeSolite® Supercoatings, a broad portfolio of optical fiber
coatings, help network owners attain higher levels of reliability
and performance. DSM announced the next generation of
DeSolite® Supercoatings, taking performance to a new level with
excellent fiber strengths and enhanced processing robustness.

DSM is actively protecting and, where needed, will defend its IP
position.

In additive manufacturing (3D printing), DSM has introduced
several innovative products to key markets in this field such as
medical, dental, aerospace and automotive. The business
introduced Somos®Precise, a new material for 3D printing
designed to create parts and patterns for high temperature
applications requiring exceptional detail resolution. Another
introduction was Somos®PerFORM, the latest composite
material for 3D printing, helping users to achieve maximum
accuracy and detail with a reduced processing time.

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Review of business in 2014:
Review of business in 2014:
Review of business in 2014:
Polymer Intermediates
Polymer Intermediates
Polymer Intermediates

Leading by
technology

Net sales

€ 1,727 m

x € million

Net sales:

2014

2013R

DSM Fibre Intermediates

Highlights 2014

DSM Fibre Intermediates

1,727

1,579

- The new second line at DNCC contributed to higher sales
- Continued efforts to improve performance and maximize

Total

1,727

1,579

margins

- Higher sales at acrylonitrile

Organic sales growth (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

117

419

4.8

113

235

570

14.0

7.2

Workforce at 31 December

(headcount)

1,423

1,456

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).

In 2014, DSM Fibre Intermediates posted sales of
€ 1,727 million, compared to € 1,579 million in 2013. EBITDA
decreased compared to 2013 given lower caprolactam margins
and lower license income, despite higher volumes and lower
costs. The addition of the new second caprolactam line at DNCC
increased capacity and contributed to innovation by applying the
latest energy-saving technologies. Acrylonitrile delivered a good
performance.

There was a continued focus on cost control and performance
throughout the cluster, including profit improvement activities.

In the period ahead, DSM will continue to pursue portfolio
enhancement via strategic actions in Polymer Intermediates.

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

DSM Fibre Intermediates is a 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.

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.

The effect of the huge increase of Chinese caprolactam capacity
was noticeable. The abundant supply leads to low margins and
strong competition, which resulted in several producers halting
production temporarily or permanently in 2014.

Through most of the year, benzene, caprolactam’s principle raw
material, has seen high price volatility, which impacted margins.

The construction of DSM's next generation ammonium sulfate
plant in Sittard-Geleen (Netherlands) is on schedule to start
production in 2015. The new facility will lead to energy savings
and lower caprolactam production costs.

DSM expects its caprolactam business to maintain its global
leadership position thanks to its focus on high growth
economies, sustainability and technological innovation, and an
unwavering commitment to its customers.

Bright Science. Brighter Living. 2014

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Life Sciences
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Materials Sciences
Performance Materials
Polymer Intermediates
Innovation Center
Corporate Activities
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Acrylonitrile
DSM Fibre Intermediates is the leading supplier in the European
merchant acrylonitrile market. Net acrylonitrile sales were higher
than the previous year due to stable production and increasing
sales volumes. DSM is further strengthening the position of its
acrylonitrile business as the dedicated supplier in the European
contract market.

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 and styrene-acrylonitrile 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.

Bright Science. Brighter Living. 2014

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Review of business in 2014:
Review of business in 2014:
Review of business in 2014:
Innovation Center
Innovation Center
Innovation Center

Connecting bright
science to brighter
living

Net sales

€ 154 m

2014

2013R

- DSM Biomedical;
- DSM Bio-based Products & Services; and
- DSM Advanced Surfaces.

x € million

Net sales

Organic sales growth (in %)

Operating profit

Operating profit plus depreciation

and amortization (EBITDA)

Capital expenditure

Capital employed at 31 December

R&D expenditure

154

(45)

(18)

523

150

(43)

(9)

469

Workforce at 31 December

(headcount)

675

659

DSM Innovation Center

Since 2006, the DSM Innovation Center helps to facilitate the
company’s strategic transition to become an intrinsically
innovative organization. It serves as an enabler and accelerator
of sustainable innovation within DSM. With its Emerging
Business Areas (EBAs) and the Business Incubator, the
Innovation Center plays a fundamental business development
role, focusing on areas outside the current scope of the business
groups. The Innovation Center also includes DSM Venturing &
Licensing.

Sales increased by three percent to € 154 million. EBITDA
declined due to intensified innovation programs. DSM
Biomedical performed well. DSM Advanced Surfaces made
good progress, albeit from a low base. The main focus of DSM
Bio-based Products & Services was on starting up the
POET-DSM plant in Iowa.

Emerging Business Areas

DSM’s Emerging Business Areas provide strong long-term
growth platforms in highly promising end-markets that are based
on the company’s core competences in Life Sciences and
Materials Sciences. The company has three Emerging Business
Areas:

DSM aspires to achieve € 1 billion in sales by 2020 in its
combined Emerging Business Areas.

DSM Biomedical

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 US and the
Netherlands, it has provided medical device materials
development and manufacturing to medical device companies
for over 25 years. These products address key trends in
medicine, from treating an aging population to caring for more
active lifestyles − meeting the need for safer, less invasive
procedures that are also more cost-effective.

By using its wide range of state-of-the-art capabilities, DSM is
able to develop and produce innovative materials, as well as
components, sub-assemblies and full medical devices for its
customers. Its broad portfolio of biomedical materials,
technologies and capabilities includes biomedical polyurethanes
and polyethylenes, resorbable polymers, ceramics, collagens,
extracellular matrices, silicone hydrogels, device coatings, and
drug delivery platforms. These products are used in applications
in some of the most attractive high growth markets, including
orthopedics, sports medicine, ophthalmology, general surgery
and cardiology.

The global market for medical devices is estimated to be worth
around € 150 billion and is growing at an annual rate of between
approximately four and five percent. Of this amount, between
€ 1 - 2 billion is accessible to DSM Biomedical. Demand is rising
for cost-effective devices that improve the lives of patients and
offset rising expenditure in healthcare. This long-term trend gives
the global biomedical market excellent growth prospects for the
period ahead.

DSM Biomedical aims to be a strong partner to its medical device
customers as its broad portfolio of technologies can meet
multiple needs. Its scalable business is positioned better than

Bright Science. Brighter Living. 2014

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processes corn crop residues to produce cellulosic bio-ethanol
through a bioconversion process using enzymatic hydrolysis
followed by fermentation. Good progress was also made in R&D
on conversion technologies (including yeast and enzymes) and
microbial oils, which led to an increase in the cost effectiveness
of DSM technologies in various applications.

Due to ongoing lack of clarity on the direction that the debate on
the Renewable Fuels Standard (RFS) in the US will take,
willingness to discuss license commitments for the construction
of additional cellulosic bio-ethanol capacity has decreased
considerably in this country. The recent decision by the US
Environmental Protection Agency not to finalize the 2014 RFS
ruling has not alleviated that situation. In response, POET-DSM
is actively looking for licensing opportunities in other regions,
including Latin America, South-East Asia and Europe.

Review of business in 2014

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

ever to capitalize on the growth opportunities that the medical
device market will offer.

DSM’s ambition is to be a leading development partner that is
trusted by the medical industry to shape the future of
biomaterials and regenerative medical devices. Continuous
growth in DSM Biomedical’s existing businesses, venturing and
incubating new technologies and solutions, as well as
acquisitions will contribute to this.

In the year, DSM announced that its first in-house medical
coating service plant was ready for commercial production. It
also expanded its Dyneema Purity® fiber portfolio with the
release of Dyneema Purity® Radiopaque fiber and delivered a
six-month study with the University Medical Center Utrecht into
the use of this material in fiber-based heart valves.

The business expanded its biomedical business in the year with
the launch of its cellular therapy development services. It also
made progress in partnerships in new devices and clinical trials,
while the DSM-DuPont joint venture, Actamax, announced
positive results from its first clinical trials for its novel sprayable
adhesion barrier device.

DSM Bio-based Products & Services

DSM’s competences in industrial biotechnology are at the core
of its strategic focus on Life Sciences and Materials Sciences.
As the world moves away from its dependencies on fossil
resources and towards a more sustainable economy that is
based on bio-renewable feedstocks, there are significant
opportunities in advanced biofuels such as cellulosic bio-
ethanol, and in renewable building blocks like bio-based succinic
acid.

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, enabling them to convert biomass in a
commercially viable and sustainable way.

Cellulosic bio-ethanol (POET-DSM Advanced Biofuels)1
September saw the grand opening of project LIBERTY, the
commercial-scale plant of the POET-DSM Advanced Biofuels
joint venture (50/50) in Emmetsburg (Iowa, USA). This
production facility for cellulosic bio-ethanol has a capacity of up
to approximately 25 million gallons (~90 million liters) per year. It

1 DSM's interest in the net result is reported as part of Associates as of 2014

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POET-DSM Advanced Biofuels intends to replicate and license
the technology worldwide.

POET-DSM

x € million (100%)

2014

2013R

Net sales

Operating profit

Operating profit plus depreciation

and amortization (EBITDA)

Capital employed at 31 December

(8)

251

146

Bio-succinic acid (Reverdia)2
Reverdia – the joint venture between DSM and Roquette Frères
− operates its Biosuccinium™ plant in Cassano (Italy), and aims
to license its BiosucciniumTM technology to third parties. This
creates a clear advantage for companies that want to integrate
bio-succinic acid production into their business offering,
enabling competitive production of bio-based materials.

DSM Advanced Surfaces

DSM Advanced Surfaces aims to accelerate the uptake and
effectiveness of solar energy by focusing on the development
and commercialization of technologies and materials solutions
that increase the efficiency of solar modules, reducing the cost
of the energy produced.

In 2014, the business delivered double digit growth, which
underpins the appeal of its anti-reflective coating product
KhepriCoat® applied to solar panel cover glass in the solar
photovoltaic (PV) industry. Increased production was possible
due to the opening of the dedicated manufacturing plant in
Sittard-Geleen (Netherlands) in 2013. It is estimated that the total
attainable market for KhepriCoat® will amount to between
€ 250-300 million by 2020.

In September, DSM Advanced Surfaces inaugurated its Solar
Technologies Demonstration Center at the DSM Engineering
Plastics facility in Pune, India. This state-of-the-art solar
technology center has been built to demonstrate and showcase
the performance of DSM's innovations in solar technology and
will also reduce the plant’s CO2 footprint by using the renewable
energy generated by the center to help power the site. DSM also
inaugurated a solar plant using PV panels coated with
KhepriCoat® at its facility in Belvidere (New Jersey, USA) in the
year, helping to meet the site’s energy needs with locally
produced renewable energy.

2 DSM's interest in the net result is reported as part of Associates as of 2014

In October, the business announced a partnership with Beneq,
the Finnish supplier of production and research equipment for
thin-film Atomic Layer Deposition and aerosol coatings. It also
entered into a three-year participation in the Solliance CIGS
Research program that focuses on developing new solutions for
solar modules. DSM will contribute its expertise in the field of
textured surfaces (light trapping technology). In the year, a multi-
functional project team focused on delivering an outdoor durable
UV-curable resin. This production process applies the required
texture on a flexible film and an application process for retrofitting
onto PV panels. It is estimated that the attainable market for light
trapping technology will be worth approximately € 1-3 billion by
2020.

Looking ahead, DSM Advanced Surfaces will leverage its
expertise in materials science to build a portfolio of ventures in
innovative materials and technologies that support the
development and commercialization of more efficient PV
modules.

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.

DSM Venturing & Licensing

DSM Venturing & Licensing invests in early to late stage
innovative companies in areas strategically relevant to DSM’s
current and future businesses. In 2014, it continued to
implement its strategy to focus on Human Nutritional Health,
Biomedical, Solar and incubators. In 2014, three new direct and
four follow-on investments were made. DSM Venturing &
Licensing ended its participation in six companies in 2014.

In the year, DSM invested in Isobionics B.V., an emerging
company active in developing, producing and selling a range of
natural products for the Flavor & Fragrance and Agrochemical
market. This was followed by an investment in Zeavision
Holdings Inc., maker of the EyePromise® brand of eye health
supplements. ZeaVision pioneered the use of Zeaxanthin, a
natural antioxidant and photo-protectant, for eye health.

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Life Sciences
Nutrition
Materials Sciences
Performance Materials
Polymer Intermediates
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Corporate Activities
Pharma Partnerships

Corporate Activities

Any consolidated activities and businesses that are outside the
four 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 company.

x € million

Net sales

Operating profit

Operating profit plus depreciation

and amortization (EBITDA)

Capital expenditure

R&D expenditure

2014

2013R

173

(149)

(90)

195

(127)

(76)

Workforce at 31 December

(headcount)

3,281

3,204

Sitech Services
Sitech Services provides manufacturing services, park services
and Safety, Health & Environment services for the Chemelot
industrial site in Sittard-Geleen (Netherlands).

DSM Insurances
The company retains a limited part of its material damage and
business interruption and product liability risks via DSM’s captive
insurance company. In 2014, the total retained damages were
€ 25 million, of which € 15 million related to the fire at DSM
Nutritional Products, Sisseln (Switzerland).

Corporate Research
The total costs of the Corporate Research Program have been
reported under Corporate Activities since 2011.

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Pharma Partnerships

DSM’s former Pharma cluster now consists of DSM’s interests
in DPx Holdings (49 percent), formed by combining DSM
Pharmaceutical Products and Patheon Inc., a leading provider
of contract development and manufacturing organization
(CDMO) services, pharmaceutical products and other
formulated products for various industries; and DSM's 50
percent share in DSM Sinochem Pharmaceuticals, market leader
in beta-lactam anti-infectives.

With the formation of DPx Holdings in 2014, DSM concluded its
strategic objective of Leveraging partnerships for growth for its
Pharma cluster.

As of 2014 the Pharma cluster is no longer included in DSM’s
EBITDA, and DSM reports on its investments in the related
ventures as associates in accordance with the equity method.

DPx Holdings

DPx Holdings was formed in 2014 as part of a USD 2.6 billion
transaction between JLL Partners and DSM. DPx is positioned
to add scale, new value chain capabilities and technologies, as
well as to expand its end-to-end service offerings as a
comprehensive solution provider to the pharmaceutical industry.

Born from the shared vision between Patheon and DSM
Pharmaceutical Products (DPP), DPx’s strategy is built upon the
collective reputations of quality, innovation, customer service
and operational excellence. These same core commitments are
at the center of each of the business units, which operate under
the Patheon, DPx Fine Chemicals and Banner Life
Sciences brand names. The integration has progressed quickly.

DPx successfully acquired Gallus BioPharmaceuticals in 2014,
a leading contract manufacturing company specializing in
biologics, to expand its biologics activities. This has further
strengthened DPx’ integrated service offering, which supports
the entire product development cycle, from preclinical phases
through to launch and commercial supply, to companies
involved in biologics, emerging pharma and generics, as well as
to large pharma players.

From closing until the end of fiscal year 2014 (ending 31
October), DPx Holdings realized net sales of € 984 million with
an EBITDA before exceptional items of € 177 million. Operating
profit amounted to € 92 million. Pro-forma sales for the fiscal year
2014 were around € 1.6 billion.

DSM Sinochem Pharmaceuticals

DSM Sinochem Pharmaceuticals (DSP) is a global leader in
generic anti-infective molecules. DSP develops, produces and
sells raw materials, intermediates and active pharmaceutical
ingredients (APIs) as well as finished dosage. It is at the forefront
of technological and process developments for anti-infectives
and cholesterol-lowering molecules, using environmentally-
friendly production technologies based on biotechnology.

As a 50/50 joint venture between DSM and Sinochem, DSP is a
market leader in enzymatic beta-lactam APIs, with nearly 500
patented innovations in this field. It is also a B2B provider of
generic drug products. Full backward integration and control of
its supply chain with the advantage of using its own high-quality

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APIs delivers unique quality and performance in the finished
dosage formulation and sets DSP apart from its competition.

Sustainability is a key driver in DSP's antibiotics business. Nearly
all of DSP’s high-quality APIs are manufactured using enzymatic
processes, which allow the production of APIs with a much lower
CO2 footprint versus comparable chemically manufactured
products, including DSP’s PureActivesTM range of sustainable
antibiotics. DSP actively promotes the sustainable and
responsible use of antibiotics throughout the value chain.

DSP’s performance in the year was further supported by solid
growth at its Yushu (China) 6-APA plant.

DSP expanded its API portfolio by the construction of a multi-
product plant in Toansa (India). The facility will help to meet the
increasing demand for DSP’s high-quality products in
cardiovascular while also driving further expansion of its portfolio
in defined therapeutic segments. To begin with, production of
atorvastatin started in the second half of 2014, using DSP’s
proprietary enzymatic (bio)technology route.

Atorvastatin is currently the most prescribed drug globally for
cardiovascular applications and one of the top selling drugs
worldwide.

DSM Sinochem Pharmaceuticals

x € million (100%)

2014

2013R

Net sales

Operating profit

Operating profit plus depreciation

and amortization (EBITDA)

Capital employed at 31 December

399

322

368

(2)

330

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Financial and reporting policy

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'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.

Tax policy

DSM is transparent towards all tax authorities and collaborates
with them to determine the amount of tax due. DSM
acknowledges that its obligation is to contribute the amount of
tax owed to authorities and to apply tax practices that comply
with the letter as well as the spirit of the tax laws 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. For calculating transfer prices, the arm’s length
principle is always applied. The level of DSM’s effective tax rate
as a percentage of pre-tax profit reflects the geographic spread
of the results over the years, also as a result of acquisitions and
divestments, and of the application of tax regimes in countries
where DSM operates.

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 18. 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 2019, including an extension option,
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 as well as the
award of restricted shares, DSM buys back shares insofar as this
is desirable and feasible. In 2014 3,733,055 shares were
repurchased (1,266,945 shares were repurchased in 2013).

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

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Financial and reporting policy

Financial policy
Reporting policy

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
business and reports on its activities in this field during 2014. In
addition to presenting developments and data for the three
categories of People, Planet and Profit, DSM also 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.

Global Reporting Initiative
DSM bases its sustainability reporting on best practice
standards and international guidelines. Most important are the
guidelines of the Global Reporting Initiative (GRI). For this report,
the company used the GRI G4 guidelines, launched in 2013. A
detailed overview of how DSM reports according to the G4
comprehensive indicators, including a reference to relevant
sections in this report, is provided on www.dsm.com. DSM does
not apply the framework of the International Integrated Reporting
Council.

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. On the basis of the
principle of materiality, 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). DSM
reports on its external recognition in the chapter on Stakeholder
engagement. DSM also reports separately on its progress in
implementing the principles of the UN Global Compact. See
page 38.

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. The Safety,
Health (People), Environment (Planet) and ECO+ 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. In the case of divestments, safety data are
consolidated until the moment of divestment. For 2014, the
safety data relating to DPP has been included up until the
moment of closing.

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.

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 ten percent.

People methodology
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. The 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 Euronext Amsterdam, 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 on the DSM website
(www.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 112. 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 on page 106
under Remuneration policy.

The functioning of and decision making within the Managing
Board are governed by the Regulations of the Managing Board,
which are in accordance with the Dutch corporate governance
code and can be found on the DSM website.

In 2014 the Managing Board had 46 formal meetings. In ten
meetings a 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 in
the chapter Supervisory Board and Managing Board on page
112. Members of the Supervisory Board are appointed for a
period of four years with a maximum of three four-year terms.

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

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
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 are in accordance with the Dutch
corporate governance code and can be found on the DSM
website.

In line with the Dutch corporate governance code the
Supervisory Board has established from among its members an
Audit Committee, a Nomination Committee, a Remuneration
Committee, and a Corporate Social Responsibility Committee.

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 DSM 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.

The current composition of the Supervisory Board is in line with
this legislation. Of the seven members, three are female and four
are male.

The appointment of Geraldine Matchett by the General Meeting
of Shareholders on 7 May 2014 as member of the Managing
Board as per 1 August 2014 is an important step towards the
aspired composition of the Managing Board in terms of gender
balance.

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

- 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 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 the DSM website.

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 60 days before the date of the Annual General Meeting of
Shareholders.

The Annual General Meeting of Shareholders was held on 7 May
2014. The agenda was to a large extent similar to that of previous
years. Additional topics were the re-appointment of Rolf-Dieter
Schwalb as member of the Managing Board for the period of
19 October up to and including 30 November 2014, the
appointment of Geraldine Matchett as member of the Managing
Board as per 1 August 2014, the re-appointments of Rob Routs
and Tom de Swaan as members of the Supervisory Board and
the appointment of KPMG Accountants N.V. as the independent
auditor for Koninklijke DSM N.V. for an initial three-year term that
covers the years 2015, 2016 and 2017. Further details can be
found on the DSM website.

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).

declaration of dividends;

- There are no special statutory rights attached to the shares of

- release from liability of the members of the Managing Board

the company.

and the Supervisory Board;

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- 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 in the
sections Issue of shares and Repurchase of own shares
below.

- Other information can be found in the notes to the

consolidated financial statements (16 Equity, 20 Borrowings,
28 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 7 May
2014 this power was extended up to and including 7 November
2015, on the understanding that this authorization of the
Managing Board is limited to a number of ordinary shares with a
nominal value amounting to ten percent of the issued capital at
the time of issue, and to an additional ten 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 the DSM 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 three 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
following shareholders had disclosed that they have a direct or
indirect (potential) interest between three percent and ten
percent in DSM’s total share capital on 1 January 2015:

- ASR Nederland B.V.
- Rabobank Nederland Participatie B.V.
- Delta Lloyd N.V.
- Capital Research and Management Company and Capital

Group International

- Blackrock, Inc.
- Third Point LLC (indirect interest)

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 7 May 2014 the Managing Board
was authorized to acquire own shares for a period of 18 months
from said date. On 27 February 2014 DSM announced its
intention to repurchase 2,500,000 ordinary shares for the
purpose of covering the company’s commitments under existing
management and employee option plans, the second phase of
a program announced in September 2013 to repurchase
5,000,000 ordinary shares. Under this program a total of
5,000,000 shares were repurchased for a combined
consideration of € 262.5 million. The program was successfully
finalized on 19 May 2014.

