Accounting Principles and Methods

The WACKER Group (WACKER) is a globally active chemical group with divisions operating in the following fields: silicone and polymer chemistry, specialty and fine chemistry, polysilicon production and semiconductor technologies.

The Group’s parent company, Wacker Chemie AG, is a listed company with headquarters in Munich, Germany. Its address is Wacker Chemie AG, Hanns-Seidel-Platz 4, 81737 München, Germany.

Wacker Chemie AG is registered at the Munich Local Court (Amtsgericht) under HRB 159705. The consolidated financial statements, the Group management report, and any other documents subject to disclosure requirements are submitted to the publisher of the online German Federal Bulletin. The consolidated financial statements and the Group management report can also be viewed on the WACKER website at www.wacker.com

The declaration concerning the German Corporate Governance Code required by Section 161 of the German Stock Corporation Act (AktG) has been submitted and made accessible to the shareholders on WACKER’s website: www.wacker.com

Wacker Chemie AG’s consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), as applicable in the European Union (EU), and the supplementary rules in Section 315a (1) of the German Commercial Code (HGB). All of the IFRS published by the International Accounting Standards Board (IASB) and valid for the fiscal year in question were adopted by the European Commission for application in the EU. The consolidated financial statements are, therefore, in compliance with the IFRS. The interpretations of the International Financial Reporting Interpretations Committee (IFRIC) which are applicable for the current fiscal year are likewise applied.

The fiscal year corresponds to the calendar year. Assets and debts are reported in the statement of financial position in line with their maturities. The statement of income is classified using the cost of sales format. To improve the clarity of presentation, various items in the statement of income and the statement of financial position have been combined. These items are shown and explained separately in the Notes.

The Group’s functional currency is the euro. All amounts are shown in millions of euro (€ million) unless otherwise stated.

The Executive Board of Wacker Chemie AG authorized the consolidated financial statements for submission to the Supervisory Board’s Audit Committee on February 26, 2010. They will be submitted to the Supervisory Board for its meeting on March 17, 2010.

Standards/Interpretations Not Applied Prematurely

The International Accounting Standards Board (IASB) has published the following standards, interpretations, and changes to existing standards of which the application is not yet mandatory and which Wacker Chemie AG is not applying earlier than required. In cases where there is no official translation of new standards or interpretations, we shall use the English title of the relevant new official statement.

Standards/Interpretations and Changes to Existing Standards Already Endorsed by the EU

IFRS 1: “First-Time Adoption of the International Financial Reporting Standards”

The IASB amended IFRS 1 in November of 2008. The first mandatory application of this amended standard is for fiscal years beginning on or after July 1, 2009. The amended standard was endorsed by the EU on November 25, 2009. Its application will have no impact on Wacker Chemie AG’s consolidated financial statements.

IFRS 3: “Business Combinations”

The IASB amended IFRS 3 in January 2008 as a consequence of the “Business Combinations – Phase II” project. The first mandatory application of this amended standard is for fiscal years beginning on or after July 1, 2009. The change was endorsed by the EU on June 3, 2009. In the event of future company acquisitions, the application of this standard might produce results different from those that would have been obtained under the previous rules. This would apply particularly where not all the shares in a company are acquired.

IAS 27: “Consolidated and Separate Financial Statements”

The IASB amended IAS 27 in January 2008. The first mandatory application of this amended standard is for fiscal years beginning on or after July 1, 2009. It was endorsed by the EU on June 3, 2009. The revised standard regulates the statement of financial position reporting of transactions with non-controlling interests if there is no change in control. The revised standard will have to be observed in the course of future company acquisitions and will, therefore, have an impact on Wacker Chemie AG’s consolidated financial statements. Particular constellations have not yet been covered by IAS 27, especially with regard to gradual company acquisitions. The extent to which these alterations will make us change our accounting methods cannot yet be assessed due to a lack of relevant data.

IAS 32: “Classification of Rights Issues”

In October 2009, the IASB amended IAS 32 with the classification of rights issues. The alterations concern particular subscription rights, options, and warrants in foreign currencies on the part of the issuer to whose equity instruments these rights are related; the rights must henceforth be shown in the statement of financial position as equity rather than liabilities. The revised standard must be applied for the first time for fiscal years which begin on or after February 1, 2010. It was endorsed by the EU on December 23, 2009. We are assuming that it will have no impact on Wacker Chemie AG’s consolidated financial statements.

