Financial Overview

(in million euros)

	FY2008	FY2007	Rate of change(%)	Factors
Overall
Sales	24,283.7	16,619.4	45.8	1)
EBIT*	(296.2)	1,675.8	(117.7)
Chassis & Safety
Sales	5,134.0	4,648.6	10.4	2)
EBIT*	303.1	567.0	(46.5)
Powertrain
Sales	4,040.0	1,177.0	243.2	3)
EBIT*	(1,046.2)	(73.5)	-
Interior
Sales	5,856.7	1,531.6	282.4	4)
EBIT*	(462.6)	10.8	-
Passenger and Light Truck Tires
Sales	5,100.3	4,975.6	2.5	5)
EBIT*	626.4	738.7	(15.2)
Commercial Vehicle Tires
Sales	1,404.2	1,452.4	(3.3)	6)
EBIT*	29.5	124.1	(76.2)
ContiTech
Sales	3,007.0	3,063.9	(1.9)	7)
EBIT*	329.1	362.8	(9.3)

*EBIT:Earning Before Interest and Taxation

Factors
1) Overall
-The increase results from the 5,240.1 million euros year-on-year rise in the first six months of 2008 and from the 2,379.2 million euros year-on-year rise in the second half of 2008.

-In both periods, the changes in the scope of consolidation - particularly through the acquisiton of Siemens VDO - had a positive impact, whilst exchange rate changes tended to reduce sales.

-The increase in raw material prices had a negative impact of approx. 325 million euros on the EBIT in 2008 compared with the average prices for 2007. This affected primarily the Tire divisions.

2) Chassis & Safety Division
-The increase resulted from changes in the scope of consolidation, especially from the acquisiton of Siemens VDO.

-In the Electronic Brake Systems business unit, sales volume fell 8.6% to 14.4 million units.

-Sales volume at the Hydraulic Brake Systems business unit also decreased. The volume of brake boosters fell by 3.3% to 13.0 million units (2007: 13.4 million units). Brake calipers saw a decrease of 12.4% to 30.3 million units (2007: 34.5 million units).

3) Powertrain Division
-The increase resulted from changes in the scope of consolidation, especially from the acquisition of Siemens VDO.

-Significant volume decreases were recorded as early as the beginning of the year in North America by the Engine Systems (injection systems installed in light and medium duty commercial vehicles), Transmission (transmission control units) and Sensors & Actuators business units.

-This declines more than offset the temporary positive trend for electronic control units and injection systems for diesel and gasoline engines in Europe and Asia, a trend which did not continue into the fourth quarter.

4) Interior Division
-The increase resulted from changes in the scope of consolidation, especially from the acquisition of Siemens VDO.

-The market slump in November and December had a negative impact on sales volume for the year overall, particularly in the NAFTA region. There was a noticeable decline in the Commercial Vehicles unit.

-Despite the downturn in the market in the fourth quarter, the Body & Security business unit managed to sell 27.8 million body and door control units.

-The Instrumentation & Displays business unit sold 17.5 million units in 2008.

-Volume decreases in the fourth quarter and exchange rate changes had the opposite effect.

5) Passenger & Light Truck Tires Division
-At 110.8 million tires, the company topped the previous year's sales volume.

-Sales in the Original Equipment business unit were down on the figure for 2007. The Company was able to lift sales volume in Europe, but the volume in the NAFTA region was substantially below the previous year's figure. Both sales volume and market share for Original Equipment in Europe were at the level of the previous year.

-Before changes in the scope of consolidation and exchange rate effects, the increase was 1.1%.

6) Commercial Vehicle Tires Division
-Worldwide sales volume of truck tires decreased by 6.4% to 6.7 million units,. All businesses units were below the previous year's levels.

-Before changes in the scope of consolidation and exchange rate effects, sales dropped by 1.6%.

7) ContiTech Division
-Sales in the Coveyor Belt Group business unit increased by 9.7% year-on-year, and those in the Elastomer Coatings business unit increased by 0.7%. All other business units posted declines in sales.

-Before changes in the scope of consolidation and exchange rate effects, sales dropped by 0.4%.


Takeover Offer by Schaeffler
-In Jul. 2008, Schaeffler KG made a takeover offer to the Company. In Aug. 2008, the offer was accepted with certain conditions. Followings are the details;

-On July 15, 2008, Schaeffler KG announced a public takeover offer to all shareholder of the Company for price of 70.12 euros per share.