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 DSM 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 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 (CFO) has
no business groups reporting to her.

The following figure depicts DSM's overall governance
framework and the most important governance elements and
regulations at each level.

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

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.

- 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 the CEO/
Chairman of the Managing Board or the 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, which is held every five years. 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.

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.

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ShareholdersArticles of AssociationSupervisory Board• Regulations of the Supervisory Board• Charter of the Audit Committee• Charter of the Nomination Committee • Charter of the Remuneration Committee• Charter of the Corporate Social ResponsibilityCommitteeManaging Board / Corporate• Regulations of the Managing Board• Management Framework for the corporate level• DSM Code of Business Conduct Operational unitsManagement Framework for operational units
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.

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 furthermore oversees the
Inclusion & 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 page 104.

At a corporate level, sustainability is organized across a network
of senior executives and employees. They are supported by the
Corporate Sustainability department, which is under the
responsibility of the Vice President Sustainability and Public-

Private Partnerships, 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 2014: once in the
Netherlands and once in Brazil, where they discussed subjects
such as DSM's energy approach, sustainable animal protein and
business solutions for societal needs together with the Managing
Board and the Supervisory Board.

Global network
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 China, India and Latin
America.

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Corporate governance and risk management

Introduction
Dutch corporate governance code
Governance framework
Risk management
Statements of the Managing Board

Sustainability Advisory Board

Member

Background

Amir Dossal (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 Institute
for Sustainability Leadership (CISL). In 2011 he published his book “The Great Disruption”. In the 1990s,
he was executive director of Greenpeace International. Nationality: Australian.
Pamela Hartigan (f) Director of the Skoll Centre for Social Entrepreneurship at Saïd Business School in Oxford, Associate

Paul Gilding (m)

David King (m)

Ye Qi (m)

Professor at Columbia Business School and founding partner of Volans Ventures. 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 Brooking-Tsinghua Center for Public
Policy at Tsinghua University in Beijing. Before he joined Tsinghua, he taught at Beijing Normal University,
and the University of California at Berkeley. Nationality: American.

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.

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, a full
description of DSM’s risk management system and process

together with a description of the identified risks is available 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 2014

The important events in risk management in 2014 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
www.dsm.com, describes principles in the areas of People
(social and humanitarian standards), Planet (environmental
principles) and Profit (principles regarding fair and ethical
business practices). In 2014, the mandatory biennial e-learning
course on the Code of Business Conduct was completed by
more than 90 percent of all eligible employees. Newly acquired
businesses in Latin America will be trained in 2015. Classroom
training is ongoing for a limited group of employees who do not
have access to e-mail. A DSM Anti-Bribery and Corruption Policy
and Compliance Manual and the corresponding e-learning tool

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are deployed company-wide 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:

- 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 (CRA). For specific
units, the risk appetite may deviate from the overall company
profile and management in business units are encouraged and
facilitated to discuss risk appetite with their teams.

Objectives and risk identification, assessment and response
In line with the mandatory risk management process, business
groups that updated their strategy in 2014 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 twice-yearly reporting process, in which
risks are reported in terms of exposure (impact multiplied by
probability). Additionally, risk assessments were performed by a
number of corporate staff units and regions, on major projects
and as part of the compliance programs of new acquisitions.

In 2014, the Managing Board updated the CRA. Based on the
results of the CRA conducted in 2013, 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 8 December 2014. 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 9 February 2015. 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 2015 set in
the DSM in motion: driving focused growth strategy.

The table on the next page shows the most important risks for
DSM not achieving its targets and the remedial actions to
mitigate them.

Following the CRA in 2014, 'Exposure to merchant market for
caprolactam' no longer qualifies as a 'top risk' as this risk has
meanwhile materialized. This business is not expected to meet
the financial returns DSM is looking for and is also strategically
no longer interesting for DSM. DSM has therefore decided to
pursue strategic actions for Polymer Intermediates, the cluster
that includes caprolactam and acrylonitrile.

In addition, 'Risks related to high growth economies' no longer
qualify as a 'top risk' either, because DSM has further detailed
its country and region-specific strategies. The current
economic slowdown in the high growth economies is not likely
to be structural. More power and freedom has been given to the
regional organizations to achieve their strategic goals, which
mitigates this risk.

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Corporate governance and risk management

Introduction
Dutch corporate governance code
Governance framework
Risk management
Statements of the Managing Board

Description of risks

Mitigating actions

The top risks and related mitigating actions

Market environment
In 2014, DSM experienced challenging market conditions in
human nutrition with limited growth and some price pressure.
There is a risk that market recovery will be slow or that markets
will even deteriorate.
Increased competition in vitamins has led to reduced prices in
2014, especially in Vitamin E, which accounted for around
eight percent of Nutrition sales in 2014.
Performance Materials end-markets still experience low
growth in some geographies. Risks for 2015 are that end-
markets remain subdued or even deteriorate.

Global financial and economic developments
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. In
2014 the negative impact of foreign currency movements on
net sales versus the previous year was not significant (2013:
minus two percent).

DSM is leading the development of an omega-3 and
multivitamin coalition in the US to promote the intake of these
essential nutrients, whereas for Vitamin E amongst others, new
forms and products are being introduced, and strong science
is being leveraged to move customers to increased inclusion
levels.
For Performance Materials, sustainable innovation is being
combined with margin optimization programs.
Both Nutrition and Performance Materials are to fully
implement running restructuring programs, including
operational costs reductions to improve competitiveness.

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.

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 human
resources in terms of quantity and quality to execute all
programs and projects.

Continued attention will be given to the implementation of
stronger regional and functional talent management and career
development. Focus and priority setting will secure proper
project execution and implementation. At the same time, DSM
will continue its ONE DSM Culture Agenda.

Strategic actions
Successful execution of strategic actions in Polymer
Intermediates and Composite Resins (in total reflecting
~20 percent of DSM’s net sales in 2014) is dependent on the
development of these businesses and third-party interest.

DSM will explore all options to achieve these strategic actions
and in the meantime continue to improve the operational
performance of these businesses through cost improvement
programs.

Operational excellence
DSM may not meet top quartile performance in certain
functional areas.

Continued focus will be placed on improving all operational
processes, sharing best practices across functions, and
benchmarking operational efficiency and costs, both internally
as well as externally.

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Other important 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. Partnerships and joint ventures
are kept at arms’ length via contracts based on specific joint
venture requirements; qualified board members have to
mitigate joint venture risks.

- 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 has achieved good progress 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. Simplifying 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 and Security (including

information security)
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. In the area
of the security of production assets, continued focus is given
to monitoring and implementation of key security behaviors to
prevent a possible incident of data fraud/theft, given the

increasing tension between the growing sophistication of
cybercrime and widespread use of (mobile) IT and social
media. Technology improvements (identity management) have
been implemented to further mitigate this risk.

- Business Continuity risks

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 like
insurances for the most important scenarios.

- 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.

Emerging risks
Identified emerging risks are climate change, energy scarcity and
water shortage. DSM is aware of these emerging risks and
actively monitoring them to anticipate possible mitigating
actions.

Control activities
Each business group, major region and relevant staff or
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

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Introduction
Dutch corporate governance code
Governance framework
Risk management
Statements of the Managing Board

Requirements are only allowed temporarily, if sufficient
alternative controls are in place and after approval by the
responsible Managing 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.
A specific regional risk assessment was performed in Russia in
2014. Employee webinars were held and dilemma discussions
were started in order to increase general awareness of risk
management.

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. The
Corporate Operational Audit department has further
strengthened its way of working by starting to implement a new
method of more risk-based auditing. 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. By simplifying the
authorization design and supported by advanced technology
DSM was able to support the business in reducing its internal
controls risks in standard goods and money-flow processes
significantly.

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 2014 and the status of the mitigation of the
risks reported over 2013, and to specify any material risks or
uncertainties for the rest of the year. By raising the materiality
level of risk impact in consultation with the external auditor,
simplification facilitated focus on top risks and improved
attention for progress of mitigating actions. 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 year figures in accordance
with the requirements of the Dutch Financial Markets Supervision
Act.

Enhancements to the risk management system
During 2014, 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 Anti-Bribery and
Corruption via a policy, compliance manual and e-learning for a
dedicated target audience. The Corporate Requirements were
improved in purchase to pay, sourcing, communication and
trade controls. 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 2014 on Russia and
China.

- Innovation: Improved risk assessment practices, including
Monte Carlo business simulations and value engineering
workshops and external orientation, were applied to scenario
planning and the balancing of risks as well as opportunities.

- Sustainability: Further implementation of the control

framework for ECO+ solutions, implementation of actions
defined in the sustainability risk assessment and enhancing of
the implementation of a framework for People+.

- 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 (China)
and in North America, where many newly acquired businesses
are being integrated.

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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, 2 March 2015

The Managing Board

Feike Sijbesma, CEO/Chairman of the Managing Board
Geraldine Matchett, CFO
Stefan Doboczky
Stephan Tanda
Dimitri de Vreeze

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Introduction
Dutch corporate governance code
Governance framework
Risk management
Statements of the Managing Board

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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 2014
an important part of its activities was focused on operational
performance and strategy; refining the business portfolio
assumptions as well as preparing the new corporate strategy
update to be discussed and approved in 2015.

Furthermore, the Supervisory Board was closely involved in
reviewing the corporate risk assessment carried out in the year,
discussing the Top 5 risks identified from a strategic, business
and operational point of view 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 the Supervisory Board
The composition of the DSM Supervisory Board is diverse in
gender (four male, three female), nationality (four Dutch, one
Swiss and two 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 112 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. The Supervisory Board has four
committees to cover four key areas in greater detail: 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 committees is given below. The
charters of the committees are published on the DSM website
under Corporate Governance.

Composition of the Managing Board
The Managing Board is diverse in nationality (two Dutch, two
Austrian and one member being a Swiss, British and French
citizen), background, knowledge and experience, and provides
a good foundation to support all clusters and business groups
in achieving their targets and so contributing to the company
strategy aimed at driving focused growth. In 2014 the Managing

Board became more diverse in terms of gender with the
appointment of Geraldine Matchett as Board Member and CFO.

For detailed background information on all Managing Board
members see the DSM website under Corporate Governance
and page 113 of this report.

Meetings and business topics
In 2014 the Supervisory Board had six meetings and one
conference call with the Managing Board. On two occasions, a
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, the Boards had in-depth discussions on
operational performance and the progress of the execution of
DSM’s strategy, as well as the preparation for an update of
DSM’s overall strategy to be discussed and approved in 2015.
Apart from its meetings with the Managing Board, the
Supervisory Board and its Committees also regularly had
meetings without the presence of the Managing Board or CEO.

For the Nutrition cluster discussions were focused on organic
growth and improving performance, among other things against
the backdrop of a slowdown in some human nutrition end-
markets and pricing pressure in several product segments
(notably in Vitamin E).

Discussions on the Materials Sciences clusters remained
focused on efficiencies, ongoing cost control, improving
performance by upgrading the Performance Materials cluster’s
portfolio and reducing exposure to the volatility of the Polymer
Intermediates markets. Regarding Innovation, discussions were
particularly focused on the innovation pipeline and on the
Emerging Business Areas (EBAs) with topics including the
opening of the cellulosic bio-ethanol plant (a joint venture
between DSM and POET) in the US and the inauguration of the
solar technology demonstration center in India.

Sustainability discussions were focused on People and Planet
targets; safety, health and environment; and inclusion and
diversity received particular attention. It was established that
progress made was in line with aspirations.

As High Growth Economies are also an important business
growth driver for DSM, one of the Supervisory Board meetings
was held in Sao Paolo (Brazil) and included extensive site visits.
During these visits the Supervisory Board was informed about
the progress made in Brazil in the area of both Life Sciences and
Materials Sciences. The visits included locations in Campinas
and Mairinque, where the Supervisory Board was updated on
the business of acquired companies Fortitech (global leader in
food ingredient blends, acquired in 2012) and Tortuga (Brazilian

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Report by the Supervisory Board

Supervisory Board report
Remuneration policy for the Managing Board and the
Supervisory Board

market leader in organic trace minerals for animal nutrition and
health, acquired in 2013) and on progress made in integrating
these businesses in the Nutrition cluster. In addition a visit was
made to Aurora Alimentos, a local customer of DSM.

Financials and auditing
The Audit Committee met three times in 2014 and in addition
had four conference calls to discuss financial developments and
interim results. On two occasions a member was excused. Tom
de Swaan (chair), Pierre Hochuli and Victoria Haynes are the
members of the Audit Committee. All Supervisory Board
members have a standing invitation to attend Audit Committee
meetings, which they do on a regular basis. In addition to the
Supervisory Board member, the external auditor and the CFO
and CEO participated in these meetings and, whenever relevant,
managers responsible for corporate control, internal audit, risk
management and compliance were invited to explain
developments in their areas to the Audit Committee. The
highlights and the minutes of all meetings were shared with the
full Supervisory 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,
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. As part of the
corporate risk assessment, the main risks of low organic growth,
price deterioration, insufficient progress in capturing innovation
value, economic and financial volatility, and the mitigation of
those risks, were extensively discussed.

The committee also discussed and evaluated cases submitted
under DSM’s whistleblower policy (DSM Alert), and mitigating
actions to prevent recurrence.

The Audit Committee discussed as well the transition plan for the
handover from EY to KPMG, who will take over the external audit
work as of January 2015, and monitored progress.

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 was
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.

Discussions were held with EY about the financial statements for
2014. As part of the planning process, key audit matters dealing
with, among others, the valuation of goodwill, the possible
impairment of the caprolactam business, the partnering of the
DSM Pharmaceutical Products business, and the
implementation of new accounting standards affecting the
accounting treatment of several affiliated companies, were
explained and shared with the Audit Committee.

The Report by the Managing Board and the financial statements
for 2014 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 2 March 2015. 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 new legislation in the Netherlands as well as
European legislation with regard to the independence of auditors
(mandatory audit firm rotation), KPMG was appointed at the
Annual General Meeting of 2014 as the new external auditor for
DSM as of 2015, for an initial period of three years.

Financial statements 2014
The Supervisory Board will submit the 2014 financial statements
to the 2015 Annual General Meeting of Shareholders, and will
propose that the shareholders adopt them and release the
Managing Board from all liability in respect of its managerial
activities and release the Supervisory Board from all liability in
respect of its supervision of the Managing Board. The profit
appropriation as proposed by the Managing Board and
approved by the Supervisory Board is presented in the Profit
appropriation section of the 2014 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 2014 nomination discussions were focused on succession
planning. The Nomination Committee discussed the proposed

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appointment of Geraldine Matchett as successor to Rolf-Dieter
Schwalb; her appointment as a member of the Managing Board
and CFO was approved by the General Meeting of Shareholders
in 2014. The Committee furthermore extensively discussed the
succession planning of the entire Managing and Supervisory
Board. As part of the planning process, the nomination for re-
appointment of Stephan Tanda and Stefan Doboczky, whose
terms as Managing Board member expire in 2015, was
discussed. In addition, the nomination for re-appointment of
Pauline van der Meer Mohr was addressed as her term as
Supervisory Board member also expires in 2015. As Pauline van
der Meer Mohr is a member of the Nomination Committee, this
discussion was held in her absence. Other members of the
Nomination Committee are Rob Routs (chair) and Ewald Kist.
Feike Sijbesma and Peter Vrijsen, Executive Vice President of the
Corporate Human Resources department, were also involved in
these discussions.

Taking into account the Supervisory Board profile, as laid down
in the Supervisory Board regulations, the Nomination Committee
continued discussions on the overall composition of the
Supervisory Board. The Committee met four times in 2014; all
members attended all meetings. Recommendations and
minutes of all Nomination Committee meetings were shared with
the entire Supervisory Board.

Board remuneration
The Remuneration Committee had three meetings and one
conference call in 2014. One member was excused from the
conference call. 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 Peter Vrijsen were also 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.

Within the context of the Committee discussions, the subject of
Supervisory Board members holding shares in DSM was
also discussed. Although not common practice in the
Netherlands and based on the understanding that a decision to
hold shares in DSM is fully left to the individual Supervisory Board
members, DSM would support the idea of Supervisory Board
members having a shareholding in the company (e.g. equivalent
to their annual fee) to emphasize their confidence in the strategy
of DSM.

of this committee are Pauline van der Meer Mohr (chair), Pierre
Hochuli and Eileen Kennedy. The Chair of the Supervisory Board,
who has a standing invitation, participated in all meetings. In the
first meeting there was extensive discussion on the Sustainability
Information to be included in the Integrated Annual Report
including the auditors’ findings, partly in the presence of the
external auditor.

The second meeting focused on the follow-up of the
implementation of the corporate strategy 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 25 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
recommendations and minutes of both meetings were shared
and discussed with the entire Supervisory Board during its
meetings with the Managing Board. The committee's view that
DSM is doing well when it comes to sustainability 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 CSR Committee as well as the other members of the
Supervisory Board also participated in one of the meetings of
DSM’s external Sustainability Advisory Board, which acts as an
external sounding board and meets with DSM's top
management twice a year.

In view of the Board's supervision of sustainability issues relevant
to the company, the sections 'DSM in motion: driving focused
growth', 'Growth driver: Sustainability', 'Stakeholder
Engagement', 'People in 2014' and 'Planet in 2014' (the
Sustainability Information) in the Integrated Annual Report 2014
were reviewed and subsequently discussed by the entire
Supervisory Board in its meeting of 10 February 2015, based on
the advice of its CSR Committee. With the Independent
Assurance Report on the Sustainability Information by EY on
page 204 of this Integrated Annual Report taken into
consideration, the full Supervisory Board approved the reporting
in these sections. The Sustainability Information is in compliance
with the G4 sustainability reporting guidelines of the Global
Reporting Initiative and the internal reporting criteria of DSM,
which are included in this Integrated Annual Report.

Supervisory Board meetings and performance evaluation
As in previous years, an extensive Board evaluation was carried
out in 2014 on the basis of written questionnaires and interviews
with each of the Supervisory Board members.

Corporate Social Responsibility
The Corporate Social Responsibility (CSR) Committee met twice
in 2014; all members participated in these meetings. Members

The review assessed the collective performance of the Board
and its Committees and the performance of the Chairman. The
overall feedback from the self-evaluation was that the Board is
operating well and discussions are very open and constructive.

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Key areas of strategy, business performance and risk
management are well covered; in the coming year more attention
will be given to talent management, the implementation of the
Code of Business Conduct and the impact of sustainability
targets. This outcome was presented and discussed in the
December meeting of the Supervisory Board. 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

General Meeting of Shareholders of 3 May 2013 approved a
number of changes which were aimed at:

This chapter outlines the remuneration policy as approved by the
Annual General Meeting of Shareholders. Details of actual
remuneration in 2014 can be found in the Consolidated Financial
Statements on page 192.

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.

- aligning 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;

- updating the policy in line with the most recent prevalent

market practices and benchmarks for executive and board
compensation; and

- further strengthening pay for multi-dimensional, people-

planet-profit driven performance within DSM.

The approved adjustments did not change the overall
remuneration model 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 in addition – for STI only – individual targets.

Full details of the adjustments can be found in the 2013
Integrated Annual Report, however the adjustments can be
summarized as follows:

- Strengthened the link between the Short-Term Incentive (STI)
and long-term value creation with the introduction of an STI
Deferral and Share Matching Plan requiring Managing Board
members to invest a proportion of their actual STI payment
earned in a given year in DSM shares, which shares the
company can match upon achievement of certain long-term
(LTI) performance conditions at the end of a three-year period.
As a result, the annual STI outcome has partly been converted
into a long-term (risk taking) performance plan.

- Established 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
measures amount to 50 percent of total STI and the non-
financial (sustainability and individual) measures also to 50
percent.

- DSM’s policy is to offer the Managing Board a total direct

- Added a new provision to the policy, stating that no STI payout

compensation approaching the median of the labor-market
peer group.

No adjustments to remuneration policy
for the Managing Board in 2014

There were no adjustments to DSM’s remuneration policy in
2014. The policy was last adjusted in 2013, when the Annual

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.

- Introduced Return on Capital Employed (ROCE) as a second
financial measure to the Long-Term Incentive (LTI) in addition
to total shareholder return (TSR), as well as introducing a
second long-term sustainability measure to the LTI, namely

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Energy Efficiency Improvement, in addition to the greenhouse-
gas emissions reduction measure already in place. Each
measure counts for 25 percent.

- Aligned 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 at on target
and 150 percent in the case of excellent performance), rather
than the discounted fair value method previously used. With
the introduction of the face value method, the actual number
of shares granted has been kept at a similar level as before.
- Introduced 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 five
years.

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, potentially
leading to adjustments. 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 Q4 2014, the results of which are the subject of study
by the Remuneration Committee.

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%

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. 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.

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Distribution of variable income (on target):

A: Short-Term Incentive (STI)

B: Long-Term Incentive (LTI)1

50%

Target areas

Financial targets

- EBITDA before exceptional items

- Gross free cash flow

Total variable income as % of base salary

100%

- Organic net sales growth1

1 LTI at discounted fair value

Total

On-target pay-out

(% of base salary)

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). Half of the STI opportunity
(i.e. 25 percent of base salary at on-target performance) is
related to financial targets, the other half to sustainability and
individual targets.

1 Excluding currency fluctuations, divestments and acquisitions

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 of base salary at on-target) relates to shared
sustainability as well as to individual targets. On a regular basis,
following proper evaluation, further refinement/adaptations of
performance measures in the area of sustainability and their
weight take place.

Target areas

Total

Shared

Individual

As from 2013 the following shared measures linked to
sustainability are applicable for the STI:

Financial

Sustainability and

individual

25%

- ECO+: percentage of successful product launches that meet

25%

15%

10%

- Employee Engagement Index: related to the High

Performance Norm in industry.

ECO+ criteria.

Total

50%

40%

10%

- Safety Performance (newly introduced in 2013).

Short-Term Incentive (STI) linked to financial targets
The part of the STI that is linked to shared financial targets (25
percent of base salary at on-target) consists of elements related
to the company's operational performance, being EBITDA
before exceptional items, gross free cash flow and (organic) net
sales growth, reflecting short-term financial results. The
weighting given to the separate 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.

