Siltronic : Compensation report

WAFER

Innovation &

Growth

Compensation report

Extract

from the Annual Report 2021

Compensation report

Siltronic Annual Report 2021 // Page 2

Compensation report

The following compensation report complies with the requirements of Section 162 of the German Stock Corporation Act (AktG) as amended by the Act Implementing the Second Shareholders' Rights Directive (ARUG II). Due to the changed regulatory condi- tions, the compensation report was prepared jointly by the Executive Board and Supervisory Board and adopted by both bodies on March 8, 2022. The unqualified report on the audit is printed at the end of the compensation report. This compensation report will be submitted to the Annual General Meeting on May 5, 2022 for approval.

Model compensation system

Overview of Executive Board compensation system

A full description of the compensation system can be found in the invitation to the 2020 Annual General Meeting, which is available on our corporate website.

The compensation system contributes to furthering Siltronic AG's business strategy of sustainably consolidating its position as one of the leading manufacturers of semiconductor wafers by defending its technology position, expanding its capacity in line with market growth, and thereby generating profit and cash flow across all market cycles by continuously improving its cost position.

35 %

25 %

LTI

(Phantom stocks with 4 year holding period)

STI

(annually, cash)

Number of phantom stocks		Adjustment of phantom stocks					Final Number
is determined at the begin-		(Target achievement factor: 0 - 2)					Phantom stocks based
ning of the compensation year										on the stock market price
based on the stock market		Ø of the annual target achieve-		Improvement of EBITDA margin		+ dividends will be con-
price and contractual allot-		ment plan EBIT during 4 years		compared to competitors in		verted into cash at the
ment value		(50 %)				4 years (50 %)		end of the holding period
plan EBIT				Plan-Net-Cashflow			non-financial targets (20 %):
(40 %)			(40 %)				• strategic targets
								(individual, if applicable)
								• ESG performance targets

0 - 200 %
0 - 200 %	-Cap
	Overall

Malus / Clawback for variable LTI and STI compensation elements that have not been paid out already (breach of duty pursuant to section 93 German Stock Corporation Act (AktG), termination for good cause, significant breach of the Code of Conduct)

Basic salary

40 %

Pension expense		• Pension expense of 30 % of the basic salary + basic company pension (pension fund)
Fringe benefits		• Interest of at least 2.5 %
		Share Ownership Commitment:
		50% of the gross annual basic salary in real stock at the time of their acquisition; 3 year build-up period for new Executive Board members

Compensation 2021

Important events in the compensation year 2021

Effective with the fiscal year 2021, the Supervisory Board had increased the basic salary of Rainer Irle from EUR 360,000 to EUR 390,000.

Against the background of the announced voluntary public tender offer by GlobalWafers, the share ownership commitment was adjusted by resolution of the Supervisory Board on December 9, 2020, so that the members of the Executive Board have the option to tender the shares held by them under the share ownership

commitment in the context of the tender offer. The Executive Board members made use of this option. However, they were obliged to continue to hold the shares in accordance with the previous rules until completion of the offer. As the tender offer was not completed by the long stop date of January 31, 2022 due to the lack of approval under foreign trade law from the German Federal Ministry for Economic Affairs and Climate Action, the existing rule on the shareholding obligation for the Executive Board members will continue to apply unchanged.

The following graphic provides an overview of the main components of the compensation system, the targets set and their strategic relevance in the fiscal year 2021.

