Report of the Supervisory Board

In 2023, market conditions weakened markedly for WACKER after its record results a year earlier. Worldwide, the chemical industry encountered major challenges in 2023. High energy and raw-material prices and diminishing orders burdened the sector, keeping production low in many countries. At the same time, the year was again overshadowed by geopolitical conflicts and uncertainties.

Amid these multiple external crises, WACKER performed well last year. This was due in no small part to the strong commitment and extraordinary dedication of every employee in WACKER’s global network. They have all earned the Supervisory Board’s deepest thanks.

An issue that again topped the political, economic and social agenda in 2023 was the fight against climate change. This issue has two aspects for WACKER. On the one hand, WACKER works relentlessly on reducing its own carbon footprint and resource needs. It has ambitious targets here and once again made good progress last year. On the other hand, WACKER supports its customers with diverse product solutions on their way to net zero.

One strategic principle at WACKER is to firmly focus on customers so that their specific needs can be solved effectively through WACKER’s core competencies, thereby creating added value. For example, WACKER has more than 3,000 silicone products today for a wide range of applications – whether in electric cars, in the construction sector or in medical technology. WACKER has transformed from a European silicone pioneer to the world’s second largest manu­facturer of silicone products today. In 2023, this success story – which began 75 years ago – was a source of pride for employees and business partners.

Another highlight of 2023 was a success story in Saxony, eastern Germany: 25 years of WACKER in Nünchritz. WACKER has invested over €1.7 billion in Nünchritz since acquiring it, creating one of the world’s largest, state-of-the-art production sites for silicones and polysilicon. With a workforce of around 1,500, the site is the largest chemical-industry employer in Saxony.

Another of WACKER’s strategic principles is to seize growth opportunities around the globe. That is why the company strives to be locally present in relevant national markets. Take China, for example. What began there over 30 years ago as sales offices has long become an extensive network of production, research and service sites. Today, WACKER has more than 1,700 employees in the world’s largest market for chemicals. As in other regions, WACKER is steadily strengthening its presence there.

Last year, WACKER’s biotechnology business was another key area that saw a significant expansion. With the acquisition of ADL BioPharma, based in León, Spain, WACKER has gained a top contract manufacturer for the food, pharmaceuticals and consumer goods industries. ADL BioPharma employs some 300 people and offers roughly 2,000 cubic meters of additional fermentation capacity. This acquisition creates the basis for further growth in biosolutions.

Continuous Dialogue 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 2023, the Supervisory Board performed – with great diligence – the duties incumbent upon it under law, the Articles of Association and its own Rules of Procedure. The Supervisory Board was involved at an early stage in every decision of fundamental significance for the company.

In both written and oral reports, the Executive Board regularly provided the Supervisory Board with timely and comprehensive information on corporate planning, strategic development, business operations, and on the current state of Wacker Chemie AG and the Group, including the risk situation, risk management, and compliance and sustainability issues. Beyond scheduled Supervisory Board meetings, the Chair of the Supervisory Board remained in close contact with the Executive Board, especially with the CEO, conferring on issues of strategy, business development, risk exposure, risk management and compliance, and was kept informed of current trends, the business situation, and key business transactions. Any deviations from business plans and targets were explained to the Supervisory Board in detail.

Wherever required by statutory provisions or the Articles of Association, the Supervisory Board voted on the reports and proposals of the Executive Board after detailed examination and discussion. There was no need for additional monitoring measures, such as the inspection of corporate documents or the appointment of experts. The Supervisory Board met on a regular basis, sometimes without the Executive Board being in attendance.

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

The Supervisory Board held five meetings in 2023, three in the first half of the year – including the newly elected body’s inaugural meeting directly after the 2023 Annual Shareholders’ Meeting – and two in the second half. All Super­visory Board meetings were in person. Between meetings, the Executive Board informed the Supervisory Board 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 of importance to the company and referred to the reports sub­mitted by the Executive Board. The full meetings were prepared by share­holder and employee representatives in their own separate sessions.

The Supervisory Board’s Main Areas of Deliberation

The development of sales, earnings and employment at Wacker Chemie AG and the Group, together with strategic development opportunities, were the subject of regular consultations in the full meetings of the Supervisory Board.

