NOTES TO THE AGENDA FOR THE ANNUAL GENERAL MEETING OF ROYAL DSM N.V. TO BE HELD ON 26 MARCH 2008

Transcription

1 NOTES TO THE AGENDA FOR THE ANNUAL GENERAL MEETING OF ROYAL DSM N.V. TO BE HELD ON 26 MARCH 2008 NOTES TO AGENDA ITEM 2 Annual Report for 2007 by the Managing Board The Managing Board will comment on the Report by the Managing Board in DSM s annual report for 2007 (see pp. 18 to 64 of the annual report for ). After the explanation those present at the meeting will be given the opportunity to ask questions or make remarks about the annual report for 2007 as well as the report by the Supervisory Board (included in the annual report for 2007 on pp. 65 to 67) and the Triple P report for Under this agenda point questions can be asked also on DSM s approach to the implementation of the Dutch corporate governance code. NOTES TO AGENDA ITEM 3 Adoption of the Financial Statements for 2007 The Supervisory Board approved on 12 February 2008 the Financial Statements for 2007 drawn up by the Managing Board. The Financial Statements were published on 13 February 2008 and are now submitted for adoption by the General Meeting (see Article 31, section 2, of the Articles of Association). NOTES TO AGENDA ITEM 4 a. Reserve policy and dividend policy The reserve policy is unchanged compared with last year. The reserve policy is closely linked to the dividend policy. Every year the Managing Board, with the approval of the Supervisory Board, decides what part of the profits is to be appropriated to the reserves. The portion of the profit then remaining and after deduction of the dividend on cumulative preference shares, is at the disposal of the General Meeting. The dividend that DSM pays its shareholders depends on business conditions, the company s financial performance and other relevant factors. As published in September 2007 at the occasion of publishing the evaluation of Vision 2010 Building on Strengths DSM has adjusted the dividend policy by abandoning the clause in the dividend policy which based the dividend on a percentage of the cash flow. DSM s adjusted dividend policy thus reflects the transformation of DSM s portfolio and the as a consequence thereof increased profit stability. DSM aims to provide a stable and preferably rising dividend. The entire dividend is distributed in cash. b. Approval of the dividend payment for 2007 With the approval of the Supervisory Board, the Managing Board is presenting to the General Meeting for approval the proposal that the dividend per ordinary share to be paid for 2007 be 1.20 (see Article 32, section 6 of the Articles of Association). An interim dividend of 0.33 per ordinary share having been paid in August 2007, the final dividend thus amounts to 0.87 per ordinary share. 1 The page numbers refer to the electronic version of the 2007 Annual Report on the DSM website 1/7

2 NOTES TO AGENDA ITEM 5 a. Release from liability of the members of the Managing Board It is proposed that the members of the Managing Board be released from liability in respect of their managerial activities (see Article 31, section 3, of the Articles of Association). b. Release from liability of the members of the Supervisory Board It is proposed that the members of the Supervisory Board be released from liability in respect of their supervisory role (see Article 31, section 3, of the Articles of Association). NOTES TO AGENDA ITEM 6 (Re-)appointment of members of the Supervisory Board According to the rotation schedule, Mr C. Herkströter, Mr H. Bodt and Mr. E. Kist are due to resign. Mr C. Herkströter and Mr E. Kist have put themselves up for reappointment. Mr H. Bodt will step down at the Annual General meeting in 2008 as he will by then have served the maximum term of 12 years on the Supervisory Board. The Supervisory Board considers it desirable to appoint a new Supervisory Board member. a. Reappointment of Mr C. Herkströter In accordance with Article 24, section 2, of the Articles of Association, the Supervisory Board nominates Mr Herkströter for reappointment as a member of the Supervisory Board of DSM on the basis of his broad experience in the management and supervision of corporations, his international experience, his industrial expertise in the field of finance & economics and his qualities as Supervisory Board Chairman as demonstrated during his past period within DSM. Mr Herkströter is an independent member of the Supervisory Board within the meaning of the Dutch corporate governance code and Article 1.4 of the Supervisory Board Regulations. It is proposed that the Meeting reappoint Mr Herkströter as a member of the Supervisory Board of DSM in accordance with the nomination of the Supervisory Board. Mr Herkströter (1937) began his career in 1967 when he joined Billiton, which was taken over by Royal Dutch/Shell Group in Until his retirement in 1998 Mr Herkströter held various posts at Shell, both in the Netherlands and elsewhere. His last positions were Chairman of the Committee of Managing Directors of Royal Dutch/Shell Group and President of Royal Dutch Petroleum Company. He is emeritus professor of International Management at the University of Amsterdam. Mr Herkströter has been a member of the Supervisory Board of Koninklijke DSM N.V. since March He is Chairman of this Board since March Mr Herkströter is also member of the Advisory Council of Robert Bosch, chairman of the social Advisory Council of the Tinbergen Institute, chairman of the Advisory Committee of Royal NIVRA and member of the Capital Market Committee (Netherlands Authority for the Financial Markets). Mr Herkströter holds no DSM shares. 2/7

