With effect from the turn of the year we modified the legal structure of our group: Our US companies were newly aligned in terms of corporate and tax law and also with regard to their fields of activity. With this measure we bundled SOLARWORLD INDUSTRIES AMERICA inc. (formerly: SOLARWORLD properties inc.) as an operating parent company of the US business into a subgroup, creating one single tax unit in the USA at the same time.

As of 1 January 2009, we transferred the SolarMaterial division to SUNICON AG. With this transfer under company law, we will bundle all group-wide raw material activities into one company in future.

Production expansion from wafer through to module. The group will expand at all stages of the value chain. In the light of strong worldwide demand for wafers, our expansion plans focus in particular on wafer capacity, while the internal expansion of cell and module capacity in our group will probably be somewhat more moderate.

We are planning to build a nominal wafer capacity of 750 MW at our production site in Freiberg, Germany, by the end of 2009 and expand it to one GW by the end of 2010. The additional capacity at the new production buildings in the Eastern Industry Park will be fully available in the following year. Seamless production workflows from raw material input to wafer output with corresponding volumes will probably boost our cost and materials efficiency further. In contrast, we will realize our capacity expansion in cell and module production by means of an optimization of logistics processes and technical workflows within our existing infrastructure.

While our US manufacturing produces mono-crystalline solar power products, we primarily process polycrystalline wafers and cells in Freiberg.

We are planning to expand our wafer and cell capacity at Hillsboro, USA, to 250 MW respectively by the end of 2009. For further expansion stages we will benefit from the size of our site, where only one third of the land is covered with production buildings so far.

Our South Korean module production will reach full utilization as of 2009. Production is based on a modular approach so that a production capacity of up to 500 MW will be feasible at that site. Our further site expansion will be flexibly handled and geared to demand in Korea. In terms of procurement, the market is expected to ease substantially by 2010 due to corresponding capacity expansion by suppliers so that we will be able to secure additional growth in the short term.

Growth underpinned by silicon production and recycling. The nominal year-end capacity of our Joint Venture, jssi, will be 850 tons of solar-grade silicon in 2009. Strategic raw material activities

A second silicon-based technology for the processing of metallurgical silicon is in the development phase and will be further developed within the framework of the Joint Venture, scheuten SOLARWORLD solicium, in 2009. We will wait for further results before taking an investment decision for the group.

Of greater current strategic relevance is our recycling competence. As before, we will underpin our commodity position with recycling, which will account for around 20 per cent, alongside the proceeds from this service. SolarMaterial, which will be part of SUNICON AG as of 2009, is preparing vigorously to accompany the expansion of wafer capacity. A business plan for the 2010 expansion has been prepared. Moreover, our engineers are already implementing selective technical improvements in the workflows of our recycling systems and eliminating bottlenecks in the run-up to expansion. Our production unit in Vancouver, close to Hillsboro, USA, will focus on reprocessing activities for American sites in future.

Through the expansion of our recycling capacities and the resulting extension of our international customer relations, a diversity of opportunities is opened up for our group business: Thus, with consistent automation, a cost-cutting potential of some 30 per cent would be possible in the medium term, and of 50 per cent over the long term. The further growth of the overall market can also be expected to increase the proportion of secondary (i.e. recycled) silicon. Recycling will take on additional importance through the discussion about the duty of solar power manufacturers to practice waste disposal which recently also started in the USA. For companies such as SOLARWORLD AG who already do a lot of recycling, this is an important opportunity and a competitive advantage. Economic performance opportunities

Strong brand and customer trust as a basis. Our group is positioned in the key solar core and growth markets. World map Thanks to our solid market position, based on good, stable customer relationships and the value of the quality brand, SOLARWORLD, we expect global sales growth for SOLARWORLD in the module and kit business for 2009.

In Germany we also expect a growth in sales. In the USA we are planning to double our sales in 2009 due to positive market expectations, also driven by the expansion of our local production. The Spanish solar market was characterized by extraordinary market conditions, benefiting from above-average growth rates. The solar power market  With the introduction of the market cap in 2009, the market will decline considerably. This trend may also affect our sales in this market. Nevertheless we expect a consolidation of our market position thanks to our established position in the roof system business. In the young EU solar markets of Italy, France, Greece, and the Benelux countries, we expect growth for our business. In France and the Benelux countries, for instance, we can build upon a sound customer base that was created in 2008. In Italy we are benefiting from our strong positioning with systems integrators and specialized wholesalers.

In the light of their increasing energy requirements, the emerging economies and developing countries offer major sales potential. We will therefore strategically expand the off-grid solar business. It includes the development of logistics through regional production – as successfully demonstrated by the South Korean example – as well as investments in our distribution networks in Asia, Africa, Australia, and South America and in products specifically developed for rural electrification.

