Wacker Chemie : Online -Annual Report 2020

March 17, 2021 at 09:09 am IST

Annual ReportHealth and Nutrition - The Basis for Good Living

2020

As an innovative chemical company, wacker makes a vital contribution to improving the quality of life around the world. We want to continue developing and supplying solutions that meet our own expectations - namely to add value for our customers and shareholders, and to achieve sustainable growth.

wacker at a Glance

€ million	Dec. 31, 2020	Dec. 31, 2019	Change in %
Results /Return /Cash Flow
Sales	4,692.2	4,927.6	-4.8
EBITDA1	666.3	783.4	-14.9
EBITDA margin2 (%)	14.2	15.9	-10.7
EBIT3	262.8	-536.3	n.a.
EBIT margin2 (%)	5.6	-10.9	n.a.
Financial result	- 44.9	-54.9	-18.2
Income before income taxes	217.9	-591.2	n.a.
Net result for the year	202.3	- 629.6	n.a.
Earnings per share (basic/diluted) (€)	3.81	-12.94	n.a.
ROCE (%)	5.6	-11.3	n.a.
Financial Position/Cash Flow
Total assets	6,950.5	6,491.0	7.1
Equity	1,691.8	2,029.0	-16.6
Equity ratio (%)	24.3	31.3	-22.1
Financing liabilities	1,405.5	1,258.9	11.6
Net ﬁnancial debt4	67.5	713.7	-90.5
Capital expenditures5	224.4	379.5	-40.9
Depreciation/amortization and impairments	-403.5	-1,319.7	- 69.4
Net cash ﬂow6	697.7	184.4	>100
Research and Development
Research and development expenses	156.6	173.3	-9.6
Employees
Personnel expenses	1,329.4	1,253.8	6.0
Employees (December 31, number)	14,283	14,658	-2.6
1 EBITDA is EBIT before depreciation and amortization.
2 Margins are calculated based on sales.

3 EBIT is the result from continuing operations for the period before interest and other ﬁnancial results, and income taxes. In 2019, depreciation/amortization and impairments reﬂected the impairment charge of €760 million on the ﬁxed assets of WACKER POLYSILICON.
4 Sum of cash and cash equivalents, noncurrent and current securities, and noncurrent and current ﬁnancial liabilities.
5 Intangible assets, property, plant and equipment, investment property, excluding right-of-use assets.
6 Sum of cash ﬂow from operating activities and cash ﬂow from long-term investing activities (before securities).

Annual Report

2020

wackerHealth and Nutrition - The Basis for Good Living

Key Events in 2020 2 Health and Nutrition - The Basis

for Good Living 3

aFor Our Shareholders

Letter to Our Shareholders 33

Executive Board 39

Report of the Supervisory Board 40

wacker Stock in 2020 46

bCombined Management Report

Group Business Fundamentals 51

Goals and Strategies 56

Management Processes 57

Statutory Information on Takeovers 60

Business Report 61

Earnings 66

Net Assets 71

Financial Position 74 Further Information on r&d,

Employees, Procurement,

Production, Sales and Marketing 77

Management Report of Wacker Chemie ag 82

Risk Management Report 87

Outlook 101

cConsolidated Financial Statements

Statement of Income 109

Statement of Comprehensive Income 110

Statement of Financial Position 111

Statement of Cash Flows 113

Statement of Changes in Equity 114

Reconciliation of Other Equity Items 115

Segment Information by Division 116

Segment Information by Region 118

Notes of the wacker Group 119 Declaration by the Executive Board

on Accounting Methods and Auditing 176

Reproduction of the Independent Auditor's Report 177

dFurther Information

Supervisory Board, Executive Board, Declaration on Corporate Management, and Non-Financial Report

Supervisory Board 187

Executive Board 188

Declaration on Corporate Management 189 Separate Non-Financial Statement Combined

for the wacker Group and for wacker Chemie ag 203 Limited Assurance Report of

the Independent Auditor 220

Multiyear Overview 222

Chemical Glossary /Financial Glossary 224

List of Tables and Figures 228

Key Events - 2020

January

After being commissioned in 2019, the new gas turbine for the Burghausen site's captive power plant is now in operation. This reduces co2 emissions by 300,000 metric tons and nitrogen oxides by 30 percent. The electricity generated is easier to adjust to actual electricity needs. The 135-megawatt power plant is a signiﬁcant factor in securing the site's supply of electricity and energy.

March

Due to the coronavirus pandemic, wacker donated 11,000 liters of iso- propyl alcohol to make 15,000 liters of disinfectants for Bavarian hospitals and care facilities.

April

Production of silicone cartridges at the company's Nünchritz site, which began late 1998/early 1999, reached one billion units.

May

The pandemic triggered the biggest decline in wacker's sales in a single month.

July wacker invested in its Amsterdam production facilities for biologics, lmps (live microbial products) and vaccines.

Key Events

2020

August

The coronavirus pandemic compelled wacker to hold its ﬁrst-ever online

Annual Shareholders' Meeting.

September wacker opened a competence cen- ter for thermal interface materials in

Shanghai.

It presented SeungA Lee and JungEun Lee of South Korea with the Alexander Wacker Innovation Award for devel-oping new silicone resins for optical bonding applications.

October wacker's Executive Board and employee representatives signed a framework agreement on the Shape

the Future efficiency program. By 2022, the Group plans to cut about 1,200 jobs and save a total of €250mil- lion, half in personnel and half in non-personnel costs.

wacker expanded its capacity for making polymer products in China by investing around us$100 million to build two new production plants at its

Nanjing site.

November wacker and biopharmaceutical company CureVac signed a contract to produce an mRNA-based vaccine against Covid-19. wacker's Amsterdam site plans to make around 100 million doses of the CureVac vaccine annually.

December wacker's Supervisory Board approved an agreement to sell wacker's stake in Siltronic ag, its publicly listed asso- ciate, to Taiwan's GlobalWafers Co., Ltd. wacker holds a stake of about 30.8percent in Siltronic ag. The offer price was €125 per share.

The Supervisory Board took key personnel decisions for the future. Dr.Christian Hartel is to become Wacker Chemie ag's new president and ceo in May 2021. He will succeed Dr.Rudolf Staudigl, who retires at the end of the Annual Shareholders' Meet- ing. Angela Wörl will join the Executive

Board as personnel director.

Health and Nutrition - The Basis for Good Living

Health and Nutrition

The Basis for Good Living

People prize their health above all else. The ongoing coronavirus pandemic has made the importance of being healthy only too clear to us. Healthy people feel better about them-selves, achieve more, take an active part in life, keep in touch socially and ultimately live longer lives. The raw materials, technologies and products that wacker supplies make a key contribution toward ensuring sound health and - highly topical - combating Covid-19. When we talk about health, we often refer to a healthy diet. Eating well is key to a healthy lifestyle. Here, too, innovative ingredients from wacker play an invaluable role. They boost heart health, while lowering both cholesterol and blood sugar levels. Our current annual report tells you all about wacker's expertise in health and nutrition, as well as about the products we make and the potential applications they open up.

Products and Applications

Protecting Your Hands

Skin is damaged by frequent handwash-ing and the use of disinfectant. Our sili-cones protect your hands and make them soft and supple.

The Right Packaging for Medicine

Our resins help ensure that drugs reach patients safely and intact. When used in tablet blister packs, these resins make sure that the aluminum foil and plastic adhere ﬁrmly to each other, yet make it easy to open the pack. Germs and air humidity, which might adversely affect the medicine, don't stand a chance.

Safety's the Name of the Game

Polymer binders make the nonwoven fabrics in protective clothing comfortable and hard-wearing. Thanks to their antiviral properties, cyclodextrins provide additional safety.

Painless Separation Guaranteed

It's not always easy to take optimum care of injuries and wounds. That's why doctors and the chronically ill use silicone-coated wound dressings. This kind of dressing can be changed more conveniently and ensures optimum healing of wounds.

Our cyclodextrins help convey hard-to-dissolve drugs into a patient's body, where they can take effect. These ring-shaped sugar molecules enhance the solubility and bioavailability of such substances.

Elemental Building Block for All Silicones

Silicon and oxygen form the backbone of sili-cones. The same goes for our medical silicone rubber compounds. Their elasticity, purity and ready compatibility mean they are often used in respirators, ventilators and infusion sets. Manu-facturers of artiﬁcial limbs and orthopedic aids are among those who rely on silicone rubber.

Get Healthy, Stay Healthy

Pharmaceutical companies contract us to manufacture biopharmaceuticals: therapeutic proteins, vaccines and live microbial products.

Microtransporters

Our dispersions combine ﬁbers to form nonwoven fabrics that are used to make disposable wipes: tear-resistant, absorbent and versatile.

We produce nature-identical plant compounds and im-prove the bioavailability of naturally occurring substances. Our bioactive ingredients provide solutions for formulating effective food supplements - thereby promoting a healthy lifestyle.

Staying Fit and Healthy

Fitness trackers and smart fabrics measure your heartbeat, or send elec-trical impulses to help build muscle. Our high-tech silicones make sure there is an ideal connection between your skin and the sensors.

Active Ingredients

Producing Vaccines by the Second

A lot of pieces need to fall into place on the journey from a vaccine to a global victory over the coronavirus pandemic. One of those pieces is Wacker Biotech.

As a contract manufacturer, the company produces drug substances for pharmaceutical companies, and will also soon be making an active ingredient that will form part of a vaccine candidate for the sars-CoV-2 coronavirus.

When Alexander Fleming discovered penicillin nearly 100 years ago, he felt that he was on the cusp of a major breakthrough. And it turned out he was right, as antibi- otics have since saved millions of lives. Of course, putting Fleming's discovery to therapeutic use took more than a decade. The production process and manufacturing capacity held up implementation, forfeiting valuable time.

As the history of penicillin shows, the struggle against bacteria and viruses plays out in more than just test tubes.

From the development of a drug substance to production and distribution - diseases are conquered only when a considerable number of pieces fall into place.

"We're incredibly proud that we can play a role in the ﬁght against the pandemic."

Sandra Verhaagh, Production Head at Wacker Biotech

Over the past months, an entire army of scientists has once again found itself on the cusp of a major breakthrough, with the search for a vaccine for sars-CoV-2 shifting into high gear. The search was a success. We now have multiple vaccines that have been proven effective, and instead of taking eight to ten years, the vaccine development phase was cut to just twelve months.

Wacker Biotech has more than 20 years of experience in manufacturing vaccines.

Production facilities in Amsterdam cover several floors.

The next step is production. We will need billions of doses to rein in the pandemic, and the race for available pro- duction capacity is well underway. A few candidates have been in production for months in anticipation of ofﬁcial authorization. But if they aren't approved, that work will have been in vain. Pharmaceutical companies, researchers and governments throughout the world are working hand in hand to make these endeavors a success.

Twenty Years of Experience Producing Vaccines

One of the pieces of the vaccine puzzle is Wacker Biotech.

For 20 years now, this subsidiary of Wacker Chemie ag has been working behind the scenes to produce vaccines.

The experts at Biotech develop production processes on a laboratory scale, while their plants produce drug sub- stances that subsequently form part of vaccines and other innovative biopharmaceuticals. Their customers operate in the pharmaceutical and biotech industries.

One of them is CureVac, a Tübingen-based biotech com- pany that has contracted Wacker Biotech to produce the drug substance for its Covid-19 vaccine candidate CVnCoV.

Production is set to begin at Wacker Biotech's Amsterdam site in the ﬁrst half of 2021, and preparations are already underway.

The brick building housing Wacker Biotech is located in the Zuid Oost district of Amsterdam. A transparent, glass dome in the middle of the building lets in daylight. It is lined with reactors, stainless-steel tanks and computer monitors. In recent months, production has been set up

Wacker Biotech

As a cdmo (contract development and manufactur- ing organization), Wacker Biotech pools the wacker Group's biopharmaceutical activities. The company works on behalf of pharmaceutical and biotech ﬁrms to make therapeutic proteins, live microbial products (lmps) and vaccines based on microbial systems. Its portfolio extends from strain/process develop- ment and analytical testing through to production for clinical and commercial applications in compli- ance with good manufacturing practice (gmp) guide- lines. Wacker Biotech maintains three production sites: Jena and Halle in Germany (Wacker Biotech GmbH) as well as Amsterdam in the Netherlands

(Wacker Biotech b.v.).

here especially for manufacturing what are known as mRNA vaccines - a new class of vaccine that has raised tremendous hopes in the ﬁght against the coronavirus pandemic. If approval is granted, there are plans to pro- duce more than 100 million doses of CureVac's mRNA drug substance per year at Wacker Biotech. That's three doses of vaccine per second.

"We're incredibly proud that we can play a role in the ﬁght against the pandemic," says Sandra Verhaagh, who heads up production at Wacker Biotech. It normally takes several months to transfer the production process for a customer's vaccine so that initial test runs can begin at Wacker Biotech. But CVnCoV is following a very different timeline. "You might say we transferred the process at light speed," she observes. The company procured special equipment for the production process, purchased raw materials and established analytical and documentation processes - a major feat for everyone involved.

A Broad Vaccine Portfolio mRNA vaccines are new territory for Wacker Biotech too.

Up to now, the company's portfolio comprised conventional live and killed vaccines as well as protein-based, polysac- charide and conjugate vaccines, such as those that combat cholera or meningitis A.

"It fascinates me that we can make something that doesn't just heal people - it is a preventive measure that keeps them healthy too," says Verhaagh, a molecular biologist who has spent nearly her entire career working on vaccines in all of their forms. "Not all vaccines are created equal," she explains. "One option is to use the pathogen itself as a vaccine - in either a weakened or inactive form." The organisms in live vaccines are capable of reproducing, but they can no longer cause illness. Many of these vaccines - those that prevent childhood diseases such as mumps, measles and rubella - confer life-long immunity. Inactivated vaccines on the other hand, which are also referred to as killed vaccines, contain either a dead pathogen or part of an inactive virus to which the immune system responds.

The protective immunity provided by killed vaccines gen- erally only lasts for a few years, after which it will need to be refreshed.

Most of today's vaccines are killed varieties developed from only select molecules of a pathogen, and these are commonly genetically engineered. These kinds of vaccines contain individual characteristic proteins of a pathogen that are intended to produce an immune response within the body. For these to work, boosters known as adjuvants usu- ally need to be added. The same applies to what are known as polysaccharide vaccines, which use polysaccharides

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Regular quality control:	Taking samples from a
vaccine samples undergoing	fermenter: with a capacity of
analysis.	1,500 liters, this is the site's
largest bioreactor.
e
Fermenters are used to make
conventional vaccines.

The mRNA is generated by enzymes and a dna template.

The vaccine contains only the blueprint for an antigen.

The mRNA gives the cell instructions for producing the antigen and stimulates the immune system.

taken from the shell of a pathogen to prompt an immune response. In order to amplify the effect, polysaccharides are often bound to proteins, in which case they are referred to as conjugate vaccines.

A New Class of Vaccines

Gene-based vaccines offer a new approach. In this case, immunization does not involve injecting pathogens or parts of pathogens - patients instead merely receive the genetic information needed to produce an individual antigen. The vaccines come in three categories: mRNA, dna and vector vaccines.

The concept behind mRNA vaccines revolves entirely around messenger ribonucleic acid, a key molecule in the human body. As a messenger, its role is to transport assembly instructions between our genetic material and the protein factories in our cells. By synthesizing mRNA and transporting it into cells, scientists could instruct the body to manufacture a speciﬁc protein that would trigger an immune response. In the example of CureVac's vaccine CVnCoV, the mRNA is encoded for the spike protein of the sars-CoV-2 virus. A key issue: when an mRNA vaccine

is injected into a patient, the mRNA does not enter the cell nucleus. What is more, single-stranded RNA is not compatible with double-stranded dna. In other words, the vaccine cannot alter our genetic material. Scientists conﬁrm this, including those from the Paul-Ehrlich-Institut, which is responsible for approving vaccines in Germany.

Vaccine Production: A Science unto Itself

The processes for manufacturing different classes of vaccines are as diverse as the vaccines themselves. "Vac- cine production is a science unto itself," says Verhaagh.

"Every vaccine is different, and every production process is unique, involving a considerable degree of scientiﬁc and technical expertise." Production proceeds in multiple steps, which vary depending on the type of vaccine. In the ﬁrst step, precultures of the vaccine candidate provided by the customer are prepared on a small scale. For a conven-tional vaccine, this is followed by scaling up production in stainless-steel tanks called fermenters or in single-use reactors. Here, bacteria multiply and produce the target active substance - in the case of a conjugate vaccine, they build the desired polysaccharides. In the next stage, the polysaccharides undergo multiple puriﬁcation steps,

after which they are chemically activated and lyophilized (i.e. freeze-dried) and, in the ﬁnal step, bound to the carrier protein to form the ﬁnished conjugate vaccine. It's a long, drawn-out process.

By comparison, production of an mRNA-based vaccine is more efﬁcient. "You don't have to culture the pathogen itself. And that eliminates a very time-consuming step,"

Verhaagh explains. The starting material for production is plasmid dna with parts of the pathogen dna. It is tran- scribed by enzymes into mRNA. The active substance is then puriﬁed using chromatography. "You can't have any kind of impurities in the production process," she adds. Vaccine production is therefore subject to very strict hygiene regulations.

From Clinical Trials to Supplying the Market

Multiple fermenters with capacities of up to 1,500 liters are available for producing biopharmaceutical therapeutic agents and conventional vaccines in Amsterdam and at Jena and Halle, the two Biotech sites in Germany. This allows the company to adapt production volumes as need- ed - small quantities for clinical trials, larger amounts for supplying the market later on - all depending on the phase of development that the customer's vaccine has reached.

These facilities are about to be complemented by a new production line for mRNA-based vaccines, which will soon go on stream in Amsterdam.

Ultrapure Production Conditions

Cleanroom conditions apply to the entire production pro- cess, and spaces where ﬁnished vaccines are dispensed are subject to the most stringent cleanroom category. After production in Amsterdam, the different vaccines can either be freeze-dried or dispensed into vials. "The general rule of thumb is: the closer you get to the end product, the stricter

the regulations," says Verhaagh. For employees, this means protective clothing from head to toe. Even one grain of dust is one too many.

Several vaccine projects are currently underway in Amster- dam: while Verhaagh and her colleagues prepare for the CVnCoV production launch, the company is producing a conventional conjugate vaccine in parallel. This vaccine will soon be approved, too - though not for use against sars- CoV-2. If CVnCoV is successfully approved, production will be expanded to include the manufacture of the mRNA drug substance. The huge number of vaccine doses needed can- not be produced any other way. For Sandra Verhaagh, that means conducting a lot of interviews these days. Whether in production, quality control or quality assurance, Wacker Biotech needs additional personnel at its Amsterdam site - in order to ﬁnally complete the vaccine puzzle.

Vaccines made at the Amsterdam site can be dispensed into vials if required.

Cornerstones of Modern Medicine

They're on your skin, in your digestive tract, in the air and on the sea ﬂoor: we're surrounded by billions of bacteria and viruses. Invisible to the naked eye, most of these tiny organisms are harmless, and some of them are even critical to our survival. Some, however, make us sick, potentially triggering severe, even life-threatening illnesses. Vaccines offer long-lasting protection from an array of infectious diseases, tricking the body into believing it has been infected with a pathogen. The immune system responds by producing antibodies to ﬁght the pathogen. If an individual is then infected at

some later point in time, their immune system will re- member the pathogen and reactivate. This is how the vaccines work that protect us from polio, typhoid fever, cholera, hepatitis A and B, hpv and smallpox, which has been eradicated since 1980 thanks to a global immuni- zation campaign. The list is long. And it brings home one important lesson: alongside the development of antibiotics, vaccines are the cornerstones of modern medicine. The World Health Organization estimates that vaccines save two to three million lives each year and prevent countless people from falling ill.

Personal Care

Effective Skin Protection

Skin creams, make-up and hair-care products are key applications in wacker's silicones business. The Consumer Care segment's high-margin specialty silicones are essential ingredients in such products. Last year saw the emer- gence of skin care as a major issue worldwide, with increased hand hygiene in response to coronavirus taking its toll on the human body's largest organ.

Cássia Picirili, like many people in Brazil and elsewhere these days, is living her life at home. For months now, the only place she has seen the ﬁve women in her team is on her laptop. "We're being good and staying at home," she says, with a laugh. The silicones expert, who has worked at wacker's South American headquarters near São Paulo for three years, is trying to stay positive.

Despite having to work from home, her team has developed a whole range of ideas for personal-care and cosmetic products aimed speciﬁcally at routines altered by the pan- demic. She is proud to have formulated a new hand sani- tizer that protects the skin. Frequent handwashing leaves the skin rough and cracked, and the alcohol in sanitizers does its own damage. In response, Picirili's team tested disinfectants containing silicones on blackberry leaves. In the presence of protective silicone, the test leaf stayed fresh and green after 24 hours; where there was no silicone, the leaf darkened and dried up.

Cássia Picirili from São Paulo is an expert in silicones. She has developed skin-friendly hand sanitizers.

Blackberry leaves react extremely sensitively to strong disinfectants - just as human skin does.

The products that wacker makes in São Paulo include silicone emulsions for the cosmetics and personal-care sectors.

"We are all affected by current market developments, and knowledge is transferred in all directions."

Dr. Timo Hagemeister, Director of Consumer Silicones,

Europe, Middle East and Africa

The ideas of her team are being picked up globally. wacker colleagues in Germany repeated the experiment, using raspberry leaves instead of blackberry, and got similarly good results. "We are all affected by current market devel- opments, and knowledge gets transferred in all directions," says Dr.Timo Hagemeister, responsible for wacker's consumer-related silicone business in Europe, Africa and the Middle East. "Our Consumer Care team offers the worldwide product and application expertise in silicones expected by the likes of Unilever or L'Oréal."

Sustainably manufactured products are gaining in popularity in the segment. With the introduction of belsil® eco, wacker can now offer ingredients for such products. Biobased methanol is used for manufacturing, compensating for fossil-based components. The process is climate-friendly and conserves resources - an ideal starting point for the sustainable manufacture of skin

creams, shampoos, conditioners and lotions. More and more wacker customers are ordering such silicones.

For personal-care companies whose customers demand products that are more climate-friendly, "fossil-free" is a key message. "We're talking to all the majors about this,"

says Hagemeister.

Silicones are also capable of protecting the skin under maximum stress conditions. Poor air quality is one of worst problems affecting the populations of Asian megacities.

Day after day, the skin is damaged by particulate matter, ozone, exhaust fumes and cigarette smoke. In response, technical service engineers at wacker developed a for-mulation containing its nature-identical hydroxytyrosol htessence®. It counteracts harmful environmental factors, decreases oxidative stress and promotes the regeneration of the skin.

In Cássia Picirili's homeland Brazil, protecting the skin from sunlight is crucial. To that end, her team has developed new specialty-silicone formulations in the laboratory. Such creams are highly repellent to water and sand and are easy to apply to the skin. The easier it is to spread the vital uv ﬁlter, the better the protection. Scientiﬁc studies have shown that the more easily a sunscreen can be applied to the skin, the more widely it is used.

Microinjection

Precisely Pumped

Dosages

Handy medical devices make life easier for people with chronic conditions.

Automated dosing systems are gradually replacing regular injections of essential medication. At the heart of such devices is a microinjection pump made with a housing of the kind developed by Trelleborg, a polymer processor.

This required a new silicone elastomer with very special properties.

Morning, noon and night - no matter the hour, people with chronic illnesses always need to monitor their bodies. Diabetics have to check their insulin level. People suffering from Parkinson's need to adjust their apomorphine dosage.

Incorrect dosage of medication can be life-threatening. Some of the diseases mentioned can be managed well with drugs that must be injected subcutaneously: small jabs that perform a vital function. Portable medical devices such as insulin pens are especially convenient, enabling the fast and safe injection of liquid medication in everyday situations. They ﬁt in every purse and can be used without attracting attention. The patient, however, still needs to remember the dosage and timing precisely.

Automated dosing systems now go one step further. These palm-sized medical devices can be attached directly to the skin with adhesive plasters, for example. Located on the surface in contact with the patient is an extremely ﬁne needle that extends automatically to inject a preprogrammed quantity of medicine subcutaneously - without the patient having to make a single move. Precise control regulates even delivery of as little as a few micro- liters of active ingredient over a period of minutes, hours or even several days. This improves the quality of life of those affected, granting them more ﬂexibility and making their lives worry-free.

The centerpiece of these medical devices is a tiny micro- injection pump that reliably delivers precise doses of the

essential medication. Trelleborg was commissioned by

An inconspicuous, albeit technically perfect part: the plastic pump cylinder is lined with a fine, yet multifunctional, layer of silicone elastomer.

"The pump's ability to administer extremely precise doses of drugs was crucial to the success of the entire device."

Felix Schädler, Project Manager for Innovation and Technology at Trelleborg

one of the world's leading suppliers of pharmaceutical and medical products to help develop a pump housing made of plastic and silicone. Deep inside this part, a unique, innovative material from wacker ensures smooth opera- tion. Felix Schädler, who is project manager for innovation and technology at Trelleborg and played a key role in the development, reports that "the pump's extremely precise dosage of drugs was crucial to the success of the entire device."

Tiny Parts in Mass Production

The delicate microinjection pump consists of a cylindrical hollow body in which a plunger is moved up and down electrically. It draws the drug from a supply vessel and conveys it to the injection needle. The pump housing comes in different versions that can deliver 2 μl or 10 μl of liquid medication. With a length of 15 mm, the smaller pump is not much bigger than a ﬁngernail. Friction, sealing and the bonding of two different materials in a very tight space posed a challenge to the developers from the start.

In addition to wanting a compact design, the customer also attached importance to the lowest possible cost, as the injection pump in the ﬁnal medical device is a single-use product. For safety reasons, all those elements of the dosing system that come into contact with the medication or the patient must be disposed of after use. That also includes the injection pump. But other components, like the housing, motor and battery, can be reused.

"Due to the compact dimensions and low tolerances involved, the part could only be manufactured using two-component injection molding with seals made of liquid silicone rubber," Schädler says. Diameters the size of a pin

The microinjection pump developed by Felix Schädler and his team at Trelleborg is not much bigger than a fingernail.

make it impossible to insert localized seals subsequently.

The special two-component processing method efﬁciently bonds two different materials in a single step. The idea was that an almost complete inner lining of the pump cylinder with elastomer should seal the moving plunger and lubri- cate it at the same time.

Processing liquid silicone rubber (lsr) is the ﬁeld of ex- pertise at Trelleborg's Stein am Rhein site in Switzerland, where one- and multicomponent injection-molded lsr parts are manufactured in a fully automated process. In addition to products for the automotive and industrial sectors, Stein am Rhein has a comprehensive cleanroom production facility for medical technology applications. The facility, whose capacity is set to expand, currently has four cleanrooms, where production takes place under strictly controlled and monitored conditions. "The capacity created by the most recent cleanroom expansion ﬁve years ago is already being fully utilized, so we are currently ex- panding again," Schädler reveals. Two-component injection molding was already common for automotive parts but was less in demand for medical applications. Citing increased pressure on the sector in terms of risk and cost reduction, Schädler explained that that was beginning to change.

"What's more, self-adhesive lsr grades have now become available for food-contact and medical applications," he adds, "making two-component injection molding possible for these applications for the ﬁrst time." Dr.Ulrich Frenzel and Dr. Florian Liesener, who both work in technical mar- keting at wacker, couldn't agree more. They collaborate closely with Trelleborg and, looking back, they consider their microinjection pump to be a very special achievement in materials development.

View of the two-component injection-molding tool. In one production cycle, the plastic part is first manufactured on the two mold halves, and the silicone elastomer is injected immediately afterwards.

Dr. Florian Liesener is an expert in silicones. Here, he is testing a two-component compound. The self-adhesive silicone bonds reliably with the thermoplastic base part.

An innovative material consisting of a silicone resin and a crosslinker component, silpuran® 6760/50 enables sealing and high friction in the smallest of spaces.

When thermoplastic elastomer (tpe) proved unsuitable for this speciﬁc application, Schädler and his team initially turned to silpuran® 6700 self-adhesive liquid silicone rub- ber. wacker has marketed specially developed silicones for medical technology under the silpuran® brand for a little over 10 years. Frenzel, a trained chemist, explains: "In this lsr line for sensitive applications, we use special formulations that can satisfy particularly demanding purity requirements, setting them apart from our silicones for engineering products."

Specialty Line Enables Efﬁcient Production

When it launched in 2008, silpuran® 6700 was wacker's ﬁrst self-adhesive lsr line marketed speciﬁcally for applications in medical technology. Their exceptional adhesion to any number of thermoplastic materials makes these lsr grades ideal for two-component injection molding. Functional parts that have been directly injection-molded and ﬁrmly bonded can now also be mass-produced inexpensively, quickly and reliably for medical technology.

Tests conducted with the medical-device manufacturer and Trelleborg's elastomer laboratory in Stuttgart demonstrated, among other things, that silpuran® 6700

can withstand long-term storage with the medication.

Since the drugs come into direct contact with the seals, interactions of any kind had to be ruled out. When the pump's functionality was put to the test, however, it turned out that the friction between the plunger and the cylinder surfaces made of silpuran® 6700 was too high. Even the slightest over- or under-dosage of medication can lead to life-threatening situations for the patient; it is therefore essential for the pump to operate smoothly. If friction between the plunger and cylinder were high, more force would have been required for the pumping action, which in turn would have necessitated a different drive and thus a larger device overall. Alternatively, the customer could have used lubricants. Those, however, would inevitably come into contact with the drug being delivered and possibly impair or, in the worst case, contaminate it. For the same reason, the use of oil-bleeding silicones such as those offered by wacker for automotive applications was ruled out. While these automotive grades do have very low friction values, they cannot be used for medical applications. It is imperative to prevent oil from mixing with the drug and inadvertently being injected into the patient. wacker's materials specialists found a solution that works without oil.

