Annual Report

2012 Annual Report of the REIFF Group

www.reiff-gruppe.de

3Preface of the Management BoardPreface of the Management Board

From left to right:Hubert Reiff, Eberhard Reiff, Dr. Immanuel Kohn

The year 2012 was not an easy one for the REIFF Group. Revenue was markedly below the previous year's level; all divisions were affected by the fall in turnover.

The winter business in the Tyre Division was worse than expected at the start of the fourth quarter. Accordingly, the results for 2012 were below expectations. Retail and wholesale sales volume dropped in all product categories in 2012. As a result, revenue in the Tyre and Automotive Technology Division dropped.This development is industry-specific and agrees with the estimate of leading industry associations that see a drop in tyre sales volume in the range of 10 to 15 per cent. Given the scarce product supply in 2011 and excess supply in 2012, the tyre wholesale business also suffered lower margins.

The ambitious goals set for the Technical Products Division could not be reached. The industrial production business declined somewhat after the record year in 2011, but it still remained at a very good level and so its development was satisfactory.

The goal for the Elastomer Technology Division in 2012 was to achieve profitability. The opposite occurred; revenue was below budget.

It is gratifying that the average price of REIFF bonds in 2012 stood at 108.7. Reasons for this include our transparent communication, prominence as a tradition-rich family-owned company and the confidence that bondholders place in us.

We would like to take this opportunity to thank our customers, suppliers and business partners for their valued co-operation.

Our special thanks go to our employees for their commit-ted efforts even in difficult times.

Despite the worsening economic outlook, we are hopeful that, with all the actions we have taken on the sales and cost side, we will achieve an acceptable financial result in 2013. Our highly qualified employees with their strong motivation and dedicated efforts will play a particularly decisive role here. In 2012, we set the stage for a successful future with important projects, which we would like to present to you on the following pages.

Reutlingen, Germany, 18 March 2013

Eberhard Reiff Hubert Reiff Dr. Immanuel Kohn

Dear business partners, bond subscribers, employees and friends,

5Table of Contents

Preface of the Management Board 3

Contents 5

The REIFF Group in overview 6The enterprises of the REIFF Group 6The REIFF bond 10Seven-year overview 12Company structure 14

Long-term orientation of the REIFF Group 16Solid growth – projects in the REIFF Group 17Tyre Division 18Technical Products Division 30Elastomer Technology Division 34Management and Service Division 38

Financial reporting 42The year 2012 in numbers 42Important benchmark data of the REIFF Group 43Consolidated profit and loss statement 44Consolidated balance sheet 46Consolidated management report (including cash flow statement) 48Statement of changes in fixed assets 60Statement of changes in owners' equity 64Notes to the consolidated financial statement 66List of shareholdings as of 31/12/2012 80Auditor’s opinion 82 Contacts/scheduled dates 2013 84

Contents

7The REIFF Group in overview: The enterprises of the REIFF Group

REIFF Reifen und Autotechnik GmbH

At numerous locations we offer motorists profession-al and customer-friendly services in everything in-volving wheels and tyres.

We  carry all the important brands and tyre sizes and offer a variety of services – our strength is service that is strongly oriented on the customer.Private customers and business customers are in the best hands at the REIFF Group – scheduling, storage of tyres and wheels, night service at peak season times, and competent advice are individually oriented on custom-ers' desires.In all locations, we have expanded our offering into a comprehensive array of auto services. Brake systems, shock absorbers or exhaust systems are checked and a master auto mechanic repairs them. At the same time, a commercial vehicle tyre organization takes care of large truck fleets in our distribution area and offers an unbeatable service. From on-site installa-tion to comprehensive kilometre contract support – REIFF is the partner of the fleet operators.

Bandag plantIn one of the most modern tyre retread plants, we pro-duce truck tyres in the Bandag system.www.reiff-reifen.de

A/B/S – Autoservice

A/B/S is a cross-brand auto support organisation that of-fers comprehensive vehicle workshop service, including

painting and body work in authorised workshop quality. In addition to private consumers, A/B/S also supports corporate fleets. www.abs-autoservice.de

NETTO Reifen-Räder-Discount

With locations in the Rhine/Main and Munich areas, NETTO covers the low-cost segment in the tyre trade. Fast, uncompli-

cated and reasonably priced – these are the character-istics of this growing retail chain. The online shop offers attractive tyre prices for all of Germany and, since 2012, also for Switzerland.www.reifendiscount.de

R.TEC

Outside of the retail loca-tions' core areas, R.TEC serves customers as a wholesale partner for

wheels and tyres. R.TEC maintains three locations in Germany – of which two are in the eastern states. With central warehouses in Limbach-Oberfrohna (near Chem-nitz), Bautzen and in Reutlingen, R.TEC delivers tyres and wheels to dealers throughout Germany with 24-hour scheduling service. A broad assortment, the consistent customer orientation and competence in the area of light- alloy wheels ensure a dynamic development.An additional company in Poland belongs to R.TEC.www.rtec.de | www.rtec.pl

REIFEN + RÄDER GmbH

With a focus on com-plete wheels, light-alloy wheels and sporty tyres, REIFEN + RÄDER serves

car dealerships and repair facilities in Germany, France and Austria with dedication and technical competence. In addition, the PJP subsidiary was established in France in 2012.www.reifenundraeder.de | www.p-j-p.fr

HANSE-TRADING Reifenservice GmbH

First-class and reliable delivery service for everything related to wheels and tyres.Major customers and final

consumers at car dealerships, speciality tyre stores and vehicle repair facilities can rely on our high supply avail-ability and rapid delivery. The wholesaler focuses on ex-press deliveries, particularly in the Berlin/Brandenburg area.www.hanse-trading-reifenservice.de

REIFEN-KRUPP GmbH & Co. KG

REIFEN-KRUPP – on the market since 1951 and one of the leading car

tyre retailers in Germany with dominant competence in motorcycle tyres.REIFEN-KRUPP is the largest motorcycle tyre dealer in Europe, with headquarters in Schifferstadt and subsidiaries in France and Spain. In Schifferstadt, the company oper-ates one of the most modern tyre logistics centres with up to 20,000 units arriving for dispatch daily.Committed and motivated employees, unrivalled con-tacts in the tyre industry and a user-friendly online shop ensure maximum customer satisfaction.www.reifenkrupp.de www.neumaticos-krupp.eswww.pneus-krupp-france.com

9The REIFF Group in overview: The enterprises of the REIFF Group

REIFF Technische Produkte GmbH

As a partner for original equip-ment and operating supplies, details are our speciality.We take a very close look when analysing customer re-

quirements and developing intelligent solutions. Here we rely on maximum quality in advice and products.Supplier reduction, process cost optimisation, procurement management, E-procurement and E-business are tasks that we deal with every bit as successfully as we do with Kanban, just-in-time or consignment warehouses. REIFF Technical Products: this name stands for competence – from original equipment for working parts right up to complete components and complex assembly solutions.As technical dealer, we primarily support original equip-ment in the machine tool and plant engineering industries in our home area.We also honour agreements, scheduled dates, and the interpersonal components with the same degree of precision – and thus convince the customers in personal contact as well. www.reiff-tp.de

Product rangeWith over 150,000 products, we have available one of the largest ranges of technical products in Germany. Our stock of 80,000 products provides planning reliability without additional storage requirements for the customer. The technical departments of Drive Technology, Sealing Technology, Hose Technology, Elastomer and Plastic Profiles, as well as Plastics Technology form teams of product specialists that fulfil customer needs.

Profile technologyIn the profile technology plant in Erbach, we primarily make core-produced profile strips, vulcanise frame sys-tems and assemble them.

REIFF Technical Products (Shanghai) Co., Ltd.

REIFF Technical Products in Shanghai was founded at the beginning of November 2011, the first company of the REIFF Group in Asia, and is managed as an independent enterprise. From Shanghai, employees take care of customers in China and at the same time continue to develop purchasing sources in Asia.

Gummi-Roller S.a.r.l.

The technical dealer in Luxembourg and Belgium

has a broad and deep assortment of technical products from the areas of fluid engineering, drive technology, sealing technology, plastics, occupational health and safety and tools.www.gummi-roller.lu | www.rollerbelgium.be

Kremer GmbH

Specialised in the distri-bution of custom-devel-oped working parts made

of rubber, plastics and thermoplastic elastomers right through to complex assemblies.www.kremer-reiff.de

R.E.T. REIFF Elastomertechnik GmbH

In our modern production plant in Reutlingen, we manufacture intelligent sealing and damping sys-tems for electronics and

sensor systems, in close cooperation with the customer. Our principal customer for elastomer-based composite parts is the automotive supply industry.www.ret-gmbh.de

REIFF Management und Service GmbH

REIFF Management und Service GmbH is a ser-vice enterprise of the REIFF Group.As a specialist for commer-

cial management and services, we support all compa-nies of the REIFF Group. Our primary tasks areas are:IT organisation, auditing and legal, personnel and ad-ministration, controlling, recruitment, financial account-ing and insurance.www.reiff-gruppe.de

11The REIFF Group in overview: The REIFF bond

The REIFF bond was issued on 16 May 2011 with a volume of EUR 30 million at an interest rate of 7.25%.After half an hour, the bond issue was over-subscribed 3.5 times.

The REIFF bond

"Until 2011, the REIFF Group was an unknown quantity in terms of financial communication. With the issue of the REIFF bond in May, a clearly more open and transparent communication was necessary.What we admittedly shied away from previously was, viewed in retrospect, an absolutely correct and important step: In contrast to our fears, the disclosure of numbers and facts has been helpful in many ways. We are convinced that consistent financial communication and the transparency connected with it pays off sooner or later. It is important to us to communicate authentically and so win the trust of investors and business partners. The bond price never fell below 100 and the issue turned over completely by the end of 2012. This shows that we have won this trust.

In my opinion, the trust in our company has been essen-tial for the success of the REIFF bond.

REIFF is an important brand in Baden-Wuerttemberg. People know us. The REIFF Group is a family-owned company and has existed for over 100 years. Founded in 1910, the Group's 100th birthday in 2010 was an event for many.

But REIFF is not just a company with tradition, it is also very versatile: We invest in new trends and live out a culture in which managers have the opportunity to try out new things. We have also been able to make direct contact with investors through road shows and so gained the opportunity to address their needs.

Eberhard ReiffChair of the Management Board

Voices from the market

"Besides the company's solid line-up, the selected constellation of the bond contributed decisively to the overwhelming success of the placement."Klaus Schlote and Joachim Schmitt, general managersSolventis Wertpapierhandelsbank GmbH

"I would like to heartily congratulate you on your successful bond placement and outstanding market debut! You've apparently prepared and implemented the project very well."Ralph Heuwing, finance director Dürr AG

"With the first price determination of your debut bond on 17 May 2011 at 08:07 am at a price of 102.5%, you made a bit of history not just for the Stuttgart Exchange and the Bondm segment, but four your company group as well. […]As a result of your personal efforts, the excellent technical and media preparation as well as the precise execution by you and your colleagues, the Albert Reiff GmbH & Co. KG bond has developed into a reference transaction for private investors and companies after just a few days."Ralph Danielski, general manager, Börse Stuttgart Holding GmbH

13The REIFF Group in overview: Seven-year overview

2006 2007 2008 2009 2010 2011 2012

EBIT 8,372 5,589 3,659 -46 11,895 21,666 6,767

Equity 28,289 30,858 29,648 27,711 33,574 45,528 42,617Non-current provisions 9,131 9,357 9,622 9,475 10,595 10,595 11,192Financial liabilities 20,794 46,485 19,281 10,854 -4,535 30,730 33,006Invested assets 58,214 86,700 58,591 48,040 39,634 87,214 86,815

ROI 14.38% 6.45% 6.24% -0.1% 30.01% 24.84% 7.79%

Personnel costs/gross profit 56.77% 57.43% 58.07% 60.3% 55.31% 47.55% 53.84%

Financial liabilities/EBITDA 1.57 4.25 2.0 1.83 -0.26 1.1 2.45

Financial liabilities/EK 0.74 1.51 0.65 0.39 -0.14 0.67 0.77

EBIT/financial result 4.32 3.86 1.38 -0.03 7.69 7.14 1.79

Seven-year overview

The following table offers a brief and inci-sive overview of the course of business in the last seven years.

