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Page 1: 8845 Omslag presentations - DSM...DSM China and DSM India Innovation Center to harvest the opportunities in these countries. This will enhance the company’s local influence on innovation

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Page 2: 8845 Omslag presentations - DSM...DSM China and DSM India Innovation Center to harvest the opportunities in these countries. This will enhance the company’s local influence on innovation

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Page 3: 8845 Omslag presentations - DSM...DSM China and DSM India Innovation Center to harvest the opportunities in these countries. This will enhance the company’s local influence on innovation

• In innovation, DSM’s ambition is to go to thenext level: from building the machine todoubling innovation output. This will be visible,amongst other things, through - an even higher speed of innovation by further

implementation of value creation throughbest practices;

- the implementation of a company-wideapproach of moving from projects to businessplatforms;

- a new stretching innovation target wherebyDSM aims to increase innovation sales —measured as sales from innovation products ofthe last five years — from ~12% towards 20% oftotal sales by 2015;

- and an ambitious growth perspective for salesfrom Emerging Business Areas of more than€ 1 billion by 2020.

• An important element to bring innovation tothe next level is to expanding innovation tonew regions. Therefore, we initiated a DSMInnovation Center in India and China.

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• DSM is well under way towards achieving itsbusiness and sustainability targets forinnovation.

• Innovation sales have shown strong andcontinuous growth since the introduction of aninnovation sales target in 2005. During theCapital Markets Days in 2010 the new ambitiousgoals were presented. Sales growth hascontinued since then and DSM is now wellunder way in reaching the 20% innovation salesas % of total target by 2015.

• One of the key sustainability targets DSM setduring the CMD 2010 was that at least 80% ofits innovation pipeline should be ECO+. Both atthe end of FY 2010 and during H1 2011 thistarget has been amply met, showing thecompany’s commitment towards sustainablebusiness.

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Page 5: 8845 Omslag presentations - DSM...DSM China and DSM India Innovation Center to harvest the opportunities in these countries. This will enhance the company’s local influence on innovation

• To achieve the new innovation targets andbring DSM to the next level of excellence ininnovation, the company will increase its focuson the most promising top 50 key projects, theEmerging Business Areas and the businessincubator. This will be done by introducingportfolio management at platform level. Aninnovation platform is a set of related projectsfrom the (often top 50) projects within DSMfocused on an identified business area/need.By increasingly focusing on platforms ratherthan individual projects, the success rate andthe impact of the innovation activities isexpected to grow further.

• In addition, DSM will use portfolio managementto manage the balance between incrementaland radical innovation. This will facilitatediscussions on the composition of theinnovation portfolio and will help optimize themix between incremental and radicalinnovation within the company. It allowscomparison of different platforms, as suchenabling company-wide portfolio management.

• For the radical part of DSM’s innovationportfolio a global, company-wide portfolioapproach will be adopted which will be tightly

managed by yearly evaluation and decision-making by the Managing Board on itscomposition. This will secure the long-termattention for Life Sciences and MaterialsSciences as the key pillars of DSM’s strategyand will secure that cross-fertilization betweenthe two fields is actively stimulated.

• This approach and DSM’s innovationperformance will not only result in an increasein innovation sales as described on the previouspages, but will also leads to an averageinnovation margin that can be even 30-50%higher than in running business.

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• The numerous partnerships, venturinginvestments, acquisitions and other forms ofcollaboration (such as licensing) announced inthe past few years show that open innovation isbecoming more and more ingrained in DSM’sinnovation approach. The interaction withindustry partners and technology thoughtleaders enables DSM to be active at theforefront of the most promising developmentsin the areas DSM focuses on.

• One of the existing partnerships, betweenRoquette Frères (the global starch and starch-derivatives company headquartered in France)and the EBA Bio-based Products and Services,has recently been expanded. This partnershipfocuses on the production, commercializationand market development of bio-based succinicacid using the most sustainable fermentativetechnology.

• The acquisition of Martek added the highlyversatile algae technology as a new,complementary business platform to DSM’sportfolio in the field of biotechnologybroadening the toolbox even further. Alreadyseveral projects are in progress, e.g. in thefield of renewable energy.

• The collaboration with SkySails is a goodexample of successfully developing and

commercializing SkySails-Systems. This wasmade possible by DSM’s materials scienceexpertise and innovation. By working closelywith its partners, DSM’s Dyneema® is enablingthe rebirth of wind-powered shipping.

• DSM Advanced Surfaces has signed license andsupply agreements with Interfloat Corporation,a leading solar-glass producer. This opens theway for Interfloat to start producing cover glassfor solar modules coated with KhepriCoat™, arecord-breaking high-transmission/anti-reflective (AR) coating from DSM AdvancedSurfaces.

• The venturing unit of DSM, part of the DSMInnovation Center organization, hasparticipated in a financing round forVerdezyne, Inc. (United States), an industrialbiotechnology company developing cost-effective processes for the production ofrenewable fuels and chemicals.

• In addition, several other partnerships havebeen established in the field of Biomedicalmaterials such as joint developmentagreements or licensing agreements assistingcustomers to bring their products to market. Anexample is the partnership with Interventionalspine for the development of new spinal discs.