"In view of our strong, longstanding partnership with wacker's materials developers, we presented them with this challenge," Schädler says. They very quickly came up with some initial ideas for an innovation that might work. A wholly new materials technology was developed and ready for marketing within just one year.

Opposing Properties

"We already had liquid silicone rubbers with self-adhesive properties in our portfolio, as well as products with low coefﬁcients of friction, but none for sensitive applications that offer both together," Liesener recalls. "The micropump was thus the perfect opportunity for us to combine both properties in one silicone." The resulting lsr would have to have properties that appear physically incompatible: high adhesion and low sliding friction - in other words, holding on and letting go at the same time. Impossible, one might think, "and yet wacker demonstrably solved this chemical conun- drum, without any problems," Schädler says with admiration.

The materials specialists want to reveal only this much about the technology: an additional formulation compo- nent modiﬁes the self-adhesive silicone in such a way as to signiﬁcantly reduce the friction with the surface of the other material. This creates a permanently friction-modiﬁed surface even without the addition of exuding oil. "That is the key requirement for this application," Liesener says.

The material developed made its public debut under the name silpuran® 6760/50 in 2016. To this day, it is the only market-ready, self-adhesive, friction-modiﬁed liquid sili- cone rubber with biocompatibility certiﬁcates.

"The micropump was a good opportunity to combine different material properties."

Dr. Florian Liesener, Technical Marketing, wacker

Complementing their successful collaboration in devel-oping the material, Liesener, himself a silicones expert, found that the Trelleborg specialists possessed extensive know-how and experience in the production process. The ﬁxed pump cylinder consists of a glass-ﬁber-reinforced en- gineering plastic. It is initially manufactured in an injection mold. In a second step, the inner wall of the cylinder is then lined with an extremely thin layer of silpuran® 6760/50.

"We had to adhere to manufacturing tolerances of two hundredths of a millimeter," Schädler remembers, "with the materials themselves already shrinking by as much as 35 percent." To solve this and other critical production problems, Trelleborg worked with its customer to improve the part's design in a way that would make it technically feasible. "That compelled us to reﬁne our manufacturing technology," Schädler says. The injection pump is manu- factured in a cleanroom and is currently one of the smallest two-component parts that Trelleborg manufactures on site.

The experts involved agree that, given the current state of the art in manufacturing, it could not be made any smaller. silpuran® 6760/50 plays an important, and reliable, dual function in the compact drug-delivery device. It may be invisible to its users, but it gives them completely new freedoms.

Hygiene and Cleanliness

Protective, Safe and Clean

Improving living standards in emerging economies had spurred growth in the global cosmetics and personal-care market for years. Then, in 2020, a new, powerful growth driver appeared on the global stage: consumers' need to protect themselves and their families from an invisible danger - the novel coronavirus (sars-CoV-2). Not only have sales of disinfectants skyrocketed - demand for cleaning wipes and protective clothing is also on the rise. Not to mention toilet paper.

The fabric used for medical protective suits is subject to stringent requirements. wacker binders help meet them.

The sales ﬁgures on Russell Thorpe's laptop are a good measure of how our lives have been turned inside out by the coronavirus pandemic. According to Thorpe, marketing manager for the Nonwovens and Technical Textile markets in wacker's polymers division, the pandemic has impacted certain end-use product segments more than others.

Demand for products used in the restaurant industry, such as paper napkins and paper tablecloths, was negatively impacted, while global demand for paper towels, wet wipes and moist toilet tissues was higher than normal. "Clean- liness has become the issue of the day," he says.

Dispersions Combine Fibers into Nonwovens

The trend is front and center in supermarkets and drug stores - browse the shelves on any aisle and you'll ﬁnd the new buzzwords: protective, safe, clean. Emblazoned in all caps on shampoos, boxes of laundry detergent and even socks: hygienic.

It's a trend that benefits wacker's polymer business. vinnapas® binders generate a bond between short ﬁbers of wood pulp or viscose to create huge rolls of nonwoven fabric. These are then made into an extraordinarily wide

bdb /c

vinnapas® dispersions ensure controlled absorbency.

The nonwoven fabric retains its tear resistance even when wet.

range of products, from absorbent hygiene products to moist toilet tissues. As Thorpe notes, "In 2020, some of our customers who produce wet wipes and industrial cleaning cloths experienced such a sharp increase in demand that they were running at capacity just to keep pace with what the market needs."

Dry wipes are normally used in workshops, stores and ﬁlling stations. In the coronavirus era, however, they can be combined with a disinfectant spray to provide clean, virus-free surfaces. They can replace less hygienic fabric hand towels when you dry your hands.

Absorbent, Tear-Resistant, Yet Flexible

Production of disposable medical gowns and the demand for polymer binders for this application have soared as well.

"Manufacturers who would normally sell their nonwoven fabrics for agricultural or automotive applications have adapted their production within a matter of days," recalls Zoltan Sattler, who manages sales of binders for consumer products and industrial applications in Western Europe for wacker. wacker's vinnapas® binders contribute to good ﬂuid absorption and combine strong binding power with

good ﬂexibility. They make protective clothing pleasantly soft yet tear-resistant, and thus more comfortable to wear for paramedics, hospital personnel and caregivers for the elderly. "By using renewable raw materials, we can further support our customers in their sustainability initiatives.

Under the vinneco® trade name, our binders are available in identical format. A biomass balance approach is used to illustrate the contribution to the overall reduction in carbon dioxide emissions," Sattler explains.

Cyclodextrins Afford Additional Protection

What's more, cyclodextrins from wacker are destined to make surfaces and protective clothing even safer. According to early scientiﬁc studies, these ring-shaped sugar mole- cules made from corn starch perfectly capture the fatty lipids on the surface of viruses, disrupting functioning of the viral membrane and inactivating the virus. "The goal is to destroy viruses," says Dr.Mark Harrison, who is responsible for industrial applications of cyclodextrins at wacker. Unlike highly concentrated alcohol or bleach, research has shown that cyclodextrins do not irritate the skin or mucous mem- branes. After all, these utterly harmless jacks-of-all-trades have been used in foods and cosmetics for years.

Wound Dressings

Optimum Wound Care

Injuries and wounds are a part of life. But taking care of them appropriately is not always simple. That is where wound dressings coated with silicones can offer valuable help. They are breathable, adhere gently to the skin and prevent the wound from drying out. The patient also experiences much less pain when dressings are changed. Silicones can provide optimal conditions for wound healing and help accelerate recovery.

Life expectancy is rising worldwide, which should be good news for everyone everywhere. This demographic change, however, also presents immense challenges to society. "As more people reach advanced age, the population suffering

from large or chronic wounds also rises," says Dr. Manuela Beckmann, who was responsible for global marketing of wound-care silicones at wacker until the end of last year.

The human skin loses its resilience as we get older. It be- comes more sensitive, thinner and more prone to injuries.

There is also less blood circulation, and skin cells don't divide as rapidly as in youth. The result: wounds take longer to heal, and they don't heal as well anymore. That makes proper care all the more important.

Wound Care with Less Pain

Silicone-coated wound dressings and bandages have enabled new options in wound care. wacker has produced medical-grade silicones for a broad range of customers for some 25 years and is Europe's leading manufacturer in the ﬁeld.

Professional wound care without silicones is now virtually inconceivable, for several reasons. Silicone adhesives are applied directly to the wound. Being hydrophobic, i.e. water-repellent, they will adhere to dry skin only - not to moist skin. Wounds are generally moist, so silicone dress- ings won't stick to them or to their edges. The dressings also cannot knit with newly formed tissue. The breathable

Attaching a release film to a silicone-coated backing material. As is the case with wound dressings, the film must be easy to detach and must not leave any residue when peeled off.

Dr. Thomas Gröer is a technical service manager based in Burghausen who develops silicone adhesives for wound and stoma care.

silicone layer offers protection from external inﬂuences such as bacteria and moisture. Because it enables per- meation of water vapor, ﬂuids and air, the protective layer provides an ideal environment for wounds to heal. It also prevents exudates coming into contact with and softening healthy skin.

But silicone-coated dressings offer even more advantages: they adhere less strongly, which makes them more pleasant to remove. Removal causes hardly any pain or wound trauma - a huge relief for patients with large or chronic wounds. In addition, silicone bandages are soft and ﬂexible, making them more comfortable to wear than conventional adhesive bandages.

"Customers increasingly opt for the adhesive with higher added value. That means our silicones, without question."

Egbert Klaassen,

Wound Care Segment Manager

Yet another distinguishing feature of silicone is that, if a dressing with a silicone layer is applied incorrectly, it can be easily removed and repositioned without impairing adhesion in any way. That is a major advantage compared with conventional dressings, which can strip skin cells as the dressing is being removed and then will not adhere properly when reapplied.

wacker has worked hard on developing silicones with these outstanding properties for use in medical wound care. That meant making hydrophobic silicones usable for this application. "The silicone dressing must absorb mois- ture and then be able to wick, i.e. draw off, that moisture to the outside," explains Dr. Thomas Gröer, who is in charge of application technology for these innovative silicone adhesives at wacker's Burghausen site.

Silicones - the Product of Choice for

Professional Wound Care

High-tech wound dressings usually comprise several lay- ers, and each one performs an important function. Facing the skin, the silicone adhesive layer is placed directly on the wound. It is secured to a polyurethane carrier ﬁlm and perforated, which makes sure that wound ﬂuid and blood are able to permeate to the absorbing layer. The ﬁlm is followed by a thin acrylate layer and a layer that absorbs the exudate from the wound. Some dressings also feature an extra polyurethane foam layer for stabilization.

"Such silicone bandages are essential for treating chronic wounds," says Sascha Casu, who heads the Ham- burg-based Acute Wound Care division of Swedish ban- dage manufacturer Essity. Specializing in medical products for wound care, compression therapy and orthopedics, Essity sells both conventional bandages and plasters with acrylate-based adhesives and high-tech products featuring silicones. "There is a case to be made for both technolo- gies," says Casu, who has worked closely with wacker for years. "Silicones are much kinder to the skin and have better adhesive and release properties. Acrylates, on the other hand, are comparatively inexpensive and adhere more securely on the ﬁrst application."

More and more often, the large plasters needed to treat chronic wounds are being coated with sili-cone. As the coating is breathable, it enhances the healing process.

Silicone adhesives are skin compat-ible and do not stick to wounds. This makes them ideal for sensitive skin.

Silicones with Increased Adhesive Strength

Silicone-coated wound dressings are the preferred choice for professional treatment of severe or weeping wounds, especially in hospital settings, Casu notes. But they are also being used increasingly for the treatment of chronic wounds and on persons with skin conditions and sensitive skin. "The demand for professional wound-care material for home use is rising, and pharmacies are selling more and more of it," Manuela Beckmann says.

For a very long time, silicone dressings were used mainly in hospitals to treat chronic wounds. Now, silicone adhesives for acute wound therapy are making inroads into the retail market.

"We've successfully developed silicone adhesives that stick reliably even when less silicone is used," Thomas Gröer says.

wacker conducted many trials to achieve the same ad-hesive strength with less material. The breakthrough wasn't long in coming. "We were able to adapt the silicone adhesives to make them adhere much more strongly.

With that improvement, a thinner silicone layer is quite sufﬁcient," Gröer concludes. This opens up completely new possibilities for manufacturers of wound dressings.

"Customers increasingly opt for the adhesive with higher added value. That means our silicones, without question," emphasizes Egbert Klaassen, who succeeded Beckmann as wacker's new wound care segment manager this year.

Opportunities in Stoma Care wacker has established a foothold in another medical ﬁeld as well: the treatment of people with colostomies, ileostomies and urostomies. To enable mobility and free movement, patients wear a bag that is attached directly to the body and encloses the stoma. That puts the skin under constant stress.

Gentle care of these skin areas is key to the patients' well-being. The most innovative development in this ﬁeld comes from Trio Healthcare. This British company is the ﬁrst manufacturer to market a complete line of stoma care products with patented, custom-formulated silicone

"Such silicone bandages are essential for treating chronic wounds."

Sascha Casu,

Director of Acute Wound Care, Essity

adhesives. wacker supplies the base silicone material used. "Developing the requisite adhesives was a challenge," as Thomas Gröer explains. "No ﬂuids must leak. All mois- ture must be absorbed in order to prevent skin irritation."

To achieve this, Trio Healthcare developed the ﬁrst breath- able silicone ostomy base plate. It is afﬁxed to the skin and secures the ostomy bag to the body. However, the skin under this plate, which is 12-15 centimeters in diameter, will quickly begin to sweat. The adhesive on the plate must be able to absorb the sweat rapidly, without impairing adhesive strength. "Our new silicone adhesives can do this, making them suitable for stoma care," says Gröer.

Stoma Care Reimagined

This improves the quality of life of stoma patients immense- ly. For Lloyd Pearce, ceo of Trio Healthcare, ﬁnding new solutions for stoma care was a personal mission, with a member of his own family affected. "One-half of all stoma patients suffer from skin conditions and irritated skin.

I wanted to do something about that."

That is why he founded Trio Healthcare in 2006. He and his colleagues have since pulled out all the stops to replace the hydrocolloid technology so widespread in stoma care.

Hydrocolloids do adhere well, and they also absorb moisture well. But they are not breathable. The result: the skin slowly softens, leaving it prone to injury and damage from body wastes. That can't happen with the company's new products using wacker's medical silicone adhesives. They are mois- ture-permeable and allow the skin to breathe, preventing skin irritations and wounds from occurring in the ﬁrst place. The base plates adhere safely and tightly to the skin without irritating it.

Huge Development Potential

Trio Healthcare's products are now available in 22 countries.

Pearce sees lots of additional potential. "We won't stop researching and trying out new things. No ostomate, i.e. stoma patient, should be left having to deal with severe skin irritation."

The use of skin-friendly silicone adhesives in medical applications is by no means exhausted. "There are still lots of opportunities," says Thomas Gröer. Silicones are suitable for anything humans attach to their bodies: insulin pumps, eeg sensors, position sensors for dementia patients - even wearables are now afﬁxed using silicone, he says. "So, there is still plenty for us to do."

layer 2

Absorbent layer, for example polyurethane foam

layer 3

Perforated polyurethane ﬁlm, coated with silicone adhesive

Prosthetics

Like a Second Skin

In order to stay mobile, many people are dependent upon orthopedic aids or prostheses. High-performance materials like silicone are what make a perfect ﬁt possible for prostheses, shoe orthotics and bandages, allowing affected individuals to live as normally as possible.

Mobility means life. But many people fail to realize that until movement becomes difﬁcult for them or causes pain. The problems start with what seem like "trivial complaints," such as tennis elbow or aching feet. In the worst-case scenario, the loss of a body part can mean severe limita- tions on an individual's mobility.

There are many different reasons why a person would need an arm or leg prosthesis or an artiﬁcial ear. Thanks to modern medicine, however, we can now offset many of these losses, both visually and functionally. Artiﬁcial body parts can never replace the real thing. But they can help affected individuals navigate their day-to-day routines and improve their quality of life. Ideally, wearers will not feel their prostheses and those around them will not even notice the difference.

tissue as much as possible to make it a perfect match for the body - and the wearer should barely feel it at all," explains Dr. Manuela Beckmann, who worked as wacker's global prosthetics coordinator up until last year.

This also applies to cosmetic reconstructions such as breast implants, which need to imitate the way a natural breast feels and moves. These are made by ﬁlling a poly- urethane envelope with silicone gel, which is then placed in a negative mold, where it cures to the proper shape and size. "To keep the implant from being too heavy, we blend the silicone gels with lightweight ﬁllers like hollow polypropylene beads," explains Dr. Thomas Gröer, a tech- nical service manager and silicone specialist at wacker.

Tricks like these allow engineers to create imitation breast material that feels more and more like human tissue.

The Closest Possible Resemblance to Human Tissue

In order to maximize the beneﬁt to wearers, today's pros- thesis makers work with the best materials - and that in- cludes silicones. No matter how ﬂexible, ﬁrm or robust the material needs to be, manufacturers can turn to wacker's comprehensive portfolio of silicones to fine-tune the desired application and properties of the prosthesis. Uses range from cosmetic replacements to hand and partial-foot prostheses. "The replacement should resemble human

A Material You Can Rely On

Silicones are extremely diverse. Depending on the for-mulation, they can be ﬂexible or insulating, or they can relieve pressure or absorb vibrations. These properties are what make silicone rubber compounds the perfect starting materials for prosthetic liners, which can be pulled over a residual limb like a sock to limit contact pressure and friction. "Silicone liners are the perfect interface between the residual limb and the prosthesis. They absorb pressure and relieve the strain on the tissue," says Gröer.

Flexibility, softness and damping properties are essential for an artificial limb to be worn comfortably. Silicones are selectively adjusted to suit this application.

The color of the silicone rubber matches the patient's own skin. Before the silicone is processed further, it is rolled out to remove any bubbles.

Artificial legs and hands are still made manually. Silicones from wacker ensure a perfect fit.

"Silicone liners are the perfect inter-face between the residual limb and the prosthesis. They absorb pressure and relieve the strain on the tissue."

Dr. Thomas Gröer,

Technical Service Manager for Prosthetics

Orthopedic products such as shoe inserts, orthotic devices and toe separators, too, beneﬁt from the ﬂexibility and mechanical properties of silicone. The silicone rubber compounds used most often in orthopedics are those that absorb shocks and vibrations well. Products like these are heat- and cold-resistant, do not age and can withstand any weather. Thanks to silicone, orthopedic aids and prostheses retain long-term functionality, providing patients with years of valuable service.

Fitness and Health

Clothing That Thinks for You

Ideally, whenever human meets wearable technology, there is always a piece of fabric in between. Smart textile fabrics are used in medicine and in sports. They can measure heartbeat with sensors, or send electrical impulses to help build muscle. To make the ideal connection, a textile pioneer from southwestern Germany uses high-tech silicones from wacker in its intelligent fabrics. wacker developed the ﬁrst silicone products for the textiles and leather sectors 50 years ago.

In more normal times, sports multinationals and textile companies the world over would make their way to Hans Bauer's showroom to develop new items of clothing with the textile specialist. Now he sits there all alone, surrounded by mannequins dressed in futuristic sports clothing, demonstrating his samples and prototypes in videoconferences. He says that it's business as usual. And his business - innovative clothing - is booming.

"We were the ﬁrst to make the electronics and silicones part of the fabric."

Hans R. Bauer,

Founder and Managing Director of ntt

Bauer holds up a sports bra from a well-known sport- ing-goods manufacturer. "We were the ﬁrst in the world to integrate a heartbeat monitor in 2004," he relates. For the in- terface between the electronics and the body, he used liquid silicones that conduct electricity. "We were the ﬁrst to make the electronics and silicones part of the fabric," the inventor explains. Silicones protect the electrodes from abrasion and when the fabric is washed; they are also extremely elastic, skin-compatible and easy to process.

a /b

Training with electro-stimulation: electrodes integrated in a skintight body suit and coated with conductive silicone promote muscle growth.

Polyamide-reinforced silicone makes sports textiles more comfortable to wear. Silicone can be used to integrate sensors, too.

The industry was ecstatic. The word was out: smart fabrics would revolutionize the ﬁtness market. But then, for a long time, nothing happened. Many sports manufacturers who jumped on the bandwagon ended up disappointed. Hans Bauer took it all in his stride. He had already learned that the initial hype elicited by an innovation was often followed by a phase of disillusionment. Now, he says, smart fabrics have reached a point where their advantages truly come to the fore.

Ideas for Occupational Safety

For several years now, the textile expert has been ﬁelding inquiries mainly relating to workplace safety - but he's also received some from the military. Custom undershirts for power electricians can detect when the worker falls and sound the alarm. In South America, sensors in the clothing worn by mineworkers can detect when blood-oxygen levels are too low. Soldiers wear integrated sensors that can detect and report critical injuries. These are just a few examples of clothing that can save lives. Bauer is convinced that "there will be many more meaningful applications in this area."

Exercise That Doesn't Stress Your Joints

Functioning business models have also emerged in the fitness sector. One of these is the booming electrical muscle stimulation (ems) market. Athletes wear skintight

body suits equipped with electrodes that stimulate muscle growth. The suppliers of these suits promise effective muscle buildup in as little as 20 minutes of ems training per week. Because it doesn't stress the joints, ems is a good alternative to the bench press, especially for old, frail and overweight persons. Hans Bauer is currently working with several manufacturers on novel ems suits in which the electrodes are coated entirely with wacker's specialty conductive silicones. Perspiration under the silicone rubber connects electrodes to the skin so well that they no longer need to be moistened beforehand - something wearers appreciate a lot.

Helping Senior Citizens to Live Independently at Home

Analysts believe that the elderly and the inﬁrm will become a major market for smart fabrics. For example, wearing clothing that can monitor vital functions can help senior citizens live independently in their own homes for longer. Electrode suits can enable people suffering from spastic paralysis to walk again unaided. With his company, Hans Bauer is participating in these developments, and here, too, he relies on products and support from Burghausen: "wacker is just exceptionally innovative in this ﬁeld, with a giant range of silicones to choose from - and working with the technical service managers in the lab is simply a pleasure."

Nutrition

Help for a Healthy Heart

It beats tirelessly - some 100,000 times a day: the heart, our body's engine and most important organ. It pumps our blood, delivering nutrients and vital oxygen throughout the body. If it fails in its job, the likely culprit is cardiovascular disease, our perennial number-one cause of death. Each year, cardiovascular disease claims the lives of nearly 18 million people through- out the world. One particularly challenging aspect of this condition is that many people go a long time with little awareness that their cardiovascular health is at risk - these illnesses creep up on us with virtually no warning.

Tumeric contains curcumin, a natural antioxidant.

If we have a toothache or tense muscles, we immediately notice that something is amiss and usually know what to do about it. Problems with the heart and circulatory system, on the other hand, are difﬁcult to self-diagnose. Health screenings generally reveal whether everything is - or isn't - as it should be, and preventive measures play a huge role in keeping the heart and circulatory system healthy: giving up smoking, drinking less alcohol and exercising are good for us and for our hearts. More and more people are also recognizing that a healthy diet likewise plays an important role in keeping us healthy. This includes eating foods that are low in fat in order to keep cholesterol values within the normal range. Elevated ldl cholesterol values, in particular, are associated with an increased risk of coronary heart disease and arteriosclerosis. ldl stands for low-density lipoprotein, a fat-protein compound. Nutritional supplements and functional ingredients can have a posi- tive impact on the concentration of ldl cholesterol - also commonly referred to as "bad" cholesterol - in our blood.

Reining in Cholesterol - and Protecting the Heart

In one survey, consumers aged 55 and older indicated that heart health was one of their most important reasons for buying functional foods.

The Super Molecule from Olives wacker is responding to that trend with two products - one of which is htessence® hydroxytyrosol, a secondary metabolite found in olives and olive leaves. Not only is the substance an effective antioxidant, it is also believed to lower blood pressure and reduce inﬂammation. Two studies have conﬁrmed that the wacker ingredient can decrease "bad" ldl cholesterol levels in the blood by as much as 8percent, which, in turn, lowers the risk of cardiovascular disease. The us National Cholesterol Education Program (ncep) estimates that the risk of cardiovascular disease decreases by as much as 2percent for every 1percent drop in ldl cholesterol levels. It follows that htessence® can reduce the risk of heart disease by as much as 16 percent.

In order to obtain hydroxytyrosol directly from olives, however, the substance must ﬁrst be extracted through a complex, expensive process. Another disadvantage is that the concentration of the desired natural compound in the resulting extract is very low. wacker has been able to improve on that considerably: the company has devel- oped a patented proprietary process for manufacturing exceptionally pure, nature-identical hydroxytyrosol - with no undesirable byproducts, of consistently high quality and with a deﬁned concentration of active ingredient. The process yields either a liquid or an odorless, water-soluble powder, making the resulting hydroxytyrosol suitable for use in functional foods and nutritional supplements.

Up to now, hydroxytyrosol has been extracted from olives.

A Vital Material for the Body's Engine

It should go without saying that we all need to keep our heart healthy; after all, it is on the job 24/7 for our entire lives. The most important muscle in the body consumes a great deal of energy, which is provided by the mito-chondria - the microscopic power plants in every cell.

The coenzyme Q10 molecule, or CoQ10 for short, is one of the substances that play a key role in energy metabolism, which is why it is often compared to a spark plug: it delivers the spark needed for cellular energy production and is what allows the cell's power plant to do its work in the ﬁrst place.

Coenzyme Q10 is similar to a vitamin, and the body can generate it to a certain degree on its own. But production in the body declines as we age. Additional factors with adverse effects on CoQ10 levels are chronic disease and the use of certain medications. Statins in particular, which are regularly prescribed to combat high cholesterol, have a negative impact on coenzyme Q10 biosynthesis in the body. Research has also shown that CoQ10 values are lower in patients with heart failure. Nutritional supplements are playing an increasingly important role in compensating for this deﬁcit and for making a supply of this important molecule available for the heart muscle and for energy metabolism in older individuals.

Making Beneﬁcial Actives Accessible

Adding coenzyme Q10 to our diet is no easy task, because the substance is fat-soluble, whereas the environment in the intestinal tract is aqueous. As a result, individual CoQ10 molecules combine to form larger structures that are very difﬁcult for our cells to absorb. The experts at wacker were therefore keen on increasing bioavailability. Their strategy was to formulate a new product - cavaq10® - by combining coenzyme Q10 with cyclodextrins, ring-shaped carbo- hydrates that wacker bioengineers produce through the enzymatic degradation of starch. Their three-dimensional structure allows them to draw a lipophilic, i.e. fat-soluble,

molecule into their inner cavity, provided that this molecule has the right size and shape - and CoQ10 does. The cyclo- dextrin shell, by contrast, is hydrophilic, i.e. drawn to water.

These rings of sugar thus encapsulate individual CoQ10 molecules, making them more readily soluble. At the same time, they also separate molecules from each other to cre- ate a molecular dispersion. In other words, cyclodextrins prevent agglomeration while ensuring that a relatively large number of molecules are available for the body's cells. This makes CoQ10 more likely to enter cells, thereby increasing bioavailability. In the case of cavaq10®, bioavailability grows by a factor of 18 relative to traditional products.

That cyclodextrins open the doors of our cells to health-promoting molecules is evidenced by a second example: curcumin. The biologically active component of turmeric is a true jack-of-all-trades when it comes to the range of its therapeutic and prophylactic powers. While the antioxidant has been shown to possess anti-inﬂammatory, antibacterial and other health-promoting properties, it does not dissolve readily in water, resulting in very poor bio- availability. The body actually eliminates up to 90 percent of curcumin taken orally. Much as they do with coenzyme Q10, cyclodextrins from wacker also help ensure that the beneﬁcial properties of curcumin can take effect in the body. When the active compound in turmeric forms complexes with the sugar rings, its bioavailability increases immensely. This was demonstrated in a clinical study in

which cavacurmin®, a product formulated by combining curcumin with cyclodextrin, was found to yield a 40-fold improvement in absorption.

Dr. Wolz, a traditional German manufacturer of nutritional supplements, has been selling the curcumin-cyclodextrin complex for several years now - and it has become one of the company's most successful products. A wide array of preventive beneﬁts is attributed to plant compounds, especially to secondary metabolites like curcumin, with anti-inﬂammatory and antioxidant properties playing a prominent role in many applications. In exercise-related muscle injuries, for example, curcumin has been found to reduce inﬂammatory markers and to delay the resulting soreness. The affected muscles regenerate more effec- tively as well. What's more, the active agent in turmeric helps control an insidious phenomenon known as silent inﬂammation, in which inﬂammation goes undetected in the body. As with hypertension or high cholesterol, by the time we even notice gradual disorders like this, it is usually too late. That makes preventive measures all the more important for keeping our heart and muscles healthy.

c cavacurmin® in capsule form

The Beneﬁts of Roughage

A Muscle Reviver

What your body needs is sometimes hard for it to digest. Indeed, because our body cannot digest rough- age - also known as dietary ﬁber - it simply eliminates it with our stool. Yet ﬁber is anything but unnecessary: a diet rich in roughage can prevent metabolic dis- orders and diseases of both the gastrointestinal tract and the cardiovascular system. Insoluble ﬁber, for example, binds large amounts of water and acts as a swelling agent, stimulating bowel movements and preventing constipation. Soluble ﬁber, which also in- cludes cavamax® w6 alpha-dextrin from wacker, playsa role in metabolism. In one clinical study, this type of cyclodextrin was shown to have a positive effect on what is known as the glycemic index (gi), reducing the gi of white bread by 50 percent. Why is that good?

The body needs more time to digest food with a low glycemic index - and that results in more stable blood sugar levels. The European Commission has certiﬁed that alpha-cyclodextrins have a proven health beneﬁt (health claim). In other words, cavamax® w6 alpha-dextrin can support a healthy lifestyle by serving as an additional source of ﬁber.