3 b. Reappointment of Mr E. Kist In accordance with Article 24, section 2, of the Articles of Association, the Supervisory Board nominates Mr Kist for reappointment as a member of the Supervisory Board of DSM on the basis of his international managerial and supervisory experience, his knowledge and experience of the financial world and his qualities as Supervisory Board member as demonstrated during his past period within DSM. Mr Kist is an independent member of the Supervisory Board within the meaning of the Dutch corporate governance code and Article 1.4 of the Supervisory Board Regulations. It is proposed that the Meeting reappoint Mr Kist as a member of the Supervisory Board of DSM in accordance with the nomination of the Supervisory Board. Mr Kist (1944) has worked for the ING Group since He has held several managerial positions within the Group, including a 3-year term in Washington D.C. as President of ING s US insurance operations. In 1993 he was appointed member of the Executive Board of the ING Group and became Vice-President of this Board in Since May 2000 Mr Kist has been Chairman of the Executive Board of ING Group. Mr Kist retired in Mr Kist has been a member of the Supervisory Board of Koninklijke DSM N.V. since March Mr Kist is also a member of the Supervisory Boards of De Nederlandsche Bank N.V., Royal Philips Electronics N.V., Stage Entertainment and Moody s Investor Services, member of the Board of Governors of the Peace Palace in The Hague (Netherlands) and of the Netherlands America Foundation. Mr Kist holds no DSM shares. c. Appointment of Mrs L. Gunning-Schepers In accordance with Article 24, section 2, of the Articles of Association, the Supervisory Board nominates Mrs Gunning-Schepers for appointment as a member of the Supervisory Board of DSM on the basis of her scientific knowledge and broad societal experience in the field of public health and her qualities as manager of complex organizations. Mrs Gunning-Schepers is an independent member of the Supervisory Board within the meaning of the Dutch corporate governance code and Article 1.4 of the Supervisory Board Regulations. It is proposed that the Meeting appoint Mrs Gunning-Schepers as a member of the Supervisory Board of DSM in accordance with the nomination of the Supervisory Board. Mrs Gunning-Schepers (1951) studied medicine and public health at Groningen University (Netherlands) and at the Johns Hopkins School of Public Health in Baltimore (USA). She earned a doctorate in Public Health at the Erasmus University of Rotterdam (Netherlands). For a number of years she worked as research fellow at Leuven University (Belgium) and as a member of the Staff Bureau for Health Policy Development of the former Dutch Ministry of Welfare, Health and Cultural Affairs before she became Professor of Social Medicine at the Institute for Social Medicine at the Medical Faculty of the University of Amsterdam (Netherlands). From 1995 until1997 she was a member of the (Dutch) Scientific Council for Government Policy. In 1997 she was appointed member of the Executive Board of the Academic Medical Centre of the University of Amsterdam. In 2001 she became chairman of this Board and Dean of the Medical Faculty of the University of Amsterdam. 3/7

