Annual Report 2019 Advance Reading Copy Subject to Modification and Amendments

Bertelsmann is a media, services and education company that operates in about 50 countries around the world. It includes the broadcaster RTL Group, the trade book publisher Penguin Random House, the magazine publisher Gruner + Jahr, the music company BMG, the service provider Arvato, the Bertelsmann Printing Group, the Bertelsmann Education Group and Bertelsmann Investments, an international network of funds. The company has 126,000 employees and generated revenues of €18.0 billion in the 2019 financial year. Bertelsmann stands for creativity and entrepreneurship. This combination promotes first-class media content and innovative service solutions that inspire customers around the world. Bertelsmann aspires to achieve climate neutrality by 2030. www.bertelsmann.com

Financial Information 4 Combined Management Report Fundamental Information about the Group 5 Corporate Profile 6 Strategy 8 Value-Oriented Management System 8 Non-Financial Performance Indicators Report on Economic Position 11 Corporate Environment 11 Significant Events in the Financial Year 12 Results of Operations 15 Net Assets and Financial Position 19 Performance of the Group Divisions 27 General Statement by Company Management on the Economic Situation 27 Alternative Performance Measures 30 Significant Events after the Balance Sheet Date 30 Risks and Opportunities 38 Outlook 39 Notes to the Financial Statements of Bertelsmann SE & Co. KGaA (in accordance with HGB, German Commercial Code) 41 Combined Non-Financial Statement 47 Consolidated Financial Statements 47 Consolidated Income Statement 48 Consolidated Statement of Comprehensive Income 49 Consolidated Balance Sheet 50 Consolidated Cash Flow Statement 51 Consolidated Statement of Changes in Equity 52 Notes 134 Responsibility Statement 135 Auditor’s Report 142 Corporate Governance 145 Report of the Supervisory Board 150 Boards / Mandates 150 Supervisory Board 153 Executive Board 154 Additional Information 154 Selected Terms at a Glance 156 Financial Calendar / Contact/ Production Credits Bertelsmann Annual Report 2019 3

Fundamental Information about the Group In this Management Report, the Group is using the option to combine the Group Management Report and the Management Report of Bertelsmann SE & Co. KGaA. This Combined Management Report outlines the business performance, including the business result and the position of the Bertelsmann Group and Bertelsmann SE & Co. KGaA. Information about Bertelsmann SE & Co. KGaA in accordance with the German Commercial Code (HGB) will be detailed in a separate section. The Combined Management Report will be published instead of the Group Management Report within the Bertelsmann Annual Report. Corporate Profile Bertelsmann operates in the core business fields of media, services and education in around 50 countries worldwide. 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 (video), Penguin Random House (books), Gruner + Jahr (magazines), BMG (music), Arvato (services), Bertelsmann Printing Group (printing), Bertelsmann Education Group (education) and Bertelsmann Investments (funds). Bertelsmann SE & Co. KGaA is a publicly traded but unlisted company limited by shares. As a group holding company, it exercises key corporate functions such as the definition and further development of group strategy, capital allocation, financing and management. Internal corporate management and reporting follow the Group’s organizational structure, which consists of the operating divisions and Corporate. RTL Group is, based on revenue, one of the leading television groups in the broadcasting, content and digital business, with interests in 68 television channels, eight streaming services, 30 radio stations, and global content production companies and digital businesses. The television portfolio includes RTL Television in Germany, M6 in France and the RTL channels in the Netherlands, Belgium, Luxembourg, Croatia and Hungary, as well as a stake in Atresmedia in Spain. RTL Group’s content business, Fremantle, is one of the largest international creators, producers and distributors of scripted and unscripted content in the world. RTL Group is active in the area of online video with the streaming services of its broadcasters (including TV Now, 6play and Videoland); the digital video networks BroadbandTV and Divimove; and Fremantle’s more than 300 YouTube channels. RTL Group also owns the ad-tech companies Smartclip and SpotX. RTL AdConnect is RTL Group’s international advertising sales house. RTL Group is a listed company and a member of the MDAX. Penguin Random House is, based on revenue, the world’s largest trade book publisher, with more than 300 imprints across six continents. Its well-known book brands include Doubleday, Riverhead, Viking and Alfred A. Knopf (United States); Ebury, Hamish Hamilton and Jonathan Cape (United Kingdom); Plaza & Janés and Alfaguara (Spain); Sudamericana (Argentina); and the international imprint DK. Germany’s Verlagsgruppe Random House, which includes illustrious publishing houses such as Goldmann and Heyne, is not part of Penguin Random House from a legal point of view, but is under the same corporate management and is part of the Penguin Random House division. Each year Penguin Random House publishes about 15,000 new titles and sells around 600 million print books, e-books and audiobooks. Gruner + Jahr is one of Europe’s leading premium magazine publishers. Its magazine portfolio includes established brands such as “Stern,” “Brigitte” and “Geo”; young brands like “ Barbara,” “Guido” and “Wohllebens Welt”; and the French magazine publisher Prisma Media. It also has products and licenses such as the “Schöner Wohnen” furniture collection and digital offerings in all publishing segments. In digital marketing, G+J operates international platforms such as AppLike, and has a stake in the global leader of native advertising, Outbrain. The G+J enterprise Territory is one of the leading communication agencies in Germany and the leading content communications provider in Europe. In addition, G+J holds the majority stake in DDV Mediengruppe in Saxony, and a stake in Spiegel-Gruppe. BMG is an international music company with 19 offices in 12 core music markets, now representing more than three million songs and recordings, including the catalogs of Alberts Music, Broken Bow Music Group, Bug, Cherry Lane, Chrysalis, Mute, Primary Wave, Sanctuary and Trojan, as well as thousands of famous artists and songwriters. Bertelsmann Annual Report 2019 5

Bertelsmann Printing Group were restructured organizationally. The new cross-division structure is based on a “single-company approach.” Another emphasis in the reporting period was strengthening collaborations and alliances – for example, the Bertelsmann Content Alliance in the content business and the Ad Alliance in advertising and marketing. The digital transformation progressed as digital businesses were continually expanded. RTL Group reported not only an increase in paying subscribers for its streaming services, but also an increase in viewing time on the platforms TV Now in Germany and Videoland in the Netherlands. In France, the RTL Group company Groupe M6 is developing a technical platform for Salto – the pay streaming service it operates with TF1 and France Télévisions, to be launched in 2020. Gruner + Jahr launched “Stern Crime Plus,” its first paying subscriber model for digital journalism. The Bertelsmann Content Alliance initiated the Audio Alliance to increase its audio offers, and started producing podcasts and distributing new podcasts on its Audio Now platform. The Group’s growth platforms were expanded further and recorded overall significant organic growth. Fremantle is continuing its drama productions with the second season of drama series “American Gods,” and was successful with for- mats such as “America’s Got Talent: The Champions” in the United States and the second season of the UFA production “Charité” in Germany. BMG expanded its presence in Asia by opening a branch in Hong Kong, and reported successful publications of artists like Kylie Minogue and Jason Aldean in the recordings business, and Bring Me The Horizon, Juice WRLD and Lewis Capaldi in the music publishing business. New or expanded agreements were signed in the record- ings business – for example, with the singers Richard Marx and Natalie Imbruglia and the band Seeed; and in the music publishing business with Neil Finn of Crowded House, Cage The Elephant, and Mick Jagger and Keith Richards of the Rolling Stones. Arvato Supply Chain Solutions attracted many new customers, and Arvato Financial Solutions initi- ated the creation of the pay-after-delivery business and a new digital “Know Your Customer” platform to offer compa- nies and banks a powerful tool. Arvato Systems continued to expand its portfolio of IP-based solutions by introducing a serialization solution for prescription medication as well as starting a VPN access service. In the online education seg- ment, Relias continued to expand its customer base and integrated the healthcare division of OnCourse Learning, a company acquired last year. Bertelsmann announced that it will provide around 50,000 scholarships for classes provided by the US-based online university Udacity in the areas of the cloud, data and artificial intelligence as part of the continuing digital education campaign “#50000Chancen.” Bertelsmann expanded its global network of start-up invest- ments in growth regions and made around 80 new and follow-up investments during the reporting period. At the end of 2019, Bertelsmann Investments held some 230 invest- ments in young companies and funds, mainly through its four international funds. During the reporting period, Bertelsmann Asia Investments (BAI) included the e-commerce platform Ding Dong Fresh, with which customers can order fresh groceries and have them delivered to their home. Further- more, this fund was successful in several exits, including the sale of all the shares in the tech company Bigo. Bertelsmann India Investments (BII) invested in the online loan market plat- form Rupeek, which is currently focused on issuing loans with gold as collateral. In Brazil, Bertelsmann acquired 100 percent of Afferolab, one of the country’s largest corporate training providers. In addition, Bertelsmann Brazil Investments (BBI) assisted in preparing the successful IPO of Afya, a Brazilian education company. Bertelsmann holds a stake in Afya via a fund participation with its partner Crescera Investimentos. Penguin Random House expanded its presence in South America with its acquisition of the publishing group Ediciones Salamandra, operating in Spain and Latin America, and by purchasing the literature and educational publisher Editora Zahar in Brazil through Companhia das Letras. Bertelsmann will continue to push ahead with its ongoing transformation in 2020, in line with the four strategic priorities. Compliance with and achievement of the strategic development priorities are continuously examined by the Executive Board at the divisional level, through regular meetings of the Strategy and Business Committee and as part of the annual Strategic Planning Dialogue between the Executive Board and the Supervisory Board. In addition, relevant markets and the competitive environment are analyzed on an ongoing basis in order to draw conclusions concerning the further development of the Group’s strategy. The Executive Board is also supported by the Group Management Committee (GMC) on issues of corporate strategy and development. This Committee is composed of executives representing key businesses, countries and regions, and select Group-wide functions. The Group’s content-based and entrepreneurial creativity is also very important for the implementation of its strategy. Bertelsmann will therefore continue to invest in the creative core of its businesses. Simultaneously, innovation compe- tence is very important for Bertelsmann and is a key strategic component (see the section “Innovations”). Bertelsmann Annual Report 2019 7

Employees At the end of the financial year 2019, the Group had 126,447 employees worldwide. In 2019, there were 1,235 people serving in trainee positions in Bertelsmann companies in Germany. The personnel department strengthened talent management processes and instruments. In particular, by 2021, one-third of top and senior management positions across all divisions should be occupied by women. The Bertelsmann Essentials (corporate values) were commu- nicated, and an inaugural digital employee survey was con- ducted across the Group to evaluate their implementation. The Group plans to conduct the survey biennially from 2019 onward. Furthermore, the digital curriculum of Bertelsmann University was expanded. At the end of 2019, over 91,000 employees in 57 countries were able to access training courses on the Group-wide digital “peoplenet” HR IT platform. At the Group Dialogue Conference in February 2020, employee representatives and company representatives discussed future methods of cooperation and current trends. After adopting the Inclusion Action Plan to improve par- ticipation of disabled persons in the working environment, implementation was launched at the German sites, working together with representatives for disabled persons. Bertelsmann has been one of the pioneers in profit sharing since 1970. Accordingly, in 2019, a total of €116 million of the 2018 profit was distributed to employees across the Group (previous year: €105 million). Innovations Businesses invest in the research and development of new products in order to ensure their long-term competitive- ness. The media sector has a similar imperative to create innovative media content and media-related products and services in a rapidly changing environment. This means that instead of conventional research and development activities, Bertelsmann views the company’s own innovative power as particularly important for business development. The long- term success of the Group depends heavily on product innovations, investing in growth markets and integrating new technologies. Furthermore, innovative expertise is very important for strategy implementation. Bertelsmann relies on innovation and growth in core opera- tions and new business fields. The key success factors of Bertelsmann’s innovation management include continu- ously following cross-industry trends and observing new markets. At the Group level, Bertelsmann works with the divisions to continuously identify and implement innovative business strategies. Alongside market-oriented activities, support is given to Group-wide initiatives that actively pro- mote knowledge transfer and collaboration. At regular inno- vation forums, executives meet with internal and external experts to examine success factors for innovation and creativity. Furthermore, cooperation is strengthened with increased collaboration among the divisions. For example, the marketer IP Deutschland, G+J eMS and other partners have combined their capabilities into the Ad Alliance, and provide them to advertising clients and media agencies. In the reporting period, Bertelsmann also launched the new Bertelsmann Content Alliance in Germany, a cooperation between all content businesses in the Group for developing and marketing mutual formats across divisions. The innovations at RTL Group focus on three core topics: continuously developing new, high-quality TV formats; using all digital means of distribution; and expanding diverse forms of advertising sales and monetization. RTL Group estab- lished, for example, the Format Creation Group (FC Group) that meets the high demand for exclusive content by devel- oping innovative format ideas and intellectual property fully owned and controlled by RTL Group. FC Group develops factual entertainment formats and reality shows exclusively for RTL broadcasters and streaming services, reflecting their needs in the local markets. Groupe M6 is devel oping the tech platform for the pay streaming service Salto, to be launched in 2020. Salto is a project of the two main commer- cial French television companies, Groupe TF1 and Groupe M6, as well as the public broadcaster France Télévisions. Salto’s tech platform will also be used by RTL Group broad- casters and is open to other broadcasting partners. In Germany, Mediengruppe RTL Deutschland together with ProSiebenSat.1 launched the joint venture d-force, which aims to boost addressable television and online video advertising in Germany. Innovations at Penguin Random House aim to promote a culture throughout the entire company that is driven by readers. The innovative approach starts with understanding Bertelsmann Annual Report 2019 9

Report on Economic Position Corporate Environment Overall Economic Developments Economic growth slowed in 2019. Real GDP increased by 3.0 percent compared to 3.7 percent in 2018. The slowdown in industry and global trade still has an effect. The economies in developed countries in particular continued to slow down, whereas the economic situation in many emerging countries stabilized. In addition, the global economy was negatively impacted by the worsening of the trade conflict between China and the United States. In Europe the economy slowed down. Real GDP grew by 1.2 percent compared to 1.8 percent in 2018. Sluggish industry growth ultimately also affected the service sector, which had been recording robust growth for a long period. Global economic slowdown affected the German economy. Real GDP grew by only 0.6 percent compared to 1.5 percent in the previous year. In contrast, the French economy maintained its growth trajectory. The smaller dependency on exports compared with Germany is a positive factor for growth. Real GDP growth was 1.2 percent in 2019 compared to 1.7 percent in 2018. Economic growth in the United Kingdom remained stable, with an increase of 1.4 percent compared to 1.3 percent in the previous year. After a slight weakness mid-year in the United States, real GDP grew by 2.3 percent in 2019 compared to 2.9 percent in 2018. slight growth in all relevant markets. Publisher sales of e-books declined moderately in the United States and the United Kingdom, whereas the markets for audiobooks continued to grow strongly. The magazine markets in Germany and France in 2019 were characterized by strongly declining print advertising business and moderately declining circulation business in Germany, as well as a significant decline in the circulation business in France, while the digital business in Germany and France posted strong growth. The global music markets in 2019 reported moderate growth in the publishing segment. The recording market segment grew significantly. The key service markets for Arvato, namely Customer Relationship Management, Supply Chain Solutions (SCS), Financial Solutions and IT, saw moderate to significant growth. The European offset printing markets declined moderately in 2019, while the European gravure printing markets declined significantly. The development of the North American book printing market declined moderately over the same period. In 2019, the education markets in the United States exhibited moderate to strong growth in the market segments where Bertelsmann is involved – namely, training in healthcare, e-learning in the technology area, and university education in the university and services areas. 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. The development in European TV advertising markets was mixed in 2019, yet was slightly down overall. TV advertising markets grew significantly in Hungary and remained stable in the Netherlands, whereas the French TV advertising markets showed a slight decrease, in Belgium and Germany a moderate drop, and in Spain a significant decline. The streaming markets in Germany, France and the Netherlands showed strong growth. Significant Events in the Financial Year Effective January 4, 2019, all worldwide Customer Relation- ship Management businesses at Bertelsmann were merged with those of the Saham Group in Morocco. Each partner holds 50 percent of the shares in the new company, Majorel, con- trolled by Bertelsmann. Majorel is a consolidated Bertelsmann Group company. Kasper Rorsted, CEO of adidas AG, resigned from the Supervisory Board of Bertelsmann effective March 31, 2019. The markets for printed books achieved slightly positive growth overall in 2019. Revenue from printed books reported As of April 1, 2019, Penguin Random House acquired the British children’s publishing company Little Tiger Group, thus Bertelsmann Annual Report 2019 11