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• With more than 60 launches in 2010, theportfolio of innovations is extensive andcompany-wide. A selection of exemplaryinnovations are highlighted below:

• A KhepriCoat™ layer on solar cover glassreduces the amount of sunlight reflected,thereby allowing more of it to pass through tothe solar cells. This significantly boosts thesunlight conversion rate of solar modules.

• To date DSM Dyneema®, SkySails and ropemanufacturer Gleistein have been combiningtheir expertise in a unique three partytechnology partnership which focuses on thedevelopment of a special high performancerope that delivers the unique requirements forhigh strength, light weight and excellentdurability for wind propulsion systems. DSM’sDyneema®, the world’s strongest fiber™, is akey component in the SkySails Kite System.

• Tilamar® is a new and innovative hair careingredient that delivers outstandingperformance especially for aerosol stylingsprays. It has a unique proposition to themarket as it combines extra strong hold withnatural feel on hair.

• RONOZYME® HiPhos is the most powerful andactive phytase in the global market enablingfor the first time the possibility to replace allfeed phosphate additives in pig and poultrydiets. Feed formulations using RONOZYME®

HiPhos therefore require considerably lessinorganic phosphorus. This noticeably cuts feedcosts and environmental impact of livestockfarming.

• Aeronite® is a composite resin that fulfills theneed for aviation materials that are both lightweight and strong. Planes made from this resinare fast, safe and more fuel efficient thanconventional carbon fiber planes.

• Cradle2Cradle® manufacturing systems areessentially waste free — they extract rawmaterial, make use of it, and then place itback into the value chain as a raw materialagain. A leading furniture manufacturer is nowadopting Cradle2Cradle® designs and usesArnitel® — a DSM product that is completely freeof toxic compounds and is thermallyrecyclable.

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Page 8: 8845 Omslag presentations - DSM...DSM China and DSM India Innovation Center to harvest the opportunities in these countries. This will enhance the company’s local influence on innovation

• The Innovation Center headed by the ChiefInnovation Officer (CIO) increasingly fulfills abusiness development role, with its incubatorand Emerging Business Areas accounting for themajority of the attention, resources andresults. In addition it continues to have aleading role in enabling innovation within DSMcompany wide. Approximately 80% of resourcesare invested in new business creation, whereasapproximately 20% are invested to enableinnovation throughout DSM. Within the lattercategory, the Chief Technology Officer (CTO)and the Corporate Technology department actas the technological conscience of the companyand provide technological input for thecompany’s strategic choices. The CTO officeralso directs the Corporate Research Program.

• Other innovation enabling elements areexplained on the following pages.

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• To achieve its innovation ambitions, DSMstrives for the next level of innovationperformance. One of the ways to further boost DSM’s innovation performance is the“Excellence in Innovation” program. Thisprogram focuses on: - the stimulation of business group

innovativeness with the aim of improvinginnovation strategy & capabilities as well asinspirational leadership;

- further guaranteeing top project deliverythrough enhanced project managementperformance, better team composition andeffective behavior;

- deepening market understanding by extensivemarket and customer assessments, includingthe search for innovation partners in themarket;

- creating the right environment forentrepreneurs and enhancing entrepreneurialbehavior;

- driving performance and results orientationby setting and tracking innovation targetsthroughout the organization and rolemodeling on performance orientation.

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Page 10: 8845 Omslag presentations - DSM...DSM China and DSM India Innovation Center to harvest the opportunities in these countries. This will enhance the company’s local influence on innovation

• Expanding innovation to new regions, combinedwith internationalization, will be anotherimportant element of DSM’s innovation effortsin the coming years. Breakthrough innovation isincreasingly happening in the emergingeconomies (especially in the East). In responseto this, DSM is in the process of establishing aDSM China and DSM India Innovation Center toharvest the opportunities in these countries.This will enhance the company’s localinfluence on innovation and unlock theinnovation potential in high growth economies.

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• DSM Venturing is an active investor in start-upcompanies and explores emerging markets andtechnologies in order to support DSM’sinnovation and growth strategy by offeringfinancial support and access to DSM’sknowledge, resources and networks in order toestablish mutual benefits.

• DSM Venturing always works in collaborationwith business groups and/or EBAs to supportthe businesses’ mid-to-long-term innovationand growth ambitions. DSM Venturing is anintegral part of DSM’s open innovationapproach, focused on teaming up withinnovative players all over the world.

• Our current portfolio of venturing participationand stakes can be found on our website athttp://www.dsm.com/venturing.

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• Besides the Emerging Business Area programsand the New Business Developmentorganizations, DSM’s Incubator plays animportant role in securing DSM’s longer terminnovative growth. While the business groupsdedicate themselves to innovation that liesrelatively close to their current activities or atleast builds on existing in-house competences,the Incubator focuses on radical innovation.

• The Incubator houses innovation projects forwhich completely new business models areapplied. One example is DSM Neev. This unitfocuses on developing sustainable businesstargeted at the world’s four billion poorestpeople which form the ‘base’ of the globaleconomic pyramid.

