Vinq Toqethe Orkinq Toqethe Being Successtu Toqethe: Report On The 144th Financial Year

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Report on the 144th financial year
THE TENGELMANN GROUP
2010 Contents 03
Contents
Preface 6 Invited Commen mployees a ponsibi ity rview
sions 34 Balance Shee and Explanatory Notes

iii
Dear Readers,
Integration cannot and must not be a one-way street. It requires give and take on all sides."
Preface 05
The 144th financial year in the history of our family business proved far more positive than expected. All of the divisions of the Tengelmann Group recorded increases in sales and earnings. There was successful progress, too, with our expansion program. The only bitter note came in December 2010, when US supermarket chain A&P was forced to file for Chapter 11 protection. In the two years during which the global economic crisis lasted, our enterprise proved strong and sustainable. We therefore look to the future with confidence. In 2010 the subject of integration was a topic of hot debate, made all the hotter by the ideas expounded by Mr. Thilo Sarrazin. Given that Germany is by far the most populous member of the European Union, it is also a matter of great importance. Germany is home to some 82 million people, more than 15 million of whom are of non-German origin. In the past 50 years we have made the transition from a destination for 'guest workers' to a magnet for immigration. As a result our culture and the way we live together have in recent decades become far more diverse. Differences in origin and cultural background call for understanding as well as mutual respect and a willingness on the part of every citizen to adapt. Sadly, when it comes to the co-existence of different cultures, almost every country on earth still seems to experience problems. All too often, prejudice, reserve and an undercurrent of suspicion prevent communities from living together in a relationship of trust. And yet a matter that appears to present such difficulty among our population - that is to say, the successful integration of citizens of foreign origin - is scarcely an
issue at our family business. I refer here quite decidedly not only to the integration of different cultures, but to the broader integration of young and old, men and women, and also of disabled persons in the day to day life of our enterprise. To this effect, we don't rely on prearranged integration programs. At Tengelmann family business we emphasize the importance of partnership: working together, living together and succeeding together. At the holding company and at our subsidiaries, people from over 100 different nations work side by side on a daily basis. They are all part of the Tengelmann family and it shows... not least in this report which is illustrated exclusively with photos of our own employees. I would like at this point to express my sincere thanks to all concerned. It is of central importance that all parties should be willing to help shape and support the integration process. Integration cannot and must not be a one-way street. It requires give and take on all sides. There is no doubt that those who are unwilling to integrate - either in society or in regular employment - constitute a problem. On the other hand, this is a phenomenon that is not limited to the immigrant communities. Successful integration is and remains a challenge that we must all face up to every single day.
Yours truly,
Karl-Erivan W. Haub
"We must integrate successfully. Our cohesion as a society depends on it.
Invited Comment 7
nteqration not aisinteqration

Two and half years ago, former German Chancellor Helmut Schmidt penned a sentence in his book "Aufter Dienst" ("In Retirement") redolent of concern. A sentence that carries a warning. He wrote, "Anyone proposing to increase the number of Muslims in our society must be prepared to accept an increasing risk to our internal 1 peace." A sentence from a man not noted for his resentment against Islam. At the time it did not cause much of a stir. However, since the debate surrounding the ideas expounded by the former Berlin Senator of Finance Thilo Sarrazin, the issues of immigration and integration have been on everyone's lips. The discussion itself is not new consider the petitions against dual nationality in the state of Hesse, against the building of mosques in DuisburgMarxloh and in Cologne, or about young offenders with an immigrant background in Berlin. What is new is the breadth, the intensity and the fundamentally of political and social debate: is multiculturalism dead, or long since a reality? Is the fear and distrust of foreigners among Germans - and vice versa - a peripheral problem or widespread? Is Islam a part of Germany or is it not?
15.6 million individuals of immigrant origin
whether integration can be successful. We must integrate successfully. Our cohesion as a society depends on it irrespective of whether we will need more immigration or less in the future.
Peaceful, open-minded coexistence
It is clear to me that where multiculturalism takes the form of parallel societies, it is harsh and inhuman. This is not living together; this is living apart from one another. A peaceful and open-minded coexistence can only succeed on the basis of a shared language and shared values. Respect for human dignity, freedom, justice, solidarity, gender equality, pluralism, the rule of law: these are the values that have shaped the Western Judeo-Christian culture. They are the values of humanism and enlightenment. They have developed over centuries and made an indelible mark on our society. They find expression in our constitution. It is essential that all those living in this country, irrespective of origin, race or religion, should respect and abide by them. It is the duty of every one of us to live up to them. This fundamental consensus is also an essential precondition for tolerance and for the acceptance of diversity. No immigrant is compelled to abandon his or her cultural, religious or ideological roots and traditions. He or she may live by them, provided that doing so does not impinge on the values and rights of others. Honor killings, forced marriages and genital mutilation are not cultural manifestations; they are criminal acts - even if they were common practice in one's country of origin. Our constitution guarantees
There are around 15.6 million individuals of immigrant 2 origin living in Germany today. In other words, for almost one in five members of the population, immigration is part of their personal or family history. In major urban centers like Cologne, the proportion of children from immigrant families has already passed the 50 percent 3 mark. In a few years time, that is likely to be the case in every city. Given facts like these it is no longer a question of
Invited Comment 8
religious freedom. This includes the right for all religions to build places of worship. We need mosques in our
The public success of his often abstruse theories stems not from the fact that people in Germany are xenophobic.
"The efforts still required on the path to successful integration are many and great."
country - visible and recognizable, not hidden in some back yard. And we need faith- oriented Islamic education, conducted in German, with teachers trained at German universities and under the supervision of the German education authorities. The goal of successful integration must be to preserve unity in diversity. That is part of our European mandate. That does not mean compulsory assimilation, even if that does not, as Turkish Prime Minister Recep Tayyip Erdogan 4 maintains, constitute a "crime against humanity" . The extent to which immigrants adapt to their host society over and beyond the fundamental consensus is a matter 5 for them alone to decide. What is important is that they should not be under any social compulsion - whether exerted by the society from which they originate or by our own German society.
Language is the key
These ideas are presented with the underlying message that "this is something that needs to be said." This right-wing populist method succeeds because, for reasons of political correctness, public and published opinion too often fails to come to grips with reality. Instead of citing undisputable facts and promoting joint remedies, a political climate develops in which solutions and coexistence are both made all the more difficult. How are the present problems of integration to be resolved? There is one thing on which virtually all experts agree: the German language is the key to success. A command of the language is of the essence if one is to feel at home in society and succeed in education and employment. That is why it is right to link moving to Germany with the willingness to learn the German language. And it is also right to introduce obligatory language tests and, if necessary, obligatory language support for all four year-olds. Even if there are those who do not wish to hear it said: if you are born in Germany and of German nationality, then German is your mother tongue. Even if your parents come from Turkey or elsewhere. That is not to say
Integration can only succeed if the people who come to this country are offered just and fair opportunities to participate in education, employment and advancement. In return, immigrants must be expected to take advantage of these offers. It is a question of encouragement and expectation. Past experience in this regard has left something to be desired. There are too many immigrants, above all children and young people, who still do not feel at home even years after arriving. There have in some cases been massive deficiencies in integrating immigrants from the former 6 Yugoslavia, Africa and Turkey. Too many have an inadequate command of German, their educational qualifications are too low and as a result they are more likely to be unemployed. There is no need to read the words of Thilo Sarrazin to be aware of this. In a free democracy, everyone has the right to point out problems. However, Sarrazin's observations are based on two false assumptions: firstly, he reduces the value of human beings to purely economic considerations. The value of the individual, family, education or culture per se has no role to play. And secondly, human intelligence is not primarily a product of heredity. Sarrazin takes a deterministic view of the world which brings into question the worth and freedom of the individual.
Invited Comment 9
we should not support the languages of migrants'

Dr. Jurgen Ruttgers was Federal Minister of
Education, Science, Research and Technology from 1994 to 1998. From 2000 to 2005 he chaired the CDU state parliamentary party in North Rhine-Westphalia and from 2005 to 2010 he was the Minister President of North Rhine- Westphalia. He holds honorary doctorates from the Universite Pierre et Marie Curie at the Sorbonne in Paris, the Roma Tre University in Rome and Waseda University Tokyo. In 2008 he was awarded an Honorary Professorship at the Ben Gurion University of the Negev. countries of origin. Those who, in addition to their German mother tongue, can also speak Turkish as a second language possess a special gift. In this globalized world, a command of several languages is of inestimable value. We need more all-day schools, more one-on-one support in schools and appropriate career advice and qualifications to ease the transition from education to employment - for example in cooperation with business and industry, the government employment agencies, chambers of industry and commerce and immigrant self-help organizations. Parents too should become involved. They must help their children to succeed in school and vocational education.
Family businesses set an example
cf. 8th Report by the Federal Commissioner for Migration, Refugees and Integration on the Status of Foreigners in Germany, Berlin 2010, page 37 3 cf. Kirsten Boldt: Aus Minderheiten wird die Mehrheit, [When minorities become the majority], published December 30, 2010 in the Kolner Stadt-Anzeiger, page 26. 4 Mariam Lau: Erdogans deutsches Spiel [Erdogan's German game], published February 12, 2008 in Die Welt 5 cf. Peter Muller: Verbrecherische Assimilation? [The crime of assimilation?], published February 16, 2008 in the Frankfurter Allgemeine Zeitung 6 cf. Berlin Institute for Population and development: Unused Potentials. On the Current State of Integration in Germany, Berlin 2009.
We also need to overcome reservations against immigrants and be more willing to acknowledge their achievements. Nevertheless, those who consistently refuse to integrate must accept the consequences - even if that means curtailing social benefits or, for non-German nationals, forfeiting the right to stay here. Clearly, the efforts still required on the path to successful integration are many and great. It is imperative that we neither treat the current reality as taboo, nor attempt to view it through colored glasses. Above all our approach to reality must be a joint one. The picture painted by the German business community is encouraging. As usual, businesses are already successfully implementing what our society has yet to learn. At family businesses in particular, integration is taking place without the need for extensive formal programs. It is happening as a matter of fact rather than through compulsion as colleagues work together and live together in friendly coexistence. And that is how it should be.
Helmut Schmidt: AuGer Dienst. Eine Bilanz [In Retirement: Taking Stock], Munich 2008, page 236.
10 Employees
Success also means uniting employees of widely differing origins as members of the same strong team.
Employees 11
Worki toqether tor a secure future

The Tengelmann Group recognized long ago that only a maturely developed workforce that embraces the full spectrum of cultures can hope to succeed in markets both inside and outside of Germany. To build such a workforce we rely not on formal integration programs but on thorough training and mutual cooperation.
107 nations under one roof
Internationalism at our Tengelmann family business means more than just operating in numerous European markets. Above all it means uniting employees from 107 nations in a single team with the ability to make the customers of all our Group companies feel welcome and well looked after. OBI can rely on 40,610 employees from 76 nations, of which 18,089 work outside of Germany. Thanks to a uniform standard of training, a shared code of conduct and mutual respect, they have evolved into a single team at the service of the customer. A policy of continuous ongoing training plays an essential part in building and maintaining the OBI team. The company also has a tradition of entrusting young people with responsibility at an early stage, which is why once again in 2010 a number of trainees were put in charge of a store. For three weeks in October, 105 junior staff managed the OBI store in Berlin-Spandau on their own initiative. The highly competitive environment in Berlin provided an added challenge. The structure of the workforce at the textile discounter KiK presents a similarly international picture, with employees from more than 70 nations. Since many of them were trained entirely by the company, they almost automatically form a united team. By taking advantage of
further in-house education and training, they can progress to become team leaders and gain recognized qualifications in retail sales. KiK takes an active interest in the lives and personal circumstances of its employees. At the end of last year, for example, as part of a mother-and-child project, 21 young mothers were able to undergo training. The success of the company's training concept is evident not just from the above-average proportion of trainees and interns who are subsequently offered full-time employment: the successful careers that junior staff can look forward to also speak for themselves. In recent years 69 percent of former trainees have gone on to occupy management positions with the company.
Team building through continuous training
Kaiser's Tengelmann has long had a successful record of encouraging employees with an immigrant background to rise to all levels of management. At the end of the 2010 financial year, the supermarket chain employed 1,975 foreign nationals from 92 countries, equivalent to more than 10 percent of the workforce. Almost 8 percent of managers have an immigrant background. Young non-German trainees account for over 17 percent of the workforce.
12 Social Responsibility
The family business Tengelmann has always attached great importance to social responsibility and sustaina-
bility - long before the term "Corporate Social Responsibility" (CSR) was created. The two fundaments of social commitment of the Tengelmann Group are: commitment to the environment and nature as well as activities in the social sector.
responsibly means aking responsibility
Supplies from unregulated and unregistered fisheries, as well as those obtained via fishing methods that are illegal
As long ago as 1968, the Karl-Schmitz-Scholl Fund laid the foundation for the environmental commitment. The foundation campaigns for the enactment and implementation of legal provisions to preserve nature, water and air. To date, the foundation is financially supported through the sale of the Nature Calendar in the Kaiser's and Tengelmann stores as well as in the online shop. For its trailblazing initiatives in the 1980s, embodied by the "frog and turtle" environmental symbol, the Group was honored with numerous awards.
Tengelmann Climate Initiative
and harmful to the environment, and feeding farmed fish with genetically modified feedstuff are unacceptable. Furthermore, Kaiser's Tengelmann has been partner of TransFair for 15 years, thereby promoting fair trade with quality products. The basis of life for small producers in the producing countries is safeguarded by guaranteeing commensurate prices. In Germany, regional producers are also promoted, not least to avoid using means of transport that are harmful to the environment. To this effect, for example, especially food producers from Brandenburg and Upper Bavaria are registered for Berlin and Munich. OBI improves its commitment by continuously expanding its product range from sustainable production and through conversion of its markets to environmentally friendly energy sources. Customers are also inspired to increase their environmental consciousness through publications and free environmental guidelines. When it comes to product policy, low-toxicity varnishes and paints, as well as turf-free products and sustainable woods are given preference. Resource-conserving and energy-efficient products
As part of the current Tengelmann Climate Initiative, the Group intends to cut its greenhouse gas emissions by 20 percent by the year 2020. The project was initiated in 2007. This aim will be achieved through the use of green power and energy efficiency measures to cut emissions. The Tengelmann climate-friendly store was opened in December 2008 as a beacon project. It is the first CO2 neutral supermarket in Germany using 50 percent less energy than a conventional market. In the meantime, virtually all stores of the Tengelmann Group are operated with certified green electricity. KiK, OBI and TEDi plan new stores pursuant to GreenBuilding Standards, a program of the European Commission aiming to improve energy efficiency and the use of renewable energies in non-residential buildings. Moreover, KiK organizes its transport of goods as environmentally friendly as possible: in comparison to air transport, KiK's preferred use of sea shipping results in a CO2 emission of not even 5 percent. 99 percent of the national transport within Europe is by rail or inland waterway vessel.
Sustainable design of products
Products should also be designed to reflect sustainability: when it comes to purchasing fish or seafood, Kaiser's Tengelmann respects a sustainable fishing policy. Fish from threatened stocks as a result of overfishing are replaced, whenever possible, by fish from healthy stocks.
13 Social Responsibility
Social commitment: Recent examples include the
support of patchwork rug production in Rangpur, Bangladesh, by KiK and sales of GEPA fair trade products, Europe's largest fair trade organization by Kaiser's Tengelmann. are actively promoted as such. Garden centers are watered through rainwater facilities. Furthermore, the vehicle fleet has been reconverted to environmentally-friendly and low emission vehicles. KiK's social commitment, which commenced with the "help & hope" foundation in 2005, was honored in 2009 for the first time. In recognition of this work, KiK received the "Gold Standard Award 2009" for sustainability in Hong Kong for its activities in Asia. Through the sustainable production of patchwork rugs and raffia baskets in Bangladesh, 400 local jobs were created. The revenue from over one million sold products flows back into sustainable projects. Additionally, KiK provides support for medical care, children's day care centers, schools, hygiene projects and health camps in the Central Asian country.
Voluntary emergency assistance
Since 2007, the Tengelmann Group has been sponsoring the social commitment of its employees with the Volunteer Day. A classic win-win situation: charitable organizations benefit from the support and the employees from insight into different areas of life. Since the launch of the Volunteer Day, approx. 500 employees have carried out over 70 projects, such as in kindergartens and retirement homes.
The Tengelmann Group voluntarily provides emergency assistance - on a large and small scale. This includes emergency aids for earthquake victims in Haiti and tsunami victims in South East Asia as well as the financing of a Vita assistance dog for a wheelchair user in the local neighborhood. Since 2001, children, young people and adults have also been invited to actively take part in the professional Gospelprojekt Ruhr concert events thanks to the financial and personal support of the Tengelmann Group.
Promoting social commitment
The proceeds from the annual Tengelmann Run are used to support organizations helping disabled children and young people.
Overview 15
Sound growth sound prospects

