At a Glance 2018 Key Figures (IFRS) in € millions Business Development Group revenues Operating EBITDA EBITDA margin in percent1) Bertelsmann Value Added (BVA)2) Group profit Investments3) Consolidated Balance Sheet Equity Equity ratio in percent Total assets Net financial debt Economic debt4) Leverage factor Dividends to Bertelsmann shareholders Distribution on profit participation certificates Employee profit sharing 2018 17,673 2,586 14.6 121 1,104 1,434 9,838 38.8 2017 17,190 2,636 15.3 163 1,198 1,103 9,127 38.5 2016 16,950 2,568 15.2 180 1,137 1,240 9,895 41.6 2015 17,141 2,485 14.5 180 1,108 1,259 9,434 41.2 2014 16,675 2,374 14.2 211 572 1,578 8,380 38.9 25,343 23,713 23,794 22,908 21,560 3,932 6,619 2.7 180 44 116 3,479 6,213 2.5 180 44 105 2,625 5,913 2.5 180 44 105 2,765 5,609 2.4 180 44 95 1,689 6,039 2.7 180 44 85 As of January 1, 2018, the new accounting standards IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers were applied for the first time. In accordance with the transitional provisions of IFRS 9 and IFRS 15, prior year comparatives have not been adjusted. Further details are presented in the section “Impact of New Financial Reporting Standards.” The figures shown in the table are, in some cases, so-called Alternative Performance Measures (APM), which are neither defined nor described in IFRS. Details are presented in the section “Alternative Performance Measures” in the Combined Management Report. Rounding may result in minor variations in the calculation of percentages. 1) Operating EBITDA as a percentage of revenues. 2) Bertelsmann uses BVA as a strictly defined key performance indicator to evaluate the profitability of the operating business and return on investment. From financial year 2018 onward, Bertelsmann Value Added is determined without taking into account the Bertelsmann Investments division. 3) Taking into account the financial debt assumed, investments amounted to €1,461 million (2017: €1,117 million). 4) Net financial debt less 50 percent of the par value of the hybrid bonds plus pension provisions, profit participation capital and the present value of operating leases.

Interactive Online Report The Bertelsmann Annual Report can also be accessed online at: ar2018.bertelsmann.com 2 Financial Information

Combined Management Report Financial Year 2018 in Review Bertelsmann can look back on a successful year in 2018. Group revenues rose by 2.8 percent to €17.7 billion (previous year: €17.2 billion). Organic growth increased to 2.7 percent (previous year: 1.7 percent) due to growth at RTL Group, Penguin Random House, BMG, Arvato and the Bertelsmann Education Group. The revenue share generated by the strategic growth businesses increased to 34 percent (previous year: 32 percent). At €2,586 million, operating EBITDA was once again at a high level. Operating EBITDA in the previous year was €2,636 million and included substantial capital gains from real estate transactions. Earnings growth at Penguin Random House, BMG, Arvato and the Bertelsmann Education Group was offset by declining earnings at Bertelsmann Printing Group in particular. The EBITDA margin went down from 15.3 percent in the previous year to 14.6 percent. Group profit was once again high, at €1,104 million, compared with €1,198 million in the same period in the previous year. For 2019, Bertelsmann again expects positive business performance. Revenues in € billions Operating EBITDA in € millions Group Profit in € millions 17.0 17.2 17.7 20 15 10 5 0 2,568 2,636 2,586 3,000 2,250 1,500 750 0 1,137 1,198 1,104 1,200 900 600 300 0 2016 2017 2018 2016 2017 2018 2016 2017 2018 • Revenue growth of 2.8 percent, organic growth of 2.7 percent • Decrease in operating EBITDA by • Group profit exceeds billion-euro 1.9 percent to €2,586 million mark for the fourth consecutive year • Revenue increases at RTL Group, • Previous-year figure included capital • Decline due to the lower operating Penguin Random House, BMG, Arvato and Bertelsmann Education Group • Organic revenue growth in growth businesses gains from real estate transactions result and greater impacts from • Decline in EBITDA margin to 14.6 percent compared with 15.3 percent in the same period in the previous year special items • Lower tax expense 4 Financial Information Combined Management Report

data-driven multichannel marketing, campaign management and customer loyalty. The Bertelsmann Printing Group also includes the storage media producer Sonopress. Bertelsmann Education Group comprises Bertelsmann’s edu- cation activities. The digital education and service offerings are primarily in the healthcare and technology sectors, as well as in the university education area. The education activities include the online education providers Relias and Udacity, as well as the US university services provider HotChalk. Bertelsmann Investments bundles Bertelsmann’s global start-up investments. The activities are focused on the stra- tegic growth markets of Brazil, China, India and the United States. Investments are made through the funds Bertelsmann Brazil Investments (BBI), Bertelsmann Asia Investments (BAI), Bertelsmann India Investments (BII) and Bertelsmann Digital Media Investments (BDMI). Regulatory Environment Bertelsmann has television and radio operations in several European countries that are subject to regulation. In Germany, for example, the media is subject to oversight by the Com- mission on Concentration in the Media. Bertelsmann Group Businesses in which Bertelsmann invests should have long- term stable growth, global reach, sustainable business models, high market-entry barriers and scalability. The rapidly expanding education business is being developed into the third earnings pillar alongside the media and service busi- nesses. The Group strategy comprises four strategic priorities: strengthening the core businesses, driving the digital transfor- mation forward, developing growth platforms and expanding into growth regions. In the financial year 2018, steady efforts continued to focus on implementing the strategy in line with these priorities. As part of strengthening core businesses, RTL Group invested in local and exclusive content that enhances both linear and non-linear services, and intensified its focus on own productions. “Becoming” by Michelle Obama was the most important publication of the year for Penguin Random House, published simultaneously in all of its markets. With new magazines such as “Guido,” “JWD” and “Dr. v. Hirschhausen’s Stern Gesund Leben,” Gruner + Jahr continued to build media products around famous personalities. In the reporting period, Gruner + Jahr completed its focus on the core markets of Germany and France. The successful merging as of 2019 of CRM activities at Bertelsmann and the Saham Group continues the strategic development of Arvato’s CRM companies occupy leading market positions in many lines of businesses. The new group, Majorel, will push the continued business and may therefore have limited potential for growth expansion of the global presence and digital transformation of through acquisition due to antitrust legislation. Moreover, the service portfolio in coming years. some education activities are subject to regulatory provisions of government authorities and accreditation bodies. Because its profit participation certificates and bonds are publicly listed, Bertelsmann is required to comply with capital market regulations applicable to publicly traded companies. Shareholder Structure Bertelsmann SE & Co. KGaA is an unlisted partnership limited by shares. Three foundations (Bertelsmann Stiftung, Reinhard Mohn Stiftung and BVG-Stiftung) indirectly hold 80.9 percent of Bertelsmann SE & Co. KGaA shares, with the remaining 19.1 percent held indirectly by the Mohn family. Bertelsmann Verwaltungsgesellschaft (BVG) controls all voting rights at the General Meeting of Bertelsmann SE & Co. KGaA and Bertelsmann Management SE (general partner). Strategy As part of the digital transformation, RTL Group expanded its video-on-demand offerings, for example with the relaunch of TV Now in Germany, and merged the online advertis- ing marketers SpotX and SmartClip. In France, Groupe M6, together with partners, plans to create a joint online video platform, which aims to provide French television pro- gramming of all formats and all genres, live or on demand. Germany’s Verlagsgruppe Random House acquired the audiobook publisher DAV, thereby strengthening its offer- ings in the growing audiobook market. Gruner + Jahr con- tinued to expand the app discovery platform AppLike, and Arvato grew its service business with customers from the IT and tech industries. In the area of growth platforms, the RTL Group production unit Fremantle profited from the return of “American Idol,” and produced new series such as “My Brilliant Friend” and “Deutschland 86.” BMG’s acquisitions included the world music label World Circuit Records, and BMG signed a global publishing agreement with former Beatles drummer Ringo Starr. Arvato continued to organically expand its logistics Bertelsmann aims to achieve a faster-growing, more digi- tal, more international and more diversified Group portfolio. and financial services activities. In addition, Arvato invested in the Israeli fintech start-up Secured Touch. The education 6 Financial Information Combined Management Report

was caused by a lower operating result and the impact of above-average invested capital. 1,279 people serving in trainee positions in Bertelsmann companies in Germany. Broadly Defined Performance Indicators The purpose of the human resources (HR) strategy is to support the implementation of the Group’s strategy. In 2018, the main To assess business development, other performance indi- cators are used that are partially derived from revenues focus was again on the further development and training of employees. This included a comprehensive adaptation of the and operating EBITDA or are strongly influenced by these central talent management processes and tools, including the figures. expansion of talent pools and digital learning. The cash conversion rate serves as a measure of cash gen- erated from business activities, which should be between 90 percent and 100 percent as a long-term average. In the financial year 2018, the Cash Conversion Rate was 91 percent (previous year: 92 percent). The EBITDA margin is used as an additional criterion for assessing business performance. In the financial year 2018, the EBITDA margin of 14.6 percent was below the previous year’s level of 15.3 percent. Bertelsmann’s financial management and controlling system is defined by the internal financial targets outlined in the sec- tion “Net Assets and Financial Position.” These financing principles are pursued in the management of the Group and are included in the broadly defined value-oriented manage- ment system. The non-financial performance indicators (employees, cor- porate responsibility and similar topics) are not included in the broadly defined value-oriented management system. As they can only be measured to a limited extent, it is not pos- sible to make any clear quantifiable statements concerning interrelated effects and value increases. For this reason, the non-financial performance indicators are not used for the management of the Group. Non-Financial Performance Indicators The following section describes the non-financial perfor- mance indicators at Bertelsmann. For more information about the organization, management and key topics of corporate responsibility, please refer to page 40 et seq. of the section “Combined Non-Financial Statement.” Employees At the end of the financial year 2018, the Group had 117,220 employees worldwide. In 2018, there were Continuous employee training is the basis of a company’s future economic success. In view of this, the training courses offered by Bertelsmann University have been further digi- tized and expanded. Furthermore, at the end of 2018, over 92,000 employees in 48 countries were able to access training courses on the Group-wide digital “peoplenet” HR IT platform. Supporting dialogue between the employee representa- tives and dialogue with Bertelsmann management is also very important. At the Group Dialogue Conference in December 2018, future work developments were discussed. In addition, together with the disabled persons councils, an Inclusion Action Plan was prepared to improve participation of disabled persons in the working environment, and is slated to be adopted in 2019. Continuing to develop the corporate culture is another priority of the HR strategy. In 2018, the Group continued to revise the Bertelsmann Essentials (company values) in accordance with the Sense of Purpose. Bertelsmann has been one of the pioneers in profit sharing since 1970. Accordingly, in 2018, a total of €105 million of the 2017 profit was distributed to employees across the Group (previous year: €105 million). Corporate Responsibility The aim of corporate responsibility (CR) at Bertelsmann is to bring the economic interests in line with the Group’s social and ecological concerns as part of a dialogue with all relevant stakeholders. In view of this, the Bertelsmann CR Council continued its cross- divisional dialogue and the strategic further development of significant Group-wide CR topics in 2018. The focus was on topics of particular relevance relating to employee and social concerns, respect for human rights, the fight against corrup- tion and bribery, and environmental concerns. Bertelsmann made donations and was involved in funding initiatives in the areas of education, culture, science and creativity. 8 Financial Information Combined Management Report

All four business areas at Arvato introduced innovations, with in 2017. However, differences between countries in terms of a strong focus on the use of innovative technologies and on design, as well as creating new services or enhancing exist- ing solutions. Among others, analytics, machine learning and chatbots were used to continue automation of customer com- munication processes and to optimize end-customer service. Its acquisition of 3C Deutschland GmbH has enabled Arvato Financial Solutions to offer a fully automated and digitalized claims management process for car insurance. Solution Group SCM Solutions has continued to develop business intelligence solutions along the supply chain, and Arvato Systems has expanded its innovative cloud services and cloud manage- ment portfolio. Innovations at the Bertelsmann Printing Group included the optimization of existing processes with new technologies and creating innovative products and services. For example, in gravure printing technical innovations were integrated into the production process, making one-step manufacture of products with a wrapper possible. GGP Media expanded its innovative online platform P3, which is used for ordering small printings, to include a completely digital process. Offset printing continued to expand its 3D scanning products and launched a division-spanning project to automate and stan- dardize internal processes with the help of IT. Furthermore, an innovation board was launched in mid-2018 to coordinate innovation topics across divisions. The innovations at Bertelsmann Education Group mainly con- sist of the further development of digital and customized edu- cation offerings and the expansion of existing business areas. Relias continued to strengthen teaching products for medical personnel in emergency care by acquiring the US online edu- cation provider OnCourse Learning. At the same time, Relias developed solutions for providing more data-based support to customers in the healthcare sector in improving performance within companies. Udacity developed new Nanodegree pro- grams, also in the area of artificial intelligence, thus setting further standards in student qualifications for future technol- ogy jobs. Report on Economic Position Corporate Environment Overall Economic Developments economic growth increased in 2018. Monetary tightening in the United States affected international capital flows, which dampened economic expansion in emerging countries. The eurozone was not able to maintain the previous year’s high growth rate. Real GDP grew by 1.8 percent in 2018 compared to 2.4 percent in the previous year. A drop in demand from abroad as well as several country- and sector-specific factors had the greatest negative impact on GDP. The expansion of the German economy was weaker in 2018. Real GDP grew by 1.4 percent compared to 2.2 percent in the previous year. The economic upswing also slowed down in France. Real GDP growth was 1.5 percent in 2018 com- pared to 2.3 percent in 2017. The UK economy grew only slightly against the backdrop of Brexit negotiations. Real GDP grew by 1.4 percent compared to 1.8 percent in the previous year. In the United States, the economy expanded more rapidly. Real GDP growth was 2.9 percent in 2018 compared to 2.2 percent in 2017. Major contributors to this growth were the positive employment situation and its impact on con- sumer expenditures. Developments in Relevant Markets The following analysis focuses on markets and regions that are of a sufficient size and are strategically important from a Group perspective. Growth in European TV advertising markets was mixed in 2018. TV advertising markets grew slightly in France and moderately in the Netherlands, whereas the German market showed a slight decrease and Belgium showed a moderate drop. Spanish and Hungarian TV advertising markets were stable. The markets for printed books achieved slightly positive growth overall in 2018. Sales of printed books in the United States showed moderate growth and in the United Kingdom sales grew slightly, while the Spanish-language market and the German market for printed books were stable. Publisher sales of e-books declined moderately in the United States and in the United Kingdom. The market for audiobooks con- tinued to grow strongly in the United States and the United Kingdom. In 2018 the global economy maintained its economic momen- tum from the previous year, yet the pace slowed somewhat. Real GDP increased by 3.7 percent compared to 3.8 percent The magazine markets in Germany and France in 2018 were characterized by strongly declining print advertising business and significantly declining circulation business, while the digital business in Germany posted strong growth. 10 Financial Information Combined Management Report

Revenues by Division in € millions RTL Group Penguin Random House Gruner + Jahr BMG Arvato Bertelsmann Printing Group Bertelsmann Education Group Bertelsmann Investments Total divisional revenues Corporate/Consolidation Continuing operations Germany Other countries 2,168 257 948 34 1,630 966 1 0 6,004 (145) 5,859 4,337 3,167 492 511 2,470 673 257 12 11,919 (105) 11,814 2018 Total 6,505 3,424 1,440 545 4,100 1,639 258 12 17,923 (250) 17,673 Germany Other countries 2,266 250 964 33 1,521 957 1 – 5,992 (152) 5,840 4,107 3,109 549 474 2,302 724 188 – 11,453 (103) 11,350 2017 Total 6,373 3,359 1,513 507 3,823 1,681 189 – 17,445 (255) 17,190 At €1,440 million, Gruner + Jahr’s revenues were down 4.8 percent year on year (previous year: €1,513 million). The organic growth was 0.4 percent. The lower revenue level is largely attributable to portfolio adjustments, which have in the meantime been completed. This was offset by revenue growth of the digital, agency and press distribution businesses. BMG revenues increased by 7.5 percent to €545 million (previous year: €507 million) due to continued expansion of business. The organic growth was 7.8 percent. Revenues at Arvato rose 7.2 percent to €4,100 million (previous year: €3,823 million). The organic growth was 5.6 percent. The increase stemmed in particular from positive business development in the SCM and Financial Solutions divisions and from changes in reporting rev- enue. Revenues at Bertelsmann Printing Group fell 2.5 percent to €1,639 million (previous year: €1,681 million) due to market effects. The organic growth was -4.2 percent. Bertelsmann Education Group increased its revenues by 36.4 percent to €258 million (previous year: €189 million). The organic growth was 13.9 percent. The rise was primarily the result of the first- time consolidation of HotChalk and the organic expansion of Relias. Bertelsmann Investments’ stakes are generally not con- solidated, so there is usually no revenue reported for this division. The revenue share generated by the growth businesses increased to 34 percent overall (previous year: 32 percent), thanks to organic growth and acquisitions, while the rev- enue share of structurally declining businesses remained stable at 4 percent (previous year: 4 percent). The growth businesses comprise those activities that post continuous revenue increases due to sustained positive market factors and that have been identified as growth priorities as part of Group strategy. These include the digital businesses of RTL Group and Gruner + Jahr; the TV production, music business and service businesses in the Arvato divisions of SCM Solutions and Financial Solutions and Systems; and the education business. The structurally declining busi- nesses comprise those activities that post sustained reve- nue losses due to market factors. These include in particular the gravure printing activities and the storage media replica- tion business. There were only minor changes in the geographical breakdown of revenues compared to the previous year. The share of revenues generated in Germany was 33.2 percent compared to 34.0 percent in the previous year. The revenue share Consolidated Revenues by Region in percent Consolidated Revenues by Category in percent 6.2 Other countries 33.2 Germany 36.1 Services 16.3 Rights and licenses 22.0 United States 18.9 Other European countries 13.2 France 6.5 United Kingdom 23.0 Advertising 24.6 Own products and merchandise 12 Financial Information Combined Management Report

Special Items Special items in the financial year 2018 totaled €-296 million compared to €-83 million in the previous year. They consist of impairment losses amounting to €-175 million ( previous year: €-100 million), results from disposals of invest- ments and remeasurements totaling €157 million ( previous year: €193 million), as well as restructuring expenses and other adjustments totaling €-278 million (previous year: €-176 million). The increase in restructuring expenses is due primarily to adjustments related to strategic reorientation of the CRM activities (see also the reconciliation of EBIT to operating EBITDA in the notes to the Consolidated Financial Statements). EBIT EBIT amounted to €1,620 million in the financial year 2018 (previous year: €1,896 million) after adjusting operating EBITDA for special items totaling €-296 million (previous year: €-83 million), and the amortization, depreciation, impair- ments and reversals of impairments on intangible assets and property, plant and equipment totaling €-670 million (previ- ous year: €-657 million), which were not included in adjust- ments. Group Profit or Loss The financial result was €-216 million, compared with the previous year’s amount of €-219 million. The decrease in income tax expense from €-472 million in the previous year to €-301 million was basically the result of the lower earnings before taxes and the measurement of deferred taxes. This produced earnings after taxes from continuing operations of €1,103 million (previous year: €1,205 million). Taking into account the earnings after taxes from discontinued opera- tions of €1 million (previous year: €-7 million), this resulted in Group profit of €1,104 million (previous year: €1,198 million). The share of Group profit attributable to non-controlling interests came to €351 million (previous year: €422 million). The share of Group profit attributable to Bertelsmann share- holders was €753 million (previous year: €776 million). At the Annual General Meeting of Bertelsmann SE & Co. KGaA, an unchanged year-on-year dividend payout of €180 million will be proposed for the financial year 2018 (previous year: €180 million). Net Assets and Financial Position Financing Guidelines The primary objective of Bertelsmann’s financial policy is to achieve a balance between financial security, return on equity and growth. For this, Bertelsmann bases its financing policy on the requirements of a “Baa1/BBB+” credit rating and the associated qualitative and quantitative criteria. Credit ratings and capital market transparency make a considerable contri- bution to the company’s financial security and independence. In accordance with the Group structure, the capital allocation is made centrally by Bertelsmann SE & Co. KGaA, which pro- vides the Group companies with liquidity and manages the issuance of guarantees and letters of comfort for them. The Group consists largely of a single financial unit, thereby opti- mizing capital procurement and investment opportunities. Bertelsmann utilizes a financial control system employing quantitative financial targets concerning the Group’s eco- nomic debt and, to a lesser extent, its capital structure. One of the financial targets is a dynamic leverage factor limited to the defined maximum of 2.5. As of December 31, 2018, the lever- age factor of Bertelsmann was 2.7, higher than the previous year’s level (December 31, 2017: 2.5). This was attributable mainly to an increase in net financial debt due to the acquisi- tion of the US online education provider OnCourse Learning in the fourth quarter of 2018 (see further explanation in the section “Alternative Performance Measures”). As of December 31, 2018, economic debt increased to €6,619 million from €6,213 million in the previous year due to an increase in net financial debt to €3,932 million (Decem- ber 31, 2017: €3,479 million). In contrast, the present value of obligations from operating leases decreased to €1,161 million (December 31, 2017: €1,261 million), particularly due to the sale of the French soccer club Girondins de Bordeaux. Provisions for pensions and similar obligations rose to €1,738 million as of December 31, 2018 (December 31, 2017: €1,685 million), primarily due to a decrease in the measure- ment of plan assets. Another financial target is the coverage ratio. This is calculated as the ratio of operating EBITDA, used to determine the leverage factor, to financial result and should exceed four. In the report- ing period, the coverage ratio was 11.1 (previous year: 11.2). 14 Financial Information Combined Management Report

Consolidated Cash Flow Statement (Summary) in € millions Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Change in cash and cash equivalents Exchange rate effects and other changes in cash and cash equivalents Cash and cash equivalents on 1/1 Cash and cash equivalents on 12/31 Less cash and cash equivalents included within assets held for sale Cash and cash equivalents on 12/31 (according to the consolidated balance sheet) 2018 1,437 (1,130) (372) (65) 28 1,442 1,405 – 1,405 2017 1,605 (760) (755) 90 (24) 1,376 1,442 (2) 1,440 was 91 percent (previous year: 92 percent); see also the sec- tion “Broadly Defined Performance Indicators.” The cash flow from investing activities was €-1,130 million ( previous year: €-760 million). This included investments in intan- gible assets, property, plant and equipment, and financial assets of €-878 million (previous year: €-890 million). The purchase price payments for consolidated investments (net of acquired cash and cash equivalents) were €-556 million (previous year: €-213 million). Proceeds from the sale of subsidiaries and other business units and from the disposal of other non- current assets were €304 million (previous year: €343 million). Cash flow from financing activities was €-372 million ( previous year: €-755 million). Dividends paid to shareholders of Bertelsmann SE & Co. KGaA remained unchanged at €-180 million (previous year: €-180 million). Div- idends to non-controlling interests and further payments to partners in partnerships came to €-356 million ( previous year: €-743 million). This includes a special dividend of €57 million (previous year: €373 million) as part of the increase of the shareholding in Penguin Random House. As of December 31, 2018, Bertelsmann had cash and cash equivalents of €1.4 billion (previous year: €1.4 billion). Off-Balance-Sheet Liabilities The off-balance-sheet liabilities include contingent liabilities and other financial commitments, almost all of which result from operating activities conducted by the divisions. Off- balance- sheet liabilities declined moderately year on year. The existing off-balance-sheet liabilities as of December 31, 2018, had no significant negative effects on the Group’s net assets, financial position and results of operation for the past or future financial year. Investments investments Total including financial debt acquired of €27 million (previous year: €14 million) amounted to €1,461 mil- lion in the financial year 2018 (previous year: €1,117 million). 16 Financial Information Combined Management Report Investments according to the cash flow statement amounted to €1,434 million (previous year: €1,103 million). As in previous years, the majority of the €325 million investment in property, plant and equipment ( previous year: €360 million) stemmed from Arvato. Investments in intangible assets came to €295 million ( previous year: €319 million) and were primar- ily attributable to RTL Group for investments in film rights and to BMG for the acquisition of music catalogs. The sum of €258 million was invested in financial assets (previous year: €211 million). These include, in particular, the investments of Bertelsmann Investments. Purchase price payments for con- solidated investments (less acquired cash and cash equiva- lents) totaled €556 million in the reporting period ( previous year: €213 million) and were attributable, among other things, to the acquisition of the US online education provider OnCourse Learning. Balance Sheet Total assets amounted to €25.3 billion as of December 31, 2018 (previous year: €23.7 billion). Cash and cash equiva- lents amounted to €1.4 billion (previous year: €1.4 billion). Investments by Division in € millions RTL Group Penguin Random House Gruner + Jahr BMG Arvato Bertelsmann Printing Group Bertelsmann Education Group Bertelsmann Investments Total investments by division Corporate/Consolidation Total investments 2018 262 43 54 107 233 36 484 202 1,421 13 1,434 2017 308 80 38 157 285 40 78 114 1,100 3 1,103