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 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)

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define engagement and link engagement to business
performance metrics. DSM will move this survey into a two-
year cycle. From 2015, a shorter pulse survey will be held, with
the next full survey to be held in 2016.

- 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.

members. Vesting of these shares is conditional on the
achievement of certain predetermined performance targets at
the end of a three-year period.

Since 2013, four performance measures are applicable in equal
measure for the calculation of the vesting of LTI performance
shares:

- Comparable Total Shareholder Return (TSR) performance

versus a peer group

- Greenhouse-gas emissions (GHGE) reduction over volume-

Target areas

Non-financial targets

- Sustainability

- Individual

Total

On-target pay-out

(% of base salary)

related revenue

- Return on Capital Employed (ROCE)
- Energy Efficiency Improvement (EEI)

Up to and including the 2012 grant, only TSR performance and
GHGE were applicable, which will remain the case for the 2014
realization of the 2011 grant and also (mutatis mutandis) for the
2015 LTI realization (2012 grant).

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
One of the adjustments approved by shareholders in 2013
related to the introduction of the STI Deferral and Share Matching
Plan. Under the Plan, a mandatory and a voluntary proportion of
the STI amount earned in a year is deferred into DSM shares with
a three-year vesting period. This is linked to a one-for-one
matching award on the total deferred amount under the
condition that predefined performance targets and measures are
met at the end of the three-year vesting period. The performance
measures are equivalent to the measures under the Long-Term
Incentive (LTI) Plan. The Deferral and Share Matching Plan thus
provides an additional link between Managing Board
remuneration and long-term sustainable value creation. It first
came into effect in 2014 with the STI pay-out over 2013
performance.

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

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.

- 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.

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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 fair 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 has been 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 consisted 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.

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.

TSR vesting scheme

GHGE vesting scheme

Rank

% of

DSM GHGE reduction

% of

shares that

over volume-related

vest

revenue in % points

that vest

9-13

100

5.27

4.68

4.09

3.50

2.91

2.32

1.73

<1.73

100

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.

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 2014. As of 2015 onwards EMS
Chemie Holding will be replaced by Croda International Plc.

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.

GHGE reduction as a performance measure
GHGE reduction over volume-related revenues in percentage
points (over a three-year period) is used as a basis for the vesting
of 25 percent of the performance shares (versus 50 percent for
the 2011 & 2012 LTI grant vesting).

Contractual arrangements
Term of employment
Managing Board members appointed prior to 1 January 2013
are engaged on the basis of an employment agreement for an

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indefinite period of time. Recently appointed Managing Board
members are engaged on the basis of a Management Services
Agreement with a four-year term, to be extended at
reappointment.

Term of appointment
Members of the Managing Board appointed before 1 January
2005 are appointed for an indefinite period of time. Managing
Board members appointed after 1 January 2005 are appointed
for a period of four years, after which they are eligible for
reappointment by the Annual General Meeting of Shareholders.

Notice period
Termination of employment by a member of the Managing Board
is subject to three months’ notice (six months in case of a
Management Services Agreement). A notice period of six
months will for legal reasons be applicable in case of termination
by the company.

Severance arrangement
There are no specific contractual exit arrangements for members
of the Managing Board appointed before 1 January 2005.
Should a situation arise in which a severance payment is
appropriate for such a Board member, 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.

Members of the Managing Board appointed after 1 January
2005 are covered by a severance provision in accordance with
the Dutch corporate governance code.

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.

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
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.

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.

Heerlen, 2 March 2015

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 Royal DSM

Supervisory Board

Rob Routs (1946, m), chairman
First appointed: 2010. End of current term: 2018.
Position: retired; last position held: executive
director Downstream and member Board of
Royal Dutch Shell plc. Nationality: Dutch.
Supervisory directorships/other positions held:
chairman Supervisory Board of Aegon N.V.,
member Supervisory Board of Royal KPN N.V.
(until April 2014), member Board of Directors of
Aecom Technology Corporation, ATCO Group
Ltd. and A.P. Moeller-Maersk Group.

Ewald Kist (1944, m), deputy
chairman
First appointed: 2004. End of current term: 2016.
Position: retired; last position held: chairman
Managing Board of the ING Group. Nationality:
Dutch. Supervisory directorships/other positions
held: member Supervisory Boards of Royal
Philips Electronics N.V., Stage Entertainment and
Moody’s Investor Services.

Victoria Haynes (1947, f)
First appointed: 2012. End of current term: 2016.
Position: retired; last position held: President and
CEO Research Triangle Institute International.
Nationality: American. Supervisory directorships/
other positions held: member Board of Directors
of PPG, Nucor and, as of 2013, Axiall.

Pierre Hochuli (1947, m)
First appointed: 2005. End of current term: 2017.
Position: retired; last position held: chairman
Board of Directors of Devgen N.V. Nationality:
Swiss. Supervisory directorships/other positions
held: none.

Pauline van der Meer Mohr (1960, f)
First appointed: 2011. End of current term: 2015.
Position: President Executive Board of Erasmus
University Rotterdam. Nationality: Dutch.
Supervisory directorships/other positions held:
member Supervisory Board of ASML N.V., chair
Board of the Fulbright Center, director
Hollandsche Maatschappij van Wetenschappen,
member Economic Development Board of
Rotterdam, chair Supervisory Board Rotterdam
School of Management (until December 2014),
member Board Concertgebouw Fonds (as of
January 2015) and chair Supervisory Board
Nederlands Danstheater (as of March 2015).

Eileen Kennedy (1947, f)
First appointed: 2012. End of current term: 2016.
Position: Professor Nutrition Friedman School of
Nutrition Science and Policy at Tufts University in
Boston (USA). Nationality: American. Supervisory
directorships/other positions held: Dean Nutrition
Friedman School of Nutrition Science and Policy
at Tufts University in Boston (USA), Global
Executive Director 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: 2018.
Position: retired; last position held: member
Managing Board and Chief Financial Officer /
Chief Risk Officer ABN AMRO. Nationality: Dutch.
Supervisory directorships/other positions held:
non-executive director Board of GlaxoSmithKline
plc, chairman Board of Zurich Insurance Group,
chairman Supervisory Board of Van Lanschot
Bankiers, chairman 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 Royal
DSM

Managing Board

Feike Sijbesma (1959, m), CEO/
chairman
Position: CEO/chairman Managing Board since
May 2007; member Managing Board since July
2000.
Nationality: Dutch.
Supervisory directorships/other positions held:
member Supervisory Board De Nederlandsche
Bank N.V. (Dutch Central Bank), member
Supervisory Board (Non-Executive Director)
Unilever N.V. and PLC., board member CEFIC
(European Chemical Industry Council), member
CEO Council Chinese Association for Friendship
with Foreign Countries.
e-mail: feike.sijbesma@dsm.com

Geraldine Matchett (1972, f), CFO
Position: member Managing Board since August
2014 and CFO since December 2014. End of
current term: 2018.
Nationality: British, French, Swiss.
Supervisory directorships/other positions held:
none.
e-mail: geraldine.matchett@dsm.com

Stephan Tanda (1965, m)
Position: member Managing Board since May
2007. End of current term: 2015.
Nationality: Austrian.
Supervisory directorships/other positions held:
board member and chairman Industrial Biotech
Section, EuropaBio (European Biotechnology
Industry Association), board member
scienceindustries (Swiss association for the
chemical, pharmaceutical and biotech
industries), board member BIO (US
Biotechnology Industry Organization), board
member FoodDrinkEurope (European Food and
Drink Industry Association).
e-mail: stephan.tanda@dsm.com

Stefan Doboczky (1967, m)
Position: member Managing Board since May
2011. End of current term: 2015.
Nationality: Austrian.
Supervisory directorships/other positions held:
none.
e-mail: stefan.doboczky@dsm.com

Dimitri de Vreeze (1967, m)
Position: member Managing Board since
September 2013. End of current term: 2017.
Nationality: Dutch.
Supervisory directorships/other positions held:
board member “Fonds voor de topsport”
(NOC*NSF; Dutch Olympic Committee Fund for
top sport) and member Advisory Board ECP
(Electronic Commerce Platform Netherlands).
e-mail: dimitri.vreeze-de@dsm.com

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Sustainability statements

Sustainability statements - People

Total workforce

% by age category

<26 years

26-35 years

36-45 years

46-55 years

>55

% non-Dutch

Executives

Management

Other

% female

Executives

Management

Other

% executive hires

Non-Dutch

Female

% new hires by region

Netherlands

Rest of Europe

North America

China

Rest of Asia-Pacific

Rest of the world

2014

21,351

2013R

23,485

2012

23,498

2011

22,224

2010

21,911

Total number new hires (excluding acquisitions)

1,997

1,834

2,073

2,341

1,978

Outflow of employees

Voluntary resignations

Dismissed

Reorganization

Retirements

Deceased

1,011

1,043

1,094

411

221

167

224

408

259

507

323

225

849

438

134

303

665

259

501

283

Total outflow (excluding divestments)

1,821

1,968

2,171

1,730

1,726

Divestments

Voluntary resignations (% total workforce)

Total resignations (% total workforce)

Training in hours per employee

Net sales per employee (x € 1,000)

2,479

4.7

8.5

409

4.4

8.4

4.7

9.2

1,763

1,297

3.8

7.8

3.0

7.9

401

399

410

405

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Sustainability statements

Sustainability statements − Planet

ECO+ sales

Innovation pipeline in %

Running business in %

Energy and greenhouse gases

Energy consumption1

Energy efficiency in %2
Greenhouse-gas emissions in CO2 equivalents
(x million tons)

Emissions to air

Volatile Organic Compounds (x 1000 tons)

Nitrogen Oxide (NOx) (x 1000 tons)
Sulfur Oxide (SO2) (x 1000 tons)4

Discharges to water and landfill

Chemical Oxygen Demand discharges to surface waters

(x 1000 tons)5

(Landfilling) Non-hazardous waste (x 1000 tons)

Water use
Water use (x million m3)

Raw materials

Renewable raw materials (%)

Fines (in € )

Non-monetary sanctions

Environmental incidents

Environmental complaints

2014

2013R

2012

2011

2010

39.1

4.2

1.5

0.08

3.9

18.2

41.1

163

4.2

4.3

1.6

0.07

4.8

22.7

40.6

4.3

3.5

1.7

0.13

5.5

29.9

44.6

4.6

4.3

2.2

0.48

7.0

23.9

44.6

4.6

6.7

2.7

1.36

7.8

21.8

118

150

149

154

144

10.8

9.9

8.7

62,500

62,300

45,100

70,500

671,600

297

261

316

300

336

1 Total energy consumption in 2013 has been restated because of corrections made for the DSM Fibre Intermediates plant in Sittard-Geleen (Netherlands).
2 Energy efficiency - general: All energy efficiency figures for 2010-2014 have been recalculated based on the new consolidation method. For more information see

www.dsm.com.

3 Energy efficiency - 2013R: Energy efficiency for 2013 has not been restated for the deconsolidation of DSP.
4 Total SO2 emissions in 2012 and 2013 have been restated because of corrections made for the DSM plant in Tongxiang (China).
5 Total Chemical Oxygen Demand discharge in 2013 has been restated because of corrections made for the plants of DSM Dyneema in Heerlen (Netherlands) and DSM Nutritional

Products in Leon (Spain).

DSM bases its sustainability reporting on best practice standards and international guidelines. Most important are the guidelines
of the Global Reporting Initiative (GRI). For this report, the company used the GRI G4 guidelines, launched in 2013. A detailed
overview of how DSM reports according to the G4 comprehensive indicators, including a reference to relevant sections in this
report, is provided on www.dsm.com. DSM does not apply the framework of the International Integrated Reporting Council.

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What still went wrong in 2014

Although DSM strives to improve its performance in all areas of
its operations, sometimes things can still go wrong.

one of the hoisting slings had not been properly removed and
was still connected to it. Lost workday case.

This chapter summarizes the most important incidents in 2014,
across the three dimensions of People, Planet and Profit.

- At DSM Fibre Intermediates in the Netherlands (Sittard-

Geleen), a near miss occurred when a steam boiler could have
exploded due to a potentially explosive mixture that had
inadvertently entered it.

DSM endeavors to remedy the outcome of unwanted incidents
and prevent them from recurring. To this end, it investigates the
root causes of any occurrence and take steps to communicate
appropriate measures.

- At DSM Food Specialties in the US (Germantown), a near miss
occurred when an operator was about to enter a blender
without having taken appropriate measures to do so safely.
He was stopped in time.

Where necessary, DSM applies consequence management to
individual employees based on its Code of Business Conduct
(see page 40). DSM does not disclose any personal details in
cases involving individuals.

In line with its reporting policy on safety, health and environment,
DSM includes some serious near misses within this overview.
These are incidents that did not result in injury, illness or damage,
but had the potential to do so, and are therefore used as a
learning opportunity.

People

- At DSM Nutritional products in the US (Fortitech,

Schenectady, New York), a contractor employee injured his
right arm/elbow when he became stuck between a forklift
truck and a pallet. This was due to a misunderstanding
between the forklift truck driver and the contractor. Lost
workday case.

- At DSM Engineering Plastics in the Netherlands (Sittard-
Geleen), a contractor employee was injured during the
construction of a new building. The contractor stepped on a
wooden plate that was covering a hole. The plate broke,
causing the man to fall about four meters through the hole.
Lost workday case.

- At DSM Nutritional products in Singapore (Fortitech),

a contractor employee dislocated his shoulder and elbow
when he fell from a ladder. He lost his balance while using both
hands to pull cables through a pipe. Lost workday case.
- At DSM Food Specialties in France (La Ferte), an employee
lost the top of one finger when it became caught in the door
of a machine. This required medical treatment.

- At DSM Nutritional products in Switzerland (Sisseln), an

employee suffered second-degree burns to his neck and
shoulders from hot water. An installation made from glass
suddenly broke and sprayed hot water on the employee who
was working nearby. Lost workday case.

- At DSM Food Specialties in the Netherlands (Delft), a

- At DSM Food Specialties in France (Seclin), an operator

suffered a deep cut to his right index finger and damaged the
tendon shaft while manually handling an empty container
without wearing gloves. Lost workday case.

- At DSM Nutritional Products in Brazil (Fortitech, Campinas), a
near miss occurred when an operator fell 2.85 meters, but was
not injured. He had been cleaning an area above the ceiling of
a recently constructed sample room. He stepped on the
weakest part of the ceiling (made from plaster), which gave
way and caused him to fall through.

- At DSM Fibre Intermediates in the Netherlands (Sittard-

Geleen), a near miss occurred when a contractor employee
from a scaffolding company could have fallen five meters when
the section of grating floor he was walking on suddenly
collapsed. The contractor was able to hold on to nearby
piping.

- At DSM Fibre Intermediates in the US (Augusta, Georgia), two
operators narrowly escaped injury when a furnace they were
starting up via a local control panel suddenly exploded. The
force of the explosion blew one side of the furnace away in the
opposite direction of the location in which the operators were
standing.

- At DSM Nutritional Products in Brazil, a contractor employee
was on his way to visit a customer when a bus, coming from
the opposite direction, hit his car. The contractor was injured,
but the accident could have been much worse.

- Several people in various regions were dismissed as a result
of violations to the Life Saving Rules or inappropriate behavior.

Planet

- At DSM Dyneema in the Netherlands (Heerlen), about 140 m3

of soil was discovered that appeared to be polluted with
organic solvents and had to be removed. This pollution, which
was caused by historical spills, was found during preparation
work for the construction of a new building.

- At DSM Nutritional Products in the US (Belvidere, New Jersey),
a process change led to higher concentration of product which
triggered foaming, resulting in a spill.

contractor fractured his ankle and cut his head when he fell
from a load. The load unexpectedly began to move because

- At DSM Nutritional Products in Canada (Mulgrave), a broken
sewer line caused fish oil to spill into the waste water treatment

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What still went wrong in 2014

system. The broken lines were repaired. A remediation plan,
developed in close cooperation with local authorities, is in
place.

Profit

- At DSM Nutritional products in Switzerland (Sisseln),

production was interrupted due to a fire in the utilities buildings
that damaged the electrical power supply for part of the site.
The insurance coverage limited the financial impact for DSM
to € 16 million.

- At DSM Food Specialties in the Netherlands (Delft), a delay

occurred in the startup of a new drying tower, which resulted
in additional project, tolling and transportation costs.

- At DSM Fibre Intermediates in the US (Augusta, Georgia), the
plant had to be shut down for three weeks due to the unusually
harsh winter. This caused a loss of steam supply, boilers to
trip and the freezing of product in processes throughout the
site.

- At DSM Fibre Intermediates in the Netherlands (Sittard-

Geleen), and at the DSM Food Specialties plant in France
(Seclin), operational issues caused production losses. These
included two leakages, a broken agitator and a broken
fermenter.

- At DSM Nanjing Chemical Company (Jiangsu, China), a

shortage in the supply of critical raw materials caused lower
production volumes.

- Since the beginning of 2014, DSM has been made aware of
several incidents of identity theft in which the DSM name and
logo were used by third parties to fraudulently order products
and services on behalf of DSM. DSM is cooperating with the
aggrieved suppliers who were mostly unknown to DSM, to
prevent such incidents in the future. There was no financial
loss for DSM.

- Several people in various regions were dismissed due to

unauthorized absences from work, inappropriate behavior and
fraud or theft.

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Information about the DSM share

Shares and listings
Ordinary shares in Koninklijke DSM N.V. are listed on the 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,
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 2014 was 172,605,434. All shares in issue are fully paid. On 31 December
2014 the company had 173,536,815 ordinary shares outstanding.

Development of the number of ordinary DSM shares

Balance at 1 January

Changes:

2014

2013

Issued

Repurchased

Outstanding

181,425,000

7,461,588

173,963,412

168,684,088

Reissue of shares in connection with exercise of option rights

Repurchase of shares

Dividend in the form of ordinary shares

(725,210)

725,210

4,300,163

3,733,055

(3,733,055)

(1,266,945)

(2,581,248)

2,581,248

2,246,106

Balance at 31 December

181,425,000

7,888,185

173,536,815

173,963,412

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

57.97

44.44

50.64

59.75

43.93

57.16

9,187

10,370

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Information about the DSM share

Geographical spread of DSM shares outstanding

in % (excl. cumprefs A)

2014

2013

North America

Netherlands

United Kingdom

France

Switzerland

Germany

Asia-Pacific

Other countries

Trading volume DSM shares 2014
x million shares as reported by Euronext Amsterdam

January

February

March

April

May

June

July

August

September

October

November

December

Dividend
DSM’s dividend policy is to provide a stable and preferably rising
dividend. DSM proposes to maintain the dividend at € 1.65 per
ordinary share. This will be proposed to the Annual General
Meeting of Shareholders to be held on 30 April 2015. An interim
dividend of € 0.55 per ordinary share having been paid in August
2014, the final dividend would then amount to € 1.10 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 5 May 2015.

Dividend per ordinary share in €
2014 dividend subject to approval by Annual General Meeting of Shareholders

1.35

1.45

1.50

1.65

2010

2011

2012

2013

2014

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DSMDow Jones Euro StoXX Chemical IndexAEX Index DSM share price development versus AEX and Dow Jones Euro StoXX Chemical Index, 2014in € 01/1404/1407/1410/1409/1408/1406/1405/1403/1402/1412/1411/14656055504540

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 2014.

Consolidation
The consolidated financial statements comprise the financial
statements of Royal DSM and its subsidiaries (together ‘DSM’
or ‘group’). As a parent DSM is exposed, or has right to, the
variable returns from its involvement with its subsidiaries and has
the ability to affect the returns through its power over the
subsidiary. 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 arrangement 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. A joint arrangement can either be a
joint venture where DSM and the other partner(s) have rights to
the net assets of the arrangement or a joint operation where DSM
and the partner(s) have rights to the assets, and obligations for
the liabilities to the arrangement. For joint ventures the
investment in the net assets is recognized and accounted for in
accordance with the equity method. For a joint operation assets,
liabilities, revenues and expenses are recognized in the financial
statements of DSM in accordance with the contractual
entitlement or obligations of DSM.

Subsidiaries are consolidated from the acquisition date until the
date on which DSM ceases to have control. 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 an 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,
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 to 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 Nutrition,
Performance Materials, Polymer Intermediates and the
Innovation Center 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 EBITDA before exceptional items. The clusters are
organized in accordance with the type of products produced and
the nature of the markets served. The same accounting policies
that are applied for the consolidated financial statements of DSM
are also applied for the operating segments. Prices for
transactions between segments are determined on an arm’s
length basis except for supplies of caprolactam from DSM
Polymer Intermediates to DSM Engineering Plastics against cash
costs. 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 a
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 that do not
have the euro as their functional currency 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.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

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
differences relating to the translation of the net investment are
recognized in profit or loss.

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 is included in
intangible assets. Goodwill paid on acquisition of joint ventures
or associates is included in the carrying amount of these entities.
Goodwill recognized as an intangible asset 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 profit
or loss.

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 and joint ventures
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.
A joint venture is an entity where DSM has joint control and is
entitled to the net assets and liabilities. Investments in associates
and joint ventures are accounted for by the equity method, which
involves recognition in the income statement of DSM’s share of
the associate’s and/or joint venture's profit or loss for the year
determined in accordance with the accounting policies of DSM.
DSM’s interest in an associate is carried in the balance sheet at

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its share in the net assets of the associate together with goodwill
paid on acquisition, less any impairment loss.

of the asset’s recoverable amount since the last impairment loss
was recognized.

When DSM’s share in the loss of an associate exceeds the
carrying amount of the associate and/or joint venture, 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 or joint venture.

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 profit or loss. Impairment losses for goodwill and other
participations are never reversed.

Other financial assets
Other financial assets comprise other participations, other
receivables and other deferred items.

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 profit or loss. 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 profit
or loss.

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.

Loans and long-term receivables are measured at fair value upon
initial recognition and subsequently at amortized cost, if
necessary after deduction for impairment. The proceeds from
these assets and the gain or loss upon their disposal are
recognized in profit or loss.