In the 2010 financial year, with 4,117 stores and 80,282 employees in 15 European countries, the Tengelmann Group achieved sales valued at euro 11.34 billion - as high as the previous year. With OBI and KiK, the Group generated a proportion of 34 percent elsewhere in Europe and increased sales and earnings despite the problem country Hungary.
Food
increase in sales of 6.8 percent and its position as the number one DIY store.
Associated Companies
Woolworth was a further commitment in the 2010 financial year in addition to the successful and strong interests in Netto Marken-Discount and TEDi. The A&P supermarket chain in North America, in which the Tengelmann Group holds an interest, filed a petition on DIP proceedings under Chapter 11 as part of restructuring measures in December.
E-Commerce
The focus of Kaiser's Tengelmann GmbH during the financial year 2010 was on making the company fit for the future. The Group moved its headquarters from Viersen to Mulheim an der Ruhr; the Rhine-Main-Neckar region was discontinued. However, at the same time, the store network in the existing core areas was consolidated.
Clothing and non-food
The Plus online shop ranks among Germany's top ten most frequently visited online portals of the newly established Tengelmann E-Commerce GmbH. Thanks to interests in ten start-up companies, the E-Commerce portfolio could be significantly extended.
Other areas of business
In the previous financial year, KiK was represented with 3,025 stores in six countries. The company has maintained its position as the market leader in the textile discount segment with an increase in sales of 2.1 percent. Price increases in cotton as well as shortage of raw materials already marked the course of the second half.
Home and garden
2010 was one of OBI's most successful financial years. In the 40th year of its existence, the company was expanded by 24 locations across Europe and thus operated 561 markets in 13 countries. In Germany, OBI continued to successfully uphold its
The Tengelmann Group also includes business interests in the real estate, energy and services sectors. TREI Real Estate GmbH manages the commercial properties occupied by the former Plus national companies in Europe and develops new store premises. Tengelmann Energie GmbH (TEG) also offers energy consulting in addition to sourcing electricity for commercial customers. The main tasks of Tengelmann Audit GmbH (TAG) and Tengelmann Auditing Services & COnsulting GmbH (TASCO) cover the full range of auditing services. Subrenta Immobilienverwaltungs- gesellschaft mbH, Tengelmann Assekuranz Vermitt- lungs-GmbH and TSG Sicherheit und Service GmbH all succeeded in continuing the excellent development reported in previous years.
-> www.tengelmann.de
Kaiser's Tengelmann Business Divisions 17
Kaiser's Tengelmann
18 Business Divisions Kaiser's Tengelmann
Quality and freshness guaranteed 7,975 employees in 531 stores d sales amounting to euro 2.34 billion
In demand: Quality and freshness Continuing trend: Organic products Strong potential: A & P own-brand
Restructuring and modernization initiated
Kaiser's Tengelmann achieved gross sales of euro 2.34 billion during the 2010 financial year. As the stores in the Rhine-Main-Neckar region were sold or closed, gross sales slipped slightly in comparison to the previous year, whereas the branch sales of the remaining regions in Berlin, Munich/Upper Bavaria and North Rhine represented an increase. By the end of the financial year, a total of 17,975 staff was employed in 531 stores, of which 1,136 were trainees. The focus of activities at Kaiser's Tengelmann in the previous financial year was therefore primarily on making the company fit for the future. This also included structural measures in 2010. In particular, shedding the stores in the Rhine-Main-Necker region, which have been loss-making for years, was a hard, yet necessary
step. With few exceptions the stores were sold to competitors. Additionally, Kaiser's Tengelmann GmbH moved its headquarters from Viersen to Mulheim an der Ruhr, where it can take full advantage of the synergies it creates. The employees also significantly contributed to the restructuring and development measures of the company, by foregoing a part of their vacation pay and Christmas bonus through a future consolidation agreement. This relinquishment and the high investments of the parent group will now enable the implementation of the modernization of the stores that has long been necessary.
Successful strategic profiling
Progress was made in optimizing the launch of the new merchandise management system in addition to projects related to intelligent pricing at the Point
20 Business Divisions Kaiser's Tengelmann
of Sale, product range and the uniform store concept. Moreover, the strategic profiling of Kaiser's Tengelmann as quality and freshness supermarket was consistently continued with the "Black, Red & Gold" concept. The freshness concept is subject to constant quality assurance: from purchasing and scheduling to warehousing, storage and transport through to sales in the Kaiser's and Tengelmann supermarkets. Thanks to revised product ranges an offer more strongly tailored to the needs of the customers was achieved With approx. 200 products, the own-brand "Star Marke" of selected products for the discerning customer was positioned at a low price. Kaiser's Tengelmann is catering to the increasing health consciousness of many consumers by expanding its organic product range. This trend is also evident in the organic "Naturkind" own-brand range. German food retailing will continue to be dominated by a price competition, even to the extent of cut-throat competition. The supermarkets will increasingly benefit
from the transition to an older demographic profile, which values premium products in the immediate vicinity. The Kaiser's Tengelmann supermarkets are perfectly located to take advantage of this.
Competition for trainees
Competition for qualified specialist staff and management is well under way, placing greater emphasis on the education and training of young people. Kaiser's Tengelmann attaches great attention to customer orientation as well as skilled personnel in the freshness segment. Numerous events for the vocational preparation of students have been arranged as part of school partnership programs in order to recruit suitable and motivated young people for the company.
-> www.kaiserstengelmann.de
22 Business Divisions E-Commerce
KiK
Shop clever. 20,009 employees in 3,025 KiK stores generated

1
ii
sales amounting
to euro 1.66 billion.

Consolidated: Position as market leader Expedited: Control in producing countries Expanded: New collections in the product range
Germany's price leader
and the exploitation of new procurement markets significantly contribute to controlling purchasing costs.
Sustainability
KiK can look back on a good and successful financial year. Total sales rose by 2.1 percent to euro 1.66 billion. This success can be attributed to 20,009 employees in six European countries, where the textile discounter operated 3,025 stores, of which 2,517 in Germany. In November 2010, the opening of the 3,000th KiK store in Europe was celebrated. In the Czech Republic the 100th store and in Austria the 250th store was opened. Despite the increase of raw material prices since the second half 2010, KiK is determined to defend its position as competitive price leader. Diversification of the product range plays an essential role in keeping the sales prices for customers stable. Long-term and trustful cooperation with select suppliers
Sustainability and quality assurance are given top priority despite cost consciousness. Strict controls in producing countries implemented by KiK and independent testing institutes are aimed at safeguarding acceptable working conditions as well as a sustainable production and logistics chain. This not only includes repeated local audits and the training of the workforce, but also the training of suppliers with regard to qualification measures and workshops and projects relating to health care. Particular attention is also attached to the continuous monitoring of production processes. In March 2007, KiK instituted comprehensive checks of social standards in the producing countries. Since October
2006, the Code of Conduct has become a binding purchasing guideline. Quality assurance starts with specific quality criteria. Subsequently, random sample tests are carried out on the finished product in the country of origin as well as in Germany prior to bringing it on the market. During the reporting period, the "fashion" range was expanded by three Verona Pooth collections with various product themes. This long-term product range expansion is underpinned by the extension of the cooperation with Verona Pooth until 2014. A maternity fashion plus a baby collection under the "Verona Pooth" label will supplement the KiK range in the 2011 financial year. KiK also expanded its offer for customers in the area of licensed products and its own "Ergee" brand.
Owing to negative media coverage in the past year, KiK has now established a management section for sustainability and corporate communication.
Number of trainees increased
The enterprise attaches high priority to the on-going support of its junior staff. In 2010, 544 apprentices started their working lives at KiK. The overall number of trainees rose to 1,732 by the end of the year, equaling a trainee quota of almost 11 percent. In the summer, 74 percent of the trainees were offered full employment and 76 percent of the interns received a contract of apprenticeship. In both respects, KiK was significantly above the average in Germany.
-> www.kik-textilien.com
OBI
Everything unaer one roo 610 employees in 561 stores generated sales amounting to euro 6.4 billion.
ii
Expansive: Opening of 30 new stores Enlarged: Online activities Again: Award as Top Employer
On course for further expansion
establishing new stores, the emphasis is on resource-efficient and environmentally-friendly construction.

Over 60,000 products
OBI is represented in Germany and twelve other European countries. In the 2010 financial year, OBI was once again able to increase its gross sales in all stores despite the global economic crises. Sales rose by 8.3 percent, totaling Euro 6.4 billion in comparison to the previous year. This is owed to the commitment of 40,610 employees in 561 stores, of which 340 in Germany. OBI's expansion on global markets is a defining element for the development of the DIY chain. In its 40th year of existence, OBI expanded the number of its stores by 24 new locations in 2010 (including 6 branches closed). Backed by this growth, the number one in the industry continued to position itself as the most expansive DIY retailer in Europe. When
For many years, OBI has sustainably established its position as market leader in the technology, construction, home and garden segments. Customers include DIYers as well as professional craftsmen, who all appreciate the easy, flexible and fast fulfillment of their requirements from a range of over 60,000 products. In this respect, the retail outlets are not the only shopping venue for customers. They are increasingly making purchases and searching for information on the Internet, as in many other retail areas. Whether via blogging, mobile apps or other online activities, the enterprise is one of the most visited addresses on the Internet.
OBI launched its new online shop mid-November 2010. Within a short period of time the enterprise was awarded the seal of approval by the leading German certification
reliability, quality and value for money will significantly contribute to achieving this goal.
body Trusted Shops. Over 100 single criteria including payment security, price transparency, information obligation, customer service and data protection were tested for the certification. This seal of approval allows OBI to provide its customers with an additional guarantee for safe online shopping. An additional 5,000 products have been added to the online offer of the OBI range profile. The addition of a garden range is scheduled for spring 2011. Online shop orders via telephone are also possible.
New openings in spring 2011
In 2010, for the third consecutive year, OBI was singled out as "Germany's Top Employer" and ranked among the Top 100 Employers based on student surveys. This ranking strengthens its position as "Employer of Choice" among current and future employees. In Germany, OBI employed a workforce of 22,521 during the reporting period, of which 1,175 completed training; 113 studied for a bachelor degree simultaneously with their training. The high qualification and strong customer orientation of the employees is permanently upheld through continuous training. OBI's future aim is to increase expansion more intensively than its competitors and to thus gain further market shares, especially in Germany. In addition to the wave of new openings in spring 2011 and the modern, self-confident store image, the benefits associated with the OBI brand like
-> www.obi.de
In 2010, the Internet proved once again to be the retail channel with the highest growth dynamic. The sales generated totaled euro 18 billion, an increase of 18 percent over the previous year. The Tengelmann Group took this development into account by reorganizing Plus Online GmbH, Tengelmann E-Commerce Beteiligungs GmbH and Tengelmann New Media GmbH under the umbrella Tengelmann E-Commerce GmbH.
Expanding the permanent product range
Real Estate Business Divisions 31
Easy online shopping

E-Commerce
In its ten years of existence, Plus.de ranks among the most long-standing and most visited online shops in Germany and offers a comprehensive choice in the garden and DIY,
home and design, household items and consumer electronics categories. Themed special offers are available each week. This is supplemented by daily offers such as the "Plus des Tages" (the Plus of the day). The new shop system launched in September 2010 allows shopping in an appealing and modern design. Moreover, the completely revised navigation, search engine optimized product presentation and new functions improve its user friendliness for customers. The ratio of purchases to page visits significantly increased and the permanent range was expanded as well. Cooperation with new partners made it possible to offer 50,000 products - an increase by almost 70 percent over the previous year. In the first half of 2010, the Tengelmann Group began to expand its activities in E-Commerce through a stake in the online shopping club brands4friends, the online shoe merchant Zalando, the Spanish specialty supplier Enologos and Baby-Markt.de. The participating interests are held by Tengelmann E-Commerce Beteiligungs GmbH in Mulheim an der Ruhr with the guiding principle "Funding your ideas". The aim is to promote fast-growing
young businesses and to meet the increasing demands of customers for online shopping offers. The second half was followed by the acquisition of stakes in the leading Internet custom tailoring site youtailor.de, the supplier of gourmet products Otto-Gourmet.de and the Stylight.de platform. The online marketplace Stylight.de is the leading Internet search engine for fashion that allows access to over 50 different online shops. A stake in Supreme NewMedia GmbH in December rounded off the expansion of the E-Commerce portfolio for 2010. At the same time, the Tengelmann Group shed its interest in brands4friends following the full take-over of the shopping club by the Internet auctioneer ebay. The Plus Online GmbH marketing segment was spun off to the newly-established Tengelmann New Media GmbH. As a full service provider, the enterprise offers integrated communication concepts with an emphasis on E-Commerce. The main focus is on promotional messages for customers via all media channels. Customers also include clients outside the Group in addition to the Tengelmann Group companies themselves.
-> www.e-tengelmann.de
ofessiona D of real estate