Performance of the Group Divisions RTL Group In 2018, RTL Group once again achieved record-level revenues; operating EBITDA decreased against the backdrop of high gains from disposals of buildings in the previous year, but increased on a comparable basis. As part of its Total Video strategy, RTL Group expanded its video-on-demand (VOD) services, primarily in Germany, France and the Netherlands, and saw a significant increase in subscriber numbers. At the same time, the group invested more in in-house productions and high-quality content for international distribution. Online video views on RTL Group’s various digital platforms increased markedly in the year under review, to a total of 497 billion (previous year: 420 billion). Despite negative exchange-rate effects, RTL Group’s revenues rose by 2.1 percent to a new record level of €6.5 billion (previous year: €6.4 billion). The rapidly growing digital business, the content production arm Fremantle and RTL Nederland were the primary growth contributors. Digital revenues, which mainly comprise revenues from multi- platform networks, VOD offerings and ad-tech businesses, increased to €985 million in the year under review (previous year: €826 million) and thus contributed 15.1 percent (previous year: 13.0 percent) to RTL Group’s total revenues. Operating EBITDA fell by 5.1 percent to €1.4 billion in 2018, after €1.5 billion in the previous year. Excluding the previous year’s capital gain on disposal, the increase was 1.3 percent. The EBITDA margin was 21.5 percent, following 23.2 percent in the previous year. Mediengruppe RTL Deutschland’s revenues and earnings remained on a high level, although they slightly softened over the previous year. The declining German TV advertis- ing market, but also major sports events such as the soccer World Cup and the Olympic Winter Games, all of which were broadcast on public television, contributed to this develop- ment. The family of channels’ combined average audience share in the main target group was 27.5 percent (previous year: 28.9 percent). At the end of 2018, Mediengruppe RTL relaunched its VOD service TV Now, which increasingly offers local, exclusive content and online-first formats. Mediengruppe RTL Deutschland teamed up with partners to launch the European NetID Foundation and with it a single log-in standard. In France, Groupe M6’s revenues were down slightly on the previous year, while operating EBITDA increased. In particu- lar, M6 Web and a capital gain from the transfer of Girondins de Bordeaux players contributed to the increase in earnings. The soccer club was sold at the end of the year. Groupe M6 achieved a combined TV audience share of 21.4 percent in the main target group (previous year: 22.3 percent). In 18 Financial Information Combined Management Report the summer of 2018, Groupe M6, together with partners, announced a joint online video platform called Salto. RTL Nederland recorded higher advertising revenues in 2018, as well as growth in its subscription VOD platform Videoland and other digital businesses. Revenues and earn- ings of RTL Nederland increased. Fremantle reported substantial growth for 2018, driven by strong business performance in North America and Germany. The company was successful with numerous drama series such as “My Brilliant Friend” and “ Deutschland 86,” which met with great interest from international audiences. On January 1, 2018, Bert Habets took over as sole CEO of RTL Group. Revenues by Region in percent (without intercompany revenues) 2.9 Other countries 15.0 United States 22.7 Other European countries 33.1 Germany 22.5 France 3.8 United Kingdom Revenues by Category in percent 5.8 Services 35.8 Rights and licenses 2.2 Own products and merchandise 56.2 Advertising Revenue Breakdown 8 6 4 2 0 €6.4 billion -1.0% 0.0% 3.1% €6.5 billion Exchange rates Portfolio and other effects Organic growth 2017 Change 2018

Gruner + Jahr Gruner + Jahr continued its transformation. Revenues declined to €1.4 billion (previous year: €1.5 billion) due to portfolio adjustments; organically, revenues remained stable at the previous year’s level. The digital revenue share was fur- ther expanded in the core countries. At €140 million (previous year: €145 million), operating EBITDA was moderately below the previous year. The EBITDA margin improved to 9.7 percent (previous year: 9.6 percent). G+J once again grew both its revenues and earnings in Germany. The decline in the print advertising business and newsstand sales, which was moderate compared to the rest of the market, was offset by strong digital growth, the expan- sion of the licensing business and new magazine businesses. Territory, the agency for content-driven communications, strongly increased its revenues and earnings. The growing digital business also made a major contribu- tion to the good business performance in Germany. In the German core market, the digital share of total revenues rose to around 29 percent. This increase was mainly driven by the strong performance of the AppLike marketing platform, which more than doubled its revenues. Other positive contributors were the expansion of the licensing business, including at Revenues by Region in percent (without intercompany revenues) 1.3 Other countries 65.3 Germany “Schöner Wohnen,” and the growth of “Eat the World.” In 1.4 United States addition, G+J launched several innovative new magazines in 2018. Along with the gourmet magazine “B-Eat,” G+J shaped and enriched the personality magazine genre with the addi- tion of “Guido” and “Dr. v. Hirschhausen’s Stern Gesund Leben.” DDV Mediengruppe generated revenues on par with the previous year. 9.1 Other European countries 0.7 United Kingdom 22.2 France G+J France’s business recorded a sharp drop in overall rev- enues and earnings. Besides the sale of the title “VSD,” this was primarily due to the digital marketing platforms. The brand business, on the other hand, increased its earnings consider- ably despite declining print revenues. The digital offerings of the classic magazine brands – for example, “Voici,” “Gala” and “Télé Loisirs” – again recorded high growth in revenues and earnings. Revenues by Category in percent 28.6 Services 1.1 Rights and licenses 43.5 Own products and merchandise 26.8 Advertising Revenue Breakdown 2 1.5 1 0.5 0 €1.5 billion 0.0% -5.2% 0.4% €1.4 billion Exchange rates Portfolio and other effects Organic growth 2017 Change 2018 20 Financial Information Combined Management Report

made significant progress in transforming its existing busi- ness models, and was able to win numerous customer orders, especially in the fast-growing cloud business. Arvato Arvato recorded a very strong business performance in 2018. Revenues from Bertelsmann’s service businesses rose by 7.2 percent to €4.1 billion (previous year: €3.8 billion), and operating EBITDA improved by 17.8 percent to €377 million (previous year: €320 million). In particular, the drivers behind this extremely positive performance were the services pro- vided for customers in high-tech and fashion by Arvato SCM Solutions, Arvato Financial Solutions’ financial services busi- nesses and Arvato Systems’ innovative IT solutions. Arvato’s EBITDA margin improved to 9.2 percent from 8.4 percent in the previous year. After Bertelsmann had indicated at the end of January 2018 that it was reviewing strategic options for Arvato’s CRM busi- ness, in September 2018 it was announced that Bertelsmann and Morocco’s Saham Group were planning to merge their global CRM businesses. The new group of companies, Majorel, which took up operations on January 4, 2019, is one of the market leaders in Europe, Africa and the Middle East, and has a strong presence in America and Asia. Arvato CRM Solutions’ service businesses delivered a satis- factory overall performance in 2018, contributing to Arvato’s Revenues by Region in percent (without intercompany revenues) revenue and earnings growth. The main growth driver was the 6.8 Other countries 38.9 Germany expansion of the business with large, international clients in the high-tech and e-commerce sectors. In Germany, the con- tract with a large mobile service provider was renewed, and the global site network was built up and expanded. The logistics services business within the SCM Solution Group experienced strong organic growth during the report- ing period – especially as a result of new orders and clients gained in the fashion, high-tech and healthcare sectors in the previous year. In addition, important master contracts with customers were renewed. The existing worldwide network of locations was enhanced with the opening of new distribution centers and the expansion of existing ones. The financial services businesses bundled in Arvato Financial Solutions also developed positively during the reporting period. Revenues and earnings were up year on year. This was 8.1 United States 29.5 Other European countries Revenues by Category in percent 94.5 Services mainly supported by a good business performance in the GSA Revenue Breakdown 11.4 France 5.3 United Kingdom 5.5 Own products and merchandise region. 3C Deutschland GmbH was acquired in the first half of 2018 with the aim of expanding and further automating the existing range of solutions for the German automotive insur- ance industry. The IT services provider Arvato Systems grew organically and profitably in the reporting period. Business with its proprietary software solutions was successfully expanded and further developed, among other things with the addition of a major client from the United States. The IT services provider also 6 4 2 0 22 Financial Information Combined Management Report €3.8 billion -1.5% 3.1% 5.6% €4.1 billion Exchange rates Portfolio and other effects Organic growth 2017 Change 2018

Bertelsmann Education Group Driven by the rising demand for educational services, the Bertelsmann Education Group’s activities saw continued growth in 2018. The Group markedly increased its revenues and operating result, and all of the division’s companies continued the strategic development of their educational and service offerings. Revenues from education businesses grew significantly in the 2018 financial year, rising by 36.4 percent to €258 million (previous year: €189 million). The full consolidation of the uni- versity services provider HotChalk, the continued growth of the e-learning provider Relias and the acquisition of the US educa- tion company OnCourse Learning were major contributors to this. As a result, the Bertelsmann Education Group’s operating EBITDA improved significantly to €37 million (previous year: €3 million). The EBITDA margin was 14.5 percent (previous year: 1.8 percent). The Bertelsmann subsidiary Relias achieved double-digit organic growth during the reporting period and expanded its client base to more than 8.400 institutions whose employees enrolled in about 37.2 million online courses in 2018. In November, Bertelsmann acquired full ownership of the US online education provider OnCourse Learning from the private equity firm CIP Capital. It integrated the firm’s healthcare training division into Relias, thereby significantly expanding the latter’s acute-care activities. The online learning provider Udacity further developed its range of courses and introduced new Nanodegree programs in fields including artificial intelligence. It also continued expanding its B2B business; at the end of 2018, more than 50 corporate clients were using Udacity services. Bertelsmann owns a significant stake in the Silicon Valley-based company. During the period under review, the Bertelsmann Education Group also acquired a majority stake in HotChalk, a US pro- vider of education technology services. The company recorded a significant increase in earnings and significantly expanded its partnership with its largest customer. The number of stu- dents enrolled in courses supported by HotChalk also rose. Alliant International University, which specializes in psychol- ogy and education, recorded an increase in the number of students in the past year and continued building its digital learning portfolio. 24 Financial Information Combined Management Report Revenues by Region in percent (without intercompany revenues) 2.3 Other countries 0.4 Germany 97.3 United States Revenues by Category in percent 100.0 Services Revenue Breakdown 300 200 100 0 €189 million -5.9% 28.4% 13.9% €258 million Exchange rates Portfolio and other effects Organic growth 2017 Change 2018

General Statement by Company Management on the Economic Situation Over the financial year 2018, Bertelsmann’s businesses posted overall positive development. The Group improved its growth profile with the continuing organic and acquisi- tive expansion of its growth platforms. Bertelsmann also systematically continued its transformation into a faster- growing, more digital, more international and more diversi- fied Group. Group revenues in the reporting period rose moderately by 2.8 percent to €17.7 billion from €17.2 billion in the previous year and were therefore in line with estimates (outlook in 2017 Annual Report: moderate increase in revenues). Organic growth was 2.7 percent. Operating EBITDA at €2,586 million was only slightly below (by 1.9 percent) the previous year’s high figure of €2,636 million, which included material capital gains resulting from strategic real estate transactions (out- look in the 2017 Annual Report: moderate decline in oper- ating EBITDA). At €121 million, the BVA used for Group manage ment was strongly below the previous year’s figure of €163 million (outlook in 2017 Annual Report: strongly declin- ing BVA). The development reflects the increase in the aver- age level of capital invested and the lower operating result. the cash and cash equivalents reported at €1.4 billion (December 31, 2017: €1.4 billion) represent sufficient liquidity. The ratings agencies Moody’s and S&P continued to rate Bertelsmann as “Baa1” and “BBB+,” respectively, with a stable outlook. Alternative Performance Measures In this Combined Management Report, the following Alternative Performance Measures, which are not defined in accordance with IFRS, are used to explain the results of operations and/or net assets and financial position. These should not be considered in isolation but as complementary information for evaluating Bertelsmann’s business situation and are differentiated in terms of strictly defined and broadly defined key performance indicators, in the same way as the value-oriented management system. The organic growth is calculated by adjusting the reported revenue growth for the impact of exchange rate effects, corporate acquisitions and disposals as well as other effects. In the financial year 2018, steady efforts continued to focus When determining the exchange rate effects, the functional on implementing the strategy. In addition to the focus at RTL Group on local content and in-house productions and on new magazines at Gruner + Jahr, the merging of CRM businesses at Bertelsmann and the Saham Group, effective as of 2019, made a contribution to strengthening core businesses. As part of the digital transformation, RTL Group continued to expand its video-on-demand offerings and also merged the online advertising marketers SpotX and SmartClip. Verlags gruppe Random House strengthened its offerings in the audio market with the acquisition of the audiobook publisher DAV, and Gruner + Jahr continued to develop the app discovery platform AppLike. Growth platforms were expanded, especially in the area of education with the acquisition of the US online education provider OnCourse Learning and the acquisition of a majority stake in the US university services provider HotChalk. Bertelsmann also made progress in China, India and Brazil with a number of new and follow-on investments through the funds grouped under Bertelsmann Investments. currency that is valid in the respective country is used. The other effects include changes in methods and reporting, for example. These chiefly involve changes in presentation in the income statement due to application of the new IFRS 15 (further details are presented in the notes to the Consolidated Financial Statements in the section “Impact of New Financial Reporting Standards”). Operating EBITDA Operating EBITDA is determined as earnings before interest, tax, depreciation, amortization and impairment losses and is adjusted for special items. The adjustments for special items serve to determine a sustainable operating result that could be repeated under normal economic circumstances and is not affected by special factors or structural distortions. These special items primarily include impairment losses and reversals Net assets and financial position remain solid despite the Organic Revenue Growth increased economic debt. As a result of the acquisition of OnCourse Learning in the fourth quarter of 2018, the lever- age factor during the reporting period was 2.7, above the previous year’s level. The maturity profile of the capital market financings was further optimized through the issue made in the financial year 2018. As of December 31, 2018, in percent Organic revenue growth Exchange rate effects Portfolio and other effects Reported organic revenue growth 2018 2.7 (1.7) 1.8 2.8 2017 1.7 (1.0) 0.7 1.4 26 Financial Information Combined Management Report

Cash Conversion Rate in € millions Cash flow from operating activities Income taxes paid Change in provisions for pensions and similar obligations Investments in intangible assets and property, plant and equipment (less proceeds from the sale of non-current assets) Further adjustments Operating free cash flow Operating EBITDA Amortization/depreciation, impairments/reversals of intangible assets and property, plant and equipment not included in special items Operating EBIT Cash Conversion Rate (in percent) Operating free cash flow / Operating EBIT 2018 1,437 534 113 (529) 198 1,753 2,586 (670) 1,916 91 2017 1,605 434 121 (489) 151 1,822 2,636 (657) 1,979 92 Cash Conversion Rate measures on payments. The operating EBITDA is used to calculate the operating EBIT by deducting amortization The cash conversion rate serves as a measure of cash generated from business activities and is calculated as the ratio of operating free cash flow to operating EBIT. The operating free cash flow is determined on the basis of and depreciation, provided that these are not included in special items. The Group aims to maintain a cash con- version rate of 90 percent to 100 percent as a long-term average. the cash flow from operating activities as reported in the consolidated cash flow statement, whereby the impact of paid income taxes and the change in provisions for pen- sions and similar obligations on cash flow from operating activities is offset. Operating free cash flow is also reduced by investments in intangible assets and property, plant and equipment or, if applicable, increased by proceeds from the sale of non-current assets. Further adjustments are made to ensure an allocation of capital flows to the rel- evant periods and to offset the impact of payment flows resulting from special items on the operating free cash flow in a way that is methodically consistent with the operating EBITDA. Further adjustments in the financial year 2018 mainly reflected the impact of restructuring Economic Debt Net financial debt is calculated on the basis of gross finan- cial debt, which comprises the balance sheet items current and non-current financial debt minus cash and cash equiva- lents. Economic debt is defined as net financial debt less the 50 percent par value component of the hybrid bonds plus provisions for pensions, profit participation capital and the net present value of operating leases. In calculat- ing economic debt, the hybrid bonds are accounted for at 50 percent as both bonds are classified by the rating agen- cies as 50 percent equity. Economic debt is modified for the purposes of calculating the leverage factor. Economic Debt in € millions Gross financial debt Less cash and cash equivalents Net financial debt Less 50 percent of the par value of the hybrid bonds Provisions for pensions Profit participation capital Net present value of operating leases Economic debt 28 Financial Information Combined Management Report 2018 5,337 (1,405) 3,932 (625) 1,738 413 1,161 6,619 2017 4,919 (1,440) 3,479 (625) 1,685 413 1,261 6,213

The Group auditors inspect the risk early-warning system for its capacity to identify developments early on that could threaten the existence of Bertelsmann SE & Co. KGaA according to section 91(2) of Germany’s Stock Corporation Act (AktG) and then report their findings to the Supervisory Board of Bertelsmann SE & Co. KGaA. Corporate Audit conducts ongoing reviews of the adequacy and functional capability of the RMS in all divisions apart from RTL Group. RTL Group’s RMS is evaluated by the respective internal auditing department and by the external auditor. Any issues that are identified are promptly remedied through appropriate measures. The Bertelsmann Executive Board defined the scope and focus of the RMS based on the ensure IFRS-compliant accounting as well as compliance with reporting deadlines and obligations. These preventive measures are supplemented by specific controls in the form of analyses by the Corporate Financial Reporting depart- ment of Bertelsmann SE & Co. KGaA and RTL Group (for the preconsolidated subgroup). The purpose of such analy- ses is to identify any remaining inconsistencies. The control- ling departments at the Group and division levels are also integrated into the internal management reporting. Internal and external reporting are reconciled during the quarterly segment reconciliation process. The further aim in introduc- ing a globally binding control framework for the decentral- ized accounting processes is to achieve a standardized ICS specific circumstances of the company. However, even format at the level of the local accounting departments of an appropriately designed and functional RMS cannot all fully consolidated Group companies. The findings of the guarantee with absolute certainty that risks will be identified and controlled. Accounting-Related Risk Management System and Internal Control System The objectives of the accounting-related RMS and ICS are to ensure that external and internal accounting are proper external auditors, Corporate Audit and the internal auditing department of RTL Group are promptly discussed with the affected companies and solutions are developed. An annual self-assessment is conducted to establish reporting on the quality of the ICS in the key fully consolidated Group compa- nies. The findings are discussed at the divisional level. Like the RMS, each ICS cannot guarantee with absolute certainty that significant misinformation in the accounting process and reliable in accordance with applicable laws and that can be prevented or identified. information is made available without delay. Reporting should also present a true and fair view of Bertelsmann’s net assets, financial position and results of operation. The following statements pertain to the Consolidated Financial Statements (including the notes to the sections “Consolidated Financial Statements” and “Combined Management Report”), interim reporting and internal management reporting. The ICS for the accounting process consists of the follow- ing areas: The Group’s internal rules for accounting and the preparation of financial statements (e.g., IFRS manual, guidelines and circulars) are made available without delay to Corporate Audit and the internal auditing department of RTL Group evaluate the accounting-related processes as part of their auditing work. As part of the auditing process, the Group auditor also reports to the Audit and Finance Committee of the Bertelsmann SE & Co. KGaA Supervisory Board about any significant vulnerabilities of the accounting- related ICS that were identified during the audit and the findings regarding the risk early-warning system. Major Risks to the Group all employees involved in the accounting process. The Group Bertelsmann is exposed to a variety of risks. The major risks financial statements are prepared in a reporting system to Bertelsmann identified in the risk reporting are listed in that is uniform throughout the Group. Extensive automatic order of priority in the table below. Details on information system controls ensure the consistency of the data in the security risks can be found in a separate chapter further financial statements. The system is subject to ongoing development through a documented change process. Sys- tematized processes for coordinating intercompany trans- actions serve to prepare the corresponding consolidation steps. Circumstances that could lead to significant misinfor- mation in the Consolidated Financial Statements are moni- tored centrally by employees of Bertelsmann SE & Co. KGaA and by RTL Group (for the preconsolidated subgroup) and then verified by external experts as required. Central contact persons from Bertelsmann SE & Co. KGaA and the divisions are also in continuous contact with local subsidiaries to below. In line with the level of possible financial loss, the risks are classified as low, moderate, significant, consider- able or endangering for the purposes of risk tolerability. The risk inventory carried out did not identify any risks that would be classified as considerable or endangering. Given the diversity of the businesses in which Bertelsmann is active and the corresponding diversity of risks to which the various divisions are exposed, the key strategic and operational risks to the Group that have been identified are specified below. Risks from acquisitions and information 30 Financial Information Combined Management Report

Falling e-book sales constitute one risk for Penguin Random House, triggered in particular by falling sales prices. Declining revenues from physical books, due to declining sales volumes in brick-and-mortar book retail, is another risk. Penguin Random House is countering these risks by introduc- ing differentiated pricing, increasing online sales of physical arising from digitization and ongoing automation could in some cases damage the business model and competitiveness in individual customer segments. New competitors entering the market could intensify the competitive pressure and lead to lower margins. By developing the range of services, the aim is to improve the competitive position and to increase books, and continuously examining alternative selling and customer loyalty through integrated solutions. A worsening of marketing options. Any risk of bad debt loss is being limited through debtor management and in some cases through credit insurance. In addition to the risk of cost increases, Penguin Random House is finding itself exposed to risks from general economic uncertainty, which could lead to lower sales. The risks are addressed through careful management of supplier relationships and innovative marketing activities, and by maintaining a flexible cost structure that allows for a quick response in the event of an economic downturn. The risk of a deterioration of the overall economic environ- ment and the resulting declines in advertising and cir- culation revenues, as well as the continuously changing conditions in the digital business, represent significant chal- lenges for Gruner + Jahr. A changing market environment, marked by product innovations and increased consolida- tion of agencies and marketers, is confronted with a wide- spread decrease in demand for print products, which as a result of pressure on prices and conditions can lead to lower margins. Furthermore, there is the risk of losing key custom- ers as advertising customers could switch to other media, notably digital media. The risks are being countered by cost the economic environment could result in declining revenues and thus lower margins, which would necessitate cost-cutting measures and capacity downsizing. Broad diversification across regions and sectors helps to reduce this risk. For Bertelsmann Printing Group, customer risks are the most significant risks. In addition, price and margin pressures result from a market environment that is characterized by over- capacity. Along with the dependence on a handful of suppli- ers, there are further risks on the supplier side associated with rising raw material prices – particularly for paper. Furthermore, deterioration in the economic environment also may lead to declining circulations. Similarly, the increasing use of digital media is accelerating the decline in circulation, particularly in the magazine segment. These risk minimization strategies are based, in particular, on the expansion of innovative print ser- vices, constantly optimizing cost structures and monitoring markets on an ongoing basis. For the Bertelsmann Education Group, increasing competition with other online providers, particularly in the US healthcare market, can lead to growing price and margin pressure and and customer management; the development of new, in impact the planned growth targets. These risks are being particular digital, forms of offerings; and product, price and countered in particular through strategic partnerships and quality improvements. marketing measures. Risks that affect BMG primarily concern the client portfolio (extending contracts with artists/authors and distribution partners), its monetarization (physical and digital distribution partners), corporate growth (integration of acquisitions) and the scalability of the company (including technical platform and organization). Market risks are addressed through high revenue diversification (clients/catalogs, business segments, regions) and contractual protection clauses (securing the recouping of advances). Arvato sees itself as particularly exposed to risks from customer and supplier relationships. The potential loss of key customers is being countered through contracts offering comprehensive service packages with simultaneously flexible cost structures. On the supplier side there are risks associated with the availability of services. Countermeasures include an active exchange with existing suppliers and entering into long-term framework agreements. Technological trends The key risks for Bertelsmann Investments consist of falling portfolio valuations and a lack of exit opportunities. These risks are being addressed through a standardized investment process and continuous monitoring of investments. The increasing pace of change in the markets and in Bertelsmann’s business segments means that employees will need to be more willing and able to adapt in the future. There are also continuing demographic risks that impact the recruitment, development and retention of talent as a result of shifts in the age distribution of the workforce. To counter- act this, employees are being offered further individual edu- cation, comprehensive health programs, a competitive salary and flexible working models. Bertelsmann is also enhancing its talent management by pushing forward on digitization of the recruiting process and making it easier for employees to switch jobs within the Group by harmonizing processes and structures. 32 Financial Information Combined Management Report

published the full audience results for Fun Radio. In parallel to the above procedure, the main competitors of Fun Radio also filed, in December 2016, a claim for damages, claiming Aside from the matters outlined above, no further significant legal and regulatory risks to Bertelsmann are apparent at this time. unfair competition, but this procedure is suspended until the Financial Market Risks end of the judicial expertise. In the meantime, four of the six claimants withdrew their claim from the proceedings. As an international corporation, Bertelsmann is exposed On February 22, 2018, the Spanish Competition Authority (CNMC) communicated to Atresmedia the opening of a proceeding for sanctions in relation to possible practices rate and currency risks. These risks are largely controlled by the Central Financial Department on the basis of guidelines established by the Bertelsmann Executive Board. Derivative to various forms of financial market risk, especially interest restricting competition prohibited by article 1 of the Spanish Competition Act. On February 6, 2019, the CNMC notified the Statement of Objections in which it assumes proven that specific commercial practices by Atresmedia are restrictive of competition. The directors of Atresmedia and their legal advi- sors take the view that the aforesaid Statement of Objections is not sufficiently founded and have confidence in a positive outcome for Atresmedia, either during the administrative pro- ceeding or in court proceeding in the event that the CNMC will take a decision imposing sanctions. Foreign direct investments in the People’s Republic of China are subject to a number of regulatory restrictions. To satisfy local requirements, some of Bertelsmann’s activities in China are held as so-called VIE structures. These types of arrange- ments are standard market practice for investments in China. However, these structures are rarely the subject of legal dis- putes in China, which means that there is a certain risk that it will not be possible to safeguard VIE structures through the courts, particularly if the People’s Republic changes its poli- cies toward investments by foreigners (particularly in respect to VIE structures) or if courts and authorities change their case law or administrative practice. The draft “PRC Foreign Invest- ment Law” of 2015 was reworked in December 2018 by the Chinese Ministry of Commerce in view of the US-China trade conflict and equal treatment of foreign investors in China. In financial instruments are used solely for hedging purposes. Bertelsmann mainly uses currency derivatives to hedge exist- ing foreign currency risks from intercompany financing and operating liabilities. Some firm commitments denominated in foreign currency are partially hedged when they are made, with the hedged amount being adapted over time. A number of subsidiaries are based outside the eurozone. The result- ing translation risk to the leverage factor is managed based on economic debt in relation to operating EBITDA (leverage factor). Bertelsmann’s long-term focus is on the maximum leverage factor permitted for the Group. Foreign currency translation risks arising from net investments in foreign enti- ties are not hedged. The cash flow risk from interest rate changes is centrally monitored and controlled as part of interest rate management. The aim is to achieve a balanced ratio of different fixed interest rates through the selection of appropriate maturity periods for the originated financial assets and liabilities affecting liquidity and through the ongoing use of interest rate derivatives. The liquidity risk is regularly monitored on the basis of the budget planning. A syndicated loan and appropriate liquidity provisions form a sufficient risk buffer for unplanned payments. Counterparty risks exist in the Group in respect to invested cash and cash equivalents and in an amount equivalent to the positive fair value from exist- ing derivatives and are exclusively conducted with a defined group of banks with an impeccable credit rating. Within the contrast to the draft of 2015, this version no longer refers to guidelines, a risk limit specified by the Bertelsmann Executive VIE structures, and some commentators assume that VIE structures will accordingly continue to be unregulated. If pro- visions of this law are infringed, all income could be seized from forbidden or also only restricted investments. Other commentators presume that the Chinese government would treat (only) Chinese companies in critical industries as for- eign companies, despite their VIE structure. Further develop- ments in this legislative process are being keenly observed by local Bertelsmann lawyers and their advisors in cooperation with the Corporate Legal Department in order to anticipate the effects of the law as early as possible. This affects com- panies within Fremantle, BMG, Arvato and the Bertelsmann Education Group, as well as investments by Bertelsmann Asia Investments (BAI). Board has been issued for financial assets and derivatives for each counterparty. Compliance with this limit is regularly monitored by the Central Financial Department. The guidelines concerning the investment of cash and cash equivalents are continuously monitored and extended if necessary. Financial investments are made on a short-term basis so that the invest- ment volume can be reduced if the credit rating changes. Overall, the financial market risks are estimated as low. General Statement on the Risk Situation The risks identified in the financial year 2018 are not endan- gering. Neither are there any substantial risks discernible that could threaten the existence of the Group. 34 Financial Information Combined Management Report