In the reporting year, the major areas of deliberation for the Supervisory Board were:

• Global market challenges, particularly the high raw-material and energy costs
• The effects of the war in Ukraine and its consequences for gas supplies in Germany
• Geopolitical developments and the resulting opportunities and risks for our business
• Disruptions in global trade and supply chains and their effects on world markets in general, and on WACKER in particular
• Various M&A and CAPEX projects
• Financing activities
• Adjustments to the compensation system for Executive Board members
• HR matters

The Supervisory Board discussed the WACKER Group’s plans for 2024 at its meeting of December 7, 2023. On that occasion, the Supervisory Board also dealt with medium-term corporate plans for 2024–2028. In addition, it discussed and approved the capital-expenditure budget for 2024.

Work in the Committees

The Supervisory Board is assisted in its work by the committees it has constituted. WACKER’s Supervisory Board has created three committees – an Audit Committee, an Executive Committee, and a Mediation Committee (the latter in accordance with Section 27 (3) of the German Co-Determination Act (­MitbestG)). The tasks and the members of these committees are detailed in the Declaration on Corporate Management.

The Audit Committee met four times in person last year. In the presence of the auditors, it discussed the audit of the annual financial statements of Wacker Chemie AG and the Group for 2022 and the consolidated interim financial statements for the first half-year. It also examined the Group’s quarterly financial figures as well as issues relating to risk management, the accounting process, the internal control systems, compliance and auditing. It monitored the audit, especially regarding quality, as well as the independence of the auditors and the additional services they performed. Moreover, the Audit Committee submitted a recommendation to the Supervisory Board for the latter’s proposal to the Annual Shareholders’ Meeting for appointing an auditor for 2023. It then awarded the auditing contract for 2023 and determined the focus of auditing.

The Executive Committee met three times in person in 2023. The committee members discussed the compensation system for Executive Board members and personnel matters, in particular Executive Board succession planning and the committee’s recommendations to the Supervisory Board to renew Angela Wörl’s contract, to raise the CEO’s and CFO’s fixed compensation, and to determine the Executive Board’s total compensation for 2022, as well as set the performance goals for variable compensation in 2023. The Chair of the Supervisory Board also discussed matters of particular importance with the Executive Committee members between the regular meetings.

The Mediation Committee did not need to be convened in the reporting year.

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

Initial and Advanced Training

The members of the Supervisory Board are called upon to take part in training courses at regular intervals and are responsible for meeting this obligation themselves. The company supports the members in their educational endeavors, in particular by granting them generous expense allowances, which can and should be used for further training, among other things. When they take office, new Supervisory Board members receive an information package about their rights and obligations; it also includes information sheets on insider-trading bans and on personal transactions by managers. Where necessary, they are also informed about significant changes in legislation and court rulings affecting their work, or are able to take part in internal information events.

Personalized Disclosure of Attendance at Meetings

Last year, four members were excused from one Supervisory Board meeting each; otherwise, all members of the Supervisory Board attended all of its meetings. All committee members attended their respective committee meetings in 2023. Members’ attendance at meetings of the Supervisory Board and at their respective committee meetings is disclosed in personalized form in the following table:

Corporate Governance

Last year, the Supervisory Board looked closely at corporate governance standards. At its meeting of December 7, 2023, the Supervisory Board, as scheduled, dealt with 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). The Declaration is available on the company’s website and is also included in the Declaration on Corporate Management.

Further information on corporate governance at WACKER can likewise be found in the Declaration on Corporate Management.

At its meeting of December, the Supervisory Board also conducted a self-assessment and found that it works efficiently – for example, due to the regular preliminary discussions regarding the Supervisory Board meetings, the comprehensive reports provided by the Executive Board and the detailed documents received well in advance of the meetings. Further information on the Supervisory Board’s regular self-assessments can be found in the Declaration on Corporate Management.

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

KPMG AG Wirtschaftsprüfungsgesellschaft, Munich, audited the annual financial statements of Wacker Chemie AG for 2023, the consolidated financial statements and the combined management report (as of December 31, 2023), as prepared by the Executive Board. KPMG AG Wirtschaftsprüfungsgesellschaft, Munich, has audited Wacker Chemie AG and the WACKER Group since 2006. The persons responsible for signing the audit are Prof. Bernd Grottel (since 2022 in his capacity as German Public Auditor Responsible for the Engagement) and Angelika Huber-Straßer (since 2021).

The Supervisory Board’s Audit Committee had awarded the auditing contract in accordance with the resolution of the Annual Shareholders’ Meeting of May 17, 2023. The auditors conducted their audit in accordance with Section 317 of the German Commercial Code (HGB) and the EU Audit Regulation, and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW). They issued unqualified audit opinions.