TREI Real Estate
TREI Real Estate GmbH, with approx. 50 employees, is tasked with the management of 361 predominantly long-term leases of retail properties of the Tengelmann Group. In 2008, the former Plus holdings outside of Germany have been amalgamated into TREI and are mainly located in Poland, the Czech Republic, Hungary, Austria and Portugal. In addition to continuing the strategic development of the enterprise, a new unique image under the name TREI Real Estate has been established in the 2010 financial year. TREI headquarters is in Mulheim an der Ruhr, with four additional offices outside of Germany. As part of the added real estate management of 89 Zielpunkt properties, a further office was opened in Vienna.
Site specific utilization concept
financial year, five new properties in Poland, the Czech Republic and Austria were completed and turned over to the tenants. Furthermore, new structures were established to successfully develop new projects based on proprietary development as well as with cooperation partners. Specific site utilization concepts are developed and implemented for renowned tenants with the know- how of in-house project developers and retail experts as well as the integration of experienced international cooperation partners, with a focus on small and medium specialist stores mainly in Central and Eastern Europe. A comprehensive investment program is planned for the years ahead in order to further enhance the real estate portfolio. In the 2011 financial year, the focus is on implementing the planned and already secured specialist stores as well as starting new projects, mainly in sound growth markets like Poland and the Czech Republic. At the same time, market entry in Slovakia is being planned as part of overall project development.
TREI, as an expert in retail properties, focuses on project development and management of specialist stores and food stores. This encompasses the entire range of project development and asset management for existing leased properties, through to portfolio management. In the 2010
-> www.treirealestate.com
33 Associate companies
u evelopments
Netto
Increase in sales and earnings
TEDi
In the past financial year, Netto generated sales of over euro 10.4 billion, representing an increase of 4.3 percent over the year before. With more than 4,000 stores, the discounter consolidated its position as number three in the German food discounting segment. After successful conversion of all former Plus stores in 2010, Netto's presence will be uniform and comprehensive in future. The approx. 2,100 converted markets have been successively modernized. In the future, several hundred stores, mainly located in city centers, will be operated as CITY-DISCOUNT markets. They will offer a compact freshness and convenience-oriented range that meets the requirements of many consumers with regard to fast shopping in the immediate vicinity. An increase in sales and earnings is also expected for the coming financial years.
Germany's leading 1-euro discounter
1,140 stores throughout Germany are supplied from this 17,000 sqm logistics center. In these stores, 8,600 employees, including around 290 trainees, helped TEDi to succeed in expanding its position as Germany's leading 1-euro discounter. Continuous expansion of the product range and preparations for the launch of a certified quality system were consistently continued. The company is also continuing its intensive expansion policy in 2011, for example with the opening of the first stores in Austria. The Dortmund Economic Development Agency certified the discounter as a family-conscious enterprise and honored the commitment of TEDi towards its employees. TEDi also provided financial aid for the "help & hope"-Stiftung, a foundation that supports socially disadvantaged children.
For TEDi, the 2010 financial year started at the new central administrative headquarters in Dortmund- Brakel. All
- www.netto-online.de
- www.tedi-discount.com
Woolworth
Modern image - revised product range
On July 1, 2010, a consortium with the participation of the Tengelmann Group took over the Woolworth department store chain with 158 stores and approx. 4,300 employees due to insolvency. The aim is to initially increase the branch network to 250 and subsequently to 500 stores. From the acquisition to the end of the year, five new department stores were opened and 350 new jobs created. The aim is to create over 3,100 new jobs by the end of 2012. The new Woolworth features a clear store layout, a modern and optimized image tailored to requirements as well as a revised product range. Whereas alcohol, magazines, shoes and consumer electronics were removed from the range, decorative items, home accessories, pet items and license products were added. The intention is to retain the broad range of low and medium-priced products. In addition to an extensive own-brand program, Woolworth is focusing on established branded goods. A total of 30 new openings are planned for the 2011/2012 financial year. Existing stores will be adapted to the new design by 2013.
-> www.woolworth.de
nerqy fo e future
TEG
Tengelmann Energie GmbH (TEG) is the Tengelmann Group's energy service provider. TEG offers a complete energy management service to commercial clients, ranging from sourcing electricity and billing through to energy efficiency consulting. In the 2010 financial year, TEG generated sales totaling euro 241.6 million with 102 employees, of which around 70 percent was achieved with non-Group customers. The new customers were Woolworth, Neckermann, Mobel Hoffner and Promontoria. During the reporting period, around 1.3 terawatt hours of electricity, 650 gigawatt hours of gas plus approx. 7 million liters of heating oil and diesel were procured at bulk buyer conditions for supplying customers. As a result of the favorable market level and TEG's recommendations, large energy quantities were purchased for 2012.
Certified green electricity
Group. In 2011, a majority of the Group companies will be supplied with certified green electricity - a significant contribution to the environment and efficient utilization of resources. The subsidiary company GrunHausEnergie GmbH also supplies private households and small businesses with certified eco-power and is operated in a joint venture with the Freiburg-based energy supplier badenova. TEG's development is increasingly oriented towards energy efficiency consulting. The qualification of employees as certified energy efficiency auditors is a fundamental component in the continuation of the positive company development.
Expansion of service offers
There is an increasing demand for green electricity something that also finds an echo in the Tengelmann
Furthermore, the company is responding to changes in statutory conditions with the development and expansion of future-oriented service offers in the measuring and monitoring segment, as well as in the environmental segment.
- www.tengelmann-energie.de
or higher ansparency
TAG / TASCO
As a traditional family company, the Tengelmann Group disposes over a comprehensive auditing organization. Tengelmann Audit GmbH (TAG) and Tengelmann Auditing Services & COnsulting GmbH (TASCO) jointly offer a full range of auditing services to both internal and external clients pursuant to the standards of Deutsches Institut fur Interne Revision e.V. External clients include wholesalers and retailers, service providers, industry and non-profit organizations. The field of activity of the audit companies extends to Europe, Russia and China.
Customized auditing concepts
monitored are analyzed as part of the branch auditing. This also includes anonymous tests and quality controls. Great importance is attached to compliance with the statutory specifications for technical and building audits. Therefore, expert teams are entrusted with construction projects from commissioning through to facility management after completion.
Auditing of data protection processes
Audits are aimed at optimizing and safeguarding business processes. To this end, the auditors meet the individual requirements of customers and develop customized auditing profiles. For example, assessments of the functionality of internal auditing systems are implemented based on reviews with respect to efficiency, safety, proper conduct and compliance. A commercial audit includes the finance, accounting, purchasing, logistics, human resources, marketing and advertising segments. In this context, cash recovery is an interesting field of activity. This unit is tasked with the identification of unsettled issues, such as bonuses, advertising subsidies and discounts of the previous financial years, and to convert these into extraordinary earnings. All commercial processes and functions of the sales outlets to be
Effective IT auditing is becoming increasingly important. The demands with regard to the highly complex hardware and software systems as well as the rapidly progressing technical development are very high. This is the context in which the auditing of internal data protection processes must be seen.
Focus on E-Commerce
In addition to audit assignments of internal and external clients, the first year of TAG's existence in direct affiliation with the Tengelmann Group was dominated by the successful setup of a complete team for internal audits. During the course of the financial year, it became evident that the future focus would increasingly be on E-Commerce. TAG and TASCO see high customer potential in the E-Commerce stakes of the Tengelmann Group.
-> www.tasco-revision.de
2010 Balance Sheet and Explanatory Notes 37
Balance Sheet and Explanatory Notes
36 Consolidated Annual Repo 60 Consolidated Balance Shee 62 Consolidated Statemen of Assets 64 Notes to the Consolidated nancia Statements 73 Audit Certificate
Y --
Consolidated Statement of Assets Balance Sheet and Explanatory Notes 39
Extracts from the Consolidated Annual Report for Financial Year 2010
The Tengelmann Group is an international multi-sector retailer based in Mulheim an der Ruhr, comprising various divisions operating in Germany and 14 other European countries. In North America the Group has an interest in the supermarket chain A&P.
1 Economic and sector-specific development
Following the sharp collapse in 2009, the global economy recovered rapidly in 2010. Global output returned to the level last seen before the financial crisis, and world trade almost made up for the drastic amount of ground lost in the preceding year. Among the primary factors contributing to this economic recovery were the highly expansive monetary 1 and fiscal policies pursued by many countries as well as the stable demand from the emerging markets. The global economy as a whole recorded strong growth of 5.0 percent in 2010. While the emerging markets achieved an increase of around 7.1 percent, gross domestic product in the industrialized countries rose by just 3.0 percent relative to the year before. The euro zone recorded a slight growth of 1.7 percent, with Germany making the biggest contribution. Growth in the euro zone excluding Germany was limited to 1.0 percent by the effects of the debt crises suffered by some member states. Sovereign debt in the euro zone - relative to nominal GDP - was an average of 18.0 percentage points higher than in 2007. Apart from Germany, high rates of GDP growth were also recorded in Slovakia, Poland, Luxembourg and Finland, whereas 2 Romania for example saw a decline of 2.1 percent. Having experienced the deepest recession of the post-War era last year when the economy shrank by -4.7 percent, Germany went on record in 2010 with the strongest upturn since reunification. On a price-adjusted basis the German economy grew by 3.6 percent in 2010. An adjustment for working day variations reveals a lower rate of GDP growth of 3.5 percent, since the number of working days in 2010 was marginally higher than in 2009. Net exports contributed 1.1 percent to GDP growth in 2010 and proved once again, as in pre-crisis years, to be a mainstay of economic development.
3
However, it was not foreign trade that stimulated growth in 2010 but domestic spending. Investments in equipment were substantially higher than in the year before (+9.4 percent) - whereas this area also saw the steepest decline in 2009 (-22.6 percent). On a price-adjusted basis, consumer expenditure rose by 0.5 percent, with the steepest rises recorded in 1 spending on clothing and shoes (+3.2 percent). Public-sector spending was 2.2 percent higher than in the year before. Available household incomes rose by 2.6 percent in 2010. Measured at current prices, consumer spending rose by 2.4 percent, slightly below the increase in available incomes. There was also a slight increase in the savings ratio, which rose from 11.1 percent to 11.4 percent in 2010. Average inflation increased by 1.1 percent, with the largest contribution at just under 0.4 percentage points coming from the freight transport sector, due to the increase in fuel prices. Food prices also 3 rose by 1.6 percent relative to the year before.
German Federal Statistical Office, January 2011.
40 Balance Sheet and Explanatory Notes Consolidated Statement of Assets
Provisional results indicate a year-on-year increase in retail sales of 1.2 percent in real terms, with a nominal increase of 2.3 percent. The retail sector thus recorded a positive development in 2010, in contrast to the negative sales performance 2 during the crisis in 2009 (nominal -3.7 percent, real -3.1 percent). Food retailers (over 100 m , excluding Aldi, Lidl, Norma) recorded an overall increase in sales of 0.8 percent in 2010. On the other hand, retailers in 2010 also had two more trading days on which to do business. After adjusting for this effect, retail food sales were stagnant (0.1 percent variation). 2 All sales formats - with the exception of small supermarkets - developed positively. The large supermarkets (400 - 999 m ) 2 saw the biggest increase in sales at 1.5 percent, followed by the large hypermarkets (over 2,500 m ) with an increase in 2 sales of 1.3 percent. The development in sales at the smaller hypermarkets (1,000 - 2,499 m ) was slightly positive at (+0.5 2 percent). Only the small supermarkets (100 - 399 m ) saw their sales decline, by a substantial 4.7 percent (The Nielsen Company, Umsatzmonitor). Overall, the discounters recorded a slight drop in sales in 2010 (-0.5 percent). While the soft discounters managed an increase of 1.7 percent, the hard discounters Aldi, Lidl and Norma turned over 1.5 percent less in 2 2010 than in the year before. Sales in the DIY stores sector continued to develop positively in 2010, rising by an unadjusted 3.0 percent year-on-year. The DIY segment thus outpaced the retail sector as a whole. Following a negative performance in April and May, sales in June were up by 15 percent relative to the year before. The DIY segment then continued to record increasing turnover 3 from June until the end of the year. The German textiles market achieved its best results in 2010 since reunification. Turnover increased by 2.4 percent year-on-year, although clothing sales were down by 2.6 percent. The proportion of goods sold at reduced prices declined slightly, and the orientation towards quality was again evident in 2010. Both trends led to an increase in the average 4 prices paid for clothing. German consumers again increased their online spending on goods and services in 2010. Retail sales via the Internet rose 5 by 18 percent year-on-year to reach a new record of euro 18 billion. The Internet thus continues to be the most dynamic of distribution channels. In terms of products, there was above-average growth in the technology category in particular (+17 percent year-on-year). The real estate markets were much more active in 2010, especially in Poland and the Czech Republic. Transactions in the Polish property market were up by almost 40 percent last year, while investments in the Czech market increased by 6 around 30 percent in the same period. Sustained growth in both of these real estate markets is expected for 2011. In Bulgaria and Romania, which were particularly hard-hit by the financial crisis, activity in the property markets remained 7 comparatively subdued in 2010, whereas Hungary showed the first signs of a recovery in the market. In Germany, Austria 8 and Portugal, a growth trend in the real estate investment markets has been in evidence since 2009.
2 Development of the Group and its operating divisions
2.1 Structure of the Group
Our corporate structure is founded on several cornerstones. In addition to the retail operating division, the fabric of the Group consists of real estate, services and participating interests (in traditional retail and E-Commerce undertakings).
Divisions
The retail division comprises the Kaiser's Tengelmann, KiK and OBI high street chains as well as Plus Online. The real estate division includes TREI Real Estate, Wissoll and Subrenta, which manage the companies' property portfolio.
2 3
SymphonyIRI, Information Resources, Inc. German Meat Products Industry Federation (BVDF) 4 GfK textile market research, annual report for 2010 5 GfK; excluding services, travel, food. 6 CB Richard Ellis, Market View EMEA Retail/Press release dated 24.01.2011; NAI Global, Central/Eastern Europe Market Report 2010. 7 NAI Global, Central/Eastern Europe Market Report 2010; Colliers, Real Estate Review 2011; King Sturge Hungary, press release. 8 Jones Lang Lasalle, investment market overview for Q1 2011; Colliers International, real estate market report for Austria 2010; CB Richard Ellis, Investment Market - Portugal.
Tengelmann Assekuranz, Tengelmann Energie, Tengelmann Audit GmbH / Tengelmann Services & Consulting GmbH (TAG/TASCO) and Tengelmann Sicherheit GmbH (TSG) provide support services to the Group as well as to external customers.
Associate companies
Our portfolio of participating interests was substantially broadened in the financial year 2010. In addition to an interest in Woolworth, our E-Commerce holdings were also expanded. Associate companies in the high street retail sector include Netto, TEDi, Woolworth and A&P. Our E-Commerce interests include baby-markt.de, brands4friends.de, zalando.de, Stylight.de, Supreme.de, Youtailor.de, Enologos.de and Otto-Gourmet.de
Business units sold / structural changes in the financial year 2010
Stores of the Plus national companies in Austria, Bulgaria and Romania were sold (Zielpunkt to bluO; Plus Bulgaria and Plus Romania to Lidl). In Romania and Bulgaria the associated real estate was included in the sales. Stores of the Kaiser's Tengelmann supermarket chain in the Rhine-Main-Neckar region were sold to competitors.
2.2 Development of the Group
The OBI and KiK business units continued to pursue their successful expansion strategy in the financial year 2010. The overall number of stores was increased relative to the previous year, with the 273 new store openings far exceeding the 110 stores closed. Group sales at euro 11.34 billion were on a par with the year before (+0.0 percent vs. the previous year). The expansion and accompanying sales growth recorded by OBI and KiK were thus sufficient to compensate for the disposal of the Kaiser's Tengelmann outlets in the Rhine-Main-Neckar region and the Plus stores in Austria, Romania and Bulgaria. While sales in Germany increased by 0.4 percent over the year before, the disposal of the Plus stores led to a negative development in sales. The proportion of sales in Germany and Europe remained unchanged.
Gross sales in million / proportion (in brackets: previous year)
Europe ........................... 3.80/34% (34%)
7.54/66% (66%)
..................... Germany
Deviation in % vs. previous year
Germany
0.4
Total
0.0
Europe
-0.8
While KiK and OBI continued to record growth in sales, Kaiser's Tengelmann saw a decline in turnover. However, after adjusting for the disposal of the Kaiser's Tengelmann stores in the Rhine-Main-Neckar region and the Plus stores in Austria, Romania and Bulgaria, sales were up by a substantial +4.1 percent (currency adjusted) over the year before. Due to the steps taken, the proportion of non-food sales increased.
Proportion of total sales food/non-food in billion /proportion
(in brackets: previous year)

