6 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 €830 million (2021: €460 million) is included for legal reserves required by Dutch law. 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. Further, a legal reserve is recorded for capitalized development costs. 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. The hedging reserve relates to cash flow hedge accounting. The negative hedge reserve of -€32 million (2021: -€77 million) as part of the legal reserve should be deducted from the freely distributable reserve. In addition, a revaluation reserve has been included for fair value changes of unquoted equity instruments of participating interests with no frequent notations owned by DSM; debit balances are recorded as part of Other reserves, which are considered freely distributable reserves.

Other reserves

The Other reserves comprise a Fair value reserve for fair value changes of unquoted equity instruments of participating interests with frequent notations, debit balances 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.

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 2022, the net profit is €1,700 million (2021: €1,676 million) and the amount to be appropriated to the reserves has been established at €1,533 million (2021: €1,238 million). From the subsequent balance of the net profit of €167 million (2021: €438 million), dividend is first distributed on the Cumulative Preference Shares B. At the end of 2022, no Cumulative Preference Shares B were in issue (same as for 2021). Subsequently, 2.52% (2021: 2.52%) dividend is distributed on the Cumulative Preference Shares A, based on a share price of €5.2942 (2021: €5.2942) per Cumulative Preference Share A. For 2022, this distribution amounts to €0.13 (2021: €0.13) per share, which is €6 million in total. An interim dividend of €0.04 per Cumulative Preference Share A paid in August 2022, the final dividend will then amount to €0.0934 per Cumulative Preference Share A.

The profit remaining after distribution of these dividends on the Cumulative Preference Shares A of €161 million (2021: €432 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 2022 of €0.93 (2021: €2.50) per share. An interim dividend for the year 2022 of €0.93 per ordinary share was recognized as a liability in the second quarter of 2022. The total distribution amounted to €161 million. This interim dividend was paid as from 26 August 2022 in cash after deduction of 15% Dutch dividend withholding tax.

If the Annual General Meeting of Shareholders decides in accordance with the proposal, the net profit will be appropriated as follows.

Upon a successful completion of the merger transaction between DSM and Firmenich, DSM-Firmenich intends to offer a gross dividend to all DSM-Firmenich shareholders of in total €423 million.