The Consolidated Financial Statements’

SHAPING THE FUTURE

Forecast Annual Forecast Forecast Forecast Actual Outlook Report Q/ H/ Q/

K+S Group Revenues billion tangible increase tangible increase . – . . – . . tangible increase EBITDA¹ million tangible increase tangible increase – – . signi cant increase

¹ Adjusted for the depreciation and amortisation amount not recognised in pro t and loss in the context of own work capitalised.

March 2017 May 2017 June 2017 August 2017 October 2017 November 2017 December 2017

Commissioning Ceremonial Bethune mine K+S opens new Ambitious growth Bethune Potash K+S and of two additional opening of the produced rst potash port facility strategy to 2030 Plant – First ship Gerstungen storage basins – new potash tonnes of potash in Vancouver introduced delivered potash municipality agree Production at mine in Canada from Canada on a settlement the Werra plant to customers stabilised further New Board of Executive Directors K+S and BUND team, led by agree on a Dr Burkhard Lohr, settlement intends to promote dialog Sigmundshall Potash mine – Termination of production operations at the end of 2018

About this report: Published on: March mation with internal and external stakeholders. Content with respect Reporting period: January to December to sustainability was prepared in accordance with version G of the Global Reporting Initiative ‘core option’ and considers sector This Annual Report combines the Financial Report with the Sustain- G Sector Disclosures: Mining and Metals. Simultaneously, the Annual ability Report. In this way, we present various dimensions of economic Report serves as the so-called Communication on Progress for the sustainability, which takes appropriate account of ecological and social Global Compact, which the board expressly committed. interests. Statements regarding substantial sustainability issues are included in the combined management report. In accordance with the In the event of any doubt, the German version of the annual report German implementation act to the European Corporate Social Respon- will prevail. sibility Directive , statements on material sustainability issues are contained in the non- nancial statement part of the combined management report, or refer to other non- nancial issues described in the management report. Statements have been reviewed externally Key (please also note the Auditor’s Report). The following icons in this report refer to additional information:

We follow the recommendations of the International Integrated = Cross-references within the Annual Report Reporting Council and use the work process to exchange infor- = References to internet sites TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

Ten-year summary + U . Responsibility Statement from Units at a glance U the Legal Representatives of + . Remuneration Report

. Preamble . Highlights . . The Board of Executive Directors . Income Statement . Supervisory Board Report . Statement of Comprehensive Income . + on the Capital Market . Balance Sheet . Statement of Cash Flows . Statement of Changes in Equity . Notes ¹ – Segment Reporting – Statement of Changes in Non-current . Company Pro le Assets – Group Legal Structure – Statement of Changes in Provisions – Value Creation – Other Notes – Employees – Research & Development Auditor’s Report . Non- nancial Statement – Business Model – Sustainability Management – People – Environment De nitions of Key Financial Indicators – Business Ethics -Index and Global Compact Principles . Declaration on Corporate Governance Glossary – Governing Bodies Index – Corporate Governance and Monitoring Financial Calendar, Online Service, Imprint . Corporate Strategy . Report on Economic Position – Overview of the Course of Business – Results of Operations – Financial Position – Net Assets – Presentation of Segments – Assessment of the Current Economic Situation by the Board of Executive Directors . Report on Risks and Opportunities . Report on Expected Developments . + (Explanations Based on the German ¹ The management report of K+S Aktiengesellschaft and the Group management report Commercial Code ()) have been combined for scal year 2017. - +

- + ¹

Pro t and Loss Revenues million , . , . , . , . , . , . , . ,. , . , . – thereof Potash and Magnesium Products business unit million , . , . , . , . , . , . , . , . , . , . – thereof Salt business unit million . , . , . , . , . ,. , . ,. , . , . Earnings before interest, taxes, depreciation and amortisation EBITDA ² million , . . . , . , . . . , . . . – thereof Potash and Magnesium Products business unit ² million , . . . . . . . . . . – thereof Salt business unit million . . . . . . . . . . EBITDA margin % . . . . . . . . . . Depreciation ³ million . . . . . . . . . . Operating earnings (EBIT I) million , . . . . . . . . . . – thereof Potash and Magnesium Products business unit million , . . . . . . . . . . – thereof Salt business unit million . . . . . . . . . . EBIT I margin % . . . . . . . . . . – Potash and Magnesium Products business unit % . . . . . . . . . . – Salt business unit % . . . . . . . . . . Group earnings from continued operations, adjusted million . . . . . . . . . . Earnings per share from continued operations, adjusted . . . . . . . . . . Cash ow Operating Cash ow million . . . . . . . . . . Capital expenditure ³ million . . . . . . , . , . , . . Adjusted Free Cash ow million . − . . . . . − . − . − . − . Balance Sheet Balance sheet total million , . ,. , . , . , . , . , . , . , . , . Equity million , . , . , . , . , . , . , . ,. ,. , . Equity ratio % . . . . . . . . . . Net debt as of 31 Dec. million . , . . . . , . , . , . , . , . Net debt/EBITDA x . . . . . . . . . . Working capital million . . . . , . . . . . . Return on Capital Employed ROCE % . . . . . . . . . . Employees Employees as of 31 Dec. number , , , , , , , , , , Average number of employees number , , , , , , , , , , The Share Book value per share . . . . . . . . . . Dividend per share . . . . . . . . . . Dividend yield % . . . . . . . . . . Closing price as of 31 Dec. XETRA, . . . . . . . . . . Market capitalisation billion . . . . . . . . . . Enterprise value as of 31 Dec. billion . . . . . . . . . . Average number of shares million . . . . . . . . . .

¹ Unless stated otherwise, information refers to the continued operations of the K+S Group. The FTE: Full-time equivalents; part-time positions are weighted in accordance with their discontinued operations of the COMPO business are also included up to 2009, and also the respective share of working hours. discontinued operations of the nitrogen business up to 2010. The balance sheet and therefore The gure for 2017 corresponds to the dividend proposal; the dividend yield is based on the the key gures working capital, net indebtedness, net indebtedness/EBITDA and book value year-end closing price. per share also include in 2010 the discontinued operations of the COMPO business and in 2011 The price of the K+S share since the capital increase in December 2009 has been traded ex also the discontinued operations of the nitrogen business. subscription right. Historical values were not adjusted. ² Adjusted for the depreciation and amortisation amount not recognised in pro t and loss in Total number of shares less the average number of own shares held by K+S. the context of own work capitalised. ³ Concerns cash investments as well as depreciation of property, plant and equipment and In this Annual Report rounding di erences may arise in percentages and numbers. amortisation of intangible assets, taking claims for reimbursement from claim management into account. The adjusted key gures only include the result from operating forecast hedges of the respective reporting period reported in EBIT I (see also ‘Notes to the income statement and the statement of comprehensive income’ on page 133). In addition, related e ects on deferred and cash taxes are eliminated; tax rate for 2017: 29.9 % (2016: 29.3 %).

Q/ Q / H/ Q/ M/ Q/ FY/ € million Revenues . . . . , . . , . EBITDA ¹ . . . . . . . EBIT I . . . . . . . Capital expenditure . . . . . . .

¹ Adjusted for the depreciation and amortisation amount not recognised in pro t and loss in the context of own work capitalised.

Q/ Q / H/ Q/ M/ Q/ FY/ € million Revenues . . . . ,. . , . EBITDA . . . . . . . EBIT I . . . . . . . Capital expenditure . . . . . . .

Q/ Q / H/ Q/ M/ Q/ FY/ € million Revenues . . . . . . . EBITDA . . . . . . . EBIT I . . . . . . . Capital expenditure . . . . . . .

Q/ Q / H/ Q/ M/ Q/ FY/ € million Revenues . . . . . . . EBITDA ‒ . ‒ . ‒. ‒ . ‒. ‒ . ‒ . EBIT I ‒. ‒. ‒ . ‒. ‒ . ‒ . ‒. Capital expenditure . . . . . . .

Q/ Q / H/ Q/ M/ Q/ FY/ € million Revenues , . . , . . , . , . , . EBITDA . . . . . . . EBIT I . . . . . . . Capital expenditure . . . . . . . .

An eventful year lies behind us. It was a transition year for us. We made a start on tack- ling the future and removed obstacles from our path.

Particularly, the development of our new Group strategy laid the foundations for the way we will steer our Company towards the future, with sustainability playing a key role. At the core of the strategy is a change in the way we view our activities. Whereas in the past we prioritized extraction of potash and magnesium products as well as salt, now we are sharpening our focus on the market and our customers. Agriculture, Industry, Consumers and Communities are our four strong customer segments. We as a company are aligning ourselves with these segments; we call this ‘One +’. In realigning our activities we have drawn up the roadmap for the way in which we intend to lift our operating earnings before depreciation and amortisation to billion by and will also grow pro tably and independently beyond this. We implemented the rst of these organisational changes this year.

To steer the entire company towards this successful future, we also had to make some tough decisions. The decision to end potash production at the Sigmundshall mine was not easy for us.

We have come a long way in our quest to achieve ‘environmental peace’. The agreement reached with and the municipality of Gerstungen on the future disposal of mining wastewater gives us certainty in our planning. The permit for early commencement of construction for the expansion of tailings piles in Hattorf and the related positive overall forecast for the project are important further milestones, as is the new wastewater treatment plant on the Werra site. The certainty thus gained creates a good starting point for our business as well as for jobs and our production sites in Germany and around the world. Resolution of environmental issues is essential for the successful future of +, which is why we have expressed a public commitment to the principles of the United Nations Global Compact.

. PREAMBLE TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

Another important milestone was the commissioning of our new potash mine in Bethune, Canada. The investment has borne fruits and our customers have already taken receipt of the initial shiploads.

Reaching these milestones will enable us to continue growing in and beyond, increase our earnings again and thus reduce our indebtedness.

On behalf of the entire Board of Executive Directors, I would like to express our thanks and appreciation to all our employees. I would also like to thank our customers, partners and you, the shareholders, for your trust and constructive criticism with which you accompanied us again in the past nancial year.

We look forward to continuing our excellent cooperation with you. All the best!

. PREAMBLE In the purpose of ‘One +’ we think and act as one company. We are developing a new way of working across areas, locations and countries. Our existing business with the two raw materials potash and salt o ers a good basis for the future. We will proceed developing it consistently and want to use organic as well as growth options by acquisitions. With the commissioning of the new Bethune mine in Canada we are entering a new dimension. Now we supply our customers with potash from two continents: North America and Europe. With the implementation of we become more independent of external in uences such as the weather and the price development of potassium chloride. In order to achieve that, we want to expand our specialty business and develop adjacent growth areas. .

The excitement in the huge warehouse is increasing immeasurably. Several dozen employees are standing together in smaller groups and staring expectantly at the ceiling. Bright spotlights illuminate the area of more than , square meters, outside it is still dark. Then suddenly the rst trickles of ‘white gold’, as the miners call potash, are falling down from a metres high conveyor belt like sudden fog. On the ground it quickly builds-up to a small pyramid. With frenetic cheers and loud clapping the employees are appreciat- ing the things that are happening right now. It’s done: The rst product appears at the brand new potash plant Bethune in the south of the Canadian province of Saskatchewan. There, in the treasury of the Canadian potash industry, + has managed to build the most modern plant of its kind worldwide in less than ve years. Therefore th of June marks one of the most important milestones in the recent history of + . ‘This is a great day for our company,’ commented Dr Burkhard Lohr, of + , the event a little later. ‘With Bethune, we are entering a new dimension. Now we produce potash on two continents.’ With the new location, + is expanding the global presence and will reduce the average cost of production, just to name a few of many advantages.

And the success story of the German resources company in Canada continues: On August the company and the partner opened the new handling and storage facility for Bethune potash in the Port of Vancouver. Just one month later, the rst train with loaded rail cars arrives there. Only four more weeks later, the rst cargo ship with , tons of potash fertilizers leaves the port to be received by customers in the Chinese port of Yantai on November th. About , tons were produced in Bethune last year.

Bethune was not the only step in to secure potash production in the long term. Thanks to the opti- mized wastewater management at the Werra plant from mid-February onwards, it has been possible to stabilize operations of the largest German + potash site. The commissioning of the new - facility was another important milestone. This facility reduces the total amount of saline wastewater from the Werra plant by further percent. The receipt of the permit for the early commencement of the tailings pile extension in Hattorf and in accordance to that the positive forecast for this project is rounding-o the successes in this business environment last year.

. HIGHLIGHTS TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

At the top of the priority list of the newly formed Board of Executive Directors was the dialogue with critics on environmental issues last year. After a few months, there were rst successful steps to be announced: There were two ongoing and lengthy legal disputes with the environmental association and the municipality of Gerstungen in Thuringia resolved by settlement agreements. On the way to environmental peace this kind of dialogue with stakeholders shall continue in the future. ‘It’s about maintaining our license-to-operate,’ Dr Burkhard Lohr aptly described this development.

In spring + promised its shareholders a ‘tangible increase in earnings’ for the nancial year compared to the previous year. This forecast was achieved with an operating result of million even- tually. Although the result lies at the lower end of the forecasted range between and million. However, this was mainly due to the fact that the planned closure of the Sigmundshall mine near Hanover was announced and thus a high one-time nancial e ect arose. Without this e ect the operating result would have increased by more than percent compared to the previous year. The decision to abandon the location at the end of was not easy for the Board of Executive Directors. However, it was inevitable as the productivity of the mine has steadily declined in recent years. The target is to give a clear perspective to the more than dedicated employees beyond .

No one can come up with a new corporate strategy just like that and it cannot be explained completely in a few sentences. It is rather the result of several months of profound analysis and development work. This mammoth task was the core approach of the newly formed Board of Executive Directors directly after the inauguration. And the Board has delivered: The outcome was a clear vision of a successful + in and the associated new strategy . It takes the interests of all stakeholders into account. The newly developed guiding principle keeps it to the point: ‘We will be the most customer-focused, independent minerals company.’ In other words: + should become more e cient and have a long-term growth perspective again. That’s why in the future, customers will be more in the focus of action. To achieve this, + reorganises the production-driven business units Potash and Magnesium Products as well as Salt to the customer segments Agriculture, Industry, Consumers and Communities.

. HIGHLIGHTS .

The new strategy is a clear commitment to the future + . It is based on our strengths and abilities. It expresses that our company will be successful in the long term. We are tapping the full potential of our existing business and explore new adjacent growth areas. Therefore we have set ambitious targets to de ne our standard and make + robust and pro table.

Targets : Ambitions :

Net debt / halved bn vs. in

> m >

Synergies from the end of

Target :

Requirements achieved for > p. a. investment grade-rating Revenue growth beyond

¹ Detailed information on the new corporate strategy SHAPING 2030 can be found in chapter 2.4 Corporate Strategy from page 75.

. SHAPING TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

We will be the most customer-focused, independent minerals company.

Tapping the full potential One Company of our existing assets

Exploring new Increasing the share of adjacent growth our specialties business areas

2017 revenue share of the four customer segments:

INDUSTRY CONSUMERS AGRICULTURE – Chemical – Table salt – Potassium chloride MOP COMMUNITIES – Pharmaceuticals – Water softening / – Premium fertilizers – De-icing – Industry specialties Pool salt – Fertigation – Food processing – Ice melt

OUR VISION FOR .

The Board of Executive Directors of the K+S Aktiengesellschaft (from left to right): Dr Thomas Nöcker, Thorsten Boeckers, Dr Burkhard Lohr and Mark Roberts.

¹ In light of the new corporate structure as part of SHAPING 2030, Dr Otto Lose stepped down from the Board of Executive Directors on the best possible terms with e ect from 28 November 2017. . THE BOARD OF EXECUTIVE DIRECTORS TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

Dr Burkhard Lohr was born in Essen in . After study- + . He has responsibility for Corporate ing business administration at the University of Cologne Board O ce, Corporate Communications, Corporate Develop- he joined in . From onwards, he ment, Internal Auditing, Investor Relations, Legal, , Corpo- held a number of positions at , Essen, including rate Secretary, Environmental & Regulatory A airs as well as as member of the Management of the Munich branch and Corporate together with Dr Nöcker. as of , Essen. He obtained his Dr rer. pol. degree from Technische Universität Braun- schweig in . As of , as of , he was responsible for Finance, Investor Relations, Accounting, Con- trolling and Taxes. In , he also became Personnel Director. Since , he has been a member of the Board of Executive Directors of + and on May he became Chairman of the Board of Executive Directors of

Thorsten Boeckers was born in in Würselen (North trolling, Corporate Finance and Accounting, Corporate Pro- Rhine-Westphalia). After training as a banker, Boeckers began curement, Corporate Tax and all direct shareholdings of his professional career in at in Aachen. + , as far as they are not assigned to He joined ’s Equity Research department in another area of responsibility. Frankfurt in . In , he was appointed Head of Institu- tional Investor Relations at . In , he was transferred and served for around two years as Head of Investor Relations North America for in New York, . In , he returned to his previous function in Bonn. In , Boeckers joined + in Kassel as Head of Investor Relations. Since May , he has been a member of the Board of Executive Directors of + , responsible for Corporate Con-

. THE BOARD OF EXECUTIVE DIRECTORS

Mark Roberts was born in New Jersey, , in . He of Executive Directors of + with began his professional career as a marketing manager at responsibility for the Business Units Potash and Magne- the . He then joined sium Products, Salt as well as Waste Management and Recy- the as a sales representa- cling, the Technical Center (Digital Transformation, Geology, tive and national account manager in . Roberts joined Mining, Research and Development, Technics/Energy) and ¡ , the Animal Hygiene Products. distribution company of + , as a sales manager in and he subsequently became the company’s Vice President. He was appointed President of in and named of the in Clarks Sum- mit, Pennsylvania, , in April . On October , Mark Roberts became of in Chicago, . Since October , he has been a member of the Board

Dr Thomas Nöcker was born in Neukirchen-Vluyn in . together with Dr Lohr, the Business Center (Communication After studying law and subsequently obtaining a doctorate Services, Financial Accounting, Insurance, Services, Logistics from the University of Münster, Nöcker completed his legal Europe, Procurement/Materials Management Europe, Proj- traineeship in Düsseldorf and Montreal, Canada, among ect Management, Real Estate and Facility Management) and other places. He began his professional career in at + , + , where he held a range of di erent positions. He was and ¢ . appointed as a member of the Board of Executive Directors of in and was responsible for human resources, legal a airs and management/organisation. Dr Thomas Nöcker has been a member of the Board of Execu- tive Directors of + since August . He is the Personnel Director and is responsible for Corporate , Corporate Health, Safety & Environment, Corporate

. THE BOARD OF EXECUTIVE DIRECTORS TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

In my new role as Chairman of the Supervisory Board of + , I am happy to report for the rst time on our work during the nancial year and on the ndings of the audit of the annual and consolidated nancial statements.

In the Supervisory Board and in the recently created Strategy Committee, we especially discussed the new Group strategy, , in great detail during as well as the forward-looking organisation based thereon. The reorientation is based on an even stronger focus on the relevant markets and customer segments. We believe that + is well positioned to achieve the ambitious medium- and long-term objectives of .

One key element of the Group strategy is the change in the way the Board of Executive Directors approaches environmental issues for safeguarding our production in Germany in the long term.

Besides the detailed explanation of the business situation, other focal points of the Supervisory Board’s activities in were the opening of the new Bethune potash mine, the future of the Sigmundshall potash mine, the implementation of nancing measures and the selection of suitable candidates for appointments to the Board of Executive Directors and the Supervisory Board.

During the nancial year, the Supervisory Board diligently performed the supervisory and advisory functions incumbent on it by law and in accordance with the Articles of Association and its bylaws. Numerous matters were discussed in depth and resolutions were adopted on transactions requiring approval. We continuously monitored the Board of Executive Directors’ management of the Company and advised the Board on the governance of the Group. We were always involved in decisions of fundamental importance in a timely and appropriate manner. The Board of

. SUPERVISORY BOARD REPORT Executive Directors regularly briefed us promptly and comprehensively on the course of business, the results of operations, nancial position and net assets, the employment situation, the progress of important investment projects, planning and the further strategic development of the Company. Deviations from planning were explained to the Supervisory Board in detail. The risk situation and risk management were carefully considered. The Supervisory Board received written reports from the Board of Executive Directors in order to get prepared for meetings. Particularly, the Chairman of the Super- visory Board also remained in close personal contact with the Board of Executive Direc- tors outside of meetings and discussed signi cant events and upcoming decisions with it. The shareholder and employee representatives regularly discussed important agenda items at separate meetings prior to meetings of the Supervisory Board.

The average attendance of the Supervisory Board members at the ve Supervisory Board meetings was in the reporting period. Three meetings were attended by all Supervisory Board members; two meetings were unable to be attended by one member in each case. Thus, in , no Supervisory Board member attended fewer than half of the meetings. Of the four Audit Committee meetings, two were attended by all Com- mittee members; one member was excused at each of the other two meetings. The Nomination Committee met on six occasions. Four of these meetings were attended by all Committee members and on two occasions one member was excused. Three of the ve meetings of the Personnel Committee were attended by all Committee members; one member was excused at each of the other meetings. The newly created Strategy Committee met on three occasions. Two meetings were attended by all members and at one meeting one member was excused.

The composition of the Board of Executive Directors changed as follows:

On January , Dr Otto Lose joined the Board of Executive Directors of + - with responsibility for the Potash and Magnesium Products business unit as well as Waste Management and Recycling business unit.

. SUPERVISORY BOARD REPORT TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

Norbert Steiner’s term of o ce ended on May after years in the Board of Executive Directors, including ten years as its Chairman. Mr Steiner decisively shaped +’s growth and success in recent years, for which we would like to formally express our gratitude once again.

Dr Burkhard Lohr, the Company’s former Chief Financial O cer, took over as Chief Execu- tive O cer from May . Thorsten Boeckers has held the post of since this date.

At its meeting on November , the Supervisory Board resolved to advance the implementation of the new Group strategy in the future with a reduced, restructured Board of Executive Directors, which will be supported by an Executive Committee. The reduced management team will be composed of Dr Burkhard Lohr, the Company’s Chief Executive O cer, along with Chief Financial O cer Thorsten Boeckers and Mark Roberts, who holds the new position of Chief Operating O cer.

Dr Thomas Nöcker will enter retirement on September and hand over the areas of responsibility to his colleagues in the Board of Executive Directors before his appointment expires on August .

In light of the new corporate structure as part of , Dr Otto Lose stepped down from the Board of Executive Directors on the best possible terms with e ect from November .

The composition of the Supervisory Board changed as follows:

Dr Ralf Bethke, who had acted as Chairman of the Supervisory Board of + - since May , retired from the Supervisory Board when his appointment ended at the close of the Company’s Annual General Meeting on May . The members of the Supervisory Board would like to thank Dr Bethke for his excellent, invariably forward-looking management of the Board, in uenced by his extensive knowledge and international experience as long-standing Chairman of the Company’s Board of Execu- tive Directors ( to ).

. SUPERVISORY BOARD REPORT Following the Annual General Meeting of + , the members of the Supervisory Board elected Dr Andreas Kreimeyer , former member of the Board of Executive Directors and Research Executive Director of , as the new Chairman of the Supervisory Board. The Annual General Meeting also appointed Thomas Kölbl , Chief Financial O cer of £¢ , to the Company’s Supervisory Board. The composition of the Supervisory Board remained otherwise unchanged.

Five ordinary Supervisory Board meetings were held during the nancial year.

At the ordinary meeting held on March , the Supervisory Board examined the annual nancial statements, the consolidated nancial statements and the management reports in the presence of the auditor, approved the nancial statements on the recommendation of the Audit Committee and, following extensive discussions, agreed to the proposal of the Board of Executive Directors concerning the appropriation of pro ts for the nancial year. The business situation and the outlook for the current year were discussed in depth and the proposed resolutions for the Annual General Meeting approved. We also resolved on the target quota for the percentage of women in the Board of Executive Directors. In addition, approval was given for the raising of further outside funds in the capital markets. We were briefed at length on progress at our new Bethune production site in Canada and on the plans to put the plant into operation on May .

At the ordinary meeting on May , the Board of Executive Directors briefed the Supervisory Board in detail on the development of business and earnings in the rst quarter of , among other things.

The constituent meeting of the new Supervisory Board was held after the Annual Gen- eral Meeting on May . Following the election of the Chairman, the elections

. SUPERVISORY BOARD REPORT TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

for the Personnel, Audit and Nomination Committees took place (see the section on the composition of the Supervisory Board). We also set up a Strategy Committee and elected its members.

Dr Ralf Bethke, who had chaired the Supervisory Board for ten years, was appointed by the Supervisory Board as its Honorary Chairman based on his extraordinary merits and his outstanding personal commitment to the development of the + .

One of the topics we discussed in detail at the ordinary meeting on August was the + ’s new strategy, and the reorganisation of the work of the Board of Executive Directors. In addition, we were briefed on the current situation as regards environmental issues, and the business situation of the + was explained to us. We also addressed the future of the Sigmundshall mine. Moreover, we were informed about the ramp-up phase of our new Bethune plant in Canada.

At the last ordinary meeting of the year, held on November , the Board of Execu- tive Directors explained the current business situation in the individual business units and provided a forecast of the anticipated revenues and earnings of the + in . The planning of the + for , including the investment and nancing framework, was examined in depth (also in terms of consistency with strategic objectives) and subsequently approved. We were then briefed on the implementation status of the new strategy, . Furthermore, the Chairman of the Board of Executive Directors gave us an explanation of the current environmental issues such as expansion of tailings piles or considerations for the supplementary long-distance pipeline. Following a detailed, intensive discussion, we along with the Board of Execu- tive Directors nally approved the closure of operations at the Sigmundshall mine by December at the latest. The Chairman of the Audit Committee reported on the last meeting. The Supervisory Board resolved to engage - £ to audit the non- nancial statement. We have also nominated the candidates we will propose to the Annual General Meeting.

. SUPERVISORY BOARD REPORT The joint declaration of conformity by the Board of Executive Directors and Supervisory Board was likewise approved.

‚Declaration on Corporate Governance’, page

In addition to the Mediation Committee required by law, the Supervisory Board has established four more committees to support its tasks and responsibilities: the Audit Committee, the Personnel Committee, the Nomination Committee and the Strategy Committee formed at the Supervisory Board meeting following the Annual General Meeting. An overview of these committees and their composition can be found in the Management Report on page and on the + website under ‘Corporate Governance’. There you can also nd the bylaws for the Supervisory Board and its committees.

The Audit Committee met four times in . On March , in the presence of the auditor as well as the Chairman of the Board of Executive Directors and the Chief Finan- cial O cer, the committee examined the annual nancial statements of + - , the consolidated nancial statements, the combined management report as well as the proposal of the Board of Executive Directors for the appropriation of pro ts, and recommended the re-election of £- to the Annual General Meeting. On August , the committee discussed the + ’s internal control system in detail with the Chairman of the Board of Executive Directors and the Chief Financial O cer. Moreover, the committee acknowledged and approved the report delivered by the Chief Compliance O cer on the status of the compliance organisation of the + . Finally, the committee discussed focal points of the audit. On November , the Audit Committee held an extraordinary meeting to deliberate on the future of the Sigmundshall mine. At the meeting on November , the head of Internal Audit reported on his work in the + . The Board of Executive Directors reported on developments with regard to consultancy fees and donations as well as on the engagement of the auditor with non-audit services

. SUPERVISORY BOARD REPORT TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

permitted under the German Audit Reform Act. Finally, the Audit Committee was briefed on the new legal obligation of the Supervisory Board to examine the non- nancial statement and, following an in-depth discussion, recommended that the Supervisory Board engage the statutory auditor to audit the non- nancial statement.

The respective Quarterly Report or Half-Yearly Financial Report awaiting publication was discussed by the members of the Audit Committee, the Chairman of the Board of Executive Directors and the Chief Financial O cer in conference calls held on May, August and November .

The Personnel Committee, which prepares personnel decisions made by the Supervi- sory Board and is responsible for other matters concerning the Board of Executive Direc- tors, met a total of ve times in . During the meetings, it dealt in particular with the structure and long-term succession planning of the Board of Executive Directors. It also focused on agreeing targets with and their attainment by the members of the Board of Executive Directors, the appropriateness of the remuneration of the Board of Executive Directors in relation to the management teams and the total workforce, the gender quota and the advancement of the remuneration system for the members of the Board of Executive Directors which is explained in detail in the remuneration report. The regulations governing Dr Lose’s resignation and the expiry of Dr Nöcker’s term of o ce were also completed. Detailed information about the level of remuneration of the members of the Board of Executive Directors in as well as the structure of the previous and new remuneration system can be found on pages – . It is envisaged that the Annual General Meeting will resolve on the approval of the new system for remunerating the members of the Board of Executive Directors.

The members of the Nomination Committee met six times in . The subject of discussions held was an in-depth analysis of the structure of the Supervisory Board as well as its competence pro le and, building on this, the selection of candidates for the Supervisory Board.

. SUPERVISORY BOARD REPORT The newly formed Strategy Committee met a total of three times in . It mainly discussed the new Group strategy and the future organisation of + based thereon.

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

No con icts of interest involving members of the Board of Executive Directors or the Supervisory Board, about which the Annual General Meeting needed to be informed, were disclosed to the Supervisory Board during the reporting period.

£, Hanover, audited the annual nancial statements of + , which were prepared by the Board of Executive Directors in accordance with the rules set out in the - , and the consolidated nancial statements, which were prepared on the basis of the , as well as the combined management report and Group management report for the nancial year, and issued unquali ed audit opinions for both sets of nancial statements. The aforementioned documents, the Board of Executive Directors’ proposal concerning the appropriation of pro ts and the audit reports of £- , each of which had been submitted to the members of the Audit Committee and the Supervisory Board on time, were each addressed extensively at the Audit Committee meeting held on March , as well as at the Supervisory Board meeting held on March , in the presence of the auditor. All questions raised at both meetings were answered satisfactorily by the Board of Executive Directors and the auditor. Following its own examination of the reports presented, the Super- visory Board did not raise any objections. It agreed with the Board of Executive Direc- tors in its assessment of the position of + and of the Group and, at the suggestion of the Audit Committee, approved the nancial statements for the nancial year, thereby ratifying the annual nancial statements of +

. SUPERVISORY BOARD REPORT TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

. The Supervisory Board endorsed the proposal of the Board of Executive Directors for the Declaration on Corporate Governance (page ). The resolution on the appropriation of pro ts proposed by the Board of Executive Directors was also examined, particularly with regard to the present and expected future nancial situation of the + . Following extensive discussions, the Supervisory Board also approved this proposal made by the Board of Executive Directors.

The Supervisory Board expresses its thanks to the members of the Board of Executive Directors, all employees and the employee representatives for their continued high level of commitment and successful work during the past nancial year.

. SUPERVISORY BOARD REPORT . +

The + share has regained its stability at the end of the year following successfully concluded settlement negotiations with the and the Gerstungen municipality. It has reached its low for the year in November at . and was back at . at the end of the nancial year.

TAB: . .

Closing price on 31 December XETRA, . . . . . Highest price XETRA, . . . . . Lowest price XETRA, . . . . . Average number of shares million . . . . . Market capitalisation on 31 December billion . . . . . Average daily trading volume million units . . . . . Enterprise value EV on 31 December billion . . . . . Enterprise value to revenues (EV/revenues) x . . . . . Enterprise value to EBITDA (EV/EBITDA) x . . . . . Enterprise value to EBIT I (EV/EBIT I) x . . . . . Book value per share /share . . . . . Earnings per share, adjusted ¹ /share . . . . . Dividend per share ² /share . . . . . Total dividend payment ² million . . . . . Payout ratio ² ³ % . . . . . Dividend yield (closing price) ² % . . . . .

¹ The adjusted key indicators include the pro t/(loss) from operating anticipatory hedges in the relevant reporting period, which eliminates e ects from changes in the fair value of the hedges as well as e ects from the exchange rate hedging of capital expenditure in Canadian dollars (Legacy Project) (see also the ‘Explanation of the income statement and the statement of comprehensive income’ on page 157). Related e ects on deferred and cash taxes are also eliminated; tax rate in 2017: 29.9 % (2016: 29.3 %). ² The gure for 2017 corresponds to the dividend proposal. ³ Based on adjusted earnings after tax.

ticularly, the continued high liquidity supply from the leading central banks, the pick-up in the European economy and the tax reform implemented shortly before the end of the year gave a boost to the listings of multinational cor- The global economy experienced a powerful upswing in , porations. with many international stock indices recording fresh highs. The reinvigorated euro exchange rate, concerns about a pos- The German ¥ index exhibited an increase of . in sible isolationist policy in the United States and other major and reached , points at the end of the year; the political and geopolitical events like the North Korea crisis ¥ closed at , points and was up . over the put the stock markets only temporarily under pressure. Par- course of the year. While the European ¦ ¥¥

. K+S ON THE CAPITAL MARKET TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

index climbed . to points, the global index also showed a positive trend, rising by . to , – points. / FIG: 1.6.1 We also track the performance of our share compared with ‘ ’ our publicly traded competitors. These include, in particular, + the fertilizer producers and as well as In the rst half of the year, the + share, which is listed on the primarily salt producing company the ¥, mostly followed a sideways trend in line with from the . / FIG: 1.6.2 the ¥, the ¥, the ¦ ¥¥ and the . The share came under pressure in the second half of The shares of −. and the year. The share therefore recorded its lowest price during −. turned in a similar performance to the + share. the year of . on November. However, the capital mar- The share price of performed encouragingly, ket especially rewarded the conclusion of the settlement mainly due to the merger of the two Canadian competitors negotiations with and the municipality of Gerstungen and to form a new company, , as well as the stabilization of potash prices. Consequently, completed in early . the share showed an upward trend again at the end of the year under review and ended at . ( year-end closing price: .). In the course of the year, the short-sell- Under the free oat de nition applied by § , ing ratio also fell, from . at the beginning of the year the free oat is . Until the end of February, the fol- to . at the end of December (Source: Bloomberg). lowing shareholder noti ed us of holdings above the legal www.k-plus-s.com/share thresholds:

+ , , FIG: . . in % Jan Feb March April May June July Aug Sept Oct Nov Dec

MSCI World MDAX DAX DJ STOXX Europe 600 K+S Index: 31 December 2017

Source: Bloomberg

+ FIG: . . in % − − − −

K+S − . PotashCorp . Mosaic − . Compass − .

Source: Bloomberg

. K+S ON THE CAPITAL MARKET : . (noti- cation dated January ) / FIG: 1.6.3 + - As a result of the continued high liquidity supply from the leading central banks, bond prices for borrowers with good In North America, we o er an credit ratings remained high on the capital market, while programme to assist investors there in trad- yields were comparatively low. / TAB: 1.6.2 ing in + securities and thus expand the international shareholder base. As s are quoted in dollars and the dividends are also paid in dollars, they are essentially similar Following a review of +’s credit rating by rating agency to stocks. Two s correspond to a single + share. s ¡ ’, our rating was downgraded from + are traded on the (over-the-counter) market in the form to with a ‘stable’ outlook (previously ‘negative’) in August of a ‘level-’ programme. The + s are listed on the . This was mainly due to the high debt/equity ratio ¨¥ trading platform. (ratio of net debt to for : .) and the lon- www.k-plus-s.com/adr; www.otcmarkets.com ger-than-expected recovery of the free cash ow. The new rating had no signi cant negative impact on the Company’s eligibility for nancing.

FIG: . .

in % Institutional investors – thereof North America – thereof Germany – thereof UK & Ireland – thereof Rest of Europe – thereof Others Private investors Free oat

TAB: . .

. . Price Yield in % K+S bond (December 2018); coupon: 3.125 % . . K+S bond (December 2021); coupon: 4.125 % . . K+S bond (June 2022); coupon: 3.000 % . . K+S bond (December 2023); coupon: 2.625 % . .

Source: Bloomberg

. K+S ON THE CAPITAL MARKET TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

+ The very extensive research coverage of the + remained virtually unchanged compared with the previous year. The banks analysing us on a regular basis range from an investment boutique with regional expertise to major banks with an international scope. In total, banks analysed us on a regular basis during the nancial year : .

In late February , according to Bloomberg, banks gave us a ‘buy/accumulate’ recommendation, a ‘hold/neutral’ recommendation and a ‘reduce/sell’ recommendation. The average upside target was about .. www.k-plus-s.com/analysts

+ In the past year, we responded to the need for information on the part of the capital market by o ering road shows and conference days : . We held investor meetings in Europe, North America and Asia and also organised numerous one-on-one meetings and conference calls. By taking part in share forums across Germany, we intensi ed our contact with private shareholders. We complement the broad information o ering on our website by publishing vid- eos showing interviews with members of the Board of Exec- utive Directors as part of our ongoing nancial reporting. www.youtube.com/user/kplussag

The aim of our investor relations work is transparent and fair nancial communication with all market participants in order to maintain and strengthen con dence in the quality and integrity of our corporate governance and provide comprehensive, prompt and objective information about our strategy as well as about all events at the + that are relevant to the capital markets.

. K+S ON THE CAPITAL MARKET COMBINED MANAGEMENT REPORT

. Company Pro le . Non-Financial Statement . Declaration on Corporate Governance . Corporate Strategy . Report on Economic Position . Report on Risks and Opportunities . Report on Expected Developments . + (Explanations Based on the German Commercial Code ) . Responsibility Statement from the Legal Representatives of + . Remuneration Report TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

+ prides itself on being a customer-centric, independent provider of mineral products for the areas of Agriculture, Industry, Consumers and Communities. We serve the constantly growing demand for mineral products from production sites primarily in Europe, North America and South America as well as through a global distribution network.

French companies + ... and + ¢ ... were sold as of November . + acts as the holding company for the + and holds shares, directly and indirectly, in its subsidiaries, both in Germany and abroad, which make a Corporate management and monitoring are exercised at signi cant contribution to its nancial performance. Along Group level by + . The Board of Execu- with + , the consolidated nancial tive Directors is supported in its work by corporate functions. statements also include all material equity investments. Sub- Group-wide service functions are concentrated largely in the sidiaries that are not material are not consolidated. + Business and Technical Centers. ‘Appendix’, List of shareholdings, page Material subsidiaries are the directly held + , The + comprises the Potash and Magnesium Prod- + ¢ and + . + ¢ ucts and Salt business unit as well as Complementary Activ- encompasses – ities. ¡ . and + .., which www.k-plus-s.com/business holds, among other things, shares in Group companies in Canada, Brazil and Chile. + , together with + .., holds shares The following overview indicates the most important sites of in , . via subsidiaries. + the + in Germany and abroad: / FIG: 2.1.1 and + ¢ primarily hold their foreign ‘Value Creation’, page ; ‘Application’, page subsidiaries through dedicated intermediate holding companies. + , + and are held directly by + .

The scope of consolidation has changed as follows compared with December : Following the acquisition of + ., . , China, by + . ., Singapore, both companies are now consolidated. As a result of the intragroup reorganisation of the French company, ... was renamed + ... and + .. was renamed + ... Moreover, the

. COMPANY PROFILE FIG: ..

S29 K9 K10 S26 S24 S25 S20 S27 S18 S28 S14 S12 S19 S13 S17

S22 S15 S16 S21

S23

S30

S34 K11

S32 S31

S33

H = Headquarters K = Potash and Magnesium Products S = Salt E = Complementary Activities Potash and rock salt mining

K+S sites in Kassel, Hesse H K+S (Huludao) Magnesium Products, production plant Werra integrated potash plant, Hesse and Thuringia and distribution company, Huludao City, China K13 (Heringen/Merkers/Philippsthal/Unterbreizbach) K1 K+S Asia Paci c, distribution company, Singapore, Singapore K14 Zielitz potash mine, Saxony-Anhalt K2 K+S Fertilizers, distribution company, New Delhi, India K15 Sigmundshall potash mine, Lower Saxony K3 esco Head O ce in Hanover, Lower Saxony S1 Neuhof-Ellers potash mine, Hesse K4 Borth salt mine, North Rhine-Westphalia S2 Bergmannssegen-Hugo potash mine, Lower Saxony K5 Braunschweig-Lüneburg salt mine, Lower Saxony S3 K+S KALI France Head O ce, Reims, France K6 Bernburg salt mine, Saxony-Anhalt S4 K+S KALI Wittenheim, production plant, Frisia Zout B.V. brine plant, Harlingen, Netherlands S5 Wittenheim, France K7 esco Benelux, distribution company, Diegem, Belgium S6 K+S Polska, distribution company, Poznan, Poland K8 K+S Czech Republic, distribution and production company, K+S Potash Canada, Saskatoon, Saskatchewan, Prague, Czech Republic S7 Canada K9 esco Holding France, Dombasle-sur-Meurthe, France S8 Bethune potash mine, Saskatchewan, Canada K10 Levallois-Perret, Saline Cérébos, Salt production and K+S Brasileira Fertilizantes e Produtos Industriais, packaging, France S9 distribution company, São Paulo, Brazil K11 esco Spain Head O ce, Barcelona, Spain S10 Shenzhen K+S Trading, distribution company, Shenzhen, China K12

. COMPANY PROFILE TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

FIG: ..

K13

K15

K12

S5 E3 K3 K8 S1 S3 K5 K2 E2 S4 S2 E5 S6 E4 H + E1 K1 S7 K4 K14 K6 S9 S8

S10

S11

Vatel – Companhia de Produtos Alimentares Mines Seleine salt mine, Québec, Canada S25 Head O ce, Alverca, Portugal S11 Ojibway salt mine, Ontario, Canada S26 Morton Salt Head O ce, Chicago, Illinois, USA S12 Windsor evaporated salt plant, Ontario, Canada S27 Rittman evaporated salt plant, Ohio, USA S13 Pugwash salt mine, Nova Scotia, Canada S28 Fairport salt mine, Ohio, USA S14 Lindbergh brine plant, Alberta, Canada S29 Grand Saline salt mine, Texas, USA S15 Salina Diamante Branco sea salt facility, Galinhos, Brazil S30 Weeks Island salt mine, Louisiana, USA S16 Servicios Portuarios Patillos S.A., Port of Patillos, Iquique, Chile S31 Hutchinson evaporated salt plant, Kansas, USA S17 Salztagebaubetrieb K+S Chile, Tarapaca, Atacama desert, Chile S32 Silver Springs evaporated salt plant, New York, USA S18 K+S Chile Head O ce, Santiago de Chile, Chile S33 Grantsville solar evaporation salt facility, Utah, USA S19 K+S Peru, Lima, Peru S34 Manistee evaporated salt plant, Michigan, USA S20 K+S Entsorgung GmbH, Kassel, Hesse E1 Port Canaveral processing site, Florida, USA S21 Granulation of Animal Hygiene Products, Glendale solar evaporated salt facility, Arizona, USA S22 Bad Salzdetfurth, Lower Saxony E2 Inagua sea salt facility, Bahamas S23 K+S Transport GmbH, Hamburg E3 K+S Windsor Salt Head O ce, Pointe-Claire, Québec, Chemische Fabrik Kalk GmbH, Cologne, North Rhine-Westphalia E4 Canada S24 MSW-Chemie GmbH, Langelsheim, Lower Saxony E5

. COMPANY PROFILE

FIG: ..

Revenues 2017 EBITDA 2017 Employees Production capacity € 1,703.5 million € 268.8 million 8,708 up to 9 million tonnes by the end of the year 2017

Fifth largest potash producer in the world

Product categories Areas of application Potassium chloride, Fertilizer specialties, Industrial products Agriculture, Chemical industry, Oil and gas drilling, Pharmaceutical industry, Cosmetic industry, Food industry, Animal feed industry

Production in Europe Production in North America The Potash and Magnesium Products business unit extracts potash and Commissioning of potash plant in Bethune, Canada in June 2017. Long- magnesium crude salts at six mines in Germany, which are further processed term additional production capacity of 2.86 million tonnes. there and at a former mining site to create end products or intermediate products. Furthermore one processing sites in France belong to the business unit.

FIG: ..

Revenues 2017 EBITDA 2017 Employees Production capacity € 1,762.0 million € 325.2 million 5,008 a good 31 million tonnes

World’s largest supplier of salt products

Product categories Areas of application Consumer products, Salt for food processing, Industry, Industry salt, Salt Food industry, sh industry, textile and leather industry, oil and gas for chemical use, De-icing salt industry, plastics industry, glass industry, pharmaceutical industry, water softening and disinfection, drinking water treatment, animal feed industry, electrolysis, winter road clearance services

Regional portfolio Production in Europe Balanced regional portfolio allows for a balance of weather-related uctuations Three rock salt mines, two brine plants, as well as several plants processing in the de-icing salt business in Europe and North America among other evaporated salt in Germany, France, the Netherlands, Portugal and things. Spain, one salt processing company in the Czech Republic.

Production in North America Production in South America Six rock salt mines, nine plants processing evaporated salt, three solar salt One rock salt open-cast mine in the Salar Grande in the Chilean Atacama plants and four salt processing sites in the United States, in Canada and desert, one sea salt facility in the north-eastern part of Brazil. in the Bahamas.

FIG: ..

Revenues 2017 EBITDA 2017 Employees € 159.9 million € 30.3 million 280

Waste Management and Recycling K+S Transport GmbH Underground disposal of waste in potash and rock salt mines and recycling Own logistics service provider. activities.

Animal hygiene products CFK (Trading) Granulation of CATSAN® and THOMAS®. Chemische Fabrik Kalk GmbH CFK trades several basic chemicals.

. COMPANY PROFILE TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

As part of our new corporate strategy , we aim ner or have not yet been reliably identi ed. These potential to utilise synergy potentials much more in the future and extraction areas are predominantly connected to existing to create a new structure for our business model. Below we ones and belong to the + , or the + has present our business model using the value chain in the Pot- the option to purchase them. ash and Magnesium Products business unit and in the Salt business unit, which extends over the following six sections: For our site in Bethune, Canada, we are quoting reserves and Exploration, Mining, Production, Logistics, Sales/Marketing resources in millions of tonnes of potassium chloride ready and Application. / FIG: 2.1.5 for sale as an end product. Reserves total million tonnes www.k-plus-s.com/valuechain and resources around million tonnes. The information on the dimensions and structure of the deposit as well as on the depth and mineral content are based on geological con- Exploration provides insights into the dimensions and struc- clusions by analogy and isolated test drilling and has not yet ture of deposits, as well as their depth and mineral content. been veri ed by concrete exploration results. The data obtained is used to estimate reserves in accordance with international standards. Worldwide, underground In the Salt business unit, the + has reserves of . exploration is predominantly conducted by drilling and seis- billion tonnes of crude salt plus virtually in nite reserves of mic measurements that enable a spatial representation of solar salt. Furthermore, resources amounting to around . underground geological structures. billion tonnes of rock salt can be disclosed in Europe and North and South America, taking into account extraction and impoverishment losses. Our potash and rock salt mineral deposits are either under the ownership of the + or located in places where we possess the appropriate licences and/or similar rights We extract raw materials in conventional mining above and that permit the mining or solution mining of raw material below ground as well as through solution mining. We also reserves and secure these rights over the long term. extract salt by evaporating saline water, mostly sea water. ‘Glossary’, page The broadly comparable mining methods make it possible to realise synergies between the Potash and Magne- Our potash deposits in Germany contain reserves of around sium Products and Salt business units. These involve the . billion tonnes of crude salt as well as resources of around exchange of technical, geological and logistical know-how . billion tonnes of crude salt. Reserves include stocks that as well as coordinated procurement of machines and aux- have been identi ed as certain or probable and can be iliary materials. extracted cost-e ciently using known technology. Resources are deposits, which are anticipated on account of geological indicators, but are not yet recoverable in a cost-e cient man-

+ FIG: ..

Exploration Mining Production Logistics Sales / Marketing Application

. COMPANY PROFILE In the case of underground extraction, crude salt is generally Siegfried-Giesen plant, which was closed in , were sub- mined by means of drilling and blasting. Huge shovel load- mitted to the competent mining authorities at the beginning ers then transport the crude salt to crushing plants. From of . An o cial decision on this application is currently there, the crushed salt is brought to the extraction shaft via expected during the course of . conveyor belts. In this manner, the Potash and Magnesium www.kali-gmbh.com/siegfriedgiesen Products business unit obtains potassium chloride (KCl) and magnesium sulphate (MgSO©)/Kieserite (MgSO©·HªO) in Ger- Detailed plans describing the procedure for shutting down many and the Salt business unit obtains rock salt (NaCl) in a site and after-care are also available for sites in the United Germany, the United States and Canada. In Chile, the Salt States, Canada and Chile. business unit extracts rock salt using open-cast mining in the Atacama Desert in the Salar Grande de Tarapacá, a large If no reasonable re-use of decommissioned mines is possible, former salt lake. It also extracts sea salt and solar salt in Bra- we are generally under obligation to ood remaining caverns zil, the Bahamas, at the Great Salt Lake in Utah, in California that have steep storage seams. caverns have already been and in Arizona, . ooded in Lower Saxony, three are currently being ooded and one has been kept ‘dry’. At present, six sites in Lower Sax- Moreover, the Salt business unit operates brine elds in the ony are in the process of being secured, and at sites this and Canada as well as one in the Netherlands and one process has already been completed. in Germany for the extraction of evaporated salt. Since the summer of , the Potash and Magnesium Products business unit has been extracting potassium chloride by means The processing and re ning of raw materials is one of our of solution mining in the new Bethune potash plant in Sas- core competencies. The mineral crude salt mined by us katchewan, Canada. passes through multi-stage mechanical or physical processes without changing its natural properties. In , . million tonnes of crude salt were mined by the Potash and Magnesium Products business unit; . million At the end of , the annual production capacity in the tonnes were extracted by the Salt business unit. We mined Potash and Magnesium Products business unit was up to a total of . million tonnes of raw material in (: million tonnes. . million tonnes). In addition to potassium (between and potassium - chloride content), the potash deposits of + in Once the raw material in a mining operation has been Germany also contain magnesium and sulphur (between exhausted, measures are initiated for the partial or com- and magnesium sulphate content). Depending on the plete closure of the mine. In Germany, decommissioning and quality of the crude salt, we use processes such as thermal after-care are regulated inter alia in the German Federal Min- dissolution, otation and, in combination with one of the ing Act. mentioned processes, electrostatic separation ( process). ‘Glossary’, page At the Sigmundshall mine in Lower Saxony, the stocks are coming to an end, with the result that + decided in Novem- + successfully completed the share purchase of of ber to stop potash production at the end of . The the fertilizer producer ¨ ¢ ., technical measures required to shut down production and ¨ in Saudi Arabia on June . Through this secure the mine are being developed as part of a compre- purchase, + aims to participate in the growth in the Mid- hensive project and will be presented to the relevant author- dle East, Africa and South Asia, particularly in the fertigation ities as a closure plan for approval. The objective is to be able segment (use of fertilizers in irrigation systems), and also to to o er clear prospects to the around employees of the o er a broader product portfolio in the future. + produces plant beyond . fertilizers containing potassium sulphate (e. g. ®) from natural sources in the Werra plant. The potassium sul- The application documents for the plan approval procedure phate synthetically manufactured in ¨, Saudi Arabia, under mining law concerning the recommissioning of the ( water-soluble) complements the + product palette

. COMPANY PROFILE TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

with a fully water-soluble potassium sulphate, which is used Open and fair partnership characterises the cooperation with primarily in the area of fertigation, including for growing our suppliers and service providers, which we select in a sys- fruit and vegetables. The production plants of ¨ on tematic, transparent and -supported process that is not the Red Sea have an annual capacity of , tonnes ( solely based on economic criteria. In addition to law-abid- water-soluble), which is to be doubled in the future. With ing conduct, we also expect them to respect human rights the takeover of the fertilizer activities of the Chinese manu- as well as the core labour standards of the facturer of synthetic magnesium sulphate , . ¢ ., . , the Potash and Magnesium products business unit complements its product portfolio in the specialties business. The plant cur- Our supply chain management governs and monitors the rently has a capacity of , tonnes, which should per- entire supply chain in order to ensure reliable supply to our spectively be doubled in the future. The transaction was customers worldwide under competitive terms and condi- completed in January . tions. We make use of the various transport carriers, tak- ‘Glossary’, page ing into account their individual advantages, and incorpo- rate more environmentally friendly and cost-e ective railway + has an annual production capacity of just over million lines and waterways as much as possible. With the help of tonnes of salt in its Salt business unit. Rock salt from under- key performance indicators applicable across the Group, we ground and open-cast mining is ground into the desired grain monitor actual costs, measure the e ciency of logistics sys- size above ground. Evaporated salt is produced by evaporat- tems and improve these in a continuous process in order to ing the water from the brine and extracting the dissolved maintain and increase customer satisfaction. salt. When extracting sea salt or solar salt, salt water is chan- nelled into evaporation ponds laid out sequentially on a gra- + conveys more than million tonnes of goods on aver- dient. The brine becomes more and more concentrated as it age, including double counts when using various transport ows through the basins until nally a layer of salt several carriers. A global network of warehouse, port and distribution centimetres thick can be harvested. locations is available to this end.

+ has acquired mining licences from a group of local investors to set up a solar salt plant in Western Australia With + in Hamburg and the Chilean (Ashburton Salt Project). The project is still in the very early « .., we have two logistics service provid- stages of development. Following the start of an environ- ers of our own. + operates the ‘Kalikai’ mental permit procedure in October , + is currently (potash quay) in Hamburg, one of the largest transshipment preparing the required documents and completing a feasi- facilities for exports of bulk goods in Europe, with a storage bility study for the project. Only when the necessary per- capacity of around , tonnes. On average, . million mits have been granted – in at the earliest – will + tonnes of potash and magnesium products are handled here make a nal investment decision on whether to build the each year. Furthermore, + organises con- solar salt production facility. Annual production capacity tainer transports in Germany using inland water vessels and of the location could be approximately . million tonnes the railways. of solar salt. + .. + handles our maritime logistics through the shipping company « .., In , + purchased technical goods and services, raw using two of its own ships as well as additional chartered materials, consumables and supplies for around . billion vessels. Our largest port is Patillos in Chile, where . mil- (: . billion) from around , suppliers. The lion’s lion tonnes of salt were loaded onto maritime vessels in share of our purchasing volume relates to production, as well . as maintenance and expansion measures. Materials going into our production or our products only represent a small In August , + together with its partners opened part of the purchasing volume. the new transshipment and warehouse facility for pot- ‘Non- nancial Statement’, Business ethics, page ash products in the port of Vancouver (Port Moody). The

. COMPANY PROFILE new state-of-the-art facility includes an unloading station ti cation companies. We constantly assess our products for freight cars, , metres of conveyor belts and a for possible risks to health and safety and for their envi- metre long storage shed for a total of , tonnes of ronmental compatibility, and ensure that they are safe for potash products. Freight trains hauling , tonnes of people and not harmful to nature when they are used product can be unloaded here and ships with a capacity responsibly and properly. We provide our customers with of , tonnes can be loaded at the facility’s quay. comprehensive information about our products and services has rail cars at its disposal to transport goods from the in product and safety speci cation sheets. Since most of our Bethune plant to the harbour. These have been designed products are chemically non-modi ed natural substances, especially for ’s requirements. The eet of goods wag- they are exempt from mandatory registration in the context ons is set to be expanded at a later time as production vol- of the . All other ume increases. substances are registered in accordance with the regulations.