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.

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
profit or loss. An impairment loss is reversed when there has
been a change in estimate that is relevant for the determination

Cash and cash equivalents
Cash and cash equivalents comprise cash at banks 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 letter of intent or
agreement to sell is ready for signing. 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

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

assets held for sale are not depreciated or amortized. For
transparency, non-current assets and disposal groups that will
be contributed to joint ventures are reported separately from
other assets and liabilities held for sale.

Revenue recognition
Revenue from the sale of goods is recognized when 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.

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.

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.

Borrowings
Borrowings are initially recognized at 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 recorded in profit or loss.

Where the interest rate risk relating to a long-term borrowing is
hedged through a fair value hedge, and the hedge is effective,
the carrying amount of the long-term loan is adjusted for
changes in fair value of the interest component of the hedge.

Other current liabilities
Other current liabilities are measured at amortized cost, which
generally corresponds to the nominal value.

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. Royalty income is reported in Net sales
when licensing-out technologies is part of the ordinary and
recurring activities of a business. 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 transferred 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 profit or loss over the expected
useful life of the relevant asset.

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
profit or loss (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 where 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 and restricted share units (matching shares)
are granted free of charge and vest after three years on the
achievement of previously determined targets. The cost of

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performance shares and restricted share units is measured by
reference to the fair value of the DSM shares on the date on
which the performance shares and restricted share units were
granted and is recognized in profit or loss (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
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
- costs related to refinancing existing loans
- releases of provisions
- disposals of property, plant and equipment
- disposals of joint ventures, 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.
From 2015 onwards all acquisition and integration costs incurred
in the first year from the acquisition date will be included in
Exceptional items and the € 10 million threshold will no longer be
applied for these costs. The reason for this change is the fact
that DSM has entered into a new phase in its acquisition strategy
with a focus on integration and targeted smaller (add-on)
acquisitions.

Income tax expense
Income tax expense is recognized in the income statement
except to the extent that it relates to an item recognized directly
in 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
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 offset, 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 profit or loss 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 profit or loss when the net investment is disposed of.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

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
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 on the interest on high quality corporate bonds.
Remeasurements are actuarial gains and losses, the return (or
interest cost) on net plan assets (or liabilities) 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 are 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 2014.

The following new or amended standards were applied for the
first time in 2014.

IFRS 10, 'Consolidated Financial Statements', establishes a
single control model that applies to all entities, including special
purpose entities. DSM has determined which entities meet the
new criteria for control and therefore have to be consolidated.
The new standard did not have a material impact on DSM’s
financial position or performance.

IFRS 11, 'Joint Arrangements', removed 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 significantly changed DSM’s financial position and
reported performance because the equity method replaced
proportionate consolidation for joint ventures. Information on
joint ventures that are affected is provided in note 10: Interests
in associates and joint ventures. The standard was applied
retrospectively.

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 has been applied for the first time in
2014.

No new or amended standards were adopted early and
applied in 2014.

Effect of forthcoming accounting standards not yet applied
The following new standards are not yet being applied by DSM.

IFRS 14, 'Regulatory Deferral Accounts', establishes
requirements for accounting by entities that are subject to rate
regulation. The new standard is effective for annual reporting
periods beginning on or after 1 January 2016 but will not impact
DSM, since none of the DSM reporting entities operate in a
market that is subject to rate regulation.

IFRS 15, 'Revenue from Contracts with Customers', establishes
a new five step approach to revenue recognition that applies to
all entities. The new standard is effective for annual reporting
periods beginning on or after 1 January 2017. The impact of this
new standard on DSM’s financial position and performance is
currently being investigated.

The 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 2014

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

Profit before income tax expense

Income tax expense

Share of the profit of associates and joint ventures

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

Net profit available to holders of ordinary shares

Earnings per share (in € )

- Basic

- Diluted

1 Excluding exceptional items

9,181

(6,778)

2,403

(1,016)

(322)

(476)

(39)

(1,784)

619

(125)

501

(89)

419

(9)

428

(10)

(292)

(40)

(34)

(64)

(356)

(7)

(363)

(66)

(348)

(318)

(37)

(281)

9,181

(7,070)

2,111

(1,016)

(322)

(516)

(73)

(1,848)

263

(132)

138

(8)

(59)

101

(46)

147

(10)

418

(281)

137

0.62

102

(95)

(5)

(1)

(3)

(6)

(30)

(2)1

(2)

9,283

(7,165)

2,118

(1,021)

(323)

(519)

114

(79)

(1,828)

290

(132)

165

(7)

(59)

(46)

145

(10)

135

0.78

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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 20131

x € million

Notes

Continuing operations

Discontinued

Total

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

Profit before income tax expense

Income tax expense

Share of the profit of associates and joint ventures

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

Net profit available to holders of ordinary shares

Earnings per share (in € )

- Basic

- Diluted

Before

Exceptional

Total

operations

exceptional

items

(note 6)

8,858

(6,400)

2,458

(975)

(340)

(442)

(32)

(17)

(18)

(75)

(40)

8,858

(6,417)

2,441

(975)

(358)

(517)

107

(72)

571

(510)

(24)

(162)

(22)

(15)

9,429

(6,927)

2,502

(999)

(520)

(539)

119

(87)

(1,697)

(118)

(1,815)

(211)

(2,026)

761

(122)

(15)

624

(110)

(17)

497

(2)

499

(10)

(135)

(7)

(142)

(77)

(160)

(237)

626

(122)

(22)

482

(77)

420

(160)

260

(2)

262

(10)

489

(237)

252

2.39

2.38

(150)

(2)

(151)

160

476

(122)

(22)

332

(76)

269

(2)

271

(10)

261

1.52

1.51

1 Restated due to retrospective application of IFRS 11 'Joint Arrangements' that came into effect from 1 January 2014
2 Excluding exceptional items

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Consolidated statement of comprehensive income

in € million

2014

2013R1

Items that will not be reclassified to profit or loss

Remeasurements of defined benefit pension plans

Exchange differences on translation of foreign operations relating to the non-controlling interests

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

Of which:

- Attributable to non-controlling interests

- Attributable to equity holders of Koninklijke DSM N.V.

1 Restated due to retrospective application of IFRS 11 'Joint Arrangements' that came into effect from 1 January 2014

(176)

278

(174)

(9)

(47)

108

(18)

126

(4)

(241)

(28)

(10)

(168)

(17)

(185)

269

(6)

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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 and joint ventures

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

2014

2013R1

2,867

3,673

427

762

130

7,859

1,739

1,570

199

669

4,230

4,267

12,126

5,723

213

5,936

365

479

105

1,637

2,667

1,143

362

1,361

554

3,507

3,523

12,126

2,690

3,611

364

295

152

7,112

1,638

1,477

120

126

770

4,150

637

4,787

11,899

5,908

188

6,096

375

326

1,725

2,598

841

190

1,272

573

2,975

230

3,205

11,899

1 Restated due to retrospective application of IFRS 11 'Joint Arrangements' that came into effect from 1 January 2014

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Consolidated statement of changes in equity (note 16)

x € million

Treasury

Other

Retained earnings

Total

Non-

capital

premium

reserves

Actuarial

Other

gains and

losses

controlling

interests

Total

equity

Balance at 1 January 20131

338

489

(479)

235

(2)

5,293

5,874

166

6,040

Dividend

Options / performance shares granted

Options / performance shares

exercised / 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 20131

338

489

(294)

Dividend

Options / performance shares granted

Options / performance shares

exercised / cancelled

Proceeds from reissued shares

Change in DSM's share in subsidiaries

Repurchase of shares

Other

Total comprehensive income

134

(189)

(11)

5,327

5,908

188

6,096

(301)

(7)

(301)

160

(189)

(6)

(307)

160

(189)

123

(142)

145

126

(18)

108

Balance at 31 December 2014

338

489

(349)

166

(122)

5,201

5,723

213

5,936

1 Restated due to retrospective application of IFRS 11 'Joint Arrangements' that came into effect from 1 January 2014

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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 27)

x € million

Operating activities

Profit for the year

Share of the profit of associates

Income tax

Profit before income tax expense

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

- Acquisition related in EBITDA

- Change in provisions

- Defined benefit plans

Income tax received

Income tax paid

Settlement intercompany hedges

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

2014

165

118

334

6172

549

1,166

(284)

882

(74)

808

2013R1

269

(13)

332

144

297

773

539

1,312

(231)

1,081

(83)

998

(18)

(53)

(78)

(22)

(171)

(87)

(90)

(1)

(66)

(17)

(3)

(29)

(1)

(49)

(30)

(112)

(89)

(122)

(8)

(31)

(37)

1 Restated due to retrospective application of IFRS 11 'Joint Arrangements' that came into effect from 1 January 2014
2 This consists of the operating profit from continuing operations before exceptional items (€ 619 million) and discontinued operations (-€ 2 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 27) continued

x € million

Cash provided by operating activities

2014

808

2013R1

998

Investing activities

Capital expenditure for:2

- 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

Interest received

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

Cash facility associates

Repayment / issue of commercial paper

Dividend paid

Interest 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

(97)

(556)

(7)

108

(35)

532

(534)

(10)

(21)

250

(175)

(302)

(189)

(83)

(566)

(509)

(30)

(58)

(515)

(1,057)

364

(149)

(71)

(150)

(160)

(200)

145

(73)

(419)

(126)

770

669

(258)

(317)

1,089

(2)

770

1 Restated due to retrospective application of IFRS 11 'Joint Arrangements' that came into effect from 1 January 2014
2 An amount of € 25 million included in capital expenditure was funded by customers (2013: € 20 million)

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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 25), the recognition and measurement
of income taxes (note 7) and the determination of fair values for financial instruments (note 24) and for share-based compensation
(note 28). Furthermore impairment testing requires judgments by management, amongst others with respect to the determination
of Cash Generating Units, growth rates and discounts rates to apply (note 6 and 8). 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

2014

2013

2014

2013

1.22

1.20

0.78

3.24

7.44

1.38

1.23

0.84

3.22

8.40

1.33

1.21

0.81

3.12

8.16

1.33

1.23

0.85

2.87

8.23

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.

Application of new accounting standards
DSM adopted IFRS 10, ‘Consolidated Financial Statements’ in 2014. The new standard establishes a single control model that
applies to all entities, including special purpose entities. DSM has determined which entities meet the new criteria for control and
therefore have to be consolidated. This assessment confirmed that the entities that were consolidated in earlier years also met the
new definition for control and that there were no additional entities that required consolidation in view of the new definition.
Furthermore, DSM does not have structured entities.

The retrospective application of IFRS 11, ‘Joint Arrangements’, removed the option to apply proportionate consolidation for joint
ventures and mandated the use of the equity method for jointly controlled entities that meet the new definition of a joint venture.
Among others DSM has joint control in DSM Sinochem Pharmaceuticals (DSP), a company that develops, manufactures and sells
generic anti-infective molecules, based in Hong Kong (China) and in POET-DSM Advanced Biofuels, a company producing
cellulosic bio-ethanol from corn crop residue, based in Sioux Falls (South Dakota, USA). These joint ventures cannot distribute
profits without consent from the non-DSM shareholder. Relations with these joint ventures and their strategic importance are
discussed in more detail in the sections Pharma Partnerships and Innovation Center in the Report by the Managing Board. Both
meet the conditions of a joint venture under IFRS 11 and are accounted for using the equity method. The transition was applied
retrospectively and the comparative information for the preceding period was restated and marked with “R” in these financial
statements. The effect of applying IFRS 11 on the financial position of DSM at the beginning of 2013 is as follows:

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

Restated consolidated balance sheet at 1 January 2013

x € million

Assets

Non-current assets

Intangible assets

Property, plant and equipment

Deferred tax assets

Associates and joint ventures

Other financial assets

Current assets

Inventories

Trade receivables

Other 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

31 December 2012 in

Impact IFRS 10 - 111

1 January 2013

IAR 2013

Restated

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

(39)

(128)

(8)

210

(26)

(35)

(45)

(5)

(32)

(110)

(101)

(2)

(1)

(12)

(3)

(16)

(19)

(52)

(12)

(83)

(101)

2,754

3,683

332

250

115

7,134

1,768

1,524

225

1,089

4,687

4,731

11,865

5,874

166

6,040

235

388

125

1,910

2,749

623

299

1,401

616

3,062

3,076

11,865

1 DSM applied the new standards IFRS 10 'Consolidated Financial Statements' and IFRS 11 'Joint Arrangements' for the first time in 2014. Due to the abolishment of proportionate
consolidation for joint ventures DSM's financial position has changed. These changes are notably related to the joint venture DSM Sinochem Pharmaceuticals Limited and POET-
DSM Advanced Biofuels. See page 158 for more information about joint ventures.

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2 Change in the scope of the consolidation

Acquisitions

2014
In January 2014 DSM obtained control of Yantai Andre Pectin co., Ltd. a 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 already owned
29% of the shares of Andre Pectin together with call options to buy out the other shareholders and obtained control by placing a
DSM management team in the company. From January 2014 onwards the financial statements of Andre Pectin have been
consolidated by DSM and reported in the Nutrition segment. The acquisition strengthens and complements DSM’s position as a
pectin manufacturer in Asia with access to the global food ingredients markets. In accordance with IFRS 3 the purchase price of
Andre Pectin had to be allocated to identifiable assets and liabilities acquired. Goodwill amounted to € 1 million. The non-controlling
interest in Andre Pectin was measured at the proportionate share of the value of net identifiable assets acquired and amounted to
€ 45 million at the acquisition date. At the acquisition date the fair value of the interest in Andre Pectin was not materially different
from the carrying amount. The acquisition of Andre Pectin contributed € 36 million to net sales and € 7 million to EBITDA in 2014.
Andre Pectin-related exceptional items amounted to € 3 million before tax (see note 6 Exceptional items).

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 which resulted in some adjustments to the opening balance sheet of
Tortuga. The Purchase Price Allocation (PPA) of Andre Pectin was finalized in the course of the year.

The impact of all acquisitions made in 2014, including adjustments to the initial accounting for Tortuga 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

2014

Assets

Intangible assets

Property, plant and equipment

Other non-current assets

Inventories

Receivables

Cash and cash equivalents

Total assets

Non-controlling interests

Liabilities

Non-current liabilities

Current liabilities

Total non-controlling interests and liabilities

Net assets

Acquisition price (in cash)

Value of associate contributed

Consideration

Goodwill

Goodwill available for tax purposes (included in

the above)

Acquisition costs recognized in exceptional

items1

Contingent liabilities included in fair value

Andre Pectin

Book

value

Fair

value

Tortuga (final PPA)2

Book

Fair

Change in

value

value total

fair value

Total

Fair

value

101

107

224

349

130

131

142

157

192

350

158

152

(2)

(5)

(1)

(6)

(1)

(6)

Included in General and administrative: Other costs
In 2014 the final Purchase Price Allocation (PPA) of Tortuga was performed, which has led to the above changes in the fair value, compared to the draft PPA

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

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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
must 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.

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

total

in fair

value

Book

value

Fair

value

Fair

value

Fair

Change

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 (PPA) 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 comprised 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.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

Disposals

2014
JLL Partners and DSM completed the transaction announced in November 2013 combining DSM Pharmaceutical Products and
Patheon Inc. into a new privately held company, named DPx, in which DSM holds a 49% share. From 11 March 2014 onwards
DSM Pharmaceutical Products, which was classified held for sale at the end of 2013, is no longer consolidated by DSM. The 49%
investment in DPx is reported as an associate and accounted in accordance with the equity method. The result on the contribution
of DSM Pharmaceutical Products (DPP) to DPx recognized in 2014 amounted to a loss of € 124 million which is specified in the
table on page 142. This is lower than the estimated loss that was recognized upon classification of the business as asset held for
sale at the end of 2013. The difference of € 28 million was mainly attributable to lower tax costs than earlier estimated. The impact
of the deconsolidation of these activities on the DSM consolidated 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

Consideration (net of selling costs, translation differences and net debt)

Book result 2014

Income tax

Net book result

DPP

Other

Total

(30)

(300)

(35)

(205)

(94)

(7)

(671)

(44)

(26)

(152)

(222)

(449)

477

(1)

(30)

(300)

(35)

(205)

(94)

(7)

(671)

(44)

(26)

(152)

(222)

(449)

481

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The impact of the business that has been disposed 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

2014

2013R

(12)

(8)

247

291

DPx

x € million

Net assets

- Book value DPP assets and liabilities

- Release related items in Other

comprehensive income

Subtotal net assets upon divestment

- Impairment upon held for sale classification

in 2013

Total net assets

Consideration / fair value

Transaction costs in 2014

Liability for demolition costs

Consideration net of costs

Total book loss

Of which:

- Goodwill impaired in 2013

(exceptional item)

- Book profit 2014 (exceptional item)

Total

449

465

152

617

505

(9)

(3)

493

(124)

(152)

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

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 consolidated 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

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

Deconsolidation and other changes

DEX

Compact

Euroresins

Other

Total

Plastomers

Solution

East

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)

In 2014 there were no material deconsolidations or material changes in the percentage of ownership of subsidiaries (same as in
2013).

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Euroresins

Synres

Total

Research and development

General and administrative

Other operating income and

(2)

expense

Assets and liabilities held for sale

2014
In view of the agreements reached regarding the sale of the
remaining Euroresins business and DSM Synres, these
businesses were reclassified as held for sale. Before
reclassification these activities were reported in the segment
Performance Materials. In view of the limited size and importance
of these activities they were not presented as discontinued
operations.

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

West

(2)

(1)

(6)

(15)

(24)

(8)

(11)

(5)

(7)

(23)

(8)

Net assets

(16)

(15)

(2)

(3)

Fair value

Transaction costs

Fair value less costs to

sell

Impairment of intangible

assets and property,

plant and equipment

(11)

(1)

(11)

(22)

(47)1

(16)

(31)

(5)

(2)

(8)

(10)

1 Assets held for sale in the balance sheet amount to € 37 million, which includes the

impairment of € 10 million

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

Operating profit

EBITDA

2014

2013R

125

106

121

103

(1)

2013
In view of the contribution of DSM Pharmaceutical Products
(DPP) to a new entity that is majority owned by private equity
company JLL Partners, the related assets and liabilities of the
business were classified as held for sale. DPP constituted a
major line of business for DSM and was therefore presented as
a discontinued operation upon held for sale classification. After
completion of the transaction that took place in the first half of
2014, DSM accounted 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
represented the recoverable amount of the cash generating unit
and was the basis for the determination of the book loss on the
transaction which was charged against the Catalytica goodwill
that was reported in discontinued operations. After impairment,
the remaining value of the Catalytica goodwill was € 7 million. The
fair value was based on the price that was agreed between DSM
and JLL Partners in an arm's length transactions that was
publicly announced on 19 November 2013.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

The impact of the reclassification of these activities on the DSM
consolidated financial statements in 2013 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) in 2013

Final price adjustment in 2014 via exceptional

items

Total book loss

DPP

(177)

(297)

(34)

(196)

(85)

(789)1

(8)

(55)

(167)

(230)

(559)

412

(5)

407

(152)

(124)

1 Assets held for sale in the balance sheet amount to € 637 million, which includes the

impairment of intangible assets of € 152 million

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3 Segment information

Business segments1

2014

Financial performance

Net sales

Supplies

EBITDA

Operating profit

Exceptional items

Operating profit including

exceptional items

Nutrition

Perform-

Polymer

Inno-

Corpo-
2

Elimina-

Total

tinued

tions

Continuing operations

Discon-

Elimina-

Total

ance

Interme-

vation

rate

tions

Materials

diates

Center

Activities

opera-

tions

Supplies to other clusters

410

4,335

2,792

1,727

154

173

9,181

(512)

102

(5)

9,283

4,427

2,800

2,137

157

173

(512)

9,182

106

(5)

9,283

850

596

(23)

343

193

(296)

(18)

(45)

(90)

(149)

(41)

573

197

(272)

(45)

(190)

Depreciation and amortization

242

Impairments

Impairments in exceptional items

Additions to provisions

Share of the profit of associates

(1)

139

(1)

R&D costs3

103

105

Wages, salaries and social

security costs

818

329

291

(2)

(10)

(48)

265

Financial position

Total assets

Total liabilities

Capital employed at year-end

Capital expenditure

Share in equity of associates

6,200

1,541

5,034

330

2,045

1,022

630

1,928

534

419

117

750

523

118

2,109

3,417

201

482

EBITDA / net sales (in %)

19.6

12.3

4.8

Workforce

Average in fte

Year-end (headcount)

11,067

10,857

5,093

5,115

1,428

1,423

697

675

3,103

3,281

1,168

619

(356)

(2)

263

521

294

(59)

322

1,559

12,126

6,190

8,105

613

617

12.7

(2.0)

21,388

21,351

410

1,166

617

(327)

290

521

297

(59)

323

1,597

12,126

6,190

8,105

616

617

12.6

21,798

21,351

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.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

Business segments1

2013R

Financial performance

Net sales

Supplies

EBITDA

Operating profit

Exceptional items

Continuing operations

Discon-

Elimina-

Total

Nutrition

Perform-

Polymer

Inno-

Corpo-
2

Elimina-

Total

ance

Interme-

vation

rate

tions

Materials

diates

Center

Activities

tinued

opera-

tions

571

tions

(33)

9,429

Supplies to other clusters

450

4,205

2,729

1,579

150

195

8,858

(561)

4,301

2,751

2,029

153

195

(561)

8,868

594

(33)

9,429

914

680

(71)

319

180

(23)

113

(10)

(9)

(43)

(76)

(127)

(32)

Operating profit including

exceptional items

609

157

Depreciation and amortization

231

135

Impairments

Impairments in exceptional items

Additions to provisions

Share of the profit of associates

R&D costs3

133

100

Wages, salaries and social

security costs

742

317

(42)

(159)

(7)

(13)

327

Financial position

Total assets

Total liabilities

Capital employed at year-end

Capital expenditure

Share in equity of associates

5,544

1,359

4,496

255

1,972

1,082

584

1,902

497

570

235

635

469

2,029

3,071

206

145

EBITDA / net sales (in %)

21.7

11.7

7.2

Workforce

Average in fte

Year-end (headcount)

10,376

10,548

5,074

5,126

1,450

1,456

592

659

3,120

3,204

1,261

761

(135)

(162)

626

(150)

488

(17)

340

150

(2)

1,523

175

11,262

5,573

7,643

653

247

637

230

417

14.2

8.9

20,612

20,993

2,462

2,492

1,312

773

(297)

476

526

172

(19)

350

1,698

11,899

5,803

8,060

694

247

13.9

23,074

23,485

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.