For Our Shareholders

31 - 48

wacker is a contract manufacturer for pharmaceutical companies, producing vaccines that help the body combat pathogens.

aFor Our Shareholders

Letter to Our Shareholders 33

Executive Board 39

Report of the Supervisory Board 40

wacker Stock in 2020 46

2020 was an extraordinary year. The coronavirus pandemic caught the economy unawares and with considerable force. Public life ground to a halt in many countries around the world and, today, the pandemic still poses enormous economic, political and social challenges for us all. To overcome this exceptional situation, we focused - and continue to focus - on three priorities:

- Protecting the health of our employees
- Keeping production running and supplying our customers
- Safeguarding the company's long-term future

A year has passed since the initial shock wave and, today, we can see that we have steered wacker soundly amid the pandemic turmoil. Our ability to keep the company operating without interruptions under these critical conditions is due to the efforts of our employees. They delivered a strong performance. On behalf of the entire Executive Board, I would like to thank each of them for their exceptional commitment and ﬂexibility, and for their self-discipline and sense of responsibility in dealing with coronavirus.

When the world comes to a virtual standstill, wacker cannot expect to emerge unscathed. Our sales of €4.69 billion were 4.8 percent lower than the year before. The sales downturn was strongest in Q2 2020.

In the second half of the year, we made up for most of that decline thanks to growing demand for our products. At €666.3 million, ebitda (earnings before interest, taxes, depreciation and amortization) fell 14.9 percent year over year. However, in 2019, our ebitda had included special income of €112.5 million in insurance compensation. Adjusted for that income, ebitda declined by a slight 0.7 percent year over year despite coronavirus. A very positive fact is that wacker has returned to proﬁt, posting net income of €202.3 million, after a loss in 2019.

Various other key ﬁnancial indicators also show how well we weathered the adversities of 2020. wacker has always paid particular attention to having stable ﬁnances. They are the basis for investments and proﬁtable growth - the foundation on which the company's future is built. In the reporting year, we aligned our investment budget with the ﬁnancially challenging situation, paring back our capital expenditures to roughly €225 million, though not at the expense of future opportunities. In addition, we systematically reduced our inventories, which lowered current assets signiﬁcantly. Both actions bolstered our net cash ﬂow, which almost quadrupled to roughly €700 million. High cash inﬂows from operating activities coupled with sufﬁcient liquidity were the key factors in bringing our net ﬁnancial debt down to only about €68 million.

The company's ﬁnancial stability is the basis of our dividend policy, which is to distribute some 50 percent of our net income to you, our shareholders. Consequently, at the Annual Shareholders' Meeting in May 2021, the Supervisory Board and Executive Board will propose a dividend payment of €2.00 per share. This corresponds to more than half of our net income for 2020.

wacker's chemical business is our sales and earnings engine. That remains true even though wacker did not post sales growth in 2020. Lower average prices for standard silicones and reduced volumes due to the pandemic slowed sales and earnings at wacker silicones. wacker polymers raised its ebitda amid robust demand from the construction industry and lower raw-material prices. At wacker biosolutions, both sales and ebitda grew.

After two difﬁcult years, our polysilicon business stabilized in 2020, for several reasons.

First: average prices for solar-grade polysilicon stopped falling.

Second: we expanded our market share with semiconductor-sector customers.

Third: we signiﬁcantly reduced our production costs.

As a result, ebitda - measured on a comparable basis - improved by roughly €60 million and came in slightly positive.

Aside from the coronavirus pandemic, the second major topic at wacker in 2020 was our Shape the Future program. Its objectives are clearly deﬁned: leaner business processes and structures, stronger regional responsibility and markedly lower costs. We aim to save €250 million per year by the end of 2022. Non-personnel costs will account for about half of this amount and personnel costs for the other half. Worldwide, a total of around 1,200 jobs will go, some 1,000 of them in Germany. Following intensive negotiations with employee representatives, we signed an agreement to that end in late October 2020. This company agreement provides for a socially responsible reduction in the workforce by means of phased early retirement, voluntary severance packages and natural employee turnover. I am certain that this program will help us effectively counter the intense competition facing our business and the cost pressures.

The third major issue in 2020 was the sale of our Siltronic shares to Taiwan's GlobalWafers. After the successful ipo of Siltronic ag in 2015, the disposal of our remaining 30.8 percent stake in the company now marks the end of an association spanning more than 50 years. We are convinced that the planned merger of the two companies will secure them a strong top-three position in the silicon-wafer market.

Coronavirus has shown that our world has become even more unpredictable, even more volatile. That volatility will remain with us. Permanent change has become the new normal. wacker is skilled at transformative change and proved this once again in 2020. Our courage to embrace change has made us stronger and is exactly what is needed in challenging times.

We have entered 2021 with optimism while taking all the precautions necessary against coronavirus. The new organizational structure for our business divisions and corporate departments has been in place since the start of the year.

Our acquisition of plasmid dna manufacturer Genopis, Inc. gives us our own production site in the all-important us biologics market. It also complements the product portfolio of wacker biosolutions in the ﬁeld of microbial technologies. It is precisely in this area that biotech company CureVac relies on our expertise and has contracted us to produce part of its mrna-based Covid-19 vaccine candidate once it receives regulatory approval.

We also got off to a dynamic start in the new year in operational terms. All our business divisions generated sales growth in the ﬁrst few weeks. We expect full-year sales to grow by a mid-single-digit percentage. Headwinds will come especially from raw-material prices. They are rising markedly at the moment, which dampens ebitda.

Year over year, ebitda should climb between 10 and 20 percent. If the economy gains further impetus during the year, there will be additional opportunities for us. After deliberately cutting back our capital expenditures in the previous year, we intend to invest more again this year. Our investment focus will be on our chemical divisions and on polysilicon for semiconductor applications.

One issue of particular concern is our pension obligations. Accounting for almost 40 percent of total equity and liabilities, they now amount to roughly €2.7 billion. You all know the reason: the European Central Bank's zero-interest policy. In the past two years alone, we had to additionally pay some €150 million into the wacker pension fund. That is money we cannot use for capital-spending projects for our company's future growth. For this reason, we are currently working on a fundamental reform of our company pension system.

With our Shape the Future program, we have created the framework for wacker's continued success. We have a clear strategy and know where we want to go. We strongly believe in sustainable solutions - for our products, in our production processes, and in the supply chain. We have the right products and we maintain close relations with our customers. Without chemicals, it will not be possible to solve the problems of our time - whether the coronavirus battle, climate change or the digital transformation. That is what drives us. That is what we work for every single day.

In closing, allow me to say a few words concerning myself. This time next year, my fellow board member Dr. Christian Hartel will be the one reporting to you on 2021 and explaining the company's prospects. For more than ﬁve years now, it has been my pleasure to work closely with Christian Hartel. I know that he will keep wacker ﬁrmly on its successful course. At the end of the Annual Shareholders' Meeting on May 12, 2021, I will be retiring from the company after more than 38 years. It has been an honor for me to lead wacker for 13 of those years. It has been both my duty and my passion.

Leading a company effectively can't be accomplished by one person alone. A ceo is only as good as his or her team - and the wacker team is an outstanding one. I sincerely thank all our employees for their support. With their skills, dedication and achievements, they have been crucial to the company's success. For everything they have contributed, I owe them my utmost respect and recognition. My thanks also go to our customers and suppliers, for their trust in me during my time as president and ceo. I am also grateful to you, our shareholders, for the conﬁdence you have placed in me. And last, but by no means least, my thanks to the Supervisory Board and the Wacker family shareholders. Your commitment to wacker and your long-term thinking and actions for the company are truly unique.

There will be much to shape in the future - by my successor and by the entire team.

I am certain that wacker will move forward on this path successfully.

Munich, March 2021

Dr. Rudolf Staudigl

President & ceo of Wacker Chemie ag

For Our Shareholders - Executive Board

Executive Board

dr. christian harteldr. rudolf staudigl President & ceo

dr. tobias ohler

auguste willems

wacker polymers wacker biosolutions

wacker polysiliconHuman Resources (Personnel Director) Corporate Research & Development Intellectual Property Corporate Engineering Region: Asia

Executive Personnel Corporate Development Corporate Communications Investor Relations Corporate Auditing Legal

Corporate Accounting and Tax Corporate Controlling Corporate Finance and Insurance

wacker silicones

Information Technology Procurement & Logistics Region: The Americas

Compliance Retirement Beneﬁts

Sales & Distribution Site Management Corporate Security Environment /Health /Safety Product Stewardship Regions: Europe, Middle East

Report of the Supervisory Board

dr. peter-alexander wacker

Chairman of the Supervisory Board of Wacker Chemie ag

For wacker, 2020 was a year of relentless effort. The coronavirus pandemic confronted the world with challenges that could not be solved with any Modern Age blueprint. In facing this critical situation, we focused chieﬂy on the company's ﬁnancial stability. Three levers were especially important: strong cash ﬂow, substantial cost cuts, and a reduced capital expenditure budget aligned with economic conditions. Another success factor was that we swiftly secured wacker's long-term ﬁnancing.

Our reporting-year results show that wacker remained very stable through this difﬁcult time. Net cash ﬂow almost quadrupled to some €700 million and net ﬁnancial debt was extremely low at about €70 million.

All parts of the company performed exceptionally well and were crucial in delivering our very good results. The Supervisory Board thanks every employee for this great achievement in such unusual times.

wacker's priority now is to make the right investments for the future. A good example of this is wacker biosolutions.

Its acquisition of plasmid dna manufacturer Genopis, Inc. rounds out our product portfolio in the ﬁeld of microbial technologies and gives us our own production site in America's large biologics market.

One issue that still needs to be resolved is wacker's high pension obligations. To secure the company's future, it is vital to mitigate the burden of these obligations. The low- interest-rate environment for capital investments weighs heavily on wacker's ﬁnancial strength. Special pension- fund payments, which the company has made and will need to make, are amounts no longer at our disposal for growth investments. Over time, this will endanger the company's economic substance, as we cannot use this money for innovation and expanding our operations. That is why we must ﬁnd ways to ease the burden on the company. We have no other alternative.

Another factor of huge importance for the company's future was an agreement we reached with employee representatives about the Shape the Future program. It enables wacker to remain on par with its competitors internationally. I sincerely thank all of the company's employee representatives, who fully support this outcome.

Transferring our Siltronic stake to Taiwan-based Global- Wafers will enable us to realize the strategic goal of focusing our energy on our original core business - chemicals. GlobalWafers was able to secure a majority shareholding in Siltronic ag by early February 2021. Although the takeover has not been ﬁnalized yet, as various merger-control and foreign-trade clearances are still outstanding, we have passed a major hurdle. We are conﬁdent that the merger will go ahead as planned and that Siltronic and GlobalWafers will be able to chart their future path to success together.

At the end of the Annual Shareholders' Meeting on May 12, 2021, there will be a change at the helm of the company.

Dr.Rudolf Staudigl is retiring after 25 years on the Executive Board, 13 of them as president and ceo, and after a total of 38 years at the company.

The Supervisory Board thanks Dr.Rudolf Staudigl for his tireless commitment to wacker's interests. He has helped shape the company like few before him. His successor is Dr.Christian Hartel, who has been with wacker since 2003.

We are thus ﬁlling the top executive position from among the company's own ranks. This underscores wacker's ability to produce outstanding leaders who are capable of taking on such a role. Our decision ensures continuity in top management and realizes a generational change at the company's helm.

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 2020, 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 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, and compliance and sustainability issues. The Chairman of the Supervisory Board remained in close contact with the Executive Board, especially with the ceo - also outside of the scheduled Supervisory Board meetings - and was kept informed of the business situation, current trends 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.

In the reporting year, we paid particularly close attention 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 four ordinary meetings in 2020, two in the ﬁrst half of the year and two in the second.

Between meetings, the Executive Board 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 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 the Group and its individual segments were the subject of regular consultations in the full meetings of the Supervisory Board. At each meeting, the Supervisory Board evaluated the Executive Board's performance - on the basis of the reports submitted by the Executive Board - and discussed strategic development opportunities and other key topics with the Executive Board. There was no need for additional monitoring measures, such as the inspection of corporate documents or the appointment of experts.

The major areas of deliberation dealt with by the Supervisory Board were:

The effects of the coronavirus pandemic and the corresponding measures that had to be taken Further challenges affecting the global market environment, especially high energy costs and the polysilicon-market trend

The rise in protectionism and trade disputes, in particular anti-dumping proceedings against the solar and other industries in the usa, eu and China; their impact on wacker; and appropriate courses of action

The sale of wacker's stake in Siltronic to Taiwan's GlobalWafers

- - -

Various M&A projects

The Shape the Future project

The increase in pension provisions amid low discount rates, and the reorganization of the company pension systems

- -

Financing activities

Personnel matters relating to the Executive Board (renewal of Dr.Ohler's contract for a further ﬁve years and personnel changes on the Executive Board in 2021)

- -

The new Executive Board compensation system The German Act implementing the Second Shareholder Rights Directive, and the revision of the German Corporate Governance Code

The Supervisory Board discussed the wacker Group's plans for 2021 at its meeting of December 9, 2020. On that occasion, the Supervisory Board also dealt with medium- term corporate plans for 2021 - 2025. In addition, it discussed and approved the capital-expenditure budget for 2021.

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 on page 189.

The Audit Committee met four times in the last ﬁscal year. Its work included the audit of the annual ﬁnancial statements of Wacker Chemie ag and the Group for 2020 and of the consolidated interim financial statements for the first half-year. It also discussed the Group's quarterly financial figures, csr reporting, and issues relating to risk management, accounting processes, the internal control systems, compliance and auditing. The committee monitored the independence of the auditors and also discussed the additional services they had provided. 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 2020. It then awarded the auditing contract for 2020 and determined the focus of auditing.

The Executive Committee met twice in 2020. At each meeting the committee members discussed personnel matters relating to the Executive Board (e.g. determining overall compensation and the performance goals for variable compensation, the renewal of Dr. Ohler's contract for a further ﬁve years until December 31, 2025, the new Executive Board compensation system, and personnel changes on the Executive Board in 2021).

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. 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. In addition, Supervisory Boardmembers are regularly informed about court rulings and key changes in laws that have an impact on their work. Last year, for instance, they were given information on the German Act implementing the Second Shareholder Rights Directive, and on the revision of the German Corporate Governance Code.

Personalized Disclosure of Attendance at Meetings

In 2020, all members attended the meetings of the Supervisory Board, while all committee members attended their respective committee meetings. Members' attendance at meetings of the Supervisory Board and at their respective committee meetings is disclosed in personalized form below:

Full Supervisory Board

Dr. Peter-Alexander Wacker Manfred Köppl

Peter Áldozó

Dr. Andreas H. Biagosch Dr. Gregor Biebl Matthias Biebl Markus Hautmann Ingrid Heindl

Konrad Kammergruber* Jörg Kammermann** Eduard-Harald Klein Franz-Josef Kortüm Barbara Kraller Beate Rohrig

Dr. Birgit Schwab*** Ann-Sophie Wacker Dr. Susanne Weiss

Prof. Ernst-Ludwig Winnacker

Executive Committee

Dr. Peter-Alexander Wacker Manfred Köppl Franz-Josef Kortüm

Audit Committee

Dr. Peter-Alexander Wacker Manfred Köppl Franz-Josef Kortüm

Mediation Committee

Dr. Peter-Alexander Wacker Manfred Köppl Franz-Josef Kortüm Eduard-Harald Klein

* Until September 30, 2020 ** Until December 31, 2020 *** Since October 1, 2020

Attendance at meetings during periodof ofﬁce

4 / 4

4/4

0 / 0

4 / 4

3/3

4 / 4

1 / 1

4 / 4

2 / 2

4 / 4

0 / 0

Corporate Governance

Last year, the Supervisory Board again looked closely at corporate governance standards. At its meeting of December 9, 2020, the Supervisory Board 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 to shareholders on the company's website and is also included in the Declaration on Corporate Management on page 189.

Further information on corporate governance at wacker can likewise be found in the Declaration on Corporate Management on page 189.

At its meeting in December 2020, the Supervisory Board also discussed the efﬁciency of its activities 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 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 on page 189.

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 2020, the consolidated ﬁnancial statements and the combined management report (as of Dec.31, 2020), as prepared by the Executive Board.

The Supervisory Board's Audit Committee had awarded the auditing contract in accordance with the resolution of the Annual Shareholders' Meeting of August 4, 2020. 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 reports.

The auditors also carried out a voluntary review of the combined non-ﬁnancial report for Wacker Chemie ag and the Group. Their review conﬁrmed that this report, too, meets the legal requirements.

The ﬁnancial-statement documents (including the auditors' reports, the combined management report 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 of February 23, 2021, 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 March 4, 2021, 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 took part in the deliberations at both meetings. They reported on the main results of the audit - in particular the key audit matters described in the auditors' report - and were available to answer questions and provide supplementary information.

After concluding our own examination, we have 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.

We therefore approve the annual ﬁnancial statements of Wacker Chemie ag and the consolidated financial statements as of December 31, 2020 as prepared by the Executive Board. The annual financial statements of Wacker Chemie ag are hereby adopted. We concur with the Executive Board's proposal for the distribution of retained proﬁt.

Changes in the Composition of the Supervisory and Executive Boards

Konrad Kammergruber, who served as an employee representative on the Supervisory Board for many years, stepped down from the Board after reaching retirement age at the end of September 2020. The Supervisory Board would like to thank Mr. Kammergruber for all his valuable, enriching and collegial work over the years, and wishes him all the best for the future.

Dr. Birgit Schwab, who had already been elected as an alternate member, replaced him as an employee representative on the Supervisory Board.

Employee representative Jörg Kammermann stepped down from the Supervisory Board with effect from December 31, 2020. We wish to thank Mr. Kammermann for his constructive and valued participation in the Supervisory Board.

At the Executive Board's request, Markus Hautmann was appointed to replace Mr. Kammermann by order of the District Court of Munich with effect from January 1, 2021.

Changes are expected in the composition of the Executive Board as well in 2021. At its meeting of December 9, 2020, the Supervisory Board took key personnel decisions with a view to ensuring long-term continuity in the company's management. Dr.Rudolf Staudigl, President & ceo of the Executive Board of Wacker Chemie ag, will retire at the end of the next Annual Shareholders' Meeting, scheduled for May 12, 2021. The Supervisory Board appointed Dr.Christian Hartel, an Executive Board member since 2015, to succeed Dr.Staudigl as of the same date. Also with effect from the end of the Annual Shareholders' Meeting of 2021, Angela Wörl will be appointed to Wacker Chemie ag's Executive Board in the position of Personnel Director. Ms. Wörl is currently head of wacker's Human Resources corporate department. Her Executive Board contract is set to run for three years.

The Supervisory Board thanks the Executive Board and the company's employees and employee representatives for their dedicated work in 2020 - a year that, in every way, was challenging for all of us.

Munich, March 4, 2021

The Supervisory Board

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

wacker Stock in 2020

On September 3, 2020, Deutsche Börse announced in its quarterly review of the composition of the dax, mdax, sdax and tecdax indices that wacker stock would exit the sdax and return to the mdax effective September 21, 2020.

After getting off to a good start in 2020, stock markets around the world suffered massive declines due to the coronavirus pandemic. In just a few weeks, trillions of dollars in market capitalization were wiped out. Share prices recovered again early in the second quarter, supported by government aid packages and major central banks' emergency measures. As the pandemic-induced restrictions gradually eased, the economy picked up again at the start of the third quarter. That had a positive impact on share prices worldwide. Additionally, wacker stock beneﬁted from improvements in the demand and earnings situation for solar-grade polysilicon and from a pick-up in demand at our chemical divisions, especially in the construction industry.

While Germany's dax and mdax indices gained 4 and 9 percent respectively in 2020, wacker's share price grew 73 percent over the same period.

As the year started, wacker stock stood at €67.64 (year-end closing price on Dec.30, 2019). Its reporting-period low of €33.03 was on March 19 when wacker presented its ﬁnal 2019 ﬁgures and issued guidance for 2020, detailing the company's operating risks for the rest of the year. After a marked sales decline in April through June, sales started picking up again early in the third quarter, a trend reﬂected in the stock price.

a.2 wacker Share Performance (indexed to 100)¹

200

Jan

Feb

Mar

Apr

180

160

140

120

100

40 ¹ 100 = €67.64 (year-end closing price on Dec. 30, 2019)

wacker stock continued recovering through to the end of the year, responding with price gains to a variety of positive news items from the business divisions, such as the production of Covid-19 vaccines for CureVac, a biopharmaceutical company. Capital markets also reacted positively to wacker's strategic decision to divest its remaining stake in Siltronic ag. wacker stock reached its year-high of €118.05 on December 17, 2020. It closed 2020 at €116.75 on December 30.

a.1 Facts & Figures on Wacker Chemie ag's Stock

€

Year-high (on Dec. 17, 2020) 118.05

Year-low (on March 19, 2020) 33.03

Year-end closing price (on Dec. 30, 2019) 67.64

Year-end closing price (on Dec. 30, 2020) 116.75

Performance for the year (without dividend) (%) 72.6 Year-end market capitalization (shares outstanding;

prior year: 3.36) (billion) 5.80 Average daily trading volume¹

(prior year: 16.6) (million) 22.0 Earnings per share from continuing operations

(prior year: -12.94) 3.81

Dividend per share (proposal) 2.00

Dividend yield² (%) 2.9

¹ Trading platforms (Xetra, Germany's regional exchanges, Tradegate and Quotrix) ² Dividend proposal based on an average weighted share price of €69.58 in 2020

May

Jun

Jul

Aug

Sep

Oct

Nov

DecWACKER¹

MDAX

DAX30

Dividend Payment of €0.50 per Share

At the Annual Shareholders' Meeting of Wacker Chemie ag on August 4, 2020, which was conducted online due to the pandemic, all Executive Board and Supervisory Board proposals were adopted by large majorities. The dividend per dividend-bearing share was €0.50 (2018: €2.50). The dividend yield based on wacker's average share price in 2019 was 0.7 percent (2018: 2.1 percent).

a.3 Dividend Trends

€	2019	2018	2017
Dividend	0.50	2.50	2.50
Special bonus from the sale
of Siltronic shares	-	-	2.00
Total dividend	0.50	2.50	4.50
Dividend yield (%)	0.7	2.1	4.0
Net result for the year (allocable to
WACKER's shareholders) (million)	- 642.6	246.1	866.7
Net result for the year from
continuing operations (allocable to
WACKER's shareholders) (million)	- 642.6	246.1	240.5
Dividend payout (million)	24.8	124.2	223.6
Distribution ratio (%)1	n.a.	50.5	51.6

¹ Excluding special bonus; in relation to net income from continuing operations (allocable to wacker's shareholders)

Shareholder Structure

Wacker Chemie ag's largest shareholder continues to be Dr. Alexander Wacker Familiengesellschaft mbH, Munich. It holds over 50 percent of the voting shares in Wacker Chemie ag (2019: over 50 percent). Blue Elephant Holding GmbH (Bad Wiessee, Germany) also had no voting-share changes to report in 2020, with its holding in Wacker Chemie ag remaining at over 10 percent (2019: over 10 percent).

a.4 Useful Information on wacker Stock

ISIN WKN

Frankfurt Stock Exchange Bloomberg

Reuters

Initial public offering Capital stock

Trading segment Category of shares Number of sharesDE000WCH8881 WCH888

WCH

CHM /WCH.GR CHE /WCHG.DE April 10, 2006 € 260,763,000

Regulated market (Prime Standard), Frankfurt/Main Stock Exchange Bearer shares

(Dec. 31, 2020) 52,152,600 Number of shares

outstanding 49,677,983

Paying agent

Deutsche Bank, Frankfurt /Main

Market Capitalization and Weighting (Weighting as of December 31, 2020)

wacker's year-end market capitalization increased from €3.36 billion to €5.80 billion (total stock without treasury shares). wacker thus has a weighting of 0.6 percent in the mdax, and is currently ranked 55th (by market capitalization) and 45th (by 12-month trading volume) among the 60 com-panies included in the index.

Trading Volume

In the reporting year, the average daily trading volume for wacker stock on Xetra, Germany's regional exchanges, Tradegate and Quotrix was approximately 315,000 shares, which was around 40 percent above the prior-year ﬁgure of around 225,000 shares.

wacker Communicates Closely with Capital Markets Key elements of corporate strategy include sustainable growth, innovative strength, and lower capital intensity across all segments. These priorities are reinforced through continuous and open communication with institutional and private investors and with analysts. During our many talks, we answered questions from capital-market participants. The latest communication and virtual conferencing technologies enabled us to maintain and even intensify our contacts with investors despite the pandemic and associated travel restrictions. We organized two virtual Capital Market Days in 2020, both of which met with great interest from our investors. Discussions during the year centered on questions about the pandemic's business implications and about the sustainability of the price recovery in solar-grade polysilicon in the second half- year. Investors responded particularly positively to news about the good third-quarter performance and the plans to divest our remaining stake in Siltronic ag. biosolutions' biopharmaceutical activities attracted investor interest after wacker announced in late November that it was building up capacity to produce CureVac's mRNA-based Covid-19 vaccine at the wacker Biotech site in Amsterdam.

In 2020, the number of analysts covering wacker increased slightly to 20 (2019: 19). During the year, analysts' consensus price target for wacker stock rose markedly. At the beginning of the year, the average price target for wacker stock was €73 (20 estimates, February 2020). At year-end, analysts set their fair-value price target at €108 on average (18 estimates), roughly 48 percent higher than at the start of the year.

a.5 Banks and Investment Firms Covering and Rating wacker

Baader Helvea Bank of America Berenberg Citigroup

Commerzbank Corporates & Markets

Credit Suisse

DZ Bank AG Exane BNP Paribas Fairesearch GmbH&Co. KG

Hauck & Aufhäuser Privatbankiers AG

As of the end of December 2020

HSBC

J.P. Morgan Cazenove Ltd. Kepler Cheuvreux

Landesbank Baden-Württemberg

Morgan Stanley

On Field Investment Research Société Générale

Stifel

UBS Ltd.

Warburg Research GmbH

On our website, we regularly report consensus analyst expectations for the current year. Moreover, our website offers extensive information on wacker stock. In addition to the annual report, other financial reports, a Fact Book, presentations and publications (viewable online or downloadable), our website lists all our key ﬁnancial- calendar dates and contact persons for your questions. Videos of our annual press conference and other events are also available for online viewing, or as an audio stream.

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49 - 106

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Combined Management Report

Group Business Fundamentals 51

Goals and Strategies 56

Management Processes 57

Statutory Information on Takeovers 60

Business Report 61

Earnings 66

Net Assets 71

Financial Position 74 Further Information on R&D,

Employees, Procurement, Production,

Sales and Marketing 77

Management Report of Wacker Chemie ag 82

Risk Management Report 87

Outlook 101

Group Business Fundamentals

Business Model of the Group

wacker is a global company with state-of-the-art specialty chemical products found in countless everyday items, ranging from tile adhesives to solar cells. Our portfolio includes more than 3,200 products supplied in over 100 countries.

Silicon Is Our Main Starting Material

Most of our products are based on inorganic starting materials. Silicon-based products account for about 65 percent of wacker sales, and primarily ethylene- related products for 35 percent. Our main customers are in the chemical, construction, electrical, electronics and photovoltaic sectors.

26 Production Sites wacker's integrated global production system consists of 26 production sites. Ten are in Europe, eight in the Americas and eight in Asia. The Group's key production site is Burghausen, Germany.

» See Figure b.2 on page 52

Legal Structure

In November 2005, wacker became a stock corporation (ag) under German law. Headquartered in Munich, Wacker Chemie ag holds a direct or indirect stake in 53 companies belonging to the wacker Group. The consolidated ﬁnancial statements cover 49 fully consolidated companies. Four companies are accounted for using the equity method. In addition, Wacker Chemie ag and a number of its subsidiaries have branch ofﬁces. But they are only of minor signiﬁcance for the Group.

» For more information about changes in the scope of consolidation and the resulting effects, please refer to the Scope of Consolidation section in the Notes to the Consolidated Financial Statements.

Technical Competence Centers Support Sales and Marketing Activities wacker operates all over the world. Our sales strategy is centered around expanding our presence in growth markets. Our sales organization is supplemented not only by a network of technical competence centers, where customers learn about wacker's product portfolio, but also by the wacker academy, where we offer technical training programs about our products and their application ﬁelds. In 2020, we opened a technical center in Shanghai for thermally conductive silicones and silicone-based solutions for a growing number of applications in consumer electronics and in the telecommunication industry.

b.1 Key Factors for Multidivisional Sites

Four Business Divisions wacker has a matrix organization with clearly deﬁned functions and four business divisions.

Each business division has global responsibility for its products, manufacturing facilities, markets, customers and results. Regional organizations are responsible for all business in their respective countries. wacker's corporate departments primarily provide services for the whole Group, although some also have production-related functions.