...................................... Food
2.98/26.3% (31.1%)
Non-food .............................. 8.35/73.7% (68.9%)
The results achieved by Kaiser's Tengelmann, KiK and OBI were above expectations. Similarly, the sale of the Plus national companies in Austria, Romania and Bulgaria resulted in a positive overall contribution to earnings. By contrast, performance was depressed by the equity valuation of our interest in A&P. Nevertheless, the Group overall returned one of the best consolidated results seen in recent years. In addition to a positive net asset position, the equity ratio rose to 36.8 percent, representing another substantial increase over the year before.
2.3 Development at the high street retail business units Kaiser's Tengelmann
With its attractive and extensive product range, the Kaiser's Tengelmann supermarket chain has positioned itself as a specialist in quality and freshness. The Kaiser's Tengelmann divisions KAISER'S Tengelmann( continue to include the Birkenhof meat and butchery products business and the timber fixtures and fittings manufacturer Ligneus. Kaiser's Tengelmann does not maintain a presence throughout Germany. Following the disposal of the stores in the Rhine-Main-Neckar region, it is now represented in just three regions only. In the past financial year 2010, Kaiser's Tengelmann achieved a gross turnover of euro 2.67 billion (previous year: euro 2.91 billion), of which branch sales accounted for euro 2.34 billion. The decline in sales was due to the withdrawal from the Rhine-Main- Neckar region. On a like-for-like basis in its three remaining core regions of Berlin, North Rhine and Munich/Upper Bavaria, the company recorded a positive increase in sales. At the end of the financial year, Kaiser's Tengelmann was operating 531 stores. On the closing date the company employed a workforce of 18,801. The highest turnover and the highest growth in sales were recorded in the Berlin region.
Gross sales acc. to region in million (in brackets: vs. previous year)
Rhine-Main-Neckar ............................................................ 177.5 (-56.8%) ..... North Rhine
583.4 (-4.6%)
Munich/Upper Bavaria 764.6 (+1.2%)
.............................................................................Berlin 819.1 (+2.6%)
In the past financial year, activities at Kaiser's Tengelmann GmbH were primarily focused on implementing the scheduled measures on making the business fit for the future. Numerous projects were completed in areas ranging from the company structure, more intelligent pricing at POS, and the product range structure, to creating a uniform, holistic market image and modifying the "contract for the future", in which employees have agreed to waive elements of their holiday pay and Christmas bonuses. In return, Kaiser's Tengelmann will undertake substantial investments in the modernization of the branch network under this three-year contract. A further change in the corporate structure involved the transfer of its headquarters from Viersen to Mulheim. In order to make Kaiser's Tengelmann more competitive, the staffing structures both at the branch level and in services - were also the subject of close attention. The joint purchasing operation established in 2009 with the competitor Bunting, which is concentrated in Northern Germany and as such does not directly compete with Kaiser's Tengelmann, was further intensified.
Furthermore, the financial year 2010 also saw a fundamental overhaul of the company's product range, which is now being constantly reviewed and adapted. The goal is to offer ranges that are substantially more closely tailored to customer needs and in tune with current preferences. A logical store and product layout forms an important part of the process, in order to avoid unnecessary dispersal of similar items. The range of A&P-branded products at entry-level prices has also been revised to meet customer needs, and meanwhile comprises almost 400 products. Customers' brand awareness of the A & P label now stands at almost 90 percent. The rebranding conducted in 2010 is aimed at making A & P even more attractive and appealing to younger customers in particular. The company's own-label concept is rounded off by the mid-price "Star Marke" range and its "Naturkind" organic products. The "black, red and gold" store concept, developed a few years ago with the purpose of consistently positioning Kaiser's Tengelmann as the supermarket of choice for quality and freshness, has meanwhile been successfully introduced at 201 locations. The goal is to convert and future-proof the entire branch network in the medium term to ensure that the company presents a uniform, modern image. The "contract for the future" entered into with the workforce will play an important part in achieving this goal. The company's results in the financial year 2010 were influenced by exceptional effects arising from its restructuring program. Kaiser's Tengelmann ended the year with an operating loss as expected.
Number of outlets (in brackets: previous year)
Berlin 149 (152)
North Rhine 181 (186)
Rhine-Main-Neckar 0 (118)
Munich/Upper Bavaria 201 (204)
KiK
Since it was first founded in 1994, KiK has always regarded itself as a supplier of basic textiles to its target group of low-income and price-conscious households. KiK is represented in six European countries (Germany, Austria, Czech Republic, Slovenia, Hungary and Slovakia). With 243 new openings, there was successful progress in expansion. In November, the opening of the 3,000th KiK store in Berlin was celebrated. Taking the 105 closures into account, KiK was able to further expand its outlet network by 138 stores overall to 3,025. On the closing date December 31, 2010, KiK employed a workforce of 20,009 (including 16,980 in Germany). The proportions of sales shifted slightly in favor of the European countries due to the international expansion.
Gross
previous year)
sales
KiK
in
million
/proportion
(in
brackets:
Europe ........................................ 317.5/19.1% (17.8%)
.......................................................... Germany 1.346.7/80.9% (82.2%)
Nevertheless, as a result of expansion, KiK succeeded in increasing its gross sales revenues by +2.1 percent (currency-adjusted by +1.9 percent) to euro 1.66 billion compared with the preceding year. However, the financial and economic crisis was especially noticeable for KiK in the Eastern European countries (Slovenia, Czech Republic and Hungary), with the result that like-for-like sales declined. While Austria achieved sales at virtually the same level as in the previous year (-0.5 percent), Hungary (+1.7 percent), Slovenia (+12.8 percent), the Czech Republic (+23.2 percent) and Slovakia (+101.8 percent) recorded significant growth thanks to expansion of the outlet network. In the second half, the negative development in the procurement market (extreme increase in raw material prices and loss in harvest) resulted in a shortage of product availability and loss of sales. Despite this, in the 2010 financial year, KiK continued to maintain its price leadership with a stable and positive result before tax. Nevertheless, it must be pointed out that the earnings before tax were substantially affected by the introduction of the basic wage of euro 7.50 per hour in Germany.
In order to enhance the public perception of KiK, a new management section for corporate social responsibility (CSR) and corporate communication was introduced, with the aim of publishing a corporate social responsibility report. KiK took part in the fundraising campaign for flood victims in Pakistan and the earthquake victims in Haiti. In the 2010 financial year as well, KiK was able to make a positive contribution to the consolidated result.
Germany 2,517 (2,437) Czech Republic 120 (94) Slovakia 42 (25) Austria 250 (249) Hungar y 55 (51)
Slovenia 41 (31)
OBI
The OBI Group is a retail chain specializing in DIY, leisure and garden products and operates 561 stores in 13 European countries with 40,610 employees. OBI is the leading brand in the German and European market and the fifth largest DIY store operator worldwide. In addition to outlet stores, franchise partner stores are also operated under the OBI name. This success derives from customers' appreciation of the easy, flexible and fast fulfillment of their personal requirements from a range of over 60,000 products. This is ensured by the excellent service and friendly advice from professional staff as well as the continuous further development of a resourceful and flexible product range. OBI's unswerving focus on creative ideas and innovations also fostered new trends in other product segments in 2010, for example the energy-efficient roof extension package. In addition, the presence and visibility of the high quality OBI own-brands was also discernibly increased. The introduction of the OBI Code of Conduct was completed throughout the OBI Group by the end of 2010. In the past financial year, OBI continued its expansion. A total of 30 stores were opened and six were closed. On February 25, 2010, OBI demonstrated its strong growth in Germany with five new openings in one day. Through the acquisition of four competitive locations, OBI succeeded in August in integrating the Saarland into the outlet network - new economic territory for OBI. 15 new stores were opened in seven other countries in addition to Germany. In the 2010 financial year, all 561 OBI stores (including franchise partners) - of which 340 are in Germany - reported gross sales of euro 6.38 billion, representing an increase of +8.3 percent over the year before and currency-adjusted by +6.0 percent.
GDH3S
OBI sales in million /proportion (in brackets: previous year)