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Geographical information

2013R

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

2,897

2,245

121

1,688

541

1,013

652

2,414

518

1,765

902

1,275

129

215

Asia

238

778

the

world

8,858

100

210

8,858

100

Workforce at year-end

5,383

5,028

388

3,679

1,759

3,084

406

151

878

237

20,993

Intangible assets and Property, plant

and equipment

Capital expenditure

Carrying amount

232

137

1,645

1,203

2,167

346

177

710

Total assets (total DSM)

3,494

2,540

114

3,186

755

1,247

2014

Net sales by origin

In € million

In %

Net sales by destination

In € million

In %

2,988

2,233

122

1,483

675

1,237

659

2,440

548

1,741

973

1,472

153

204

138

653

6,301

328

11,899

253

782

9,181

100

209

9,181

100

Workforce at year-end

5,304

4,951

408

3,583

1,891

3,489

478

141

866

240

21,351

Intangible assets and Property, plant

and equipment

Capital expenditure

Carrying amount

262

134

1,628

1,223

119

2,335

353

766

Total assets (total DSM)

3,709

2,110

113

3,323

820

1,458

144

613

6,540

359

12,126

DSM has no single external customer that represents 10% or more of revenues and therefore information about major customers
is not provided.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

4 Net sales and costs

Depreciation, amortization and impairments

Net sales

Continuing operations before

exceptional items

Goods sold

Services rendered

Royalties from ordinary activities

2014

2013R

Continuing operations before

exceptional items

Amortization of intangible assets

Depreciation of property, plant

8,849

302

8,505

and equipment

Impairment losses

320

Total

2014

2013R

139

382

549

150

338

500

The increase in depreciation is mainly due to investments in
recent years that have been put into operation.

Other operating income

Total

9,181

8,858

Total costs

In 2014 total operating costs of continuing operations before
exceptional items amounted to € 8.6 billion, € 0.5 billion higher
than in 2013, when these costs stood at € 8.1 billion. Total
operating costs in 2014 included Cost of sales to an amount of
€ 6.8 billion (2013: € 6.4 billion); gross margin as % of net sales
stood at 26% (2013: 28%).

Employee benefits costs

Continuing operations before

exceptional items

Release of provisions

Gain on sale of assets and

activities

2014

2013R

Gain on scrap, waste material,

emission rights, royalties and

Continuing operations before

exceptional items

Wages and salaries

Social security costs

Pension costs (see also note 25)

Share-based compensation (see

also note 28)

Total

licenses sold

Insurance benefits

Claims

Earn-out payments

Sundry

1,301

199

115

Total

1,349

191

114

1,673

1,638

2014

2013R

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Other operating expense

6 Exceptional items

2014

2013R

2014

2013R

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 and intangible

assets

- Other costs

2014

2013R

- Release of provisions

Other operating income:

- Book gain on disposals

- Other income

Other operating expense:

- Additions to provisions

- Other costs

122

(10)

117

(9)

(291)

(1)

(292)

(4)

(36)

(40)

(33)

(1)

(15)

(16)

(170)

(1)

(78)

(79)

(55)

Operating profit

Other financial income and

expense

(327)

(297)

(7)

125

122

Total, before income tax

expense

Income tax expense

Share of the profit of associates/

joint ventures

Net result from exceptional

items

(334)

(66)

(304)

(318)

(237)

(13)

(1)

(2)

(7)

118

(3)

137

In 2014 the interest rate applied in the capitalization of interest
during construction was 5% (2013: 5%).

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

2014

The exceptional items in 2014 are listed below:

- The impairment of Property, plant and equipment and
business activities within Cost of sales relates to the
impairment of the caprolactam business of Polymer
Intermediates.

- Other costs within Cost of sales relate to the inventory step up
of Andre Pectin. See also note 2, Change in the scope of
consolidation.

- The impairment of Intangible assets within General and

administrative relates to application software and other assets
within DSM Business Support. See also note 8, Intangible
assets.

- Other costs within General and administrative relate to

restructuring costs (€ 33 million), acquisition and disposal
costs (€ 5 million) and a settlement of a former disposal (-€ 2
million)

- The release of provisions in Other operating income relates to
the (partial) release of restructuring provisions (€ 7 million) and
the partial release of Other provisions € 3 million) which were
originally recognized as exceptional items.

- The book gain on disposals relates to the sale of DPP. For
further information see note 2, Change in the scope of
consolidation.

the business which is expected to be below 1% and the related
revenue projections. The projections exclude restructuring
effects. This resulted in a non-cash impairment charge of € 291
million reported as exceptional item. The impairment charge was
allocated to long-term assets of the CGU on the basis of the
book values of these assets, which resulted in the amount being
allocated to property, plant and equipment. The estimated pre-
tax cash flows were discounted to their present value using a
pre-tax weighted average cost of capital of 9%.

Furthermore € 66 million of exceptional items after tax relating to
associates/joint ventures have been included. This mainly relates
to financing, reorganization and acquisition-related costs of DPx.

2013

The exceptional items in 2013 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 other costs in Cost of sales mainly relate to the inventory

- Additions to provisions relates fully to restructuring provisions.

step up of the acquisitions.

See also note 19 Provisions.

- Other costs within operating expenses relate to acquisition

and disposal costs.

- Other financial income and expense relates to the waiver of a

loan.

Cash generating units are tested for impairment when economic
circumstances trigger an impairment test, which was the case
for the caprolactam business of DSM Fibre Intermediates in
2014. The impairment was principally triggered by the low
utilization of the production capacity as a result of amongst
others a huge increase in Chinese caprolactam capacity coming
to market. DSM determined the value in use of the cash
generating unit using the model and approach that is also used
for goodwill impairment testing. The cash generating unit
excludes the acrylonitrile and licensing businesses of DSM Fibre
Intermediates because those are stand-alone businesses that
generate their own independent cash flows. 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 the Annual Strategic Review. The key
assumptions in the cash flow projections relate to the growth of

- 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

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 19 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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7 Income tax

Effective tax rate

The income tax expense on the total result was € 7 million, which
represents an effective income tax rate of 4.2%
(2013: € 76 million, representing an effective income tax rate of
22.9%) and can be broken down as follows:

in %

2014

2013R

Domestic income tax rate

25.0

Tax effects of:

- Deviating rates

2014

2013R

- Tax-exempt income and non-

Current tax expense:

- Current year

- Prior-year adjustments

- Tax credits compensated

- Non-recoverable withholding

tax

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

(64)

(7)

(45)

(7)

(57)

(7)

(74)

(1)

(75)

(22)

(1)

(76)

items

(89)

(110)

- The result from exceptional

items

- The result from discontinued

operations

The deferred tax expense originating from temporary differences
is mainly caused by the impairment of the caprolactam business.
See also note 6 Exceptional items.

deductible expense

- Other effects

Effective tax rate continuing

operations

Discontinued operations

Exceptional items (see note 6)

Total effective tax rate

(7.9)

(4.1)

4.8

17.8

0.1

(13.7)

4.2

(1.1)

(5.6)

(0.7)

17.6

(0.2)

5.5

22.9

Other effects relate to changes in tax losses and tax credits
recognized.

The balance of deferred tax assets and deferred tax liabilities
increased by € 73 million owing to the changes presented in the
table below:

Deferred tax assets and liabilities

2014

2013R

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

364

(375)

(11)

(5)

(17)

332

(235)

(1)

(17)

(95)

(13)

(11)

427

(365)

364

(375)

The effective income tax rate on the result from continuing
operations before exceptional items was 17.8% in 2014 (2013:
17.6%). The tax rate for continuing operations for 2015 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:

Balance at 31 December

Of which:

- Deferred tax assets

- Deferred tax liabilities

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

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

2014

2013R

Deferred tax

assets

liabilities

assets

liabilities

102

104

413

205

(191)

427

(224)

(279)

(4)

(35)

(5)

(2)

(1)

(5)

(556)

191

(365)

271

263

(170)

364

(218)

(265)

(3)

(37)

(8)

(1)

(5)

(7)

(545)

170

(375)

No deferred tax assets were recognized for loss carryforwards amounting to € 88 million (2013: € 82 million). Unrecognized loss
carryforwards amounting to € 2 million will expire in the years up to and including 2019, (2013: € 32 million up to and including
2018), € 63 million between 2020 and 2024 (2013: € 42 million between 2019 and 2023) and the remaining € 23 million between
2025 and 2029 (2013: € 37 million between 2024 and 2028).

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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8 Intangible assets

Balance at 1 January 2013R

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 2013R

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 2014

Cost

Amortization and impairment losses

Carrying amount

Goodwill

Licenses

Under

Development

Other

Total

and patents

construction

projects

2,052

164

1,888

(152)

(104)

(7)

(228)

1,660

(1)

122

128

1,788

153

(9)

(2)

(7)

156

(10)

204

111

118

(80)

(1)

(3)

(10)

108

(79)

(6)

102

(1)

(18)

(2)

(3)

1,113

460

3,464

710

653

2,754

285

(140)

(4)

(40)

(8)

355

(150)

(176)

(154)

(25)

155

(64)

1,347

540

3,329

639

807

2,690

(126)

(12)

(1)

(139)

(13)

193

177

1,525

713

3,694

827

812

2,867

Other intangible assets principally comprises acquisition related intangibles that have been included in the annual goodwill
impairment test discussed later in this section. These assets are amortized on a straight line basis.

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

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

Changes in the scope of the consolidation). Furthermore an impairment of development costs in DSM Nutritional Products of
€ 18 million has been included as certain new production techniques that had been developed were not taken into operation.

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 2014 is as follows:

Goodwill

Acquisition

Martek

NeoResins

Fortitech

Ocean Nutrition Canada

Kensey Nash

Tortuga

The Polymer Technology Group

Pentapharm

Cargill Culture and enzymes business

Shandong ICD

Unitech

AGI Corporation

Novamid

Syntech Far East

Zhejiang Zhongken Biotechnology

Verenium

C5 Yeast Company

Crina

DSM Japan Engineering Plastics

Fatrom

Other acquisitions

Total

2014

2013 R

Cash generating unit

Functional

Year of

currency

acquisition

382

358

286

210

133

125

337

358

252

202

117

121

1,788

1,660

DSM Nutritional Products

DSM Resins & Functional Materials

DSM Nutritional Products

DSM Biomedical

DSM Nutritional Products

DSM Biomedical

DSM Nutritional Products

USD

EUR

USD

CAD

USD

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 Nutritional Products

DSM Engineering Plastics

DSM Nutritional Products

CNY

NZD

TWD

JPY

HKD

CNY

USD

EUR

CHF

EUR

RON

2011

2005

2012

2013

2008

2007

2012

2011

2013

2011

2010

2005

2010

2012

2011

2006

2003

2011

The cash generating unit DSM Pharmaceutical Products including the goodwill relating to Catalytica was reclassified to assets held
for sale in 2013 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
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

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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 13% 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% and 10.5% (2013: between 8.5% 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 (CGU) with significant amounts of goodwill clearly exceeded their carrying amount. The market capitalization
of DSM at 31 December 2014 amounted to € 9,187 million (31 December 2013: € 10,370 million) and was clearly above the carrying
amount of net assets, providing an additional indication that goodwill was not impaired.

Because there were indicators for an impairment of the cash generating unit caprolactam this CGU was also tested for impairment.
No goodwill was allocated to this cash generating unit. The results of the impairment test are discussed in note 6 Exceptional items.

The other intangible assets are listed in the following table:

Other intangible assets

Application software

Marketing-related

Customer-related

Technology-based

Other

Total

Total 2013R

Cost

Amortization

Carrying

Of which

2014

2013R

Of which

amount

acquisition-

209

492

658

(134)

(18)

(143)

(399)

(19)

1,525

(713)

1,347

(540)

349

259

812

807

287

200

566

687

328

235

687

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

9 Property, plant and equipment

Balance at 1 January 2013R

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 2013R

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 2014

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

2,096

917

5,059

3,180

1,179

1,879

(2)

(74)

(3)

(43)

(68)

(1)

183

(2)

(283)

(7)

(45)

(170)

231

167

(19)

(1)

(3)

(10)

(1)

557

555

554

(300)

(18)

(49)

(8)

(1)

(248)

(3)

178

2,024

844

4,441

2,810

1,180

1,631

(5)

(75)

(11)

(3)

(11)

464

(2)

(285)

(191)

126

(7)

201

140

(22)

734

733

456

(547)

(110)

(7)

173

(174)

2,155

925

5,097

3,293

1,230

1,804

234

160

669

110

559

7,969

4,286

3,683

612

116

(4)

(376)

(11)

(109)

(297)

(4)

(1)

(72)

7,420

3,809

3,611

519

(7)

(382)

(312)

223

(10)

(6)

8,175

4,502

3,673

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In 2014 there are no material finance lease agreements (same as in 2013).

In 2014 impairment losses on Property, plant and equipment of € 312 million were recognized. This mainly related to the impairment
of the cash generating unit caprolactam of € 291 million at DSM Fibre Intermediates. The impairment test for caprolactam is
discussed in note 6 Exceptional items.

In 2013 impairment losses on Property, plant and 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.

10 Associates and joint ventures

The application of IFRS 11 impacted the accounting for the DSM interest of 50% in DSM Sinochem Pharmaceuticals and POET-
DSM Advanced Biofuels which were proportionally consolidated in earlier years. With the adoption of IFRS 11, it has been
determined that the interests in both companies have to be classified as joint venture under IFRS 11 and accounted for using the
equity method. The transition was applied retrospectively and the comparative information was restated. DSM has a 49% interest
and significant influence in DPx since the formation of this company early in 2014 and also accounts for this interest using the
equity method. Relations with these joint ventures and their strategic importance are discussed in more detail in the sections
Pharma Partnerships and Innovation Center in the Report by the Managing Board. Entities that meet the definition of joint operations
of IFRS 11 were not identified.

DSM's share in its most important associates and joint ventures is disclosed below:

Company

DSM Sinochem Pharmaceuticals, Ltd. (Hong Kong, China)

POET-DSM Advanced Biofuels LLC (Sioux Falls, South Dakota, USA)

DPx Holdings (Cayman Islands)

joint control

significant influence

2014

50%

49%

DSM interest

2013

50%

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

The following table provides an overview of DSM's investments in associates and joint ventures.

Associates and joint ventures

Balance at 1 January

130

295

250

DPx

DSP

POET-DSM

Other1

Total

2013R

2014

Changes:

- Share of profits

- Acquisitions

- Capital payments

- Dividend received

- New loans

- Disposals

- Consolidation changes

- Reclassification to held for sale

- Transfers

- Exchange differences

- Other

Total changes

Balance at 31 December

Of which carrying amount of the investment

Of which loans granted

(51)

422

(7)

413

362

(1)

(10)

142

109

(4)

147

106

412

(9)

(3)

(1)

(25)

(1)

(2)

(24)

(61)

(3)

(1)

397

(1)

(19)

467

762

617

145

(5)

(4)

(24)

(18)

(12)

295

247

1 Amongst others Japan Fine Coatings, Xinhui Meida-DSM Nylon and Actamax are included in Other
2 The outstanding loan receivable is secured for 50% by a guarantee from the joint venture partner POET LLC

Loans include a USD 61 million loan granted to DPx in 2014 with an annual fixed interest rate of 10.75% and an expected 5-year
maturity. Loans of € 6 million and € 12 million to DSP maturing in 2016 together with a loan of CNY 115 million to be repaid in or
before 2017. A USD 50 million loan to POET-DSM with a 5% interest repayable in 2018 and secured for 50% by a guarantee from
the joint venture partner.

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Associates and joint ventures on a 100% basis

DPx1

DSP

Other2

Total

2014

2013R

2014

2013R

2014

2013R

2014

2013R

Assets

Intangible assets

Property, plant and equipment

Other non-current assets

Inventories

Receivables

Cash and cash equivalents

Other current assets

Total assets

Liabilities

Provisions (non-current)

Borrowings (non-current)

Other non-current liabilities

Provisions (current)

Borrowings and financial derivatives (current)

Other current liabilities

Total liabilities

Net assets (100% basis)

Of which non-controlling interest

Net assets excluding goodwill

Contingent liabilities

Summarized statement of profit or loss

Revenue (net sales)3

Operating profit (EBIT)

Interest income

Interest expense

Other financial income and expense

Share of the profit of associates

Profit before income tax expense

Income tax expense

Profit for the year (continuing operations)

Post-tax result discontinued operations

Exceptional items

Income tax expense exceptional items

Profit for the year (total)

Other comprehensive income

Total comprehensive income

EBITDA

Depreciation, amortization and impairment

1,405

819

110

362

296

3,062

1,625

299

410

2,401

661

984

(56)

(1)

(152)

(105)

(35)

(140)

177

(85)

241

172

607

145

181

385

222

215

105

541

118

129

330

211

399

368

(6)

(5)

(4)

(14)

(2)

(7)

(3)

(11)

(5)

(16)

(10)

(4)

(23)

315

500

210

290

368

(25)

(4)

(29)

(27)

(18)

(7)

243

102

495

146

217

278

443

(11)

(1)

(9)

(1)

(10)

(9)

(6)

(5)

1,442

1,375

161

450

551

185

458

207

4,169

1,036

1,752

314

192

690

2,996

1,173

1,751

(66)

(1)

(150)

(126)

(39)

(165)

182

(106)

133

275

547

489

811

(13)

(8)

(20)

(6)

(26)

(3)

(10)

(13)

(28)

1 DPx is included from 11 March until end of fiscal year 2014 (31 October).
2 POET-DSM Advanced Biofuels is included in Other in view of the commercial start-up of the plant. At year-end 2014 total assets amounted to € 258 million and net assets

amounted to € 211 million. Revenue for 2014 was € 0 and EBITDA was -€ 8 million. Furthermore, Japan Fine Coatings, Xinhui Meida-DSM Nylon and Actamax are included among
others.

3 Excluding sales to DSM of € 18 million (DPx) and € 12 million (DSP).

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

11 Other financial assets

Balance at 1 January 2013R

Changes:

- Charged to the income statement

- Acquisitions

- Capital payments

- Disposals

- Loans granted

- Repayments

- Exchange differences

- Transfers

- Changes in fair value

- Other changes

Balance at 31 December 2013R

Changes:

- Charged to the income statement

- Acquisitions

- Capital payments

- Disposals

- Loans granted

- Repayments

- Prepayments

- Exchange differences

- Transfers

- Changes in fair value

Balance at 31 December 2014

Other

participations

receivables

Other

deferred

items

(10)

(2)

(6)

(2)

(4)

(1)

(3)

(4)

(5)

(2)

(21)

(3)

(1)

(5)

(7)

(14)

Total

115

(10)

(2)

(1)

(4)

(1)

152

(13)

(2)

(1)

(35)

130

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 € 26 million is included that relates to equity instruments, with a fair value that
cannot be measured reliably (2013: € 29 million). These instruments are therefore measured at cost.

Transfers include the reclassification of a deferred receivable from Sinochem Group of € 39 million excluding accrued interest (same
as in 2013), to current receivables, as this receivable has become due within one year.

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12 Inventories

13 Current receivables

2014

2013R

2014

2013R

Raw materials and consumables

Intermediates and finished goods

521

1,274

334

1,353

Trade receivables

Trade accounts receivable

1,538

1,453

Adjustments to lower net

realizable value

1,795

1,687

Receivables from associates

Deferred items

(56)

(49)

Adjustment for bad debts

1,588

(18)

1,496

(19)

Total

1,739

1,638

Total Trade receivables

1,570

1,477

The carrying amount of inventories adjusted to net realizable
value (before reclassification to held for sale) was € 213 million
(2013: € 186 million).

The carrying amount of inventories before reclassification to held
for sale was € 1,749 million.

Changes in the adjustment to net realizable value

Other current receivables

Income taxes receivable

Other taxes and social security

contributions

Government grants

Loans

Receivables from joint venture

partners

Interest

Receivables associates relating to

cash facility

Balance at 1 January

(49)

(50)

2014

2013R

Other receivables

Deferred items

Additions charged to income

statement

Utilization / reversals

Exchange differences

Reclassification to held for sale

Acquisitions

Balance at 31 December

(38)

(3)

(56)

(47)

(1)

(49)

Total Other current receivables

199

120

Deferred items comprised € 33 million (2013: € 25 million) in
prepaid expenses that will impact profit or loss in future periods.

Receivables from joint venture partners include 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.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

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 € 1,408 million (2013: € 1,258 million) is provided below. The
remaining balance reported as trade receivables amounting to
€ 130 million (2013: € 195 million) is excluded from this analysis
because it principally concerns reclaimable VAT and accruals
that are not related to the payment behavior of customers.

14 Current investments

Fixed term deposits

Total

Aging overview Trade receivables

15 Cash and cash equivalents

in %

2014

2013R

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

2014

2013R

2014

2013R

550

669

770

2014

2013R

Cash at year-end 2014 was not being used as collateral (same
as in 2013). It was not restricted at year-end 2014 (in 2013: € 5
million restricted).

Balance at 1 January

(19)

(22)

Additions charged to income

statement

Deductions

Acquisitions

Exchange differences

Balance at 31 December

(7)

(18)

(7)

(3)

(19)

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16 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 (2013: € 0.23)

Per ordinary share: € 1.65 (2013: € 1.65)

Total

2014

6,096

310

(141)

(307)

160

(189)

(92)

2013R

6,040

269

(232)

(276)

268

(73)

5,936

6,096

2014

2013R

286

296

287

297

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 205.