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 2,138 265 913 46 1,697 948 2 0 6,009 (203) 5,806 4,513 3,371 442 554 2,478 620 331 13 12,322 (105) 12,217 2019 Total 6,651 3,636 1,355 600 4,175 1,568 333 13 18,331 (308) 18,023 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 due to continued expansion of the business. The organic growth was 6.9 percent. Revenues at Arvato rose 1.8 percent to €4,175 million (previous year: €4,100 million). The organic growth was 2.3 percent. The increase stemmed in particular from positive business development in the SCM and Financial Solutions divisions. Revenues at Bertelsmann Printing Group fell 4.3 percent to €1,568 million (previous year: €1,639 million) due to market effects. The organic growth was -4.9 percent. Bertelsmann Education Group increased its revenues by 29.4 percent to €333 million (previous year: €258 million). The organic growth was 4.0 percent. Revenue growth was due to organic growth, and in particular due to portfolio effects. The investments of Bertelsmann Investments are generally not consolidated, so revenue is not usually reported for this division. The revenue share generated by the growth businesses increased to 36 percent overall (previous year: 34 percent), thanks to organic growth and acquisitions, while the rev- enue share of structurally declining businesses decreased to 3 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 the Group’s 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 busi- nesses. The structurally declining businesses comprise those activities that post sustained revenue losses due to market factors. These include in particular the gravure printing activities and the storage media replication 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 32.2 percent compared to 33.2 percent in the previous year. The revenue share generated by France amounted to 12.3 percent (previous year: 13.2 percent). In the United Kingdom, the revenue share was 6.5 percent (previous year: 6.5 percent). The share of total revenues generated by the other European countries amounted to 18.9 percent compared to 18.9 percent in the previous year. The revenue share generated by the United States was 23.4 percent (previous year: 22.0 percent), and the other countries achieved a revenue share of 6.7 percent (previous year: 6.2 percent). This means that the share of total revenues generated by foreign business was 67.8 percent (previous year: Consolidated Revenues by Region in percent Consolidated Revenues by Category in percent 6.7 Other countries 32.2 Germany 36.1 Services 17.1 Rights and licenses 23.4 United States 18.9 Other European countries 12.3 France 6.5 United Kingdom 22.5 Advertising 24.3 Own products and merchandise Bertelsmann Annual Report 2019 13

adjustments of carrying amounts of assets held for sale of €-7 million (previous year: €-6 million), results from dispos- als of investments amounting to €90 million (previous year: €6 million), fair value measurement of investments amounting to €143 million (previous year: €157 million), as well as restruc- turing expenses and other special items totaling €-293 million (previous year: €-278 million). The increase in restructuring expenses is largely attributable to cutting back the gravure printing business. EBIT EBIT amounted to €1,825 million in the financial year 2019 (previous year: €1,620 million), after adjusting operating EBITDA for special items totaling €-154 million (previous year: €-296 million) and the amortization, depreciation, impair- ments and reversals of impairments on intangible assets, property, plant and equipment and right-of-use assets totaling €-930 million (previous year: €-670 million), which were not included in the special items. Group Profit The financial result was €-216 million, compared with the previous year’s amount of €-309 million. The deviation is attributable to the first-time adoption of the interest accrual effects of lease liabilities due to the initial application of IFRS 16, as well as to effects from the market valuation of derivatives used to secure internal Group transactions. The tax expense of €-426 million reached a normalized level com- pared to €-301 million in the previous year, primarily due to a decrease in positive valuation effects of deferred taxes. This produced earnings after taxes from continuing operations of €1,090 million (previous year: €1,103 million). Taking into account the earnings after taxes from discontinued opera- tions of €1 million (previous year: €1 million), this resulted in Group profit of €1,091 million (previous year: €1,104 million). The share of Group profit attributable to non-controlling inter- ests came to €362 million (previous year: €351 million). The share of Group profit attributable to Bertelsmann shareholders was €729 million (previous year: €753 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 2019. 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 contribution 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 provides 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 optimizing 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 lim- ited to the defined maximum of 2.5. As of December 31, 2019, the leverage factor of Bertelsmann was 2.6, lower than the previous year’s level (December 31, 2018: 2.7). Due to a high operating release of funds, net financial debt decreased. This was counteracted by the increase in pension provisions due to the lower discount rate and the increase in the present value of lease liabilities resulting from IFRS 16. Both of these effects caused the leverage factor limit to be exceeded (see further explanation in the section “Alternative Performance Measures”). Assuming that the discount interest rate did not change from the pre- vious year, the leverage factor would have been below 2.4 as of December 31, 2019. As of December 31, 2019, economic debt decreased to €6,511 million from €6,619 million in the previous year, due to a decrease in net financial debt to €3,364 million (December 31, 2018: €3,932 million). In contrast, the rec- ognized lease liabilities increased (method effect of IFRS 16) to €1,392 million (December 31, 2018/net present value of Financial Targets Leverage Factor: Economic debt/Operating EBITDA1) Coverage ratio: Operating EBITDA/Financial result1) Equity ratio: Equity as a ratio to total assets (in percent) 1) After modifications. Target ≤ 2.5 > 4.0 ≥ 25.0 2019 2.6 8.5 38.2 2018 2.7 11.1 38.8 Bertelsmann Annual Report 2019 15

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) 2019 2,090 (712) (1,128) 250 (12) 1,405 1,643 (7) 1,636 2018 1,437 (1,130) (372) (65) 28 1,442 1,405 – 1,405 €-1,128 million (previous year: €-372 million). Dividends paid to shareholders of Bertelsmann SE & Co. KGaA remained unchanged at €-180 million (previous year: €-180 million). Dividends to non-controlling interests and further payments to partners in partnerships came to €-263 million (previous year: €-356 million). As of December 31, 2019, Bertelsmann had cash and cash equivalents of €1.6 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 year on year in particular due to the initial application of the new IFRS 16 account- ing standard. The existing off-balance-sheet liabilities as of December 31, 2019, 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 Total investments including acquired financial debt of €6 million (previous year: €27 million) amounted to €1,276 million in the financial year 2019 (previous year: €1,461 million). Invest- ments according to the cash flow statement amounted to €1,270 million (previous year: €1,434 million). As in previ- ous years, the majority of the €323 million investments in property, plant and equipment (previous year: €325 million) stemmed from Arvato. Investments in intangible assets came to €313 million (previous year: €295 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 €317 million was invested in financial assets (previous year: €258 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 €317 million in the reporting period (previous year: €556 million) and were attributable in part to the acquisi- tion of the TV activities of Groupe Lagardère. 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 2019 481 124 31 80 216 45 25 260 1,262 8 1,270 2018 262 43 54 107 233 36 484 202 1,421 13 1,434 Bertelsmann Annual Report 2019 17

Performance of the Group Divisions RTL Group RTL Group once again grew its revenues to a new record level in 2019, mainly driven by Fremantle’s expanding production busi- ness and the group’s digital businesses. Operating EBITDA also increased based on accounting method effects and Fremantle’s strong performance, despite higher costs for programming and streaming services. RTL Group rapidly expanded its streaming services in the European core markets. In Germany in particu- lar, the group strengthened its market presence through alli- ances within and outside the Bertelsmann Group, primarily in the areas of advertising sales, technology and content. RTL Group’s revenues rose 2.2 percent to €6.7 billion (previous year: €6.5 billion), reaching a new peak. At €1.1 billion (previous year: €985 million), 16.1 percent (previous year: 15.1 percent) of total revenues were attributable to digital businesses such as digital advertising, streaming and advertising technology. Operating EBITDA increased by 2.7 percent to €1,439 million (previous year: €1,402 million), and the EBITDA margin was 21.6 percent (previous year: 21.5 percent). At year-end, RTL Group had more than 1.44 million paying subscribers to its streaming platforms TV Now in Germany and Videoland in the Netherlands. This represents a 37 percent year-on-year increase. In France, approval was granted by the antitrust authorities to Salto, the joint streaming service of Groupe M6, TF1 and France Televisions, which is scheduled to launch in 2020. Mediengruppe RTL Deutschland operated in a declining TV advertising market in 2019, but was able to partially compen- sate for lower advertising revenues with increased streaming and platform revenues. Earnings declined against a back- ground of higher costs for sports content and the expansion of TV Now. The family of channels’ combined audience share increased to 28.1 percent (previous year: 27.5 percent) in the main target group. The market-leading flagship channel RTL Television did especially well, increasing its audience share for the first time since 2011. In France, Groupe M6’s revenues fell slightly, while earnings remained stable. The decrease in revenue was mainly due to the sale of the soccer club Girondins de Bordeaux in 2018, which was almost completely compensated by higher TV ad sales following the acquisition of Lagardère’s TV operations in September 2019. With this acquisition, which included France’s leading children’s TV channel, Gulli, Groupe M6 further strengthened its market position and profitability. As a result, Groupe M6 increased its combined audience share in the key target group to 22.8 percent (previous year: 21.4 percent). At RTL Nederland, revenues and earnings declined despite a posi- tive performance by the streaming business. The production business Fremantle grew strongly: revenues and operating EBITDA increased at double-digit rates. This was driven by new seasons of successful series and show formats in the United States, as well as a thriving business at the German production subsidiary UFA. RTL Group contributed to the Bertelsmann Content Alliance in Germany with numerous projects and expanded its group-wide audio business. The German Ad Alliance gained additional partners. In the field of advertising technology, the activities of the RTL Group subsidiaries Smartclip and SpotX were strategically realigned. RTL Group created a leading European digital studio by combining Divimove and United Screens. The digital video network StyleHaul was discontinued in 2019. Revenues by Region in percent (without intercompany revenues) 2.4 Other countries 16.9 United States 22.9 Other European countries 31.5 Germany 21.8 France 4.5 United Kingdom Revenues by Category in percent 5.7 Services 37.5 Rights and licenses 1.7 Own products and merchandise 55.1 Advertising Revenue Breakdown 8 6 4 2 0 €6.5 billion 0.7% -0.9% 2.4% €6.7 billion Exchange rates Portfolio and other effects Organic growth 2018 Change 2019 Bertelsmann Annual Report 2019 19

Gruner + Jahr Gruner + Jahr successfully continued its transformation in 2019. Revenues remained organically stable at the previous year’s level, operating EBITDA rose sharply by 12.1 percent to €157 million (previous year: €140 million), and the EBITDA margin improved to 11.6 percent (previous year: 9.7 percent). The reasons for this are share gains in the declining advertising market through the Ad Alliance in Germany, the initial application of IFRS 16 and the growing digital business in Germany and France. Against a backdrop of continued portfolio measures, reported sales declined by 5.9 percent to €1.4 billion (previous year: €1.4 billion). The special-interest publishing house Motor Presse Stuttgart was sold, and the digital marketing platform Ligatus was integrated into Outbrain, the world market leader in native advertising. In its core countries, G+J once again significantly increased the digital revenue contribution. It now stands at 33 percent (previous year: 27 percent). One growth driver was the AppLike marketing platform, which posted strong increases in both revenues and earnings. Meanwhile, the digital offer- ings of the magazine brands in Germany and France also saw strong increases in revenues and earnings. Revenues by Region in percent (without intercompany revenues) Other reasons for the strong increase in earnings in Germany, besides the merger of Ligatus into Outbrain and the growing digital business, were innovative magazine launches such as “Barbara,” as well as some classic segments like popular- science magazines (e.g., “Geo”) and the cheaper production of magazines. This more than compensated for the market- driven decline in newsstand and print-ad sales. 2.0 Other countries 1.9 United States 7.5 Other European countries 1.1 United Kingdom 21.0 France 66.5 Germany G+J France’s earnings were well above the previous year. This was due to, among other things, the digital businesses’ earnings performance. DDV Mediengruppe was able to slightly increase its revenues; its result was below the previous year, due to cost factors among other things. Territory, Europe’s leading content communication provider, reported year-on- year declines in revenues and earnings. As part of the Bertelsmann Content Alliance, G+J took on a leading role in coordinating the collaboration of all Bertelsmann’s content businesses. Initial cross-divisional joint formats such as the MOSAiC Arctic expedition and Crime Day were developed and successfully marketed. Revenues by Category in percent 26.6 Services 1.2 Rights and licenses 42.7 Own products and merchandise 29.5 Advertising Revenue Breakdown 2 1.5 1 0.5 0 €1.4 billion 0.0% -5.6% -0.3% €1.4 billion Exchange rates Portfolio and other effects Organic growth 2018 Change 2019 Bertelsmann Annual Report 2019 21

Arvato The group’s services activities, pooled in the Arvato division, continued their positive development in 2019. The company’s business operations significantly increased both revenues and operating profit. Revenues grew by 1.8 percent to €4.2 billion (previous year: €4.1 billion), while operating EBITDA increased by 45.7 percent to €549 million (previous year: €377 million). This positive business performance was driven mainly by the strong organic growth of the IT, logistics and financial services businesses and the initial application of IFRS 16. Arvato’s EBITDA margin was 13.2 percent (previous year: 9.2 percent). In January, Bertelsmann and Morocco’s Saham Group com- pleted the merger of their global CRM businesses. The two partners each own a 50 percent stake in the new company, which will operate globally as Majorel and be fully consolidated at Bertelsmann. Majorel saw a positive business performance last year. The international service center organization grew significantly, especially outside the European Union, with the opening of additional sites in Togo (Lomé), Armenia (Yerevan) and Georgia (Tbilisi and Kutaisi). The logistics services businesses at Arvato Supply Chain Solutions showed strong and profitable growth in the year under review. It was driven mainly by the establishment of new businesses as well as the expansion of existing ones, particularly with customers in the growth areas of consumer products, healthcare and high-tech. The global network of locations was further expanded by opening new distribution centers and expanding existing ones, including in Germany, Poland and Hong Kong. Likewise, revenues and operating profit at Arvato Financial Solutions (AFS) developed positively in the reporting period, exceeding the previous year’s results. This development was primarily supported by a steeply positive business trend in the receivables management segment in the GSA region. For example, a comprehensive purchase-to-bill solution was successfully implemented for the customers of a leading international e-commerce marketplace. In the B2B finance area, a new service was developed to make it easier to customize the compilation of regulatory data, validate it and make this data available online. The IT services provider Arvato Systems grew organically and profitably in the period under review. On one hand, this was due to serialization solutions in the healthcare sector, which were implemented in various European countries. And on the other hand, new customers and contract renewals in the energy, healthcare, retail and media sectors provided positive momentum. In the emerging field of multicloud services, Arvato Systems was able to expand its comprehensive cloud portfolio and further strengthen its position as a service provider through a partnership with Google Cloud Platform (GCP). Revenues by Region in percent (without intercompany revenues) 8.2 Other countries 39.9 Germany 7.2 United States 30.1 Other European countries Revenues by Category in percent 96.7 Services 9.5 France 5.1 United Kingdom 3.3 Own products and merchandise Revenue Breakdown 6 4 2 0 €4.1 billion 0.2% -0.7% 2.3% €4.2 billion Exchange rates Portfolio and other effects Organic growth 2018 Change 2019 Bertelsmann Annual Report 2019 23

Bertelsmann Education Group The group’s education businesses, which are pooled in the Bertelsmann Education Group, recorded significant growth in the 2019 financial year. Operating profit more than doubled. The division benefited from ongoing high demand for digital educational services in the areas of health, educational theory and technology. Bertelsmann Education Group revenues increased by 29.4 percent to €333 million (previous year: €258 million). Organic and acquisition-related growth at the e-learning provider Relias, the expansion of the online business at Alliant International University and positive currency effects all contributed to this result. Operating EBITDA improved to €84 million (previous year: €37 million). The EBITDA margin was 25.2 percent (previous year: 14.5 percent). The e-learning provider Relias, which specializes in online continuing education and training for the healthcare sector, increased its customer base to around 11,200 institutions in 2019. During the course of the year, the healthcare division of the educational provider OnCourse Learning, acquired in 2018, was fully integrated into Relias. The OnCourse divisions for training in financial services and real estate were sold separately. Alliant International University, specializing in psychology and education, continued to expand its online enrollments. Alliant also introduced a new Student Information System that allows students to plan and manage their academic careers entirely online. The online learning platform Udacity, in which Bertelsmann holds a significant stake, further developed its range of courses in the technology vertical and introduced new Nanodegrees for data engineering, cloud computing and artificial intelligence. Udacity continued to expand its business with corporate customers. In 2019, Bertelsmann launched a three-year global education initiative that will provide 50,000 tech scholarships for Udacity courses in the fields of cloud, data and artificial intelligence. Around 46,000 applications from all over the world were submitted for the first round comprising 15,000 scholarships. The courses started in October. Revenues by Region in percent (without intercompany revenues) 97.6 United States 1.8 Other countries 0.3 Germany 0.3 United Kingdom Revenues by Category in percent 100.0 Services Revenue Breakdown 400 300 200 100 0 €258 million 5.7% 19.7% 4.0% €333 million Exchange rates Portfolio and other effects Organic growth 2018 Change 2019 Bertelsmann Annual Report 2019 25

