Senior Associate Investor Relations
Phone: +49 (0) 5241-80-1861
Fax: +49 (0) 5241-701182
Below you will find the questions most frequently asked about Profit Participation Certificates, and the answers to them.
Bertelsmann PPCs may be purchased through your bank by placing an order for the amount, in Euro, that you want and giving the identification number (ISIN DE0005229942). The desired amount has to be in even 10-Euro increments, e.g., 4,870 Euro since the par value of each certificate is €10. Your bank forwards the buy order to the market. Please note that the price of the PPCs is determined as a percentage value listing related to the par value. For example, for a buy order for €1,000 par value at a listing of 200%, the purchase price will be €2,000. The execution of buy and sell orders and the administration of a depository account (for depositing the PPCs) usually involves additional charges; please check with your bank beforehand.
The Bertelsmann PPC is traded on the German stock exchange (Frankfurt). Foreign investors can buy the PPCs on the German stock exchange at any time. Compared to the acquisition of PPCs for a domestic custody account, bank charges and brokerage fees may be higher.
There is no specified minimum investment amount for the Bertelsmann PPC. Theoretically, a single PPC for the par value amount of 10 Euro can be acquired through the stock exchange. But since minimum banking and broker fees usually apply for buy and sell orders, we recommend that you order at least several PPCs at a time.
The profit distribution on the Bertelsmann PPC is 15 percent of the par value. Achieving the profit distribution is contingent on the Bertelsmann SE & Co. KGaA generating sufficient consolidated annual group net income and annual net income.
The Bertelsmann PPC has a par value of 10 Euro. It is listed on the stock exchange as a percentage value listing. For examplem a listing of 150%, means a value of 15 Euro for each PPC at a par value of 10 Euro. The profit distribution is also represented as a percentage of the par value, i.e., in case of a profit share of 15% the amount of 1.50 Euro is paid on every Bertelsmann PPC with a par value of 10 Euro.
Consolidated annual net income is sufficient if the consolidated annual net income minus the minority interest, and adjusted for impairments of goodwill, suffices for the 15% profit payout. With a profit participation capital of, for example, €500 million par value, the consolidated annual net income minus the minority interest and after adjustments for impairments of goodwill needs to be at least €75 million (15% of €500 million). Please refer to § 4 of the Terms and Conditions of Issuance of PPCs for the complete profit distribution regulations.
In this case, the profit share is determined proportionately based on the consolidated annual net income, minus the minority interest and after adjustments for impairments of goodwill: if, for example – given profit participation capital of €500 million – the consolidated annual net income after deduction of the minority interest and adjusted for impairments of goodwill is €50 million, the profit share will be 50/500 or 10% of par value. Please refer to § 4 of the Terms and Conditions of Issuance of PPCs for the complete profit distribution regulations.
The consolidated annual net income determines the amount of the profit share. For a profit share distribution to take place, there also has to be sufficient annual net income at the level of Bertelsmann SE & Co. KGaA, the corporation that issues the PPCs and the legal entity that distributes the profit distribution. Therefore, it is necessary to examine whether its modified annual net income – modified as explained in the Terms and Conditions of Issuance – is sufficient. Should the annual net income of Bertelsmann SE & Co. KGaA not suffice to pay the profit share, the payment would be reduced accordingly. The unpaid part of the profit share, however, would be paid in the future, presuming sufficient results.
Minority interests exist in subsidiaries that are not wholly owned by Bertelsmann SE & Co. KGaA (directly or via intermediate companies) but fully figure in the group statement. The other shareholders have a right to a share of the profits of the appropriate companies. Bertelsmann SE & Co. KGaA only has a claim to "its share" of the profits of these companies. Therefore, the profit owed to the other shareholders is deducted in the determination of the profit share of the PPCs.
PPC distributions are normally paid out in spring of the following year.
The PPCs have different profit-share criteria. The distribution on the PPC 1992 is based on the “return on total assets” of the Bertelsmann Group. A profit share of 15% on the nominal amount is conditional on the achievement of a return on total assets of 12% or more. In case the return on total assets is lower than 12% or higher than 16 %, the dividend distributed will generally be one percentage point higher than the return on total assets. Since 2001 Bertelsmann Group has applied different performance indicators and issued the PPC 2001. The profit distribution criteria of the PPC 2001 reflect this change. The profit share of a PPC 2001 for each full fiscal year of the Bertelsmann group amounts to 15% of its par value, provided that the consolidated annual net income is sufficient.
The prices can differ due to the different profit distribution formulas. The PPC 2001 pays 15% on the par value when consolidated annual group net income and annual net income of Bertelsmann SE & Co. KGaA are sufficient. Meanwhile, profit distribution on the PPC 1992 depends on the return on total assets. Another factor that could influence the PPC’s price is the difference in trading volume.
Unfortunately, the prices of PPCs listed on the stock exchange are shown in a misleading way by some online finance sites. The price of the Bertelsmann PPC is often represented as an absolute price even though it is a percentage listing. The reason for this false representation is the standardized information transfer used by some information suppliers. In the case of a non-standardized security like the PPC, which has characteristics of stocks as well as of fixed-interest securities, this leads to problems.
If instead of a positive annual net income, the Group should occur a loss, the percentage of the negative return on total assets will be determined in relation to the arithmetic average of the assets at the beginning and end of the fiscal year. This percentage, related to the par value of the PPCs, then results in a share in the loss. In the future it would first have to be offset against profit shares before another profit distribution could be made. Please refer to §5 of the Terms and Conditions of Issuance of PPCs for the full loss participation regulation.
The change in legal form had no effect on the Company's identity, which continues to exist as such in a different legal form as Bertelsmann SE & Co. KGaA. This changes nothing for the owners of profit participation certificates. Please note that no adjustments have been made to the conditions of issue.