Report of the Supervisory Board

Dear Shareholders,

2009 was not a standard fiscal year as it was shaped significantly by the consequences of the global economic crisis. For all of our employees, the Executive Board, the employee representatives and the Supervisory Board, this situation demanded special measures and efforts for coping with the effects of the crisis. Despite these difficult general conditions, WACKER can look back on a successful 2009 fiscal year. There are several reasons for this.

Dr. Peter-Alexander Wacker (Foto)

/ Dr. Peter-Alexander Wacker

Securing the future of the company and making the strategic decisions that this necessitates are an important part of the WACKER Supervisory Board’s work. Undaunted by the economic crisis, WACKER remained true to the strategic course which was adopted by the Supervisory Board in agreement with the Executive Board in 2008 and which opens up further growth opportunities for the company. The expansion of polysilicon production at the Nünchritz site progressed according to plan in 2009. By acquiring land in the US state of Tennessee, we are taking the first step toward establishing an integrated polysilicon site in America. In this way, we are sending an important signal that we remain convinced of the photovoltaic market’s positive development and intend to keep growing along with that market.

For this reason, WACKER again made substantial investments in the 2009 fiscal year. The company financed the bulk of these investments out of its net gross operating cash flow. This is outstanding performance. Taking advantage of growth opportunities while simultaneously adjusting cost structures to the general economic conditions was a demanding balancing act that the company performed with great skill. The Executive Board, in conjunction with the Supervisory Board, has in a timely manner implemented measures to further reduce costs.

Despite the high investment volume, the company’s financial condition remains good. The company has a highly sound equity base and no sizeable financial liabilities. Long-range financing was secured in good time. WACKER has always been keen to pursue a conservative financial policy and keep the company financially strong. This has always been one of WACKER’s strengths. For this reason, the company took precautions for pensions and working-life accounts in its statement of financial position in the 2009 fiscal year.

Continuous Dialog with the Executive Board

In the 2009 fiscal year, the Supervisory Board performed the duties incumbent upon it under the law, the Articles of Association, and the internal rules of procedure with great diligence. The Supervisory Board was involved in every decision of fundamental significance for the company at an early stage.

In both written and verbal reports, the Executive Board regularly provided us with timely and comprehensive information on corporate planning, strategic development, business operations, and the current state of Wacker Chemie AG and the Group, including the risk situation. In view of the difficult global economic situation, we, along with the Executive Board, observed the company’s position very closely and in detail. Outside of the scheduled Supervisory Board meetings, the Chairman of the Supervisory Board also remained in regular contact with the Executive Board, especially with the CEO, and was kept informed about the current business situation and key business transactions. Any deviations from business plans and targets were explained to us in detail. Wherever required by statutory provisions and the Articles of Association, the Supervisory Board voted on the reports and proposals of the Executive Board after detailed examination and discussion.

Against the backdrop of the global economic crisis, we paid particularly close attention to the cost reduction measures that were initiated, the restructuring measures, the investment projects, the current earnings situation, including the risk position and risk management, and the company’s liquidity and financial position in the reporting year.

The Supervisory Board held four meetings in 2009, two in the first half of the year and two in the second. Between meetings, the Executive Board immediately informed us in detail by means of written reports about all projects and plans of particular importance to the Group. At its full meetings and in its committees, the Supervisory Board discussed in detail business transactions important to the company on the basis of the reports submitted by the Executive Board.

The Supervisory Board’s Main Areas of Deliberation

The development of sales, earnings, and employment in the Group and its individual segments were the subject of our regular deliberations in the full meetings. At each meeting, the Supervisory Board evaluated the Executive Board’s performance – on the basis of Executive Board reports – and discussed strategic development opportunities and other key topics with the Executive Board. There was no need for additional monitoring measures, such as inspection of corporate documents or appointing expert counsels from outside. The full meetings were prepared by shareholder and employee representatives in their own separate sessions. In the period under review, every Supervisory Board member attended at least half of the meetings held during their period in office.

Major areas of deliberation dealt with by the Supervisory Board were

  • / The effects of the global economic crisis on the company’s development, and particularly on the Group’s strategic investment plans, the development of liquidity, and financing
  • / The restructuring measures at Siltronic AG and the new lead-site strategy
  • / The withdrawal from the joint venture WACKER SCHOTT Solar GmbH
  • / The modified strategy in the WACKER SILICONES division and the new market orientation of the WACKER FINE CHEMICALS division
  • / The expansion of our production capacities in Burghausen, Nünchritz, Jena, Nanjing, Zhangjiagang and Singapore.

The Supervisory Board discussed the WACKER Group’s plans for the 2010 fiscal year at its meeting held on December 10, 2009. At this meeting, the Supervisory Board also dealt with the medium-term corporate plans up until 2013. Both sets of plans were adopted by the Supervisory Board. It also approved the capital expenditure budget for 2010.