15The REIFF Group in overview: Company structure

Company structure of the REIFF Group in 2012

REIFF Beteiligungs GmbH, Reutlingen

ALBERT REIFF GMBH & CO. KGREIFF Management + Service GmbH, Reutlingen

REIFF Anlagen-Management GmbH & Co. KG, Reutlingen

Commercial service, REIFF company group

Tyre wholesale Elastomer Technology

Technical dealers

Technical dealers

Technical dealers

Technical dealers

Technical dealers

Tyre wholesale

Tyre wholesale

Tyre wholesale

Tyre wholesale

100%100 % 100%

20%

80%

100%

99.5%

80%1)100%

100 %

100%

100%

100%

100%

100%

100 %

66.7%

Holds the fixed assets in the tyre area

Tyres and automotive technology, retreading

and wholesale

Tyre and wheel wholesalers

Tyres and Automotive Technology

Tyres and Automotive Technology

Herbert Krupp Gm bH & Co. KG Schifferstadt

R.E.T. REIFF Elastomertechnik GmbH Reutlingen

Kremer GmbH Wächtersbach

REIFF Technical Products (Shanghai) Co., Ltd.

REIFF Technische Produkte GmbH Reutlingen

Evergreen SA Luxembourg

Gummi-Roller S.a.r.l. Luxembourg

ROLLER S.a.r.l. Belgium

Krupp Verwaltungs GmbH Schifferstadt

Pneus Krupp Fran ce S.a.r.l. Wissembourg

Neumaticos Krupp SL Madrid

PJP (Pneus Jantes et Pr estations) Bischheim

REIFF Reifen + Autotechnik GmbH Reutlingen

R.TEC Polska SpZ.oo Warsaw

REIFEN + RÄDER GmbH Karlsbad

HANSE-TRADING Reifenservice GmbH, Fürstenwalde

Hubert Reiff 0.5%

16.7% General manager

Uwe Richter

16.7% Michael Richter

Reiff 75%

Wendler 25%

100%

100 %

Limited partners

1) 10% is held by Hans-Jürgen Kremer, son of the former majority owner, an additional 10% by the general manager, Gregor Hämel

17Long-term orientation: Projects 2012/2013

Trees can live to be much more than 800 years old, but during this time they have to re-invent themselves every year. They show a very special adaptation capability. Dry periods, "Little Ice Ages", the change of seasons, air pollution. Well grown and rooted trees can survive even severe storms and sprout again on damaged parts.

An overview of the projects:

• Tyre wholesale: Close interlock between the whole-sale organisations

• Tyre retail: Profitability increase through best practice• NETTO Reifen-Räder-Discount: Multipath distribution

channel• Technical Products: Expansion of the logistics centre

and optimisation of warehousing• R.E.T. REIFF Elastomertechnik: Change of generation

and repositioning• REIFF Management und Service: Adaptation of the

performance spectrum on the strategic demands of the companies

Solid growth

Already in 2012, projects were started in the various divisions to prepare REIFF for the coming years. These projects will markedly improve the competitiveness of REIFF and so also contribute to REIFF's long-term success.

Some of the projects have been continuously and consist-ently pursued since the start of 2012.

The various parts of the tree stand for the projects in the different divisions at REIFF: the treetop for the tyre whole-sale business, the branches with their leaves for the tyre retail business, the trunk for Technical Products, the bark for Elastomer Technology and the roots for Management und Service GmbH.

19Long-term orientation: Tyre Division

Broadly branchedThe treetop cannot live without the trunk, the trunk not without the roots, and the roots not without the leaves – the circle is closed. Everything is adapted especially to each other and intertwined.

REIFF tyre wholesale

The delicate branching and twigging of the tree-top ensures broad, fast and direct supply.REIFF tyre wholesale is broadly branched and supplies both small and large trade units throughout Europe.

For over 20 years, tyre wholesale has been an important pillar of the Tyre and Automotive Technology Division:Shortly after the founding of the R.TEC wholesaler for wheels and tyres in 1990, the first locations were opened in eastern Germany. In 1993, the first tyre wholesaler was taken over, REIFEN + RÄDER in Karlsbad. Only four years later, we expanded into Poland with the foundation of R.TEC Polska. Through the acquisition of HANSE-TRADING tyre service in 2005 and the 2011 takeover of REIFEN-KRUPP, the motorcycle-tyre specialist wholesaler, the REIFF Group became Germany's largest independent tyre wholesaler and Europe's largest motorcycle tyre dealer. Today, REIFF tyre wholesale is active in many countries in Europe.

Like the brands, the structures of the individual companies remained intact at first. Interlocking of the wholesale organisations began in 2012. That means: The five companies remain independent as brands, develop their own profiles, but use synergies in the areas of IT, procurement, logistics and organisation. This development process should be complete in 2015.

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Today, 35,000 articles can be acquired through REIFF wholesale, with a growing trend. Shipment is made within 24 to 48 hours.

Interlocking of tyre wholesale

The competitiveness of the tyre wholesale companies within the REIFF Group will be increased further through the narrow interlocking of the companies, with the goal of serving customers in the European market as compre-hensively as possible, as competently as possible and as fast as possible.

International procurement

Tyres are produced worldwide, and Asian manufacturers are gaining increasing importance. Here the task is to keep our eyes on the ball in all markets, design our contacts to the industry and know exactly which products need to be placed in which product niches. With its wholesale brands R.TEC, HANSE-TRADING Tyre Service, REIFEN + RÄDER and REIFEN-KRUPP, REIFF covers all product areas and so has listed almost all tyre manufacturers.

Perfect logistics

The tyre wholesale business is always a logistical challenge. The tyre business is strongly seasonal, and only those who are perfectly prepared for the peak times in the season, master the processes to the last detail and perform stocking with maximum product knowledge can succeed in this hard-fought market. The great challenge is to network the warehouses of the individual wholesalers so that the products ordered by the customer arrive at the desired location within 24 to 48 hours, regardless of the size of the order.

Fine-tuned processes

Delivery capability is everything – with around 35,000 different articles, stocking requires comprehensive market and product knowledge. The processes must

work exactly and down to the smallest detail – only then can up to 60,000 units per day be put on the road.

At home in Europe

Regardless of which REIFF wholesaler the goods are ordered from, whether in France, the Czech Republic, Poland, Spain or Germany, regardless of whether the order comprises tractor, automobile, SUV or motorcycle tyres, and regardless of whether two or a thousand units are delivered, the goal is to deliver the goods to the desired destination quickly and reliably. Make use of synergies

The technical requirements for a successful partnership lie in the implementation. The employees of the individual companies currently work in a functionally oriented way: All positions are present in every company.

Through the cooperation across organisations in project groups, not only are synergies used, potentials released and processes optimised, but most of all, knowledge transfer is enabled that leads to better results in all areas.

The tight interlocking of the organisations expresses even more clearly: No other tyre wholesaler in Europe offers a comparably performance through maximum product line width and depth as well as perfect logistics with high product availability.

Functional orientation

Process orientation

Long-term orientation: Tyre Division

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REIFF tyre retail

Functionality down to the smallest detail: Speci-ality retailers have an especially wide array of tasks to perform and stand in direct contact with the customer. In the branch stores, the relation-ship to the customer is in the forefront.

Tyre retail stores at REIFF can look back on a long history: Back in 1922, Albert Reiff founded the company A. Reiff + Cie., Reifen + Vulkanisation. Today, the network consists of 34 stores, most of them in Baden-Wuerttemberg. Service is written large in all the stores.Besides competent and friendly advice, custom-ers at all locations can take advantage of the following services: Wheel storage, scheduled service, filling gas, pick-up and delivery service, mobility guarantee and night service as well as a comprehensive, professional auto service.

Visionary, innovative actions and a modern leadership style with delegation of competencies and clear goals create the requirements for a successful future for tyre speciality retailers. Here, the greatest value is placed on qualified employees, who behave in a dependable, trustworthy, self-critical and appreciative way and expect that also from their partners.

Reaching high goals

Giraffes prefer to graze on treetops, especially of acacia trees. The tongue and lips are formed so they suffer no harm despite the thorny limbs. The need for liquid is largely covered from the food, so giraffes can get by for weeks without drinking.

Branching into the finest detailThe leaves of a large tree can hardly be counted. Uncounted twigs, branches and leaves – each fulfils its function, and each is provided for up to the edge. The leaves take up sunlight and carry the water into the inside of the tree, so that weak points do not arise anywhere.

Long-term orientation: Tyre Division

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Our promise "Strong in service" is lived out by each individual employee and is implemented in all areas. It applies to customer advising, product ordering, service, speed and for all customer groups equally.

Strong in change

Effective 1 January 2013, the new division management for retail took up its responsibilities. The change programme "Strong in change" is completely oriented on the future. The changed customer demands, the ever more individual purchasing behaviour, the high demands for service and expectations of employees for autonomous work have been equally taken into account.

Entrepreneur on site

The role of the branch store manager as entrepreneur on site is both demanded and strengthened. A leadership philosophy based on independent action gives each individual more responsibility and thus also more room for action.

Premium customer advising

Learning from others is the motto. Open communication with each other and maximum transparency across all task areas permit concentration on advising our customers.All customer groups must be served according to their expectations in an uncomplicated but perfect way. Truck customers expect fast flat-tyre repair, car fleet customers want a transparent cost-benefit analysis, auto service customers demand professional, inexpensive repair, tradespeople expect tyre mounting on Saturdays and steady customers that their stored tyres will be washed and ready.

Successful organisation

This variety of services and products for very different groups of customers requires a finely tuned coordination. Only when all processes run reliably in the background is there sufficient time to advice customers competently and comprehensively.

Auto service potential

Every tyre customer is also a potential customer for auto service. This service covers replacement of wearing parts and performance of the main inspection. Every REIFF branch store is technically equipped for this and has a set of modern car service equipment. The cars are in the shop – here the goal is to make further use of the existing potential and convince the tyre customers, who frequently have been coming to REIFF for decades, of the benefits of our auto service.

With "Strong in change", we are establishing a learning organisation that will develop further with its own dynamic and, with consistent implementation, will create resources for more customers and thus more profit.

Long-term orientation: Tyre Division

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Reliable supplierWhen the leaves on the tree take up energy, the branches are there to guide it – in two directions: The leaves feed solar energy to the roots, and in turn the roots provide water and nutrients to the last leaf.

NETTO Reifen-Räder-Discount

In autumn 1993, the first NETTO branch was opened in Stuttgart Bad Cannstatt. Accordingly, NETTO has been in the market for over two decades.

It is one of the first discounters in the tyre industry, which has discovered the potential of price-conscious customers. Since then, NETTO-Reifen-Discount has offered low prices for tyres and aluminium or steel rims and good service, which is limited compared to speciality retailers.

NETTO concentrates mainly on the final car consumer business and pure tyre service. Processes are extremely lean, due to this focussing. Standardisation contributes to a very high throughput, especially in season.

The branch network comprises twelve stores in various cities, seven of them in the Rhine-Main region and an additional four in the Munich metropolitan area.

NETTO has operated an on-line shop since 2009.

Long-term orientation: Tyre Division

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With twelve branch stores and the platform www.reifendiscount.de, NETTO serves customers throughout Germany. In 2012, a  video with Lego figures showed how easy it was to by tyres in the internet.

Multipath distribution channel

NETTO-Reifen-Discount has already been doing for five years now what is currently a hot topic in retail circles. Cross-selling or multipath distribution: With twelve branches in the Frankfurt, Munich and Stuttgart metropolitan areas and an on-line shop, NETTO covers especially the low-price segment.www.reifendiscount.de is one of the top tyre shops for final consumers. NETTO distinguishes itself with first-class prices, easy handling and an enormous availability.

Short transport paths, perfect processes and first-class purchasing conditions put NETTO in a position to offer drivers the best price.Best prices and good quality – the message quickly spread by word of mouth among car owners, for NETTO chooses not to sell the cheapest products that do not meet the quality requirements of the REIFF Group.

E-commerce is the strategic action field

In 2013, we will expand our on-line activities. The best shop is truly the best only if it can be found – and so we will pursue two lines of attack: The on-line marketing activities will be accelerated so that the shop can be found quickly and user friendliness further optimised for the user. For it is true in the on-line business as well: customer recommendations create growth.

Ordered today – delivered tomorrow

That is what on-line buyers usually expect. The biggest challenge will be to meet this expectation across the entire assortment. Experience shows: Strategically linking on-line and off-line activities creates advantages. Not only in recognition, but also in the freedom of choice for customers – they can have the tyres mounted locally and do not need to use any other service-providers. This is another reason to expand the branch network in the metropolitan areas.