BMG’s focus is on organic growth through the signing of additional songwriter and artist clients. There may also be opportunities for selective acquisitions of music rights cata- logs. The growing market penetration of subscription-based music streaming services offers significant opportunities to Other opportunities could arise from changes to the legal and regulatory environment. The financial opportunities are largely based on a favor- able development of interest and exchange rates from expand the recorded music and music publishing market Bertelsmann’s point of view. internationally. At Arvato, interdivisional cooperation and major projects can provide additional opportunities for acquiring new custom- ers. The global e-commerce market will continue its dynamic growth over the next few years. Arvato could participate sig- nificantly in this growth through new services, particularly those offered by the Solution Groups SCM and Financial Solutions. Further growth opportunities from the ongoing digitization lie in the development of innovative IP-based and cloud-based IT services. The Bertelsmann Printing Group businesses may decline less steeply through additional volumes of existing and new custom ers. There could also be a further consolidation of competitors, which could result in an additional strengthening of Bertelsmann Printing Group’s own market position. The education business is being developed as Bertelsmann’s third earnings pillar, alongside the media and service busi- nesses. A further shift away from traditional classroom-based delivery methods toward online and skill-based training could offer further growth opportunities for the education business. The growing online education market also offers organic growth opportunities for Bertelsmann Education Group busi- nesses. For example, Relias has the potential to grow through the expansion of employee assessment and data analytics products, and through internationalization. Owing to the lack of skilled workers and the ongoing demand for further educa- tion in the technology sector, Udacity has an opportunity to become a premium brand in the area of IT and technology training. For Bertelsmann Investments fund activities, there is the opportunity to realize higher-than-expected profits, thanks to increasing portfolio valuations or through the disposal of investments. Outlook Anticipated Overall Economic Development Bertelsmann anticipates that economic conditions will develop as follows in 2019. The global economy is expected to continue to grow in 2019, although less strongly than in the previous year. Due to the higher utilization of overall capacities in most economies, slower growth is anticipated. The Kiel Institute for the World Economy (IfW) estimates that global production will increase by 3.4 percent in 2019, compared to 3.7 percent in 2018. Risks to economic development are present especially in the eurozone, due to the looming disorderly withdrawal of the United Kingdom from the EU. In addition, the insecurity caused by a possible escalation of international trade conflicts impacts the outlook. In the eurozone, the economic upturn will probably continue, although somewhat less dynamically. The IfW estimates real economic growth of 1.7 percent in 2019. The IfW also expects GDP for Germany to grow by 1.7 percent in real terms. The growth rate in France is expected to be 1.4 percent in real terms. For the United Kingdom, GDP is expected to rise at a slower pace: by 1.0 percent in real terms in 2019. For the United States, real economic growth of 2.5 percent is expected, thanks to the continuing solid economic momentum. Anticipated Development in Relevant Markets The worldwide media industry is primarily influenced by global economic developments and the resulting growth dynamic. The continued trend toward digitization of content and distribution channels, changes in media usage and the increasing influence of emerging economies will continue to present risks and opportunities in the years to come. Through The current innovation efforts detailed in the section the intended transformation of the Group portfolio in line with “Innovations” offer further potential opportunities for the the four strategic priorities, Bertelsmann expects to benefit individual divisions. to an increasing extent from the resulting opportunities. 36 Financial Information Combined Management Report

Notes to the Financial Statements of Bertelsmann SE & Co. KGaA (in accordance with HGB, German Commercial Code) In addition to the Group reporting, the business develop- ment of Bertelsmann SE & Co. KGaA is outlined below. Bertelsmann SE & Co. KGaA is the parent company and group holding company of the Bertelsmann Group. As a group hold- ing company, it exercises key corporate functions such as the definition and further development of group strategy, capital allocation, financing and management. There are also ser- vice functions for individual divisions within the Corporate Center. Furthermore, it is the controlling company of the tax group for most of the domestic subsidiaries. The position of Bertelsmann SE & Co. KGaA is essentially determined by the business success of the Bertelsmann Group. The Annual Financial Statements of Bertelsmann SE & Co. KGaA, in contrast to the Consolidated Financial Statements, have not been prepared in accordance with the International Financial Reporting Standards (IFRS) but in accordance with the regula- tions of the German Commercial Code (HGB) and the supple- mentary regulations of the German Stock Corporation Act (AktG). income from other participations, due to Bertelsmann SE & Co. KGaA’s role as the parent company of the Bertelsmann Group. The decrease in net income to €306 million (previous year: €363 million) is primarily attributable to lower other operating income and higher write-downs of long-term financial assets. In contrast, higher income from other par- ticipations and lower taxes on income impacted net income favorably. Other operating income decreased by €109 million as a result of lower write-ups recognized on the shares in Bertelsmann Inc., Wilmington, and lower currency gains. The increase of €194 million in other operating expenses to €245 million is primarily attributable to higher currency losses. Given that expenses from loss assumption have increased, in the the trend income from participations from €687 million in the previous year to €759 million in 2018 is primarily attributable to higher income from profit and loss transfer agreements. Firstly, these changes are related to changes in the income from participations recognized by subsidiaries. Secondly, the income from subsidiaries is negatively impacted by non-recurring expenses in the 2018 financial year. Results of Operations of Bertelsmann SE & Co. KGaA The results of operations of Bertelsmann SE & Co. KGaA will continue to be significantly affected by the amount of The higher write-downs of long-term financial assets mainly pertain to write-downs of shares in Media Communication S.A.S., Vendin-Le-Vieil. Income Statement of Bertelsmann SE & Co. KGaA in accordance with HGB in € millions Revenues Other operating income Cost of materials Personnel costs Amortization, depreciation and write-downs Other operating expenses Income from other participations Interest income Write-downs of long-term financial assets Taxes on income Earnings after taxes Other taxes Net income Income brought forward from previous year Transfer to retained earnings from net income Unappropriated income 38 Financial Information Combined Management Report 2018 115 202 (30) (175) (20) (245) 759 (58) (128) (111) 309 (3) 306 485 (150) 641 2017 105 311 (28) (143) (17) (194) 687 (80) (79) (198) 364 (1) 363 462 (160) 665

Dependent Company Report (Statement in accordance with Section 312 of the German Stock Corporation Act (AktG)) for law-abiding and ethically responsible conduct within the company and toward business partners and the public. The Executive Board of Bertelsmann Management SE, as general partner of Bertelsmann SE & Co. KGaA, has submitted a voluntary report to the Supervisory Board of Bertelsmann SE & Co. KGaA in accordance with sections 278 (3) and 312 (1) of the German Stock Corporation Act, in which it outlines its relationships with affiliated companies for the financial year 2018. The Executive Board hereby declares that Bertelsmann SE & Co. KGaA received adequate consideration in return for each and every legal transaction under the circumstances known at the time the transactions were undertaken. Combined Non-Financial Statement The following information relates to Bertelsmann SE & Co. KGaA and the Bertelsmann Group (“Bertelsmann”) with its incorporated, fully consolidated subsidiaries (“subsidiaries”) in accordance with sections 315b and 315c of the HGB in conjunction with sections 289b to 289e of the HGB. Bertelsmann operates in the core business fields of media, services and education in around 50 countries (cf. section “Company Profile”). Responsible conduct – in business, toward employees, in society and in dealing with the environ- ment – is firmly anchored in Bertelsmann’s corporate culture. In its corporate responsibility management, Bertelsmann pur- sues the goal of reconciling commercial interests with social and environmental concerns within the Group and beyond. For the purpose of identifying relevant topics and describing concepts, the GRI Standards 2016 specified by the Global Reporting Initiative (in particular standards 102 and 103) were used to produce the Group Non-Financial Statement. In addition, voluntary CR-reporting based on the GRI Standards (2016; Option “core”) will be published by the middle of the financial year. The sense of purpose embodied in the triad “To Empower. To Create. To Inspire.” also provides orientation for the company’s staff and partners. Bertelsmann’s actions are also determined by external guide- lines. The company largely follows the recommendations of the German Corporate Governance Code for good and responsible corporate governance, and the OECD Guidelines for Multinational Enterprises. Bertelsmann is committed to the principles of the Universal Declaration of Human Rights, the United Nations Guiding Principles on Business and Human Rights, and the International Labor Organization core labor standards. Bertelsmann has been a signatory of the United Nations Global Compact since 2008. Corporate Responsibility Management Organization The advisory body for the strategic development of corpo- rate responsibility at Bertelsmann is the CR Council. The CR Council, which is made up of the Chief Human Resources Officer (CHRO) and representatives from the corporate divi- sions, focuses on the Group-wide CR objectives in line with the corporate strategy and the cross-divisional coordination of CR activities within the Group. At the Group level, the Corporate Responsibility & Diversity Management department coordinates and supports the work of the CR Council in close cooperation with the other Group functions. Within the decentralized Bertelsmann corporate structure, the local management teams are responsible for implementing corporate responsibility through specific CR measures and projects. The corporate divisions and compa- nies have their own structures and processes in place for this, in accordance with local requirements. Topics Company Principles and Guidelines The prerequisites for a corporate culture in which employees, management and shareholders work together successfully, respectfully and in a spirit of trust are common goals and shared values. These are enshrined in the corporate constitution and in the Bertelsmann Essentials. Furthermore, the Bertelsmann Code of Conduct – as a binding guideline – defines standards To identify key CR topics, Bertelsmann carries out regular CR relevance analyses. The current analysis was finalized in early 2018. For this analysis, the company conducted a survey of internal and external stakeholders. The external stakeholders estimated the impact of Bertelsmann’s busi- ness activity on the topics, while the internal stakeholders assessed their business relevance. This made it possible to identify topics of relevance to Bertelsmann relating to environ mental, social and employee matters, and respect 40 Financial Information Combined Management Report

also emphasized this stance. The diversity strategy is implemented by the Corporate Responsibility & Diversity Management department with support from a Group-wide working group. The focus is on “Gender,” “Generations” and “Nationality.” The Group Management Committee, which currently consists of 18 members (previous year: 17), includes 6 women (previous year: 6) and 7 nationalities (previous year: 6). To further increase diversity at the management levels, Bertelsmann has sought since 2017 to increase the percentage of women in the talent pools to one-third (Top Manage ment Pool, Senior Management Pool, Career Development Pool). Additional topics are inclusion and sexual Social Matters Corporate citizenship is one of the Bertelsmann Essentials and is thus firmly anchored in Bertelsmann’s corporate culture. As a good corporate citizen, Bertelsmann is committed to contributing to society and implemented measures in the following areas in 2018. Creative Independence Bertelsmann stands for editorial and journalistic independence as well as for freedom of the press and artistic license. orientation and identity. As part of this initiative, work began Bertelsmann publishes a wide variety of opinions and in 2018 to create a Bertelsmann Inclusion Action Plan and to positions. These basic principles for business activities are roll out diversity training courses. set forth in the Bertelsmann Code of Conduct. Bertelsmann Health interprets this independence in two directions: Inside the company, it means that our management does not attempt to influence the decisions of artists, editors and program With a view to designing a health-promoting work environment and preventing work-related risks of disease, Bertelsmann is expanding a systematic health management system at managers, or to restrict their artistic or editorial freedom. In accordance with the Bertelsmann “Editor-in-chief Principle,” editorial decisions are the sole responsibility of the content German locations. Bertelsmann Health Management has managers. To the outside, this means that the company does been put in charge of supervising and coordinating the Germany-wide health strategy and associated activities, in conjunction with a cross-functional strategy group. The cross-divisional “Health Community,” which is comprised of health experts, works council chairs, Supervisory Board not capitulate to political or economic influence in its coverage, and complies with existing laws regarding the separation of editorial content and commercial advertising. The result is that the company expects careful research and qualitative reporting, unaffected by fake news and online disinformation. members, HR managers and representatives for employees In addition to the Bertelsmann Code of Conduct, many with disabilities, plays a key role here. Through targeted subsidiaries and their editors and creative departments in networking, it also helps to reinforce uniform standards for all German locations. In 2018, another working group was created to accelerate the implementation of health 2018 continued to implement their own statutes and rules to safeguard editorial and artistic independence in their day-to- day business and to develop these further where necessary. management in the companies. These statutes focus primarily on duties of care, respect for privacy, and dealing with the representation of violence and Fair Working Conditions the protection of minors. At Bertelsmann, remuneration issues are an essential part of Content Responsibility the topic of fair working conditions. The policy is to establish consistent and transparent remuneration structures in the Bertelsmann reflects on the repercussions of the content it Group. The design of the compensation system is intended produces and distributes to protect the rights and interests of to ensure that remuneration is driven by market, function and performance, taking into account business-specific characteristics. Employee profit sharing in Germany is based media users, customers and third parties as far as possible. Overriding principles and guidelines of media ethics are set by national and international laws governing the press, on the same criteria as those used to calculate variable broadcasting and multimedia; by voluntary commitments remuneration components for Executive Board members to external guidelines such as the ethics codes of national and executives. This includes Bertelsmann and subsidiaries based in Germany, with the exception of RTL Group and Gruner + Jahr. These and many foreign subsidiaries have similar success and profit-sharing models adapted to local requirements. In 2018, a total of €105 million of the 2017 profit was distributed as part of such schemes. press councils; and within the company by the Bertelsmann Code of Conduct and editorial statutes. In accordance with these principles and guidelines, Bertelsmann’s editorial staff are committed to, among other things, “respecting privacy and the responsible treatment of information, opinion and images.” In accordance with the “Editor-in-chief Principle,” 42 Financial Information Combined Management Report

addition, individual subsidiaries and Bertelsmann itself issued statements in 2018 in accordance with the “UK Modern Slavery Act” that condemn all forms of modern slavery, coercive and child labor, and exploitation and discrimination, and present measures to prevent these human rights violations. These statements are revised each year (if required). At Bertelsmann, violations of this principle may be reported by employees and Fair Competition and Antitrust Law Bertelsmann is committed to the principle of fair competi- tion and condemns antitrust violations and anticompeti- tive behavior. The company acts against any contravention and consults internal or external experts on antitrust and competition issues. The Bertelsmann Executive Board has by third parties via the reporting channels within the existing approved a “Group Guideline for Compliance with Antitrust compliance management system. Regulations.” There is an obligation to report any antitrust In terms of anti-discrimination, contact persons for Germany’s “General Equal Treatment Act” (AGG) have been appointed at all German locations. Employees can contact them in the event of suspected breaches of said act. The employees are informed of their rights under the AGG and given correspond- ing training through a wide range of communication chan- nels. The topic of anti-discrimination was addressed in a Group-wide e-learning program designed to build employee awareness of the issue and advise them of their rights. These activities were continually refined and expanded in 2018. Anti-Corruption and Bribery Matters Both the Bertelsmann Code of Conduct and the Bertelsmann Executive Board Guideline on Anti-corruption and Integrity expressly prohibit all forms of corruption and bribery. This prohibition also applies to all third parties that work for, with or violations. The Corporate Legal Department offers antitrust training programs to corporate divisions and the manage- ment and employees of these divisions. A comprehensive compulsory training program for employees working in antitrust- related areas, which was also implemented in 2018, is intended to identify antitrust risks at an early stage and to prevent antitrust violations. Environmental Matters The Bertelsmann Environmental Policy and the Bertelsmann Paper Policy provide guidelines for Group-wide responsible use of natural resources and environmentally friendly energy and material procurement. The environmental commitment extends beyond the individual locations to the supply chain, in particular by selecting and influencing paper suppliers and energy firms. Operational responsibility for energy and environmental management, as well as for implementing on behalf of Bertelsmann, as stipulated in the Supplier Code of measures, is decentralized and rests with the management Conduct. Along with instructions for dealing with officials, and of the individual companies. The international “be green” guidelines for the granting or accepting of gifts in the context of business relations, the Anti-corruption and Integrity Guideline prescribes appropriate due diligence processes in dealing with Working Group with representatives from the Bertelsmann corporate divisions again provided a platform for cross- divisional exchange on environmental topics in 2018. The third parties. An appropriate due diligence review is carried out cooperation will focus on increasing the use of paper from for each individual risk profile through a corresponding risk certified or recycled sources and reducing greenhouse gas classification. This Executive Board guideline also describes emissions from the consumption of energy, heat and fuels. the channels for reporting suspected violations and seeking Experts from the “be green” Working Group also coordinate advice, as well as other prevention and control measures. The the annual collection of key environmental figures, which Executive Board guideline for dealing with alleged compliance creates transparency about impacts on the environment violations anchors an obligation to report suspected violations and climate and Bertelsmann’s environmental performance, of the prohibition of corruption to the Bertelsmann Corporate and enable the management to derive measures for Center. The topic of corruption prevention is globally managed and further developed by the I&C department. One of the most important measures in 2018 was advising and training executives and employees on anti-corruption and the continued Group-wide rollout of the new e-learning program on this topic conceived in 2017. improvement. In 2018, in parts of the Group, the annual environmental data collection was conducted for the first time with an IT-supported environmental platform, and preparations were made for a rollout in other divisions. The Group-wide environmental key figures are published on the Bertelsmann website. 44 Financial Information Combined Management Report

Consolidated Statement of Comprehensive Income in € millions Group profit or loss Items that will not be reclassified subsequently to profit or loss Remeasurement component of defined benefit plans Changes in fair value of equity instruments Share of other comprehensive income of investments accounted for using the equity method Items that will be reclassified subsequently to profit or loss when specific conditions are met Exchange differences – changes recognized in other comprehensive income – reclassification adjustments to profit or loss Available-for-sale financial assets – changes in fair value recognized in other comprehensive income – reclassification adjustments to profit or loss Cash flow hedges – changes in fair value recognized in other comprehensive income – reclassification adjustments to profit or loss Share of other comprehensive income of investments accounted for using the equity method Notes 2018 1,104 (60) 3 – 94 20 n/a n/a 23 2 (2) Other comprehensive income net of tax Group total comprehensive income attributable to: Bertelsmann shareholders Non-controlling interests 17 80 1,184 816 368 2017 1,198 176 n/a – (445) 13 17 (35) (45) (27) (8) (354) 844 508 336 As of January 1, 2018, the new accounting standards IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers were applied for the first time. In accordance with the transitional provisions of IFRS 9 and IFRS 15, prior year comparatives have not been adjusted. Further details are presented in the section “Impact of New Financial Reporting Standards.” 46 Financial Information Consolidated Financial Statements

Consolidated Cash Flow Statement in € millions Group earnings before interest and taxes Taxes paid Depreciation and write-ups of non-current assets Results from disposals of investments Gains/losses from disposals of non-current assets Change in provisions for pensions and similar obligations Change in other provisions Change in net working capital Fair value measurement of investments Other effects Cash flow from operating activities – thereof discontinued operations Investments in: – intangible assets – property, plant and equipment – financial assets – purchase prices for consolidated investments (net of acquired cash) Disposals of subsidiaries and other business units Disposals of other fixed assets Cash flow from investing activities – thereof discontinued operations Issues of bonds and promissory notes Redemption of bonds and promissory notes Proceeds from/redemption of other financial debt Interest paid Interest received Dividends to Bertelsmann shareholders Dividends to non-controlling interests and payments to partners in partnerships (IAS 32.18(b)) Change in equity Cash flow from financing activities – thereof discontinued operations Change in cash and cash equivalents Exchange rate effects and other changes in cash and cash equivalents Cash and cash equivalents 1/1 Cash and cash equivalents 12/31 Less cash and cash equivalents included within assets held for sale Cash and cash equivalents 12/31 (according to the consolidated balance sheet) 2018 1,621 (534) 855 (7) (62) (113) (20) (178) (157) 32 1,437 – (295) (325) (258) (556) 113 191 (1,130) 1 942 (400) (150) (196) 27 (180) (356) (59) (372) – (65) 28 1,442 1,405 – 1,405 2017 (adjusted) 1,889 (434) 766 (176) (119) (121) 7 (225) (15) 33 1,605 – (319) (360) (211) (213) 4 339 (760) – 697 – 282 (166) 12 (180) (743) (657) (755) – 90 (24) 1,376 1,442 (2) 1,440 As of January 1, 2018, the new accounting standards IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers were applied for the first time. In accordance with the transitional provisions of IFRS 9 and IFRS 15, prior year comparatives have not been adjusted. Further details are presented in the section “Impact of New Financial Reporting Standards.” Details on the cash flow statement and the adjustment made are presented in note 25 “Cash Flow Statement.” Change in Net Financial Debt in € millions Net financial debt at 1/1 Cash flow from operating activities Cash flow from investing activities Interest, dividends and changes in equity, additional payments (IAS 32.18(b)) Exchange rate effects and other changes in net financial debt Net financial debt at 12/31 Net financial debt is the balance of the balance sheet positions “Cash and cash equivalents” and “Financial debt.” 48 Financial Information Consolidated Financial Statements 2018 (3,479) 1,437 (1,130) (764) 4 (3,932) 2017 (adjusted) (2,625) 1,605 (760) (1,734) 35 (3,479)