4 Mrs Gunning-Schepers is also a member of the Dutch Health Council, the Board of the Amsterdam Concertgebouw Foundation Committee, the Board of Arbo Unie and the Board of Sanquin. Mrs Gunning-Schepers holds no DSM shares. NOTES TO AGENDA ITEM 7 Adaptation of the remuneration policy of the members of the Managing Board In April 2005 the General Meeting adopted the policy regarding the remuneration of the members of the Managing Board. This policy is outlined in the 2007 annual report on pp It is proposed that parts of the remuneration policy be changed. a. Adaptation of the financial targets of the short-term incentive scheme During the AGM in 2007 some comments were made on the financial targets for the short- term Incentive scheme relating to overlaps and correlation between financial targets and the complex CFROI (Cash Flow Return On Investments) mechanism as short-term incentive target. In reaction to these comments the Supervisory Board reviewed the financial targets of the short-term incentive scheme. As a result the intention is to modify the short-term incentive scheme as follows: - Replacement of CFROI as financial target by net-sales growth (organic) to reduce overlaps and correlation between financial targets. - An increase in the percentage bonus for overachievement of financial targets from 150% to 200% of the base bonus to close the gap with the median of the market for total cash compensation. - Abolition of the adjustment mechanism for the euro/dollar ratio. As a result the financial targets within the bonus scheme account for a bonus amounting to 42% of base salary (84% for outstanding financial performance) and relate to: - operating profit (EBIT) 21% (42%) - net cash 12% (24%) - net-sales growth (organic) 9% (18%) Total 42% (84%) The bonus part related to non-financial targets amounts to 18% of the base salary and cannot increase beyond that. No change is being proposed with respect to non-financial targets. b. Adaptation of the labor-market peer group For benchmarking purposes with respect to the remuneration of the Managing Board a labor market peer group of ten Dutch companies is used. In 2008 two of these companies, Numico and Getronics, no longer are listed and therefore will have to be eliminated from the Dutch labor market peer group and have to be replaced. Recent changes in the composition of the AEX/AMX index of the Euronext Amsterdam Exchange limit DSM s options to compose a specific Dutch labor-market peer group based on the AEX/AMX only. Moreover Eumedion (a platform of Dutch institutional investors) has issued 4/7

5 guidelines to the effect that a labor-market peer group should consist of at least 12 companies. It is to be expected that corporate-governance-regulating bodies will adopt this guideline. The Supervisory Board has requested independent remuneration experts to propose an alternative labor-market peer group. The proposed peer group will consist of Dutch listed companies that are more or less comparable to DSM in terms of size and complexity and some industry-specific European specialty-chemicals companies. It is proposed to replace the existing labor-market peer group by a peer group consisting of the following 12 companies: Aegon Akzo Nobel Ciba Clariant Heineken KPN Nutreco Océ Rhodia Solvay TNT Wolters Kluwer In accordance with Article 18, section 1, of the Articles of Association it is proposed to the General Meeting to adopt the remuneration policy of the members of the Managing Board in accordance with the proposal. NOTES TO AGENDA ITEM 8 Powers of the Managing Board In order to be able to finance acquisitions in whole or in part through the issuance of shares, if necessary, and in order to be able to service the option rights of DSM managers and employees, it is desirable for the Managing Board to have restricted authority to issue ordinary shares and to grant options on ordinary shares. In accordance with Articles 10 and 11 of the Articles of Association, the General Meeting, by virtue of the resolution adopted on 28 March 2007, has extended the period during which the Managing Board is authorized to issue shares and to limit or exclude the preferential right when issuing ordinary shares by 18 months. This authorization will therefore end on 29 September 2008, if it is not extended. The duration of the extension of this authorization is restricted by law to a maximum of five years. However, as in previous years, it is proposed that this period be extended by another 18 months. s whereby the Managing Board exercises these powers to issue ordinary shares and to limit or exclude the preferential right when issuing ordinary shares are subject to approval by the Supervisory Board. a. Extension of the period during which the Managing Board is authorized to issue ordinary shares A proposal is submitted to the General Meeting to extend the period during which the Managing Board is authorized to issue ordinary shares, which includes the granting of rights for the taking up of ordinary shares as provided for in Article 10 of the Articles of Association, to a date 18 months from the date of this General Meeting (i.e. up to and including 26 September 2009), on the understanding that this authorization of the Managing Board is limited to a number of ordinary shares with a nominal value amounting to 10% of the issued capital at the time of issue, and to an additional 10% of the issued capital at the time of issue, if the issue takes place within the context of a merger or acquisition. 5/7