• Another activity in DSM’s Incubator is theClimate Change Induced Innovation program.This program was started to tap into theopportunities following from global climatechange and energy developments.

• The EBA Advanced Surfaces has only recentlyevolved from the Business Incubator and hasreached the stage of an Emerging BusinessArea. Its coating technologies enable glass to

look and perform better across a wide range ofindustries and applications, such as the solarenergy market, the framing market, the displaymarket and lighting industry.

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• As a result of a shifting innovation focus theformer EBA programs “Personalized Nutrition”and “Specialized packaging” have beenearmarked for divestment or transfer to thebusiness groups.

• DSM has announced that it has sold DSMPersonalized Nutrition, LLC to Viocare, Inc.(Princeton, New Jersey, United States). DSMwill remain involved in the business as aminority shareholder in Viocare Inc. throughDSM Venturing. Financial details of thetransaction will not be disclosed.

• The food related specialty packaging activities(PackAge™) has been transferred to the DSMFood Specialties business group.

• The pharma related compliance packagingbusiness will be divested to a new owner. Thisdivestment process is in its final stage. Moredetails will be announced in due time.

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• Around 1850, the world started to change; webegan digging for coal, oil and later on gas. Allof this “out of the ground”, and in this way westarted to build the fossil based economy, stepby step, but fast. For almost all our energy andelectricity, transportation, heating, andartificial and processed materials we are todaydependent on coal, oil and gas (estimationsindicate over 80%). In most western countries,alternative energy sources (like wind, water,solar and bio) supply for around 5% of the totalenergy need. This era has been characterizedby unprecedented economic, technological,scientific and societal advances. But it is slowlycoming to an end, or rather: a new era hasstarted.

• The increase in demand for fossil resources has already been driving up prices; it has beenpredicted that long term oil prices above US dollar 100 per barrel will be the futurescenarios. Availability will become limited and,last but not least, one day fossil sources will beexhausted. Coal and gas reserves will lastlonger, though the arguments of conserving theenvironment will drive us to use morerenewable materials.

• Energy-dense and flexible, crude oil’s successwill be hard to replicate. But through cutting-edge biotechnology combined with farming, weenvision an economy that can prosper withoutoil.

• The fossil based industry will last perhapsanother 150 or 200 years; we could be halfway.However, the turning point to the bio-basedeconomy is now.

• For thousands of years, mankind used materialsfrom the land for building, heating,transportation, etc. and that will again be thecase in the thousands of years to come. So wewill go back to doing what we did before thefossil carbon age. Humans have to go back toliving with & off nature: the land, the sun, thesea and the wind.

• DSM is working from a fundamental paradigmshift to produce energy from raw materialscreated anew each year instead of 300 millionyears ago. And by using agricultural waste orbiomass as a feedstock, no new land or newcrops are required.

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• The topic ‘Climate & Energy’ is a key globaltrend that continues to foster the transitionfrom fossil feedstocks to bio-based feedstocksfor energy and materials. From this trend wehave identified four main drivers for thegrowing focus on bio-based feedstocks: - Demand for energy & resources: The world

population has reached 7 billion people andwill grow to 9 billion by 2050. They all needenergy, transportation, heating andmaterials, so demand will grow in the comingdecades, with Asia taking about 75% of thatgrowth. Living standards will increase,especially due to the global economic shifts.All this will increase energy consumption percapita too.

- Energy security and political stability: Fossilsources will become more expensive andavailability will become limited. In addition,countries like the US and China would like tobecome less dependent on oil imports.

- Climate change and environmentalawareness: We are facing the issue of climatechange. A lot is being said about (the rootcauses of) the heating of our planet, rain anddroughts, but a fact is that the level of CO2 inthe atmosphere has increased substantially.

- Valorization of bio-based resources: At this

moment we do not upgrade a substantial part of plant derived proteins for humanconsumption, leaving huge human foodopportunities underutilized. At some point inthe future it will be possible to produce highquality proteins suitable for humanconsumption by extracting them beforefurther processing of the plant-materials intobio-ethanol or other bio-based chemicals &materials.

• DSM envisages major challenges for theindustry as we work to build the bio-basedeconomy. DSM is, however, confident andexcited about its capability to successfullysupport this transformation. Biotechnology canbring society new health solutions, a moresustainable environment, as well as newmaterials and even a new source of energy thatdoes not have to compete with food. To put itmore strongly: the new biotech solutions cancontribute to Food and Fuel solutions.

• Industry and science must support thisdevelopments, and governments and NGOsneed to build awareness and shape the termsof the public discussion around the bio-basedeconomy.

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• Biomass has been hailed as a key option toreplace fossil feedstocks, mitigate greenhousegas (GHG) emissions and provide a majoropportunity for rural development on a globalscale. Ideally, the bio-based industry will userenewable feedstocks that do not competewith the food chain and are certified assustainable based on internationally agreedstandards.

• Current commercial bio-ethanol production isentirely 1st generation - based on sugar orstarch. It is estimated that in the US about onethird of corn is now used for biofuels.