General Statement by Company Management on the Economic Situation Over the financial year 2019, Bertelsmann’s businesses posted overall positive development. The Group improved its growth profile with the continuing organic and acquisitive expansion of its growth platforms. Bertelsmann also systematically continued its transformation into a fast-growing, digital, international and diversified Group. Group revenues in the reporting period rose by 2.0 percent to €18.0 billion from €17.7 billion the previous year, and were therefore marginally lower than estimates (outlook in the 2018 Annual Report: moderate increase in revenues). This was primarily due to largely unplanned portfolio effects caused by divestments at Gruner + Jahr, Arvato and the Bertelsmann Education Group. The organic revenue growth was 1.2 percent. Operating EBITDA also increased strongly due to the initial application of the new IFRS 16 Leases accounting standard, by 12.5 percent to €2,909 million, from €2,586 million in the previous year (outlook in the 2018 Annual Report: strong increase in operating EBITDA due to IFRS 16; without IFRS 16, stable to slight growth in operating EBITDA). At €89 million, the BVA used for Group management was strongly below the previous year’s figure of €121 million (outlook in the 2018 Annual Report: strongly declining BVA). The development reflects the increase in the average level of capital invested. In the financial year 2019, steady efforts continued to focus on implementing the strategy. Important strategic acquisi- tions – for example, the French children’s TV station Gulli, the UK children’s book publisher Little Tiger Group and the pending complete takeover of Penguin Random House – contributed to strengthening the core businesses. Further- more, another emphasis in the reporting period was placed on strengthening collaborations and alliances; for example, the Bertelsmann Content Alliance in the content business and the Ad Alliance in advertising marketing. In the context of the digital transformation, the Bertelsmann Content Alliance initiated the Audio Alliance to increase its audio offers and started producing podcasts and distributing new podcasts on the Audio Now platform. The growth platforms were further expanded; in particular, the TV production business was successful with the new formats. 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. Net assets and financial position remain solid. The leverage factor of Bertelsmann was 2.6, slightly lower than the previous year’s level (December 31, 2018: 2.7). As of December 31, 2019, the cash and cash equivalents, reported at €1.6 billion (December 31, 2018: €1.4 billion), represent sufficient liquidity. The ratings agencies Moody’s and S&P continued to rate Bertelsmann as “Baa1” and “BBB+.” The outlook is rated stable by S&P and negative by Moody’s. 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 they are differentiated in terms of strictly defined and broadly defined key performance indicators, in the same way as in the value- oriented management system. Organic Revenue Growth 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. When determining the exchange rate effects, the functional currency that is valid in the respective country is used. The other effects include changes in methods and reporting, for example. Operating EBITDA Operating EBITDA is determined as earnings before interest, tax, depreciation, amortization, and impairment losses and reversals, 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 circum- stances and is not affected by special factors or structural distortions. These special items primarily include impair- ment losses and reversals of impairment losses, fair value Organic Revenue Growth in percent Organic revenue growth Exchange rate effects Portfolio effects and other effects Reported revenue growth 2019 1.2 1.1 (0.3) 2.0 2018 2.7 (1.7) 1.8 2.8 Bertelsmann Annual Report 2019 27

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) Lease payments Further adjustments Operating free cash flow Operating EBITDA Amortization/depreciation, impairments/reversals of intangible assets, property, plant and equipment, and light-of-use assets not included in special items Operating EBIT Cash Conversion Rate (in percent) Operating free cash flow/Operating EBIT 2019 2,090 424 95 (611) (288) 173 1,883 2,909 (930) 1,979 97 2018 1,437 534 113 (528) n/a 197 1,753 2,586 (670) 1,916 91 will be adjusted for the Bertelsmann Investment division; hence, capital costs will be neutralized. Cash Conversion Rate The cash conversion rate serves as a measure of cash gener- ated 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 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 pensions 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 as well as lease payments, increased by proceeds from the sale of non-current assets. Further adjustments are made to ensure an allocation of capi- tal flows to the relevant 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 operating EBITDA. Operating EBITDA is used to calculate operating EBIT by deducting amortization and depreciation, provided that these are not included in special items. The Group aims to maintain a cash conversion rate of 90 percent to 100 percent as a long-term average. Economic Debt Net financial debt is calculated on the basis of gross financial debt, which comprises the balance sheet items current and non-current financial debt, minus cash and cash equivalents. Economic debt is defined as net financial debt less the 50 percent par value com- ponent of the hybrid bonds plus provisions for pensions, profit participation capital and lease liabilities (previous year: net pres- ent value of operating leases). In calculating economic debt, the hybrid bonds are accounted for at 50 percent, as both bonds are classified by the rating agencies as 50 percent equity. Economic debt is modified for the purposes of calculating the leverage factor. Economic Debt in € millions Net financial debt Less cash and cash equivalents Net financial debt Less 50 percent of the par value of the hybrid bonds Pension provisions Profit participation capital Net present value of operating leases Lease liabilities Economic debt 2019 5,000 (1,636) 3,364 (625) 1,967 413 n/a 1,392 6,511 2018 5,337 (1,405) 3,932 (625) 1,738 413 1,161 n/a 6,619 Bertelsmann Annual Report 2019 29

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 specific circumstances of the company. However, even an appropriately designed and functional RMS cannot 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 and reliable in accordance with applicable laws, and that information is made available without delay to the various recipients. 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 Consolidated Financial Statements and the Combined Management Report), interim reporting and internal management reporting. The ICS for the accounting process consists of the fol- lowing areas. The Group’s internal rules for accounting and the preparation of financial statements (e.g., IFRS manual, guidelines and circulars) are made available with- out delay to all employees involved in the accounting pro- cess. The Consolidated Financial Statements are prepared in a reporting system that is uniform throughout the Group. Extensive automatic system controls ensure the consis- tency of the data in the financial statements. The system is subject to ongoing development through a documented change process. Systematized processes for coordinat- ing intercompany transactions serve to prepare the cor- responding consolidation steps. Circumstances that could lead to significant misinformation in the Consolidated Financial Statements are monitored centrally by employees of Bertelsmann SE & Co. KGaA and by RTL Group (for the preconsolidated subgroup), and then verified by exter- nal experts as required. Central contact persons from Bertelsmann SE & Co. KGaA and the divisions are also in continuous contact with local subsidiaries to 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 automated and manual analyses by the Corporate Financial Reporting department of Bertelsmann SE & Co. KGaA and RTL Group (for the preconsolidated subgroup). The purpose of such analyses is to identify any remaining inconsistencies. The controlling departments at the Group and division levels are also integrated into the internal management report- ing. Internal and external reporting are reconciled during the quarterly segment reconciliation process. The further aim in introducing a globally binding control framework for the decentralized accounting processes is to achieve a standardized ICS format at the level of the local account- ing departments of all fully consolidated Group companies. The findings of the 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 companies. The findings are discussed at the divisional level. Like the RMS, each ICS cannot guar- antee with absolute certainty that significant misinformation in the accounting process can be prevented or identified. 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 Bertelsmann is exposed to a variety of risks. The major risks to Bertelsmann identified in the risk reporting are listed in order of priority in the table below. Details on information security risks can be found in a separate chapter further below. In line with the level of possible financial loss, the risks are classified as low, moderate, significant, considerable 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 security risks were identified as the primary risks, and are therefore described separately. This is followed by an outline of legal and regulatory risks and financial market risks. These risks are largely managed at the corporate level. Bertelsmann Annual Report 2019 31

for example, distribution revenues from platform operators. To reduce the risk of customer losses, advertising packages with cooperation partners are offered, as well as pursuing the basic aim of establishing long-term customer relation- ships. Falling e-book sales, and the possibility of price concessions in the audiobook segment due to a change in market conditions, constitute risks for Penguin Random House. Another risk attributable to the changing retail landscape is declining sales volumes in brick-and-mortar book retail. Penguin Random House is countering these risks by introducing differentiated pricing, increasing online sales of physical books and audiobooks, and continuously examining alternative selling and marketing options. Any risks of bad- debt loss are 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 envi- ronment 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 envi ronment, 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. Due to these developments, subse- quent risks such as imminent bad-debt losses or service limitations are possible, because service providers in the areas of distribution or manufacturing could restrict or dis- continue their products. The risks are being countered by cost and customer management; the development of new – in particular, digital – forms of offerings; product, price and quality improvements; and developing alternative scenarios and solution scenarios. 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 new businesses) 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 cus- tomer 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. 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 increase customer loyalty through integrated solutions. Technological trends aris- ing from digitization and ongoing automation could in some cases damage the business model and competitiveness in individual customer segments. A worsening of 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 pressure results from a market environment that is characterized by over-capacity. Furthermore, deterioration in the economic environment also may lead to declining circulations. There are risks on the supplier side associated with rising raw material prices – particularly for paper, color and energy. 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 services, constantly optimizing cost structures and monitoring markets on an ongoing basis. For Bertelsmann Education Group, increasing competition from other training providers, particularly in the US healthcare market, could lead to growing price and margin pressure and negatively impact the planned growth targets. These risks are being countered in particular through strategic partnerships, long-term customer agreements and marketing measures. 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. Bertelsmann Annual Report 2019 33

In June 2016, the main competitors of Fun Radio alleged that a host of the morning show had influenced Fun Radio’s results by encouraging his listeners to give favorable treatment to Fun Radio in the Médiamétrie surveys. In response to these allegations, Médiamétrie decided to remove Fun Radio from its surveys. Following a legal procedure initiated by Fun Radio, Médiamétrie was required to reinstate Fun Radio in the audience results surveys as of September 2016. Nevertheless, Médiamétrie decided to lower Fun Radio’s audience results in its published surveys, alleging the existence of a “halo effect.” Following a procedure initiated by Fun Radio, a judicial expert was appointed in December 2017 to examine Médiamétrie’s assessment of the alleged halo effect. The judicial expert issued in September 2019 his final report which confirmed the halo effect but assessed that Fun Radio’s results were over- corrected. As of September 2017, Médiamétrie has again 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 unfair competition, but this procedure was suspended until the end of the judicial expertise and will restart in the course of first quarter of 2020. In the meantime, four of the six claimants withdrew their claim from the proceedings. On February 22, 2018, the Spanish Competition Authority (CNMC) communicated to Atresmedia the opening of a proceeding for sanctions in relation to possible practices 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. On May 28, 2019, the department of the com- petition authority responsible for the investigation submitted a proposal for a decision which included a proposed fine of €49.2 million. Atresmedia submitted its observations on the proposed decision on June 28, 2019. On November 12, 2019, the CNMC Board took its decision and imposed a fine of €38.2 million. On January 10, 2020, Atresmedia filed an application for judicial review against the decision with the competent court. Atresmedia remains convinced that the decision made by the CNMC is not sufficiently justified, and expects a positive outcome. The prospects of success are based, inter alia, on the outdated definition of the advertising market used by CNMC. Foreign investments in the People’s Republic of China are subject to regulatory restrictions. To satisfy local require- ments, some of Bertelsmann’s activities in China are held as so-called VIE structures. These types of arrangements 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 policies toward investments by foreigners (particularly in respect to VIE structures) or if courts and authorities change their case law or administrative practice. The law passed in May 2019 by the People’s Republic of China regarding for- eign investment (PRC Foreign Investment Law: FIL) entered into force on January 1, 2020. This FIL replaces existing laws on the regulation of foreign investment in China. This affects companies that are wholly owned by foreign com- panies, Chinese-foreign contractual joint ventures, and Chinese-foreign equity joint ventures. During the legisla- tive process, VIE structures were to be made equivalent to those of all other foreign direct investment. However, in the FIL as adopted, VIE structures are no longer a topic, so that it is expected that this structure will retain its status quo, meaning it will fall under the unregulated area. Furthermore, the FIL requires fair access to the market and equal treatment of foreign investment companies, and stipulates that these companies’ corporate governance is subject to Chinese company law, with a transition period of five years. The Implementing Regulations announced by the Chinese State Council on December 31, 2019, entered into force on January 1, 2020. They contain detailed provi- sions regarding protection and equal treatment of foreign investments, publishing obligations and the five-year tran- sition period. Local Bertelsmann legal advisors are closely observing implementation of the FIL and its implementing regulations, and will take any steps necessary and conduct procedures to remain compliant with the law. This affects companies within Fremantle, BMG, Arvato and Bertelsmann Education Group, as well as investments by Bertelsmann Asia Investments (BAI). Aside from the matters outlined above, no further significant legal and regulatory risks to Bertelsmann are apparent at this time. Financial Market Risks As an international corporation, Bertelsmann is exposed to various forms of financial market risk, especially interest rate and currency risks. These risks are primarily monitored cen- trally by the Finance Department on the basis of guidelines set up by the Executive Board. Derivative financial instru- ments are used solely for hedging purposes. Bertelsmann uses currency derivatives mainly to hedge existing foreign currency risks from intercompany financing and operating liabilities. Some firm commitments denominated in foreign Bertelsmann Annual Report 2019 35

opening up opportunities. Professionally produced content can be distributed across multiple platforms nationally and interna- tionally. New revenue streams could be generated by exploiting existing TV content across different platforms, and by creating native digital content. Also, the increased presence in the digital sector provides opportunities for online video advertising sales on all devices and platforms, and growing subscriber-based rev- enues in the on-demand business. Other opportunities can be found in target-group marketing of the Group’s own inventory (addressable advertising) and advertising technology products for third parties. In addition, stepping up distribution of new technologies such as UHD/4K could contribute to greater rev- enue growth in the platform business. Penguin Random House is the world’s largest trade book publisher. Its position enables the publishing group to attract new authors and book projects to potentially grow its market share. The group is well positioned to invest in new markets and diverse content worldwide to take advantage of increas- ing interest in long-form reading, and to thereby offer its con- tent to the widest possible readership. In general, the digital evolution transforming book markets offers the potential for new product development, and broader and more efficient marketing channels as well as better accessibility to the back- list. Digital audiobooks are experiencing growth worldwide, while new technologies could make books more appealing and bring book content to wider audiences. New online tools and platforms are expanding opportunities for author engage- ment with readers. For Gruner + Jahr, a better development of the advertising and sales markets represents significant opportunities. The trans- formation is providing further opportunities due to the develop- ment of new businesses related to the published brands. There are opportunities for growth, particularly in the development and expansion of digital activities and in cooperation with other publishers and marketers. In terms of marketing, G+J could gain new customers through new forms of advertising in the online, mobile and video media channels. At Arvato, interdivisional cooperation and major projects can provide additional opportunities for acquiring new customers. The global e-commerce market will continue its dynamic growth over the next few years. Arvato could participate significantly in this growth through new services, particularly those offered by the Supply Chain Solutions and Financial Solutions areas. Further growth opportunities from ongoing digitization lie in the development of innovative IP-based and cloud-based IT services. Bertelsmann Printing Group businesses may decline less steeply through additional volumes of existing and new cus- tomers. Furthermore, increased consolidation in the market could result in an additional strengthening of Bertelsmann Printing Group’s own competitive 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, the stake in Udacity provides the 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. The current innovation efforts detailed in the section “Innova- tions” offer further potential opportunities for the individual divisions. BMG’s focus is on organic growth through the signing of addi- tional artists and songwriters. There may also be opportunities for selective acquisitions of music catalogs. The growing market penetration of subscription-based music streaming services offers significant opportunities to expand the recorded-music and music-publishing markets internationally. Other opportunities could arise from changes to the legal and regulatory environment. The financial opportunities are largely based on a favorable development of from Bertelsmann’s point of view. interest and exchange rates Bertelsmann Annual Report 2019 37