-In Aug. 2008, the Company entered into an investment agreement with Schaeffler KG. With this agreement, the dispute regarding the public takeover offer by Schaeffler for the Company has been settled. Schaeffler increased offer price from EUR 70.12 to EUR 75.00 per share and guaranteed to compensate possible disadvantages in an aggregate amount of up to 522M Euro.

-In addition, Schaeffler has undertaken to limit its position to a minority shareholding in the Company (up to 49.99 %) for a period of four years, to support the ongoing strategy and business policies of the Company

-In Dec. 2008, the EU Commission has approved the takeover of the Company by the Schaeffler Group.


Coopration with Schaeffler
-On Jan 24, 2009, the Company and Schaeffler have substantiated the basis for constructive cooperation based on the investment agreement. It was agreed:

-to develop concepts for cooperation between the automotive businesses of both groups under the leadership of the Company's Chairman, Dr. Neuman

-to initiate a process to create an organizationally and legally independent Rubber Group (carve out)

-Schaeffler will be represented with four board members in the Supervisory Board (became effective on Feb 5th, 2009)


Contracts
VW
-In Feb. 2008, the Company announced that the new Passat CC four-door is equipped with self-sealing tyres made by the Company.

-In Dec. 2008, the Company announced that it provides the VW Golf's sixth model generation with a wide range of products as follows;

<Chassis & Safety Division>
-Airbag system employing new crash impact sound sensing technology.
-Complete ESC electronics, ABS, the brake calipers, the brake boosters, the brake lines, and the components for windshield washing systems.

<Interior Division>
-RNS 510 navigation and multimedia system as an option.
-Gateway, instrument cluster, controls for climate control system and the direct-measurement tire pressure monitoring system for the Golf GTI (North American market).

<Powertrain Division>
-Common-rail systems with piezo injectors.
-Engine control units for the two gasoline engine models, the Golf 1.6 and the 1.2 TSI.


BMW
-In Aug. 2008, the Company announced that it and Mobileye N.V., a specialist of vision-based driver assistance systems, supply a multifunctional camera system for the new BMW 7 Series.

-In Oct. 2008, the Company announced that Johnson Controls has cited Benecke-Kaliko for its two-tone Yorn(R) PVC expanded foil. It is used in producing a one-piece, two-tone door trim, which is adopted in the BMW 5 Series.


Daimler
-In Sept. 2008, the Company announced that it has developed the first production-ready lithium-ion battery for hybrid vehicles. As early as 2009, Mercedes-Benz plans to equip the S 400 BlueHYBRID with the new Company's technology as standard.


GM
-In Nov. 2008, the Company announced that ContiTech Vibration Control is supplying a torque support made of polyamide for the new Opel Insignia. ContiTech will be the sole supplier for all new start-up GM models based on a midsize platform until 2012.


Renault
-In Aug. 2008, the Company announced that it delivers a variety of products for the new model Dacia Sandero as follows;

<Powertrain Division>
-Injectors (for 1.6L 16v gasoline engine vehicles)
-Engine control units (on the 1.6L 16V, 1.6L 86V, 1.0L 16V gasoline engine vehicles)
-Transmission control unit for automatic gearbox (on the 1.6L 16V gasoline engine)
-ETC (on the 1.6L 16V engine)
-Camshaft sensor and mass airflow sensor (on the 1.5d Ci diesel engine)

<Interior Division>
-BMC - body control unit and the audio system for the South-American market.

<ContiTech Division>
-Membranes for the regulation of fuel distribution and the power steering pipelines.

<OE tires>
-ContiEcoContact 3 tires, size 185/65 R15 88T.


Acquisitions
-In Jun. 2008, the Company announced that it has acquired a 16 percent holding in the Japanese lithium-ion specialist Enax. Enax is a technology expert for the development and production of high-energy and high-performance lithium-ion cells for hybrid and electrical vehicle batteries. The two partners have agreed upon an exclusive cooperative venture for the development of lithium-ion cells especially for future hybrid and electric drives in automobiles. (From a press release on June 2, 2008)

-In Sept. 2008, the Company announced that it took over the Finnish spike manufacturer TIKKA Spikes Oy mid-September 2008. TIKKA Spikes has a plant in Finland - in Tikkakoski - and a sales office in Espoo as well as a plant in St. Petersburg, Russia. (From a press release on Sep 17, 2008)


Restructuring
<Chassis & Safety Division>
-The sensors business of the Chassis & Safety and Powertrain divisions at the Dortmund location in Germany will be closed due to reduction in volume and a lack of follow-up orders.

<Powertrain Division>
-The Powertrain division plant at Asniere, France, is to be closed down.