Poland ........................... 487.3/8% (8%) Russia ........................... 691.9/11% (9%) Italy ..................................... 451.2/7% (7%) Czech Republic ............... 344.1 /5% (6%) Others ................................ 861.9/13% (14%)
3,548.4/56% (56%)
............................ Germany
In Germany, OBI accounted for the bulk of sales and is the undisputed market leader. In the 2010 financial year, sales increased by + 6.8 percent over the year before; thanks to its 40th year anniversary campaign, a significant increase in sales was recorded on a like-for-like basis. Furthermore, the German economy markedly regained its strength after last year's crisis. The excellent "DIY weather" in the early summer months had an additional positive impact on sales. OBI continued to succeed in the financial year 2010 in comparison to the DIY average of +3.0 percent over the year before. In other European countries an increase in sales was also recorded compared to the year before (+5.0 percent currency-adjusted), whereby the countries are becoming more diverse. Significant increases in sales were recorded again in Russia (+20.3 percent currency-adjusted) and Italy (+12.7 percent). The recent expansion countries, including Croatia, Ukraine and Romania, also markedly increased sales. In the Ukraine this was mainly attributable to sales promotions and a more stable political environment. However, expansion effects in Romania overcompensated for a decline in regular growth brought about by the effects of the economic crisis (e.g. increase in VAT in July 2010). The effects of the economic crisis were also clearly felt in other OBI countries as exemplified by Hungary and the Czech Republic, which also recorded a decline in sales after the VAT increase. The economic development of the 2010 financial year was accompanied by gratifying positive results.
18 (15)
Russia
Germany 340 (330)
Poland 34 (32) Czech Republic 30 (29) Ukrain e 3 (3)
Switzerland 10 (10) Hungary 25 (23) Romania 7 (4) BosniaHerzegovina 3 (3)
Italy 49 (47) Austria 32 (32) Slovenia 7 (6) I Croatia ; 3 (3)
Plus Online
In 2001 Plus.de was the first Internet shop to be launched by a German food discounter and is today the most visited German online shop. Customers are offered a comprehensive choice in the garden and DIY, home and design, household items and consumer electronics categories. To this effect, the focus is on price leadership and excellent value for money. The financial year was dominated by the change to a new shop system from Intershop on September 1, 2010. The preparation and implementation of this project only allowed limited momentum for sales promotion. However, the increase in sales of the pre-Christmas business showed first positive results relating to the restructuring measures. The posting of new partners on the sales platform resulted in a significant expansion and consolidation of the product range, which virtually tripled over the year before (approx. 50,000 products). On December 31, 2010, the company employed 85 staff. In the 2010 financial year, the Plus Online GmbH was not able to make a positive contribution to the consolidated result.
2.4 Development of the real estate business TREI Real Estate
Since 2008, the TREI Real Estate GmbH has been tasked with the management of 361 predominantly long-term leases of retail properties of the Tengelmann Group mainly in Poland, Czech Republic, Hungary, Austria and Portugal - and is successfully positioning itself in the project development of new retail stores. In addition to the asset management for existing leased properties, five new properties in Poland, Czech Republic and Austria were completed and turned over to the tenants in the 2010 financial year. Furthermore, new structures were established - not least as a result of establishing new companies in Belgium and Luxemburg - to successfully develop new projects based on proprietary development as well as with cooperation partners. The focus was on small and medium specialist stores mainly in Central and Eastern Europe. The first real estate securing agreements and leases have already been concluded. Moreover, seven properties were sold and three properties revitalized or leased as part of the portfolio management. The strategic development of the TREI Real Estate was continued in the 2010 financial year by the amalgamation of former Plus holdings outside of Germany into TREI Real Estate in 2008. As part of the sale of the remaining Plus subsidiaries in Romania and Bulgaria, properties of TREI Real Estate in both countries were sold to the buyer of the business operations. In Austria, the real estate management for 89 Zielpunkt properties was successfully taken over. In Poland, headquarters was relocated from Posen to Warsaw. In the five national companies as well as in the German parent company, a new unique image under the name "TREI Real Estate" has been established at the same time. A positive result was also recorded in the 2010 financial year.
if
ssssi5sa
REAL
LTREI
ESTATE
Subrenta, Wissoll
SUBRENTA Subrenta
ImmoblllenveiwBlUjngsgesellsctiatt mbH
Immobiliengesellschaft mbH, which is tasked with the efficient management and exploitation of stores that are no longer operated by the Tengelmann Group, as well as the Wissoll Company (real estate management based in Mulheim) exceeded expectations.
The core business of Tengelmann Energie GmbH (TEG) includes supplying Group member companies as well as external clients with electricity. In addition, TEG is also engaged in supplying energy (electricity, gas and heating), brokerage business, energy efficiency and environmental consulting, and technical project management. As part of the brokerage business, TEG provides energy management services such as purchasing and invoice verification in return for appropriate fees. In 2010, TEG generated sales of euro 241.6 million with 102 employees, representing an increase of 14.9 percent over the year before. The increase in sales was mainly accounted for by acquisition of new customers and the conversion of several commercial energy contracts to Cost Plus. TEG ended the past financial year with a positive result. As early as 2010, a comprehensive project had been set up to optimize the realignment of TEG as a result of the amended statutory conditions and loss of the key customer Netto (Ponholz) in 2011. TEG will focus on consultancy in future.
Other service companies
1:
2.5 Development of the service companies TEG
Z TENGELMANN ENERGIE
In the 2010 financial year, TASCO encountered significant economic manifestations. The TASCO outlet auditing division was forced to respond to the considerably reduced scope of its activities, which arose as a result of the sale of Plus to Netto Marken- Discount AG & Co. KG (Netto) and the subsequent loss of Netto as a key customer. This resulted in two approved redundancy programs and the accompanying staff reduction in the outlet auditing division. In the 2010 financial year, the course of business of the other service companies continued and achieved the objectives.
2.6. Development of interest
2.6.1 Stake in high street chains Netto Marken-Discount
In the financial year 2010, the company recorded sales of over euro 10.36 billion, an increase of +4.3 percent over the previous year. With over 4,000 stores, the discounter is firmly anchored among the three leading German food discounters. Integration of the former Plus stores has almost been completed. An increase in sales and earnings is also expected for the coming financial years.
TEDi
Marken-Discount
In the 2009/2010 financial year (qualifying date April 30, 2010), TEDi continued its successful business as in previous years and continuously expanded its position as Number One among the German 1-euro discounters. In 2009/2010, 215 stores were opened and 24 were closed so that the outlet network could be expanded by 191 stores. On the qualifying date December 31, 2010, TEDi operated 1,140 stores throughout Germany and employed a workforce of 8.600 (including approx. 290 trainees). In order to guarantee the continued high growth of the company, the entire company was relocated in 2009 to the new Dortmund-Brackel location , bringing with it a significant extension of the central and logistics capacities. In the financial year 2009/2010 net sales revenues rose by +27.0 percent to euro 304.7 million over the year before. Moreover, as a result of expansion, TEDi succeeded in increasing its sales on a like-for-like basis over the year before, primarily through continuous product range optimization. The result was also satisfactory and TEDI was able to distribute profits to its shareholders once again. In addition to the positive economic development, TEDi has set itself the goal of assuming responsibility of social and environmental issues. Accordingly, TEDi meanwhile operates five stores certified as GreenBuilding. With regard to product ranges, cooperation with accredited companies was continued with the aim of a certified quality system. External customer surveys revealed the positive public perception of TEDi by its customers in the 2009/2010 financial year. TEDi also expects a positive result for the 2010/2011 financial year. The company is also continuing its intensive expansion policy to further optimize the product range as well as the outlet network. With effect from May 2011, the first expansion abroad is scheduled with the opening of stores in Austria.
Woolworth
WOOLWORTH On July 1, 2010 the Woolworth department store chain was re-launched, following a year of
insolvency. The Tengelmann Group has a 30 percent stake in Woolworth GmbH. A total of 158 stores and 4,300 employees were taken over into the new company. The management has set itself the goal of again making the Woolworth brand successful in Germany by streamlining its attractive product range with a modern image. Woolworth is a local supplier for all generations, offering products in the medium and lower price segments. In the medium term the intention is to convert the existing outlet network of 167 stores to the new marketing concept. The successive expansion of the branch network by over 500 stores is a long-term goal.
A&P
The Great Atlantic & Pacific Tea Company, Inc. (A&P) food retailer is located in the Northeast of the United States. The Montvale-based enterprise is the market leader in its core regions, New York and New Jersey. The Tengelmann Group has held a participating interest in A&P since 1979 (41.2 percent). As a result of the continuing decline in sales and the accompanying liquidity situation, A&P filed a petition under Chapter 11 of the U.S. Bankruptcy Code in December 2010. The proceedings according to Chapter 11 enable A&P to reorganize and restructure its financial obligations while maintaining operation in the normal course of business. The American bank J. P. Morgan has secured the transitional funding, amounting to USD 800 million. It is designed to allow A&P to maintain and continue operations after accepting a restructuring plan by its creditors and shareholders.
2.6.2 Stake in E-Commerce
Since the end of 2009, the Tengelmann E-Commerce Beteiligungs GmbH has been investing in fast-growing young enterprises with the guiding principle "Funding your ideas" and has already become a significant start-up investor in Germany. The focus of investment is on E-Commerce and Social Commerce concepts, marketplaces and Internet and Web-enabling technologies. Besides financing and management know- how, the Tengelmann E-Commerce Beteiligungs-GmbH also provides infrastructure services.
Stake in equity Otto-Gourmet.de (Gebruder Otto Gourmet GmbH)
The brothers Stephan, Wolfgang and Michael Otto established Otto Gourmet GmbH in 2004. The company's philosophy is to also offer German amateur cooks premium products from all over the world that were previously only available to top restaurants. Meanwhile Otto Gourmet achieves 50 percent of its sales with end consumers who appreciate premium product quality in their own kitchens.
Babymarkt.de (babymarkt.de GmbH)
Babymarkt is Germany's largest online supplier of baby and infant products and currently employs 90 staff. The range comprises approx. 12,000 in-stock items from well-known manufacturers offered at low prices. In 2009, sales amounted to over euro 30 million. The Internet shop has won numerous awards and has been certified.
Supreme.de (supreme new Media GmbH)
Supreme is the leading expert in refining eBay offers. With over 350,000 sellers and currently almost 5 million updated live offers in the largest online market place, the Cologne-based company is the global leading eBay supplier. Cj Supreme
NewMedia
Enologos.de
Enologos is a supplier of Spanish products for top gastronomy. Top class quality products are offered for the German market.
Financial investments
In 2010, the following financial investments were made:

Zalando.de (Zalando GmbH)
Zalando is the 10th largest E-Commerce platform in Germany. The product range comprises shoes, fashion and accessories. Zalando employees over 500 staff at several locations and continues to successfully expand elsewhere in Europe.
Brands4friends.de (Private Sale GmbH)
zalando
brands4friends is Germany's Number One shopping club . Over 3.5 million members can purchase brand products at low prices on the Internet. The business records significant growth. In 2011, brands4friends was sold to eBay and after only nine months, the Tengelmann Group benefitted from positive net proceeds. Further financial investments were made in stylight.de (stylight GmbH), Youtailor.de (BFB Handel GmbH) and Bigfoot GmbH.
brands friends
3 Net assets and financial position
The consolidated balance sheet total in the financial year 2010 declined by euro 179.7 million in comparison with the year before and stands at euro 4,701.0 million. The changes in individual balance sheet items were as follows:
Assets Million euro Equity and liabilities Million euro
Fixed Assets Inventories Receivables and other assets Liquid funds Deferred taxes Other assets
-190.5 + 29.9
Equity Tied shareholder accounts
+ 144.2
+ 35.8 -34.5 -14.2 -6.2
Differences arising from capital consolidation Accruals Financial liabilities Trade receivables Other equity and liabilities + 12.3 -279.7 -46.1 -24.1 + 13.7
Total
-179.7
Total
-179.7
The equity ratio within the Group was significantly increased by 4.3 percentage points compared with the year before and now stands at 36.8 percent. The Group's capital resources are composed of equity capital and tied shareholder accounts. Total investments in tangible assets in the financial year 2010 amounted to euro 124 million, and were, therefore, slightly below the depreciation, which totaled euro 136 million. Taking the changes in the consolidated group and currency impacts into account, tangible assets were reduced by a total of euro 152 million. Changes in the consolidated group were reduced by a total of euro 120 million. The sales of TREI and Plus Eastern Europe had a major impact on tangible assets, which were reduced by a total of euro 229 million. Additions from initial consolidations of new purpose entities, resulting from the first application of the Accounting and Reporting Regulations Modernization Act (BilMoG) totaling euro 91 million, had the opposite effect. In the financial year 2010, investments totaling euro 84 million were made in financial assets. The investments mainly accounted for the acquisition of stakes. In the course of the 2010 financial year, the Group reduced borrowings by euro 46 million to a total of euro 166 million. On the qualifying date the Group's liquid assets stood at euro 888 million.
4 Earnings situation
The Group recorded sales of euro 11.34 billion, as high as the previous year (+0.0 percent over the year before). The results were positive. The expansion and growth in sales of OBI and KiK succeeded in compensating for the sales of Kaiser's Tengelmann in the Rhine-Main-Necker region and Plus stores in Austria, Romania and Bulgaria.
5 Risk management and business risks Risk management
Germany's Corporate Control and Transparency Act (KonTraG) calls for a monitoring system that allows the early identification of risks that might endanger the continued existence of a company. Even though this legislation imposes no direct obligation on the Tengelmann Group, risk management systems have for a long time been integral to our management information systems. Responsibilities at divisional levels are structured along functional lines. Branch operations are controlled by responsible regional managers and well-trained branch managers. At the head offices, all specialist departments - coordinated by the Finance/Controlling department - actively exercise their responsibility of identifying risks. All stores and service departments are integrated into a strategy, planning and budgetary process, which includes an evaluation of the market and the competitive environment and the preparation of action plans for at least one financial year. In addition, on the overall company level, a rolling three-year medium-term projection is made on the basis of essential key data. The planning process similarly takes account of the factors that will have an impact on the net worth, financial and earnings position of Group companies. Deviations from the planned course are analyzed and the results forwarded to the relevant management committees in order to counter abortive developments and exploit opportunities. In advance of the strategy and planning processes, potential risks and opportunities are consistently analyzed, and if necessary, new alternative courses of action are developed.
Market and sector risks
In order to counter risks arising in the market and in the sector-specific environment, it is the responsibility of those in operational charge of the Group to constantly monitor the market and the competition, integrate the plans and decision of competitors into long-term corporate strategies and respond to short-term changes with adaptability and flexibility. For example, product ranges are to be regularly reviewed and amended as necessary and new items included. In addition, the positioning of individual stores in the local competitive environment is to be regularly monitored. Depending on the findings of these observations, the ranges carried by individual stores may be optimized, conversion works undertaken or local marketing activities adapted. There is strong predatory competition not least in the German food retailing sector. There will be an increasing number of instances in which we find ourselves compelled to curb the otherwise nationally increasing market strength of Edeka and Rewe on a regional basis, that is to say, in our core regions. A further risk is perceived in food safety scandals.
Procurement risks
It is not currently possible to foresee how long the problems affecting the raw materials and procurement markets will last, nor what the effects will be. Our KiK business unit anticipates that cotton prices will remain high and may even continue to rise. It is to be expected that every competitor is equally affected by this development and that consumers will face further price rises, some of which are already in the pipeline. Consumer spending will also be affected by the rising cost of basic essentials such as energy and food, thereby reducing the amount of income available for textile purchases. At the OBI business unit an active risk management process has been put in place which entails analyzing the economic situation of major suppliers and identifying alternative sources of supply. As a result it has been possible to minimize the risk of lost sales and
earnings and avoid delivery bottlenecks arising from the precarious economic situation in Eastern Europe.
Currency risks
The risk of exchange rate fluctuations with the potential to have an impact on profit and loss (so-called transaction risks) essentially occurs in connection with international purchasing and the activities of central and national companies. In addition, the payment of rentals and leases in euro and US-Dollar has an impact on the earnings of Eastern European stores and thus, also on the result for the Group as a whole. Group headquarters is predominantly faced with a combination of transaction risks and translation risks - which initially do not impact on profit and loss - in connection with intercompany financing arrangements. Furthermore, the effects of dividend and equity payments must also be considered. At the OBI business unit, the aforementioned risks are limited by a stringent hedging policy adopted by the company management, in some cases on the level of individual transactions. The policy makes use of derivatives such as forward exchange transactions and currency options. Compliance with the policy is safeguarded by the strict separation of trading and risk management functions.
IT risks
Of particular importance among the internal risks typically subject to continuous monitoring in this sector are the risks arising from the highly sensitive data processing operations that retailers are required to undertake.
Economic and political risks
Not all potential risk strategies (avoidance, mitigation, transference, acceptance) are available to counter economic and political risks. For example it is not possible to insure against risks arising from changes in the economic environment, that is to say, these risks cannot be transferred to an insurer. In the Eastern Europe countries, the global downturn triggered by the financial crisis has not yet been overcome: A sustained improvement in the economic situation is still not in sight. Our plans and projections are therefore based on appropriately conservative assumptions and both expenditure and investments have been adjusted accordingly. As a result it has been possible to anticipate the changes in consumer demand in Germany and abroad.
Personnel risks
The need to recruit suitable employees and retain existing staff is a permanent source of risk. In 2010 OBI made even greater efforts to position itself as an employer of choice. The company has been rewarded for its efforts with a "Top Employer" award. In spring 2011, for the fourth year in succession, OBI was singled out by the CRF Institute for its outstanding modern human resources management. In response to the debate about wage dumping, KiK voluntarily increased the salaries paid to its employees in financial year 2010 and is already prepared for the potential nationwide introduction of a minimum wage. Similarly, in the financial year 2010, the TEDi business unit placed a strong emphasis on supporting its own staff and trainees with the introduction of special programs.
E-Commerce risks
Investments in start-up companies entail the risk that their business model may not develop as expected in the marketplace. For this reason both key performance figures and the market itself are the subject of continuous analysis to enable appropriate action to be taken in good time.
Overall, an assessment of the current risk situation has revealed that there are no present risks to the continued existence of the undertaking and no such risks are identifiable in the future.
6 Outlook and opportunities 6.1 The Tengelmann Group
The Group continues to focus on organic growth in the core business segments and, on a case-by-case basis, acquisitions in E-Commerce. OBI and KiK especially are set to continue their expansion. Moreover, investments are being made in the Kaiser's Tengelmann outlet stores in order to forge ahead with the positioning as a quality and freshness supermarket. It is currently anticipated that gross domestic product in 2011 will increase by +2.8 percent (IfW) in Germany. Nevertheless, the Group continues to plan conservatively. In general, a stable sales development is forecast. Company Management also expects positive results during the next two years. These positive effects will be primarily generated from existing business divisions. Further positive effects on earnings are expected from interests.
6.2 Divisions (stationary) Kaiser's Tengelmann
It is currently anticipated that gross domestic product in 2011 will increase by 2.8 percent. It is also anticipated that the positive trend in increased consumption in the past year will be sustained at quality and freshness suppliers like Kaiser's Tengelmann. An important contribution comes from the trend towards the consumption of healthy and sustainable food by customers. Despite the positive overall outlook for 2011, it is anticipated that continued fierce competition will persist as in past years. The future trend in food retailing will clearly be towards discount and low entry-level priced goods. This trend will also persist in the supermarkets and hypermarkets. Kaiser's Tengelmann enjoys a good position in that respect with its entry-level priced brand A& P. The positive trends towards quality and freshness must be increasingly emphasized to secure customer's loyalty in the long-term. Food scandals like the recent dioxin scandal have a negative impact on the entire industry while also leading the customers to rethink their purchases, calling attention to the fact that premium products are not available at discount prices. Opportunities, therefore, still remain for Kaiser's Tengelmann quality supermarkets to stand out from the crowd and win customers over to its concept. In 2011, the consolidation agreement entered into will now enable partial provisions of funds for the modernization of the Kaiser's Tengelmann stores that has long been necessary. A loss is also anticipated for the current financial year due to the comprehensive conversion work in the 2011 financial year, which is aimed at making the branch network more attractive. Following the completion of the restructuring work, a positive result is expected.
The KiK business division continues to finance itself through its own resources, and the expansion of operations can therefore be sustained. With a substantially increased selection
of aggressively priced goods and a greater expenditure on advertising, KiK hopes to boost both customer numbers and the volume and value of sales through existing stores, even in the present climate of general price growth. Germany is still estimated to hold the potential for at least 3,000 stores, and the company expects to exploit this potential through its own efforts and resources over the next five years. In addition to expansion per se, KiK sees further potential to increase earnings by reassessing its existing branch portfolio. The intention is to replace around 50 smaller stores each year with larger floor-area designs. Moreover, expansion into other European markets is envisaged. KiK intends to further develop and position itself as a brand. As part of the process, branded goods are to be incorporated into the product range and the company's own- label brands developed to enhance their image. In March 2009, KiK acquired the hosiery brand "Ergee", which is currently being improved. It is anticipated that the activities initiated with respect to quality and corporate social responsibility will have a positive impact on the image value of the company. It is therefore expected that the KiK business division will be accompanied by stable and positive results in the next two years.
OBI
In 2011, the objective of the OBI business division is to continue to open more stores than its competitors by furthering the process of expansion in Germany and other countries. OBI will focus ever more sharply on the expansion of the own brand and private label under the OBI/LUX brands. Expansion of the multi-channel activities will be also strengthened. The objective is to interlink the online business model with the measures in high street chains. Since November 22, 2010, German OBI customers can also purchase via the Internet. The online shop has been integrated into the existing www.obi.de-site. In additional 5,000 products have been added to the online offer of the attractive OBI range. Moreover, products from the OBI online shop can also be ordered in all participating OBI stores as well as via telephone. The local OBI stores thereby stand to benefit from this multi- channeling thanks to a broader range of products and convenient home deliveries. It is, therefore, expected that the OBI business division will deliver positive results for the group over the next two years.
Plus Online
Following the optimization of its Internet presence, the focus will again be on increasing sales. Thanks to numerous targeted promotions and campaigns, the 10th anniversary of the shop is particularly expected to result in increased public perception on the Internet and promises a significant increase in sales. The process optimization measures already initiated in 2010 will be continued in the current financial year. Despite the anniversary activities, a significant saving potential is especially expected in marketing. In the next few years, the emphasis will be on strongly increased expansion of the business, which is why positive results are only planned in the medium term.
6.3 Real estate TREI Real Estate
A comprehensive investment program is planned for the years ahead in order to further enhance the real estate portfolio. In the 2011 financial year, the focus is on implementing the planned and already secured specialist stores plus the exploitation of new projects. This particularly pertains to the stable growth markets in Poland and the Czech Republic. Moreover, market entry in Slovakia is being planned as part of overall project development. With the know-how of in-house project developers and retail experts, as well as the integration of experienced international cooperation partners for successful retailing, specific site utilization concepts will be developed and implemented for renowned tenants with an eye to successful retailing. Positive results for the Group are expected in the next two years due to the business model on long-term leases.
6.4 Service companies
In the years ahead, stable business activities of the service companies are expected. Results and developments of the Tengelmann Energie GmbH will, however, still be affected by the conversion of the business model. This will result in an approved redundancy program and staff reduction in 2011. The plans of the Tengelmann Energie GmbH are therefore as follows: carrying out future restructuring measures, strengthening of sales and safeguarding existing customers, motivation of staff through pointing out future prospects, continuous enhancement of internal processes and service quality, development of existing, complementary and new services as well as support in market positioning of the GrunHausEnergie subsidiary.
6.5 Stake in high street chains
A stable development is expected for the Netto and TEDi companies. Woolworth will still be in the conversion phase in the next few years. However, a stable and positive development is expected. A & P is still under Chapter 11 proceedings and the result cannot yet be predicted. However, it is no longer expected that the measures will have a negative impact on the Group in the current financial year.
6.6 Stake in E-Commerce
The Group continues to plan investments in E-Commerce in the coming years. The investment focus is on E-Commerce and Social Commerce concepts and marketplaces as well as Internet and Web-enabled technologies.
6.7 Sustainability
Over the past few years, the Tengelmann Group has been strongly committed to environmental and social responsibility. Within the Tengelmann Group, a CSR round table was established in the 2010 financial year, from which a corporate social responsibility board was developed. All company departments are represented and the sustainable orientation of business processes forms the basis of discussion. KiK will take a pioneering role and publish the first corporate social responsibility report of the Tengelmann Group.
7 Important events following the close of the financial year
In the OBI division, a total of eight properties and stores were sold to an investor in the amount of euro 83.8 million in January 2011. The new owner will lease the active store properties. In April 2011 OBI began to restructure the equity and liabilities side of its balance sheet. As part of the process, financing in the amount of euro 100 million was arranged over a five year term with a five percent coupon.
8 Thanks to staff and customers
We would like to thank our members of staff, who in the past financial year have once again displayed an exceptional commitment to our Group. It was only with their support that we have been able to guide our enterprise successfully through a difficult year. We would like to express our particular thanks to the Kaiser's Tengelmann GmbH members of staff, who have stood firmly by their company despite the relocation from Viersen to Mulheim. In addition, we would also like to thank our customers, who in the course of this year have continued to place their confidence in our stores as well as to all partners for their excellent and trustful cooperation. Mulheim an der Ruhr, June 8, 2011
Karl-Erivan W. Haub CEO
Christian W. E. Haub CEO
62 Balance Sheet and Explanatory Notes Consolidated Annual Report
Consolidated financial statements
Balance sheet total
4,700,967 4,880,680
Equity and liabilities A. Equity I. Capital contributions II. Revenue reserves
to December 3 1 , 2010
December 31, 2010 T Assets A. Fixed assets I. Intangible assets 45,000 1.071,946 -20,094 188,316 1,285,168
December 31, December 31, 2010 T December 31, 2009 T 2010 T
45,000 962,411 -49,681 183,283 1,141,013 445,690 1,586,703 2,033,694 2,224,21 1 258,962 1,048,078 726,654 265,811 1.200,427 757,973
III. Equity difference from currencyTangible assets II. conversion IV. Shares of other shareholders III. Financial assets B. Tied shareholder accounts
445,690 1,730,858
B. Current assets C. Difference from capital consolidation I. Inventories 1. Raw materials and supplies 2. Goods and accomplishments in process 3. Finished products and goods 4. Payments on account 176,181 49,532 729,287 955,000 171,992 210,913 851,805 1,234,710 1,080,535 4,308 1,092,518 1,054,173 48 1,062,60 1 6,838 837 7,347 1,033 12,348 0
D Provisions .
1. Provisions for pensions and similar commitments

2. Tax provisions 3. Other provisions
11. Receivables and other assets E. Liabilities 1. Trade receivables 2. Receivables from affiliated enterprises 1. Liabilities vis-a-vis banks 166,514 3. Receivables vis-a-vis companies which are linked by virtue of - of which residual term up to one year (16,334) participating interests 2. Payments on account for orders 4. Other assets 3,986 - of which residual term up to one year - of which residual term more than 3. Trade receivables one year - of which residual term up to one year which from shareholders - of 4. Liabilities vis-a-vis affiliated enterprises - of which residual term up to one year 5. Liabilities vis-a-vis companies which are linked by virtue of participating Shares III. interests - of which residual term up to one year affiliated enterprises Shares in 6. Other liabilities - of which residual term up to one year - of which taxes IV. Cheques, cash assets, bank balances 505,164 (39,764) 386,533 (257,144) (43,739) (11,263) (58,790) 1,951,973 524,843 (39,443) 364,933 (237,974) (60,742) (13,836) (41,083) 2,030,332 2,518,567 2,487,25 5 887,743 922,162 2,395 2,395 885,168 (885,051) 4,608 212,564 (23,578) 2,909 437,236 (5,745) 909,298 (908,476) 15,785 (90,217) 535,911 (73,458) 500,097 375,314 (36,450) 54,086 5,881 38,708 59,076 1,490 64,217
- of which relating to social security - of which vis-a-vis shareholders
C. Accruals and deferrals F. Accruals and deferrals - of which from shareholders G. Deferred tax liabilities D. Deferred taxes 1,752 1,870 49,036 27,065
19,867
26,180
(370)
(815 ) 143,034
128,839
Consolidated Statement of Assets