The average level of capital invested will continue to increase as a result of acquisitions made, as well as continued invest- ment in growth businesses. Compensating effects from earn- ings contributions are not expected to materialize for some time. Against this backdrop, a strong decline in BVA is still expected for the Group. These expectations are based on operational planning and the medium-term outlook for the corporate divisions, assuming that exchange rates remain constant. At present, the expected performance of any individual unit of key significance for the Bertelsmann Group is not expected to deviate significantly from that of the Group. Depending on how the economy develops, Bertelsmann does not currently anticipate interest rate changes to have any material impact on the average financing costs of medium- to long-term financing. The liquidity situation in the forecast period is expected to be sufficient. These forecasts are based on Bertelsmann’s business strategy, as outlined in the section “Corporate Profile.” In general, the forecasts reflect careful consideration of risks and opportu- nities. All statements concerning potential economic and business developments represent opinions advanced on the basis of the information that is currently available. Should underlying assumptions fail to apply and/or further risks arise, actual results may differ from those expected. Accordingly, no assurances can be provided concerning the accuracy of such statements. 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 holding company, it exercises key corporate functions such as the definition and further development of group strategy, capital allocation, financing and management. There are also service 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 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 Transfer to retained earnings Unappropriated income 2019 113 189 (31) (171) (23) (213) 664 (67) – (60) 401 (3) 398 461 (195) 664 2018 115 202 (30) (175) (20) (245) 759 (58) (128) (111) 309 (3) 306 485 (150) 641 Bertelsmann Annual Report 2019 39

of €467 million in loans to affiliates and a decrease of €159 million in securities, on the other hand. Investments in affiliated companies increased due to the contributions to Bertelsmann Capital Holding GmbH, Gütersloh, in the amount of €500 million. Loans to affiliated companies decreased as a result of timely repayment of loans. The increase in receivables and other assets is largely related to the repayment of loans. The equity increased by €398 million as a result of the net income of the reporting year, and decreased by €180 million as a result of distributions to shareholders. The increase in liabilities to €11,944 million (previous year: €11,767 million) includes liabilities to affiliated companies in the amount of €616 million. The decrease of €310 million in bonds and promissory notes is attributable to timely repayment of two promissory notes and a floating-rate note. Risks and Opportunities for Bertelsmann SE & Co. KGaA As Bertelsmann SE & Co. KGaA is largely linked to the Bertelsmann Group companies, among other things through the financing and guarantee commitments, as well as through direct and indirect investments in the subsidiaries, the situation of Bertelsmann SE & Co. KGaA in terms of risks and opportu- nities is primarily dependent on the risks and opportunities of the Bertelsmann Group. In this respect, the statements made by corporate management concerning the overall assessment of the risks and opportunities also constitute a summary of the risks and opportunities of Bertelsmann SE & Co. KGaA (see the section “Risks and Opportunities”). Outlook for Bertelsmann SE & Co. KGaA As the parent company of the Bertelsmann Group, Bertelsmann SE & Co. KGaA receives from its subsidiaries dividend distributions and income or expenses from profit and loss transfer agreements, as well as income from services provided to its subsidiaries. Consequently, the performance of Bertelsmann SE & Co. KGaA is primarily determined by the business performance of the Bertelsmann Group (see the section “Outlook”). Dependent Company Report (Statement in accordance with Section 312 of the German Stock Corporation Act (AktG)) 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 2019. 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 section 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 (see the section “Company Profile”). Responsible conduct – toward employees, in society, in business and in dealing with the environment – is firmly anchored in Bertelsmann’s corporate culture. In its corporate responsibility management, Bertelsmann pursues the goal of reconciling commercial interests with social and environmental concerns, within the Group and beyond. Identifying relevant topics and the concept descriptions in this non-financial statement are oriented toward the standards (2016) of the Global Reporting Initiative (102 and 103). In addition, voluntary reporting based on the GRI Standards (2016; in accordance: “core” option) will be published by the middle of the financial year. 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 set forth in the corporate constitution as well as in the newly created Bertelsmann Essentials “Creativity and Entrepreneurship,” which were introduced in 2019. Furthermore, the Bertelsmann Code of Conduct – as a binding guideline – defines standards for law-abiding and ethically responsible conduct within the company and toward business partners and the public. 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 Bertelsmann Annual Report 2019 41

positions on the Supervisory Board of Bertelsmann SE & Co. KGaA available to employees on a voluntary basis; three of these are works council members and one is a member of the Bertelsmann Management Representative Committee. In addition, managers, general workforce, employees with dis- abilities and trainees all have platforms for exchanging ideas, advancing topics and voicing their concerns. For example, the Bertelsmann Group Dialogue Conference is an event where the CEO, CHRO and members of the Corporate Works Council can exchange ideas. In 2019, cross-divisional work groups developed new dialogue formats for employee representatives and management groups, in order to further enhance social partnership. Employees are also involved in the development and improvement of working conditions through standardized HR interview tools (Performance and Development Dialogue, Agreements on Objectives, Team Talk), as well as Group-wide employee surveys. In 2019, for the first time the international employee survey was conducted exclusively online. Learning Highly qualified employees are needed to overcome major challenges such as the Group’s increasingly international focus, the digital transformation of media and services, and demographic change. By providing opportunities for lifelong learning, Bertelsmann helps secure the long-term employability of its employees. With four different campuses – Strategy, Leadership, Function and Individual – Bertelsmann University is the central learning organization within the company. The most important measures implemented in 2019 included the further development of international programs in the areas of leadership, strategy and transformation, and – in the context of focusing on our corporate values of creativity and entrepreneurship – formats on the topics of creativity, innovation and entrepreneurship. The three-year Udacity scholarship program, with around 50,000 scholarships, further strengthened the technology focus on the areas of data, cloud and artificial intelligence. In addition, the training and courses offered by Bertelsmann in Germany were continually expanded. New content was included, modern learning environments were created, and teachers were given suitable further qualification. Diversity For Bertelsmann, the diversity and differences in its workforce are prerequisites for creativity, innovation and long-term business success. This is conveyed in the Bertelsmann Essentials. The diversity strategy is implemented by the Corporate Responsibility & Diversity Management department, with support from a Group-wide working group. The focus is on the following dimensions: gender, disabilities, sexual orientation and identity, nationality and ethnic origin, as well as generational differences. The Group Management Committee, which at the end of 2019 consisted of 16 members (previous year: 18), included at that time six women (previous year: 6) and six nationalities (previous year: 7). To enhance diversity at the management levels, Bertelsmann aims to achieve the goal of having women occupy one-third of positions in top and senior management across all divisions by the end of 2021. To fulfil this target in top and senior management, the targeted proportion of women in the respective Group-wide talent pools was set at one-third, and was increased to 50 percent in the career development pool. These targets were reached in 2019 for all three talent pools. Furthermore, in 2019 the Bertelsmann Inclusion Action Plan (2019–2024) was rolled out in the German companies. Health 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 German locations. Bertelsmann Health Management has 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, HR managers and representatives for employees with disabilities, plays a key role here. Through targeted networking, it also helps reinforce uniform standards for all German locations. In 2019, advising on health topics was expanded by testing workshop formats and analysis tools in selected Bertelsmann companies. Fair Working Conditions At Bertelsmann, remuneration issues are an essential part of the topic of fair working conditions. The policy is to estab- lish consistent and transparent remuneration structures in the Group. The design of the compensation system is intended to ensure that remuneration is driven by market, function and performance, taking into account business-specific character- istics. Employee profit sharing at Bertelsmann and many of its subsidiaries in Germany is based on the same criteria as those used to calculate variable remuneration components for Executive Board members and executives. A number of additional subsidiaries in Germany and abroad have similar success and profit-sharing models adapted to local require- ments. In 2019, a total of €116 million of the 2018 profit was distributed as part of such schemes. Bertelsmann Annual Report 2019 43

creates the technical and organizational framework for confidential data processing. The ISMS features a regular and structured survey of relevant processes and procedures, to ensure compliance with statutory information security requirements, a systematic recording of risks and derivation, and control of related mitigation measures. Protecting Intellectual Property Bertelsmann’s businesses develop, produce, transfer, license and sell products and services that are protected as intellectual property. For Bertelsmann, the protection of intellectual property rights is the foundation of its busi- ness success. For this reason, the company is committed to a high level of global copyright protection worldwide, and fair competition in the digital market. The Group- wide Taskforces Copyright, with representatives from the relevant corporate divisions, monitor current developments in copyright and develop joint positions – for example, on EU copyright law. In addition, individual subsidiaries and Bertelsmann itself issued statements in 2019 in accordance with the “UK Modern Slavery Act” that condemn all forms of modern slavery, coercive and child labor, and exploitation and dis- crimination, and present measures to prevent these human rights violations. These statements are revised each year (if required). Infringements of these principles can be reported by Bertelsmann employees and third parties by using the existing compliance management systems. 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 cor- responding training through a wide range of communication channels. 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 and other international activities were continually refined and expanded in 2019. Respect for Human Rights Through its corporate principles and its voluntary commit- ment to external guidelines, Bertelsmann is committed to respecting and protecting human rights within the company and in its business relationships. For this reason, the Bertelsmann Executive Board established an Integrity & Compliance program and appointed a Corporate Compliance Committee (CCC). The CCC submits an annual Compliance Report to the Bertelsmann Executive Board and the Audit and Finance Committee. The Integrity & Compliance (I&C) department was created to manage the ongoing day-to-day work, and is subordinated to the CCC in the organization. I&C supports the CCC in fulfilling its tasks and makes sug- gestions for necessary improvements to the I&C program. I&C ensures that employees worldwide are made aware of the key legal provisions and internal company guidelines, including those concerning the respect for human rights, and it implemented the training and communication mea- sures necessary for this in 2019. Respect for human rights within the supply chain is also expressly stipulated by the Bertelsmann Code of Conduct and the Supplier Code of Conduct. This includes a ban on child and coercive labor and a ban on discrimination and intimidation, and it reaffirms the right to freedom of association and the right to engage in collective bargaining. 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 on behalf of Bertelsmann, as stipulated in the Supplier Code of Conduct. Along with instructions for dealing with officials, and 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 third parties. An appropriate due diligence review is carried out for each individual risk profile through a corresponding risk classification. This Executive Board guideline also describes the channels for reporting suspected violations and seeking advice, as well as other pre- vention and control measures. The Executive Board guide- line for dealing with alleged compliance violations anchors an obligation to report suspected violations of the prohibition of corruption to the Bertelsmann Corporate Center. The topic of corruption prevention is globally managed and further developed by the I&C department. One of the most impor- tant measures in 2019 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. Bertelsmann Annual Report 2019 45

Consolidated Financial Statements Consolidated Income Statement in € millions Revenues Other operating income Cost of materials Royalty and license fees Personnel costs Amortization/depreciation, impairment and reversals on intangible assets, property, plant and equipment and right-of-use assets Other operating expenses Results from investments accounted for using the equity method Impairment and reversals on investments accounted for using the equity method Results from disposals of investments EBIT (earnings before interest and taxes) Interest income Interest expenses Other financial income Other financial expenses 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 attributable to: Bertelsmann shareholders Earnings from continuing operations Earnings from discontinued operations Earnings attributable to Bertelsmann shareholders Non-controlling interests Earnings from continuing operations Earnings from discontinued operations Earnings attributable to non-controlling interests Notes 1 2 13 3 4 5 11 11 6 6 7 7 8 2019 18,023 455 (5,663) (1,580) (5,645) (1,051) (2,877) 124 (51) 90 1,825 13 (117) 24 (229) (309) 1,516 (426) 1,090 1 2018 17,673 473 (5,535) (1,593) (5,658) (847) (2,954) 57 (2) 6 1,620 15 (115) 27 (143) (216) 1,404 (301) 1,103 1 1,091 1,104 728 1 729 362 – 362 752 1 753 351 – 351 Bertelsmann Annual Report 2019 47 s t n e m e t a t S i l a c n a n F i d e t a d i l o s n o C

Consolidated Balance Sheet in € millions Assets Non-current assets Goodwill Other intangible assets Property, plant and equipment and right-of-use assets Investments accounted for using the equity method Minority stakes and other financial assets Trade and other receivables Other non-financial assets Deferred tax assets Current assets Inventories Trade and other receivables Other financial assets Other non-financial assets Current income tax receivables Cash and cash equivalents Assets held for sale Equity and liabilities Equity Subscribed capital Capital reserve Retained earnings Bertelsmann shareholders’ equity Non-controlling interests Non-current liabilities Provisions for pensions and similar obligations Other provisions Deferred tax liabilities Profit participation capital Financial debt Lease liabilities Trade and other payables Other non-financial liabilities Current liabilities Other provisions Financial debt Lease liabilities Trade and other payables Other non-financial liabilities Current income tax payables Liabilities related to assets held for sale Notes 12/31/2019 12/31/2018 (adjusted) 9 9 10 11 12 14 15 8 13 14 12 15 16 17 18 19 8 20 21 22 23 23 19 21 22 23 23 8,537 2,436 2,935 652 1,320 89 922 1,087 17,978 1,745 4,523 63 1,092 178 1,636 9,237 102 8,427 2,590 1,670 658 1,143 59 851 1,051 16,449 1,735 4,443 71 1,002 156 1,405 8,812 82 27,317 25,343 1,000 2,345 5,509 8,854 1,591 10,445 1,967 178 95 413 4,612 1,116 363 379 9,123 214 388 276 4,840 1,908 78 7,704 45 1,000 2,345 5,129 8,474 1,364 9,838 1,738 135 127 413 4,638 32 353 395 7,831 299 660 7 4,718 1,839 88 7,611 63 27,317 25,343 The figures from the previous year have been adjusted. Further details are presented in the section “Acquisitions and Disposals.” Upon initial application of IFRS 16, lease liabilities are reported separately. As of December 31, 2018, only the amounts accounted for under finance leases in accordance with IAS 17 are reported. Bertelsmann Annual Report 2019 49

Consolidated Statement of Changes in Equity Sub- scribed capital Capital reserve1) Other retained earnings in € millions Balance on 1/1/2018 Adjustment 1,000 2,345 4,631 – – 59 Balance on 1/1/20183) 1,000 2,345 4,690 1,000 2,345 5,200 Balance on 1/1/2019 1,000 2,345 5,200 Adjustment – – (38) Balance on 1/1/20194) 1,000 2,345 5,162 Group profit or loss Other compre- hensive income Group total compre- hensive income Dividend distributions Changes in own- ership interests in subsidiaries that do not result in a loss of control Equity transactions with shareholders Other changes Balance on 12/31/2019 – – – – – – – – – – – – – – 729 (205) 524 (180) (13) (193) 3 1,000 2,345 5,496 Group profit or loss Other compre- hensive income Group total compre- hensive income Dividend distributions Changes in own- ership interests in subsidiaries that do not result in a loss of control Equity transactions with shareholders Other changes Balance on 12/31/2018 686 110 – – – – – – – – – – – – – – 753 (67) (180) 6 (174) (2) Total Bertels- mann share- holders’ equity Non- con- trolling interests Retained earnings Accumulated other comprehensive income2) Exchange differ- ences Available- for-sale financial assets Fair value reserve Cash flow hedges Share of other com- prehensive income of investments accounted for using the equity method (196) – (196) – 110 – 1 1 – (85) (85) – (85) – 80 80 – 8 8 – 3 69 (69) n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 10 10 – 3 3 – – – (1) 12 12 – 12 – (2) (2) – – – (2) 8 (22) – (22) – 19 19 – – – – (3) (3) – (3) – 4 4 – – – – 1 15 (8) 7 – (2) (2) 7,842 1,285 9,127 (8) (3) (11) 7,834 1,282 9,116 753 351 1,104 63 17 80 816 368 1,184 – (180) (293) (473) – 7 (8) (1) – – 5 5 – 5 – (4) (4) (173) (301) (474) (3) 15 12 8,474 1,364 9,838 8,474 1,364 9,838 (38) (12) (50) 8,436 1,352 9,788 729 362 1,091 (127) (15) (142) 602 347 949 – (180) (254) (434) – – – (5) 126 121 (185) (128) (313) 1 20 21 1 8,854 1,591 10,445 1) The capital reserve mainly includes share premiums received from the issue of ordinary shares in excess of their par values. 2) As of December 31, 2019, €4 million related to assets classified as held for sale in accordance with IFRS 5. As of December 31, 2018, no significant amounts related to assets classified as held for sale in accordance with IFRS 5. 3) The adjustments resulted from the initial application of the financial reporting standards IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers as of January 1, 2018. 4) The adjustments result from the initial application of the financial reporting standard IFRS 16 Leases as of January 1, 2019. In accordance with the transitional provisions of IFRS 16, prior-year comparatives have not been adjusted. Bertelsmann Annual Report 2019 51