Long-term orientation: Tyre Division

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Healthy growthThe annual rings are a living expression of growth and continuity.The trunk gives the tree indispensable support and the necessary height to supply itself sufficiently with energy.

REIFF Technical Products

REIFF Technical Products is characterised by its healthy growth.

The logistics centre in Reutlingen-Betzingen is currently being expanded as are offices and warehouse space in Chemnitz. With around 150,000 products, REIFF Technical Products already has one of the largest technical assortments in Germany; 55,000 products are available in the on-line shop.Our stock of 80,000 products provides planning reliability without additional storage requirements for the customer. Thanks to professional processing and delivery of complete sub-assemblies, REIFF Technical Products finds a solution for to meet all requirements. Process-optimised order processing and automatic transport systems ensure exact handling according to customer specifications.

The logistics centre in Reutlingen-Betzingen has warehouse space of currently 20,000 m² with 7,000 pallets and 21,600 container spaces. The centre keeps 80,000 active articles ready in small part, pallet and high-rack storage. Every month, 11,000 items are booked as received, while 4,000 tour orders, 1,200 pallets and 13,000 packages leave the warehouse monthly.

Watch film:REIFF Technical Products logistics centre

Long-term orientation: Technical Dealers Division

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Albert Reiff founded Albert REIFF KG für Technische Gummiwaren in 1910 in Reutlingen. Today, REIFF Technical Products is one of Germany's largest technical retailers and boasts one of the largest assortments of technical products.

Strong in service

The motto of the REIFF Group, "Strong in service" is written large in the Technical Products Division: This service is improved even further through warehouse expansions, optimisation of logistical processes, expansion of international activities and other actions. Through consistent process and data management, integrated processes and so the electronic connection of customers are achieved. The highest productivity in processes and maximum capacity for customer and market are our goal.

Expansion of capacities

Currently, the second expansion stage of the logistics centre of REIFF Technical Products with automatic small-parts warehouse in Reutlingen-Betzingen is in process; the first was already completed in 2006. A new high-rack pallet warehouse and an automatic small-parts

warehouse will be in place by 2014. The investment will amount to EUR 5.5 million. Independently of this, we succeeded in reducing inventory in 2012. This trend will be continued.

Expansion of international activity

The foreign activities of the Technical Products Division increasingly gain in importance. Since the start of selling by REIFF Technical Products Shanghai in May 2012, subsidiaries of German companies in China have been supplied successfully; the profit threshold should be reached as early as 2013.

Effective 1 January 2013, our presence in the Benelux area was markedly increased with acquisition of the company PICHA Sprl. As a result, Technical Products has achieved complete coverage of the market in Wallonia.

Customer orientation in a new dimension

With its total catalogue published in mid-2012 as a hybrid catalogue, REIFF Technical Products showed its innovation and customer orientation once again. The print catalogue, over 1,000 pages thick, was enriched with multimedia links: Through QR codes and augmented reality apps, customers are offered true added value. Practical apps help with conversion of units of measure or with finding suitable adhesives. In addition, links on the on-line shop simplify the purchase of technical products. In addition, not only was a PDF version of the catalogue published on-line, but an electronic scrolling catalogue was also provided.

The project KSL+, which was begun in 2011, is showing initial success. Here, customers are distributed among several customer service levels and categorised

accordingly. This guarantees that every customer group receives customised service.

Outlook

Since 2011, the motto of the Technical Products Division has been "Code 200/15", which stands for revenue of EUR 200 million in the year 2015. The aspiration is growth through repetition of successes in the industry, a continuing assembly sales offensive as well as organic geographic expansion and targeted acquisitions.

Long-term orientation: Technical Dealers Division

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R.E.T. REIFF Elastomertechnik

The structures of R.E.T. GmbH are undergoing change: Already in 2012, a generation change was completed that works in two targeted directions: revenue growth and cost reduction.

The origins of R.E.T. GmbH go back to 1978, when rubber moulded parts production at REIFF came into being. Today, the company offers three product groups: elastomer rubber moulded parts, elastomer composite parts and free application technology. It serves the automobile, food, general industry and medical technology markets. Large production runs of several million units per year as well as small production runs of 1,000 parts and fewer are executed.

The core competence of R.E.T. is elastomer processing with the focus on metal or plastic composite parts as material carrier. Two processes are used: two-component production, which processes two materials in one production step, and the traditional process, in which parts are inserted loosely.

Watch film:Forty years of experience and know-how in elastomers

Perfect structuresNot always visible at first glance. The bark of a tree fulfils two major tasks: it protects and supplies. It adapts to the tree's growth unnoticed and supplies the trunk with moisture through its ridges, grooves and indentations.

Long-term orientation: Elastomer Technology Division

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The core competence of R.E.T. is elastomer processing and particularly the composite as a hard/soft component, i.e., elastomers in combination with metal or plastic and the very good adhesive connection between these materials.

On new paths

Challenges let R.E.T. grow! For 2013, the company's 130 employees have one goal: To cross the profit threshold by the end of 2014 and ensure sustainable development. With this goal, the new general manager, Jan Beutnagel, entered the company on 1 October 2012. His predecessor, Horst Schäfer, continues to serve the company with his experience and contacts as authorised representative.

The new management team is confident that R.E.T. will find its way back to its old strength. Customers appreciate the company's technical competence and flexibility and continue to expect it.

Opening of an LCC1 location along the logistics chain of our customers in the automobile supplier industry is being investigated. In addition, a new team organisation will ensure a better start for new projects and will perform tasks quickly, sustainably and consistently.

Considerable production increases must be achieved to optimise process flows and reduce costs. Revenue increases should be achieved in existing and new markets. The sales team was strengthened again for this purpose.

The transformation already began in 2012 and is showing its first fruits: A new communication and motivation model is strengthening employee cohesion. Thanks to the new organisation and project structure, initial good results in production improvement have already been achieved. In addition, the team was able to acquire new orders, not only from customers of many years but from other renowned companies as well. Negotiations with other potential business partners are currently ongoing.

The planned investments are focused on new projects and rationalisation measures.

1) LCC – Low Cost Country

Long-term orientation: Elastomer Technology Division

39Long-term orientation: REIFF Management and Service

On a good foundationThe larger the tree, the more stable the foundation. The hardly visible roots do their work hidden, but ensure that all visible parts work perfectly. The circle is closed here and clearly shows the interdependencies – only when all the parts work in concert with each other do we have a healthy whole.

REIFF Management and Service

Like the roots, REIFF Management and Service supplies the company and strengthens the position of the entire REIFF Group.

Experts from the areas of finance and accounting, administration, personnel and organisation development, audit and risk management, information technology and project management assist, support and advise the operating divisions of the REIFF Group.

REIFF Management and Service invests continuously in the future of the business areas. Technically sound capabilities are taught in personnel development; the legal department advises the operating divisions on legal questions. The areas of finance and accounting as well as administration ensure that transactions runs smoothly, support projects such as the REIFF bond and enable the individual companies to concentrate on their core business.

IT ensures with foresight that existing applications and services will also be available to meet the needs from future growth of the REIFF Group.

REIFF Management and Service regularly adapts its service spectrum to the strategic demands of the companies.

41Long-term orientation: REIFF Management and Service

REIFF Management and Service is a service-provider for all operational divisions of the REIFF Group. Its services include finance and accounting, management, human resources, law and administration, strategy implementation, IT operation and help desk, audit and risk management.

Business partner

REIFF Management and Service supports the operating divisions in all aspects. The following provides a short look at projects begun in 2012, most of which will be completed in 2013.

Personnel development

REIFF places the greatest importance on continuous training and development of our employees. With a look toward the strategic goals and long-term success of the company group, important personnel development projects were carried out even in the difficult year 2012. The focus of training and development covers the topics of automobile technology and quality in auto service as well as sales training and competence, cooperation and leadership in dialogue, expertise and international cooperation in all organisations. Trainee programmes helped young professionals begin their careers and provided orientation within the company. In addition,

individually tailored training programmes were offered, such as technical understanding for administrators, legal foundations, self-management and integrated project management.Moreover, the employees participated actively in the offered technical training, such as IT technical training and training to obtain the professional driver's licence.The value of the personnel development services is confirmed through low fluctuation and the performance of the trainees, who on average achieve good, sometimes even very good completion marks with awards from the German Chamber of Commerce and Industry.

Finance and accounting

With the integration of the REIFEN-KRUPP bookkeeping into the structures of REIFF Management and Service, an important step took place in the integration into the REIFF Group of this tyre wholesaler, which was acquired

in 2011. The Schifferstadt company profits greatly from the optimally coordinated processes and, through the unburdening, can concentrate even more strongly on its core business.

IT operation and IT strategy support

A small team with roots in the project world of information technology comprehensively supports the executives of the REIFF Group in long-term changes and innovations in order to create shared sustainable solutions.The necessary resources are taken from their own pool of professional and competent IT experts as well as partnership-based linking with external service providers.

The ongoing projects include the reorganisation of the IT structure of the wholesale company as explained in the Wholesale chapter, implementation of e-business solutions, development of a CRM system tailored to the

individual needs of the companies, and introduction of Enterprise 2.0 Solution IBM Connections.These and further measures will contribute to keeping the REIFF Group a decisive step ahead of the competition and to optimising communication within the REIFF Group, especially across the individual company boundaries.

43Financial reporting

2012 in numbers

Income after taxes is EUR 0.6 million.

Revenue of the REIFF Group is EUR 528.2 million.

The Tyres and Automotive Technology Division achieved revenue of EUR 377 million.

The Technical Products Division achieved revenue of EUR 134 million.

The Elastomer Technology Division earned revenue of EUR 16 million.

EBIT was 1.3% of the overall performance.

The Creditreform rating was confirmed in 2013 with BBB- (investment grade).

Important benchmark data of the REIFF Group

2012 2011 2010 Change Change12 to 11 11 to 10

TEUR TEUR TEUR TEUR TEUR

Overall performance 528,016 565,615 379,770 -37,446 185,845

Gross profit 123,048 139,522 104,520 -16,471 35,002Gross profit to overall performance 23.2% 24.7% 27.5%

Personnel expenses 66,220 66,338 57,806 -121 8,532Personnel expenses to gross profit 53.8% 47.5% 55.3%Depreciation 6,701 6,234 5,608 467 626

Other operating expenses 48,894 49,686 33,569 -792 16,117

Operating result1 2,391 18,060 10,348 -15,669 7,712

Extraordinary Expenditures2 0 0 1,267 0 -1,267

Balance sheet total 226,079 218,546 140,435 7,533 78,111

Inventories 113,497 100,783 48,649 12,714 52,134

Customer receivables 10,355 9,860 11,516 495 -1,656

Other assets 11,828 17,990 10,583 -6,162 7,407

Bonds 30,000 30,000 0 0 30,000Bank liabilities 22,535 24,007 18,962 -1,472 5,045

Supplier liabilities 79,908 68,880 44,142 11,025 24,738

Employees3 1,572 1,483 1,291 89 192

1) = the result of ordinary business activity2) from BilmoG adaptation3) Annual average value without apprentices

Revenue 2012100% = EUR 528.2 million

Tyres Division:71.4%

Technical Dealers Division:25.4%

Elastomer Technology Division:3.2%

45

Consolidated profit and loss statement

in TEUR Details 2011 2011 Details 2012 2012

1. Sales revenue 565,290.2 528,168.9 2. Reduction/increase in stocks of finished goods and work in progress 324.8 -152.6 3. Other operating income 3,456.0 4,792.6 of which from currency translation 87.5 99.6 4. Cost of materials a) Expenses for raw materials, supplies and procured goods 417,206.8 396,801.5 b) Expenses for purchased services 8,886.4 8,166.4

426,093.2 426,093.2 404,967.9 404,967.9

5. Personnel expenses a) Wages and salary 55,593.4 55,471.5 b) Contributions to social insurance, pension plans and other benefits 10,745.0 10,748.2

of which for old age pensions TEUR 956,1 66,338.4 610.2 66,219.766,338.4 66,219.7

6. Depreciation a) of intangible assets, depreciation of property, plant and equipment 6,234.0 6,700.9 b) of current assets 0.0 0.0