Securing long-term freight capacity is very important to us. – Most of our international transport volume is forwarded by service providers with which we maintain long-standing More than half of the revenues of the Potash and Magne- partnerships. sium Products business unit are generated in Europe. In this region we bene t from the logistically favourable proximity of the production sites to European customers. Other key We aim to be the most strongly customer-focussed, inde- sales regions are located in South America, particularly in pendent provider of mineral products in the market. High Brazil, as well as in Asia. / FIG: 2.1.6 product quality and reliability are crucial prerequisites for this. We strive for the greatest possible proximity to our In addition to the standard product, potassium chloride, and customers and o er them tailor-made products that we unlike its main competitors, + o ers fertilizer specialties sell through our e cient and customer-oriented distribu- containing potassium, sulphur and magnesium and occu- tion network. pies leading positions worldwide in this product segment. With its products for industrial, technical and pharmaceutical applications, + is also one of the most competitive man- As part of our continuous dialogue with customers and other ufacturers in the world and is by far the largest supplier in stakeholders, we obtain feedback on our performance from Europe. + is the world’s fth largest and Western Europe’s a customer perspective both from direct customers (dealers, largest producer of potash products. In , we had a share manufacturers) and also users of our products (e. g. farmers). of approximately of global potash sales volumes. As part of our communications measures, we seek dialogue with our customers and utilise the various exchange oppor- Important competitors are the North American companies tunities at trade fairs, in dialogue marketing or via commu- and , which merged in early to nicative response elements. Furthermore, in the last year we form , as well as . They operate the joint carried out a comprehensive customer satisfaction survey, export organisation with ¥. Other important which attests to our excellent perception amongst customers competitors are the Russian and the Belarusian with respect to product quality, but also provides us with valu- , the Israeli , Jordanian and Chilean ¨. able insights into how we can improve our service even more. Assured quality, on-time delivery and professional advice – contribute signi cantly to customer loyalty. In terms of the The revenues of the business unit are generated primarily on quality management of the individual companies, we want the American continent. Here, the , Canada, Brazil and to improve the quality of our products in all phases of the Chile are particularly important markets. Germany, France, value chain. Our quality management system is based on Benelux, Scandinavia and Eastern Europe are the key sales and is audited by accredited external cer- regions in Europe. / FIG: 2.1.7

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– FIG: ..

in % Europe . . – of which Germany . . North America . .

South America . . Asia . . Africa, Oceania . .

– FIG: ..

in % Europe . . – of which Germany . . North America . . South America . . Other regions . .

In terms of production capacity, + is the largest supplier of salt products in the world. In terms of products for the food The number of + brand rights increased slightly in . processing industry, salts for industrial and commercial appli- The + uses the following, among others, as cations and de-icing salt, along with the competitors umbrella brands: ¬¬®, ®, +-®, ®, £ ¢, and ¢- ®, ®, ® and ®. As product are the leaders in Europe. Through + , South brands, e.g. ¥®, ®, ®, ®, - America’s largest salt producer, + has access to the growing -®, ®, ®, ®, ®, - sales regions in South and Central America. is, ®, ® and ® are used. As of the end of along with and , one of the larg- , the + holds in total , : , national est salt producers in North America. and regional proprietary rights, derived from basic trade- marks : . Thanks to our unique network of production facilities in Europe, North America and South America, we can respond more exibly than local competitors to uctuations in the As part of our new corporate strategy , we weather-dependant demand for de-icing salt and ensure will be placing our future focus on the customer segments reliable supplies to our customers. In the other segments, of Agriculture, Industry, Consumers and Communities. the demand situation is relatively stable. While the mar- The core of this strategy is a market- and customer-driven ket for salt in Western Europe and North America tends to positioning of a company which has until now been driven exhibit only low growth rates, a trend towards a stronger by production. increase in demand is being observed in the emerging market countries.

. COMPANY PROFILE Industrial Products Furthermore, we o er a wide range of high-quality potas- Most of the products from the Potash and Magnesium Prod- sium and magnesium products for industrial applications, ucts business unit are used as plant nutrients in agriculture. which are available in di erent degrees of purity and in As natural products, these are largely permitted for organic speci c grain sizes. These are used, for example, in chlo- farming under law as well. Furthermore, we o er our rine-alkali electrolysis in the chemical industry, in the pro- customers products for industrial applications, high-purity duction of glass and plastics, in the mineral oil industry, in potassium and magnesium salts for the pharmaceutical, cos- metallurgical processes, in the textile industry, in biotech- metics and food industries as well as feed production com- nology, in oil and gas exploration, as well as in the recycling ponents. of plastics. www.k-plus-s.com/potash Health Care & Nutrition Potassium chloride In addition, the business unit provides a range of products The universally applicable mineral fertilizer, potassium chlo- meeting the particularly high requirements of the phar- ride, is used in particular for important crops, such as cereals, maceutical, cosmetics, food processing and animal feed corn, rice and soybeans. Potassium chloride is spread directly industries. on elds as a granulate, mixed with other straight fertilizers in bulk blenders to produce what are known as ‘Bulk blends’ As a service, the Potash and Magnesium Products business or supplied as a ne-grain ‘standard’ product to the fertilizer unit o ers professional advice to customers in the agricul- industry, which processes it along with other nutrients to tural sector. We anticipate trends and we research changes produce complex fertilizers. in general conditions with a view to water and resource e - ciency and in relation to soil fertility. Our aim is to optimise Fertilizer Specialties the supply of plant nutrients to crops even when general con- The fertilizer specialties di er from traditional potassium ditions change. We o er technical application advice for our chloride, either because they are chloride-free or because industrial products worldwide. of di erent nutrient formulas with magnesium, sulphur, sodium and trace elements. These products are used for We advise our customers in the agricultural industry crops which have a greater need for magnesium and sul- through agricultural engineers working worldwide and phur, such as rapeseed or potatoes, as well as for chlo- develop tailored solutions. We also conduct our own ride-sensitive special crops, such as citrus fruits, vines or research and eld tests in order to optimise the supply of vegetables. nutrients by adapting our product portfolio. The crops we focus on are potatoes, corn, oil palms, rapeseed and soybeans. For our customers, we o er individual fertilization recommendations, which are the prerequisites for ‘good

– FIG: ..

. Industrial Products Potassium Sulphate (SOP)

Korn-Kali . . Potassium Fertilizer Kieserite Chloride MOP Specialties Others

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professional practice’ in terms of agricultural land use. Salt for the food processing industry These recommendations help safeguard fertility and the The salt for the food processing industry product segment productivity of the soil as a natural resource in the long includes, amongst others, pretzel and pickling salt. term. / FIG: 2.1.8 Industrial salt The ‘Growth for Uganda’ project launched by + Industrial salts are used in the textile industry, in the produc- in cooperation with the in tion of animal feed, for preserving sh, in drilling uids used has trained almost , farmers so far to use better for the extraction of oil and natural gas as well as in many agricultural techniques and to reduce post-harvest losses. other industrial areas. Pharmaceutical salts are a key element The supply of self-grown food products has become more in infusion and dialysis solutions. reliable and yields have increased considerably. The second phase of the project will, in addition to the basic work, now Salt for chemical use focus on the commercial aspect, ‘Farming as a Business’. In Salt for chemical use is one of the most important raw an environment which is characterised by small farms, the materials for the chemical industry. In electrolysis plants, it goal is to build an infrastructure for fertilizer sales, to o er is split into chlorine, caustic soda and hydrogen. It reaches fertilizers in small volumes and to provide training for dis- the end user as a component of various plastics (for exam- tributors. ple, ). www.kali-gmbh.com/uganda De-icing salt Winter road maintenance services, public and private road authorities, road maintenance depots and commercial bulk The Salt business unit o ers its customers various salt prod- customers procure de-icing salts from +. Premium de-icing ucts for a number of applications. Depending on the particu- salt blends are also o ered which, through the addition of lar application, the products di er primarily in terms of their calcium or magnesium chloride, create more heat on contact grain size and shape, degree of purity, the form in which they with ice and snow than conventional products and there- are supplied and possible additives. fore work more quickly, especially at very low temperatures. www.k-plus-s.com/salt Household packages for end users round o the product range in this segment. / FIG: 2.1.9 Consumer products In the consumer products segment + manufactures products such as table salt, water softening salt for home use and dishwater salt for end users. The portfolio also includes pre- The Waste Management and Recycling business unit uses mium products such as kosher and low-sodium salt. parts of underground chambers that have been created by the extraction of crude salt, for the elimination and

– FIG: ..

Consumer products

Industrial salt

. . Salt for food processing industry De-icing salt Non de-icing salt Salt for chemical use

Others

. COMPANY PROFILE reutilisation of waste products in a manner that is safe over a longer period of time. The salt mineral sites used The following value added statement describes our contribu- for this purpose are separated from the ongoing extraction tion to private and public income. Value added is calculated operation, are impervious to both gas and liquids and are using sales revenues and other income after deducting mate- securely separated from the layers carrying groundwater. rial costs, depreciation and amortisation and other expenses. A combination of geological and technical barriers guaran- The allocation statement reveals what share of value added tees the highest possible safety. went to employees, shareholders, government and lenders and what share remains with the Company (reserves). The business unit operates two underground depositories and ve underground reutilisation facilities. The waste stored In , our value added amounted to , . million (: in the underground depositories is dealt with in a manner ,. million). The majority of that, ,. mil- that is safe in the long-term and maintenance-free, and per- lion, was allocated to our employees (: ,. mil- manently removed from the biosphere. For the underground lion . This share is composed of wages and salaries, reutilisation, permitted waste such as residue from the ue social insurance contributions and pension contributions. gas cleaning procedure is used as back ll material to ll the Local authorities received taxes and fees of . million chambers. (: . million . . million went as interest to lenders (: . million . It is assumed + o ers a complete service cover- that the shareholders will receive the suggested dividend ing the recycling of salt slag for the secondary aluminium amounting to . million (: . million industry. An additional business sector is the recycling above and that the Company has retained . million ground of low-contaminated materials by a subsidiary, + (: . million in the form of reserves and other . assets. / TAB: 2.1.1, 2.1.2

+ operates primarily in Europe and is the market leader there for underground reutilisation. A key factor for the customers of the business unit is the range of TAB: .. disposal options on o er thanks to the most varied of locations, techniques and procedures. Excellent business relationships, some of them decades-long, con rm the strate- in € million Revenues , . , . gic focus on quality in both the services and the consultancy Other income . . provided. Cost of materials − , . − , . Depreciation and amortisation − . − . Other expenses − . − . At the Salzdetfurth site, extensive sections of the above Value added , . ,. ground infrastructure of an inactive potash plant are used to granulate, among others, the well-known branded animal hygiene product ® for our customer .

+ TAB: .. + in Hamburg acts as +’s own logistics service provider, o ering a number of di erent logistics in € million services. To employees (wages, salaries, social bene ts) , . , . To governments (taxes, fees) . . To lenders (interest expenses) . . trades in a selection of basic chemicals such as caustic To shareholders (dividends) ¹ . . soda, nitric acid, sodium carbonate (soda) as well as calcium To the Company (reserves and other) . . chloride and magnesium chloride. Value added , . ,. ¹ Dividends relate to the year under review and are paid in the subsequent year. The gure for 2017 corresponds to the dividend proposal.

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, employees or , s) including employees or . s at + . / TAB: 2.1.3 We want to be an attractive employer and ensure the loyalty of ‘Non- nancial Statement’, People, page our employees. With this in mind, we are developing an inte- grative and comprehensive global human resources strategy Our workforce consists of . employees not covered by a to contribute towards the long-term growth of the + . collective wage agreement : ., . employees As of December , the + employed a total of covered by a wage agreement : . and . train- , employees, or , s (full-time equivalents) (: ees : . . / FIG: 2.1.10, 2.1.11

TAB: ..

% % in full-time equivalents as of 31 Dec. (FTEs) ¹ Potash and Magnesium Products business unit , . , . Salt business unit , . , . Complementary activities . . Other areas . . K+S Group , . , .

¹ FTE: Full-time equivalents; part-time positions are weighted according to their share of working hours.

FIG: ..

in % Non-tari paid employees . . Pay-scale . . Trainees . .

FIG: ..

, in % Germany

Rest of Europe North America South America Asia

. COMPANY PROFILE On average, our employees are years old and have been ing amounted to around . million (: . million). working for us for years. The turnover rate, i.e. the ratio of The reduction in cost is attributable to the training days in persons who leave the company to average workforce size, Germany (, days, : , days) and a reduction in is . : .. the valuation rate for absences.

+ wants to develop and utilise its employees’ full potential in the best possible way. The measures we use to do this The knowledge management/continuous improvement are described below. process gives all employees the opportunity to take an active role in operating processes and structures and to be involved in shaping these. A total of , ideas were sub- Vocational training is an important investment in the + mitted in : , . The bene t over a period of two ’ future viability. Consequently, in Germany we recruit and a half years, i. e. the e ciency gains generated, less the highly motivated school leavers, especially for those jobs that actual cost of knowledge management was . million require formal training in commercial and technical elds, (: . million). which are increasingly more di cult to ll. As of December , a total of young people were undergoing training at + companies in Germany : . In , : The measures we use to recruit and retain employees are new trainees were hired. At the end of the year, the train- described below. ing ratio, based on employees in Germany, was ., about the same level of previous year : . . Last year, we o ered permanent jobs to approximately of our trainees. In the + , we pursue the aim of rewarding our employees worldwide comparably and in line with the market and performance. The equal pay of our German tari The + competency model introduced globally in system was con rmed by the Federal Anti-Discrimination de nes which skills employees require in di erent roles. This Agency. The performance appraisal component included in model serves as a basis for all personnel processes from the the collective wage agreement was applied uniformly to all initial job advertisement to interviews through to annual locations for the rst time from May , concluding the reviews and development decisions. Performance and poten- implementation of the tari system. As part of our regular tial are identi ed worldwide every year as part of the talent review of our non-tari remuneration system, roles not cov- management process for all employees not covered by a col- ered by collective wage agreements were assessed based on lective wage agreement. This provides information for suit- standard criteria across the Group. In the next stage, the able courses of action with regard to vacancies that need required need for adjustment was determined as part of a to be lled. The global development programme +, market comparison of remuneration for employees not cov- which can be applied for by all employees anywhere in the ered by a collective wage agreement in terms of commen- world, aims to promote employees and to prepare partici- surability with performance and market compliance. The pants for leadership or expert roles in the + . results were implemented in January .

In , personnel expenses amounted to ,. million and + o ers its skilled employees and managers numerous were therefore a good above the level of the previous year further training opportunities in order to impart general and (: ,. million). During the year under review, person- company-speci c knowledge. Moreover, depending on com- nel expenses per employee (s) amounted to , : pany requirements, we award grants to our employees for , and therefore increased by a good . The propor- full-time bachelor’s or master’s studies. In the United States, tion of variable remuneration included in personal expenses, Canada and Chile, we support employees who continue their which allows our employees to participate in the success of education in line with their career at a university recognised the Company in the context of a performance-related remu- by the company, by reimbursing all or part of their tuition neration system, was . million in or approximately fees. Investment in continuing education and further train- (: . million or approx. ).

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Framework wage agreement on demographics TAB: .. In light of demographic change, sustainable and forward- looking human resources policies should be encouraged and incentives for longer employment should be put in place for in € million the locations in Germany. To this end, the framework wage Potash and Magnesium Products business unit . . Salt business unit . . agreement concerning demographics was resolved in . Other research costs . . Measures tailored to speci c needs are expected to be agreed Total . . and implemented in based on a quali ed demographic analysis.

Pension scheme + helps its employees secure their standard of living in old age. Every employee in the participating German com- Research and development costs totalled . million in panies receives an employer subsidy corresponding to of the reporting period and were thus signi cantly above the the sum they pay from their remuneration subject to social gure for the previous year (: . million). At . mil- security deductions into one of the three company pen- lion, capitalised development-related capital expenditure was sion schemes. The majority of our pension schemes for the below the level of the previous year as planned (: . employees of our companies abroad are de ned contribution million). / TAB: 2.1.4, 2.1.5 plans, which are predominantly nanced by the employees themselves and subsidised by the employer. In , we spent The occupational exposure limits (s) project is one fac- a total of . million (: . million) on de ned con- tor resulting in the increase in research and development tribution pension plans. costs. The project was launched in as the statutory workplace limits for nitrogen oxide, carbon monoxide and diesel engine emissions underground had been tightened ¡ signi cantly. Yet another factor is the intensi cation of the research cooperation projects, for instance with - We constantly review our extraction and production pro- . cesses with regard to the use of the resources available to us ‘Non- nancial Statement’, People, page and enhance our procedures and products. Global change is giving rise to additional elds of activity in the search for innovative solutions, even beyond our traditional salt and For our research and development, we use our own research potash products. Sustainability and environmental protec- facilities, we cooperate in public/private partnerships, ini- tion continue to be our central concerns. Our current research tiate research projects at higher education institutions and projects focus on new alternative uses, tailings pile and dis- other research institutes, and cooperate with industrial posal concepts as well as the reduction of saline wastewater. partners. www.k-plus-s.com/research

TAB: ..

in € million Research costs . . . . . Research intensity (research costs/revenues) . % . % . % . % . % Capitalised development-related capital expenditure . . . . .

. COMPANY PROFILE + detail and the in uence of magnesium on photosynthetic The + ¢ in Unterbreiz- e ciency and capacity is examined. bach, which employs around scientists, engineers and www.iapn-goettingen.de specialist sta , is +’s central research institute. The tasks of the ¢ include carrying out analyses, application-oriented The located in fundamental research and process and product development Fu Zhou in China, a cooperation between + for all business units of the + . All relevant analysis and the ¦ , is methods are covered from standard analysis to more com- expanding our scienti c knowledge for the use of the plant plex special analysis. nutrient magnesium in agriculture in Asia.

+ also cooperates with external companies and industrial operates a modern research and devel- partners, for example, with opment laboratory in Elgin, Illinois, . Work is largely + - , on solutions for increasing focussed on new product development in the area of salt, the recovery of recyclable materials and the avoidance of the improvement of existing products by modifying the saline wastewater product characteristics and the search for new applica- + +¯ , on the possibilities for using tion options. membrane ltration to separate salts.

The creates the best general conditions for pursuing the innovation goals in the context of opti- + For our Canadian location, Bethune, various process analy- mising internal business processes, engaging in product sis technologies were developed and are currently in oper- development and establishing innovative business mod- ation. els. Innovation is rmly enshrined in the corporate culture + A review is ongoing into whether processing wastewater as an important foundation and its orientation is further can be disposed of in suitable pit areas as a salt solution re ned in accordance with customer needs. Collaborations or with the addition of suitable binding agents. with internal and external idea providers, entrepreneurs and + For the coverage of tailings piles and to reduce tailings start-ups are facilitated, allowing both early access to inno- pile water, we are performing research in the laboratory, vative ideas and accelerated implementation. in greenhouses and directly on the tailings piles themselves. + + The new The , which were set up in , supplement the was developed by + , and its large-scale commis- established research and development facilities. The ‘ sioning has taken place. An automatic analysis system for ’ , for example, is working on overarching process control was developed for this plant in the ¢ and questions relating to the elds of safeguarding resources, has already been implemented. water e ciency and soil health. The ‘ ’ + Work on the further mechanical development of the is looking for new business models in the areas of (= electrostatic separation process) separation technology health care and biochemistry. was performed. ‘Non- nancial Statement’, Environment, page The is run as a by + together with Worldwide, the + has patent families : the §. The initial , which are protected by national rights : . research years concentrated on fundamental research into The patents are used, for example, in the areas of electro- the changes in the e ciency of water use where magne- static separation processes, granulate production and o- sium and potassium are lacking. In further research proj- tation. ects, physiological and genetic mechanisms are studied in

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. -

The corporate strategy aims to increase +’ value contribution for employees, customers, shareholders and society. To succeed, + needs to reconcile its economic, environmental and social objectives. We are committed to our responsibility towards people, the environment, communities and the economies in the regions in which we operate.

All information and key gures presented in this sec- United Nations’ , the for tion relate to the + , including + - multinational enterprises and the guidelines of the . Aspects according to -, which apply . This report was created in accordance only to + , have not been identi ed. with Version of the , As + essentially exercises a holding Core option. function within the + , the disclosure of separate www.k-plus-s.com/sustainability; ‘ index’, page non- nancial information for + is waived. The Group-wide Sustainability Programme – , which covers the action areas of Diversity & Anti-Discrimination, Health & Safety, Environment, Human Rights and Sustain- able Supply Chains, was extended in to include the Com- pliance & Anti-Corruption action area. Within the scope of + prides itself on being a customer-centric, independent , target statements for these were de ned provider of mineral products. Our products support farmers and assigned to three areas: people, environment and busi- in ensuring the world has an adequate supply of food. And ness ethics. The target statements will be supplemented by we o er solutions for industrial companies, enrich the daily measurable key performance indicators in . In so doing, lives of consumers and provide a safe environment in the we intend to safeguard intra-Group management and make winter. We serve the constantly growing demand for min- progress visible. eral products from production sites in Europe, North Amer- ‘Corporate governance and monitoring’, page ; ‚Corporate Strategy’, ica and South America as well as through a global distribu- page ; ‘Risk and opportunity report’, page tion network. Our value chain covers exploration, mining, production, logistics, sales and distribution/marketing and The Group-wide sustainability targets are in the areas: application. ‘Company pro le’, page - + Increasing diversity and assuring zero incidents related to discrimination to ensure equal opportunities and to drive business innovation through di erent perspectives Sustainability is an integral part of our corporate strategy and is being continuously enhanced. Our sustainability management considers relevant internationally rec- ¹ The section ‘Non-Financial Statement’, which contains the disclosures pursuant to sections 289b – 289e and sections 315b and 315c HGB, is not subject to auditing in accordance with ognised guidelines. These include the principles of the section 317(2) sentence 4 HGB.

. NONFINANCIAL STATEMENT Gerstungen in Thuringia and with (Bund für Umwelt- + Providing a healthy and safe work environment to pro- und Naturschutz Deutschland e.V.) relating to the disposal tect our employees who constitute our most valuable of saline wastewater and, on the basis of settlement agree- capital ments, settled long-standing disputes. This form of dialogue will be continued in the future. + Establishing the respect towards internationally recog- For the purposes of illustrating which topics are material nized human rights at all sites to ensure this core value is for the + from an internal and external perspec- applied globally tive, we presented topics in a materiality analysis in Section on ‘People’, page for the rst time and updated this in following analyses and deliberations in di erent Group-wide committees. To record local needs more speci cally and also get a more comprehensive picture for the + at global level, in + Ending deep well injection of saline wastewater from pot- internal and external stakeholders were directly invited ash production in Germany by end of , no application to take part in an online survey on the relevance of aspects for continuation of injection of sustainability from the reporting standard of the + Reducing saline process water . The representative participation rate + Promoting research and development as well as innova- amounted to of the people surveyed. The result tion activities shows a clear focus in the aspect of the environment on the topics of ‘wastewater’, ‘health and safety’, ‘compliance’, ‘energy’, ‘emissions’ and ‘use of water’ and coincides with + Reducing the environmental impact and conserving nat- our sustainability goals. ural resources by re-examining the potential of residues stored on tailings piles To advance our existing business, seize new business opportunities and minimise risk, the specialist units are developing concepts and management systems and deriving measures + Reducing the carbon footprint and improving energy e - and due diligence processes for the sustainability targets. ciency to enhance competitiveness Through our governance and monitoring processes, we moni- Section on ‘Environment’, page tor signi cant or serious non- nancial e ects on aspects such as environmental issues, treatment of employees and social matters, respect for human rights as well as anti-cor- - ruption and bribery matters. + Establishing a zero tolerance policy for corruption and bribery as well as anti-competitive practices to avoid the risks of liability, culpability, loss of reputation as well as nancial disadvantages We combine aspects such as employee-related matters, our understanding of diversity and respect for human rights + Demanding sustainable practices from our suppliers along under the collective heading of ‘people’. As of December the entire supply chain to align all business activities to , the + employed a total of , employees, our values including s at + . Against the Section on ‘Business Ethics’, page backdrop of the + Sustainability Programme – and with regard to our materiality analysis, we focus con- The new team of executive directors will encourage dialogue. ceptually on the action areas Diversity & Anti-Discrimina- We therefore regularly engage with our stakeholders. In its tion, Health & Safety and Human Rights and derive appro- quest to achieve ‘environmental peace’ at its German sites, priate measures. + held successful talks in with the municipality of www.k-plus-s.com/people; ‘Sustainability management’, page ; ‘Employees’, page

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- tems together’) project, which was completed at the end of A diversity and anti-discrimination concept will be rmed , constitutes important preparatory work for our strat- up in the future. In line with our understanding of diversity, egy in this regard. Minimum global standards, among other we have set ourselves the Group-wide target of increasing things, were de ned as part of the project, and in particular diversity. Moreover, we have a clear target of zero incidents employee awareness of health and safety was strengthened. related to discrimination to ensure equal opportunities and A platform for best practice and international sharing was to drive business innovation through di erent perspectives. furthermore established in relation to topics such as health, safety and the environment. This platform will remain in This has been laid down by us in our place even after the project, and other working topics will . We have con rmed this be added. approach by signing the and the , a German initiative designed to encourage diversity in companies and institutions. In addition, + respects the Our workplace health promotion and prevention programmes freedom to join or not to join trade unions and the right to supplement the management systems with measures to collective bargaining. Around of employees covered by a improve health competencies. Programmes and measures collective wage agreement in Group companies in Germany for health promotion are planned and implemented site-spe- are members of trade unions. The relationship with the works ci cally. Health care and advice for employees of Group com- councils as well as with , panies in Germany is provided by company doctors. We are , is characterised by a long-stand- committed to implementing operational integration man- ing partnership built on trust. In Chile, approximately half agement, which is mandatory in Germany, and encourage the the employees and at around two-thirds are incorporation of disabled employees into operations. At . organised in trade unions. : ., the proportion of disabled employees of the + workforce in Germany is once again above the national aver- Traditionally, more men work in mining than women. As of age of just under . . of severely disabled people were December , of our workforce was male and employed by + in . female for the companies of the + (based on the number of employees), while at + An important aspect of health care is reliable compliance were female and male. The target gures for the with occupational exposure limits. In case of the occupational percentage of women at managerial levels below the Board exposure limits disclosed by the Federal Ministry of Labor and of Executive Directors of + can be Social A airs in Germany for nitrogen oxides and particulate found in the section entitled ‘Declaration on Corporate Gov- diesel emissions underground, our broad-based implemen- ernance’ on page . tation project for the German sites has been launched successfully. For example, the initiatives we got o the ground include projects on the use of the latest diesel engine tech- Health and safety are main drivers for our success. We are nology, the development of alternative drive technologies, committed throughout the Group to providing a healthy and the development of low-emission explosive substances as safe work environment to have all employees returned from well as the optimisation of ventilation underground. work without acciudent or injury. This allows us to create a ‚Report on Risks and Opportunities’, page stable basis for e ciency, productivity and corporate success. We are focusing increasingly on introducing management systems in order to achieve these goals. This is coordinated Advanced systems and processes constitute factors for by the recently established Management Systems center of the success of safety. We record key indicators on safety competence. throughout the Group. In , work accidents occurred ‘Environment’, page ; ‘Employees’, page at our locations worldwide : , of them at + : . The accident rate (workplace To integrate the concepts of health and safety throughout accidents divided by number of hours worked multiplied the Group, the global foKuS (‘Focus on integrating sys- by one million) fell to . : . and at + -

. NONFINANCIAL STATEMENT to . : .. While the number of lost We systematically record and evaluate risks and opportu- working hours per million working hours for the + nities for our environmental interests in order to derive increased to . : ., this number fell to . at + speci c measures and objectives. Environmental manage- : , . Our safety programmes ment generally takes account of country-speci c issues, take account of location-speci c challenges and local leg- but is coordinated on an issue-speci c basis across loca- islation. Comprehensive certi cation of all + tions and companies as well as the Group. Our environ- locations in accordance with the ‘Sicher mit System’ mental experts meet at regular intervals in committees, (‘Systematically Safe’) quality seal is already successfully competence centres and working groups to exchange expe- under way. The same applies to a uniform system for record- riences and best practices and to develop standards. The ing near-accidents for the German potash and salt locations. Management Systems centre of competence was estab- By stepping up training measures, another cornerstone was lished in in order to develop standards in the area of laid in raising awareness among management for the role of management systems. The overall management systems safety as an important factor for sustainable corporate gov- strategy provides for the Group-wide introduction of envi- ernance. Finally, a project for using modern -based meth- ronment, energy, safety and health management systems ods for training and instructing employees is about to come for production sites based on a phased plan. The manage- to a close. ment systems are in conformity with international standards (e. g. for environmental management and for energy management). Our Group-wide objective is to respect internationally recognised human rights at all of our sites. The international Environmental performance indicators at plant and company Human Rights Charter and - level are collected and evaluated using an environmental core labour standards are rmly embedded in data software package that has been implemented at all pro- our and duction sites. The environmental indicators reported are col- our Group-wide , among others. lected for all key consolidated production sites and are based ‘Corporate governance’, page on gures – that are collected directly by means of a measuring system. As part of our due diligence in the area of human rights, we develop procedures for identifying, avoiding or mitigating the potentially negative impact of our corporate activities on human rights. We have already commenced this ongoing pro- In , environment-related capital expenditure increased cess-based task for ensuring a systematic approach. A pilot by . million to . million (: . million). project for practical implementation is in preparation and is The signi cantly higher level on the whole is attributable expected to be implemented in . to increased investment in water conservation. The main www.k-plus-s.com/compliance focus was on completion of the newly developed facility at the Hattorf site, which was advanced further in . Other increases in capital expenditure on water conservation resulted in particular from additions to property, plant and equipment in In relation to the environment, our conceptual focus in the the area of technology and energy supply in anticipation of + Sustainability Programme – and on the basis the applied-for or planned extension of the tailings piles of our materiality analysis is on water, in particular measures at the three potash sites in Germany, Hattorf, Wintershall for water withdraw and wastewater, as well as waste (solid and Zielitz. residues), energy and climate. www.k-plus-s.com/environment; ‚Sustainability Management’, Conversely, capital expenditure on the prevention of air page pollution and climate protection as well as waste management decreased after larger projects had virtually been completed in . These included the installation of new

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¹ TAB: ..

absolute deviation % in € million Water protection . . . . Prevention of air pollution and climate protection . . − . − . Waste management . . − . − . Nature conservation ² and soil decontamination . . − . − . Other . . − . − . Total . . . .

¹ The reporting of environmental investments is based on the German Environmental Statistics Act (Umweltstatistikgesetz, UStatG), but also includes the items relating to our global operations. ² Including landscape conservation.

¹ TAB: ..

absolute deviation % in € million Water protection . . . . Prevention of air pollution and climate protection . . . . Waste management . . . . Nature conservation ² and soil decontamination . . . — Other . . . . Total . . . .

dedusting units at the Neuhof-Ellers potash site, environ- The higher costs incurred for waste management stem mentally friendly conversion of steam into gas at a North primarily from the covering and sealing of mining waste American salt site and projects implemented in the under- in the inoperative tailings piles at the Hattorf site. In con- ground reutilisation of waste at the Werra plant and in the nection with the start of production in , waste costs recycling of salt slag at the Sigmundshall potash mine. at the site in Bethune, Canada, were also higher than in / TAB: 2.2.1 the previous year. The slight cost increase recorded with regard to the prevention of air pollution and climate pro- The operating costs for environmental protection in tection can be attributed to the higher production-related amounted to . million, up a signi cant . mil- demand for conditioning materials for avoiding dust build- lion compared with the prior-year gure ( . million). up in the transshipment and spreading of the nished This increase was due in particular to a sharp rise in trans- products. port costs for the additional measures implemented for remote disposal of saline wastewater by the Werra plant in Operating costs primarily include additional environmen- Lower Saxony and Saxony-Anhalt. As a result, production tal protection measures. These measures relate in particular was considerably more stable than in . Other signi - to water protection, prevention of air pollution and climate cant cost increases were attributable to higher expenses protection, waste management, nature conservation and soil for post-closure obligations in connection with the potash decontamination, and refer to facilities separate from other tailings piles in Germany and operation of the tailings pile production processes. Operating costs and depreciation and at the Hattorf site. amortisation on production facilities for water protection,

. NONFINANCIAL STATEMENT which are integrated into production processes at the Werra TAB: .. plant, are not included. Overall, both the costs of the additional environmental protection measures and the integrated ¹ costs not reported here are production cost components and millions of m³ thus increase the speci c costs per tonne of product pro- Seawater and other saline water . . River water . . duced. / TAB: 2.2.2 Groundwater . . Drinking water and water from municipal water utilities . . A Group-wide water risk analysis was carried out for all rele- Total volume of water extracted . . vant production sites in in order to identify water risks ¹ The previous year’s gures have been adjusted based on improved measuring methods and subsequent data received. that could impact on our business activity. The results provide the concept for environmental management at the locations.

We have set ourselves the following speci c targets: TAB: ..

+ Ending deep well injection of saline wastewater from potash production in Germany by end of , no application millions of m³ for continuation of injection Wastewater + Reducing saline wastewater and Wastewater discharged into municipal sewage treatment plants . . + Promoting research and development as well as innova- Process water in river water . . tion activities Salt water ¹ Injection . . We have broken down the water categories further in order Saline wastewater discharged into seawater to improve our indicator system. and other saline waters . . Saline wastewater discharged into surface water ² . . – Saline wastewater in potash production ³ . . We use water of varying origins, including seawater and – Saline wastewater in salt production . . other saline water, river water, groundwater and drinking ¹ Total dissolved solids TDS > 1 g/l water, and di erentiate in this context between di erent ² The previous year’s gures have been adjusted based on improved measuring methods and salinity levels. / TAB: 2.2.3 subsequent data received so they can be compared. ³ Total dissolved solids TDS > 250 g/l

Seawater and water from other saline waters is used in the production of solar salt. Locations close to the ocean also use seawater for cooling purposes. We extracted a total of production to . million m³ ( ¹: . million m³). A total . million m³ of water in . of . million m³ (: . million m³) was injected deep underground. / TAB: 2.2.4 Wastewater accumulates during the production process Higher volumes of wastewater and injection are attributable and also in the areas of tailings piles. This water has a high to increased production at + as well as to the salinity level. The volume and chemical composition of pro- start of production at the plant in Bethune, Canada. cess wastewater and tailings pile runo is dependent on many factors such as raw salt quality, the treatment method used, the products manufactured and the product quality required. We use gures for total dissolved solids to establish the quality of the accumulated wastewater. In , saline wastewater accumulated in potash production ¹ The previous year’s gures have been adjusted based on improved measuring methods and amounted to . million m³ ( ¹: . million m³) and in salt subsequent data received so they can be compared.

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Water protection measures data generated is available to the licensing authorities at In Germany, + is working hard on implementing additional all times. Regular inspections are also carried out to moni- measures aimed at reducing saline pollution in the Werra tor tailings pile operation. The authorities are given detailed and Weser, in order to safeguard potash production in Ger- information about the planning and implementation of mea- many. As set out in the management plan and the Salt pro- sures. The extension of existing tailings piles is necessary in gramme of measures of the Flussgebietsgemeinschaft ( order to secure potash production in the long term. Weser), these measures will focus, for example, on stacking + Our objective for the Hattorf site is to have completed brine underground as well as on preparations for covering the o cial licensing procedure for the expansion of the tailings piles in order to reduce the amount of saline tailings Hattorf tailings pile by the end of the third quarter of pile runo dramatically over the medium to long term. . + The application documents for extending the tailings piles The commissioning of the at the Zielitz site were submitted to the relevant author- plant at the Hattorf site of the Werra plant ities in October . in January will lead to a further reduction in saline + The application documents for extending the tailings piles wastewater by around . The remaining amount of at the Wintershall site are expected to be submitted in saline wastewater can continue to be disposed of through April . In the run-up to the approval process, the gen- discharge into the Werra together with injection into deep eral public was provided with comprehensive information rock layers. about the project through a variety of information events and communication channels including yers and online If the two means of disposal are insu cient due to prolonged information. low water levels in the Werra river, some of the accumulated wastewater can be transported by truck and/or rail for dis- Comprehensive compensatory and replacement measures posal in suitable vacant mines and gas caverns or used for are provided for in connection with the tailings pile expan- mine stabilisation work. sions. The compensatory measures include long-term projects that aim to create new biotopes for fauna and ora or Production at the Werra plant was secured for most of upgrade existing ones. Reforestation will also be carried out compared with . Only the unusually low water levels of where possible in areas deemed to be of poor quality from a the Werra river at the start of and the resulting reduc- nature conservation perspective to conserve usable agricul- tion in its use for discharge led to a -day interruption in tural areas. Furthermore, comprehensive species conserva- production at the Hattorf site. tion measures will be carried out and new habitats created ‘Risk and opportunity report’, page in neighbouring areas.

Medium-sized inoperative tailings piles have been succes- Most of our solid waste can be categorised as mining waste, sively covered as part of our strategy for legacy tailings piles which occurs during the extraction and processing of crude in an e ort to avoid and minimise the long-term impact on potash salts. Our Group-wide target is to reduce the impact nature and the environment. on the environment and preserve natural resources by ‘Risk and opportunity report’, page renewed examination of the potential of residues previously stored on tailings piles. Our Group-wide target is to reduce our carbon footprint and Measures for managing tailings piles improve energy e ciency to enhance competitiveness. E ec- In , + piled up . million tonnes of solid tive energy management will reduce the energy-related impact residues in Germany (: . million tonnes). Disposal on on the environment, such as greenhouse gas emissions. tailings piles depends on the conditions at the individual locations and aims to minimise the impact on the environment. Comprehensive monitoring programmes meas ure and Due to the increase in production at + in Ger- monitor the potential impact of tailings piles. The resulting many and the start of production at the plant in Bethune,

. NONFINANCIAL STATEMENT Canada, total energy consumption rose to ,. GWh in TAB: .. (: ,. GWh). / TAB: 2.2.5 A Group-wide concept for energy management is being Direct energy sources GWh ,. ,. developed. The + (Scope 1) COªe . . was established in . + thus voluntarily contributes Natural gas GWh , . , . to the tensions of the German Federal Government and Coal GWh . , German industry to establish energy e ciency net- Diesel GWh . . works by . Through its sense of individual responsibil- Heating oil GWh . . ity to increase energy e ciency, + is helping to achieve Lique ed Petroleum Gas LPG GWh . . national climate and energy targets at the same time. Ger- Petrol GWh . . man + plants and external companies are members of Indirect energy sources GWh ,. ,. (Scope 2) . COªe . . Externally sourced In , we operated a certi ed energy electricity GWh . . Externally sourced steam GWh , . ,. management system in all German companies with pro- Externally sourced heat GWh . . duction locations. We regularly conduct energy audits in Total energy consumption GWh , . ,. accordance with in all other German compa- COªe . . nies. The energy management system contributes to more Sold electricity GWh . . e cient use of all utilised sources of energy and to continuous optimisation of + energy costs.

The energy sources used di er according to the location of the mines and production facilities. Approximately ing areas, we anticipate increasing speci c demand for pri- of the energy and steam required for operating our power mary energy. Under otherwise identical conditions, this will stations, drying facilities and evaporated salt plants in Ger- require a continually increasing use both of natural gas to many is generated using natural gas. Six of our seven German produce the energy necessary to ventilate the mines and potash plants have their own power stations, which operate operate the conveyors underground and of diesel to trans- solely in accordance with the cogeneration system . port personnel. Furthermore, the average valuable material Their e ciency level is . Investigations into the use of content of German deposits is tending to decline, which in further cogeneration units to increase energy e ciency and turn increases speci c energy consumption. save ª continued at the + , and + sites and the plans were substantiated at one location. The summarises the state of worldwide climate is committed to reducing energy consump- research by declaring that the global average temperature on tion by by based on data. Consequently, two the Earth’s surface has increased since the start of industriali- coal-powered operating sites in the U.S. were converted to sation. The attributes this development to the increasing gas as a reduced-emissions energy source in recent years. emission of greenhouse gases by human activities. Climate This conversion has led to a reduction in coal consumption change will continue and will be associated with more fre- across the Group. In addition, is examining the quent extreme weather events. possibility of using renewable energy sources – sun and/or wind – at three production sites in North America and one On a political level, the consequences and adjustment mech- in the Bahamas. anisms are being discussed in di erent regional, national and global contexts. In order to limit global warming to Due to our new plant in Bethune in Canada and the con- .° compared with pre-industrial levels as far as possible, tinuing expansion of our underground raw material min- participating countries reached a global climate agree-

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ment by signing the Paris Climate Accord. The aims de ned as well as our commitment to in the Paris Climate Accord are set to be implemented in the the , the Group-wide internal regula- Federal Republic of Germany on the basis of the Climate tions form the basis for our compliance management sys- Protection Plan. tem. Our compliance management system is described in detail on page . In , the ‘Compliance management’, page for regulating greenhouse gas emissions in energy-intensive industries entered into force. Emissions will be reduced in those places where the reduction is the most e cient. By capping emissions allowances in the marketplace, car- We are involved in the international ¥ - bon dioxide emissions can be reduced. This system is cur- , which aims to combat rently in the third trading period and has been revised sev- corruption. + is a member of the so-called multi-stake- eral times. At present, policy-makers are working on an holder group of - and is committed to the manage- amendment for the period after . We currently operate ment and implementation in Germany. Through its vol- power stations and drying facilities in Germany that are untary participation, +, like other participating compa- subject to emissions trading. Their emissions are recorded nies, ensures the transparency of its tax expenditure and in accordance with applicable monitoring guidelines and thus documents the responsible handling of nancial ows. veri ed by external audit organisations. The - implementation process on which this report is based sets a clear signal in this context that extends We fully report Scope and Scope greenhouse gases far beyond the domestic raw material sector. The process expressed as ª equivalents (ªe), which are composed also shows that the companies meet the high standards of of ª and other greenhouse gases converted into ª accountability. This brings an important measure of objec- equivalents. In , ªe emissions from the consumption tivity to the debate surrounding the issue of raw material of all direct and indirect fuels (Scope and ) amounted to extraction in Germany. . million tonnes and, based on the calculation method www.d-eiti.de/en; using emission factors from the - www.rohsto transparenz.de/en/rohsto gewinnung , were therefore higher than in the previous year (. million tonnes) in line with energy consumption. / TAB: 2.2.6 , , In order to increase the attractiveness of the regions in which we are located, we support selected projects in the areas of education, social a airs and culture. The terms and conditions for donations and sponsorship are governed by an In relation to business ethics, we focus on aspects such internal guideline. + does not make any contributions to as anti-corruption and bribery with the Compliance & political parties, including their related organisations or per- Anti-Corruption action area and on social matters with the sons. Donations totalling nearly . million were made to Sustainable Supply Chains action area. Against the back- bene t scienti c and charitable causes in . In addition to drop of the + Sustainability Programme – and donations, we also contribute material goods and support based on our materiality analysis, concepts are developed our employees in getting involved in charity work. and measures initiated for the action areas. www.k-plus-s.com/businessethics; ‘Sustainability Management’, page As part of our + Sustainability Programme – , we are working on the eld of action sustainable supply chains. - Our Group-wide goal is to demand a sustainable approach We have imposed a zero tolerance policy for corruption and from our suppliers along the entire supply chain in order to bribery as a Group-wide target so as to avoid the risks of align all business activities with our values. liability, culpability, loss of reputation as well as nancial ‘Company pro le’, page disadvantages. In addition to our -

. NONFINANCIAL STATEMENT To rm up our concept, our focus in was on a comprehensive review of supplier management including a risk assessment. A has been developed, processes have been set up and implementation will begin in . It covers human rights, employee rights, health and safety, environmental aspects and corporate citizenship.

In our activities, the entire procurement process is assessed, from the initial request through to delivery and performance to settlement. The evaluation of suppliers is then also incorporated in the total cost of ownership calculation. This evaluation is supplemented by self-disclosure, which new suppliers are required to submit. Should it become evi- dent that a supplier does not meet our criteria, the Compa- ny’s internal members of the supply chain will be informed immediately. A total of of our contractual partners are based in countries.

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In accordance with Sections f and d of the , the Board of Executive Directors issues the following declaration on corporate governance; a report by the Board of Executive Directors and the Supervisory Board is also provided with this statement in accordance with Item . of the German Corporate Governance Code.

Our goal is responsible management and monitoring of the Annual General Meeting, we also publish details of atten- Company that is geared towards sustainable value creation. dance and the results of the voting online. This principle forms the basis of our internal decision-mak- www.k-plus-s.com/agm ing and control processes. In accordance with Article sentence of the Articles of Association, the composition of the Supervisory Board is governed by mandatory statutory regulations. It currently The governing bodies of the Company are the Annual General has members and is subject to codetermination in accor- Meeting, the Supervisory Board and the Board of Executive dance with the German Co-Determination Act. This there- Directors. The powers vested in these bodies and their duties fore means that half of the Supervisory Board members are and responsibilities are governed by the Aktiengesetz (AktG – elected as representatives of the shareholders by the Annual German Stock Corporation Act), the Mitbestimmungsgesetz General Meeting and half as employee representatives by the (MitbestG – German Co-Determination Act), the Articles of employees of the + in Germany. An election is held Association and the bylaws of the Board of Executive Direc- around every ve years. tors and the Supervisory Board. www.k-plus-s.com/corporategovernance

The Supervisory Board oversees and advises the Board of Execu- The shareholders assert their rights at the Annual General tive Directors in connection with the conduct of business activ- Meeting and decide on fundamental matters a ecting the ities. It is promptly and appropriately involved in any decisions Company by exercising their voting rights. Each share carries of fundamental importance. The Board of Executive Directors one vote (one share, one vote principle). All documents that informs the Supervisory Board regularly, promptly and com- are important in terms of decision-making are also made prehensively about corporate strategy, planning, the course available to shareholders on our website. The Annual Gen- of business, earnings, the nancial and asset position, the eral Meeting is also streamed live online until the end of the employment situation and about speci c corporate opportu- speech by the Chairman of the Board of Executive Directors. nities and risks. The Supervisory Board regularly receives writ- Shareholders may exercise their voting rights through a proxy ten reports from the Board of Executive Directors in order to whom they have appointed and issued voting instructions, prepare for meetings. After thorough review and discussion, or may cast a postal vote. Voting is also possible via an elec- the Supervisory Board adopts resolutions on proposals made tronic system on our website. Shortly after the end of the by the Board of Executive Directors and on other matters where required. In the case of particular business transactions that are

¹ In accordance with Section 317(2) sentence 6 of the Handelsgesetzbuch (HGB – German of great importance to the Company, the Supervisory Board is Commercial Code), the information contained in the sections ‘Governing Bodies’, ‘Corporate also provided with immediate and comprehensive information Governance/Declaration of Conformity’ and ‘Compliance Management’ pursuant to Section 289f and 315d of the HGB is not within the scope of the audit. by the Board of Executive Directors between routine meetings.

. DECLARATION ON CORPORATE GOVERNANCE The Supervisory Board regularly carries out an e ciency review nation of total remuneration for the individual members in the form of a questionnaire in order to obtain pointers for of the Board of Executive Directors and on resolving con- the future work of the Supervisory Board and its committees. tractual matters. The Chairman of the Supervisory Board is ‘Supervisory Board Report’, page also the chairman of this committee. The Personnel Com- mittee has four members and includes an equal number The Supervisory Board has adopted bylaws and formed ve of shareholder and employee representatives. committees from among its members: + The Nomination Committee nominates suitable Super- + The Mediation Committee performs the tasks set out in visory Board candidates to the Supervisory Board for pro- Section sentence of the MitbestG. The Chairman of posal to the Annual General Meeting. The Chairman of the the Supervisory Board is also the chairman of this commit- Supervisory Board is also the chairman of this committee. tee. Two members of this committee are representatives of The committee has four members, all of whom represent the shareholders and two represent the employees. the shareholders. + The Strategy Committee is responsible for advising the www.k-plus-s.com/corporategovernance Board of Executive Directors on the strategic direction of the Company including strategic reviews and reporting In accordance with the new German Act on Equal Partic- thereof to the Supervisory Board. In addition, the Strategy ipation of Women and Men in Leadership Positions, the Committee prepares resolutions of the Supervisory Board minimum percentage of women and men on the Supervi- that require approval concerning acquisitions, divest- sory Board is each . Two female shareholder represen- ments, investments, organisational changes or restruc- tatives and one female employee representative currently turing. Further, it advises the Board of Executive Directors have a seat on the Supervisory Board. The next Supervisory on corporate strategy matters and on projects of a stra- Board election for the shareholder representative and for the tegic nature. The Strategy Committee consists of three employee representative to fall under this new statutory reg- members: the Chairman of the Supervisory Board serving ulation will take place in . as Chairman of the Committee, one shareholder representative and one employee representative. + The Audit Committee performs the tasks set out in the The target of lling the Supervisory Board is to ensure a com- AktG and the German Corporate Governance Code. In par- petence pro le and a member diversity in the Supervisory ticular, it is involved in monitoring the accounting pro- Board that is necessary for the proper performance of the cess, the e ectiveness of the internal control system, the Supervisory Board tasks. risk and opportunity management system, the internal audit system and compliance, the issuing of mandates to The Company complies with the recommendation under the company auditors as well as the audit of the nan- Item . . of the German Corporate Governance Code for the cial statements. It also discusses the half-yearly nancial Supervisory Board to set concrete targets for its composition. report and quarterly reports with the Board of Executive It should be noted in this regard that the Supervisory Board Directors prior to publication. The Chairman of the Audit does not itself decide on its own composition and can there- Committee, Dr Sünner (independent nancial expert), has fore only work to achieve the targets it pursues by suggesting comprehensive knowledge and experience with regard to appropriate candidates for proposal to the Annual General the application of accounting principles and internal con- Meeting. As a corporate body, it is not entitled to in uence trol procedures. He has garnered this knowledge from his proposals for the nomination of employee representatives. experience as former head of the Central Legal A airs, Tax and Insurance Department and as former Chief Com- In , the Nomination Committee conducted a competence pliance O cer of . The Audit Committee has six analysis of the Supervisory Board under the professional guid- members and includes an equal number of shareholder ance of a remuneration expert. As part of this analysis, all and employee representatives. shareholder representatives were consulted about the target + The Personnel Committee is responsible for preparing the and actual pro le. In its November meeting, the Supervisory appointment of members of the Board of Executive Direc- Board discussed in detail the competence pro le of the share- tors, including long-term succession planning. The com- holder representatives and is convinced that the performance mittee submits proposals for resolutions to the plenary of the body as a whole depends essentially on diversity in the meeting of the Supervisory Board concerning the determi- mix of experts, quali cations, integrity and independence.

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The culture should be characterized by professionalism and In o ce until the end of the Annual General Meeting appreciation. Against this background, the requirements pro- First appointed: May le includes in particular the following aspects: + Members should have sectoral skills, such as industry Other supervisory board appointments: knowledge, product segments, production and relevant + Karlsruher Institut für Technologie , Karlsruhe (Vice technologies. Chairman of the Supervisory Board) + Knowledge of international and + relevant markets should be available. Other supervisory bodies: + The experience in the strategic management of a company + .. ¡ . , Ingelheim is an essential requirement. (Member of the Advisory Council) + A reasonable number of members should have nancial literacy, in particular accounting and auditing. + The Supervisory Board must include at least one indepen- Michael Vassiliadis (born ), chemical laboratory dent nancial expert. technician, vice chairman + The knowledge in the areas of law, compliance, includ- Employee representative ing codetermination as well as restructuring and crisis Chairman of the Mining, Chemicals and Energy Trade management should be available in the appropriate extent. Union, Hanover

E orts are also made to ensure that at least half of the share- In o ce until the end of the Annual General Meeting holder representatives on the Supervisory Board are indepen- First appointed: May dent. This assumes in particular that the persons concerned do not hold a governing or advisory position with signi - Other supervisory board appointments: cant customers, suppliers, lenders, other business partners + , Ludwigshafen or main competitors, or have any other signi cant business + , Essen or personal relationship with the Company or its Board of + (Vice Chairman) Executive Directors. Potential con icts of interest on the part + (Vice Chairman) of persons proposed for election to the Supervisory Board + , Essen should be prevented, wherever possible.

To round o its pro le, the Supervisory Board has selected Ralf Becker (born ), trade union secretary three candidates to be proposed for election to the Annual Employee representative General Meeting. These three pro les complement the Super- Regional Manager North of the Mining, Chemicals and visory Board in the areas of technology, sector competence in Energy Trade Union, Hanover agriculture, knowledge of international markets relevant for +, as well as , restructuring and change management. In o ce until the end of the Annual General Meeting First appointed: August The Supervisory Board believes that the aforementioned objectives are ful lled. Other supervisory board appointments: + , Hanover (Vice Chairman) + , Hamburg (Information on other supervisory board appointments and + , Hamburg supervisory bodies as of December ) + , Hamburg

Dr rer. nat. Andreas Kreimeyer (born ), degree in biology, chairman of the supervisory board Jella S. Benner-Heinacher (born ), lawyer Shareholder representative Shareholder representative Retired (former member of the Board of Executive Directors Deputy General Manager of the ¢- and Research Spokesperson at , Ludwigshafen) £ ¢ .., Düsseldorf

. DECLARATION ON CORPORATE GOVERNANCE In o ce until the end of the Annual General Meeting Other supervisory bodies: First appointed: May + Board of Directors of , ., Fort Worth, Texas, (Non-Executive Chairman) Other supervisory board appointments: + Board of Directors of , Beloit, + .. ¬ , Gummersbach Wisconsin, + Board of Directors of ., Franklin, Tennessee, (until February ) Philip Freiherr von dem Bussche (born ), degree in + Board of Directors of , business administration ., Fort Worth, Texas, (Non-Executive Chairman) Shareholder representative Entrepreneur/Farmer Harald Döll (born ), power plant electronics technician In o ce until the end of the Annual General Meeting Employee representative First appointed: May Chairman of the General Works Council of the + Chairman of the Works Council of the Werra plant of + Other supervisory bodies: + ¡ . , Spelle (Chairman of the Supervisory Board) In o ce until the end of the Annual General Meeting + , Dissen (Member of the First appointed: August Advisory Board) + ¡ . , Damme (Chairman of the Advisory Board) Axel Hartmann (born ), training in retail sales + , Cologne (Member of the Employee representative Shareholders’ Committee) Vice Chairman of the General Works Council of the + + .. Frankfurt am Main (Chairman of the Supervisory Board) Chairman of the Works Council of the Neuhof-Ellers plant of +

George Cardona (born ), economist In o ce until the end of the Annual General Meeting Shareholder representative First appointed: May Economist

In o ce until the end of the Annual General Meeting Michael Knackmuß (born ), car mechanic First appointed: October Employee representative Chairman of the Works Council of Zielitz plant of + Other supervisory bodies: + Board of ., Gibraltar (until October ) In o ce until the end of the Annual General Meeting First appointed: July

Wesley Clark (born ), master of business administration Thomas Kölbl (born ), degree in business Shareholder representative administration Operating Partner of Shareholder representative ¨ , Boston, Massachusetts, Chief Financial O cer of £¢ , Mannheim

In o ce until the end of the Annual General Meeting In o ce until the end of the Annual General Meeting First appointed: May First appointed: May

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Other supervisory board appointments: Dr Annette Messemer (born ), Group companies of £¢ political scientist + , Mannheim (Vice Chairman) Shareholder representative Other companies Divisional director of ¢ + ¥ , Stuttgart (until Decem- ber ) Other supervisory bodies: + Board of Directors of .., Other supervisory bodies: Charenton-le-Pont, France Group companies of Südzucker Group + ¯ , Vienna/Austria (Member of the In o ce until the end of the Annual General Meeting Supervisory Board) First appointed: May + ¢ , Vienna/Austria (Member of the Supervisory Board) + ¡ , London/United Kingdom Anke Roehr (born ), industrial clerk (Member of the Board of Directors (non-executive)) Employee representative + , Berlin (Member of the Chairman of the Works Council of – Supervisory Board) ¡ ., Hanover + .., Oud-Beijerland/ Employee in sales and distribution of -– Netherlands (Chairman of the Supervisory Board) ¡ . , Hanover + .., Brussels/Belgium (Member of the Conseil d’Administration) In o ce until the end of the Annual General Meeting + ..., Paris/France (Member of the First appointed: April Comité de Supervision) + £¢ .., Wroclaw/Poland (Member of the Supervisory Board) Dr Eckart Sünner (born ), lawyer + £¢ --, Shareholder representative Mannheim (Chairman of the Advisory Board) Independent solicitor at Neustadt an der Weinstraße

In o ce until the end of the Annual General Meeting Gerd Kübler (born ), degree in engineering First appointed: April Employee representative Head of Mining, + , Kassel Other supervisory board appointments: + , Neubiberg In o ce until the end of the Annual General Meeting www.k-plus-s.com/supervisoryboard First appointed: January

: Dieter Kuhn (born ), mining mechanic Employee representative Dr Ralf Bethke (born ), degree in business First Vice-Chairman of the General Works Council of the administration, former chairman of the supervisory board + Shareholder representative Chairman of the Works Council of the Bernburg plant of Entrepreneur (as member of the supervisory boards men- – ¡ . tioned below)

In o ce until the end of the Annual General Meeting Appointment ended at the end of the Annual General First appointed: May Meeting Chairman of the Supervisory Board since May First appointed: July

. DECLARATION ON CORPORATE GOVERNANCE Other supervisory board appointments: the resolutions adopted by the Annual General Meeting. + ¦ , Pullach (Chairman) The Board of Executive Directors represents the Company in its dealings with third parties. Other supervisory bodies: + , Salzburg (Chairman of the The bylaws of the Board of Executive Directors govern the Supervisory Board) cooperation between its members and the allocation of business responsibilities as well as mutual representation. Mat- ters that concern other areas of responsibility or deviate from usual day-to-day business have to be agreed with the other members of the Board of Executive Directors. Where possible, + Dr Andreas Kreimeyer (Chairman) (since May ) such matters should be discussed at the regular meetings of + Dr Ralf Bethke (Chairman) (until May ) the Board of Executive Directors that are held at two or three + Harald Döll weekly intervals and measures decided there, where neces- + Dr Eckart Sünner sary; a resolution must always be brought about on import- + Michael Vassiliadis ant business matters and measures. www.k-plus-s.com/corporategovernance + Dr Andreas Kreimeyer (Chairman) , + Philip Freiherr von dem Bussche + Michael Vassiliadis In accordance with Article of the Articles of Association, the Board of Executive Directors has at least two members. The exact number of members is determined by the Supervisory + Dr Eckart Sünner (Chairman) Board. Since the appointment of Dr Lose to the Board of Exec- + Ralf Becker utive Directors as of January until his departure on + Dr Ralf Bethke (until May ) November , the Board of Executive Directors had ve male + Axel Hartmann members. From November until December, the Board of + Thomas Kölbl (since May ) Executive Directors was made up of four male members. + Dr Annette Messemer + Michael Vassiliadis At its meeting on November , the Supervisory Board resolved to advance the implementation of the new Group strategy in the future with a reduced, restructured Board of + Dr Andreas Kreimeyer (Chairman) (since May ) Executive Directors, which will be supported by an extended + Dr Ralf Bethke (Chairman) (until May ) management team. The reduced management team will be + Jella S. Benner-Heinacher composed of Dr Burkhard Lohr, the Company’s Chief Execu- + Harald Döll tive O cer, along with Chief Financial O cer Thorsten Boeck- + Michael Vassiliadis ers and Mark Roberts, who holds the new position of Chief Operating O cer. + Dr Andreas Kreimeyer (Chairman since May ) Eligibility criteria for the appointment of Executive Board + Dr Ralf Bethke (Chairman) (until May ) members are the professional suitability for the management + Jella S. Benner-Heinacher (since May ) of the respective division, proven achievements on the previ- + Philip Freiherr von dem Bussche ous career path as well as a pronounced leadership compe- + George Cardona tence. In addition, the Supervisory Board is of the opinion that diversity is also important for the Board of Executive Directors. Thus, the Board should consist of people who complement The Board of Executive Directors manages the Company each other in terms of professional and life experience and under its own responsibility in accordance with the law, the are of di erent ages. In addition, at least one board member Articles of Association and its bylaws, taking into account should have strong international experience.