Bertelsmann Bertelsmann Printing Group Education Group Bertelsmann Investments2) Total divisions Corporate Consolidation operations Continuing 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 – – 18,023 17,673 (364) (364) (305) (305) 1,405 1,468 333 163 171 – 1,568 1,639 333 68 85 84 257 1 258 37 13 – 13 (1) 12 18,001 17,650 – 330 273 12 18,331 17,923 (3) 2,995 2,688 4.4% 5.2% 25.2% 14.5% -4.6% -25.8% 16.3% 15.0% (14) (3) (101) (25) – – 39 (5) – – (128) (185) – (10) 125 57 22 34 56 (86) n/a – – 23 32 55 (95) n/a – – – – 18,023 17,673 2,909 2,586 16.1% 14.6% (129) (183) 124 57 (7) n/a 2 – – n/a (1) (1) 2 106 187 1,292 1,422 1,059 899 16,214 15,487 136 124 (21) 16,352 15,590 Information by Geographical Area (Continuing Operations) Germany France United Kingdom countries United States Other countries operations Other European Continuing 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 5,806 5,859 2,213 2,336 1,180 1,152 3,413 3,336 4,211 3,896 1,200 1,094 18,023 17,673 3,461 3,220 1,337 1,092 1,362 1,301 3,481 3,267 3,841 3,530 426 277 13,908 12,687 in € millions Revenues from external customers Non-current assets1) 1) Non-current assets comprise intangible assets (including goodwill), property, plant and equipment and right-of-use assets. Details on segment reporting are presented in note 27 “Segment Reporting.” Information on Revenue Sources (Continuing Operations) in € millions Revenues from external customers Own products and merchandise Services Advertising Rights and licenses Continuing operations 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 4,385 4,349 6,508 6,375 4,043 4,061 3,087 2,888 18,023 17,673 Bertelsmann Annual Report 2019 53

by a specific risk premium for Bertelsmann SE & Co. KGaA and a risk premium specific to the lease. This lease-specific risk premium takes into account in particular that lease con- tracts are not entered into by Bertelsmann SE & Co. KGaA itself but by its subsidiaries, and also takes into account the different payment profile of a leasing contract as opposed to a government bond with a final maturity. The weighted average incremental borrowing rate used to determine the lease liability as of January 1, 2019, was 3.0 percent. The following table shows a reconciliation of the rental and lease commitments for real estate and movables already in use as of December 31, 2018, to the opening balance of lease liabilities as of January 1, 2019: in € millions Rental and lease commitments for real estate and movables already in use on December 31, 2018 Practical expedients for short-term leases and leases for low-value assets Adjusted estimates of extension options and termination options Other Commitments from operating leases (undiscounted) Discounting effect Commitments from operating leases (discounted) Carrying amount of finance lease liabilities on December 31, 2018 Carrying amount of lease liabilities on January 1, 2019 1,367 (17) 191 (1) 1,540 (210) 1,330 39 1,369 For individual real estate leases, the right-of-use asset was recognized at an amount as if IFRS 16 had been applied since the commencement date of the lease. In all other cases, the right-of-use assets corresponded to the amount of the related lease liability on the date of initial application, adjusted by the amounts for any prepaid or accrued lease payments. In addition, the right-of-use asset was adjusted by the amounts recognized as provisions for onerous leases of €28 million on the balance sheet as of December 31, 2018. In this regard, an impairment test was not carried out on the right-of-use assets on the date of initial application. Initial direct costs were not taken into account in the measurement of the right-of- use assets on the date of initial application. Furthermore, the new provisions were not applied in individual cases where the lease ended by December 31, 2019. As part of the transition to IFRS 16 as of January 1, 2019, right- of-use assets of €1,245 million (including €35 million from finance leases existing as of December 31, 2018) and lease liabilities of €1,369 million (including €39 million from finance leases existing as of December 31, 2018) were recognized. The cumulative effect of initial application of IFRS 16 amounting to €-50 million was recognized directly in equity. The vast majority of leases concern rental properties in the RTL Group, Penguin Random House and Arvato divisions. In addition, leases also exist for technical equipment and machinery, vehi- cles and other fixtures, and furniture and office equipment. In the consolidated income statement, the change in recognition of expenses from leases resulted in an increase in operating EBITDA of an estimated €0.3 billion compared to the financial year 2018. This is due to the replacement of the operating lease expenses formerly included in other operating expenses with depreciation of right-of-use assets and other financial expenses from the compounding of the lease liability shown in the financial result. In the financial year 2019, the change in recognition of lease payments in the consolidated cash flow statement results in an improvement of the cash flow from operating activities. The cash flow from financing activities is reduced by a corresponding amount. Details on the accounting and measurement policies applied on leases in accordance with IFRS 16 since January 1, 2019, are presented on page 65. Further details on right-of- use assets are presented in note 10 “Property, Plant and Equipment and Right-of-Use Assets” and on lease liabilities in note 22 “Lease Liabilities.” Impact of Issued Financial Reporting Standards that Are Not Yet Effective The Bertelsmann Group has not opted for early adoption of any additional standards, interpretations or amendments that have been issued by the IASB or the IFRS IC but are not yet mandatory. Bertelsmann Annual Report 2019 55

Scope of Consolidation Bertelsmann is the majority shareholder of RTL Group, with an interest of 75.4 percent, and Penguin Random House with an interest of 75 percent. Gruner + Jahr, BMG, Arvato, the Bertelsmann Printing Group, the Bertelsmann Education Group and Bertelsmann Investments are each wholly owned by Bertelsmann. Composition of Scope of Consolidation Subsidiaries Joint ventures2) Associates2) Total 12/31/2019 12/31/2018 12/31/2019 12/31/2018 12/31/2019 12/31/2018 12/31/2019 12/31/2018 RTL Group Penguin Random House Gruner + Jahr BMG Arvato Bertelsmann Printing Group Bertelsmann Education Group Bertelsmann Investments Corporate1) Total 282 114 80 65 204 37 21 12 46 299 102 101 73 196 39 31 12 48 15 14 42 41 – 1 – 4 1 – 1 – – 4 1 4 1 – 1 – 1 1 – 2 – 4 – – 1 1 – 1 – 4 – – 339 115 82 65 210 38 25 13 46 354 103 106 74 201 40 35 13 48 861 901 22 25 50 48 933 974 1) Including Bertelsmann SE & Co. KGaA. 2) The joint ventures and associates included in the table are investments accounted for using the equity method. Changes in Scope of Consolidation Consolidated on 12/31/2018 Additions Disposals Consolidated on 12/31/2019 Germany France United Kingdom Other European countries United States Other countries 280 7 21 266 114 7 10 111 136 8 9 135 198 17 14 201 93 3 15 81 153 16 30 139 Total 974 58 99 933 A total of 191 (previous year: 209) companies were excluded from the scope of consolidation. These consist of the associ- ates in the portfolio of the Bertelsmann Investments division and entities without significant business operations and of negligible importance for the financial position and financial performance of the Bertelsmann Group. The complete list of the Bertelsmann Group’s shareholdings will be published in the “Bundesanzeiger” (“Federal Gazette”) as an annex to these Consolidated Financial Statements in accordance with section 313 (2) of the German Commercial Code and will be available at the General Meeting. Bertelsmann Annual Report 2019 57

The following table shows the fair values of the assets and lia- bilities of the acquisitions on their dates of initial consolidation based on the purchase price allocations, some of which are currently preliminary: Effects of Acquisitions in € millions Non-current assets Goodwill Other intangible assets Property, plant and equipment and right-of-use assets Trade and other receivables Other non-current assets Current assets Inventories Trade and other receivables Other current assets Cash and cash equivalents Liabilities Provisions for pensions and similar obligations Financial debt Lease liabilities Other financial and non-financial liabilities Fair value of pre-existing interests Non-controlling interests Little Tiger Group 16 14 1 – – 5 11 1 3 – – (1) (10) – – Gulli 193 – 2 1 7 20 24 1 10 (2) (1) – (31) – – Other 40 22 13 7 3 11 51 8 7 – (5) (8) (56) (12) (19) Total 249 36 16 8 10 36 86 10 20 (2) (6) (9) (97) (12) (19) Since initial consolidation, all new acquisitions in accordance with IFRS 3 in the financial year 2019 have contributed €186 million to revenue and €10 million to Group profit or loss. If consolidated as of January 1, 2019, these would have contributed €246 million to revenue and €13 million to Group profit or loss. On the acquisition date, the fair value of the acquired receivables was €94 million. Of that amount, €88 million is attributable to trade receivables and €6 million to other receivables. Trade receivables are impaired in the amount of €10 million, so that the gross amount of trade receiv- ables amounts to €98 million. The other receivables were not impaired, so that the fair value is equal to the gross amount. In accordance with IFRS 3, the fair values of the identifiable assets, liabilities and contingent liabilities acquired are measured primarily using the market price-oriented method. According to this method, assets and liabilities are measured at the prices observed in active markets. If measurement using the market price-oriented method is not feasible, as a rule the capital value-oriented method is to be applied. According to that method, the fair value of an asset or a liability corresponds to the present value of the future cash inflows or outflows (cash flows). In November 2018, Bertelsmann Education Group acquired an interest of 100 percent in the US online education provider OnCourse Learning. The initial accounting for the acquisition had not yet been completed in the last financial year. In accordance with IFRS 3.49, goodwill from the acqui- sition of OnCourse Learning was increased by €17 million to €380 million. The increase results mainly from the adjustment of the consideration transferred in the amount of €16 million and from further minor adjustments of the fair values of the acquired intangible assets in the amount of €1 million. The consolidated balance sheet figures from the previous year have been adjusted accordingly. Bertelsmann Annual Report 2019 59

Assets Held for Sale and Liabilities Related to Assets Held for Sale The carrying amounts of the assets classified as held for sale and related liabilities are presented in the following table: Assets Held for Sale and Related Liabilities in € millions Assets Non-current assets Goodwill Other intangible assets Property, plant and equipment and right-of-use assets Investments accounted for using the equity method Other non-current assets Current assets Inventories Trade and other receivables Other current assets Cash and cash equivalents Impairment on assets held for sale Assets held for sale Equity and liabilities Non-current liabilities Provisions for pensions and similar obligations Financial debt Trade and other payables Current liabilities Other provisions Financial debt Trade and other payables Other current liabilities Liabilities related to assets held for sale 12/31/2019 12/31/2018 44 4 8 1 3 9 20 7 7 (1) 102 – – – 1 – 25 19 45 13 6 – – 16 35 12 1 – (1) 82 5 6 1 1 2 46 2 63 As of December 31, 2019, the carrying amounts of the assets classified as held for sale and related liabilities are mainly attributable to the RTL Group division. RTL Group is currently conducting sales negotiations with Global Savings Group regarding the sale of its cashback company iGraal. Closing of the transaction is expected in the first half of 2020. For disposal groups, which were measured at fair value less costs to sell, impairment losses were recognized in the amount of €7 million, which were attributable to planned or completed disposals in the Gruner + Jahr division. The fair values are based on level 3 of the hierarchy of non-recurring fair values. Valuations for level 3 are based on information from the contract negotiations. The impairment losses are recognized in profit or loss in the item “Other operating expenses.” Bertelsmann Annual Report 2019 61

• Own products and merchandise: As a rule, the revenues resulting from these contracts are recognized at a point in time when control is transferred. Depending on the underlying respective terms of sale, this is generally upon delivery to the customer. Expected returns from sales of products, mainly from physical books and magazines, are 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 customers meet the criteria of a separate performance obligation. Any giveaways to an agent are capitalized as costs to obtain a contract and are amortized over the expected term of the subscription. • Services: Services are generally rendered over a period of time, and the revenue is recognized based on an appropriate output method or input method for measuring progress. If permissible, revenues are recognized in the amount of the invoice if this amount corresponds to the value of the performance provided. Revenue from financial services is presented separately as revenue if it results primarily from interest rate effects. • Advertising: Advertising services are generally rendered over a period of time, and revenue is recognized on the basis of an appropriate output method for measuring progress. If several performance obligations are identified in an advertising contract, the transaction price is allocated on the basis of the relative stand-alone selling prices. • Rights and licenses: The timing of revenue recognition for business models generating revenue from licenses depends on whether the license represents a right to access the intellectual property through the entire licensing period or a right to use when the license is granted. In particular, the underlying contracts are analyzed to determine whether the customer is exposed to significant changes to the intellectual property or whether the intellectual property remains in the condition defined upon entering into the contract throughout the term of the contract with regard to its content and scope. While revenues from licenses granted for a right to use are realized at the date of the transfer of control, revenues from licenses for rights to access are realized over a period of time throughout the term of the contract. The majority of licenses granted in the TV business represent a right to use the intellectual property at the date the license is granted. As a result, revenue is recognized at the point in time the license is granted to the licensee. In contrast, rights to access are used extensively in the music business, and these revenues recognized are throughout the term of the contract. IFRS 15 stipulates some practical expedients of which the following are applied in the Bertelsmann Group: • Costs of obtaining contracts are not capitalized if the underlying asset is amortized in no more than 12 months. • The value of consideration is not adjusted for the effects of a material financing component if the financing component pertains to a period of no more than 12 months. • For contracts with an original duration of not more than 12 months and for contracts for which revenue can be recognized according to the amount invoiced for simplification purposes, no disclosure of the aggregated transaction price is provided. Payments received before satisfaction of the corresponding performance obligation are recognized as contract liability. If contractual provisions make the invoicing of services completed to date causally dependent on the need to provide further goods or services, a contract asset is recognized. Receivables from contracts with customers are generally due in less than 12 months. Interest income and expenses relating to financial assets measured at amortized cost are recognized on an accrual basis using the effective interest method in accordance with IFRS 9. Dividends are only recognized in profit or loss when the right to receive payment of the dividend is established. Other income is recognized when the economic benefits are probable and the amount can be measured reliably. Expenses are deferred on the basis of underlying facts or the period of time to which they relate. Goodwill In accordance with IFRS 3, goodwill resulting from a business combination is initially recognized at acquisition cost, with subsequent recognition at cost less accumulated impairment losses. Goodwill is subject to impairment testing at least annually in accordance with IAS 36. In the Bertelsmann Group, goodwill is tested for impairment as outlined in the section “Impairment.” Bertelsmann Annual Report 2019 63

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 profiles. 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. 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. The impairment loss and reversals of impairment losses are both recognized immediately in profit or loss. Leases Generally, for all leases with the Bertelsmann Group as a lessee the related contractual rights and obligations are recognized on the balance sheet as a right-of-use asset and a lease liability. On the date of initial accounting, lease liabilities are recognized at the present value of the outstanding lease payments. The lease payments include fixed payments less any lease incentives due from the lessor, variable lease payments linked to an index or a rate, amounts expected to be payable under residual value guarantees, the exercise price of a purchase option if the exercise is reasonably certain and penalty payments for terminating the lease, if the lease term reflects the exercise of the termination option. Variable lease payments linked to sales are recognized in profit or loss in the period when the conditions for the payments have been met. The present value is determined using maturity-, currency- and risk-specific incremental borrowing rates. Subsequent lease measurement of a lease liability includes the increase of the carrying amount to reflect interest on the lease liability and reducing the carrying amount to reflect the lease payments made. Right-of-use assets are measured at cost less any impairment accumulated depreciation and accumulated losses. Cost comprises the amount of liabilities recognized, the initial direct costs and the lease payments made at or before the commencement date of the lease, less any lease incentives received. The right-of-use asset is depreciated on a straight-line basis over the shorter of the useful life or lease term. Short-term leases with a lease term of up to one year, and leases for low-value assets for which the Bertelsmann Group does not recognize right-of-use assets or lease liabilities, constitute an exception. For such leases, the payments are recognized on a straight-line basis as expenses in the income statement under “Other operating expenses.” Financial Assets 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, • at fair value with changes in fair value through other comprehensive income (FVOCI) and • at fair value with changes in fair value through profit or loss • contractual cash flow characteristics of the financial asset. Financial assets are recognized initially at fair value, taking into account transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets recognized at fair value through profit or loss are expensed in profit or loss. (FVTPL). The allocation to the respective classification categories is based on the following criteria: • the entity’s business model for managing the financial assets and Subsequent measurement of financial instruments depends on the classification categories: • At amortized cost: Financial assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest on the Bertelsmann Annual Report 2019 65

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 such items at the end of the reporting period is the lower of historical cost or net realizable value. The consumption of film and television rights starts from the date of initial broadcast 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. • 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 second broadcast. • Pay television channels: Program rights are consumed on a straight-line basis over the license period. The consumption of inventories and current film and televi- sion rights, changes in inventories of work in progress and fin- ished goods as well as own costs capitalized, are recognized in the income statement in the position “Cost of materials.” Income Taxes In accordance with IAS 12, current income taxes are calculated on the basis of the respective entity-specific taxable income of the financial year. For the calculation of current and deferred taxes, the applicable tax laws and tax jurisdictions of the respective country in which the consolidated Group companies are registered are considered. In the case of existing tax groups and tax-transparent entities, current and deferred taxes are accounted for in accordance with the applicable tax requirements in each case, and from the perspective of the formally applicable company laws. Accordingly, current and deferred taxes within Consolidated Financial Statements are recognized on the level of the entity carrying the tax liability. In accordance with IAS 12, deferred tax assets and liabilities are recognized for temporary differences between the tax base and the carrying amounts shown on the IFRS consolidated balance sheet, and for as yet unused tax loss carryforwards and tax credits. Deferred tax assets are recognized only to the extent it is probable that taxable income will be available against which the deductible temporary difference can be utilized. Deferred tax assets that are unlikely to be realized within a clearly predictable period are reduced by valuation allowances. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets and liabilities resulting from business combinations are recognized, with the exception of temporary differences on goodwill not recognizable for tax purposes. The tax rates applied for computation are those expected as of the date of reversal of temporary differences and use of tax loss carryforwards, respectively. As a rule, deferred taxes are recognized in profit or loss unless they relate to items recognized in other comprehensive income. In this case, deferred taxes are recognized in other comprehensive income. Accumulated Other Comprehensive Income Accumulated other comprehensive income includes net exchange differences and gains and losses from the fair value measurement of equity instruments with changes through other comprehensive income (IFRS 9 classification category FVOCI) and of derivatives used to hedge future cash flows (cash flow hedges) in accordance with IFRS 9. Bertelsmann Annual Report 2019 67