6,234.0 6,234.0 6,700.9 6,700.8 7. Other operating expenses 49,685.7 48,893.5 of which from currency translation 531.8 93.1 8. Income from participations 0.1 0.1 9. Earnings from other securities and loans of financial assets 0.0 0.010. Other interest income and similar earnings a) Interest income and similar earnings 750.3 624.8 b) Income from discounting 4.6 3.611. Depreciation on financial assets 0.0 0.012. Interest and similar expenses a) Interest and similar expenses 2,840.7 3,667.1 b) Expenses from discounting 573.3 597.3

13. Results from ordinary activities 18,060.6 2,391.114. Extraordinary profit and loss 0.0 0.015. Taxes from income and from earnings 5,006.2 1,531.7 of which from deferred taxes 0.0 74.616. Other taxes 245.2 307.1

17. Consolidated net income for the year 12,809.2 552.3

18. Profit allocated to minority shareholders, § 307 para. 2 German Commercial Code (HGB) 1,145.2 93.5

Financial reporting

47Financial reporting

Consolidated balance sheet as of 31/12/2012

in TEUR Status as of 31/12/2012

Status as of 31/12/11

A. Fixed assets

I. Intangible assets 10,552.5 9,057.3

II. Property, plant and equipment 57,811.6 54,597.5

III. Financial assets 17.0 18.3

68,381.1 63,673.1

B. Current assets

I. Inventories 1. Expenses for raw materials and supplies 1,859.6 1,566.8 2. Work in progress 59.8 84.7 3. Finished goods 111,312.6 98,765.3 4. Pre-payments on inventories 264.9 366.3

113,496.9 100,783.1

II. Receivables and other assets 1. Trade receivables 10,354.6 9,860.1 2. Receivables from shareholders 0.0 0.0 3. Receivables from companies with which a participatory relationship

exists0.0 0.0

4. Other assets 11,827.8 17,990.1

22,182.4 27,850.2 III. Checks, cash-in-hand, bank balances 1. Checks, cash-in-hand 69.9 70.8 2. Bank balances 19,529.4 23,275.7

C. Accruals and deferrals 1,387.5 1,796.5

D. Deferred tax assets 926.0 997.8

E. Excess of plan assets over post-employment benefit liability 105.6 98.8

226,078.8 218,564.0

Assets

in TEUR Status as of 31/12/12

Status as of 31/12/11

A. Equity

I. Subscribed capital, unlimited partner 30.7 30.7II. Limited liability capital 8,180.7 8,180.7III. Capital account II 5,927.1 2,878.4IV. Other retained earnings 3,657.2 1,869.5V. Difference in equity due to currency translation 41.3 -50.3VI. Equity share of minority shareholders 3,935.5 2,830.3Vii. Profit carried forward 20,292.3 16,978.3Viii. Consolidated profit/loss for the year 552.3 12,809.2

42,617.1 45,526.8

B. Provisions and accrued liabilities 1. Provisions for pensions and similar obligations 11,192.3 10,956.0 2. Tax provisions 941.0 3,378.0 3. Other provisions 5,372.3 9,079.4

17,505.6 23,413.4

C. Liabilities 1. Bond issue 30,000.0 30,000.0 2. Liabilities to banks 22,534.9 24,007.0 3. Pre-payments received on orders 108.6 0.0 4. Trade liabilities 79,907.6 68,880.2 5. Liabilities from bills of exchange accepted and drawn 0.0 0.0 6. Liabilities to companies with which a participatory relationship

exists0.0 0.0

7. Liabilities to shareholders 5,239.6 2,837.8 8. Other liabilities 27,719.0 23,396.6

165,509.7 149,121.5

of which from taxes TEUR 8,142.7 4,398.8 of which relating to social security TEUR 200.0 179.4

D. Accruals and deferrals 439.1 478.8

E. Deferred tax liabilities 7.3 5.5

226,078.8 218,546.0

Liabilities

49

1) Presentation of the course of business

a) Overall economic developments and the REIFF Group

Thanks to continued strong demand for export goods in Asia and the USA, the German economy's growth was much better than in other countries of the European Un-ion. For the year as a whole, gross domestic product in Germany grew 0.5%. In contrast, economic output in other EU countries fell. When newspapers discuss the "periphery", what is meant is largely the Greco-Roman cultural area. These countries covered some distance in 2012 on the path to consolidation of their finances. The excessive indebtedness affects both private and public finances in different ways, which vary from country to country. The German government seems to have no op-tion but to guide the partner countries back to the path of virtue using a "carrot and the stick" approach. As a creditor country, Germany sits in the same boat with the highly indebted EU members. For private creditors, safe investments that pay more than the rate of inflation are now in short supply. The policy of the ECB to buy gov-ernment bonds without limit and even accept negative interest rates appears to follow the motto "Better a horror without end than an end with horror". It remains to be seen how an environment of "free" money will affect the allocation of investments.

In this environment, the REIFF Group is experiencing weaker demand, following this logic, in the Technical Products and Elastomer Technology divisions. In contrast, the Tyres and Automotive Technology Division experi-enced an industry-specific economic trend that can hard-ly be explained through the general development of the economy. In the first half of 2012, we already reported a declining market for summer tyres, but were still confident that the decline in the winter tyre market in 2011 would be followed by at least a slight improvement in the mar-ket. The opposite was true. On the one hand, higher fuel costs caused our customers to hold back on the purchase of new tyres. On the other hand, some manufacturers fought a battle for market share, resulting in excess sup-ply. Both factors resulted in collapsing margins for tyre retailers.

As a result of these influences, revenue dropped 6.6% from the previous year to EUR 528 million. EBITDA of EUR 13.5 million was below our expectations and the level of the previous year (EUR 27.9 million).

b) Revenue and earnings

Tyre Division:

The tyre markets in 2012 experienced a dramatic development. Whereas in the previous year shortages were reported, retail-to-consumer sales volume shrank in 2012 by two-digit percentages in all product categories. One important manufacturer, which in 2011 had to give up market share due to poor ability to deliver, was able to regain lost territory in 2012 due to good test results and an excellent brand image. Other manufacturers, which jumped into the breach in 2011, began 2012 with the intention of maintaining the gains they had won. This was one of the factors that favoured the change from shortage (2011) to excess supply (2012). As a result, revenue in the Tyre Division fell 8.4%. The division's EBITDA was EUR 6.6 million (previous year, EUR 18 million).

This development fit the industry trend. According to var-ious industry associations, the tyre market in all product categories fell more than 10% compared to the previous year (2011).

REIFF outlets were again able to increase the number of customers. The good development of auto service shows that there is still much potential slumbering here in providing tyre customers with auto service. Despite the high customer frequency in the winter business as well, many customers decided only to mount their old tyres and

not buy new ones. Customers may have been reacting to rising fuel prices. Many customers are apparently not conscious enough that tyres are especially important for safety. Experts point out that the statutory minimum thread of 1.6 mm is too small. Tyres are fully winter-capable only with a tread of at least 4 mm.

In the commercial vehicle tyre business, EU environmental standards in particular ensured that many fleets equipped their motor pools with new vehicles in both of the last two years. Together with a trend to putting more kilometres on existing tyres, this had a negative impact on the replacement market, which shrank again after 2011 for the second year in a row. Positive, in contrast, were developments again in the production and sale of retread tyres in the Bandag-licensed process. The plant was utilised at 85 per cent of capacity.

The operating result of the retail operation was below the previous year's level.

The branch outlets of NETTO Reifen-Räder-Discount were not able to avoid the market trend, but with a revenue decline of -7.8% achieved a comparably good result. All markets achieved a positive operating result. The Internet shop www.reifendiscount.de meanwhile continued its success.

The tyre wholesale division was hit hardest by the general market developments. Besides the previously mentioned market factors, the weak demand in France and southern Europe had an impact. The simultaneous occurrence of excess supply and declining demand resulted in markedly lower retail margins. These averaged around three percentage points below the year 2011. This development, management believes, will not continue. Rather, it shows how the government's intervention in the market, such as the car scrapping bonus in 2009 and the strengthened winter tyre requirements in 2010 artificially reinforced normal cycles, with the result of enormous deviations, first upward (2010 and 2011) and then in 2012 downward. The supply side acted pro-cyclically, with too little production capacity in 2010 and 2011 but too much in 2012. In view of this one-time experience and the demonstrated behaviour of market participants,

management expects that margins will even out between the level of 2011 and 2012 not later than 2014.

Technical Dealers Division:

The years 2010 and 2011 were marked by scarcity in procurement markets, rising inventories and revenue following the 2009 crisis. In contrast, 2012 brought consolidation. With a decline in revenue of around 4% with roughly constant margins, we were able to adjust inventories downward again. On the raw materials side, there were occasional price declines.

The revenue developments fits the industry trend reported by the Verband der Technischen Händler (VTH), the trade association of industrial distributors.

The new catalogue was issued in the middle of the year, this time also in electronic form. At a sales conference in autumn 2012, the growth goals of the division were presented under the motto Code 200/15. The division will strive to grow its revenue from its current EUR 134 million to EUR 200 million in 2015.

Decisive prerequisites for this were already accomplished in 2012. The Customer Service Level project, in which customers are served in an even more targeted way, is well into the implementation phase. In addition, the division has decided on SAP as the CRM solution to be introduced in future. CRM means Customer Relationship Management and mainly means that what is known about customers is expanded considerably and administered in such a way that all participants in the performance process can access it efficiently and also through mobile means. Achieving this also entails a fundamental reworking of

Financial reporting: Consolidated management report

Consolidated management report of Albert Reiff GmbH & Co. KG

2012 2011 Change absolute

in %

Revenue 377,388 409,940 -32,552 -8.0

EBITDA 6,638 17,954 -11,316 -63.1

in % 1.7 4.4

2012 2011 Change absolute

in %

Revenue 133,931 139,670 -5,739 -4.2

EBITDA 7,749 10,276 -2,527 -24.6

in % 5.7 7.4

51

processes, which the newly founded Process and Data Management Team will focus on.

The process of founding RTP China in Shanghai was delayed until the end of April 2012, so the company could only start selling in May 2012. The market reacted very positively and auspiciously to our assortment. Promising business relationships were built up, mainly with subsidiaries of German companies.

Roller Luxembourg/Belgium: In Luxembourg, too, revenue fell compared to 2011. The restrained demand of some major customers in the steel area and rubber production had a strong impact in this market. In Belgium, in contrast, the growth of over 25% was fully within plan. To take even better advantage of the potential in Belgium, we acquired an industrial distributor in Liege effective 1 January 2013 and so, in addition to Charleroi, are present in the second industrial region of Wallonia.

Kremer, Wächtersbach, with -2.5% earned only slightly below the revenue of the previous year. By 2015, under the motto "Offensive K13/15", today's revenue of EUR 10 million should be raised to a level of EUR 13 million.

The Technical Products Division achieved a very good result in 2011, with an EBITDA of EUR 10.3 million. Given this background, the EBITDA of EUR 7.7 million earned in 2012 was still a solid amount.

Elastomer Technology Division:

The goal of bringing the operating result for 2012 near the break-even threshold (EBIT) could not be achieved. The unforeseeable run-out of an important revenue pro-ducer and declining demand of automotive customers contributed to revenue falling 0.1% below the 2011 level rather than rising markedly above that year's level as originally planned. Special costs due to customer claims and process-related productivity losses hurt the EBITDA result, which at EUR -1.3 million was considerably below the previous year's level (EUR 0.0 million).

c) Investments

The REIFF Group made net investments of EUR 11.5 million in the 2012 business year. Given the general condition of the market, the originally planned expansion of the tyre wholesale warehouse was deferred for the present. Accordingly, total investments were below plan.

d) Financing measures or plans The companies of the REIFF Group are centrally financed. In 2012 as in the previous year, this was done through a longer-term working capital line of credit (term to mid-2017), the asset-backed-securities (ABS) programme with the LBBW (term to 08/2019) and the company bond, which matures not later than 16 May 2016.

Our financial liabilities with variable interest rates (working capital line of credit and ABS programme) were hedged to an amount of EUR 13 million with a 3M Euribor of 5%. Depending on the difference between the 30-year and the 2-year capital market rate, this hedge can result in costs of maximum EUR 200 thousand p.a. in the time period cited. In the reporting year, earnings from this derivative in the amount of EUR 57 thousand were achieved. The derivative was cancelled by the contracting bank with effect at the end of the third quarter 2012. A similar agreement to secure against rising interest rates has not been made for the future from 2013 on.

Also in view of current business developments, management expects that all covenants can continue to be observed.