Cost of acquisition
Balance carried forward to January 1, 2010 T Development of Group assets Capital assets Changes in consolidated group T Differences in currency exchange rate T Additions T
I. Intangible assets
1. Concessions, industrial rights and similar rights and assets acquired in return for payment 2. Goodwill 3. Other intangible assets (including payments on account)
184,003
-2,060
327
8,041
523,308 1,939
45,376 -86
29 -1
10,140 529
709,250
43,230
355
18,710
II. Tangible assets
1. Land, land rights and buildings including buildings on third-party land 2. Technical equipment and machines 3. Other equipment, furnitures and fixtures 4. Payments on account and assets under construction
1,083,479
-89,233
14,409
24,877
44,501 1,105,673 37,692 2,271,345
-13,488 -83,019 -5,475 -191,215
-97 4,944 1,193 20,449
4,074 79,033 23,086 131,070
III. Financial assets
1. Shares in affiliated enterprises 2 Interests in associated companies 3. Other participating interests 4. Loans vis-a-vis companies which are linked by virtue of participating interests 5. Security of assets 6. Other loans
4,470 194,616 589,212 5,061
22 -2,686 0 0
0 724 0 0
2,090 20,123 41,109 4,854
9,030 46,428 848,817
0 -5,460 -8,124
699 274 1,697
2,172 7,286 77,634
3,829,412
-156,109 1
22,5012
227,414
1 2
and manufacture
The depreciations in the financial year totaled T -71,336. The depreciations in the financial year totaled T 6,096.
Rebookings
Disposals
Status on December 31, 2010
Depreciation in the financial year T
Cumulated depreciations
Book value on December 31, 2010
Book value on December 31, 2009 T
724
3,149
187,886
16,477
155,126
32,760
41,953
994 -1,334
0 81
579,847 966
49,445 19
354,610 1
225,237 965
222,053 1,805
384
3,230
768,699
65,941
509,737
258,962
265,811
20,962
30,904
1,023,590
44,992
289,808
733,782
822,777
-109 2,343 -29,889 -6,693
1,089 95,332 1,795 129,120
33,792 1,013,642 24,812 2,095,836
3,184 88,044 0 136,220
19,495 738,455 0 1,047,758
14,297 275,187 24,812 1,048,078
23,574 316,420 37,656 1,200,427
7,255 -2,241 2,104 -2,104
576 173,251 0 750
13,261 37,285 632,425 7,061
1,933 1,097 0 500
5,195 5,247 0 5,561
8,066 32,038 632,425 1,500
835 113,281 589,212 0
1 -907 4,108
1,887 5,002 181,466
10,015 42,619 742,666 3,530
0 0 16,012
0 9
10,015 42,610 726,654
9,030 45,615 757,973
-2,201
313,816
3,607,201
205,691
1,573,507
2,033,694
2,224,211
Extracts from the notes to the consolidated financial statements for the financial year 2010
General principles
As a commercial partnership, Tengelmann Warenhandelsgesellschaft KG of Mulheim an der Ruhr is required in accordance with the provisions of the German Disclosure Act [PublG] to prepare and publish consolidated financial statements and a consolidated management report. The consolidated financial statements of Tengelmann Warenhandelsgesellschaft KG, Mulheim an der Ruhr, are prepared in accordance with the applicable rules for corporations contained in the German Commercial Code [HGB]. The company waives the right to apply the simplified rules pursuant to Article 13, Para. 3, Sentences 1 and 2 of the Disclosure Act [PublG], with the result that consolidated statements have the effect of discharging the company's responsibilities in accordance with Article 291 of the Commercial Code [HGB]. The balance sheet is fundamentally structured in accordance with Article 266, Para. 2 of the German Commercial Code (HGB). In structuring the income statement, the total cost calculation has been applied in accordance with Article 275, Para. 2 of the German Commercial Code (HGB). In the interests of greater clarity of presentation, certain items have been amalgamated in the consolidated balance sheet and consolidated income statement and are reported separately in the notes pursuant to Article 265, Para. 7, No. 2 HGB. The financial statements of integrated subsidiaries were prepared in accordance with the accounting and valuation methods specified by Tengelmann Warenhandels- gesellschaft KG of Mulheim an der Ruhr. The Group avails itself to apply the modified accounting and valuation rules set forth in the German Commercial Code (HGB) pursuant to Article 66, Para 3, Sentence 1 Introductory Act to the German Commercial Code [EGHGB] for the first time in the 2010 financial year. The assigned values were adjusted with regard to the transitional rules effective January 1, 2010. Changeover options concerning the retention or carrying-forward of values from the previous year may only be exercised in connection with the changeover. Similarly, figures deriving from the adjustment of values from the preceding year may only be allocated to or offset against revenue reserves independently of the income statement - insofar as it is legally permissible to do so - in connection with the changeover. Any other income and expenses resulting from the adjustment of assigned values must be recorded in the income statement and reported as extraordinary profit or loss. In accordance with Section 67, Para. 8, Sentence 2 of the German Commercial Code Introductory Act (EGHGB), previous year's figures included for purposes of comparison have not been adjusted in line with the modified valuation methods. The consolidated financial statements are prepared to the same qualifying date as the annual financial statements for the parent company. In the case of the majority of integrated subsidiaries, their financial year corresponds with the Group financial year. Insofar as the financial years of integrated companies and more than three months prior to the qualifying date of the consolidated financial statements, interim financial statements are prepared for the purpose of consolidation.
Group of consolidated companies
In addition to Tengelmann Warenhandelsgesellschaft KG, the consolidated financial statements include all significant subsidiaries in which Tengelmann Warenhandels- gesellschaft KG directly or indirectly holds a majority of shareholder voting rights. The fully consolidated group comprises 115 (previous year 107) German and 60 (previous year 76) foreign companies. In the period under review, 21 (previous year three) subsidiaries were included in the consolidated financial statements for the first time; 29 (previous year twelve) companies exited the consolidated group or were merged with or absorbed by other integrated companies. In comparison with the previous year, the following material changes have taken place in the consolidated group.
..... With the Accounting and Reporting Regulations Modernization Act (BilMoG) coming into effect on January 2010, one special purpose entity was integrated for the first time in the KiK Textilienund Non-Food GmbH, Bonen ("KiK"), and nine special purpose entities in the Olympics Baumarkt Holding GmbH, Wermelskirchen ("OBH") sub-Groups, since the Group holds a majority of chances and risks in these companies as seen from an economical perspective. ..... In the financial year 2010, the OBI sub-Group integrated the following into the consolidated group: an Austrian company for the first time, acquired on August 1, 2010, with nine franchise partner stores and, as a result of the acquisition of further shares, an at-equity company with five stores and its subsidiaries with two stores. ..... In Romania and Bulgaria the food retailing units Plus-Bulgaria Targovia KD, Sofa/ Bulgaria, and PLUDI Market S.R.L., Aricestii Rahtivani/Romania as well as the real estate units Tengelmann Real Estate International Bulgaria KD, Sofa/Bulgaria and the Tengelmann Real Estate International Romania Societate in Commandita, Aricestii Rathivani/Romania were sold and have been deconsolidated from October 31, 2010. On June 30, 2010, the Austrian food retail chain Zielpunkt Warenhandel GmbH & Co. KG, Vienna/Austria was sold and exited the consolidated group at this point in time. The results of the consolidated and deconsolidated companies have been integral in the consolidated financial statements on a pro rata basis. Significant effects which limit the consolidated income statement were not reported. However, the effects of changes in the group of consolidated companies are likely to impair the extent to which tangible and intangible assets, negative goodwill and trade accounts payable are comparable with the previous year. In the interests of comparability, the effects are described in the notes to the corresponding balance sheet items. As a result of their subordinate overall significance for the net assets, financial position and earnings situation of the Group, consolidation was dispensed with in the case of seven (previous year seven) German and six (previous year nine) foreign subsidiaries, in accordance with Article 296, Para. 2, HGB. Eight companies (previous year four) intended for resale or liquidation were not consolidated as provided for in Article 296, 1 No. 3 HGB. In the year under review, as in the previous year, one foreign company in which the Groups owns a capital share of 49 percent was consolidated on a pro rata basis since it is managed jointly with a company not included in the consolidated financial statements. 28 (previous year 27) German and five (previous year seven) foreign associate companies in which the Tengelmann Group mainly holds between 20 percent and 50 percent of the shares are integrated into the consolidated financial statements in accordance with the at-equity method. In the case of three (previous year three) German associate companies deemed to be of subordinate significance, in accordance with Article 311, Para. 2, HGB, an at-equity valuation was dispensed with. In addition, the Group holds the following interests with a shareholding in excess of 20 percent:
name, registered office
Capital share %
Equity
Earnings in the
past financial year

T T
FISTULA Grundstucks-Vermietungsgesellschaft mbH & Co. Objekt Wermelskirchen KG, Dusseldorf (voting rights 15,0) Padlata GmbH & Co. KG, Pocking (voting rights 10,0) ROSEA Grundstucks-Vermietungsgesellschaft mbH & Co. Objekt Offenburg KG, Dusseldorf (voting rights 8,0) TALPA Grundstucks-Vermietungsgesellschaft mbH & Co. Objekt Bensheim KG, Dusseldorf (voting rights 10,0) Wines GmbH & Co. KG, Pocking (voting rights 47,0) 94.0 252 -37 49.9 -1,758 16 82.5 -2,252 -91 94.0
5
94.0
351
138
-137
Principles of consolidation
Financial statements to December 31, 2009. The interest in Padlata GmbH & Co. KG, Pocking, relates to a capital interest held by the limited partners. The company reports overall attributable shares in losses not covered by capital contributions amounting to T835. 2 The interest in Wines GmbH & Co. KG, Pocking, relates to a fixed capital contribution by the limited partners. The company reports overall attributable shares in losses not covered by capital contributions amounting to T 1,130.
In accordance with Section 301, Paras. 1 and 2 of the German Commercial Code as amended by the Accounting and Reporting Regulations Modernization Act (BilMoG), the companies included in the consolidated Group for the first time in financial year 2010 were consolidated in application of the revaluation method at the time these companies first became subsidiaries. The value assigned to the shares held directly and indirectly by the parent company is offset against the proportion of equity in the subsidiary represented by these shares as calculated in the revaluation balance sheet prepared at the relevant point in time. The capital consolidation of companies consolidated both fully and pro rata and already integrated into the Group prior to applying the provisions of the Accounting and Reporting Regulations Modernization Act (BilMoG) was performed in accordance with the book value method of December 31, 2009 by offsetting the cost of acquiring the interests against the book value of the pro rata equity capital at the time of acquisition or time of first inclusion into the consolidated accounts. Differences arising from capital consolidation are - as far as possible - allocated to corresponding assets and liabilities. Any asset-side difference still remaining is reported as goodwill and subjected to scheduled depreciation. As a result of the changes introduced by the Accounting and Reporting Regulations Modernization Act, since financial year 2010 any resulting negative goodwill is on principle reported as a separate equity item and carried forward in accordance with the provisions of Section 309, Para. 2 of the German Commercial Code. Negative goodwill arising in previous years, insofar as this does not derive from the retention of earnings between the time of acquisition and the time of first consolidation, has been reallocated to this separate item heading. In the case of first-time consolidation at equity, the book value method will be applied, whereby any remaining difference is reported together with the participating interest. The difference is calculated at the point in time at which the undertaking is first integrated into the consolidated financial statements as an associated company. The shares in these companies' annual results, including writedowns on goodwill, are shown as part of the consolidated income from participating interests. An elimination of interim results pursuant to Article 312, Para. 5, Sentence 3, HGB, in conjunction with Article 304, Para. 2, HGB has not been performed. Interim results, income and expenditure and inter-company accounts receivable and payable within the consolidated group will be eliminated. The voting right for consolidation of third-party debtors will be partially exercised.
Tax accruals and deferrals were made in respect of consolidations having an effect on income.
Currency conversion
The assets and liabilities of companies included in the consolidated financial statements, who prepare their financial statements in foreign currency, are reported at the mean rate of exchange on the qualifying date. Since the Accounting and Reporting Regulations Modernization Act came into effect, equity items have been converted at a historic exchange rate, which was set on December 31, 2009 for companies integrated into the consolidated financial statements prior to the introduction of the new Act. Income statement items, including annual net income, are converted into euro at the average rate for the financial year. Differences resulting from currency conversions are recognized as a separate equity item without being recognized in the income. When a subsidiary partially or wholly ceases to belong to the group of consolidated companies, the income is affected by the liquidation of the item. Before the Accounting and Reporting Regulations Modernization Act came into effect, any currency conversion differences relative to the consolidated equity at the time of first consolidation were allocated to revenue reserves and not recognized in income. In the interests of comparability, this amount as of December 31, 2009 was reallocated to the new item heading. The figures for the previous year have been adjusted accordingly. Income and expenditure as reported in the respective income statements are converted at the average exchange rate during the financial year, whereas with the exception of the OBH division, annual net income and depreciation are converted at the mean rate of exchange on the balance sheet closing date. The resulting differences are reported under the headings of other operating income or other operating expenses.
Accounting and valuation methods as well as changes in the accounting and valuation methods
The financial statements of companies included in the consolidated financial statements are, in general, prepared in accordance with the accounting and valuation methods specified by Tengelmann Warenhandelsgesellschaft KG of Mulheim an der Ruhr. Insofar as valuations have been taken over from the financial statement of the subsidiary, these deemed to be of subordinate significance for conveying an image of the net assets, financial position and earnings situation of the Group which accords with the true circumstances.
Intangible assets - including goodwill acquired in return for payment, as well as tangible assets are carried at cost of
acquisition and depreciated on a linear basis. Insofar as the asset values calculated in accordance with the above principles are greater than the value attributable on the qualifying date of the financial statements, this will be accommodated by non-scheduled depreciation. For goodwill deriving from capital consolidation and individual financial statements for the financial years ending prior to December 31, 2009, the retention option afforded by Section 66, Para. 3, Sentence 2 of the German Commercial Code Introductory Act (EGHGB) has been exercised and an adjustment of scheduled depreciation in line with the anticipated depreciation over the individual operational lifespan has been dispensed with. In view of the average innovation cycle in the OBI market presence, the anticipated operational lifespan of goodwill at the OBH division is eight years. Goodwill resulting from capital consolidation of other companies is depreciated over 15 years in accordance with the average duration of branch leases. Goodwill deriving from individual financial statements is accounted for entirely by the OBH division and is subject to linear depreciation over 15 years in Germany and ten years elsewhere. Goodwill originating from previous financial years is depreciated in Germany over the average term of the companies' store leases. For companies abroad, the period is based on an average of country-specific market cycles, taking into account the duration of leases.
Shares in non-consolidated associated companies, other participating interests and securities are valued at the Group's
expense or the lowest fair value.

Interests in associated companies are valued at net book value, plus or less the pro rata company results not as yet
received and less scheduled depreciation of differentials carried as assets. Any goodwill of the equity valuation within the OBH sub-Group is subjected to scheduled depreciation over eight years due to the average innovation cycle of the OBI image. The remaining goodwill of equity valuation is subjected to scheduled depreciation over five years.
Loans are carried at nominal value. Inventories are reported at cost of acquisition of manufacture or lower current or market prices. Stockholding and
market risks are taken into consideration through valuation allowances.