• The use of 1st generation feedstocks forbiomaterials has a minor impact on the use ofcrops, perhaps less than a few percent. Thequantities used for production of biofuels aremuch higher.

• 2nd generation feedstocks are the best availablesolution to switch humanity’s dependence onnon-renewable oil towards non-food-competingbio-based raw materials as 2nd generation isbased on biomass feed stocks which do notcompete with food.

• DSM has identified ways in which we canabsolutely demonstrate that we can deliver‘Brighter Living’ with biotechnology, and showwe are playing our part in solving thechallenges and embarking on the bio-basedopportunities.

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• The global cellulosic bio-ethanol market isexpected to grow to 18 billion gallons by 2022,representing a value of around US dollar 50 billion. These estimates are based on theethanol demand forecast from Hart’s GlobalEnergy Study. Versus Hart’s forecast DSM hasbuilt in a one-year delay, based on its estimateof projects to be operational in 2015 (based onactual project status in 2011 several projectedplants will not be delivered and reachoperational status by 2015).

• Based on the above estimates for the totalcellulosic bio-ethanol market, the total attainablemarket value for enzymes & yeasts is estimatedbetween US dollar 3 and 5 billion in 2022.

• DSM is unique in that it is active in both yeastsand enzymes. After the recent acquisition of C5Yeast Company (former Nedalco), DSMundisputedly has strengthened its position asthe industry leader in yeast fermentationtechnologies for conversion of C5 and C6 sugarsinto ethanol.

• In enzyme technology, DSM holds a top 3position with Novozymes and DuPont as majorplayers in enzymes.

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• The upstream part of the value chain forcellulosic bio-ethanol is owned and controlledby major agri companies like ADM, Cargill,Roquette, Brazilian sugar consortia and manyothers. Downstream this is expected to be thegame of major oil companies like Shell & BP.

• Value chain enablers are key for thevalorization of both existing and futureagriculture feedstocks at the bio-refineries atthe front end of this emerging value chain.These value chain enablers develop keytechnologies like yeast & enzymes, chemicaland biological catalysts, conversiontechnologies, downstream processingtechnologies, etc.

• These players are partnership builders. Theyare very R&D intensive but operate withrelatively low capital even though proof ofconcept requires significant initial investments.Companies like e.g. Novozymes, DuPont,Codexis and many others are activelydeveloping technologies and establishingpositions as value chain enabler employingvarious business models. The expectation isthat these companies will generate modestrevenues from product volumes but enjoy

higher returns on these revenues through firstmover advantages and licensing models.

• Finding and safeguarding long-termpartnerships will be of the essence to become asuccessful player in the emerging market forbio-ethanol.

• DSM is in a relatively unique position with itspresence in enzyme technology and its no. 1position in yeasts. We are engaged in ~2/3 ofthe cellulosic ethanol projects.

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• Last year, DSM announced a majorbreakthrough enabling cellulosic biofuels tobecome commercially viable through thecreation of a new yeast technology and enzymecocktail. This provides the broad spectrumcapability to break down and ferment almost all(C5/C6) sugars from these non-edible (celluloserich) materials that we need in order to createcommercial efficiency of cellulosic biofuels.

• DSM is well on its way to delivering a costcompetitive cellulosic enzyme cocktail (targetin line with current NREL analysis andassumptions) — well in time for the firstcommercial cellulosic bio-ethanol plants tostart up. DSM’s enzyme cocktail has improvedheat and acid stability and therefore providesthe best fit with prevailing pre-treatmentprocesses.

• DSM has recently completed a series of largertests with its Advanced Yeast technology incooperation with Abengoa. We now have asystem that actually has shown its efficacyunder industrial scale conditions. The testresults have now proven that with our unique(and patented) technology we can convert over90% of the so called C5 sugars (e.g. arabinose,xylose) and C6 sugars (glucose) into ethanolunder industrial scale conditions.

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• Biogas is produced by anaerobic digestion oforganic material, including sewage sludge,industrial waste streams, energy crops,agricultural leftovers, manure etc. Anaerobicfermentation is an efficient technology forwaste upgrading to valuable fertilizer andrenewable energy.

• The production of biogas is projected to growwith a CAGR of 16% this decade, from ca. 23BCM bio-methane equivalents in 2010 to ca.100 BCM CH4 eq., which equals roughly 3% ofthe global natural gas consumption.

• Through the acquisition of Biopract in Berlin,Germany two years ago, DSM took a startingposition in one of the most developed biogascountries, and created an entrance into thebiogas market. With the Methaplus™ enzymeproduct to improve biogas productivity we haveestablished ourselves as one of the first moversinto biogas biotechnology.

• The market for biogas enzymes and processimprovements is currently estimated at ~US dollar 1 billion by 2020. Currently, DSM is aleading provider of biogas enzymes and processimprovements in the European biogas market.By applying current DSM’s technology, anincrease in the biogas yield can be achieved of10% - 15%.