Notes Segment Information (Continuing Operations) in € millions Revenues from external customers Intersegment revenues Divisional revenues Operating EBITDA EBITDA margin1) Impairment (-)/reversals (+) on intangible assets and property, plant and equipment Results from investments accounted for using the equity method Invested capital Penguin RTL Group Random House Gruner + Jahr BMG Arvato 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 6,494 6,358 3,424 3,359 1,420 1,493 11 15 – – 20 20 6,505 6,373 3,424 3,359 1,440 1,513 1,402 1,478 528 521 140 145 542 3 545 122 504 4,033 3,754 3 67 69 507 4,100 3,823 104 377 320 21.5% 23.2% 15.4% 15.5% 9.7% 9.6% 22.5% 20.5% 9.2% 8.4% (105) 58 (3) 69 – (2) – – (46) (32) 9 8 – – – – (6) 7 (2) 9 6,438 6,564 2,370 2,309 667 690 1,885 1,816 1,619 1,673 As of January 1, 2018, the new accounting standards IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers were applied for the first time. In accordance with the transitional provisions of IFRS 9 and IFRS 15, prior year comparatives have not been adjusted. Further details are presented in the section “Impact of New Financial Reporting Standards.” Further details on segment reporting are presented in note 26 “Segment Reporting.” 1) Operating EBITDA in percent of revenues. 2) The business development of Bertelsmann Investments is determined primarily on the basis of EBIT. EBIT amounted to €96 million (previous year: €141 million). Reconciliation to Operating EBITDA (Continuing Operations) in € millions EBIT from continuing operations Special items – impairment on goodwill and other intangible assets with indefinite useful life as well as gains from business combinations – adjustment to carrying amounts on assets held for sale – impairment on other financial assets at amortized cost – impairment and reversals on investments accounted for using the equity method – results from disposals of investments – fair value measurement of investments – restructuring and other special items Amortization/depreciation, impairment and reversals on intangible assets and property, plant and equipment Adjustments on amortization/depreciation, impairment and reversals on intangible assets and property, plant and equipment included in special items Operating EBITDA from continuing operations 2018 1,620 173 6 – 2 (6) (157) 278 847 (177) 2,586 2017 1,896 30 4 20 50 (182) (15) 176 691 (34) 2,636 As of January 1, 2018, the new accounting standards IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers were applied for the first time. In accordance with the transitional provisions of IFRS 9 and IFRS 15, prior year comparatives have not been adjusted. Further details are presented in the section “Impact of New Financial Reporting Standards.” 50 Financial Information Consolidated Financial Statements

General Principles The Bertelsmann SE & Co. KGaA Consolidated Financial Statements as of December 31, 2018, were prepared in accordance with International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB) and the related interpretations (IFRIC) of the IFRS Interpreta- tions Committee (IFRS IC) that are applicable in the European Union (EU-IFRS). The supplementary requirements set out in section 315e of the German Commercial Code (HGB) were also met. The Consolidated Financial Statements are prepared in euros. Unless otherwise stated, all amounts are given in millions of euros (€ million). For the sake of clarity, certain items in the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet and the consolidated cash flow statement are combined. These items are disclosed and explained in greater detail in the notes. of the company’s registered headquarters is Carl-Bertelsmann- Strasse 270, 33311 Gütersloh. Bertelsmann is a media, services and education company that operates in about 50 countries around the world. The geographic core markets are Western Europe – in particular, Germany, France and the United Kingdom – and the United States. In addition, Bertelsmann is strengthening its involvement in growth markets such as Brazil, India and China. The Bertelsmann divisions are RTL Group (television), Penguin Random House (books), Gruner + Jahr (magazines), BMG (music), Arvato (services), Bertelsmann Printing Group (printing), Bertelsmann Education Group (education) and Bertelsmann Investments (funds). Further information on the main activities of Bertelsmann SE & Co. KGaA and its subsidiaries is presented in detail in the Combined Bertelsmann SE & Co. KGaA is a partnership limited by shares with its registered office in Gütersloh, Germany. The address Management Report. Reconciliation of the Classes and Measurement Categories of Financial Assets from IAS 39 to IFRS 9 as of January 1, 2018 in € millions Loans and receivables Category in accordance with IAS 39 Available-for-sale Financial assets initially recog- nized at fair value through profit or loss Financial assets held for trading Balance as of 12/31/2017 Derivatives with hedge relation Measurement Loans Investments in affiliates Other investments Securities and financial assets Equity instruments and debt instruments (IFRS 9) Derivative financial instruments Trade receivables Receivables from participations Sundry financial receivables Cash Other securities < 3 months At amortized cost At cost Fair value recognized in equity Fair value recognized in profit or loss Fair value recognized in profit or loss 63 – – – n/a – 3,317 25 755 1,384 56 – 3 25 1 n/a – – – – – – – 15 491 3 n/a – – – – – – – – – 19 n/a – – – – – – – – – – n/a 87 – – – – – 5,600 29 509 19 87 – – – – n/a 4 – – – – – 4 63 18 516 23 n/a 91 3,317 25 755 1,384 56 6,248 52 Financial Information Consolidated Financial Statements

In accordance with the IFRS 9 classification and measurement approach for financial assets, there are three classification categories for financial assets in the Bertelsmann Group: • at amortized cost, transaction. The new standard replaces the current risk and reward approach with a contract-based five-step model. In addition to substantially more extensive application guidance for the accounting treatment of revenue from contracts with • at fair value with changes in fair value through profit or loss customers, there are more detailed disclosure requirements (FVTPL) and in the notes. Application of the standard is mandatory for • at fair value with changes in fair value through other financial years beginning on or after January 1, 2018. The comprehensive income (FVOCI). In accordance with IFRS 9, equity instruments where the Bertelsmann Group has neither control nor significant influence are classified as a rule at fair value through profit or loss. Bertelsmann exercises the option granted by IFRS 9 to measure at fair value through other comprehensive modified retrospective method was used for the transition to IFRS 15. For its first-time application, Bertelsmann has applied the expedients provided in the standard for the modified retrospective method. The immaterial cumulative effect of the first-time application as of January 1, 2018, was recognized in other retained earnings. Prior year comparatives were not adjusted. As a result of the accounting treatment of expected income mainly for individual immaterial investments. These returns, which are no longer offset with the receivables, but equity instruments were already measured at fair value which are included in the balance sheet position “Trade and in accordance with IAS 39, so that as of January 1, 2018, other payables,” total assets increased by €371 million as of there was no financial impact from the measurement of January 1, 2018. The corresponding effects on the balance these financial instruments. As of January 1, 2018, and sheet position “Trade receivables” as of January 1, 2018, as of December 31, 2018, the Bertelsmann Group held no debt instruments measured at fair value through other income. Certain in debt comprehensive instruments, primarily so-called fund-of-fund investments purchased by the Bertelsmann Investments division, were investments are shown in the table “Reconciliation of the Classes and Measurement Categories of Financial Assets from IAS 39 to IFRS 9 as of January 1, 2018” presented in the section “IFRS 9 Financial Instruments.” With regard to certain digital products and certain services, presentation of revenue and expenses reclassified into the category of fair value through profit or change as a result of the new standard. Based on a more specific loss because their contractual cash flows did not represent solely principal and interest payments. With deferred taxes taken into consideration, the revised method for determining impairment of financial instruments results in an increase of impairment by €9 million, which was recognized in other retained earnings as of January 1, 2018. The first-time application of IFRS 9 had no impact on the classification and measurement of financial liabilities. Within the class of derivative financial instruments in hedge relationships, there were no reclassifications due to the first- time application of IFRS 9. concept of the term “customer” or more specific definition of the term “customer,” the control concept underlying IFRS 15 and the application of the enhanced principal-agent approach, revenue is recognized in the amount of the retail price to the end consumer, and revenue previously reported as other operating income will now be presented as revenue. Furthermore, advertising subsidies paid to customers are no longer recognized under expenses but result in a reduction in revenues. With regard to the income statement, the above-mentioned changes in presentation due to the introduction of IFRS 15 lead in total to an increase in revenues of €309 million with a corresponding increase in other operating expenses of €137 million and reduction in other operating income of €172 million. IFRS 15 Revenue from Contracts with Customers IFRS 15 Revenue from Contracts with Customers includes new comprehensive regulations for the recognition of revenue that are independent of a specific industry or Details on the accounting and measurement policies applied on revenue recognition in accordance with IFRS 15 since January 1, 2018, are presented on pages 62 f. 54 Financial Information Consolidated Financial Statements

Consolidation Principles of Consolidation The Bertelsmann Consolidated Financial Statements include the financial statements of the parent company and its subsidiaries, joint ventures and associates. Subsidiaries are companies controlled by Bertelsmann SE & Co. KGaA in accordance with IFRS 10. Consolidation begins on the date on which the ability to exercise control exists Joint ventures in accordance with IFRS 11 and associates are included in the Consolidated Financial Statements using the equity method in accordance with IAS 28. Associates are companies over which Bertelsmann exercises a significant influence. This is generally the case for voting rights between 20 percent and 50 percent. Smaller shareholdings are accounted for using the equity method if there is a significant influence and ends when Bertelsmann loses the ability to exercise in accordance with IAS 28.6. The portfolio of investments held control. Profit or loss and each component of total by the Bertelsmann Investments division includes, among comprehensive income are attributed to the shareholders of the parent company and the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. In accordance with IFRS 3, business combinations are accounted for using the acquisition method. Non-controlling interests are measured at the proportionate fair value of the assets and liabilities. If the consideration transferred for the business combination or the fair values attributable to the identifiable assets and liabilities of the company acquired can only be provisionally others, investments in associates. In the financial year 2018, the division’s companies meet the criteria of IAS 28.18 as investors for the first time, since their interests in associates – in line with the other minority stakes held – are now managed on the basis of a systematic valuation process at the fair value of these investments and their performance. As a result, Bertelsmann decided to make use of the exception rule in IAS 28.18 and to measure such interests at fair value through profit or loss in accordance with IFRS 9. The immaterial restatement effect of the investments previously accounted for using the equity method identified on the date of initial accounting, the business with a carrying amount of €222 million amounts to €6 million. combination is accounted for using these provisional values. Initial accounting is completed in accordance with IFRS 3.45, taking into account the one-year measurement period. Comparative information for reporting periods prior When changing the accounting treatment of investments to the equity method, IFRS 3 is applied correspondingly so that the fair value of the previously held interest is used in determining the cost of the investment, accounted for using the equity to the completion of initial accounting is presented as if method on the transition date. The difference between the fair it had already been completed on the acquisition date. value and the carrying amount of the previously held interest is Changes in the parent’s ownership interest in a subsidiary recognized in profit or loss. When applying the equity method that do not lead to a loss of control are accounted for as equity transactions. After the loss of control of a subsidiary, it is deconsolidated in accordance with the requirements of IFRS 10. Any investment retained in the former subsidiary as well as any amounts owed by or to the former subsidiary are accounted for in accordance with the applicable IFRSs from the date when control is lost. to an associate or joint venture that is an investment entity, Bertelsmann, which is a non-investment entity, generally retains as investor the fair value measurement applied by the associate or joint venture to its interests in subsidiaries. The Bertelsmann Group recognizes immaterial investments in accordance with IFRS 9. 56 Financial Information Consolidated Financial Statements

Acquisitions and Disposals In the financial year 2018, the cash flow from acquisition activities totaled €-556 million (previous year: €-213 million), of which €-508 million (previous year: €-178 million) related to new acquisitions during the reporting period less cash and cash equivalents acquired. The consideration transferred in accordance with IFRS 3 amounted to €375 million (previous year: €273 million) taking into account contingent consideration of €8 million (previous year: €19 million). In addition, put options in the amount of €9 million (previous year: €12 million) related to the acquisitions were accounted for. In February 2018, Bertelsmann Education Group increased its interest in the US university services provider HotChalk by 36 percent through the conversion of a loan granted, the conversion of previously held shares into newly issued shares, and the direct acquisition of additional shares. The acquisition loss. Consolidation of HotChalk from January 1, 2018, would have also resulted in an immaterial increase in Group revenues and an immaterial decrease in Group profit or loss. In November 2018, Bertelsmann Education Group acquired an interest of 100 percent in the US online education pro- vider OnCourse Learning from the private equity company CIP Capital. Based in Brookfield, Wisconsin, the company provides digital corporate and advanced training courses to clients in the healthcare and financial services sectors. The healthcare sector further strengthens the activities of Relias, a business of Bertelsmann Education Group. The range of advanced train- ing courses in financial services adds another rapidly growing market segment. The consideration transferred of €280 million includes a preliminary working capital adjustment of €-18 million in addition to the purchase price paid in cash. In addition to of the majority interest in HotChalk strengthens Bertelsmann the consideration transferred, financial debt in the amount of Education Group’s position in the services segment of the US education market. As a result of obtaining control, the investment previously accounted for using the equity method is fully consolidated from the date of acquisition. The consideration transferred was €28 million, of which a cash contribution to HotChalk amounted to €11 million. Obtaining control led to a derecognition of the investment previously accounted €165 million was repaid. The purchase price allocation resulted in goodwill of €363 million, which is tax deductible in the amount of €76 million, mainly representing future growth potential in the customer base and further synergies between education companies. The goodwill was allocated to the Online Learning and Other cash-generating units of the Bertelsmann Education Group. The purchase price allocation is still preliminary due to the for using the equity method, whose fair value amounted to €127 million immediately before the acquisition date, and to a reclassification of the associated share of other comprehensive proximity of the acquisition to the end of the reporting period. In the financial year 2018, transaction-related costs amounted to €2 million and have been recognized in profit or loss. The income of investments accounted for using the equity method amounting to €-14 million in profit or loss in the item “Results from disposals of investments.” The remeasurement of the investment already held resulted in other operating income of €2 million. In connection with the acquisition of the majority interest in HotChalk, tax loss carryforwards of €131 million were assumed which can be used in the future as part of the inclusion of HotChalk in Bertelsmann’s US tax group. The valuation of the loss carryforwards resulted in deferred tax assets of €28 million. Non-tax-deductible goodwill from the purchase price allocation amounted to €71 million, resulting primarily from potential new customers, employees taken over and synergies and forms the Education Services cash- generating unit. Transaction-related costs were not material in the financial year 2018 and have been recognized in profit or loss. The initial consolidation led to an immaterial increase in initial consolidation led to an increase in Group revenues of €11 million and a decrease in Group profit or loss of €-5 million. Consolidation of OnCourse Learning from January 1, 2018, would have resulted in an increase in the Group revenues of €75 million and a decrease in Group profit or loss of €-23 million. In addition, the Bertelsmann Group made several acquisitions in the financial year 2018, none of which was material on a stand-alone basis. Payments net of acquired cash and cash equivalents amounted to €49 million; the consideration transferred in accordance with IFRS 3 for these acquisitions amounted to €66 million, taking into account contingent consideration of €8 million. The other acquisitions resulted in goodwill totaling €49 million, reflecting synergy potential and which is not tax-deductible. Transaction-related costs were not material in the financial year 2018 and have been recognized Group revenues and an immaterial decrease in Group profit or in profit or loss. 58 Financial Information Consolidated Financial Statements

In November 2018, Groupe M6, which belongs to RTL Group, sold its investment in the French premier league club FC Girondins de Bordeaux (FCGB) to the US-based investment fund General American Capital Partners (GACP) for €50 million, net of transaction-related costs. The sale resulted in a loss of €-7 million recognized in the item “Results from disposals of investments.” In addition, loans of €41 million granted to FCGB in connection with the sale were repaid. After considering the cash and cash equivalents disposed of, the Bertelsmann Group recorded cash flows in the amount of €113 million (previous year: €4 million) from all disposals. The disposals resulted in a loss from deconsolidation of €-4 million (previous year: €-10 million), which is recognized in the item “Results from disposals of investments.” The following table shows their impact on the Bertelsmann Group’s assets and liabilities at the time of deconsolidation: Effects of Disposals in € millions Non-current assets Goodwill Other intangible assets Property, plant and equipment Other non-current assets Current assets Inventories Other current assets Cash and cash equivalents Liabilities Provisions for pensions and similar obligations Financial debt Other financial and non-financial liabilities Discontinued Operations Earnings after taxes from discontinued operations of €1 million (previous year: €-7 million) comprise follow-on effects related to the disposal of companies of the former Direct Group division. Football Club Girondins de Bordeaux Other Total 12 46 6 – 2 70 4 1 – 41 14 6 13 1 3 27 9 5 2 24 26 52 19 1 5 97 13 6 2 65 60 Financial Information Consolidated Financial Statements

Foreign Currency Translation Transactions denominated in a currency other than a sub- sidiary’s functional currency are recognized in the functional currency at the exchange rate applicable on the day of their initial accounting. At the end of the reporting period, mone- tary assets and liabilities denominated in foreign currency are revalued into the functional currency using the closing rate applicable at that time. Gains and losses from these foreign currency translations are recognized in profit or loss. Non- monetary balance sheet items in foreign currency are carried at the historical exchange rate. The financial statements of subsidiaries, joint ventures and associates that were prepared in foreign currencies are into the reporting currency at the closing rate at the end of the reporting period, while income statement items are translated at the average rate for the financial year. Foreign currency translation differences are recognized in other compre hensive income. Such differences arise from trans- lating items in the balance sheet at a closing rate that differs from the previous closing rate, and from using the average rate for the period and the closing rate at the end of the reporting period to translate the Group profit or loss. At the time of deconsolidation of Group companies, the respec- tive accumulated exchange differences recognized in other comprehensive income and accumulated in a separate com- ponent of equity are reclassified from equity to the income translated into euros using the functional currency concept statement. The following euro exchange rates were used set out in IAS 21 before they are included in the Consolidated Financial Statements. Assets and liabilities are translated for currency translation purposes for the most significant foreign currencies for the Bertelsmann Group. Euro Exchange Rates for Significant Foreign Currencies Foreign currency unit per €1 Australian dollar Canadian dollar Chinese renminbi British pound US dollar Accounting and Measurement Policies Recognition of Income and Expense Average rates Closing rates 2018 1.5799 1.5301 7.8077 0.8847 1.1817 2017 12/31/2018 12/31/2017 1.4733 1.4645 7.6278 0.8766 1.1295 1.6220 1.5605 7.8751 0.8945 1.1450 1.5346 1.5039 7.8044 0.8872 1.1993 AUD CAD CNY GBP USD Revenues from contracts with customers are recognized in accordance with IFRS 15. Under this standard, a contract- based five-step model is used to first identify and distinguish the relevant contracts with customers. In a next step, the separate The prioritization of the five steps depends on the design of the underlying business model. Based on the underlying revenue sources in the Bertelsmann Group, the following key aspects are taken into consideration for revenue performance obligations explicitly or implicitly stipulated in the contract are identified, and the contract is examined for fixed and variable consideration in order to use this as a basis recognition: • Own products and merchandise: As a rule, the revenues resulting from these contracts are recognized at a point for determining the respective transaction price. In doing so, in time when control is transferred. Depending on the constraining estimates of variable consideration are adequately underlying respective terms of sale, this is generally upon taken into account. If more than one separate performance delivery to the customer. Expected returns from sales of obligation is identified in a contract, the transaction price is then products, mainly from physical books and magazines, are allocated to the identified performance obligations using the method of relative stand-alone selling prices, which are generally determined as prices on the markets relevant for the respective customers. Revenue recognition occurs upon satisfaction of the shown as liabilities in the balance sheet position “Trade and other payables.” Return assets are presented in the balance sheet position “Other non-financial assets.” In certain business models at Gruner + Jahr, giveaways to performance obligation either at a point in time or over time, customers meet the criteria of a separate performance depending on the underlying business model. If necessary, the extensive principal-agent considerations presented in IFRS 15 are also taken adequately into account in analyzing the contracts. obligation. Any giveaways to an agent are capitalized as costs to obtain a contract and are amortized over the expected term of the subscription. 62 Financial Information Consolidated Financial Statements

Other Intangible Assets Non-current, internally generated intangible assets are capi- talized at cost in accordance with IAS 38, if the corresponding requirements have been met. Intangible assets acquired sepa- rately are carried at acquisition cost less accumulated amorti- zation and accumulated impairment losses, also in accordance with IAS 38. Intangible assets acquired as part of a business combination are initially recognized at fair value on the acqui- sition date in accordance with IFRS 3. Intangible assets with finite useful life are amortized on a straight-line basis over their estimated useful life. Impairment losses and reversals of impairment losses are determined by applying the require- ments for impairment testing in accordance with IAS 36. As a rule, capitalized software has a useful life of between three and five years. Acquired customer relationships are amortized over a period of two to 15 years, while the amorti- zation period for trademarks and music and publishing rights is three to 25 years. Licenses are amortized on a straight-line basis over the term of the license agreement or depending on performance (based on the ratios of income from use gener- ated in the reporting period to the estimated total income from use over the entire useful life). Intangible assets with indefinite useful life are not amortized. Instead, they are subject to at least annual impairment testing in accordance with IAS 36 and, if applicable, written down to their recoverable amount. Property, Plant and Equipment Items of property, plant and equipment are accounted for in • buildings: 10 to 50 years accordance with IAS 16 and carried at cost less accumulated depreciation and accumulated impairment losses. Deprecia- tion is determined on a straight-line basis over the estimated useful life of the asset. In the financial year 2018, depreciation • technical equipment and machinery: four to 15 years • other equipment, fixtures, furniture and office equipment: three to 15 years was generally based on the following useful lives: Land is not subject to depreciation. Impairment Losses Goodwill and intangible assets with indefinite useful life are value measurement. If there is no active market, fair value less tested for impairment in accordance with IAS 36 annually, as costs of disposal is generally calculated using the discounted of December 31 and if a triggering event occurs. Intangible cash flow method. If it is not possible to allocate cash flows to assets with a finite useful life and property, plant and equipment are tested for impairment at the end of each reporting period in accordance with IAS 36 only if there are any indications of impairment. An impairment loss in accordance with IAS 36 has occurred when the carrying amount of an asset or cash-generating unit exceeds its recoverable amount. The recoverable amount is the higher of fair value less costs of disposal and value in use. Fair value less costs of disposal and the value in use are generally determined using the discounted cash flow method, which is based on future cash flow forecasts, which are part of company forecasts. For assets held for sale, only fair value less costs to sell is used as a basis for comparison. assets, the relevant impairment losses are determined on the basis of cash flows attributable to the cash-generating unit to which the assets belong. Projected cash flows are based on internal estimates for three planning periods. Generally, two further detailed planning periods are applied in addition. For periods beyond this detailed horizon, a perpetual annuity is recognized, taking into account individual business-specific growth rates. Discounting is generally based on the weighted average cost of capital (WACC) after tax. Specific WACCs are derived for cash-generating units with different risk pro- files. The Bertelsmann Group performs sensitivity analyses on the cash-generating units, especially on those where the headroom between the recoverable amount and the carrying amount is low. For determining the value in use, estimated future cash inflows or outflows from future restructurings or from improvement or enhancement of the cash-generating units’ performance are excluded unless, as of the end of the report- ing period, the cash-generating unit is committed to the restructuring and related provisions have been made. If an If the reasons for an impairment loss recognized in prior periods no longer exist, the impairment loss is reversed up to a maximum of the carrying amount of the respective asset if the impairment loss had not been recognized. The latter does not apply to goodwill. Impairment losses and reversals of active market exists, the market price or, if applicable, the price impairment losses are both recognized immediately in profit in the most recent comparable transaction, is used for fair or loss. 64 Financial Information Consolidated Financial Statements

matrices were created for division-specific or business- unit-specific groups of receivables, each with similar default patterns. In addition, separate risk assessments are characteristics as trade receivables for the same types of contracts so that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for contract performed. Contract assets have substantially the same risk assets. Measurement at Fair Value In the case of financial assets and financial liabilities measured at fair value, the valuation technique applied based on observable market data are used (level 2). If the fair values are not based on observable market data, depends on the respective inputs present in each case. they are identified using established financial methods or If listed prices can be identified for identical assets on active markets, they are used for measurement (level 1). If this is not possible, the fair values of comparable market transactions are applied, and financial methods that are on the basis of observable prices obtained as part of the most recently implemented qualified financing rounds, taking into account the life and developmental cycle of the respective entity (level 3). Inventories Inventories – including raw materials and supplies, finished goods, work in progress and merchandise – are accounted for in accordance with IAS 2 and recognized at the lower of historical cost or net realizable value at the end of the reporting period. Similar inventories are measured at average cost or using the FIFO (first-in, first-out) method. In addition, inventories include all short-term film, television and similar rights that are intended for broadcast or sale within the Group’s normal operating cycle. In particular, this includes films and TV shows currently in production, co-productions and acquired broadcasting rights. The carrying amount of • Free television other channels: • • • Entertainment programs such as soap operas, documen- taries, sports, and quiz or music programs are written off in full at the initial broadcast date. Fifty percent of the carrying amount of children’s pro- grams and cartoons is written off at each of the first two broadcast dates. The consumption of cinema productions and TV feature films and series also spans a maximum of two broad- casts: 67 percent of the value is consumed upon the first broadcast and the remaining 33 percent upon the such items at the end of the reporting period is the lower of second broadcast. historical cost or net realizable value. The consumption of film • Pay television channels: Program rights are consumed on a and television rights starts from the date of initial broadcast straight-line basis over the license period. and depends either on the number of planned broadcasts or the expected revenues. The broadcast-based consumption of film and television rights is as follows: • Free television thematic channels: Program rights are con- sumed on a straight-line basis over a maximum of six runs. The consumption of inventories and current film and television rights, changes in inventories of work in progress and finished goods, as well as own costs capitalized, are recognized in the income statement in the position “Cost of materials.” 66 Financial Information Consolidated Financial Statements