The above-mentioned working capital line of credit was extended in mid-2012 for an additional five years

and increased by EUR 6 million to EUR 36 million. The existing working capital line of credit was not used as at 31 December 2012. Four financial institutions participate with equal shares. Security and the financial framework parameters (covenants) correspond to the previous agreement.

The price of the REIFF company bond fluctuated above the 100% mark during the entire business year. Meanwhile, the bond issue has turned over in the secondary market more than once.

At the end of 2012, a financing agreement with a term of ten years and volume of EUR 10 million was made with the Hessische Landesbank.

e) Personnel and social area

The number of employees (average) increased to 1,664 or 2.5% over 2011 (1,622).

Of the number of employees in 2012 (average) including REIFEN-KRUPP, 58% were employed in the Tyre Division, 28% in the Technical Products Division and 7% in the Elastomer Technology Division. The remaining employees were employed at REIFF Management and Service.The following changes in the upper management level are a prerequisite for our further development:− In the Technical Products Division, a new sales manager

for Germany took up his work starting in July 2012.− Almost at the same time, a management platform

was installed in the tyre wholesale segment. As a result, all tyre wholesale companies share the same management.

− In the Elastomer Technology Division, an experienced expert from the automotive supplier industry took over management in October 2012.

− In the Tyre Division, a new area management took over the retail segment effective 1 January 2013 with the goal of sustainably achieving the targeted profitability through a learning organisation and best practices.

On average, the apprentices working in the companies achieved good, in some cases, excellent results with awards from the German Chamber of Industry and

Commerce (IHK).

f) Other important events of the financial year

A number of projects for further development of the business architecture were implemented in 2012.

2012 2011 Change absolute

Revenue 15,970 15,670 +300

EBITDA -1,329 36 -1,365

in % -8.3 0.2

Financial reporting: Consolidated management report

53

2) Presentation of the financial situation

a) Financial position

The balance sheet total increased from EUR 218.5 million to EUR 226 million, or 3.5%. Fixed assets increased by 7.4% to EUR 68.4 million.

Inventory stock grew from EUR 100.8 million (31 Dec. 2011) to EUR 113.4 million (31 Dec. 2012) or 12.6%. This increase was almost exclusively due to the Tyre Division. Whereas the stock reduction for summer tyres planned for 2012 was partially achieved, the winter business, which fell far below our expectations, resulted in an increase again. In the Technical Products Division, a consistent stock management resulted in 6.2% smaller inventories at the end of 2012.

Receivables on the reporting date were 5% above the value of 2011.

Other assets were lower by EUR 6.2 million or 34.3% than they were on the reporting date of the previous year. The change resulted from the fact that more bonus receivables from suppliers could be offset against open trade liabilities than in the previous year. At the same time, higher shares of receivables were placed as part of the ABS programme. Through expiration of a real estate leasing contract, the corresponding tenant loan was also eliminated.

Equity increased due to net income of EUR 552 thousand and was reduced especially through placement of partial amounts of the previous year's profit for tax payments into liabilities to shareholders.

Pension provisions were 2% higher compared with the previous year.

Due to the earnings development, provisions for taxes were EUR 2.4 million less than in the previous year. Other provisions declined by EUR 3.7 million compared to the previous year. This resulted mainly from lower variable salary components and an adjustment to the provision for guarantees.

The REIFF Group reports a 6.1% lower amount for liabilities to banks.

Trade liabilities were increased over the previous year by EUR 11.1 million or 16.2%. Inventories were financed to a greater extent through supplier payables (70.5% in 2012 compared to 68.3% in 2011).

Liabilities to shareholders increased to EUR 2.4 million. This was largely in connection with balances reserved for private taxes.

Other liabilities increased by EUR 4.3 million or 18.5%. This resulted from higher value added tax liabilities on the reporting date.

Due to the declining accrued liability for an investment grant, accrued liabilities fell by 8.3%.

b) Liquidity position

In depicting the liquidity position, we refer to the cash flow statement.

A balance, primarily consisting of annual result, depreciation and amortisation as well as changes in provisions improved the liquidity of the REIFF Group by EUR 1.4 million in financial year 2012.

Selected assets of the REIFF Group increased by EUR 12.7 million. The described increases were mainly among the inventories.

2012 2011 ChangeTEUR % TEUR % TEUR

Assets

Intangible assets 7,783 3.4 9,057 4.1 -1,274Property, plant and equipment 60,581 26.8 54,598 25.0 5,983Financial assets 17 0.0 18 0.0 -1Long-term fixed assets 68,381 30.2 63,673 29.1 4,708

Inventories 113,497 50.2 100,783 46.1 12,714Trade receivables 10,355 4.6 9,860 4.5 495Other assets 11,828 5.2 17,990 8.2 -6,162Liquid funds 19,599 8.7 23,346 10.7 -3,747RAP 1,387 0.6 1,797 0.8 -410Deferred tax assets 926 0.4 998 0.5 -72Excess of plan assetsOver pension liabilities 106 0.0 99 0.0 7Short term tied assets 157,698 69.8 154,873 70.9 2,825

226,079 100 218,546 100.0 7,533

Capital

Equity 42,617 18.9 45,527 20.8 -2,910Pension provisions 11,193 5.0 10,956 5.0 237Non-current loans RT>5Y. 1,553 0.7 8,045 3.7 -6,492Longer-term capital 55,363 24.5 64,528 29.5 -9,165

Current provisions 6,313 2.8 12,457 5.7 -6,144Bonds 30,000 13.3 30,000 13.7 0Liabilities to banks RT<5Y. 20,983 9.3 15,962 7.3 5,021Pre-payments received on orders 108 0.0 0 0.0 108Trade liabilities 79,908 35.3 68,880 31.5 11,028Liabilities to shareholders 5,239 2.3 2,838 1.3 2,401Other liabilities 27,719 12.3 23,397 10.7 4,322RAP 439 0.2 479 0.2 -40Deferred tax liabilities 7 0.0 5 0.0 2

Short-term capital 170,716 100.0 154,018 70.5 16,698226,079 100 218,546 100.0 7,533

Financial reporting: Consolidated management report

55

Cash flow account 2012 2011TEUR TEUR

Annual result 552 12,809Depreciation on property, plant and equipment 6,701 6,234Deferred tax assets 72 375Pension provisions 236 361Tax provisions -2,437 1,480Other provisions -3,707 2,942Profit from the retirement of asset items -77 -284Changes in capital according to the equity report 52 -158

Subtotal 1,392 23,759

Change in assets(+ inflow from reduction of assets, - outflow from increase in assets) inventories -12,714 -52,134Trade receivables -495 1,655Receivables from companies with which a participatory relationship exists 0 16Other assets 6,162 -7,407Excess of plan assets over post-employment benefit liability -7 36Accrued assets 409 -1,482

Change in liabilities(+ inflow from increasing liabilities, - outflow from reducing liabilities)Pre-payments received on orders 109 -38Trade liabilities 11,028 24,737Other liabilities 4,322 271Deferred tax liabilities 2 0Accrued liabilities -40 471

A. Cash flow from ongoing business activity (+ inflow / - outflow) 10,168 -10,116

Incoming payments from retirements of fixed asset items 153 2,519Outgoing payments for fixed asset investments -1,485 -27,846

B. Cash flow from investment activities (+ inflow / - outflow) -11,332 -25,327

Change in other loans 0 0Reduction in liabilities to shareholders -3,514 -698Increase in liabilities to shareholders 2,402 888Proceeds from loans taken and usage of current account credits 2,117 7,897Receipts from the issuing of bonds 0 30,000Outgoing payments for loan repayments and draw-down of current account credits

-3,588 -2,851

Deposit from life insurance payout for shareholder 0 0

Cash flow from financing activity (+ inflow / - outflow) -2,583 35,236

Change in funds (total of A./B./C.) -3,747 -207

Working capital fund at the start of the period 23,346 23,553

D. Working capital fund at the end of the period 19,599 23,346

This was offset by higher liability values of EUR  15.3 million, primarily comprised of trade liabilities and other liabilities.

The summary of the three situations described makes up the cash flow from ongoing business activity, which was EUR 10.2 million in 2012 (previous year EUR -10.2 million). Cash flow from investment activities was much lower at EUR -11.3 million compared to 2011 (EUR -25.3 million). The change in cash flow from financing activity was EUR -2.6 million in 2012 and resulted from a reduction in liabilities to shareholders (EUR -1.1 million), receipt of an investment credit of EUR 2.0 million and repayment of existing loans (EUR -3.6 million).

On balance, the amount of funds fell by EUR -3.7 million compared to the previous year, but at EUR 19.6 million was still at a satisfactory level.

The liquidity bridge graphically clarifies the development of liquidity in the financial year 2012 and shows that the amounts of liquid assets were maintained at a satisfac-tory level.

The increase in inventories could be more than offset by higher, non-interest-bearing liabilities (trade liabilities and other liabilities).

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31/1

2/20

12

50

40

30

20

10

-10

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Financial reporting: Consolidated management report

57

The investment in fixed assets were covered by the gross cash flow (EBIT + depreciation and amortisation). The expansion and extension of the working capital line of credit in mid-2012 and a further financing agreement made at the end of 2012 underline our solid financial position beyond 2012 as well.

c) Earnings position

The Group gross profit (P&L items 1/2/4) of EUR 123  million fell by 11.8% from the previous year (EUR 139.5 million).The ratio of gross profit to overall performance decreased in 2012 by 1.4 percentage points to 23.3%. This was largely due to margin developments in the Tyre Division.

For personnel expenses a value is shown that is slightly below the 2011 value by 0.2%. Costs rose in part due to the 2.5% increase in the average number of employees in the year. But this effect was more than offset by declining variable salary components.Due to these developments, the ratio of personnel expenses to gross profit rose from 47.5% in 2011 to 53.8% in the reporting year. At the end of 2012, other operating income was EUR 1.3 million or 38.7% above the previous year’s level. Part of the reason for this was a partial reversal of provisions for damages in the Technical Products Division.

Depreciation and amortisation increased by EUR  0.5  million or 7.5% to EUR  6.7 million. Other operating expenses declined in 2012 compared to 2011 by EUR 0.8 million or 1.6% to EUR 48.9 million.

The interest balance (P&L items 10 and 12) increased EUR 1.0 million to EUR 3.6 million or 36.7%. The interest expense of the bond issue contributed EUR 2.2 million to this (previous year, EUR 1.3 million). The remaining increase is explained by higher utilisation of the working capital line of credit with simultaneously historically low interest rates.

The result from ordinary business activity of the REIFF Group at EUR 2.4 million stood in sharp contrast to

the record earnings in 2011 (EUR 18.1 million). The Tyre and Elastomer Technology Divisions had a major role in this development, whereas the stable earnings situation in the Technical Products Division helped offset this.

The ratio of income taxes to the result from ordinary busi-ness activity was 64.1% (previous year: 27.8%). As a result of the factors cited above, a consolidated profit for the year of EUR 552 thousand was achieved (previous year EUR 12.8 million).

3) Indications of risks in the future development

The development of the enterprise is characterised by foresighted and prudent action. Nevertheless risks are deliberately taken in order to generate earnings from them. We are prepared to take risks, after conscientious review and weighing of all available information, up to an annual amount of EUR 1 million per individual item and in a total amount of EUR 2 million per year. All risks beyond this limit are secured, unless the likelihood of

2012 2011 ChangeTEUR % TEUR % TEUR

Sales revenue 528,169 100 565,290 99.9 -37,121Inventory change -153 0 325 0.1 -478Overall performance 528,016 100 565,615 100.0 -37,599

Cost of materials -404,968 -76.7 -426,093 -75.3 21,125Gross profit 123,048 23.3 139,522 24.7 -16,474

Other operating income 4,793 0.9 3,456 0.6 1,337Personnel expenses -66,220 -12.5 -66,338 -11.7 118Depreciation -6,701 -1.3 -6,234 -1.1 -467Other oper. expenses -48,893 -9.3 -49,686 -8.8 793

-117,021 -22.2 -118,802 -21.0 1,781Consolidated net income 6,027 1.1 20,720 3.7 -14,693

Interest earnings/earnings Loans 629 0.1 754 0.1 -125Interest expense -3,667 -0.7 -2,841 -0.5 -826Expenses from discounting -598 -0.1 -573 -0.1 -25Financial result -3,636 -0.7 -2,660 -0.5 -976

Inter-company profits 2,391 0.5 18,060 3.2 -15,669

E.o. expense 0 0.0 0 0.0 0Taxes on income and earnings -1,532 -0.3 -5,006 -0.9 3,474Other taxes -307 -0.1 -245 0.0 -62

Annual net profit 552 0.1 12,809 2.3 -12,257

Financial reporting: Consolidated management report

59

occurrence can be disregarded.The risks of future development, e.g.– of increasing competition,– the changing buying behaviour of the customers,– the changing payment ethics of the customersare recognised. Regular questioning of our company strategy ensures that we examine whether the respective measures are still right, or whether other priorities must be set in place.