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 the financial year 2019, no hedge transactions were recog- nized with fair value hedges. Likewise, no hedge of net invest- ment in foreign operations was made. Share-Based Payments Share-based payments for employees of the Bertelsmann Group include equity-settled share-based payment transactions and cash-settled share-based payment transactions. Equity- settled share-based payment transactions are granted to certain directors and senior employees in the form of share options. The options are granted at the market price on the grant date and are exercisable at that price. For share options, the fair value of the options granted is recognized as personnel costs with a corresponding increase in equity. The fair value is measured at the grant date and allocated over the vesting period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using a binomial option pricing model, taking into account the terms and conditions at which the options were granted. The amount recognized as an expense is adjusted to reflect the actual number of share options vesting. Share options forfeited solely due to share prices not achieving the vesting threshold are excluded. The financial liability arising under cash-settled share-based payment transactions is measured initially at fair value at grant date using an option pricing model. Until the liability is settled, its fair value shall be remeasured at the end of each reporting period and at the date of settlement, with any value changes recognized in profit or loss as personnel costs of the period. Non-Current Assets Held for Sale and Related Liabilities Non-current assets or disposal groups are classified as held for sale if the associated carrying amount will be recovered principally through a sale transaction and not from continued use. These non-current assets and the associated liabilities are presented in separate balance sheet positions in accordance with IFRS 5. They are measured at the lower of the carrying amount or fair value less costs to sell. Depreciation/amortization is not recognized if a non-current asset is classified as held for sale or forms part of a disposal group that is classified as held for sale. Components of entities that fulfill the requirements of IFRS 5.32 are classified as discontinued operations and thus are carried separately in the income statement and cash flow statement. All the changes in amounts made during the reporting period that are directly connected with the sale of a discontinued operation in any preceding period are also stated in this separate category. If a component of an entity is no longer classified as held for sale, the results of this entity component that were previously carried under discontinued operations are reclassified to continuing operations for all the reporting periods shown. Significant Accounting Judgments, Estimates and Assumptions The preparation of the Consolidated Financial Statements requires the use of accounting judgments, estimates and assumptions that may impact the carrying amounts of assets, liabilities, income and expenses recognized. Amounts actually realized may differ from estimated amounts. The following section presents accounting judgments, estimates and assumptions that are material in the Bertelsmann Consolidated Financial Statements for understanding the uncertainties associated with financial reporting. • Recognition of income and expense: In the event of return rights, mostly for print products, estimates must be made with regard to the anticipated return volume, as revenues are recognized taking the anticipated returns into account. Return ratios determined using statistical methods are used Bertelsmann Annual Report 2019 69

testing for intangible assets (including goodwill) in the Bertelsmann Group are presented in note 9 “Intangible Assets.” In addition, in the case of sports and film rights, estimates are made with regard to anticipated revenues. • Pension obligations: Pension obligations are measured using the projected unit credit method. Using this approach, biometric calculations, the prevailing long-term capital market interest rates and, in particular, assumptions about future salary and pension increases are taken into account. As a result of the decrease in the discount rate for measuring provisions for pensions, actuarial losses amounting to €502 million before related tax effects were recognized in the item “Remeasurement component of defined benefit plans.” Details on the assumptions made in pension 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. Assessments of whether there is a present obligation, whether an outflow of resources is probable and whether it is possible to reliably determine the amount of the obligation 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 that an estimate can be made. Contingent liabilities from litigation that were of subordinate significance from a Group perspective existed at the end of the reporting period. Management regularly reviews the recognition, measurement and use of provisions along with the disclosure requirements for contingent liabilities. • Leases: Some real estate lease contracts include extension and/or termination options. Payments from these optional periods are included in the lease liability, provided it is reasonably certain that the lease will be extended beyond the non-cancellable lease period or that a termination option will not be exercised. In assessing whether an option to extend or terminate will be exercised, management considers all facts and circumstances that are associated with an economic incentive to exercise the option or not to exercise it. These include, in particular, the amount of lease payments compared to market prices in the optional period, completed or expected leasehold improvements, and the importance of the underlying asset to the Bertelsmann Group’s operations. In the case of purchase price allocations, assumptions are also made regarding the measurement of assets and liabilities assumed as part of business combinations. This applies in particular with regard to the acquired intangible assets, as measurements are based on fair value. As a rule, this is the present value of the future cash flows after taking into account the present value of the tax amortization benefit. In addition, the definition of uniform useful lives within the Group is based on management’s assumptions. General information on useful lives is presented in the sections “Other Intangible Assets” and “Property, Plant and Equipment.” Assessments of the ability to realize uncertain tax positions and future tax benefits are also based on assumptions and estimates. Recognition of an asset or liability from an uncer- tain tax position is performed in accordance with IAS 12 if payment or refund of an uncertain tax position is probable. Measurement of the uncertain tax position is at its most likely amount. Deferred tax assets are only carried to the extent that it is probable that they can be utilized against future taxable profits. When assessing the probability of the ability to use deferred tax assets in the future, various factors are taken into account, including past earnings, company forecasts, tax forecast strategies and loss carryforward periods. Information relating to the ability to realize tax benefits is presented in note 8 “Income Taxes.” Assumptions are also made for fair value measurement of other financial assets and financial liabilities. In this regard, Bertelsmann uses various financial methods that take into account the market conditions and risks in effect at the end of the respective reporting periods. The inputs to these models are taken from observable markets where possible, but where these are not available, fair value measurement is based on Bertelsmann Annual Report 2019 71

in € millions RTL Group 2018 Penguin Random 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 379 3,647 2,324 6,494 2,159 1,459 244 1,472 972 188 Timing Point in time Over time 6,494 2,169 4,325 6,494 144 3,280 618 406 380 16 90 – 54 3,424 1,420 257 14 366 287 1,966 534 3,424 3,327 97 3,424 928 315 10 129 20 18 1,420 928 492 1,420 48 – – 494 542 34 21 134 66 239 48 542 140 402 542 222 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 1,468 295 3,520 3,815 61 1,407 1,468 1 – – – 250 6 257 – 257 257 5,715 2,336 1,151 3,240 3,896 1,082 17,420 6,920 10,500 17,420 1) Excluding Bertelsmann Investments and Corporate activities. During the reporting period, the revenues from contracts with customers comprise performance obligations fulfilled at a certain point in time of €7,015 million (previous year: €6,920 million) and performance obligations fulfilled over a certain period of time of €10,733 million (previous year: €10,500 million). If revenue is recognized at a point in time, the respective timing of revenue recognition is determined by the contractually agreed terms of sale. For performance obligations satisfied over time, a sufficient measure of progress is determined generally based on output methods to recognize revenue accordingly. Input methods are used to determine revenue recognition in business models for which they more accurately measure progress. Revenues amounting to €7 million (previous year: €12 million) result from performance obligations already satisfied in previous periods. Bertelsmann makes use of practical expedients set out in IFRS 15 and does not disclose any unsatisfied performance obligations for contracts with an original duration of no more than 12 months, or for contracts for which revenue can be recognized according to the amount invoiced for simplification purposes. As of December 31, 2019, Bertelsmann expects future revenues from existing long-term service level agreements of €1,210 million (previous year: €718 million), which will be attributable to unsatisfied (or partially unsatisfied) performance obligations as of the balance sheet date and is expected to be recognized in the amount of €451 million (previous year: €307 million) in the next financial year and in the amount of €759 million (previous year: €411 million) in the following years. Bertelsmann Annual Report 2019 73

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 Losses on disposals of non-current assets Adjustment to carrying amounts on assets held for sale Foreign exchange losses Sundry operating expenses 2019 1,102 2018 1,336 645 406 257 168 104 9 7 6 610 393 192 183 116 16 6 – 173 2,877 102 2,954 The item “Administrative expenses” includes repair and maintenance costs of €195 million (previous year: €197 million) and costs for IT services of €204 million (previous year: €168 million). In the financial year 2019, expenses from short- term leases in the amount of €48 million and expenses from leases for low-value assets in the amount of €10 million are also included in this item. In the previous year, administrative expenses also comprised payments recognized as expenses from operating leases of €275 million, associated services and incidental costs of €37 million and contingent lease payments of €8 million. The item “Loss allowances on receivables, loans and non-financial assets” comprises mainly loss allowances on advance payments for royalties and licenses of the Penguin Random House division amounting to €199 million (previous year: €167 million). 6 Interest Income and Interest Expenses in € millions Interest income Interest income on cash and cash equivalents Other interest income Interest expenses Interest expenses on financial debt Interest expenses on interest rate derivatives Other interest expenses 2019 2018 5 8 13 (108) (1) (8) (117) 4 11 15 (104) (1) (10) (115) Bertelsmann Annual Report 2019 75

These relate in the amount of €4 million to German corporate tax (previous year: €0 million), in the amount of €4 million to German trade tax (previous year: €0 million) and to foreign income taxes in the amount of €11 million (previous year: €58 million). As a result of this utilization, current tax expense decreased by €4 million (previous year: €12 million). Deferred tax assets and liabilities resulted from the following items and factors. Due to the introduction of IFRS 16 and the associated changes to the structure of the consolidated balance sheet, the financial years 2018 and 2019 are presented in separate tables. Deferred Taxes in € millions Goodwill Other intangible assets Property, plant and equipment and right-of-use assets Investments accounted for using the equity method Minority stakes and other financial assets Inventories Trade and other receivables Other non-financial assets Cash and cash equivalents Provisions for pensions and similar obligations Other provisions Financial debt Lease liabilities Trade and other payables Other non-financial liabilities Loss carryforwards/tax credits Total Offset Carrying amount in € millions Intangible assets Property, plant and equipment Financial assets Inventories Receivables Advance payments and other assets Provisions Financial debt Liabilities Advance payments and other liabilities Loss carryforwards/tax credits Total Offset Carrying amount 12/31/2019 Equity and liabilities thereof recognized in profit or loss in the financial year Assets 37 131 50 1 22 228 257 54 1 906 126 3 432 112 15 264 2,639 (1,552) 1,087 291 46 18 76 138 173 840 15 9 85 369 2,060 (1,009) 1,051 93 317 421 – 45 4 76 106 6 333 59 129 3 46 9 1,647 (1,552) 95 10 101 (69) – 15 (11) 42 (14) – (12) (31) (75) 83 27 (11) (106) (51) 12/31/2018 Equity and liabilities thereof recognized in profit or loss in the financial year 494 33 54 7 27 131 291 66 7 26 1,136 (1,009) 127 7 3 (26) 18 12 (2) (31) (9) (8) 27 102 93 Bertelsmann Annual Report 2019 77 Assets

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 2019 1,516 2018 1,404 31.00% 31.00% (470) (435) 5 (5) (7) 31 (5) 16 14 5 (10) 44 (426) 21 (7) (46) 1 7 33 123 10 (8) 134 (301) The income tax rate applicable to Bertelsmann SE & Co. KGaA consists of corporate income tax, the solidarity surcharge and trade tax. In the current financial year, income taxes reached a normalized level compared with the previous year, particularly as a result of lower positive measurement effects of deferred taxes. The effects from the measurement of deferred tax assets in the previous year are attributable to the planned use of previously unrecognized loss carryforwards and tax credits. Effective Income Tax Rate Corporate income tax including solidarity surcharge Trade tax Effective income tax rate 2019 15.83% 15.17% 31.00% 2018 15.83% 15.17% 31.00% Bertelsmann Annual Report 2019 79

Other rights and licenses include brands and publishing rights, acquired customer relationships along with acquired software, and other licenses. In the financial year, BMG acquired music catalogs in the amount of €49 million, €21 million of which related to various music catalogs in the United Kingdom, €15 million to various music catalogs in the United States, and €11 million to various music catalogs in Germany. Internally generated intangible assets mostly include own film and TV productions and internally generated software. As in the previous year, no intangible assets were subject to restrictions on disposal as of the end of the reporting period. In the financial year 2019, an impairment of €74 million was recognized on customer relationships recognized as an intangible asset due to the loss of an important customer within the cash-generating unit Education Services. Goodwill and other intangible assets are attributable to the following cash-generating units: Goodwill and Other Intangible Assets with Indefinite Useful Life by Cash-Generating Units 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 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 Goodwill Other intangible assets with indefinite useful life 12/31/2019 12/31/2018 12/31/2019 12/31/2018 5,216 2,123 1,047 968 662 159 126 – 131 1,009 959 50 436 290 129 17 364 543 420 123 40 23 17 921 889 26 6 9 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 1,008 872 51 84 9 127 – – – 127 – – – – – – – – – – – – – – – – – – – – – – – 127 – – – 127 – – – – – – – – – – – – – – – – – – – – – – – 8,537 8,427 127 127 Bertelsmann Annual Report 2019 81

• The gravure printing market in 2020 is likely to show an ongoing strong decline. Continued moderate decline is expected for the offset market in Europe, while the book printing market in North America is also expected to continue its moderate downward trend. • Overall, sustained moderate to strong growth is anticipated for the relevant US education markets. Overview of Growth and Discount Rates In addition, fair values based on discounted cash flows were measured using the following individual business-specific growth rates and discount rates for periods after the detailed planning period: 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 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 12/31/2019 12/31/2018 12/31/2019 12/31/2018 1.8 0.5 0.0 2.0 – 1.8 1.0 1.0 2.0 – 7.6 5.6 5.4 10.1 – 7.1 5.8 5.8 10.1 27.5 0.0–2.0 0.0–2.0 5.7–10.6 6.4–11.8 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 4.0 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 8.1 6.5 5.8 6.1 5.8 6.1 5.6 9.6 7.2 5.5 5.8 6.3 6.0 6.3 7.4–9.4 6.4–8.2 7.4 8.8 5.3–6.0 5.5–6.8 8.9 9.0 9.1 13.7 10.6 11.4 10.6–11.7 18.0 Bertelsmann Annual Report 2019 83

Property, Plant and Equipment in € millions Cost Balance on 1/1/2018 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 on 12/31/2018 Adjustment Balance on 1/1/20191) 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 on 12/31/2019 Accumulated depreciation Balance on 1/1/2018 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 on 12/31/2018 Adjustment Balance on 1/1/20191) 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 on 12/31/2019 Carrying amount on 12/31/2019 Carrying amount on 12/31/2018 Land, rights equivalent to land and buildings Technical equipment and machinery Other equipment, fixtures, furniture and office equipment Advance payments and construction in progress 1,910 2 – 36 (14) (43) – 32 1,923 (80) 1,843 10 – 33 – (32) (47) 17 1,824 1,028 2 56 – – (7) (31) – 2 1,050 (50) 1,000 6 54 1 – – (27) (28) – 2,453 9 – 55 (12) (92) – 44 2,457 (3) 2,454 17 2 49 – (91) – 47 2,478 2,124 8 80 3 – (8) (91) – 9 2,125 (2) 2,123 15 80 8 – – (87) – 1 1,006 2,140 818 873 338 332 1,372 3 3 118 (18) (150) (2) 22 1,348 (9) 1,339 9 5 152 (4) (95) (19) 37 1,424 980 3 135 3 – (11) (144) (1) (2) 963 (5) 958 7 135 2 – (3) (90) (16) 1 994 430 385 55 1 – 114 (1) (1) – (88) 80 – 80 1 – 93 – (2) – (104) 68 – – – – – – – – – – – – – – – – – – – – – 68 80 Total 5,790 15 3 323 (45) (286) (2) 10 5,808 (92) 5,716 37 7 327 (4) (220) (66) (3) 5,794 4,132 13 271 6 – (26) (266) (1) 9 4,138 (57) 4,081 28 269 11 – (3) (204) (44) 2 4,140 1,654 1,670 1) The adjustments result from the initial application of the financial reporting standard IFRS 16 Leases as of January 1, 2019. In accordance with the transitional provisions of IFRS 16, prior-year comparatives have not been adjusted. Bertelsmann Annual Report 2019 85