Work in the Committees

The Supervisory Board is assisted in its work by the committees which it has constituted. WACKER’s Supervisory Board has set up three committees – an Audit Committee, an Executive Committee, and a Mediation Committee – in accordance with Section 27 (3), German Codetermination Act (MitbestG). With the exception of the Audit Committee, which is chaired by Dr. Bernd W. Voss, the Chairman of the Supervisory Board chairs the committees.

The Audit Committee met four times in the 2009 fiscal year. Key aspects of its work included the meticulous audit of the financial statements of Wacker Chemie AG and the Group for the 2008 fiscal year and of the consolidated interim financial statements for the first half-year, and discussion of the consolidated quarterly reports as well as risk management and compliance issues. The Audit Committee additionally awarded the audit assignment to the chosen auditors and submitted a proposal for the choice of auditor for the 2009 fiscal year to the Supervisory Board’s full meeting.

The Executive Committee met twice in 2009. At its meetings, it dealt with personnel issues relating to the Executive Board.

The Mediation Committee did not need to be convened in 2009.

The Supervisory Board was regularly informed about the committees’ work.

Corporate Governance

The Supervisory Board dealt intensively with the company’s corporate governance in the 2009 fiscal year. A prominent part in these deliberations was played by the alterations to the Code implemented by the Government Commission on the German Corporate Governance Code as of June 18, 2009. At its meeting held on December 10, 2009, the Supervisory Board adopted the annual Declaration of Conformity that must be submitted jointly by the Executive and Supervisory Boards in accordance with Section 161 of the German Stock Corporation Act (AktG). Shareholders can find the Declaration of Conformity on the company’s website.

In its Corporate Governance Report, the Executive Board reports on corporate governance at WACKER also in the name of the Supervisory Board in accordance with Item 3.10 of the German Corporate Governance Code. This is part of the Declaration on Corporate Governance. More information about Declaration on Corporate Governance

At its meeting in December 2009, the Supervisory Board also reviewed the efficiency of its own activities – and arrived at a positive conclusion.

Audit of the Annual Financial Statements of Wacker Chemie AG and the WACKER Group

KPMG AG Wirtschaftsprüfungsgesellschaft, Munich, audited the annual financial statements for the 2009 fiscal year (reporting date December 31, 2009), along with the management report of Wacker Chemie AG, the consolidated financial statements, and the Group management report (reporting date December 31, 2009), which were prepared by the Executive Board, including the accounting, and awarded them an unqualified audit certificate. The audit assignment had been awarded by the Supervisory Board’s Audit Committee in line with the resolution of the Annual Shareholders’ Meeting of May 8, 2009.

The auditors also examined the Group’s risk management system in accordance with Section 91 of the German Stock Corporation Act (AktG). The audit verified that the risk management system meets the legal requirements. No risks endangering the continued existence of the company were identified. The financial statement documents (including the auditor’s report, the management reports, and the Executive Board’s proposal for the distribution of profits) were submitted to all the Supervisory Board members in good time.

At its meeting on March 8, 2010, the Audit Committee closely examined the aforementioned financial statements and reports, as well as the audit reports submitted by the auditors of the company and consolidated financial statements, and discussed and examined them in detail with the auditors before reporting to the full Supervisory Board. At its meeting on March 17, 2010, the full Supervisory Board discussed and examined the relevant financial statements and reports intensively, taking account of the reports submitted by the Audit Committee and the auditors. At both meetings, the auditors took part in the deliberations. They reported on the main results of the audit and were available to the Audit Committee and the full Supervisory Board to answer questions and provide supplementary information.

After concluding our own examination, we found no grounds for objecting to the financial statements and management reports of either Wacker Chemie AG or the Group, or to the auditor’s report.

Accordingly, we concur with the audit’s result and approve the financial statements of both Wacker Chemie AG and the WACKER Group submitted by the Executive Board as of December 31, 2009. The annual financial statements of Wacker Chemie AG are hereby adopted. We approve the Executive Board’s proposal for the distribution of retained profits.

Changes in the Composition of the Supervisory and Executive Boards

In the 2009 fiscal year, there were no changes in the composition of the Executive Board or the Supervisory Board. The appointment of Dr. Joachim Rauhut, who has been a member of the Executive Board at Wacker Chemie AG since May 2001, was extended for another five years up to 2015 by the Supervisory Board at its meeting on December 10, 2009.

The allocation of regional responsibilities in the Executive Board was adjusted at the Supervisory Board’s meetings in March and September.

The work of the Executive Board, the employee representatives, and all of the employees in the 2009 fiscal year deserves a great deal of credit. The Supervisory Board of Wacker Chemie AG would like to take this opportunity to thank them.

Munich, Germany, March 17, 2010
Supervisory Board

Dr. Peter-Alexander Wacker