Trade accounts receivable and other assets are reported at nominal value. Discernible individual risks as well as general
risk exposure are taken into consideration through appropriate valuation allowances.
Marketable securities are reported at the Group's expense or the lowest fair value on the balance sheet closing date. Tax deferrals are calculated for all temporary differences between the book values and tax valuations of assets, liabilities
and deferred items which may in future be taxable or deductible. These may arise from differences in the treatment of items on the balance sheet, from adjustments or from consolidation. In addition to valuation and accounting differences, tax loss carry-forwards are also taken into account. Losses may be carried forward dependent on whether they are expected to be utilized within the next five financial years following the reporting period. This assessment is made on the basis of projections which take into account past experience, the economic development of the company and also the operating environment and other known trends. As relevant new information comes to light, the projections are adjusted accordingly. Where it is considered unlikely that deferred tax assets can be realized in subsequent years, a value adjustment is made. When calculating tax deferrals, it is presumed that the tax rates applicable under current legislation will apply at the time of their anticipated realization. Deferred tax assets and liabilities are netted against one another insofar as they relate to the same tax authority. The effects of changes in tax rates are taken into consideration in the year in which the rules are changed, insofar as these affect net income. Due to the changes introduced by the Accounting and Reporting Regulations Modernization Act, negative goodwill resulting from capital consolidation since financial year 2010 has for the first time been reported as a separate equity item. Effective January 1, 2010 the sum of T 2,684 was reallocated from equity. Until December 31, 2009 pension provisions were formed in the appropriate amount in accordance with Section 6a of the German Income Tax Act (EStG) and with the application of the "Richttafeln 2005 G" biometric tables prepared by Professor Klaus Heubeck. The assumed interest rate was 4.5 percent (OBH division: 6 percent). With effect from January 1, 2010, provisions for pensions and similar obligations are calculated actuarially by the projected unit credit method, on the basis of biometric probabilities (the Heubeck 2005 G tables). The calculation also takes account of anticipated future increases in pay and pensions. Annual adjustments are currently assumed to be 2 percent. In application of the general provision pursuant to Section 253, Para. 2, Sentence 2 of the German Commercial Code, pension obligations are discounted as of November 30, 2010 at 5.15 percent and, as of December 31, 2010, at 5.16 percent. These are the average market rates over the past seven years calculated and published by the Deutsche Bundesbank for an assumed residual term of 15 years. The interest rate for tax purposes for the calculation of pension provisions remains at 6 percent. Due to the change in valuation of current pensions and vested pension rights, effective January 1, 2010, an additional allocation to the pension provisions was required. In accordance with the option afforded by Section 67, Para. 1, Sentence 1 of the German Commercial Code Introductory Act, the necessary sum was allocated immediately and in full in the overall amount of T 5,879.
Allocations to pension provisions and other longer-term personnel reserves, insofar as they resulted from accrued interest, were included in net interest income for the first time in the financial year 2010. In the preceding year these amounts were reported as personnel costs. Now that the Accounting and Reporting Regulations Modernization Act has come into effect, assets which, in accordance with Section 246, Para. 2, Sentence 2 of the German Commercial Code, are intended solely to fulfill pension liabilities and are ring-fenced against access by any and all creditors must be set off at fair value against these pension liabilities. Accordingly, provisions for pension liabilities amounting to T 177,076 were set off against an attributable asset value of T 895. The asset values are current market values. Interest costs of T 59 were set off against interest income of T 50.
Tax provisions and other provisions are formed at a level deemed necessary on the basis of prudent commercial
judgment to fulfill the associated liabilities and take account of all risks and contingent liabilities identifiable at the time the balance sheet is prepared. Provisions with a time to maturity of more than one year are discounted at the average market rate over the preceding seven financial years for their respective maturities. As a result of the change in the valuation of provisions effective January 1, 2010, it was in theory necessary to liquidate other provisions for liabilities such as leasing risks and removal of installations in the total amount of T 40,650. The Group has decided to retain this amount pursuant to Section 67, Para. 1, Sentence 2 of the German Commercial Code Introductory Act, since the amount to be liquidated would otherwise have to be reallocated no later than December 31, 2024 based on current knowledge. Surplus provisioning as of December 31, 2010, amounted to T 33,807. As a result of the amendment of the Accounting and Reporting Regulations Modernization Act, an allocation to the provisions in the amount of T 665 was required for the continued payment of wages and salaries in case of death that are included among the other provisions.
Liabilities are carried at repayment value. Contingencies
December 31, 2010 December 31, 2009 T Guarantees and sureties Creation of securities Letters of comfort 15,324 148,827 3,061 167,212 T 9,069 145,009 2,512 156,590
The creation of securities (T 140,327; previous year T 137,612) essentially resulted from the assumption of credit risk vis-a-vis suppliers at the OBH division. This relates to German, Austrian and Bosnian franchise partners' liabilities to suppliers. TREI Austria GmbH of Vienna issued letters of comfort in the amount of T 2,461 in favor of Zielpunkt KG which was deconsolidated in the reporting period. The letters of comfort contained an undertaking to ensure that Zielpunkt Warenhandel GmbH & Co. KG of Vienna, Austria, was in a position to satisfy all financial and business obligations to its creditors. In February and March 2011, these letters of comfort were duly returned by or corresponding waivers received from the beneficiaries. At the time of preparing these consolidated financial statements, it is not anticipated that these contingencies will be drawn upon.
Other financial obligations
December 31, 2010 of which due in total T Leases Leasing contracts Maintenance contracts Purchase commitments for investments in fixed assets Commitments from purchase contracts Others 32,000 187 4,628,835 12,000 181 669,426 20,000 6 1,968,348 0 0 1,991,061 24,877 24,877 0 0 4,185,774 339,066 46,931 one year T 567,023 38,011 27,334 1,799,623 131,871 16,848 in one to five years T after five years T 1,819,128 169,184 2,749
December 31, 2009
total T 3,978,622 640,468 34,717
53,881
44,000 0 4,751,688
OBI Group Holding GmbH, Wermelskirchen, has uncalled payment obligations of T 4,623 (previous year: T 3,622) in limited liability partnership interests.
Audit certificate Balance Sheet and Explanatory Notes 73
Audit certificate of the annual auditor

We have audited the consolidated financial statements prepared by Tengelmann Warenhandelsgesellschaft KG of Mulheim an der Ruhr, comprising the balance sheet, income statement, notes, cash flow statement and statement of changes in equity, as well as the consolidated management report for the financial year from January 1 to December 31, 2010. It is the responsibility of the officers legally entitled to represent the company to prepare the consolidated financial statements and consolidated management report in accordance with the provisions of German commercial law. Our task is on the basis of the audit undertaken by us to deliver a judgment on the consolidated financial statements and consolidated management report. We have conducted our audit of the consolidated financial statements pursuant to Article 317 of the German Commercial Code (HGB) in consideration of the German auditing standards defined by the Institut der Wirtschaftsprufer (IDW). These require the audit to be planned and conducted in such manner as to detect with adequate certainty any inaccuracies or infringements which may significantly impact on the impression of the net assets, financial position and earnings situation as conveyed by the consolidated financial statements and the consolidated management report in consideration of the principles of due and proper accounting. In determining the actions to be taken as part of the auditing procedure, consideration was given to a knowledge of the business activities of the Group and its economic and legal environment, as well as to the possible errors likely to be encountered. In the course of the audit the effectiveness of the internal accounting control system and proofs of the information contained in the consolidated financial statements and consolidated management report were assessed on the basis of random samples. The audit encompasses an appraisal of the annual financial statements of the companies integrated into the consolidated accounts, the demarcation of the consolidated group, the accounting and consolidation principles applied and the principal assessments made by the officers legally entitled to represent the company, as well as an evaluation of the overall presentation of the consolidated financial statements and consolidated management report. We are of the opinion that our audit forms an adequately secure foundation on which to base our judgment. Our audit has caused us to raise no objections. In our judgment based on the findings of our audit, the consolidated financial statements comply with the principles of the law and in consideration of accounting standards convey an image of the net assets, financial position and earnings situation of the Group which accords with the true circumstances. The consolidated management report is consistent with the consolidated financial statements and overall presents an accurate image of the position of the Group and the opportunities and risks of future development."
Cologne, dated May 30, 2011 KPMG AG Wirtschaftsprufungsgesellschaft
Nonnenmacher Wirtschaftsprufer (Auditor) Wirtschaftsprufer (Auditor)
Acknowledgement and photo credits

The Tengelmann Group would like to thank all employees who have shown their face in this annual report in the truest sense of the word and attended the photo shoot:
Kaiser's Tengelmann
Mr. Nazim Civ Mr. Younes El-Habsaoui Mr. Pawan Lund Ms. Daniela Nonnenmacher Ms. Birgit Storch
Mr. Dragoslav Joksimovic Mr. Gerd Koord Mr. Alexander Krist

Tengelmann E-Commerce
Ms. Ivanka Herceg Ms. Ayse Karabas

TREI Real Estate
KiK
Ms. Rufaldiye Busatovic Ms. Lydia Hermes Ms. Ingrid Heselmann Ms. Petra Katzenberger, and also on the photo: Daniel Seidl, General Manager, German-Bengalese Chamber of Commerce Ms. Marta Lasok Mr. Huseyin Ugur Fijola Avdin, daughter of an employee
OBI
Mr. Bjorn Fraeb Ms. Rebecca Giesen Ms. Sabrina Konig

TEDi
Ms. Teresa Cadilo Mr. Deniz Dogru

Woolworth
Ms. Susanne Komnenovic

TEG
Mr. Victor Altergott Mr. Armando Calabrese Mr. Marc Giegel
Ms. Daniela Striefeler Mr. Dietmar Voss

TAG / TASCO:
Facts & Figures
Ms. Andrea Lenz
Financial year 2010 (January 1, 2010 - December 31, 2010)
Sales
in billion
Germany Europe Total
7.54 3.80 11.34
Facts & Figures
Sales on adjusted basis
in billion
A in % to py
A in % to py currency adjusted
Germany9 Europe1 Total
7.36 3.16 10.52
3.7 9.9 5.5
3.7 5.2 4.1
Employees Germany Europe1 Total

1
A in % to py 59,146 21,136 80,282 6.3 9.4 7.1
Outlets Germany Europe1 Total

1
A in % to py 3,388 729 4,117 2.4 11.0 3.8
after adjusting for "discontinued national companies/sales regions" in Germany: Rhine-Main-Neckar sales region of Kaiser's Tengelmann in Europe: Plus Austria, Romania, Bulgaria
General information
The consolidated sales figure includes sales recorded by the production business units after adjusting for internal sales. Arithmetical differences may occur as a result of rounding. Employee and branch data are based on the closing date of the relevant financial year. For foreign subsidiaries the average exchange rates for the relevant reporting periods have been applied.
Facts & Figures
Financial year 2010 (January 1, 2010 - December 31, 2010)
Kaiser's Tengelmann
Total*
Sales area
Outlets
Sales A in % to py
Employees
in m2 440,395
total 53 1
A in % to py -2.0
in mill. 2,167.1
A in % to py 0.1
currency adjusted 0.1
total 17,97 5
A in % to py 3.0
* excluding the disposal of the Rhine-Main Neckar sales region
KiK
Sales area
Outlets
Sales A in % to py
Employees
in m2 Germany Austria Slovakia Slovenia Czech Republic Hungary Total 1,297,162 122,902 26,860 25,272 68,642 32,977 1,573,815
total 2,517 25 0 42 41 12 0 55 3,025
A in % to py 3.3 0.4 68.0 32.3 27.7 7.8 4.8
in mill. 1.346,7 191,4 22,2 31,8 54,2 17,9 1,664.2
A in % to py 0.5 -0.5 101.8 12.8 28.7 3.5 2.1
currency adjusted 0.5 -0.5 101.8 12.8 23.2 1.7 1.9
total 16,980 1,393 273 223 777 363 20,00 9
A in % to py 11.5 -0.9 20.3 12.6 10.2 -0.5 10.4
OBI
Sales area Outlets Sales A in % to py in m2 Germany Bosnia-Herzegovina Italy Croatia Austria Poland Romania Russia Switzerland Slovenia Czech Republic Ukraine Hungary Total 2,605,170 15,782 209,585 19,109 183,326 255,652 55,264 215,262 75,594 46,958 207,966 34,113 155,963 4,079,744 total 34 0 3 49 3 32 34 7 18 10 7 30 3 25 56 1 Outlets A in % to py 3.0 0.0 4.3 0.0 0.0 6.3 75.0 20.0 0.0 16.7 3.4 0.0 8.7 4.5 in mill. 3,548.4 18.5 451.2 14.4 335.4 487.3 46.9 691.9 182.4 67.3 344.1 32.4 164.6 6,348.8 A in % to py 6.8 0.0 12.7 22.0 0.8 4.1 31.7 31.8 7.7 8.7 -1.9 34.4 -7.6 8.3 currency adjusted 6.8 0.0 12.7 21.0 0.8 -3.7 30.3 20.3 -1.6 8.7 -6.0 25.6 -9.1 6.0 total 22,521 215 2,014 173 1,781 3,744 631 3,673 625 418 2,547 411 1,766 40,51 9 A in % to py 5.6 0.5 5.2 0.0 1.1 2.3 45.7 34.0 1.5 6.1 4.5 5.9 9.6 7.6 Employees
Others
Sales area
Sales A in % to py
Employees
in m2 Total Discontinued national -
total -
A in % to py -
in mill. 721.5
A in % to py 5.9
currency adjusted 5.9
total 1,779
A in % to py 1.9
companies/sales regions
816.6 -40.2
-40.4
Facts & Figures
LEGAL NOTICE
Tengelmann Group Public Relations Wissollstrasse 5 - 43 45478 Mulheim an der Ruhr Phone: +49 208 5806-7601 Fax: +49 208 5806-7605 E-mail: public-relations@uz.tengelmann.de Website: www.tengelmann.de Responsible for content: Sieglinde Schuchardt
For the sake of the environment this publication has been printed on environmentally friendly Galaxi Keramik FSC paper by a certified printing company.
A
FSC
www.fsc.org
MIX
Paper from sources
responsible
FSC C017894
1 2
German Council of Economic Experts, Annual Report, November 2010. IMF, WEO Update, January 2010; IfW, Euro zone economic report for spring 2010, March 2010; Global economic report for spring 2010, March 2010, German Council of Economic Experts, Annual Report, November 2010.

Vinq Toqethe Orkinq Toqethe Being Successtu Toqethe: Report On The 144th Financial Year

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Vinq Toqethe Orkinq Toqethe Being Successtu Toqethe: Report On The 144th Financial Year

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vinq toqethe orkinq toqethe being successtu toqethe

Report on the 144th financial year

THE TENGELMANN GROUP

Preface 6 Invited Commen mployees a ponsibi ity rview

sions 34 Balance Shee and Explanatory Notes

"We must integrate successfully. Our cohesion as a society depends on it.

nteqration not aisinteqration

we should not support the languages of migrants'

Worki toqether tor a secure future

responsibly means aking responsibility

Social commitment: Recent examples include the

Sound growth sound prospects

Kaiser's Tengelmann Business Divisions 17

18 Business Divisions Kaiser's Tengelmann

Restructuring and modernization initiated

20 Business Divisions Kaiser's Tengelmann

22 Business Divisions E-Commerce

Shop clever. 20,009 employees in 3,025 KiK stores generated

23 Business Divisions E-Commerce

to euro 1.66 billion.

24 Business Divisions E-Commerce

Germany's price leader

27 Business Divisions E-Commerce

28 Business Divisions E-Commerce

29 Business Divisions E-Commerce

On course for further expansion

establishing new stores, the emphasis is on resource-efficient and environmentally-friendly construction.

Real Estate Business Divisions 31

Easy online shopping

32 Business Divisions E-Commerce

ofessiona D of real estate

34 Business Divisions E-Commerce

36 Business Divisions E-Commerce

2010 Balance Sheet and Explanatory Notes 37

Balance Sheet and Explanatory Notes

Consolidated Statement of Assets Balance Sheet and Explanatory Notes 39

1 Economic and sector-specific development

German Federal Statistical Office, January 2011.

40 Balance Sheet and Explanatory Notes Consolidated Statement of Assets

2.1 Structure of the Group

Consolidated Statement of Assets Balance Sheet and Explanatory Notes 41

42 Balance Sheet and Explanatory Notes Consolidated Statement of Assets

Gross sales in million / proportion (in brackets: previous year)

Europe ........................... 3.80/34% (34%)

Deviation in % vs. previous year

Proportion of total sales food/non-food in billion /proportion

(in brackets: previous year)

Non-food .............................. 8.35/73.7% (68.9%)

Consolidated Statement of Assets Balance Sheet and Explanatory Notes 43

Munich/Upper Bavaria 764.6 (+1.2%)

.............................................................................Berlin 819.1 (+2.6%)

44 Balance Sheet and Explanatory Notes Consolidated Statement of Assets

Number of outlets (in brackets: previous year)

Berlin 149 (152)

North Rhine 181 (186)

Munich/Upper Bavaria 201 (204)

Consolidated Statement of Assets Balance Sheet and Explanatory Notes 45

Europe ........................................ 317.5/19.1% (17.8%)

.......................................................... Germany 1.346.7/80.9% (82.2%)

46 Balance Sheet and Explanatory Notes Consolidated Statement of Assets

Number of outlets (in brackets: previous year)

Consolidated Statement of Assets Balance Sheet and Explanatory Notes 47