Compensation report

Siltronic Annual Report 2021 // Page 3

Main components of the compensation system

Component			Strategic Reference		Implementation
Remuneration not linked to performance
Annual basic salary			Attraction/retention of qualified management		• CEO Dr. Christoph von Plotho: 550,000 EUR
			personnel		• CFO Rainer Irle: 390,000 EUR
					• fixed salary in 12 monthly instalments
Fringe benefits			Granting of compensation at market rates		• Commitment to assume costs or non-cash benefits, including for company
			and assumption of costs in connection with		car, D&O insurance, criminal law protection and accident insurance, health
			Executive Board activities		care, legal fees and subsidies to build up a private pension plan
Pension benefit			Adequate beefit as part of		• 30 % of the basic salary is added to a fictitious capital account
			competitive remuneration		and bears interest at 2.5 % to a maximum of 5 % + basic company pension
					(pension fund)
					• Pension cap: 50 % of the last monthly basic salary received before
					the insured even
Remuneration linked to performance
Annual bonus STI			Focusing on profitability and generating		Financial KPIs:
			positive cash flow. Supporting the strategic		• plan EBIT (40 %)
			development of the Company, which also		• Plan-Net-Cashflow (40 %)
			includes social and environmental aspects.
					Non-financial KPIs
					• strategic target (10 %): project FabNext
					• ESG (10 %):
					• work safety, silicon yield, energy consumption,
					water consumption, recycling
					Cap: 200 %
Long-termshare-based			Strengthening the long-term		• 4 year performance period for phantom stocks
compensation LTI			sustainability and sustainable		(stock market price + dividends)
			development of the Company		• KPIs for multiplication of the phantom stocks:
					• ø of the plan EBIT target achievement (50%)
					• EBITDA margin of the Company compared to the competitor market (50%)
					• Cap: 200 %
Benefits in case of termination
Mutual termination			Avoidance of unreasonably high severance		• Cap: compensation payment limited to remaining term,
			payments		max. 2 years' compensation (in accordance with GCGC)
Post-contractual			Knowhow protection, competitiveness		• Compensation for waiting: 12 months in the amount
non-competition clause					of basic annual salary
Further regulations of the compensation system
Share Ownership			Alignment of interests of the Executive Board		• Shareholding obligation in the amount of 50 % of the annual basic salary
			and shareholders		(gross amount) in shares
					• Relevant date for current Executive Board members: Sept. 14, 2017
Malus/Clawback			Sanctions/incentives against		• Payment amount for STI/LTI may be withheld:
			compliance violations		• good cause pursuant to section 93 of the German Stock Corporation Act (AktG)
					• significant breach of the Code of Conduct
Max. remuneration			Avoidance of unreasonably high payouts		• CEO EUR 2,450,000
					• Executive Board member EUR 1,810,000

Compensation report

Siltronic Annual Report 2021 // Page 4

Determination of the target compensation and maximum compensation for 2021

Based on the compensation system, the Supervisory Board has set the following specific target compensation for the fiscal year 2021 upon recommendation of the Executive Committee of the Supervisory Board.

				Dr. Christoph von Plotho,				Rainer Irle,
				CEO					CFO
				2021					2021
			Target	in %	Minimum	Maximum		Target	in %	Minimum	Maximum
Basic salary	550,000	37%	550,000	550,000	390,000	33%	390,000	390,000
Short term variable compensation
STI for 2021	343,750	23	0	687,500	243,750	20	0	487,500
Long term variable compensation
LTI 2021-2024	481,250	33	0	962,500	341,250	28	0	682,500
Target compensation	1,375,000	93		2,200,000	975,000	81		1,560,000
Fringe benefits	30,000	2			30,000	3
Pension expense (service cost)	68,111	5			194,455	16
Total target compensation	1,473,111	100		2,450,000	1,199,455	100		1,810,000

In addition to the caps for the individual variable compensation components (STI: 200 percent, LTI: 200 percent), the Supervisory Board has, in accordance with Section 87a (1) sentence 2 no. 1 of the German Stock Corporation Act (AktG), set a binding maximum compensation in the compensation system that comprises all compensation amounts paid for a given fiscal year (annual basic salary, variable compensation components, pension expenses or service costs, and fringe benefits). The maximum compensation for the fiscal year 2021 for the CEO Dr. Christoph von Plotho is EUR 2,450,000 and for the CFO Rainer Irle is EUR 1,810,000. The final inflow for the fiscal year 2021 can only be determined after the expiry of the four year holding period for the phantom stocks of the LTI at the beginning of the fiscal year 2025. If the total compensation determined thereafter for the fiscal year 2021 exceeds the defined maximum compensation, the cash settlement of the LTI for the fiscal year 2021 will be reduced accordingly.

Procedures for establishing, implementing and reviewing the appropriateness of the compensation system

Based on a proposal by the Executive Committee of the Supervisory Board, the Supervisory Board determines the system and the amount of the Executive Board compensation, including the maximum compensation. The Supervisory Board submits the resolved compensation system to the Annual General Meeting for approval.

