Remuneration Executive Committee

Remuneration set-up

Remuneration philosophy

Our remuneration philosophy aims to attract and retain qualified leaders who can shape our future, rewarding progress in innovation and growth, and achieving outstanding outcomes together. Our remuneration principles are in line with how the top executives of listed companies in the EU and Switzerland are rewarded. In line with the business strategy, the new remuneration approach focuses on creating long-term stakeholder value. In addition, dsm-firmenich considers it important to align compensation not only with financial targets but also with sustainability goals and ambitions. The main elements of the compensation philosophy and implementation guidelines are set out below.

Benchmarking

Total compensation for the Executive Committee is regularly reviewed through benchmarking against the market to ensure we can attract and retain talented leaders who bring progress to life and to ensure that we remain competitive. The benchmarking includes a quantitative review of remuneration level, but also a qualitative review of best practices as well as developments regarding remuneration in the public domain.

In view of the quantitative analysis, a labor market peer group has been defined, based on the following considerations:

• Manufacturing companies headquartered in Europe (mix of companies based in Switzerland, the Netherlands, and other countries); US companies excluded
• Acknowledging recommendations by shareholder representatives, selected peer group companies are comparable in size and complexity. Indicators considered in this respect include: market capitalization, revenue, and number of employees

Positioning

The new remuneration model developed for the merged Company (greenfield approach) reflects the position of dsm-firmenich in the selected peer group. The maximum Total Direct Compensation opportunity for the CEO has been positioned at the median of the peer group, while the at-target opportunity has been set slightly above the median, reflecting the scope of a single CEO position. There is a strong focus on long-term value creation in pay mix design: maximum payout can only be achieved by delivering exceptional performance.

This greenfield approach also applies to the other Executive Committee Members. The greenfield serves as the remuneration reference for existing and future Executive Committee appointments, considering the scope and responsibilities of the role. Total remuneration for the individual Executive Committee Members is around the median of the peer group.

Pay mix

The direct compensation of the Executive Committee Members is approved by the Board of Directors, and comprises:

• Total Direct compensation (Base salary, Short-Term Incentive, Long-Term Incentive)
• Benefits, including pension benefits and risk insurances, company car, and social security contributions

Total Direct Compensation is strongly linked to the short- and long-term success of the Company. The incentive plans are designed to link award opportunities to business performance. For the CEO, 75% of the at-target Total Direct Compensation is linked to incentive programs. Outstanding business performance and achievements may result in pay-out or vesting above target while performance that remains below expectation results in lower compensation or no pay-out or vesting. Each of the components is further explained hereafter.

Pay-mix Executive Committee

Base salary

With reference to the Total Direct Compensation benchmark, base salary is set acknowledging the scope of responsibilities, competencies, skills, and competitive market data. It is the foundation to determine the Short- and Long-Term incentive opportunity. Base salary is reviewed annually and may be adjusted considering the responsibilities in the role, performance, and contribution of the Executive Committee Members as well as market movements.

Pension and other benefits

The CEO participates in an international pension plan, while the Members of the Executive Committee participate in the local pension plan of the country in which their employment resides. The benefits to be accrued under the respective (international) plans are similar to the plans applicable to the workforce in the respective countries (the international plan mirrors the Swiss pension scheme). Typical other benefits include a company car and risk insurances in the event of death in service or full disability. In specific situations, temporary housing or typical expatriation benefits may be foreseen.

Short-Term Incentive

The Short-Term Incentive (STI) scheme is designed to reward short-term operational performance within the long-term objective of creating sustainable value and growth, considering the interests of all stakeholders. For at-target performance, the annual STI opportunity amounts to 85% or 100% of annual base salary. The maximum pay-out is capped at 200% of target.

For each goal, a target will be set corresponding to a 100% pay-out. In addition, a floor defines the level of performance below which no pay-out will be made, while the cap represents the level of performance at which the maximum pay-out is 200% of the target opportunity. Pay-out levels between floor, target, and the cap are calculated by linear extrapolation. Final assessment of target achievement is at the sole discretion of the Board of Directors. The STI is subject to an overall threshold. If the actual Adjusted EBITDA over the performance year does not reach 75% of the budgeted Adjusted EBITDA of the year, no STI will be awarded at all.

Long-Term Incentive

The Long-Term Incentive (LTI) is designed to ensure long-term value creation and alignment with the interests of all stakeholders and supports the retention of talented leaders.