» See Figure b.4 on page 54

wacker GroupBurghausen

Charleston

NünchritzCaptive energy supply

Integrated production system

Qualiﬁed employees from local area

Long-term supplier relations

Areas on site available for expansion

North and South America

1 Adrian, Michigan, USA
2 Allentown, Pennsylvania, USA
3 Ann Arbor, Michigan, USA
4 Calvert City, Kentucky, USA
5 Charleston, Tennessee, USA
6 Chino, California, USA

7 Dalton, Georgia, USA
8 Eddyville,Iowa, USA
9 North Canton,Ohio, USA
10 San Diego, California, USA
11 Jandira,São Paulo, Brazil
12 Bogotá, Colombia
13 Mexico City, Mexico

Europe

14 Burghausen, Germany
15 Halle (Saale), Germany
16 Jena, Germany
17 Cologne, Germany
18 Munich, Germany
19 Nünchritz, Germany
20 Riemerling, Germany
21 Stetten, Germany
22 Stuttgart, Germany
23 Lyon, France
24 Bracknell, Great Britain
25 Milan, Italy
26 Amsterdam, Netherlands
27 Krommenie, Netherlands
28 Kyrksæterøra,Holla, Norway
29 Warsaw, Poland

30 Moscow, Russia
31 Solna, Sweden
32 Barcelona, Spain
33 León, Spain
34 Plzeň, Czech Republic
35 Istanbul, Turkey
36 Kyiv, Ukraine
37 Budapest, Hungary

Asia

38 Dhaka, Bangladesh
39 Beijing, China
40 Chengdu, China

41 Guangzhou, China
42 Hong Kong, China
43 Nanjing, China
44 Shanghai, China
45 Shunde, China
46 Zhangjiagang, China
47 Bengaluru, India
48 Chennai, India
49 Dankuni, India
50 Delhi, India
51 Kolkata, India
52 Mumbai, India
53 Jakarta, Indonesia
54 Tokyo, Japan
55 Tsukuba (Akeno), Japan
56 Kuala Lumpur, Malaysia
57 Yangon, Myanmar
58 Makati City, Philippines
59 Singapore
60 Anyang, South Korea
61 Jincheon, South Korea
62 Seoul, South Korea
63 Ulsan, South Korea
64 Taipei, Taiwan
65 Bangkok, Thailand
66 Dubai, United Arab Emirates
67 Hanoi, Vietnam
68 Ho Chi Minh City, Vietnam

Australia

69 Melbourne/Victoria, Australia

Production siteSales site

Technical competence center

¹ Only majority-owned subsidiaries and joint ventures

Management and Supervision

In compliance with the German Stock Corporation Act (AktG), Wacker Chemie ag has a two-tier management system, comprising an Executive Board and Supervisory Board. The Executive Board has four members.

Wacker Chemie ag is the parent company and thus determines the Group's strategy, overall management, resource allocation, funding, and communications with key target groups (especially with the capital market and shareholders).

Executive Board and Supervisory Board in 2020

Due to retirement, a long-standing member of Wacker Chemie ag's Supervisory Board, Konrad Kammergruber, stepped down on September 30, 2020. Dr. Birgit Schwab, who had already been elected as an alternate member, replaced him as an employee representative on the Supervisory Board. With effect from December 31, 2020, Jörg Kammermann, former district chairman of the ig bce labor union Altötting, stepped down from Wacker Chemie ag's Supervisory Board. Markus Hautmann, new district chairman of the ig bce labor union Altötting, was appointed as his successor effective January 1, 2021.

There were no changes to the composition of Wacker Chemie ag's Executive Board in 2020. At its meeting on March 11, 2020, the Supervisory Board renewed Dr.Tobias Ohler's contract for ﬁve years until 2025.

At another meeting on December 9, 2020, it made key personnel decisions. Dr. Rudolf Staudigl, President & ceo of the Executive Board, will retire at the end of the next Annual Shareholders' Meeting on May 12, 2021. The Supervisory Board appointed Dr.Christian Hartel to succeed him as President&ceo of the Executive Board as of that date. At

b.3 Group Structure

Corporate departments

the same time, Angela Wörl will join the Executive Board as Personnel Director.

» For details about Executive Board responsibilities, please refer to the Further Information section.

Declaration on Corporate Management

The declaration on corporate management required by Section 315d in combination with Section 289f of the German Commercial Code (hgb) is included in the corporate governance report. This declaration, which does not form part of the combined management report, is also available online. It contains the Executive and Supervisory Boards' work procedures, the declaration of conformity pursuant to Section 161 of the German Stock Corporation Act (AktG), and information on key corporate management practices.

It also includes: targets for the proportion of women on the Supervisory Board and Executive Board, and in the two levels of management below the Executive Board, as well as deadlines for implementation; statutory minimum quotas to be observed when ﬁlling Supervisory Board positions; and information on the company's diversity strategy.

»www.wacker.com/corporate-governance

Non-Financial Statement

The non-ﬁnancial statement that is to be submitted in accordance with Sections 315b and 315c, and 289b and 289c of the German Commercial Code (hgb) is included in the annual report in the form of a non-ﬁnancial report for the Group and does not form part of the combined management report. It is also available on the internet, in the online Annual Report for 2020. In addition, it is published in Germany's Federal Gazette. This non-ﬁnancial report includes a description of the Group's business model and details of environmental concerns, social issues and personnel matters, as well as information on respect for human rights, and on combating corruption and bribery.

»https://www.wacker.com/annual-report

wacker Group

Business divisions

wacker	wacker	wacker	wacker
silicones	polymers	biosolutions	polysilicon
Wacker Chemie AG - Annual Report 2020

Executive Board and Supervisory Board Compensation Executive Board compensation contains both ﬁxed and variable components. The main features of the compensation system for the Executive Board and Supervisory Board are described in the compensation report, which is included in the corporate governance report. The compensation report also forms part of the combined management report.

wacker biosolutions supplies customized biotech and catalog products for ﬁne chemicals. Products include pharmaceutical proteins, vaccines, cyclodextrins, cysteine, polyvinyl acetate solid resins (for gumbase) and acetylacetone. The division focuses on customer-speciﬁc solutions for growth areas, such as pharmaceutical actives, food additives and agrochemicals.

Key Products, Services and Business Processes

Overall, the range of products and services at each of our divisions remained unchanged in 2020. In several application areas, though, we expanded our product portfolio.

wacker silicones is the business division with the broadest range of products. Two raw materials - silicon metal and methanol - are the basis for making over 2,800 silicone products in seven product groups: silanes, siloxanes, silicone ﬂuids, silicone emulsions, silicone elastomers, silicone resins and pyrogenic silica. Silicones have numerous chemical, mechanical and tactile properties that can be precisely adjusted and newly combined time and again. No other synthetic material offers this kind of versatility and range of applications. Silicones are extremely durable, stress-resistant, water-repellent and uv-resistant.

They are just as indispensable in everyday applications as they are in developing innovative, new technologies.

wacker polymers makes state-of-the-art binders and polymeric additives (such as dispersible polymer powders and dispersions). They are used in diverse industrial applications or as basic chemicals. The main customer for polymer binders is the construction industry. Other customers include the paint, coating, paper and adhesive industries.

b.4 Group Structure in Terms of Managerial Responsibility

wacker polysilicon produces hyperpure polysilicon for the semiconductor and solar sectors.

Integrated Production System - wacker's Greatest Strength

A key competitive advantage for wacker is the highly integrated material loops at its major production sites in Burghausen, Nünchritz, Charleston and Zhangjiagang. The basic principle of integrated production is to use the by products from one stage as starting materials for making other products. The auxiliaries required for this, such as silanes, are recycled in a closed loop. Waste heat from one process is utilized in other chemical processes. Integrated production cuts energy and resource consumption, lastingly improves raw-material use and makes environmental protection an intrinsic part of the production process.

Major Sales Markets and Competitive Positions (unaudited section)

wacker's three largest divisions rank among the top 3 suppliers worldwide.

Competitive Positions of wacker's Divisions wacker silicones is No. 2 globally and leads the market in Europe. In building-protection silicones, wacker is the global market leader. Silicones are used in every major industry due to their versatile properties. The greatest growth potential is in Asia.

Managerial Responsibility

Structure based on decision-making responsibility and reporting linesExecutive BoardBusiness divisions

Corporate departments

Regions

Group coordinators

wacker polymers is the world's largest producer of vae dispersions and dispersible polymer powders. We are the only company in the market with a complete supply chain for dispersions and dispersible polymer powders in Europe, the Americas and Asia. We consider Asia to offer the largest growth potential.

wacker polysilicon, we conclude short- and long-term contracts. A proportion of incoming orders are short-term ones based on market benchmarks. Due to varying order-placement procedures at the Group, order-level reporting is not very meaningful and hence does not serve as an indicator in our monthly reports.

wacker biosolutions is the global market leader not only for cyclodextrins and cysteine made from vegetarian-grade raw materials, but also for polyvinyl acetate solid resins used in gumbase. We hold a small but promising market position as a producer of bacterial pharmaceutical proteins, and are continually expanding that position.

wacker polysilicon's business is characterized by intense competition. This primarily results from solar-industry demand for polysilicon and from the market environment facing the solar industry worldwide. According to in-house analyses, wacker polysilicon is global No. 1 in terms of production volumes for both polysilicon supplied to the semiconductor sector and monocrystalline polysilicon used in the solar sector.

Economic and Legal Factors

wacker sells its products and services to virtually every industry. Although our business divisions are not immune to economic ﬂuctuations, their onset and impact may vary.

Our product portfolio and broad customer base enable us to mitigate the magnitude of such ﬂuctuations.

Orders

The terms for orders placed with wacker vary from division to division. Most orders received by wacker silicones are short term, though a small number are long term. At wacker polymers, business is based on contracts and framework agreements with terms of up to one year. At

b.5 wacker's Competitive Positions

WACKER SILICONES WACKER POLYMERS

WACKER POLYSILICON solar applications WACKER POLYSILICON semiconductor applications

(Table B.5 unaudited)

Operational Metrics as Leading Indicators of Future Developments

By referring to specific leading indicators based on operational metrics, we try to factor potential developments into our business plans and to allocate capacities accordingly. Since our operations are based on diverse businesses and markets, we use a number of leading indicators to gain insights into potential developments at each of our business divisions. Indicators include trends in raw-material and energy prices, as well as data from our own market research and from customer discussions.

Economic Factors Impacting Our Business

The main economic factors inﬂuencing wacker's business remained unchanged in many areas.

Raw-Material and Energy Costs

As a chemical company, we belong to an energy-intensive industry and require diverse raw materials to manufacture our products. Consequently, increases in raw-material and energy costs affect our cost structure after a time lag. wacker constantly strives to keep costs at a competitive level. By generating our own power at Burghausen and Nünchritz, we reduce our energy-procurement needs and, thus, the cost risk. Amendments to the regulatory framework - such as to grid charges, to energy and electricity taxes, to CO2 certiﬁcates in the European Emissions Trading Scheme (ets) and to the German Renewable Energy Act (eeg) - can negatively affect wacker's energy costs both directly and indirectly. Germany's high electricity prices result in competitive disadvantages for wacker. That is why

Number 1

Dow WACKER Yongxiang WACKER

Number 2

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Number 3

KCC + Momentive Dairen

WACKER Tokuyama

Combined Management Report - Group Business Fundamentals - Goals and Strategies

we advocate introducing an industrial electricity price and urging policymakers to do so. In addition, we continuously strive to improve our energy efﬁciency. Our goal is to reduce speciﬁc energy consumption by half between 2007 and 2022. When procuring raw materials, we ensure not only favorable pricing, but also price ﬂexibility. To this end, we sometimes conclude contracts with varying durations, with greater freedom for the volume procured, or with regular adjustments of wholesale market prices.

Exchange-Rate Fluctuations

As a rule, wacker hedges against exchange-rate ﬂuc-tuations. We hedge about half of our dollar exposure for the following year with a mix of currency-hedging transactions. In determining sensitivity, we simulate a 10 percent devaluation of the us dollar against the euro. Without hedging, such an increase in the euro against the us dollar would have a negative impact on ebitda of around €39 million. In 2020, we also concluded hedging transactions in Japanese yen (jpy).

State-Regulated Incentive and Feed-In Tariff Programs for Renewable Energy Sources

As one of the world's leading suppliers of hyperpure polycrystalline silicon, we are affected by regulatory changes to incentive and feed-in tariff programs for renewable energy sources. Substantially lower prices for solar modules and cells have greatly increased the competitive advantage of solar energy over fossil fuels and other methods of power generation. The cost of manufacturing photovoltaic products is expected to continue decreasing, which will further reduce dependence on state-regulated incentive and feed-in tariff programs over the next few years. Our assumption is that, in a few years, solar energy will do well even without special incentives, particularly in combination with cost-efﬁcient storage options.

Legal Factors Impacting Our Business

China imposed anti-dumping and anti-subsidy tariffs on us manufacturers of solar-grade polysilicon. These tariffs currently affect solar-grade polysilicon produced at our site in Charleston, Tennessee (usa). Trade relations with China were impaired further when the usa, in turn, introduced safeguard tariffs through a Section 201 proceeding (global safeguard tariffs on solar cells and modules) and through other "Section" proceedings. An amicable settlement to the dispute over solar products may be achievable as part of a comprehensive trade agreement between the usa and China.

Goals and Strategies

Strategy of the wacker Group wacker's ﬁve overarching strategic goals have not changed.

The focus is on proﬁtable growth and on holding a leading competitive position in most of our business ﬁelds. In achieving this, we orientate our activities toward sustainable development.

» For further information, visitwww.wacker.com

wacker's ongoing strategic business goals are to:

Expand our production capacities, with capital expenditures below depreciation/amortization Generate higher growth than the average rate for the chemical industry

- -

Focus strongly on sustainability

Achieve attractive margins throughout the economic cycle

Increase our cash inﬂow from operating activitiesInvestment spending is focused on region-speciﬁc plants for intermediate and downstream production. They have a lower capital intensity than full-scale plants for upstream products.

We want to grow faster than the chemical-sector average by deploying new capacities, by expanding in emerging markets and regions, by innovating, and by substituting competitors' products with wacker products. In doing so, we intend to increase the proportion of specialty products in our portfolio. Our focal regions and countries for further growth remain unchanged: China, Southeast Asia, India, the Middle East and Brazil. We also see opportunities to expand our chemical business in our established markets in Europe and the usa.

Our wacker Operating System (wos) is focused on curbing raw-material consumption and raising process efﬁciency at our plants, the goal being to further lower speciﬁc operating costs. Additionally, we are developing a wide range of new, sustainable products to lower CO2 emissions. For example, we supply polysilicon as a starting material for solar installations and for diverse products used in today's resource-saving construction sector.

Our aim is to achieve attractive margins with our products, with a target ebitda margin for the chemicals divisions of > 16 percent.

Combined Management Report - Goals and Strategies - Management Processes

To ﬁnance investments ourselves, we aim to generate positive cash ﬂow and steadily increase cash inﬂows from operating activities.

Management Processes

The aim of our Shape the Future program, launched in late 2019, is to cut costs and enhance efﬁciency. Our business divisions and corporate departments are reorganizing themselves and, in the process, streamlining their workﬂows and structures. At the same time, we are strengthening the responsibility of our regional entities. By the end of 2022, wacker intends to save a total of €250 million. This includes cutting more than 1,000 jobs, mainly in Germany.

Digitalization is another topic affecting all our business processes. In 2017, we launched a digitalization program encompassing all core business processes - from logistics, production control and maintenance through to our distribution systems and new business models. Since December 2019, the program's individual projects have been making progress in the corporate sectors responsible.

Strategy at Each Business Division

As a global producer of silicones, wacker silicones intends to continue increasing its share of high-margin specialties to generate proﬁtable growth. For standard products, the division's focus is on being a full-range supplier with global reach and achieving cost leadership via economies of scale. wacker polymers is pursuing growth by concentrating on the trend toward value-added construction materials and actively promoting related industry standards (transformation). Using the advantages offered by vae dispersions and dispersible powders, the division aims to replace conventional technologies (substitution) and tap new application areas. At wacker biosolutions, the focus is on expanding biotech activities and acquiring new customers. To this end, the division is leveraging its extensive expertise and its facilities for making biotech products on an industrial scale.

In polysilicon, our wacker polysilicon division is con- centrating on business-process efﬁciency. Top priorities are cutting production costs markedly, bolstering the output of existing manufacturing plants, and reducing energy and raw-material consumption. At the same time, we will maintain the high standard of quality that has made us an industry benchmark. Our business is focused on increasing output for semiconductor customers and on satisfying the growing demand for monocrystalline applications in the solar industry.

Value-Based Management Is Integral to Our Corporate Policies

Value-based management is an integral part of our corporate policies. Its purpose is to achieve a lasting increase in our company's value. In our management processes, we distinguish between performance parameters and budget parameters. Performance parameters serve the ﬁnancial management of the company. They include the ebitda margin and roce. The ebitda margin indicates how successful the company is compared with the competition, while roce shows how efﬁciently the company employs its capital. Budget parameters such as ebitda and net cash ﬂow are also important for management control. In addition to these indicators, bvc (business value contribution) is a dedicated budget parameter used in the calculation of variable compensation for Executive Board members. The ebitda trend is considered to be the most important ﬁnancial indicator for communication with capital markets.

Key Financial Performance Indicators for the wacker Group

In 2020, the key ﬁnancial performance indicators for value-based management remained unchanged.

ebitda margin (ebitda in relation to sales). We compare historical performance with planned performance and that of the competition, and use the results to calculate a target ebitda margin. We calculate the weighted divisional average as our target margin for the Group.

roce, or return on capital employed. roce is deﬁned as earnings before interest and taxes (ebit) divided by capital employed. Capital employed comprises working capital as well as the four-quarter aggregate of noncurrent assets required for business operations.

It is determined retroactively for the previous quarter. Investment income from Siltronic ag and the corresponding carrying amount in equity are not included when roce is calculated. roce is a clear indicator of how proﬁtably the capital required for business operations is being employed.

ebitda (earnings before interest, taxes, depreciation and amortization). This shows the company's operational performance capability before considering the cost of capital. We set absolute ebitda targets for the business divisions and take the cost of capital into account by using bvc to determine the internal budget target. We calculate bvc by deducting the cost of capital, non-operational factors, and depreciation/amortization and impairments from ebitda. The bvc trend depends mainly on changes in ebitda.

Net cash ﬂow (deﬁned as the sum of cash ﬂow from operating activities and long-term investing activities before securities). Net cash flow shows whether we can ﬁnance ongoing operations and necessary investments with the funds from our own operating activities. wacker's aim is to generate a sustained positive net cash ﬂow. Apart from proﬁtability, the main factors affecting net cash ﬂow are the effective management of net current assets and the level of capital expenditures.

Supplementary Financial Performance Indicators

Our key ﬁnancial performance indicators are supplemented by additional performance indicators that provide us with information on the Group's sales and liquidity situation and on its debt levels.

These supplementary ﬁnancial performance indicators include:

Sales: profitable growth is an important factor in increasing the company's value over the long term and one of the main drivers of a positive cash ﬂow trend.

Capital expenditures: in the course of our medium- term planning, we set capital-expenditure priorities and an investment budget. Investments do not contain any right-of-use assets from lease accounting.

Non-Financial Performance Indicators Are Not Intended for Groupwide Management Control

None of the non-ﬁnancial indicators we employ is used universally for corporate decision-making.

Development of Key Financial Performance Indicators in 2020 ebitda margin: in 2020, the target margin was 20 percent. The Group actually achieved an ebitda margin of 14.2 percent.

b.6 Planned and Actual Figures

€ million

EBITDA margin (%)

EBITDA

ROCE (%)Net cash ﬂow

Reported for 2020

Forecast 2020 2019

Somewhat lower

14.2 than last year 15.9

About 20% lower

666.3 than last year 783.4

Clearly positive, substantially higher than last

5.6

year -11.3 Clearly positive, substantially higher than

697.7

last year 184.4

ebitda: we expected ebitda to be some 20 percent lower in 2020 than a year earlier. The 14.9 percent contraction in ebitda was in line with our expectations. The main reason for this drop was the special income of €112.5 million in insurance compensation we had booked in 2019. Adjusted for this income, the year-over-year decline in ebitda was 0.7 percent. The pre-tax cost of capital was 10 percent in 2020. We reached our bvc target for the Group in 2020. At €-169 million, bvc was still negative but signiﬁcantly better than in the prior year (2019: €-1.1 billion).

Net ﬁnancial debt: deﬁned as the sum of cash and cash equivalents, noncurrent and current securities, and noncurrent and current ﬁnancial liabilities.

b.7 roce and bvc

b.8 Strategic and Operational Planning

€ million	2020	2019
EBIT	262.8	-536.3
Capital employed¹	4,111.4	5,183.5
ROCE² (%)	5.6	-11.3
Pre-tax cost of capital (%)	-10.1	10.0
BVC³	-169.3	-1,102.4

¹ Capital employed is the sum of average noncurrent assets (less noncurrent securities and deferred tax assets), plus inventories and trade receivables (less trade payables). It is the variable used in calculating the cost of capital.

² Return on capital employed is a ratio indicating how proﬁtably capital is employed. Investment income from Siltronic AG and the corresponding carrying amount in equity are not included when ROCE is calculated.

³ BVC is calculated by adjusting EBIT for non-operational factors.

roce: wacker's roce in 2020 was 5.6 percent. In our March 2020 forecast, we had expected roce to be positive and substantially above the prior-year level.

Net cash ﬂow: our 2020 guidance was for a clearly posi- tive ﬁgure, substantially higher than the year before. At €697.7 million, net cash ﬂow was much better than we had forecast. The reason for the improvement were lower investment spending and signiﬁcant reductions in current assets.

Planning Cycle

Strategic planning determines how we can meet value-related and corporate goals. First, our divisions identify their market and competitive positions, and their value- related strength. We then use these results to formulate recommendations regarding strategic positioning and planned steps. All of this is supplemented by innovation and investment projects, and approved by the Strategy Conference.

a Forecasts made for current year
b Strategy Conference
b
c Strategy implemented in operational planning
d Planning Conference
a
e Operational planning approved (by Supervisory Board)

Operational planning in the second half of the year addresses strategic-planning decisions with a ﬁve-year timeline. The Executive and Supervisory Boards jointly approve the annual plan, which then forms the basis for determining basic forecasts for the current year in early February. We monitor whether we are meeting our forecasts by means of monthly comparisons of planned and actual ﬁgures.

Financing Strategy

The goal of wacker's financing strategy is to ensure sustainable growth and stability for the Group. This strategy comprises both ﬁnancing through our own resources and the use of debt instruments.

We ensure the Group's ongoing solvency with rolling cash-flow management and an adequate volume of contractually agreed lines of credit. Financing requirements are calculated for the entire Group, with loans usually being taken out centrally. Project-speciﬁc and regional funding are available in special cases.

» For details of the ﬁnancing measures implemented in 2020, please refer to the Financial Position section on page 74.

Operational Control Instruments

We control operational processes via our integrated management system (ims). This system stipulates uniform standards throughout the Group for issues relating to quality, environmental protection, and health and safety. We have our Group management system analyzed by an international certiﬁcation organization in accordance with uniform standards based on iso 9001 (quality) and iso 14001 (environment).

Combined Management Report - Statutory Information on Takeovers

Statutory Information on Takeovers

b.9 Information Required by Section 315a (1) of the German Commercial Code (hgb)

The following table contains information required by Section 315a (1) of the German Commercial Code (HGB):

§315a (1) 1

§315a (1) 2 §315a (1) 3

§315a (1) 4

§315a (1) 5

§315a (1) 6

§315a (1) 7

§315a (1) 8

§315a (1) 9

Composition of subscribed capital:Restrictions on voting rights or on the transfer of shares:

Direct or indirect capital stakes:Owners of shares with special rights:Method of voting-right control in the case of employee participation:

Statutory provisions and articles of association regarding the appointment and dismissal of executive board members and amendments to said articles:Authority of the executive board to issue or buy back shares:

Major agreements associated with changes of control due to a takeover bid:Severance agreements with the executive board or employees in the event of a takeover bid:Wacker Chemie AG's subscribed capital comprises 52,152,600 non-par value voting shares. No other share classes have been issued. The total number of shares currently includes 49,677,983 held by external shareholders and 2,474,617 held by Wacker Chemie AG itself. WACKER's treasury shares were acquired by repurchasing Wacker Chemie GmbH shares in August 2005, when it was still a private limited company. The Executive Board may use or sell 1,692,317 of these treasury shares with the consent of the Supervisory Board; use or sale of the remaining 782,300 shares requires Supervisory Board approval as well as a resolution by the Annual Shareholders' Meeting.

There are no restrictions on voting rights or the transfer of shares. Each of the following holds a stake of over 10 percent of the subscribed capital: Dr.Alexander Wacker Familiengesellschaft mbH, based in Munich; Blue Elephant Holding GmbH, based in Pöcking; and Dr.Peter-Alexander Wacker, resident in Bad Wiessee and to whom the voting shares of Blue Elephant Holding GmbH are attributable.

Shareholders have not been given any special rights that bestow powers of control.

Insofar as employees hold shares in Wacker Chemie AG's capital, they exercise their resulting control rights directly.

The provisions to appoint and dismiss Wacker Chemie AG's Executive Board members are based on Section 84 et seq. of the German Stock Corporation Act (AktG). Wacker Chemie AG's Articles of Association do not contain any further provisions in this respect. Pursuant to Article 4 of the Articles of Association, the number of Executive Board members is ﬁxed by the Supervisory Board, which also appoints an Executive Board member as President&CEO. Amendments to the Articles of Association are covered by Sections 133 and 179 of the German Stock Corporation Act. In accordance with Section 179 (1) sentence 2 of the Act, the Supervisory Board has been empowered to amend the Articles of Association if only the wording thereof is affected.

In accordance with a resolution passed at the August 4, 2020 Annual Shareholders' Meeting, Wacker Chemie AG's Executive Board was authorized - in compliance with the legal provisions set out in Section 71 (1) no. 8 of the German Stock Corporation Act - to acquire treasury shares totaling a maximum of 10 percent of capital stock. No capital has been authorized for the issue of new shares. Various agreements with joint-venture partners include change-of-control clauses, which stipulate what is to happen if one of the joint-venture partners is taken over. These arrangements comply with the usual standards for such joint-venture agreements. In addition, several loan agreements contain change-of-control clauses. Here, too, the clauses are typical of this type of agreement.

There are no severance agreements or similar with employees or with Executive Board members in the event of a takeover bid (please refer to the Compensation Report).

Business Report

Economic Trends

In 2020, the coronavirus pandemic resulted in the deepest recession in almost a century. According to the International Monetary Fund (imf), the global economy contracted by 3.5 percent. The decline in economic activity was particularly pronounced in the eurozone. According to economists, gdp in Italy was down by some 9.2 percent and, in Spain, by 11.1 percent year over year. Despite some extensive government aid packages, the pandemic signiﬁcantly increased unemployment and poverty in many countries. Even in China, where the pandemic originated at the start of the year, the economy collapsed for a time. But the country posted growth again as early as q2 2020.

and pharmaceuticals stabilized. According to the German Chemical Industry Association (vci), the chemical industry's global sales (including pharmaceuticals) totaled €5.1 trillion in 2019, with Asia accounting for over 50 percent. In recent years, the centers of growth have shifted increasingly toward emerging markets. Investment activities are intensifying in countries with low energy and raw-material costs. Europe beneﬁts from these growth markets through foreign trade. This trend continued in 2020.

For Germany's chemical industry, 2020 was a difﬁcult year. Based on vci ﬁgures, sales in this sector, Germany's third-largest industry, contracted 6 percent to €186 billion (2019: €193 billion). The pandemic-related decline in orders impacted not only international business in nearly every export market (-6.5 percent), but also sales in Germany (-5.5 percent). Production fell 3 percent. The chemical industry alone, excluding the almost stable pharmaceutical sector, saw a 4 percent drop.

b.10 gdp Trends in 2020 %

Sources - worldwide: IMF; Europe: OECD; Asia: ADB; China: National Bureau of Statistics; India: ADB; Japan: OECD; USA: IMF

Sector-Speciﬁc Conditions

2.3

We supply products to a wide range of industries. Our main customers are in the chemical, construction, electrical, electronics and photovoltaic sectors.

Pandemic Hits the Chemical Industry

Due to the coronavirus pandemic, global chemical-industry sales fell in the ﬁrst half of 2020. A recovery started in the summer and lasted until year-end. Demand for chemicals

Construction Expenditure Decreases

Even though other economic sectors were hit much harder by the coronavirus pandemic, the construction industry was not spared in 2020. Projects were delayed and investment spending postponed. According to market research institute b+l Marktdaten GmbH, construction expenditure fell in nearly all markets. Globally, construction volume decreased by -2.3 percent to us$ 9.11 trillion (2019: us$ 9.32 trillion). The strongest drop was in South America at -6.4 percent. But in Western Europe, too, construction volume was signiﬁcantly below the prior-year level (down 5.5 percent).

b.11 Growth Rate in Construction by Region in 2020 %

Middle East and AfricaAsiaNorth AmericaWestern EuropeSouth America

-6.4

0.3

Source: B+L Marktdaten GmbH, November 2020

Electrical and Electronics Industry Posts Decline According to estimates of Germany's Electrical and Electronic Manufacturers' Association (zvei), the global electrical and electronics market declined 3 percent to about €4.37 trillion in 2020 (2019: €4.51 trillion). While the pandemic caused a drop of around 7 percent in advanced economies, the decline in emerging-market countries was comparatively moderate at 1 percent.