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With regard to the German Act on Equal Participation of Dr Thomas Nöcker (born ), lawyer, personnel director Women and Men in Leadership Positions, the de ned tar- + Corporate get quota of de ned by the Supervisory Board of + + Corporate until December has been met + Corporate Health, Safety & Environment during the reporting period. + Business Centre and sub-units: – Communication Services – Financial Accounting – Insurance (Information on responsibilities and appointments as of – Services December , unless otherwise stated) – Logistics Europe – Procurement/Material Management Europe Dr Burkhard Lohr (born ), degree in business – Project Management administration, chairman (since May ) – Real Estate & Facility Management + Corporate Board O ce + + + Corporate Communications + + + Corporate Development + ¢ + Corporate + Environmental & Regulatory A airs In o ce until August + Internal Auditing First appointed: August + Investor Relations + Legal, , Corporate Secretary Supervisory Board appointment: + + , Kassel ¹ In o ce until May First appointed: June Mark Roberts (born ), bachelor of science (marketing) Supervisory board appointment: + Potash and Magnesium Products business unit + + (Chairman), Kassel ¹ + Salt business unit + Waste Management and Recycling business unit + Technical Centre and sub-units: Thorsten Boeckers (born ), banker, – Digital Transformation chief nancial o cer – Geology + Corporate Controlling – Mining + Corporate Finance and Accounting – Research and Development + Corporate Procurement – Technics/Energy + Corporate Tax + Animal hygiene products + all direct shareholdings of the Company to the extent that they are not assigned to another area of responsi- In o ce until September bility First appointed: October www.k-plus-s.com/executivedirectors; In o ce until May www.k-plus-s.com/corporategovernance First appointed: May

Supervisory Board appointment: : + + , Kassel ¹ Norbert Steiner (born ), lawyer, chairman + Corporate Communications ¹ Group appointment. + Corporate Development

. DECLARATION ON CORPORATE GOVERNANCE + Corporate Executive Important business transactions and measures require the + Internal Auditing consent of the Supervisory Board; more information on this + Investor Relations can be found in Section of the Supervisory Board bylaws. + Legal, , Corporate Secretary Appointment ended May No con icts of interest involving members of the Board of First appointed: May Executive Directors or the Supervisory Board, about which the Annual General Meeting needed to be informed, were dis- Supervisory Board appointment: closed to the Supervisory Board during the reporting period. + ¥ , Hanover + ..., Hanover + + (Chairman), Kassel ¹ (until May ) We have taken out ¡ insurance in case a claim for compensation based on statutory third-party liability provisions is made against members of the Board of Executive Direc- Dr Otto Lose (born ), lawyer tors or the Supervisory Board on account of a breach of duty + Potash and Magnesium Products business unit committed in the performance of their duties. The excess is + Waste Management and Recycling business unit of the respective claim up to a maximum of . times the xed annual remuneration. The ¡ insurance also applies Appointment ended November to managers. First appointed: January Supervisory Board appointment: + + , Kassel ¹ (until November ) In accordance with Article of the Market Abuse Regulation, members of the Company’s Board of Executive Directors and the Supervisory Board must disclose the purchase and disposals of Company shares. The Supervisory Board is kept informed by the Board of Exec- During , we did not disclose any directors’ dealings for the utive Directors, at regular intervals in a timely and compre- Supervisory Board. The directors’ dealings for the Board of Exec- hensive manner, regarding any issues that are relevant to utive Directors in were disclosed as follows: / TAB: 2.3.1 the Company as a whole and that concern corporate strat- www.k-plus-s.com/directorsdealings egy, planning, the course of business and the earnings, nancial and asset position as well as about any particular busi- On December , the members of the Board of Execu- ness risks and opportunities. Moreover, the Chairman of the tive Directors and the Supervisory Board held less than Supervisory Board is in close contact with the Chairman of the of the shares of + and related nan- Board of Executive Directors with regard to all relevant topics. cial instruments.

’ TAB: . .

Date Transaction ISIN Price Volume

Dr Susanne Nöcker/Dr Thomas Nöcker / / Bond sale XS , . , . Dr Thomas Nöcker / / Bond purchase XS , . , . Dr Burkhard Lohr / / Bond purchase XS , . , . Norbert Steiner / / Bond purchase XS , . , . Dr Burkhard Lohr / / Bond sale XS , . , .

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The task of the central Governance, Risk, Compliance Committee is to analyse the general suitability of the governance and monitoring system on a regular basis and to issue In accordance with legislation, we have set target quotas recommendations for actions to the respective responsible for the percentage of women at management levels below management if weaknesses are identi ed. the Board of Executive of + until December . As of December , the target quota Firstly, the sub-systems of governance, compliance manage- of for the management team was unfortunately not ment, risk and opportunity management and sustainability met. Due to uctuation and a slight increase in the total management, which are relevant for both the governance number of management positions at this management and monitoring components, are presented below. These level, the proportion of women as of the reporting date was complement one another and overlap in part. Finally, gover- . + remains fully committed to an equal participation nance and internal monitoring are explained. of women and men at this management level. A favourable result was achieved by exceeding the target quota of for the management team with as of December . Over and above the legal obligations, we have de ned our own core values and principles in our Code of Conduct, which forms a compulsory framework for our conduct and decisions and provides orientation for our corporate actions. In addition to the relevant statutory requirements, the target status of an e ective and legally compliant corporate governance and monitoring system (internal control system in a broader sense in the + has been de ned by the The high degree of entrepreneurial expertise the + ‘Governance and Monitoring in the + ’ guideline shows in its business units is recognised by busi- adopted by the Board of Executive Directors. These guidelines ness partners and other stakeholders alike. It is vital that also stipulate the regulatory and organisational measures we continuously develop this reputation. In order to do this required to ensure that this status is achieved and main- we rely on the integrity and responsibility of each individ- tained. This system should ensure: ual employee. + The sustainable economic e ciency of business operations (these also include protecting assets and prevent- Sustainability ing and identifying damage to assets), We aim for sustainability in all we do, as we are commit- + Responsible corporate governance, ted to our responsibility towards people, the environment, + The adequacy and reliability of internal and external communities and the economies in the regions in which accounting procedures as well as we operate. + Compliance with legislation relevant to the Company. We act upon opportunities which arise while handling risks The structure of the governance and monitoring system is with care. de ned in detail by additional internal regulations; consistent standards are agreed for the formulation and commu- Integrity nication of such regulations. We observe and support compliance with internationally recognised human rights and act in accordance with the laws The ‘Legal, , Corporate Secretary’ unit, whose head reports of the countries in which we operate. We reject any form of directly to the Chairman of the Board of Executive Directors, forced and child labour. is responsible for coordinating Group-level development and maintenance of an e ective and legally-compliant gover- We respect free competition. We do not tolerate any form of nance and monitoring system. corruption. We avoid con icts of interest, and protect company property against any misuse. We respect trade union

. DECLARATION ON CORPORATE GOVERNANCE freedom of association and the right to engage in collective In December , the Company’s Board of Executive Direc- wage bargaining. tors and the Supervisory Board made the following joint declaration in accordance with Section of the AktG: Respect, Fairness, and Trust We treat our business partners, employees, and other stake- ‘We declare that the recommendations of the Government holders with respect and fairness. Providing an environment Commission of the German Corporate Governance Code, of equal opportunities and rejecting of any kind of discrim- published by the German Ministry of Justice in the o cial ination is a matter of course for us. We create a workplace section of the German Federal Gazette, were complied with atmosphere that facilitates the open exchange of ideas and in as follows: an approach to dealing with one another characterised by + in the period from January to April , in the ver- con dence. sion dated May , with the exception of the recommendations in Items .. sentence (stipulation of an Competence and Creativity age limit for the members of the Board of Executive Direc- We take actions to maintain and increase specialist com- tors) and . . sentence (stipulation of an age limit for petencies, commitment and motivation of our employees. Supervisory Board members) We encourage our employees to contribute their creativity and to the success of the company. We reward our employees in + in the period from April to December , in line with the market and in relation to performance on the the version dated February , with the exception basis of salary structures which are oriented towards eco- of the recommendations in Items .. sentence nomic success. (variable remuneration components determined on the basis of a multi-year assessment with essentially for- As a global company, we recognise that intercultural com- ward-looking characteristics), .. sentence (stipu- petence is an important factor of our continued success. We lation of an age limit for the members of the Board of develop intercultural competences in a targeted way. Executive Directors) and . . sentence (stipulation of an age limit for Supervisory Board members as well Transparency as a control limit for the length of service on the Super- We provide our employees, shareholders, the capital mar- visory Board). ket, the media and other stakeholders with comprehensive, truthful and intelligible information. In , the recommendations of the Government Commis- sion of the German Corporate Governance Code, published Other important regulations applicable across the Group by the German Ministry of Justice in the o cial section of the are our ‘Management within the + ’, ‘Organisation German Federal Gazette on February , will be complied within the + ’ and ‘Corporate Governance and Mon- with, except for the recommendations in Item .. sentence itoring in the + ’ guidelines. (stipulation of an age limit for the members of the Board of Executive Directors) and Item . . sentence (stipulation of Each organisational unit of the + is obliged, in com- an age limit for Supervisory Board members as well as a con- pliance with the regulations of higher-level units, to issue the trol limit for the length of service on the Supervisory Board). required illustrative regulations for its area of responsibility to ensure proper governance and monitoring. We do not believe that it is necessary or appropriate to stipulate strict age limits for the members of the Board of Execu- The content of (overall) works agreements and regulatory tive Directors and the Supervisory Board or control limits for standards (i.e. rules and standards of third parties, which the the length of service on the Supervisory Board, as the ability + or parts of it have undertaken to comply with and to carry out the work of the respective corporate body does implement) have the same importance as internal regula- not necessarily end upon reaching a certain age or a certain tions; this applies inter alia to the German Corporate Gover- length of service, but depends solely on the respective indi- nance Code unless the Board of Executive Directors and the vidual capabilities. Also considering demographic trends, Supervisory Board have jointly agreed on deviations from its age limits in particular con ict with meeting the general recommendations.

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interest of the Company to sta its corporate bodies in the Management in the + ’, ‘Donations and Sponsoring best possible way. in the + ’ and ‘Extending and Accepting Gifts, Invita- tions and other Donations’). Obligatory training sessions for There were no changes to the remuneration system of the potentially a ected employees are held in relation to speci c Board of Executive Directors in ; thus, it no longer com- issues (for example, anti-trust law, anti-corruption measures, plied with the new recommendations in Item .. sen- money laundering and the nancing of terrorism, environ- tence as of April . The recommendation will, how- mental protection, safety). ever, be complied with in by an adjustment taking e ect January . Employees have the option to seek advice internally in compliance-related matters (for example, from the legal depart- Kassel, December ’ ments or compliance o cers). Moreover, we have set up external hotlines (ombudspersons) for reporting compliance breaches, anonymously if desired. Our Group-wide compliance management system creates the prerequisites for ensuring awareness across the Group of respectively applicable legislation as well as our internal The aim of the risk and opportunity management system is regulations and other regulations of equal importance, and to promptly identify risks and opportunities across the whole that compliance with these can be monitored. We want not of the + and evaluate the nancial impact on the only to avoid the risks of liability, culpability and nes as well asset, nancial or earnings position as well as the non nancial as other nancial disadvantages for the Company, but also impact of the risk and opportunities. Steps are then taken to to ensure a positive reputation for the Company, its corpo- prevent/reduce the risks or use the opportunities; by doing so, rate bodies and employees in the public eye. We regard it as the system is able to support the safeguarding of the Compa- a matter of course that breaches of compliance are pursued ny’s success on a sustainable basis. Moreover, structured inter- and penalties in icted. nal and external reporting of the risks and opportunities should www.k-plus-s.com/corporategovernance be ensured. The following principles apply in this respect: + Corporate actions are inevitably associated with risk. The Board of Executive Directors has entrusted the head of The aim is to use the opportunities available and only the ‘Legal, , Corporate Secretary’ unit with the role of take risks that are unavoidable in order to secure income Chief Compliance O cer and the task of ensuring the exis- potential. tence of an e ective and legally compliant compliance man- + No action or decision may constitute a risk in itself, which agement system in the + . The Chief Compliance can foreseeably lead to a risk in terms of the Company’s O cer reports directly to the Chairman of the Board of Exec- continued existence. utive Directors and heads up the central Compliance Com- mittee on which the compliance o cers of each business A directive that is applicable across the Group governs the unit and the heads of central Company functions that are tasks and powers of the parties involved in the risk manage- relevant in terms of compliance have a seat (for example, ment process, the risk and opportunities management pro- Internal Audit, Legal, Human Resources). The committee has cess itself and de nes the requirements for risk and oppor- the task of advising on general compliance management tunity reporting. topics and coordinating this across the Group. In addition, it is tasked with analysing the general suitability of the com- The central risk and opportunities management committee pliance management system on a regular basis and issuing has the task of providing general advice on general issues recommendations for actions to the respective responsible relating to risk and opportunities management and coordi- management if a need for action is identi ed. nating these across the Group. It also has the task of analysing the general suitability of the risk and opportunities Every employee is acquainted with the core values and princi- management system on a regular basis and issuing recom- ples that are applicable across the Group as well as the inter- mendations for actions to the respective responsible man- nal regulations derived from them (for example, ‘Compliance agement if a need for adjustment is identi ed.

. DECLARATION ON CORPORATE GOVERNANCE A detailed description of the process for identifying, assessing, The basis for ful lment of this mission is the Group strategy controlling and reporting risks and opportunities, a presenta- de ned by the Board of Executive Directors. Sub-targets and tion of risk management in relation to nancial instruments sub-strategies, processes and measures are de ned for its , as well as the signi cant risks and opportunities, can implementation based on regular talks between the Board be found in the Risk and Opportunity Report from page . of Executive Directors and the heads of the + - units reporting directly to it and the management of key Group companies, which in turn are broken down Corporate action on the part of + is geared towards in a cascading process to the respective subordinated organ- the achievement of sustainable economic success. In order isational levels. The relevant content of each of these is com- to enjoy economic success in the long-term, appropri- municated to the respective employees by the line manager. ate account also needs to be taken of ecological and social aspects; they are therefore an integral part of our strategy. The quality of target de nition is crucial in terms of achieving For this reason, ecological and social issues as well as societal these targets and being able to assess them. Therefore, they trends are identi ed early and systematically, and assessed must be speci c, measurable, achievable, realistic and time- in the context of sustainability management. The inclusion based and should not contradict other targets. of the aspects considered relevant in the management processes are intended to help promote existing business, seize Key business transactions and measures require the approval new business opportunities and minimise risks. of the whole Board of Executive Directors or of the mem- ‘Sustainability Management’, page ber of the Board responsible for the respective unit/Group company. Following a holistic approach, sustainability management has been incorporated into the ‘Legal, , Corporate Sec- Essential control instruments are mid-term planning and roll- retary’ unit. The task of the unit in this respect is to create ing monthly planning. Mid-term planning of the + e ective structures to engage in and deal with sustainability comprises a planning period of three years and includes the issues within the + and further determine, analyse annual plan for the coming nancial year and planning for and prioritise the general sustainability requirements of the the following two years. Key gures are planned by the busi- + and those imposed on it as well as draw up pro- ness units and departments in numerous sub-processes and posals to the Board of Executive Directors for determining with central speci cation of the most important planning sustainability targets across the Group. assumptions. Central controlling consolidates mid-term planning by the business units and departments to the opera- The Central Sustainability Committee has the task of advis- tional planning as well as human resources, capital expen- ing on sustainability issues and coordinating these across diture and nancial planning of the + and provides the Group. It also analyses the general suitability of the sus- an explanation to the Board of Executive Directors. Once this tainability management system for achieving the de ned has been approved, the Board of Executive Directors presents objectives on a regular basis and issues recommendations the annual plan to the Supervisory Board for approval and for action to the respective responsible management if a explains planning for the following two years. Once the con- need for adjustment is identi ed. The committee met on solidated nancial statements have been prepared, the Board two occasions in in order to deepen the + Sustain- of Executive Directors and the Supervisory Board receive a ability Programme – , to de ne the sustainability detailed overview as part of a budget/actual comparison of targets and to advise on the materiality analysis, among the main di erences from the annual plan for the previous other things. + nancial year. ‘Sustainability Strategy’, page Rolling monthly planning is based on the endorsed annual plan. Here, all key gures, such as revenues, earnings, nan- The framework and general objectives of the + cial position and capital expenditure for the current nancial governance system are derived from its mission and vision, year are projected by the units to be included in the consoli- which are described in the ‘Corporate Strategy’ section on dated nancial statements and consolidated by central Con- page . trolling. The actual values available and new information

. DECLARATION ON CORPORATE GOVERNANCE TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

about business development are continually included in the We use the performance indicator return on capital projections. Signi cant assumptions are checked on a regu- employed to monitor our nancial objective; its rel- lar basis and updated where necessary. Deviations are ana- evance was also emphasised again when communicating lysed and assessed as part of rolling monthly planning and our strategy. We derive economic value added are used to manage business operations. The Board of Exec- on the basis of using the weighted average cost of utive Directors receives a written and verbal explanation of capital before taxes. Economic value added is also included the consolidated rolling monthly planning of the + . in the calculation of variable remuneration for the Board of Executive Directors and non-tari paid employees. A principal key performance indicator for managing the company is The Company is managed based on the following key nan- adjusted Group earnings after tax, which serves as the basis cial performance indicators: for dividend proposals. + ¹ (+ , Business units) + Adjusted free cash ow ² + The comparison of the actual and projected course of busi- + Return on capital employed ³ (+ , Busi- ness on page includes, amongst others, the performance ness units) indicators referred to above. + Group earnings after taxes, adjusted + ‘De nition of the nancial indicators used’, page ; ‘Glossary’, A presentation and description of the development of earn- page ings gures in the last ve years can be found in the ‘Earn- ings Position’ section on page and that of cash ow in the The activities of our operating units are managed on the ‘Financial Position’ section on page . basis of the aforementioned performance indicators. Within this context, the key nancial performance indicators have In addition to revenues and return on total investment, other changed slightly compared with previous years. Going for- key nancial gures and non- nancial gures that are also ward, we will primarily utilise as the earnings g- relevant to the + are sales volumes, average selling ure to direct the Company, whereby is no longer a key prices and the number of employees. The operating earnings nancial performance indicator e ective nancial year . as well as the investments, which no longer function as Due to our capital expenditure in Canada last year and the key nancial performance indicators, are nevertheless receiv- impact on depreciation and amortisation as a result, ing further attention. However, these gures are not consid- is no longer directly comparable over time. We also empha- ered as key performance indicators within the meaning of sised the relevance of as a key performance indica- German Accounting Standard . tor during communication of our Group strategy . We have thus not only set an target for , - but the short term incentive as a variable component of In the context of sustainability management, the require- the remuneration of the Board of Executive Directors and the ments of the + and those imposed on it are deter- non-tari paid employees has been based on since mined, analysed and prioritised in order to de ne speci c the beginning of the current nancial year. Furthermore, we sustainability targets for sub-areas (sites, companies, prod- no longer consider capital expenditure as a key performance uct segments etc.). In this manner, targets were set in in indicator. The phase of higher capital expenditure (primarily sustainability management for the + . in the new Bethune plant) has been completed, and we are ‘Non- nancial Statement’, page not focusing primarily on reducing the net debt/ ratio. For this reason, we are focusing on adjusted free cash ow. ‘Remuneration Report’, page The monitoring system is intended to ensure ful lment of the management requirements developed in the context of the governance system as well as compliance with

¹ Adjusted for depreciation and amortisation recognized directly in equity in the context of the relevant legal requirements. It consists of process-inte- own work capitalised can be found in the ‘Economic Report’ on page 83. ² The calculation of the ‘Adjusted free cash ow’ performance indicator can be found in the grated monitoring measures (internal control system in a Economic Report on page 90. narrower sense) as well as process-independent monitor- ³ The calculation of the ‘ROCE’ performance indicator can be found in the Economic Report on page 87. ing measures.

. DECLARATION ON CORPORATE GOVERNANCE Process-integrated monitoring measures entail that man- undergo training according to their tasks and receive regu- agement responsible for an internal process must identify lar training particularly in relation to changes in regulations and analyse risks to achieving objectives in order to be com- or processes. pliant with internal regulations and the law. Depending on the signi cance of the respective risk, upstream, process-in- We have a Group-wide platform for all major companies, a tegrated controls are to be de ned that are designed to pre- standard Group accounts structure and automatically stan- vent the occurrence of this risk. Downstream, process-inte- dardised accounting processes. This standardisation ensures grated controls are also to be de ned which identify errors the proper and timely reporting of key business transactions. that have occurred/risks that have materialised as quickly as Binding regulations as well as control mechanisms are in possible so that the relevant action to counter these can be place for additional manual recording of accounting trans- taken. Depending on the materiality of the respective process actions. Valuations on the balance sheet, such as the review and its risks, the risk analysis conducted, the controls de ned of the impairment of goodwill or the calculation of mining and the action taken are to be recorded. obligations, are calculated by internal Group experts. In individual cases, such as the valuation of pension obligations, the Non-process dependent monitoring measures are imple- valuation is calculated by external experts. mented by the internal audit department. Reports containing summary audit results are produced for these audits and pre- To prepare the consolidated nancial statements of the + sented to the respective responsible management to support , the nancial statements of those companies whose managers with assessing the general suitability and actual accounts are kept on the + platform are imported e ectiveness of the governance and monitoring system. The directly into an consolidation system. In the case of the reliability of the risk and opportunity management system remaining consolidated companies, the nancial statements and the compliance management system are reviewed on a data are transferred via an online interface. The validity of the regular basis. nancial statements data transferred is reviewed by means of system controls. In addition, the nancial statements sub- Non-process dependent monitoring measures are taken mitted by the consolidated companies are reviewed centrally externally in connection with the annual audits as well as in with due consideration being given to the reports prepared the form of penetration tests. by the auditors. Information relevant to the consolidation process is automatically derived and obtained in a formalised manner by the system, thus ensuring that intragroup transactions are properly and completely eliminated. All consolidation processes for the preparation of the consolidated nancial statements are carried out and documented in the consolidation system. The components of the consolidated are nancial statements, including key information for the Notes, applied when preparing the Company’s consolidated nan- are developed from this. cial statements. The regulations for + accounting and reporting are in accordance with stipulate stan- The annual nancial statements of companies subject to dard accounting and valuation principles for the German mandatory audits and the consolidated nancial statements and foreign companies included in the consolidated nancial are audited by independent auditors in addition to the exist- statements. In addition, we impose detailed and formalised ing internal monitoring. This is the key process-independent requirements for the reporting of the consolidated com- monitoring measure with regard to the Group accounting panies. New external accounting regulations are analysed process. The annual nancial statements of those German promptly in terms of their e ects and, if these are relevant companies not subject to mandatory audits are audited by to us, are implemented in the accounting processes through the internal audit department. Moreover, the independent internal regulations. The accounting and valuation regula- auditor audits the reliability of the risk management system tions for the separate nancial statements of + - in the narrow sense. and its domestic subsidiaries are documented in accounting instructions, in accordance with German com- The audit was conducted by - mercial law and supplementary provisions. All employees £, (formerly

. DECLARATION ON CORPORATE GOVERNANCE TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

¡ £- : , ). This company or its predecessor companies have conducted our audits since . The auditor, There are no shares with special rights conferring control who was directly responsible, was auditor/tax adviser Dr powers. Christian H. Meyer. The overall mandate was overseen by auditor/tax adviser Heiner Kompenhans as responsible part- : ner. issued a declaration of independence pursuant to Item .. of the German Corporate Governance No voting right controls apply. Code. The elected auditor is appointed by the Supervisory Board, acting on a recommendation submitted by the Audit : Committee. The Chairman of the Supervisory Board and the Chairman of the Audit Committee are advised by the auditor without delay of any reasons giving rise to exclusion or partiality that may arise during the audit if these cannot be eliminated immediately. Furthermore, the auditor should immediately advise of any ndings and occurrences of rel- The appointment and dismissal of member of the Board of evance to the tasks of the Supervisory Board that may arise Executive Directors are governed by Section of the AktG. during the audit. In addition, the auditor is required to advise Accordingly, the members of the Board of Executive Direc- the Supervisory Board or make an appropriate note in the tors are appointed by the Supervisory Board for a maximum audit report if, during the course of the audit, he identi es term of ve years. In accordance with Article of the Arti- any facts suggesting incompatibility with the declaration on cles of Association, the Board of Executive Directors of + conformity issued by the Board of Executive Directors and the has at least two members. The num- Supervisory Board in accordance with Section of the AktG. ber of members is determined by the Supervisory Board. The Supervisory Board may appoint a member of the Board of Executive Directors as chairman of the Board of Executive Directors. The Supervisory Board may rescind the appointment of a member of the Board of Executive Directors or ¥ the appointment of the Chairman of the Board of Executive ¥ Directors for good cause. The Annual General Meeting may pass amendments to the Articles of Association with a simple majority of the share capital represented (Section of the AktG in conjunc- : tion with Article of the Articles of Association), unless The share capital is , , and is divided into mandatory statutory provisions require a larger majority. , , shares. The bearer shares of the Company are no-par value shares. There are no other classes of shares. : ’ :

Each share carries one vote; no restrictions apply to voting rights or to the transfer of shares. The Board of Executive ’ Directors is not aware of any relevant shareholder agree- The Board of Executive Directors was authorised by the ments. Annual General Meeting on May to increase the Company’s share capital, with the consent of the Supervi- : sory Board, by a total of , ,., in one lump sum or several partial amounts at di erent times, by issuing a No direct or indirect interests in the share capital of more maximum of , , new registered shares (authorised than were reported to us. capital) in return for cash and/or non-cash contributions

. DECLARATION ON CORPORATE GOVERNANCE during the period to May . The Board of Executive not exceed of the share capital ( ceiling), neither on Directors was further authorised on May to increase the date of the resolution regarding these authorisations nor the Company’s share capital, with the consent of the Super- on the date they are respectively exercised. If other authori- visory Board, by a total of , ,., in one lump sum sations to issue or sell Company shares or to issue rights or several partial amounts at di erent times, by issuing a are exercised, which enable or obligate the acquisition of maximum of , , new registered shares (authorised Company shares, during the term of the authorised capi- capital ) in return for cash and/or non-cash contributions tal or authorised capital until their respective utilisation during the period to May . Shareholders are generally thus excluding the right to subscribe, this must be credited o ered the right to subscribe when increasing capital from against the ceiling referred to above. the authorised capital or authorised capital respectively. The new shares can be acquired by a nancial institution The Board of Executive Directors is authorised to determine determined by the Board of Executive Directors with the the further details of capital increases from the authorised obligation that they must be o ered to the shareholders for capital or the authorised capital with the consent of the subscription (indirect subscription right). Supervisory Board. www.k-plus-s.com/agminvitation; www.k-plus-s.com/agminvitation As a result of the option granted by the Board of Executive Directors to implement a capital increase with limited exclu- The Board of Executive Directors is authorised, both for sion of the right to subscribe with the approval of the Super- the authorised capital and for the authorised capital , visory Board until May (authorised capital) or May with the consent of the Supervisory Board, to exclude the (authorised capital ), the Company will be given a wide- shareholders’ statutory right to subscribe up to a propor- spread instrument with the help of which, for example, fast tionate amount of the share capital of , ,. (cor- and exible use can be made of the opportunities that pres- responding to , , no-par value shares) in the fol- ent themselves to make acquisitions. The Board of Execu- lowing cases: tive Directors will only make use of this option if there is an + For fractional amounts that arise as a consequence of the appropriate ratio between the value of the new shares and right to subscribe. the value of the consideration. + In the case of capital increases in return for cash contributions up to a proportionate amount of the share capital of , ,. (corresponding to , , no-par value shares) if the issue price of the new shares is not signi - ’ cantly less than the stock exchange price of already listed

shares of the same type and structure on the date when

the issue price is nally agreed. Authorisation to issue convertible bonds and bonds with + In the case of capital increases in return for non-cash con- warrants tributions up to a proportionate amount of the share cap- The Board of Executive Directors is authorised until May ital of , ,. (corresponding to , , shares) , with the consent of the Supervisory Board, to issue bearer if the new shares are to be used as consideration in the and/or registered convertible bonds and/or warrant linked acquisition of an undertaking or an interest in an under- bonds (‘bonds’) on one or more occasions, with an aggregate taking by the Company. nominal value of up to ,,. with or without a + In order to implement a scrip dividend where the share- limited term, and to issue or impose conversion rights or obli- holders are asked to o er their dividend claim, in full or in gations on the holders or creditors of bonds, or warrants on part, as a non-cash contribution in return for new shares shares in the Company with a proportionate amount of the in the Company. share capital of up to a total of , ,., as set out in greater detail in the terms and conditions of the convertible or The Board of Executive Directors may only make use of the warrant-linked bonds. The proportionate amount of the share authorisations described above to exclude the right to sub- capital represented by the shares to be issued upon conversion scribe insofar as the proportionate amount of the total may not exceed the nominal amount of the bonds. shares issued with exclusion of the right to subscribe does www.k-plus-s.com/agminvitation

. DECLARATION ON CORPORATE GOVERNANCE TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

In addition to euros, bonds may also be issued in the legal exercising of these rights or the ful lment of the conver- tender of any country, limited to the corresponding sion obligations. euro counter-value at the time of issuing the bond. Bonds + In order to exempt fractional amounts from the share- may also be issued by group companies of the Company; in holders’ right to subscribe, which are a consequence of this case, the Board of Executive Directors is authorised to act the subscription ratio. as guarantor for the bonds on behalf of the Company and to + Insofar as the bonds are issued in connection with the grant or impose conversion rights or obligations or warrants acquisition of undertakings, interests in undertakings, or on shares in the Company to/upon the holders or creditors parts of undertakings in exchange for non-cash consider- of such bonds. The bond issues may be subdivided into equiv- ations, provided the value of the consideration is adequate alent debentures in each case. in relation to the value of the bonds.

The Company’s shareholders are generally entitled to sub- The authorisations described above to exclude the right to scription rights to bonds. The bonds can also be acquired by subscribe only apply to bonds with conversion rights or obli- one or more nancial institutions with the obligation that gations or warrants on shares representing a proportionate they must be o ered to the Company’s shareholders for sub- amount of the share capital of up to of the share capital scription. as of the date of the resolution or, if the amount of the share capital is lower at that time, on the date when the authori- The Board of Executive Directors is however authorised with sation is exercised. the approval of the Supervisory Board to exclude subscription rights, in full or in part, in the following cases: If bonds with conversion rights are issued, creditors may + If bonds are issued against cash and if the issue price is exchange their bonds against shares in the Company not substantially lower than the theoretical market value in accordance with the bond terms and conditions. The of the bonds calculated in accordance with recognised exchange ratio is calculated by dividing the nominal amount actuarial methods. However, exclusion of subscription of a bond by the conversion price determined for a new share rights only applies to bonds with conversion rights or in the company. The exchange ratio can also be calculated by obligations or warrants on shares representing a propor- dividing the issue price of a bond that is below the nominal tionate amount of the share capital of up to of the amount by the conversion price determined for a new share share capital as of the date of the resolution or, if the in the company. The exchange ratio can be rounded up or amount of the share capital is lower at that time, on the down to the next whole number in each case; a premium to date when the authorisation is exercised. The maximum be paid in cash can also be determined. Moreover, provision limit of of the share capital is reduced by the propor- can be made for fractional amounts to be combined and/or tionate amount of the share capital amount attributable settled in cash. The proportionate amount of the share capi- to shares issued during this authorisation period in con- tal represented by the shares to be issued per bond may not nection with another increase in capital where subscrip- exceed the nominal amount of the bond. tion rights are excluded in direct or indirect application of Section sentence of the AktG. The maximum If warrant-linked bonds are issued, one or more warrants limit of of the share capital is also reduced by the will be attached to each bond, which authorise the holder proportionate amount of the share capital attributable to subscribe to shares in the Company, as set out in greater to own shares, which are sold by the Company during detail in the warrant terms and conditions to be de ned by this authorisation period, where subscription rights are the Board of Executive Directors. The proportionate amount excluded in direct or indirect application of Section of the share capital represented by the shares to be issued sentence of the AktG. per bond may not exceed the nominal amount of the war- + If and insofar as this is necessary in order to grant the bear- rant-linked bond. ers of convertible bonds or warrants in respect of shares in the Company or the creditors of convertible bonds pro- The respective conversion or option price for a share in the vided with conversion obligations, a right to subscribe to Company (subscription price) must correspond to either (a) the extent to which they would be entitled following the at least of the weighted average stock exchange price of + shares in the ¥ computer trading system (or

. DECLARATION ON CORPORATE GOVERNANCE any functionally comparable successor system replacing it) following the declaration of the conversion or exercise of at the Frankfurt Stock Exchange during the last ten trading the warrant. days prior to the day on which the Board of Executive Direc- tors adopts the resolution to issue the convertible or war- The Board of Executive Directors is authorised, in the con- rant-linked bonds, or (b) at least of the weighted average text of the requirements described above, with the approval stock exchange price of + shares in the ¥ computer of the Supervisory Board, to de ne the further details of the trading system (or any functionally comparable successor issue and structure of the convertible and/or warrant-linked system replacing it) at the Frankfurt Stock Exchange during bonds, particularly interest rate, issue price, term, denom- the days on which subscription rights are traded on the Frank- ination, dilution protection, and the conversion or warrant furt Stock Exchange, with the exception of the last two days period or to de ne these in consultation with the corporate of subscription rights trading. bodies of the holding companies issuing the convertible and/ or warrant-linked bonds. For warrant-linked bonds or bonds with conversion rights, or obligations, the warrants or conversion rights, or obligations, Conditional capital increase can be adjusted to preserve value in the event of a dilution in The share capital is increased by up to , ,. by issu- the value of the warrants or conversion rights, or obligations, ing up to , , bearer shares with no par value (condi- in accordance with the bond terms and conditions, notwith- tional capital). The purpose of the conditional capital increase standing Section of the AktG, insofar as the adjustment is is to grant no-par value shares to the holders or creditors of not already stipulated by law. Moreover, the bond terms and bonds, which are issued by the Company or group companies conditions may make provision for a value-preserving adjust- of the Company in accordance with the above authorisation ment of the warrants or conversion rights/obligations in the before May . New no-par value shares will be issued event of a capital reduction or other extraordinary measures at the conversion or option price to be determined in each or events (such as a third party obtaining control, unusually case as described above. large dividends). The conditional capital increase will be implemented only The bond terms and conditions may also make provision insofar as the holders or creditors of conversion rights or for a conversion obligation at the end of the term (or an warrants from bonds, which were issued by the Company or earlier date) or for the Company’s right to grant shares in a group company before May based on the authoris- the Company, in full or in part, in lieu of payment of the ing resolution of the Annual General Meeting held on May amount due to the creditors of the bonds at the time of , exercise their conversion rights or warrants; or as the nal maturity of bonds with conversion rights or warrants holders or creditors of the convertible bonds with conversion (this also includes maturity on account of termination). The obligation, which were issued by the Company or a group bond terms and conditions may also stipulate in each case company before May based on the authorising res- at the Company’s discretion that instead of being converted olution of the Annual General Meeting held on May , into new shares from conditional capital, warrant-linked or who are required to convert, ful l their conversion obligation; convertible bonds may be converted into existing shares in or if the Company elects before May , based on the the Company or that the warrant can be ful lled by provid- authorising resolution of May , to grant shares in the ing such shares. Company, in full or in part, in lieu of payment of the amount due; and if no cash settlement is made or own shares are Finally, the bond terms and conditions may make the pro- used to settle such claims. New no-par value shares are eli- vision that in the event of a conversion, the Company gible to participate in the pro ts from the beginning of the will not grant shares in the Company to the party enti- nancial year during which they are created through the tled to the conversion, but will make a payment, which exercise of conversion rights or warrants or through the ful- for the number of shares to be supplied alternatively, cor- lment of conversion obligations; in deviation from this, the responds to the weighted average stock exchange price of Board of Executive Directors may determine, with the con- + shares in the ¥ computer trading system (or any sent of the Supervisory Board, that new no-par value shares functionally comparable successor system replacing it) at are eligible to participate in the pro ts from the beginning the Frankfurt Stock Exchange during the ten trading days of the nancial year, in respect of which the Annual Gen-

. DECLARATION ON CORPORATE GOVERNANCE TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

eral Meeting has not yet adopted a resolution regarding the be the price of the + share in the ¥ computerised appropriation of the balance sheet pro t at the time when trading system (or any functionally comparable successor the conversion rights or warrants are exercised or the con- system replacing it) at the Frankfurt Stock Exchange, deter- version obligations are ful lled. The Board of Executive Direc- mined by the opening auction on the day of purchase. In the tors is authorised with the consent of the Supervisory Board event of a purchase by means of an o er to buy addressed to determine the additional content of share rights and fur- to all shareholders, the purchase price o ered per share ther details of the implementation of a conditional capital (excluding acquisition costs) must not exceed or undercut increase. the relevant stock exchange price by more than ; the relevant stock exchange price will be the weighted aver- In addition to the traditional options for raising outside age stock exchange price of + shares in the ¥ com- and equity capital, issuing convertible bonds and/or war- puter trading system (or any functionally comparable suc- rant-linked bonds can also provide an opportunity to take cessor system replacing it) at the Frankfurt Stock Exchange advantage of attractive nancing alternatives on the capi- during the last ten trading days prior to the publication of tal markets depending on the market situation. The Board the o er to buy. In the event of a call to shareholders to of Executive Directors believes that it is in the Company’s submit o ers for sale, the purchase price o ered per share interests that this nancing option is also available to the (excluding acquisition costs) must not exceed or undercut Company. Issuing convertible bonds and/or warrant-linked the relevant stock exchange price by more than ; the bonds makes it possible to raise capital under attractive con- relevant stock exchange price will be the weighted average ditions. The conversion and/or option premiums achieved stock exchange price of + shares in the ¥ computer bene t the Company’s capital base thereby enabling it to trading system (or any functionally comparable successor take advantage of more favourable nancing opportunities. system replacing it) at the Frankfurt Stock Exchange during The other possibility provided for, in addition to the granting the last ten trading days prior to the publication of the call of conversion rights and/or warrants, to create conversion to shareholders to submit o ers for sale. In the event of obligations, widens the scope for structuring this nanc- acquisition by means of a public o er to buy addressed to ing instrument. The authorisation provides the Company all shareholders or by way of a public call to shareholders with the necessary exibility to place the bonds itself or to submit o ers for sale, the volume of the o er or call can through direct or indirect holding companies. The option be limited. If the overall subscription to this o er or the to exclude the right to subscribe allows the Company to o ers for sale exceed this volume, shares must be acquired make rapid use of advantageous stock exchange situations on allocation basis. Provision may be made for preferential and to place bonds on the market quickly and exibly under acceptance of small quantities of up to shares o ered attractive conditions. for sale per shareholder. www.k-plus-s.com/agminvitation ’ Furthermore, the Board of Executive Directors is authorised, with the consent of the Supervisory Board, to sell shares The Board of Executive Directors is authorised to acquire in the Company, which are or were acquired based on the own shares representing no more than of the total authorisation above or authorisation previously granted by no-par value shares comprising the share capital of + the Annual General Meeting pursuant to Section sen- until May . At no time may tence of the AktG, on the stock exchange or via a public the Company hold more than of the total number of o er addressed to all shareholders. In the following cases, no-par value shares comprising its share capital. Acquisi- shares may be disposed of by other means and thus with the tion will be made via the stock exchange by means of a exclusion of the shareholders’ right to subscribe: public o er to buy addressed to all shareholders or by way + Disposal against payment of a cash sum that is not signi - of a public call to shareholders to submit o ers for sale. In cantly below the relevant stock exchange price; the event of a purchase e ected on a stock exchange, the + Issue of shares as consideration for the purpose of acquir- purchase price per share (excluding acquisition costs) must ing undertakings, parts of undertakings or interests in not exceed or undercut the relevant stock exchange price undertakings; by more than ; the relevant stock exchange price will

. DECLARATION ON CORPORATE GOVERNANCE + Servicing of convertible bonds and bonds with warrants, out any dilution of shareholder interests that would occur if which have been issued on the basis of authorisation conditional capital were used. The continued option to with- given by the Annual General Meeting. draw own shares from circulation is also a common alternative, the use of which is in the interest of the Company and The authorisation to exclude the right to subscribe applies in its shareholders. respect of all shares representing a proportionate amount of the share capital of up to of the share capital when the : resolution is adopted or if the amount of the share capital is lower at that time, on the date when the authorisation is exercised. If use is made of other authorisations to issue or In , + concluded a syndicated credit line for bil- sell Company shares or to issue rights, which enable or obli- lion. All loans drawn against this line of credit will become gate the acquisition of Company shares, during the term of due and payable immediately and the entire credit line will this authorisation to acquire own shares, thus excluding the become redeemable in accordance with the loan terms and right to subscribe, the total number of shares issued or sold conditions if one person acting alone or more persons acting where the right to subscribe is excluded must not exceed jointly acquire control over + . Also in of the share capital. the case of the bonds issued by + , as well as the promissory notes issued, the respective creditors Finally, the Board of Executive Directors is authorised, with have the right, in the event of a change of control, to termi- the consent of the Supervisory Board, to withdraw shares in nate the bonds or promissory notes that have not yet been the Company from circulation, which are or were acquired redeemed. based on the authorisation above or authorisation previously granted by the Annual General Meeting pursuant to Section The provisions in credit agreements and bond conditions sentence of the AktG, without the Annual General agreed in the event of a change of control are routine and Meeting having to pass a further resolution on such with- reasonable from the perspective of protecting the legitimate drawal. Shares must be withdrawn from circulation in accor- interests of the creditors. dance with Section sentence of the AktG without a capital reduction in such a way that withdrawal results in an : increase in the proportion of remaining no-par value shares in the share capital pursuant to Section of the AktG. The Board of Executive Directors is authorised pursuant to Sec- tion sentence clause of the AktG to adjust the num- Agreements of this type exist with the members of the Board ber of shares indicated in the Articles of Association. of Executive Directors of + and are explained in detail in the Remuneration Report on page . The authorisations to purchase own shares as well as to dis- The existing compensation agreements with the members of pose of them and withdraw them from circulation may be the Board of Executive Directors take into appropriate consid- exercised in full or in part each time and on several occasions eration both the legitimate interests of those concerned and in the latter case. The authorisation granted by the Annual of the Company and its shareholders. General Meeting to the Board of Executive Directors to purchase a limited number of own shares in the Company is a common instrument available in many companies. The ability to resell own shares, puts the Company in a position to, for example, gain long-term investors in Germany and abroad or to nance acquisitions exibly. Moreover, it will also enable the Company to use shares for servicing convertible and warrant-linked bonds. It may be advisable to use own shares in full or in part instead of new shares from a capital increase to ful l conversion rights or warrants. Using own shares rules

. DECLARATION ON CORPORATE GOVERNANCE TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

In October , we published our vision for a successful + in and the associated new corporate strategy .

The commissioning of the new potash mine in Bethune, Our vision: We will be the most customer-focused, independ- Cana da, and improved wastewater management including ent minerals company and grow our to billion in construction of the innovative facility at the Werra plant by represented major advances in safeguarding our potash pro- + thinking and acting as ‘One Company’, duction in the long term. The Salt business unit also system- + tapping the full potential of our existing assets, atically implemented its measures for increasing e ciency + exploring new adjacent growth areas, and pro tability. The new team of executive directors and the + increasing the share of our specialties business. new Supervisory Board chairman started work in May. This www.k-plus-s.com/vision was exactly the right time to tackle the future strategic focus of the Group in depth – especially considering that the mar- Our organisation: We will be a customer-centric One + ket and competition are changing and the megatrends are that focuses on its four customer segments, systematically having an increasing impact on +’s business operations. re nes its raw material and production base and makes use The Supervisory Board and the Board of Executive Directors of opportunities to grow organically as well as through acqui- considered it important to take a long-term perspective in sitions – supported by megatrends. This portfolio gives all order to chart the course for change and growth at an early of our stakeholders the greatest potential to create value in stage. There was a no-holds-barred mindset; all topics were the long term, considering a balanced pro le of opportuni- examined in detail. The interests of all stakeholders – cus- ties and risks. tomers, employees, shareholders and society – had to be considered. Our ambitions: It is important to us to make the success of our strategy measurable: of billion with a return Following an intensive six-month analytical and development on capital employed of at least and a portfolio process, we presented our vision of a successful + that can achieve revenue growth of at least p. a. after in and the related new corporate strategy entitled . These key indicators show the potential that we see to our stakeholders in October . in the + but also set a standard for us. We want to achieve over two-thirds of the growth just by driving the We also renewed our mission. This reveals what drives us development of our existing business and optimising our every day at + and which contribution we intend to make organisation and processes. through our work. In addition, it underlines that sustainability plays a major role in our operations. The path to get from the status quo to making our vision a reality is described in our strategy. Our mission: We enrich life by sustainably mining and trans- forming minerals into essential ingredients for Agriculture, Industry, Consumers and Communities.

Our vision shows where we are going and who we want to is a corporate strategy based on our skills be in . It is our guiding principle. and strengths. We have globally acknowledged expertise

. CORPORATE STRATEGY in the exploration and processing of minerals, but also con- duction will enable + to return to a positive free cash ow siderable experience in the development of new markets. by . The leverage (net debt/) is to be halved by We will harness these strengths to systematically drive the compared with the gure reported in the Half- development of our existing business and develop new Yearly Financial Report. We are seeking to ful l the require- areas of business. Here we will particularly make use of the ments for regaining our investment grade rating in . opportunities presented by the megatrends that are of rele- Strengthening the nancial base will set the scene for future vance to us, such as the scarcity of resources, urbanisation, growth. climate change and digitalisation. Our strategy also takes our existing nancial, business and structural challenges The persistent focus on our customers and our Company’s into consideration. With we have laid the development towards ‘One Company’ is a challenge for +. foundations for steering our Company towards a successful This also entails a change in culture, for the way we see our future. New development and employment opportunities business and the way we work together will be transformed. will arise for our employees. We will actively shape this transformation and empower our www.k-plus-s.com/strategy employees accordingly.

Our strategy will be implemented in two stages: / FIG: 2.4.1 The target we set in of achieving consolidated of around . billion in is not realistic anymore in . our view since mid . The basis for our calculations was Through we will align our business to our four customer the price of around /tonne ( Brazil gran cfr segments – Agriculture, Industry, Consumers and Commu- pink) that we assumed for potassium chloride at the time. nities. For this we will integrate the Potash and Magne- Although the current price trend is pointing in the right sium Products and Salt business units more closely to form direction, it is quite unlikely that we will reach the gure we ‘One Company’. This is a key prerequisite for strengthening envisaged back then. our customer focus and will allow us to develop our product portfolio more systematically and tap synergies in our . existing business. This will mostly be achieved in the areas We have drafted a clear roadmap setting out development of production, digitalisation, administration, procurement goals and strong growth options for the growth phase up to and logistics. As a result, + will generate a positive e ect . It aims to increase operating earnings and reduce the on earnings of at least million per year from the end business’s dependence on external factors such as weather of . and the global market price for potassium chloride and hence the volatility of the operating earnings. To realise Implementation of our synergy measures, lower capital these growth options, the Company will expand the specialty expenditure and the ramp-up of our Canadian potash pro- business and new areas of business such as fertigation. We

+ : FIG: . .

Phase 1: Transformation Phase 2: Growth 2017 – 2020 2020 – 2030 Measures – Reduce indebtedness – Tapping the full potential of our existing assets – Realize synergies – Exploring new adjacent growth areas – Advance corporate culture – Increased share of specialties – Shaping the organization and focusing towards our clients Goals – Net debt/EBITDA: halved vs. H1/2017 – Requirements for Investment Grade-Rating achieved in 2023 – Synergies: > € 150 m – EBITDA ambition: € 3 bn – ROCE: > 15 % – Revenue growth beyond 2030: > 4%

. CORPORATE STRATEGY TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

also intend to step up our business in high-growth regions mental, social and economic aspects for long-term sustain- such as Asia and Africa. For this we will, for example, build a able success. We have set ourselves ambitious objectives for new trading platform in Africa with regional partners from di erent elds of action in three areas: people, environment agriculture. In the industrial sector we intend to strengthen and business ethics. Sustainability is an opportunity to guide our product portfolio and expand our o ering for the phar- our Company through innovative changes. This helps us to maceutical industry. advance our existing business, seize new business opportunities and minimise risk. For us, sustainability means future viability. Comprehensive programme management was set up in www.k-plus-s.com/sustainability October for the structured implementation of our strategy. We started with the validation of the synergy potential For more information on sustainability management at +, identi ed. In November , as an important rst step in the di erent elds of action and the objectives de ned in the new approach, a decision was made to restructure and this framework, please refer to the consolidated Non-Finan- reduce the size of the Board of Executive Directors from ve cial Statement on page . to initially four and, in the future, three members as well as ‘Non- nancial statement’, page to form an extended management team. / FIG: 2.4.2

Sustainability is an integral component of our new strategy. In all our strategic decisions we strive to integrate environ-

FIG: . .

Agriculture Industry We enable farmers to provide nutrition for the world. We provide solutions for industrial companies. – Potassium chloride MOP – Chemical industry – Premium fertilizers – Pharmaceutical industry – Fertigation (spreading of fertilizers using irrigation systems) – Food processing – Specialties for industrial products (e. g. for oil/gas exploration, textiles, plastics industry) Consumers Communities We enrich the lives of consumers in terms of food, the quality of water used We keep streets and pavements in communities safe in winter. in their households and the safety on streets and pavements in winter. – De-icing salt business – Table salt, water softening salt (e. g. for dishwashers), packaged de-icing salt for personal use

. CORPORATE STRATEGY .

We increased our revenues and our earnings in nancial year . During the reporting period, revenues of the + rose from , . million to ,. million. Earnings before interest, taxes, depreciation and amortisation amounted to . million, tangibly higher than the previous year’s gure (: . million).

returned to a level signi cantly above that of the previous year : . Global gross domestic product rose by . in ; the econ- The Natural Gas Year Future, which focuses primarily omy continued to pick up steam in nearly every major coun- on western and southern Germany, also rebounded to / try. Particularly in the United States and in the Euro area, MWh by the end of the year after dropping from around growth rates picked up strongly after the rst six months /MWh to approximately /MWh during the rst of the year. Investments increased and private consumption half of the year. The average gure increased slightly to remained at a high level. Although the economic sentiment around /MWh compared to the previous year (: in emerging market countries remains weak, the economy /MWh). continued to gain footing over the course of the year. This was mainly attributable to rebounding production in the Developments in the currency markets in were charac- raw material exporting countries as a result of the increase terised by a strengthening of the euro against the dollar. in commodity prices. As a result, the value of the dollar stood at . and thus slightly below the previous year’s level : Prices for important soft commodities showed mixed results .. / FIG: 2.5.2 over the course of . While the price of wheat showed a tendency toward improvement, for instance, soy beans and + palm oil reported tangible price drops. The ¦- The changes in the macroeconomic environment had an ¥, which tracks developments in the impact on the business development of + as follows: prices of corn, soybeans, sugar, wheat, soy oil, cotton and cof- + The + ’s energy costs are a ected in particu- fee, decreased by around . / FIG: 2.5.1 lar by the cost of purchasing gas. Despite the latest price increases, the cost of purchasing gas in Europe remained Following a signi cant fall lasting through the rst six relatively low. months of the year, the price of oil recovered strongly in + Foreign currency hedging system: The use of hedging . At the end of December, the price of Brent Crude was instruments for the Potash and Magnesium Products around per barrel ( December : ). The business unit resulted in an average exchange rate of decision by the Organisation of Petroleum Exporting Coun- . in including hedging costs : tries to limit the output and political tensions in .. We also hedged the euro exchange rate for the Saudi Arabia drove oil prices up mainly in the second half capital expenditure related to construction of the Bethune of the year. The average price for the year of around mine payable in Canadian dollars for the last time in the

. REPORT ON ECONOMIC POSITION TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

FIG: .. in % Jan Feb March April May June July Aug Sept Oct Nov Dec

Crude Oil (Brent) Wheat Corn Soybeans Dow Jones-UBS Agriculture Subindex Palm Oil Index: 31 December 2016

Source: Bloomberg

FIG: .. in % Jan Feb March April May June July Aug Sept Oct Nov Dec

CAN$ to US$ Euros to US$ Index: 31 December 2016

Source: Bloomberg

nancial year. The average hedging rate in the year - under review was . : . . ‘Financial position’, page + Prices of important soft commodities continued to trade at a comparatively low level at the end of the reporting In the nancial year, the industry-speci c situation for year. At the same time, the input costs, for example for fer- the Potash and Magnesium Products business unit was char- tilizers, were relatively low despite the most recent price acterised by strong demand. Because contracts between the increases. The resulting earnings prospects should con- major potash producers and the Chinese and Indian cus- tinue to give farmers su cient incentive to increase yield tomers were signed at a relatively late date in , remain- per hectare by making use of plant nutrients. ing contractual quantities were still delivered in the rst six + The tax reform took e ect on January . Although months of . It was not until the beginning of the second a non-recurring tax expense negatively impacted net half of the year that the contractual parties were able to earnings in the fourth quarter of , + expects this reach an agreement on a new price for potassium chloride tax reform to have an overall positive e ect due to the including freight of per tonne in China and reduction of the corporate tax rate from to . per tonne in India (: and per tonne, respec- Based on our current forecasts for through , tively). As a result of ongoing strong demand throughout the the cumulative positive impact on liquidity should be year, the price for potassium chloride has improved in many up to million. regions around the world.