Share capital
On 31 December 2014 the authorized capital amounted to € 1,125 million (2013: € 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 2013 and 2014 are shown 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

Overview shares

Issued shares

Treasury shares

Ordinary

Cumprefs A

Ordinary

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

Balance at 1 January 2014

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

7,461,588

(725,210)

3,733,055

(2,581,248)

Balance at 31 December 2014

181,425,000

44,040,000

7,888,185

Number of treasury shares at 31 December 2014

(7,888,185)

Number of shares outstanding at 31 December 2014

173,536,815

44,040,000

The average number of ordinary shares outstanding in 2014 was 172,605,434 (2013: 172,183,369). 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 2014 no cumulative preference shares B were outstanding.

Share premium
Of the total share premium of € 489 million (2013: € 489 million), an amount of € 108 million (2013: € 110 million) can be regarded
as entirely free of tax.

Treasury shares
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.

On 31 December 2014 DSM possessed 7,888,185 ordinary shares (nominal value € 12 million, 3.5% of the share capital). The
average purchase price of the ordinary treasury shares was € 44.27. As at 31 December 2014, 3,844,468 of the total number of
treasury shares outstanding were held for servicing management and personnel share-option rights. The remainder, 4,043,717
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 the years 2011 through 2014.

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Other reserves in Shareholder's equity

Balance at 1 January 2013R

244

(30)

(24)

235

Translation

Hedging

Reserve for

Fair value

Total

reserve

share-based

reserve

compensation

Changes:

Fair-value changes of derivatives

Release to income statement

Release to share 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 2013R

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 2014

(228)

282

298

(28)

(10)

(8)

(7)

(174)

(9)

(163)

(170)

(24)

(4)

(11)

(28)

(10)

(228)

(24)

(8)

(200)

(15)

(11)

(174)

(9)

282

(11)

131

166

The significant increase in the translation reserve in 2014 amounting to € 282 million is the result of the weakening of the euro in
2014. As a consequence the value of the US, Swiss and Brazilian subsidiaries of DSM increased. The decrease of the hedging
reserve is the consequence of value changes of interest rate hedges for which cash flow hedge accounting is applied.

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.

The translation reserve, hedging reserve and the fair value reserve are legal reserves in accordance with Dutch law and cannot be
distributed to shareholders. Additional information is provided in note 6 to the parent company financial statements.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

17 Earnings per ordinary share

in €

2013R

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

489

2.84

(237)

(0.45)

(0.93)

252

2.39

(0.93)

(0.87)

0.93

261

1.52

1.51

1.52

1.65

172,183

1,200

173,383

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)

2014

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

418

2.42

(281)

(1.80)

0.17

137

0.62

0.17

(2)

0.16

(0.17)

135

0.78

operations to exceptional items

2.42

(1.63)

0.79

(0.01)

0.78

- Diluted earnings

- Impact of reclassification of net result from activities disposed of

- Diluted earnings after reclassification of net result from discontinued

2.41

(1.79)

0.17

0.62

0.17

0.16

(0.17)

0.78

operations to exceptional items

2.41

(1.62)

0.79

(0.01)

0.78

- 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

1.70

1.65

172,605

762

173,367

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18 Non-controlling interests

% of non-controlling interest

Balance at 1 January

Changes:

- Share of profit/charged to income statement

- Acquisitions

- Capital payments

- Dividend paid

- New loans

- Disposals

- Consolidation changes

- Reclassification to held for sale

- Transfers

- Exchange differences

Subtotal changes

Balance at end of period

DNCC Nanjing

Andre Pectin

Other

Total

2013R Total

2014

(CN)

40%

(35)

(16)

(CN)

71%

188

166

(11)

(6)

(10)

(46)

(6)

213

(2)

(4)

188

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

Not fully-owned subsidiaries on a 100% basis

DNCC Nanjing (CN)

Andre Pectin (CN)

Other

2014

2013R

2014

2013R

2014

2013R

Assets

Intangible assets

Property, plant and equipment

Other non-current assets

Inventories

Receivables

Cash and cash equivalents

Other current assets

Total assets

Liabilities

Provisions (non-current)

Borrowings (non-current)

Other non-current liabilities

Provisions (current)

Borrowings and financial derivatives (current)

Other current liabilities

Total liabilities

Net assets (100% basis)

Net sales

Profit for the year

Total comprehensive income

Operating cash flows

Dividend paid to non-controlling interests

320

399

521

515

104

166

127

333

188

616

(14)

269

102

139

287

228

437

311

242

227

432

431

246

186

395

(13)

(15)

227

204

382

(12)

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19 Provisions

The total of non-current and current provisions decreased by € 15 million. This is the balance of the following changes:

Balance at 1 January 2013R

Of which current

Changes in 2013:

- Additions

- Releases

- Uses

- Acquisitions

- Exchange differences

- Reclassifications from/to held for sale

Total changes

Balance at 31 December 2013R

Of which current

Changes in 2014:

- Additions

- Releases

- Uses

- Exchange differences

- Other Reclassifications

Total changes

Balance at 31 December 2014

Of which current

Restructuring

Environmental

Other long-

Other

Total

costs and

termination

benefits

costs

term employee

provisions

benefits

(26)

(54)

(1)

(28)

(8)

(42)

(7)

(23)

(1)

(3)

(1)

(3)

(4)

(2)

(4)

(8)

(6)

(3)

(6)

(22)

(2)

(7)

(8)

(6)

206

(33)

(83)

(4)

(8)

(44)

162

(16)

(55)

(15)

147

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, decreased from 3.16% to 1.82%. The balance of provisions
measured at present value increased by € 1 million in 2014 in view of the passage of time, and increased by € 3 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.

The provisions for other long-term employee benefits mainly relate to length-of-service and end-of-service payments. The average
life of this provision is estimated to be between 10 and 12 years.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

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 2014 mainly relate to the various restructuring
projects.

20 Borrowings

2014

2013R

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

2,041

237

497

144

2,040

222

500

502

303

Total

2,780

1,143

2,566

841

2014

2015

2016

2017

2018 and 2019

After 2019

2014

2013R

641

794

303

497

538

653

765

300

Total

2,278

2,263

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

2014

2013R

2,042

125

2,046

132

2,278

2,263

In agreements governing loans with a residual amount at year-
end 2014 of € 2,165 million, of which € 500 million and
USD 150 million are of a short-term nature (31 December 2013:
€ 2,149 million, of which € 500 million of a short-term nature),
clauses have been included that 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 € 300 million
bond issued in November 2013 and the documentation of the
€ 500 million bond issued in March 2014 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 December 2014 Moody's
confirmed their A3 credit rating for DSM with a stable outlook.
Standard & Poor's reconfirmed DSM's credit rating in 2014,
being A with a stable outlook.

At 31 December 2014, there were € 497 million in borrowings
outstanding with a remaining term of more than five years
(at 31 December 2013 there was € 307 million with a remaining
term of more than five years).

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On balance, total borrowings increased by € 214 million owing
to the following changes:

locked in for the remaining life time. The effective interest rate for
the increase now amounts to 3.67%.

Movements borrowings

2014

2013R

Balance at 1 January

2,566

2,533

Loans taken up

Repayments

Acquisitions/disposals

Changes in debt to credit

institutions/commercial paper

Exchange differences

Cash facility associates

532

(534)

240

(73)

370

(149)

(221)

(19)

Balance at 31 December

2,780

2,566

At the end of 2014 an amount of € 300 million (year-end 2013:
€ 300 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.

In March 2014 a new 2.375% EUR bond of € 500 million was
issued for a tenor of 10 years. In November 2010 pre-hedge
contracts were concluded for this intended refinancing in 2014
of the maturing 5.75% EUR loan 2009-2014 at a 10-year interest
rate of 3.42% excluding DSM spread. With the issue of the new
bond this pre-hedge was settled. The effective interest rate for
this bond amounts to 3.98% including settlement of pre-hedge
and DSM spread.

The average effective interest rate on the portfolio of borrowings
outstanding in 2014, including hedge instruments related to
these borrowings, amounted to 3.88% (2013: 4.2%).

End of 2013 the € 300 million of the 1.75% EUR loan 2013-2019
was swapped to USD. The swap had been unwound by the end
of September 2014.

A breakdown of debenture loans is given below:

Debenture loans

4.00%

5.25%

5.75%

1.75%

2.38%

EUR loan

Total

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 2014, the fair value of the pre-hedge contracts amounted
to € 109 million negative (year-end 2013: € 77 million negative
including fair value of pre-hedge on matured 2009-2014 bond),
which is recognized in the hedging reserve. The refinancing
remains highly probable.

A breakdown of private loans is given below:

2014 2013R

2005-2015

2007-2017

2009-2014

2013-2019

2014-2024

497

747

300

497

494

746

500

300

Private loans

2,041

2,040

All debenture loans have a fixed interest rate.

TWD loan

floating

2013-2018

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

CNY loan

(1 month)

floating

(12 months)

2008-2017

USD loan

5.61%

2003-2015

Other loans

Total

2014 2013R

124

109

237

222

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

The currency component of the 5.61% USD loan 2003-2015
was swapped into EUR (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).

23 Contingent liabilities and other financial obligations

The contingent liabilities and other financial obligations in the
following table are not recognized in the balance sheet.

DSM’s policy regarding financial-risk management is described
in note 24.

21 Other non-current liabilities

Operating leases and rents

Guarantee obligations on behalf of

associates and third parties

Outstanding orders for projects

2014

2013R

under construction

Other

Total

2014

2013R

124

281

150

253

Investment grants

Deferred items

Other non-current liabilities

Total

22 Current liabilities

Trade payables

Received in advance

Trade accounts payable

Notes and cheques due

Owing to associates

2014

2013R

1,287

1,212

Total Trade payables

1,361

1,272

Other current liabilities

Income taxes payable

Other taxes and social security

contributions

Interest

Pensions

Investment creditors

Employee related liabilities

Payables associates relating to

cash facility

Other liabilities

Deferred items

Total Other current liabilities

108

240

554

154

282

573

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 2015. 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:

Operating leases and rents

2014

2015

2016

2017

2018 and 2019

After 2019

Total

2014

2013R

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

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been recognized in the financial statements and disclosed in
note 19 Provisions.

24 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
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 in Financial and reporting policy of
the Report by the Managing Board.

Liquidity risk
DSM has two committed credit facilities: one facility of € 500
million issued in 2011 and maturing in September 2018 and one
facility issued in 2013 of € 500 million and for greatest part
maturing in April 2019. In 2013 the second extension option for
the 2011 facility 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. In 2014 the

first extension option for the 2013 facility 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
€ 480 million. Together, the facilities actually amount to a total of
€ 1,000 million (2013: € 1,000 million).

Furthermore, DSM has a commercial-paper program amounting
to € 1,500 million (2013: € 1,500 million). The company will use
the commercial-paper program to a total of not more than
€ 1,000 million (2013: € 1,000 million). The agreements for the
committed credit facilities neither have financial covenants nor
material adverse changes clauses. At year-end 2014 no loans
have 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. The
remaining maturities presented in the following table provide an
overview of the timing of the cash flows related to these
instruments. Financial assets are not linked to financial liabilities
in order to meet cash outflows on these liabilities.

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

Borrowings and short-term monetary liabilities by maturity

2013R

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

2014

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

Total cash

borrowings

monetary

payments

redemption

out

liabilities

2,148

2,686

653

762

300

505

610

756

300

2,762

725

804

307

2,172

2,148

4,411

240

4,661

626

747

300

497

2,181

2,417

3,058

794

300

497

842

2,417

4,695

340

3,148

108

852

324

584

5,044

1 Difference between nominal redemption and amortized costs
2 Cumulative interest payment in remaining years

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 2014, DSM had no outstanding fixed-floating interest rate swaps other than the pre-hedges for refinancing in
2015 (see note 20).

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 2014, with all other
variables held constant. A 1% reduction in interest rates would result in a € 1 million pre-tax loss in the income statement on the
basis of the composition of financial instruments on 31 December 2014 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 2014 to changes in interest rates is set out in the following table.

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Sensitivity of fair value to change in interest rate

2014

2013R

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)

669

(1,143)

(1,637)

669

(1,166)

(1,842)

(109)

(6)

(94)

(58)

770

(841)

770

(847)

(1,725)

(1,902)

(77)

(1)

(64)

(99)

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
€ 766 million, hedge accounting is applied for these instruments. On 31 December 2014, the notional amount of the currency
forward contracts was € 3,781 million (2013: € 3,713 million).

In 2014 DSM hedged USD 684 million (2013: USD 707 million) of its projected net cash flow in USD in 2015, of which USD 209
million against EUR and USD 475 million against CHF by means of average-rate currency forward contracts at an average exchange
rate of USD 1.31 per euro and CHF 0.93 per US dollar, respectively, for the four quarters of 2015. In 2014 DSM also hedged
JPY 5,100 million (2013: JPY 5,100 million) of its projected net cash flow in JPY in 2015, of which JPY 4,000 million against CHF
and JPY 1,100 million against EUR by means of average-rate currency forward contracts at an average exchange rate of JPY 114
per Swiss franc and JPY 138 per euro, respectively, for the four quarters of 2015. DSM also continued the hedge of projected
GBP cash obligations against CHF: GBP 50 million at an average exchange rate of CHF 1.50 per British pound. These hedges
have fixed the exchange rate for part of the USD and JPY receipts and GBP payments in 2015. Cash flow hedge accounting is
applied for these hedges. As a result of similar hedges concluded in 2013 for the year 2014, in 2014 € 11 million positive (2013:
€ 24 million positive) 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 2014. CHF-denominated net assets have been partially hedged by currency swaps
(2014: CHF 994 million; 2013: CHF 994 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.

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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 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

2014

2013R

rates of:

+10%

(10%)

rates of:

+10%

(10%)

669

(1,143)

(1,637)

(109)

(49)

(36)

(87)

(34)

669

(1,166)

(1,842)

(109)

(49)

(36)

(87)

(34)

(25)

(9)

(101)

(136)

(89)

(20)

(1)

(53)

101

136

770

(841)

770

(847)

(1,725)

(1,902)

(77)

(73)

(77)

(73)

(11)

(19)

(236)

(89)

(17)

(38)

236

(13)

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 2014
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 13). It is therefore unlikely that significant losses will arise in relation to receivables that have not been provided
for.

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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 joint ventures, note 11 Other financial assets, note 13 Current receivables, note 14 Current investments, note 15 Cash and
cash equivalents and note 24 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 2014

31 December 2013R

Carrying amount

Fair value

Carrying amount

Fair value

1,769

669

1,637

1,143

362

1,915

1,769

669

1,842

1,166

362

1,915

1,597

126

770

1,725

841

190

1,845

1,597

126

770

1,902

847

190

1,845

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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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

The following table shows the carrying amounts of the financial instruments recognized at fair value, broken down by type and
purpose:

Carrying amounts financial instruments at fair value

Interest rate swaps

Currency swaps

Total financial derivatives related to borrowings

Currency forward contracts

Balance at 31 December 2013R

Interest rate swaps

Currency swaps

Total financial derivatives related to borrowings

Currency forward contracts

Balance at 31 December 2014

Fair value hierarchy

Assets

Liabilities

Total

Level 2

126

(77)

(106)

(183)

(7)

(190)

(109)

(168)

(277)

(85)

(362)

(77)

(15)

(92)

(64)

(109)

(136)

(245)

(70)

(315)

During the year there were no transfers between individual levels of the fair value hierarchy.

25 Post-employment benefits

The charges for pension costs recognized in the income
statement (note 4) relate to the following:

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.

Pension costs

Defined benefit plans:

- Pension costs included in

operating profit

- Healthcare plans

- Other post-employment

benefits

Defined contribution plans

Total continuing operations

Discontinued operations

Pension costs included in

Financial income and expense

Pension costs included in

Exceptional items

Changes in these key assumptions can have a significant impact
on the projected defined benefit obligations, funding
requirements and periodic costs incurred.

Total

2014

2013R

114

(8)

120

115

136

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For 2015, costs for the defined benefit plans relating to pensions
will be € 47 million (2014: € 39 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:

Changes in Employee benefits liabilities recognized in the
balance sheet are disclosed in the following overview:

Present value of defined benefit obligations

Employment benefits liabilities

2014

2013R

2014

2013R

Balance at 1 January

1,279

1,317

Balance at 1 January

(360)

(429)

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 31 December

(167)

(31)

(14)

(1)

(164)

(524)

- Service costs

- Interest costs

- Contributions

(39)

(1)

- Actuarial (gains)/losses

- Past service costs

- Curtailments/termination

benefits

- Exchange differences

- Reclassification from/to held for

sale

- Settlements

- Benefits paid

223

(8)

(16)

(52)

(9)

(6)

(23)

(37)

(42)

(360)

Balance at 31 December

1,564

1,279

The Employee benefits liabilities of € 524 million
(2013: € 360 million) consist of € 478 million (2013: € 322 million)
related to pensions, € 33 million (2013: € 25 million) related to
healthcare and other costs and € 13 million (2013: € 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 € 294 million (2013: € 252 million).

Fair value of plan assets

Balance at 1 January

958

931

2014

2013R

Changes:

- Interest income on plan assets

- Actuarial gains/(losses)

Actual return on plan assets

- Contributions by employer

- Contributions by employees

- Exchange differences

- Settlements

- Benefits paid

(16)

(52)

(20)

(42)

Balance at 31 December

1,086

958

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

The amounts recognized of these major plans in the balance
sheet are as follows:

The changes in the net assets / liabilities recognized in the
balance sheet are as follows:

Net liabilities / assets

Present value of funded

obligations

Fair value of plan assets

Present value of unfunded

obligations

Funded status

Effect of asset ceiling

Net liabilities / net assets1

Of which:

- Liabilities (Employee benefits

liabilities)

- Assets (Prepaid pension costs)

2014

2013R

(1,261)

1,086

(175)

(303)

(478)

(321)

1 Excluding less material plans with a net liability of € 46 million (2013: € 39 million)

Balance at 1 January

Expense recognized in the

income statement

Actuarial gains/(losses)

recognized directly in Other

comprehensive income during the

year

(994)

958

(36)

(285)

Contributions by employer

Reclassification from/to held for

sale

Exchange differences

2014

2013R

(321)

(386)

(29)

(37)

(162)

(11)

Balance at 31 December

(478)

(321)

In 2015 DSM is expected to contribute € 44 million (actual 2014:
€ 45 million) to its defined benefit plans.

The major categories of pension-plan assets as a percentage of
total plan assets are as follows:

Pension-plan assets by category

Bonds

Equities

Property

Other

2014

2013R

55%

34%

54%

34%

The pension-plan assets include neither ordinary DSM shares
nor property occupied by DSM.

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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 included in exceptional

items

Costs related to defined benefit

plans

2014

2013R

(8)

(7)

2014

2013R

Plans outside the

1 Plans outside the

Netherlands

2.07%

1.73%

2.43%

3.14%

1.92%

2.72%

0.93-2.2%

2.25-2.6%

Discount rate

Price inflation

Salary increase

Pension increase

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

2014

2013R

2012

2011

2010

Defined benefit obligations

Plan assets

(1,564)

1,086

(1,316)

958

(1,317)

931

(1,105)

817

(5,543)

5,440

Funded status of asset/(liability)

(478)

(358)

(386)

(288)

(103)

Experience adjustments on plan assets, gain/(loss)

Experience adjustments on plan liabilities, gain/(loss)

Gain/(loss) on liabilities due to changes in assumptions

(1)

(222)

(25)

(27)

(157)

(18)

(8)

(12)

245

(466)

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 3.4% 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 1.0% 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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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

26 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 2013R

1,089

(1,910)

(123)

(500)

(237)

(1,662)

Change from operating activities

Change from investing activities

Reclassification from non-current to current

Transfers

Dividend

Interest

Proceeds from reissued shares

Repurchase of shares

Capital payments of non-controlling interests

Derivatives

Other

Change from financing activities

Exchange differences

Total changes

998

(1,057)

(7)

(160)

(200)

145

(73)

(258)

(2)

(319)

537

(354)

(5)

178

(24)

(537)

139

(28)

222

(398)

222

1,028

(1,073)

107

(160)

(200)

145

(73)

107

(4)

(149)

185

(415)

197

173

(179)

Balance at 31 December 2013R

770

(1,725)

(538)

(303)

(64)

(1,841)

Change from operating activities

Change from investing activities

Reclassification from non-current to current

Transfers

Dividend

Interest

Proceeds from reissued shares

Repurchase of shares

Cash facility associates

Derivatives

Other

Change from financing activities

Exchange differences

808

(515)

238

(175)

(302)

(189)

(21)

(419)

(13)

Total changes

(101)

(13)

623

(532)

(9)

(623)

534

(89)

(16)

(26)

(240)

(167)

(391)

(314)

871

(546)

(175)

(225)

(189)

(391)

(898)

(6)

(103)

(199)

(251)

(579)

Balance at 31 December 2014

669

(1,637)

(641)

(502)

(315)

(2,420)

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27 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

2014

2013R

1,843

1,948

105

(130)

1,891

1,843

(48)

(101)

134

In 2014 the operating working capital of continuing operations before reclassification to held for sale, was € 1,968 million, which
amounts to 20.7% of annualized fourth quarter net sales (2013: 21.2%). Besides the business impact this decrease was due to
acquisitions, disposals and an exchange rate effect.

28 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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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

For members of the Managing Board specifically, only LTI performance shares have been granted since 2010 (no longer stock
options). LTI 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.

For LTI performance shares, see note 9 to the financial statements of the parent company.

All stock options and LTI 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 at

In 2014

Outstanding at

Fair value on

Exercise price

Expiry date

31 Dec. 2013

Granted

Exercised

45,225

159,438

373,279

372,200

615,125

2,562,113

2,918,063

3,308,063

(42,725)

(56,250)

(35,375)

(44,500)

(94,500)

(283,825)

(25,600)

(16,600)

Average

price (€ )

48.11

51.36

50.03

52.02

51.68

52.08

51.94

52.73

Forfeited/

31 Dec. 2014

grant date (€ )

(€ )

expired

(2,500)

103,188

337,904

327,700

520,625

(1,159,780)3

1,118,508

(227,300)3

2,665,163

(243,800)3

3,047,663

8.95

7.69

5.73

2.83

6.07

9.60

6.88

9.23

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

3,018,463

(50,850)3

2,967,613

10.66

52.00

9 May 2022

2006

2007

2008

2009

2010

20111,2

20121

20131

20141

2014 Total

10,353,506

3,018,463

(599,375)

51.55

(1,684,230)

11,088,364

Of which

vested

1,823,017

at 31 Dec.