Photovoltaics Pivotal to Global Energy Supply

The global solar industry expanded further in 2020. Various market studies and our own market surveys show that some 140 gigawatts (gw) were newly installed worldwide (2019: about 120 gw). That was around 17 percent more than the year before. The amount of installed pv capacity worldwide exceeded 700 gw at year-end 2020. About half of the new capacity in 2020 was added in China, Japan and the usa. Global pv markets thus grew year over year despite the pandemic's negative impact. Key factors in the global expansion of pv installations were incentives coupled with substantially lower system costs. Today, photovoltaics are already competitive compared with electricity generated from conventional energy sources. The non-incentivized cost of solar energy has continued to fall. In several solar auctions in sun-rich regions, the electricity-trading price was down to below us$ 15 per megawatt hour.

b.12 Installation of New pv Capacity in 2020 and 2019

b.13 Market-Price Trends for wacker's

Key Raw Materials in Europe

2018

Silicon metal (€/t)

2019

Three-year high €2,210

3,000

2,000

1,000

€ 2,046Ø €1,702

Ethylene (€/t)

Three-year high € 1,15 0 1,500

1,000

500

2020

Three-year low €1,500

Ø € 1,791

Ø€ 1,10 0

Three-year low €620

Ø € 1,0 07

Ø€ 797

Methanol (€/t)

Installation of New PV

Capacity (MW)Growth in 2020

2020

2019

Germany Spain

Rest of Europe USA

Japan China India

Other regions Total

2,600

4,800

4,000 4,700

20 -45

13,000

13,000 0

19,000

13,300 43

8,200

7,500 9

48,200

30,100 60

3,500

7,300 -52

40,700

40,100 1

140,000

120,000

Sources: Germany's Federal Network Agency, Solar Energy Industries Association (SEIA), China National Energy Agency, India's Ministry of New and Renewable Energy, Bridge to India, market studies, and WACKER's own market surveys. (Table B.12 unaudited)

Despite the global rise in new installations, conditions in the pv industry remained challenging. In the usa and India, punitive tariffs on imported solar cells and modules are pushing up prices, impeding growth. In China, year-over- year growth was stable despite the difﬁcult underlying conditions. Strong competitive pressure persists throughout the supply chain.

600

400

200

Three-year high € 379

Ø €334

Ø € 238

Vinyl acetate monomer (€/t)

2,000

1,000

Three-year high

€ 1,370

Ø € 1,14 3

Ø Annual average in each case (Table B.13 unaudited)

Three-year low € 15 5

Ø€ 2 15

Three-year low € 715

Ø € 950

Ø € 823

Raw-Material Prices Decline Year over Year

In 2020, raw-material prices were lower on balance than a year earlier, with prices developing differently for certain materials. Price trends reﬂected pandemic-driven demand shifts, which were sometimes abrupt. Entire supply chains were impacted. After rising at the start of the year, metallurgical-grade silicon prices fell in the second and third quarters due to lower demand, particularly for aluminum applications. Prices then recovered toward year- end. Ethylene prices in Europe were largely determined by naphtha, which is the main cost factor, and thus by the price trend for crude oil. Methanol prices dropped steeply until mid-year, reﬂecting not only the buoyant supply situation, but also movements in coal and oil prices, which are decisive for methanol pricing. Subsequently, prices climbed strongly due to higher precursor prices and lower volume availability. The trend for vinyl acetate monomer was similar. Prices initially fell due to both weaker demand amid the pandemic and lower prices for upstream products, before picking up in the second half-year.

Electricity and CO2 Prices Fall

The coronavirus pandemic triggered a pronounced but temporary drop in prices for wacker's key energy sources in spring 2020. On the global crude oil market, prices fell to a three-year low amid the demand slump. After opec cut production and the pandemic-related restrictions eased, prices recovered slowly during the year, but did not reach their previous level. Germany's electricity prices initially continued dropping, impacted by historically low gas and coal prices, by high feed-in levels of renewable electricity and by lower industrial demand. They then stabilized during the year at a price of around €40/MWh. Electricity prices reached their annual high at year-end, driven by soaring gas, coal and CO2 prices. Electricity prices in Germany are also subject to levies and fees, including grid fees, electricity taxes and the German eeg surcharge for renewables.

Prices for CO2 emission allowances fell to a daily low of around €16 per metric ton in the ﬁrst quarter. Then, a nascent recovery lifted daily prices above €30 per metric ton for the ﬁrst time in more than ten years. In the second half of the year, prices initially stabilized at around €25 per metric ton, before surpassing €30 per metric ton in December. The overall price trend showed signiﬁcant volatility.

b.14 Market-Price Trends for Energy Sources

Relevant to wacker

2018

2019

2020

Traded electricity price in Germany (eex, front year) (€/MWh)

Three-year high €53.9

Three-year low €34.1

Ø €44.2

CO2 (€/t)

Three-year low 20 €8.3

Ø€ 15.8

Brent crude (€/bbl)

Three-year high €70.2

Ø€ 60.6

Ø Annual average in each case (Table B.14 unaudited)

Ø€ 48.1

Ø€40.5

Three-year high €30.5

Ø € 24.8

Ø€ 24.6

Ø € 57.3

Three-year low€24.5Ø

€37.8

Overall Statement by the Executive Board on Underlying Conditions

In 2020, economic and political risks rose signiﬁcantly, primarily due to the coronavirus pandemic. As a result, global economic growth slowed markedly. Aside from China, every major economy reported a decrease in economic activity. The last time a global downturn had been so strong was during the ﬁnancial crisis of 2009.

wacker's chemical business delivered a solid performance in 2020 given such difﬁcult underlying conditions. In the second quarter of 2020, wacker posted an especially steep sales contraction. A recovery began early in the third quarter and continued in the fourth quarter. Sales at wacker silicones were well below the year-earlier figure. wacker polymers, on the other hand, posted only slightly lower sales. At wacker biosolutions, sales edged up. The operating result for our chemical divisions was slightly lower year over year. The main reason was the fall in average prices for standard silicone products, which dampened ebitda at wacker silicones. ebitda at wacker polymers and wacker biosolutions rose. In our polysilicon business, sales grew slightly due to higher volumes. wacker polysilicon posted signiﬁcantly lower earnings year over year due to the special income from insurance compensation recognized in 2019. Measured on a comparable basis, its operating result improved signiﬁcantly.

Due to the pandemic, sales declined in the three major regions: Europe, Asia and the Americas. Sales fell by a mid-single-digit percentage year over year in Europe and Asia and by a high-single-digit percentage in the Americas.

Key Events Affecting Business Performance

Acquisitions and Investments

In 2020, wacker neither took over nor acquired a stake in any companies.

Divestitures

In 2020, wacker concluded an agreement to transfer its stake of 30.83 percent in Siltronic ag to GlobalWafers Co. Ltd., Taiwan. The agreement remains subject to various merger-control and foreign-trade clearances.

The focus of our investing activities was on the three chemical divisions, with several projects in different countries. In Ulsan, South Korea, we completed a new dispersion reactor. We are expanding our capacities in Nanjing, China, with a new reactor for dispersions and a spray dryer for dispersible polymer powders. In Amsterdam, we invested in setting up coronavirus vaccine production capacity and in biopharmaceutical production plants. wacker also invested in a series of small- and medium- scale projects for intermediates and downstream products, and in infrastructure measures at our fully integrated sites in Burghausen and Nünchritz.

Comparing Actual with Forecast Performance

During the year, wacker adjusted its targets for 2020 (published in its 2019 Annual Report) to take account of the pandemic's effects. The main factor here was the steep slump in the global economy in the second quarter. When the company presented its 2019 Annual Report in mid-March, it already made its annual guidance conditional because of the difﬁculty of reliably estimating the pandemic's implications for its earnings and ﬁnancial position.

No Guidance after Close of the First Quarter

At the start of 2020, wacker projected that its sales would increase by a low-single-digit percentage. The ebitda margin was likely to be slightly lower than a year earlier, with ebitda about 20 percent lower. roce was expected to be positive and substantially higher than the year before. Net cash ﬂow would be clearly positive and substantially higher than the previous year. Capital expenditures would reach around €350 million, with depreciation and amortization amounting to around €425 million. Net ﬁnancial debt would be substantially lower than the year before.

Capital Expenditures

Capital expenditures decreased year over year, as planned. They amounted to €224.4 million in the reporting year (2019: €379.5 million).

In its q1 Interim Report of April 2020, wacker refrained from issuing full-year guidance. At the time, it was not possible to reliably estimate either how strongly or for how long government measures to contain the global spread of the virus would dampen the company's business.

In its q2 Interim Report, wacker again refrained from providing speciﬁc guidance for full-year 2020, as it was still not possible to adequately quantify how the global spread of the virus would affect the company's business.

But wacker made it clear that it expected its sales, ebitda and ebitda margin for 2020 to be below the previous year's levels due to the pandemic. Net cash ﬂow was likely to be above the year-earlier ﬁgure.

In its q3 Interim Report, wacker reiterated its expectations for sales, ebitda and ebitda margin for 2020. Net cash ﬂow was now likely to be substantially higher than a year earlier.

wacker Closes 2020 in Line with Its Expectations

In 2020, wacker posted sales of €4.69 billion (2019: €4.93 billion), down 4.8 percent year over year. The company's sales contracted sharply in q2 2020 due to the effects of the pandemic. Although wacker regained some ground in q3 and q4, supported mainly by robust demand from the construction industry and for polysilicon, it did not fully make up for that sales slump. wacker's sales trend was slowed not only by somewhat lower volumes year over year, but also by price changes and exchange-rate effects.

b.16 Comparing Actual with Forecast Performance

Key Financial

Results inPerformance Indicators 2019

EBITDA margin (%) 15.9

EBITDA (€ million) 783.4

ROCE (%) -11.3

Net cash ﬂow (€ million) 184.4

Supplementary Financial

Performance Indicators

Sales (€ million) 4,927.6

Capital expenditures

(€ million) 379.5

Net ﬁnancial debt (€ million) 713.7

Depreciation / amortization

and impairments (€ million)

Forecast March 2020

Somewhat lower than last year

About 20% lower than last year

Clearly positive, substantially higher than last year

Low-single-digit percentage increaseAround 350

Substantially lower than

ebitda was €666.3 million, down 14.9 percent (2019: €783.4 million). The ebitda margin was correspondingly lower than in the prior year. The main reason for the ebitda decline was prior-year special income of €112.5 million in insurance compensation. Adjusted for this income, the year-over-year fall in ebitda was 0.7 percent.

At €697.7 million, net cash ﬂow was substantially higher year over year (2019: €184.4 million). Factors prompting this strong rise included a marked reduction in current assets and much lower capital expenditures. roce of 5.6 percent was clearly positive and signiﬁcantly higher than in the prior year.

In 2020, capital expenditures reached €224.4 million, well below the year-earlier ﬁgure of €379.5 million.

At year-end, net ﬁnancial debt amounted to €67.5 million, down significantly versus the previous year (2019: €713.7 million).

b.15 Expenses by Cost Type

% of sales

Personnel costs Raw-material costs Energy costs

Depreciation / amor tization and impairments

2020 2019

28.4 25.6

28.1 30.0

7.7 8.1

8.6 26.8 65

Forecast April 2020

- - - -

<300

Forecast July 2020

Below last year's levelBelow last year's level

Above last year's levelBelow last year's level

<250

ForecastResults inOctober 2020 2020

Below last year's level 14.2

Below last year's level 666.3

- 5.6

Substantially higher thanlast year 697.7

Below last year's level 4,692.2

<250 224.4

last year - - - 67.5

1,319.7

Around 425 - - - 403.5

Earnings

At €4.69 Billion, Group Sales 5 Percent Below Prior-Year Figure of €4.93 Billion

The wacker Group's sales in 2020 were lower than the year before. Especially from April through June, sales dropped markedly due to the coronavirus pandemic. The main reasons for the decrease were lower prices and reduced volumes, especially at wacker silicones. Changes in the product mix also had an impact, as did exchange-rate effects attributable to the year-over-year decline in value of the us dollar. The sales contraction was only slight at wacker polymers, while wacker biosolutions posted marginal sales growth. wacker silicones recorded sales of €2.24 billion (2019: €2.45 billion), down 9 percent year over year due to reduced volumes and lower prices for standard products. Sales at wacker polymers came in at €1.30 billion in 2020 (2019: €1.32 billion), down by a slight 1 percent. Sales at wacker biosolutions edged up 1 percent to €246.1 million (2019: €243.0 million). wacker polysilicon's sales rose 2 percent to €792.2 million (2019: €780.0 million), particularly due to higher volumes in the second half of the year.

» For further information on the business divisions, please refer to the Segments section starting on page 68.

wacker generated the majority of its sales outside of Germany. International sales came in at €3.91 billion (2019: €4.13 billion), accounting for 83 percent of the total.

» For further information, please refer to the Regions section starting on page 70.

b.17 Year-over-Year Sales Comparison € million

Group ebitda at €666.3 Million, with ebitda Margin of 14.2 Percent

Group ebitda declined 15 percent year over year, coming it at €666.3 million (2019: €783.4 million). The ebitda margin of 14.2 percent was lower than in the previous year (2019: 15.9 percent). Prior-year ebitda included special income in insurance compensation for the damage incurred following the incident at the Charleston (usa) site in 2017. wacker recognized this special income of €112.5 million under cost of goods sold. Adjusted for this amount, ebitda totaled €670.9 million in 2020. Measured on a comparable basis, ebitda fell 1 percent year over year. Despite the marked decline in sales in the second quarter due to the coronavirus pandemic, wacker reduced its cost of goods sold and functional costs thanks to savings made in current non-personnel costs and to lower raw-material costs. That had a positive effect on ebitda. The efﬁciency program also includes job reductions. wacker set aside €48.0 million for voluntary termination beneﬁts in the fourth quarter. These costs had a negative impact on ebitda.

A positive factor inﬂuencing ebitda was the Group's income from investments in joint ventures and associates, which amounted to €34.9 million (2019: €54.3 million). Investment income from Siltronic contributed €32.7 million (2019: €51.4 million) to the result from investments in joint ventures and associates.

» For further information on the business divisions, please refer to the Segments section starting on page 68.

Group sales,	Sales-volume and	Price effects	Exchange-rate effects	Group sales,
full-year 2019	product-mix effects	full-year 2020
4,928	4,692
-38	-150
-48

b.18 Reconciliation of ebitda to ebit

€ million

EBITDA

Depreciation / amortization and (reversals of) impairments of ﬁxed assets

EBIT

-403.5

ebit Reaches €262.8 Million

2020

2019

Change in %

666.3

783.4

-14.9

-1,319.7 -536.3

- 69.4

262.8

n.a.

Group earnings before interest and taxes (ebit) totaled €262.8 million in the reporting period (2019: €-536.3 million), yielding an ebit margin of 5.6 percent (2019: -10.9 percent). The negative prior-year ebit was attributable to an impairment charge of €760.0 million recognized on wacker polysilicon's ﬁxed assets because of low polysilicon prices. In 2020, depreciation and amortization totaled €403.5 million (2019: €1.32 billion, including impairment charge).

b.19 Reconciliation of ebit to Net Result for the Period

€ million

EBIT

Financial result

Income before income taxes

Income taxes

Net result for the year

Of which

Attributable to Wacker Chemie AG shareholders

Attributable to non-controlling interests

Earnings per share (€) (basic / diluted)

Average number of shares outstanding (weighted)

2020

2019

262.8 - 44.9

-536.3 -54.9

217.9 -15.6

-591.2 -38.4

202.3 - 629.6
189.2 - 642.6
13.1
13.0
3.81 -12.94

49,677,983

Cost of Goods Sold Lower Year over Year

Change in %

n.a. -18.2

n.a. -59.4

n.a.

0.8

n.a.

At €869.9 million, gross proﬁt from sales was 8 percent higher than a year earlier (2019: €803.2 million). The cost of goods sold came in at €3.82 billion (2019: €4.12 billion). The gross margin was 18.5 percent (2019: 16.3 percent). wacker

reduced the cost of goods sold by means of efﬁciency gains, with lower raw-material and energy costs also having a positive effect. The prior-year ﬁgure for cost of goods sold included insurance compensation of €112.5 million posted in September 2019 for the incident at the Charleston site. Inventory valuation adjustments increased the cost of goods sold by €22.5 million (2019: €46.3 million). The Group's cost-of-sales ratio declined from 84 percent to 81 percent.

Substantial Decline in Functional Costs

Other functional costs (selling, r&d and general admin-istrative expenses) dropped 7 percent year over year to €586.7 million (2019: €633.4 million). This decline stemmed chieﬂy from a reduction in non-personnel and travel costs and from efﬁciency gains across all departments.

Other Operating Income and Expenses

In 2020, the balance of other operating income and expenses was €-57.4 million (2019: €-760.4 million). Other operating expenses included €48.9 million for termination benefits under the voluntary program. Most of these beneﬁts will be paid out in 2021. In the previous year, other operating expenses had included an impairment charge of €760 million on wacker polysilicon's ﬁxed assets. Foreign currency losses of €-7.8 million (2019: €-12.7 million) lowered other operating income and expenses.

Result from Investments

Due to lower investment income from Siltronic ag, the result from investments in joint ventures and associates fell, coming in at €34.9 million (2019: €54.3 million). Investment income from Siltronic was €32.7 million (2019: €51.4 million).

Financial and Net Interest Result wacker's financial result improved year over year, amounting to €-44.9 million (2019: €-54.9 million). Interest income was €8.1 million (2019: €10.6 million) and interest expenses reached €22.0 million (2019: €20.3 million). The net interest result was thus €-13.9 million (2019: €-9.7 million). wacker took on further ﬁnancial liabilities in 2020 in order to enhance its liquidity.

The other ﬁnancial result was €-31.0 million (2019: €-45.2 mil- lion) and included lower interest-rate effects from provisions for pensions and other provisions as well as exchange-rate effects and the cost of derivative ﬁnancial instruments used to hedge Group loans.

Income Taxes wacker reported tax expenses of €15.6 million for 2020 (2019: €38.4 million). The Group's effective tax rate was 7.1 percent (2019: 22.7 percent, adjusted for the impairment charge of €760 million). Recognized after tax, the investment income from Siltronic ag, which formed part of pre-tax income, reduced the effective tax rate, as did tax-free income and taxes relating to other periods.

Group Net Income

As a result of the effects mentioned, Group net income was €202.3 million, compared with a net loss of €-629.6 million in the previous year.

Return on Capital Employed (roce)

The return on capital employed (roce) sets earnings before interest and taxes (ebit) in relation to the capital employed for business activities. Investment income from Siltronic and the corresponding carrying amount in equity are not included when calculating roce.

In the reporting year, roce was 5.6 percent (2019: -11.3 percent). The main reason for this rise was a marked improvement in ebit. Capital employed declined due to higher working capital, decreasing from €5,183.5 million to €4,111.4 million in the year under review.

Segments wacker silicones

Sales at wacker silicones decreased substantially in 2020. At €2.24 billion (2019: €2.45 billion), they were down 8.5 percent year over year. The decline was attributable to lower prices for standard silicones, to reduced volumes and to negative exchange-rate effects. In regional terms, wacker silicones' sales fell in the Americas, Asia and Europe.

ebitda also decreased year over year. It fell 19.0 percent to €387.8 million (2019: €478.5 million) due to a signiﬁcant fall in volumes and prices for standard silicones and to reduced volumes in general. The ebitda margin was 17.3 percent (2019: 19.5 percent).

Capital expenditures dropped 49.9 percent year over year to €96.9 million (2019: €193.6 million). The funds were invested in new facilities, predominantly at sites in Germany. As of December 31, 2020, the division had 5,076 employees (Dec. 31, 2019: 5,267).

b.20 Key Data: wacker silicones

€ million	2020	2019	2018	2017	2016
Total sales	2,244.0	2,453.0	2,499.6	2,200.2	2,001.1
EBITDA	387.8	478.5	616.6	444.9	361.2
EBITDA margin
(%)	17.3	19.5	24.7	20.2	18.1
EBIT	276.8	375.3	536.7	362.2	280.8
Capital
expenditures	96.9	193.6	222.7	142.8	88.6
R&D expenses	60.2	65.0	60.9	58.6	53.7
Employees
(December 31,
number)	5,076	5,267	5,114	4,737	4,566

wacker polymers

Sales at wacker polymers fell by a slight 1.3 percent in 2020, coming in at €1.30 billion (2019: €1.32 billion). Lower prices and negative exchange-rate effects dampened sales growth. While the division sold higher volumes of dispersible polymer powders, its volumes for dispersions decreased.

wacker polymers' sales in Europe and Asia were on par with the prior year, while sales in the Americas fell. Polymer applications for the construction industry performed well in 2020.

Capital expenditures climbed year over year to €19.9 million (2019: €13.2 million). That was a rise of 50.8 percent. One investment focus was the new biologics production plant in Amsterdam.

ebitda came in at €270.5 million, up 39.3 percent versus 2019 (€194.2 million). The rise was prompted by an improvement in the cost of goods sold and by raw-material prices that were lower than a year earlier. The ebitda margin was 20.8 percent (2019: 14.8 percent).

Capital expenditures declined signiﬁcantly versus the prior year, amounting to €35.6 million (2019: €62.4 million). These expenditures focused on capacity expansion at Nanjing (China) and on Germany. The number of employees as of December 31, 2020, was lower at 1,540 (Dec.31, 2019: 1,630).

b.21 Key Data: wacker polymers

€ million	2020	2019	2018	2017	2016
Total sales	1,298.5	1,315.1	1,282.2	1,245.1	1,194.8
EBITDA	270.5	194.2	147.7	205.6	261.0
EBITDA margin
(%)	20.8	14.8	11.5	16.5	21.8
EBIT	229.3	153.7	108.0	168.1	223.7
Capital
expenditures	35.6	62.4	71.0	48.1	37.5
R&D expenses	32.2	33.9	30.0	29.3	30.3
Employees
(December 31,
number)	1,540	1,630	1,600	1,539	1,484

wacker biosolutions

In 2020, wacker biosolutions lifted its sales 1.3 percent to €246.1 million (2019: €243.0 million), chieﬂy due to volume growth in biologics and cyclodextrins. Reduced volumes for a number of products had a dampening effect on sales growth. In regional terms, sales were very positive in Europe, but declined in the Americas and Asia.

At €38.1 million, ebitda was signiﬁcantly higher year over year (2019: €31.1 million). The increase was due to volume growth and an improved cost structure. The ebitda margin was 15.5 percent (2019: 12.8 percent).

As of December 31, 2020, the division had 764 employees (Dec. 31, 2019: 754).

b.22 Key Data: wacker biosolutions

€ million	2020	2019	2018	2017	2016
Total sales	246.1	243.0	227.0	205.9	206.4
EBITDA	38.1	31.1	23.5	37.5	37.0
EBITDA margin
(%)	15.5	12.8	10.4	18.2	17.9
EBIT	21.6	14.0	9.8	26.1	25.7
Capital
expenditures	19.9	13.2	17.9	15.7	9.1
R&D expenses	5.7	6.4	6.3	6.0	6.2
Employees
(December 31,
number)	764	754	709	533	510

wacker polysilicon

wacker polysilicon's sales were slightly higher in 2020, coming in at €792.2 million (2019: €780.0 million). That was a gain of 1.6 percent. The chief reasons for the increase were volume growth and a better product mix. Asia was once again the division's key sales region.

ebitda at wacker polysilicon totaled €4.7 million (2019: €56.9 million), down 91.7 percent year over year. When the prior-year ﬁgure is adjusted for the special income of €112.5 million in insurance compensation for the Charleston incident, ebitda actually increased by about €60.3 million. In particular, further improvements in the cost of goods sold had a positive impact on ebitda. The ebitda margin was 0.6 percent (2019: 7.3 percent).

wacker polysilicon's capital expenditures were once again lower at €24.9 million (2019: €35.3 million). The number of employees declined to 2,180 (Dec. 31, 2019: 2,333).

b.23 Key Data: wacker polysilicon

Regions

€ million

Total sales EBITDA

EBITDA margin (%)

EBIT

Capital expenditures

R&D expenses

Employees (December 31, number)

2020

2019

792.2

4.7

780.0 56.9

0.6

7.3

-147.8 -1,012.9

2018

2017 2016
823.5 72.4
1,124.0 1,095.5
290.4 285.9
8.8
25.8 26.1

-257.3 - 87.6 -117.1

24.9 21.3

wacker's operations are highly international. Of the Group's €4.69 billion in sales (2019: €4.93 billion), 83.3 percent came from international business (2019: 83.8 percent). Germany accounted for 16.7 percent.

Sales Decline in Asia

2,180

35.3 30.0

2,333

62.2 32.8

2,549

57.6 130.0
22.6 18.3
2,538 2,490

In 2020, wacker's sales in Asia decreased by 4.3 percent to €1.69 billion (2019: €1.76 billion). Sales in Greater China totaled €1.02 billion (2019: €1.05 billion), marginally lower than a year earlier. wacker's sales in Southeast Asia declined markedly. Asia accounted for 36.0 percent of Group sales (2019: 35.8 percent).

Other

Sales reported under "Other" totaled €128.0 million in 2020 (2019: €157.6 million), down 18.8 percent year over year.

b.24 Divisional Shares in External Sales

2.8Other

27.3wacker polymers

5.2wacker biosolutions

16.9wacker polysilicon

"Other" ebitda amounted to €-35.3 million in the reporting year (2019: €22.4 million). The decline was due to reduced investment income from Siltronic and to one-off costs in connection with the Shape the Future program.

"Other" ebit was €-117.6 million (2019: €-66.7 million).

As of December 31, 2020, "Other" had 4,723 employees (Dec.31, 2019: 4,674). This wacker segment includes site management and the employees at infrastructure units in Burghausen and Nünchritz, and at the Group's corporate departments.

Business Also Weaker in Europe wacker's business slowed in Europe. Sales decreased 3.8 percent to €1.93 billion (2019: €2.00 billion). The region delivered 41.1 percent of Group sales (2019: 40.7 percent).

b.25 External Sales by Customer Location

€ million

Europe

The Americas Asia

Other regions Total sales

2020

2019

2018

1,927.2 832.9 1,687.7 244.4 4,692.2

2,004.0

2,096.7

919.5 1,763.8 240.3 4,927.6

878.2 1,756.9

247.0 4,978.8

Sales in the Americas Fall Signiﬁcantly

2017

2016

1,970.4 1,850.9

838.7 825.6

1,886.2 1,751.6

228.9 206.1

4,924.2

4,634.2

Sales in the Americas declined 9.4 percent to €832.9 million (2019: €919.5 million) and accounted for 17.8 percent of Group sales (2019: 18.7 percent).

b.26 External Sales by Group Company Location

€ million

Europe

The Americas Asia

Other regions Consolidation Total sales

2020

2019

3,798.2 1,134.6 918.2 11.2

3,977.5 1,249.7 980.5 13.1

-1,170.0 -1,293.2

2018

2017

2016

4,018.3 1,106.1 979.5 13.0

4,029.5 3,825.2
1,167.7 1,116.2
859.5 731.2
12.1 10.4

-1,138.1 -1,144.6 -1,048.8

4,692.2

4,927.6

4,978.8

4,924.2

4,634.2

Other Regions

Sales in the "other regions" of the world rose sightly, up 1.7 percent to €244.4 million (2019: €240.3 million).

Net Assets

wacker's total assets were 7 percent higher compared with December 31, 2019. Climbing €459.5 million, they amounted to €6.95 billion as of December 31, 2020 (Dec.31, 2019: €6.49 billion). The biggest changes related to liquidity. Due to higher cash inﬂows from operating activities and to additional bank loans raised, wacker recognized liquid assets of €1.34 billion as of December 31, 2020. In December 2020, wacker accepted an offer from GlobalWafers Co. Ltd., Taiwan, to transfer wacker's remaining shares in Siltronic to GlobalWafers in the event the latter's takeover bid for the company is successful. For this reason, we reclassiﬁed this equity-accounted investment to assets held for sale. On the equity and liabilities side, provisions for pensions increased due to lower discount rates. This caused a marked drop in equity.

b.27 Asset and Capital Structure

2020

Total Balance Sheet €6,950.5 million

b.28 Trends: Assets

€ million	2020	2019
Intangible assets, property, plant and
equipment, investment property and
right-of-use assets	2,527.8	2,801.8
Investments in joint ventures and
associates accounted for using the
equity method	49.1	640.4
Other noncurrent assets	794.6	700.8
Noncurrent assets	3,371.5	4,143.0
Inventories	879.5	979.8
Trade receivables	627.0	631.5
Other current assets	2,072.5	736.7
Current assets	3,579.0	2,348.0
Total assets	6,950.5	6,491.0

Fixed Assets Decline Due to Reclassiﬁcation of Shares in Siltronic

Relative to the end of the previous year, ﬁxed assets (including equity-accounted investments) fell €865.0 million to €2.58 billion (Dec.31, 2019: €3.44 billion). Property, plant and equipment declined to €2.39 billion (Dec.31, 2019: €2.64 billion) as a result of depreciation. Current depreciation/amortization amounted to €403.5 million. Capital expenditures decreased to €224.4 million (2019: €379.5 million). Investments were focused on wacker

2019

Total Balance Sheet €6,491.0 million

Assets

Equity and liabilities

AssetsEquity and liabilities

silicones and wacker polymers, as well as on infrastructure measures. wacker responded ﬂexibly to the economic risks associated with the coronavirus pandemic by postponing a portion of its capital expenditures. Over half of investment spending was in Germany. Exchange-rate effects decreased the carrying amount of property, plant and equipment by about €100 million. The effects stemmed from the rise in value of the euro against the us dollar in the course of the year.

As of December 31, 2020, working capital was down 14 percent year over year, coming in at €1.08 billion (Dec.31, 2019: €1.26 billion). The 10 percent reduction in inventories was a factor in this decrease. Trade receivables were almost unchanged at €627.0 million. Trade payables rose 20 percent due to a higher procurement volume in the second half of 2020 and extended payment terms. Prior to that, wacker had scaled back its procurement volume in q2 because of a decline in sales and production volumes.

On the assets side, a total of €110.8 million was recognized in right-of-use assets from leases (Dec.31, 2019: €119.8 million). At the same time, €122.8 million was recognized in ﬁnancing liabilities from leases (Dec.31, 2019: €137.8 million). wacker's investment property included right-of-use assets of €1.2 million (Dec.31, 2019: €7.1 million) for long-term sublease agreements for parts of its Munich headquarters.