Risk concentrations (cluster receivables, non-fungible inventories, special liability risks) occurred in the year under review only in the form of several cluster receivables, which however are secured and are also unlikely in the future. Consequently, there are no indications whatsoever that the continued existence of the Group companies is threatened.In addition to the annual report, which is audited well before the end of the subsequent quarter, the REIFF Group prepares a monthly consolidated financial statement that shows the development of the asset position, financial position and earnings position of each subsidiary and of the Group. The major financing partners receive a detailed quarterly report at the end of every subsequent quarter. Moreover, since 2011 a semi-annual report (unaudited consolidated financial statement with explanations) has been published at www.reiff-gruppe.de.

4) Other information, particularly foreseeable developments

The prospects for 2013 are not unfavourable, according to the unanimous opinion of the leading economic institutes, if possible turbulence in financial markets is not considered. Overall we assume more of a lateral step than a decline in the economy. However, the prerequisite in this regard is that governments must continue to pursue the course of reducing government debt.

Overall, in the REIFF Group we assume increasing revenues relative to 2012. For 2013, we plan for consolidated net profit that should be markedly above the 2012 level.

Tyre Division:

After two sequential years of sales volume declines in the German market (retail to consumer), slight growth in the car area is now expected. Due to the negative experiences from 2012, retailers will plan extremely carefully. In the first half of 2013, excess supply will result in weak resale margins. Starting in the second half of the year, the lower production volumes of the manufacturers should again have a positive impact on margin levels. For truck sales, the situation is viewed as cautiously positive, which also creates opportunities with a view toward retreads and the trend toward longer service lives. The auto service business will continue to grow. As in the past, there remain large numbers of tyre customers who have not yet used our auto service.

The goal of the retail segment is to achieve further earnings improvements even under difficult market conditions. In particular, "cross selling" of tyres to auto service customers and vice versa, for which we are better prepared than other retailers, must be consistently expanded. This is the only way we can succeed in achieving the price and gross margin quality that we need. Already in 2013, management will take an important step toward the target return of 5%.

Under the motto "Visibly develop and grow", a new division management took over at the start of 2013 with the goal of strengthening the role of local store managers as entrepreneurs. The changes include measures effective in the short term as well as a longer-term anchoring of a new management philosophy based on independent action. Branch stores can also learn from each other about self-defined best practices.

After a phase of consolidation, NETTO Reifen-Räder-Discount will again grow with additional markets. Moreover the E-commerce efforts will be increased further.

The tyre wholesale segment looks back on a somewhat better, but not yet normal year. In addition to Germany, our interests also include the large markets of Europe. The division operating result will be above that of 2012, according to our planning.

Several brands incorporating different strengths for the customer under one roof – that is the foundation we see for our future success. It will be a long road until this vision is fully implemented, as the previously largely autonomous companies must find their way through shared values to a strategy internalised by all, to leadership roles consistent with it and a shared value creation process. Besides the strength of a broad assortment, the task will be to work in a way that economises on resources.

Technical Dealers Division:

As of the end of the year, we perceive a slight economic downturn. This will produce a consolidation or normalisation of business activity. The messages from our clientèle are positive, as before. We plan on revenue growth that will be slightly below the VDMA expectations. We are confident and do not expect a slump as was experienced in 2009.

Two construction projects are being carried out at the start of 2013: the second expansion stage of the logistics centre with an automatic small parts warehouse and expansion of office facilities and the warehouse in Chemnitz.In addition, an examination and then redesign of our distribution processes will be done in 2013. Data management and process management will receive a high level of attention. A new position has been created for this.The development of standardised and automated procedures in the execution of business processes is an important success factor in future. With introduction of a CRM system, networking of customer/market and ERP business data will be established. In September 2012, a sales offensive was declared under the motto “Code 200/15”, which should result in revenues of EUR 200 million by 2015. Our activities abroad are increasingly gaining in importance. The profitability threshold in China should be reached in 2013. With acquisition of PICHA Sprl, the division will continue to grow strongly in Belgium.

The operating result of the division planned for 2013 should reach a level above that posted in 2012.

Elastomer Technology Division:

The new management has kicked off a comprehensive work programme for optimising the division. Shortly, at the start of 2013, we will release all temporary employees. Two stages are planned in the restructuring. In the first stage, profitability (EBIT) should be achieved in 2013 and 2014. At the same time and following this, the task is to secure sustained development.

5) Supplementary report

Effective 1 January 2013, 100% of the shares in PICHA Sprl in Liege, Belgium, were acquired.We are not aware of other transactions that have occurred after the reporting date and that significantly influence the financial statement.

Financial reporting: Consolidated management report

61

Statement of changes in fixed assets

Development of book values

AccumulatedCOA

01/01/2012

Additions2012

Disposals2012

Repostings2012

Accumulated acq. cost

31/12/2012

Accumulateddepreciation

Book value

31/12/2012

Book value

31/12/2011

TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR

I. Intangible assets1. Software 7,816.4 979.2 21.4 325.1 9,099.3 7,664.4 1,434.8 702.72. Goodwill 11,607.1 676.6 0.0 0.0 12,283.7 4,498.2 7,785.5 7,853.43. Prepayments 501.4 1,327.5 0.0 -496.6 1,332.2 0.0 1,332.2 501.4

19,924.9 2,983.2 21.4 -171.6 22,715.2 12,162.6 10,552.5 9,057.3

II. Property, plant and equipment1. Property and buildings, including

buildings on non-owned land64,585.3 3,126.4 180.2 1,451.0 68,982.4 25,445.3 43,537.2 40,758.4

2. Technical equipment 20,610.5 1,754.3 726.7 487.5 22,125.5 16,107.6 6,018.0 5,147.3 and machines3. Other equipment, fixtures 20,278.0 2,825.1 698.3 285.7 22,690.4 15,334.8 7,355.8 6,534.0 and office equipment4. Prepayments 2,157.8 795.4 0.0 -2,052.6 900.7 0.0 900.6 2,157.8 assets under construction

107,631.6 8,501.3 1,605.3 171.6 114,699.2 56,887.7 57,811.6 54,597.5

III. Financial assets1. Investments 13.7 0.0 0.0 0.0 13.7 0.0 13.7 13.72. Other loans 4.6 0.0 1.3 0.0 3.3 -0.1 3.3 4.6

18.3 0.0 1.3 0.0 17.0 -0.1 17.0 18.3

Total 127,574.8 11,484.5 1,627.9 0.0 137,431.4 69,050.2 68,381.1 63,673.1

Financial reporting: Statement of changes in fixed assets

63

Statement of changes in fixed assets

Development of cumulated depreciation

Accumulateddepreciation

01/01/2012

Depreciation Appreci-ation

Repost-ings

Accumulateddepreciation

31/12/2012Financial year On disposals

TEUR TEUR TEUR TEUR TEUR TEUR

I. Intangible assets1. Software 7,113.8 572.1 21.4 0.0 0.0 7,664.52. Goodwill 3,753.8 744.4 0.0 0.0 0.0 4,498.23. Prepayments 0.0 0.0 0.0 0.0 0.0 0.0

10,867.6 1,316.5 21.4 0.0 0.0 12,162.7II. Property, plant and equipment1. Property and buildings,

including buildings on non-owned land

23,826.9 1,766.3 147.9 0.0 0.0 25,445.3

2. Technical equipment 15,463.2 1,352.7 708.3 0.0 0.0 16,107.6 and machines3. Other equipment, fixtures 13,744.0 2,265.3 674.6 0.0 0.0 15,334.7 and office equipment4. Prepayments 0.0 0.0 0.0 0.0 0.0 0.0 assets under construction

53,034.1 5,384.3 1,530.8 0.0 0.0 56,887.5

III. Financial assets1. Investments 0.0 0.0 0.0 0.0 0.0 0.02. Other loans 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0

Total 63,901.7 6,700.8 1,552.2 0.0 0.0 69,050.3

Financial reporting: Statement of changes in fixed assets

65

Statement of changes in equity

subscribed capitalUnlimited partner

Limited liability capital Capital account II Retained earnings Equity difference from currency conversion

Equity share Minority shareholders

Profit carried forward

Remaining change in equity

Total

TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR

31/12/2011 30.7 8,180.7 2,878.4 1,869.5 -50.3 2,830.2 29,787.7 0.00 45,526.8

1) 69.5 -69.5 0.0 1)2) 1,075.5 -1,075.8 0.0 2)3) 3,048.6 -3,048.6 0.0 3)4) -3,052.2 -3,052.2 4)5) 63.3 5)6) -40.0 -40.0 6)7) -516.9 -516.9 7)8) -7.8 -7.8 8)9) 1,787.7 -1,787.7 0.0 9)

10) 91.7 91.7 10)11) -0.1 -0.1 11)

Changes 0.0 0.0 3,048.6 1,787.7 91.7 1,105.3 -9,495.3 0.0 -3,462.0

Consolidated net income 2012

552.3 552.3

31/12/2012 30.7 8,180.7 5,927.0 3,657.2 41.4 3,935.5 20,844.7 0.0 42,617.1

1) Share of result 2011 (profit distribution) Kremer 2) Share of result 2011 (profit distribution) HANSE-TRADING Reifenservice 3) Transfer of previous year's ARK result to capital account II 4) Withdrawals (rebooking of earnings on shareholder loan accounts) 5) Paid imputable taxes on distribution of profits in 2011 6) Distribution of profits Kremer for 2011 – share of minority interest 7) Deduct paid imputable taxes on distribution of profits in 2012 8) Distribution of profits RBG previous year 9) Reclassification to retained earnings10) Allocation of the equity difference from currency translation11) Other

Financial reporting: Statement of changes in equity

67

I. General information

II. Basis of consolidation

III. Principles of consolidation

IV. Foreign currency translation

V. Accounting and valuation methods

VI. Disclosure requirements for the group balance sheet 12/31/2011

VII. Disclosure requirements for the financial position

VIII. Disclosure requirements for the profit and loss statement

IX. Other information

X. Annexes to the notes

Breakdown of share ownership

Development of fixed assets

I. General information

As of 12/31/2001 the company, Albert Reiff GmbH + Co. KG, is subject to the obligation to prepare consolidated financial statements. The GmbH & Co. KG is viewed as a unified company that is first subject to the directives concerning incorporated companies with validity of the Act to Improve the Disclosure of Annual Returns and to Change other Commercial Regulations (KapCoRiLiG), and thus can be obligated to prepare a consolidated financial statement. As of 31/12/2011 and 31/12/2012, the exemptions available pursuant to § 293 of the German Commercial Code (HGB) due to the company's size were exceeded.

II. Basis of consolidation The general partner GmbH, Reiff-Beteiligungs-GmbH and Albert Reiff GmbH + Co. KG have been included in the consolidated financial statement. Regarding the companies included in the scope of consolidation and the abbreviations used for them, reference is first made to Annex 1 to these notes (see page 80).

Added to the scope of consolidation were the following companies, established as of 1 January 2012:

Company: REIFF Technical Products (Shanghai) Co., Ltd.Purpose: Trade in technical products

K4 Plus GmbH, in which RTP has a 25% stake, has not been included in the consolidation because this participation is of subordinate importance. REIFEN-KRUPP Polska Sp.z.o.o is likewise of subordinate importance and consequently is not included.A consolidation is rejected for the company, SUPERA Grundstücks-Vermietungsgesellschaft mbH & Co. Objekte Reifen KG, according to the alternatives cited in § 290 para. 2, number 1-3 of the German Commercial Code (HGB). Also a consolidation in accordance with § 290 para. 2 number 4 of the German Commercial Code (HGB), cannot be considered because the parent company does not bear the majority of the risks. According to the leasing contracts, after the contract term expires, in the event that sales proceeds do not cover the residual book value, the residual risk remains with the bank, which is also only secured by land charges on the building. The other companies shown under the participation items have not been included as affiliated companies because the investment amounts are under 20% and a significant influence is not exercised on these companies.