2012

2,767,500

at 31 Dec.

2013

2013 Total

11,772,416

3,442,563

(3,363,035)

50.82

(1,498,438)

10,353,506

Of which

vested

3,382,177

1,823,017

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 2011 did only partially vest; the remaining part has been forfeited.
3 Number of forfeited options: 1,157,280 (2011), 164,300 (2012), 180,800 (2013) and 50,850 (2014).

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 five years.

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Overview of stock options for employees

Year of issue1 Outstanding at

In 2014

Outstanding at

Fair value on

Exercise price

Exercise

31 Dec. 2013

Granted

Exercised

2009

2011

2012

2013

2014

41,922

254,445

212,080

199,940

314,660

(34,927)

(15,935)

(16,245)

(5,840)

(1,850)

Average

price (€ )

47.92

51.18

51.26

53.11

53.18

Forfeited/

31 Dec. 2014

grant date (€ )

(€ )

period until

expired

(6,995)

(1,835)

(1,775)

(5,805)

(4,350)

236,675

194,060

188,295

308,460

2.31

10.35

6.79

6.51

5.68

21.10

46.20

40.90

48.91

52.00

Mar. 2014

May 2016

May 2017

May 2018

May 2019

2014 Total

708,387

314,660

(74,797)

49.88

(20,760)

927,490

2013 Total

1,338,068

284,935

(876,928)

51.93

(37,688)

708,387

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 € 19 million is
included for share-based compensation (2013: € 23 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

2014

2013

Share-based compensation

0.76%

0.56%

2014

2013R

52.00

31%

3.17%

10.66

48.91

29%

3.07%

9.23

Stock options

Share appreciation rights

Performance shares

Total expense

0.22%

0.13%

29 Related parties

(1)

2.5

52.00

23.5%

3.17%

5.68

2.5

48.91

27.5%

3.07%

6.51

Koninklijke DSM N.V. is the group holding company that is listed
on the Euronext Amsterdam stock exchange. 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

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Consolidated financial statements

Summary of significant accounting policies
Consolidated statements
Notes to the consolidated financial statements of
Royal DSM

and conditions that are equivalent to those that apply to arm's
length transactions.

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

20141

2013R1

147

203

170

244

DSM has provided guarantees to third parties for debts of
associates for an amount of € 81 million (2013: € 82 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 € 7.3 million (2013: € 9.6 million). The decrease was
mainly caused by costs in 2013 in relation to the early retirement
of Mr. Gerardu to facilitate succession planning for the Managing
Board and the Dutch crisis levy which was partly offset by the
one-time compensation payment to the new CFO. Total
remuneration and related costs includes fixed annual salary
including other items to the amount of € 3.9 million
(2013: € 3.9 million), short-term incentives to the amount
of € 1.1 million (2013: € 1.8 million), pension expenditure
amounting to € 0.5 million (2013: € 0.5 million) and long-term
incentives amounting to € 1.8 million (2013: € 2.2 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 (2013: € 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
Remuneration policy for the Managing Board and the
Supervisory Board onwards and note 9 to the Parent company
financial statements.

The service fees recognized in the financial statements 2014 for the service of EY amounted to € 7.3 million (2013: € 7.8 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)

2014

2013R

2014

2013R

3.9

0.8

0.2

4.9

2.4

7.3

4.1

1.4

0.3

5.8

2.0

7.8

2.1

0.3

0.1

2.5

2.2

0.6

0.1

2.9

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Parent company financial
statements

Balance sheet at 31 December of Koninklijke DSM N.V. before profit appropriation

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

2014

2013

444

9,773

260

10,502

215

256

432

9,980

129

10,566

10,758

10,595

338

489

(349)

166

4,934

145

5,723

1,544

1,021

215

2,255

3,491

338

489

(294)

5,068

271

5,908

1,649

650

185

2,203

3,038

10,758

10,595

2014

2013

(40)

185

145

319

(48)

271

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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 (€ 32 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 2014 was € 3 million
(2013: € 2 million), while the depreciation charge in 2014 was € 2 million (2013: € 2 million). The historical cost of property, plant
and equipment as at 31 December 2014 was € 63 million (2013: € 59 million); accumulated depreciation amounted to
€ 44 million (2013: € 41 million).

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4 Financial assets

Subsidiaries

Associates

Share in Equity

Loans

Other loans

Total

Share in

equity

Balance at 1 January 2013

11,911

315

105

Changes:

- Share in profit

- Dividend received

- Capital payments

- Net actuarial gains/(losses)

- Change in Fair value reserve

- Exchange differences

- New loans

- Transfers

316

(2,901)

1,854

(226)

(1,461)

(5)

Balance at 31 December 2013

9,517

315

103

- Changes:

- Share in profit

- Dividend received

- Deconsolidation

- Capital payments

- Net actuarial gains/(losses)

- Change in Fair value reserve

- Change in Hedging reserve

- Exchange differences

- New loans

- Transfers

(895)

150

(133)

(71)

222

131

(48)

381

(8)

(1)

Balance at 31 December 2014

8,933

315

471

12,335

(42)

319

(2,901)

1,854

(231)

(1,421)

9,980

(40)

(895)

381

153

(141)

(72)

270

9,773

Transfers and the main part of dividend received and capital payments relate to the restructuring of the legal set-up of financing
companies within DSM. Loans to associates relate to the USD 61 million loan granted to DPx in 2014 with an annual fixed interest
rate of 10.75% and an expected 5-year maturity. Loans to subsidiaries relate to a € 315 million non-interest bearing profit
participating loan granted to DSM Nutritional Products AG in 2004 and maturing in 2057.

5 Receivables

Receivable from subsidiaries

Other receivables / deferred items

Total

2014

2013R

157

215

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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

5,908

5,874

2014

2013R

2014

2013R

Borrowings by maturity

2014

2015

2016

2017

2018 and 2019

2020 through 2024

621

747

300

497

500

603

746

300

Total

2,165

2,149

In agreements governing loans with a residual amount at year-
end 2014 of € 2,165 million, of which € 620 million are of a
current nature (31 December 2013: € 2,149 million, of which
€ 500 million of a current nature), clauses have been included
which restrict the provision of security. More information on
borrowings is provided in note 20 (Borrowings) to the
consolidated financial statements.

8 Other current liabilities

2014

2013R

Owing to subsidiaries

2,201

2,133

Other liabilities

Deferred items

Total

2,255

2,203

Contingent liabilities
Guarantee obligations on behalf of affiliated companies and third
parties amounted to € 160 million (31 December 2013:
€ 164 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.

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

145

282

(140)

(301)

(189)

160

(142)

271

(228)

(271)

(73)

268

Balance at 31 December

5,723

5,908

For details see the consolidated statement of changes in equity
(note 16).

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 € 298 million (2013: € 16 million) is included for
Translation reserve, -€ 170 million (2013: -€ 7 million) for Hedging
reserve and -€ 11 million (2013: -€ 15 million) for Fair value
reserve.

7 Borrowings

2014

2013R

Total

Of which

Total

Of which

current

Debenture loans

Private loans

Commercial paper

2,041

124

400

497

124

400

2,040

109

150

500

150

Total

2,565

1,021

2,299

650

At 31 December 2014, there was one debenture loan (€ 497
million, maturing in 2024) with a remaining term of more than five
years (€ 300 million at 31 December 2013).

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9 Remuneration of Managing Board and Supervisory
Board

The 2014 Integrated Annual Report presents the Short-Term
Incentives that have been earned on the basis of results achieved
in 2014. These Short-Term Incentives will be paid out in 2015.

The Supervisory Board has established the extent to which the
targets for 2014 were achieved. Regarding the financial targets,
the score on the EBITDA target was slightly above threshold,
while the score on gross free cash flow was close to target. The
target for net sales growth was however not achieved. For the
sustainability targets, the score on ECO+ was well above target,
and the score on the Employee Engagement Index was just
below target. The target on Safety Performance was not
achieved. Managing Board members also have individual
targets. The scores achieved on these targets were below, at
and above target. The realization of the 2014 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 33.55% of
base salary.

In line with 2013 AGM approval, an STI Deferral and Share
Matching Plan came into effect in 2014 with the STI pay-out over
2013 performance.

With this plan only part of the STI outcome is paid out as cash.
25% of the gross STI value is mandatorily converted into DSM
Investment shares. Managing Board members can choose to
convert up to a further 25% into additional DSM Investment
shares (in 5% increments, with a minimum of 5% and a
maximum of 25%).

The company matches these STI Investment shares with an
equivalent number of Restricted Share Units (RSUs), vesting of
which is deferred for three years, conditional on achieving
predefined performance targets equivalent to the measures
under the Long-Term Incentive (LTI) Plan. The remainder of the
STI gross outcome (50% to maximum 75%) is paid out in cash
after tax.

Remuneration Managing Board in 2014
As part of its remuneration policy for the Managing Board, DSM
benchmarks its remuneration package against the packages
offered by the labor-market peer group once every three years.

Base salary in 2014
In view of the above-mentioned market comparison the base
salaries of the Managing Board members were moderately
increased with effect from 1 July 2014:
CEO: from € 855,000 to € 870,000 (+1.8%).
Other Managing Board members: from € 560,000 to € 570,000
(+1.8%).

Fixed annual salary

in €

1 July 2014

1 July 2013

Feike Sijbesma

Stefan Doboczky

Nico Gerardu1

Geraldine Matchett2

Rolf-Dieter Schwalb3

Stephan Tanda

Dimitri de Vreeze4

870,000

570,000

855,000

560,000

492,500

1 Retired as member of the Managing Board as of 1 September 2013
2 Member of the Managing Board as of 1 August 2014
3 Retired as member of the Managing Board as of 1 December 2014
4 Member of the Managing Board as of 1 September 2013

A new benchmark was conducted in Q4 2014, the results of
which are the subject of study by the Remuneration Committee.

Short-Term Incentives (STI) for 2014
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.

Target STI level and pay-out
When they achieve all their targets, Managing Board members
receive an incentive of 50% of their annual base salary.
Outstanding performance can increase the STI level to 100% of
the annual base salary.

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Parent company financial statements

Notes to the parent company financial statements

Short-Term Incentives

in €

20141

20132

For an overview of all granted and vested stock options and
performance shares see Overview of outstanding and exercised
stock incentives on page 195.

Feike Sijbesma

Stefan Doboczky

Nico Gerardu3

Geraldine Matchett4

Rolf-Dieter Schwalb5

Stephan Tanda

Dimitri de Vreeze6

320,812

188,813

92,329

166,548

158,888

193,088

480,938

315,000

309,400

315,000

298,200

90,719

Pensions in 2014
The members of the Managing Board participate in the Dutch
pension fund Stichting Pensioenfonds DSM Nederland (PDN).
PDN operates similar pension plans for various DSM companies.
As a consequence, the pension scheme for the Managing Board
is the same as the pension scheme for employees employed in
the Netherlands.

1 Based on results achieved in 2014 and therefore payable in 2015
2 Based on results achieved in 2013 and therefore payable in 2014
3 Retired as member of the Managing Board as of 1 September 2013
4 Member of the Managing Board as of 1 August 2014
5 Retired as member of the Managing Board as of 1 December 2014
6 Member of the Managing Board as of 1 September 2013

All members of the Managing Board decided to invest the
maximum of 50% of their gross 2013 STI which was payable in
2014 into DSM shares in 2014 in accordance with the STI
Deferral and Share Matching Plan. Mr. Sijbesma bought 4,822
shares, Mr. Doboczky and Mr. Schwalb each bought 3,158
shares, Mr. Tanda bought 2,990 shares and Mr. De Vreeze
bought 910 shares. All were awarded the same number of
Restricted Stock Units (RSU’s) as matching shares.

Long-Term Incentives (LTI)
The following table provides an overview of the LTI performance
shares that were granted to members of the Managing Board in
the respective year. These performance shares are subject to a
three year vesting period.

As already mentioned in previous Integrated Annual Reports the
pension plan for DSM in the Netherlands agreed with labor
unions came into effect on 1 January 2011. Its main
characteristics are:

- Based on career-average pay; annual accrual of pension rights

(old-age pension) over base salary exceeding € 13,449
(reviewed annually) at a rate of 2%.

- Retirement age, 66 for accruals from 2012 onwards. Until
2011 the accrual was linked to a pensionable age of 65.

- The scheme includes a spouse pension as well as a disability

benefit.

- Employee's contribution (Managing Board and Executives) of

3.5% percent of base salary up to € 59,827 and 7.5% of
pensionable salary above this amount (reviewed annually).
(Other employees contribute 5.5% of pensionable salary
above € 13,449 (revised annually)).

- Collective defined contribution: indexation of accruals and
retirement benefits, depending on PDN's coverage ratio.

Number of LTI performance shares granted1

Pensions

Feike Sijbesma

Stefan Doboczky

Nico Gerardu

Rolf-Dieter Schwalb

Stephan Tanda

Dimitri de Vreeze

2014

2013

in €

24,000

16,000

24,000

16,000

Feike Sijbesma

Stefan Doboczky

Nico Gerardu2

Geraldine Matchett3

Rolf-Dieter Schwalb4

Stephan Tanda

Dimitri de Vreeze5

Accrued pension1

31 Dec. 2014

31 Dec. 2013

466,639

38,920

4,638

85,918

103,910

144,430

449,658

27,889

357,494

74,887

92,879

134,074

1 Grant according to Koninklijke DSM N.V. Performance Share Plan

For 2015, the number of conditionally granted ordinary shares
under the LTI program will be:
Chairman 29,000
Members 19,000

1 Pensions built up in the Dutch Pension Plan. The accrual is linked to a retirement age

of 66 years.

2 Retired as member of the Managing Board as of 1 September 2013.
3 Member of the Managing Board as of 1 August 2014.
4 Retired as member of the Managing Board as of 1 December 2014.
5 Member of the Managing Board as of 1 September 2013.

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Revision and claw-back of bonuses
In 2014, as well as in 2013, no revision or claw-back of bonuses occurred.

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 106 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 € 7.3 million (2013: € 9.6 million). The cost of the
remuneration of the individual members of the Managing Board for the company was as follows (these are costs for DSM which
are not in all cases compensation paid to members of the Managing Board):

DSM's remuneration expense for the Managing Board

x € thousand

Salary

Short-term

Pension

Share-based

Other items2

Total

2014

2013

2014

2013

2014

2013

2014

2013

2014

2013

2014

2013

incentive

expenditure

compensation

Feike Sijbesma

Stefan Doboczky

Nico Gerardu

Geraldine Matchett5

Rolf-Dieter Schwalb6

Stephan Tanda

Dimitri de Vreeze7

Subtotal

Crisis levy

Total

863

565

538

518

565

531

848

553

9303

553

164

321

189

167

159

193

481

315

309

315

298

127

124

137

594

391

359

391

106

458

281

8524

302

1,990

1,994

1,284

1,316

2,259

700

1,153

1,285

1,239

1,270

949

285

3,580

3,601

1,121

1,809

486

521

1,841

2,195

287

283

7,315

8,409

1,215

7,315

9,624

1 Share-based compensation expense represents the cost for DSM of performance shares awarded to members of the Managing Board. These costs are recognized over the
vesting period of the performance shares and therefore cover several years. The increase in 2014 is a result of the fact that older grants are being replaced by newer more
expensive grants. The number of LTI performance shares granted was not increased from 2013 to 2014.

2 Other items include company car and expense allowance.
3

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 Member of the Managing Board as of 1 August 2014; including assignment bonus of € 300,000.
6 Retired as member of the Managing Board as of 1 December 2014. Excluding € 47,500 salary and € 57,987 other remuneration expenses (including pro rata STI) for Mr. Schwalb

as retired member of the Managing Board.

7 Member of the Managing Board 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 2014

Outstanding
1

Average

Exercise

Expiry date

at 31 Dec.

Granted

Exercised

Forfeited/

at 31 Dec.

share price at

price (€ )

Feike Sijbesma

2008

2009

Total

Rolf-Dieter

Schwalb2

Of which vested

2008

2009

Total

Of which vested

Stephan Tanda

2008

2009

Total

Of which vested

Dimitri de Vreeze

2008

2009

2010

2011

2012

2013

Total

Of which vested

2013

28,125

18,750

46,875

22,500

15,000

37,500

22,500

15,000

37,500

22,500

18,000

36,000

166,500

58,500

expired

2014

exercise (€ )

(18,000)

28,125

18,750

46,875

22,500

15,000

37,500

22,500

15,000

37,500

22,500

18,000

36,000

(18,000)

148,500

76,500

29.79 28 Mar 2016

21.10 27 Mar 2017

29.79 28 Mar 2016

21.10 27 Mar 2017

29.79 28 Mar 2016

21.10 27 Mar 2017

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

1 Currently Stefan Doboczky and Geraldine Matchett do not hold any stock options
2 Retired as member of the Managing Board as of 1 December 2014

Since 2010 the Managing Board has been granted LTI performance shares instead of stock options.

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Overview of performance shares

Year of issue Outstanding

In 2014

Outstanding

Share price

at 31 Dec.

Granted

Vested

Forfeited /

at 31 Dec.

at date

expired

2014

of grant (€ )

Feike Sijbesma

Stefan Doboczky

Rolf-Dieter Schwalb2

Stephan Tanda

2013

24,000

31,000

24,000

79,000

2011

2012

2013

2014

Total

28,822

(12,000)

Retained shares originated from performance shares

2011

2012

2013

2014

Total

16,000

20,000

16,000

52,000

19,158

(8,000)

Retained shares originated from performance shares

2011

2012

2013

2014

Total

16,000

20,000

16,000

52,000

19,158

(8,000)

Retained shares originated from performance shares

2011

2012

2013

2014

Total

16,000

20,000

16,000

52,000

18,990

(8,000)

Retained shares originated from performance shares

Dimitri de Vreeze

2014

Total

16,910

Retained shares originated from performance shares

1 Currently Geraldine Matchett does not hold any LTI performance shares
2 Retired as member of the Managing Board as of 1 December 2014

46.20

40.90

48.91

49.88

46.20

40.90

48.91

49.88

46.20

40.90

48.91

49.88

46.20

40.90

48.91

49.88

31,000

24,000

28,822

83,822

47,900

20,000

16,000

19,158

55,158

5,382

20,000

16,000

19,158

55,158

31,600

20,000

16,000

18,990

54,990

26,938

16,910

Purchasing 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.

All members of the Managing Board, with the exception at this time of the recently appointed CFO, have purchased shares in the
company to emphasize their confidence in the strategy and the company. At 31 December 2014 the members of the Managing
Board together held 202,598 shares in Koninklijke DSM N.V., compared to 147,296 at 31 December 2013. These shares were
bought through private transactions with private funds (including shares bought from earned STI) and obtained through vested
performance shares.

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Parent company financial statements

Notes to the parent company financial statements

Managing Board holdings of DSM shares

Board member

Ordinary shares

Retention from

Total

Ordinary shares

Retention from

31 December 2014

31 December 2013

purchased with

vested

holdings

purchased with

vested

private money

performance

private money

performance

Feike Sijbesma

Stefan Doboczky

Geraldine Matchett1

Rolf-Dieter Schwalb2

Stephan Tanda

Dimitri de Vreeze

47,900

5,382

31,600

26,938

45,922

11,158

17,658

12,990

3,050

93,822

16,540

49,258

39,928

3,050

38,600

6,500

13,000

8,000

140

35,900

23,600

21,556

Total

holdings

74,500

6,500

36,600

29,556

140

Total holdings

90,778

111,820

202,598

66,240

81,056

147,296

1 Member of the Managing Board as of 1 August 2014
2 Retired as member of the Managing Board as of 1 December 2014

Loans
The company does not provide any loans to members of the Managing Board.

Supervisory Board remuneration in 2014
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.

Committee membership Supervisory Board

Rob Routs, chairman

Ewald Kist, deputy chairman

Victoria Haynes

Pierre Hochuli

Eileen Kennedy

Pauline van der Meer Mohr

Tom de Swaan

Audit

Committee

Corporate

Social

Responsibility

Committee

Nomination

Committee

Remuneration

Committee

Member

Chairman

Member

Chairman

Member

Chairman

Member

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Overview of remuneration awarded to the Supervisory Board in 2014
The total remuneration (annual fixed fee and annual committee membership fee) of the members of the Supervisory Board amounted
to € 0.5 million (2013: € 0.5 million).

The remuneration of the individual members of the Supervisory Board was as follows:

in €

Annual fixed fee

Committee fee

Other costs

Rob Routs, chairman

Ewald Kist, deputy chairman

Victoria Haynes

Pierre Hochuli

Eileen Kennedy

Pauline van der Meer Mohr

Claudio Sonder (retired on 3 May 2013)

Tom de Swaan

Total

Total 2013

70,000

50,000

12,500

10,000

15,000

5,000

12,500

50,000

17,500

4,250

6,151

16,250

4,250

16,250

6,151

Total

2014

86,750

68,651

76,250

69,250

71,250

68,651

73,651

Total

2013

86,750

70,691

76,250

69,250

71,250

70,691

28,933

75,691

370,000

85,000

59,453

514,453

549,506

387,308

90,000

72,198

549,506

At year-end 2014 two members of the Supervisory Board held shares in Koninklijke DSM N.V.: Pierre Hochuli 7,210 (2013: 7,210)
and Victoria Haynes 300 (2013: 300).

Loans
The company does not provide any loans to members of the Supervisory Board.

Heerlen, 2 March 2015

Managing Board,

Supervisory Board,

Feike Sijbesma, CEO/Chairman
Geraldine Matchett, 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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Parent company financial statements

Notes to the parent company financial statements

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Other information

Independent Auditor's Report on the
Financial Statements

To the Shareholders and the Supervisory Board of Royal DSM

Report on the Audit of the Financial Statements 2014
Our opinion
We have audited the financial statements 2014 of Koninklijke
DSM N.V. (hereafter: Royal DSM), based in Heerlen. The financial
statements include the consolidated financial statements and
the company 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
2014, and of its result and its cash flows for 2014 in
accordance with International Financial Reporting Standards
as adopted by the European Union (EU-IFRS) and with Part 9
of Book 2 of the Dutch Civil Code.