Interests in Other Entities 11 Subsidiaries with Material Non-Controlling Interests In the Group’s view, material non-controlling interests relate to RTL Group, the publishing group Penguin Random House and the company Majorel. The proportion of ownership interests held by non-controlling interests in RTL Group, based in Luxembourg, is 24.0 percent after treasury shares (previous year: 24.3 percent). At RTL Group itself, material non- controlling interests relate to the subsidiary Groupe M6, based in Paris, France. The Bertelsmann Group has a 48.4 percent interest (previous year: 48.3 percent) in Groupe M6. Of the non-controlling interests of RTL Group, €496 million (previous year: €470 million) is attributable to Groupe M6. The publishing group Penguin Random House, formed due to the merger of Random House and Penguin as of July 1, 2013, consists of the two legal groups Penguin Random House LLC, based in Wilmington, Delaware, United States, which bundles all the publishing units in the United States; and Penguin Random House Limited, based in London, United Kingdom, comprising all other publishing units. To better reflect the substance of the Bertelsmann Group’s investment in the two groups, both groups are considered as a single entity. In October 2017, Bertelsmann acquired, in addition to its existing 53 percent, another 22 percent of the shares in Penguin Random House from Pearson, the British media and education company. The remaining shares in the company remained with Pearson. In December 2019, Bertelsmann announced the full acquisition of the trade book publisher Penguin Random House. In this regard, Bertelsmann will acquire the remaining 25 percent interest from its British co-shareholder Pearson, increasing its own investment to 100 percent. The purchase price for the share package is US$675 million. The acquisition of shares is subject to the necessary official approvals. The transaction is expected to be completed from the second quarter of 2020. The German Verlagsgruppe Random House, which is already wholly owned by Bertelsmann, will become part of Penguin Random House once regulatory approvals have been obtained. Bertelsmann anticipates that the full integration will result in the realization of value-enhancing synergies. The transaction will be accounted for as an equity transaction in accordance with IFRS 10. As of December 31, 2019, the proportion of ownership interests held by non- controlling interests in Penguin Random House is 25 percent (previous year: 25 percent). Change in Bertelsmann Shareholders’ Equity In January 2019, Bertelsmann’s customer relationship management businesses (Arvato CRM) and the Morocco- based Saham Group were merged to form the new CRM company Majorel, based in Luxembourg. Each partner holds 50 percent of the shares in 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 includes it as a subsidiary in the Consolidated Financial Statements. Under the transaction, the Saham Group made a valuation compensation payment in the amount of €100 million in addition to the CRM businesses it contributed. The transaction was accounted for as an equity transaction in accordance with IFRS 10. The difference between the consideration received in the amount of €125 million and the carrying amount attributable to the derecognized shares in Arvato CRM businesses of €105 million was recognized in shareholders’ equity. in € millions Fair value of consideration received (including valuation compensation payment) Derecognized shares in Arvato CRM businesses Increase in Bertelsmann shareholders’ equity – thereof increase in other retained earnings – thereof increase in the reserve of exchange differences Change in Bertelsmann shareholders’ equity 125 (105) 20 12 8 Bertelsmann Annual Report 2019 87

Investments in Joint Ventures As of December 31, 2019, investments in 22 (previous year: 25) 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 12/31/2019 12/31/2018 37 69 9 58 2019 27 – – 27 51 57 9 54 2018 27 – – 27 Investments in Associates As of December 31, 2019, investments in 50 (previous year: 48) 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, 2019, the ownership is 18.7 percent after treasury shares (previous year: 18.7 percent). As of December 31, 2019, the stock market value of Atresmedia, which is listed on the Madrid Stock Exchange, amounted to €786 million (previous year: €985 million). As of December 31, 2019, the fair value less costs of disposal amounted to €139 million (previous year: €174 million), which is assigned to level 1 fair value measurement. Management considers that the current share price of Atresmedia does not reflect its earnings potential, which is expected to include new digital and platform revenue streams and further content and channel exploitation opportunities. Therefore, the recoverable amount of Atresmedia on December 31, 2019, was based on the value in use determined using a discounted cash flow model. The further reduction of the share price, the evolution of the Spanish TV advertising market, the decrease in consumption of linear TV and the operating performance constituted trigger events for performing impairment testing on December 31, 2019. The assumptions used in the valuation as of December 31, 2019, consider the following risks resulting in a significant decrease of terminal EBITDA margin compared to previous financial projections: an ongoing challenging economic environment in Spain combined with increased competition and continued dependence on linear television. This dependence continues to exist despite promising developments in the content and streaming business. The current valuation resulted in an impairment loss of €50 million as of December 31, 2019. As of December 31, 2019, the carrying amount after impairment is €198 million. The impairment loss was measured on the basis of the following assumptions: a discount rate of 9.3 percent (December 31, 2018: 8.4 percent) and a long-term growth rate of 0.0 percent (December 31, 2018: 1.0 percent). The following table shows summarized financial information for Atresmedia. The information presented is the amounts included in the financial statements of Atresmedia plus adjust- ments for using the equity method, and not the Bertelsmann Group’s share of these amounts. Bertelsmann Annual Report 2019 89

than 20 percent, the Bertelsmann Group exercises a significant influence in Udacity due to representation within the Board of Directors. In the financial year 2019, the share of earnings attributable to Udacity amounted to €-6 million (previous year: €-10 million). The investment was tested for impairment as of December 31, 2019. 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 1.6 percentage points and a decrease in the long-term growth rate of 2.2 percentage points, the recoverable amount would fall below the carrying amount. Of the total carrying amount of the investments in all individually immaterial associates, an additional €124 million (previous year: €96 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 management and investment decisions in particular are the 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 2019, dividends received from investments accounted for using the equity method amounted to €85 million (previous year: €86 million). 12 Minority Stakes and Other Financial Assets 2019 2018 139 29 110 (15) (2) (13) 124 27 97 92 29 63 (35) (2) (33) 57 27 30 in € millions Loans Fund-of-fund investments Minority stakes in start-ups Other financial assets Derivative financial instruments Current Non-current 12/31/2019 12/31/2018 12/31/2019 12/31/2018 22 – – 3 38 63 23 – – – 48 71 86 317 705 190 22 55 173 685 211 19 1,320 1,143 The item “Minority stakes in start-ups” is mainly attributable to 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, if 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 development cycles of the entity. Fund-of- fund investments, which are also held by the Bertelsmann Investments division, are measured at fair value through profit or loss. The measurement of their fair values is based on the valuations of the external management as presented in regular reporting and taking into account a fungibility 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” for both minority stakes in start-ups and fund-of-fund investments. The changes in carrying amounts recognized in profit or loss of the financial instruments held by the Bertelsmann Bertelsmann Annual Report 2019 91

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 12/31/2019 12/31/2018 922 851 1,092 1,002 556 196 130 210 489 224 100 189 The non-current other non-financial assets relate to advance payments for royalties and licenses in the amount of €851 million (previous year: €778 million). Loss allowances are generally recognized for advance payments for royalties and licenses if no recoupment is expected. The amount of these allowances is based on management estimates of future sales volumes and price changes using historical data. Costs for obtaining and fulfilling contracts with customers are recog- nized and are immaterial, both individually and in total. The same applies to the amount of amortization and impairment losses recognized for these costs in the reporting period. 16 Cash and Cash Equivalents in € millions Bank balances and cash on hand Cash equivalents 12/31/2019 12/31/2018 1,610 26 1,636 1,369 36 1,405 Cash equivalents include short-term, highly liquid securities with a term to maturity on acquisition of not more than three months. As of the end of the reporting period, cash and cash equivalents totaling €7 million (previous year: €7 million) were subject to restrictions on disposals. 17 Equity Subscribed Capital Number of shares Ordinary shares Total shares 12/31/2019 12/31/2018 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, 2019, 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 of the general partner Bertelsmann Management SE. In the financial years 2019 and 2018, a dividend amounting to €180 million (a dividend of €2,149 per ordinary share in each year) was distributed to the shareholders. Bertelsmann Annual Report 2019 93

Share-Based Payments The Bertelsmann Group has granted cash-settled or equity- settled share-based payment awards. 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 employees. The number of free shares granted to participants is approved by the Supervisory Board of Métropole Télévision SA The terms and conditions of the grants are as follows, whereby all plans are settled by the physical delivery of shares: Granting and Vesting Conditions (Groupe M6) Free share plans July 2017 July 2017 October 2017 July 2018 July 2018 July 2019 July 2019 Total Maximum number of free shares granted (in thousands)1) Remaining options (in thousands) 307.20 217.66 8.92 313.40 247.10 298.17 246.50 1,638.95 – 217.66 8.92 291.20 241.04 297.17 246.50 1,302.49 Vesting 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 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. The plans granted in July 2017, in October 2017, July 2018 and in July 2019 are subject to Groupe M6 achieving its target growth in net consolidated result over the financial years 2017, 2018 and 2019, respectively. The second plan in July 2017, the plan in October 2017, the second plan in July 2018 and the second plan in July 2019 are subject to a cumulative performance requirement over three years. At the end of the year, 1,302,495 free shares are exercisable against 1,083,884 the beginning of the year. During the year, 544,667 free shares were granted, with 287,600 being exer- cised and 38,456 being forfeited. Bertelsmann Annual Report 2019 95

18 Provisions for Pensions and Similar Obligations in € millions Defined benefit obligation Obligations similar to pensions 12/31/2019 12/31/2018 1,884 83 1,967 1,669 69 1,738 The Bertelsmann Group operates various pension plans for current and former employees and their surviving dependents. The model of such plans varies according to the legal, fiscal 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 company has no obligation to provide further benefits once it has made these payments, so no provisions are recognized. Expenses for defined contribution plans in the amount of €53 million were recognized in the financial year 2019 (previous year: €49 million). 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 external investment fund. 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 12/31/2019 12/31/2018 951 3,677 4,628 (2,786) 1 1,843 1,884 41 818 3,302 4,120 (2,502) 1 1,619 1,669 50 12/31/2019 12/31/2018 2,397 1,492 521 162 56 4,628 284 2,228 1,256 424 160 52 4,120 253 Bertelsmann Annual Report 2019 97

Further significant actuarial assumptions were made as follows: Actuarial Assumptions Discount rate Rate of salary increase Rate of pension increase 12/31/2019 12/31/2018 Germany Foreign Germany Foreign 1.38% 2.25% 1.54% 2.05% 2.87% 2.78% 2.08% 2.25% 1.55% 2.91% 3.05% 2.96% An increase or decrease in the assumptions set out above compared to the assumptions actually applied would have had the following effects on the present value of the defined benefit obligation as of December 31, 2019: 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 (364) 43 176 197 416 (39) (158) (193) In order to determine the sensitivity of the longevity, the mortality rates for all beneficiaries were reduced or increased evenly, so that the life expectancy of a person of a country- specific retirement age increases or decreases by one year. Bertelsmann Annual Report 2019 99

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) Cash and cash equivalents Qualifying insurance policies Other funds Derivatives Property Fair value of plan assets 2019 2018 59 (10) 32 81 61 2 30 93 12/31/2019 12/31/2018 1,708 1,713 583 206 164 105 12 8 511 28 141 85 13 11 2,786 2,502 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 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. A contribution of €6 million was made to plan assets during the reporting 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 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 assets. The weighted average duration of the pension obligations on December 31, 2019, was 17 years (previous year: 16 years). The maturity profile of the anticipated undiscounted pension payments is presented in the following table: Maturity Profile of Pension Payments in € millions 2020 2021 2022 2023 2024 2025–2029 Expected pension payments 160 158 167 168 180 927 Bertelsmann Annual Report 2019 101

The provisions for other employee benefits in the amount of €15 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 item “Other” includes a provision in the amount of €22 million (previous year: €22 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 12/31/2019 12/31/2018 23 390 413 23 390 413 The market value of the 2001 profit participation certificates with a closing rate of 353.40 percent on the last day of trading in the past financial year on the Frankfurt Stock Exchange was €1,005 million (previous year: €901 million with a rate of 317.01 percent) and, correspondingly, €34 million for the 1992 profit participation certificates with a rate of 201.50 percent (previous year: €33 million with a rate of 193.00 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 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 Other financial debt Current Non-current 12/31/2019 12/31/2018 Remaining term in years 1 to 5 years > 5 years 12/31/2019 12/31/2018 – 100 134 154 388 100 210 248 102 660 1,793 – 4 6 2,584 225 – – 4,377 225 4 6 4,372 249 8 9 1,803 2,809 4,612 4,638 As of the financial year 2019, finance lease liabilities reported in the 2018 Annual Report will be shown as lease liabilities on the consolidated balance sheet. Further details on lease liabilities are presented in note 22 “Lease Liabilities.” The Bertelsmann Group has access to floating-rate and fixed-rate funds through various contractual arrangements. Financial debt is generally unsecured. The fixed-rate promissory note of €150 million due for repay- ment in February 2019 was repaid on time. In May 2019, a maturing fixed-rate promissory note loan of €60 million was repaid on time. In addition, Bertelsmann repaid on time the floating-rate note of €100 million due in November 2019. At the end of the reporting period, the Group had bonds, private placements and promissory notes outstanding with a nominal volume of €4,725 million (previous year: €4,960 million). In July 2019, Bertelsmann issued a promissory note of €75 million with a term of seven years, €65 million of which is at a fixed rate and €10 million at a floating rate. The differences in carrying amount versus nominal amount in the table below result from transaction costs, premiums and discounts. Bertelsmann Annual Report 2019 103

22 Lease Liabilities The maturities of lease liabilities as of December 31, 2019, are presented in the table below. Maturity Analysis for Lease Liabilities in € millions Carrying amount Up to 1 year 1 to 5 years Over 5 years 1,392 315 728 558 Total 1,601 Undiscounted cash flows As of December 31, 2019, potential future cash outflows of €341 million were not included in the lease liabilities, as it could not be assumed with reasonable certainty that the leases would be extended (or would not be terminated). Future payments arising from short-term leases and leases for low-value assets are not recognized as right-of-use assets and lease liabilities. For such leases, the payments are recognized on straight-line basis as expenses (further explanations are presented in note 5 “Other operating expenses”). Expenses from variable lease payments not included in the lease liability were immaterial. The same applies for income from subleasing right-of-use assets and the resulting lease payments expected in the future. As of December 31, 2018, lease liabilities amounted to €39 million. These exclusively comprised items previously accounted for under finance leases in accordance with IAS 17. No subleases were in place as part of finance lease agreements as of December 31, 2018. Details on the corresponding right-of-use assets are presented in note 10 “Property, Plant and Equipment and Right-of-Use Assets.” 23 Liabilities in € millions Non-current Trade payables Derivative financial instruments Sundry financial payables Contract liabilities Sundry non-financial payables Current Trade payables Refund liabilities Derivative financial instruments Sundry financial payables Contract liabilities Sundry non-financial payables – personnel-related liabilities – tax liabilities – social security liabilities – deferred items – other 12/31/2019 12/31/2018 174 83 106 9 370 174 28 151 11 384 3,642 3,530 456 44 698 601 440 28 720 595 1,307 1,244 721 225 118 18 225 699 196 116 19 214 Bertelsmann Annual Report 2019 105

The following off-balance-sheet liabilities existed as of December 31, 2018: in € millions Rental and lease commitments for already used real estate and movables Commitments from assets under construction Guarantees Other commitments Of other commitments, €2,386 million pertains to RTL Group as of December 31, 2018. These relate to supply agreements for productions and co-productions, contracts for TV licenses and broadcasting rights, as well as other rights and services. As of December 31, 2018, a further €832 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 accep- tance of manuscripts). Other commitments of €17 million are for the acquisition of property, plant and equipment as of December 31, 2018. 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 1,367 238 15 3,408 5,028 Since January 1, 2019, rental commitments with the exception of commitments from short-term leases and leases for low- value assets have been accounted for as lease liabilities. Further details are presented in the section “Impact of New Financial Reporting Standards.” As of December 31, 2018, the following minimum lease payments existed for all the long-term rental commitments classified as operating leases in accordance with IAS 17: 12/31/2018 283 664 420 1,367 1,161 These commitments largely concerned real estate leases. As of December 31, 2018, commitments were partially offset by expected minimum lease payments from subleases with a nominal amount of €11 million. The net present values, calculated considering country-specific interest rates, showed all the net payments required to settle the obligation. Bertelsmann Annual Report 2019 107

The fair values of the bonds and promissory notes are presented in note 21 “Financial Debt.” The carrying amounts of the other financial assets and liabilities measured at amortized cost represent a reasonable approximation of fair value. Financial Assets Measured at Fair Value Categorized Using the Fair Value Measurement Hierarchy in € millions Financial assets measured at fair value Primary and derivative financial assets held for trading Derivatives with hedge relation in € millions Financial assets measured at fair value Primary and derivative financial assets held for trading Derivatives with hedge relation Level 1: Quoted prices in active markets Level 2: Observable market data Level 3: Unobservable market data Total on 12/31/2019 140 – – 140 Level 1: Quoted prices in active markets Level 2: Observable market data 110 – – 110 10 34 26 70 9 51 16 76 1,118 1,268 – – 34 26 1,118 1,328 Level 3: Unobservable market data Total on 12/31/2018 983 1,102 – – 51 16 983 1,169 It is possible to allocate the financial instruments measured at fair value in the balance sheet to the three levels of the fair value hierarchy by category, based on the tables showing carrying amounts and measurement categories for the respective financial year. The financial assets of levels 1 and 3 mainly pertain to investments held by the Bertelsmann Investments division, which were recognized at fair value. Bertelsmann Annual Report 2019 109