Provisions Provisions for pensions and similar obligations are calculated using the projected unit credit method in accordance with IAS 19. The net interest expense included in pension expense subsequent period (recycled). With the exception of the other personnel-related provisions calculated in accordance with IAS 19, all other provisions are recognized in accordance with is recognized in the financial result. Remeasurement effects of defined benefit pension plans (actuarial gains and losses on the defined benefit obligation, differences between actual IAS 37. Provisions are measured in the amount of the most likely outcome. Non-current provisions are discounted. The discount rates take into account current market expectations investment returns and the returns implied by the net interest and, if necessary, specific risks for the liability. As a rule, cost on the plan assets, and effects of the asset ceiling) are income from the reversal of provisions is generally included recognized immediately in equity under other comprehensive in the income statement line item to which the provision was income and are not reclassified to profit or loss in a previously charged. Financial Liabilities Trade payables and other primary financial liabilities, including Group on the equity interests of subsidiaries are accounted for profit participation certificates, are initially measured at their as a financial liability. The liability is initially recognized at the fair value less transaction costs. Subsequent measurement is present value of the redemption amount with a corresponding based on amortized cost using the effective interest method, charge directly to equity. In case of a business combination unless the financial liability is classified as initially recognized at fair value through profit or loss. Finance lease liabilities, which are also recognized under financial liabilities, are carried at their net present value in accordance with IAS 17. Future payments related to put options issued by the Bertelsmann with the transfer to the Bertelsmann Group of the risks and rewards of the non-controlling interests underlying the put option, the goodwill increases by a corresponding amount upon initial recognition. Subsequent measurement of liabilities from put options is recognized in profit or loss. Derivative Financial Instruments As set out in IFRS 9, all derivative financial instruments are recognized at fair value on the balance sheet. Derivative 2. Cash flow hedge: The effective portion of the changes in the fair value of derivatives used to hedge future cash flows is financial instruments are recognized as of the transaction recognized in other comprehensive income. The amounts date. When a contract involving a derivative is entered into, it is initially determined whether it serves to hedge a balance sheet item (fair value hedge) or to hedge future cash flows (cash flow hedge). Some derivatives do not meet the requirements included in IFRS 9 for recognition as hedges, despite this being their economic purpose (stand-alone hedge). carried here are included in the initial measurement when an underlying non-financial asset or a non-financial liability is received (basis adjustment). In other cases, the reclassi- fication of the previously recognized gains and losses from equity to the income statement is performed when the hedged underlying transaction affects profit or loss. The ineffective portion of the changes in the fair value of the Changes in the fair values of derivatives are recognized as follows: 1. Fair value hedge: Changes in the fair value of these derivatives used to hedge assets or liabilities are recognized hedging instrument are recognized in profit or loss. 3. Stand-alone hedge: Changes in the fair value of derivatives that do not meet the criteria for recognition as hedges are recognized in profit or loss. in profit or loss; the corresponding gain or loss on the change in fair value of the underlying balance sheet item is In the financial year 2018, no hedge transactions were recog- nized with fair value hedges. Likewise, no hedge of net also directly included in the income statement. investment in foreign operations was made. 68 Financial Information Consolidated Financial Statements

Groupe M6, which belongs to RTL Group, even though it isolate as the main driver of the various business models holds less than 50 percent of the voting rights. RTL Group and respective valuations. Changes to these estimates as is the major shareholder of Groupe M6, while the balance of other holdings remains highly dispersed, and the other share- holders have not organized their interest in such a way that they intend to vote differently from the Bertelsmann Group. In addition, the Bertelsmann Group has a majority in relevant governing bodies and the decision-making rights over the relevant activities of Groupe M6 resulting from this majority. a result of more recent information could have a material impact on the amount of the possible impairment. The growth rates applied are based on long-term real growth rates for the relevant economies, growth expectations for the relevant sectors and long-term inflation forecasts for the countries in which the cash-generating units operate. The values allocated to the key assumptions are in line • Significant influence although the Bertelsmann Group with external sources of information. The figures obtained holds less than 20 percent of the equity shares in another entity: Although the Bertelsmann Group holds less than 20 percent of the equity shares of Atresmedia, manage- ment considers that the Group exercises a significant influence on Atresmedia in view of the representation of RTL Group on the Board of Directors and other governing bodies of Atresmedia. using the respective discount rates reflect the recoverable amount of the cash-generating units. Material changes in market or competitive environment may impair the value of cash-generating units. Details on impairment testing for intangible assets (including goodwill) in the Bertelsmann Group are presented in note 9 “Intangible Assets.” In addi- tion, in the case of sports and film rights, estimates are • Investments in equity instruments: The measurement of made with regard to anticipated revenues. various investments in equity instruments recognized at fair value that are not based on prices quoted on active markets is based on observable prices obtained as part of the most recently implemented qualified financing rounds, • Pension obligations: Pension obligations are mea- sured using the projected unit credit method. Using this approach, biometric calculations, the prevailing long-term capital market interest rates and, in particular, assumptions taking into account the life and developmental cycle of the about future salary and pension increases are taken into respective entity, or on valuations obtained on the basis of established financial methods using risk-adjusted discount rates. Further adjustments are made for financial instru- ments with contractual lock-ups. account. As a result of the increase in the discount rate for measuring provisions for pensions, actuarial gains amount- ing to €64 million before related tax effects were recog- nized in the item “Remeasurement component of defined • Trade and other receivables: Calculation of loss allowance benefit plans.” Details on the assumptions made in pension for accounts receivables is based on historical credit loss rates for groups of financial assets with similar credit risk characteristics and on forward-looking information, includ- ing customer-specific information and forecasts of future economic conditions. accounting are presented in note 18 “Provisions for Pensions and Similar Obligations.” • Provisions for onerous contracts and warranties are also based to a significant extent on management estimates with regard to their amount and probability of occurrence. • Advance payments: Sales estimates and assumptions on Assessments of whether there is a present obligation, future sales success are also made in connection with advances paid to authors to secure exploitation rights for their publications. • Impairment losses: Management estimates of cash flow, on which impairment tests are based, are based on factors including assumptions of economic trends and the associ- ated risks, the regulatory environment, the competitive envi- ronment, market share, investments, EBITDA margins and growth rates. A combination of long-term trends, industry forecasts and in-house knowledge, with special emphasis on recent experience, is used in forming the assumptions about the development of the various relevant markets in which the Bertelsmann Group operates. The relevant mar- kets are an area highly exposed to the general economic conditions. The state of the relevant markets is just one of the key operational drivers the Bertelsmann Group uses when assessing individual business models. The most whether an outflow of resources is probable and whether it is possible to reliably determine the amount of the obli- gation are generally based on the expertise of in-house or third-party specialists. More recent information could change the estimates and thus impact the Group’s financial position and financial performance. The legal and regulatory environment in which Bertelsmann operates does not bear significant litigation risks. With regard to risk provisioning, a provision for potential losses from litigation is recognized when the risks of a loss are considered probable and when a reliable estimate of the anticipated financial impact is possible. For significant contingent liabilities for which the possibility of a future loss is more than remote but less than probable, the Bertelsmann Group estimates the possible loss where the Group believes an estimate can be made. Contingent liabilities from litigation that were of subordi- nate significance from a Group perspective existed at the important assumptions include estimated growth rates, the end of the reporting period. Management regularly reviews weighted average cost of capital and tax rates. All these the recognition, measurement and use of provisions along different elements are variable, interrelated and difficult to with the disclosure requirements for contingent liabilities. 70 Financial Information Consolidated Financial Statements

Notes to the Income Statement and the Balance Sheet 1 Revenues In the financial year 2018, group revenues were primarily generated from contracts with customers in accordance with IFRS 15. Other revenues not in the scope of IFRS 15 resulted from financial services in the Arvato division. The following table shows the revenues from contracts with customers in accordance with IFRS 15 by division and broken down by the revenue sources and geographical areas. The categorization of revenue sources shown corresponds to that used in segment reporting. Revenue from Contracts with Customers Penguin Random in € millions RTL Group House Gruner + Jahr BMG Arvato Bertelsmann Printing Group Bertelsmann Education Group Total divisions1) Revenue Sources Own products and merchandise Services Advertising Rights and licenses Geographical Areas Germany France United Kingdom Other European countries United States Other countries 144 3,280 618 406 380 16 379 3,647 2,324 6,494 2,159 1,459 244 1,472 972 188 6,494 90 – 54 3,424 1,420 257 14 366 287 1,966 534 3,424 928 315 10 129 20 18 1,420 48 – – 494 542 34 21 134 66 239 48 542 222 34 – 3,593 1,400 257 – – 34 – – – 4,346 6,125 4,061 2,888 3,815 1,468 257 17,420 1,448 459 212 1,096 326 274 888 68 185 190 123 14 3,815 1,468 1 – – – 250 6 257 5,715 2,336 1,151 3,240 3,896 1,082 17,420 As prior year comparatives have not been adjusted in accordance with the transitional provisions of IFRS 15, they are not included in this table. 1) Excluding Bertelsmann Investments and Corporate activities. The revenues reported by source of revenue and geographical period performance obligations fulfilled at a certain point in areas reflect exclusively the revenues in accordance with IFRS 15 and consequently differ in amount from the breakdown of revenues in segment reporting. The revenues from contracts with customers comprise in the reporting time of €6,920 million and performance obligations fulfilled over a certain period of time of €10,500 million. They are attributable to the following divisions: 72 Financial Information Consolidated Financial Statements

3 Personnel Costs in € millions Wages and salaries Statutory social security contributions Expenses for pensions and similar obligations Profit sharing Other employee benefits The contributions paid by employer to state pension plans amounted to €371 million (previous year: €369 million) in the financial year 2018. 2018 4,464 719 141 116 218 2017 4,368 714 138 105 216 5,658 5,541 4 Amortization/Depreciation, Impairment and Reversals on Intangible Assets and Property, Plant and Equipment in € millions Amortization/depreciation, impairment and reversals on – intangible assets – property, plant and equipment Further details on amortization/depreciation, impairment and reversals are presented in note 9 “Intangible Assets” and note 10 “Property, Plant and Equipment.” 5 Other Operating Expenses in € millions Administrative expenses Selling and transmission expenses Advertising costs Loss allowances on receivables, loans and non-financial assets Consulting and audit fees Operating taxes Adjustment to carrying amounts on assets held for sale Losses on disposals of non-current assets Foreign exchange losses Sundry operating expenses 2018 2017 570 277 847 423 268 691 2018 1,336 2017 1,318 610 393 192 183 116 6 16 – 102 2,954 479 427 192 177 85 4 6 16 77 2,781 The item “Administrative expenses” includes, among others, payments recognized as expenses from operating leases of €275 million (previous year: €270 million), associated services and incidental costs of €37 million (previous year: €29 million) and contingent lease payments of €8 million (previous year: €7 million). In addition, this item includes repair and maintenance costs of €197 million (previous year: €195 million) and costs for IT services of €168 million (previous year: €156 million). 74 Financial Information Consolidated Financial Statements

8 Income Taxes Income taxes, broken down into current and deferred income taxes, are as follows: Income Taxes in € millions Earnings before income taxes (total) Current income taxes from continuing operations Deferred income taxes from continuing operations Income taxes from continuing operations Current income taxes from discontinued operations Deferred income taxes from discontinued operations Income taxes from discontinued operations Total income taxes Net income after income taxes (total) 2018 1,405 (394) 93 (301) – – – 2017 1,670 (462) (10) (472) – – – (301) 1,104 (472) 1,198 Tax loss carryforwards of €397 million (previous year: €389 million) were utilized in the financial year 2018, reducing current tax expenses by €92 million (previous year: €106 million). Of the tax loss carryforwards utilized, €31 million (previous year: €31 million) was due to German corporate income tax, €22 million (previous year: €29 million) was due to German trade tax, and €344 million (previous year: €329 million) was due to foreign income taxes. These amounts include €58 million (previous year: €78 million) for tax loss carryforwards for which no deferred tax assets were recognized in the past. These relate in an immaterial amount to German corporate tax (previous year: €2 million), in an immaterial amount to German trade tax (previous year: €2 million) and to foreign income taxes in the amount of €58 million (previous year: €74 million). This led to a decrease in current tax expense of €12 million (previous year: €20 million). 76 Financial Information Consolidated Financial Statements

A reconciliation of expected tax result to actual tax result is shown in the following table: Reconciliation to Actual Tax Expense in € millions Earnings before income taxes from continuing operations Income tax rate applicable to Bertelsmann SE & Co. KGaA Expected tax expense from continuing operations The tax effects of the following items led to differences between the expected and actual tax expense: Adjustment to different national tax rates Effect of changes in tax rate and tax law Non-tax-deductible impairment on goodwill Tax effects in respect of results from disposals of investments Current income taxes for previous years Deferred income taxes for previous years Effects of measurements of deferred tax assets Permanent differences Other adjustments Total of adjustments Actual tax expense from continuing operations 2018 1,404 2017 1,677 31.00% 30.80% (435) (517) 21 (7) (46) 1 7 33 123 10 (8) 134 (301) (6) (17) (10) 37 10 (10) 23 25 (7) 45 (472) The income tax rate applicable to Bertelsmann SE & Co. KGaA consists of corporate income tax, the solidarity surcharge and rate. The effects from the valuation of deferred tax assets are attributable to the planned use of previously unrecognized loss trade tax. The effective income tax rate rose slightly compared carryforwards and tax credits. to the previous year due to the increase in the average trade tax Effective Income Tax Rate Corporate income tax including solidarity surcharge Trade tax Effective income tax rate 2018 15.83% 15.17% 31.00% 2017 15.83% 14.97% 30.80% 78 Financial Information Consolidated Financial Statements

Other rights and licenses include brands and publishing rights, acquired customer relationships along with acquired Goodwill and other intangible assets are attributable to the following cash-generating units: software and other licenses. Internally generated intangible assets mostly include own film and TV productions and inter- nally generated software. As in the previous year, no intangible assets have been provided as collateral for liabilities. Goodwill and Other Intangible Assets with Indefinite Useful Life by Cash-Generating Units Goodwill Other intangible assets with indefinite useful life 12/31/2018 12/31/2017 12/31/2018 12/31/2017 121 – – – 120 – – – 1 – – – – – – – – – – – – – – – – n/a – n/a 121 in € millions RTL Group RTL Group, Group level Fremantle Television Germany Groupe M6 RTL Nederland SpotX StyleHaul Other Penguin Random House Penguin Random House Venture Random House Germany Gruner + Jahr Magazines and digital business Germany & MPS Magazines and digital business International Newspapers BMG Arvato Financial Solutions Other Bertelsmann Printing Group Print US Other Bertelsmann Education Group Online Learning Education Services Other Bertelsmann Investments 5,043 2,123 1,050 936 510 159 123 – 142 952 904 48 479 334 129 16 361 535 419 116 40 23 17 990 861 51 78 9 5,158 2,123 1,047 955 525 160 112 104 132 925 881 44 524 334 174 16 355 529 412 117 39 22 17 554 548 n/a 6 n/a 127 – – – 127 – – – – – – – – – – – – – – – – – – – – – – – 8,410 8,084 127 80 Financial Information Consolidated Financial Statements

Overview of Growth and Discount Rates RTL Group Fremantle Television Germany RTL Nederland SpotX StyleHaul Other Penguin Random House Penguin Random House Venture Random House Germany Gruner + Jahr Magazines and digital business Germany & MPS Magazines and digital business International Newspapers BMG Arvato Financial Solutions Other Bertelsmann Printing Group Print US Other Bertelsmann Education Group Online Learning Education Services Other Bertelsmann Investments Growth rate in % for the year Discount rate in % for the year 12/31/2018 12/31/2017 12/31/2018 12/31/2017 1.8 1.0 1.0 2.0 – 1.8 1.5 1.5 2.0 2.0 7.1 5.8 5.8 10.1 27.5 0.0–2.0 0.0–2.0 6.4–11.8 7.1 6.8 6.8 9.8 11.1 7.2–10.8 8.7 6.9 6.1 6.5 7.1 6.9 6.8 9.6 7.2 5.5 5.8 6.3 6.0 6.3 0.5 0.5 0.0 0.0 0.0 2.0 1.0 1.0 0.0 0.0 2.5 1.0 2.0 5.0 0.5 0.5 0.0 0.0 0.0 2.0 1.0 1.0 0.0 0.0 2.5 n/a 2.0 n/a 6.4–8.2 6.0–8.2 8.8 9.4 5.5–6.8 6.0–7.9 10.6 11.4 10.6–11.7 18.0 9.1 n/a 13.8 n/a In the financial year 2018, impairment losses on goodwill amounted to €173 million (December 31, 2017: €30 million). Impairment losses on goodwill and other intangible assets with indefinite useful lives are recognized in the income statement under “Amortization/depreciation, impairment and reversals on intangible assets and property, plant and equipment.” 82 Financial Information Consolidated Financial Statements

10 Property, Plant and Equipment in € millions Cost Balance as of 1/1/2017 Exchange differences Acquisitions through business combinations Other additions Reductions through disposal of investments Other disposals Reclassifications in accordance with IFRS 5 Reclassifications and other changes Balance as of 12/31/2017 Exchange differences Acquisitions through business combinations Other additions Reductions through disposal of investments Other disposals Reclassifications in accordance with IFRS 5 Reclassifications and other changes Balance as of 12/31/2018 Accumulated depreciation Balance as of 1/1/2017 Exchange differences Depreciation Impairment losses Reversals of impairment losses Reductions through disposal of investments Other disposals Reclassifications in accordance with IFRS 5 Reclassifications and other changes Balance as of 12/31/2017 Exchange differences Depreciation Impairment losses Reversals of impairment losses Reductions through disposal of investments Other disposals Reclassifications in accordance with IFRS 5 Reclassifications and other changes Balance as of 12/31/2018 Carrying amount as of 12/31/2018 Carrying amount as of 12/31/2017 Land, rights equivalent to land and buildings Technical equipment and machinery Other equipment, fixtures, furniture and office equipment Advance payments and construction in progress 1,826 (19) – 52 – (51) 81 21 2,453 (46) 3 70 – (69) 1 41 1,910 2,453 2 – 36 (14) (43) – 32 1,923 1,013 (12) 55 – – – (32) – 4 9 – 55 (12) (92) – 44 2,457 2,153 (40) 81 1 – – (67) (1) (3) 1,028 2,124 2 56 – – (7) (31) – 2 8 80 3 – (8) (91) – 9 1,050 2,125 873 882 332 329 1,368 (43) 3 136 – (106) (2) 16 1,372 3 3 118 (18) (150) (2) 22 1,348 984 (32) 129 3 (1) – (103) (1) 1 980 3 135 3 – (11) (144) (1) (2) 963 385 392 67 (2) – 68 – (1) – (77) 55 1 – 114 (1) (1) – (88) 80 – – – – – – – – – – – – – – – – – – – 80 55 Total 5,714 (110) 6 326 – (227) 80 1 5,790 15 3 323 (45) (286) (2) 10 5,808 4,150 (84) 265 4 (1) – (202) (2) 2 4,132 13 271 6 – (26) (266) (1) 9 4,138 1,670 1,658 As of the end of the reporting period, property, plant and equipment in the amount of €14 million (previous year: €13 million) were pledged as collateral for liabilities. Impairment losses totaling €-6 million were recognized for property, plant and equipment (previous year: €-4 million). 84 Financial Information Consolidated Financial Statements

Investments in Joint Ventures As of December 31, 2018, investments in 25 (previous year: 28) individually immaterial joint ventures were accounted for in the Consolidated Financial Statements. The following table shows summarized financial information on these joint ventures. The information given represents in each case the Bertelsmann Group’s interest. Financial Information on Individually Immaterial Joint Ventures in € millions Non-current assets Current assets Non-current liabilities Current liabilities in € millions Earnings after taxes from continuing operations Earnings after taxes from discontinued operations Other comprehensive income Total comprehensive income Investments in Associates 12/31/2018 12/31/2017 51 57 9 54 2018 27 – – 27 61 57 8 58 2017 30 – – 30 As of December 31, 2018, investments in 48 (previous year: 63) associates were accounted for in the Consolidated Financial Statements. As in the previous year, the investment of RTL Group in Atresmedia, based in San Sebastián de los Reyes, Spain, is individually material for the Group. As of December 31, 2018, the ownership is 18.7 percent after taking into account treasury shares (previous year: 18.7 percent). On December 31, 2018, the stock market value of Atresmedia, which is listed on the Madrid Stock Exchange, amounted to €985 million ( previous year: €1,964 million). As of December 31, 2018, the fair value of the Bertelsmann Group’s interest in Atresmedia, which is assigned to level 1 fair value measurement, amounted to €184 million (previous year: €366 million). The management considers that the stock market value of Atresmedia at the end of the year does not reflect its earnings potential, which includes new digital and platform revenue streams and fur- ther content and channel exploitation opportunities. Therefore additionally a value in use was determined for Atresmedia as at December 31, 2018, on the basis of a discounted cash flow method. The value in use was determined on the basis of the following assumptions: a long-term growth rate of 1.0 percent and a discount rate of 8.4 percent. As of December 31, 2018, the value in use determined exceeded the fair value determined from the market price and the carrying amount. The interest in Atresmedia was not subject to impairment, even given a change by one of the two most important factors: discount rate (increase of 1.0 percentage point) and long-term growth rate (decrease of 1.0 percentage point). The following table shows summarized financial information on Atresmedia. The information presented is the amounts included in the financial statements of Atresmedia plus adjustments for using the equity method, and not the Bertelsmann Group’s share of these amounts. 86 Financial Information Consolidated Financial Statements

The investment was tested for impairment as of December 31, 2018. Taking into account current growth targets, recognition of impairment was not required for Udacity. In the event of an increase in the discount rate by 0.6 percentage points and a decrease in the long-term growth rate of 1.2 percentage points, the recoverable amount is lower than the carrying amount. Of the total carrying amount of the investments in all individually immaterial associates, an additional €96 million (previous year: €84 million) is attributable to the three University Venture Funds, which invest in high-growth companies in the education sector. Bertelsmann holds between 47.3 percent and 100 percent of the shares in these funds. As operational The interest in HotChalk, which as of December 31, 2017, had management and investment decisions in particular are the been accounted for using the equity method, has been fully consolidated since obtaining control in February 2018. Obtaining control resulted in derecognition of the investment previously accounted for using the equity method. Further details are presented in the section “Acquisitions and Disposals.” responsibilities of the respective fund managers, there is significant influence, but control as defined by IFRS 10 does not exist despite an ownership interest of over 50 percent in some cases. Results from Investments Accounted for Using the Equity Method in € millions Income from investments accounted for using the equity method – joint ventures – associates Expenses from investments accounted for using the equity method – joint ventures – associates Results from investments accounted for using the equity method – joint ventures – associates In the financial year 2018, dividends received from investments accounted for using the equity method amounted to €86 million (previous year: €107 million). 2018 92 29 63 (35) (2) (33) 57 27 30 2017 119 33 86 (56) (2) (54) 63 31 32 12 Minority Stakes and Other Financial Assets in € millions Loans Minority stakes in start-ups and fund investments Other financial assets Investments in affiliates Other investments Securities and financial assets Derivative financial instruments Current Non-current 12/31/2018 12/31/2017 12/31/2018 12/31/2017 23 – – n/a n/a n/a 48 71 24 n/a n/a – – 5 38 67 55 858 211 n/a n/a n/a 19 1,143 39 n/a n/a 18 516 18 53 644 The item “Minority stakes in start-ups and fund investments” mainly includes minority stakes purchased by the Bertelsmann Investments division. The fair value of its listed investments is measured on the basis of their market values and of its unlisted investments, when possible, on the basis of observable prices obtained as part of the most recently implemented qualified financing rounds, which meet the minimum requirements for volume and participants, taking into account life and develop- ment cycles of the entity. The item also includes so-called fund-of-fund investments, which are also measured at fair value through profit or loss. The measurement of their fair values is based on the valuations of the external management as pre- sented in regular reporting and taking into account a fungibil- ity discount. The gains and losses resulting from changes in the fair value are recognized as other operating income in the item “Fair value measurement of investments.” The changes in carrying amounts of the financial instruments held by the Bertelsmann Investments division amounted to €152 million during the reporting period. In addition, the acquisitions made by Bertelsmann Investments during the reporting period and 88 Financial Information Consolidated Financial Statements