. REPORT ON ECONOMIC POSITION Prices for fertilizer specialties showed rst indications of recovery at the end of the year after higher product availability on the market had initially caused prices to fall slightly. Farmers cultivating chloride-sensitive crops, such as vegeta- The revenues forecast as part of the Annual Report bles or wine, tend to be less sensitive to the cost of using fer- assumed a tangible increase in revenues for compared tilizer on account of the attractive earnings that can be gen- to the previous period. Over the course of the year, that erated with these crops. forecast was narrowed to a range from . to . billion. At . billion, revenues were within the forecasted

range. / TAB: 2.5.1 Mild winter weather at the beginning of led to relatively high de-icing salt inventories at customers in the Midwest and on the East Coast. Regional prices in this segment have At . million and . million respectively, operat- thus declined for the early ll business for the ing earnings and of the + in the winter season. In contrast, the wintery weather conditions in nancial year ful lled the qualitative forecast of a sig- Europe resulted in a reduction of inventory levels and there- ni cant increase compared to the previous year and were fore in a slight recovery of de-icing salt prices. The start of the within the range of to million and to de-icing salt season was better overall compared million, respectively, set over the course of the year to the weak previous year due to favourable winter condi- (: . million and . million, respectively). Oper- tions in North America. ating earnings were also forecast to increase tangibly in both business units. The Potash and Magnesium Products General conditions for sales of consumer products and salts business unit achieved of . million and for the food industry remained largely unchanged compared of . million (: . million and . million, to the previous year. Demand for premium products (sea salt respectively), thus meeting the forecast. The Salt business and kosher salt) was once again robust. unit generated of . million and of . million (: . million and . million, respec- Primarily industrial salt and salt for chemical use showed tively). At the level, operating earnings remained a positive trend. In South America, in particular, demand stable, while the forecasted tangible increase was achieved for salt for the extraction of copper from the mined raw at the level. ore (copper leaching) was once again strong. Prices for salt for chemical use increased in Europe due to reduced prod- A tangible increase in adjusted Group earnings after taxes of uct availability and strong demand. Slightly higher global . million (: . million) was also anticipated and demand for pharmaceutical salts was seen due primarily to achieved. The reached . and was thus moderately an ageing population. higher than the previous year : .. At the levels of the Potash and Magnesium Products business unit and the Salt business unit, the forecast of a tangibly higher compared to the previous year was exceeded in the Potash and Magne- + Product availability at the Werra plant was signi cantly sium Products business unit with . and reached in the Salt higher compared to the previous year. The main reasons business unit . (: . and ., respectively). were the approval of the deep-well injection permit in December and e cient wastewater management. This made it possible to realise tangible increases in vol- The forecast formulated in the Annual Report of a con- umes in the Potash and Magnesium Products business tinued negative, but tangibly improved adjusted free cash unit. ow was ful lled for the nancial year. It amounted to + The new Bethune potash plant was o cially opened in −. million (: −. million) in the reporting May . As last expected, around , tonnes were period. produced there in the nancial year and the targeted annual technical capacity of two million tonnes was achieved as scheduled at the end of .

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TAB: ..

Forecast Forecast Forecast Forecast ACTUAL ACTUAL Annual Report Q/ H/ Q/

K+S Group tangible tangible Revenues billion . increase increase . – . . – . . tangible tangible EBITDA million . increase increase – – . tangible tangible Operating earnings (EBIT I) million . increase increase – – . tangible tangible Group earnings after taxes, adjusted ¹ million . increase increase – – . signi cantly signi cantly signi cantly signi cantly below below below below previous previous previous previous Capital expenditure ² million , . year’s level year’s level year’s level year’s level . tangible tangible tangible signi cant improvement, improvement, improvement, improvement, remains remains remains remains Adjusted free cash ow million − . negative negative negative negative − . tangible tangible tangible tangible ROCE % . increase increase increase increase . EUR/USD exchange rate EUR/USD . . . . . . Potash and Magnesium Products business unit signi cant signi cant Sales volumes million tonnes . increase increase . – . . – . . Salt business unit moderate moderate moderate moderate Sales volumes solid salt million tonnes . increase increase increase increase . moderate moderate moderate moderate – of which de-icing salt million tonnes . increase increase increase increase .

¹ The adjusted key indicators include the result from operating forecast hedges in the respective reporting period, which eliminates e ects from uctuations in the market value of the hedges as well as e ects from the exchange rate hedging of capital expenditure in Canadian dollars. Related e ects on deferred and cash taxes are also adjusted; tax rate for 2017: 29.9 % (2016: 29.3 %). ² Concerns cash investments as well as depreciation, amortisation and write-downs of tangible and intangible xed assets, taking reimbursement claims from claim management into account.

TAB: .. In the Annual Report, we estimated capital expenditure volume for the nancial year signi cantly below the pre- in % vious year (: . billion). The actual amount was . Change in revenues + . million and was thus in line with our forecast. With . – volume/structure-related + . million and . million, respectively, capital expenditure – price/pricing-related − . in both the Potash and Magnesium Products business unit as – currency-related − . well as in the Salt business unit was signi cantly lower than – consolidation-related + . in the previous year (: ,. million and . million, respectively). ‘Declaration on Corporate Governance’, page Potash and Magnesium Products business unit, greater product availability, especially of fertilizer specialties, at the integrated Werra plant along with the rst sales volumes from our new plant in Canada had a positive e ect on revenue growth. The Salt business unit also bene ted from higher sales vol- In the nancial year, revenues amounted to ,. mil- umes during the reporting period. In contrast, the unfavour- lion compared to , . million in the previous year. In the able development of exchange rates in both business units and

. REPORT ON ECONOMIC POSITION lower prices in the North American de-icing salt business had In the Salt business unit, de-icing salt contracts for the public an o setting e ect. A certain seasonality can generally be rec- sector in Europe, Canada and the United States are awarded ognised from the quarterly revenues; in terms of volume, the through public tenders. We generally participate in these ten- rst six months for the Potash and Magnesium Products busi- ders from the second quarter for the coming winter season, ness unit usually bene t from the start of spring fertilizing in but also, in some cases, for subsequent winter seasons. The Europe. The de-icing salt business is normally focused on the contracts include agreements on both prices and maximum rst and fourth quarter of a year. / TAB: 2.5.2, 2.5.3 volumes. If the contractually agreed volumes are subject to ‘Presentation of segments’, page ; uctuations permitted by law – depending on weather con- ‘Segment Reporting’ page ditions – these volumes cannot be classi ed as orders on hand. This also applies if volumes can be transferred to the Within the + , the Salt business unit once again following winter if demand is weak in a particular season. achieved the highest revenues in this nancial year, accounting for around of total revenues, and was followed by For the reasons stated above, the reporting of orders on hand the Potash and Magnesium Products business unit and Com- is not relevant for the assessment of short-term and medi- plementary Activities. / FIG: 2.5.3 um-term pro tability.

In terms of the regional distribution, the percentage of revenues in North America sank as a result of the lower price During the reporting period, the cost of sales rose from of de-icing salt in this region. Accordingly, the percentage in ,. million to , . million. In addition to the vol- Europe increased. We therefore continued to generate the ume-driven increase as a result of fewer working days lost largest share of revenues here, now accounting for around at the integrated Werra plant, cost of sales also increased as of revenues. Asia accounted for approximately of a result of the start of production at our Bethune mine. The total revenues. / FIG: 2.5.4 selling expenses amounted to . million in the reporting year compared to . million in the previous year; the increase was also the result of higher sales volumes. Most of our business is not covered by longer-term agree- ‘Notes’, page ments on xed volumes and prices. In addition to the impacts presented, the cost of materials, At less than , the share of orders on hand in relation to personnel expenses, energy and freight costs had a partic- revenues at the end of the year is low in the Potash and Mag- ularly strong e ect on the cost trend. At , . million, nesium Products business unit. The business is character- the cost of materials increased tangibly as a result of higher ised by long-term customer relationships as well as revolv- production volumes (: , . million). In , person- ing framework agreements with non-binding volume and nel expenses amounted to ,. million and were there- price indications. fore moderately higher than the amount of the previous year (: ,. million). This is primarily due to higher

TAB: ..

Q/ Q / Q/ Q/ % in € million

Potash and Magnesium Products business unit , . . . . . , . + . Salt business unit , . . . . . , . — Complementary activities . . . . . . − . Reconciliation . . . . . . − . K+S Group ,. , . . . , . , . + . Share of total revenues (%) — . . . . . —

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FIG: ..

in % Potash and Magnesium Products business unit . . Salt business unit . . Complementary Activities . .

FIG: ..

, in % Europe . . – of which Germany . . North America . . South America . . Asia . . Africa, Oceania . .

¹ TAB: ..

Q/ Q / Q/ Q/ % in € million Potash and Magnesium Products business unit . . . . . . + . Salt business unit . . . . . . + . Complementary activities . . . . . . − . Reconciliation ² − . − . − . − . − . − . — K+S Group . . . . . . + . Share of total EBITDA (%) — . . . . . —

¹ Adjusted by the depreciation and amortisation amount not recognised in pro t and loss in the context of own work capitalised. ² Expenses and income that cannot be allocated to business units and Complementary Activities are recorded separately and shown under ‘Reconciliation’.

accruals for performance-related remuneration, a one-time payment to our employees following the salary review and to the increase in personnel in Canada. Freight costs of . million (: . million) continued to bene- Earnings before interest, taxes, depreciation and amorti- t from a relatively low crude oil price level, yet remained sation , which were adjusted by the depreciation tangibly above the gure in the previous year, mainly due and amortisation amount not recognised in pro t and to volume. Energy costs were . million compared to loss in the context of own work capitalised ( . million), . million, with the increase due mainly to pricing and amounted to . million in the year under review and volume. were tangibly higher than the previous year’s amount (:

. REPORT ON ECONOMIC POSITION TAB: ..

Q/ Q / Q/ Q/ % in € million Potash and Magnesium Products business unit . . . . . . > Salt business unit . . . . . . + . Complementary activities . . . . . . + . Reconciliation ¹ − . − . − . − . − . − . — K+S Group . . . . . . + . Share of total EBIT I (%) — . . . . . —

¹ Expenses and income that cannot be allocated to business units and Complementary Activities are recorded separately and shown under ‘Reconciliation’.

TAB: ..

in € million Earnings after operating hedges EBIT II . . Income (−)/expenses (+) arising from changes in the fair market value of outstanding operating anticipatory hedges − . − . Neutralisation of changes in the fair value of operating anticipatory hedges recognised in prior periods − . − . Recognised income (−)/expenses (+) of currency hedging for capital expenditure in Canada − . − . Operating earnings (EBIT I) . . Depreciation and amortisation (+)/impairment losses (+)/reversals of impairment losses (−) on xed assets . . Depreciation and amortisation recognised directly in equity ¹ (−) − . − . EBITDA . .

¹ Depreciation and amortisation of assets which are used to produce other tangible xed assets. This depreciation and amortisation is capitalised as part of production costs and not recognised in pro t or loss.

. million). The main driver of this trend was in partic- reduced depreciation and amortisation by over mil- ular the higher sales volume of the Potash and Magnesium lion in the quarter under review. / TAB: 2.5.5 Products business unit. / TAB: 2.5.4 Operating pro t amounted to . million in Operating earnings of . million after operating the reporting year due to the e ects mentioned compared hedges were generated in (: . million). This to . million in the previous year; this represents an di erence between and of +. million (: increase of around . An expense of million mainly +. million) was largely the result of the positive change for forming provisions and adjusting existing provisions for in the fair market prices of outstanding hedging transactions the closure of the Sigmundshall potash mine planned for and the elimination of maturing transactions with negative was also re ected in in . contains depre- market values. / TAB: 2.5.6 ciation and amortisation including reductions of value and ‘Consolidated nancial statements’, page ; ‘Glossary’, page reversals (adjusted by the depreciation and amortisation amount not recognised in pro t and loss in the context of In accordance with s, the changes in fair value arising own work capitalised) of . million. These increased by from hedging transactions are reported in pro t or loss. around compared to the previous year (: . mil- includes all earnings from operating hedges, i.e. both lion), mainly due to additional capital expenditure in water reporting date-related measurement e ects and earnings protection and the deprecation applied on the new Bethune from realised operating hedging derivatives. Any e ects on site in Canada beginning in September . In contrast, the earnings arising from the hedging of underlying transac- adjustment of the plants’ useful lives performed on July

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tions relating to nancing that are not re ected in are Group earnings serve as a basis for calculating dividends in reported in the nancial result. accordance with our distribution policy and are determined as follows: / TAB: 2.5.7 The nancial result increased from −. million to −. Adjusted Group earnings after taxes amounted to . million. One important reason for the signi cant improve- million (: . million). Considering an adjusted pre- ment was, apart from the lower interest share of mining pro- tax result of . million, the adjusted Group tax rate was visions, in particular the positive development of the other extraordinarily high at . in the year under review, pri- nancial result from −. million to +. million. The marily due to the e ects of the tax reform, compared increase is mainly due to exchange rate e ects, as the weaker to . in the previous year. Adjusted earnings per share dollar resulted in higher income from the measurement amounted to . in the year under review compared to of nancial assets and nancial liabilities. . in the previous year. Here, too, . million no-par value shares were used as the basis for the calculation. In the year under review, Group earnings after taxes As of December , we held no shares of our own. At the amounted to . million (: . million). Tax end of the year, the total number of shares of the + expenses were . million (: . million) and outstanding therefore remained unchanged at . million included a non-recurring tax expense of . million in no-par value shares. / TAB: 2.5.8 relation to the tax reform. The anticipated income tax expense was calculated based on a domestic Group income tax rate of . : . . The increase over the previous year is due to higher trade tax assessment rates. ‘Notes’, page TAB: ..

In the year under review, earnings per share reached . : .. As in the previous year, an average number in € million of . million outstanding no-par value shares remained Group earnings . . unchanged as the basis for calculation. Income (−)/expenses (+) arising from changes in the fair value of outstanding operating anticipatory hedges − . − . Neutralisation of market uctuations in operating anticipatory hedges recognised in prior periods − . − . To enhance comparability, we also report adjusted Group Elimination of resulting earnings, which eliminate the e ects from operating forecast deferred and cash taxes . . Recognised income (−)/expenses hedges. Furthermore, the e ects on deferred and cash taxes (+) of currency hedging for capital resulting from this adjustment are calculated separately, expenditure in Canada − . − . however not the impacts of the tax reform. The adjusted Group earnings, adjusted . .

TAB: ..

Q/ Q / Q/ Q/ %

Earnings per share (€) . . . . . . + . Earnings per share, adjusted (€) ¹ . . . . . . + . Average number of shares (millions) . . . . . . —

. REPORT ON ECONOMIC POSITION FIG: ..

in %

. . . . . . . . . .

EBITDA margin EBIT I margin

that an equity provider would be entitled to notional returns of . : . . The margin key indicators also improved in the year under The average interest on debt before taxes was . : review: Earnings before interest, taxes, depreciation and . and is based on the peer group company rating and a amortisation of . million in resulted in corresponding spread applicable to the risk-free interest rate. an margin of around compared to in the After taxes, this results in an average cost of debt of . previous year; the margin reached almost : : .. The debt-equity ratio calculated according to . The return on revenues was once again around the peer group method is . : . . : . / FIG: 2.5.5 ‘De nitions of Key Financial Indicators’, page In total, this results in a weighted average cost of capital for the + of . : . after taxes. Based on an average gure for capital tied up of , . million (of The weighted average cost of capital rate for the + which operationally tied up: , . million) for , this is calculated from the aggregate of the expected returns of gives a cost of capital of . million (: . mil- equity providers in terms of their equity share as well as the lion). This corresponds to a cost of capital before taxes of interest on debt in respect of the share of interest-bearing . : . . debt in total capital according to the peer group method as per . As this is considered from an after-tax perspective, the average interest on debt is reduced by the corpo- Pro tability ratios improved slightly, due in particular to rate tax rate. favourable performance in both business units. In the year under review, the return on equity after taxes was . : The expected returns of equity providers is derived from a . with the return on total investments amounting to risk-free interest rate plus a risk premium. The cash value . : . . The return on capital employed of equivalent average of the yields of government bonds the + climbed to . in the year under review denominated in euros with a maturity of to years was compared to . in the previous year. This was due to the assumed as the risk-free interest rate according to the Svens- signi cant increase in , while a higher working capital son method; at the end of , this was . : . . commitment mainly because of Bethune had an o setting The risk premium has been calculated using a market risk e ect. In as well, the was therefore below our cost premium of . : . as well as the applicable of capital of . before taxes. As a result, the + beta factor of . derived from the peer group : . in was forced to record a negative value added of − . mil- relation to the benchmark index. This means lion for the past nancial year (: −. million). For

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these reasons, the Potash and Magnesium Products busi- TAB: .. ness unit achieved a of . , and the Salt business unit reached .. / TAB: 2.5.9, 2.5.10 in € million ‘De nitions of Key Financial Indicators’, page EBIT I . .

Intangible assets ¹ . . Tangible xed assets , . , . Investments in a liated companies and other equity interests . . - Operating xed assets , . , . Inventories . . + Trade receivables . . Other assets . . The primary goals of the nancial management of the + Trade payables − . − . include: Other liabilities − . − . + securing liquidity and controlling it e ciently across the Current provisions − . − . Group, Working capital adjustments ² . . + maintaining and optimising the nancial capability of the Working capital . . Group, and Capital employed , . , . + reducing nancial risks, including through the use of

ROCE = Operating earnings (EBIT I)/ nancial instruments. Capital employed (average for the year) . % . % – Potash and Magnesium Centralised cash management allows us to control liquidity Products business unit . % . % – Salt business unit . % . % and optimise the payment ows within the + . In – Complementary activities . % . % order to maintain our eligibility for nancing and to achieve

¹ Adjusted by the deferred tax included in goodwill from initial consolidation. a low cost of capital for borrowed capital and equity, we aim ² Adjusted by CTA asset surpluses, receivables and liabilities from investments, market values to achieve a capital structure in the long term which, not- of operating forecast hedging transactions, reimbursement claims and corresponding obligations as well as liabilities from nance lease. withstanding the current ‘non-investment grade’ rating, is

¹ TAB: ..

Key indicators in % Gross margin . . . . . EBITDA-margin . . . . . EBIT I margin . . . . . Return on revenues ² . . . . . Return on equity after taxes ² ³ . . . . . Return on total investment ² ³ . . . . . Return on capital employed ROCE . . . . . Weighted average cost of capital before taxes . . . . . Value added (€ million) . . . − . − .

¹ Information refers to the continuing operations of the K+S Group. ² The adjusted key indicators only include the pro t/(loss) from operating anticipatory hedges in the relevant reporting period reported in EBIT I, which eliminates e ects from changes in the fair value of the hedges as well as e ects from the exchange rate hedging of capital expenditure in Canadian dollars. Related e ects on deferred and cash taxes are also eliminated; tax rate for 2017: 29.9 % (2016: 29.3 %). ³ This information refers to continued and discontinued operations of the K+S Group.

. REPORT ON ECONOMIC POSITION orientated towards the standard criteria and indicators for ing on the reporting date. The latter can result in currency- an ‘investment grade’ rating. The capital structure is man- related uctuations in the equity of the + . Transla- aged on the basis of the following key gures: / TAB: 2.5.11 tion e ects from the conversion of dollars mainly occur ‘K+S on the Capital Market’, page in the Salt business unit at present and will continue to play an increasingly important role for Canadian dollar conver- Currency and interest rate management is performed cen- sion in the Potash and Magnesium Products business unit trally for all key Group companies. Derivative nancial instru- in future. ments are only entered into with top-rated banks and are spread across several banks and regularly monitored to Options and futures are used as part of transaction hedging reduce the risk of default. to secure the worst case, but at the same time, the opportunity is retained for some of the foreign currency positions to participate in exchange rate developments that are more Exchange rate uctuations can lead to the value of the ser- favourable for us. vice performed not matching the value of the consideration received because income and expenditure arise at di erent In , the price of the dollar realised in the Potash and times in di erent currencies (transaction risks). Exchange Magnesium Products business unit averaged . rate uctuations, especially in relation to the dollar, play a including costs : .. / TAB: 2.5.12 particular role for the Potash and Magnesium Products business unit regarding the level of earnings and receivables. Key Due to the commissioning of the Bethune site in Canada, net positions (net revenues in minus freight and capital noteworthy e ects will occur due to uctuations in the expenditure for other costs in ) are hedged using deriva- exchange rate between the Canadian dollar and the dol- tives, normally options and futures, in the context of trans- lar (transaction) or the euro (translation). action hedging. www.k-plus-s.com/bethune

Furthermore, currency e ects occur for subsidiaries whose Until the construction phase in Bethune was completed, functional currency is not the euro (translation risks): On hedging transactions were entered into against the euro for the one hand, the earnings of these companies determined these investments in Canadian dollar. Since the mine tran- in a foreign currency are translated into euros at average sitioned to regular operations, the required is procured rates and recognised in pro t or loss, and on the other hand, through a direct hedge against the from the sale of the their net assets are translated into euros at the rates prevail- products manufactured in Canada.

TAB: ..

Net debt/EBITDA . . . . . Net debt/equity (%) . . . . . Equity ratio (%) . . . . .

– TAB: ..

Q/ Q / Q/ Q/

EUR/USD exchange rate after premiums . . . . . . Average EUR/USD spot rate . . . . . .

. REPORT ON ECONOMIC POSITION TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

¹ TAB: ..

Q/ Q / Q/ Q/ % in € million Potash and Magnesium Products business unit , . . . . . . − . Salt business unit . . . . . . − . Complementary activities . . . . . . − . Other capital expenditure . . . . . . + . K+S Group , . . . . . . − . Share of capital expenditure (%) — . . . . . —

¹ Relates to cash investments in tangible and intangible xed assets taking account of reimbursement claims from additional claims management.

, , - FIG: .. in € million , , ,

. . . , . . . , . . . ,. . . . . .

Capital expenditure ¹ Depreciation/Amortisation ² Cash ow from operating activities

¹ Relates to cash investments in tangible and intangible xed assets taking account of reimbursement claims from additional claims management. ² Depreciation, amortisation and write-downs a ecting pro t or loss on tangible and intangible xed assets and investment properties, as well as amortisation of nancial assets.

in the previous year (: ,. million). The Bethune The + invested a total of . million in mine, the warehouse and loading facilities at the Vancouver (: ,. million). As expected, the decrease compared site and the rail connection were successfully put into opera- to the previous year was mainly due to the lower capital tion. The repair work necessitated by the damage in July expenditure for our Bethune mine, which was successfully has been completed. Additional rail cars have been produced commissioned in . / TAB: 2.5.13 and delivered. In addition, considerable investments have been made in measures for water protection in the Hesse- At the end of the year, there were capital expenditure obliga- Thuringia potash district, especially in the construction of the tions totalling . million related to ongoing investment new ¢ projects and obligations from operating leasing. / FIG: 2.5.6 which began operations on schedule at the beginning of . ‘Presentation of segments’, page ; ‘Non- nancial-Statement’, Environment, page We invested . million in the Potash and Magnesium Products business unit and therefore . million less than

. REPORT ON ECONOMIC POSITION TAB: ..

Q/ Q / Q/ Q/ % in € million Net cash ows from operating activities . . . − . − . . − . Net cash ows from/(used in) investing activities − , . − . − . − . − . − . + . Free cash ow − . . − . − . −. − . + .

Adjustment for purchases/sales of securities and other nancial investments − . − . . − . − . − . − . Adjusted free cash ow − . . − . − . − . − . + .

TAB: ..

in € million Equity , . , . ,. ,. , . Equity ratio (%) . . . . . Non-current debt , . ,. , . , . , . – of which provisions for pensions and similar obligations . . . . . – of which provisions for mining obligations . . . . , . Long-term provisions as share of total equity and liabilities (%) . . . . . Current debt , . . . , . , . – of which trade accounts payable . . . . . Financial liabilities ,. ,. , . , . , . Net nancial liabilities . . , . , . , . Net debt , . , . , . , . , . Debt/equity ratio I (%) . . . . . Debt/equity ratio II (%) . . . . . Working capital . . . . . Net cash ows from operating activities . . . . . Free cash ow − . . − . − . − . Net cash ows from/(used in) nancing activities . − . − . . .

Capital expenditure in the Salt business unit decreased to Net cash ows from operating activities in the year under . million in (: . million). The development review were . million (: . million). The of the next mining horizon at the Ojibway site in Canada as decrease was primarily the result of an increase in receiv- well as measures to eliminate the storm damage at the site ables, due in particular to the revenues from the mine in in Inagua, Bahamas, were among the most signi cant proj- Canada. / TAB: 2.5.14 ects in the year under review. In , net cash ows used in investing activities (adjusted for purchases/sales of securities and other nancial investments) The capital expenditure for Complementary Activities amounted to −. million (: −,. million). At decreased to . million (: . million). The majority −. million, the adjusted free cash ow (excluding pur- of this spending went toward retention investments in the chases/sales of securities and other nancial investments) Waste management and Recycling segment.

. REPORT ON ECONOMIC POSITION TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

showed a signi cant improvement compared to the previous and liabilities therefore increased to . as of December year (: −. million). : . . ‘Notes’, page Net cash ows from nancing activities in the year under review fell to . million (: . million). This was due to less outside nancing and higher repayment of principal. As of December , nancial liabilities amounted to ,. million (: , . million). The increase is mainly As of December , net cash and cash equivalents due to continued high levels of capital expenditure in the new amounted to . million ( December : . mil- Bethune potash plant in Canada. For this reason, bonds and lion). These consist of term deposit investments, money promissory notes with a total volume of million were market instruments and comparable securities with a resid- issued in . Further large parts of non-current debt relate ual term of less than three months. / TAB: 2.5.15 to the corporate bonds issued in June and December as well as the promissory notes issued in the summer of . As of December , of nancing resulted from equity and non-current debt, which in turn preferentially The non-current provisions of the + are mainly pro- consists of bond payables and provisions ( December : visions for mining obligations as well as for pensions and ). / FIG: 2.5.7 similar obligations.

The provisions for long-term mining obligations remained vir- Equity fell to ,. million in the year under review com- tually unchanged at ,. million (: . million). pared to ,. million in the previous year. Due to a pro- The average discount rate also remained at . : .. portionately higher increase in debt to a total of ,. million (: ,. million), the equity ratio declined to . The non-current provisions for pensions and similar obliga- : . . tions also decreased slightly to . million (: . million). The average weighted interest rate for pensions and similar obligations was . as of December : Non-current debt including long-term provisions amounted .. The actuarial valuation of pension provisions uses the to , . million as of December (: ,. mil- projected unit credit method in accordance with . lion). As a result, the proportion of non-current debt increased ‘Notes’, page to . of total equity and liabilities ( December : .), which was mainly due to higher long-term nancial - liabilities. We use operating leases for company vehicles, storage capac- Current debt was ,. million on the reporting date ities and equipment, for example; their scope has no mate- ( December : ,. million). Its share of total equity rial bearing on the economic position of the + .

FIG: .. in %

. . . . . .

Equity Non-current debt Current debt

. REPORT ON ECONOMIC POSITION FIG: ..

in %

. . . .

Non-current assents Current assents

TAB: ..

. . . . in € million Cash on hand and bank balances . . Non-current securities and other nancial investments . . Current securities and other nancial investments . . Financial liabilities − , . − , . Liabilities from nance leases − . − . Reimbursement claim Morton Salt bond . . Net nancial liabilities − , . − ,. Non-current provisions for pensions and similar obligations − . − . Non-current provisions for mining obligations − . − , . Net debt − ,. −, .

TAB: ..

in € million Tangible and intangible xed assets , . , . , . , . , . Financial assets, non-current securities and other nancial investments . . . . . Inventories . . . . . Trade receivables . . . . . Cash and cash equivalents, current securities and other nancial investments , . . . . .

particular due to the rst product sales from Bethune, trade receivables also increased to . million (: . million). Cash and cash equivalents, current and non-current Total assets of the + amounted to , . mil- securities and other nancial investments rose to . million as of December ( December : , . million ( December : . million) mainly as a result of lion). Tangible xed assets increased mainly as a result of the the issue of a corporate bond. Compared to the previous year, commissioning of the new Bethune potash plant in Canada the ratio of non-current to current assets remained at : to ,. million ( December : , . million). In : :. / FIG: 2.5.8

. REPORT ON ECONOMIC POSITION TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

The net debt of the + was , . million as of December ( December : ,. million). Net nancial liabilities, excluding non-current provisions, amounted to , . million as of the reporting date (: , . million). / TAB: 2.5.16, 2.5.17 ‘De nitions of Key Financial Indicators’, page In the year under review, revenues in the Potash and Mag- nesium Products business unit increased to ,. million as a result of higher volumes and tangibly exceeded those of In , we began funding the pension obligations of the the previous year (: ,. million). One signi cant rea- domestic companies through a contractual trust arrange- son for this was greater product availability at the integrated ment ( model). Such allocation of funds requires that Werra plant. After approval of the deep-well injection permit nancial resources are earmarked. The same applies to plan was granted in December and due to e cient wastewater assets which serve to fund pension obligations in Canada. management, only days of interruptions in production could Moreover, reinsurance arrangements are in place which are not be avoided in the rst quarter of – after some dis- also to be classi ed as plan assets in accordance with . posal-related stoppage days in the previous year. Furthermore, Obligations treated in this way are presented on the bal- the new Bethune mine was commissioned in the summer of ance sheet on a net basis in accordance with . In , . In total, the sales volumes in the Potash and Magnesium assets earmarked in connection with personnel obligations Products business unit increased to over . million tonnes amounted to . million compared to . million in (: . million tonnes). / FIG: 2.5.9 / TAB: 2.5.18, 2.5.19 the previous year. ‘Industry-speci c framework conditions,’ page ‘Notes’, note (), page

As of December , other nancial obligations totalled TAB: .. . million ( December : . million) and concern both obligations arising from as yet incomplete capital in % expenditure projects as well as from operating leases for fac- Change in revenues + . tory and o ce equipment (e.g. printers, photocopiers and – volume/structure-related + . peripherals). In addition, vehicles and storage capacities are – price/pricing-related − . leased. Due to the chosen contractual structures, these items – currency-related − . are not carried under xed assets. – consolidation-related + .

FIG: ..

in %

Europe . . – of which Germany . . North America . . South America . . Asia . . Africa, Oceania . .

. REPORT ON ECONOMIC POSITION TAB: ..

Q/ Q / Q/ Q/ % in € million Revenues , . . . . . , . + . – of which potassium chloride . . . . . . + . – of which fertilizer specialities . . . . . . + . – of which industrial products . . . . . . + . Earnings before interest, taxes, depreciation and amortisation EBITDA ¹ . . . . . . + . Operating earnings (EBIT I) . . . . . . >

¹ Adjusted by the depreciation and amortisation amount not recognised in pro t and loss in the context of own work capitalised.

, ¹ TAB: ..

Q/ Q / Q/ Q/ %

Revenues million ,. . . . . , . + . Europe million . . . . . , . + . Overseas US´ million . . . . . . + .

Sales volumes t million (product) . . . . . . + . Europe t million (product) . . . . . . + . Overseas t million (product) . . . . . . + .

Average price /t (product) . . . . . . + . Europe /t (product) . . . . . . − . Overseas US´/t (product) . . . . . . + .

¹ Revenues include prices both inclusive and exclusive of freight costs and, in the case of overseas revenues, are based on the respective EUR/USD spot rates. Hedging transactions were concluded for most of these sales revenues. Prices are also a ected by the relevant product mix and should therefore be taken as a rough indication only.

In the reporting year, around of revenues were gener- Greater product availability at the integrated Werra plant and ated in Europe. Of the remaining revenues, the majority was the resulting growth in sales volume and demand triggered a generated in Asia and South America. / TAB: 2.5.20 tangible recovery of revenues particularly in the area of fertilizer specialties to . million (: . million). Sales vol- In the nancial year, revenues for potassium chloride umes in Europe rose from . million tonnes to almost . million increased tangibly to . million in particular due to tonnes, and overseas sales of over . million tonnes were higher volume (: . million). Over the course of the also above the previous year’s value (: . million tonnes). year, the price of potassium chloride also increased in many major sales regions. An unfavourable currency trend had In the industrial products unit, revenues increased slightly an o setting e ect for +. The commissioning of the new to . million driven by higher volumes from . mil- Bethune potash plant in Canada made it possible to real- lion in the previous year. Sales volumes in Europe climbed to ise additional sales volumes overseas, and sales volume in . million tonnes (: . million tonnes) and remained Europe increased as well. In Europe, around . million tonnes almost stable overseas at . million tonnes. of potassium chloride were sold in the year under review (: . million tonnes), and around . million tonnes were sold in overseas (: . million tonnes). Earnings before interest, taxes, depreciation and amortisation of the business unit amounted to . million in the

. REPORT ON ECONOMIC POSITION TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

year under review and were therefore signi cantly higher than injection of saline wastewater until the end of was an the previous year’s gure (: . million). This is mainly important step in further securing higher production levels. attributable to the increases in volumes described above. A However, the permit is only for an annual injection volume of one-time payment to our employees and higher energy costs . million m³ – an amount lower than was applied for – and had an o setting e ect, reducing earnings. In addition, a corre- it also limits the daily injection volume to , m³ per day. In sponding provision was recognised in the nancial year for light of this, we implemented additional measures for waste- the closure of the Sigmundshall potash mine at the end of . water disposal in . In addition to the temporary storage of brine in the Springen mining eld (Thuringia), wastewater has been transported for discharging into the inactive The new Bethune mine was inaugurated on May and + Bergmannssegen-Hugo mine (Hanover region) and to handed over to the operations team. This marked the success- the Bernburg mine (Saxony-Anhalt) for shutting down and ful completion of the almost ve-year construction period. permanently securing a gas cavern. Furthermore, production Furthermore, the new transhipment and warehouse facility in was further stabilised by continuously expanding the basin the port of Vancouver (Port Moody) was opened on August capacities on site. After an interruption of days was neces- ; + mainly delivers to customers in South America and sary at the Hattorf site in the rst quarter of on account Asia from that facility. As last expected, around , tonnes of the low water levels in the Werra, production at the inte- were produced at the Bethune site in the nancial year grated Werra plant could operate without limitations after and the targeted annual capacity of two million tonnes was these measures were implemented. achieved as scheduled at the end of . ‘Non- nancial-Statement’, Environment, page

By opening the Bethune facility, + is now a potash supplier + commissioned the ¢ - with production sites on two continents. In the long term, at the Hattorf site on schedule on January the plant will have access to annual production capacity of as yet another milestone for water protection in the Werra. . million tonnes, and it represents a key addition to the The facility extracts around , tonnes of saleable product German production network, reduces production costs and from previously unusable brine, thus reducing the wastewater extends the average useful life of the + potash mines. Con- produced by the Werra plant each year by around . At an sequently, the new potash plant also bolsters the Company’s capital expenditure volume of million, this new facility competitiveness at an international level, which will bene t represents our largest individual project to date for water pro- the results of operations of the entire + . tection. For , no disposal-related production interruptions are anticipated at the integrated Werra plant. - The approval process started in for the expansion of tail- At the end of November , the Supervisory Board and ings pile capacity at the Hattorf site for the disposal of solid Board of Executive Directors of + production residues is progressing well. The approval process resolved to discontinue potash production at the Sigmunds- for the expansion of tailings pile capacity at the Wintershall hall mine (near Hanover) at the end of . The stocks are and Zielitz sites are also on schedule. dwindling, and the conditions for mining the commodity at ‘Risk and opportunity report’, page a depth of over , metres pushes people and technology to the limit. As a result of the greater e ort required to mine, + productivity at this site has fallen steadily over the past three years despite the strong commitment of the employees. Following intensive talks, + reached an agreement on a settlement with (Bund für Umwelt- und Naturschutz Deutschland e.V.). Assuming a normal water ow of the – Werra, + will renounce up to one million cubic meters of the deep-well injection volume approved for the next four Disposal of saline production wastewater is crucial to main- years, and will also not submit any new application for injec- taining potash production. For our integrated Werra plant, tion after the current approval expires at the end of . In the permit obtained in December to continue deep-well return, withdrew its complaint and the emergency

. REPORT ON ECONOMIC POSITION FIG: ..

, in % Europe . . – of which Germany . . North America . . South America . . Asia . . Africa, Oceania . .

petition based on this against the existing deep-well injec- ni cant reduction in prices. As a result, revenues for de-icing tion permit. salt remained stable at . million in over the previous year’s gure (: . million). In December , + also settled the long-standing disputes with the municipality of Gerstungen and successfully In the consumer products segment, including for exam- concluded the negotiations. Accordingly, + undertakes to ple table salts and water softening salts, revenues in the support the municipality in implementing an action plan for year under review amounted to . million, moder- optimising the drinking water supply. In return, the munici- ately down on the previous year’s level (: . mil- pality of Gerstungen withdraws the action and summary pro- lion). This development was largely attributable to volume ceedings against permits issued under water laws which it e ects, which were only partially compensated by positive had initiated and agrees to advocate for amicable settlement price e ects. Sales decreased from . million tonnes to of the proceedings against the discharge of saline wastewa- . million tonnes. / FIG: 2.5.10 / TAB: 2.5.21, 2.5.22 ter into the Werra river. Revenues for industrial salts, such as for the animal feed, By reaching these settlements, + achieves legal certainty crude oil/natural gas and pharmaceutical industry, remained for the existing deep-well injection permit and also, together stable in the past nancial year; revenues amounted to with the involved parties, lays the groundwork for further . million compared to . million in the previous cooperation. In future, any such disputes shall be cleared up year. Negative currency e ects were compensated by sig- amicably taking into account the parties’ mutual interests, ni cantly higher sales volumes in South America due to thus intensifying the dialogue. the use of salt for copper extraction. Overall, the business unit reported sales of . million tonnes in this segment, an increase of around on the previous year’s value (: . ’ million tonnes). In the Salt business unit, revenues in were ,. million (: ,. million) and thus at the level of the pre- Revenues for salt in food processing of . million were vious year. also in line with the previous year’s value (: . million). Sales volumes in amounted to just under . mil- The de-icing salt business in North America was subdued due lion tonnes (: . million tonnes). to a mild winter in and generally higher inventory levels of our customers. An improved European demand was Revenues of . million in the salt for chemical use busi- able to more than o set this development. At . million ness were signi cantly higher than . million in . tonnes, approximately more de-icing salt was sold over The increase was primarily due to higher sales volumes in the course of the year (: . million tonnes). The average North America, coupled with improved prices in Europe. price in this segment was around lower than the previous Sales volumes of . million tonnes in total were therefore year’s gure. The Midwest in particular saw the most sig-

. REPORT ON ECONOMIC POSITION TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

moderately higher than in the previous year (: . million tonnes). Earnings before interest, taxes, depreciation and amortisation were up slightly on the previous year at . At . million tonnes, sales volumes for solid salt were million (: . million). Despite the negative e ects of around above the gure for the previous year (: . Hurricane Irma which resulted at times in production stop- million tonnes). / TAB: 2.5.23 pages, limited transport capacities and increased costs at the Inagua (Bahamas) site, was slightly higher compared to the previous year.

TAB: .. Revenues of . million for Complementary Activities in % Change in revenues — in the year under review were at the level of the previous – volume/structure-related + . year (: . million). In accordance with , intra- – price/pricing-related − . group revenues deriving from services provided to +- – currency-related − . Group companies are not included in these gures. If these – consolidation-related — intra-group revenues are included, total revenues for the

TAB: ..

Q/ Q / Q/ Q/ % in € million Revenues , . . . . . , . — – of which de-icing salt . . . . . . + . – of which consumer products . . . . . . − . – of which industrial salt . . . . . . + . – of which food processing . . . . . . − . – of which salt for chemical use . . . . . . + . Earnings before interest, taxes, depreciation and amortisation EBITDA . . . . . . + . Operating earnings (EBIT I) . . . . . . + .

, ¹ TAB: ..

Q/ Q / Q/ Q/ %

De-icing salt Revenues million . . . . . . + . Sales volumes million t . . . . . . + . Average price /t . . . . . . − . Consumer products, food processing, industrial salt and salt for chemical use Revenues million ,. . . . . ,. — Sales volumes million t . . . . . . + . Average price /t . . . . . . − .

¹ Revenues include prices both inclusive and exclusive of freight costs. Prices are also a ected by exchange rate movements and the relevant product mix and should therefore be taken as a rough indication only.

. REPORT ON ECONOMIC POSITION FIG: ..

, in % Germany . . Rest of Europe . . Asia . . Africa/Oceania . .

TAB: ..

Q/ Q / Q/ Q/ % in € million Revenues . . . . . . − . – Waste Management and Recycling . . . . . . − . – K+S Transport GmbH . . . . . . − . – Animal Hygiene Products . . . . . . — – CFK (Trading) . . . . . . + . Earnings before interest, taxes, depreciation and amortisation EBITDA . . . . . . − . Operating earnings (EBIT I) . . . . . . + .

year under review amounted to . million (: . TAB: .. million). / FIG: 2.5.11 / TAB: 2.5.24, 2.5.25 in % Revenues fell from . million to . million in the Change in revenues − . Waste Management and Recycling segment in the year under – volume/structure-related − . review mainly as a result of lower volumes. At . million, – price/pricing-related + . third party revenues for + declined com- – currency-related — pared to the previous year (: . million). Revenues of – consolidation-related — . million for the Animal Hygiene Products segment in the year under review remained at the level of the previous year (: . million). The trading business recorded a volume-driven increase in revenues to . million (: . million). ¥ ¹ ’ Earnings before interest, taxes, depreciation and amortisa- The nancial year was characterised by strong demand tion for Complementary Activities amounted to for plant nutrients containing potash along with a higher . million in the year under review, almost on a par with price level for potassium chloride. Prices for fertilizer spe- the previous year (: . million). While of + cialties also showed the rst signs of recovery at the end of increased mainly as a result of higher volumes, the other segments reported a slight decline, primarily related to costs. ¹ as of 7 March 2018

. REPORT ON ECONOMIC POSITION TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

the year after higher product availability on the market had initially caused prices to fall slightly. The deep-well injection permit granted in December and our e cient wastewater management had a positive e ect on product availability at the integrated Werra plant. By commissioning our new Bethune potash plant, we were also able to increase our sales volume compared to the previous year. In contrast, the unfavourable development of exchange rates in both business units and lower prices in the North American de-icing salt business negatively impacted revenues. Earn- ings before interest, taxes, depreciation and amortisation amounted to . million and were thus tangibly better than the previous year (: . million). A non-recurring expense for recognising provisions and adjusting existing provisions for the closure of the Sigmunds- hall potash mine planned for was also re ected in earnings. At −. million, the adjusted free cash ow remained negative although it improved compared to the previous year (: −. million). As a result, the ratio of net debt to amounted to . times after the key g- ure had peaked at . times during the year (: . times).

. REPORT ON ECONOMIC POSITION .

As an international company, + regularly encounters a series of developments and events that may a ect the achievement of nancial and non- nancial targets. Planning and strategy constitute the starting point for the management of risks and opportunities at +.

We de ne risks as negative deviations and opportunities as tial can be reliably reduced by implementing e ective and positive deviations from possible future developments of a appropriate counter-measures, the focus of consideration forecast or target value. will be on the net likelihood of occurrence and the net loss potential a ecting the operating result.

With regard to their likelihood of occurrence and loss potential, risks are assessed internally for a short-, medium- and long-term observation period, i.e. for the coming , Risks and opportunities are generally identi ed in the and months from the time of identi cation or review. respective corporate departments using various tools. There The assessments for risks that have already been identi ed are a number of tools available for this purpose. In ongo- and the counter-measures developed and possibly imple- ing operations and project management, we take a close mented are continuously reviewed to ensure these are up look at analyses of the market and the competition, for to date and e ective; they are adjusted and reported in instance, evaluate a wide range of external information, the event of signi cant changes or if de ned thresholds the relevant revenue/cost elements and mining circum- are exceeded. stances, and observe risk indicators and success factors from the macroeconomic, industry-speci c, legal and polit- To assess the nancial impact, each opportunity is exam- ical environment. ined in terms of its feasibility, pro tability and any risks it ‘Declaration on Corporate Governance’, page may entail. Suitable development measures are speci cally sought, pursued and implemented in order to make e ective use of opportunities. The bene t potential only applies to the net perspective following implementation of appro- We have set up and documented speci c processes for man- priate development measures. The assessment periods are aging opportunities and risks. For each risk a gross assess- identical to those used for risk assessment. ment is carried out initially in which the likelihood of occurrence and the loss potential are quantitatively assessed in - terms of the nancial impact. The next step involves developing suitable counter-measures, considering alternative Identi ed risks can also have negative e ects on the risk scenarios. Our aim is to reduce the loss potential or the non- nancial aspects of environmental matters, social likelihood of occurrence. The decision whether to implement and employee-related matters, respect for human rights, the measures also takes account of the actual costs required. anti-corruption and bribery matters. Identi ed risks that In the process, risks can also be transferred to a third party. If the gross likelihood of occurrence and/or gross loss poten-

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materialise may give rise to reputational risks that are dif- Board of Executive Directors without delay in case of urgency. cult or impossible to quantify. The Supervisory Board is also briefed by the Board of Exec- ‘Non- nancial statement’, page utive Directors on a regular basis and in a timely manner, immediately in urgent cases. The non- nancial impact is identi ed and assessed based on our central sustainability analyses and using the dimensions of loss potential and likelihood of occurrence. Systems and concepts for managing developments or events that may a ect the above-mentioned aspects are described in our sustainability strategy in the non- nan- We aim to limit nancial risks (for example, exchange rate cial statement. risk, interest rate risk, default risk and liquidity risk) through special management. A centralised nance management system has been set up at + for this pur- Internal reporting on risks and opportunities is based on a pose. In addition, we manage our capital structure to safe- threshold concept. This involves continuous reporting on guard the nancing of business operations and investing risks and opportunities by the corporate departments to activities at all times and in the long term. the Board of Executive Directors if de ned thresholds for ‘Financial position’, page both the likelihood of occurrence and loss potential/ben- e t potential are exceeded. Information on whether a risk Our international business activities can give rise to cur- or an opportunity is included in the forecast or planning is rency-related revenue risks, which we counteract through also provided. hedging transactions as part of our currency management. Internal regulations determine the permissible hedging Risks and opportunities whose nancial impact is consid- strategies as well as hedging instruments, responsibilities, ered in the medium-term planning or forecast through cor- processes and control mechanisms. Other market risks may responding earnings discounts or premiums do not form arise from changes in interest rates. Similar regulations part of risk and opportunity reporting. Where risks could apply insofar as derivative nancial instruments are spe- have a signi cant or serious non- nancial impact on the ci cally used here for hedging purposes. Financial transac- aspects of environmental matters, social and employee-re- tions are conducted only with suitable partners. The suit- lated matters, respect for human rights, anti-corruption and ability of partners and compliance with position limits is bribery matters, we specify these in the description of the continuously reviewed through regular monitoring. A bal- relevant risk. anced distribution of the nancial derivatives used across various counterparties is implemented to further limit the Moreover, when determining the substantial general risk of default. assumptions for the medium-term planning or forecast (such ‘Notes’, page as volumes, revenues, costs, exchange rates, interest rates), the relevant risks and opportunities need to be considered in The instruments selected are used exclusively to secure the likeliest scenario. In addition, the negative/positive e ect underlying transactions, but are not used for trading or that certain deviations would have on the individual planning speculative purposes. Firstly, hedging transactions are con- parameters is required to be disclosed for particular planning cluded for existing underlying transactions. Our intention assumptions (‘sensitivities’). here is to largely avert exchange rate risks arising from recognised underlying transactions (usually receivables). The Board of Executive Directors and management contin- Secondly, we enter into hedging transactions for future ually have an overview of the current risk and opportunity business, which can be anticipated with a high level of exposure thanks to standardised reporting. Signi cant risks probability based on empirically reliable ndings (antici- that arise in the short term are communicated directly to the patory hedges).

. REPORT ON RISKS AND OPPORTUNITIES – + Signi cant nancial impact: > million + Moderate nancial impact: > – million Risks and opportunities that could a ect the results of operations, nancial position and net assets of + during the The relevant likelihood of occurrence is di erentiated as medium-term planning period (three years) and have not yet follows: been incorporated into the planning are listed and described + Likely: > in this section. The cumulative net loss/net bene t potential + Possible: – is distinguished as follows: + Unlikely: <

TAB: . .

Likelihood of occurrence Loss potential External and industry-speci c risks Macroeconomic developments Possible Signi cant Increased supply/reduced demand Possible Signi cant Weather-related uctuations in demand Possible Signi cant Additional weather-related costs Possible New Moderate New

Risks arising from changes in the legal environment Management planning in accordance with the Water Framework Directive or amendment, refusal or revocation by a court of o cial licences for the disposal of liquid and solid production residues Possible Signi cant More stringent requirements regarding the outdoor storage of de-icing salt in North America Possible Signi cant Requirement for collateral security under mining law Possible Moderate Tightening of existing regulations on the underground disposal of mining waste Possible Moderate

Operational risks Leveraging of synergies Possible New Moderate New Ramp-up phase at the Bethune site Possible New Moderate New Litigation risks and legal disputes Possible ↑ Moderate ↓ Energy costs and energy supply Possible Moderate Freight costs and availability of transport capacity Possible Moderate Production equipment Possible Moderate Carbon dioxide pockets in deposits Possible Moderate Damage due to rock bursts Unlikely Signi cant Water in ow Unlikely Signi cant Compliance Unlikely Signi cant Loss of suppliers and supply bottlenecks Unlikely Moderate Personnel Unlikely Moderate IT security Unlikely Moderate Reputation Unlikely New Moderate New

Financial risks Currency/exchange rate uctuations Possible Signi cant Change in the general interest rate level Possible Moderate Downgrading of the company rating Possible Moderate Liquidity Unlikely Signi cant Default on receivables from customers Unlikely Moderate Default of partners in nancial transactions Unlikely Moderate

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TAB: . .

Likelihood of occurrence Bene t potential External and industry-speci c opportunities Macroeconomic developments Possible Moderate Price increase/increase in demand Possible Moderate Weather-related uctuations in demand Possible Signi cant

Operational opportunities Market penetration, market development, expansion in capacity, cost optimisation, acquisitions and/or strategic partnerships, innovation Possible Moderate Leveraging of synergies Possible New Moderate New Ramp-up phase at the Bethune site Possible New Moderate New Litigation Possible New Moderate New Energy costs Possible ↑ Moderate

Financial opportunities Currency/exchange rate uctuations Possible Signi cant Change in the general interest rate level Possible Moderate Upgrading of the company rating Possible Moderate

We show changes in the assessment of risks and opportuni- their net likelihood of occurrence for an observation period ties compared with the previous year as follows: of three years, as well as the change in the assessment + Higher than in the previous year: ↑ compared with the previous year. Comparable opportuni- + Lower than in the previous year: ↓ ties from di erent segments are aggregated and reported. The opportunities listed are considered as potential posi- A change in the general conditions compared with the tive deviations compared with the assumptions made in the assumptions made in our medium-term planning may result medium-term planning (for example in respect of volumes, in a reassessment of risks and opportunities over time. The revenues, costs, exchange rates and interest rates). If no seg- results are then communicated accordingly in our interim ment is speci ed, the opportunities concern the entire + reporting. . / TAB: 2.6.2

The following table provides an overview of the risks with sig- ¥ - ni cant or moderate net loss potential with their net likelihood of occurrence for an observation period of three years, as well as the change in the assessment compared with the previous year. Comparable risks from di erent segments are aggre- Demand for potash and magnesium products is signi - gated and reported. The risks listed are considered as potential cantly in uenced by economic growth and the associ- negative deviations from the assumptions made in the medi- ated rising standards of living in the regions relevant to um-term planning (for example in respect of volumes, reve- us, trends in soft commodity prices and, in part, also by nues, costs, exchange rates and interest rates). If no segment political decisions in some consumer countries. Interna- is speci ed, the risks apply to the entire + . / TAB: 2.6.1 tional prices for potassium chloride continued to increase almost everywhere in , continuing the trend seen since mid-. Overall, we believe that agricultural prices should The following table provides an overview of the opportuni- continue to provide an incentive for farmers to increase ties with signi cant and moderate net bene t potential with their yield per hectare also through more intensive use of

. REPORT ON RISKS AND OPPORTUNITIES plant nutrients. There is a risk that growth in the emerging tal factors such as diseases in certain crops or the occur- economies will slow down contrary to expectations and/ rence of animal epidemics could likewise lead to a decline or that the sovereign debt crisis in the euro area will inten- in demand. Moreover, demand could also develop nega- sify again. If this should lead to agricultural prices falling tively due to deliberate purchasing restraint on the part of to a level that triggers uncertainty among farmers about our customers. their future income situation, it could adversely a ect their demand for plant nutrients. The impact on the Company Changes on the supply side could arise as a result of capacity depends on the duration and the intensity of the relevant expansion. New and existing producers are in the process of scenario. expanding their production capacity based on their forecasts of long-term growth in demand on the global potash market. The impact of the general economic situation on demand for de-icing and industrial salt as well as for consumer prod- Should the market not be ready to absorb additional vol- ucts and salt for food processing is of minor importance, umes entirely, this could increase competitive pressure since this business is largely independent of economic con- during a transitional period. Furthermore, producers could ditions. attempt to gain additional market share or regain lost market share by increasing supply within available capacity. A Changes in trade policy in particular are currently the decline in demand could also give rise to increased compet- focus of discussion. These are possible and are being con- itive pressure. tinuously monitored. The future e ects of the tax reform also carry certain uncertainties. The relevant impact cannot Major increases in capacity and its utilisation, increases in be assessed at present. Should the global economy develop supply from individual producers within available capacity as better than expected and growth prove to be higher than well as longer-term decreases in demand could substantially generally forecasted, especially in our main sales regions of a ect pricing and/or sales prospects. This could change the Europe, North America, Brazil and South East Asia, this could existing structure of the entire plant nutrient market, even lead to positive deviations from planning. resulting in the squeezing out of supply-side competition. Consequently, a drop in potash prices and/or saleable vol- We would respond to the e ects described above with umes cannot be ruled out. demand-oriented production management. The impact on the Company depends on the duration As +’s planning is based on the expectations stated in the and intensity of these events. Since the development of forecast report, the assessment of the future macroeconomic new potash capacity is very capital-intensive and takes situation is incorporated directly in the forecast for . many years to implement, there should be an incentive ‘Macroeconomic environment’, page for producers to obtain an attractive premium on the capital employed. We consider the long-term drivers to be still valid: demand for agricultural products and thus for plant nutrients depends on megatrends such as the grow- Particularly products from our Potash and Magnesium ing world population and a rising standard of living in the Products business unit could be threatened by consider- emerging economies. Plant nutrients, which increase yields able decreases in demand caused by external in uences. and enhance quality, will therefore also play a key role in future agricultural production. In terms of demand, macroeconomic factors such as unfavourable exchange rate developments or liquidity reduc- To increase competitiveness, we are working to further tion of farm businesses could a ect demand in individual improve our cost and organisational structures and expand sales regions. The same is true for political market reg- our speciality products. ulation, for example through regional subsidy cuts, the imposition of customs duties on fertilizers or the introduction of more restrictive fertilizer regulations. Environmen-

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We are responding to such uctuations with regional diversi- cation, demand-oriented production management and ex- Opportunities with signi cant positive e ects essentially lie ible working time models. Strategic inventories and exible in demand for potash and magnesium products. adjustment of production levels of de-icing salt enable us to meet spikes in demand even at short notice. In , the industry situation in the Potash and Magnesium Products business unit was characterised by strong demand. A sales risk for the Potash and Magnesium Products business International prices for potassium chloride continued to unit could arise as a result of the dependence on weather increase almost everywhere in , continuing the trend conditions. Prolonged cold and wet weather conditions seen since mid-. If farmers utilise any additional avail- during the spring season, which is particularly important for able uncultivated land or increase the intensity of existing Europe, could, for example, result in shifts in or even declining cultivation, this would require additional use of plant nutri- sales of plant nutrients. The same holds for weather phenom- ents and in future could result in global demand for potash ena such as El Niño or droughts, which could lead to signif- fertilizers rising faster than forecasted. In addition, the trend icant losses of yields for farmers in the a ected regions and towards balanced fertilisation involving the use of the main reduced use of plant nutrients. nutrients nitrogen , phosphorus and potassium in key sales regions such as India and China could lead to dis- - proportionate growth in demand for potash. In the Potash and Magnesium Products business unit, water The nancial impact of the associated increase in demand law framework conditions are particularly important at some depends to a large extent on the scale of the fertilizer price production sites for the unrestricted use of the available increase triggered as a result. Compared with the assump- technical production capacity. We believe that the commis- tions made in our medium-term planning, we consider pos- sioning of the new - itive price e ects with a moderate impact to be possible, in January will allow the Werra facility to but we do not anticipate a signi cant impact in the medi- dispose of all saline wastewater close to the site under the um-term owing to increasing competition. existing permits in a hydrological normal year. In a dry year, however, certain volumes of saline wastewater would have - to be disposed of remotely, generating additional costs for the transportation of this waste. In the Salt business unit, the weather in the de-icing salt regions of Europe and North America is of particular rel- For this reason, + developed additional measures for evance. Our planning is based on a rolling average for the wastewater disposal. We have obtained permits for tem- past ten years. An unusually hard winter in +’s de-icing porary storage of brine at the Springen mining eld salt regions could have a clearly positive e ect on sales vol- (Merkers mine) and for discharging process and tailings umes of de-icing salt caused by a weather-related increase pile water into the inactive + Bergmannssegen-Hugo in demand. This in turn could put pressure on inventory mine (Hanover region). Furthermore, another cavern at levels and subsequently result in increasing prices. Con- the underground gas storage facility in Bernburg is being versely, mild winters may lead to a weather-related decrease secured by ooding with saturated saline water from pot- in demand and thus considerably reduced sales volumes; ash production at the Werra plant. Additional measures this in turn could create large season-ending inventories of include continuous expansion of basin capacity on site to de-icing salt, putting pressure on tenders for the upcoming further increase the exibility of wastewater management. winter season. Both cases would have a moderate nan- Other measures are currently under review which from the cial impact on the development of the Company’s reve- current perspective would still need some time for imple- nues and earnings with respect to one year. Should such mentation. Technical issues need to be resolved and per- positive or negative weather conditions be repeated during mits obtained and subsequent adjustments to infrastruc- the medium-term period, signi cant opportunities or risks ture will be required. could arise.