• DSM has taken the approach to find attractivemarket players: plant builders, plant owners,feedstock owners and/or energy companies

that can function as a stepping stone to alarger market or represent a larger market initself. These players have unmet needs whichDSM can help to fulfill with a collaborativeapproach. For instance a beer brewer would belooking for ways to valorize its brewers spentgrain, especially in remote areas, or areaswhere energy supply is less reliable. Convertingbrewing side streams to biogas can not onlyvalorize this side stream, it also makes thebrewer ‘greener’, less dependent on externalenergy supply and can even in some casespreserve their license to operate.

• There are many biogas plant builders andtechnology development companies with astrong hardware focus, mainly due to theirbackground. The largest biogas builders inGermany have an agricultural and engineeringbackground. They used their existing networksand sales channels to enter this market,however, they could benefit frombiotechnology know-how to understand andimprove the fermentation part of the process.Other stakeholders are companies active inrelated fields of waste-water treatment,measurement and automation technology andtechnology for generating combined heat andpower or upgrading biogas.

• DSM is in an excellent position to monetize itsbiotech and fermentation expertise bydeveloping next generation biogas technologiesin this already present and strongly growingglobal market.

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• DSM plans to develop and demonstrate itsposition in bio-energy in technologypartnerships to grow to commercial scale. Fromthere the options are to either engage in rollingout DSM’s technologies via licensing models orby further participation in commercialprojects/plants.

• In parallel, DSM builds on its own strongposition in the technology for the bio-ethanolindustry as a supplier of a uniquely positionedmix of enzymes and yeast for bio-refineries.DSM will continue to test and license its yeasts(both DSM Advanced Yeast and C5 YeastCompany yeast) and enzyme technology tointerested parties, followed by offering yeastsand enzymes as such.

• For biogas, DSM plans to engage in activities forthe development of a ‘biogas plant-of-the-future’ concept. DSM will explore possiblepartnerships and/or acquisitions to addengineering and plant design competencesrequired to implement this concept.

• In parallel, DSM continues to develop and sellenzymes and additives to operators of smalleragricultural plants through distributors and to

bigger plants/projects through its own salesforce.

• Following the acquisition of Martek, DSMinherited an R&D program focusing ondeveloping microbial oils, suitable for biodieselproduction at competitive costs.

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• Bio-based chemicals are categorized either aslarge existing chemicals that can be considered“drop-ins” with minimal applicationdevelopment required, or as new buildingblocks (i.e. succinic acid, levulinic acid,isobutanol to name three) that are relativelysmall markets today, but have the potential tobecome competitive substitutes for petroleumbased incumbent raw materials. The drop-inchemicals are more popular targets because ofthe ease of market introduction and thereforetypically of more interest by downstream usersi.e. terephtalic acid, butadiene, acrylic acid,caprolactam, adipic acid and HMDA.

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• Succinic acid is a chemical building block usedin the manufacture of polymers, resins, foodand pharmaceuticals among other products.Bio-based succinic acid is a renewablealternative to petroleum-derived chemicalbuilding blocks such as adipic acid and 1.4-butanediol. As a result of price competivenessand its renewable nature, bio-based succinicacid is addressing a much larger market(estimated at 500kt by 2020) than fossilfeedstock based succinic acid (around 25kt).

• The yeast-based fermentation for succinic acidhas the potential of absorbing CO2 whereas thecurrent chemical process is emitting CO2.Furthermore, the yeast-based processeliminates salt waste and other by-productsand thus improves the overall eco-footprint ofend-products

• With a capacity of about 10 kilotons per year,the plant will be Europe’s largest bio-basedsuccinic acid facility. It is expected to come onstream in H2 2012 and will be built on thepremises of Roquette in Cassano Spinola (Italy).

• Sample material has been produced in theLestrem (France) pilot plant of Roquette andhas been tested by potential customers. Theinitial feedback from the market is veryencouraging and proves that DSM and

Roquette’s choice to invest in bio-renewablealternatives for fossil feed stocks by usingbiotechnological routes is starting to pay off. Incase the market develops as DSM and Roquetteexpect, an even larger facility will beconsidered in the future.

• It is DSM’s ambition to further strengthen itsportfolio in bio-based chemicals and materials.Bio-based adipic acid is such a high potentialbuilding block. Adipic acid is a US dollar 5 billion existing market serving both thepolyamide 6.6 (Nylon 6.6) markets (engineeringplastics, textiles) as well as polyurethanes,plasticizers, solvents and resins.

• DSM has established a strong global leadershipposition in polyamide 6 and is the largestmerchant supplier of polyamide 6 precursorcaprolactam. As part of its broader polyamidevision, a cost advantaged and more sustainableroute for adipic acid is expected to offersignificant value in its key markets.

• DSM is currently exploring multiple routes usingits competencies in both chemistry andbiotechnology. The exciting technology beingdeveloped can be used as a platform for thedevelopment of other high potential bio-basedbuilding blocks.

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• DSM Bio-based Products & Services continues tosee huge opportunities in the move towards abio-based economy, particularly in bio-energyand bio-based building blocks and materials.