In the external wafer business, we will continue to serve international customers and expand our market position as a quality supplier with our SOLSIX® brand.

New products for off-grid markets. In 2009 we will launch new solar modules – our rural modules – on the market.

With their compact construction, these modules are ideally suited for solar home systems, i.e. stand-alone power supply solutions in rural off-grid regions. Their quality features match those of our on-grid standard modules. They include the processing of internally produced quality solar cells, the use of high-quality films, frames and glass geometries similar to those in standard modules as well as certification according to the global standards: IEC 61215 and IEC 61730 (planned to be listed with UL).

Crystalline solar power products with continually optimized price/performance ratios will continue to be our core business in the near future. We will successively include more advanced wafer, cell and module generations with higher efficiencies, better materials yield and corresponding cost efficiency. Research and development

The market launch of our solar tracking systems SUNTRAC®, which we developed ourselves to reach series production, is planned for 2009. These systems comprise a sensor-controlled solar tracking mechanism and thus enhance yields by around 35 per cent.

Securing and expanding our competitive edge. We intend to significantly boost our competitive edge in terms of innovation and cost containment from silicon all the way through to systems. In this regard, we are guided by our internal cost-cutting and efficiency enhancement targets. Research and development

In order to achieve this goal, we launched development projects for 2009 with a view to achieving corresponding annual cost reductions along the entire value chain. Activities include projects to enhance efficiency and further increase production of thinner wafers and reduce kerf losses and wafer rupture. Additional development projects are aimed at increasing plant throughput by means of the production or larger blocks and reduced cycle times in crystallization as well as substituting for cost-intensive consumables.

With the commissioning of the wafer pilot plant in the spring of 2009 and the cell and module pilot plant at the end of 2009, we will be able to transfer fully tested automation solutions, process variants and also optimizations of consumables to production. We thus ensure high quality standards and efficient workflows throughout our group in order to promote a ‘corporate technology’ and will thus leverage cost potentials in production. This creates a considerable competitive edge for our group as this type of core know-how cannot be purchased from institutes or suppliers.

New highly efficient technologies such as the wafer RGS procedure currently developed can be used as new production methods in the medium term. Silicon requirements could be cut by 50 per cent in industrial production. Main research and development areas and new products in 2008

Future R&D expenditure. The spending on research and development in the period 2009+ is to develop in line with the growth of our production. Excluding the research and development activities of our Joint Ventures that have their own R&D functions, we are planning a stable and/or slightly elevated research rate (R&D expenditure/revenues x 100) versus the previous year. Research and development expenses

Further increase in research and development headcount. In order to push technological development correspondingly ahead in our company, we will increase our headcount in research and development. According to our plan, our headcount in SOLARWORLD innovations will rise by about 40 per cent (2008: 80 employees) in 2009.

The planned growth of our group in 2009 as against 2008 has been fully secured in the field of raw materials, e.g. by means of long-term delivery contracts unaffected by declining purchasing prices in the raw materials area. For consumables, secure supplies for 2009 have been contractually fixed.

We will further expand our internal raw materials position through jssi and recycling operations and conclude additional raw material contracts to achieve further expansion steps in 2009 and 2010.

Since worldwide silicon capacities are expected to double by the end of 2009, silicon prices are also expected to drop as of 2009. The future solar power market

The principal goal of our human resources management will be qualitative and quantitative employment growth. We also aim to develop a corresponding organizational structure to support our planned expansion phases.

We are planning to create around 250 new positions at our production and research site in Freiberg as of 2009.

At group level, we will create up to 450 additional permanent jobs in 2009. We intend to employ almost 3,000 employees by the end of 2010, including physicists, chemists, electrical engineers, mechatronics and semi-conductor experts.

We also want to expand strategic core areas such as the securing of raw materials (SUNICON AG) as well as research and development (SOLARWORLD INNOVATIONS GmbH).

For 2009 we are planning to introduce talent management in order to identify top performers or employees with high potential for executive or technical careers. This approach is intended to help us prepare highly motivated, competent junior staff even better for leadership positions.

2009 will be an important year for the promotion of cooperation spanning different companies and sites. We will, for instance, further develop and anchor a group-wide uniform understanding of a SOLARWORLD leadership culture, based for example on additional group-wide executive training, and introduce an enlarged code of conduct.

In 2009 we will actively implement our »Employer Branding Strategy«. The focus of our campaigns to position SOLARWORLD as an employer of choice will initially be on Germany and the USA in 2009. Our goal is to continue winning the best in »Competing for the right talents«.