15 Other Non-Financial Assets in € millions Non-current Other non-financial assets Current Other non-financial assets – advance payments – deferred items – other tax receivables – sundry non-financial assets 12/31/2018 12/31/2017 851 1,002 489 224 100 189 710 868 447 191 82 148 The non-current other non-financial assets relate to advance payments for royalties and licenses in the amount of €778 million (previous year: €659 million). Advance payments for royalties and licenses are generally written off if no recoup- ment is expected. The amount of these write-downs is based on management estimates of future sales volumes and price changes using historical data. Costs for obtaining and fulfilling contracts with customers are recognized and are immaterial, both individually and in total. The same applies to amount of amortization and impairment losses recognized for these costs in the reporting period. 16 Cash and Cash Equivalents in € millions Cash Other securities < 3 months 12/31/2018 12/31/2017 1,369 36 1,405 1,384 56 1,440 Cash includes bank balances and cash on hand. Cash equivalents liquid securities with a term to maturity on acquisition of a maximum of include short-term, highly three months. Cash and cash equivalents of €7 million (previous year: €1 million) were used as collateral for liabilities. As in the previous year, no restricted cash and cash equivalents existed as of the end of the reporting period. 17 Equity Subscribed Capital Number of shares Ordinary shares Total shares 12/31/2018 12/31/2017 83,760 83,760 83,760 83,760 Compared with the previous year, the subscribed capital of Bertelsmann SE & Co. KGaA remained unchanged at €1,000 million and comprises 83,760 registered shares (ordinary shares). As of December 31, 2018, foundations (Bertelsmann Stiftung, Reinhard Mohn Stiftung and BVG- Stiftung) held 80.9 percent of Bertelsmann SE & Co. KGaA shares, with the other 19.1 percent held indirectly by the Mohn family. Bertelsmann Verwaltungsgesellschaft mbH (BVG) controls the voting rights at the General Meeting of Bertelsmann SE & Co. KGaA and personally liable partner Bertelsmann Management SE. In the financial years 2018 and 2017, a dividend amounting to €180 million (a dividend of €2,149 per ordinary share in each year) was distributed to the shareholders. 90 Financial Information Consolidated Financial Statements

Share-Based Payments The Bertelsmann Group has granted cash-settled or equity- settled share-based payment awards. is approved by the Supervisory Board of Métropole Télévision SA in accordance with the authorization given by the General Meeting of Shareholders. There are various free share plans at Groupe M6, which belongs to RTL Group, open to directors and certain The terms and conditions of the grants are as follows, whereby employees. The number of free shares granted to participants all plans are settled by the physical delivery of shares: Granting and Vesting Conditions (Groupe M6) Free share plans Maximum number of free shares granted (in thousands)1) Remaining options (in thousands) July 2016 July 2016 July 2017 July 2017 October 2017 July 2018 July 2018 Total 440.60 361.00 307.20 217.66 8.92 313.40 247.10 1,895.88 – – 296.80 217.66 8.92 313.40 247.10 1,083.88 Vesting conditions 2 years of service + performance conditions 2 years of service + performance conditions 2 years of service + performance conditions 3 years of service + performance conditions 3 years of service + performance conditions 2 years of service + performance conditions 3 years of service + performance conditions 1) Maximum number of free shares granted if the performance conditions are significantly exceeded. Such number could be reduced to zero if objectives are not met. The free share plans are subject to performance conditions. At the end of the year, 1,083,884 free shares are exercisable The plans granted in July 2016, July 2017 and July 2018 against 1,319,684 at the beginning of the year. During the are subject to Groupe M6 achieving its target growth in net year, 560,500 free shares were granted with 774,600 being consolidated result over the financial years 2016, 2017 and exercised and 21,700 being forfeited. 2018, respectively. The second plan in July 2016 and the second plan in July 2017, the plan in October 2017 and the second plan in July 2018 are subject to a cumulative performance requirement over three years. 92 Financial Information Consolidated Financial Statements

18 Provisions for Pensions and Similar Obligations in € millions Defined benefit obligation Obligations similar to pensions 12/31/2018 12/31/2017 1,669 69 1,738 1,606 79 1,685 The Bertelsmann Group operates various pension plans for Expenses for defined contribution plans in the amount of current and former employees and their surviving dependents. The model of such plans varies according to the legal, fiscal €49 million were recognized in the financial year 2018 (previous year: €46 million). and economic environment of the country concerned. These company pension plans include both defined contribution and defined benefit plans. In the case of defined contribution plans, the company makes payments into an external pension fund or another welfare fund through a statutory, contractual or voluntary model. The All other pension plans are defined benefit plans. The US companies’ obligations for healthcare costs for employees after they retire (medical care plans) are also defined benefit obligations and are included in the provisions on the balance sheet. For all the retirement benefit plans, a distinction must be made as to whether or not these are financed through an company has no obligation to provide further benefits once it external investment fund. has made these payments, so no provisions are recognized. Net Defined Benefit Liability Recognized in the Balance Sheet in € millions Present value of defined benefit obligation of unfunded plans Present value of defined benefit obligation of funded plans Total present value of defined benefit obligation Fair value of plan assets Impact from asset ceiling Net defined benefit liability recognized in the balance sheet – thereof provisions for pensions – thereof other assets Provisions are recognized for these defined benefit plans. These are mostly flat salary plans and final salary plans. Defined Benefit Plans in € millions Flat salary plans/plans with fixed amounts Final salary plans Career average plans Other commitments given Medical care plans Present value of defined benefit obligation – thereof capital commitments 94 Financial Information Consolidated Financial Statements 12/31/2018 12/31/2017 818 3,302 4,120 (2,502) 1 1,619 1,669 50 826 3,347 4,173 (2,591) 1 1,583 1,606 23 12/31/2018 12/31/2017 2,228 1,256 424 160 52 4,120 253 2,254 1,265 416 181 58 4,174 246

Further significant actuarial assumptions were made as follows: Actuarial Assumptions Discount rate Rate of salary increase Rate of pension increase 12/31/2018 12/31/2017 Germany Foreign Germany Foreign 2.08% 2.25% 1.55% 2.91% 3.05% 2.96% 2.06% 2.25% 1.56% 2.58% 3.03% 3.00% An increase or decrease in the assumptions set out above had the following effects on the present value of the defined compared to the assumptions actually applied would have benefit obligation as of December 31, 2018: Effect of Actuarial Assumptions in € millions Effect of 0.5 percentage point change in discount rate Effect of 0.5 percentage point change in rate of salary increase Effect of 0.5 percentage point change in rate of pension increase Effect of change in average life expectancy by 1 year Increase Decrease (299) 38 144 157 340 (35) (130) (156) In order to determine the sensitivity of the longevity, the mortality rates for all beneficiaries were reduced or a country-specific retirement age increases or decreases by one year. increased evenly, so that the life expectancy of a person of 96 Financial Information Consolidated Financial Statements

The expenses for defined benefit plans are broken down as follows: Expenses for Defined Benefit Plans in € millions Current service cost Past service cost and impact from settlement Net interest expenses Net pension expenses The portfolio structure of plan assets is composed as follows: Portfolio Structure of Plan Assets in € millions Debt instruments1) Equity instruments1) Qualifying insurance policies Other funds Cash and cash equivalents Derivatives Property Other Fair value of plan assets 2018 2017 61 2 30 93 71 (7) 34 98 12/31/2018 12/31/2017 1,713 1,658 511 141 85 28 13 11 – 659 140 78 43 4 8 1 2,502 2,591 1) For almost all equity and debt instruments, market prices are listed on an active market. The plan assets in the Bertelsmann Group are used exclusively for the fulfillment of benefit obligations. To avoid a concentration of risk, plan assets are invested in various classes period. The trust assets were invested in accordance with the investment guideline of the beneficiary, using a long-term total return approach. This approach is based on the aim of of investments. The majority of plan assets are managed by Bertelsmann Pension Trust e. V. under a contractual trust arrangement (CTA) for pension commitments of Bertelsmann SE & Co KGaA and some of the German subsidiaries. There is no funding requirement for the CTA. No using strategic asset allocation to generate a suitable return in the long term regardless of short-term market fluctuations and/or crises. The management board of the pension trust is responsible for the investment and regularly informs the beneficiary of the status and performance of the pension contribution was made to plan assets during the reporting assets. The weighted average duration of the pension obligations on December 31, 2018, was 16 years (previous year: 17 years). The maturity profile of the anticipated undiscounted pension payments is presented in the following table: Maturity Profile of Pension Payments in € millions 2019 2020 2021 2022 2023 2024–2028 98 Financial Information Consolidated Financial Statements Expected pension payments 156 154 159 167 170 911

The provisions for other employee benefits in the amount of €16 million (previous year: €16 million) relate to an obligation in connection with the withdrawal from a multi-employer plan. Further details are presented in note 18 “Provisions for Pensions and Similar Obligations.” The remaining other provisions include a provision in the amount of €22 million (previous year: €24 million) for compensation obligations from pension entitlements for employees at the Prinovis location in Ahrensburg toward Axel Springer SE. 20 Profit Participation Capital in € millions Profit participation capital 1992 Profit participation capital 2001 12/31/2018 12/31/2017 23 390 413 23 390 413 The market value of the 2001 profit participation certificates with a closing rate of 317.01 percent on the last day of trading in the past financial year on the Frankfurt Stock Exchange was €901 million (previous year: €950 million with a rate of 334.00 percent) and, correspondingly, €33 million for the 1992 profit participation certificates with a rate of 193.00 percent (previous year: €34 million with a rate of 199.00 percent). The market values are based on level 1 of the fair value hierarchy. Further information on profit participation capital is presented in detail in the Combined Management Report. 21 Financial Debt Financial debt includes all of the Bertelsmann Group’s interest-bearing liabilities to banks and capital markets as of the end of the reporting period. Carrying amounts are calculated as follows: Current and Non-Current Financial Debt in € millions Bonds Promissory notes Liabilities to banks Finance lease liabilities Other financial debt Current Non-current 12/31/2018 12/31/2017 Remaining term in years 1 to 5 years > 5 years 12/31/2018 12/31/2017 100 210 248 7 102 667 – 200 314 10 144 668 1,891 100 7 32 9 2,481 149 1 – – 4,372 249 8 32 9 3,725 459 10 37 20 2,039 2,631 4,670 4,251 The Bertelsmann Group has access to floating-rate and fixed-rate funds through various contractual arrangements. Financial debt is generally unsecured. In July 2018, Bertelsmann issued in a private placement a floating rate note with a term of up to two years and a volume of €200 million. This was repaid early in December 2018 on time. At the end of the reporting period, the Group had bonds, private placements and promissory notes outstanding with a nominal volume of €4,960 million (previous year: €4,410 million). To finance a short-term funding requirement, a bank loan of US$250 million was taken out in the financial year 2017. This was fully repaid in 2018. by exercising an agreed termination option. In addition, in The differences in carrying amount versus nominal amount in September 2018 Bertelsmann placed a publicly listed bond the table below result from transaction costs, premiums and of €750 million with a term of seven years. The promissory discounts. note due in June 2018 in the amount of €200 million was repaid 100 Financial Information Consolidated Financial Statements

Credit Facilities The Bertelsmann Group has access to a syndicated loan In addition, Bertelsmann has access to further syndicated agreement entered into with major international banks in the amount of €1,200 million (previous year: €1,200 million). Bertelsmann SE & Co. KGaA can draw down this credit facility using floating-rate loans in euros, US dollars and pounds sterling, based on EURIBOR or LIBOR, on a revolving basis. and bilateral credit facilities in the amount of €470 million (previous year: €470 million), which can also be drawn down using floating-rate loans, based on EURIBOR, on a revolving basis. As of December 31, 2018, credit facilities were taken out in the amount of €150 million (previous year: €10 million). Finance Lease Liabilities Finance leases exist for the following assets: Leased Assets in € millions Land, rights equivalent to land and buildings Technical equipment and machinery Other equipment, fixtures, furniture and office equipment 12/31/2018 12/31/2017 Acquisition costs Net carrying amount Acquisition costs Net carrying amount 80 3 9 92 30 1 4 35 89 5 12 106 36 1 4 41 The Group’s finance lease activities primarily relate to long- term agreements for office space. The Group generally has the option to acquire such properties at the end of the lease term. Finance leases for buildings are generally subject to non-cancelable minimum lease terms of approximately 20 years. The minimum lease payments for finance leases are presented in the following table: Minimum Lease Payments for Finance Leases in € millions Up to 1 year 1 to 5 years Over 5 years Nominal amount of lease payments 12/31/2018 Discount amounts Present value Nominal amount of lease payments 12/31/2017 Discount amounts Present value 7 34 – 41 – 2 – 2 7 32 – 39 10 41 – 51 – 4 – 4 10 37 – 47 As in the previous year, no subleases were in place as part of finance lease agreements as of the end of the reporting period. 102 Financial Information Consolidated Financial Statements

23 Off-Balance-Sheet Liabilities Contingent Liabilities and Other Commitments in € millions Guarantees Rental and lease commitments for already used real estate and movables Commitments from assets under construction Other commitments 12/31/2018 12/31/2017 15 1,367 238 3,408 5,028 28 1,475 185 3,522 5,210 Commitments from assets under construction result from lease contracts for assets, which were not completed at the end of the reporting period. The right of use will begin in future periods. Of the commitments, €75 million (previous year: €36 million) relates to periods between one and five years, and €158 million (previous year: €148 million) relates to periods of more than five years. Of other commitments, €2,386 million (previous year: €2,481 million) pertains to RTL Group. These relate to supply agreements for productions and co-productions, contracts for TV licenses and broadcasting rights, as well as other rights and services. A further €832 million (previous year: €786 million) of other commitments pertains to Penguin Random House, which represents the portion of obligations to authors for which no payments have yet been made and where future payments are contingent upon other events (such as delivery and acceptance of manuscripts). Other commitments of €17 million (previous year: €18 million) are for the acquisition of property, plant and equipment. The following minimum lease payments exist from all of the Group’s long-term rental commitments classified as operating leases: Minimum Lease Payments for Operating Leases in € millions Nominal amount Up to 1 year 1 to 5 years Over 5 years Present value 12/31/2018 12/31/2017 283 664 420 1,367 1,161 276 653 546 1,475 1,261 These commitments largely concern real estate leases. They are partially offset by expected minimum lease payments from subleases with a nominal amount of €11 million (previous year: €14 million). The net present values, calculated considering country-specific interest rates, show all of the net payments required to settle the obligation. The existing leases have varying terms and also include renewal options in some cases. 104 Financial Information Consolidated Financial Statements

Both of the following tables show the carrying amounts and measurement categories of financial instruments in accordance with IAS 39 as of December 31, 2017: in € millions Loans and receivables Category in accordance with IAS 39 Available-for-sale Financial assets initially recog- nized at fair value through profit or loss Financial assets held for trading Measurement Loans Investments in affiliates Other investments Securities and financial assets Derivative financial instru- ments Trade receivables Receivables from participations Sundry financial receivables Cash Other securities < 3 months At amortized cost At cost Fair value recognized in equity Fair value recognized in profit or loss Fair value recognized in profit or loss 63 – – – – 3,317 25 755 1,384 56 5,600 – 3 25 1 – – – – – – – 15 491 3 – – – – – – – – – 19 – – – – – – – – – – 87 – – – – – 29 509 19 87 in € millions Category in accordance with IAS 39 Balance as of 12/31/2017 Deriv- atives with hedge relation – – – – 4 – – – – – 4 63 18 516 23 91 3,317 25 755 1,384 56 6,248 Balance as of 12/31/2017 Derivatives with hedge relation Payables out of scope of IAS 39 – – – – – – – 23 – 23 – – – 47 – – – – – 413 4,384 324 47 164 3,596 28 47 1,008 47 10,011 Financial liabilities At amortized cost Financial liabilities initially recognized at fair value through profit or loss Fair value recognized in profit or loss Financial liabilities held for trading Fair value recognized in profit or loss 413 4,384 324 – 164 3,596 28 – 964 9,873 – – – – – – – – 44 44 – – – – – – – 24 – 24 Measurement Profit participation capital Bonds and promissory notes Liabilities to banks Finance lease liabilities Other financial debt Trade payables Liabilities to participations Derivative financial instruments Sundry financial payables 106 Financial Information Consolidated Financial Statements

Financial Assets Measured at Fair Value Based on Level 3 in € millions Balance as of 1/1/2018 Total gain (+) or loss (-) – in profit or loss – in other comprehensive income Purchases Sales/settlements Transfers out of/into level 3 (including first-time classification on level 3) Balance as of 12/31/2018 Gain (+) or loss (-) for assets still held at the end of the reporting period in € millions Balance as of 1/1/2017 Total gain (+) or loss (-) – in profit or loss – in other comprehensive income Purchases Sales/settlements Transfers out of/into level 3 (including first-time classification on level 3) Balance as of 12/31/2017 Gain (+) or loss (-) for assets still held at the end of the reporting period Primary and derivative financial assets held for trading Financial assets measured at fair value 428 208 197 11 276 (133) 204 983 180 – – – – – – – – – Primary and derivative financial assets held for trading Available-for- sale financial assets 371 (30) (9) (21) 94 (76) 15 374 (9) 3 – – – – (3) – – – Total 428 208 197 11 276 (133) 204 983 180 Total 374 (30) (9) (21) 94 (79) 15 374 (9) 108 Financial Information Consolidated Financial Statements

Financial Liabilities Measured at Fair Value Based on Level 3 in € millions Balance as of 1/1/2018 Total gain (-) or loss (+) – in profit or loss – in other comprehensive income Purchases Settlements Transfers out of/into level 3 Balance as of 12/31/2018 Gain (-) or loss (+) for liabilities still held at the end of the reporting period in € millions Balance as of 1/1/2017 Total gain (-) or loss (+) – in profit or loss – in other comprehensive income Purchases Settlements Transfers out of/into level 3 Balance as of 12/31/2017 Gain (-) or loss (+) for liabilities still held at the end of the reporting period Financial liabilities measured at fair value through profit or loss 44 (8) (8) – 9 (14) – 31 (4) Financial liabilities initially recognized at fair value through profit or loss 48 3 5 (2) 23 (30) – 44 – Total 44 (8) (8) – 9 (14) – 31 (4) Total 48 3 5 (2) 23 (30) – 44 – Level 1: period. The fair value of forward commodity transactions is The fair value of the listed financial instruments is determined derived from the stock exchange listings published at the end on the basis of stock exchange listings at the end of the of the reporting period. Any mismatches to the standardized reporting period. stock exchange contracts are reflected through interpolation Level 2: For measuring the fair value of unlisted derivatives, Bertelsmann uses various financial methods reflecting the prevailing market conditions and risks at the respective balance sheet dates. Irrespective of the type of financial instrument, future cash flows are discounted at the end of the reporting period based on the respective market interest rates and yield curves at the end of the reporting period. The fair value of forward exchange transactions is calculated using or additions. Level 3: If no observable market data is available, fair value measurement is based primarily on cash flow-based valuation techniques. As a rule, so-called qualified financing rounds are used for minority stakes in the Bertelsmann Investments division. Listed financial instruments with contractual lock- ups held by Bertelsmann are also based on level 3. the average spot prices at the end of the reporting period and The measurement of financial assets and financial liabilities taking into account forward markdowns and markups for the according to level 2 and level 3 requires management to remaining term of the transactions. The fair value of interest make certain assumptions about the model inputs, including rate derivatives is calculated on the basis of the respective market rates and yield curves at the end of the reporting cash flows, discount rate and credit risk, as well as the life and development cycle of start-up investments. 110 Financial Information Consolidated Financial Statements

Based on this, loss allowance as of December 31, 2018, was determined as follows for both trade receivables and contract assets: Credit Risk for Trade Receivables and Contract Assets Collective impairment Overdue in € millions Expected loss rate Trade receivables and contract assets Loss allowance for expected credit losses Balance as of 12/31/2018 Not overdue ≤ 1 month 2 to 3 months 3 to 6 months 0.47% 1.37% 2.04% 6.52% 6 to 12 months 18.42% > 12 months 20.69% 2,365 (11) 2,354 439 (6) 433 147 (3) 144 46 (3) 43 38 (7) 31 29 (6) 23 Individual impairment n/a 878 (126) 752 The expected loss rates correspond to the average rates for the respective for division-specific or business-unit-specific groups of receivables. In the financial year 2018, impairment losses and reversals of €-7 million were recognized on trade receivables and contract assets. The following table shows a reconciliation from the opening balance to the closing balance of loss allowances for trade receivables and contract assets in the financial year 2018: Reconciliation of Loss Allowance for Trade Receivables and Contract Assets in € millions Balance as of 1/1 Additions Usage Reversal Change of consolidation scope Balance as of 12/31 Trade receivables and contract assets (162) (55) 12 48 (5) (162) 112 Financial Information Consolidated Financial Statements

The following table shows a maturity analysis of selected financial assets as of December 31, 2017: Neither impaired nor past due on the reporting date 62 23 2,549 24 653 3,311 in € millions Loans Securities and financial assets Trade receivables Receivables from participations Other selected receivables Balance as of 12/31/2017 Not individually impaired as of the reporting date and past due by: < 1 month 2 to 3 months 3 to 6 months 6 to 12 months > 12 months – – 472 – 27 499 – – 150 – 15 165 – – 61 1 13 75 – – 29 – 16 45 – – 33 – 44 77 Gross value of accounts receivable individually impaired 47 – 173 – 20 240 No loss allowance was recognized for unsettled receivables not yet due as of the end of the reporting period, as there was no indication of default. Reconciliation of changes in impairment in accordance with IFRS 7 as of December 31, 2017, are shown in the following table: in € millions Loans Trade receivables Receivables from participations Sundry financial receivables Total 2017 Balance as of 1/1 (48) Additions (15) (197) (3) (42) (290) (46) – (12) (73) Usage Reversal Change of consolidation scope Exchange rate effect 5 23 3 14 45 11 66 – 6 83 – (5) – – (5) 1 9 – 1 11 Balance as of 12/31 (46) (150) – (33) (229) The carrying amount of all receivables, loans and securities constitutes the Bertelsmann Group’s maximum default risk as of both December 31, 2017, and December 31, 2018. 114 Financial Information Consolidated Financial Statements

Based on the remaining contractual terms of its financial liabilities at the end of the reporting period, the Bertelsmann Group will have to make the following future interest payments: Future Interest Payments in € millions Profit participation capital Bonds and promissory notes Liabilities to banks Finance lease liabilities Other financial debt Balance as of 12/31/2018 Profit participation capital Bonds and promissory notes Liabilities to banks Finance lease liabilities Other financial debt Balance as of 12/31/2017 Undiscounted interest payments Up to 1 year 1 to 5 years Over 5 years 45 95 5 2 2 149 45 86 8 2 3 136 346 – 1 3 486 181 333 1 3 1 – 167 – – – 167 – 210 – – 1 Total 181 608 5 3 5 802 226 629 9 5 5 144 519 211 874 Financial Services Related to Receivables Sold In certain individual cases, Bertelsmann sells receivables all the rewards nor all risks that are associated with the purchased from third parties to financial intermediaries. The receivables sold relate primarily to short-term receivables, some covered by credit insurance, that Arvato Financial Solutions acquires from third parties in the course of its financial services, and some of which it resells to financial intermediaries on an ongoing basis. This business can be changed at any time during the year. As part of the contractual agreements on the sale of receivables, substantially neither receivables were transferred or retained. This relates in particular to possible defaults and late payments of receivables sold, so that a receivable was accounted for in the amount of the continuing involvement of €46 million (previous year: €49 million). The carrying amount of the associated liability is €52 million (previous year: €56 million). The underlying volume of receivables sold amounts to €340 million as of the end of the reporting period (previous year: €346 million). 116 Financial Information Consolidated Financial Statements

Counterparty Risk The Bertelsmann Group is exposed to default risks in the amount of the invested cash and cash equivalents and the positive fair value of the derivatives in its portfolio. Transactions involving money market securities and other financial in the event of credit rating changes. In addition, some tri- party transactions with banks have been concluded to reduce default risks. These tri-party transactions are collateralized investments, and the banks provide predefined securities as instruments are exclusively conducted with a defined group of banks with a high credit rating (“core banks”). The credit ratings of core banks are constantly monitored and classified on the basis of quantitative and qualitative criteria (rating, CDS spreads, stock price, etc.). Counterparty limits determined on collateral. As in the previous year, at the end of the reporting period no tri-party transactions were outstanding and no collateral had been provided. Processing these transactions, and managing and valuing the collateral, are performed by a clearing agent. Default risks arising from trade receivables the basis of credit ratings refer to cash holdings and positive fair values of the derivatives in its portfolio. The draw-down of limits is monitored on a regular basis. Funds are invested in very short-term portfolios in some cases to preserve flexibility are partially mitigated through credit insurance coverage. The Bertelsmann Group has obtained credit collateralization in the amount of €713 million for these receivables (previous year: €665 million). Capital Management The financing guidelines adopted by the Bertelsmann Group are designed to ensure a balance between financing security, return on equity and growth. The Group’s indebtedness is based specifically on the requirements for a credit rating of “Baa1/BBB+.” Financial management at Bertelsmann is conducted using quantified financing objectives that are a central factor in ensuring the Group’s independence and capacity to act. These objectives, as elements of the planning process and regular monitoring, are broadly defined performance indicators. The key performance indicator for limiting economic debt within the Bertelsmann Group is a maximum leverage factor of 2.5. On December 31, 2018, the leverage factor was 2.7 (previous year: 2.5). In addition, the coverage ratio is to remain above four. The coverage ratio amounted to 11.1 on December 31, 2018 (previous year: 11.2). The equity ratio is not to fall below 25 percent of total assets. Management of the equity ratio is based on the definition of equity in IFRS. Although minority interests in partnerships represent equity in financial terms, they are classified as debt for accounting purposes. In the financial year 2018, the equity ratio was 38.8 percent (previous year: 38.5 percent), meeting the internal financial target set by the Group. Interest Rate and Currency Sensitivity For the analysis of interest rate risk, a distinction is made between cash flow and present value risks. Financial debt, cash and cash equivalents and interest rate derivatives with variable interest terms are subject to a greater degree of cash flow risk, as changes in market interest rates impact the Group’s interest result almost immediately. In contrast, medium- and long-term interest rate agreements are subject to a greater degree of present value risk. The accounting treatment of present value risks depends on the respective financial instrument or a hedging relationship documented in conjunction with a derivative (micro-hedge). Upon initial recognition, originated financial debt is measured at fair value less transaction costs. Subsequent measurement is based on amortized cost. Changes in fair value are limited to opportunity effects, as changes in interest rates have no effect on the balance sheet or the income statement. The recognition of originated financial debt at fair value is only permitted for transactions for which a micro-hedge is documented in accordance with IFRS 9 in conjunction with the conclusion of an interest rate or exchange rate hedge transaction involving derivatives. In this case, changes in the fair value of the respective items are recognized in the income statement in order to substantially balance out the offsetting effects of the fair value measurement of the related derivatives. For derivative financial instruments, the effects of changes in interest rates are recognized in the income statement. In the case of documented hedging relationships (cash flow hedges), however, these effects are taken directly to equity. 118 Financial Information Consolidated Financial Statements