. REPORT ON RISKS AND OPPORTUNITIES In March , the environment ministers of the federal states represented in the Weser River ( Weser) rati ed the detailed Salt management plan as well as a compre- A large number of licences and permits under public law are hensive Salt programme of measures for to in required for the exercise of our activities, particularly in the accordance with the Water Framework Directive. This areas of mining/extraction/processing and disposal of res- management plan forms the regulatory framework for the idues. The framework for the granting of these licences and period from to and will not have any direct adverse permits is rmly entrenched in European and national envi- e ect on potash production in the Hesse-Thuringia potash ronmental, water and mining law with respect to production district during this period. Further measures and target val- in Germany and Europe. We believe that the regulatory den- ues for the third management period from to will sity will increase further in the future. be reviewed and de ned in the coming years. If the aspects included in the management plan for the period from There is a risk for all activities requiring approval that third to (in particular the target values in bodies of water) parties will appeal against licences or permits after they have also appear in the plan for the period after without fur- been granted and that these will be revoked by courts. Fur- ther realizable and proportionate measures being available, thermore, extensions of existing licences and permits or new considerable risks relating to the granting and retention ones granted may be restricted in terms of time and scope, of operating licences, planning decisions approving public permanently amended or refused or further conditions may works and water permits cannot be ruled out. This could be attached. have a material adverse e ect on employment and on the region’s economic situation. Further measures for saline wastewater prevention and addi- , tional means of disposal will be examined and tested during the period from to . In the Potash and Magnesium Products business unit, both : solid residues and liquid residues (saline wastewater) arise In December , withdrew its complaint and the from both ongoing production and the tailings piles. The emergency petition based on this against the existing solid residues are either placed on our tailings piles or dis- deep well injection permit at the Hattorf plant dated posed of underground. Saline wastewater is discharged December . Furthermore, that month, as part of a set- into rivers in accordance with existing permits and some is tlement, the municipality of Gerstungen and + unan- injected into the dolomite layer. It is also used to secure old imously declared the application for annulment and the mines permanently. emergency petition against the above-mentioned permit settled at the Kassel administrative court. Ending the legal disputes with and the municipality of Gerstungen : will give + greater legal certainty as regards the existing The management plans based on the European Water Frame- deep well injection permit. work Directive and German water legislation impose signif- ‘Non- nancial-Statement’, Environment, page icant general conditions for the above-mentioned means of disposal of residues from the German sites. For the coming If, contrary to expectations, circumstances arise that could years, the management plans for the second management have an adverse e ect on usable groundwater resources, period of to of the individual river authorities are or if appeals against the existing permit were successful, relevant in this regard. this could result in the restriction or revocation of existing ‘Non- nancial-Statement’, Environment, page permits.

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This in turn could lead to production stoppages and/or nomic situation of the region in question. This could be major cuts in production at the a ected sites due to a lack avoided through the development of further safeguards of disposal options for saline wastewater (injection volumes) and through rescheduling, which would nevertheless lead and/or give rise to additional costs for transport to remote to signi cant cost increases. alternative disposal sites. We believe that the decisions by the authorities will endure and that potash production Positive developments can be reported concerning the at the Werra plant is possible under these circumstances. approval process for the expansion of tailings pile capacity The results of a groundwater model also con rm that at the Hattorf site, which started in . Based on the con- adverse e ects from the injection to the groundwater can cept, which has been enhanced further to reduce the envi- be excluded. A revocation is still possible if compliance with ronmental impact, the licensing authorities have issued a the threshold values at two wells of a potable water supply positive overall forecast as regards the approvability. Accord- facility is not ensured. ingly, the application for ‘early commencement’ for surface clearance was approved on November . We are there- + continues to work hard on measures to reduce saline fore con dent of being able to complete the approval process wastewater and on alternative disposal options. These are such that this has no material e ects on production. More- designed to ensure the disposal of production and tailings over, the approval process for the expansion of tailings pile pile wastewater into the Werra river largely through the dis- capacity at the Wintershall and Zielitz sites is on schedule. charge permit. The aim of these measures is also to maintain added value and safeguard the associated jobs over the long term by means of further substantial investments, as well as to reduce the impact on the Werra and Weser rivers and thus ensure the future viability of the potash plants in the Hesse- In the course of our comprehensive and continuous monitor- Thuringia potash district. ing of the ground and surface water in the surrounding area of the tailings piles, an increase in heavy metal values was identi ed. However, in terms of their composition and concentration, these cannot be classi ed as tailings pile material. ‘Non- nancial-Statement’, Environment, page If licences and permits for the enlargement of tailings piles are revoked or necessary projects for the expansion of tailings According to the current state of knowledge, a greater num- piles are not approved or are only approved subject to unrea- ber of decisive factors with locally varying degrees of mani- sonably high requirements, it would not be possible to dispose festation and interaction could play a role in the emergence of the solid residues. We consider the complete refusal or the of this phenomenon. Therefore, + has, in collaboration with withdrawal of all existing licences and permits for the expan- external research institutions, adopted a fundamental inves- sion of tailings piles to be unlikely, as the permits are compati- tigation regarding the circumstances (comprehensive survey, ble with the legal and statutory framework. Furthermore, they supplementary monitoring measures and construction of represent the state of the art and there is governmental and additional measuring points) that extends across the loca- widespread political support for the preservation of potash tions. With the approval of the authorities, + has, with mining in Germany in the federal states that are relevant to us. due regard to conditions at the individual locations, devel- ‘Non- nancial-Statement’, Environment, page oped respective concepts (including collecting, draining and cleaning of the emerging spring water at the Hattorf location Individual licences and permits for the necessary expan- as well as drainage works and wells or the removal of topsoil sion of tailings piles might not be granted in certain cir- with heavy metal mobilisation potential) to encounter the cumstances or might be approved only to a limited extent. described phenomenon. Individual measures have already In the worst case, this would result in an adjustment of been implemented. production levels and possibly the closure of the a ected sites with considerable negative economic repercussions The potential impact of increased amounts of heavy met- both for the Company and for the employment and eco- als and trace matters on the subjects of protection (partic-

. REPORT ON RISKS AND OPPORTUNITIES ularly groundwater and drinking water protection areas) costs for the underground disposal of mining waste, as it located in the sphere of in uence of the tailings piles are may then only be possible to store waste with mineral prop- therefore virtually excluded through suitable technical erties underground. This would have the e ect of driving up measures with due regard to general conditions at the indi- running disposal costs as well as the costs required to close vidual locations. down mining sites.

Individual licences and permits for the necessary expansion of tailings piles at the Werra and Zielitz locations may be granted in certain circumstances with the imposing of further safety measures. However, it is unlikely that licenses and permits will be refused. , , , , - - , In all the segments, we use our growth potential to increase In the past, there have been no special environmental pro- our market share by generating higher sales volumes from tection requirements regarding the outdoor storage of de-ic- our existing customer base and/or by acquiring new cus- ing salt in North America. However, more and more indi- tomers. Furthermore, we are reviewing whether it would be vidual states and local authorities are now moving towards possible to enter new sales regions with our products. We de ning mandatory standards in this regard. As a result of also want to use our market-related opportunities by invest- stricter local requirements, comprehensive measures may be ing in new products and business approaches. The enter- required, including indoor storage. prise value should be continually increased in the process. This will require external growth, plus an organisational In conjunction with environment experts we continue to reorientation. In addition, possibilities to optimise costs (e.g. work on environmental audits to determine whether owned by way of process digitalisation at the underground mines and leased warehouse locations comply with the new local or by increasing the e ciency of machinery, processes and requirements. organisational structures) will be closely reviewed on an ongoing basis. Through the systematic implementation of the growth ini- The requirement to furnish collateral security under mining tiatives, de ned in detail in our corporate and sustainability law is subject to the professional judgement of the acting strategy, we want to successfully use the opportunities pre- authorities; at the present time, existing collateral security sented and achieve sustainable, pro table growth. is usually provided through the formation of corresponding provisions as well as through comfort letters or group guarantees. If additional security had to be furnished, this + assumes the leveraging of synergies will increase earn- could narrow the Company’s nancial scope, especially if ings by at least million per year from the end of . such security were required to be provided through bank Signi cant deviations from projected e ects represent both guarantees or a deposit of funds. a risk and an opportunity.

- Our new potash mine at the Bethune site in Canada was The Closed Cycle and Waste Management Law (KrWG) and opened on May after nearly ve years in construction. the German Federal General Mining Ordinance (ABBergV) The initial tonnes of potash were produced in mid-June . must be complied with for underground waste disposal. The The desired annualized production capacity of two million existing regulations currently vary from one federal state to tonnes has been achieved. When a site of this size is being another. A tightening of the regulations could result in higher built, negative e ects in the transition to regular operation

. REPORT ON RISKS AND OPPORTUNITIES TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

(e. g. goods that temporarily do not conform to speci ca- To limit this risk, we have reduced the quantities of natural tions) cannot be ruled out completely, which may result in gas required for our potash and salt production in Europe by goods being reworked or lead to price reductions. Conversely, using steam from alternative fuel heating systems. More- planned qualitative and quantitative objectives may also be over, we are pursuing a hedging strategy worldwide that surpassed. allows us to secure attractive prices for purchasing natural gas in the medium term by concluding xed supply Through systematic cost and quality management we try to agreements. limit negative e ects and increase earnings contributions. + is exposed to risks arising from legal disputes or legal Our total costs are in uenced by freight costs to a consider- proceedings in which we are either currently involved or that able degree. A signi cant proportion of our products in terms could arise in the future. of volume needs to be transported to the customer over long distances in some cases. Reduced availability of freight capac- At the present time, it cannot be ruled out that + might ity could result in higher costs. Furthermore, considerable be involved in lawsuits and arbitration proceedings with additional costs are incurred when crude oil prices rise. The suppliers in connection with supplies and services procured heavy reliance of our business operations on transport like- in connection with the investment project for building the wise makes us highly dependent on the relevant infrastruc- new Bethune potash mine. For our part, we also intend to ture facilities such as ports, roads, railway lines and loading assert reimbursement claims against contracting parties facilities. A breakdown or a bottleneck could limit the sales involved in the project. The outcome of potential legal dis- prospects and thus production. putes, which can take an extended period of time to clarify, is very di cult to predict. This could result in cash out ows We make every e ort to reduce cost increases. or in ows that negatively or positively a ect the site’s prof- itability. The impact in terms of liquidity and earnings varies signi cantly. Through the formation of a claim management The production facilities of the + are character- team, a continuous claim management process is ensured ised by a high degree of complexity and e ciency. As a with the goal of processing +’s existing receivables from result of operational and accident risks to which our facil- suppliers and recovery claims to achieve the best possible ities, production plants, storage and loading facilities are outcome. exposed, business interruptions may occur and serious personal injury or damage to property or the environment may All other process risks are described in the context of the rel- also be caused. evant risk. Where possible and economically viable, suitable insurance cover is taken out with the aim of limiting these risks. Tailored The energy costs incurred by + are primarily determined training and sta development measures are also designed based on its consumption of natural gas. This applies in vary- to increase occupational safety. ing degrees to all corporate departments. Energy prices are often subject to strong uctuations. Sharp rises in energy prices compared with the projected price level constitute a Carbon dioxide pockets constitute a latent potential danger price risk and cannot be ruled out in the future. A positive in certain mines. Despite our comprehensive safety meas- development of energy costs compared with projected costs ures, carbon dioxide could escape from these pockets in an provides an opportunity for +. uncontrolled manner. Consequently, there are risks of pro- ‘Non- nancial-Statement’, Environment, page duction cuts/stoppages as well as of personal injury and damage to property. Underground extraction is therefore always carried out in compliance with speci c safety guidelines in case of escapes of ª.

. REPORT ON RISKS AND OPPORTUNITIES ognised by the Company. + could sustain damage to its There is the speci c risk at active and inactive mining sites of assets or reputation as a result. a sudden subsidence of the earth’s surface over a large area ‘Declaration on Corporate Governance’, page that could, in certain circumstances, be severe (rock burst). If a rock burst occurs, in addition to the partial or complete We have established a Group-wide compliance man- loss of the mine and damage to facilities, it could also result agement system that helps to raise awareness among in personal injury or death and in considerable damage to employees and prevent breaches of compliance, includ- the property of third parties. ing through training in the main areas of risk (for example, anti-trust law and competition law, corruption and Our professional dimensioning of the underground safety money laundering). pillars based on comprehensive research serves to secure the surface, safeguard the stability of the mine workings over a longer period of time and therefore prevent rock bursts. After the closure of a location, preservation meas- The number of suppliers for raw materials, consumables ures are carried out, for which appropriate provisions have and supplies as well as technical equipment and spare parts been recognised. Continuous monitoring of the mine work- speci c to mining is limited. In spite of counter-measures ings aims to provide timely indications of whether addi- in place, supply bottlenecks, non-delivery or delivery boy- tional measures for the protection of the mine workings cotts, over which we only have very little in uence or no in u- and the prevention of damage resulting from mining are ence at all, could result in limited availability of these mate- necessary. rials and thus lead to a signi cant increase in costs or have adverse e ects on production. Hydrogeological risks generally exist in underground mining We will mitigate these procurement risks through market operations. There are risks in connection with shafts that analyses, targeted supplier selection and evaluation, long- cut through water-bearing rock shafts and in saline deposits term supply agreements, clearly de ned quality standards in rock strata. Hydrogeological risks are limited through the and state-of-the-art purchasing methods. extensive safeguards we have put in place; however, these risks could result in signi cant uncontrollable damage cul- minating in the total loss of the mine. In this case, material Competition for quali ed managers and specialists is erce in adverse e ects on employment, the region’s economic situa- all of the regions in which we operate. The loss of employees tion and damage to the environment and to property would in key positions could constitute a risk. Moreover, we could be virtually unavoidable. be facing demographic challenges in the future, especially in Europe and North America. This increases the risk that suit- Extensive exploration work is carried out by means of seis- able applicants for vacancies will not be found or that it will mology, drilling and ground-penetrating radar in order to take considerable time and e ort to nd them. secure the mines. Preservation of protective layers and adequate dimensioning of safety pillars ensure maximum mine The + wants to be an attractive employer not only safety. Ongoing maintenance work on the shafts ensures for entry-level sta , but also for quali ed managers and spe- that the risk of groundwater in ows can normally be virtu- cialists. By o ering practical support for the next generation ally ruled out. Because the top of a shaft is in a high position, of employees as well as tailored training and further educa- surface water is not expected to gain access to mine work- tion measures and by promoting high achievers and employ- ings even if ooding occurs. ees showing potential, the + still succeeds in permanently motivating employees and in retaining quali ed managers and specialists for the long term. In addition, our There is a general risk that members of management/super- focus on diversity in our workforce enables us to unlock all visory bodies or employees of + companies may potential in the labour market. By adopting this strategy and breach laws, internal regulations or regulatory standards rec- increasing cooperation with selected higher education insti-

. REPORT ON RISKS AND OPPORTUNITIES TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

tutions, we o er quali ed managers and specialists promis- other national currencies (such as Canadian dollars, Chilean ing career prospects. pesos and pounds sterling). Our earnings are therefore ‘Employees’, page exposed to exchange rate uctuations. This may lead to the value of the service performed not matching the value of the consideration received in transactions, because income Our systems support almost all corporate functions in and expenditure are incurred at di erent times in di erent large measure. The security risk lies primarily in loss of currencies. Exchange rate uctuations, especially in the the availability, integrity, con dentiality and authenticity of euro/ dollar exchange rate, have so far primarily a ected data due to external attacks (for example, hackers, viruses) the Potash and Magnesium Products business unit, partic- and internal risks (for example, technical failure, sabotage). ularly in relation to the level of earnings and receivables. If this risk were to materialise, serious interruptions to busi- Due to the commissioning of the Bethune site in Canada ness could result. However, we consider a prolonged fail- and the resulting costs incurred in Canadian dollars, uc- ure of the systems to be unlikely due to the precautions tuations in the exchange rate between the Canadian dol- we take. lar and the dollar or the euro are also of considerable signi cance. We limit such risk by having independent experts continu- ‘Financial position’, page ; ‘Notes’, page ously review the scope and e ectiveness of our wide-rang- ing security measures. Insurance to cover claims from sys- We use derivative nancial instruments to counter exchange tem failures has been taken out for cyber-attacks with a loss rate risks arising from transactions. Signi cant net positions amount of million. are hedged using derivatives, normally options and futures, in the context of transaction hedging. These ensure a ‘worst case’ exchange rate. On the basis of revenue and cost plan- The materialisation of any risk may have a nancial impact ning as well as expected capital expenditure, the volumes to for the Company that is di cult or impossible to quantify be hedged are determined and updated continuously using depending on the perception among the general public of a safety margins, so as to avoid excess hedging or hedging loss of image. This includes, in particular, risks with material shortfalls. adverse e ects on the non- nancial aspects of environmental matters, social and employee-related matters, respect for human rights, anti-corruption and bribery matters, as well Furthermore, currency e ects arise in relation to subsid- as failure to achieve management-related targets de ned iaries whose functional currency is not the euro, since the by the Company. earnings of these companies calculated in a foreign currency are translated into euros at average rates and rec- We counter such developments with open, timely communi- ognised in net pro t or loss. However, the net assets of cation to our stakeholders. these companies are translated into euros at the rates prevailing on the reporting date. This conversion system could result in currency-related uctuations in the earnings and equity of +. These translation e ects arise both in the Pot- ash and Magnesium Products business unit and in the Salt business unit and are not hedged. A currency risk results from transactions which are not e ected in the currency of our Group reporting (the euro). In Conversely, favourable exchange rate developments may the case of this risk, we make a distinction between transac- have a positive impact on earnings and equity, thus present- tion and translation risks. ing an opportunity.

A signi cant proportion of + revenues is in dollars. In addition to this, revenues are also generated in Both risks and opportunities arise as a result of changes in the general interest rate level. On the one hand, changes

. REPORT ON RISKS AND OPPORTUNITIES in market interest rates have an e ect on future interest payments for variable-rate liabilities, as well as on interest A liquidity risk entails the failure to procure the nancial income for variable-rate investments. The market values means needed to meet payment obligations or the inabil- of nancial instruments are also a ected. However, due to ity to do so in a timely manner. External factors, especially a the current nancing structure, only a moderate impact is general nancial crisis, could result in it not being possible to expected. replace credit lines or bonds on acceptable commercial terms should the need arise. In this case, a risk associated with pro- The + is required to report non-current provi- curing liquidity would also arise. sions, particularly from mining obligations and pensions, at the present value of the future anticipated expenditure. For this reason, the principal objective of our liquidity man- A change in the market interest rates compared with the agement activities is to ensure the ability to make payments preceding reporting date could therefore lead to changes at any given time. The liquidity requirement is determined in the discount rates on the current reporting date and through our liquidity planning and must be met with cash thus to an adjustment of non-current provisions. A one-o on hand and bank balances, committed credit lines and other adjustment by half a percentage point would have a mod- nancial instruments. erate impact on the balance sheet and the earnings of the ‘Notes’, Note () ‘Financial liabilities’, page + . ‘Notes’, page Liquidity is managed by the central treasury department using cash pooling systems. As of December , the avail- Most of the pension obligations are covered by plan assets able liquidity amounted to , . million and consisted of resulting from xed-income securities, shares and other investments and cash on hand and bank balances as well as investments. Decreasing income from these investments the unused portion of our syndicated credit line running until may have an unfavourable e ect on the fair value of the plan mid-. The available liquidity was therefore signi cantly assets. We mitigate the risk of uctuations in the fair value of higher than our target minimum reserve of million. In the plan assets through balanced asset allocation and con- the case of investments, we pursue the goal of optimising tinuous analysis of the investment risks. the income earned from cash on hand and bank balances at low risk. Ratings are used to assess the creditworthiness of compa- We maintain comprehensive business relationships with nies and are normally issued by external rating agencies. many customers. If one or more major customer/s is/are The rating provides indications of the ability of companies not in a position to ful l their contractual payment obliga- to pay, particularly for credit institutions and institutional tions towards us, this could result in corresponding losses for investors. It cannot be ruled out that a rating agency might us, which in turn could have an adverse e ect on the nan- change +’s credit rating. cial position of +. ‘Financial position’, page Risks arising from payment default are covered across the A downgrade could impact negatively on the costs of nanc- Group mainly through credit insurance. We only waive a ing for +. Conversely, an upgrade in the credit rating – and security against non-payment following a critical review of hence an improvement in the Company’s rating – has a pos- the customer relationship and express approval. itive e ect on the costs and availability of the Company’s nancing options. The Company hopes to regain an investment grade rating in ; at the present time, we believe that an upgrade before is unlikely. Default risks also exist with regard to partners with which we have concluded hedging transactions, credit lines exist or We hedge this risk through forward-looking nancing meas- money was invested. A potential failure of a bank or another ures. partner could have an adverse e ect on the nancial position

. REPORT ON RISKS AND OPPORTUNITIES TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

of +. There is no particular dependency on any individual employees. The ruling on May upheld the Regional Court’s nancial institutions. decision. In light of these events, advantages gained by the Company are ruled out.

Leveraging of synergies as well as legal disputes was aug- mented. Reputational risks were analysed and incorporated. Due to the current price level for energy, we estimate that The assessments made in relation to the likelihood of occur- opportunities to reduce energy costs compared with fore- rence and/or nancial impact of the risks and opportunities casts may arise again. reported in prior periods are shown in tables .. and .. on pages and . Risks in the Potash and Magnesium Products business unit ¥ in relation to the disposal of liquid and solid production : ’ residues continue to be signi cant on account of the reg- ¥ ulatory conditions. The risk of a refusal or revocation by a court of o cial permits for the disposal of solid production residues and the disposal of liquid residues remains within the probability of risk of between and . The agree- The risk and opportunity position is assessed below based on ments reached for deep-well injection are creating greater the ndings of our risk and opportunity management system legal certainty and leading to a substantial reduction within in conjunction with the planning, management and monitor- this range. ing systems in place.

The risk of a weather-related production cut at the Hattorf Taking into account the likelihood of occurrence and the site no longer exists. We believe that the commissioning of nancial impact of each of the risks discussed, and based on the new - the ndings of our medium-term planning, at the present will allow the Werra facility to dispose of all saline time the Board of Executive Directors does not expect any wastewater close to the site under the existing permits in future development where the risks, either individually or a hydrological normal year. Due to the implementation of in conjunction with other risks, could have a lasting adverse further disposal alternatives, we no longer anticipate pro- e ect on the results of operations, nancial position and duction cuts, even in a dry year. net assets of +, jeopardising its continued existence as a going concern. +’s risk position has improved due to pos- The new potash mine at the Bethune site was opened on itive developments in the potash market and the environ- May after nearly ve years in construction. The initial mental regulations, notwithstanding the cost pressure for tonnes of potash were produced in mid-June . The risks environmental and additional disposal measures. and opportunities arising from operation of the new Bethune site have been integrated into the existing system. The opportunities open to + in the medium term were analysed as a whole versus the previous year and provide The litigation risk regarding advantages gained from alleged a positive outlook. We are con dent that +’s operating crimes concerning Gerstungen through injection in the years strength provides a solid foundation for our future business – no longer exists. In a ruling on May , the growth and that the resources necessary to take advantage Thuringia Higher Regional Court in Jena rejected an appeal of the opportunities are available. by the Meiningen Public Prosecutor’s O ce. The subject of this appeal was the decision by the Meiningen Regional Court Overall, the risk and opportunity position has improved com- in September to not to open a lawsuit against active pared with the previous year but remains on high attention and former members of the Board of Executive Directors and owing to the general conditions in the Potash and Magne- sium Products business unit.

. REPORT ON RISKS AND OPPORTUNITIES .

We expect to see a tangible rise in revenues in ; earnings before interest, taxes, depreciation and amortisation should increase signi cantly compared to . The main reasons for these developments are the higher production volumes assumed at the Bethune site and the expected absence of wastewater-related production stoppages at the Werra plant.

The imminent exit from the European Union is not expected to have an appreciable impact on the future nan- The following details on the future macroeconomic situation cial position and results of operations of +. The share of the are based on forecasts by the United Kingdom in the total revenues of the + is in and the . the low single-digit percentage range. / TAB: 2.7.1

The forecasts a growth rate of . in global gross domestic product for . Experts assume that the economic upturn in the industrialised nations will continue in view of the most recent e ects of scal policy measures and the sustained expansive mon- In future, too, it will only be possible to meet the increasing etary policy. Many emerging market countries continued to demand for soft commodities in light of a constantly growing see economic growth rebound, a trend that many experts global population, changing eating habits and limited arable think is likely to continue in . The growth in commodity land by intensifying fertilizer application. A balanced use of prices remains slow. In combination with the restrained wage mineral plant nutrients is crucial here and should lead to at growth and only minimal core price gains, that is currently least stable demand in as well. Even the continued low keeping in ation rates low in many industrialised nations. If price level of agricultural products should continue to give the price increases should pick up speed more quickly than farmers an ongoing su cient incentive to increase yield per currently expected, this could soon be re ected in rising price hectare by a balanced or even greater use of fertilizers in levels. This could likely weaken the real economy. case of de ciency.

TAB: ..

e in %; in real terms Germany + . + . + . + . + . European Union (–) + . + . + . + . + . World + . + . + . + . + .

Source: IMF

. REPORT ON EXPECTED DEVELOPMENTS TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

For , we expect global potash demand to remain at + Furthermore, cuts in production due to a lack of disposal least stable with the year under review (: around options are not expected in in longer periods of low million tonnes including around million tonnes of potas- water level in the Werra river, as it was the case in the rst sium sulphate and potash grades with a lower mineral con- months of . tent). Prices for fertilizer specialties are showing initial indications of recovery and the price environment for standard potash should continue to recover, at least in the rst + The winter weather that prevailed prior to the preparation six months of . date, primarily in North America, and slightly increasing sales of non de-icing salts should lead to tangibly higher sales volumes overall (: . million tonnes). In the de-icing salt segment, the winter season started better overall than the weak previous year. This was + mainly attributable to good wintery weather conditions in + Average exchange rate for the year of . : North America. ..

North America is among the leading sales regions for the consumer products and food processing salt business. In the nancial year, we expect revenues of the + Demand in this area is expected to remain more or less to be tangibly higher (: , million) than the stable in . Consumption at the previous year’s level is previous year and earnings before interest, taxes, depreci- expected in Europe and South America as well. In the long ation and amortisation to be signi cantly higher term, however, a global trend of increased use of more pre- (: . million). Particularly in the Potash and Mag- mium salt such as sea salt or kosher salt as well as low-so- nesium Products business unit, the increase in production dium products is discernible. volumes at the Bethune site in Canada and the expected absence of wastewater-related production stoppages at In the salt for chemical use and industrial salt segments, the Werra plant should result in a signi cant recovery in demand is expected to rise slightly in the medium term. earnings (: . million). In the Salt business unit, The global economic upturn should increase the demand we assume that a tangible increase in sales volumes and for salt for industrial applications signi cantly. Aided by the improvements in the product mix should result in a tangi- aging population, demand for pharmaceutical salts should ble increase in (: . million). The adjusted continue to support moderate growth rates. In South Amer- Group earnings after taxes should also increase signi cantly ica, demand for salt for the extraction of copper from the compared to the same period in the previous year (: mined raw ore (copper leaching) is expected to grow in million). as well.

¥ ¥ The expected capital expenditure volume of the + Our assessment for full-year is mainly based on the fol- for should remain signi cantly below the level of the lowing assumptions: previous year as a result of the completed construction of the Canadian Bethune production site (: . million). The adjusted free cash ow should therefore show a signi cant + Robust demand for potassium chloride, especially in the improvement compared to the previous year (: −. second half of , has resulted in further price increases million), however it is expected to remain slightly negative. in the overseas markets. For the full-year , we expect The return on capital employed should increase signi - demand to remain at least stable and, along with that, cantly due to signi cantly higher earnings and despite more prices to rise at least in the short term. capital being tied up : . . On a business unit level,

. REPORT ON EXPECTED DEVELOPMENTS should therefore also see a signi cant improvement (: Potash and Magnesium Products . ; Salt . ).

Our earnings-based dividend policy is essentially re ected in a payout ratio of to of adjusted Group earnings after taxes. Consequently, the Board of Executive Directors and the Supervisory Board intend to propose a dividend of . per share (previous year: . per share) to the Annual General Meeting on May ; this corresponds to a payout ratio of (previous year: ) of the adjusted Group earnings after taxes.

¥ +

The Board of Executive Directors of + views optimistically and expects that of the + will be signi cantly higher than that of the previous year. In particular, the new Bethune potash plant in Canada and greater production security at the Werra site in connection with further price increases should contribute to a signi cant increase in earnings in the Potash and Magnesium Products business unit. This represents the tangible reward of the hard work in recent months and years. The Salt business unit had a promising start to . + was once again able to help the local authorities and consumers around the world to guarantee road safety in winter. Demand was strong at the beginning of the year, particularly in the North Amer- ican de-icing salt regions. The Board of Executive Directors also expects further growth in the non-de-icing salt business in . Overall, the + ’s adjusted free cash ow should improve signi cantly, even though it is expected to remain slightly negative.

. REPORT ON EXPECTED DEVELOPMENTS TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

. +

The management report of + and view of the course of business can be found on pages – the Group management report have been combined for and – . the nancial year. The annual nancial statements of + in accordance with the and the combined Management Report are published simultaneously in the German Federal Gazette (Bundesanzeiger). At . million, revenues of + were . million below the level in the previous year ( . million). Revenues in the Animal Hygiene Products segments slightly surpassed the level of the previous year + ; revenues in the segment fell by . Other rev- The Declaration on Corporate Governance in accordance with enues increased by . million to . million (: Section f of the German Commercial Code is shown . million), mainly due to an increase in intragroup billing on page . of services rendered to Group companies. / TAB: 2.8.1

Other operating income increased signi cantly by . million to . million (: . million). This was mainly attrib- - utable to higher income from the measurement of and ¥ items compared to the previous year. ¥ Other operating expenses decreased from . million to . million. This is due mainly to the reduction in exchange rate losses and lower taxes for previous years. Information in accordance with Section a of the Ger- man Commercial Code and the explanatory report of Income from investments declined from . million the Board of Executive Directors can be found on page . in to . million in . In the previous year, income from investments included the investments in + ¢ , + and + . Higher earnings from the investment in + of − . million in to . million in The information to be disclosed in accordance with Section had an o setting e ect. Additional income from investments a of the German Commercial Code is provided resulted from the transfer of pro t from + on page . at . million (: . million) and + - at . million (: . million).

, - Other interest and similar income increased from . million , to . million mainly on account of higher interest income , from Group companies and higher interest income for additional tax charges. Information on business operations, corporate strategy, Interest and similar expenses increased from . million corporate management and monitoring as well as an over- to . million mainly due to higher interest expenses

. K+S AKTIENGESELLSCHAFT EXPLANATIONS BASED ON THE GERMAN COMMERCIAL CODE HGB + ¹ TAB: . .

in € million Revenues . . Cost of sales . . Gross pro t . − . Sales and distribution, general and administrative expenses and research costs . . Other operating income and expenses − . . Income from investments, net . . Interest income − . − . Write-downs of long-term nancial assets and securities classi ed as current assets . . Expenses from transfer of losses . — Earnings before tax . − . Income tax expense . . Earnings for the period . − . Withdrawals from other reserves — . Accumulated pro t . .

¹ A detailed income statement is included in the 2017 Annual Financial Statements of K+S Aktiengesellschaft.

+ – TAB: . .

. . . . in € million Intangible assets . . Tangible xed assets . . Financial investments , . , . Fixed assets ,. ,. Inventories . . Receivables and other assets . . Securities . . Cash on hand and bank balances . . Current assets . . Prepaid expenses . . ASSETS , . ,.

caused by the bond issued in the spring of , higher a liated companies. Consequently, xed assets accounted expenses for interest on provisions and higher interest for of total assets : . Overall, the total assets expenses payable to Group companies. were up . million to , . million in . Current assets decreased by . million to . million (: Income after taxes declined by . million to −. million . million). Receivables from a liated companies declined (: . million). from . million in the previous year to . million. Lower receivables from pro t transfer were the main reason for this decrease. / TAB: 2.8.2, 2.8.3 Equity declined by . million to ,. million com- Fixed assets increased by . million to ,. million pared to the previous year (: ,. million). The (: , . million) due essentially to capital injections to equity ratio was as of the reporting date : .

. K+S AKTIENGESELLSCHAFT EXPLANATIONS BASED ON THE GERMAN COMMERCIAL CODE HGB TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

+ – TAB: . .

. . . . in € million Issued capital . . Share premium . . Retained earnings , . , . Accumulated pro t . . Equity ,. ,. Provisions for pensions and similar obligations . . Tax provisions . . Other provisions . . Provisions . . Liabilities , . , . Prepaid expenses — . EQUITY AND LIABILITIES , . ,.

Liabilities to a liated companies of , . million (: May to use the accumulated pro t of + - ,. million) primarily consisted of cash pooling liabil- from the nancial year as presented in ities and loan liabilities. table .. . / TAB: 2.8.4

Fixed assets increased by . million to ,. million in the nancial year (: ,. million). This increase is mainly attributable to the issue of a bond in the spring of . Current liabilities to banks and liabilities to a liated compa- The information in accordance with Section of the nies developed in the opposite direction. As of the report- German Stock Corporation Act (Aktiengesetz) is included in ing date, the company reported provisions of . million the Notes to the annual nancial statements of + with a predominantly long-term character. The company’s . nancing came to a considerable extent from funds available in the long term.

Detailed information about the research and development activities of the + , which relate primarily to holding An annual average of employees (: employees) companies with operating activities, can be found on page . were employed at + , of whom were trainees (: trainees). The increase in personnel is mainly due to reassignments of human resources from other business units to + . ¹ TAB: . .

in € million Dividend per share (€) . . + reports accumulated pro t of Total dividend payment taking into account 191,400,000 no-par value . million for the nancial year (: . million). bearer shares eligible for dividend . . Allocation to other reserves . — The Board of Executive Directors and the Supervisory Accumulated pro t . . Board intend to propose to the Annual General Meeting on ¹ Amounts are rounded.

. K+S AKTIENGESELLSCHAFT EXPLANATIONS BASED ON THE GERMAN COMMERCIAL CODE HGB

The business development of + is essentially subject to the same risks and opportunities as the + . + participates in the risks and opportunities of its shareholdings and subsidiaries according to its respective interest share. More information can be found in the ‘Risk and Opportunity Report’ on page .

The description of the internal monitoring system with regard to the accounting process of + (Section of the German Commercial Code can be found on page .

The ‘Report on Post-balance Sheet Date Events’ for the + and + can be found on page .

The earnings performance of + depends to a large extent on the performance of its subsidiaries. The expected business development for the + can be found in the ‘Report on Expected Develop- ments’ on page .

. K+S AKTIENGESELLSCHAFT EXPLANATIONS BASED ON THE GERMAN COMMERCIAL CODE HGB TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

To the best of our knowledge, and in accordance with the applicable principles for nancial reporting, the consolidated nancial statements and the annual nancial statements of + give a true and fair view of the assets, nancial and earnings position of the Group and + , and the combined Management Report includes a fair review of the development and performance of the business and the position of the Group and + , together with a description of the principal opportunities and risks associated with the expected development of the Group and + .

Kassel, March

This report contains facts and forecasts that relate to the future development of the + and its companies. The forecasts are estimates that we have made on the basis of all the information available to us at this time. Should the assumptions underlying these forecasts prove incorrect or should certain risks – such as those referred to in the Risk Report – materialise, actual developments and results may deviate from current expectations. The Company assumes no obligation to update the statements contained in this Man- agement Report, save for the making of such disclosures as required by law.

. RESPONSIBILITY STATEMENT FROM THE LEGAL REPRESENTATIVES OF K+S AKTIENGESELLSCHAFT .

This report explains the main features of the remuneration In order to harmonise the interests of shareholders to a great systems used for the Board of Executive Directors and the extent with those of the Board of Executive Directors, part of Supervisory Board of + , together with the bonus is determined on the basis of the return on the speci c design of the individual components. the total investment of the Group. Moreover, the personal performance of the members of the Board of Executive Direc- tors is taken into consideration when calculating bonuses; these are paid in the following nancial year. ¥ The structure of the annual remuneration in a normal year provides for a xed remuneration of and variable, The criteria for the appropriateness of remuneration include, short-term performance-related components of . In in particular, the responsibilities and performance of the Board turn, of the variable component is linked to com- of Executive Directors, a comparison with senior executives pany performance, i. e. to the return on total investment worldwide and the total workforce, as well as the economic achieved; the remaining is dependent on personal per- situation, the success and future prospects of the Company, formance. Individual targets are de ned for each member of considering comparable remuneration of their peer group. the Board of Executive Directors. Variable remuneration of is reached if the return on total investment achieved The remuneration for the members of the Board of Execu- reaches at least of the respective capital cost rate and, tive Directors consists of annual components and those with secondly, personal performance has been assessed as . a long-term incentive character. The annual remuneration Remuneration based on the return on total investment is components include both those not related to performance capped at a ceiling of percentage points above the mini- ( xed) and performance-related components (variable). The mum return. The target achievement ranges for the two vari- components not related to performance consist of xed able remuneration components are between and around remuneration as well as non-cash remuneration and other . Moreover, fringe bene ts have also been capped since bene t packages; the bonus is the performance-related . part. There is also a variable remuneration component, based on key indicators, with a long-term incentive character. The Chairman of the Board of Executive Directors receives . The members of the Board of Executive Directors also have times the remuneration of an ordinary member of the Board pension commitments. of Executive Directors.

In , the Supervisory Board fundamentally rede ned the Income can also be drawn from a long-term incentive pro- remuneration system for the Board of Executive Directors. gramme based on key indicators as a variable component of The new system takes e ect on January . In the follow- remuneration with a long-term incentive and risk character. ing, the old system according to which the Board of Execu- The system is based on a multi-year assessment in accor- tive Directors was remunerated in will be described rst. dance with the value contributions achieved. The Company’s success is thereby determined on the basis of two four-year periods. The value contribution is derived as follows: Fixed, basic remuneration not related to performance is paid monthly. Additionally, the members of the Board of Executive Operating earnings Directors receive fringe bene ts, in particular contributions + interest income for the nancial year to pension, health and long-term care insurance as well as – capital costs (before taxes) for the nancial year non-cash remuneration, which consists mainly of the use of = value contribution company cars.

. REMUNERATION REPORT TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

FIG: . .

Value contributions in € million Reference period Performance period year − year − year − year − year year year year

∅ ∅

Beginning of End of programme programme

– FIG: . . in € million ¹ Result

Ø Ø − Di erence = − million LTI − − — — — Disbursement² = . Ø not yet complete (Ø to date: − 202)

LTI — − − — — — Ø not yet complete (Ø to date: − 417)

LTI — — − − — — — Ø not yet complete (Ø to date: − 437)

LTI — — — − − — — —

Reference period Performance period

¹ In 2011, the cap limit was reached on account of outstanding value contributions. ² For an ordinary member of the Board of Executive directors, payment is made in April of the year following the end of the programme.

A cap for the value contribution is set at ± million per The average of the four value contributions for the reference nancial year. period is calculated at the beginning of an period and the average of the four value contributions for the performance Two four-year periods (a ‘reference period’ and a ‘perfor- period at the end of the programme. The di erence between mance period’) are compared to determine the result for an these average value contributions is re ected as a percentage tranche. The reference period covers the four years prior on a scale from − million to + million. If the value to commencement of the respective , while the perfor- contributions in the reference and performance period are mance period covers the four years of the respective term. the same, of the is paid out. In this case, the vari- The following diagram shows the programme periods: able component of remuneration with a long-term incentive / FIG: 2.10.1 character for an ordinary member of the Board of Executive

. REMUNERATION REPORT Directors is ,. In the case of underperformance, the that shall have essentially forward-looking characteristics. To payment decreases on a straight-line basis to in line with ensure this, the Supervisory Board fundamentally rede ned the percentage deviation. In the case of outperformance, the the remuneration of the Board of Executive Directors. payment increases accordingly up to an upper limit of = ,. The Chairman of the Board of Executive Direc- In addition to xed remuneration and the previous fringe tors receives . times that of an ordinary member of the bene ts which are paid out monthly, the Board of Execu- Board of Executive Directors. tive Directors also continues to receive performance-related remuneration components. Payment is made in April of the year following the end of the programme. In the event of termination of an employment The performance-related remuneration components still con- contract or reaching retirement age, a discounted pro-rata sist of two parts. The short-term incentive relates to the payment for all current tranches is generally made in April ongoing nancial year and, at , comprises the smaller of the following year. / FIG: 2.10.2 part of variable remuneration. The long-term incentive comprises the more signi cant part, at , and is made up The remuneration system applicable to the Board of Execu- of two equally weighted components. One is linked to value tive Directors was approved by a large majority at the added and the second is linked to share price perfor- Annual General Meeting and highlighted by - mance . Both components are measured over a three- , the organisation of European shareholder associ- year period. ations, as a particularly shareholder-friendly remuneration system. Going forward, is measured against reaching the from the annual plan. If the gure from the annual A sample calculation of the annual remuneration of a mem- plan approved by the Supervisory Board is reached, the ber of the Board of Executive Directors is shown below. base amount is . If the actual exceeds or falls / TAB: 2.10.1 short of the planned , the percentage rate of target achievement increases or decreases in a linear fashion by the same percentage. Maximum target achievement is According to the new recommendation of the German Cor- and minimal achievement is . porate Governance Code (Deutscher Corporate Governance Kodex, ) paragraph .. of , variable compo- In addition, after the nancial year in question has ended, nents should generally have a multi-year assessment basis the Supervisory Board sets a performance factor for the

TAB: . .

Target achievement Target achievement Maximum % % target achievement in € Fixed remuneration: 40 % , , , Bonus: 60 % , ¹ ² , ³ – of which Company performance: 80 % , , – of which individual target achievement: 20 % , , Annual remuneration , , , ,, LTI PROGRAMME , , Total remuneration , , , , ,

¹ Return on total investment =^ minimum return; individual target achievement =^ 100 %. ² Return on total investment =^ 0 %; individual target achievement =^ 0 %. ³ Return on total investment ≥ minimum return +21 percentage points; individual target achievement =^ around 150 %. Di erence in average value contributions between reference and performance periods = € 0 million =^ 100%. Di erence in average value contributions between reference and performance periods ≤ € −200 million =^ 0 %. Di erence in average value contributions between reference and performance periods ≥ € +200 million =^ 200 %.

. REMUNERATION REPORT TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

- FIG: . .

Reference period Performance period MDAX ¹ MDAX ²

K+ S share ¹ K+ S share ²

Beginning of programme End of programme

¹ Average for the stock market year. ² Average of stock market year 2020, basis for performance comparison to 2017.

entire team of executive directors. This serves as a multi- or decreases in a linear fashion by the same percentage. plier on the base amount of and ranges from . to .. Maximum target achievement is and minimal achieve- The result of the performance factor depends on achievement is . / FIG: 2.10.3 ment of annual targets de ned between the Supervisory Board and the entire Board of Executive Directors. For the In the new composition of the Board of Executive Directors, years from to , the speci c target is reaching the the Chairman of the Board of Executive Directors receives milestones of the strategy, e. g. reducing the . times the remuneration of an ordinary member of the net debt/ ratio. Board of Executive Directors.

Sample calculation for applying the performance factor: Details of the individual remuneration of the Board of ful lment level, e. g. x performance factor, e. g. Executive Directors in the nancial year are shown in . = the tables below. The di erence between the ‘Allowances granted’ and ‘In ow’ tables merely relates to the variable To determine I, before the performance period begins, the remuneration elements. The ‘Allowances granted’ table Supervisory Board as a rule uses the medium-term planning shows amounts that have been promised in the event of to de ne value creation for each year of the performance target achievement. The ‘In ow’ table, on the other period. The planned value added corresponds to the arith- hand, shows amounts that will be paid in the following year metical mean of the three value contribution gures of the based on the targets that have actually been achieved. performance period. After the performance period has ended, / TAB: 2.10.2, 2.10.3 actual value creation is compared to planned value creation. If actual and plan value creation are the same, target achieve- Mark Roberts receives his remuneration in euros. In order to ment is . If the actual value contribution exceeds or falls limit exchange rate risks, a clause has been agreed according short of the planned value contribution, the percentage rate to which exchange rate o setting takes place at the end of of target achievement increases or decreases in a linear fash- each year, in the event that the actual rate of the respective ion by the same percentage. Maximum target achievement transfers di ers from the rate upon signing the contract is and minimal achievement is . . = . by more than in individual cases or by more than on average for the whole year. is based on the + share price performance (incl. dividends paid) compared to the performance of the ¥ (Per- Therefore, the salary of the Board of Executive Directors in formance Index). If the + share price performance is equal the previous year on average was . times (: . times) to the performance of the ¥ during the reference period, that of senior executives worldwide and . times (: target achievement is . If the price performance of the . times) the total workforce. The decrease in the ratio of + share exceeds or falls short of the performance of the the Board of Executive Directors to the senior executives is ¥, the percentage rate of target achievement increases attributable to the fact that the Board of Executive Direc-

. REMUNERATION REPORT TAB: . .

Norbert Steiner Dr Burkhard Lohr Chairman of the Board of Executive Chairman of the Board of Executive Directors until / Thorsten Boeckers Directors since / Member of the Board of CFO Mark Roberts ² Dr Thomas Nöcker Dr Otto Lose Member of the Board of Executive Executive Directors Member of the Board of Executive Member of the Board of Executive Member of the Board of Executive Member of the Board of Executive Directors since / from / to / Directors since / Directors since / Directors since / Directors from to / (min.) (max.) (min.) (max.) ³ (min.) (max.) (min.) (max.) (min.) (max.) (min.) (max.) in € thousand Fixed remuneration . . . . . . . . — . . . . . . . . . . . — . . . Fringe bene ts ¹ . . . . . . . . — . . . . . . . . . . . — . . . Total . . . . . . . . — . . . . . . . . . . . — . . . Single-year variable . . . , . , . . . . — . . . . . . . . . . . — . . . Multi-year variable remuneration . . . . . . . . — . . . . . . . . . . . — . . . – LTI . . . . . . . . — . . . . . . . . . . . — . . . Total , . ,. . , . , . . . , . — . . . ,. ,. . ,. , . , . . , . — , . . ,. – Service costs . . . . . . . . — . . . . . . . . . . . — . . . Total remuneration , . ,. ,. , . , . , . . ,. — , . . , . , . , . , . ,. ,. ,. . ,. — , . , . , .

¹ Fringe bene ts are capped at € 75,000. ³ Assumption of the remaining periods for the LTI entitlements that Mr Boeckers received as the Head of Investor Relations of K+S Aktiengesellschaft. ² Before exchange rate o setting: A US dollar rate is stipulated for the translation of remuneration. Since payments are initially converted using current rates, o setting may be required after the As the Chairman of the Board of Executive Directors, Mr Steiner receives 1.7 times the remuneration of an ordinary member. end of the year.

TAB: . .

Dr Burkhard Lohr Norbert Steiner Chairman of the Board of Executive Chairman of the Board of Executive Thorsten Boeckers Directors since / Directors until / CFO Mark Roberts Dr Thomas Nöcker Dr Otto Lose ³ Member of the Board of Executive Member of the Board of Executive Member of the Board of Executive Member of the Board of Executive Member of the Board of Executive Member of the Board of Executive Directors since / Directors from / to / Directors since / Directors since / Directors since / Directors from to / ² ² in € thousand Fixed remuneration . . . . . — . . . . . — Fringe bene ts . . . . . — . . . . . — Total . . . . . — . . . . . — Single-year variable . . . . . — . . . . . — Multi-year variable remuneration . . . . . — . . . . — — – LTI – – – – – — – – – – — — Other — — — — — — — — — — — — Total 1 ,. . . ,. . — . . . . . — – Pension-related expenses . . . . . — . . . . . — Total remuneration ,. , . . , . , . — ,. ,. , . , . , . —

¹ Total corresponds to disclosures in accordance with Section 314 of the German Commercial Code HGB and German Accounting Standard DRS 17. ³ Dr Otto Lose resigned from the Board of Executive Directors with e ect from 28 November 2017; his employment contract ended on 31 December 2017. In addition to the reported overall remuneration ² Incl. exchange rate o setting. as a member of the Board of Executive Directors, Dr Lose also received the following remuneration for the remaining term of his original employment contract from 29 November 2017 to 31 December 2019: For December 2017, xed remuneration amounting to € 35.0 thousand, fringe bene ts of € 2.3 thousand, one year of variable remuneration of €29.2 thousand. For the period beginning on 1 January 2018: xed remuneration of € 840.0 thousand, one year of variable remuneration of € 860.0 thousand, lump-sum compensation from the long-term incentive programme for the periods 2017 – 2019, 2018 – 2019 and 2019 of € 100.0 thousand, pension-related expenses of € 1,270.1 thousand. As the Chairman of the Board of Executive Directors, Mr Steiner receives 1.7 times the remuneration of an ordinary member.

. REMUNERATION REPORT TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

TAB: . .

. REMUNERATION REPORT tors agreed to payment of the short-term incentive The pension modules are calculated on the basis of of the for the nancial year to the workforce in order to o set xed annual remuneration of the respective member of the a strongly lower variable remuneration, while the Board of Board of Executive Directors. The annual total pension under Executive Directors was remunerated for the lower gures this modular system has an upper ceiling in order to avoid dis- actually achieved. proportionate pensions in the case of long-standing appointments (> years). The amount is calculated in accordance with Norbert Steiner’s term of o ce ended on May . actuarial principles and set aside for retirement; the factors for Dr Burkhard Lohr, the Company’s former Chief Financial O - the creation of the modules for the members of the Board cer, took over as Chief Executive O cer from May . of Executive Directors are between . and ., depend- Thorsten Boeckers has held the post of since this date. ing on their age. These factors decline with increasing age. The individual pension modules earned during the respective At its meeting on November , the Supervisory Board nancial years are totalled and, when the insured event occurs, resolved to advance the implementation of the new Group the respective member of the Board of Executive Directors or, strategy in future with a reduced, restructured Board of Exec- if applicable, his survivors, receive the bene t to which they utive Directors, which will be supported by an extended man- are entitled. The upper limit for the Chairman of the Board of agement team. The reduced management team will be com- Executive Directors is ,, and for an ordinary member posed of Dr Burkhard Lohr, the Company’s Chief Executive of the Board of Executive Directors it is ,. The gures O cer, along with Chief Financial O cer Thorsten Boeckers are reviewed in a three-year cycle and adjusted if necessary. and Mark Roberts, who holds the new position of Chief Oper- ating O cer. Pension bene ts are adjusted in line with changes in the ‘consumer price index for Germany’ only on payment. Enti- Dr Thomas Nöcker will enter retirement on September tlements arising from modules earned are non-forfeitable. and hand over the areas for which he was responsible A xed euro- dollar translation rate has been agreed for to his colleagues in the Board of Executive Directors before Mark Roberts. his appointment expires on August . If the term of o ce of a member of the Board of Executive In light of the new corporate structure as part of Directors ends, the retirement pension starts upon reaching , Dr Otto Lose stepped down from the Board of Execu- the age of unless it is to be paid on the basis of an occupa- tive Directors with e ect from November and left the tional or general disability or as a surviving dependent’s pen- Company on December . The contractual entitlements sion in the event of death. In the event of an occupational or for the time period between January and December general disability of a member of the Board of Executive Direc- have been compensated and are outlined in footnote tors prior to reaching pension age, the respective member of the in ow table. receives a disability pension commensurate with the pension modules created up to the time the disability occurs. If inva- The total remuneration of the Board of Executive Directors lidity occurs before the age of , modules are ctitiously cre- related to ve members, three of whom were in o ce for the ated on the basis of a minimum value for the years missing up whole year. In the previous year, the Board of Executive Direc- to the age of . In the event of the death of an active or for- tors consisted of ve members, of whom four were in o ce mer member of the Board of Executive Directors, the surviving for the whole year. spouse receives , each orphan and each half-orphan of the bene t. The maximum amount for bene t awarded As shown in gure .. on page , the value contributions to surviving dependents must not exceed of the pension generated in the four-year performance period were below payment. If this amount is reached, the bene t is reduced pro- those generated in the reference period. Consequently, the portionately. If a member of the Board of Executive Directors programme had no positive value. retires at the age of , entitlements can already be claimed in accordance with the pension commitment at that time. The pensions of the active members of the Board of Execu- In , the following amounts were allocated to pension tive Directors are based on a modular system, i.e. a pension provisions for members of the Board of Executive Directors: module is created for each year of service as a member of the / TAB: 2.10.4 Board of Executive Directors.

. REMUNERATION REPORT TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

¹ TAB: . . Current value Current value Age as of . Pension expense ² as of . in € thousand Dr Burkhard Lohr , . . , . , . . , . Norbert Steiner , . . ,. (member until 11 May 2017) , . . , . Thorsten Boeckers ³ . . . (member until 12 May 2017) — — — Dr Thomas Nöcker ,. . , . , . . ,. Mark Roberts , . . , . ,. . , . Dr Otto Lose . . . (member from 1 January to 28 November 2017) — — — Dr Andreas Radmacher — — — (member until 29 February 2016) , . . , . Total ,. , . , . ,. ,. ,.

¹ Disclosures in accordance with IFRS. ² Including interest expense. ³ Includes pension entitlements from the time as Head of Investor Relations of K+S Aktiengesellschaft. Dr Otto Lose resigned from the Board of Executive Directors with e ect from 28 November 2017; his employment contract ended on 31 December 2017. In addition to the pension expenses reported, pension-related expenses of € 1,270.1 thousand were incurred for the remaining period of his original employment contract from 29 November 2017 to 31 December 2019, increasing the current value of the total entitlement as of 31 December 2017.