-As of April 1, 2008, the electric motors activities were sold to the Brose Group for a price of 248.8 million euros.

-In Dec. 2008, the Company announced that it will consolidate the manufacturing operations in the Engine Systems business unit into its Newport News, Virginia facility. The plan will involve the relocation of diesel fuel injection products currently manufactured at the Blythewood, South Carolina facility to Newport News. The Blythewood facility will be closed by the end of 2010.

<Interior Division>
-At the plant in Wetzlar, Germany, production for the Interior division will be shut down due to a lack of orders.

-Production at the plant in Rambouillet, France, is to be relocated. R&D activities and administration are to remain at the location.

-Plans are to close the plant in Birmingham, UK. Here the cockpit business of the Interior division was sold on Dec. 31, 2008.

-The Company sold the parking assist systems business.

R&D Expenditure

(in million euros)

	FY2008	FY2007	FY2006
Gross Expenses	1,498.2	834.8	677.0

-R&D expenditures rose by 79.5% compared with the previous year.

-The key reason for the increase is the change in the scope of consolidation due to the acquisition of Siemens VDO.

R&D Expenditure by Divisions

(in million euros)

	FY2008	FY2007
Chassis & Safety	423.6	347.5
Powertrain	420.1	144.9
Interior	432.5	131.5
Passenger and Light Truck Tires	119.5	110.5
Commercial Vehicle Tires	43.4	43.6
ContiTech	59.1	56.8
Total	1,498.2	834.8

Product Development by Divisions
<Chassis & Safety Division>
Infrared Sensor and Electronic Braking System for Volvo
-The Company has developed and supplied both the infrared sensor, which monitors the road ahead and detects objects, and the electronic braking system, both of which are core components of Volvo's innovative "City Safety" concept. This system, the Closing Velocity (CV) sensor, reduces the risk of a rear-end collision. The sensor uses three infrared beams to probe the road up to some six meters in front of the vehicle. The sensor picks up vehicles which are stationary or traveling in the same direction. If the gap is less than the distance which must be regarded as critical at the current speed, the system causes the brakes to be applied automatically. (From a press release on Mar. 31, 2008)

Next-Generation Electronic Brake System, MK100
-In Apr. 2008, Continental AG of Germany announced that it has developed a next-generation electronic brake system, MK100 and will begin its production in 2011. The MK100 has the basic specifications that can be applied to a wide range of functions from the motorcycle ABS to the high-end electronic stability control (ESC) designs. Its function and cost can be modified to meet requirements of each model in consideration of adoption by low-priced vehicle models expected to become popular in Eastern Europe and Asia. The system has also been made smaller and lighter by 20%. (From an article in the Nikkan Jidosha Shimbun on Apr. 23, 2008)

Multifunctional Camera System
-In Aug. 2008, the Company and Mobileye N.V., a specialist of vision-based driver assistance systems, supply a multifunctional camera system for the new BMW 7 Series. For the first time three driver assistance functions are controlled by a single camera powered by a system-on-chip EyeQ1 processing unit. The combined technologies - Speed Limit Information (SLI), High Beam Assist (HBA) and Lane Departure Warning (LDW) were engineered with BMW through a partnership between the Company and Mobileye. The system consists of a dynamic range digital CMOS camera developed and produced by the Company and a high performance chip EyeQ1 provided by Mobileye. (From a press release on Aug 13, 2008)

Accelerator Force Feedback Pedal (AFFP)
-In Sep. 2008, the Company announced the development of Accelerator Force Feedback Pedal (AFFP) that gives a warning to a driver of hazardous situations by vibrating and exerting counter pressure in the accelerator pedal and urges the driver to leave the foot off the pedal and get ready to brake. The company also said that AFFP is now being installed by a Japanese car manufacturer. When used in combination with a system to measure a distance between cars, it can further contribute to reducing rear-end collisions and improving driving safety. It also helps the driver to drive at a more even speed and therefore more economically, reducing fuel consumption. (From an article in the Nikkan Jidosha Shimbun on Sep.6, 2008)

New Chassis Controller: Global Chassis Control (GCC)
-In Nov. 2008, the Company has developed a new chassis controller, called Global Chassis Control (GCC), that can integrate all electronic chassis and safety systems together and deliver enhanced safety. One of advantages of GCC: Reducing the number of sensors also drives down the level of complexity of the vehicle's electronics systems. Other advantages include software standardization and fast data communication. The base technology for the chassis controller is already in use in certain models produced by one German car manufacturer. (From a press release on Nov 7, 2008)