Nominal Volume and Fair Values of Financial Derivatives in € millions Currency derivatives Forward contracts and currency swaps Interest rate derivatives Interest rate swaps Other derivative financial instruments 12/31/2018 Nominal volume < 1 year 1 to 5 years > 5 years 2,682 – – 1,411 480 – 660 – – Total 4,753 480 – 2,682 1,891 660 5,233 in € millions Currency derivatives Forward contracts and currency swaps Interest rate derivatives Interest rate swaps Other derivative financial instruments 12/31/2017 Nominal volume < 1 year 1 to 5 years > 5 years 2,652 – – 1,435 250 – 203 – – Total 4,290 250 – 2,652 1,685 203 4,540 Fair values 8 3 – 11 Fair values 44 – – 44 The option offered in IFRS 13.48 (net risk position) is used for measuring the fair value of financial derivatives. To identify other comprehensive income until the effects of the hedged underlying transaction affect profit or loss, or until a basis the credit exposure from financial derivatives, the respective net position of the fair values with the contractual partners is used as a basis, as these values are managed based on a net adjustment occurs. The amount of €3 million relating to cash flow hedges (previous year: €-39 million) was reclassified from other comprehensive income to the income statement. position in view of their market or credit default risks. Currency These are amounts before tax. The portion remaining in other forwards are used to hedge the foreign currency risk relating comprehensive income as of December 31, 2018, will thus to the purchase and sale of program rights and output deals mainly impact the income statement in the coming years. As for the TV business. Bertelsmann hedges between 80 percent and 100 percent of the short-term (within one year) future cash flows, and between 10 percent and 80 percent of the longer- term (two to five years) future cash flows. The derivatives used for this purpose are recognized as hedging instruments in connection with cash flow hedges. The effective portion of changes in the fair value of cash flow hedges is recognized in in the previous year, no ineffective portion of the cash flow hedges existed. The effects of non-designated components of a cash flow hedge (e.g., the forward component of a foreign currency derivative with a designation on a spot basis) in the amount of €10 million (previous year: €13 million) were recognized immediately in profit or loss. 120 Financial Information Consolidated Financial Statements

25 Cash Flow Statement The Bertelsmann consolidated cash flow statement has been consolidation. Items in the consolidated cash flow statement prepared in accordance with IAS 7 and is used to evaluate the thus cannot be reconciled with changes in items reported Group’s ability to generate cash and cash equivalents. Cash flows are divided into those relating to operating activities, investing activities and financing activities. Cash flows from operating activities are presented using the indirect method, whereby EBIT is adjusted for the effects of a non-cash nature, any deferrals or accruals of past or future operating receipts or payments, and items of income or expenses associated with investing cash flows. In addition, cash flows arising from income taxes are classified as cash flows from operating activities as well as other cash flows that are neither investing on the consolidated balance sheet. Investing activities include payments for investments in non-current assets and purchase price payments for acquisitions as well as proceeds from the disposal of non-current assets and investments. Further explanations concerning acquisitions made during the financial year are presented in the section “Acquisitions and Disposals.” Disposals during the financial year are also presented separately in that section. Financial debt of €192 million (previous year: €14 million) was assumed during the reporting period. nor financing. The management of Group operations of the Bertelsmann financial debt and dividend payments affecting cash, as well Cash flow from financing activities includes changes in equity, Group utilizes indicators that include operating EBITDA and is thus before interest and taxes, as well as depreciation, amortization, and impairment and special items. Operating results and the resulting cash flow from operating activities should therefore be consistent and comparable. Accordingly, the net balances of interest paid and interest received during the financial year are shown in the cash flow statement as part of financing activities. as interest paid and interest received. The item “Proceeds from/redemption of other financial debt” includes receipts in the amount of €241 million (previous year: €476 million) and payments in the amount of €-391 million (previous year: €-194 million). The payments include the redemption of financial debt in the amount of €-165 million in connection with the acquisition of the interest in OnCourse Learning. The other receipts and payments mainly relate to short-term loans at short maturities and correspondingly high turnover The change in provisions for pensions and similar obligations rates. In addition, the item also includes other changes represents the balance of personnel costs for pensions affecting cash in the amount of €19 million in connection and similar obligations and company payments for these obligations (further explanations are presented in note 18 “Provisions for Pensions and Similar Obligations”). From the financial year 2018 onward, contributions to pension plans are also included in this item. The change in presentation with hedge transactions. The item “Change in equity” amounts to €-59 million and mainly comprises €-29 million from the exercise of the put option for the interest in Relias Learning. A further €-18 million relates to the acquisition of treasury shares by Groupe M6. In the previous year, the increases comparability with international companies. The item “Change in equity” amounted to €657 million, of which figures from the previous year have been adjusted accordingly. €505 million related mainly to purchase price payments In the financial year 2018, these contributions to pension plans amounted to €41 million (previous year: €37 million). Other effects include the adjustments of results from investments accounted for using the equity method, taking into account dividends received from these investments, and adjustments in connection with non-cash income and expenses. The consolidated cash flow statement includes the effects of changes in foreign currencies and changes in the scope of in connection with the shareholding increase in Penguin Random House and €128 million related to purchase price payments including a contribution to SpotX. The item “Dividends to non-controlling interests and payments to partners in partnerships (IAS 32.18(b))” mainly resulted in the previous year from the special dividend distribution of €373 million to the co-shareholder of the publishing group Penguin Random House. 122 Financial Information Consolidated Financial Statements

The following table shows the reconciliation of segment information to the Consolidated Financial Statements: Reconciliation of Segment Information to the Consolidated Financial Statements in € millions Operating EBITDA from continuing operations Amortization/depreciation, impairment and reversals on intangible assets and property, plant and equipment Adjustments on amortization/depreciation, impairment and reversals on intangible assets and property, plant and equipment included in special items Special items EBIT from continuing operations Financial result Earnings before taxes from continuing operations Income tax expense Earnings after taxes from continuing operations Earnings after taxes from discontinued operations Group profit or loss 2018 2,586 847 (177) 296 1,620 (216) 1,404 (301) 1,103 1 1,104 2017 2,636 691 (34) 83 1,896 (219) 1,677 (472) 1,205 (7) 1,198 27 Related Party Disclosures For the Bertelsmann Group, related parties as defined in IAS 24 are those persons and entities that control or exer- cise a significant influence over the Bertelsmann Group, and those persons and entities controlled or jointly controlled by the Bertelsmann Group, or over which it exercises a signif- icant influence. Accordingly, certain members of the Mohn family, the members of the Executive Board of Bertelsmann Management SE as the personally liable partner, and the Supervisory Board of Bertelsmann SE & Co. KGaA, including close members of their families and including the companies that are controlled or jointly managed by them, and the joint ventures and associates forming part of the Bertelsmann Group and their subsidiaries are defined as related parties. Furthermore, Bertelsmann Pension Trust e. V. is to be consid- ered a related party (further details on this are presented in note 18 “Provisions for Pensions and Similar Obligations”). and of Bertelsmann SE & Co. KGaA. Reinhard Mohn Verwaltungsgesellschaft mbH and Mohn Beteiligungs GmbH still own more than one-quarter of the shares in Bertelsmann Management SE and in Bertelsmann SE & Co. KGaA. Shares held both directly and indirectly are included when identifying shareholdings. In the legal form of a KGaA, the business is managed by a personally liable partner. In the case of Bertelsmann SE & Co. KGaA, Bertelsmann Management SE, represented by its Executive Board, is responsible for the management of the business. The statutory bodies consist of the Supervisory Board and the General Meeting at the Bertelsmann SE & Co. KGaA level and the Executive Board, Supervisory Board and General Meeting at the Bertelsmann Management SE level. The Supervisory Board of the KGaA is elected by the limited partners at the General Meeting. The members Bertelsmann Verwaltungsgesellschaft mbH (BVG), Gütersloh, a holding company with no operating activities, has control of of the Bertelsmann Management SE Supervisory Board are appointed at the General Meeting of Bertelsmann the Bertelsmann Group. Johannes Mohn GmbH has informed Bertelsmann SE & Co. KGaA that it directly owns more than 50 percent of the shares in Bertelsmann Management SE Management SE. BVG controls the voting rights at the Bertelsmann SE & Co. KGaA and Bertelsmann Management SE General Meeting. 124 Financial Information Consolidated Financial Statements

financial year 2018 (previous year: €15 million). As in the previous year, no loans were received from associates. In ventures existed in the amount of €10 million (previous year: €21 million). As in the previous year, no expenses were the financial year 2018, capital contributions were made to associates of €21 million (previous year: €32 million). recognized for bad or doubtful debts due from joint ventures in the financial year 2018. Loans amounting to €1 million Joint ventures have obligations to the Bertelsmann Group from operating leases in the amount of €3 million (previous year: €8 million) and contingent liabilities in the amount of €22 million (previous year: €27 million). As of the end of the reporting period, commitments for RTL Group joint were granted to joint ventures in the financial year 2018 (previous year: €1 million). Loans were received from joint ventures in the amount of €2 million during the reporting period (previous year: €8 million). As in the previous year, no capital contributions were made to joint ventures. 28 Events after the Reporting Period In September 2018, Bertelsmann and the Moroccan merger. The CRM businesses contributed by Bertelsmann Saham Group announced the merger of their global Customer Relationship Management (CRM) businesses. The transaction was completed on January 4, 2019. Each partner holds 50 percent of the shares in the new company Majorel, which is one of the market leaders in Europe, Africa and the Middle East, coupled with a strong presence in America and Asia. The merger gives Bertelsmann access to the growth markets of the African continent. Bertelsmann has a majority in the relevant governing bodies and the resulting decision- making authorities over the relevant activities of Majorel and will include it as a subsidiary in the Consolidated Financial Statements for the financial year 2019. Saham’s contribution of the CRM businesses will be accounted for in the Bertelsmann Consolidated Financial Statements as a business combination in accordance with IFRS 3. As a result of the early stage of the preliminary purchase price allocation, it is not possible to quantify any adjustments relating to the fair value prior the preparation of Consolidated Financial Statements and to provide any other information required by IFRS 3 on the will continue to be accounted for at their carrying amounts. The reduction in the ownership interest in CRM businesses is accounted for as an equity transaction in accordance with IFRS 10 and can result in a reduction in the low double-digit million range in the equity item “Non-controlling interests.” Furthermore, an additional effect can result in the equity attributable to the Bertelsmann shareholders as a difference between the carrying amounts and the fair value of the corresponding shares. In January 2019, Groupe M6, which belongs to RTL Group, entered into exclusive negotiations with Lagardère Active for the acquisition of Lagardère’s television business. The acquisition is subject to consultation with the employee representative bodies of both Lagardère Group’s television business and Groupe M6, as well as to approval of the Conseil Supérieur de l’Audiovisuel (French broadcasting authority) and the competition authorities. Approval for the acquisition is expected in the second half of 2019. 126 Financial Information Consolidated Financial Statements

Name of the entity Place Name of the entity Global Assekuranz Vermittlungsgesellschaft mit beschränkter Haftung Gruner + Jahr Communication GmbH Gruner + Jahr GmbH Henri-Nannen-Schule Hamburger Journalisten- schule Gruner + Jahr - DIE ZEIT GmbH infoNetwork GmbH informa HIS GmbH informa Solutions GmbH infoscore Business Support GmbH infoscore Consumer Data GmbH infoscore Finance GmbH Gütersloh Hamburg Hamburg Hamburg RTL Group Financial Services GmbH RTL Group Licensing Asia GmbH RTL Hessen GmbH RTL interactive GmbH RTL Journalistenschule GmbH RTL Nord GmbH Cologne RTL Radio Berlin GmbH Wiesbaden RTL Radio Center Berlin GmbH Baden-Baden RTL Radio Deutschland GmbH Baden-Baden RTL Radio Luxemburg GmbH Baden-Baden RTL Radiovermarktung GmbH Baden-Baden RTL West GmbH infoscore Forderungsmanagement GmbH Verl rtv media group GmbH infoscore Portfolio Management International GmbH infoscore Tracking Solutions GmbH inmediaONE] GmbH IP Deutschland GmbH Gütersloh Gütersloh Gütersloh Smart Shopping and Saving GmbH smartclip GmbH Sonopress GmbH Sparwelt GmbH Cologne SpotX Deutschland GmbH IP Internationale Presse direct GmbH Mörfelden-Walldorf SSB Software Service und Beratung GmbH Ligatus GmbH mbs Nürnberg GmbH Cologne stern Medien GmbH Nuremberg stern.de GmbH MEDIASCORE Gesellschaft für Medien- und Kommunikationsforschung mbH Cologne TERRITORY Content to Results GmbH TERRITORY CTR GmbH Mediengruppe RTL Deutschland GmbH Cologne TERRITORY EMBRACE GmbH Mohn Media Energy GmbH Mohn Media Mohndruck GmbH MSP Medien-Service und Promotion GmbH NETLETIX GmbH Next Level Integration GmbH Gütersloh Gütersloh Hamburg Munich Cologne TERRITORY MEDIA GmbH TERRITORY webguerillas GmbH TERRITORY webguerillas Nord GmbH trnd DACH GmbH trnd International GmbH NORDDEICH TV Produktionsgesellschaft mbH Hürth trndnxt GmbH Prinovis Ahrensburg Weiterverarbeitung und Logistik GmbH Prinovis GmbH Prinovis Klebebindung GmbH PRINOVIS Service GmbH Print Service Gütersloh GmbH Probind Mohn media Binding GmbH PSC Print Service Center GmbH Random House Audio GmbH Reinhard Mohn GmbH Relias Learning GmbH rewards arvato services GmbH Hamburg trndsphere blue GmbH UFA Distribution GmbH Gütersloh UFA Fiction GmbH Nuremberg UFA Film und Fernseh GmbH Hamburg Gütersloh Gütersloh Oppurg Cologne UFA GmbH Ufa Radio-Programmgesellschaft in Bayern mbH UFA Serial Drama GmbH UFA Show & Factual GmbH Universum Film GmbH Gütersloh Verlag RM GmbH Berlin Munich Verlagsgruppe Random House GmbH Verlegerdienst München GmbH RM Buch und Medien Vertrieb GmbH Gütersloh VIVENO Group GmbH RTL Group Central & Eastern Europe GmbH RTL Group Deutschland GmbH RTL Group Deutschland Markenverwaltungs GmbH Cologne Cologne Cologne Vogel Druck und Medienservice GmbH VOX Holding GmbH VSG Schwerin - Verlagsservicegesellschaft mbH webmiles GmbH Place Potsdam Cologne Frankfurt am Main Cologne Cologne Hamburg Berlin Berlin Berlin Cologne Berlin Cologne Nuremberg Berlin Düsseldorf Gütersloh Berlin Cologne Munich Hamburg Hamburg Hamburg Gütersloh Bochum Munich Munich Berlin Munich Munich Munich Munich Potsdam Potsdam Cologne Potsdam Ismaning Potsdam Cologne Munich Gütersloh Gütersloh Gilching Gütersloh Höchberg Cologne Schwerin Munich 128 Financial Information Consolidated Financial Statements

The following table shows the number of employees as of December 31, 2018, and on an annual average: Number of Employees RTL Group Penguin Random House Gruner + Jahr BMG Arvato Bertelsmann Printing Group Bertelsmann Education Group Bertelsmann Investments Corporate Total Number of employees (closing date) Number of employees (average) 15,975 10,351 10,079 834 67,464 8,245 2,033 306 1,933 14,154 10,301 10,336 805 71,109 8,309 1,879 246 1,965 117,220 119,103 31 Proposal for the Appropriation of Net Retained Profits The personally liable partner Bertelsmann Management SE and the Supervisory Board of Bertelsmann SE & Co. KGaA will propose to the General Meeting that the remaining net retained profits of Bertelsmann SE & Co. KGaA of €641 million be appropriated as follows: Net Retained Profits for Bertelsmann SE & Co. KGaA in € millions Retained earnings Dividends to shareholders Carry forward to new financial year The dividend per ordinary share thus totals €2,149. 641 (180) 461 130 Financial Information Consolidated Financial Statements

Responsibility Statement To the best of our knowledge, and in accordance with the applicable reporting principles, the Consolidated Financial Statements give a true and fair view of the assets, liabilities, development and performance of the business and the position of the Bertelsmann Group and Bertelsmann SE & Co. KGaA, together with a description of the material opportunities financial position, and profit or loss of the Group, and the Combined Management Report includes a fair review of the and risks associated with the expected development of the Bertelsmann Group and Bertelsmann SE & Co. KGaA. Gütersloh, March 14, 2019 Bertelsmann SE & Co. KGaA Represented by: Bertelsmann Management SE, the personally liable partner The Executive Board Thomas Rabe Markus Dohle Immanuel Hermreck Bernd Hirsch 132 Responsibility Statement

Hereinafter we present the key audit matters: 1 Recoverability of goodwill 1 Goodwill amounting in total to EUR 8.4 billion (33.2% of consolidated total assets and 85.3% of consolidated equity) is reported in the Company’s consolidated the respective group of cash-generating units, the dis- count rate used, the rate of growth and other assump- tions, and is therefore subject to considerable uncertainty. Against this background and due to the complex nature of the valuation, this matter was of particular significance in the context of our audit. financial statements. Goodwill is tested for impairment 2 As part of our audit, we assessed the methodology used by the Company once a year on December 31 of the for the purposes of performing the impairment test, respective financial year or when there are indications of impairment to determine any possible need for write- downs. Impairment testing is carried out at the level of the cash-generating units to which the relevant goodwill is allocated. The carrying amount of the relevant good- will is compared with the corresponding recoverable amount in the context of the impairment test. The recov- erable amount is initially determined on the basis of fair among other things. After matching the future cash inflows used for the calculation against the business plan of the Group, adopted by the Board of Directors and approved by the Supervisory Board, we assessed the appropriateness of the calculation, in particular by reconciling it with general and sector-specific market expectations. In addition, we assessed the appropriate consideration of the costs of Group functions. In the value less costs of disposal. If this amount is higher than knowledge that even relatively small changes in the the carrying amount, a calculation of the value in use is discount rate applied can have a material impact on the no longer required. Since there are normally no available prices from active markets (exception: quoted price of the RTL Group and Groupe M6) or comparable trans- actions from the recent past for the cash-generating units, their fair value less costs of disposal, as well as value in use, is generally determined using discounted cash flow models (DCF). For this purpose, the adopted business plan of the Group forms the starting point for in general five detailed plan- ning periods which are extrapolated based on assump- tions about long-term rates of growth. Expectations relating to future market developments and assumptions value of the entity calculated in this way, we focused our testing in particular on the parameters used to determine the discount rate applied, evaluated the specific average costs of capital derived, and assessed the calculation model. In order to reflect the uncertainty inherent in the projec- tions, we evaluated the sensitivity analyses performed by the Company and carried out our own sensitivity analyses for those groups of cash-generating units with low head- room (recoverable amount compared with the carrying amount). about the development of macroeconomic factors are We verified that the necessary disclosures were made in also taken into account. The discount rate used is the weighted average cost of capital (“WACC”) for the respective group of cash- generating units. the notes to the consolidated financial statements relating to groups of cash-generating units for which a reason- ably possible change in an assumption would result in the recoverable amount falling below the carrying amount of the relevant goodwill. The impairment test determined that, even after taking We assessed the recoverability of goodwill of the into account the fair value less costs of disposal, it was necessary to recognize write-downs amounting to a total of EUR 173 million with respect to the group of cash- generating units “StyleHaul,” “Gruner + Jahr Zeitschriften und Digitalgeschäft International” and “Education Services.” RTL Group and of Groupe M6 on the basis of the stock exchange quotation as of the balance sheet date. Overall, the valuation parameters and assumptions used by the executive directors are in line with our expectations and fall within the ranges considered to be reasonable. The outcome of this valuation exercise is dependent to 3 The Company’s disclosures on goodwill are contained a large extent on the estimates made by the executive in section 9 of the notes to the consolidated financial directors with respect to the future cash inflows from statements. 134 Auditor’s Report

assets of EUR 2.5 billion and other obligations similar to pensions of EUR 0.1 billion. The majority of these pro- visions amounting to EUR 3.2 billion relates to old-age pension commitments in Germany. The other obligations relate primarily to the United Kingdom and the USA, including a small amount of obligations from medical care plans in the USA. Obligations under defined benefit plans are measured using the projected unit credit method. This requires assumptions to be made in particular about future increases in salaries and pensions, average life expectancy (biometrics), and staff turnover. Furthermore, as of each balance sheet date the discount rate must be determined by reference to market yields on high-quality corporate bonds with matching currencies and terms which are consistent with the expected maturities of the obligations. The plan assets are measured at fair value, which in turn involves making estimates that are subject to estimation uncertainties. A large portion of the plan the executive directors are substantiated and sufficiently documented to justify the recognition and measurement of the material pension provisions. 3 The Company’s disclosures relating to pension provisions are contained in section 19 of the notes to the consoli- dated financial statements. 4 Acquisition of OnCourse Learning 1 During the financial year, Bertelsmann SE & Co. KGaA acquired all of the shares in the online education company OnCourse Learning, Inc., Brookfield, Wisconsin, USA, via a subsidiary (share deal). The consideration paid amounted to EUR 280 million. The acquisition was accounted for in accordance with IFRS 3 as a business combination using the acquisition method. The acquired identified assets and assets is managed by Bertelsmann Pension Trust e.V. as liabilities were recorded at fair value as of the acquisition trustee in the context of a Contractual Trust Arrangement (“CTA”) for pension commitments of Bertelsmann SE & Co. KGaA and several German subsidiaries. date. Taking into account the acquired net assets of EUR -83 million that are to be allocated to the Company, the acquired goodwill amounted to EUR 363 million. From our point of view, these matters were of particular significance in the context of our audit because the recogni- tion and measurement of this significant item in terms of In view of the material impact in total that the acquisition had on the amounts of net assets, liabilities, financial posi- tion, and financial performance of the Group and given the its amount are based to a large extent on estimates and complexity of measuring the acquisition, this matter was assumptions made by the Company’s executive directors. of particular significance in the context of our audit. 2 As part of our audit we evaluated the actuarial expert reports obtained and the professional qualifications of 2 In auditing the accounting treatment of the acquisi- tion, we assessed the calculation of the purchase the external experts. We also examined the specific price, the remeasurement of the assets acquired and features of the actuarial calculations and assessed the numerical data, the actuarial parameters and the valu- ation methods on which the valuations were based for compliance with the standard and appropriateness, in addition to other procedures. In addition, we analyzed the development of the obligation and the cost compo- nents on the basis of the actuarial expert reports in the light of changes occurring in the valuation parameters and the numerical data, and assessed their plausibility. For the purposes of our audit of the fair value of the plan assets, we obtained relevant bank confirmations for liabilities assumed at fair value and the calculation of goodwill, and evaluated their appropriateness. For this purpose we initially inspected and assessed the con- tractual agreements relating to the acquisition and reconciled the purchase price paid as consideration for the acquired business operations received with the supporting payment documentation provided to us. We assessed the underlying opening balance sheet figures for said acquisition. We assessed centrally cal- culated fair values (e.g., for customer relationships) by evaluating the assumptions in the business plan the fund units included in the plan assets. We also on the basis of market expectations and discussions compared the fair values of the assets included in the with the Company. We also used checklists to check plan assets with their respective market prices on the basis of appropriate sample testing. the completeness of the disclosures in the notes to the consolidated financial statements required by IFRS 3. Based on our audit procedures, we were able to satisfy ourselves that the estimates and assumptions made by Based on our audit procedures, we were able to satisfy ourselves that the acquisition of On-Course Learning was 136 Auditor’s Report

and are considered material if, individually or in the aggre- gate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements and this group manage- ment report. We exercise professional judgment and maintain professional true and fair view of the assets, liabilities, financial posi- tion and financial performance of the Group in compliance with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to § 315e Abs. 1 HGB. • Obtain sufficient appropriate audit evidence regard- ing the financial information of the entities or business skepticism throughout the audit. We also activities within the Group to express audit opinions • Identify and assess the risks of material misstatement of on the consolidated financial statements and on the the consolidated financial statements and of the group group management report. We are responsible for the management report, whether due to fraud or error, direction, supervision and performance of the group design and perform audit procedures responsive to audit. We remain solely responsible for our audit those risks, and obtain audit evidence that is sufficient opinions. and appropriate to provide a basis for our audit opinions. • Evaluate the consistency of the group management report The risk of not detecting a material misstatement with the consolidated financial statements, its conformity resulting from fraud is higher than for one resulting from with German law, and the view of the Group’s position it error, as fraud may involve collusion, forgery, intentional provides. omissions, misrepresentations, or the override of internal • Perform audit procedures on the prospective information control. • Obtain an understanding of internal control relevant to the audit of the consolidated financial statements and of arrangements and measures (systems) relevant to the audit of the group management report in order to design audit presented by the executive directors in the group management report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the significant assumptions used by the executive directors as a basis for the prospective information, and evaluate the proper procedures that are appropriate in the circumstances, but derivation of the prospective information from these not for the purpose of expressing an audit opinion on the assumptions. We do not express a separate audit opinion effectiveness of these systems. on the prospective information and on the assumptions • Evaluate the appropriateness of accounting policies used used as a basis. There is a substantial unavoidable risk that by the executive directors and the reasonableness of future events will differ materially from the prospective estimates made by the executive directors and related information. disclosures. • Conclude on the appropriateness of the executive directors’ We communicate with those charged with governance use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncer- tainty exists related to events or conditions that may cast regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify significant doubt on the Group’s ability to continue as a during our audit. going concern. If we conclude that a material uncertainty exists, we are required to draw attention in the auditor’s report to the related disclosures in the consolidated financial statements and in the group management report or, if such disclosures are inadequate, to modify our respective audit opinions. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to be able to continue as a going concern. We also provide those charged with governance with a statement that we have complied with the relevant indepen- dence requirements, and communicate with them all relation- ships and other matters that may reasonably be thought to bear on our independence, and where applicable, the related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of • Evaluate the overall presentation, structure and content most significance in the audit of the consolidated financial of the consolidated financial statements, including the disclosures, and whether the consolidated financial state- ments present the underlying transactions and events in a statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure manner that the consolidated financial statements give a about the matter. 138 Auditor’s Report