On December 9, 2020, Wacker Chemie ag signed an agreement with GlobalWafers Co. Ltd., a Taiwanese competitor of Siltronic ag, to sell wacker's stake of 30.83 percent in Siltronic as part of a takeover bid by GlobalWafers. The offer period ended on February 10, 2021, with more than 50 percent of Siltronic's shareholders accepting the offer price of €145 per share. Effective December 31, 2020, wacker reclassiﬁed its investment of €550.4 million in Siltronic to assets held for sale. As a result, wacker's equity-accounted investments are now lower at €49.1 million (Dec.31, 2019: €640.4 million).

Other Noncurrent Assets

Other noncurrent assets totaled €794.6 million as of December 31, 2020 (Dec.31, 2019: €700.8 million), up 13 percent year over year. Deferred tax assets rose markedly, from €632.9 million to €770.8 million, reﬂecting higher provisions for pensions. A repayment of €50.8 million was posted on a loan made to a joint venture.

Working Capital Down 14 Percent

Current assets grew 52 percent year over year and amounted to €3.58 billion (Dec.31, 2019: €2.35 billion). The increase was due mainly to the build-up of liquid assets. Inventories decreased 10 percent, from €979.8 million to €879.5 million. The decline stemmed chieﬂy from heightened demand for our products in the second half of 2020 following a steep pandemic-induced drop in sales in q2 2020.

b.29 Working Capital

Change
€ million	2020	2019	in %
Trade receivables	627.0	631.5	- 0.7
Inventories	879.5	979.8	-10.2
Trade payables	- 424.2	-355.0	19.5
Working capital	1,082.3	1,256.3	-13.9

Liquidity Increases to €1.34 Billion

Securities, fixed-term deposits, and cash and cash equivalents are major components of other current assets. Current securities and fixed-term deposits amounted to €712.0 million at the end of q4 2020 (Dec.31, 2019: €109.4 million) after wacker invested liquid assets in funds and ﬁxed-term deposits. Cash and cash equivalents reached €626.0 million as of December 31, 2020 (Dec.31, 2019: €435.8 million). Total liquid assets (current and noncurrent securities, cash and cash equivalents) thus grew to €1.34 billion year over year (Dec.31, 2019: €545.2 million). That was a year-over-year increase of 145 percent. The rise resulted primarily from the decline in working capital and from the company scaling back its investing activities.

In June, wacker issued new promissory notes (German Schuldscheine) for €300 million (2019: €200 million). In q4 2020, on the other hand, the company made a special payment of €73.4 million to the wacker pension fund (2019: €70.7 million). Wacker Chemie ag's dividend payment of €24.8 million in q3 2020 (2019: €124.2 million) also reduced liquid assets. In the previous year, the €112.5 million in insurance compensation received for the damage incurred at the Charleston site in the usa beneﬁted liquidity.

b.30 Trends: Equity and Liabilities
€ million	2020	2019
Equity	1,691.8	2,029.0
Noncurrent provisions	2,947.2	2,507.9
Financing liabilities	1,322.7	1,049.0
Other noncurrent liabilities	162.5	152.8
Of which noncurrent
advance payments	71.1	61.0
Noncurrent liabilities	4,432.4	3,709.7
Financing liabilities	82.8	209.9
Trade payables	424.2	355.0
Other current provisions and liabilities	319.3	187.4
Current liabilities	826.3	752.3
Liabilities	5,258.7	4,462.0
Total equity and liabilities	6,950.5	6,491.0
Capital employed	4,111.4	5,183.5
Equity Ratio at 24.3 Percent

Group equity declined substantially year over year. It amounted to €1.69 billion as of December 31, 2020 (Dec.31, 2019: €2.03 billion). The corresponding equity ratio was 24.3 percent (Dec. 31, 2019: 31.3 percent). The net proﬁt for the year increased retained earnings by €202.3 million, whereas the prior year had ended with a net loss of €629.6 million. The dividend payment of Wacker Chemie ag reduced retained earnings by €24.8 million. The change in provisions for pensions, which was recognized in other comprehensive income, lowered other equity items by €340.8 million. Currency translation had a negative impact of €179.8 million on equity. The share of equity attributable to non-controlling interests amounted to €66.6 million as of the reporting date (Dec.31, 2019: €62.1 million).

Overall, other noncurrent liabilities were on par with the prior year at €162.5 million (Dec.31, 2019: €152.8 million). They mainly comprised contract liabilities in the shape of advance payments received and noncurrent income tax liabilities.

Trade payables rose markedly, to €424.2 million (Dec.31, 2019: €355.0 million). The main causes were higher fourth- quarter procurement volumes and extended payment terms.

Other current provisions and liabilities climbed 70 percent to €319.3 million (Dec.31, 2019: €187.4 million), reﬂecting the rise in personnel liabilities and provisions for pensions. Performance-based compensation for 2020 was much higher than a year earlier and increased liabilities. Further, €48.0 million was recognized in provisions for termination beneﬁts relating to a voluntary program. Current advance payments received amounted to €46.7 million as of the reporting date (Dec.31, 2019: €46.3 million).

Financing Liabilities Rise

Current and noncurrent ﬁnancing liabilities rose €146.6 million to €1.41 billion as of the reporting date (Dec.31, 2019: €1.26 billion). Exchange-rate effects reduced ﬁnancing liabilities by around €35 million. In q2 2020, wacker took out new loans totaling €300 million at favorable conditions, taking advantage of the prevailing low interest rates. Financing liabilities are mostly denominated in euros and us dollars. Fixed interest is payable on the majority of the ﬁnancing liabilities.

As of December 31, 2020, wacker recognized lease liabilities of €122.8 million (Dec. 31, 2019: €137.8 million).

Liabilities Increase Amid Higher Provisions for Pensions wacker's liabilities grew by €796.7 million compared with the previous year, up 17.9 percent to €5.26 billion. Provisions for pensions climbed €438.1 million year over year and totaled €2.71 billion. This increase was attributable to lower discount rates. The discount rates were 0.70 percent in Germany (Dec. 31, 2019: 1.25 percent) and 2.29 percent in the usa (Dec. 31, 2019: 3.16 percent). Other noncurrent provisions mainly comprised anniversary provisions, and provisions for environmental protection and phased early retirement.

For further information on our ﬁnancing liabilities, please refer to Note 16 in the Notes to the consolidated ﬁnancial statements. For further information on the principles and goals of ﬁnancial management, please refer to Note 13 in the Notes to the consolidated ﬁnancial statements.

Financial Position

Financial Analysis

The Group's cash ﬂow is a key instrument of liquidity management. Net cash ﬂow serves as the internal indicator for measuring the liquidity of operating activities.

Financial-Management Principles and Goals

Our key ﬁnancial-management goal is to secure wacker's ﬁnancial strength over the long term. The central task is to sufﬁciently cover the ﬁnancial needs of our operations and investment projects. Financial management at wacker comprises capital structure management, cash and liquidity management, and the management of market-price risk (currencies, interest rates). Capital structure management involves shaping the capital structure of the Group and its subsidiaries.

In liquidity management, wacker continuously monitors cash ﬂows from operations and from ﬁnancial transactions. wacker covers the resulting liquidity needs via suitable instruments such as intra-Group lending, or through external loans from local banks.

Net Cash Flow

In 2020, wacker clearly achieved its long-term policy of ﬁnancing investments essentially from its own cash ﬂow. Net cash ﬂow totaled €697.7 million in 2020 (2019: €184.4 million).

b.31 Net Cash Flow

€ million

Cash ﬂow from operating activities (gross cash ﬂow) Cash ﬂow from long-term investing activities before securities

Net cash ﬂow

2020

2019

873.7 605.0
-176.0 - 420.6

Change in %

44.4

697.7

184.4

-58.2 >100

wacker pursues a careful ﬁnancing policy that targets a balanced ﬁnancing portfolio, a diversiﬁed maturity portfolio and a comfortable liquidity buffer. Our aim is to maintain our corporate ﬁnancial structures so that the Group's credit rating remains - at a minimum - in the investment-grade range.

Net cash ﬂow is deﬁned as the sum of cash ﬂow from operating activities and cash ﬂow from long-term investing activities (excluding securities).

b.32 Net Cash Flow € million

wacker's key source of liquidity is the operations of its Group companies and the resulting incoming payments. This centralized system of internal transfers reduces our interest expense and the need for debt ﬁnancing. The purpose of managing market-price risks is to limit the effects of ﬂuctuations in exchange rates and interest rates on the Group's bottom line.

Financing Measures in 2020

In April 2020, wacker repaid a further installment of us$ 130 million of its private placement in the United States. Promissory notes (German Schuldscheine) of €300 million were ﬁnalized in June 2020, with maturities of four and six years. These promissory notes replace short-term interim ﬁnancing of €250 million. In the fourth quarter, wacker signed a European Investment Bank (eib) loan for €290 million. This loan has a maturity of ﬁve years from utilization and will be drawn in 2021 or 2022.

Gross Cash Flow

2020

2019 2018

184.4

86.2

2017 358.1

2016 361.1

697.7

In 2020, cash ﬂow from operating activities (gross cash ﬂow) totaled €873.7 million (2019: €605.0 million). Aside from the net income for the year of €202.3 million (2019: €-629.6 million), gross cash ﬂow was improved by positive changes of €100.0 million in working capital (2019: higher cash outﬂows of €35.4 million). Operating cash ﬂow was increased by the depreciation/amortization and impairments of €403.5 million (2019: €1.32 billion) included in net income. In the previous year, depreciation/amortization and impairments had included the impairment charge on wacker polysilicon's

ﬁxed assets. The improvement in working capital was due primarily to lower inventories and to the higher level of trade payables at year-end. The proﬁt of €34.9 million from investments in joint ventures and associates (2019: €54.3 million) included in net income for the year reduced gross cash flow. Siltronic ag's dividend payment of €27.8 million lifted gross cash ﬂow. The special payment of €73.4 million to the pension fund also inﬂuenced gross cash ﬂow.

b.33 Cash Flow from Operating Activities (Gross Cash Flow)

€ million

2020873.7

2019 605.0

2018 509.6

2017 613.0

2016 621.0

Cash Flow from Long-Term Investing Activities

The Group's investment projects are the key factors inﬂuencing cash ﬂow from long-term investing activities. In 2020, cash payments of €-226.5 million for investments were less than the prior-year ﬁgure (2019: €-415.1 million). The wacker Group reduced its investment spending in the wake of the coronavirus pandemic. More than half of the reported capital expenditures were made in Germany. wacker received a partial repayment of €50.1 million on a strategic loan made to equity-accounted Dow Siloxanes (Zhangjiagang) Co. Ltd. Cash ﬂow from long-term investing activities amounted to €-176.0 million in 2020 (2019: €-420.6 million).

b.35 Net Financial Debt € million

Net ﬁnancial debt as of Dec. 31, 2019

Cash ﬂow from operating activities (gross cash ﬂow)Cash ﬂow from long-term investing activities before securities

b.34 Cash Flow from Long-Term Investing Activities

Before Securities

€ million

2020

2019 -420.6

2018 -423.4

2017

2016 -420.3

-176.0

-325.0

Cash Flow from Financing Activities

Cash ﬂow from ﬁnancing activities totaled €117.1 million in the reporting year (2019: €-26.2 million). It reﬂects the impact of external ﬁnancing liabilities for a net amount of €177.1 million (2019: €142.0 million). Wacker Chemie ag's dividend payment of €24.8 million led to a cash outﬂow in the third quarter. Repayments of lease liabilities amounted to €-31.8 million (2019: €-34.8 million).

Cash and Cash Equivalents

Cash and cash equivalents increased to €626.0 million (2019: €435.8 million). Liquidity from cash and from current and noncurrent securities rose markedly, from €545.2 million to €1,338.0 million.

High Liquidity Reduces Net Financial Debt wacker deﬁnes net ﬁnancial debt - which is one of its ﬁnancial indicators - as the balance of gross ﬁnancial debt (current and noncurrent ﬁnancing liabilities) and existing noncurrent and current liquidity, consisting of securities, cash and cash equivalents. Net ﬁnancial debt amounted to €67.5 million as of December 31, 2020 (Dec.31, 2019: €713.7 million), down 91 percent year over year.

Dividend paid,

Wacker Chemie AG

Lease liabilitiesExchange-rate effects, changes in scope of consolidation, and other

Net ﬁnancial debt as of Dec. 31, 2020

873.7

-713.7

The decrease in net ﬁnancial debt is primarily attributable to the cash inﬂows from operating activities and to lower investment spending.

Aside from the ﬁnancing liabilities disclosed in the report on net assets, wacker has at its disposal an adequate amount (more than €600 million) in unused lines of credit with maturities of over one year. Our existing lines of credit provide us with enough ﬁnancial scope to secure the Group's continued growth. The Group does not engage in any off-balance-sheet ﬁnancing.

Rating

As wacker has sufﬁcient lines of credit with banks and does not issue rated ﬁnancing instruments such as bonds and commercial paper, it has not published a credit rating thus far.

Proposal on Appropriation of Proﬁts

In 2020, Wacker Chemie ag posted a retained proﬁt of €1,198.6 million under German Commercial Code accounting rules. The Executive and Supervisory Boards will propose a dividend of €2.00 per share at the Annual Shareholders' Meeting. Based on the number of shares entitled to dividends as of December 31, 2020, the total cash dividend corresponds to a payout of €99.4 million. Calculated in relation to wacker's average share price in 2020, the dividend yield is 2.9 percent.

Executive Board Statement on Business Development and on the Group's Economic Position

In 2020, wacker's operations were characterized by the worldwide economic impact of the coronavirus pandemic.

Sales were down substantially in the second quarter, but picked up again overall in the second half of 2020. Among our chemical divisions, wacker silicones posted the steepest decline in sales, due to reduced volumes and to lower average prices for standard silicones. Sales at wacker polymers came in only slightly lower than in the previous year, while wacker biosolutions managed to grow its sales slightly. wacker polysilicon also recorded a slight increase in sales, underpinned by volume growth.

Earnings in the chemical divisions were depressed by lower average sales prices for some product groups, as well as by reduced volumes and negative exchange-rate effects. Positive effects on ebitda, on the other hand, came from lower raw-material costs and from measures to improve productivity. roce improved signiﬁcantly year over year. wacker polysilicon's ebitda was slightly positive in 2020, primarily due to successful cost-cutting measures and volume growth.

Personnel expenses rose, both in absolute terms and as a percentage of sales, due to higher expenses for pensions and variable compensation. Raw-material costs declined in absolute terms and as a proportion of sales. Energy costs were lower year over year, especially because of the decline in natural-gas prices. Depreciation and amortization were substantially lower, both in absolute terms and as a percentage of sales.

At €1.69 billion, Group equity was down €337.2 million year over year. This was mainly caused by the recognition in other comprehensive income of changes in provisions for pensions. The equity ratio declined from 31.3 percent to 24.3 percent. The Group's net ﬁnancial debt decreased signiﬁcantly. Substantial reductions in current assets, coupled with signiﬁcantly reduced investment spending, were among the causes of that decline. Net ﬁnancial debt amounted to €67.5 million as of December 31, 2020. Capital expenditures decreased signiﬁcantly year over year. At €224.4 million, they were clearly below depreciation/amortization. Net cash ﬂow of €697.7 million was substantially higher than in the previous year.

Given the coronavirus pandemic's severe impact on the global economy, wacker performed well overall in 2020. The composition of the portfolio once again proved its worth in the present crisis, enabling the company to at least partially offset weaknesses in speciﬁc industries.

Further Information on r&d, Employees, Procurement, Production, Sales and Marketing

We invested in new laboratories and equipment, as well as in pilot facilities and pilot reactor technologies. We further automated and digitalized the work processes at our international r&d competence centers. At the Nünchritz site, we built a pilot facility for an innovative resin technology.

b.37 Investments in r&d Facilities € million

Research and Development

wacker's research and development (r&d) activities pursue three goals:

We contribute to our customers' market success by searching for solutions that meet their needs.

We optimize our methods and processes in order to lead in technology and be sustainably proﬁtable. We concentrate on creating innovative products and applications for new markets and on serving highly promising fields, such as energy storage, renewable energy generation, electromobility, modern construction, and biotechnology.

2020	5.7
2019	5.6
2018
2017	5.5
2016	5.4

6.7

The development of products and production methods accounted for a large share of r&d costs. wacker is active in many highly promising ﬁelds. The key ones range from energy recovery and storage, electronics, automotive and construction through to household products, medicine, health care, cosmetics, food and biotechnology.

wacker's r&d rate - research and development spending as a percentage of Group sales - reached 3.3 percent, down slightly from 2019 (3.5 percent).

b.36 r&d Expenses

€ million

Research and development expenses

2020

2019

2018

2017

2016

156.6

173.3

164.6

153.1

150.0

In 2020, we ﬁled 91 patent applications (2019: 99). Worldwide, our portfolio contains about 4,200 active patents, with 1,400 patent applications currently pending. We license r&d know-how from third parties to a limited extent. The results of our research partnerships with universities are usually made available to us free of charge or by the transfer of rights of use.

b.38 Breakdown of r&d Expenditures in 2020 %

17Basic research

20Technology development

24Process and product optimization

The aim of our New Solutions initiative is to develop technically and commercially superior solutions for new applications. We combine our company-wide expertise and apply it across interfaces as needed.

Some of our research projects are subsidized by government grants. In the reporting period, these projects were focused on process-speciﬁc topics, electromobility and lightweight construction.

Research and Development at Two Levels wacker conducts r&d at two levels: centrally at our Corporate r&d department and locally at our business divisions, where the focus is on speciﬁc applications. Corporate r&d coordinates activities on a company-wide basis and involves other departments. We use Project System Innovation (psi) software to steer the Group's product and process innovations by systematically evaluating customer beneﬁt, sales potential, proﬁtability and technology position.

Strategic Collaboration with Customers and Research Institutes

We collaborate with customers, scientiﬁc institutes and universities to achieve research successes more quickly and efﬁciently. These partnerships cover topics such as electricity storage, construction applications, and process simulation and development.

Back in 2006, Wacker Chemie ag joined forces with the Technical University of Munich (tum) to establish the wacker Institute of Silicon Chemistry, located on tum's Garching research campus near Munich, and has funded the institute ever since.

Research Work at wacker

In 2020, the Group had 752 r&d staff (2019: 766), accounting for 5.3 percent of the workforce (2019: 5.2 percent). Of these, 590 were employed at r&d units in Germany and 162 abroad.

Alexander Wacker Innovation Award

The Alexander Wacker Innovation Award, a €10,000 prize bestowed since 2006, is presented at the annual wacker Innovation Days research symposium, which was held as an online event in the reporting year. The recipients were SeungA Lee and JungEun Lee from wacker's Center of Excellence Electronics in Seoul, Korea, who had developed silicone resins for optical-bonding applications. Their work enables the creation of customized solutions for the burgeoning market in high-quality non-reﬂective displays. In optical bonding, silicone gels bond the thin cover glass with the electronic layers beneath. Non-reflectivity is achieved by ﬁlling the gap with a gel, displacing air in the process.

For the ﬁrst time ever, wacker also presented a Lifetime Achievement version of this award to recognize outstanding performance during an individual's career. This award went to an Indian researcher, Amit Paul of wacker Metroark

Chemicals in Kolkata, who succeeded in developing water-free mixtures of silane oligomers and surfactants for treating cement compounds - the resulting hydrophobic cement gives concrete and mortar compounds water- repellent properties. One of his other achievements was to develop a silicone ﬂuid emulsion of low particle size, which is now used in hair-care products and in high-performance additives for cosmetics, varnish formulations and crop protection.

Selected Corporate r&d Research Topics

Our corporate r&d work is focused on projects to advance sustainability, such as the circular economy and renewable resources. We are conducting research into the use of sustainable methods to continuously reduce the carbon footprint of our products and production methods. We are working to develop biodegradable polymer components made from CO2 for use in silicone products and for vinyl acetate-ethylene (vae) copolymers. In these areas, Corporate r&d is collaborating very closely with wacker silicones and wacker polymers. To enhance the efﬁciency of our research, we also participate in publicly funded projects, such as the Kopernikus project P2X. As part of this project, we are investigating technologies to convert electricity from renewable sources into other forms of energy, such as chemicals and synthetic building blocks.

»https://www.kopernikus-projekte.de/en/projects/p2x/

One focus of our basic research is the chemistry of low-valence silicon and germanium for use in industrial applications (such as catalysis and synthesis). Here we are working closely with the wacker Institute of Silicon Chemistry at the tum.

The catalysts required for crosslinking silicones contain precious metals like platinum. These not only make the manufacturing process expensive, but also remain present in the silicone. In the reporting year, researchers at the wacker Institute of Silicon Chemistry and at the wacker Group successfully cured silicone rubber compounds without resorting to precious-metal catalysts. Rather than working with the standard crosslinkers, they instead used silicone building blocks containing silirane units. The silicone elastomers produced in this way display exceptional purity and contain neither volatile substances nor traces of precious metals.

International partners are testing our highly innovative silicon-based anode materials for suitability in such applications as consumer electronics and batteries to propel electric vehicles. In collaboration with researchers at our British associate Nexeon Ltd., we are stepping up work on silicon-based materials for high-performance batteries.

One focus of our research focus is on biotechnology processes and bioengineered products. Our third- generation esetec® strains have enabled us, for the ﬁrst time, to selectively trigger the release of correctly folded pharmaceutical proteins from a bacterial cell. We are developing just such a process for the production of nucleic acids - an important class of biopharmaceuticals. We are using our biotechnological production platforms to develop new manufacturing processes for functional additives to supply the fast-growing market for alternative, non-animal food proteins. Our modern systems biology has made possible the sustainable, cost-effective manufacture of the amino acid L-cysteine. Taking that as our basis, we are working with partners to develop fermentation methods to make naturally occurring compounds containing sulfur for use as food and food additives.

Selected Divisional Research Projects

Sustainability in general and biodegradability in particular continue to grow in importance. Our researchers at Burghausen are working on silicone systems that feature materials or organic components that are biodegradable. At the Shanghai technical center, wacker silicones is researching thermal interface materials, especially those for the electronics industry. During the reporting year, one point of focus at the Burghausen technical center was on ﬁber composites for thermally stable refractory components. Made from carbon or glass fibers and silicone resins, these are used in lightweight construction. wacker silicones developed printable elastic electrode materials for sensor applications. Our resin-ﬁlled, optically clear silicone systems for optical bonding enhance the functionality of display screens.

We are continuing our research into uv-activated silicones, whose use is more energy-efﬁcient than thermal curing. At the research site in Ann Arbor, Michigan (usa), we are working on silicone systems for the selective release of active ingredients in wound care. We are using molecule simulations and big-data analyses to digitalize our research activities. We employ innovation methods like Design Thinking in inter-disciplinary High Innovation ImpacT ("hit") teams to assess whether our development projects can be implemented and marketed. In the reporting year, the hit teams concentrated on hygiene and the pandemic.

At wacker polymers, research remains centered on sustainable functional polymer binders for use in consumer goods and the construction industry. We are continuously improving products that are free of volatile organic compounds (vocs) and that enable the use of sustainable formulation components in a wide variety of materials. A particular focus is on renewable raw materials andfunctional polymer additives for manufacturing biodegradable materials. In the reporting period, we launched functionalized polymer dispersions, dispersible polymer powders and polymer resins, which our customers use to manufacture enhanced dispersion paints and high-performance composite materials. We introduced sustainable binders for adhesives and for cementitious building materials.

We are supporting the Karlsruhe Institute of Technology (kit) in building up an innovation platform for sustainable construction. Called "ChangeLab! wacker/kit Innovation Platform for Pioneering Sustainable Construction," this joint project is aimed both at kit students and at architects, engineers and construction experts. We want to forge stronger ties between research work and the construction sector's supply-chain stages by fostering the exchange of ideas and conceptual approaches in the ﬁelds of materials development and sustainable construction.

»https://changelab.exchange

At wacker biosolutions, research remains geared to strengthening the division's expertise in biotechnology and microbiology. Once the Covid-19 vaccine candidate CVnCoV developed by biopharmaceutical company CureVac N.V. has been approved, we will manufacture it at our Amsterdam site in line with gmp (Good Manufacturing Practice). We are continuously updating and improving our fermentation processes for the manufacture of high- quality biobased and natural ingredients for food and dietary supplements. The esetec® microbial production platform, which we are constantly evolving, allows our pharmaceutical customers to manufacture active proteins that are not easily accessible. In the reporting period, we developed manufacturing processes for live bacteria that our customers use as pharmaceutical actives. We are developing applications for our versatile cyclodextrins in the food, agriculture and pharmaceutical industries.

In the ﬁeld of solar modules, huge technological progress is being made at every stage of the supply chain, and this trend is reﬂected in continually rising cell efﬁciencies. The highest cell efﬁciencies are attainable only with the kind of hyperpure polycrystalline silicon that wacker polysilicon produces. Reference studies such as the International Technology Roadmap for Photovoltaics (itrpv) show efﬁciencies that now exceed 22 percent for monocrystalline solar cells produced with perc (passivated emitter rear cell) technology. Efﬁciency is a measure of how much of the radiant energy absorbed by a solar cell is transformed into electricity. High-efﬁciency monocrystalline cells (such as heterojunction or interdigitated back contact solar cells) achieve efﬁciencies of 23-25 percent. High-performance segments like these require wacker-quality polysilicon. In

Combined Management Report - Further Information on R&D, Employees, Procurement, Production, Sales and Marketing

the reporting year, we joined the Ultra Low-Carbon Solar Alliance (ULCSA). The international members of this US- based organization are committed to the deployment of photovoltaic components with a low carbon footprint.

»https://ultralowcarbonsolar.org/

B.40 Personnel Expenses

€ million	2020	2019	2018	2017	2016
Personnel
expenses	1,329.4	1,253.8	1,231.5	1,198.0	1,101.2

Employees

Slight Decrease in Workforce

WACKER's workforce decreased by 2.6 percent in 2020. German sites accounted for 70.7 percent of WACKER's employees and international sites for 29.3 percent.

To mitigate the economic effects of the coronavirus pandemic, WACKER introduced short-time work in several production-related and administrative units in Germany in the second quarter of the reporting year. At certain times between April and December 2020, almost 2,000 employees were working reduced hours at the Munich, Burghausen, Stetten and Nünchritz sites.

In October 2020, as part of WACKER's Shape the Future efﬁciency program, the company and employee represen- tatives reached an agreement on the framework for the planned job cuts. By the end of 2022, some 1,200 jobs are to be eliminated groupwide in administrative units and in the non-operational functions of the business divisions. Around 1,000 of the job cuts are planned for Germany. The reduction in Germany is to be implemented solely through voluntary and socially responsible measures, such as phased early retirement arrangements and severance agreements. Forced layoffs are explicitly excluded in Germany under this project.

As a manufacturing company, WACKER has a large contin- gent of industrial workers (47.9 percent), roughly one-eighth

(12.1 percent) of whom are women.

B.39 Number of Employees as of December 31

2020	2019	2018	2017	2016
Germany	10,096	10,356	10,291	9,984	9,775
International	4,187	4,302	4,251	3,827	3,673
Group	14,283	14,658	14,542	13,811	13,448

At €1,329.4 million, personnel expenses were higher versus the previous year (2019: €1,253.8 million).

They included outlays for social beneﬁts and the company pension plan totaling €288.7 million (2019: €263.2 million). As stipulated in the collective-bargaining agreement reached between the IG BCE labor union and chemical employers in November 2019, the standard pay scale in 2020 rose by the agreed one-off payment for the ﬁrst six months of the year and by the ﬁrst stage of the scale increase, which took effect on July 1, 2020.

A WACKER company pension is an important compensation component. It is provided at most of our German and international sites. In Germany, WACKER employees receive a pension through Wacker Chemie AG's pension fund (Pensionskasse der Wacker Chemie VVaG). Employees can supplement their company pensions by making their own additional contributions. As provided for in collective bargaining agreements, WACKER supports employees' supplementary contributions. Employees in Germany also receive an additional supplementary pension for that portion of their salary that exceeds the pension insurance contribution assessment ceiling. The fund has around 17,800 members and provides pension payments to some 8,800 retirees. The average pension paid in the reporting period was around €675 per month. WACKER pays in up to four times an employee's annual pension contributions, with the exact amount being determined by the type of agreement. Given prevailing low interest rates, we made a special payment of €73.4 million to WACKER's pension fund to ensure sufﬁcient cover for the pension obligations.

WACKER is working hard to reform its company pension system with a view to reducing the burden on its earnings, net assets and ﬁnancial position.

Procurement and Logistics (unaudited section)

In 2020, WACKER's procurement volume fell to €2.8 billion (2019: €3.4 billion). The main reasons were not only markedly lower raw-material and energy prices, but also a general reduction in procurement activities due to lower capital expenditures and to the Shape the Future cost-saving program. At 61 percent, the procurement rate - raw materials, services and other materials as a percentage of sales - was well below the prior-year level (2019: 69 percent). The number of suppliers, at around 11,000, was on par with the prior year.