• DSM is confident that the growth of the EBABio-based Products & Services will continue ata steep rate, ultimately leading to an aspiredcombined sales (together with the EBABiomedical and the EBA Advanced Surfaces), ofmore than € 1 billion in 2020 with an aboveaverage profitability.

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• Worldwide healthcare spending is increasingrapidly, particularly in more developedcountries. The US spends over 16% of GDP onhealthcare and Europe 9-12%. This is caused bya number of trends, such as the following: - Ageing populations in North America, Europe

and Japan. Healthcare costs tend to risedramatically once people have reached theirmid sixties.

- Increased obesity, which is a risk factor formany diseases such as Type 2 diabetes.

- Patient expectations for a continued activelifestyle at older age increases demand forsurgical treatments.

- As healthcare costs continue to increase, theindustry will have to provide solutions thatimprove patients’ outcome and at the sametime contribute to total treatment costreduction.

• These trends, along with other factors such asnew treatments and surgical techniques, driveongoing market growth in medical devices(such as pacemakers, implants). Similarly,there is an ongoing strong market demand forsophisticated pharma drug delivery systems,notably for those clinical indications wheresystemic administration is sub-optimal (e.g.

poorly soluble drugs, biologics) or simply fails(e.g. ophthalmology, neurodegenerativediseases). Both markets are the mainconsumers of specialty biomedical materials.Furthermore, the use of biodegradablematerials to help the body to heal and torestore functions is also increasing.

• These smarter solutions are having atremendous impact on society. On the onehand they contribute to significantly reducetotal healthcare costs, e.g. less time inhospital, less infections, less need for re-operation, and on the other they improvethe patient’s quality of life e.g. by increasingcomfort, reducing pain, etc.

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• The worldwide medical device market isestimated at approximately US dollar 150 billion in 2010(*) with a growth close to 10%.The United States is the largest market, followedclosely by Western Europe and Japan. In thismarket the cardiovascular and orthopedicsegments are the main focus for biomedicalmaterials while with the introduction of newmaterials and techniques other markets likeophthalmology, neurology and cosmeticsurgeries are also growing. The United Statesproduces half of the world’s medical devicesand consumes approximately 40% of the world’soutput. A country’s medical devices market isdirectly correlated to its economic strengthand degree of healthcare infrastructure.

• The medical devices market is incrediblydiverse, including products such as surgicalblades and hand tools for surgeons,orthopaedic screws but also pacemakers andneural leads. The very unique characteristics ofindividual segments of the industry are oftennot recognized when the market is assessed atthe overall level.

• While the vast majority of medical devicecompanies are highly specialized and have very

few employees, large medical devicecompanies generating than half-a-billion dollarsa year or more account for approximately 65%of overall sales in this market.

(*) This figure includes all products in direct contact with the

body for short and long term use but excludes all other

products or equipment used in hospitals such as

diagnostics, machines (scanning equipment), beds, chairs,

gloves, plasters.

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• As the medical business environment continuesto evolve at a rapid pace, medical devices andpharmaceutical products must meet stringentstandards for safety, efficacy and affordability.This calls for innovative and reliable materialssolutions which enable medical device andpharmaceutical companies to meet existing andfuture healthcare needs.

• A key requirement of biomedical materials isthat these remain functional in the human bodyfor the duration of the therapy, in some casesup to lifelong. Therefore biostability is ofparamount importance to maintain the physicaland chemical integrity of the materials afterimplantation in living tissue.

• In addition, the materials need to bebiocompatible as they should not interactnegatively with the patient’s physiology.

• In the still embryonic area of regenerativemedicine, bio-interactive properties come intoplay. Here, polymer-based ‘scaffolds’containing biological materials either from thepatient or a donor are inserted into the body,with the purpose of providing a catalyst totissue healing. The first breakthroughs in

regenerative medicine are only now becomingcommercialized.

• Given the strong growth in demand and highentry barriers because of the market’scomplexity with its stringent regulatoryrequirements, polymer-based biomedicalmaterials offer a very attractive business forthose companies active in the space.

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• DSM has history of more than 10 years in thefield of biomaterials. It all started withresearch and development efforts to bringDyneema® to the medical field with theintroduction of Dyneema® Purity (a tailor madefiber for use in biomedical applications) as newmaterial of choice for orthopedic sutures,quickly followed by similar efforts in the fieldof medical coatings.

• An important milestone was the establishmentin 2006 of the Emerging Business Area (EBA)Biomedical within the DSM Innovation Center.

• Over the last five years several new productshave been launched as a result of a strongemphasis on building new technology platformsaddressing changing market needs.

• DSM is also broadening its portfolio ofpartnership options in order to speed up entryin and knowledge of new markets. Significantexamples are BMM (Public-Private partnershipin (The Netherlands), the acquisition of thePolymer Technology Group in 2008 enablingDSM to access new markets and technologies,and more recently the Actamax® joint venturewith DuPont.

• DSM’s most recent strong and visiblecommitment to Biomedical has been, in thecontext of DSM’s new strategy DSM in motion:driving focused growth, the setting of a salestarget of € 1 billion in 2020 for the EBAs,followed by the decision to move theheadquarter of DSM Biomedical to the UnitedSates in an effort to be more closely connectedto customers and innovation activities.