Corporate Governance at Bertelsmann The pursuit of responsible corporate governance is part of Closed Group of Shareholders the Bertelsmann identity and an important element of its corporate culture. The German Corporate Governance Code as amended on February 7, 2017, is an accepted standard for good corporate governance. Bertelsmann SE & Co. KGaA is a capital market-oriented company but is unlisted. The company is therefore not subject to the statutory requirement to issue a formal declaration as per section 161 of the German Stock Corporation Act. Nevertheless, the recommendations and suggestions contained in the German Corporate Governance Code serve as guidelines for Bertelsmann SE & Co. KGaA. Exceptions to this code in Bertelsmann’s own corporate governance relate primarily to those recommendations and Three foundations (Bertelsmann Stiftung, Reinhard Mohn Stiftung and BVG-Stiftung) indirectly hold 80.9 percent of Bertelsmann SE & Co. KGaA shares, with the remaining 19.1 per- cent held indirectly by the Mohn family. Bertelsmann Verwal- tungsgesellschaft (BVG) controls all voting rights at the General Meetings of Bertelsmann SE & Co. KGaA and Bertelsmann Management SE. BVG is responsible for upholding the interests of the foundations invested in Bertelsmann and of the Mohn family as indirect shareholders in Bertelsmann SE & Co. KGaA, as well as ensuring the continuity of the company’s manage- ment and Bertelsmann’s corporate culture. BVG is controlled by suggestions that apply to publicly held enterprises with large numbers of shareholders or anonymous shareholders, and above all to those recommendations concerning the organization of the Annual General Meeting and remuneration a steering committee composed of three representatives of the Mohn family and three additional non-family members. Corporate Management of the Executive Board and Supervisory Boards. Because it is not obligated to disclose Executive Board remuneration, Bertelsmann SE & Co. KGaA consequently also does not prepare a report on Executive Board remuneration. Statutory Bodies of the Company Bertelsmann’s legal form is that of a Kommanditgesell- schaft auf Aktien (KGaA) (partnership limited by shares). The statutory bodies of the KGaA are the General Meet- ing, the Supervisory Board and the general partner. The general partner serves as the management and represen- tative body of the KGaA. In the case of Bertelsmann, this is Bertelsmann Management SE, a European stock corpo- ration (Societas Europaea), represented by its Executive Board. Bertelsmann SE & Co. KGaA and Bertelsmann Management SE each have their own Supervisory Boards. The members of the Executive Board of Bertelsmann Management SE are appointed and monitored by the Supervisory Board of Bertelsmann Management SE (dual leadership structure). The Supervisory Board of Bertelsmann Management SE & Co. KGaA supervises the management of the business by Bertelsmann Management SE. The duties and responsibilities of the individual bodies are clearly Transparent structures and clear decision-making processes are characteristic for Bertelsmann’s corporate management. The general partner, Bertelsmann Management SE, represented by its Executive Board, is responsible for independently managing the company. The duties consist of determining the corporate objectives, the strategic direction of the Group, Group management, management training, and corporate planning and financing. The Executive Board provides the respective Supervisory Boards with regular, prompt and comprehensive reports on all matters that are relevant to business development and strategy implementation, planning, financial and earnings position, the risk situation, and risk management. It ensures compliance with the provisions of law and corporate guidelines within the Group. The members of the Executive Board bear joint responsibility for the overall management. Matters of fundamental significance and matters concerning the spheres of responsibility of multiple Executive Board members are addressed by the overall Executive Board. Notwithstanding this overall responsibility, the individual members of the Executive Board manage their departments as part of the duties stipulated by the overall Executive Board. The Executive Board Chairman coordinates the cooperation within the Executive Board and between the Executive Board defined in each case and are strictly separated from each and the Supervisory Boards, and has regular consultation other. It is not permitted for a member of the Executive Board of Bertelsmann Management SE to also be a member of the Supervisory Board of Bertelsmann Management SE or the Supervisory Board of Bertelsmann SE & Co. KGaA. The Bertelsmann boards are obliged to secure the continu- ity and independence of the company and to enhance the enterprise value in the long term through responsible and sustainable corporate management. meetings with the chairs of the two Supervisory Boards. In addition, the Executive Board has established the Group Management Committee (GMC), which advises on important corporate strategy and development matters and other issues that affect the Group as a whole. This committee currently has 18 members and includes members of the Executive Board as well as executives representing key businesses, countries, regions and select Group-wide functions. 140 Corporate Governance

the Combined Management Report, p. 40 ff.). This includes a also provides ad hoc reports to the Executive and Supervisory focus on increasing diversity within senior management. The Boards in the event of any significant compliance violations. 18 members of the senior management of the GMC originate The CCC is responsible for the effectiveness of measures from seven different nations. Six members of this committee designed to ensure compliance and for promoting a culture are women. The Supervisory Board supports all measures in of integrity and compliant conduct within the Bertelsmann the area of succession planning, management development and the selection processes that help achieve the aim of equal participation within the workforce. Bertelsmann SE & Co. KGaA is an unlisted company and is not subject to parity codetermination. The “Equal Participation of Women and Men in Leadership Positions in the Private and Public Sector Act” does not apply to the two Supervisory Board bodies. Nevertheless, Bertelsmann supports the goal of this Group. In particular, the CCC monitors investigations into compliance violations and the measures taken to prevent vio- lations. The Integrity & Compliance department is responsible for the day-to-day work to ensure compliance, implementing Board-mandated compliance initiatives and managing the whistleblowing systems. The Bertelsmann Integrity & Compliance program is based on the relevant standards for compliance management systems legislation. Three of the 14 Supervisory Board members are and helps to mitigate risks in various ways. Its basic elements women. Even though the Supervisory Board will not be setting include, in particular, the Bertelsmann Code of Conduct, risk a target quota for women on the Supervisory Board for the time being, the share of women in new appointments should not go down. When candidates are nominated for election as new members of the Supervisory Board, consideration is always given to the aim of increasing the proportion of female members or members from other countries. analysis, advice on compliance, communication and training measures, whistleblowing systems that give not only employ- ees but also third parties the opportunity to report misconduct in the company without fear of reprisal, and case manage- ment. It also includes additional measures in specific subject areas, such as anti-corruption, antitrust law, foreign trade law and antidiscrimination. Integrity & Compliance Corporate responsibility, lawful behavior and acting with integrity toward employees, customers, business partners and govern ment agencies are an integral part of our value system at Bertelsmann. Bertelsmann has always been committed to the principle of adhering to laws and has internal policies on the prevention of risks and their consequences. To ensure compliance, the Executive Board has established a compliance organization and the Integrity & Compliance program. It oversees this program and ensures that it is con- tinuously improved. The Supervisory Board Audit and Finance Committee monitors the effectiveness and proper functioning of the compliance organization. The Executive Board estab- lished the Corporate Compliance Committee (CCC). Each year, the CCC submits an extensive report about compliance The Executive Board has continuously developed and expanded Bertelsmann’s compliance structure and orga- nization over time, including during the financial year 2018. In 2018, Code of Conduct training for employees contin- ued. Additional training was offered on topics such as anti- corruption, antitrust law, foreign trade law, business partner compliance and antidiscrimination. Over the last few years, the interlinks between the compliance organization and the risk management system have been strengthened and the Supplier Code of Conduct has been approved. In 2018, guide- lines were implemented on the compliance organization and the role of local Compliance Officers. All reports of compliance violations received were investi- gated and appropriate actions were taken. within the Group to the Executive and Supervisory Boards. It Executive Board Supervisory Board 142 Corporate Governance

Supervisory Board Plenary Meeting the auditor for the financial year 2018 and for the interim report, and resolved on its corresponding proposal to the In the plenary meetings, the Supervisory Board of Bertelsmann SE & Co. KGaA regularly heard reports from the Executive Board on the current business and financial position Annual General Meeting. Another agenda item at the meeting was a follow-up report on the Executive Board’s plans for the future of Bertelsmann’s customer relationship management of the Group and of the individual divisions. They also heard businesses. reports on Group planning and material business transactions, particularly major planned investments and divestments. As usual, the annual Strategic Planning Dialogue between the The Supervisory Board Chairman, who at the same time is the Chairman of the Supervisory Board of Bertelsmann Management SE, reported regularly and comprehensively to the plenary session of the Supervisory Board concerning the topics and the progress of discussions in the Supervisory Board of Bertelsmann Management SE. The Supervisory Board was kept regularly informed of the status of the implementation of the Group’s strategy by the Executive Board. The Bertelsmann SE & Co. KGaA Supervisory Board and the Bertelsmann Management SE Executive Board discussed fundamental issues of strategic Group development and Executive Board and the Supervisory Board took place as part of the two-day meeting of the Supervisory Board on July 11 and 12, 2018. The Supervisory Board was first updated on the status of strategy implementation and the progress made in the transformation of the Group portfolio since the last Strategic Planning Dialogue. It assessed a steady increase in operative growth, an increasing share of revenue generated by digital and high-growth businesses, and a decline in Group businesses’ dependency on advertising. The Group has also succeeded in further expanding its businesses in the growth regions of China, India and Brazil. The Supervisory Board modifications to the Group strategy. To the extent stipulated discussed exemplary growth and innovation projects in the by law and the articles of association or bylaws, the plenary individual divisions and model cooperation projects between meeting made the necessary decisions. In the financial year individual businesses from different divisions. The HR strategy 2018, the Supervisory Board held four meetings and also met with the Executive Board for a two-day strategy retreat. presented at the meeting constitutes a significant element in the successful implementation of the Group strategy. Based on the outcome of the strategy retreat, the Supervisory Board The first meeting of the Supervisory Board on January 31, believes that Bertelsmann is well positioned for the challenges 2018, focused on discussing and passing resolutions regarding the Group budget for 2018 and on the report of the current business and financial situation. The Supervisory Board also deliberated over the further expansion of the Bertelsmann Group portfolio. One of the main points of discussion was the further expansion of Bertelsmann’s global customer relationship management businesses (Arvato CRM). At the following meeting, on March 20, 2018, in addition of the future. The Board went on to discuss the Executive Board’s specific plans for combining Bertelsmann’s cus- tomer relationship management businesses with Morocco’s Saham Group and with potential investment projects of the Bertelsmann Education Group. In the last Supervisory Board meeting of the financial year, on October 11, 2018, the Supervisory Board once again addressed the business and financial position of the Group to routine reports, the Executive Board reported on the and was given a report on the outlook for the overall financial current business situation and on progress that had been year by the Executive Board. A special focus of the meeting made in implementing the Group strategy. A further agenda was the Executive Board’s update on the steps and measures item was the approval of the Annual and Consolidated Financial Statements for 2017 and the Combined Manage- ment Report. At the recommendation of the Audit and Finance Committee and after discussion with the auditors PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesell- schaft (PwC), the Supervisory Board approved the Annual and Consolidated Financial Statements for the financial year 2017 and the Combined Management Report of Bertelsmann SE & Co. KGaA. The proposal of the personally liable partner for the appropriation of net income was also approved. Further- more, the Supervisory Board followed the recommendations of the Audit and Finance Committee for the appointment of taken to develop and revise the Bertelsmann Essentials, which express the values represented in Bertelsmann’s corporate culture. The Supervisory Board Chairman maintained ongoing con- tact with the Executive Board outside the framework of Supervisory Board meetings, in particular with the Executive Board Chairman, in order to stay abreast of the current busi- ness situation and significant transactions. All Supervisory Board members attended at least half of the Supervisory Board meetings convened. No potential conflicts of interest arose on the Supervisory Board. The Supervisory Board discussed the 144 Report of the Supervisory Board

In particular, and in accordance with its mandate for the reporting year, the Audit and Finance Committee discussed issues of corporate financing, financial planning, fiscal pol- icy and individual negative deviations of the performance of Group businesses from budgeted performance. The commit- tee also extensively addressed the accounting process and monitored the effectiveness and functional capability of the risk monitoring and risk management system, the internal control system and the internal audit system. It also requested regular reports from the Head of Corporate Audit and Con- sulting. Furthermore, the Committee addressed issues relat- ing to compliance, in particular the effectiveness and proper functioning of the compliance management system. In addi- tion, the Audit and Finance Committee reviewed at length the implementation of the Audit Reform Act and the EU General Data Protection Regulation (GDPR) at Bertelsmann. An issue regularly addressed in the meetings of the Audit and Finance Committee was the status and development of cybersecurity in the Group. While routinely discussing structural issues in a separate meeting, an area of special focus was the approaching pro- cess of re-tendering the auditor contract. After first being informed about the new legal regulations for the tender- ing process, the Committee approved the start of prepa- ratory measures for a tendering of the auditor contract. Another agenda item was the EU General Data Protection Regulation (GDPR). During this part of the meeting, the Audit and Finance Committee was briefed on the Group’s data protection strategy and the establishment of a Group data protection organization that complies with legal require- ments. The Audit and Finance Committee also discussed the Group’s fiscal policy and structure. The Committee focused largely on the auditing of the Annual Financial Statements and the Consolidated Financial Statements (see also the section “Audit of the Annual and Consolidated Financial Statements” above). The Audit and Finance Committee had already discussed the focal points of the audit with the auditor during the financial year 2017 and then finalized them in a Committee meeting. The Key Audit Matters from the auditor’s report were also discussed with the auditor in advance during the Committee meeting held at the end of January 2018. The Chair of the Audit and Finance Committee regularly discussed the provisional findings from the audit of the Annual and Consolidated Financial Statements for the financial year 2017 at length with the auditor before the Com- mittee’s financial review meeting that took place on March 20, 2018. In this role, the Committee also addressed the indepen- dence of the auditor and additional services performed by the auditor. There was no indication of grounds for bias or a risk to independence. The 2018 Interim Report was exten- sively discussed with the Committee prior to its publication on August 29, 2018. The Audit and Finance Committee of Bertelsmann SE & Co. KGaA met four times during the 2018 reporting period. An additional meeting was held via teleconference. The Chair- man of the Audit and Finance Committee or his representative continuously updated the plenary session of the Supervisory Board on the work of the Committee through regular reports. Department heads, such as those from the Corporate Finan- cial Reporting, Corporate Taxation and Corporate Legal depart- ments, were represented during the discussion of individual agenda items. In addition, the Chair of the Audit Committee held individual meetings with the responsible auditor. Changes in the Executive Board of Bertelsmann Management SE and in the Supervisory Board, Objectives for the Composition of the Supervisory Board The business of Bertelsmann SE & Co. KGaA is managed by its personally liable partner, Bertelsmann Management SE, represented by its Executive Board. The past financial year saw the following change to the Executive Board of Bertelsmann Management SE: The appointment of Anke Schäferkordt, Executive Board member and Managing Director of Medien gruppe RTL Deutschland, as a member of the Executive Board of Bertelsmann Management SE ended on December 31, 2018, on the best of terms and by mutual agreement. The Supervisory Board would like to thank Anke Schäferkordt for her outstanding service. The financial year also saw the following changes to the Supervisory Board: With the end of the ordinary Annual General Meeting of Bertelsmann SE & Co. KGaA on May 14, 2018, the term of office ended for Supervisory Board members Prof. Dr. Werner Bauer, Kai Brettmann, Murat Cetin, Helmut Gettkant, Ian Hudson, Gigi Levy-Weiss, Christoph Mohn and Christiane Sussieck. Christiane Sussieck, Prof. Dr. Werner Bauer, Gigi Levy-Weiss, Christoph Mohn, Kai Brettmann, Murat Cetin and Ian Hudson were re-elected as members of the Supervisory Board of Bertelsmann SE & Co. KGaA, with immediate effect. The Supervisory Board would like to thank Helmut Gettkant for many years of excellent and trusting cooperation. On January 9, 2018, Günter Göbel, member of the Works Council of Bertelsmann SE & Co. KGaA, was elected as a new member of the Supervisory Board. Murat Cetin left the Supervisory Board of Bertelsmann SE & Co. KGaA on February 28, 2019. The Supervisory Board would also like to thank him for the many years of excellent and trusting cooperation. At present, 146 Report of the Supervisory Board

Supervisory Board Christoph Mohn Chairman Murat Cetin (until February 28, 2019) Chairman of the Works Council, Arvato Direct Services Chairman of the Reinhard Mohn Stiftung Dortmund GmbH Managing Director, Christoph Mohn Internet Holding GmbH • Bertelsmann Management SE (Chairman) Chairman of the General Works Council, Arvato Services CRM2 Member of the Works Council, Bertelsmann SE & Co. KGaA Prof. Dr.-Ing. Werner J. Bauer Vice Chairman Former Executive Vice President of Nestlé AG for Innovation, Technology, Research and Development • Bertelsmann Management SE (Vice Chairman) • GEA-Group AG (until November 12, 2018) • Givaudan S.A. (Vice Chairman) • LONZA S.A. • SIG Combibloc Group AG (since September 27, 2018) Helmut Gettkant (until May 14, 2018) Chairman of the Corporate Works Council, Bertelsmann SE & Co. KGaA (until June 28, 2018) Günter Göbel (since July 9, 2018) Chairman of the Corporate Works Council, Bertelsmann SE & Co. KGaA (since June 28, 2018) Kai Brettmann Editorial Director Online, RTL Nord GmbH, Hamburg Chairman of the RTL Group European Works Council Chairman of the Mediengruppe RTL Deutschland Corporate Ian Hudson Chairman of the International Management Representative Committee of Bertelsmann SE & Co. KGaA (BMRC) • Which? Limited Works Council Chairman of the Works Council of RTL Nord Dr. Thomas Buberl (since January 16, 2018) Chairman of the Executive Board, AXA S.A. • AXA Konzern AG (Chairman) (until April, 27, 2018) • Bertelsmann Management SE (since January 16, 2018) • AXA ASIA (until June 20, 2018) • AXA Equitable Holdings, Inc. • AXA Equitable Life Insurance Company • AXA Financial, Inc. (until May 16, 2018) • AXA Leben AG (until April 19, 2018) • AXA Versicherungen AG (until April 19, 2018) • AXA XL Group Ltd. (since September 12, 2018) • MONY Life Insurance Company of America Bernd Leukert Member of the Executive Board, SAP SE, Products & Innovation (until February 20, 2019) • Bertelsmann Management SE • Deutsches Forschungszentrum für Künstliche Intelligenz (DFKI) GmbH • TomTom NV • Membership of statutory domestic supervisory boards • Membership of comparable domestic and foreign supervisory bodies of business enterprises 148 Boards/Mandates Supervisory Board

Bertelsmann SE & Co. KGaA’s Bertelsmann Management SE’s Supervisory Board Committees 2018 Supervisory Board Committees 2018 Audit and Finance Committee Bodo Uebber (Chairman) Kai Brettmann Christoph Mohn Hans Dieter Pötsch Working Group of Employee Representatives Liz Mohn (Chairwoman) Kai Brettmann Murat Cetin (until February 28, 2019) Helmut Gettkant (until May 14, 2018) Günter Göbel (since July 9, 2018) Ian Hudson Christiane Sussieck Personnel Committee Christoph Mohn (Chairman) Prof. Dr.-Ing. Werner J. Bauer Liz Mohn Hans Dieter Pötsch Program Committee Christoph Mohn (Chairman) Prof. Dr.-Ing. Werner J. Bauer Dr. Brigitte Mohn Hans Dieter Pötsch 150 Boards/Mandates Supervisory Board

Selected Terms at a Glance Selected Terms at a Glance Alternative Performance Measures Corporate Governance Additional financial measures that are not directly specified by The term for responsible corporate management and control financial reporting regulations. These are determined by means of a company-specific reconciliation and are based on manda- tory (IFRS) measures. in the interest of creating sustainable value. Bertelsmann Value Added (BVA) A performance indicator for assessing the profitability of operations and return on invested capital. BVA is calcu- lated as the difference between net operating profit after tax (NOPAT) and the cost of capital. NOPAT is calculated on the basis of operating EBITDA. By deducting depre- ciation, amortization and impairment losses and adjusting for special items, and after modifications and less a flat 33 percent tax, NOPAT, which is used as the basis for calcu- lating BVA, is determined. Cost of capital is the product of the weighted average cost of capital (WACC, where uniform WACC after taxes is 8 percent) and the level of capital invested (Group’s operating assets less non-inter- est-bearing operating liabilities). Cash Flow A company’s cash inflows and outflows during a specific period. Contractual Trust Arrangement (CTA) Coverage Ratio The (interest) coverage ratio is a financing target. It represents the ratio of operating EBITDA to financial result. Amounts reported in the Annual Financial Statements are modified in calculating the coverage ratio. Customer Relationship Management (CRM) Customer Relationship Management (CRM) is a strategic approach that establishes, maintains and reinforces compa- nies’ customer relationships using state-of-the-art information and communication technologies. Equity Method The equity method is a method of accounting to recognize associates and joint ventures whereby the investment is ini- tially recognized at cost and adjusted thereafter for the post- acquisition change in the investor’s share of the investee’s net assets. Goodwill The concept of funding and insolvency protection of pension obligations by transferring of assets into a structure similar to a trust. Assets are classified as plan assets under IFRS and netted against the company’s pension obligations. Goodwill represents the future economic benefits arising from those assets acquired in a business combination that are not individually identified and separately recognized. 152 Additional Information Selected Terms at a Glance

Financial Calendar Contact May 15, 2019 Announcement of figures for the first three months of 2019 May 22, 2019 Payout of dividends on profit participation certificates for the 2018 financial year August 29, 2019 Announcement of figures for the first half of 2019 November 7, 2019 Announcement of figures for the first nine months of 2019 Production Credits Publisher Bertelsmann SE & Co. KGaA Carl-Bertelsmann-Strasse 270 33311 Gütersloh Germany Responsible Karin Schlautmann Bertelsmann SE & Co. KGaA Executive Vice President Corporate Communications Project Management Simone Fratczak Bertelsmann SE & Co. KGaA Corporate Communications Design and Production Territory CTR GmbH, Gütersloh Print Mohn Media Mohndruck GmbH, Gütersloh Photo Credits Sebastian Pfütze 154 Additional Information Production Credits For Journalists Corporate Communications/Media Relations Phone: +49 (0) 52 41-80-24 66 press@bertelsmann.com For Analysts and Investors Investor Relations Phone: +49 (0) 52 41-80-23 42 investor.relations@bertelsmann.de For Global Jobs and Careers Recruiting Services createyourowncareer@bertelsmann.com www.createyourowncareer.com Corporate Responsibility & Diversity Management Tel.: +49 (0) 52 41-80-750 21 responsibility@bertelsmann.com The Annual Report and current information about Bertelsmann are also posted on: www.bertelsmann.com The Annual Report is also available in German.

Bertelsmann SE & Co. KGaA Carl-Bertelsmann-Strasse 270 33311 Gütersloh Germany www.bertelsmann.com