The Group spent at €1.7 billion to procure energy and raw materials, which was down by around 11 percent (2019: €1.9 billion). Most of this decline stemmed from lower prices, with the rest being due to reduced volumes.

involving savings spanning all cost types. Priorities were labor productivity and speciﬁc energy consumption. As a result of the pandemic, the wos Academy conducted far fewer courses and training sessions in 2020.

b.41 Procurement Volume (Including Procurement for Capital Expenditures)

€ million

Procurement volume

2020

2,847

3,414

Production (unaudited section)

2019

2018

2017

2016

3,603

3,144

2,890

Production output rose by a low-single-digit percentage year over year. Production costs, on the other hand, fell slightly.

b.42 Plant Utilization in 2020

Plant
Utilization
%	Rate
WACKER SILICONES	95
WACKER POLYMERS	87
WACKER POLYSILICON	85

Capital expenditures for 2020 amounted to €224.4 million (2019: €379.5 million). Maintenance costs totaled around €386.2 million.

b.43 Key Start-Ups

Location	Projects	Year
Nitrogen production
Burghausen, Germany	capacity extension	2020
New medium-voltage
Cologne, Germany	power supply	2020
Construction of storage
Nanjing, China	tanks for dispersions	2020
Ulsan, South Korea	Dispersion reactor	2020

Priorities of the Productivity Program

The ongoing wacker Operating System (wos) program is helping us boost productivity along the entire value chain. The most important goal is to continue reducing speciﬁc operating costs each year. In 2020, we handled 500 projects,

Sales and Marketing (unaudited section)

In 2020, wacker's sales trend was inﬂuenced by the global spread of the coronavirus pandemic. wacker silicones reported the largest drop in sales at 9 percent, while wacker polymers posted only a marginal decline and wacker biosolutions and wacker polysilicon delivered slight increases. Prices were lower year over year in all areas, while at wacker silicones volumes contracted as well. On the other hand, wacker polymers, wacker biosolutions and wacker polysilicon generated volume growth.

wacker's chemical business is geared to three customer groups: key accounts, regional customers and distributors. wacker currently has 37 key accounts, through which it generated around 23 percent of its total chemical sales in 2020. More than 50 percent of sales stemmed from about 5,000 active relationships with other customers. Our distributors account for some 22 percent of sales.

Marketing communication plays a central role in supporting branding and the sale of products. In 2020, wacker spent €7.5 million on marketing communication (2019: €14.8 million).

Pandemic Rules Out Most In-Person Tradeshows Presentations at international tradeshows more or less ground to a halt in 2020. The number of tradeshows slumped to 32 (2019: 114), of which honored eleven could be attended in person. We analyze the success of tradeshow communication in both qualitative and quantitative terms.

Management Report of Wacker Chemie ag

(Additional Information Pursuant to the German Commercial Code)

The management report of Wacker Chemie ag and the Group management report for 2020 are combined in accordance with Section 315 (5) in connection with Section 298 (2) of the German Commercial Code (hgb). The annual ﬁnancial statements of Wacker Chemie ag (prepared in accordance with the German Commercial Code) and the combined management report are published simultaneously in the electronic version of Germany's Federal Gazette.

The combined management report includes a separate section covering all reporting elements pertaining to Wacker Chemie ag that are required by law. Further to our report on the wacker Group, we explain developments at Wacker Chemie ag.

Wacker Chemie ag is the parent company of the wacker Group and has its headquarters in Munich, Germany. The parent company operates through four business divisions - wacker silicones, wacker polymers, wacker biosolutions and wacker polysilicon - which generate a substantial portion of the Group's sales. Wacker Chemie ag's directly and indirectly held subsidiaries and investments located in Germany and abroad have a strong inﬂuence on its business. The company has a total of 53 subsidiaries, joint ventures and associated companies, and also provides the Group with corporate functions. Wacker Chemie ag's Executive Board exercises key management functions for the Group as a whole, which include determining the Group's strategy, allocating resources (such as funds for investment spending), and bearing responsibility for managing executive personnel and corporate ﬁnances. Wacker Chemie ag's Executive Board also oversees communications with the company's key stakeholders, especially with the capital markets and shareholders.

more information, please refer to the respective details provided for the wacker Group as a whole. The general business conditions of Wacker Chemie ag are essentially the same as those of the Group.

The annual ﬁnancial statements of Wacker Chemie ag were prepared in accordance with the German Commercial Code (hgb) and the German Stock Corporation Act (AktG).

These statements differ substantially from the ifrs ﬁgures in relation to ﬁxed assets, depreciation/amortization and impairments, right-of-use assets and ﬁnancial liabilities in connection with lease accounting, provisions for pensions, and deferred taxes. As regards ebitda, there are only slight differences between ifrs and hgb ﬁgures.

b.44 Statement of Income

€ million

Sales

Changes in inventories

Other capitalized self-constructed assets

Operating performance

Other operating income

3,579.1 -65.3

32.7 3,546.5

183.5

Cost of materials -1,819.6 -2,070.1
Personnel expenses -1,067.5 -989.7

Depreciation / amor tization and

impairments -169.6 -224.7
Other operating expenses -722.8 -791.0

Operating result

Result from investments in subsidiaries, joint ventures and associates (incl. (reversals of) impairment losses)

- 49.5

63.8 107.6

Net interest result -92.4 -121.8

Other ﬁnancial result Financial result

Income before income taxes

Income taxes

Net result

EBITDA¹

-31.6 -1.4

-60.2 -15.6

-109.7 -72.3

8.2 -101.5

120.1

¹ EBITDA is the operating result before depreciation/amortization and (reversals of) impairments of ﬁxed assets.

The key performance indicators used in corporate management are implemented groupwide in the business divisions. Corporate goals are deﬁned and reported for the divisions on a groupwide basis. Even though Wacker Chemie ag is an independent entity, no separate key performance indicators are deﬁned or reported for it. For

Wacker Chemie ag's Earnings Pursuant to the German Commercial Code

2020

2019

3,779.0 -13.3

37.1 3,802.8

216.0

-56.7

39.3 -33.0

168.0

Wacker Chemie ag's earnings were inﬂuenced by the effects of the coronavirus pandemic. Amid a decline in sales of 5 percent, the operating result was on par with the previous year. The ﬁnancial result was substantially lower due to reduced dividend income. At year-end, Wacker Chemie ag posted a net loss of €-101.5 million. That was €68.5 million less than a year earlier.

Sales decreased from €3.78 billion to €3.58 billion, a drop of 5 percent. This contraction was largely due to the economic impact of the coronavirus pandemic. Sales were lower across almost all divisions. At wacker silicones, sales of €1.70 billion were down 8 percent (2019: €1.84 billion). wacker polymers' sales totaled €780.1 million (2019: €805.6 million), a 3 percent decline. Sales at wacker biosolutions fell €6.9 million to €145.6 million (2019: €152.5 million). On the other hand, wacker polysilicon posted slightly higher sales of €794.2 million (2019: €783.1 million).

The cost of materials decreased by €250.5 million in 2020 to €1.82 billion (2019: €2.07 billion), mainly due to lower procurement prices and to reduced volumes for commodities and strategic raw materials. In 2020, Wacker Chemie ag benefited from lower prices for ethylene, methanol and vinyl acetate monomer. Prices for silicon metal, another raw material, also trended downward at times. Energy costs were also slightly lower. Overall, the material-to-sales ratio decreased to 51.3 percent (2019: 54.4 percent).

Personnel expenses increased 8 percent to €1,067.5 million (2019: €989.7 million). This rise stems from collective bargaining agreements and from higher variable-compensation components that will be paid out in 2021.

Expenses for pension agreements concluded as part of the Shape the Future restructuring program were also higher. As in the prior year, personnel expenses included non- recurring expenses to secure the future ﬁnancing of the pension fund (Pensionskasse der Wacker Chemie VVaG). As of December 31, 2020, Wacker Chemie ag had 9,823 employees (Dec.31, 2019: 10,093). The employee-expense ratio rose to 30.1 percent (2019: 26.0 percent).

Depreciation and amortization decreased again, falling to €169.6 million (2019: €224.7 million), a drop of 25 percent.

cost savings. On the other hand, restructuring charges of €48.9 million were posted in connection with the Shape the Future project. The prior-year ﬁgure had contained income of €112.5 million in insurance compensation for damage incurred following the incident at the Charleston site (usa) in 2017. Other operating expenses include not only exchange-rate losses, but also selling expenses, maintenance, other contractor work, rents, servicing costs, r&d costs and costs assumed on behalf of subsidiaries. In particular, expenses for maintenance and other contractor work were lower in 2020. The foreign currency result rose by €40.1 million to €27.1 million (2019: €-13.0 million).

The operating result was €-49.5 million (2019: €-56.7 million).

The result from investments in subsidiaries, joint ventures and associates contained income from proﬁt-and-loss transfer agreements and dividend payments. This income of €63.8 million was below the prior-year ﬁgure of €107.6 million.

In 2020, dividend payments from subsidiaries decreased markedly. Dividend income from the investment in Siltronic ag was also lower.

The net interest result improved to €-92.4 million (2019: €-121.8 million), reﬂecting a year-over-year decline in discount rates for pension obligations. Interest expenses for pensions declined accordingly, to €85.4 million (2019: €93.8 million). The prior year's interest expenses had also included reimbursements to subsidiaries.

The income tax item was impacted by the loss posted in the reporting year. Wacker Chemie ag - including those German subsidiaries with which it has proﬁt-and-loss transfer agreements - recognized tax income of €8.2 million in the reporting year. This income consisted mainly of refunds for previous years. In the prior year, the company had recognized tax income of €39.3 million.

The other operating result (other operating income less other operating expenses) improved by €35.7 million to €-539.3 million (2019: €-575.0 million). That was mainly due to the reduction in other operating expenses, achieved through

The ﬁscal year ended with a net loss of €-101.5 million. Retained proﬁt for 2020 - adjusted for the loss carried forward from a year earlier and the €24.8 million in dividend payments - totaled €1.20 billion (2019: €1.32 billion).

Net Assets and Financial Position of Wacker Chemie ag Pursuant to the German Commercial Code

Wacker Chemie ag's total assets increased 10 percent year over year to €6.04 billion (Dec.31, 2019: €5.48 billion). The individual balance-sheet items did not develop uniformly.

b.45 Statement of Financial Position

€ million

Assets Intangible assets

Property, plant and equipment Financial assets

Fixed assets

Inventories Trade receivables

Other receivables and other assets Receivables and other assets Securities and ﬁxed-term deposits Cash on hand and bank deposits Current assets

Prepaid expenses Total assets

Equity and Liabilities Subscribed capital

Less nominal value of treasury shares Issued capital

Capital reserves

2020 2019 Dow Siloxanes (Zhangjiagang), Co. Ltd., China. Overall, ﬁxed assets accounted for 61 percent of total assets,

5.5 8.8

982.3 992.8

2,665.1 3,652.9

2,704.8 3,706.4

562.6 346.8 322.5 669.3

606.7

365.5 Trade receivables were also lower year over year, falling
350.2 5 percent to €346.8 million as of the reporting date
715.7 (Dec.31, 2019: €365.5 million).

680.6 107.7

463.4 339.4 Other receivables and other assets amounted to €322.5 million

2,375.9

1,769.5

6.7 6,035.5

4.7 5,480.6

260.8 -12.4 248.4 157.4

260.8 -12.4

248.4 maturities of over three months (Dec.31, 2019: €107.7 million).
157.4 Wacker Chemie ag's bank deposits amounted to €463.4 million

Other retained earnings 1,000.0 1,000.0

Retained proﬁt Equity

Provisions for pensions and similar obligations

Other provisions Provisions Financing liabilities Trade payables Other liabilities Liabilities

Deferred income

Total equity and liabilities

1,198.6 1,324.9

At €3.65 billion, ﬁxed assets for 2020 were lower than the year before (2019: €3.71 billion). Property, plant and equipment was also down slightly year over year. Depreciation and amortization of €164.0 million (Dec.31, 2019: €218.0 million) exceeded investment spending of €155.3 million (Dec. 31, 2019: €208.3 million). Financial assets also decreased, from €2.70 billion to €2.67 billion. This decline was due to the scheduled repayment of a loan issued to

compared with 68 percent in the prior year.

Inventories decreased year over year. They amounted to €562.6 million (Dec.31, 2019: €606.7 million), down 7 percent. This decline was due both to lower raw-material costs and to increased volumes, especially at wacker polysilicon.

as of the reporting date (Dec.31, 2019: €350.2 million), down 8 percent. They included receivables from affiliated companies in the amount of €246.8 million (Dec.31, 2019: €271.4 million).

As of December 31, 2020, Wacker Chemie ag held €680.6 million in securities and ﬁxed-term deposits with

as of December 31, 2020 (Dec.31, 2019: €339.4 million).

2,604.4 2,730.7 Equity came to €2.60 billion as of the reporting date (Dec.31, 2019: €2.73 billion), yielding an equity ratio of

980.0 912.9 43.2 percent (Dec. 31, 2019: 49.8 percent). At Wacker

473.0 326.3

1,453.0

1,239.2

1,507.3 1,061.1

264.2 212.6

189.1 218.3

1,960.6

Chemie ag's annual shareholders' meeting, a resolution was passed to distribute a dividend of €24.8 million

from the retained proﬁt for 2019. The remaining retained

profit of €1,300.1 million was carried forward. As of

17.5 6,035.5

18.7 5,480.6

1,492.0

December 31, 2020, retained proﬁt totaled €1,198.6 million and mainly comprised the current net result of €-101.5 million for 2020 and the non-distributed proﬁt carried forward from the preceding year.

Cash flow from operating activities increased to €351.9 million (2019: €96.9 million), lifted primarily by cost savingsandareductioninthecostofmaterials.Thetrend in working capital also improved cash ﬂow from operating activities.

Investmentspendingonproperty,plantandequipmentwas substantially lower in 2020. Thus, net cash ﬂow - deﬁned as the sum of cash ﬂow from operating activities and cash ﬂowfromlong-terminvestingactivities(excludingsecurities and ﬁxed-term deposits) - improved in the reporting year, risingto€222.8million(2019:€-139.0million).Freefundswere invested in securities and ﬁxed-term deposits, causing the cashoutﬂowforinvestingactivitiestoriseto€703.2million (2019:€298.0million).Cashﬂowfrominvestingactivitiesalso includedtherepaymentofaloanissuedtoDowSiloxanes (Zhangjiagang),Co.Ltd.,China.

Cash inflows from financing activities amounted to €475.3 million (2019: €273.9 million). In addition to funds receivedfromussubsidiariesonthebasisofexistingcash- pooling arrangements, bank loans of €287.2 million were raisedonbalancein2020(2019:€186.4million).Thedividend paid for 2019 led to a cash outﬂow of €-24.8 million.

Liquidity - deﬁned as the sum of the securities in current assets and of cash on hand and bank deposits - amounted to €1,144.0 million as of December 31, 2020, and was higher mainly because of the increase in securities and ﬁxed-term deposits. A year earlier, liquidity had amounted to €447.1 million. The balance of liquidity and liabilities to ﬁnancialinstitutionsresultedinnetﬁnancialreceivablesof €86.4 million. A year earlier, the company had net ﬁnancial debtof€-323.2million.

CombinedManagementReport- ManagementReportofWackerChemieAG

Provisions for pensions and similar obligations rose €67.1million year over year to €980.0million (Dec.31,2019:€912.9million).Otherprovisions-primarily comprising those for personnel, taxes and environmental protection - also increased in 2020, amounting to €473.0million(Dec.31,2019:€326.3million).Thiswasdue, aboveall,totheriseof€149.8millioninprovisionsfor personnel.Aprovisionof€48.0millionwasrecognized in connection with the Shape the Future program. The phased early retirement agreements offered under this program resulted in provisions for top-ups in the amount of€23.9millionin2020.Provisionsaccountedfor24percent oftotalequityandliabilities(Dec.31,2019:23percent).

As of the reporting date, financial liabilities were €1,507.3million (Dec.31, 2019: €1,061.1million), up 42 percent. Bank loans amounted to €1,057.6 million (Dec.31,2019:€770.3million).Liabilitiesduetoafﬁliated companiesgrewby€158.4millionto€444.4millionasof thereportingdate(Dec.31,2019:€286.0million).Theoverall share of ﬁnancial liabilities in total equity and liabilities increasedto25percent(Dec.31,2019:19percent).

Trade payables grew €51.6 million year over year to €264.2million (Dec.31, 2019: €212.6million). As of the reportingdate,otherliabilitiesamountedto€189.1million (Dec.31,2019:€218.3million).Thedeclineinliabilities due to affiliated companies was the main factor in this decrease. They fell €46.6 million to €50.2 million (Dec.31,2019:€96.8million).

Deferredincomecameto€17.5millionasofthereporting date(Dec.31,2019:€18.7million).Itmainlycomprised a payment by Siltronic ag to Wacker Chemie ag for the transferofemployees.

WackerChemieAG- AnnualReport2020

Wacker Chemie ag's business performance is subject to essentially the same risks and opportunities as the wacker Group. Wacker Chemie ag's exposure to the risks associated with its subsidiaries and investments depends on the size of its stakes in the respective entities. The measurement of holdings is affected in particular by the risks speciﬁed in the Risk Management Report. Through our subsidiaries and investments, we could face impairments arising from legal or contractual contingencies (especially ﬁnancing). These contingencies are explained in the Notes to the ﬁnancial statements of Wacker Chemie ag. As the parent company of the wacker Group, Wacker Chemie ag is integrated in the groupwide risk management system.

Risks and Opportunities

» For further details, see the Financial Instruments section of this Annual

Report. A description of the internal control system for Wacker Chemie ag, as mandated by Section 289 (5) of the German Commercial Code (hgb), can be found in the section on the Internal Control System (ics) and the Internal Control System for Accounting.

Outlook wacker's main planning assumptions relate to raw-material and energy costs, personnel expenses and exchange rates.

For 2021, we anticipate a euro exchange rate of us$ 1.20. The expectations for Wacker Chemie ag's business performance in the year ahead are essentially the same as those for the wacker Group, which are explained in full in the Group's Outlook section.

At present, it is not possible to reliably predict the future effects of the coronavirus on economic growth. We currently assume that sales will edge up year over year.

For Wacker Chemie ag, we expect net income to be slightly positive before accounting for potential income from the sale of our stake in Siltronic.

Publication

The annual ﬁnancial statements of Wacker Chemie ag have been submitted to the publisher of the German Federal Gazette and can be viewed on the website of the German register of companies. kpmg ag Wirtschaftsprüfungsgesellschaft, Munich, audited the annual ﬁnancial statements and issued an unqualiﬁed audit certificate for them. The statement of financial position and statement of income are the main parts of the annual ﬁnancial statements published in this Annual Report. Wacker Chemie ag's annual ﬁnancial statements are published together with those of the wacker Group. The annual ﬁnancial statements can be requested from Wacker Chemie ag, Hanns-Seidel-Platz 4, 81737 Munich, Germany. They can also be accessed on the internet.

Risk Management Report

Description and Statement Relating to Risk and Compliance Management

requirements and is integral to all our decisions and business processes. The Executive and Supervisory Boards are regularly informed about the current risk status in the Group and at each business division.

Integrated Approach to Risk and Compliance Management

Risk and compliance management are an integral part of corporate management at wacker. As a global company, we are exposed to numerous risks directly attributable to our operational activities. Starting from an acceptable level of overall risk, the Executive Board decides which risks we should take to utilize opportunities available to the company. The goal of risk management at wacker is to identify risks as early as possible, to evaluate them adequately and to take appropriate steps to reduce them. We deﬁne risks as internal and external events that may have a negative effect on the attainment of our targets and forecasts. Compared with the previous year, we made no fundamental changes to our existing risk management system in 2020.

As a chemical company, we have a particular responsibility to ensure plant safety and protect human health and the environment. At all our production sites, there are employees who are responsible for plant and workplace safety and for health and environmental protection. Our risk management system complies with the statutory

b.46 Three Lines of Defense Model

wacker follows the Three Lines of Defense model to effectively manage corporate risks and ensure compliance with legal provisions and the ethical principles of corporate management.

» See Figure b.46 on page 87

The ﬁrst line of defense lies with the managers of operating activities. They are responsible for handling risks there, including risk responses and risk control. This involves setting up functioning internal control systems in their operational units.

The second line of defense is formed by risk management and compliance management. Risk management involves systematically tracking the main risks facing operational units and reporting on the risks to the Executive Board.

Compliance management ensures that the ethical principles of corporate management are observed. The Compliance Management team identiﬁes the relevant legal requirements and amendments, forwards them to all affected corporate units and holds courses on compliance for employees. The tax compliance management system ensures that Wacker Chemie ag and its subsidiaries comply fully and punctually with their obligations under tax law. Early involvement of the tax department and checks on preliminary tax-related processes help minimize the corresponding risks.

Supervisory BoardExecutive BoardFirst line of defenseInternal control systems

Risk response Direct response and control

Second line of defenseRisk management

Compliance management

Policy on identifying speciﬁc risks Training courses

Third line of defenseCorporate Auditing

Audits

AuditorsRisk response

Risk controlNumber of risks

A third line of defense is provided by the Corporate Auditing department, which acts as an independent monitoring body for the Executive Board. This department conducts audits at regular intervals to review the risk management activities in place at the various corporate units and to check whether the internal control systems run by the operational units are effective. Corporate Auditing also liaises with the Compliance Management team, for example if anti-corruption investigations are undertaken or related measures implemented.

Internal Control System (ics) and Internal Control System for Accounting

Our internal control system (ics) is an integral component of our risk management system.

and internal accounting rules. The accounting manual, which is applicable groupwide and available on the wacker intranet, represents a key accounting guideline. The manual speciﬁes binding rules for groupwide accounting and assessment. The Group regulation on accounting contains uniform stipulations for the organizational responsibility of accounting-related topics. The organizational workﬂow is also deﬁned in accounting and organizational regulations, and in book-entry instructions. Corporate Accounting monitors compliance with reporting obligations and deadlines. By separating financial functions between accounting, statement analysis and strategy, we ensure that potential errors are identiﬁed prior to ﬁnalization of the statements and that accounting standards are complied with.

The objective of the internal control system for accounting is to ensure consistent compliance with legal requirements, generally accepted accounting principles and International Financial Reporting Standards (ifrss), and thus avoid misstatements in Group accounting and external reporting.

In addition to the ics principles already mentioned, we perform assessments and analyses to help identify and minimize any risks that may directly inﬂuence ﬁnancial reporting. We enlist external experts to reduce the risk of accounting misstatements in complex and challenging issues, such as pensions.

Our internal accounting control system is designed to ensure that our accountants process every business transaction promptly, uniformly and correctly, and that reliable data on the Group's earnings, net assets and ﬁnancial position is available at all times. Our approach here complies with statutory provisions, accounting standards

b.47 Risk Management System

Our subsidiaries ensure that all regulations are implemented locally. Corporate Accounting assists them in this task and monitors the process. The reported data is veriﬁed both by automatic system validation, and by reports and analyses. We safeguard the effectiveness of controls not only by gathering feedback from the employees involved, but also by continually monitoring key ﬁnancial indicators in our monthly management reports and in system-based test runs. Moreover, regular external audits are carried out, as well as external reviews at year-end and at the end of the ﬁrst six months.

Each quarter, managers at our divisions, corporate departments and subsidiaries conﬁrm for their areas that all key issues for the quarterly and annual ﬁnancial statements have been reported.

The Supervisory Board is also integrated into the internal control system through its Audit Committee. In particular,

Supervisory and Executive BoardsRisk identiﬁcation: all business divisions and corporate departmentsBasis for risk managementRisk monitoring: internal control system, Corporate

ControllingRisk coverage: Corporate Finance and InsuranceControl of risk management process: Corporate Auditing

Risk list

Risk management manualRisk management regulation

the Audit Committee monitors the accounting process, the effectiveness of the internal-control and risk-management systems, and the auditing procedures. Further, the Committee reviews the documents for Wacker Chemie ag's separate ﬁnancial statements and the wacker Group's annual and quarterly consolidated ﬁnancial statements as well as the combined management report for these statements, and discusses them with the Executive Board and the auditors.

We deploy user-authorization systems, data-release policies and access restrictions to protect all ﬁnancial systems from misuse. However, even with adequate and functioning systems in place, we cannot guarantee that the internal control system will be 100-percent effective.

The cfo has overall responsibility for the effectiveness and appropriateness of the risk management systems.

Risk Management Structures and Tools

This groupwide system draws on existing organizational and reporting structures, supplemented by additional elements:

The risk management manual: contains the system's principles and processes. It explains reportable levels of risks and how risks are to be covered and mapped.

The risk management regulation: stipulates groupwide reporting requirements and when a speciﬁc committee must be informed.

Risk Response wacker focuses on identifying, evaluating, responding to, and monitoring risks as part of a transparent risk management and control system for all company processes. The system is based on a deﬁned risk strategy and an efﬁcient reporting procedure. The Executive Board regularly reviews and enhances the risk strategy and provides the Supervisory Board's Audit Committee with regular brieﬁngs on existing risks.

All corporate areas are integrated into the risk management system. It consists of three intermeshed aspects:

Division-speciﬁc risk management and early-warning systems

- -

Groupwide risk coverage Groupwide risk mapping

b.48 Basis of Our Internal Control System (ics)

The risk management coordinator: oversees the risk management system and is supported by local risk coordinators.

The risk list: contains speciﬁc risks that our business divisions and other corporate sectors face. Reporting is mandatory for individual risks where the effect on earnings would exceed €5 million.

Risk Identiﬁcation wacker identifies risk on two levels: divisional and Group. We employ various instruments to detect and recognize risk. These include order-intake trends, market and competition analyses, customer talks, and ongoing observation and analysis of the economic environment.

Separation of Dual-control policyJob rotation functions

Regulations and work instructions

Systematically structuredcontrol measures within business processesComplying with legislation and wacker regulationsPreventing ﬁnancial losses¹

¹ Possible ﬁnancial losses due to the intentional or inadvertent misconduct of our employees or third parties

Assuring the functionality and efﬁciency of business processes

Assessment, Quantiﬁcation and Management of Risks We analyze each identiﬁed risk's probability of occurrence and potential effect on earnings. Corporate Controlling compiles a monthly report to inform the Executive Board of current and expected business developments and their associated risks. We evaluate risks and opportunities at regular meetings with our divisions and weigh them up against each other.

Corporate Controlling's task is to ensure that our risk management standards are implemented and our risk management process is enhanced. It is responsible for recording all signiﬁcant risks groupwide and evaluating them systematically. Signiﬁcant risks and those endangering the company's continued existence are communicated immediately via ad-hoc reports. As wacker's business divisions are responsible for their own results, this process is closely interwoven with operational controlling. Individual divisional risks are identiﬁed and evaluated on a monthly basis.

Financial risks are managed by Corporate Finance and Insurance. Corporate Accounting & Tax monitors receivables management with respect to customers.

Compliance Management wacker's ethical principles of corporate management exceed the statutory requirements. The Compliance Management department is responsible for ensuring that these principles and all related legislation are observed throughout the company. Training courses on compliance raise employees' awareness of the relevant risks and convey binding rules of behavior for daily work routines. These aspects are covered by wacker's compliance regulation. Employees are instructed to inform their supervisors, the compliance ofﬁcers, the employee council or their designated hr contacts of any violations that come to their attention. They also have the option of reporting suspected violations anonymously via a protected channel.

The Group's compliance officers are responsible for implementing these rules and regulations, and are on hand to advise employees on all matters relating to compliance. Prevention is a key aspect of the compliance ofﬁcers' work. They train, inform and advise employees and management on, for example, strategies and measures to prevent corruption and other breaches of the law. In 2020,no major infringements of compliance were identiﬁed that were subject to the above-mentioned reporting threshold of an effect on earnings of more than €5 million.

Corporate Auditing

The third line of defense is provided by wacker's Corporate Auditing department, which acts as an independent monitoring body for the Executive Board. This department shares responsibility for effective internal control systems throughout the various operational processes and systems. When setting up an internal control system, the operational units must apply certain principles, such as a policy of dual control. These principles are deﬁned in an internationally applicable regulation, where they are explained in more detail for critical functions.

On behalf of the Executive Board, Corporate Auditing performs regular, mainly process-speciﬁc, reviews of all relevant functions and corporate units, focusing on internal control systems. Audit topics are selected using a risk- driven approach. This takes account of risk management reporting, as well as the reports and information provided by the corporate departments, business divisions and major joint ventures/associates. The auditing schedule is supplemented and approved by the Executive Board, and discussed with the Audit Committee. If necessary, the schedule can be adjusted ﬂexibly during the year to accommodate any changes in underlying conditions.

Any process-optimization measures derived from the audits are implemented and systematically monitored by the Corporate Auditing department. The latter provides the Executive Board and Audit Committee with regular reports on the results and implementation status of the various measures.

Nothing came to our attention in the year under review that would endanger the proper functioning of the internal control systems or have an effect on earnings subject to the above-mentioned reporting threshold of more than €5 million.

Audits

When auditing our annual ﬁnancial statements, the external auditors examine our early-warning system for detecting risks. The auditors then report to the Executive and Supervisory Boards.

Central Risk Areas

b.49 Probability and Possible Impact of Our Risks in 2021

Deﬁning the Probability and Impact of Risk Occurrence We have deﬁned categories to describe the probability that risks we identify will occur. This provides a framework for understanding our assessment of individual areas of risk. In percentage terms, our categories deﬁne the range of probability as follows:

- - -

Unlikely: under 25 percent Possible: 25-75 percent Likely: over 75 percent

We also use categories to describe how the occurrence of the risks listed might affect the Group's earnings, net assets or ﬁnancial position. We assess the possible effect on earnings using the net method, i.e. after taking appropriate countermeasures, such as establishing provisions or hedging. The following categories deﬁne the ranges:

- - -

Low: up to €25 million Medium: up to €100 million High: over €100 million

The table shows our estimation of the probability of risks and of how the occurrence of those risks might affect the Group's earnings, net assets or ﬁnancial position. The statements refer to the forecast period, thus to 2021.