The LTI scheme is a rolling cliff plan covering a three-year performance period. Any grant will be subject to goals set by the Board of Directors. For each goal, a target will be set corresponding to the level of performance that will result in an at-target vesting (i.e., 100% of the target is achieved). In addition, a floor defines the level of performance below which no vesting will take place, while the cap represents the level of performance at which the maximum vesting is earned. Achievement between floor, target, and the maximum are calculated by linear extrapolation. Final assessment of target achievement is at the sole discretion of the Board of Directors.

The at-target grant level for the CEO represents 200% of base salary; maximum vesting is capped at 150% of target. For other Executive Committee Members, the at-target grant is set at 120% or 100% of base salary, with maximum vesting capped at 150% or 200% of target respectively.

Main plan features:

• The grant will be provided for in Performance Share Units (PSUs), i.e., the right to receive – upon vesting – one ordinary dsm-firmenich share, provided the vesting criteria are met
• Vesting is subject to continued employment and the achievement of the performance goals set for the respective grant
• Vesting and holding period: three years starting at the grant date
• Performance period: three financial years starting on 1 January of the year of grant
• The number of PSUs to be granted is determined by the base salary at the grant date and the average share price over the reference period to be set by the Board of Directors
• At vesting, Grantees may elect a sell-to-cover in order to cover the withholding of social security contributions and withholding of taxes due at the vesting date

Share ownership guidance

To align the interests of the Executive Committee Members even further with those of our stakeholders, the Members of the Executive Committee are required to hold a minimum multiple of their annual base salary in dsm-firmenich ordinary shares equivalent to:

• CEO: three times annual base salary
• Other Members: one annual base salary

The required value must be accrued within a five-year period. Only shares in the form of fully vested shares obtained upon the vesting of PSUs granted under a company program or shares privately acquired on the open market are considered.

Goal setting

A broader set of key performance indicators is in place for dsm-firmenich, some of which feature in our incentive programs. This relates to targets that reflect our financial performance and sustainability goals, since bringing progress to life goes hand in hand with profitable growth. The design of our Short- and Long-Term Incentive plans emphasizes the importance of building long-term growth opportunities. Our goals underpin our commitment to contribute to a better world, while at the same time generating profitable growth in line with our key strategic goals.

Concerning our incentive programs, the Board of Directors will set goals, their weight, and targets (i.e., the metric) for each performance year or equity grant. The weighting shall reflect the importance of both financial and sustainability aspirations. In doing so, the Board of Directors may respond in an agile way to business needs and/or strategy adjustments in a changing environment. In doing this, the Board of Directors shall:

• Derive goals from the Company strategy
• Focus on objectives instrumental to achieving long-term value creation
• Consider historical performance, business outlook and circumstances, and priorities
• Take into account stakeholders’ expectations
• Ensure that targets are stretching, in order to drive competitive advantage while discouraging excessive risk-taking

No individual goals are included.

For 2023, a goal related to the delivery of G&A (General & Administrative expenses) synergies via the merger has been defined. Following the end of an applicable performance period, the Board of Directors will, at their sole discretion, compare the actual performance to the targets that were set and will assess their achievement. Within the limits of business-sensitive information, dsm-firmenich will give stakeholders insight into target-setting and achievement.

Employment terms and conditions

All employment agreements of the Members of the Executive Committee include a clause prohibiting (changes in) pay to be executed if such (change in) remuneration is not included in the maximum amount of remuneration approved by the General Meeting. Members of the Executive Committee have an employment agreement for an indefinite period of time and are subject to a notice period of six or twelve months. During this period (unless there was a termination for cause), entitlement to base salary and STI continues. Unvested Long-Term incentives grants are forfeited on the effective date of a resignation or termination for cause. In other cases of a termination of employment, unvested LTI grants will vest on a pro rata basis on the effective date of such termination. In accordance with Swiss law, no severance payments or change in control provisions are agreed or paid. Non-compete provisions will be activated on a case-by-case basis and are in line with the Swiss Code of Obligations. The Board of Directors may at its discretion recover variable remuneration awarded on the basis of incorrect data, provided that such recovery is required by law and/or will result in the re-statement of annual accounts. This right of recovery shall expire three (3) years from the date of the adoption by the General Meeting of the annual accounts in which the (last instalment of the) applicable variable remuneration has been accounted for.

Remuneration Executive Committee in 2023

Composition Executive Committee

Members of the Executive Committee were appointed on 18 April 2023. In May 2023, the Board of Directors decided to evolve the then existing Co-CEO structure, and appointed Dimitri de Vreeze as sole CEO of dsm-firmenich, effective 1 September 2023. No changes were made in Dimitri de Vreeze’s remuneration in this connection.

