The remuneration package for the Managing Board is subject to annual review. The market competitiveness of the remuneration package of the Managing Board for 2007 was reviewed, based on the Dutch labor-market peer group. The data reflect the July 2007 remuneration levels.

On-target bonuses and stock-incentive grants are expressed as a percentage of base salary. The remuneration data are regressed to reflect the size and scope of DSM. Stock-incentive valuations are based on the Black-Scholes method.

Furthermore, data are presented as median actual levels.

The Supervisory Board reviewed whether circumstances justified an adjustment of the base-salary levels. Based on the benchmark against the peer group, it was concluded that the base salary for the chairman was well below the median whilst the salaries of the other members of the Managing Board were around the median level. DSM’s policy is to offer the Managing Board a base salary comparable with the median of the Dutch labor-market peer group. As stated in the annual report 2006, it is the intention to close the gap with the median of the benchmark by 2008.

External and internal circumstances justified a general increase in the base salary of the Managing Board of 2.5% as of 1 July 2007 to cope with inflation and labor-market developments.

Bonus 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.

When they achieve all their targets, Managing Board members receive a bonus of 60% of their annual base salary. Outstanding financial performance can increase the bonus level to 81% of the annual base salary.

The 2007 annual report presents the bonuses that have been earned on the basis of results achieved in 2007. These bonuses will be paid out in 2008.

The Supervisory Board has established the extent to which the targets for 2007 were achieved. The realization of the 2007 financial bonus targets has been reviewed by Ernst & Young Accountants. Furthermore, Ernst & Young has reviewed the process with respect to the target setting and realization of the non-financial bonus targets. The targets relating to the group's financial performance were all met and partially even exceeded. The other, non-financial targets were also fully realized. The average realization percentage (annualized) was 65%.

In 2007 performance-related stock options and performance shares were granted to the Managing Board on 30 March 2007 at an exercise price of €33.60. The following table shows the number of stock incentives granted to the individual Board members:

The members of the Managing Board are participants in the Dutch pension fund Stichting Pensioenfonds DSM Nederland (PDN). The pension scheme (revised as of 1 January 2006) comprises the following elements:

• Retirement age 65 years (early retirement possible only by actuarial reduction of pension rights).
• The scheme includes a spouse pension as well as a disability pension.
• Annual accrual of pension rights (old-age pension) over base salary exceeding €11,872 (reviewed annually) at a rate of 2%.
• Employee’s contribution of 2.5% of base salary up to €52,608 and 6.5% of pensionable salary above this amount (to be reviewed annually).
• Conditional defined benefit: indexation of pensions and pension rights, conditional depending on PDN’s financial returns.

Members of the Managing Board born before 1 January 1950 (Jan Zuidam) continue to participate in the old pension plan. Other Board members participate in the revised PDN pension plan (due to changed legislation on pre-pensions). For Mr Sijbesma a transitional arrangement is applicable.

The company does not provide any loans to members of the Managing Board. There are therefore no loans outstanding.

As announced in the press release on the third quarter results of 2007, members of the Managing Board have decided to purchase more shares in the company to emphasize their confidence in the strategy. Shares purchased are private transactions with private money.

The total remuneration (including pension costs relating to current and former Board members) of the Managing Board amounted to €3.8 million in 2007 (2006: €4.3 million). The decrease of €0.5 million was mainly due to a discount on pension cost and the changed composition of the Managing Board.

The tables below show the remuneration awarded to the Managing Board in 2007.

The remuneration package of 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 €50,000. The members of the Supervisory Board each receive a fixed fee of €35,000. Committee membership is awarded €5,000 per member and €7,500 for the Chairman.

In accordance with good corporate governance, the remuneration of the Supervisory Board is not dependent on the results of the company. This implies that neither stock options nor shares are granted to Supervisory Board members by way of remuneration.

If any shareholdings in DSM are held by Supervisory Board members, they serve as a long-term investment in the company. At year-end 2007 the members of the Supervisory Board together held 6,084 shares in Royal DSM NV.

The company does not provide any loans to its Supervisory Board members.

Rules have been adopted governing ownership of and reporting on transactions in securities (other than securities issued by DSM) by Supervisory Board members.

The following table gives an overview of the remuneration paid to the Supervisory Board in 2007.

To close the gap with the median of the benchmark (Dutch labor-market peer group), an extra 10% increase in the base salary of the Managing Board chairman has taken place on 1 January 2008.

The Supervisory Board will review in the second quarter of 2008 whether circumstances justify adjustment of the base-salary levels of the Managing Board with effect from 1 July 2008 to compensate for inflation and to reflect market developments. This review will among other things be based on the labor-market peer group.

Since Numico and Getronics are no longer listed, they will be eliminated from the Dutch labor-market peer group and need to be replaced.

Recent changes in the AEX/AMX index will limit DSM’s options to compose a specific Dutch labor-market peer group based on the AEX/AMX only. Moreover, Eumedion (a platform of institutional investors) has issued 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 wil adopt this guideline.

As a consequence, 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. The following peer group is being proposed, subject to approval of the Annual General Meeting of Shareholders:

In December 2007 the Supervisory Board reviewed the financial targets of the short-term incentive scheme for the Managing Board. A proposal will be submitted to the 2008 Annual General Meeting of Shareholders to modify the short-term incentive scheme for the Managing Board. The proposal consists of the following elements.

• Replacement of CFROI as financial target by net-sales growth (organic) to reduce overlaps and correlation between financial targets. Moreover net-sales growth as a target fits in with the organic sales growth target of > 5% on average per year as part of the accelerated Vision 2010 strategy.
• 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.

Financial targets within the bonus scheme account for a bonus amounting to 42% of base salary (84% for outstanding financial performance) and relate to:

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.

In 2008 a proposal will be prepared to further align the remuneration of the Managing Board and other executives with the long-term strategy of the company by making the Long-Term Incentive (LTI) a more important element of the total remuneration package than the Short-Term Incentive (STI).