Overall Economic Risks

Scenario: Economic slowdown.

Impact on wacker: Production-capacity utilization drops, speciﬁc production costs rise, and the Group's sales and earnings decline.

Risk/Category

Overall economic risks Sales-market risks

Chemicals

Polysilicon

Procurement-market risks Investment risks

Production and environmental risks Financial risks

Credit risk

Currency-exchange and interest-rate risks

Liquidity risk

Pensions Legal risks Regulatory risks

Energy transition in Germany Polysilicon trade restrictions

New regulations for production processes and products

IT risks

Personnel-related risks External risks

PossibleProbabilityImpact

Possible

Possible Possible Possible Possible Possible

High

Medium Medium Medium Medium Medium

Possible

Low

Possible Possible Likely Possible

Medium Low High Low

Possible Possible

Low High

Likely Possible Unlikely Likely

Low Medium Low High

Evaluation and Risk Assessment: Although economists forecast a gradual global upswing in 2021 following the severe recession amid the coronavirus pandemic, they do not expect pre-crisis levels to be reached in the current year. Instead, they predict a long, regionally uneven recovery, whose outcome remains uncertain in light of the as-yet uncontrolled pandemic. Ongoing trade conﬂicts are another negative factor.

Measures: We counter this risk by continuously monitoring economic trends in our key sales markets. Should the economy start slowing, we take early precautions to quickly adjust production capacities, resources and inventories to customer demand. In such a case, we concentrate capacity utilization on production locations with the best cost position, for example.

Due to the continuing risks, we consider it possible that the global economy will fall short of current expectations for 2021. Should global economic activity prove weaker than currently anticipated, that would potentially have a high impact on wacker's earnings.

Sales-Market Risks

Scenario 1: Overcapacity at our chemical divisions.

Impact on wacker: Price and volume pressure on our products.

Measures: We minimize this risk by adjusting our production capacity and by ensuring plant utilization through volume control and the intense cultivation of growth markets. It remains our goal to increase the share of cyclically resilient product lines in our portfolio and to rank among the global leaders in those lines. But we can only partially balance out the type of sudden and strong ﬂuctuations in demand being caused by the coronavirus crisis.

Evaluation and Risk Assessment: We expect the risk of overcapacity to remain basically unchanged for our products in 2021. At wacker polymers, we anticipate overcapacity for dispersions in Asia. Despite this, we expect plant utilization to be high. wacker silicones assumes the supply and demand situation will normalize during 2021, following the pandemic-induced downturn. As a result, plant utilization is likely to climb. The situation could vary, though, depending on the end market and sales region, and on the current status of the pandemic. We expect to see a volatile, though basically unchanged, price level for standard silicones and slightly higher price pressure on specialties.

Generally, we consider it possible that speciﬁc areas of our chemical business will face overcapacity and resultant price pressure. We have already factored this possibility into our planning. Our current projections are based on the assumption that the pandemic will be brought under control in the course of 2021. Should that not be the case, such a trend would have a medium impact on the Group's earnings trend.

Scenario 2: Overcapacity and very low prices for solar-grade polysilicon; difﬁcult market conditions due to a rollback of government incentive programs; and the tight ﬁnancial situation of many customers.

Impact on wacker: Volume risks arise if the photovoltaic market is negatively affected by excessive and hurried cuts to government solar incentives or by limitations on new pv capacity. Overcapacity could put pressure on margins through intense price competition. Both factors could lower sales and earnings.

Measures: We counter this risk by continuously improving our cost positions and by optimizing our product and customer portfolio in line with market developments, for example by expanding our market share for semiconductor- grade polysilicon. We respond to customers' liquidity problems by demanding collateral.

Evaluation and Risk Assessment: In all probability, the consolidation process in the solar industry will continue in 2021. As long as this trend persists and global production capacities exceed market demand, polysilicon prices are likely to remain volatile and under pressure. Such a trend has been factored into our planning and forecasts. Should demand for solar-grade polysilicon clearly exceed supply, this would presumably lift wacker polysilicon's earnings. Conversely, a slump in demand for wacker's solar-grade polysilicon would probably have a medium impact on earnings in this business. In our view, the risk of prices falling is possible.

Procurement-Market Risks

Scenario: Higher raw-material and energy prices; bottlenecks in the supply of certain raw materials; risks of tariffs.

Impact on wacker: Earnings dampened by higher raw- material and energy prices. Any supply bottlenecks could lead to longer customer delivery times and volume losses.

Measures: For strategic raw materials and energy, we prepare systematic annual procurement plans, which include an evaluation of the procurement risk. For any procurement risk that is classed as relevant, we take appropriate countermeasures where possible. Such countermeasures include: long-term supply contracts with partners; structured procurement policies for multiple suppliers under contracts of differing lengths; a wider supplier base; a higher level of safety stocks. We reduce our dependence on external suppliers by means of partial backward integration, for example in producing silicon metal and vinyl acetate.

Evaluation and Risk Assessment: wacker's good position in raw-material and energy procurement enables us to manage risks effectively during economic upturns and downturns. If the world economy were to weaken signiﬁcantly, our purchasing terms for key raw materials would allow us to adjust contractual volumes ﬂexibly and - wherever possible - to beneﬁt from price decreases through appropriate pricing models. Should global growth become unexpectedly strong, our volume guarantees are so extensive that we do not see any major risks to raw-material security. Prices can rise markedly in such situations. But experience has shown that we then have opportunities to compensate, at least partially, for additional costs by increasing the selling prices of our own products. In addition, purchasing prices for certain raw materials might be affected by punitive tariffs. Such import tariffs exist, for example, for silicon metal exported from China to Europe and the usa.

Under current German law, energy-intensive companies are partially exempt from paying various levies and surcharges. wacker, too, beneﬁts from these rules. Any restriction on the exemption rules would signiﬁcantly reduce the competitiveness of speciﬁc business activities. In general, energy price trends (wholesale prices, infrastructure costs and ancillary costs) will remain heavily dependent on how German and European policymakers organize the energy transition.

In 2020, wacker benefited from lower raw-material prices amid the pandemic-induced global recession. For 2021, average prices of our key raw materials should be signiﬁcantly higher than last year, with the cost of natural gas and electricity probably remaining stable. Our planning is based on this scenario. Any possible major price increases beyond this would probably have a medium impact on Group earnings.

Investment Risks

Scenario: Bad investments, higher-than-expected investment costs, postponed plant start-ups, deterioration of original market projections, and the assumption of risks from investments in joint ventures and associates.

Impact on wacker: Bad investments incur costs for idle capacity and impair assets and equity investments. The possible effect on earnings could be substantial. Higher investment costs mean higher cash outﬂows and will lead to higher expenses for depreciation/amortization and impairments in our operating result. Postponed start- ups expose us to the risk of being unable to fulﬁll supply contracts and of posting lower sales and earnings. Should Siltronic ag's market capitalization fall substantially, wacker might have to recognize a corresponding impairment on the carrying amount of its equity-accounted investment and this could negatively affect wacker's earnings.

Measures: wacker has numerous measures in place to counter investment risks. Investment projects are subject to a risk management process and their planning is thoroughly checked for completeness and plausibility. Economic feasibility is assessed using comparative studies that look at other projects, including those of competitors. Major capital expenditure is approved in stages only. Stringent project-budget management helps minimize or prevent delays.

Evaluation and Risk Assessment: Our capital expenditures will be substantially higher in 2021. This is due to capacity- expansion projects for our chemical segments. Higher- than-expected investment spending is a risk that is currently considered to be low. Even if this risk did materialize, the impact on our earnings, net assets and ﬁnancial position would probably be low. Similarly, we currently view the risk of a negative trend in Siltronic ag's market capitalization to be unlikely. We concluded an irrevocable undertaking with semiconductor manufacturer GlobalWafers to tender our stake in Siltronic at an offer price of €145 per share as part of a voluntary takeover bid for Siltronic by GlobalWafers. Should, contrary to expectations, the takeover fail to materialize, Siltronic's market capitalization could come under pressure. We estimate that low-probability investment risks, taken as a whole, could have a medium impact on our earnings, net assets and ﬁnancial position.

Production and Environmental Risks

Scenario: Risks relating to the production, storage, ﬁlling and transport of raw materials, products and waste.

Impact on wacker: Personal injury; property damage and environmental impairment; production downtimes and operational interruptions; and the obligation to pay damages.

Measures: wacker coordinates its processes through its integrated management system (ims). This system regulates workﬂows and responsibilities, attaching equal importance to productivity, quality, the environment, and health and safety. The ims is based on statutory regulations, and on national and international standards, such as Responsible Care® and the un Global Compact, which go far beyond legally prescribed standards. We focus on securing the highest possible level of operational safety at our production sites by monitoring maintenance extensively and by performing regular plant inspections. We conduct thorough safety and risk analyses, from the design stage through to commissioning, to ensure the safety of our plants. We regularly hold seminars on plant and workplace safety, and protection against explosion damage. Every wacker site has an emergency response plan in place to regulate cooperation between internal and external emergency response teams, and with the authorities. We are insured against loss events at our plants and the potential consequences of such events. Our insurance cover is in line with customary chemical-industry standards.

When we work with logistics providers, we ensure that shipments of hazardous goods are always checked prior to loading. Any deﬁciencies are systematically recorded and tracked.

Evaluation and Risk Assessment: Experience has shown that risks stemming from the production, storage, ﬁlling and transport of raw materials, products and waste can never be completely ruled out. Although there is a general possibility that such risks will occur, we currently consider a serious loss event to be unlikely. Should such an event occur, though, it could have a medium impact on wacker's earnings.

Financial Risks wacker's ongoing operations and ﬁnancing expose it to ﬁnancial risks. These include credit, market-price, ﬁnancing and liquidity risks. The Notes to the Consolidated Financial Statements provide extensive information about risk hedging with derivative ﬁnancial instruments.

Currency-Exchange and Interest-Rate Risks

Scenario: Fluctuations in exchange rates and interest rates.

Impact on wacker: Effect on earnings, liquidity, and ﬁnancial assets and liabilities.

Measures: Currency risks arise mainly from exchange- rate ﬂuctuations for receivables, liabilities, cash and cash equivalents, and ﬁnancial liabilities not held in euros. The currency risk with respect to the us dollar is of particular importance. wacker hedges any net exposure above a certain level by using derivative ﬁnancial instruments. Foreign exchange hedging is carried out mainly for the us dollar. We also counter exchange-rate risks through production sites that are not in the eurozone.

Interest-rate risks arise due to changes in market rates.

Such changes affect future interest payments for variable- rate loans and investments. Once an exposure has been identiﬁed, we hedge the corresponding interest rates.

Credit Risk

Scenario: Customers or business partners fail to meet their payment obligations.

The use of derivative ﬁnancial instruments requires an underlying operating transaction and is governed by internal regulations.

Impact on wacker: Losses on trade receivables, and failure of banks to fulﬁll their obligations to wacker.

Measures: We use a variety of instruments to reduce the risk of any loss on receivables. Depending on the nature of the product or service provided and the amount involved, we may demand collateral. Our preventive measures range from obtaining references and performing credit checks to evaluating payment histories. We limit default risks by means of credit insurance, advance payments and bank guarantees. We prevent counterparty risk with respect to banks and contractual partners by carefully selecting these partners. We transact cash investments and derivative dealings with banks that are usually above a defined minimum rating.

Evaluation and Risk Assessment: We consider it unlikely that credit risks stemming from customer business will materialize. We consider our risk concentration with regard to bank failures to be low, given our approach to counterparty risk. If bank failures were to occur unexpectedly, their impact on wacker's earnings would probably be low.

Evaluation and Risk Assessment: We hedge part of our us dollar business. Possible gains or losses from exchange- rate ﬂuctuations are partially cushioned by hedges. At the present time, we consider it possible that exchange-rate and interest-rate changes in 2021 will differ substantially from our planning assumptions. We believe that this would have a medium impact on Group earnings.

Liquidity Risk

Scenario: Lack of funds for payments and tougher access to credit markets.

Impact on wacker: Higher ﬁnancing costs and impact on further investment projects.

Measures: Liquidity risk is managed centrally at wacker.

Our Corporate Finance and Insurance department employs efﬁcient systems for both cash management and rolling liquidity planning. To counter ﬁnancing risks, wacker holds adequate, contractually agreed long-term lines of credit, and has set aside sufﬁcient liquidity. We invest liquid funds only in issuers or banks that have a solid investment-grade credit rating. Cash pooling means liquid funds are passed on internally within the Group as required.

Evaluation and Risk Assessment: wacker's liquidity totaled €1,338.0 million as of the reporting date. At the same time, there were unused lines of credit with terms of over one year totaling €690 million. We consider the occurrence of ﬁnancing and liquidity risks to be unlikely. At the moment, we see no risks relating to ﬁnancial-covenant infringements.

If ﬁnancing or liquidity bottlenecks did occur, their impact on Group earnings would be low. If unused lines of credit were tapped, net ﬁnancial debt would rise.

Pensions

Scenario: Higher life expectancy of those entitled to a pension; pay and pension adjustments; falling discount factors; signiﬁcant changes in the composition of invested fund assets and capital-market interest rates (low-rate environment).

Impact on wacker: A rise in pension obligations, a decline in fund assets and a possible injection of ﬁnancial resources into the pension fund or into the plan assets will affect the ﬁnancial position and earnings of the Group. Further factors with a substantial impact on wacker's equity and earnings are the higher life expectancy of pension-fund beneﬁciaries, adjustments to pay and pensions, and the discount factor (used to calculate the present value of future cash ﬂows).

Measures: A large portion of wacker's pension commitments are covered by the Wacker Chemie VVaG pension fund, by other pension-related funds and special-purpose assets, and by insurance plans. The investment portfolio is diversiﬁed to ensure a sufﬁcient rate of return and to limit investment risks. The pension fund optimizes all asset items so that it attains the required return within speciﬁed risk limits. As one of the sponsoring entities, wacker makes payments to the fund (when necessary), thereby ensuring sufﬁcient coverage for pension obligations. In 2020, wacker made an additional, special payment of €73.4 million to the pension fund. We periodically adjust the calculation parameters (e.g. life expectancy) for the other deﬁned- beneﬁt pension commitments.

Evaluation and Risk Assessment: Employee beneﬁciaries of the pension fund are steadily getting older and capital- market interest rates have been very low in recent years. The rate of return will probably be insufﬁcient to fulﬁll pension obligations in the long term. It is highly probable that, in the future, more special payments to the fund will be necessary, that pension expenses and pension payments will rise further, and that higher provisions for pensions will weigh on the balance sheet. In the medium term, this would have a high impact on wacker's earnings, net assets and ﬁnancial position.

Legal Risks

Scenario: Diverse legal risks related to tax, trademarks, patents, competition, antitrust proceedings, the environment, labor and contracts could arise from our international business.

Impact on wacker: Drawn-out legal disputes, which could be detrimental to our company's operations, image and reputation, and which could be costly.

Measures: We limit legal risks through centralized contract management and through reviews by our Legal department.

Where necessary, we also have recourse to external legal experts.

Our Intellectual Property department protects and monitors patents, trademarks and licenses. Before launching r&d projects, we conduct searches to determine whether existing third-party patents and intellectual property rights could obstruct these projects.

We use compliance programs to limit risks arising from possible legal infringements. wacker's Code of Conduct deﬁnes and stipulates binding rules of behavior for all employees. wacker enhances awareness of these issues through training programs.

Evaluation and Risk Assessment: Due to the varied nature of our business activities, it is always conceivable that legal risks could arise. We currently do not foresee any legal disputes, patent infringements or other legal risks that could signiﬁcantly inﬂuence our business, and consider the probability of such risks materializing to be fundamentally unlikely. Should such an individual case occur, we would expect its impact on wacker's earnings to be low.

Regulatory Risks

Energy Transition in Germany

Scenario: Germany's energy transition policy to achieve the CO2-reduction targets set for 2030-2050 creates a regulatory environment that is likely to involve repeated legislative amendments, especially in the electricity sector (the German Renewable Energy Act, including relief for energy-intensive companies and self-generated electricity; German regulations governing grid charges for electricity and gas; eu laws on state aid; the eu Energy-Efﬁciency Directive; national and European emissions trading systems; integrated energy; the hydrogen economy).

Impact on wacker: Increased energy-cost burden due to higher government-regulated charges and levies, unless energy-intensive industries are exempted to the same extent as before.

Measures: We continually monitor regulatory activity in Germany and in the eu. Whenever we anticipate changes in the current legal situation, we try to introduce our viewpoint into legislative procedures through discussions with policymakers and by participating in the work of trade associations. We also take advantage of market opportunities arising from regulatory changes (e.g. industrial demand-response management).

Evaluation and Risk Assessment: Changes in grid-fee exemption and in the calculation basis for grid levies meant that wacker's level of relief from grid charges has dropped in the last few years. As of this year, Phase 4 of the European emissions trading regulations will take effect to accelerate the reduction of the emission ceiling in the European Union. This could lead to higher prices or lower allocations of emission allowances. In addition, we consider it possible that 2021 will see further amendments to statutory provisions on energy supply. The impact of such amendments on wacker's earnings would probably be low in the current year, but could increase substantially in subsequent years.

Polysilicon Trade Restrictions

Scenario: Anti-dumping proceeding completed by mofcom (Chinese Ministry of Commerce) against polysilicon imports from the usa. On January 20, 2020, mofcom decided (following an expiry review) to extend the existing anti- dumping and anti-subsidy tariffs on us-made solar-grade polysilicon for another ﬁve years.

Impact on wacker: Negative impact of anti-dumping and anti-subsidy tariffs on earnings, net assets and ﬁnancial position; inﬂuence on sales volumes; impact on long-term customer relations.

Measures: Despite the usa-China trade conﬂict, we are holding numerous talks with policymakers in both countries to try and mitigate or eliminate punitive solar-sector tariffs (us tariffs on Chinese solar modules and cells, and Chinese tariffs on solar-grade polysilicon from the usa). Our aim in doing so is to reduce or end Chinese anti-dumping and anti-subsidy tariffs and other punitive tariffs on wacker's us-made solar-grade polysilicon. We also have the option under Chinese anti-dumping law to apply to have the tariffs reviewed individually and, if necessary, have separate tariffs set. This is because wacker did not, in fact, import any polysilicon from the usa into China during the investigation period of the anti-dumping proceedings. In addition, we have already qualiﬁed polysilicon made at our Charleston site with customers for semiconductor applications and will be able to complete further qualiﬁcations for semiconductor customers in 2021.

Evaluation and Risk Assessment: The usa and China signed phase 1 of a trade agreement on January 15, 2020. Under the agreement, China commits itself to purchase at least us$ 250 billion worth of us-made goods in 2020 and 2021. This explicitly includes solar-grade polysilicon. At present, we cannot assess if, and to what degree, this will have a positive impact on our sales of us-made polysilicon, since it is unclear exactly how China will implement the agreement. As China has not yet lifted its tariffs on us- made solar-grade polysilicon, wacker is still not able to export its Charleston-made solar-grade polysilicon from the usa to China at competitive terms. Given the ongoing trade disputes worldwide, we consider it possible that wacker's polysilicon business could be affected by further trade barriers and punitive tariffs. The potential impact on our 2021 earnings would then probably be high.

New Regulations for Production Processes and Products

Scenario: Due to new legislation, the production and use of chemical substances is regulated more strictly. New regulations make it necessary to modify our production processes or reformulate our products. They also impose more extensive information requirements on us and, in some cases, on our customers as well.

Impact on wacker: Additional investments in production facilities, conversion costs, and revenue losses in individual application ﬁelds.

Measures: wacker continually monitors the regulatory environment surrounding its products and production processes so that it can react promptly to impending changes. We are continuously optimizing our production processes. Any other necessary measures will be aligned with the changed regulatory environment in each speciﬁc situation.

Evaluation and Risk Assessment: It is always possible that new legal provisions necessitate modiﬁcations to our product portfolio or production processes. We consider it likely that new legal provisions will require additional investment in our production facilities or changes to our product portfolio. Should such changes occur, their short- term impact on wacker's earnings would probably be low. In the medium term, though, they could have a medium- to-high impact.

it Risks

Scenario: Attacks, system errors and unauthorized access to our it systems and our production plants and networks, resulting in a threat to data security.

Impact on wacker: Negative impact on the company's earnings, net assets and ﬁnancial position, and on its production processes and workﬂows; loss of know-how.

Measures: We continually monitor our use of information technology and do everything we can to ensure that computer-assisted business processes function reliably. Our it-security and risk-management specialists are responsible for handling hazards in a cost-efﬁcient way. Their work is based on iso 27001. We use risk analyses to deﬁne the requirements for our central systems with regard to the availability, confidentiality and integrity of data. We anchor these requirements in service level agreements (slas) and continually monitor compliance with those agreements. The deciding factor in conﬁguring our systems for maximum availability is an associated backup and recovery procedure. Predeﬁned processes and workﬂows are in place for emergencies (business continuity management).

We minimize project-related it risks by applying uniform project/quality management methods. These ensure that changes are integrated into our system landscape in a controlled manner and in accordance with deﬁned processes.

During the risk management process, we log and evaluate any operations-related risks that arise and take appropriate countermeasures. In 2020, Corporate Auditing analyzed the risk management process and conﬁrmed the accuracy and completeness of processes and structures used at it and for digitalization. We deploy state-of-the-art hardware and software solutions to counter network downtime, data loss, data manipulation and unauthorized access to our network. In 2020, we set up a Cyber Defense Center (cdc). It continually monitors the security of our it landscape and applications, and ensures that any deﬁcits found are rectiﬁed in a timely manner. Our user-authorization systems are based on the need-to-know principle. We review them regularly and assess any new concepts that reﬂect advances in digitalization. In order to protect our it systems against malware, we deploy efﬁcient security software, which we always keep up to date. We have set up an international security team, which addresses problems involving the confidentiality, integrity and availability of data and systems by introducing organizational and technical measures and by initiating awareness campaigns and training courses. Information events and training courses on it security ensure that our employees have the necessary skills to enhance information security at the company. In addition, we regularly conduct comprehensive penetration tests and audits at domestic and international sites. We continually observe and evaluate the techniques of potential attackers and, where necessary, realign our defense strategies accordingly.

Evaluation and Risk Assessment: A long-term failure of it systems or a major loss of data could considerably impair wacker's operations. As in previous years, there were a large number of attempted attacks on our it systems and infrastructure in 2020. It cannot be ruled out that such attacks could succeed in certain cases despite the precautions we have taken. We thus consider such events possible. If, as a result of such an event, any of our it systems faced downtime, a service disruption or a hacker attack that affected a signiﬁcant number of users or lasted for a substantial period, the impact on wacker's earnings would be of medium scale.

Personnel-Related Risks

Scenario: Demographic change, lack of qualiﬁed technical and managerial employees, and problems in filling executive positions.

wacker has a detailed, groupwide succession planning process in place for all key positions in the company, including all positions held by senior executives (ofks). wacker's succession planning process distinguishes between short-term needs (up to two years) and medium- term needs (two to four years). In addition, wacker has appointed deputies for senior executives in the event of a lengthy absence or illness.

Impact on wacker: A lack of technical and managerial employees could impede our continued growth and cause us to lose our technological edge.

Measures: We limit these risks through our personnel policies. In particular, we have a talent management process in place, which we use to draw up development plans for our employees. In addition, we offer a wide variety of training programs, attractive social beneﬁts and performance-oriented compensation. We also offer our employees in Germany a wide range of working- time models and arrangements to better balance career demands with the different phases of their lives.

Evaluation and Risk Assessment: Demographic change will increase the risk of not being able to ﬁnd sufﬁciently qualiﬁed personnel for technical and managerial positions in the medium to long term. We consider it unlikely that risks to our personnel needs will arise in 2021. Should these risks materialize, the impact on Group earnings would probably be low.

External Risks

Scenario: Pandemic, natural disaster, war or civil war.

Impact on wacker: Impairment of our company's capacity to act; supply bottlenecks; production outages; supply- chain disruptions; loss of trade receivables; impact on sales and earnings.

Evaluation and Risk Assessment: Risks from pandemics, natural disasters, and acts of war or civil war can never be ruled out entirely. The current coronavirus pandemic is clear proof of this. The novel coronavirus and government measures introduced to contain the pandemic and protect public health hugely impaired the global economy and led to a severe recession in 2020. Numbers of infections are still very high in many countries. It is currently not possible to estimate whether, and how quickly, vaccinations will help effectively stop the pandemic in the long term. Thanks to our detailed action plans and our global network of production sites and sales offices, we succeeded in limiting the impact of covid-19 on our company in 2020. As the situation continues to evolve very fast, however, we cannot reliably estimate the outbreak's future effects at the moment. If the pandemic cannot be curbed signiﬁcantly, there is a high probability that wacker could once again be subject this year to risks from the coronavirus pandemic and to measures taken by the authorities. If such a scenario occurs, it could have a high impact on wacker's earnings.

Opportunities Report

Opportunity Management System wacker's opportunity management system remained unchanged from the previous year. It is both a divisional and Group-level instrument. We identify operational opportunities and leverage them in our business divisions, as they have the detailed product and market expertise required for these tasks. We continuously use market observation and analysis tools to obtain, for example, a well-structured evaluation of industrial, market and competitor data. In addition, we conduct customer interviews to evaluate future opportunities. The monitoring process - how wacker seizes opportunities - is based on key indicators (such as rolling forecasts and current-status reporting).

Measures: Our management entities and our sites have prepared and communicated plans and measures to minimize the effects of a pandemic on the health of our employees and on our business processes. Our pandemic-preparedness plan ensures a uniform, coordinated approach. The ﬁnancial impact of damage to our production plants due to natural disasters is partly covered by insurance. As wacker has production sites on various continents, it can always ensure a certain degree of manufacturing and delivery capability even if individual plants fail.

Strategic opportunities of overriding importance - such as strategy adjustments, potential acquisitions, collaborations and partnerships - are handled at the Executive Board level.

Such opportunities are incorporated into wacker's annual strategy-development and planning process, with current issues discussed at regular Executive Board meetings. As a general rule, we elaborate different scenarios and risk-opportunity proﬁles for these issues before making decisions.

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Wacker Chemie AG published this content on 15 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 March 2021 03:39:02 UTC.

Market Closed - Xetra Other stock markets 09:10:07 20/05/2024 pm IST			After market 01:29:36 am
104 ^EUR	+0.82%		103.8	-0.17%

07/05	WACKER CHEMIE AG : Gets a Neutral rating from DZ Bank	ZD
02/05	Siltronic starts the year with lower sales and profits	DP

WACKER CHEMIE AG : Gets a Neutral rating from DZ Bank	07/05	ZD
Siltronic starts the year with lower sales and profits	02/05	DP
WACKER CHEMIE AG : UBS reiterates its Buy rating	01/05	ZD
WACKER CHEMIE AG : Warburg Research reaffirms its Buy rating	29/04	ZD
WACKER CHEMIE AG : Berenberg reiterates its Neutral rating	26/04	ZD
Wacker Chemie still cautious - analyst: light and shade in the quarter	25/04	DP
WACKER CHEMIE AG : Jefferies maintains a Buy rating	25/04	ZD
Transcript : Wacker Chemie AG, Q1 2024 Earnings Call, Apr 25, 2024	25/04
WACKER CHEMIE AG : UBS gives a Buy rating	25/04	ZD
Dpa-AFX Overview: COMPANIES from 25.04.2024 - 15:15	25/04	DP
WACKER CHEMIE AG : Warburg Research reiterates its Buy rating	25/04	ZD
Wacker Chemie AG Reports Earnings Results for the First Quarter Ended March 31, 2024	25/04	CI
Warburg Research upgrades Wacker Chemie to 'Buy' - Target 150 euros	19/04	DP
WACKER CHEMIE AG : Raised to Buy by Warburg Research	19/04	ZD
Climate-neutral natural gas?: Experts doubt the effectiveness of offsetting	16/04	DP
WACKER CHEMIE AG : JP Morgan remains Neutral	11/04	ZD
Citi recommends Wacker Chemie and Evonik - BASF, Lanxess 'Neutral'	08/04	DP
Wacker Chemie jumps - UBS: Conservative outlook for the year	03/04	DP
UBS raises target for Wacker Chemie to 137 euros - 'Buy'	03/04	DP
WACKER CHEMIE AG : DZ Bank from Sell to Neutral	26/03	ZD
Siltronic closes production of small silicon wafers - 400 employees affected	22/03	DP
Aker Carbon Capture Bags Contract for Test Campaign at Wacker Chemie's Silicon Production Plant	22/03	MT
WACKER CHEMIE AG : Jefferies gives a Buy rating	21/03	ZD
WACKER CHEMIE AG : Berenberg sticks Neutral	15/03	ZD
WACKER CHEMIE AG : Jefferies keeps its Buy rating	12/03	ZD

	1st Jan change	Capi.
WACKER CHEMIE AG	-9.01%	557.11Cr
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HEXPOL AB	+6.80%	410.46Cr
ELKEM ASA	+2.17%	128.35Cr
ALLIED SUPREME CORP.	+19.82%	97Cr
SHANDONG DAWN POLYMER CO.,LTD.	-5.70%	73Cr
JENKEM TECHNOLOGY CO., LTD.	-31.02%	62Cr
JIANGSU MAYSTA CHEMICAL CO., LTD.	-10.03%	30Cr
DAQING HUAKE COMPANY LIMITED	-6.18%	27Cr
BGF CO., LTD.	-1.57%	26Cr

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