As from the same date, Géraldine Matchett, until then Co-CEO (and holding CFO responsibility), stepped down from the Executive Committee to further her career elsewhere, in full alignment and with the thanks of, the Board of Directors for more than ten years of leadership and impact. She will remain employed during the agreed notice period and will leave the organization on 31 May 2024. During the notice period, contractually agreed arrangements (base salary, Short- and Long-Term Incentive, benefits) remain in force until the date employment is effectively terminated. No new LTI grant is made during the notice period. The agreed non-compete arrangement, effective for a six-month period, includes payment of base salary (excl. benefits and incentives). No severance is paid. If Géraldine Matchett accepts another role prior to the scheduled termination date and within the term of the non-compete arrangement, the Company’s obligations will be reduced during the garden leave period by income awarded to her in such other role.  Actual payments will be included in the remuneration report concerning the year in which the payments actually are or will be conducted.

In view of these changes, the Board of Directors appointed Ralf Schmeitz as a Member of the Executive Committee and Chief Financial Officer (CFO) as of 1 September 2023. The Board of Directors has established his remuneration in line with the established remuneration set-up referred to herein.

While retaining his role as Chief Integration Officer, Emmanuel Butstraen was appointed President of the Perfumery & Beauty business with effect from 1 July 2023. On the same date, Ilaria Resta left dsm-firmenich, following her decision to pursue external career opportunities. In accordance with Swiss law, no severance was paid to her, while any eligibility under the dsm-firmenich incentive schemes and benefit programs was cancelled on the same date.

Base salary

Base salaries were set in line with the market benchmark. On an annual basis, the CEO’s base salary was set at CHF1.350 million (€1.389 million based on the Average Fx Rate).

Pension and other benefits

The total contribution to the pension plan for the CEO amounted to € 127,573 (CHF Value: 118,133). For the Members of the Executive Committee (including former Members), the amount is € 670,407 (CHF Value: 620,797). The spend on other benefits, such as a company car and risk insurances in the event of death in service or full disability, as well as housing and other benefits of international assignments, amounted to € 1,382,117 (CHF Value: 1,279,840).

Short-Term Incentive (STI)

On an annual basis, the at-target STI opportunity is set at 100% of base salary for the CEO. The at-target STI for other Members of the Executive Committee is on annual basis set at 85% or 100% of base salary. The maximum pay-out is capped at 200% of the at-target opportunity.

For 2023, a new STI framework has been designed containing the goals as described below. Targets have been set against the new performance criteria of the two merged entities post-closing. The 2023 STI payout prior to closing of the merger was settled in accordance with legacy plan rules for the first quarter of 2023 for DSM legacy Executive Committee members, whereas for Firmenich Executive Committee Members it was paid through May 2023.

For each goal, a pay-out curve is defined:

• If the defined target is achieved, the pay-out is equal to the at-target percentage times base salary times the weight assigned to the respective goal
• A minimum floor is set for each goal; an achievement below this threshold results in no pay-out
• Over-performance results in a pay-out exceeding 100%, where the maximum achievement is capped at 200% of the ‘at-target’ weighting of the respective goal
• Between floor and target respectively target and cap, a linear calculation determines the achievement and pay-out

In case of a fatality during the year, the Safety target will not result in a pay-out. If the achieved Adjusted EBITDA is below 75% of the budgeted Adjusted EBITDA, no STI payment will be made, regardless of the achievements against the other goals.

STI target definition and achievement

Post-merger financial targets were set for the second half of the year. The performance of the Perfumery & Beauty and Taste businesses remained strong, while Ingredients Solutions showed resilience. The Animal Nutrition & Health as well as the Health, Nutrition & Care businesses were impacted by record low vitamin prices and continued destocking. Considering the combined result of the businesses, the sales growth target as well as the target on Adjusted EBITDA were not achieved. Cash flow generation resulted in an achievement above target, as did Merger G&A cost synergies.

The overall Safety performance improved slightly compared to combined pre-merger levels. The achievement fell short of the target but reached the pay-out floor.

Our workforce has shown continued strong engagement, resulting in overachievement on the Engagement KPI versus target.

The achievement on the 2023 STI goals set for the second half of financial year 2023 resulted in a pay-out (to be effectuated April 2024) as included in the below table.