III. Principles of consolidation All included financial statements have the reporting date of 31/12/2012. The capital consolidation occurred for the companies included as of 31/12/2009 in accordance with the old law (book value method) through offsetting of the costs of acquisition with the Group equity share of the consolidated sub-sidiaries. New acquisitions activated after this point in time will be consolidated in accordance with § 301 German Commercial Code (HGB) in the version of the Accounting Law Modernisation Act (BilMoG ).Consolidation occurs at the time the subsidiaries were acquired. Consequently annual net profits earned from the date of acquisition and adjusted in the provisions or profits carried forward, will be shown as Group accruals or Group profits carried forward.

Notes to the consolidated financial statements for the year 2012

Financial reporting: Notes to consolidated financial statements

69

Inter-company profits did not occur in the corporate Group, as advance deliveries within Group companies for the most part were resold to outsiders.For shares of fully-consolidated companies that do not belong to the parent company, an appropriate adjustment item is formed for shares of other shareholders, in accordance with § 307, para. 1 of the German Commercial Code (HGB).In the consolidated profit and loss statement the profit contained in the annual results to which other shareholders are entitled is shown after the item annual net profit.

IV. Foreign currency translation

Receivables and liabilities denominated in foreign currencies are valued with the rate as of the date of first posting, or in the case of exchange hedging, they are valued with the hedge rates. As of the balance sheet date valuation was executed in accordance with § 256a of the German Commercial Code (HGB).

The currency translation of the financial statements of foreign Group companies was executed in accordance with the new regulation of § 308a of the German Commercial Code (HGB).

V. Accounting and valuation methods The financial statements of the companies included in the Group financial statement are always prepared in accordance with uniform accounting and valuation directives.

Fixed assets Purchased immaterial assets are reported at the costs of acquisition. They are depreciated linearly scheduled in accordance with their useful life. Beginning of depreciation is reported pro rata temporis.Fixed assets are always reported at the costs of acquisition or manufacturing, reduced by depreciation. The beginning of depreciation is reported pro rata temporis and depreciated using straight-line or accelerated depreciation, depending on the useful life usual in operation. Movable assets with a value of up to EUR 150 were expensed immediately. Movable assets with net costs of acquisition or costs of manufacturing of more than EUR 150 but less than EUR 1,000 are recorded in a compound item and uniformly depreciated over a period of 5 years. This fictitious useful life of 5 years essentially corresponds to the actual useful life of the assets included in the compound items. Investments and other loans are reported at costs of acquisition or in the case of continued impairment at fair value. Current assets Raw materials, auxiliary materials and operating materials as well as merchandise were valuated at costs of acquisition. Reductions in the costs of acquisition have been taken into account. If the fair values were lower on the balance sheet date, these values were reported. This was particularly the case if there was restricted usability of the assets or if special customer risks were present.Finished and unfinished goods were valuated at manufacturing costs. In this regard the items were taken into account in accordance with § 255 para. 2, sentence 2 and 3 of the German Commercial Code (HGB). If the fair values were lower on the balance sheet date, these values were reported. This was particularly the case if there was restricted usability of the assets or if special customer risks were present.

Receivables and other assets were valued at the nominal value; corporation tax credits were valued at present value in accordance with § 37 of the Corporate Tax ACT (KstG). Recognisable individual risks were covered through appropriate provisions for losses. The general credit risk is taken into account through a standard allowance for the bad debts for which provisions do not apply.

Provisions and liabilities

The pension provision obligations and comparable long-term obligations are determined in accordance with § 253 (1) and (2) of the German Commercial Code (HGB). The discount rates are determined from § 253 (2) of the German Commercial Code with the rates announced by the German Federal Bank. In exercising the right of election according to § 253, par. 2, sentence 2 of the German Commercial Code (HGB), discounting is done across-the-board with the average market rate assuming a remaining life of 15 years.The capitalised reinsurance claim, if it has been withdrawn from the access of all other creditors and serves exclusively for the fulfilment of debts arising from pension provision obligations, has been accounted for with the provision amount. In accordance with § 246 (2), p.2 of the German Commercial Code (HGB), asset amounts in excess of the above were shown separately as excess of plan assets over post-employment benefit liability.

The tax provisions include the taxes that have not yet been assessed. Other provisions take all recognisable risks and uncertain obligations into account at the settlement amount of these obligations. Liabilities are reported at their settlement amount.

VI. Disclosure requirements for the financial position

Assets

(1) Goodwill In accordance with § 309 (1) of the German Commercial Code (HGB) the item includes an amount of EUR 1.183 million from the initial consolidation of HAT in 2005. The previous distribution over 15 years will be continued. The annual depreciation is EUR 148 thousand.

Goodwill in the amount of EUR 4.480 million resulted from the initial consolidation of REIFEN-KRUPP GmbH & Co. KG. The amortisation period for this goodwill is also assessed at 15 years. The annual amortisation in 2011 was EUR 299 thousand. Through additional capitalisation, goodwill rose by EUR 142 thousand to EUR 4.622 million in 2012. As a result, for the remaining amortisation period of 14 years, the annual amortisation rises to EUR 309 thousand. The remaining book value at 31/12/2012 is EUR 4.015 million.

The amortisation period is substantiated with the long-term investment and the stable anchoring of the acquired enterprise in the market. The participation has a strategic character, mainly with regard to volume and purchasing advantages (substantiation in accordance with § 314, no. 20 of the German Commercial Code (HGB)).

Together with purchases on the individual company level from earlier years, as of 31/12/2012 there is a total book value of EUR 7.783 million.

Financial reporting: Notes to the consolidated financial statements

71

(2) Receivables and other assets Information on the remaining terms The receivables and other assets have a remaining term of:

Status as of

of which remaining term

of which remaining term

12/31 Under 1 year Over 1 yearTEUR TEUR TEUR

1. Trade receivables 10,355 10,355 0Previous year 9,860 9,860 0

2. Other assets 11,828 9,611 2,217Previous year 17,990 15,724 2,266

22,183 19,966 2,217Previous year 27,850 25,584 2,266

(3) Prepaid expenses/discount

Of the accrued assets in the amount of EUR 1.387 million, EUR 93 thousand refer to the difference between the face value of the loan taken out and its payout amount (discount). This amount is amortised yearly at EUR 20 thousand.

(4) Deferred taxes in accordance with § 314 no. 21 of the German Commercial Code (HGB)

Deferred taxes occur from the differences between the commercial financial statements and the financial statements for tax purposes.A tax rate of 30% served as the basis for the valuation. This rate is generalised from the corporate tax rate, trade tax rate, and the solidarity surcharge rate. These rates are:

Status as of 31/12/12

Status as of 31/12/11

TEUR TEUR

a.) On pension provisions and other provisions (part-time retirement)

726 698

b.) On existing loss carry forwards, that will presumably be offset in the next five years

200 300

926 998

For point b.) note: Due to a subsequent audit within the next five years of the loss statement that can be expected with due consideration of the revenue-dependent leasehold offsets within the Group, an amount of EUR 100 thousand would have to be reversed through the taxes on income in accordance with § 274 (2), sentence 2 of the German Commercial Code (HGB).

Liabilities (5) Explanations on equity

In accordance with § 265, par. 5 of the German Commercial Code (HGB), the Group equity is supplemented by special items of the parent company ARK. (6) Information on pension provisions in accordance with § 314 no. 16 of the German Commercial

Code (HGB) and on the offset of assets used to cover the obligation in accordance with § 314 no. 17 of the German Commercial Code (HGB)

There are two care areas:

a.) Pensions for general managers and ongoing pensions The provisions have been valued by an expert actuarial opinion of Prof. Dr. Neuburger. In this regard the following methods and assumptions were used:Valuation method: PUC method (projected unit credit method) Calculation interest: 5.05% p.a. Pension trend: 2.00% p.a. Salary trend: 2.00% p.a. Fluctuation: 3.25% p.a. Biometric assumptions: © Actuarial tables 2005 G from Klaus Heubeck b.) Contributory pension for managing employees The provisions were valued by an expert actuarial opinion of Towers Watson (Reutlingen) GmbH. In this regard the following methods and assumptions were used: Valuation method: PUC method (projected unit credit method)Calculation interest: 5.05% p.a. Fluctuation: Age- and service-term-dependent probabilities Biometric assumptions: © Actuarial tables 2005 G from Klaus Heubeck Offset asset values:As time values, asset values were reported from the insurance company.Reinsurance amounts of EUR 1.649 million euros were offset in accordance with § 246 (2) sentence 2 of the German Commercial Code (HGB).The associated expenses and earnings from the discounting and the offsetting assets were calcuated at EUR 44 thousand.

Financial reporting: Notes to the consolidated financial statements

73

(7) Other provisions

The other provisions are broken down as follows:

2012 2011TEUR TEUR

Internal costs of financial audits 196 196Audit costs 172 145Tax consultation costs 49 56Employer's liability insurance 363 330Time credit/overtime 491 507Bonus for employees 0 916Royalties 1,301 4,113Part-time retirement 6 11Accrual for compensated absence 707 542Guarantee 405 787Cases of damage 257 800Severance 584 198Other 841 478

5,372 9,079

Obligations arising from part-time retirement were valued in accordance with § 253 (2) sentence 2 of the German Commercial Code (HGB) as the long-term obligations due comparable to the pension obligations. The legally prescribed assets required to cover the obligation were offset against this in accordance with § 246 (2) s. 2 of the German Commercial Code (HGB) in the amount of EUR 449 thousand. The excess residual amount of EUR 106 thousand is shown as Excess of plan assets over post-employment benefit liability. For the provision in accordance with legal retention obligations it can be assumed that future cost increases will be compensated by the deduction of accrued interest. The residual terms of the other provisions are under one year. Consequently an adaptation due to cost increases or price increases, as well as deduction of accrued interest is not required.

(8) Information on the residual terms of liabilities

The residual terms of liabilities are shown on the following list:

Residual termOver

1 year

Residual termOver

1-5 years

Residual termOver

5 yearsTotal

31. 12.TEUR TEUR TEUR TEUR

1. Bonds 0 30,000 0 30,000Previous year 0 30,000 0 30,000

2. Liabilities to banks 8,639 12,344 1,552 22,535Previous year 8,609 7,353 8,045 24,007

3. Pre-payments received 109 0 0 109Previous year 0 0 0 0

4. Trade liabilities 79,908 0 0 79,908Previous year 68,880 0 0 68,880

5. Liabilities to shareholders 5,239 0 0 5,239Previous year 2,838 0 0 2,838

6. Other liabilities 24,364 3,355 0 27,719Previous year 18,110 4,804 483 23,397

118,259 45,699 1,552 165,510Previous year 98,437 42,157 8,528 149,122

(9) Collaterisation The liabilities to banks are secured through mortgages in the amount of approximately EUR 16 million and through a statement of subordination for capital account II of the shareholder, originally in the amount of EUR 9.784 million, a joint and several maximum surety of ARK in the amount of EUR 9 million and a transfer of storage ownership by way of security by all domestic companies.At the same time, there is a surety in the amount of EUR 150 thousand granted to a supplier as security for the proper fulfilment of purchase contracts with R.TEC Polska. (10) Accruals and deferrals This account shows an amount of EUR 375 thousand (previous year EUR 388 thousand) relating to an investment subsidy for a production hall in Bautzen.This amount will be distributed over the presumable useful life of 31 years, starting mid-2011.

Financial reporting: Notes to the consolidated financial statements

75

(11) Deferred tax liabilities

The deferred tax liabilities occur through the neutralisation of a provision for depreciation in the relationship to an affiliated company.In this respect the Group result is above the result in the individual financial statement that is authoritative for the calculation of the tax.

VII. Disclosure requirements for the financial position

(12) Liability relationships in accordance with §§ 251, 268 (7) of the German Commercial Code (HGB) and information in accordance with § 314 no. 19 of the German Commercial Code (HGB)

As of the balance sheet date, our Group had note liabilities in the amount of EUR 176 thousand (previous year EUR 296  thousand). The risk of a claim is classified as low, as there are no visible financial difficulties for the borrower in question. (14) Type and purpose, as well as risks and advantages of transactions not included in the

balance sheet § 314 no. 2 of the German Commercial Code (HGB):

a.) Asset Backed Securities programme This ABS financing combines elements of factoring and receivables securitisation. In this regard, trade receiv-ables are sold to a special purpose company founded by the offering bank. In exchange the company gets a purchase price minus a security deduction of a margin for the costs of the programme.The special purpose company finances itself by issuing securities on the capital market. Investors purchase these interest-bearing securities, and through this measure the special-purpose company obtains the necessary liquidity.