The pension module earned by each of the members of the from the ‘change of control’ clause may not exceed the value Board of Executive Directors in gives rise to pension of the combined annual remuneration for three years. In the expenses, which are calculated in accordance with actuar- event of a change of control, members of the Board of Execu- ial principles. The increase in current values compared to the tive Directors enjoy no extraordinary right to terminate their previous year’s value is due to the fact that the period until contract. the assumed start of the pension is one year shorter. The members of the Board of Executive Directors were not If the appointment as board member is revoked, the mem- promised or granted bene ts by third parties in relation to ber of the Board of Executive Directors receives, at the time their activity as Board members during the reporting year. of termination, a severance payment of . times the xed Apart from the employment contracts mentioned, there are remuneration, however, up to a maximum of the total remu- no contractual relationships between the Company or its neration for the remaining term of the employment contract. Group companies and members of the Board of Executive Directors or persons closely related to them. In the event of an early termination of an Executive Board contract as the result of a takeover (‘change of control’), the The total remuneration of previous members of the Board of xed remuneration and bonuses outstanding until the end Executive Directors and their surviving spouses amounted of the original term of the appointment will be paid plus a to . million in the reporting year (: . million). The compensatory payment, unless there are reasons justifying a increase is due to the inclusion of Mr Steiner as a retiree. termination of the respective contract without giving notice. The bonus is calculated in accordance with the average of the preceding two years. The compensatory payment is . times the annual xed remuneration. In addition, there is an upper The remuneration of the Supervisory Board is regulated in limit for severance payments, whereby entitlements arising Article of the Articles of Association. A member of the

. REMUNERATION REPORT Supervisory Board receives xed annual remuneration of ,. The Chairman of the Supervisory Board receives twice this amount and the Vice-Chairman . times this amount.

The members of the Audit Committee each receive annual remuneration of , and the members of the Personnel Committee ,. Each member of the Nomination Com- mittee receives annual remuneration of , if at least two meetings have taken place during the respective year. The chairmen of these committees each receive twice this amount and a vice-chairman . times this amount. Finally, each member of the Supervisory Board receives a fee of for attending a meeting of the Supervisory Board or one of its committees; however, if more than one meeting is held on the same day, members will receive a maximum of , per day. The members of the Supervisory Board are entitled to reimbursement by the Company of any expenses that are necessary and reasonable for the performance of their duties, as well as to the reimbursement of any value added tax to be paid as a consequence of their activities in their capacity as Supervisory Board members.

Details of the individual remuneration of the Supervisory Board for the nancial year are shown in the table below: / TAB: 2.10.5

Additionally, in , members of the Supervisory Board were reimbursed expenses totalling . thousand (: . thousand). In , no remuneration was paid to members of the Supervisory Board for services personally rendered, particularly consultancy or brokerage services, nor were bene ts provided.

In addition to the Supervisory Board remuneration, employee representatives, who are employees of the + , receive remuneration that is not related to activities performed for the Supervisory Board.

. REMUNERATION REPORT TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

¹ TAB: . .

Fixed Audit Personnel Nomination Attendance remuneration Committee Committee Committee fees Total in € Dr Ralf Bethke , , , , , , (Chairman until May ) , , , , , , Dr Andreas Kreimeyer , — , ² ³ , ³ , , (Chairman since May ) , — — , , , Michael Vassiliadis , , , — , , (Vice Chairman) , , , — , , Ralf Becker , , — — , , , , — — , , Jella S. Benner-Heinacher , — , , ² , , , — , — , , George Cardona , — — , , , , — — , , , Wesley Clark , — — — , , , — — — , , Harald Döll , — , — , , , — , — , , Axel Hartmann , , — — , , , , — — , , Michael Knackmuß , — — — , , , — — — , , Thomas Kölbl , , — — , , (since May ) — — — — — — Gerd Kübler , — — — , , , — — — , , Dieter Kuhn , — — — , , , — — — , , Dr Annette Messemer , , — — , , , , — — , , Anke Roehr , — — — , , (since April ) , — — — , , Dr Eckart Sünner , , — — , , , , — — , , Philip Freiherr von dem Bussche , — — , , , , — — , , , Total ,, , , , , , , , , , , , , , ,

¹ Excluding reimbursement to members of the Supervisory Board for value added tax VAT paid as a consequence of their activities. ² Since 10 May 2017. ³ Chairman since 21 August 2017. Excluding members who retired in 2016.

. REMUNERATION REPORT CONSOLIDATED FINANCIAL STATEMENTS

. Income Statement . Statement of Comprehensive Income . Balance Sheet . Statement of Cash Flows . Statement of Changes in Equity . Notes

Auditor’s Report TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

¹ TAB: ..

Notes in € million Revenues () ,. , . Cost of sales , . , . Gross pro t , . , . Selling expenses . . General and administrative expenses . . Research and development costs . . Other operating income () . . Other operating expenses ( ) . . Income from investments, net ( ) . . Gains/(losses) on operating anticipatory hedges () . . Earnings after operating hedges EBIT II ² ³ . . Finance income ( ) . . Finance costs ( ) . . Other nancial result () − . . Financial result − . − . Earnings before tax . . Income tax expense ( ) . . – of which deferred taxes − . − . Earnings for the period . . Non-controlling interests . — Earnings after tax and non-controlling interests . .

Earnings per share in € (basic = diluted) () . .

¹ TAB: ..

Notes in € million Earnings for the period . . Exchange di erences on translation of foreign operations . − . Items of other comprehensive income that may be reclassi ed to pro t or loss in subsequent periods . − . Remeasurement gains/(losses) on de ned bene t plans . . Other comprehensive income not to be reclassi ed to pro t or loss . . Other comprehensive income after tax ( ) . − . Total comprehensive income for the period . − . Non-controlling interests . — Total comprehensive income for the period, net of tax and non-controlling interests . − .

¹ Rounding di erences may arise in percentages and numbers. ² The reconciliation of EBIT II to operating earnings (EBIT I) and EBITDA is presented in the notes (see ‘Notes to the Income Statement and the Statement of Comprehensive Income’ on page 157). ³ Key performance indicators which are not de ned in the IFRS. Previous year restated due to structural distinction between production cost and selling expenses introduced in the year under review. An amount of € 91.6 million was reclassi ed from selling expenses to production cost without a ecting pro t or loss.

. INCOME STATEMENT | . STATEMENT OF COMPREHENSIVE INCOME ¹ TAB: . .

December December Notes in € million Intangible assets () , . . – of which goodwill from acquisitions of companies () . . Property, plant and equipment , . , . Investment properties ( ) . . Financial investments ( ) . . Other nancial assets ² ( , ) . . Other non- nancial assets ² . . Securities and other nancial investments () . . Deferred taxes ( ) . . Non-current assets ,. ,. Inventories () . . Trade receivables ( ) . . Other nancial assets ² ( , ) . . Other non- nancial assets ² . . Income tax refund claims . . Securities and other nancial investments () . . Cash and cash equivalents ( ) . . Current assets ,. ,. ASSETS ,. ,.

. BALANCE SHEET TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

¹ TAB: . .

December December Notes in € million Issued capital ( ) . . Share premium ( ) . . Other reserves and net retained earnings ( ) , . , . Total equity attributable to shareholders of K+S Aktiengesellschaft , . ,. Non-controlling interests . . Equity , . , . Financial liabilities () , . , . Other nancial liabilities (, ) . . Other non- nancial liabilities . . Income tax liabilities — . Provisions for pensions and similar obligations () . . Provisions for mining obligations () . , . Other provisions (, ) . . Deferred taxes ( ) . . Non-current liabilities , . , . Financial liabilities () . . Trade payables () . . Other nancial liabilities (, ) . . Other non- nancial liabilities . . Income tax liabilities . . Provisions (, ) . . Current liabilities , . ,. TOTAL EQUITY AND LIABILITIES ,. ,.

¹ Rounding di erences may arise in percentages and numbers. ² Prior-year gures restated (amounts reclassi ed between other nancial and non- nancial assets, aggregate of the two items remains unchanged).

. BALANCE SHEET ¹ TAB: . .

Notes in € million ( ) Earnings after operating hedges EBIT II . . Income (−)/expenses (+) arising from changes in the fair value of outstanding operating anticipatory hedges − . − . Elimination of prior-period changes in the fair value of operating anticipatory hedges − . − . Realised gains (−)/losses (+) from currency hedging for capital expenditure in Canada − . − . Depreciation, amortisation, impairment losses (+)/reversals of impairment losses (−) . . Increase (+)/decrease (−) in non-current provisions (excluding interest rate e ects) . . Interest received and similar income . . Realised gains (+)/losses (−) on nancial assets/liabilities − . − . Interest paid (−) − . − . Income tax paid (−) − . − . Other non-cash expenses (+)/income (−) − . . Gain (−)/loss (+) on sale of assets and securities . − . Increase (−)/decrease (+) in inventories . − . Increase (−)/decrease (+) in receivables and other operating assets . − . Increase (+)/decrease (−) in liabilities from operating activities − . − . Increase (+)/decrease (−) in current provisions − . . Allocations to plan assets − . − . Net cash ow from operating activities . . Proceeds from sale of assets . . Purchases of intangible assets − . − . Purchases of property, plant and equipment − , . − . Purchases of nancial investments − . − . Proceeds from sale of consolidated companies — . Proceeds from sale of securities and other nancial investments . . Purchases of securities and other nancial investments − . − . Net cash ows from/(used in) investing activities − , . − . Dividends paid − . − . Proceeds from other allocations to equity . . Purchases of own shares − . − . Sales of own shares . . Repayment (−) of borrowings − . − . Proceeds (+) from borrowings ,. . Net cash ows from/(used in) nancing activities . . Cash change in cash and cash equivalents . . Exchange rate-related change in cash and cash equivalents . − . Consolidation-related change in cash and cash equivalents — . Net change in cash and cash equivalents . . Net cash and cash equivalents as of 1 January . . Net cash and cash equivalents as of 31 December . . – of which cash on hand and bank balances . . – of which cash invested with a liated companies . — – of which cash received from a liated companies − . − .

¹ Rounding di erences may arise in percentages and numbers.

. STATEMENT OF CASH FLOWS TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

¹ TAB: ..

Remeasure- Note ( ) Net retained Foreign ment gains/ Total equity pro ts/ currency (losses) on attributable Non- Share revenue translation de ned to sharehold- controlling Issued capital premium reserves reserve bene t plans ers of K+ S AG interests Equity in € million Balance as of 1 January 2017 . . ,. . − . , . . ,. Earnings for the period — — . — — . — . Other comprehensive income after tax — — — − . . − . — − . Total comprehensive income for the period — — . − . . − . — − . Dividend for the previous year — — − . — — − . — − . Other changes in equity — — . — — . — . Balance as of 31 December 2017 . . ,. . − . ,. . , .

Balance as of 1 January 2016 . . , . . − . , . . ,. Earnings for the period — — . — — . . . Other comprehensive income after tax — — — . . . — . Total comprehensive income for the period — — . . . . . . Dividend for the previous year — — − . — — − . — − . Issuance of shares to employees — − . — — — − . — − . Balance as of 31 December 2016 . . , . . − . , . . , .

¹ Rounding di erences may arise in percentages and numbers.

. STATEMENT OF CHANGES IN EQUITY .

¹ TAB: . .

Notes Total revenues of which revenues with third parties of which intersegment revenues EBIT I EBITDA ³ in € million Potash and Magnesium Products business unit , . , . , . , . . . . . . . Salt business unit ,. ,. , . , . . . . . . . Complementary activities . . . . . . . . . . Reconciliation ² ( ) − . − . . . − . − . − . − . − . − . K+S total ,. , . ,. , . — — . . . .

Notes Assets Liabilities ROCE Capital expenditure Depreciation and amortisation ³ in € million Potash and Magnesium Products business unit , . , . , . , . . % . % , . . . . Salt business unit ,. , . . . . % . % . . . . Complementary activities . . . . . % . % . . . . Reconciliation ² ( ) . . , . , . — — . . . . K+S total ,. ,. , . ,. . % . % , . . . .

¹ Rounding di erences may arise in percentages and numbers. ² Figures for business units are shown before intersegment consolidation. Expenses and income as well as balance sheet items that cannot be allocated to business units are reported separately. Both e ects are shown under ‘Reconciliation’. ³ Adjusted for depreciation and amortisation recognized directly in equity in the context of own work capitalised. Return on capital employed (see de nition in section entitled ‘Further information’ on page 205). Relates to cash payments for investments in property, plant and equipment and intangible assets, taking claims for reimbursement from claim management into account. Relates to systematic depreciation and amortisation. If material impairment losses or reversals of impairment losses are involved, they are disclosed in note (35).

. NOTES TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

¹ TAB: . .

. NOTES -

- ¹ TAB: . .

Depreciation, amortisation Net carrying Gross carrying amounts and impairment losses amounts Balance as Change in Balance as of Balance as Change in Depreciation Reversals of Balance as of Balance as of of January scope of Reclassi - Translation December of January scope of and Impairment impairment Reclassi - Translation December December Notes consolidation Additions Disposals cations di erences consolidation amortisation losses losses Disposals cations di erences in € million Other acquired concessions, industrial property rights, similar rights and assets, and licences in such rights and assets . . . . . − . . . — . — — . — − . . . Customer relations . — — — — − . . . — . — — — — − . . . Brands . — — — — − . . . — . — — — — − . . . Port concessions . — — — — − . . . — . — — — — − . . . Goodwill from acquisitions of companies . — — — — − . . — — — — — — — — — . Internally generated intangible assets . — . — . — . . — . — — — — — . . Emission rights . — . . — — . — — — — — — — — — . Intangible assets in progress . — . — − . — . — — — — — — — — — . Intangible assets ( ) , . . . . . − . ,. . — . — — . — − . . . Land, land rights and buildings including buildings on third-party land , . − . . . . − . , . . − . . . — . — − . . , . Finance leases for land etc. . — — . — − . . . — . — — . — − . . . Raw material deposits . — — — — − . . . — . — — — — − . . . Technical equipment and machinery , . − . . . , . − . ,. ,. − . . . . . . − . , . , . Finance leases for technical equipment and machinery . — . . . − . . . — . — — — — − . . . Ships . — . — . − . . . — . — — — — − . . . Finance leases for ships . — — — — − . . . — . — — — — − . . . Other equipment, operating and o ce equipment . − . . . . − . . . − . . — — . — − . . . Finance leases for other equipment etc. — — — — — — — — — — — — — — — — — Prepayments and assets under construction , . − . . . − , . − . . — — — — — — — — — . Property, plant and equipment , . − . . . — − . , . , . − . . . . . . − . , . , . Investment properties () . — — . — — . . — — — — — — — . . Shares in a liated companies . − . . . — — . . − . — — — — — — . . Equity investments . — — — — — . — — — — — — — — — . Other loans and other nancial assets . — . . — — . — — — — — — — — — . Financial investments () . − . . . — — . . − . — — — — — — . . Non-current assets , . − . . . . − . ,. ,. − . . . . . . − . , . ,.

¹ Rounding di erences may arise in percentages and numbers.

. NOTES TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

- ¹ TAB: . .

¹ Rounding di erences may arise in percentages and numbers.

. NOTES - ¹ TAB: . .

Depreciation, amortisation Net carrying Gross carrying amounts and impairment losses amounts Balance as Change in Balance as of Balance as Change in Depreciation Reversals of Balance as of Balance as of of January scope of Reclassi - Translation December of January scope of and Impairment impairment Reclassi - Translation December December Notes consolidation Additions Disposals cations di erences consolidation amortisation losses losses Disposals cations di erences in € million Other acquired concessions, industrial property rights, similar rights and assets, and licences in such rights and assets . . . . . . . . — . — — . — . . . Customer relations . — — — — . . . — . — — — — . . . Brands . — — — — . . . — . — — — — . . . Port concessions . — — — — . . . — . — — — — — . . Goodwill from acquisitions of companies . — — — — . . — — — — — — — — — . Internally generated intangible assets . — . — . — . . — . — — — — — . . Emission rights . — . . — — . — — — — — — — — — . Intangible assets in progress . — . — − . — . — — — — — — — — — . Intangible assets ( ) , . . . . . . , . . — . — — . — . . , . Land, land rights and buildings including buildings on third-party land , . — . . . . , . . — . . — . — . . . Finance leases for land etc. . — — — — . . . — . — — — — . . . Raw material deposits . — — — — . . . — . — — — — . . . Technical equipment and machinery , . — . . . . , . , . — . . — . — . ,. , . Finance leases for technical equipment and machinery . — — . − . . . . — . — — — − . . . . Ships . — . — . . . . — . — — — — . . . Finance leases for ships . — — — — . . . — . — — — — . . . Other equipment, operating and o ce equipment . — . . . . . . — . — — . — . . . Finance leases for other equipment etc. . — — . — — — . — — — — . — — — — Prepayments and assets under construction , . — , . . − . . , . — — — — — — — — — , . Property, plant and equipment ,. — , . . − . . , . ,. — . . — . − . . , . ,. Investment properties () . — — . — — . . — — — — . — — . . Shares in a liated companies . — . — — — . . — — — — . — — . . Equity investments . — — — — — . — — — — — — — — — . Other loans and other nancial assets . — — . — — . — — — — — — — — — . Financial investments () . — . . — — . . — — . — — — — . . Non-current assets ,. . , . . − . . , . , . — . . — . − . . ,. ,.

¹ Rounding di erences may arise in percentages and numbers.

. NOTES TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

- ¹ TAB: . .

Depreciation, amortisation Net carrying Gross carrying amounts and impairment losses amounts Balance as Change in Balance as of Balance as Change in Depreciation Reversals of Balance as of Balance as of of January scope of Reclassi - Translation December of January scope of and Impairment impairment Reclassi - Translation December December Notes consolidation Additions Disposals cations di erences consolidation amortisation losses losses Disposals cations di erences in € million Other acquired concessions, industrial property rights, similar rights and assets, and licences in such rights and assets . . . . . . . . — . — — . — . . . Customer relations . — — — — . . . — . — — — — . . . Brands . — — — — . . . — . — — — — . . . Port concessions . — — — — . . . — . — — — — — . . Goodwill from acquisitions of companies . — — — — . . — — — — — — — — — . Internally generated intangible assets . — . — . — . . — . — — — — — . . Emission rights . — . . — — . — — — — — — — — — . Intangible assets in progress . — . — − . — . — — — — — — — — — . Intangible assets ( ) , . . . . . . , . . — . — — . — . . , . Land, land rights and buildings including buildings on third-party land , . — . . . . , . . — . . — . — . . . Finance leases for land etc. . — — — — . . . — . — — — — . . . Raw material deposits . — — — — . . . — . — — — — . . . Technical equipment and machinery , . — . . . . , . , . — . . — . — . ,. , . Finance leases for technical equipment and machinery . — — . − . . . . — . — — — − . . . . Ships . — . — . . . . — . — — — — . . . Finance leases for ships . — — — — . . . — . — — — — . . . Other equipment, operating and o ce equipment . — . . . . . . — . — — . — . . . Finance leases for other equipment etc. . — — . — — — . — — — — . — — — — Prepayments and assets under construction , . — , . . − . . , . — — — — — — — — — , . Property, plant and equipment ,. — , . . − . . , . ,. — . . — . − . . , . ,. Investment properties () . — — . — — . . — — — — . — — . . Shares in a liated companies . — . — — — . . — — — — . — — . . Equity investments . — — — — — . — — — — — — — — — . Other loans and other nancial assets . — — . — — . — — — — — — — — — . Financial investments () . — . . — — . . — — . — — — — . . Non-current assets ,. . , . . − . . , . , . — . . — . − . . ,. ,.

¹ Rounding di erences may arise in percentages and numbers.

. NOTES

¹ TAB: . .

Balance as of Translation Change in scope Balance as of Notes January di erences of consolidation Additions Interest component Utilisation Reversal Reclassi cation December in € million Back lling of vacant mines and shafts . − . — . . . . — . Maintenance of tailings piles . — — . . . . — . Risk of mining damage . — — . − . . . — . Other mining obligations . — — . . . . — . Provisions for mining obligations ( ) . − . — . . . . — , . Service anniversaries . — — . − . . — — . Other personnel obligations . − . . . — . . − . . Personnel obligations ( ) . − . . . − . . . − . . Other provisions ( ) . − . − . . . . . − . . Provisions (non-current liabilities) ,. − . — . . . . − . ,.

Provisions for mining obligations () . — — . — . — — . Personnel obligations ( ) . − . − . . — . . . . Provisions for obligations from sales transactions ( ) . − . − . . — . . — . Provisions for obligations from purchase contracts ( ) . − . — . — . . − . . Other provisions . − . — . — . . . . Provisions (current liabilities) . − . − . . — . . . .

Provisions ,. − . − . . . . . . ,.

¹ Rounding di erences may arise in percentages and numbers.

items of the consolidated nancial statements are presented in millions of euros ( million). Rounding di erences The consolidated nancial statements of the + may arise in percentages and numbers. prepared by + as of December have been prepared in accordance with the - The consolidated nancial statements were prepared by issued by the Board of Executive Directors on March and pre- the . sented to the Supervisory Board for approval at its meeting This process took account of all adopted by the Euro- on March . pean Union for which application was mandatory as of the balance sheet date, as well as the additional requirements of section e of the German Commercial Code (Handels- gesetzbuch, ). The following companies were included in the scope of con- + is a listed stock corporation solidation in : (Aktiengesellschaft) registered in the commercial register + + . under at the Local Court of Kassel. Its registered + + ., . o ce is Bertha-von-Suttner-Str. , Kassel, Germany. On January , the production facilities together with The consolidated nancial statements are prepared in all existing patents of the Chinese fertilizer producer euros . To ensure a clear presentation, the individual ¢ ., .

. NOTES TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

¹ TAB: . .

Provisions ,. − . − . . . . . . ,.

¹ Rounding di erences may arise in percentages and numbers.

were acquired as part of an asset deal for a total purchase All joint ventures and companies over which companies of price of . million. is one of the largest Chi- the + exercise signi cant in uence (associates) are nese producers of synthetic magnesium sulphate, which is accounted for using the equity method. The potential impact used, among other things, to fertilize oil palms, soybeans on earnings of accounting for such equity interests using the and sugar cane as well as for industrial applications. This equity method is, however, immaterial from a Group per- acquisition will drive the expansion of the specialties busi- spective. As a result of their overall immateriality, all equity ness forward and improve access to the growth markets in investments in joint ventures and associated companies were South East Asia. therefore recognised at cost less impairment in both the nancial year and the previous year. The following companies were removed from the scope of consolidation in as a result of disposals: A complete summary of equity investments of + - + + ... can be found in the list of shareholdings on + + ¢ ... page .

: domestic and : foreign companies were included in the consolidated nancial statements. : subsidiaries were not included in the consolidated nancial statements and are measured at cost, as they are immaterial to the consolidated nancial statements in terms Subsidiaries are companies controlled by + - of total assets, revenues and earnings. . Control is presumed to exist in cases where

. NOTES + has pre-existing rights that give it nection with the transaction, can be reliably determined. the current ability to direct the relevant activities. The relevant Furthermore, it must be probable that future economic activities are those that have a signi cant e ect on the com- bene ts will ow to the Company. In the + , rev- pany’s returns. As a rule, the ability to exercise control is based enues include income from the sale of goods and the on + directly or indirectly holding a provision of services, as well as contract revenues from majority of the voting rights. Consolidation begins on the date customer-speci c construction contracts, net of revenue when + gains control of the investee. deductions.

The nancial statements of the consolidated subsidiaries are Revenues derived from the sale of goods are reported as of prepared as of the same balance sheet date as the consoli- the date when the associated risks of ownership have been dated nancial statements. The assets and liabilities of the transferred, provided no continuing managerial involvement consolidated subsidiaries are recognised and measured uni- or e ective control over the sold goods is retained. formly in accordance with the policies described here and in the following notes. Revenues from services and customer-speci c construction contracts are recognised using the percentage of comple- Revenues, expenses and income generated or incurred tion method, if they can be estimated reliably. In the + between consolidated companies while the companies con- , revenues from services are reported after the service cerned are members of the + are eliminated in full. has been provided, whereas contract revenues from cus- Similarly, receivables and liabilities as well as inter-company tomer-speci c construction contracts are recognised accord- pro ts resulting from goods and services supplied between ing to the ratio of costs incurred to expected total costs. If consolidated subsidiaries are eliminated, unless they are the percentage of completion cannot be estimated reliably, immaterial. revenues are recognised only to the extent of the expenses incurred that the Company is expected to recover. In the In acquisition accounting, the cost of the investee is o set context of contract manufacture, amendments introduced against the share of the remeasured equity attributable to it by customers with respect to the range of goods and ser- at the date of acquisition. Any positive di erence that remains vices to be provided can increase or reduce contract reve- after allocating the purchase price to the assets and liabili- nues. An expected loss on a construction contract is imme- ties is recognised as goodwill. Any negative di erences from diately recognised as an expense. Moreover, revenues that the purchase price allocation are recognised in pro t or loss. have already been recognised for a service transaction are not adjusted retrospectively, if they subsequently become , irrecoverable. Irrecoverable amounts are immediately recognised as an expense. Joint operations and joint ventures are de ned by the existence of a contractual arrangement according to which + If the amount can be determined reliably and it is probable directly or indirectly conducts the that economic bene ts will ow to the Company as a result respective activities jointly with a non-Group company. of the transaction, other operating income is recognised in the period in which a legal (contractual or statutory) claim Associates are companies over which + - arises. directly or indirectly has signi cant in uence. Operating expenses are charged to pro t or loss on the date the goods or services are used or the expenses are incurred.

Revenues are income generated in the ordinary course of business. Revenues are recognised, if the amount, as well This item contains income from non-consolidated subsid- as the actual costs incurred or yet to be incurred in con- iaries measured at cost, joint ventures, associates and other

. NOTES TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

equity investments on a net basis. This item contains distri- Impairment losses are recognised in case of impairment. butions, pro t or loss transfers, impairment losses and gains If the reasons for previously recognised impairment losses and losses on the disposal of these companies. no longer exist, the impairment loss is reversed, although the net carrying amount of the asset must not be exceeded. Impairment losses on goodwill must not be reversed. Intangible assets are only recognised, if it is probable that future economic bene ts will ow to the Company and the Goodwill is tested for impairment at least once a year and cost of such assets can be measured reliably. Purchased an impairment loss is recognised if necessary. Any need intangible assets are recognised at cost. Internally gener- to recognise an impairment loss is determined in accor- ated intangible assets are recognised at the development dance with by comparing the carrying amounts of cost attributable to them (production costs). the cash-generating units to which goodwill has been allocated with the recoverable amounts of the units. The recov- If their useful lives can be determined, intangible assets are erable amount is the higher of fair value less costs to sell subject to systematic amortisation. If they have inde nite and value in use. Value in use is determined based on the useful lives, they are not amortised, but written down for discounted expected future cash ows from the cash-gen- impairment, if necessary. Goodwill is always assumed to have erating units to which the corresponding goodwill amounts an inde nite useful life. have been allocated.

Intangible assets are amortised using the straight-line ª emission rights are initially measured at cost. Accord- method based on normal useful lives. For intangible ingly, rights granted free of charge are recognised at a value assets with nite useful lives, the following useful lives of zero and those acquired for a consideration are rec- are applied as standard across the Group: ognised at cost. If the fair value on the reporting date falls / TAB: 3.6.5 below cost, an impairment test is carried out under which the carrying amount of the cash-generating unit holding The amortisation charges for the nancial year are disclosed the emission rights is compared with the value in use of in the income statement in line with the use of the assets that unit. concerned under the following items: + Production cost , + Selling expenses + General and administrative expenses Property, plant and equipment is carried at cost less depreci- + Research and development costs ation and, if required, impairment losses. Cost also includes + Other operating expenses future restoration and recultivation expenses. Impairment

TAB: . . in years Customer relations – Brands – Port concessions Other intangible assets –

. NOTES losses in excess of depreciation charges already recognised + Research and development costs are charged to other operating expenses. These impairment + Other operating expenses losses are determined in accordance with by comparing the carrying amounts with the discounted expected future cash ows of the assets concerned. If no speci c cash ows can be allocated to the assets concerned, the cash ows Borrowing costs that are directly attributable to the acqui- of the corresponding cash generating units are used for the sition, construction or production of a qualifying asset form comparison instead. If the reasons for previously recognised part of the cost of that asset and should therefore be capi- impairment losses no longer exist, the impairment loss is talised. A qualifying asset is an asset that takes a period of reversed as appropriate, although the net carrying amounts at least one year to get ready for its intended use or sale. must not be exceeded. If the qualifying asset can be shown not to be nanced with borrowings, no borrowing costs are recognised. In the Acquired raw material deposits are recognised as property, statement of cash ows, capitalised borrowing costs are plant and equipment. Depreciation starts on the date the reported under ‘Interest paid’ in ‘Net cash ow from oper- raw materials are rst extracted. Galleries and excavations ating activities’. are also reported under property, plant and equipment. If property, plant and equipment is sold or decommissioned, A lease is a contract that conveys the right to control the use the gain or loss calculated as the di erence between the sale of an identi ed asset for a period of time in exchange for a proceeds and the net carrying amount is recognised in other single payment or a series of payments. Leases are divided operating income or expenses. into nance leases and operating leases. A nance lease is a lease that substantially transfers all the risks and rewards Property, plant and equipment is depreciated using the of ownership to the lessee, who consequently becomes the straight-line method based on normal useful lives. The bene cial owner of the asset. If that is the case, the lessee following useful lives are applied to property, plant and recognises the asset at its fair value or, if lower, at the pres- equipment as standard across the Group: ent value of the minimum lease payments. A corresponding / TAB: 3.6.6 amount is recognised as a lease liability. The depreciation policy for lease assets is the same as for comparable (legally) The depreciation charges for the nancial year are disclosed owned assets. Lease payments under operating leases are in the income statement in line with the use of the assets recognised as expenses over the lease term on a straight- concerned under the following items: line basis, unless another systematic basis is more represen- + Production cost tative of the time pattern of the user’s bene t. Conditional + Selling expenses lease payments under an operating lease are expensed in the + General and administrative expenses period they are incurred.

Government grants for the acquisition or production of property, plant and equipment (e. g. investment subsidies and , grants) reduce the cost of the assets to which they relate. Per- TAB: . . formance-related grants are o set against the corresponding in years expenses in the current year. Buildings – Raw material deposits – Technical equipment and machinery (galleries and excavations) – Investment properties are primarily leased properties. They Technical equipment and machinery (other) – are carried at amortised cost less depreciation. Investment Ships property is depreciated using the straight-line method Other equipment, operating and o ce equipment – based on normal useful lives. A useful life of years

. NOTES TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

is generally assumed. The depreciation expense is rec- cial instruments with a positive fair value. Financial liabilities ognised under other operating expenses. Income from the include, in particular, nancial obligations, trade payables disposal of investment properties is recognised in the as well as derivative nancial instruments with a negative nancial result. fair value.

- Financial instruments are initially recognised at their fair value as soon as the reporting enterprise becomes a contractual party to the nancial instrument. Transaction costs A non-current asset (or disposal group) is classi ed as held that can be allocated directly to the acquisition are taken into for sale, if most of its carrying amount will be recovered account in determining the carrying amount, if the nancial through a sale transaction rather than through continuing instruments are not subsequently measured at fair value use. This is the case, if the asset (or disposal group) is avail- through pro t or loss. able for sale in its present condition and if such sale is highly probable. Non-current assets (or disposal groups) classi ed Financial assets that are not recognised at fair value through as held for sale are carried at the lower of carrying amount pro t or loss are assessed in accordance with at each and fair value less costs to sell. These assets are no longer balance sheet date to determine, whether there is any objec- depreciated. tive evidence of impairment. Examples of such objective evidence include signi cant payment di culties of a debtor, An operation is reported as a discontinued operation, if it has breach of contract due to default or late interest and princi- been sold or is classi ed as held for sale and pal payments, a high probability of debtor insolvency, major + represents a separate major line of business or a geo- changes in the legal, technological or economic environment graphical area of operations, or a sustained and signi cant drop in the value of a listed + is part of a single coordinated plan to dispose of a sepa- equity instrument. rate major line of business or geographical area of operations, or The allocation of nancial instruments to one of the follow- + represents a subsidiary exclusively acquired with a view ing measurement categories de ned in determines to resale. subsequent measurement:

: Financial instruments are contracts that give rise to a nan- This measurement category comprises non-derivative nancial asset for one of the parties to such contract and to a cial assets with xed or determinable payments that are not nancial liability or equity instrument for the other party. As quoted in an active market. These include trade receivables, a rule, nancial assets and nancial liabilities are disclosed loans, xed- or oating-rate securities (without an active separately from each other (no o setting). Financial assets market) as well as bank deposits. mainly comprise cash and cash equivalents, trade receivables, receivables from customer-speci c construction contracts, After initial measurement, the nancial assets belonging securities, nancial investments as well as derivative nan- to this measurement category are measured at amortised

. NOTES cost applying the e ective interest method less impairment. is objective evidence of impairment. If the reasons for previ- Non-interest-bearing or low-interest receivables with matur- ously recognised impairment losses no longer apply, impair- ities of more than three months are discounted. If there is ment losses on debt instruments are reversed through pro t objective evidence, impairment losses are recognised and or loss, while impairment losses on equity instruments are charged to pro t or loss through separate impairment reversed through equity. accounts. If the reasons for previously recognised impairment losses no longer apply, the impairment loss is reversed. Receivables are derecognised when settled or when they : become uncollectible. Other assets are derecognised on dis- All nancial liabilities, with the exception of derivative nan- posal or, if they are impaired. cial instruments, are carried at amortised cost applying the e ective interest method. Liabilities are derecognised on settlement or if the reasons for recognising a liability no lon- : ger apply. This measurement category comprises nancial assets held for trading that have been acquired with the intention to sell in the short term. Derivatives with positive fair values : are also classi ed as held for trading unless they have been This measurement category comprises derivative nancial designated as hedging instruments in accordance with instruments with negative fair values classi ed as held for . trading. This category is not sued for derivatives that have been designated as hedging instruments in accordance with They are subsequently measured at fair value. Changes in . fair value are recognised through pro t or loss. Securities are derecognised after disposal on the settlement date. Derivatives are measured at fair value. Changes in fair -- : value are recognised through pro t or loss. Derivatives are At present, the + does not hold any nancial instru- derecognised on the settlement date. ments in the ‘held-to-maturity investments’ category. -- : In accordance with , inventories include assets held for This measurement category comprises non-derivative sale in the ordinary course of business ( nished goods and nancial assets designated on initial recognition as avail- merchandise), assets in the production process for sale in the able for sale or any other instruments that are not classi ed ordinary course of business (work in progress), and materials as any of the valuation categories mentioned above. This and supplies that are consumed in production (raw materials, measurement category includes certain debt and equity consumables and supplies). instruments such as shares in (non-consolidated) a liated companies. Inventories are measured at the lower of average cost and net realisable value. In addition to direct costs, production They are initially and subsequently measured at fair value. costs also include reasonable proportions of xed and vari- If the fair value of equity instruments cannot be reliably able material and manufacturing overheads provided they determined because no active market exists, they are sub- are incurred in connection with the production process. The sequently measured at cost (less impairment, if applicable). same applies to general administrative expenses, post-em- This applies, for example, to investments in (non-consoli- ployment and other employee bene t costs as well as other dated) a liated companies. Changes in fair value arising on social security expenses. Fixed overheads are allocated on subsequent measurement are recognised in the revaluation the basis of normal capacity. Net realisable value is de ned surplus directly in equity. Unrealised gains or losses previ- as the estimated selling price less the estimated costs of ously recognised in the revaluation surplus are only reclassi- completion and the estimated costs necessary to make the ed to pro t or loss when the instrument is sold or if there sale.

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+ changes in the e ects of the asset ceiling, excluding This item includes cash on hand and balances with banks. amounts contained in the net interest attributable to the It also includes nancial investments with a maturity of net liabilities from de ned bene t pension plans (asset). generally not more than three months from the date of acquisition. Provisions are recognised in an amount corresponding to the extent to which they are expected to be used for discharging current obligations to third parties arising from a past event. The provisions for pensions and similar obligations are deter- Such utilisation must be more probable than not and it must mined in accordance with actuarial principles applying the be possible to reliably estimate the amount of the obliga- projected unit credit method. The discount rate is determined tions. Non-current provisions with a remaining maturity of on the basis of the returns for high-grade corporate bonds more than one year are discounted using a capital market available on the reporting date. High-grade corporate bonds interest rate of suitable duration to take account of future are bonds with an rating. To this end, corporate bonds that cost increases, if the interest rate e ect is material. match the expected maturity and currency of the pension obligations must be used. Since appropriate long-term corporate bonds were not always available at the balance sheet Deferred taxes are determined in accordance with date, the interest rate with matching maturities was in such using the accounting-based liability method in line with com- cases determined by means of extrapolation. Aspects such as mon international practice. This results in the recognition of future expected salary and pension increases, cost increases deferred tax items for temporary di erences between the for healthcare bene t commitments as well as mortality tax base and the amounts recognised in the consolidated rates are also taken into account. Any plan assets are o set balance sheet, as well as for tax loss carryforwards. How- against the corresponding obligations. ever, deferred tax assets are only recognised, if it is su - ciently probable that they will be realised. Deferred taxes are The net interest for a reporting period is determined by mul- measured using tax rates that, under current legislation, are tiplying the net liabilities from the de ned bene t pension expected to apply in the future when the temporary di er- plans (asset) by the discount factor speci ed above. Both ences will reverse. The e ects of changes in tax legislation factors are determined at the beginning of the reporting on deferred tax assets and liabilities are recognised in pro t period after taking into account expected allocations/dis- or loss in the period in which the changes in legislation have bursements. been substantively enacted. As speci ed in , deferred tax assets and liabilities are not discounted. Deferred tax Remeasurement gains or losses on the net liabilities from assets and liabilities are o set based on maturity within indi- de ned bene t pension plans are recognised in other com- vidual companies or within tax groups. prehensive income. They include: + actuarial gains/losses, + income from plan assets, excluding amounts contained Business combinations are accounted for using the acqui- in the net interest attributable to the net liabilities from sition method. In connection with the remeasurement of de ned bene t pension plans (asset) and the acquiree, all hidden reserves and hidden liabilities of

. NOTES the acquiree are uncovered, and assets, liabilities and con- ress, total contract costs, cost to completion, total contract tingent liabilities are recognised at their fair values (with revenue and contract risks), the exceptions speci ed in ). Any resulting positive + determining the usability of tax loss carryforwards and di erence from the cost of the acquiree is recognised as + determining the fair value of intangible assets, property, goodwill. Any negative di erence is immediately recognised plant and equipment and liabilities acquired in connection in pro t or loss. with a business combination, and determining the useful lives of the intangible assets and property, plant and equipment acquired. ¦ Despite taking great care in producing such estimates, actual outcomes may di er from the assumptions made. Non-current intangible assets, property, plant and equipment , and investment properties are measured at cost less amortisation or depreciation in the nancial statements. The option In nancial year , analyses led to the extension of the to carry them at fair value, which is allowed under certain standard Group-wide useful lives of certain classes of prop- conditions, is not exercised. erty, plant and equipment. The adjusted useful lives were applied as changes in accounting estimates in accordance with on a prospective basis as from July . The reasons for and amount of some items recognised in the The resulting e ect on the nancial statements for nancial nancial statements are in some cases based on esti- year and the subsequent two nancial years is a reduc- mates and the de nition of certain assumptions. This is par- tion in depreciation expenses. Assuming that the assets will ticularly necessary in the case of be held until the end of their estimated useful lives, the e ect + determining the useful lives of depreciable items of prop- recognised in nancial year was million. The corre- erty, plant and equipment, sponding reduction in depreciation expenses is expected to + specifying measurement assumptions and future gains or amount to around million in nancial year and to losses in connection with impairment tests, especially for around million in nancial year . capitalised goodwill, + determining the net realisable value of inventories, + determining the inputs necessary for the measurement of An asset must be depreciated or amortised as soon as it is pension provisions and similar obligations (e.g. discount available for use as intended by the management. In relation rate, future wage/salary and pension trends, mortality to the Bethune plant, it was determined that this point has rates, healthcare cost trends), been reached on the basis of the following criteria: + determining amounts, settlement dates and discount + ability to ensure continuous production of the product in rates for the measurement of provisions for mining obli- saleable condition, gations, + amount of capital expenditure incurred compared with + selecting inputs for the model-based measurement of planned capital expenditure, derivatives (e.g. assumptions about volatility and inter- + degree of physical completion of the plant. est rates), + determining the pro t or loss on customer-speci c con- Based on the above criteria, depreciation of the Bethune struction contracts accounted for using the percent- plant began on September . The completed facilities age-of-completion method (estimate of contract prog- were reclassi ed from ‘assets under construction’ to the

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appropriate asset class and depreciation commenced on a tional terms. The functional currency generally corresponds prospective basis on the basis of useful lives. to the local currency. Assets and liabilities are translated at the exchange rate prevailing on the balance sheet date. Income and expenses are translated at the average exchange rates for the quarter. The resulting currency translation dif- ferences are recognised directly in equity. When Group com- In nancial year , it was decided to discontinue potash panies exit the scope of consolidation, the corresponding production at the Sigmundshall mine already by the end of currency translation di erence is reversed and recognised nancial year because stocks that can be mined pro t- in pro t or loss. ably are coming to an end. Discussions are currently taking place with workforce representatives and the trade union to companies use the dollar, rather than their local cur- nd new opportunities and alternatives for the employees rency, as the functional currency, because these companies a ected. In addition, negotiations are taking place to achieve generate most of their cash ows in this currency. The com- a fair balance of interests and a socially acceptable redun- panies using the dollar are: dancy plan. The expenses expected to arise were taken into ., ., - account by recognising a personnel provision. Other factors .., , ., , weighing on earnings will result from the reduction in the ., ., planned useful lives due to shorter terms and from adjust- ., + . ., + .., + ments to the mining provisions for this location. In total, this , ., - had an impact of . million on pro t or loss in nancial .. and .. year , all of which was attributable to the Potash and Magnesium Products business unit. The translation of signi cant currencies in the Group was based on the following exchange rates per one euro: / TAB: 3.6.7, 3.6.8 In the year under review, net translation di erences of . The annual nancial statements of foreign Group companies million (: −. million) were recognised in the income are translated into euros in accordance with the functional statement (e. g. measurement/realisation of receivables and currency concept of . All companies conduct their oper- liabilities in a foreign currency), which were mainly reported ations independently in nancial, economic and organisa- in other operating income or expenses.

TAB: . .

Closing rate as of Q quarterly Q quarterly Q quarterly Q quarterly December average average average average per € 1 US dollar USD . . . . . Canadian dollar CAD . . . . . Czech koruna CZK . . . . . Brazilian real BRL . . . . . Chilean peso CLP . . . . . Pound sterling GBP . . . . .

. NOTES TAB: . .

The classi cation and measurement of nancial assets will in future depend on the underlying business model and the The amendment to has led to additional disclosures on contractual cash ow characteristics. +’s business model changes in liabilities arising from nancing activities. The speci es that nancial assets are always held to maturity. reconciliation statement comprises both cash and non-cash Since the cash ows received normally represent solely pay- items (see p. ). The other amendments to the nancial ments of principal and interest on the underlying receivables, reporting standards had no material impact on the consol- the vast majority of instruments will continue to be meas- idated nancial statements of the + . / TAB: 3.6.9 ured at amortised cost (especially in the case of trade receivables and other nancial assets).

One exception is the measurement of subsidiaries, joint ventures, associates and other equity investments that are not included in the consolidated nancial statements due to immateriality. These have previously been measured at cost The following nancial reporting standards and interpreta- and will in future be recognised at fair value. This will lead tions were published by the by the balance sheet date, to an increase in the carrying amount from . million although application by the + is only required at a to . million at the time of initial application. For subse- subsequent date. / TAB: 3.6.10 quent periods, the option will be exercised in all cases, which allows changes in fair value to be recognised in other comprehensive income without reclassifying them to the replaces the current standard for accounting for nan- income statement. cial instruments, Financial Instruments: Recognition and Measurement. Its application is mandatory for + from The treatment of nancial liabilities will not change. nancial year onwards; there is no early application. The e ect of initial application as of January is recognised directly in equity under retained earnings. Prior-year gures The new guidance of for recognising impairment is will not be restated. In addition to new qualitative and quan- based on expected credit losses. To date, impairment losses titative disclosure requirements, will lead to adjust- have only been recognised for loss events that have already ments in the following three areas: occurred.

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The main balance sheet items a ected are trade receivables. tected against default with credit insurance and other hedg- The simpli ed model will be used, under which credit losses ing instruments. Due to the excellent credit ratings of the expected over the life of the instrument are recognised on ini- credit insurers, the risk is largely limited to a small excess. tial recognition. As of the reporting date, of the Group’s Most of the trade receivables that cannot be hedged were trade receivables that qualify for hedge accounting were pro- receivables from public-sector customers. Based on past

TAB: . .

Date Date of mandatory of mandatory application in application ¹ the K+ S Group ² Standard/interpretation Amendment IAS 7 Disclosure initiative January January Amendment IAS 12 Recognition of deferred tax assets for unrealised losses January January Collective standard to amend Amendment several IFRS Annual improvements to IFRS, 2014 – 2016 cycle January ³ January ³

¹ IASB requires initial application for reporting periods beginning on or after this date. ² Initial application for companies whose registered o ce is in the EU for reporting periods beginning on or after this date. The application of new or amended IFRS standards or interpretations for companies whose registered o ce is in the EU is subject to endorsement by the European Commission. Early application of IFRS standards or interpretations (if provided for by the IASB) is subject to EU endorsement. Occasionally, the date of mandatory application determined in the endorsement may di er from the rst-time application date stipulated by the IASB. ³ The amendments to IFRS 1 and IAS 28 are e ective for reporting periods beginning on or after 1 January 2018.

TAB: . .

Date Date of mandatory of mandatory application in application ¹ the K+ S Group ² Standard/interpretation Amendment IAS 19 Plan Amendments, Curtailments and Settlements January open Amendment IAS 28 Investments in Associates and Joint Ventures January open Amendment IAS 40 Investment Property January open Amendment IFRS 2 Classi cation and Measurement of Share-Based Payment January open Amendment IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts January ³ January ³ Amendment IFRS 9 Prepayment Features with Negative Compensation January open Amendment IFRS 15 Clari cations to IFRS 15 Proceeds from Contracts with Customers January January Collective standard to amend Amendment several IFRS Annual improvements to IFRS, 2015 – 2017 cycle January open new IFRS 9 Financial Instruments January January new IFRS 15 Revenue from Contracts with Customers January January new IFRS 16 Leases January January new IFRS 17 Insurance Contracts January open new IFRIC 22 Foreign Currency Transactions and Advance Consideration January open new IFRIC 23 Uncertainty over Income Tax Treatments January open

¹ 1 ASB requires initial application for reporting periods beginning on or after this date. ² Initial application for companies whose registered o ce is in the EU for reporting periods beginning on or after this date. The application of new or amended IFRS standards or interpretations for companies whose registered o ce is in the EU is subject to endorsement by the European Commission. Until then, the date of mandatory application for companies whose registered o ce is in the EU remains open. Early application of IFRS standards or interpretations (if provided for by the IASB) is subject to EU endorsement. Occasionally, the date of mandatory application determined in the endorsement may di er from the rst-time application date stipulated by the IASB. ³ As a result of the amendment to IFRS 4, insurers meeting certain criteria have the option to be exempted from the application of IFRS 9 Financial Instruments until 1 January 2021 (‘deferral approach’).

. NOTES default rates, no material defaults are expected for these tion under . Under these contracts, total revenue receivables and the unhedged portion of trade receivables (transaction price) is allocated to the respective perfor- that are in principle eligible for hedge accounting . There mance obligation on the basis of the ratios of the individ- is no indication that future default rates will signi cantly dif- ual selling prices to each other. The share of total revenues fer from past default rates. For this reason, the unadjusted attributable to each performance obligation is recognised past default rates were applied to the calculation. as the performance obligation is met (over time or at a point in time). In addition to hedging derivatives, the ‘other nancial assets’ item contains a large number of individual items (e. g. claims In the + , multiple element arrangements occur in for reimbursement, assets pledged as collateral, insurance the form of goods supplies and transport services provided receivables), for which no material impairment losses are subsequently. Whether a transport service represents a sep- expected. The derivatives continue to be measured at fair arate performance obligation depends on the relevant con- value and are not subject to impairment rules. tractual arrangements with the customer. To date, the + has recognised revenues from transport services Overall, the amended impairment rules will not have a mate- simultaneously with the revenues attributable to the sup- rial e ect at the time of initial application. In subsequent ply of goods. In future, the share of revenues attributable periods, the amounts of impairment losses may uctuate if proportionately to transport services identi ed as a sep- expectations change. arate performance obligation will be recognised pro rata over the duration of the goods transport (recognition over time). This will result in a timing mismatch between the The amended regulations on hedge accounting aim for a recognition of revenues and the recognition of the corre- closer alignment of hedge accounting with the company’s sponding selling expenses. The quantitative e ects on the risk management strategy. The new regulations will have + ’s assets, liabilities, nancial position and pro t no impact as the + does not currently apply hedge or loss arising from the di erent accounting treatment of accounting. multiple element arrangements are not material from the Group’s perspective. As things stand at present, no other changes have been iden- The aim of is to introduce standardised, sector-inde- ti ed as a result of the application of , apart from pendent revenue recognition requirements that are appli- quantitative and qualitative disclosure requirements. cable to all types of transactions. To this end, a ve-step revenue recognition model has been developed, which The + will initially apply using the mod- applies to all contracts with customers (with few excep- i ed retrospective method. In this process, the opening tions). replaces the current standards, Con- carrying amount of retained earnings (equity) as of Jan- struction Contracts and Revenue as well as the cor- uary will be adjusted for the cumulative e ect of ini- responding interpretations. tial application (+ : reduced). The + has exercised the option that allows users to apply ret- The + launched a Group-wide project in to rospectively only to contracts that have not yet been (fully) assess the impact and implement the new requirements. performed as of January . The + does not As part of this project, the + ’s predominant trans- make use of practical expedients in relation to contract actions were subjected to a comprehensive analysis, which modi cations that the standard setter has made available found that the application of will result in changes for initial application. There are no contracts to be classi- to the accounting treatment of multiple element arrange- ed as ‘modi ed’ within the meaning of . Contracts ments. Multiple element arrangements are transactions containing (explicitly agreed or implied) signi cant nanc- containing several contractual promises to the customer, ing arrangements do not normally exist in the + . each of which represents a separate performance obliga- Should this apply to future contracts with customers, the

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Group will make use of the expedient to recognise these The new standard must be applied to nancial years begin- e ects in the transaction price only if the payment terms ning on or after January . The + intends exceed one year. The + does not capitalise the to apply the new guidance from January onwards costs of obtaining contracts with payment terms of one using the modi ed retrospective method and opt not to year or less, but recognises them immediately in pro t or restate prior-year gures. No decision has as yet been taken loss (practical expedient). whether to exercise the various options contained in . There is an accounting and measurement option to apply E ects from the application of in future periods the standard to a portfolio of leases with the same or sim- may arise due to changes in business (such as price or vol- ilar characteristics. In addition, there is an option not to ume changes) or changes in the business model of the + recognise a right-of-use asset for short-term leases (with . a lease term of months or less) and low-value assets as well as an option to separate lease components from non- The new standard must be applied to nancial years begin- lease components (service). The cumulative e ect of the ning on or after January . The + has not early transition will be recognised directly in equity at the time adopted . of transition.

The + launched a Group-wide project back in replaces the current Leases as well as the to assess the impact and implement the new requirements. associated interpretations: Determining whether All accounting-relevant data of existing leases is currently an Arrangement Contains a Lease, Operating Leases – being collated. Once this process has been completed, the Incentives and Evaluating the Substance of Trans- implementation will start on this basis. It is not currently actions in the Legal Form of a Lease. The core concept of possible to reliably estimate the quantitative e ect at the the new standard is to standardise the accounting treat- time of initial application because the data is incomplete and ment of all leases by the lessee. The previously required changes to the lease portfolio are expected for . Informa- di erentiation between nance and operating leases no tion on existing lease obligations as of December can longer applies to the lessee. In future, all rights and obli- be found in the notes on page . gations arising from leases must be recognised in the balance sheet as right of use assets and lease liabilities. The only exceptions are short-term leases of up to one year for As things stand at present, the other changes to the nancial low-value assets. reporting standards and interpretations will have no material impact on the consolidated nancial statements of the Because of the growth in the balance sheet, liabilities will + . increase and the equity ratio will decline accordingly. For leases currently classi ed as operating leases, the lessee will in future recognise depreciation and impairment on the right-of-use asset and interest expenses on the carrying amount of the lease liability, instead of lease expenses. This change will lead to an improvement in key gures such as , and . Changes in the way lease expenses The income statement and statement of comprehensive from operating leases are reported will also result in an income are presented on page . The income statement improvement in cash ows from operating activities and a has been prepared in accordance with the cost of sales deterioration in cash ows from nancing activities. More- method. over, will require new qualitative and quantitative disclosures. The + uses derivatives to hedge market risk. The hedging strategy is explained in more detail in note . Hedge accounting according to is not applied to the

. NOTES derivatives and hedged items described above so that uc- the term of the hedging instrument as speci ed in . As tuations in the fair values of the outstanding derivatives a result, the following e ects must be eliminated from are recognised through pro t or loss at each balance sheet reported in the income statement: date. In addition, the exercise/settlement, sale or expiry of derivatives used for hedging purposes also have an e ect on pro t or loss. Depending on the purpose of the hedge, the e ects of hedg- Until maturity, the hedging transactions must be meas- ing are reported under the following items in the income ured at fair value as of each balance sheet date. Any di er- statement: ence from the carrying amount is recognised as income or expense. - All e ects on pro t or loss arising from anticipatory hedges of operating transactions to be recognised in pro t or loss in The carrying amount of the hedging instrument is future periods are combined in this income statement line derecognised at the time it is realised. It is realised when item. ‘Anticipatory’ refers to hedged items expected with a the hedging instrument is exercised/settled, expires or is high degree of probability, although they have not yet been sold. The di erence between the realised amount and car- recognised in the balance sheet or income statement. ‘Oper- rying amount is the income or expense recognised in the ating’ relates to hedged items that will have an e ect on . current period. Since is intended to show earnings Signi cant cases of application are that exclude the e ects of fair value measurement in accor- + hedging forecasted revenues in dance with , changes in fair value from earlier periods + hedging forecasted cash out ows (capital expenditure, included in the carrying amount are eliminated. operating expenses) in Canadian dollars Due to the elimination of all fair value changes during the term, the gain or loss on operating anticipatory hedges This item includes e ects on pro t or loss from hedging exist- included in corresponds to the value of the hedging ing foreign currency receivables (e. g. hedging receivables transaction at the time of realisation (di erence between against exchange rate uctuations with a forward the spot rate and hedging rate); in the case of options, it is exchange contract). reduced by the premium paid or increased by the premium received. E ects on pro t or loss from hedging items with a nanc- If the currency hedge relates to the expected capital expen- ing element that a ect neither in the current nancial diture denominated in Canadian dollars for the Bethune year nor in future nancial years are reported in the nancial plant, is adjusted for not only the above-mentioned result (e. g. interest derivatives). items, but all e ects on pro t or loss. Since the hedged items (capital expenditure in Canadian dollars) a ect Internal control of the + is performed on the basis only with a time lag through depreciation and amortisa- of , which is in turn determined on the basis of oper- tion, the fact that the hedged items do not a ect pro t ating earnings . di ers from the reported or loss means that to report the e ect on pro t or loss of in the income statement in that fair value uctuations aris- these hedges arising on maturity would not produce meaning from operating anticipatory hedges are not taken into ingful information on the pro tability gure expressed in account if they result from fair value measurement during . / TAB: 3.6.11

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on page . The regional breakdown of revenues is shown The sales revenues of the + amounted to ,. in the Segment Reporting Disclosures under note . million (: , . million), with , . million (: ,. million) resulting from the sale of goods, . million (: . million) from the provision of services Other operating income includes the following material and . million (: . million) from recognising rev- items: / TAB: 3.6.12 enues under customer-speci c construction contracts. The breakdown of revenues by business unit as well as interseg- Compensation and refunds in include income from loss ment revenues are presented in the segment information compensation covered by insurance pay-outs in the amount

TAB: . .

in € million Earnings after operating hedges EBIT II . . Income (−)/expenses (+) arising from changes in the fair value of outstanding operating anticipatory hedges − . − . Elimination of prior-period changes in the fair value of operating anticipatory hedges − . − . Recognised income (−)/expenses (+) of currency hedging for capital expenditure in Canada − . − . Operating earnings (EBIT I) . . Depreciation and amortisation (+)/impairment losses (+)/reversals of impairment losses (−) on non-current assets . . Capitalised depreciation expenses recognised directly in equity ¹ (−) − . − . EBITDA . .