6 b. Extension of the period during which the Managing Board is authorized to limit or exclude the preferential right when issuing ordinary shares A proposal is submitted to the General Meeting to extend the period during which the Managing Board is authorized to limit or exclude the preferential right when issuing ordinary shares, including the granting of rights for the taking up of ordinary shares, as provided for in Article 11 of the Articles of Association, to a date 18 months from the date of this General Meeting (i.e. up to and including 26 September 2009) on the understanding that this authorization of the Managing Board is limited to a number of ordinary shares amounting to 10% of the issued capital at the time of issue, and to an additional 10% of the issued capital at the time of issue if the issue takes place within the context of a merger or acquisition. NOTES TO AGENDA ITEM 9 Authorization of the Managing Board to have the company repurchase shares DSM considers it desirable to have flexibility with regard to the repurchase of its own shares up to the statutory maximum of 10% of the issued capital, e.g. to service share options granted to management and personnel, or as part of a share buy-back program, or otherwise. In accordance with Article 13 of the Articles of Association, the company may acquire its own shares by virtue of a resolution of the Managing Board, which resolution is subject to approval by the Supervisory Board. Under Article 98 of Book 2 of the Dutch Civil Code, this requires authorization by the General Meeting. The duration of such authorization is limited by law to a maximum of 18 months. It is proposed that the General Meeting authorize the Managing Board to repurchase shares, on the stock exchange or otherwise, as meant in Article 13 of the Articles of Association, for a period of 18 months from the date of this General Meeting (i.e. up to and including 26 September 2009), up to the legally allowed maximum of 10% of the issued capital and in the case of ordinary shares for a price between the nominal value and the opening price on the Euronext Amsterdam Exchange on the day of purchase plus 10% and in the case of cumulative preference shares A for a price between the par value and the computation base referred to in Article 32, section 3, of the Articles of Association, plus 10%. NOTES TO AGENDA ITEM 10 Reduction of the issued capital by canceling shares The issuing of shares, for instance in connection with the exercise of the option rights annually granted to DSM s management and personnel, may lead to dilution of the share capital. To the extent that DSM s financial position allows this and the possibilities exist on the share market, this disadvantage for holders of ordinary shares will be offset as much as possible by the purchasing and possible cancellation of shares in DSM s own capital. The authorization to repurchase company shares is requested under item 9 of the agenda. The Managing Board, with due observance of the provisions of Article 14 of the Articles of Association and with the approval of the Supervisory Board, proposes that the General Meeting resolves to reduce the issued capital by cancellation of shares held by the company in its own capital up to a maximum of the number that is or will be bought by the company. This will enable the company to further optimize its equity structure. 6/7

7 The number of shares to be cancelled under this resolution shall be determined by the Managing Board and shall be limited to a maximum of 10% of the issued capital as appearing from the Financial Statements for The amount of the capital reduction shall always appear from a resolution adopted to this end by the Managing Board, which will be filed at the Trade Register. The capital reduction shall take place with due observance of the applicable provisions of the law and the Articles of Association. NOTES TO AGENDA ITEM 11 Choice of English as language for the annual report and the financial statements Articles 391(1) and 362(7) of Book 2 of the Dutch Civil Code require the annual report and the items in the financial statements to be in Dutch unless the General Meeting has decided to use another language. The Managing Board and Supervisory Board are of the opinion that the quality of DSM's external disclosures will benefit from officially reporting in English from now on. DSM already publishes an English version of the annual report each year for the benefit of the large number of foreign shareholders and other concerned and interested parties outside the Netherlands. Furthermore the international composition of the Managing Board and Supervisory Board requires English to be the working language at Managing Board and Supervisory Board meetings and the official annual report and financial statements no longer to be in Dutch. The Managing Board, with the approval of the Supervisory Board, proposes to the General Meeting to adopt a resolution for the annual report and financial statements for the financial year 2008 and subsequent years to be drawn up in English. For the benefit of Dutch parties concerned DSM will publish Dutch versions or summaries of the annual report and the financial statements. 7/7