Purpose or advantages: - The essential advantage is the financing. Through the ongoing purchase, receivables can be converted to liquidity before they are due.

- Through access to the international capital market, financial latitude is increased.- Receivables continue to be managed by the company.- There must be a disclosure relative to the customer (silent assignment), and the company can continue to deal with recovery of receivables itself. This shields the relationship between the company and the customer from disturbing influences through the factoring company.

- Due to the transfer of receivables (true sale) and the possible use of the liquidity for debt repayment, a positive balance sheet effect occurs.

Risks:- A lack of interest in purchasing the securities on the part of investors.- Increased costs.- Processing imposes rigorous requirements on the finance department. As of 31/12/2012, the volume of transferred receivables was EUR 19 million. The maximum purchase volume is EUR 30 million with a term until August 2019.

Inclusion in the basis of consolidation in accordance with § 290, para. 2, number 4 of the German Commercial Code (HGB) is not intended, for the following reasons: The special purpose company was not founded by the parent company; rather, the finished concept was offered by a financial institution. The special purpose company does not "serve" as stipulated in the directive of the parent company, but rather the parent company participates in addition to many other companies in a finished, available, worked-out concept. The majority of opportunities and risks remain with the parent company. Due to the presence of true sale and the ties to capital market conditions, the opportunities and risks are uniformly distributed among all parties.

b.) Leasing financing Long term rental contracts and leasing obligations exist with total obligations in the amount of

2012 2011TEUR TEUR

to 2 years 18,908 16,836

greater than 2 years 25,129 23,379

The amount essentially results from the long-term leasing of new buildings, of which for the most part these are leasing contracts with purchase right through the parent company. If the other financial obligations are calculated with a discount rate of 5% on their cash value, then the amount of financial obligations of EUR 44.037 million is reduced by EUR 5.666 million to EUR 38.371 million. Included here are annual real estate leasing rates of EUR 513 thousand payable to the affiliated company SUPERA Grundstücks-Vermietungsgesellschaft mbH & Co. Objekte Reifen KG, Düsseldorf.

The purpose of lease financing is that investments can be made while conserving funds.

Financial reporting: Notes to the consolidated financial statements

77

VIII. Disclosure requirements for the profit and loss statement

(14) Breakdown of sales revenue according to activity areas and geographical markets (§ 314 No. 3 German Commercial Code (HGB))

The sales developed in the individual divisions as follows:

2012 2011TEUR TEUR

Tyres Division 377,390 409,941

Technical Dealers Division 134,057 139,666

Elastomer Technology Division 15,970 15,670

Other 752 13

Total 528,169 565,290

The sales have the following regional geographic distribution:

2012 2011TEUR TEUR

Domestic 408,645 446,407

EU 110,187 113,884

Third countries 9,337 4,999

Total 528,169 565,290

(15) Other operating income This account consists of non-period items in the amount of EUR 2,035 thousand, including supplier credits of EUR 1.485 million that were received after the 2011 consolidated financial statements were completed. (16) Other operating expenses This item includes non-period expenses in the amount of EUR 1.126 million. This primarily involves the following: - Supplier invoices that were received after the 2011 consolidated financial statements were completed.- Payment of arrears for SAP maintenance fees for previous years.

IX. Other information

(17) Derivative financial instruments in accordance with § 285 no. 19 of the German Commercial Code (HGB)

An interest cap transaction with Commerzbank for a reference amount of EUR 13 million and a maximum rate (strike) of 4% or 5% p.a. The term started on 06/12/2005 and ended on 31/09/2012. The costs were 1.55% p.a. on the volume of EUR 13 million and were settled quarterly.Simultaneously REIFF receives a remuneration of 2.1% on the volume for every day on which the difference (between 30-year interest rate and 2-year interest rate) is greater than 0.829%. (18) Number of workers (average in accordance with § 267 (5) and § 314 no. 4 of the German Commercial Code (HGB)

2012 2011

Salaried employees 981 929 of which apprentices 86 77 Salaried employees without apprentices 895 852

Hourly employees 683 637 of which apprentices 6 6 Hourly employees without apprentices 677 631

Total without apprentices 1,572 1,483

(19) Total remuneration of the management board (§ 314 no. 6 of the German Commercial Code (HGB)) The remuneration of the management board based on the total Group was:

2012 EUR 1.037 million

Remuneration of former members of the management board based on the total Group was:

2012 EUR 287 thousand

The provisions formed for this purpose as of 31/12/2012 were

EUR 2.393 million (20) The total fee invoiced by the auditor of the consolidated financial statement for the financial

year is broken down as follows

a) Auditing services EUR 156 thousand b) Tax consulting services EUR 49 thousand (§ 314 no. 9 of the German Commercial Code (HGB))

Financial reporting: Notes to the consolidated financial statements

79

X. Breakdown of share ownership For the name and location of the companies included in the consolidated financial statement, the share of capital of the subsidiaries, see the next page. Reutlingen, 6 February 2013 The Managing Directors of Reiff-Beteiligungs-GmbH as the unlimited partner of Albert Reiff GmbH & Co. KG

Eberhard Reiff Hubert Reiff Dr. Immanuel Kohn Dipl.- Kaufmann Dipl.- Ingenieur Dipl.- Kaufmann Dipl.- Wirtschaftsing.

Financial reporting: Notes to the consolidated financial statements

81

Breakdown of share ownership as of 31/12/2012

Abbreviations Name The company's head office Equity share Consolidated Exemption of liability in accordance with §264 para.3 of the German

Commercial Code (HGB)

Exemption of liability in accordance with §264b of

the German Commercial Code (HGB)

from

ARK Albert Reiff GmbH + Co. KG Reutlingen Parent companies K YesRBG Reiff Beteiligungs GmbH Reutlingen Parent companies K YesRAM REIFF-Anlagen-Management-GmbH + Co. KG Reutlingen 100% K YesRTP REIFF Technische Produkte GmbH Reutlingen 100% K YesRET R.E.T. REIFF Elastomertechnik GmbH Reutlingen 100% K YesK4 Plus K4 Plus GmbH Reinbek 25%RRA REIFF Reifen und Autotechnik GmbH Reutlingen 100% K YesSUPERA SUPERA Grundstücks-Vermietungsgesellschaft mbH & Co. KG Düsseldorf 100%R.TEC P R.TEC Polska Sp.z.o.o. Warsaw, Poland 100% KRMS REIFF Management und Service GmbH Reutlingen 100% K YesR+R REIFEN + RÄDER GmbH Karlsbad-Ittersbach 100% K YesPJP Pneus Jantes et Prestations S.a.r.l. Bischheim 100% K 2011EG Evergreen Luxembourg 100% KRoller L Gummi-Roller S.a.r.l. Luxembourg 100% KKR Kremer GmbH Wächtersbach 80% K YesSP Securite Plus – Caoutchouc Plus S.p.r.l. Belgium 100% KHAT HANSE-TRADING Reifenservice GmbH Fürstenwalde 66.66% K 2005 YesRKK REIFEN-KRUPP GmbH & Co. KG Schifferstadt 100% K 2011 YesKVG Herbert Krupp Verwaltungs GmbH Schifferstadt 100% K 2011 YesPKF Pneus Krupp France S.a.r.l. Wissembourg 100% K 2011RKP Reifen Krupp Polska Sp.z.o.o. Jaslo 100%RTPS REIFF Technical Products (Shanghai) Co., Ltd. Shanghai, China 100% K 2012

Financial reporting: Breakdown of share ownership

83

The following audit opinion, associated with the consolidated financial statement to which it refers has been submitted to Albert Reiff GmbH + Co. KG as the parent company:

"Audit opinion of the statutory auditor"

I have audited the consolidated financial statement prepared by Albert Reiff GmbH + Co. KG – comprising the balance sheet, profit and loss statement, notes, cash flow statement and statement of changes in equity – and the management report for the financial year from 1 January to 31 December 2012. Preparation of consolidated financial statement and the consolidated management report in accordance with German commercial law is the responsibility of the company's legal representatives. My task is to provide an assessment, based on my audit of the consolidated financial statement and the consolidated management report.

I have carried out my audit of the consolidated financial statements in accordance with § 317 of the German Commercial Code (HGB) taking into consideration the German generally accepted auditing standards set out by the "Institut der Wirtschaftsprüfer". Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with German principles of proper accounting and in the consolidated management report are detected with reasonable assurance.Knowledge of the business activities and the economic and legal environment of the Group and evaluations of possible misstatements are taken into account in the determination of audit procedures.Within the context of the audit, the effectiveness of internal accounting-related controls and records supporting the information in the consolidated financial statement and the consolidated management report are assessed largely on the basis of spot checks.The audit includes an assessment of the financial statements issued by the companies included in the consolidated financial statement, the delimitation of the consolidation Group, the accounting and consolidation principles applied, and the main assessments made by the legal representatives, as well as acknowledgement of the overall presentation of the consolidated financial statements and the consolidated management report. I am of the opinion that my audit provides a sufficiently reliable basis for my assessment.

My audit has not resulted in any objections.

In my view, based on the insights obtained during the audit, the consolidated financial statement complies with legal requirements and, taking into account the principles of orderly bookkeeping, conveys an accurate picture of the Group’s asset, financial and earnings situation. The Group management report is consistent with the consolidated financial statements, conveying overall an accurate picture of the Group’s situation, and correctly presents the opportunities and risks associated with future development.

Signed, Reiner Ehle, Auditor“

Fellbach, 20 February 2013

Copy of the audit opinion

Financial reporting: Audit opinion of the statutory auditor

85Contacts/scheduled dates 2013

We would be pleased to answer any questions you might have.

Press contact:Christina GuthTelephone +49 2151 36805-11presse@reiff-gruppe.de

Director of Finances:Manfred BraunTelephone +49 7121 323-273manfred.braun@reiff-gruppe.de

Financial calendar 2013:

25 March 2013 Financial statements as of 31/12/2012

25 March 2013 2nd follow-up rating 201327 May, 2013 Interest payment date for

the REIFF bond (WKN A1H3F2)

July 2013 Semi-annual financial state-ments as of 30/06/2013

Interesting facts

Forward-looking statementsThis annual report includes forward-looking statements based on current assessments of future developments. Such statements are subject to risks and uncertainties that are beyond the REIFF Group's ability to control or estimate precisely, such as future market and economic conditions, the behaviour of other market participants, the successful integration of new acquisitions and realisation of the anticipated synergy effects, as well as measures of public authorities. Should one of these or other uncertainty factors and inponderabilities occur, or should the assumptions upon which these statements are based prove to be incorrect, the actual results could deviate significantly from the results explicitly cited or implicitly contained in these statements. The REIFF Group neither intends nor undertakes a separate obligation to update forward-looking statements in order to adapt them to the events or developments after the date of this report.

Deviations due to technical reasonsDue to technical reasons (e.g. conversion from electronic formats), deviations can occur between the disclosure documents included in these financial statements and the disclosure documents submitted to the electronic Federal Gazette. In this case the version submitted to the electronic Federal Gazette applies as the binding version.

The financial statements are available on the Internet for download at www.reiff-gruppe.de.

We would be pleased to send you additional copies at no charge, on request:

Telephone: +49 7121 323-434 Fax: +49 7121 323-6434E-Mail: anita.lang@reiff-gruppe.de

87

REIFF GroupTübinger Str. 2 - 6D-72762 Reutlingen

Telephone +49 7121 323-0Fax +49 7121 323-346

info@reiff-gruppe.dewww.reiff-gruppe.de

Since the company was founded in 1910, REIFF has stood for innovation and reliability in wholesale and retail and the associated services.

Our more than 100-year company tradition goes hand in hand with a consistent commitment to looking ahead – for promising trends in products and services, and for changes in the markets of our customers.Thus the family enterprise has developed into Germany's leading partner, active throughout Europe, for products for industrial distribution and a broadly based organisation for tyres and automotive technology.

Today, twelve brand name companies belong to the REIFF Group. At approximately 80 locations in Germany and Europe a total of more than 1,660 employees are serving our customers.

REIFF Group

Tübinger Str. 2 - 6, D-72762 ReutlingenTelephone +49 7121 323-0, Telefax +49 7121 323-346info@reiff-gruppe.de, www.reiff-gruppe.de

2012

The REIFF Group