¹ Relates to depreciation of assets used to create other items of property, plant and equipment. The depreciation expenses are capitalised as part of cost and not charged to pro t or loss.

TAB: . .

in € million Gains from exchange rate di erences/currency hedging transactions . . Reversals of provisions . . Compensation and refunds received . . Reversals of allowances for receivables . . Rental and leasing income . . – of which from investment properties . . Income from the disposal of property, plant and equipment and intangible assets . . Other income . . Other operating income . .

. NOTES of . million (: . million), most of which is attributable to impaired or destroyed items of property, plant and In the nancial year, investment income of . million (: equipment. . million) was realised; there were no impairment losses (: . million). Other operating expenses include the following material items: / TAB: 3.6.13 More information on ‘Gains/(losses) on operating anticipa- The net ‘Additions to/utilisation of provisions’ item includes tory hedges’ can be found in the ‘Notes to the Income State- personnel expenses in connection with the discontinuation ment and Statement of Comprehensive Income’ on page . of potash production at the Sigmundshall mine. / TAB: 3.6.14

TAB: . .

in € million Losses on exchange rate di erences/currency hedging transactions . . Expenses for the Bethune plant until production start . . Additions to/utilisation of provisions . . Ancillary capital expenditure costs . . Prior-period expenses . . Depreciation, amortisation and impairment losses . . – of which impairment losses . . Losses on the disposal of non-current assets . . Other expenses . . Other operating expenses . .

TAB: . .

in € million Gain/loss on the realisation of currency hedging transactions (expected USD revenues) . . – of which positive contributions to pro t or loss . . – of which negative contributions to pro t or loss − . − . Gain/loss on the realisation of currency hedging transactions (expected CAD capital expenditure) . . – of which positive contributions to pro t or loss . . – of which negative contributions to pro t or loss − . − . Gain/loss on realised hedging transactions . . Changes in the fair value of hedging transactions not yet due (expected USD revenues) − . . – of which positive fair value changes . . – of which negative fair value changes − . − . Changes in the fair value of hedging transactions not yet due (expected CAD capital expenditure) . — – of which positive fair value changes . — – of which negative fair value changes − . — Gain/loss from fair value uctuations for hedging transactions not yet due . . Gains/(losses) on operating anticipatory hedges . .

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In determining the borrowing costs to be capitalised, a / TAB: 3.6.17 weighted cost of capital of . was applied : . . / TAB: 3.6.15

The ‘Interest component from measurement of provisions for mining obligations’ consists of the net balance of the following items: / TAB: 3.6.16

TAB: . .

in € million Interest and similar income from securities . . Bank interest . . Interest income from pension provisions . . Other interest and similar income . . Interest income . . Interest expense on bonds/promissory note loans − . − . Interest component from measurement of provisions for mining obligations − . − . Interest expense on pension provisions − . − . Capitalisation of borrowing costs . . Other interest and similar expenses − . − . Interest expense −. − . Net interest −. − .

TAB: . .

in € million Interest rate e ect from the change in the discount rate for provisions for mining obligations − . − . Increase in provisions for mining obligations due to passage of time (interest cost) − . − . Interest rate e ect from the reversal of provisions for mining obligations . . Interest component from measurement of provisions for mining obligations −. − .

TAB: . .

in € million Gain/loss on the realisation of nancial assets/liabilities − . − . Income from the measurement of nancial assets/liabilities . . Other nancial result −. .

. NOTES viously untaxed earnings and pro ts generated at the level Deferred taxes in Germany were calculated using a tax rate of foreign companies. of . : .. In addition to an unchanged corporate income tax rate of . and an unchanged solidarity sur- The gure has been determined on the basis of current esti- charge of . on the corporate income tax rate, an average mates and is subject to uncertainty, because further guidance trade tax rate of . : . was taken into account. and instructions on how to apply the law are still expected. Deferred taxes in other countries are calculated applying the respective national income tax rates for pro t retention. / TAB: 3.6.18

The following table reconciles expected to actual tax expense. The expected income tax expense was calculated TAB: . . based on a domestic Group income tax rate of . : . . / TAB: 3.6.19 in € million Current taxes . . An amount of million included in the e ects of tax − – in Germany . . rate changes relates to a special item from the remeasure- – other countries . . ment of deferred taxes due to the reduction in the corporate Deferred taxes − . − . income tax rate in the from to . The full amount – in Germany . . of other e ects of changes in tax laws relates to repatriation – other countries − . − . tax payable on a once-o basis in connection with the tax – of which from loss carryforwards and tax credits . − . reforms. This is because, under the reforms, there is a transi- – of which attributable to temporary tion from the previous global taxation system to a territorial di erences − . − . taxation system, which will lead to tax being charged on pre- Income tax expense . .

TAB: . .

in € million Earnings before tax . . Expected income tax expense (Group tax rate: 29.9 %; previous year: 29.3 %) . . Changes in expected tax expense: Reduction in tax resulting from tax-free income and other items — — – Tax-free income from investments and gains on disposals − . − . – Other tax-free income − . − . Trade tax additions/deductions . . Increases in tax resulting from non-deductible expenses and other items . . Permanent di erences − . − . Increases/reductions in tax resulting from the measurement of deferred tax assets . − . E ects of tax rate di erences . . E ects of tax rate changes — − . E ects of other changes in tax law — . Taxes for prior years . − . Other e ects . − . Actual tax expense . . Tax rate ¹ . % . %

¹ Based on consolidated pro t before tax.

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TAB: . . / TAB: 3.6.20 in € million Expenses for raw materials and / TAB: 3.6.21, 3.6.22 supplies and for purchased goods . . ‘Employees’, page ; ‘Remuneration Report’, page Cost of purchased services ¹ . . Energy costs . . Cost of materials , . ,. Undiluted earnings per share are calculated by dividing con- ¹ Previous year restated by € 56.8 million due to a structural distinction. solidated earnings after taxes and non-controlling interests by the weighted average number of shares outstanding. Since none of the conditions resulting in the dilution of earnings per share are met in the + at present, TAB: . . undiluted earnings per share are the same as diluted earnings per share. / TAB: 3.6.23 in € million Wages and salaries . . If the authorised capital is utilised or a conditional capital Social security costs . . increase is implemented (see note , page ), earnings Pension . . per share could be diluted in the future. Personnel expenses , . , .

TAB: . .

Annual average (FTEs) Germany , , Other countries , , Total , , – of which trainees

¹ TAB: . .

in € million Earnings after tax and non-controlling interests . . Average number of shares (in millions) . . Earnings per share in € (basic = diluted) . .

¹ The calculation of adjusted earnings per share is described in the combined management report on page 85.

. NOTES For the Salt America and the Salt Europe, the mid- term planning is based on the detailed forecast period from The balance sheet is presented on page . The balance to . For the Potash and Magnesium Products, sheet is classi ed according to the maturity of the assets the detailed forecast period covers the years to . and liabilities. The gross carrying amounts and depreciation, For years beyond the detailed forecast period, a growth amortisation and impairment losses on individual non-cur- rate of . has been assumed for the nominal cash ows rent assets are shown separately on page . : . to compensate for cost and revenue in ation. The forecast period of the Potash and Magnesium Prod- ucts, which ends in , re ects the gradual expansion of In the consolidated balance sheet, goodwill from business production capacity at the new Bethune production plant combinations is allocated to the following cash-generating in Canada. units s: / TAB: 3.6.24 For the Potash and Magnesium Products, the forecast The Salt business unit is divided into the cash-generating re ects a slight increase in sales volumes, based on the units Salt America and Salt Europe. The decrease in goodwill increase in production at the new Bethune mine in Canada. is due to the e ects of currency translation as of the report- In addition, a slight recovery in the prices of potassium chlo- ing date. ride has been assumed.

In order to test goodwill for impairment, the net carrying The price and sales forecasts for the s Salt America and amounts of the respective cash-generating units were com- Salt Europe are based on the assumption of moderate rises in pared with their values in use. Values in use were deter- sales volumes and slight price increases. While the assumed mined on the basis of the present value of the future cash volume growth is based on an anticipated normalisation ows of the cash-generating units. The Salt America of winter weather and on our strategy, the expected price is based on the assumption of continuing use. The peri- trends primarily re ect our participation in the anticipated ods applied to the s Salt Europe and Potash and Mag- market performance. nesium Products are determined by the reserves of raw materials and annual production. The cash ow forecast is The following discount rates were applied as of the end of based on the latest mid-term planning of the + the nancial year: / TAB: 3.6.25 or the respective business units on the basis of plans of the company concerned. The mid-term planning is based The rates of interest for the cash-generating units correspond on internal estimates of the performance of the operating to the weighted cost of capital for the + before and business, market studies, the latest nancial results and the after taxes. best estimate of drivers such as energy and shipping costs ‘Computation of Cost of Capital’, page or exchange rates. The impairment tests conducted at the end of the nancial year con rmed that the goodwill items were not impaired. According to our assessment, realistic changes in the fundamental assumptions on which the process of determining the values in use is based would not result in the car- - rying amount of the particular cash-generating unit exceed- TAB: . . ing its value in use. in € million Brand rights totalling . million (: . million) CGU Salt America . . CGU Potash and are, in view of their level of awareness in the relevant sales Magnesium Products . . regions as well as their strategic relevance, classi ed as CGU Salt Europe . . assets with inde nite useful lives. All brand rights are allo- Total goodwill . . cated to the Salt America.

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TAB: . .

before tax after tax before tax after tax Interest rates in % CGU Salt America . . . . CGU Potash and Magnesium Products . . . . CGU Salt Europe . . . .

TAB: . .

in € million Securities and other nancial investments (non-current) . . Securities and other nancial investments (current) . . Securities and other nancial investments . .

The impairment test on the brand rights with inde nite the basis of local market conditions. In determining the val- useful lives, which is conducted annually, was carried out ues, particular account was taken of local property valuation by comparing the values in use of the brands with their car- records and, in part, of external valuation reports. The meas- rying amounts. The value in use was determined using the urement methods correspond to Level of the three-level fair relief-from-royalty method, which derives the brand value value hierarchy set out in . from the licence costs saved. The brand-speci c revenues for the years to were determined on the basis - of the corporate planning, and an annual growth rate of An amount of . million (: . million) is attribut- . : . was assumed for the period from . able to investments in a liated companies and equity invest- The applicable licence prices for the brands were derived ments. from third-party comparisons. The value in use was then determined by discounting the licence costs saved using The maximum default risk as of the balance sheet date corre- a risk-adjusted pre-tax interest rate of . : . . sponds to the amount recognised in the balance sheet. There The impairment test on the brands carried out on this basis are no speci c indications that would suggest any possible at the end of the nancial year did not result in any default. There are no signi cant concentrations of default impairment losses. risk.

The customer relationships obtained as a result of the acquisition of the are a signi cant intangible asset. As of December , the carrying amount totalled This item includes various investments (e. g. bonds and repos), . million (: . million), the remaining useful life which, in accordance with , are classi ed as loans and as of the reporting date was around years (: years). receivables or available-for-sale nancial assets. / TAB: 3.6.26

As of December , the fair values of investment properties amounted to . million (: . million). The fair values were estimated by internal specialist departments on

. NOTES In the year under review, a deferred tax charge of −. mil- The following deferred tax assets and liabilities recognised lion (: credit of . million) was recognised in other in the balance sheet relate to recognition and measurement comprehensive income. di erences for individual balance sheet line items and to tax loss carryforwards: / TAB: 3.6.27 The amount of deferred taxes recognised in the balance sheet declined by −. million as of December Deferred taxes totalling . million (: . million) (: . million); this change is made up of a decrease were not capitalised as utilisation of the underlying loss car- in deferred tax assets of −. million (: . million) ryforwards or the realisation of taxable income is considered and a decrease in deferred tax liabilities of − . million unlikely. The underlying loss carryforwards amount to . (: . million). million (: . million). They expire in the following periods: / TAB: 3.6.28 Taking into account deferred tax charge of −. million (: . million) and currency translation e ects of

TAB: . .

Deferred tax assets Deferred tax liabilities in € million Intangible assets . . . . Property, plant and equipment . . . . Inventories . . . . Trade receivables . . . . Other assets . . . . – of which derivative nancial instruments . — . . Provisions . . . . Trade payables — — . . Other liabilities . . . . – of which derivative nancial instruments . . — — Gross amount . . . . – of which non-current . . . . Valuation allowances − . − . — — Tax loss carryforwards . . — — Consolidations . . − . − . Netting − . − . − . − . Carrying amount (net) . . . .

TAB: . .

in € million Unrecognised loss carryforwards . . – of which loss carryforwards expiring within one year . — – of which loss carryforwards expiring after between two and ve years . — – of which loss carryforwards expiring after ve years . . – loss carryforwards that do not expire . .

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. million (: . million) recognised in other comprehensive income in the year under review, this results in deferred tax income of . million disclosed in the income Trade receivables recognised in connection with accounting statement (: . million). for customer-speci c construction contracts break down as follows: / TAB: 3.6.30, 3.6.31 Temporary di erences of . million (: . million) are related to shares in subsidiaries for which no deferred tax As in the previous year, there were no customer-speci c con- liabilities are recognised in accordance with .. struction contracts with negative balances as of Decem- ber . Since inventories are carried at net realisable value, allow- Current and non-current nancial assets include an amount ances of . million (: . million) were recognised in of . million (: . million) relating to assets the period under review. / TAB: 3.6.29 pledged as collateral for obligations.

TAB: . . - TAB: . .

in € million in € million Raw materials, consumables Contract costs incurred and and supplies . . contract pro t recognised . . Work in progress . . Less advances received . . Finished goods and merchandise . . Receivables from customer-speci c construction contracts . . Inventories . .

TAB: . .

of which remain- of which remaining maturity of ing maturity of more than year more than year in € million Trade receivables . — . — Other nancial assets . . . . – of which derivative nancial instruments . . . . – of which claim for reimbursement for Morton Salt bond . . . . – of which receivables from a liated companies . — . — Trade receivables and other nancial assets . . . .

. NOTES The allowances for trade receivables and other nancial instruments. Across the Group, : of all insur- assets have changed as follows: / TAB: 3.6.32 able receivables are hedged against default. This ensures that only a small residual loss is incurred in the event of default. Allowances of . million were recognised on trade receiv- An internal credit check is conducted for customers that can- ables as of December (: . million). Impair- not be hedged. There is no signi cant concentration of risk ment losses recognised on other nancial assets amounted relating to receivables. to . million (: . million). The impairment is due to the assessment of the existing risk of default. If receivables Receivables management is aimed at collecting all outstand- have a residual term of more than three months, they are ing accounts punctually and in full as well as of avoiding discounted applying interest rates as of the balance sheet the loss of receivables. Invoices are issued on a daily basis date. and invoice data is transferred to debtor accounts online. Accounts receivable are monitored on an ongoing basis with As of December , non-interest-bearing and low-inter- system support, in accordance with the payment terms est receivables amounting to . million were discounted agreed with the customers. Most payment terms range from (: . million). to days, with longer terms being customary in some

The following table provides information about the extent of the risk of default contained in ‘Trade receivables’. / TAB: 3.6.33

TAB: . . As of the balance sheet date, an amount of . million (: . million) of the unimpaired other nancial assets in € million was overdue. As of 1 January . . Additions . . The risk of default is the risk of a contractual partner fail- Reversals . . ing to meet its contractual payment obligations. The vast Utilisation . . majority of customer receivables are hedged against default Other changes . — risk with appropriate insurance coverage and other hedging As of 31 December . .

TAB: . .

of which neither overdue nor impaired as of the reporting Carrying amount date of which not impaired but overdue as of the reporting date for > and > and < days < days < days > days in € million Trade receivables . . . . . .

Trade receivables . . . . . .

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markets. In the case of late payment, reminders are issued at and the Australian dollar. Hedging transactions are entered regular two-week intervals. into for invoiced receivables and anticipated net positions on the basis of projected revenues. In this context, the net posi- In the case of trade receivables and other nancial assets tions are determined on the basis of revenue and cost plan- that are neither overdue nor impaired, it is assumed that the ning using safety margins and updated continuously to avoid respective debtors are in good nancial standing. excess hedging or hedging shortfalls.

The maximum risk of default on receivables and other nan- The hedging transactions used for hedging of anticipated cial assets is re ected in the carrying amount recognised in positions can have maturities of up to three years. The the balance sheet. As of December , the maximum main objective is to hedge a worst-case scenario. Here, amount in default in the highly unlikely event of a simulta- futures and plain vanilla options are used, although par- neous default on all unsecured receivables was . mil- ticipation in favourable market developments is generally lion (: . million). limited by the sale of simple options. This also serves to reduce premium expenses. In principle, it is also possible to use compound options consisting of an option on a plain Currency and interest rate management is performed cen- vanilla option, which can be acquired at a later date for a trally for all Group companies. This also applies to the use of xed amount. derivative nancial instruments, e.g. those aimed at limiting certain costs. The use of derivative nancial instruments is Based on the agreed payment terms, the maturities of instru- regulated by guidelines and procedural instructions. Trad- ments used to hedge invoiced receivables are less than one ing, settlement and control are strictly segregated. Deriva- year. tive nancial instruments are only traded with banks that have a good credit rating; they are monitored continually The hedges of anticipated net positions described above are by means of appropriate instruments. As a rule, the entire used in the Potash and Magnesium Products business unit portfolio of derivative nancial instruments is distributed for dollar positions as well as for Canadian dollar posi- amongst several banks to reduce the risk of default. The tions for production in Canada. Hedges of invoiced receiv- level of default risk is limited to the amount of derivative ables are entered into in the Potash and Magnesium Prod- nancial assets. ucts business unit.

The aim of interest rate management is to mitigate the risks All the above-mentioned derivatives are traded over the arising from rising interest expense for nancial liabilities counter only. Forward exchange and option contracts are as well as the risks arising from declining interest income always transacted via a trading platform through which from nancial assets as a result of changes in the general quotations are obtained from several banks so that a trans- level of interest rates. Since some of the promissory notes action can be entered into with the bank providing the best outstanding have oating interest rates, interest rate caps quotation. were acquired in order to eliminate the risk of higher interest charges. In the case of the nancial assets, there is currently Forward exchange contracts are subject to market risk on no identi able need for action because of the short remain- the respective reporting date. This is, however, o set by ing maturities and the low interest rates, meaning that there the opposite e ects of currency-based measurement of is a minimal risk of declining rates. receivables, which uses derivatives to hedge foreign currency receivables. Derivatives are used in currency hedging in order to limit the risks to which operating activities can be exposed as a The fair values determined in this process correspond to result of changes in exchange rates. Exchange rate risks exist the hypothetical value they would have on early transfer mainly with respect to the dollar and the Canadian dol- on the balance sheet date. The values are determined using lar, and, to a lesser extent, pound sterling, the Chilean peso recognised nancial methods generally used by market

. NOTES TAB: . .

Nominal values ¹ Fair values Nominal values ¹ Fair values in € million GBP/EUR forward exchange contracts – of which maturing in 2017 . — — — – of which maturing in 2018 — — . — AUD/EUR forward exchange contracts – of which maturing in 2017 — — — — – of which maturing in 2018 — — . — CAD/EUR forward exchange contracts – of which maturing in 2017 . − . — — – of which maturing in 2018 . . . . USD/EUR forward exchange contracts – of which maturing in 2017 . . — — – of which maturing in 2018 . − . . . – of which maturing in 2019 — — . . CLP/EUR forward exchange contracts – of which maturing in 2017 . . — — – of which maturing in 2018 — — . − . Plain vanilla currency options purchased (USD/EUR) – of which maturing in 2017 . . — — – of which maturing in 2018 . . . . Plain vanilla currency options sold (USD/EUR) – of which maturing in 2017 . − . — — – of which maturing in 2018 . − . . − . Plain vanilla currency options purchased (CAD/USD) – of which maturing in 2017 . . — — – of which maturing in 2018 . . . . – of which maturing in 2019 — — . . Plain vanilla currency options sold (CAD/USD) – of which maturing in 2017 . − . — — – of which maturing in 2018 . − . . − . – of which maturing in 2019 — — . − . Interest caps purchased – of which maturing in 2019 . . . — – of which maturing in 2021 . . . . Total derivative nancial instruments , . −. , . .

¹ In euros, translated using weighted average exchange rates.

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participants. These calculations were based in particular of Executive Directors was further authorised on May on the following inputs that applied on the balance sheet to increase the Company’s share capital, with the consent date: of the Supervisory Board, by a total of up to , ,., + the spot exchange and forward exchange rates of the cur- on one or several occasions, by issuing up to , , new rencies concerned, no-par-value registered shares (Authorised Capital ) until + the interest rate level, May . + did not make use of the + the agreed hedging levels and exercise prices, authorisations in the nancial year. + the traded volatilities and + the counterparty risk.

The share capital is conditionally increased by up to Although permits hedging relationships to be estab- , ,. by issuing up to , , no-par-value reg- lished between hedged items and derivative nancial instru- istered shares (Conditional Capital). ments, this is not applied (see ‘Notes to the Income State- ment and the Statement of Comprehensive Income’ on page The Board of Executive Directors is authorised until May ). , with the consent of the Supervisory Board, to issue bearer and/or registered convertible bonds and/or war- The following foreign exchange derivative nancial instru- rant-linked bonds on one or several occasions and to grant ments existed as of December : / TAB: 3.6.34 conversion rights to or impose conversion obligations on the holders or creditors of bonds or to issue warrants on shares in the Company in a proportionate amount of the The changes in individual equity items are shown separately share capital of up to , ,. in total. + - on page . did not make use of the authorisation in the nancial year.

The issued capital of + is unchanged from the previous year at . million, divided into . The share premium mainly consists of the premium received million no-par-value registered shares. The shares are fully as part of share issues of + . paid up. / TAB: 3.6.35 ‘Disclosures in Accordance with Section a () and Section a () of the as well as the Explanatory Report of the Board of Executive Directors This item summarises retained earnings, net retained prof- in Accordance with Section () Sentence of the AktG’ on page its, currency translation di erences, the reserve for fair value measurement of securities classi ed as available-for-sale - nancial assets and the remeasurement of pensions and According to the resolution adopted by the Annual General similar obligations. Meeting on May , the Board of Executive Directors was authorised to acquire own shares of up to of the share capital until May . + did not make use of the authorisation in the nancial year.

TAB: . . The Board of Executive Directors was authorised by the Outstanding Annual General Meeting on May to increase the shares on issue Issued capital Company’s share capital, with the consent of the Supervisory in € million Board, by a total of up to , ,., on one or several 31 December 2015 . . occasions, by issuing up to , , new no-par-value regis- 31 December 2016 . . tered shares (Authorised Capital) until May . The Board 31 December 2017 . .

. NOTES TAB: . .

Before taxes Tax e ect Net Before taxes Tax e ect Net in € million Items of other comprehensive income that may be reclassi ed to pro t or loss in subsequent periods . − . . − . . − . Exchange di erences on translation of foreign operations . − . . − . . − . – of which change in unrealised gains/losses . − . . − . . − . Items of other comprehensive income not to be reclassi ed to pro t or loss − . . . . −. . Remeasurement gains/(losses) on de ned bene t plans − . . . . − . . Other comprehensive income . . . −. −. − .

+ TAB: . .

in € million Net retained pro ts of K+S Aktiengesellschaft as of 1 January . . Dividend distributed for previous year − . − . Appropriation to other revenue reserves (resolution of Annual General Meeting) − . − . Earnings for the year of K+S Aktiengesellschaft . − . Withdrawal from other revenue reserves — . Net retained pro ts of K+S Aktiengesellschaft as of 31 December . .

Net retained pro ts mainly consist of past earnings of the companies included in the consolidated nancial statements, less dividends paid to shareholders. Currency translation dif- The + has made a number of de ned bene t pen- ferences mainly comprise di erences from the translation of sion commitments. Most of the commitments relate to Ger- foreign business operations from the functional currency into many and Canada. the Group’s reporting currency (euro). / TAB: 3.6.36 A signi cant pension plan in Germany is the + pension - scheme, which consists primarily of a basic pension, sup- + plementary bene ts as well as vested pension rights. The The dividend distribution is based on the annual nancial basic pension is based on a modular system under which statements of + as prepared in accor- notional contributions corresponding to a certain percent- dance with the German Commercial Code (Handelsgesetzbuch, age of pensionable income are collected annually. The pen- ). There is an intention to propose to the Annual General sion entitlement is calculated by applying a xed percentage Meeting that a dividend of . per share : ., i. e. to total notional contributions. Supplementary bene ts . million in total (: . million), be distributed to are a nal salary plan under which the entitlement is based the shareholders. As of the balance sheet date, the following on certain percentages of salary components above stat- net retained pro ts were reported in the single-entity nancial utory and miners’ insurance, multiplied by the number of statements of + : / TAB: 3.6.37 pensionable years of service. Fixed euro amounts or vested

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rights to nal-salary percentages were granted for periods salaries, while taking into account length of service. In this of service before the introduction of the basic pension and context, certain ceilings have to be observed. Since January supplementary bene ts . This pension plan has since been , active plan members can no longer earn new entitle- discontinued, so that no additional employees are eligible ments, but in return they participate in a de ned contribu- to acquire bene ts. tion scheme. The commitment was switched prospectively, which means that bene ts vested up to this date will remain Alongside the + pension scheme, numerous individual unchanged. Pension plans in Canada are regulated by law, for commitments were made, especially to members of the example, by the Financial Services Commission in Ontario Board of Executive Directors and senior management. They and the Canada Revenue Agency. There are minimum fund- are generally based on a modular system under which a cer- ing requirements under the Pension Bene ts Act (Ontario). To tain percentage of pensionable annual income is converted satisfy them, an independent actuarial valuation is generally into a lifelong pension applying an age-related factor. The performed in the middle of the year. The aim is to determine total entitlement corresponds to the sum of the individual the funded status of the pension plan in accordance with year-based modules. In this context, a certain de ned bene- legal requirements. If the plan is underfunded, the shortfall t level may not be exceeded. must be made up within a period of ve to years based on the type of shortfall. The valuation di ers from an In addition, there are other company-speci c pension com- valuation in that, for example, a di erent discount factor is mitments in Germany, which were already discontinued applied. some years ago. Most of the bene ciaries are already draw- ing pensions. The Canadian plan assets are held by an external company on a trust basis. It is responsible for the payment of pensions In Germany, all the pension obligations described above to pensioners as well as the management of plan assets. The are covered by a contractual trust arrangement . The trustee is selected by the , . Employee Ben- vehicle used for this is the + Vermögenstreuhänder e. V., e ts Committee, which comprises company representatives which was established in as a trustee to manage the and external advisors. It is also responsible for determining assets dedicated to the servicing of pension obligations. the investment strategy. While the pension payments continue to be made by the respective company, the payments are normally reimbursed The pension-related bene t commitments cover payments by the as they occur. There are no minimum funding for life, dental and medical insurance. The level of pay- requirements. ments for the dental and medical insurance depends on the average claims ratio of the pensioners, whereas life Moreover, there are deferred compensation arrangements assurance in principle involves a xed-sum commitment. and commitments that will be met through a provident No plan assets were established for the pension-related fund. These obligations are largely covered by reinsurance bene t commitments and there are no minimum funding policies. requirements.

In Canada, in addition to de ned bene t pension commit- The other pension commitments largely relate to pension-re- ments, there are pension-related plans that entail commit- lated plans in the United States and the Bahamas, which ments, for example, to provide medical bene ts to eligible provide for payments towards medical and life assurance bene ciaries after retirement. policies. No plan assets were established for these commitments and there are no minimum funding requirements. In The pension plans in principle provide for bene ts that are addition, there are pension commitments of minor signi - calculated as a percentage of the average ve highest annual cance in other countries.

. NOTES – TAB: . .

Germany Other countries Germany Other countries in % (weighted average) Pension commitments Discount rate . . . . Expected annual rise in income . . . . Expected annual rise in pensions . . . . Other pension-related bene t commitments Discount rate — . — .

– TAB: . .

The plans described above are subject to a number of risks, in obligations, which is only partially o set by a corre- in particular: sponding change in the value of plan assets. + Investment risks: The provisions for pensions and simi- + Healthcare cost trend (North America, in particular Can- lar obligations are calculated using a discount rate based ada and the Bahamas): Since payments for medical ben- on -rated corporate bonds. If the yield on plan assets is e t commitments are adjusted in line with cost trends in below this interest rate, this will result in underfunding. healthcare, an increase in medicine prices, hospital costs The investments are spread widely, mainly in bonds and etc. in the respective country will lead to an increase in equities, with the latter being particularly exposed to sig- obligations. ni cant market price uctuations. + Longevity risks: Life expectancy is taken into account in + In ationary risks: In Germany, the German Company Pen- calculating obligation levels by using mortality tables. sion Plan Act (Gesetz zur Verbesserung der betrieblichen An increase in life expectancy results in a corresponding Altersvorsorge, BetrAVG) requires a review of pension lev- increase in the obligations. els every three years, and this generally results in pen- + Salary risks: If the actual trend in salaries exceeds the sions being adjusted for in ation. Pension commitments anticipated trend, this will result in an increase in obli- in Canada are adjusted annually at a rate of of the gation levels. consumer price index . As a rule, an increase in the respective rates of in ation will therefore lead to a corre- The + strives to mitigate the risks by, for example, sponding increase in the respective obligations. changing over from de ned bene t plans to de ned con- + Interest rate risks: A decrease in yields on corporate bonds tribution plans. For this reason, most of the workforce in and, consequently, in the discount rate leads to an increase Germany now receives de ned contribution commitments

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only. In North America, too, bene t commitments have been + Germany: Heubeck mortality tables (: Heubeck either settled or frozen and transferred to a de ned contri- mortality tables ) bution system. + Canada: Private Scale B with adjustment factor (: Private Scale B with adjustment factor) The following assumptions have been made in calculating + Bahamas: Scale - (: Scale provisions for pensions and similar obligations as of the bal- -) ance sheet date: / TAB: 3.6.38 In the case of pension-related commitments for healthcare To determine the pension expenses for , the following bene ts, the following annual cost increases were assumed: actuarial assumptions – de ned at the end of nancial year + Canada: ., declining to . from (: . – were used: / TAB: 3.6.39 . from ) + Bahamas: . (: . . from ) As of December , the following mortality tables were applied: The following tables show the changes in the projected ben- e t obligation and plan assets: / TAB: 3.6.40, 3.6.41

TAB: . .

Other Other Other Other Total Germany countries countries Total Germany countries countries Pension- Pension- related related Pensions Pensions obligations Pensions Pensions obligations in € million Projected bene t obligation on 1 January . . . . . . . . Changes to the scope of consolidation — — — — − . — − . — Service costs . . . . . . . . Past service costs . — . — − . — . − . Interest expense . . . . . . . . Remeasurement ¹ . . − . . . − . . . – of which actuarial gains (−)/losses (+) from changes in demographic assumptions − . — − . − . − . — — − . – of which actuarial gains (−)/losses (+) from changes in nancial assumptions . . − . . . − . . . – of which actuarial gains (−)/losses (+) based on experience-based adjustments − . − . − . − . − . . − . . Pension payments − . − . − . − . − . − . − . − . Plan amendments/settlements . . − . — — — — — Exchange rate uctuations . — . . − . — − . − . Projected bene t obligation on 31 December . . . . . . . .

¹ The actuarial losses arising from changes in nancial assumptions in Germany include e ects of the initial recognition of deferred compensation and the provident fund in an amount of € 4.3 million (2017) and € 7.0 million (2016).

. NOTES TAB: . .

Other Other Total Germany countries Total Germany countries Pensions Pensions Pensions Pensions in € million Plan assets on 1 January . . . . . . Finance income . . . . . . Employer contributions . . . . . . Gains (−)/losses (+) from remeasurement of plan assets (excluding amounts recognised in interest income) ¹ . . . . . . Pension payments − . − . − . − . − . − . Exchange rate uctuations . — . − . — − . Plan assets on 31 December . . . . . .

¹ The remeasurement gain in Germany includes e ects of the initial recognition of deferred compensation and the provident fund in an amount of € 4.3 million (2017) and € 6.8 million (2016).

TAB: . .

Other Other Other Other Total Germany countries countries Total Germany countries countries Pension- Pension- related related Pensions Pensions obligations Pensions Pensions obligations in € million Projected bene t obligation on 31 December . . . . . . . . Plan assets on 31 December . . . — . . . — Carrying amounts on 31 December . . . . . . . . – of which provisions for pensions and similar obligations (+) . . . . . . . . – of which assets (−) − . − . — — − . − . — —

For reconciliation to the carrying amounts, the projected ben- The fair value of plan assets is distributed across the follow- e t obligation must be o set against plan assets. ing investment classes: / TAB: 3.6.44 / TAB: 3.6.42 Investments held through investment funds were allo- The following amounts were recognised in the statement of cated to the individual investment classes in the list above. comprehensive income: / TAB: 3.6.43 A majority of the bonds are rated as investment grade. The shares are regularly traded on an active market. While the The service costs (including past service costs) are reported same generally applies to the bonds, the item includes prom- according to the allocation of employees to the respective issory note loans with a carrying amount of . million functional area. Net interest expense or income is reported (: . million) that are not traded on an active market. in net interest. Positive past service cost for pension-related There is no active market for reinsurance arrangements. Own obligations in other countries is attributable to the introduc- nancial instruments are held in an amount of . million tion of minimum periods of service as an eligibility criterion. (: million).

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TAB: . .

Other Other Other Other Total Germany countries countries Total Germany countries countries Pension- Pension- related related Pensions Pensions obligations Pensions Pensions obligations in € million Service costs . . . . . . . . Past service costs . — . — − . — . − . Net interest expenses (+)/income (−) . . . . . . . . Expenses (+)/income (−) from plan amendments/settlements . . − . — — — — — Amounts recognised in the income statement . . . . . . . − . Gains (−)/losses (+) on remeasurement of plan assets (excluding amounts recognised in interest income) − . − . − . — − . − . − . — Actuarial gains (−)/losses (+) from changes in demographic assumptions − . — − . − . − . — — − . Actuarial gains (−)/losses (+) from changes in nancial assumptions . . − . . . − . . . Actuarial gains (−)/losses (+) based on experience-based adjustments − . − . − . − . − . . − . . Amounts recognised in other comprehensive income ¹ . . − . . −. −. −. . Total (amounts recognised in statement of comprehensive income) . . −. . −. −. −. .

¹ As a result of the initial recognition of deferred compensation and the provident fund, the gures for Germany include actuarial losses from changes in nancial assumptions in an amount of € 4.3 million (2017) and € 7.0 million (2016) and a remeasurement gain on plan assets in an amount of € 4.3 million (2017) and € 6.8 million (2016).

TAB: . .

Total Germany Other countries Total Germany Other countries Pensions Pensions Pensions Pensions in € million Bonds . . . . . . – Government bonds . . . . . . – Corporate bonds . . . . . . Shares . . . . . . – Consumer . . . . . . – Raw materials . . . . . . – Finance . . . . . . – Industry . . . . . . – Energy . . . . . . – Other . . . . . . Cash and cash equivalents . . . . . . Reinsurance arrangements . . — . . — Other . . . . . . Plan assets on 31 December . . . . . .

. NOTES TAB: . .

Change in present value of obligations Total Germany Other countries Other countries Change in Pension-related assumption Pensions Pensions obligations in € million Discount rate + basis points − . − . − . − . Discount rate − basis points . . . . Expected annual rise in income + basis points . . . — Expected annual rise in income − basis points − . − . − . — Expected annual rise in pensions + basis points . . . — Expected annual rise in pensions − basis points − . − . − . — Medical cost trend + basis points . — — . Medical cost trend − basis points − . — — − . Life expectancy + year . . . . Life expectancy − year − . − . − . − .

TAB: . .

The following sensitivity analysis shows how the present The following maturities of undiscounted payments of pen- value of the obligation would change in the event of a change sions and similar obligations are expected in subsequent in actuarial assumptions. No correlation between individ- years: / TAB: 3.6.47 ual assumptions was taken into account, which means that in the event of one assumption being changed, the other As of December , the weighted average duration of assumptions remained unchanged. The projected unit credit obligations in Germany was years (: years), for pen- method used to determine the carrying amounts was also sion obligations outside Germany it was years (: used in the sensitivity analysis. / TAB: 3.6.45 years), and for pension-related obligations outside Germany it was years (: years). The duration and maturity pro- The previous year’s analysis identi ed the following values: le of the obligations di er between individual companies, / TAB: 3.6.46 signi cantly so in some cases. The asset allocation generally

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takes this circumstance into account, especially in Germany. vested pension rights and pensioners account for less than The aim is to service the pension payments from current plan of the total pension fund. asset income. The pension bene ts provided via the pension fund are In the nancial year, a cash out ow of . million (: to be classi ed as a multi-employer plan within the meaning . million) is expected from pension and similar commit- of . et seq. In principle, the plan is a de ned bene t ments. This out ow comprises allocations to plan assets and plan. Since reliable information, in particular on plan assets, pension payments that are not covered by corresponding is only available for the pension fund as a whole and not spe- reimbursements from plan assets. ci cally for the units attributable to the + , insu - cient information is available for reporting the plan on the In addition, there are other pension plans for which no pro- balance sheet. That is why the plan is accounted for as a visions need to be recognised, since there are no obliga- de ned contribution plan in accordance with . . tions other than contribution payments (de ned contribution plans). These comprise both bene ts funded solely As a result of the termination of regular memberships, no by the employer and deferred compensation subsidies for further contributions are to be paid into the pension employees. fund. Due to a decrease in the discount rate at the pension fund, the need for a special contribution was identi ed Employers and employees made contributions under the – in ; under the technical business plan, the proportionate now closed – supplementary pension plan operated via the share attributable to + is . million. This amount was pension fund. In , the pension fund terminated recognised through pro t or loss and charged to the appro- the regular memberships for + employees, so that as of priate functional area in the nancial year under review; the December , only extraordinary membership is available payment will be made in . Apart from the special con- for the employees concerned and those memberships are tribution described above, no other contribution payments continued as vested pension rights. In addition, the pen- are expected to be made to the pension fund in . sion fund makes regular pension scheme payments to (former) + employees. + company employees with Moreover, the secondary liability governed by the German Company Pension Plan Act (Gesetz zur Verbesserung der betrieblichen Altersversorgung, BetrAVG) may give rise to an obligation to assume liabilities for +, especially for in ation adjustments to current pension payments. Pension TAB: . . adjustments not covered by the pension plan must be assumed by +. . . . . in € million Up to 1 year . . In total, pension expenses are as follows for the period under Between 1 and 5 years . . review: / TAB: 3.6.48 Between 5 and 10 years . . More than 10 years . . In addition, contributions of . million (: . mil- Total , . , . lion) were paid to government pension funds.

TAB: . .

Total Germany Other countries Total Germany Other countries in € million De ned contribution expenses . . . . . . De ned bene t expenses . . . . . − . Pension expense (recognised in EBIT) . . . . . .

. NOTES TAB: . .

Total of which current Total of which current in € million Mine and shaft back lling . . . . Maintenance of tailings piles . — . — Mining damage . . . . Renaturation . — . — Other . . . . Mining provisions , . . , . .

assumed : . . The discount rate for mining obligations in countries is . : . . The discount rate Provisions for mining obligations are recognised as a result used for mining obligations in North America is . in of legal and contractual requirements as well as conditions the : . and . in Canada : . . The imposed by the authorities; details are primarily provided in expected settlement dates largely depend on the remaining operating plans and water permit decisions. These obliga- useful lives of the locations. Some of the obligations extend tions, most of which are subject to public law, require sur- well beyond . face securing and renaturation measures. Mining damage can result from underground extraction and any resulting The additions to mining provisions totalled . million subsidence or from damage in the production process in the (: . million) for the year under review. They were form of dust or saltwater intrusion. Any obligations arising largely attributable to interest cost added to provisions, the as a result are covered by provisions. / TAB: 3.6.49 recognition of additional provisions for mining risks and the remeasurement of existing provisions. The amount of the provisions to be recognised is based on expected expenditure or estimated compensation. It is Mining provisions were used in an amount of . million determined by internal experts and – where necessary – (: . million) to settle obligations to secure mines. with the help of third-party reports prepared using state- of-the-art techniques and in compliance with current legal Provisions totalling . million (: . million) were requirements. Since some of the settlement dates are in the reversed, largely from provisions for mine and shaft back ll- future, there may be di erences between actual and esti- ing and mining damage risks. mated expenses, even though great care is taken in applying these techniques. These di erences may arise, for exam- - ple, from di erent cost trends, technological advances or changes in legal requirements. These circumstances are The carrying amount of provisions for anniversary bonuses is taken into account by regularly recalculating the provisions . million (: . million) and therefore represents required. a signi cant item under non-current personnel obligations. They are recognised for future payments in connection with Provisions for mining obligations are mainly non-cur- , and -year service anniversaries. They are measured rent provisions, which are recognised at the settlement using the projected unit credit method. Calculations are amount determined on the basis of expenses expected to based on a discount rate of . : . with an antic- be incurred in the future and discounted to the balance ipated annual increase in salaries and wages of . : sheet date. In this process, a future price increase of . is . .

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Obligations arising from sales transactions relate primarily to The following table shows the liquidity analysis of nancial discounts and price concessions; provisions for outstanding liabilities in the form of contractually agreed, undiscounted invoices are recognised on the basis of purchase contracts. cash ows: / TAB: 3.6.50, 3.6.51 Current personnel obligations mostly consist of provisions for performance-related remuneration and provisions for untaken vacation leave and non-working shifts. ‘Employees’, page ; ‘Remuneration Report’, page

- TAB: . .

Cash ows Remaining Remaining maturity Remaining carrying maturity > year and maturity amount total < year < years > years in € million Financial liabilities , . , . . ,. . – of which bonds , . , . . , . . – of which promissory note loans . . . . . – of which liabilities to banks . . . . — Trade payables . . . . . Liabilities from nance leases . . . . . Other non-derivative nancial liabilities . . . — — Non-derivative nancial liabilities ,. ,. , . , . .

- TAB: . .

Cash ows Remaining Remaining maturity Remaining carrying maturity > year and maturity amount total < year < years > years in € million Financial liabilities , . , . . , . . – of which bonds , . , . . , . . – of which promissory note loans . . . . . – of which liabilities to banks . . . — — Trade payables . . . . . Liabilities from nance leases . . . . . Other non-derivative nancial liabilities . . . — . Non-derivative nancial liabilities ,. , . . ,. .

. NOTES ¹ TAB: . .

Nominal Nominal Nominal amount interest rate Nominal amount interest rate in million % p.a. in million % p.a.

2012/22 bond . % . % 2013/18 bond . % .% 2013/21 bond .% .% 2017/23 bond — — . % Promissory note loans ( xed, mature 2019 – 23) Average around % Average around % Promissory note loans ( oating, mature 2019 – 22) Based on EURIBOR Based on EURIBOR

¹ In addition, there is a USD bond taken over in 2009 as part of the acquisition of Morton Salt with a nominal value of USD 22.6 million and a maturity date in 2020. Interest and principal payments resulting from this bond are to be paid by Rohm & Haas and are covered by a contractual bank guarantee. Reimbursement claims for payments of interest and principal resulting from this legal construct are reported under ‘Other nancial assets’, both current and non-current.

TAB: . .

Cash ows Remaining Remaining maturity Remaining carrying maturity > year and maturity amount total < year < years > years in € million Gross settlement Currency derivatives − . − . − . — — Payment obligation ¹ − . − . — — Payment claim ¹ . . — —

¹ Translation of payment transactions in foreign currency at the spot rate.

TAB: . .

Cash ows Remaining Remaining maturity Remaining carrying maturity > year and maturity amount total < year < years > years in € million Gross settlement Currency derivatives − . . . − . — Payment obligation ¹ − , . − . − . — Payment claim ¹ , . ,. . —

¹ Translation of payment transactions in foreign currency at the spot rate.

The bonds and promissory note loans issued break down as non-discounted gross cash which are settled on a gross follows: / TAB: 3.6.52 basis. / TAB: 3.6.53, 3.6.54 ‘+ on the Capital Market’, page The following table shows the Group’s liquidity analysis for derivative nancial liabilities. The table is based on

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The fair values of the nancial instruments are mostly based on the market information available on the balance sheet The following table shows the carrying amounts and fair val- date. They can be allocated to one of the three levels of the ues of the Group’s nancial instruments: / TAB: 3.6.55 fair value hierarchy of .

The carrying amounts of the nancial instruments, aggre- Level nancial instruments are measured on the basis of gated according to measurement categories, are as quoted prices in active markets for identical assets and liabil- follows: / TAB: 3.6.56 ities. Level nancial instruments are measured on the basis

TAB: . .

Measurement category in Carrying Carrying accordance with IAS amount Fair value amount Fair value in € million Shares in a liated companies and other equity investments ¹ Available for sale . . . . Loans Loans and receivables . . . . Financial investments . . . . Trade receivables Loans and receivables . . . . Derivatives with positive fair values Held for trading . . . . Other non-derivative nancial assets Loans and receivables . . . . Other nancial assets . . . . Securities and other nancial investments Loans and receivables . . . . Securities and other nancial investments Available for sale . . . . Cash and cash equivalents Loans and receivables . . . . Financial liabilities Financial liabilities at amortised cost ,. , . , . ,. Financial liabilities at Trade payables amortised cost . . . . Derivatives with negative fair values Held for trading . . . . Financial liabilities at Other non-derivative nancial liabilities amortised cost . . . . Liabilities from nance leases IFRS . . . . Other nancial liabilities . . . .

¹ Following the initial application of IFRS 9 as of 1 January 2018, this item will be measured at fair value of € 71.2 million.

TAB: . .

in € million Available-for-sale nancial assets . . Loans and receivables . , . Financial assets held for trading . . Financial liabilities at amortised cost , . , . Financial liabilities held for trading . .

. NOTES TAB: . .

Total Level Level Level Total Level Level Level in € million Assets . — . — . — . — Derivative nancial instruments not designated as hedging instruments under IAS 39 . — . — . — . — Available-for-sale nancial assets . — . — . — . — Equity and liabilities . — . — . — . — Derivative nancial instruments not designated as hedging instruments under IAS 39 . — . — . — . —

of inputs that can be derived from observable market data, correspond to their fair values, because these instruments or on the basis of market prices for similar instruments. Level mostly have short maturities. nancial instruments are measured on the basis of inputs that cannot be derived from observable market data. The fair values of securities and other nancial investments belonging to the loans and receivables category correspond The table below shows the assets and liabilities measured at to the present values of the cash ows associated with these fair value: / TAB: 3.6.57 balance sheet items (Level ).

The derivative nancial instruments primarily consist of cur- In the case of nancial liabilities, fair value is based on market rency derivatives (forward exchange contracts, options). The prices, if active markets exist (Level ); if not, the present value fair value of forward exchange contracts is calculated by of future cash ows is used (Level ). They are discounted estimating future cash ows based on the quoted forward using market interest rates with matching maturities. exchange rates as of the reporting date and the agreed forward exchange rates, which are subsequently discounted at In the case of trade payables and other non-derivative nan- an interest rate matching the respective maturities and cur- cial liabilities, it is assumed that the carrying amounts corre- rencies. Recognised option pricing models are applied when spond to the fair values of these instruments, because these determining the fair value of currency options, using inputs instruments mostly have short maturities. observed in the market on the reporting date (in particular exchange rate, interest rate, volatility). In addition, the risk of For loans and liabilities from nance leases, we assume that counterparty default is taken into account when performing carrying amounts correspond to fair values, because di er- the calculations. ences between market interest rates and discount rates are not material. Fair values of available-for-sale nancial assets are based on the present values of the cash ows associated with these The following table shows the net gains or losses on nancial balance sheet items (Level ). instruments: / TAB: 3.6.58

Equity instruments measured at cost include shares in Net gains/losses on available-for-sale nancial instruments (non-consolidated) subsidiaries, joint ventures, associates primarily comprise gains or losses on equity investments. and other equity investments. Following the initial applica- Net gains/losses on loans and receivables mainly include the tion of as of January , these instruments will be e ects of currency translation and changes in allowances. measured at fair value. Net gains/losses on nancial assets and liabilities held for trading consist mainly of e ects arising from the fair value In the case of trade receivables, other non-derivative nancial measurement and realisation of derivative nancial instru- assets and cash and cash equivalents, the carrying amounts ments. Net gains/losses on nancial liabilities measured at

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amortised cost come mainly from the e ects of currency ing system. The liquidity requirement is determined in our translation. liquidity planning. Available liquidity amounted to , . million as of December (: . million); it con- Total interest income and expenses for nancial assets and sisted of short-term investments and cash and cash equiv- liabilities measured at fair value through other comprehen- alents as well as the undrawn part of our syndicated credit sive income were as follows: / TAB: 3.6.59 line, which matures in . ‘Financial Risks and Opportunities’, page Liquidity risk entails the failure to procure the funds needed to meet payment obligations or the inability to do so in a The vast majority of customer receivables are hedged against timely manner. External factors, especially a general nan- default risk with appropriate insurance coverage and other cial crisis, could make it impossible to replace credit lines hedging instruments. We only waive a security against or bonds on acceptable commercial terms should the need non-payment following a critical review of the customer rela- arise. There would also be a risk that the cost of procuring tionship and speci c approval. The vast majority of unsecured liquidity would rise. For this reason, the principal objective receivables are receivables from public-sector customers. of our liquidity management activities is to ensure the abil- ‘Financial Risks and Opportunities’, page ity to make payments at any given time. Liquidity is managed by the Central Treasury unit using a Group-wide cash pool- Default risks also exist with regard to partners with which we have entered into hedging transactions, credit lines exist or money has been invested. A potential default of a bank or other party could have an adverse e ect on the nancial position.

TAB: . . Interest rate risk arises from a change in market interest rates, in € million which may have an impact on interest payable or receivable, Available-for-sale nancial assets . . and also on the fair values of nancial instruments. This may Loans and receivables . − . also impact on earnings or equity. Under , interest rate Financial assets and risk must be presented using sensitivity analysis. This analy- liabilities held for trading . . sis is based on the following assumptions: Financial liabilities at amortised cost − . . + The e ect on earnings or equity identi ed by way of sensitivity analysis relates to the total as of the balance sheet date and demonstrates the hypothetical e ect over one year. + Changes in market interest rates for primary nancial TAB: . . instruments with variable interest rates have an impact

on net interest and are taken into account in an earn- in € million ings-based sensitivity analysis. Interest income . . + Changes in market interest rates for primary nancial Interest expenses before instruments with xed interest rates that are measured capitalisation of borrowing costs . . Capitalised borrowing costs . . at amortised cost do not have an impact on earnings or Interest expenses after equity and are therefore not taken into account during the capitalisation of borrowing costs . . sensitivity analysis. While these instruments are subject

. NOTES ¹ TAB: . .

in € million Net debt/EBITDA . . . . . Net debt/equity (%) . . . . . Equity ratio (%) . . . . .

¹ See ‘De nition of nancial indicators’ on page 205. Information on how EBITDA is calculated can be found in the ‘Notes to the Income Statement and the Statement of Comprehensive Income’ on page 157.

to interest rate risk on reinvestment, this is not taken into to which the collateral is taken into account depends on the account in the sensitivity analysis carried out as of the bal- above criteria, i. e. if the rating or tradability of the collateral ance sheet date. declines, the lending value decreases, and additional collat- ‘Financial Risks and Opportunities’, page eral has to be provided. The appropriate terms and limits of the eligible collateral are based on our internal monitoring, There were oating-rate liabilities as of the reporting date. which always takes the rating and the level of credit default insurance (using credit default swaps) into account. An increase in the reference interest rate by one percentage point would have led to further interest charges of . million for non-current oating-rate liabilities as of the balance sheet date (: . million). The purchased interest rate The aim of capital management in the + is to caps would have reduced this e ect to an interest charge of ensure and e ciently control liquidity across the Group, . million (in , the interest rate caps would have elim- maintain and optimise nancing capability and reduce nan- inated this e ect). As in the previous year, a decrease in the cial risk. reference interest rate by one percentage point would have ‘Financial Position’, page had no impact on the interest expenses for non-current oating-rate liabilities. The nancial policy instruments for meeting these aims include nancing measures that involve both equity and In addition to receivables and liabilities denominated in Group borrowings. All nancing measures in the Company, which currency, there are also items in foreign currency. Under also include cash, currency and interest rate management, , exchange rate risks must be presented using sensitivity are coordinated and managed by the Central Treasury unit. analysis. If the euro had been stronger or weaker against foreign currencies (mainly dollar), the carrying amount of Capital management is guided by nancial indicators such the net position of foreign currency receivables and liabilities as net debt/, net debt/equity and the equity ratio. would have increased or decreased by +−. million (: / TAB: 3.6.60 +−. million) through pro t or loss.

As of the balance sheet date, there were also investments for which collateral had been provided by the counterparties, normally banks. They relate to repo transactions that TAB: . .

have the features of secured term investments. The terms and limits for the collateral, which cannot be appropriated in € million for any other purpose, are agreed with the counterparty on Equity ,. , . the basis of a collateral basket, which is primarily de ned by Non-current liabilities , . , . asset class, rating, country and currency. The lending value up Current liabilities , . , .

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Managed capital was as follows as of the reporting date: The + only acts as lessor to an insigni cant extent. / TAB: 3.6.61 The + is also a lessee in operating leases. Given the relevant contractual arrangements, these assets are not recognised as non-current assets. Operating lease expenses In the + , general business activities are associ- incurred in amounted to . million (: . mil- ated with a number of risks, for which provisions have been lion). The nominal amount of future minimum lease pay- recognised, provided that the conditions for recognition ments from non-cancellable operating leases is allocated to according to have been met. In addition, there is an future periods as follows: / TAB: 3.6.64 obligation to disclose contingent liabilities. Contingent liabilities are possible obligations, which are not recognised in the balance sheet, because it is less probable that they will be used. In , contingent liabilities amounted to around . million (: around . million), resulting mainly TAB: . . from legal risks. in € million In , liabilities from uncompleted capital expenditure Land, land rights and buildings . . projects totalled . million (: . million). They Technical equipment and machinery . . related almost exclusively to uncompleted capital expen- Ships . . diture projects in property, plant and equipment. For addi- Prepayments and assets tional nancial liabilities due to leasing, see the disclosures under construction . — in Note . Total . .

Certain technical equipment and machinery, such as supply networks, dedicated railway sidings, railway goods carriages and cogeneration units, is used in the context of nance TAB: . . leases; it is capitalised because bene cial ownership of the leased asset is attributable to the + . Speci cally, this in € million applies to the following items: / TAB: 3.6.62 – due in the following year . . – due within 2 – 5 years . . The relevant payment obligations from nance leases are due – due after 5 years . . as follows: / TAB: 3.6.63 Total . .

TAB: . .

Minimum lease payments Interest component included Lease liabilities in € million Due within 1 year . . . . . . Due within 2 – 5 years . . . . . . Due after 5 years . . . . . . Total . . . . . .

. NOTES The main operating leases relate to vehicles, o ce premises, Cash deposits with a liated companies are reported under storage capacity, technical equipment and machinery and ‘Other nancial assets’ (current) and cash deposits received railway goods carriages. from a liated companies are reported under ‘Other nancial liabilities’ (current). Both nance and operating leases sometimes contain lease renewal and/or purchase options and, to a small extent, Dividend payments and pro t transfers from non-consoli- price adjustment clauses. In the case of operating leases, dated companies totalled . million in the reporting period the price of exercising the purchase option is not signi cantly (: . million). lower than the fair value of the assets concerned at the time the option can be exercised. On the reporting date, there were trade payables and current provisions totalling . million (: . million), which resulted from non-cash additions to property, plant and equipment. Similar to the non-cash additions to nance leases, they are primarily attributable to the new Bethune plant. The cash ow statement is presented on page . No cash transactions from discontinued operations had to be included. ‘Financial Position’, page

TAB: . . in € million Cash and cash equivalents include cash on hand and bal- Cash and cash equivalents (as ances with banks, as well as nancial investments with a recognised in balance sheet) . . maturity that generally does not exceed three months from Cash deposits with a liated companies . — the date of acquisition. These nancial investments consist Cash deposits received from predominantly of short-term deposits at credit institutions a liated companies − . − . Net cash and cash equivalents . . and other cash-equivalent investments. / TAB: 3.6.65

TAB: . .