IAS 39: “Financial Instruments: Eligible Hedged Items – Recognition and Measurement”

In July 2008, the IASB adopted changes to IAS 39 which must be applied for the first time in the fiscal year that begins on or after July 1, 2009. It was endorsed by the EU on September 15, 2009. The revised standard contains additions to the application guidelines in respect of particular aspects of hedge accounting. At the moment, we are not assuming that its application will have any impact on Wacker Chemie AG’s consolidated financial statements.

IFRIC 17: “Distribution of Non-Cash Assets to Owners”

The interpretation must be used for the first time in the fiscal year beginning on or after July 1, 2009. It was endorsed by the EU on November 26, 2009. We are assuming that the application will have no material impact on Wacker Chemie AG’s consolidated financial statements.

IFRIC 18: “Transfer of Assets from Customers”

The interpretation must be used for the first time in the fiscal year beginning on or after July 1, 2009. It was endorsed by the EU on November 27, 2009. We are assuming that its application will have no material impact on Wacker Chemie AG’s consolidated financial statements.

Standards, Interpretations, and Changes to Existing Standards Not Yet Endorsed by the EU

IFRS 1: “First-Time Adoption of the International Financial Reporting Standards”

In July 2009, the IASB carried out amendments to IFRS 1 which affect the retrospective application of IFRS in special situations and are designed to ensure that companies do not incur unreasonably high costs when they switch to IFRS. These have not yet been endorsed by the EU. The amendments to this standard will have no impact on Wacker Chemie AG’s consolidated financial statements.

IFRS 2: “Share-Based Payment: Group Cash-Settled Share-Based Payment Transactions”

In June 2009, the IASB carried out amendments to IFRS 2 which clarify the share-based payment with cash settlement in the Group. The amended standard must be used for the first time in the fiscal year beginning on or after January 1, 2010. The changes have not yet been endorsed by the EU. We are assuming that due to its lack of relevance for the Group, its application will have no impact on Wacker Chemie AG’s consolidated financial statements.

IFRS 9: “Financial Instruments”

In November 2009, the IASB published the standard IFRS 9 for the categorization and valuation of financial assets. IFRS 9 embodies a new and less complex approach to regulating the categorization and valuation of financial assets. The first-time application of IFRS 9 is mandatory as from January 1, 2013. These have not yet been endorsed by the EU. As a result of the amendments to IFRS 9, financial assets will have to be allocated to new categories. We are assuming that there will be no significant new valuations of financial assets which will have to be carried out at fair value.

IAS 24: “Related Party Disclosures”

In November 2009, the IASB carried out amendments to IAS 24 which will simplify the disclosure obligations for companies in relationships with governments. The amendments to IAS 24 also clarify the definition of a related company and a related person. The revised standard will take effect for reporting periods which begin on or after January 1, 2011. It has not yet been endorsed by the EU. We are assuming that it will have no impact on Wacker Chemie AG’s consolidated financial statements.

“Improvements in IFRS: 2007 – 2009 Annual Improvements”

In April 2009, the IASB made a number of amendments to twelve standards which were summarized in a single publication. These encompass amendments affecting the estimation, valuation, and reposting of business transactions, as well as terminological or editorial adjustments. The changes must be applied for the first time in the fiscal year which begins on or after January 1, 2010. The changes have not yet been endorsed by the EU. We are assuming that their application will have little or no impact on Wacker Chemie AG’s consolidated financial statements.

IFRIC 14: “The Limit on a Defined Benefit Asset, Minimum Funding Requirements, and Their Interaction”

The interpretation was published by the IFRIC on September 11, 2009. The revised interpretation must be applied for the first time in the fiscal year beginning on or after January 1, 2011. The revision has not yet been endorsed by the EU. We are assuming that its application will have no impact on Wacker Chemie AG’s consolidated financial statements.

IFRIC 19: “Extinguishing Financial Liabilities with Equity Instruments”

The interpretation was published by the IFRIC on November 26, 2009 and gives instructions on the partial or full repayment of a financial liability by issuing shares or other equity instruments. IFRIC 19 must be applied for fiscal years beginning on or after July 1, 2010. The interpretation has not yet been endorsed by the EU. Its application will have no impact on Wacker Chemie AG’s consolidated financial statements.