<Powertrain Division>
New Injector for Diesel Engines
-In May 2008, the Company announced development of a new injector for diesel engines. While this new injector uses a highly-responsive piezo element as well as the previous product, injection nozzle opening and its control programs have been improved. It will therefore allow introduction of new vehicles models which will meet the Euro 6 exhaust gas limits effective in 2014 in Europe without an aftertreatment device. Production of the new injector is scheduled for 2009 to be applied in a light commercial vehicle. (From an article in the Nikkan Jidosha Shimbun on May 2, 2008)

High-Precision Automotive NOx Sensor
In Jun. 2008, the Company and NGK Insulators Ltd. have jointly developed a high-precision automotive NOx sensor with 30% smaller NOx measurement errors, which is the world's first for commercial use. The new and smart NOx sensor uses NGK's proprietary technology to cut NOx measurement errors by 30% to 10ppm. This sensor is then combined with a control unit developed by the Company. (From an article in the Nikkan Jidosha Shimbun on Jun.12, 2008)

New Piezo Direct Injection Technology
-In Nov. 2008k, the Company developed a new Piezo direct Injection technology which saves on fuel consumption and lowers emissions by 20 percent. This system takes advantage of the fast switching speeds and precise fuel metering of Piezo technology, making it possible to use a spray-guided stratification combustion process in a gasoline engine for the first time. (From a press release on Nov 14, 2008)


<Interior Division>
Head-up Display (HUD)
-In Mar. 2008, the Company announced that it offers automobile manufacturers the head-up display (HUD). This system projects important driving-related information such as speed, safe distance, warnings or navigational data toward the windshield via several mirrors. It's almost like glancing in the mirror: drivers see the virtual information suspended above the hood at a distance of about two meters. (From a press release on Mar. 3, 2008)

New Central Body Control Unit for Low-Cost Car Segment
-The Company has developed a new central body control unit for the low-cost car segment. In the emerging markets, low-cost cars with few extra features and simple functions will experience high growth rates. In response to these needs, the Company's Interior division engineers at the Shanghai location have developed a new control unit especially for the markets in the emerging countries: the Basic Function Controller. It replaces the individual relays required previously for functions such as blinker or wiper interval. The Basic Function Controller will be used for the first time in standard production at the end of 2008 by the Chinese car maker Geely. Other production start-ups at further Asian manufacturers are already in the pipeline. (From a press release on May 20, 2008)


<Passenger & Light Truck Tire Division>
Self-Sealing Tyres
-The Company equips the new Passat CC four-door with self-sealing tyres. Using technology called ContiSeal, the Company has developed a system that makes it possible for a vehicle to continue on its ways even after a tyre has been punctured with a screw or nail: A protective layer on the inside of the tread immediately seals holes. (From a press release on Feb. 1, 2008)


<ContiTech Division>
Engine Torque Rod
-In Mar. 2008, the Company announced that the Company and BASF, a Germany-based chemical supplier, have jointly developed an engine torque rod made of plastic The plastic torque rod weighs 35 percent less than a conventional product made of aluminum and can withstand changes in temperatures ranging from minus 30 degrees Celsius to 120 degrees Celsius. In addition, the plastic part has a high level of oil and chemical resistance. BASF has already launched mass production of this new torque rod for the Opel Vectra and Saab 9-3. (From an article in the Nikkan Jidosha Shimbun on Mar. 26, 2008)

Seat Material: Sport-Esteem(R)
-In Aug. 2008, the Company announced that Benecke-Kaliko presents Sport-Esteem(R), a newly developed seat material for sporty vehicles. The material is light-proof and non-fading and complies with the OkoTex 100 standard for extremely low emissions. (From a press release on Aug 6, 2008)

Capital Expenditure

(in million euros)

	FY2008	FY2007
Chassis & Safety	336.0	279.8
Powertrain	494.4	129.6
Interior	265.2	65.5
Passenger and Light Truck Tires	292.7	220.0
Commercial Vehicle Tires	95.6	83.0
ContiTech	110.8	99.8
Other/Consolidation	0.5	17.2
Total	1,595.2	896.9

Investment in Germany
-In Sept. 2008, the Company started series production of lithium-ion batteries for hybrid vehicles. It has invested around 3.3 million euros in the new battery production in Nuremberg and 15,000 lithium-ion batteries can be produced annually. The battery produced in Nuremberg will be installed as standard in the new Mercedes S400 BlueHYBRID, available from the middle of 2009. (From a press release on Sep. 24, 2008)