Long-Term incentive (LTI)

In view of the merger, it was decided to postpone the 2023 grant to 31 July 2023 (regular grant date 31 March). The performance period starts on the same date and ends on 31 December 2025. The vesting is set for 31 March 2026. PSUs have been granted to the Members of the Executive Committee. On an annual basis, the at-target LTI opportunity for the CEO is set at 200% of base salary (vesting is capped at 150% of the number of PSUs granted at-target). For the other Members of the Executive Committee, the at-target grant is set at 120% of base salary (vesting is capped at 150% of the number of PSUs granted at-target) or at 100% of base salary (vesting is capped at 200% of the number of PSUs Units granted at-target).

The 2023 grant is implemented by dividing the at-target grant value (% of base salary) by the average opening price of the dsm-firmenich share on the Amsterdam stock exchange in June 2023 (i.e., € 97.38). The table below provides an overview of the number of share units granted, the face value (opening price on the date of grant) of such grant as well as the fair value (acc. to IFRS rules) of such grant.

The grant is provided in PSUs, subject to the goals and targets included in the table below.

For each goal, a pay-out curve is defined:

• If the defined target is achieved, the vesting shall be equal to the number of granted PSUs at-target times the weight assigned to the respective goal
• A minimum floor is set for each goal; an achievement below this threshold results in no vesting related to the respective goals
• Over-performance results in a vesting exceeding the at-target level, where the maximum achievement is capped at 150% or 200% of the at-target weighting of the respective goal
• Between floor and target and cap, a linear calculation determines the achievement and vesting

Targets and vesting scheme 2023 LTI grant

The below scheme provides an overview of the targets and their vesting scheme of the 2023 LTI grant. The Core ROCE target will not be disclosed upfront, as it concerns business-sensitive information.

Total remuneration

With reference to the remarks made in the chapter on Currency, the total remuneration excluding social security contributions to the Members of the Executive Committee amounts to € 20,418,000.

No loans were provided to Members of the Executive Committee, while no payments have been made by any subsidiary of the Company. Neither DSM-Firmenich AG nor any of its subsidiaries made payments to Associated Persons of Members of the Executive Committee (Audited).

Shareholding obligation

In addition to the vested performance shares under the dsm-firmenich Long-Term Incentive plan (or equity-based plans applicable at Royal DSM), Members of the Executive Committee invested in dsm-firmenich stock. These shares were bought through private transactions with private funds. The below table provides an overview of the number of shares held at year-end by the Members of the Executive Committee (including Associated Persons). The CEO significantly exceeds the shareholding obligation (300% of base salary). Depending on whether the legacy company had a cash-settled (Firmenich) or equity-settled (DSM) Long-Term Incentive plan, various other Members of the Executive Committee exceed the shareholding obligation (100% of base salary).

Compensation voting

The General Meeting of Danube AG (renamed DSM-Firmenich AG) on 18 April 2023 approved a maximum total amount of remuneration for the Executive Committee of €37.5 million for the period from 18 April 2023 to 31 December 2023. In establishing the amount, the Assumed Fx rate (EUR 1 = CHF 1) was considered.

The approved maximum total amount of remuneration includes the fixed base salary, benefits, and the maximum STI that can be achieved. Regarding the LTI, the amount included represents the at target value of the grant as a percentage of Annual Base Salary. The number of PSUs is calculated considering the average share price over a reference period. Therefore, the approved maximum amount includes an amount to offset an eventual appreciation of the share price on the grant date compared to the reference period (average price over June 2023). An amount of €2.8 million is included for other and unforseen items. This amount concerns, among others, obligations toward Executive Committee Members following international assignment arrangements agreed by the legacy companies prior to the appointment to the Executive Committee of dsm-firmenich and will otherwise be used to cover unforeseen circumstances such as changes in regulatory requirements.

The approved amount does not include the company-related portion of contributions to social security systems paid in line with applicable laws and regulations in any geography, nor does it include foreign exchange rate fluctuations.

Obligations towards Executive Committee Members confirmed by the legacy companies prior to the appointment into the Executive Committee of dsm-firmenich are not included in the approved amount. This includes but is not limited to special payments by Royal DSM and Firmenich SA as referred to in the Offering Circular (issued 22 November 2022) or the vesting or exercise of Long-Term Incentives granted prior to the Settlement Date (as such term is defined in the Offering Circular).

As the above table demonstrates, the total remuneration excluding social security contributions provided in 2023 to all Members of the Executive Committee (including Members who stepped down or were appointed in 2023) amounts to €20.418 million and remains within the approved maximum total amount of remuneration €38.590 million. Against the Average Fx rate, the total remuneration provided in 2023 amounts to CHF19.841 million.