Cash ows Changes Carrying amount Carrying amount from nancing to the scope of Additions Changes in Other December January activities (net) consolidation to nance leases exchange rates e ects in € million Bonds , . . — — − . . , . Promissory note loans . . — — — . . Liabilities to banks . − . — — — — . Total nancial liabilities (as recognised in balance sheet) , . . — — − . . , . Liabilities from nance leases . − . — . − . . . Reimbursement claim from Morton Salt bond − . — — — . . − . Total , . . — . −. . ,.

. NOTES TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

Currency hedges were entered into to hedge -denomi- Financial assets (with the exception of equity interests) and nated capital expenditure payments for the Bethune plant non-current nancial liabilities are not allocated to seg- against currency uctuations. The hedges that matured in ments. resulted in a cash in ow of . million (: cash in ow of . million), which is reported under purchases of property, plant and equipment. / TAB: 3.6.66 The data for determining segment pro t or loss is based on income statements produced according to the total cost (nature of expense) method (internal reporting structure of the + ). Income statements of the companies Segment reporting is presented on page . included in segment pro t or loss are allocated to segments in accordance with pro t centre accounting. Segments are de ned according to products. This corre- Earnings before interest, taxes, depreciation and amortisa- sponds to the internal organisational and reporting struction is used by the + as the most import- ture of the + . ant internal pro tability variable and performance indicator. The calculation of is based on . Net interest and The Potash and Magnesium products segment combines the tax expense as well as other income and expenses a ect- production and marketing of potash fertilizers and fertilizer ing the nancial result are not included in the calculation. specialties as well as potash and magnesium compounds for In addition, certain gains or losses arising from operating technical, industrial and pharmaceutical applications. anticipatory hedging transactions are eliminated, taking tax e ects into account (see ‘Notes to the Income Statement and The Salt segment encompasses the production and market- Statement of Comprehensive Income’ on page ). , is ing of consumer products, salt for food processing, indus- calculated by adding the included depreciation and amorti- trial salt and salt for chemical use, deicing salt and sodium sation to , but adjusted for the depreciation and amor- chloride brine. tisation recognised directly in equity for own work capitalised. In the year under review, the adjusted depreciation and The Complementary Activities segment bundles together amortisation amount recognised directly in equity was . not only recycling activities and waste disposal and/or million (: . million). reutilisation in potash and rock salt mines and ® and ® granulation, but also other activities important for Business unit pro t or loss is presented on a consolidated the + . The + has its own logistics service basis. Intrasegment supplies of goods and services are con- provider: + . solidated. trades in di erent basic chemicals. - The accounting policies applied to determine the segment information are the same as those of the + . Transfer prices for supplies of goods and services between segments are set on an arm’s length basis, as they would be payable by an unrelated third party. Transfer pricing methods are documented on a timely basis and kept up to date Assets, provisions and liabilities are allocated to a segment at all times. The comparable uncontrolled price method, according to their use or origin. If they are used by or origi- the resale price method, the cost plus method or a combi- nate in more than one segment, they are allocated based on nation of all three may be used when determining transfer appropriate formulas. prices for goods and services. We select the method that

. NOTES best re ects the way external prices are determined in com- of property, plant and equipment resulted in a loss of . parable markets. million in .

Provisions amounting to . million (: . million) The reconciliation of segment gures to the corresponding were reversed in the reporting period for unused obligations. items in the consolidated nancial statements of the + Insurance pay-outs of . million (: . million) were includes items allocated to central functions as well collected during the year under review. The disposal of items as consolidation e ects. The main items are: / TAB: 3.6.67 of property, plant and equipment resulted in a loss of . million in . The breakdown of the + ’s revenues by region is as

follows: / TAB: 3.6.68 Provisions amounting to . million (: . million) were reversed in the reporting period for unused obligations. The allocation is based on the registered o ce of customers. Insurance pay-outs of . million (: . million) were No single customer accounted for more than of total collected during the year under review. The disposal of items revenues in the and nancial years.

TAB: . .

in € million Reconciliation of segment earnings EBITDA ¹ EBIT I before consolidation . . Consolidation e ects − . − . Depreciation, amortisation and impairment losses . . −. −. Reconciliation of segment assets Non-current assets . . Deferred tax assets . . Fair values of derivatives − . . Income tax refund claims . . Other receivables . . Cash and cash equivalents . . Consolidation e ects − . − . . . Reconciliation of segment liabilities Provisions for pensions and similar obligations . . Other provisions . . Deferred tax liabilities . . Fair values of derivatives − . − . Financial liabilities , . , . Other liabilities . . Income tax liabilities . . Consolidation e ects − . − . ,. , .

¹ The reconciliation of EBIT II to operating earnings (EBIT I) and EBITDA is presented in the notes (see ‘Notes to the Income Statement and the Statement of Comprehensive Income’ on page 157).

. NOTES TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

- TAB: . . The non-current assets of the + comprise intangible assets, property, plant and equipment and investment in € million properties. They break down into regions as follows: Europe , . , . / TAB: 3.6.69 – of which Germany . . North America , . , . The allocation is based on the location of the relevant – of which USA , . . assets. South America . . Asia . . Africa, Oceania . . Total revenues ,. , .

’ The audit services include the audit of the consolidated nancial statements and annual nancial statements of all con- - TAB: . . solidated German companies. The other assurance services primarily relate to the issuance of comfort letters, energy law compliance audits and the audit. The auditor did not in € million provide any tax advice or other consultancy services. Europe , . , . – of which Germany , . , . / TAB: 3.6.70 North America , . , . – of which USA , . , . – of which Canada , . , . The investment grants/subsidies reported here relate to South America . . amounts received for developing areas in the Federal Repub- – of which Chile . . lic of Germany, the United States and Canada. / TAB: 3.6.71 Asia — . Africa, Oceania . . Total assets ,. , . No signi cant changes have occurred in the general economic environment or in the situation of the industry since the end of the nancial year under review. ’ TAB: . . In addition to the subsidiaries included in the consolidated in € million Audit services . . nancial statements, the + has relations with Other assurance services . . other related companies; these include non-consolidated Auditor’s fees . . subsidiaries, joint ventures and companies over which the + can exercise signi cant in uence (associates). A complete summary of all related companies can be found in the list of shareholdings on page .

TAB: . .

in € million Investment grants/subsidies . . Government grants . .

. NOTES Table .. shows + transactions with non-consol- Related persons are de ned as persons who are responsible idated subsidiaries in the reporting period. The transactions for the planning, management and monitoring of a com- were conducted at arm’s length. / TAB: 3.6.72 pany. They include the Board of Executive Directors and the Supervisory Board. The remuneration of related persons is Trade revenues are mostly the result of goods sold by consol- presented in the following section as well as in the Remuner- idated companies to foreign distribution companies. Goods ation Report section in the combined Management Report. and services received largely consist of supplies of explo- There were no other material transactions with related per- sives and chemical products by a German subsidiary as well sons. / TAB: 3.6.74 as commissions invoiced by foreign distribution companies. The total remuneration of the Board of Executive Directors in On December , the following outstanding balances with the year under review was paid to ve Board members; three non-consolidated subsidiaries were reported: / TAB: 3.6.73 of these were in o ce for the whole year. In the previous year, the Board of Executive Directors had ve members, four of As in the previous year, there were no allowances on receiv- whom were in o ce for the whole year. ables from a liated companies as of the balance sheet date. There are no contingency insurance policies for receivables In the period under review, the service cost for the pensions from non-consolidated subsidiaries. Banking receivables are of the Board of Executive Directors amounted to . million the result of centralised withdrawals and deposits of cash (: . million). at + (cash pooling). As of the balance sheet date, there were no loans to non-consolidated The remuneration system for the Board of Executive Directors subsidiaries. has the following elements: + regular monthly payments ( xed salary) to which non- Transactions carried out by the + with joint ven- cash bene ts are added tures and associates are immaterial from a Group per- + non-recurrent performance-related remuneration, with spective. bonuses based on the return on total investment and on

- TAB: . .

in € million Trade revenues . . Goods and services received . . Income from dividend payments and pro t transfers . . Other income . . Other expenses . .

- TAB: . .

in € million Receivables from a liated companies . . – of which banking receivables . — Liabilities to a liated companies . . – of which banking receivables . .

. NOTES TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

TAB: . .

in € million Total remuneration of the Supervisory Board . . – of which xed . . Total remuneration of the Board of Executive Directors . . – of which xed . . – of which performance-related . . Total remuneration of former members of the Board of Executive Directors and their surviving dependents . . Pension provisions for former members of the Board of Executive Directors and their surviving dependents . .

an individual performance-related component, and paid in the subsequent nancial year + long-term incentive programme

The individual remuneration received by the members of the Board of Executive Directors in the nancial year is disclosed in the Remuneration Report section of the combined Management Report on page .

In addition to the Supervisory Board remuneration, employee representatives who are employees of the + receive remuneration that is not related to activities performed for the Supervisory Board.

+ On January , , Sydney (Australia), noti ed us that its share of the voting rights had exceeded the threshold of and that it now holds . of the company. Until the end of February, no other shareholder noti ed us of shareholdings above the legal reporting threshold of .

The declaration of conformity pursuant to section of the German Stock Corporation Act (Aktiengesetz, AktG) with the recommendations of the Government Commission on the German Corporate Governance Code was issued by the Board of Executive Directors and the Supervisory Board of + for . It is available to shareholders on the + website (www.k-plus-s.com) and also published on page of the combined Management Report.

. NOTES The gures in the following tables also apply to the previous year. If there are any deviations, these are commented on in a footnote on the company concerned. / TAB: 3.6.75

TAB: . .

Share of Company’s registered o ce Interest held voting rights in % Fully consolidated German companies (15 companies) K+S Aktiengesellschaft Kassel Germany — — Chemische Fabrik Kalk GmbH Cologne Germany . . Deutscher Straßen-Dienst GmbH Hanover Germany . . esco – european salt company GmbH & Co. KG ¹ ² Hanover Germany . . esco international GmbH ² Hanover Germany . . K+S Bahamas Salt Asset Management GmbH & Co. KG ¹ Kassel Germany . . K+S Bausto recycling GmbH ³ Sehnde Germany . . K+S Beteiligungs GmbH ² ³ Kassel Germany . . K+S Entsorgung GmbH ² ³ Kassel Germany . . K+S Kali GmbH ² ³ Kassel Germany . . K+S North America Asset Management GmbH ² Kassel Germany . . K+S North America Salt Asset Management GmbH & Co. KG ¹ Kassel Germany . . K+S Salz GmbH ² ³ Hanover Germany . . K+S Transport GmbH ² ³ Hamburg Germany . . Kali-Union Verwaltungsgesellschaft mbH ² ³ Kassel Germany . .

Fully consolidated foreign companies (42 companies) Canadian Brine, Ltd. Pointe-Claire Canada . . Compania Minera Punta de Lobos Ltda. Santiago de Chile Chile . . Empresa de Servicios Ltda. Santiago de Chile Chile . . Empresa Maritima S.A. Santiago de Chile Chile . . esco benelux N.V. Diegem Belgium . . esco france S.A.S. Levallois-Perret France . . esco Spain S.L. Barcelona Spain . . Frisia Zout B.V. Harlingen Netherlands . . Glendale Salt Development, LLC Chicago USA . . Inagua General Store, Ltd. Nassau Bahamas . . Inagua Transports, Inc. Chicago USA . . Inversiones Columbus Ltda. Santiago de Chile Chile . . Inversiones Empremar Ltda. Santiago de Chile Chile . . Inversiones K+S Sal de Chile SpA Santiago de Chile Chile . . K plus S Salt Australia Pty Ltd Perth Australia . . K+S Asia Paci c Pte. Ltd. Singapore Singapore . . K+S Canada Holdings Ltd. Vancouver Canada . . K+S Chile S.A. Santiago de Chile Chile . . K+S Czech Republic a.s. Prague Czech Republic . . K+S Finance Belgium BVBA Diegem Belgium . . K+S Finance Ltd. St. Julians Malta . .

. NOTES TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

TAB: . .

Share of Company’s registered o ce Interest held voting rights in % Dombasle- K+S France S.A.S. sur-Meurthe France . . K+S (Huludao) Magnesium Products Co. Ltd. Huludao China . . K+S Investments Ltd. St. Julians Malta . . K+S KALI France S.A.S. Reims France . . K+S KALI Wittenheim S.A.S. Wittenheim France . . K+S Montana Holdings, LLC Chicago USA . . K+S Netherlands Holding B.V. Harlingen Netherlands . . K+S North America Corporation Chicago USA . . K+S Perú S.A.C. Lima Peru . . K+S Potash Canada General Partnership Vancouver Canada . . K+S Salt LLC Chicago USA . . K+S Windsor Salt Ltd. Vancouver Canada . . Montana US Parent Inc. Chicago USA . . Morton Bahamas Ltd. Nassau Bahamas . . Morton Salt, Inc. Chicago USA . . Salina Diamante Branco Ltda. Rio de Janeiro Brazil . . Salines Cérébos S.A.S. Levallois-Perret France . . Servicios Maritimos Patillos S.A. Santiago de Chile Chile . . Servicios Portuarios Patillos S.A. Santiago de Chile Chile . . VATEL Companhia de Produtos Alimentares S.A. Alverca Portugal . . Weeks Island Landowner, LLC Chicago USA . .

Non-consolidated German companies (9 companies) 4. K+S Verwaltungs GmbH Kassel Germany . . Beienrode Bergwerks-GmbH Kassel Germany . . esco Verwaltungs GmbH Hanover Germany . . Ickenroth GmbH Staudt Germany . . K+S An-Instituts Verwaltungsgesellschaft mbH Kassel Germany . . K+S Consulting GmbH Kassel Germany . . K+S Versicherungsvermittlungs GmbH Kassel Germany . . MSW-Chemie GmbH Langelsheim Germany . . Wohnbau Salzdetfurth GmbH Bad Salzdetfurth Germany . .

Non-consolidated foreign companies ( companies) Al Biariq for Fertilizer Plant Co. Ltd. Riyadh Saudi Arabia . . Imperial Thermal Products, Inc. Chicago USA 100.00 100.00 ISX Oil & Gas Inc. Calgary Canada . . K plus S Africa (Pty) Ltd. Johannesburg South Africa . . United Arab K plus S Middle East FZE Jebel Ali, Dubai Emirates . . K+S Brasileira Fertilizantes e Produtos Industriais Ltda. São Paulo Brazil . . K+S Denmark Holding ApS Hellerup Denmark . . K+S Entsorgung (Schweiz) AG Delémont Switzerland . . K+S Fertilizers (India) Private Limited New Delhi India . . K+S Italia S.r.L. Verona Italy . . K+S Legacy GP Inc. Vancouver Canada . . K+S Mining Argentina S.A. Buenos Aires Argentina . . K+S Polska Sp. z o.o. Poznan Poland . . K+S UK & Eire Ltd. Hertford United Kingdom . .

. NOTES TAB: . .

Share of Company’s registered o ce Interest held voting rights in % Kali (U.K.) Ltd. Hertford United Kingdom . . Kali AG Frauenkappelen Switzerland . . Russian OOO K+S Rus Moscow Federation . . Shenzhen K+S Trading Co. Ltd. Shenzhen China . .

Associates and joint ventures ( companies) Börde Container Feeder GmbH Haldensleben Germany . . Morton China National Salt (Shanghai) Salt Co., Ltd. Shanghai China . . Werra Kombi Terminal Betriebsgesellschaft mbH Philippsthal Germany 50.00 50.00

Other equity investments ( companies) Fachschule f. Wirtschaft und Technik Gem. GmbH Clausthal Germany . . Lehrter Wohnungsbau GmbH Lehrte Germany . . Nieders. Gesellschaft zur Endablagerung von Sonderabfall mbH Hanover Germany . . Poldergemeinschaft Hohe Schaar Hamburg Germany . . Pristav Pardubice a.s. Pardubice Czech Republic . . Zoll Pool Hamburg AG Hamburg Germany . .

¹ Exemption provision of section 264b of the HGB applied. ² Exemption provision of section 291 of the HGB applied. ³ Exemption provision of section 264(3) of the HGB applied. Not consolidated due to immateriality. Not equity-accounted due to immateriality. Amount of equity and prior-year pro t/loss not disclosed due to immateriality. Unlimited liability of the parent company or another consolidated company. Control assumed on the basis of potential voting rights.

A list of members of the Supervisory Board and its committees can be found in the Management Report on page ; this list is also part of the ‘Notes to the Consolidated Finan- cial Statements’.

A list of members of the Board of Executive Directors and its responsibilities can be found in the Management Report on page ; this list is also part of the ‘Notes to the Consolidated Financial Statements’.

Kassel, March

. NOTES TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

’

We audited the consolidated nancial statements of + Chapter ‘Other information’ of our independent auditor’s , Kassel, and its subsidiaries (the report. Group), which comprise the consolidated balance sheet as at December , , the consolidated income statement Pursuant to Section Sentence of the , we state and statement of comprehensive income, the consolidated that our audit has not led to any reservations with respect statement of changes in equity and the consolidated state- to the propriety of the consolidated nancial statements and ments of cash ows for the nancial year from January , the combined management report. through December , as well as the notes to the consolidated nancial statements, including a summary of signi cant accounting policies. In addition, we audited the We conducted our audit of the consolidated nancial state- group management report of + , ments and the combined management report in accordance Kassel, which is combined with the company’s management with Section of the and the Audit Regulation (No. report, for the nancial year from January , through ; hereinafter referred to as ‘ Audit Regulation’), and December , . In conformity with German legal reg- generally accepted German standards for the audit of nan- ulations, we have not audited the parts of the combined cial statements promulgated by the Institute of Public Audi- management report speci ed in the Chapter ‘Other infor- tors in Germany ( £, ). mation’ of our independent auditor’s report with regard to Our responsibilities under these requirements and principles their content. are further described in the Section ‘Auditor’s responsibility for the audit of the consolidated nancial statements and the In our opinion, based on our knowledge obtained during the combined management report’ of our report. We are inde- audit, pendent of the group companies in accordance with Euro- + the accompanying consolidated nancial statements pean and German commercial law and rules of professional comply with conduct and we have ful lled our other ethical responsibili- as adopted by the and the sup- ties applicable in Germany in accordance with these require- plementary German legal regulations to be applied in ments. In addition, pursuant to Article lit. f Audit Reg- accordance with Section e of the (German ulation, we declare that we have not provided any prohibited Commercial Code) in all material respects and give a non-audit services pursuant to Article Audit Regula- true and fair view of the Group’s net assets and nan- tion. We believe that the audit evidence we have obtained cial position as of December , as well as its results is su cient and appropriate to provide a basis for our audit of operations for the nancial year from January , opinions on the consolidated nancial statements and com- through December , in accordance with these bined management report. requirements and + the accompanying combined management report as a whole provides a suitable view of the Group’s position. In all material respects, this combined management Key audit matters are those matters that, in our professional report is consistent with the consolidated nancial state- judgment, were of most signi cance in our audit of the con- ments, complies with German legal requirements and solidated nancial statements for the nancial year from Jan- suitably presents the opportunities and risks of future uary , through December , . These matters were development. Our audit opinion on the combined man- addressed in the context of our audit of the consolidated nan- agement report does not extend to the content of the cial statements as a whole and in forming our opinion thereon parts of the combined management report detailed in the but we do not provide a separate opinion on these issues.

AUDITOR’S REPORT In the following we present the key audit matters in our view: mine stabilization concepts and cost rates, and our audit . Provisions for mining obligations results from the previous year, and examined the current . Impairment of goodwill for ‘Salt America’ level of the nancial obligations resulting from regula- . Impairment of goodwill for ‘Potash and Magnesium Prod- tory requirements and mine sealing concepts by means ucts’ of evidence in the form of correspondence with the min- . Closure of the Sigmundshall mine ing authorities and individual audit reports. In examining the discount rate, we received veri cation of the applied Our presentation of these key audit matters is structured parameters. as follows: a) Description (including reference to corresponding infor- . mation in the consolidated nancial statements) ‘ ’ b) Auditor’s response a) In the consolidated nancial statements of + - c) Important ndings, if applicable as of December , , goodwill of . million (equivalent to . of total Group assets) from the . cash-generating unit ‘Salt America’ is recognised a) In the consolidated nancial statements of + - under the balance sheet item ‘Goodwill from acquisitions as of December , , mining provisions of companies.’ The company subjects this material item of ,. million (equivalent to . of total Group of goodwill to an impairment test at the level on the assets) are reported under non-current provisions (. closing date of the nancial year. The value in use to be million is reported under current provisions). Changes in compared to the respective carrying amount is determined interest rates can signi cantly impact the measurement according to the discounted cash ow method using a of this major balance sheet item. Due to their long-term valuation model. The expected future cash ows are dis- nature, furthermore, the provisions are heavily based counted using the weighted cost of capital of the respec- on estimates and assumptions by the legal representative cash-generating unit. tives with regard to future cost developments and technological innovations. As estimated values result in an As the result of this valuation depends heavily on the increased risk of incorrect information in nancial report- estimates of the legal representatives with regard to ing and measurement decisions by the legal represen- the future cash ows and the applied discount rate and tatives have a direct and signi cant impact on the con- growth rate, this matter was a special focus of our audit. solidated nancial statements, we rated this matter as particularly signi cant. The disclosures about goodwill are contained in Section of the notes to the consolidated nancial statements. The disclosures about the mining provisions are contained in Section of the notes to the consolidated nancial b) In the course of our audit, we examined the structures and statements. procedures of the process for measuring goodwill with regard to their appropriateness and the e ectiveness of b) In the course of our audit, we critically assessed the the audit-relevant controls with the help of valuation spe- development of the liabilities reported in the previous cialists. To examine the appropriateness of the future cash year and analysed the measures taken by the legal rep- ows used in the calculation, we, for example, compared resentatives to assess the completeness and valuation of these gures with the current budgets from the three- the mining obligations. In this connection, we examined year planning adopted by the legal representatives and the structures and procedures of the process for estab- approved by the supervisory board, as well as with general lishing mining provisions with regard to their appropri- and industry-speci c market expectations. ateness and the e ectiveness of the audit-relevant controls. In doing so, we have prepared our analysis based As even relatively small changes in the applied discount on our knowledge of the legal, contractual and regula- rate can have signi cant e ects on the determined value tory requirements, the up-to-dateness of the respective in use, we also received veri cation of the parameters

AUDITOR’S REPORT TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

applied to determine the discount rate, including partic- The disclosures about goodwill are contained in Section ularly the risk-free interest rate, the market risk premium of the notes to the consolidated nancial statements. and the beta factor, including the weighted average cost of capital, as well as the assumptions on which the model is b) To examine the appropriateness of the future cash ows based, and reconstructed the calculation scheme for value used in the calculation of goodwill, we, for example, in use. compared these gures with the current budgets from the planning adopted by the legal representatives and Due to the materiality of the goodwill allocated to the approved by the supervisory board, as well as with gen- ‘Salt America’ and to the fact that the measurement eral and industry-speci c market expectations, against of this goodwill also depends on the general price devel- the background of the current state of the potash mar- opment and economic conditions, which cannot be in u- ket and the price development. We also critically evalu- enced by the Group, we carried out sensitivity analyses to ated the legal representatives’ assessment of the con- audit whether the goodwill is su ciently covered by the sequences that the disposal of saline wastewater could discounted cash ow surpluses. have for the Group. With regard to the Bethune site, we compared the projected cash ow surpluses of the We also examined the completeness and accuracy of the through , which take into account the succes- information required to be disclosed in the notes to the sive establishment of production capacities for the Leg- consolidated nancial statements pursuant to . acy project (now: Bethune production site), with market expectations. Considering that even relatively small c) Even an increase in the discount factor by percentage changes in the applied discount rate can have signi cant points to . does not cause the carrying amount of the e ects on the determined value in use, we also received goodwill allocated to ‘Salt America’ to exceed its value in veri cation of the parameters applied to determine the use according to the conducted sensitivity analysis. discount rate, including particularly the risk-free interest rate, the market risk premium and the beta factor, . ‘ including the weighted average cost of capital, as well ’ as the assumptions on which the model is based, and a) In the consolidated nancial statements of + - reconstructed the calculation scheme for value in use as of December , , goodwill of with regard to consistency and the calculation system. . million (equivalent to . of total Group assets) allo- Due to the uncertainties related to the goodwill allocated to the ‘Potash and Magnesium Products’ is cated to the ‘Potash and Magnesium Products’ and recognised under the balance sheet item ‘Goodwill from to the fact that the measurement of this goodwill also acquisitions of companies.’ The company subjects this depends on the general price development and economic item of goodwill to an impairment test at the level on conditions, which cannot be in uenced by the Group, the closing date of the nancial year. The value in use to be we used sensitivity analyses to determine whether the compared to the respective carrying amount is determined goodwill is su ciently covered by the discounted cash according to the discounted cash ow method using a ow surpluses. measurement model. We also examined the completeness and accuracy of the The result of this valuation depends heavily on uncertain- information required to be disclosed in the notes to the ties with regard to the future cash ows and the applied consolidated nancial statements pursuant to . discount rate. The uncertainties with regard to the cash ows result from the current state of the potash mar- c) Even an increase in the discount factor by percentage ket and the price development, the legal uncertainties points to . percent does not cause the carrying amount with regard to the discharge of saline wastewater from of the goodwill allocated to ‘Potash and Magnesium Prod- the Werra plant and the risks pertaining to the startup ucts’ to exceed its value in use according to the conducted phase of the new potash mine in Bethune. This matter sensitivity analysis. was therefore a special focus of our audit.

AUDITOR’S REPORT . + the Group’s statement on business management pursu- a) Due to the decision made by the legal representatives of ant to Sections f and d speci ed in Chapter . the company in November to discontinue potash pro- ‘Statement on Business Management and Corporate Gov- duction at the Sigmundshall mine at the end of nancial ernance’ of the combined management report, year , the Group recognised expenses of . million + the other sections of the combined management report in . These expenses result from adjustments in the marked as ‘unaudited’, calculation of mining obligations, from the reduction of + assurance pursuant to Sections Sentence of the the scheduled useful life of the xed assets, and from the to the consolidated nancial statements and assur- establishment of personnel provisions according to the ance pursuant to Section Sentence of the to forecasted career path. the group management report, and + all remaining components of the annual report, with the We rated this matter as particularly signi cant because exception of the audited consolidated nancial state- not just the mining obligations, but also the recognition ments and the combined management report and our of completeness and measurement of the personnel obli- Auditor’s Report. gations resulting from the closure are based heavily on estimates and assumptions by the legal representatives. Our audit opinions on the consolidated nancial statements and the combined management report do not extend to The disclosures about the provisions for mining obliga- cover the other information, and accordingly we do not issue tions are contained in Section of the notes to the con- an audit opinion or any other form of assurance conclusion solidated nancial statements. The information on the thereon. personnel provisions related to Sigmundshall can be found in the introduction to the notes to the consolidated nan- In connection with our audit of the consolidated nancial cial statements in the section pertaining to the accounting statements, our responsibility is to read the other informa- and valuation principles. tion and, in doing so, to consider whether the other information b) With regard to the audit procedure for the mining obli- + is materially inconsistent with the consolidated nancial gations, we refer to the remarks under ‘. Mining obliga- statements, the combined management report or our tions’. knowledge obtained in the audit, or + otherwise appears to be substantially misstated. With regard to the personnel obligations, we assessed the recognition criteria according to . We assessed in particular whether the factual conditions for a severance - payment obligation according to Section a German Dis- missal Protection Act apply and whether a justi ed expec- tation was raised among the a ected employee group. In The legal representatives are responsible for the preparation this connection, we received veri cation of and analysed of the consolidated nancial statements which comply with the most important assumptions for the value assessment as adopted by the and the supplementary require- (particularly the underlying personnel expenses, the fore- ments of the German legal regulations pursuant to Section casted career path and estimation parameters). e of the in all material respects, so that the consolidated nancial statements give a true and fair view of the net assets, nancial position, and results of operations of The legal representatives are responsible for the other infor- the Group in accordance with these requirements. In addi- mation. The other information comprises: tion, the legal representatives are responsible for the internal + the Group’s consolidated non nancial statement pursu- controls they have identi ed as necessary in order to enable ant to Sections b and e and Sections b and c the preparation of consolidated nancial statements that speci ed in Chapter . of the combined manage- are free from material misstatements, whether intentional ment report, or unintentional.

AUDITOR’S REPORT TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

In preparing the consolidated nancial statements, the legal ally accepted German standards for the audit of nancial representatives are responsible for assessing the Group’s abil- statements promulgated by the Institute of Public Auditors ity to continue as a going concern. Furthermore, they have in Germany will always detect a material misstate- the responsibility to disclose matters relating to the Group’s ment when it exists. Misstatements can arise from fraud ability to continue as a going concern, if relevant. In addi- or error and are considered material if, individually or in the tion, they are responsible for using the going concern basis aggregate, they could reasonably be expected to in uence of accounting, unless the intention is to liquidate the Group the economic decisions of users taken on the basis of these or to cease operations, or there is no realistic alternative but consolidated nancial statements and this combined man- to do so. agement report.

In addition, the legal representatives are responsible for the As part of an audit, we exercise professional judgement and preparation of the combined management report, which as maintain professional scepticism. We also a whole provides a suitable view of the Group’s position, + identify and assess the risks of material misstatements is consistent with the consolidated nancial statements in in the consolidated nancial statements and in the com- all material respects, complies with German legal regula- bined management report, whether due to fraud or error, tions and suitably presents the opportunities and risks of design and perform audit procedures responsive to those future development. Furthermore, the legal representatives risks, and obtain audit evidence that is su cient and are responsible for such arrangements and measures (sys- appropriate to provide a basis for our audit opinions. The tems) which they have deemed necessary in order to enable risk of not detecting a material misstatement resulting the preparation of a combined management report in accor- from fraud is higher than one resulting from error, as fraud dance with the applicable German legal regulations and to may involve collusion, forgery, intentional omissions, mis- furnish su cient and appropriate evidence for the state- representations, or the overriding of internal controls. ments in the combined management report. + obtain an understanding of internal controls relevant to the audit of the consolidated nancial statements and The Supervisory Board is responsible for overseeing the the arrangements and measures relevant to the audit of Group’s nancial reporting process for the preparation of the the combined management report in order to design audit consolidated nancial statements and the combined man- procedures that are appropriate in the circumstances, but agement report. not for the purpose of expressing an opinion on the e ectiveness of these systems. ’ + evaluate the appropriateness of the accounting policies used by the legal representatives and the reasonableness of accounting estimates and related disclosures made by Our objectives are to obtain reasonable assurance about the legal representatives. whether the consolidated nancial statements as a whole + form a conclusion on the appropriateness of the legal rep- are free from material misstatements, whether due to fraud resentatives’ use of the going concern basis of account- or error, and whether the combined management report as ing and, based on the audit evidence obtained, whether a whole provides an appropriate view of the Group’s position a material uncertainty exists relating to events or condi- and, in all material respects, is consistent with the ndings tions that may cast signi cant doubt on the Group’s ability of the audit, is in accordance with the German legal regula- to continue as a going concern. If we conclude that there tions, and appropriately presents the opportunities and risks is a material uncertainty, we are required to draw atten- of future development, as well as to issue an auditor’s report tion in our auditor’s report to the related disclosures in the that includes our audit opinions on the consolidated nancial consolidated nancial statements and combined manage- statements and the combined management report. ment report, or, if such disclosures are inadequate, to mod- ify our opinion. Our conclusions are based on the audit Reasonable assurance is a high level of assurance, but is not evidence obtained up to the date of our auditor’s report. a guarantee that an audit conducted in accordance with Sec- However, future events or conditions may cause the Group tion of the and the Audit Regulation and gener- to cease to continue as a going concern.

AUDITOR’S REPORT + evaluate the overall presentation, structure, and content of From the matters communicated with those charged with the consolidated nancial statements, including the dis- governance we determine those matters that were of most closures, and whether the consolidated nancial state- signi cance in the audit of the consolidated nancial statements represent the underlying transactions and events in ments of the current reporting period and are therefore the a manner such that the consolidated nancial statements key audit matters. We describe these matters in our auditor’s give a true and fair view of the net assets and nancial report on the consolidated nancial statements unless law position as well as the results of operations of the Group or regulation precludes public disclosure about the matter. in accordance with as adopted by the and the supplementary requirements of German law pursuant to Sec- tion e of the . + obtain su cient appropriate audit evidence regarding the nancial information of the entities or business activities within the Group to express opinions on the consoli- We were appointed by the Annual General Meeting on May dated nancial statements and the combined management , to audit the consolidated nancial statements. report. We are responsible for the direction, supervision, and We were engaged by the Supervisory Board on August , performance of the group audit. We remain solely respon- . We have been engaged continuously as the auditors sible for our audit opinions. of the consolidated nancial statements of + - + evaluate the consistency of the combined management , Kassel, since the nancial year . report with the consolidated nancial statements, its legal consistency, and the view provided of the Group’s position. We con rm that the audit opinions contained in this audi- + perform audit procedures on the forward-looking infor- tor’s report are consistent with the additional report to the mation presented by the legal representatives in the audit committee pursuant to Article Audit Regulation combined management report. On the basis of su cient (‘Prüfungsbericht’). appropriate audit evidence, we particularly evaluate the signi cant assumptions underlying the forward-looking information by the legal representatives and evalu- The auditor responsible for the audit is Dr Christian H. Meyer. ate the correct derivation of forward-looking information from these assumptions. We do not issue an indepen- Hanover, March dent opinion on the forward-looking information or on the underlying assumptions. There is a signi cant unavoidable risk that future events will di er materially from the forward-looking information. Wirtschaftsprüfungsgesellschaft

We communicate with those charged with governance (Kompenhans) among other matters, on the planned scope and timing of Auditor the audit and signi cant audit ndings, including any de - ciencies in internal control, which we identify during our (Dr Meyer) audit. Auditor

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

AUDITOR’S REPORT TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

AUDITOR’S REPORT FURTHER INFORMATION

De nitions of Key Financial Indicators Index and Global Compact Principles Glossary Index Financial Calendar, Online Service, Imprint TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

¹ Adjusted for the e ects of market value changes of operating forecast hedges; for adjusted Book Value per Equity Group earnings, the related e ects on deferred and cash taxes are also eliminated. = ² Annual average. Total number of shares as of 31 Dec Share ³ Adjusted for reimbursement claims and corresponding obligations. Adjusted by deferred tax in uencing goodwill from initial consolidation. Operating Earnings (EBIT I) Without the market value of operating forecast hedges still outstanding as well as derivatives -Margin = Revenues no longer in operation, but including premiums paid for derivatives used for operating purposes; without receivables and liabilities from nancial investments; adjusted for reimbursement claims as well as the surplus of the CTA plan assets. EBITDA -Margin = Revenues

Enterprise Value = Market capitalisation + net debt

Bank loans and overdrafts = Equtiy

Net Debt = Equity

EBIT I + write-downs/– write-ups on intangible assets, property, plant and equipment and nancial assets + increase/– decrease in non-current provisions (without interest Gross Cash Flow = rate e ects) + interests and dividends received and similar income + gains/– losses from the realisation of nancial assets/liabilities – interest paid – income taxes paid + other non-cash expenses - other non-cash income

Net Financial Financial liabilities – cash on hand and = balances with banks – securities and other Liabilities nancial investments

Financial liabilities + provisions for pension and similar obligations + non-current Net Debt = provisions for mining obligations – cash on hands and balances with banks – securities and other nancial investments

Intangible assets + property, plant and Operating Assets = equipment + shares in a liated companies + participating interests

Return on Capital Operating Earnings (EBIT I) = Employed Operating assets ² + working capital ² ³

Adjusted Group earnings after taxes ¹ Return on Equity = Adjusted equity ¹ ²

Return on Adjusted Group earnings after taxes ¹ = Revenues Revenues

Return on Total Adjusted earnings = before taxes ¹ + interest expenses Investment Adjusted balance sheet total ¹ ² ³

(ROCE – weighted average cost of capital Value Added = before taxes) x (operating assets ² + working capital ² ³)

Inventories + accounts receivable trade + Working Capital = other assets – current provisions – accounts payable trade – other payables

DEFINITIONS OF KEY FINANCIAL INDICATORS

This report was prepared in accordance with Core ness policy. Following the ‘comply or explain’ approach, we requirements and considers the G Sector Disclosures: Min- have marked those indicators that are not fully covered by *. ing and Metals document. As a member of the , + - For issues we assessed as material, we report the respective supports the ten principles in the areas of human indicators. For some indicators we do not provide detailed rights, labor, environment and anti-corruption. The overview disclosures, as we are currently examining their relevance, we shows where to nd information regarding the ten principles considered them as non-material, data are not easily avail- in this Annual Report. able, or we do not publicly report on them for reasons of busi-

UN Global GRI Indicators Page Compact

General Standard Disclosures:

Strategy and analysis G4-1 Statement from the most senior decision-makers 2 – ½ G4-2 Description of important key impacts, risks, and opportunities 100 – 113

Organisational pro le G4-3 Name of the organisation 216 G4-4 Primary brands, products, and services 36 – 40 G4-5 Location of the organisation’s headquarters 216 G4-6 Countries where the organisation operates 30 – 31 G4-7 Nature of ownership and legal form 29 G4-8 Important markets 36 – 37 G4-9 Scale of the organisation 32 G4-10 Total workforce 41 – 45 6 G4-11 Employees covered by collective bargaining agreements 47 3 G4-12 Description of the organisation’s supply chain 53 – 54 G4-13 Signi cant changes during the reporting period 29 G4-14 Implementation of the precautionary approach 100 – 113 G4-15 Support of external initiatives 46, 53 G4-16 Memberships in associations and interest groups 53

Identi ed material aspects and boundaries G4-17 Liste of consolidated companies 144 G4-18 Process for de ning the report content 45 – 46 G4-19 List of material aspects 45 – 46 G4-20 Material aspects of the company 45 – 46

GRI INDEX AND UN GLOBAL COMPACT PRINCIPLES TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

UN Global GRI Indicators Page Compact

G4-21 Material aspects outside of the company 45 – 46 G4-22 Restatements of information provided in previous reports 45 G4-23 Signi cant changes in the reporting scope and boundaries 144

Stakeholder engagement G4-24 Stakeholder groups engaged 45 – 46 G4-25 Identi cation and selection of stakeholders 45 – 46 G4-26 Approaches to stakeholder engagement and frequency 46 G4-27 Key concerns of stakeholders and statements 46

Report pro le G4-28 Reporting period U2 G4-29 Date of publication of the most recent report 216 G4-30 Reporting cycle 216 G4-31 Contact point for questions regarding the report 216 G4-32 ‘In accordance’ option GRI Index 45, 206 G4-33 External assurance for the report U2, 22, 45, 197

Governance G4-34 Governance structure including highest governance body 55 – 74

Ethics and integrity G4-56 Value, principles, standards and norms 63 – 74 10

Speci c Standard Disclosures:

Category: Economic G4-DMA Management approach 78 – 99

Economic performance G4-EC1 Direct economic value generated and distributed 32, 40

Category: Environmental G4-DMA Management approach 48 7, 8, 9

Energy G4-EN3 Energy consumption within the organisation 52 7, 8, 9 G4-EN4 Energy consumption outside of the organisation 52 Water G4-EN8 Total water withdrawal by source 50 7, 9 Emissions G4-EN15 Direct greenhouse gas emission (Scope 1)* 52 – 53 G4-EN16 Indirect greenhouse gas emission (Scope 2)* 52 – 53 E uents and waste G4-EN22 Total water discharge by quality and destination 50 7 Total amounts of overburned, rock, tailings, MM3 and sludges and their associated risks 51 Overall G4-EN31 Total environmental protection expenditures and investments by type 48 – 50 9

GRI INDEX AND UN GLOBAL COMPACT PRINCIPLES

UN Global GRI Indicators Page Compact

Category: Society Labour practices and decent work G4-DMA Management approach 41 – 43 1, 3, 6

Employment G4-LA1 New employee hires and employee turnover* 41 – 42 6 Labor/management relations G4-LA4 Minimum notice periods regarding signi cant operational changes* 41 3 MM4 Strikes and lock-outs* 41, 47 3 Occupational health and safety G4-LA6 Accidents, occupational diseases, lost days, fatalities* 47 – 48 Training and education G4-LA9 Average hours of training* 42 Diversity and equal opportunity G4-LA12 Composition of governance bodies and employees according to diversity* 46 – 47, 56 – 62 6 Equal remuneration of women and men G4-LA13 Ratio of basic salary of women to men* 42 6

Human rights G4-DMA Management approach 48 1, 2

Non-discrimination G4-HR3 Number of discrimination and corrective actions taken* 47 6 Freedom of association and right to collective bargaining Operations and suppliers in which the right to freedom of asscociation G4-HR4 may be violated or at signi cant risk, and measures taken* 36, 53 3 Child labor Operations and suppliers with signi cant risks for incidents G4-HR5 of child labor, and measures taken* 36, 53 5 Forced or compulsory labor Operations and suppliers with signi cant risks for incidents of G4-HR6 forced or compulsory labor, and measures taken* 36, 53 4 Human rights grievance mechanisms G4-HR12 Formal grievance about human rights impacts eld* 48, 65

Society G4-DMA Management approach 53, 65 10

Anti-corruption G4-SO4 Communication and training on anti-corruption* 53, 65 10 Public policy G4-SO6 Total value of political contribution 53 10 Anti-competitive behavior G4-SO7 Legal actions for anti-competitive behavior or anti-trust* 53, 65 10 Compliance G4-SO8 Fines and sanctions for non-compliance 53, 65 10 Supplier assessment for impacts on society G4-SO10 Negative impacts on society in the supply chain and actions taken* 53 – 54 Grievance mechanisms for impacts on society G4-SO11 Number of grievances about impacts on society 65

GRI INDEX AND UN GLOBAL COMPACT PRINCIPLES TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

UN Global GRI Indicators Page Compact

Product responsibility G4-DMA Management approach 36

Product and service labeling Product and service information required by the organisation’s procedure for product and G4-PR3 service information and labeling and percentage to such information requirements* 36

GRI INDEX AND UN GLOBAL COMPACT PRINCIPLES

Operators of bulk fertilizer equipment, in which various nutrients are Compliance (conforming with regulations) denotes adherence to man- combined. datory laws, internal regulations and regulatory standards recognised by the company. A compliance management system is intended to ensure compliance and avoid penalties and nes resulting from breaches of compliance and claims for damages as well as other direct or indi- Aqueous rock salt solution. Natural brine is obtained through drilling rect negative in uences (caused particularly as a result of damage to underground deposits of brine or through the controlled drillhole solu- image), by identifying and evaluating compliance risks promptly and tion mining procedure and also produced through the dissolution of taking steps to reduce the likelihood of materialisation and their loss mined rock salt. potential. Moreover, structured internal compliance reporting should be ensured.

Carbon dioxide (ª) is a chemical compound comprising carbon and

oxygen. It is produced during the combustion of fuels containing car- also (weighted average cost of capital); denotes the opportunity bon or fossil fuels. costs arising for equity providers and/or lenders through capital made available to the company. The weighted average cost of capital rate is calculated from the aggregate of the expected returns of equity providers in terms of their equity share as well as the interest on debt in Net balance of incoming and outgoing payments during a reporting respect of the share of interest-bearing debt in total capital. As this is period. considered from an after-tax perspective, the average interest on debt is reduced by the corporate tax rate.

In mining, a cavern is a large, arti cially created underground cavity. In contrast to liquid brine, crystallised salt exists in solid form, such as food grade salt and de-icing salt. - In chlorine-alkaline electrolysis, chlorine, caustic soda solution and hydrogen are produced as a result of the decomposition of the basic substance sodium chloride with the aid of electricity. Alternatively, (Earnings before interest and taxes) The internal control of the + potassium hydroxide solution is produced by the application of potas- is carried out partly on the basis of its operating earnings sium chloride. The important basic chemicals of chlorine, caustic soda . Due to the elimination of all market value fluctuations during solution, hydrogen and potassium hydroxide solution form the basis of the term, the earnings from operating forecast hedges included in numerous chemical products. correspond to the value of the hedging transaction at the time of realisation (difference between the spot rate and hedging rate), less the premium paid or plus the premium received in the case of options. Cogeneration is a method enabling the generation of useful heat at the same time as producing electricity. Compared with separate production facilities, cogeneration plants use the respective fuel, for example, natural gas, more e ciently. The heat generated during the In accordance with , uctuations in market value from hedging cogeneration process is available in the form of hot water or high-pres- transactions are reported in the income statement. includes all sure steam. earnings from hedging transactions, i. e., both valuation e ects as at the reporting date and earnings from realised operating hedging derivatives. Earnings e ects arising from the hedging of underlying transactions with a nancing character, whose e ects impact on neither Complex fertilizers contain more than one nutrient, as a rule nitro- in the current nancial year nor in future nancial years, are stated in gen, phosphorus and potassium as well as – depending on need and the nancial result. application – magnesium, sulphur or trace elements. As a result of the combination of raw materials in the production process and subsequent granulation, every single grain of the fertilizer contains pre- cisely the same combination of nutrients; this allows for even spread- (Earnings before interest, taxes, depreciation and amorti- ing of the nutrients on the eld. sation) is intended to enable comparisons of operational earnings

GLOSSARY TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

power between companies and describes the pro tability of compa- – nies. + calculates based on operating earnings plus The Global Reporting Initiative is a nonpro t foundation that devel- depreciation and amortisation of property, plant and equipment and ops cooperatively a framework for global sustainability reporting. The intangible assets; the depreciation and amortisation amount not reporting guideline speci es principles and indicators for organi- recognised in pro t and less is adjusted in the context of own work sations to measure their economic, environmental and social perfor- capitalised. mance. The purpose is to promote transparency and comparability for sustainability reports.

Enterprise value is an indicator frequently used to determine the value of a company. It is often related to other indicators (for example, Integrated reporting is a standard concept that combines traditional revenues, ). nancial reporting with non- nancial reporting elements. The focus should be the company’s business model and its strategy. The aim is reporting which considers all the stakeholders’ interests. The goal is to re ect the interdependencies between environmental, social, gover- is produced by evaporating saturated brine, whereby sodium chloride nance and nancial factors of decisions, which in uence a company’s crystallises. long-term nancial performance and position, by clarifying the connection between sustainability and economic values.

® The ® process is a dry processing method for potash crude salts, patented by +. With this process, the individual crude salt elements are charged di erently, to ultimately be separated into the compo- The facility represents nents sodium chloride and potassium chloride with the aid of an elec- a new process to signi cantly reduce saline wastewater and at the tric eld. In comparison with classical, wet processing methods, energy same time to increase the yield of valuable substances. By using heat inputs and production residues are signi cantly reduced. energy, water is evaporated. Thereby crystallises a salt mixture, which also includes kainite – a salt containing potassium and magnesium salt. The kainite is separated by using a sorting technique ( otation) and is subsequently used for potassium sulfate production. In production, the otation process separates rock salt and potash or kieserite from the crude salt without heat supply. During the process, the minerals are separated into their components in a saturated saline solution as air is supplied. With the addition of otation agents, Mg[©]·Hª, Kieserite is a mineral component of crude salt, which the reusable substances adhere to the air bubbles and can thus be is composed of the water-soluble minerals magnesium and sulphur. skimmed o after oating to the surface. From a chemical perspective, it is aqueous magnesium sulphate. Kieserite is used as a basic raw material in the production of plant nutrients. The number of shares not held by major shareholders owning more than of the shares of a company (with the exception of shares held by investment companies and asset managers). The guidelines for multinational companies are government recommendations for the multinational companies which operate in or from the member states. They contain non-legally binding principles and benchmarks in the areas of basic obligations, information policy, Granulate production describes the production of spreadable fertil- human rights, employment policy, environmental protection, anti-cor- izer granules that can be distributed using an agricultural fertilizer ruption, consumer interests, science and technology, competition and spreader. taxation.

- The Greenhouse Gas Protocol is a tool for calculating and manag- Open-cast mining is a form of mining for raw material deposits that ing the greenhouse gas emissions of companies and organisations. takes place close to the surface. In contrast to other forms of mining, It includes direct emissions from core corporate areas (Scope ), indi- no underground tunnels or shafts are created. rect emissions from the use of purchased electricity, heat and steam (Scope ) and indirect emissions, which are upstream or downstream of corporate activities (Scope ). To compare the global warming potential of di erent greenhouse gases, each greenhouse gas is converted in To hedge future currency positions (mainly in dollars), we use oper- ª equivalents. A ª equivalent has the same global warming poten- ating derivatives in the form of options and futures (see also transac- tial as one unit of ª. tion risks).

GLOSSARY A solution mining operation typically consists of a well eld and a pro- Sea water ows through large, open evaporation ponds for the produc- cessing facility. The well eld thereby is organized into so called pads. tion of solar salt. After several months of sunshine, the salt crystallises Each pad is a relatively at surface location with a surface of approxi- in the nal pond. mately xm, that is used for drilling wells, creating caverns and has additional above ground facilities used for pumping water into the deposit and handling brine which is then sent via a pipeline system to the processing facility. In solution mining, fresh water is brought into solvant (salt) rock through a drill hole, thus creating chambers lled with a water-salt solution, so-called caverns. In a subsequent step, the saturated brine is brought to surface level along a further pipeline. The planning approval procedure is an approval process for speci c construction/infrastructure projects to reach planning approval decisions. As an administrative act, this decision is a planning permission with a concentration e ect. Therefore, a permission includes many Stakeholders are interest groups in the working environment or in others. The process of the procedure is formalised in the Administra- an organisation, who are directly or indirectly a ected by corporate tive Procedure Act. The procedure always includes an involvement of activities, currently or in the future, and are thus in an interdependent concerned parties in consultations to consider their interests. relationship. They include employees, customers, investors, suppliers, local residents and policymakers.

The plate dolomite (Leine carbonate) is above the salt deposits at a depth of approximately to metres and is covered by clay layers on both sides. It is approximately metres thick and consists of Synthetic magnesium sulphate is soluble in water and, among others, limestone and dolomite rock, which already contains naturally min- has a positive in uence on root development, water absorption, crop eralised water. yield and plant quality parameters.

Potassium chloride (KCl) is a potassium salt used as fertilizer. In addi- The thermal dissolution process is a production method used in the tion, it is the basic raw material for all inorganic and organic potassi- production of potash which is based on the temperature-dependent um compounds. extraction behaviour of minerals. The di erent components are separated because the solubility of rock salt is consistently good regard- less of the water temperature and the solubility of potassium chloride increases with the temperature. Potassium sulphate is used as a fertilizer. It can be produced from mined mineral raw materials as well as using a chemical process that involves the reaction of potassium chloride with sulphuric acid. A transaction risk is a currency risk that may arise in connection with existing receivables or liabilities in a foreign currency if a transaction in a foreign currency is to be converted to the Group currency and thus Rating agencies award ratings of a company’s ability to meet its future represents a risk in terms of payment. interest and repayment obligations in a timely manner in the form of standard categories. A translation risk is a currency risk, which may arise as a result of translating pro t, cash ow or balance sheet items to other periods or Return on Capital Employed is a nancial ratio that measures reporting dates, which are accrued in a currency other than the Group a company’s pro tability and the e ciency with which its capital is currency. This is therefore a non-cash risk. employed.

Sodium chloride (NaCl) or table salt is a crystalline mineral extracted The United Nations Global Compact is a voluntary strategic initiative from rock salt and sea salt. As food grade salt, sodium chloride is an for companies designed to promote sustainable development and indispensable mineral supplier to the human body. Sodium chloride is social commitment. The participating companies acknowledge the ten also used to maintain road safety and as an important element in the principles of the Global Compact in the areas of human rights, working production of glass, paper and plastic. standards, environmental protection and anti-corruption.

GLOSSARY TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

This key gure is based on the assumption that a company creates added value for the investor when the return on the average capital employed exceeds the underlying cost of capital. This excess return is multiplied by the average capital employed (annual average for operating assets and working capital) to give the company’s added value for the year under review.

- Water-softening salts remove hardeners such as calcium and magnesium from the water through an ion exchange process. Soft water is necessary or advantageous for numerous industrial processes, but also in private households.

GLOSSARY

Administrative expenses , Earnings before interest, taxes, depreciation Agricultural prices , , , and amortization , , , , , , , , Animal hygiene products , , Earnings per share , , Annual General Meeting -margin , Anti-corruption , -margin , Anti-discrimination , – German Extractive Industries Application advice Transparency Initiative Auditor’s Report Employees , , , Energy costs , , , Environment , , , , Environmental management , Balance Sheet , , Equity , , , , , Bethune , , , , , , , , , Equity ratio , , Brands , , , Board of Executive Directors , , , Bonds Business ethics , Business model Fertilizer specialties , , , , Financial result , , , Food processing industry , , , , Freight costs , Capital expenditure , , , , Further training , Capital structure Cash ow , , , , , , , Cash ow statement , (Trading) , Global Compact , , Climate Goals , , , , , Continuing education Index Committees , , , , Group earnings , , Complementary Activities , , , Group tax rate Compliance , , , Consumer products , , , , Core values and principles (Code of Conduct) , , Corporate Governance , Health , Cost of capital development Cost of materials , , Human rights , Cost of sales , , Customers , , Income Statement , , Industrial products , Declaration of conformity Industrial salt , , , Declaration on corporate governance Industry situation , , Deep-well injection , , , Internal control system , De-icing salt , , , , , , , Depreciation and amortisation , , , , , , , , Derivative nancial instruments , , , , Directors’ Dealings + , , Diversity , , + , , Dividend , , , , Donations/Sponsoring , , , , ,

INDEX TO OUR SHAREHOLDERS COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

Liquidity , , , , Sales regions , , , , Litigations , Salt , , , , , , , , Logistics Salt for chemical use , , , , Long-term incentive programme Seasonality Securities and other nancial investments , , Segment reporting , , , , , Market capitalization Share Materiality analysis , Shareholder structure Mission Sites , , , , Supervisory board , , , , , Suppliers , , , Sustainability , , , Sustainable supply chains , Net debt , , , Stakeholders , , , Non- nancial statement Strategy

Occupational safety , , Tailings pile management , Opportunities , Trade unions , Outlook Training guidelines for multinational companies , Operating earnings , , , , , Organisation structure , dollar , , ,

Pension provisions , Vision Pension scheme People Potash and Magnesium Products , , , , , , , , Potassium chloride , , , Waste , , , Potassium sulphate Waste Management and Recycling , , , Provisions , , , , , , , , Wastewater , , , , , Provisions for mining obligations , , , , , , , Water protection , , Personnel expenses , , Working capital , , Works council

Quality management

Rating , , , , , Remuneration , Research coverage Research & Development Reserves and resources Return on Capital Employed , , Return on equity , Return on revenues , Return on total investment , , Revenues , , , , , , , , , , , Risk and opportunities management system Risks

INDEX , ,

Annual Report www.k-plus-s.com/fy / Annual General Meeting www.k-plus-s.com/agm Quarterly Report, 31 March 2018 May Annual General Meeting, Kassel May Other publications Dividend payment May www.k-plus-s.com/publications Half-Yearly Financial Report, 30 June 2018 August Quarterly Report, 30 September 2018 November 2018 Annual Report March

Publisher Contact + + Bertha-von-Suttner-Str. Investor Relations Kassel, Germany Phone: + - www.k-plus-s.com Fax: + - Company’s registered o ce: Kassel E-mail: [email protected] Companies’ Register: Kassel Website: www.k-plus-s.com/ir

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FINANCIAL CALENDAR, ONLINE SERVICE, IMPRINT The ® Logo identi es products which contain wood from well managed forests certi ed in accordance with the rules of the Forest Stewardship Council®. + -- - , .- - .