The Supervisory Board regularly reviews the system and the level of the Executive Board compensation for appropriateness. To this end, it conducts an annual vertical comparison of the Executive Board compensation. In doing so, it considers the basic and target compensation in relation to the comparative groups of management and other employees. Secondly, the level and structure of the compensation is compared with a peer group of German listed companies defined by the Supervisory Board, which have similar key figures and whose composition is published (horizontal com- parison). For the formation of this peer group, it was not possible to draw on the wafer competitors, as they only publish insufficient compensation information and are not listed in Europe. The Supervisory Board therefore formed a peer group of German listed companies that are listed in the MDAX, TecDAX or SDAX and have similar key figures. This includes Carl Zeiss Meditec AG, Fuchs Petrolub SE, Gerresheimer AG, Jenoptik AG and Sartorius AG.

In case of significant changes, but at least every four years, the compensation system is again submitted to the Annual General Meeting for approval.

The system and the level of the Executive Board compensation are determined by the full Supervisory Board on the basis of a proposal by the Executive Committee of the Supervisory Board and regularly reviewed for appropriateness. The compensation system for the Executive Board was last adjusted for the fiscal year 2020. It was approved by the Annual General Meeting on June 26, 2020 with 98.84 percent of the votes cast.

Compensation report

Siltronic Annual Report 2021 // Page 5

Fixed compensation components	Executive Board and for Dr. Christoph von Plotho after January 1,
	2022 and for Rainer Irle after January 1, 2021:

Basic annual salary

The basic annual salary is a fixed cash payment for the entire year, based on the respective Executive Board member's area of respon- sibility. In 2021, Dr. Christoph von Plotho received a basic annual salary of EUR 550,000 and Rainer Irle received a basic annual salary of EUR 390,000, each of which was paid in twelve monthly installments.

Company pension scheme

Executive Board members are initially entitled to a basic Company pension through the Wacker Chemie VVaG pension fund. For this purpose, the Company and the Executive Board make monthly contributions to the pension fund.

In addition, Dr. Christoph von Plotho is entitled to a supplementary Company pension from the Company up to and including the fiscal year 2021 as follows:

The agreed basic annual salary is regarded as pensionable income. The benefits from this supplementary company pension plan consist of retirement pensions, early retirement pensions, disability pensions and surviving dependents' pensions. The pension expense for a fiscal year is 15 percent (above 150 percent of the applicable contribution assessment ceiling for statutory pension insurance) or 12.25 percent of the basic annual salary (between 100 and 150 percent of the contribution assessment ceiling). The pension expense forms the assessment basis for the amount of the pension benefit. The pension benefit payable annually after the occurrence of the insured event amounts to 18 percent of the total pension expense provided by the Company up to that point. Entitlement to a pension arises when the service contract is terminated, but not before the employee reaches the age of 65, or if the employee becomes incapacitated for work.

Deviating from the above, the following applies to entitlements acquired following the new appointment of members of the

The Company provides a pension expense of 30 percent of the basic annual salary each year. The pension expenses saved up to the time of retirement are credited to a notional capital account and bear interest at the current yield, but at a minimum of

2.5 percent and a maximum of 5 percent. The pension is calcu- lated by multiplying this pension capital according to the status of the corresponding capital account at the time of the occurrence of the pension case by the pension factor applicable to the respec- tive retirement age of the Executive Board member at the time of the occurrence of the pension case. Alternatively, in the event of a pension being payable, the member of the Executive Board can choose a lump-sum payment instead of the promised lifelong retirement and disability pension, which corresponds to the pen- sion capital at the time of the pension payment.

The gross amount of the monthly pension to be paid after retirement (based on the employer-financed portion) is limited for the members of the Executive Board to 50 percent of the monthly installment of the basic annual salary last received by the respective Executive Board member from the Company (pension cap).

Members of the Executive Board who have been promised deferred compensation in the past may continue to receive this compensation to the same extent as before.

The current members of the Executive Board receive an additional monthly amount (gross) from the Company in the amount of the employer's contribution to the statutory pension scheme as a building block for building up a private pension scheme. Such a component will no longer be granted in the event of future appointments of new Executive Board members.

The following overview shows the pension expense and the present value of the defined benefit obligations for fiscal year 2021.

EUR

Dr. Christoph von Plotho Rainer Irle

Benefit obligations		Pension expense
2021	2020	2021	2020
2,985,634	2,905,485	89,838	94,590
2,596,909	2,681,427	237,133	190,098