Characteristics

Purchase

The Bertelsmann PPC 2001 is officially listed for trading on the Regulated Market of the Frankfurt Stock Exchange. The PPC is among the most liquid PPCs on the stock exchanges. This guarantees a proper and quick execution of any orders. Bertelsmann PPC may be purchased through your bank by placing an order for the amount in Euro that you want by giving the identification number (ISIN DE0005229942). Your bank forwards the order to the stock exchange. For the execution of orders and the administration of a depository account (for depositing the PPCs) additional fees will be due; please ask your bank beforehand.

Opportunities and Risks

It is Bertelsmann's aim to generate sufficient annual net profit, in order to be able to distribute a 15% dividend on the Bertelsmann PPC (ISIN DE0005229942). Please be aware of the fact that the 15% dividend payment is not a fix rate resp. not guaranteed. In case of an unsufficient group's net result the dividend payment can be lower. The annual profit distribution of 15% of the par value that has been aimed for and achieved for many years is opposed by a participation in possible losses, which however is relatively modest for PPCs. If the return on assets of the group is negative in one year, a share of the loss is applied to the PPC. The loss participation is determined by the percentage of the negative return on assets related to the par value of the PPC. Such a loss has to be set off against profit shares in subsequent years. In case of the company’s insolvency and dissolution, the repayment claims of PPC owners are subordinate to the claims of creditors. From an investor’s point of view, these risks have to be compared with the yield that can be achieved with the Bertelsmann PPC.

Generally, the expected yield of an investment in Bertelsmann PPC is clearly higher than, for example, the yield of 10-years government bonds that offer a standard for comparison for long-term investment in fixed interest-bearing securities. This added yield of the PPC can be traced back to the before mentioned risk component.

Aside from the opportunities and risks depending on the economic success of Bertelsmann, the PPC also participates in price change related opportunities and risks that primarily result from changes in the long-term interest level on the capital market and are therefore not subject to the influence of Bertelsmann.

Price Quotation

The Bertelsmann PPC 2001 has a par value of 10 Euro. The listing on the stock exchange is a percentage value listing. At a price of, for example, 200%, a market value of 20 Euro results for each PPC at the par value of 10 Euro. A purchase or sale of a PPC between the profit distribution dates, accrued interest / profit will not be calculated. The profit distribution affects the price listing, therefore, a price decline can regularly be observed on the day of profit distribution. The development of the PPC price is mainly determined by the expected payment of 15% annually on the par value and the development of the long-term capital market interest. If capital market interest decline, it can be expected that the price of the PPCs will go up. This effect is reversed in the case of rising interest. Hence, the price of the Bertelsmann PPC develops like the price of a fixed interest-bearing security: in the case of a low interest level such securities have higher prices than in the case of a higher interest level. Additionally, the price development is influenced by the respective supply and demand situation at the stock exchange.

Termination

In company´s view the Bertelsmann PPC 2001 does not have a fix term. Therefore, in simple terms the PPC can be characterized as a perpetual instrument. It can basically be bought and sold at any time, especially through the stock exchange. Selling orders will be forwarded by the depositary banks to the stock exchange. At the earliest date by June 30, 2017 holders may terminate their PPCs. The repayment amount will be the weighted average of the issuance prices of all of profit participation capital issued under these or any prior Terms and Conditions of Issuance. Bertelsmann cannot terminate the PPC.

Profit Distribution

The profit distribution of the PPC is 15% of the par value if Bertelsmann SE & Co. KGaA has sufficient consolidated annual group net income and sufficient annual net income at its disposal. The profit distribution is determined in two steps: first, the profit share of the PPC is determined based on the amount of the annual group net income. In a second step, it is determined whether the annual net income of Bertelsmann SE & Co. KGaA is sufficient for the profit distribution to be made.

Step 1: Determination of the Profit Share
The profit share of the PPC is 15% of the par value if the annual group net income, after the deduction of the minority interest, is sufficient enough. Is this not the case, the profit share shall be determined proportionally based on the available annual group net income. Thus, a profit share lower than 15% would result.

Step 2: Determination of the Profit Distribution
Because Bertelsmann SE & Co. KGaA is the legal entity that issued the PPC, its annual net income according to its statuory unconsolidated accounts is decisive for determining the profit distribution. The dividend determined in Step 1 is distributed whenever Bertelsmann SE & Co. KGaA has generated sufficient annual net income, including any profits carried forward and minus any loss carryforwards, to cover the payouts on all types of profit participation certificates. Should Bertelsmann SE & Co. KGaA’s net income for the year not be sufficient, distribution would be reduced accordingly. However, the profit participation not paid out would be paid at a later date, provided sufficient results.

The determination of the profit share and the profit distribution are verified by the certified public accountant of the Bertelsmann SE & Co. KGaA.

Profit distribution will be effected regularly in the spring of each year.

Tax Treatment of Profit Distribution

For investors it is advisable to check the taxation with a tax advisor.

Please note that no adjustments in the conditions of issue are made in the course of the change in legal form from Bertelsmann AG into Bertelsmann SE & Co. KGaA.