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• Building on its broad technology portfolio andits understanding of specific market needs,DSM’s strategy is to focus on cardiovascular,orthopedic and ophthalmic markets. Othermarkets such as urinary, general surgery orwound care are also addressed wheneverrequired by key customers.

• DSM’s strategy in the biomedical field in thesefocused areas is to expand its offering throughnew products based on the broadest technologyportfolio of the industry, to establish apresence in the field of drug delivery based onlicensed-in technology from MediVas and toexplore opportunities in the promising field oftissue engineering and regenerative medicine.

• Of all the businesses with a presence in thepolymer-based biomedical materials &solutions market, DSM is the only company withproducts covering all the major applications,from implants and coatings to drug deliverysystems and sutures. DSM technology/productspillars are: Dyneema® Purity, medical coatings,polyurethane, UHMWPE, silicone hydrogels, andDrug delivery (PEA).

• Furthermore, the combination of theseproducts allows customers to use the synergiesbetween them, e.g. Dyneema® Purity (suture)and PLA (anchor) for sport medicine, Dyneema®

Purity (balloon) and Trancerta® (Drug Elutingstent) for cardiovascular stents, Polyurethaneand UH for lumbar discs.

• To achieve this, DSM will rely on organicgrowth, strategic alliances/partnerships andacquisitions.

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• Partnering with DSM offers the customers ofDSM Biomedical the advantage of working witha global provider of contract manufacturingservices for the manufacture of activeingredients (APIs) and biological products. Inaddition, its products comply with allapplicable regulatory and c-GMP requirements.

• Actamax Surgical Materials LLC, the 50/50 jointventure agreement between DSM and DuPont,will address the market for surgical sealants,adhesion barriers and tissue adhesives. This is alarge and underserved market of over 100million annual surgical procedures worldwide.Actamax Surgical Materials LLC will build acomprehensive biomedical product portfoliobased on several patent-protectedbiodegradable hydrogel technologies focus onthe clinical validation of the products, itstechnology and the further commercialization.

• To boost the innovation process the unitactively exploits venturing and licensingopportunities, setting up business models thatare typical of knowledge-based rather thanproduction-based businesses, including thelicensing of intellectual property. Through DSMVenturing, DSM has taken equity stakes in

several start-ups focusing on key areas of thebiomedical market have been taken.

• In addition DSM Biomedical is involved in anumber of public-private research partnershipswith top-universities and other well-recognizedplayers. For example in June 2008 DSMBiomedical received funding from theBiomedical Materials Program (BMM) a publicprivate partnership in the Netherlands. In totalBMM allocated over € 50 million to seven R&Dprojects, four of which were initiated by DSMBiomedical. The funding will help DSMBiomedical to expand its technology platformand accelerate the development time of newbiomedical materials.

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• These examples reflect the high level ofinnovation needs of the industry requiring newmaterials, devices and approaches.

• With its portfolio breadth (5 technology pillars)and depth (building its offering along thematerial evolution lifecycle) DSM is wellpositioned to address unmet needs of theindustry.

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• With its market focused organization DSM iswell positioned to understand the needs of theindustry. Being connected to the long-termneeds of the market is a critical step to ensurethe right technology, products and applicationdevelopment activities are carried out in time.

• DSM is managing its portfolio of future businessactivities in such a way that the pipeline isbalanced across two axes: - Application field: efforts spread over

cardiovascular, orthopedic, ophthalmic andothers,

- Project phase: efforts spread over newprospects, development from ideas toprojects and agreements phases.

• Time to market is significantly different notonly per market segment but also per device.Depending on novelty time to market typicallyranges from 3 to 10 years.

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• The above picture illustrates in a schematicway the value extraction from the value chainrelevant for biomedical materials.

• The value chain for biomedical materials obeysto the standard principles of any value chain inthe sense that the physical place in the chain isusually connected to the value extractionpotential i.e. the closer to the market/end-user the more value is created and extracted.

• However, this typical value chain also offersthe opportunity to create and extract value byusing value chain enablers e.g. materialknowledge, IP, licensing, regulatory, etc. It istherefore possible for players along the chainto: - Expand the materials and technology portfolio

offering to medical device companies andleveraging the synergies.

- Support medical device companies withmaterial / device development as well asmanufacturing and assembly capabilities.

- Provide excellent quality and regulatorycapabilities.

- To connect to medical device companiesunmet needs at M&S level.

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• The EBA Biomedical is still in its “investmentphase” building a healthy portfolio of emergingbusinesses through internal incubation (e.g.Dyneema Purity®, medical coatings) andacquisitions (e.g. The Polymer TechnologyGroup in the US), but also through venturingopportunities like Actamax, a DSM-DuPont jointventure addressing the unmet needs in the areaof adhesion barriers and sealants/hemostats.

• The objective of the EBA is to contributesubstantially to DSM’s target of reaching€ 1 billion in sales for the DSM InnovationCenter by 2020. This will be achieved byorganic growth and growth from acquisitions.A growth of € 100 million might come fromeither organic growth or acquisitions.

