7 Shareholders’ equity

For details see the consolidated statement of changes in Note 16 Equity to the ‘Consolidated financial statements’.

Legal reserves

In Shareholders’ equity, a total amount of -€14 (2019: €428 million) is included for legal reserves required by Dutch law, of which -€289 million (2019: €162 million) Translation reserve, €223 million (2019: €267 million) reserve for capitalized development costs, and €120 million (2019: €116 million) reserve for participating interests and -€68 million (2019: -€122 million) as hedging reserve relating to cashflow hedge accounting. The translation reserve relates to exchange gains and losses arising from the translation of the functional currency of foreign operations to the reporting currency of Koninklijke DSM N.V. The legal reserve for participating interests is recorded to the extent that there are limitations for Koninklijke DSM N.V. to arrange profit distributions from its participating interests. In addition, a revaluation reserve of €0 million (2019: €5 million) has been included for fair value changes of unquoted equity instruments of participating interests owned by DSM; the debit balance of -€6 million in 2020 is recorded as part of Other reserves, which are considered freely distributable reserves.

Other reserves

The Other reserves amounting to €114 million (2019: 51 million) comprise a Fair value reserve of €79 million (2019: €0 million), the debit balance of -€6 million of the legal reserve for fair value changes of unquoted equity instruments of participating interests owned by DSM, and a Reserve for share-based compensation of €41 million (2019: €51 million).

In the ‘Consolidated financial statements’, the Other reserves consist of the Translation reserve, Fair value reserve, Hedging reserve and Reserve for share-based compensation. See Note 16 Equity to the ‘Consolidated financial statements’.

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 2020, the net profit is €506 million (2019: €758 million) and the amount to be appropriated to the reserves has been established at €86 million (2019: €333 million). From the subsequent balance of the net profit of €420 million (2019: €425 million), dividend is first distributed on the cumulative preference shares B. At the end of 2020 no cumprefs B were in issue (same as for 2019). Subsequently, a 2.94% (2019: 3.26%) dividend is distributed on the cumulative preference shares A, based on a share price of €5.29 (2019: €5.29) per cumulative preference share A. For 2020, this distribution amounts to €0.16 (2019: €0.17) per share, which is €7 million in total. An interim dividend of €0.06 per cumulative preference share A paid in August 2020, the final dividend will then amount to €0.10 per cumulative preference share A.

The profit remaining after distribution of these dividends on the cumulative preference shares A of €413 million (2019: €417 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 2020 of €2.40 (2019: €2.40) per share. With an interim dividend of €0.80 (2019: €0.77) per ordinary share paid in August 2020, the final dividend will then amount to €1.60 (2019: €1.63) 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.