- the company financial statements give a true and fair view of
the financial position of Royal DSM as at 31 December 2014,
and of its result for 2014 in accordance with Part 9 of Book 2
of the Dutch Civil Code.

The consolidated financial statements comprise:

- the consolidated balance sheet as at 31 December 2014;
- the following statements for 2014: consolidated income

statement and consolidated statements of comprehensive
income, changes in equity and cash flows for the year then
ended; and

- the notes, comprising a summary of the significant accounting

policies and other explanatory information.

The company financial statements comprise:

- the company balance sheet as at 31 December 2014;
- the income statement for 2014; and
- the notes comprising a summary of the accounting policies

and other explanatory information.

Basis for our opinion
We conducted our audit in accordance with Dutch law, including
the Dutch Standards on Auditing. Our responsibilities under
those standards are further described in the “Our responsibilities
for the audit of the financial statements” section of our report.

independence requirements in the Netherlands. Furthermore we
have complied with the Verordening gedrags- en beroepsregels
accountants (VGBA).

We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.

Materiality
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken
on the basis of these financial statements. The materiality affects
the nature, timing and extent of our audit procedures and the
evaluation of the effect of identified misstatements on our
opinion.

Based on our professional judgment we determined the
materiality for the financial statements as a whole at € 44 million.
This amount is based on a percentage (0.5%) of revenues, which
we considered to be an appropriate and stable basis for
determining overall materiality. This materiality level is broken
down in smaller amounts that are allocated to individual
companies. In performing our audit, we have also taken into
account misstatements and/or possible misstatements that in
our opinion are material for qualitative reasons.

We agreed with the Supervisory Board that misstatements in
excess of € 1 million, which are identified during the audit, would
be reported to them, as well as smaller misstatements that in our
view must be reported on qualitative grounds.

Scope of the group audit
Royal DSM is head of a group of entities. The financial
information of this group is included in the consolidated financial
statements of Royal DSM. The consolidated financial statements
are a consolidation of 293 reporting units, comprising Royal
DSM’s operating businesses and centralized functions spread
across more than 54 countries.

In establishing the overall approach to the audit, we determined
the type of work that is needed to be done by us, as group
auditors, by component auditors of the EY network, or by other
auditors operating under our instructions. In this respect we have
determined the nature and extent of the audit procedures to be
carried out for reporting units, which was based on either their
overall size or risk characteristics. On this basis we selected
reporting units for which an audit or review had to be carried out
on the complete set of financial statements or on specific items.

We are independent of Royal DSM in accordance with
international and national independence regulations, including
the ‘Verordening inzake de onafhankelijkheid van accountants
bij assurance-opdrachten’ (ViO) and other relevant

Accordingly, we selected 54 reporting units for which an (full or
specific) audit or review had to be carried out, representing 82%
of the consolidated revenue and 81% of the consolidated assets.

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Assurance report of the independent auditor
Profit appropriation
Special statutory rights
Important dates

The remaining reporting units were subject to period on period
movement analysis with a focus on higher risk balances and
unusual movements and additional audit procedures over
specific transactions. This provided us with the evidence we
needed for our opinion on the consolidated financial statements
as a whole.

and Annual Strategic Reviews) as adopted by the Managing
Board. We also verified the adequacy of the disclosures of the
assumptions to which the outcome of the impairment test is
most sensitive, as included in note 8 of the financial statements.
The impairment of € 291 million has been properly included as
exceptional item under DSM accounting policies and has been
disclosed in note 6 (exceptional items).

At most of the group entities in scope of the financial audit in The
Netherlands we have performed audit procedures ourselves. We
have mostly used EY auditors for the audit of group entities
outside The Netherlands. For the audit of significant associates
and joint ventures we have used auditors of EY and KPMG.
Where the work was performed by component auditors, we
determined the level of involvement we needed to have in the
audit work at those reporting units to be able to conclude
whether sufficient appropriate audit evidence had been obtained
as a basis for our opinion on the consolidated financial
statements as a whole.

Our key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements. We have communicated the key audit matters with
the Supervisory Board. The key audit matters are not a
comprehensive reflection of all matters discussed.

These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.

Judgment with respect to the valuation of goodwill and
(in)tangible assets
Under EU-IFRS, Royal DSM is required to annually test the
amount of goodwill and intangible assets with an indefinite life
for impairment. The entity’s disclosures about goodwill and
intangible assets are included in Note 8. IFRS also requires that
Royal DSM assesses for all other classes of assets whether there
are any indications of impairment. An impairment test itself only
has to be carried out if there are such indications.These annual
impairment tests were significant to our audit as the assessment
process is complex, contains items based on judgments and is
based on assumptions that are affected by expected future
market conditions. With respect to the DSM Fibre Intermediates
business group and as described in Note 6, the 2014 impairment
test resulted in an impairment of € 291 million.

Our audit procedures included, among others, using a valuation
expert to assist us in verifying the assumptions and
methodologies used by Royal DSM. We compared forecasted
revenue growth and profit margins for all cash generating units
with the Royal DSM business plan (Corporate Strategy Dialogue

Accounting for the disposition of the Pharmaceutical Products
business
As described in Note 2 and the Managing Board report, Royal
DSM finalized the agreement with private equity company JLL in
March 2014 and agreed to contribute its Pharmaceutical
Products business into a new company (DPx Holdings B.V.). As
a result of this agreement, the related business group was
classified as asset held for sale at year-end 2013. In 2014 the
business transaction was finalized resulting in a classification as
associate of the 49% share of Royal DSM in DPx Holdings B.V.
Accounting for the associate value of DPx Holdings B.V. was
complex considering the conversion of the local US GAAP
financials to IFRS, the fact that the year-end date for DPx
Holdings B.V. is 31 October 2014 and the need for purchase
price allocation adjustments. We audited management’s
accounting treatment of the exchange of DPP as assets held for
sale into the net equity value of DPx Holdings presented within
associates. Furthermore, we verified the net equity value as per
year-end 2014 and we audited the book result recognized in
2014.

Judgment and disclosure with respect to deferred tax assets
Under EU-IFRS, Royal DSM is required to annually review the
valuation of the deferred tax positions. This was important to our
audit because the assessment process is judgmental and
amongst other based on assumptions that are affected by future
market or economic conditions. Management concluded that it
is not probable that all deferred tax assets will be realized within
the foreseeable future and therefore recognized only those
assets for which recovery was deemed probable, which has
been disclosed in note 7.

Our audit procedures included, amongst others, a review of
forecasted fiscal results and methodologies used. We
ascertained that information used was derived from Royal
DSM’s business plans that have been subject to internal reviews
and were approved by those charged with governance
(Corporate Strategic Dialogue and Annual Strategic Reviews).
We also involved EY tax specialists to review the fiscal position,
current tax planning strategies and to verify that the method used
to calculate the valuation adjustment was consistently applied.
We have also ascertained that disclosures in the financial
statement with respect to taxes are in line with IAS 12.

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Responsibilities of management and the Supervisory Board
for the financial statements
Management is responsible for the preparation and fair
presentation of the financial statements in accordance with EU-
IFRS and Part 9 of Book 2 of the Dutch Civil Code, and for the
preparation of the management board report in accordance with
Part 9 of Book 2 of the Dutch Civil Code. Furthermore,
management is responsible for such internal control as
management determines is necessary to enable the preparation
of financial statements that are free from material misstatement,
whether due to fraud or error.

As part of the preparation of the financial statements,
management is responsible for assessing the company’s ability
to continue as a going concern. Based on the financial reporting
frameworks mentioned, management should prepare the
financial statements using the going concern basis of accounting
unless management either intends to liquidate the company or
to cease operations, or has no realistic alternative but to do so.
Management should disclose events and circumstances that
may cast significant doubt on the company’s ability to continue
as a going concern in the financial statements.

The Supervisory Board is responsible for overseeing the
company’s financial reporting process.

Our Responsibilities for the audit of the financial statements
Our objective is to plan and perform the audit assignment in a
manner that allows us to obtain sufficient and appropriate audit
evidence for our opinion.

Our audit has been performed with a high, but not absolute, level
of assurance, which means we may not have detected all errors
and frauds.

We have exercised professional judgment and have maintained
professional skepticism throughout the audit in accordance with
Dutch Standards on Auditing, ethical requirements and
independence requirements. Our audit included e.g.:

- Identifying and assessing the risks of material misstatement of

the financial statements, whether due to fraud or error,
designing and performing audit procedures responsive to
those risks, and obtaining audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control.

in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control.

- Evaluating the appropriateness of accounting policies used

and the reasonableness of accounting estimates and related
disclosures made by management.

- Concluding on the appropriateness of management’s use of
the going concern basis of accounting, and based on the audit
evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt
on the company’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related disclosures
in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the
company ceasing to continue as a going concern.

- Evaluating the overall presentation, structure and content of

the financial statements, including the disclosures; and
- Evaluating whether the financial statements represent the

underlying transactions and events in a manner that achieves
fair presentation.

We communicate with the Supervisory Board regarding, among
other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.

We provide the Supervisory Board with a statement that we have
complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships
and other matters that may reasonably be thought to bear on
our independence, and where applicable, related safeguards.

From the matters communicated with the Supervisory Board, we
determine those matters that were of most significance in the
audit of the financial statements of the current period and are
therefore the key audit matters. We describe these matters in
our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare
circumstances, when non-mentioning is in the public interest.

Report on other legal and regulatory requirements
Report on the management board report and the other
information
Pursuant to legal requirements of Part 9 of Book 2 of the Dutch
Civil Code (concerning our obligation to report about the
management board report and other information):

- Obtaining an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate

- We have no deficiencies to report as a result of our

examination whether the management board report, to the

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Statements
Assurance report of the independent auditor
Profit appropriation
Special statutory rights
Important dates

extent we can assess, has been prepared in accordance with
Part 9 of Book 2 of the Dutch Civil Code, and whether the
information as required by Part 9 of Book 2 of the Dutch Civil
Code has been annexed.

- We report that the management board report, to the extent
we can assess, is consistent with the financial statements.

Engagement
We were appointed as auditor of Royal DSM for the 2013 and
2014 year audit by the Supervisory Board on 10 December
2012, which was approved by the shareholders at the annual
meeting held on 3 May 2013. We have been statutory auditor of
DSM for an uninterrupted period since 1967 and will rotate off
after 2014 following mandatory firm rotation.

Maastricht, 2 March 2015

Ernst & Young Accountants LLP

Signed by G.A.M. Aarnink

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Assurance report of the independent
auditor

To the Supervisory Board and shareholders of Royal DSM

We have reviewed the sustainability information in the sections
‘DSM in motion: driving focused growth’, ‘Growth driver:
Sustainability’, ‘Stakeholder engagement’, ‘People in 2014’,
‘Planet in 2014’, and ‘Sustainability statements’, as included in
the Integrated Annual Report for the year 2014 (hereinafter: the
Report) of Koninklijke DSM N.V. (hereinafter: Royal DSM). The
Report comprises a description of the policy, the activities,
events and performance of Royal DSM relating to sustainable
development during the reporting year 2014.

Limitations in our scope
The Report contains prospective information, such as ambitions,
strategy, targets, expectations and projections. Inherent to this
information is that actual future results may be different from the
prospective information and therefore may be uncertain. We do
not provide any assurance on the assumptions and feasibility of
this prospective information.

References in the Report (to www.dsm.com, external websites
and other documents) are outside the scope of our assurance
engagement.

Management’s responsibility
The Managing Board of Royal DSM is responsible for the
preparation of the Report in accordance with the Sustainability
Reporting Guidelines G4 (application level Comprehensive) of
the Global Reporting Initiative (GRI) and the reporting criteria
developed by Royal DSM, including the identification of the
stakeholders and the determination of material issues. The
disclosures made by management with respect to the scope of
the Report and the reporting criteria are included in the section
‘Reporting policy’ of the Report. Furthermore management is
responsible for such internal control as it determines is necessary
to enable the preparation of the Report that is free from material
misstatement, whether due to fraud or error.

Auditor’s responsibility
Our responsibility is to express a conclusion on the Report based
on our review. We conducted our review in accordance with
Dutch law, including Dutch Standard 3810N ‘Assurance
Engagements relating to Sustainability Reports’. This requires
that we are independent of DSM, comply with ethical
requirements and that we plan and perform the review to obtain
limited assurance about whether the Report is free from material
misstatement.

A review is focused on obtaining limited assurance. The
procedures performed in obtaining limited assurance are aimed
on the plausibility of information which does not require
exhaustive gathering of evidence as in engagements focused on
reasonable assurance. The performed procedures consisted
primarily of making inquiries of management and other within the
entity, as appropriate, applying analytical procedures and
evaluating the evidence obtained. Consequently a review
engagement provides less assurance than an audit.

Procedures performed
Our main procedures included the following:

- Performing an external environment analysis and obtaining an
understanding of the sector, relevant social issues, relevant
laws and regulations and the characteristics of the
organization;

- Evaluating the acceptability of the reporting policies and their
consistent application, such as assessment of the outcomes
of the stakeholder dialogue and the reasonableness of
accounting estimates made by management;

- Evaluating the application level in accordance with the

Sustainability Reporting Guidelines G4 (application level
Comprehensive) of GRI;

- Evaluating the design and implementation of the systems and
processes for data gathering and processing of information as
presented in the Report;

- Interviewing management (or relevant staff) at corporate level

responsible for the sustainability strategy and policies;
- Interviews with relevant staff responsible for providing the

information in the Report, specific issues including
sustainability strategy, employee engagement survey, ECO+
and safety, carrying out internal control procedures on the
data and the consolidation of the data in the Report;

- Evaluating internal and external documentation, in addition to
interviews, to determine whether the information in the Report
is reliable;

- Review of the results of procedures performed by the

Corporate Operational Audit department of Royal DSM as part
of the operational audits at Royal DSM sites with respect to
sustainability information;

- Analytical review of the environmental data submitted by all
sites for consolidation, together with an assessment of the
quality of the data validation process at group level;

- Analytical review of the people data submitted by all Business
Groups for consolidation, together with an assessment of the
quality of the data validation process at group level;
- Analytical review of other data and trend explanations

submitted for consolidation at group level.

We believe that the evidence we have obtained is sufficient and
appropriate to provide a basis for our conclusion.

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Other information

Independent Auditor's Report on the Financial
Statements
Assurance report of the independent auditor
Profit appropriation
Special statutory rights
Important dates

Conclusion
Based on our procedures performed, and with due
consideration of the limitations described in the paragraph
‘Limitations in our scope’, nothing has come to our attention that
causes us to conclude that the sustainability information in the
Report, in all material respects, does not provide a reliable and
appropriate presentation of the policy of Royal DSM for
sustainable development, or of the activities, events and
performance of the organization relating to sustainable
development during 2014, in accordance with the Sustainability
Reporting Guidelines G4 (application level Comprehensive) of
the GRI and reporting criteria developed by Royal DSM as
disclosed in the section ‘Reporting policy’ of the Report.

Maastricht, 2 March 2015

Ernst & Young Accountants LLP

Signed by G.A.M. Aarnink

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 2014 it has been
determined that no amount of the net profit of € 145 million will
be appropriated to the reserves. From the profit of € 145 million,
dividend is first distributed on the cumulative preference shares
B. At the end of 2014 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 2014 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 2014, 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 (€ 135 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 2014 of € 1.65 per share to be paid from
the profit remaining after distribution (€ 135 million) and from the
distributable reserves in accordance with the provisions of Article
33, section 4 of the Articles of Association (€ 151 million).
With a total dividend of € 1.65 per ordinary share and an interim
dividend of € 0.55 per ordinary share having been paid in August
2014, the final dividend would then amount to € 1.10 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 the reserves

- Dividend on cumprefs A

- Interim dividend on ordinary

- Final dividend distributable on

ordinary shares

2014

2013R

145

271

(151)

191

(26)

200

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On 31 December 2014 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 Thursday, 30 April 2015 at

14.00 hours.

Important dates

Publication of first-quarter results

Wednesday, 29 April 2015

Ex-dividend quotation

Publication of second-quarter

Tuesday, 5 May 2015

results

Tuesday, 4 August 2015

Publication of third-quarter results

Tuesday, 3 November 2015

Full year results 2015

Wednesday, 17 February 2016

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 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 2014.

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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Other information

Independent Auditor's Report on the Financial
Statements
Assurance report of the independent auditor
Profit appropriation
Special statutory rights
Important dates

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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

20141

2013R1

2012

2011

2010

2,867

3,673

427

762

130

2,690

3,611

364

295

152

7,859

7,112

1,739

1,769

669

4,230

4,267

1,638

1,597

126

770

4,150

637

4,787

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

12,126

11,899

11,966

11,157

10,480

5,723

213

5,936

365

479

105

1,637

2,667

1,143

362

1,915

3,507

3,523

5,908

188

6,096

375

326

1,725

2,598

841

190

1,845

2,975

230

3,205

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

Total equity and liabilities

12,126

11,899

11,966

11,157

10,480

1 Application of IFRS 11 'Joined Arrangements' that came into effect from 1 January 2014. 2013 has been restated. The years 2010 till 2012 have not been restated.

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DSM figures: five-year summary

Income statement

x € million

Net sales

2014

2013R

2012

2011

2010

9,283

9,429

9,131

9,193

9,050

Operating profit plus depreciation and amortization (EBITDA)

1,166

1,312

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

617

(118)

(89)

417

(318)

145

(10)

135

773

(137)

(111)

(19)

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

8,105

8,060

8,084

6,581

5,468

616

549

(2,420)

296

21,351

1,713

7.8

1.17

1.21

0.49

0.29

6.6

2.4

9.9

694

424

539

(1,841)

297

23,485

1,822

9.6

1.18

1.49

0.51

0.23

8.2

4.5

9.6

715

1,265

474

(1,668)

263

528

974

742

430

(318)

247

427

377

440

108

234

23,498

1,761

22,224

1,655

21,911

1,566

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

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Information about ordinary DSM shares

per ordinary share in €

2014

2013R

2012

2011

2010

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 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 Euronext Amsterdam:

- Average

- Lowest

- Highest

1 Subject to approval by the Annual General Meeting of Shareholders

2.85

2.42

0.78

5.52

1.651

0.55

1.10

3.3

3.19

2.84

1.52

5.77

1.65

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

57.97

44.44

50.64

59.75

43.93

57.16

46.29

36.33

45.79

46.82

30.54

35.85

42.85

30.43

42.61

173,537

172,605

173,963

172,183

168,684

165,543

163,257

165,567

166,468

164,047

801

104

7,981

728

3,049

823

225

2,720

1,028

191

3,512

995

3,629

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DSM figures: five-year summary

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Explanation of some concepts and
ratios

PEOPLE
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)).

Occupational Health Incident
This refers to any abnormal condition or disorder requiring
medical treatment – other than one resulting directly from an
accident – caused by, or mainly caused by, repeated exposure
to work-related factors

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.

Chemical Oxygen Demand (COD)
COD is an indicator of the degree of pollution of wastewater by
organic substances.

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Explanation of some concepts and ratios

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 causes 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
ordinary share, however, the number of shares outstanding at
year-end is used.

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

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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.

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.

Total shareholder return (TSR)
Total shareholder return is capital gain plus dividend paid.

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Explanation of some concepts and ratios

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List of abbreviations

ADR

AFM

ANH

API

BIO

BMI

BRIC

American Depositary Receipts

Netherlands Authority for the Financial Markets

Animal Nutrition & Health

Active pharmaceutical ingredients

Biotechnology Industry Organization

Body Mass Index

High growth economies including Brazil, Russia, India and

China

CEFIC

Conseil Européen des Fédérations de l'Industrie Chimique

(European Chemical Industry Council)

cGMP

Current Good Manufacturing Practice

CMO

CMP

COA

COD

CRA

CSR

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 Engineering Plastics

DSM Fibre Intermediates

DSM Food Specialties

DNCC

DSM Nanjing Chemical Co., Ltd.

DNP

DPP

DSP

EBA

EBIT

DSM Nutritional Products

DSM Pharmaceutical Products

DSM Sinochem Pharmaceuticals

Emerging Business Area

Earnings before interest and taxes (Operating Profit)

EBITDA

Earnings before interest, taxes, depreciation and amortization

FIFO

FTE

GAIN

GDP

GFCF

GHG

GHGE

GHS

GMM

GMP

GPS

GRI

First in, first out

Full-time equivalent

Global Alliance for Improved Nutrition

Gross Domestic Product

Gross Free Cash Flow

Greenhouse gas

Greenhouse-gas emissions

Globally Harmonized System

Genetically Modified (Micro-)organisms

Good Manufacturing Practice

Global Product Strategy

Global Reporting Initiative

HNH

IAS

IASB

IFRIC

IFRS

ILO

IUCN

KPI

LCA

LMRA

LTI

LWC

NGO

NIP

NPS

NYSE

OECD

PDN

PPA

PSI

R&D

Human Nutrition & Health

International Accounting Standards

International Accounting Standards Board

International Financial Reporting Interpretation Committee

International Financial Reporting Standards

International Labor Organization

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

Purchase Price Allocation

Process Safety Incident

Research & Development

REACH

Registration, Evaluation, Authorization and Restriction of

ROCE

SAM

SAR

SHE

SSP

STI

TDC

TSR

Chemical substances

Return on Capital Employed

Sustainable Asset Management

Share Appreciation Rights

Safety, Health and Environment

Supplier Sustainability Program

Short-Term Incentive

Total Direct Compensation

Total Shareholder Return

UHMwPE

Ultra high molecular weight polyethylene

VNCI

VOC

VRR

Association of the Dutch Chemical Industry

Volatile Organic Compound

Volume-Related Revenue

WBCSD

World Business Council for Sustainable Development

WEF

WFP

World Economic Forum

United Nations World Food Programme

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List of abbreviations

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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.contacts@dsm.com