Dear Shareholders,

WACKER succeeded in achieving a good financial result in 2011, though early in the year we had high hopes of even better performance. The first nine months were very successful for us. But then consolidation on the PV market in the last three months slowed our sales and earnings development significantly. Despite our strong standing as a price and quality leader in polysilicon, this sharp market correction left its mark on WACKER.

WACKER’s business will continue to be influenced by cyclic swings for the foreseeable future. The important question is whether a company is capable of mastering them successfully. WACKER is a healthy, financially strong and highly innovative company with attractive business fields and a unique pool of expertise. With the exception of the 2009 crisis, our sales have grown steadily. WACKER has expanded its production capacities in line with its growth strategy and the ongoing internationalization of its operations. Since 2006, WACKER has invested over €4.5 billion in the company’s future. That has made WACKER not only larger, but also substantially stronger.

This expansion strategy is underscored by the investment project in Tennessee, USA. Despite the high volume, WACKER financed its investment spending last year from its own cash flow, including customer advance payments. The biggest single investment in our corporate history is WACKER’s springboard for establishing an integrated production facility in one of the largest chemical and industrial centers in the world. That not only opens up new market perspectives in the US, but also allows us better to balance out fluctuations in the dollar-to-euro exchange rate. With an integrated site in Tennessee, WACKER can now exploit one of its major strengths in the Americas, too, and advance its business further here.

The importance of the US market in WACKER’s success is further underscored by the growth of the WACKER POLYMERS business division. We substantially increased sales in the Americas in 2011 by offering VAE dispersions as an alternative to styrene-butadiene polymers. WACKER POLYMERS’ growth also shows that we made the right decision in 2008 to take full ownership in our two joint ventures with Air Products. This acquisition is now yielding sustainable benefits.

The investment in Tennessee also puts WACKER on a good long-term footing globally. As a result, the Group will possess modern, integrated production sites in the three key regions of the world.

A considerable part of this success is due to WACKER’s employees. Through their hard work, their profound expertise and their commitment, they are an essential guarantor of the company’s positive growth. The Supervisory Board of Wacker Chemie AG thanks them for their achievement.

Continuous Dialog with the Executive Board

At WACKER, sound corporate governance and control are built on a relationship of trust between the Executive Board and Supervisory Board as they work closely together in the company’s interest. In the 2011 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. 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, trends 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.

In the reporting year, we paid particularly close attention to investment projects, the current earnings situation, including the risk position and risk management, and the company’s liquidity and financial position.

The Supervisory Board held four scheduled meetings in 2011, 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 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.

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 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.

Major areas of deliberation dealt with by the Supervisory Board were:

  • the construction of the new polysilicon facility in Tennessee in the United States
  • expansion of production capacities for polysilicon in Burghausen and Nünchritz
  • restructuring of Siltronic and implementation of the lead site strategy
  • expansion of the joint venture with Samsung in Singapore, and the requisite financing
  • start-up costs for the new siloxane plant in Zhangjiagang
  • the situation on the photovoltaic market and the impact on WACKER
  • performance of the share price
  • ensuring Group financing

The Supervisory Board discussed the WACKER Group’s plans for the 2012 fiscal year at its meeting held on December 8, 2011. On this occasion, the Supervisory Board also dealt with medium-term corporate plans up until 2015. It also discussed and approved the capital expenditure budget for 2012.

Work in the Committees

The Supervisory Board is assisted in its work by the committees which it has constituted. WACKER’s Supervisory Board has created three committees – an Audit Committee, an Executive Committee, and a Mediation Committee (as per the German Co-Determination Act [MitbestG], Section 27, Subsection 3). 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 2011. Key aspects of its work included the audit of the annual financial statements of Wacker Chemie AG and the Group for 2010 and of the consolidated interim financial statements for the first half-year. It also discussed the consolidated quarterly reports, risk management and compliance issues. Additionally, the Audit Committee awarded the audit assignment to the chosen auditor and submitted a proposal for the choice of auditor for 2011 to the Supervisory Board’s full meeting.

The Executive Committee met once in 2011. At this meeting, it dealt with personnel issues relating to the Executive Board.

The Mediation Committee did not need to be convened in 2011.

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

Corporate Governance

In 2011, the Supervisory Board dealt intensively with corporate-governance standards. At its meeting of December 8, 2011, the Supervisory Board discussed the application of the German Corporate Governance Code and 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 access the Declaration 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. For further details, refer to Corporate Governance

At its meeting in December 2011, 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 prepared by the Executive Board for 2011, the consolidated financial statement and the combined management report (reporting date: December 31, 2011), including the accounting.

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 18, 2011. The auditors issued an unqualified audit report.

The auditors also examined the 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 auditors’ reports, 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 February 27, 2012, 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 7, 2012, 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 disputing the financial statements and management reports of either Wacker Chemie AG or the Group, or the auditor’s report.

We approve the financial statements of both Wacker Chemie AG and the WACKER Group submitted as of December 31, 2011. The annual financial statements of Wacker Chemie AG are hereby adopted. We concur with the Executive Board’s proposal for the distribution of retained profits.

Changes in the Composition of the Supervisory and Executive Boards

In the 2011 fiscal year, there were no changes in the composition of the Executive Board.

In the Supervisory Board, the trade-union representative Uwe Fritz resigned his office as of May 31, 2011. Harald Sikorski was officially appointed as his successor as of June 1, 2011. As of December 31, 2011, the middle management representative Dr. Konrad Bachhuber resigned his office. Konrad Kammergruber was elected to replace him with effect from January 1, 2012.

Munich, Germany, March 7, 2012
The Supervisory Board

Dr. Peter-Alexander Wacker
Chairman of the Supervisory Board of Wacker Chemie AG