The auditors also carried out a review with limited assurance of the separate non-financial report for Wacker Chemie AG and the Group. The outcome was that no issues were identified that would indicate that the report did not satisfy the statutory requirements in all material respects.

The financial-statement documents (including the auditors’ reports, the combined management report and the Executive Board’s proposal for the distribution of profits as well as the combined non-financial report for Wacker Chemie AG and the Group) were submitted to all the Supervisory Board members in good time.

At its meeting of February 20, 2024, the Audit Committee examined and discussed in detail the financial statements, the combined management report, the combined non-financial report for Wacker Chemie AG and the Group (as per Sections 289b and 315b of the German Commercial Code – HGB) as well as the auditors’ reports. At its meeting of February 29, the full Supervisory Board closely examined and discussed the relevant annual accounting documents – including the combined non-financial report for Wacker Chemie AG and the Group – with knowledge and in consideration of both the report of the Audit Committee and the auditors’ reports. The auditors, Angelika Huber-Straßer and Prof. Bernd Grottel, took part in the deliberations at both meetings. They reported on the main results of the audits – in particular, the key audit matters described in the auditors’ reports and the results of non-financial reporting – and were available to answer questions and provide supplementary information.

After concluding its own examination, the Supervisory Board has no objections to raise to the annual financial statements of Wacker Chemie AG, the consolidated financial statements, the combined management report, the combined non-financial report for Wacker Chemie AG and the Group, or the auditors’ reports.

The Supervisory Board therefore approves the annual financial statements of Wacker Chemie AG and the consolidated financial statements as of December 31, 2023 as prepared by the Executive Board. The annual financial statements of Wacker Chemie AG are hereby adopted. The Supervisory Board concurs with the Executive Board’s proposal for the distribution of retained profit.

The Compensation Report for 2023 has been formally reviewed by the auditors in accordance with Section 162 (3), sentence 2 the of German Stock Corporation Act. It has also undergone a voluntary material review by the auditors.

Changes in the Composition of the Supervisory and Executive Boards

As of January 1, 2023, Andreas Schnagl and Reinhard Spateneder joined the Supervisory Board as employee representatives to replace Peter Áldozó and Eduard-Harald Klein, who had left the Supervisory Board on December 31, 2022. At the Annual Shareholders’ Meeting of 2023, the mandates of all Supervisory Board members ended as scheduled. The election of shareholder representatives to Wacker Chemie AG’s Supervisory Board at the Annual Shareholders’ Meeting of May 17, 2023 resulted in the following change: Prof. Patrick Cramer was elected by the Annual Shareholders’ Meeting to succeed Franz-Josef Kortüm, who had not stood for re-election. All the other shareholder representatives were re-elected to the Supervisory Board. At its inaugural meeting, directly after the Annual Shareholders’ Meeting, the Supervisory Board confirmed Dr. Peter-Alexander Wacker as its chair. The employee representatives on the Supervisory Board had been elected by Wacker Chemie AG’s employees and executives before the Annual Shareholders’ Meeting. The following changes occurred: Dr. Benedikt Postberg and Stefan Entholzner replaced Dr. Birgit Schwab and Andreas Schnagl as employee representatives on the Supervisory Board. The other employee representatives were re-elected, including both IG BCE (labor union) members. The Super­visory Board confirmed Manfred Köppl as its deputy chairman at its inaugural meeting directly after the Annual Shareholders’ Meeting.

Effective September 30, 2023, Beate Rohrig stepped down. Harald Sikorski succeeded her as employee representative on the Supervisory Board on October 1, 2023. He was appointed at the Executive Board’s request by order of the District Court of Munich dated September 13, 2023.

The following changes were made to the composition of Wacker Chemie AG’s Executive Board in 2023: Auguste Willems, member of the Executive Board of Wacker Chemie AG, left the company at his own request on April 30, 2023. The Supervisory Board appointed Dr. Christian Kirsten as his successor, effective May 1, 2023. At its meeting on June 21, 2023, Wacker Chemie AG’s Supervisory Board confirmed Angela Wörl’s membership on the Executive Board and renewed her contract for a further five years (until April 30, 2029).

Last year, WACKER’s Executive Board and employees kept the company on course with great dedication in a challenging market environment. The Super­visory Board would like to express its sincere thanks and respect for what was achieved by the members of the Executive Board, by every employee in WACKER’s global network and by the various employee councils.

Munich, February 29, 2024
The Supervisory Board

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