Investment outside Germany
Asia
<China>
-In Jan. 2008, the Company officiated the ground breaking ceremony for Continental Asia Headquarters and a dedicated Engineering Center in Shanghai, China. The total capital investment is 60 million euros. The new site in Yangpu District of Shanghai will have a 14-floor office building and a total floor space of approximately 14,000 square meters. From May 2009 on, nearly 900 employees will work (From a press release on Jan. 16, 2008)

-In Jul. 2008, the Company announced opening of its new hydraulic brake system plant in Changshu, China. The plant will manufacture disc brake calipers, drum brakes and brake actuation units including brake boosters. With a growing workforce of up to 1,000 staff in the coming two years, the annual production capacity is aimed to reach 5 millions of brake caliper and 2.4 millions of brake actuation units and by 2011. Continental Automotive Systems Changshu Co. Ltd., established as a 100% subsidiary of the Company with a total investment of 600 million Yuan (approx. 9.4 billion yen), has a land area of 73,000 sq.m. and a building area of 25,000 sq.m. (From an article in the Nikkan Jidosha Shimbun on Jul.11, 2008)

-In Oct. 2008, the Company celebrated the land opening ceremony for its new plant in Hefei, Anhui Province, China. This new plant features the first phase project of around 70,000 square meters of constructional area. The Company will invest around 185 million Euros in the plant, which is scheduled to be completed by 2010. The Company is aiming for an annual production of four million PLT tires in Hefei in the first step. (From a press release on Oct 10, 2008)

-In Oct. 2008, ContiTech has laid the cornerstone for a new production location in Changshu (Jiangsu Province). By the end of 2009, all production plants located to date in Shanghai, Changchun, Ninghai and Jiading are to be brought together in the South East Economic Development Zone industrial park, 100 kilometers northwest of Shanghai. The company will be investing some 30 million euros in the first phase. (From a press release on Oct 20, 2008)

<India>
-In Jan. 2008 , the Company announced that with an initial investment of Rs.100 Crores (17.5 Million Euros), the upcoming automotive electronics plant in Bangalore is one of the major investments for the Company in India. The new manufacturing setup will also house an R&D centre. (From a press release on Jan. 10, 2008)

-In Jul. 2008, the Company launched its new electronic manufacturing facility and R&D centre in Bangalore, India. With a total investment of Rs. 220 crores, the new facility will develop and produce electronic components for the Indian market. In this facility electronic components will be developed and produced all three Continental automotive electronics divisions - Chassis and Safety, Powertrain and Interior. The new plant will manufacture instrument clusters, immobilizers, engine management systems, electronic control units and body control units. The facility will be the new headquarters of Continental India. (From a press release on Jul 14, 2008)

<Philippine>
-In Sept. 2008, the Company opened its second manufacturing site at the location in Calamba, Philippines. The product range produced in Calamba covers sensors, chassis components, passive safety and ADAS components, ECUs, transmission controllers, and actuators. Approximately Euro 23 million was invested for the new facility. (From a press release on Sep. 25, 2008)


Europe
<Hungary>
-The Chassis & Safety Division is making further investments at its Veszprem site in Hungary. The division will be building new proving grounds for ABS and ESC development. The total investment in the site runs to over EUR 10 million. The new proving grounds for ABS and ESC will comprise road test facilities, as well as a vehicle dynamics facility for applications testing. Building work on the proving grounds is slated for completion by the beginning of 2009. (From a press release on Feb. 14, 2008)

-The Company announced that it invested approximately EUR 24 million in the Budapest plant in 2007 and intends to increase this amount in 2008. The largest investment project planned for 2008 was the construction of the new EBS (Electronic Brake Systems) production hall and the installation of additional production lines. In the new production hall, which belongs to the Continental Division Chassis & Safety, 700 people will work on 4 production lines. (From a press release on May 19, 2008)

<Czech>
-In Apr. 2008, the Company announced that the Powertrain Division is expanding still further its production of diesel injection pumps in Trutnov in the Czech Republic. Investment is planned to exceed 18 million euros. Production of high pressure diesel injection pumps will be progressively increased from the summer 2008 and the construction work on the production halls will be completed in 2010. (From a press release on Apr. 2, 2008)


North America
<USA>
-In Jul. 2008, Continental Tire North America, Inc. (CTNA) announced more than $60 million in new investments for its Mt. Vernon facility over the next three years. These investments will significantly expand CTNA's Passenger & Light Truck (PLT) tire operations as well as its Commercial Vehicle Tire (CVT) operations. This investment is in addition to the previous investment in both the PLT and CVT divisions bringing the total investment in Mt. Vernon since 2006 to more than $220 million. (From a press release on Jul 16, 2008)