• Around 2015 the EBA will enter into itsprofitable phase by delivering both revenuegrowth and very profitable returns with anexpected EBITDA/sales ratio in 2020 in the 35%-45% range. During the investment phaseEBITDA margins will temporarily decrease. In2011/2012 this will for example happen as aresult of DSM’s participation in the ActamaxJoint Venture. The expected EBITDA/sales in2020 can vary between 35% and 45%.

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• DSM’s development of its biomedical business isexemplary of its innovation strategy. Takingglobal trends, in this specific case Health andWellness, as a starting point, the companyleverages its strengths in the areas of LifeSciences and Materials Sciences to developinnovative solutions for specific market needs.

• Open innovation is a key element of DSM’sinnovation approach. Throughout theinnovation pipeline there is continuousinteraction with external parties in order tocomplement the competences, products andtechnologies available within DSM.

• Through its strategic commitment to (open)innovation DSM creates a source of competitiveadvantage that will secure long-termsustainable growth for the company.

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DISCLAIMER

This document may contain forward-looking statements with respect to DSM's future(financial) performanceand position. Such statements are based on current expectations, estimates and projections of DSM andinformation 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 business aswell as the impact of future acquisitions, and the company’s financial position. These statements can bemanagement 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 predictand therefore it should be understood that many factors can cause the company's actual performance andposition 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 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 completeacquisitions and to successfully integrate acquired companies, the company’s ability to realize planneddisposals, savings, restructuring or benefits, the company’s ability to identify, develop and successfullycommercialize new products, markets or technologies, economic and/or political changes and otherdevelopments in countries and markets in which DSM operates.

As a result, DSM’s actual future performance, position and/or financial results may differ materially from theplans, 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.

A more comprehensive discussion of the risk factors affecting DSM’s business can be found in the company’slatest Annual Report, a copy of which can be found on the company's corporate website, www.dsm.com

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6-APA 6-amino-penicillanic acid AGI AGI Corporation TaiwanAMEA Asscociation of Machinery and

Equipment AppraisersANH Animal Nutrition & HealthAPI Active pharmaceutical ingredientsAR Anti-reflectiveARA Arachidonic Acid B&C Building and ConstructionB2 Vitamin B2B2C Business-to-ConsumerB6 Vitamin B6BCM Billion Cubic MeterBF Bio-FuelBMM Biomedical Materialbn billionBP&S Bio-based Products & ServicesC/E Central / EastCAGR Compound Annual Growth RateCAPEX Capital ExpendituresCEO Chief Executive OfficerCFO Chief Financial OfficerCH4 MethaneCHF Swiss francCHP Combined heat and powerCIO Chief Innovation OfficerCIS Commonwealth of Independent

StatesCMD Capital Markets DaysCMO Contract Manufacturing

OutsourcingCRM Customer Relationship

ManagementCTO Chief Technology OfficerDA Depreciation and amortizationDAI DSM Anti-InfectivesDBM DSM BioMedicalDBPS DSM Bio-based Products &

ServicesDD DSM DyneemaDEP DSM Engineering PlasticsDEP DSM Engineering PlasticsDHA Docosahexaenoic acidDPP DSM Pharmaceutical ProductsDS Dietary SupplementsDSP DSM Sinochem PharmaceuticalsE&E Electrical & Electronic IndustryEBA Emerging Business AreaEBITDA Earnings Before Interest, Taxes,

Depreciation and Amortization ECO+ The Greenhouse DialogueEFSA European Food and SafetyEP Engineering plasticsEPA Environmental Protection AgencyEPS Earnings per Share

EU European UnionF&B Food & BeverageFD Finished dosage / final doseFDA Food and Drugs AdministrationGBP Pound Sterling GDP Gross Domestic ProductGHG Greenhouse GasGUR Global Utilization RateHGE High Growth EconomiesHMDA Healthcare distribution

management associationHQ HeadquartersIFRS International Financial Reporting

StandardsINF Infant FormularJPY Japanese YenJV Joint VentureKA KuibyshevAzot OJSCKGA Ketoglutaric Acidkt kilotonLATAM Latin AmericaLCD Liquid crystal displaym millionM&A Merger & AcquisitionsMB Managing BoardNGO Non-governmental organizationOEM Original equipment manufacturerOWC Operating Working CapitalP&L Profit and Lossp/a per annumPA6 Polyamide 6PEN PenicillinPI Polymer IntermediatesPM Performance MaterialsPTG The Polymer Technology GroupPUFA Polyunsaturated fatty acidsR&D Research and DevelopmentROCE Return on Capital EmployedSSC Shared Service CenterSSP Supplies Service PartnerUD Unidirectional UHMwPE Ultra-High Molecular Weight

PolyethyleneUOR Urgent Operational RequestsUS United States (of America)US$ United States dollarUSA United States of AmericaUSD United States dollarUV Ultra VioletVA Vitamin AVE Vitamin EVOC Volatile organic compoundsy-o-y Year-on-yearYTD Year-to-Date

Abbreviation ExplanationAbbreviation Explanation