Financial Liabilities Measured at Fair Value Categorized Using the Fair Value Measurement Hierarchy in € millions Financial liabilities measured at fair value through profit or loss Primary and derivative financial liabilities held for trading Derivatives with hedge relation in € millions Financial liabilities measured at fair value through profit or loss Primary and derivative financial liabilities held for trading Derivatives with hedge relation Level 1: Quoted prices in active markets Level 2: Observable market data Level 3: Unobservable market data Total on 12/31/2019 – – – – – 122 5 127 32 – – 32 32 122 5 159 Level 1: Quoted prices in active markets Level 2: Observable market data Level 3: Unobservable market data Total on 12/31/2018 – – – – – 52 4 56 31 – – 31 31 52 4 87 Bertelsmann Annual Report 2019 111

The measurement of financial assets and financial liabilities according to level 2 and level 3 requires management to make certain assumptions about the model inputs, including cash flows, discount rate and credit risk, as well as the life and development cycle of start-up investments. Financial assets and liabilities are offset on the balance sheet if master netting agreements or similar agreements allow the Bertelsmann Group and the counterparty to reach settlement on a net basis. Settlement on a net basis is thus legally valid both as part of ordinary business activities and in the event of payment default by one of the parties. In addition, Bertelsmann enters into transactions in financial derivatives that do not meet the criteria for offsetting on the balance sheet, as future events determine the right to offset. As in the previous year, in general the requirements for offsetting the financial instruments reported on the balance sheet are not met, so that no material offsetting was carried out as of December 31, 2019. Credit Risk In accordance with IFRS 9, Bertelsmann uses a simplified approach to measure expected credit losses on trade receivables and contract assets. According to this, the loss allowance is measured using lifetime expected credit losses. For this purpose, impairment matrices based on historic bad debt losses, maturity bands and expected credit losses were prepared. The impairment matrices were created for division-specific or business unit-specific groups of receivables, each with similar default patterns. In addition, separate risk assessments are performed. Contract assets have substantially the same risk 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 assets. Bertelsmann Annual Report 2019 113

Bertelsmann applies the general approach for all other financial assets that are subject to the expected credit loss model. The following table shows a reconciliation from the opening balances to the closing balances of loss allowances for the corresponding financial instruments. Reconciliation of Loss Allowance for Other Financial Assets in € millions Balance on 1/1/2019 Additions Usage Reversal Change of consolidation scope Exchange rate effect Balance on 12/31/2019 – thereof 12-month expected credit loss – thereof lifetime expected credit loss but not credit impaired – thereof lifetime expected credit loss and credit impaired Loans in € millions Balance on 1/1/2018 Additions Usage Reversal Change of consolidation scope Exchange rate effect Balance on 12/31/2018 – thereof 12-month expected credit loss – thereof lifetime expected credit loss but not credit impaired – thereof lifetime expected credit loss and credit impaired Loans Sundry financial receivables Purchased or originated financial assets which are credit impaired (39) (18) 15 9 3 – (30) (1) – (29) (43) (2) 5 2 (1) – (39) (25) (1) (13) (63) (31) 6 11 2 – (75) (24) (48) (3) (16) (5) 3 2 – – (16) n/a n/a n/a Sundry financial receivables Purchased or originated financial assets which are credit impaired (61) (18) 2 8 6 – (63) (19) (34) (10) (16) (13) 3 10 – – (16) n/a n/a n/a Total (118) (54) 24 22 5 – (121) (25) (48) (32) Total (120) (33) 10 20 5 – (118) (44) (35) (23) The impairment loss identified for cash and cash equivalents was immaterial in both the financial year 2019 and the previous year. As in the previous year, the carrying amount of all receivables, loans and securities constitutes the Bertelsmann Group’s maximum default risk as of the end of the reporting period. Bertelsmann Annual Report 2019 115

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 Other financial debt Balance on 12/31/2019 Profit participation capital Bonds and promissory notes Liabilities to banks Other financial debt Balance on 12/31/2018 Undiscounted interest payments Up to 1 year 1 to 5 years Over 5 years 45 94 3 2 144 45 95 5 2 147 90 310 – 2 402 136 346 – 3 485 – 117 – – 117 – 167 – – 167 Total 135 521 3 4 663 181 608 5 5 799 Financial Services Related to Receivables Sold In certain individual cases, Bertelsmann sells receivables 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 conducting 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 all the rewards nor all risks that are associated with the 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 €54 million (previous year: €46 million). The carrying amount of the associated liability is €61 million (previous year: €52 million). The underlying volume of receivables sold amounts to €379 million as of the end of the reporting period (previous year: €340 million). Bertelsmann Annual Report 2019 117

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 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 the basis of credit ratings refer to cash holdings and positive fair values of the derivatives in its portfolio. The drawdown of limits is monitored on a regular basis. Funds are invested in very short-term portfolios in some cases to preserve flexibility 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 collateral. As in the previous year, there were no tri-party transactions outstanding at the end of the reporting period; as in the previous year, no collateral had been provided. Processing these transactions and managing and valuing the collateral is performed by a clearing agent. Default risks arising from trade receivables are partially mitigated through credit insurance coverage. The Bertelsmann Group has obtained credit collateralization in the amount of €632 million for these receivables (previous year: €713 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, 2019, the leverage factor was 2.6 (previous year: 2.7). In addition, the coverage ratio is to remain above four. The coverage ratio amounted to 8.5 on December 31, 2019 (previous year: 11.1). 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 2019, the equity ratio was 38.2 percent (previous year: 38.8 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. Bertelsmann Annual Report 2019 119

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 12/31/2019 Nominal volume < 1 year 1 to 5 years > 5 years 3,249 – – 1,182 480 – 823 – – Total 5,254 480 – 3,249 1,662 823 5,734 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 Fair values (74) 7 – (67) Fair values 8 3 – 11 The option offered in IFRS 13.48 (net risk position) is used for measuring the fair value of financial derivatives. To identify 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 position in view of their market or credit default risks. Currency forwards are used to hedge the foreign currency risk relating to the purchase and sale of program rights and output deals 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. As a rule, the derivatives used are recognized as hedging instruments in connection with cash flow hedges, taking into account the volume of the cash flows to be hedged. The effective portion of changes in the fair value of cash flow hedges is recognized in other comprehensive income until the effects of the hedged underlying transaction affect profit or loss, or until a basis adjustment occurs. The amount of €-4 million relating to cash flow hedges (previous year: €3 million) was reclassified from other comprehensive income to the income statement. These are amounts before tax. The portion remaining in other comprehensive income as of December 31, 2019, will thus mainly impact the income statement in the next years. As 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 €16 million (previous year: €10 million) were recognized immediately in profit or loss. Bertelsmann Annual Report 2019 121

26 Cash Flow Statement The Bertelsmann consolidated cash flow statement has been prepared in accordance with IAS 7 and is used to evaluate the 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 nor financing. The management of Group operations of the Bertelsmann Group utilizes indicators that include operating EBITDA and are thus before interest, taxes, amortization/depreciation, impairment and reversals, 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. The change in provisions for pensions and similar obligations represents the balance of personnel costs for pensions and similar obligations and company payments for these obligations (further explanations are presented in note 18 “Provisions for Pensions and Similar Obligations”). Contributions to pension plans totaling €24 million (previous year: €41 million) were also included in this item. “Other effects” of the cash flow from operating activities 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 consolidation. Items in the consolidated cash flow statement thus cannot be reconciled with changes in items reported 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 made during the financial year are also presented separately in that section. Financial debt of €6 million (previous year: €192 million) was assumed during the reporting period. Gaining and losing control of subsidiaries or other businesses resulted in the disposal of financial liabilities amounting to €14 million (previous year: €2 million). The amount recognized under “Disposals of other fixed assets” is mainly attributable to several transactions conducted in the Bertelsmann Investments division, including the sale of the investment in the tech company Bigo. Cash flow from financing activities includes changes in equity, financial debt, lease liabilities and dividend payments affecting cash, as well as interest paid and interest received (including interest paid due to leases). The item “Proceeds from/redemption of other financial debt” includes receipts in the amount of €185 million (previous year: €214 million) and payments in the amount of €-252 million (previous year: €-374 million). The payments include the repayment of a bank loan of €150 million by Bertelsmann SE & Co. KGaA. In the previous year, the payments were attributable among other things to the redemption of financial debt in the amount of €-165 million in connection with the acquisition of the interest in OnCourse Learning. In the previous year, the other receipts and payments mainly related to short-term loans at short maturities and correspondingly high turnover rates. As in the previous year, the item “Other effects” mainly includes changes affecting cash in connection with hedge transactions. Total cash outflows from leases amounted to €-288 million in the financial year 2019. The item “Change in equity” amounts to €81 million and results mainly from the transaction in connection with Majorel (further details are presented in note 11 “Interests in Other Entities”). In the previous year, the item amounted to €-59 million and mainly comprised €-29 million from the exercise of the put option for the interest in Relias Learning. A further €-18 million related to the acquisition of treasury shares by Groupe M6. Bertelsmann Annual Report 2019 123

27 Segment Reporting IFRS 8 Operating Segments requires that external segment reporting must be based on the internal organizational and management structure, and on management and reporting indicators used internally. The Bertelsmann Group comprises eight operating reportable segments (RTL Group, Penguin Random House, Gruner + Jahr, BMG, Arvato, Bertelsmann Printing Group, Bertelsmann Education Group and Bertelsmann Investments), differentiated according to the type of products and services offered and which are reported by segment managers to the Executive Board of Bertelsmann Management SE in its role as the chief operating decision-maker in accordance with IFRS 8. Corporate is mainly responsible for activities in the areas of accounting and reporting, taxes, legal, human resources, information technology, internal auditing, corporate communications and management, internal control and strategic development of the Group, securing the required financing, risk management and optimization of the Group’s investment portfolio. Intersegment eliminations are included in the column “Consolidation.” As in the past, specific segment information is defined according to the definitions on which Group management is based. As a rule, accounting and measurement in the segment reporting uses the same IFRS principles as in the Consolidated Financial Statements. Invested capital is calculated on the basis of the Group’s operating assets less non-interest- bearing operating liabilities. Intercompany revenues are recognized using the same arm’s-length conditions applied to transactions with third parties. Operating EBITDA serves as a key performance indicator for a sustainable determination of operating result. Assessment of the operating segments’ performance is also based on this performance indicator. Operating EBITDA represents the operating earnings generated by the respective segment management before interest and taxes, as well as amortization/ depreciation, impairment and reversals, and it is adjusted for special items. Elimination of these special items allows the determination of a normalized performance indicator, thus simplifying forecasting and comparability. Segment amortization/depreciation, impairment and reversals relate to property, plant and equipment and right-of-use assets, and to intangible assets as set out in notes 9 “Intangible Assets” and 10 “Property, Plant and Equipment and Right-of-Use Assets.” For segment reporting, intercompany leases are presented as operating leases with income and expenses recognized using the straight-line method in accordance with IFRS 8, in line with internal management. The business development of Bertelsmann Investments is determined primarily on the basis of EBIT. Each segment shows the investments accounted for using the equity method and their results, provided these companies can be clearly allocated to the segment concerned. Results from investments accounted for using the equity method are shown before impairment. In addition to the segment break- down, revenues are broken down by customer location and revenue source. Non-current assets are also stated according to the location of the respective company. Tabular segment information is presented on page 52 f. Bertelsmann Annual Report 2019 125

Remuneration for key management personnel includes the following: Remuneration for Key Management Personnel in € millions Short-term employee and termination benefits Post-employment benefits Other long-term benefits 2019 2018 19 2 9 26 4 13 The remuneration shown also includes remuneration for activities by the members of the Supervisory Board of Bertelsmann SE & Co. KGaA on the Supervisory Board of Bertelsmann Management SE. Transactions with subsidiaries included in the scope of consolidation are eliminated and are not further disclosed. In addition to transactions with consolidated subsidiaries, the following transactions with related parties and entities were conducted in the reporting period: Transactions with Related Parties in € millions 2019 Goods delivered and services provided Goods and services received Receivables against Amounts owed to 2018 Goods delivered and services provided Goods and services received Receivables against Amounts owed to Parent and entities with significant influence Key members of management Joint ventures Associates Other related parties – – – – – – – – 1 (2) – 58 1 (2) – 65 68 (32) 31 72 64 (35) 24 62 44 (38) 41 20 29 (29) 40 14 – (1) – 17 – (2) – 36 The amounts owed to key members of management include pension obligations, variable remuneration components and long-term incentives. The item “Other related parties” primarily includes transactions with the general partner Bertelsmann Management SE. The obligations as of the end of the reporting period result from expenses passed on by Bertelsmann Management SE. As of December 31, 2019, guarantees for associates were entered into in an immaterial amount (previous year: €0 million). As in the previous year, Bertelsmann has no share in the contingent liabilities of its associates. As of December 31, 2018, there was a contribution obligation in the amount of €31 million to a Brazilian fund set up by Bertelsmann along with the investment company Bozano Investimentos and other partners, investing in educational companies, with a particular focus on healthcare. As of December 31, 2019, there were no comparable contribution obligations to the fund. Contribution obligations of €9 million exist to University Ventures Funds as of December 31, 2019. Capital contributions to associates of €3 million (previous year: €21 million) were made in the financial year 2019. In addition, capital distributions from associates amounting to €18 million were made in the financial year 2019, almost all of which were attributable to University Ventures Funds (previous year: €0 million). As of December 31, 2019, loans amounting to €8 million were granted to associates (previous year: €9 million). As in the previous year, no loans were received from associates. As in the previous year, no significant expenses were recognized for bad or doubtful debts due from associates in the financial year 2019. Bertelsmann Annual Report 2019 127

30 Exemption for Subsidiaries from Preparation, Audit and Publication of Financial Statements The following subsidiaries took advantage of the exemption regulations set out in section 264 (3) of the German Commercial Code (HGB) relating to additional requirements for limited liability companies to prepare annual financial statements and a management report, and the requirements for audit of and publication by limited liability companies for the financial year ended December 31, 2019. Name of the entity "I 2 I" Musikproduktions- und Musikverlagsgesellschaft mbH 3 C Deutschland GmbH adality GmbH Ad Alliance GmbH Applike GmbH arvato CRM Healthcare GmbH arvato direct services GmbH arvato distribution GmbH Place Name of the entity Cologne BFS finance Münster GmbH BFS health finance GmbH Heilbronn BMG Production Music (Germany) GmbH Munich Cologne BMG RIGHTS MANAGEMENT (Europe) GmbH BMG RIGHTS MANAGEMENT GmbH Place Münster Dortmund Berlin Berlin Berlin Hamburg Campaign Services Neckarsulm GmbH Neckarsulm Berlin Campaign Services Offenbach GmbH Frankfurt am Main Gütersloh CBC Cologne Broadcasting Center GmbH Harsewinkel Chefkoch GmbH arvato eCommerce Beteiligungsgesellschaft mbH arvato eCommerce Verwaltungsgesellschaft mbH Gütersloh Gütersloh COUNTDOWN MEDIA GmbH Der Audio Verlag GmbH arvato infoscore GmbH arvato Logistics, Corporate Real Estate & Transport GmbH arvato media GmbH Arvato Payment Solutions GmbH arvato SCM Consumer Products GmbH Arvato SCM Kamen GmbH arvato services Dresden GmbH arvato services Gera GmbH arvato services Leipzig GmbH arvato services solutions GmbH arvato services Suhl GmbH Arvato Supply Chain Solutions SE arvato systems GmbH arvato Systems perdata GmbH arvato Systems S4M GmbH Audio Alliance GmbH AVE Gesellschaft für Hörfunkbeteiligungen mbH AZ Direct Beteiligungs GmbH AZ Direct GmbH BAG Business Information Beteiligungs GmbH BAI GmbH BDMI GmbH BePeople GmbH Bertelsmann Accounting Services GmbH Bertelsmann Accounting Services Schwerin GmbH Bertelsmann Aviation GmbH Bertelsmann Capital Holding GmbH Bertelsmann China Holding GmbH Bertelsmann Transfer GmbH Bertelsmann Treuhand- und Anlagegesellschaft mit beschränkter Haftung Baden-Baden DeutschlandCard GmbH Gütersloh Digital Media Hub GmbH Direct Analytics GmbH Gütersloh direct services Gütersloh GmbH Verl DIVIMOVE GmbH Gütersloh Gütersloh Dresden Gera Leipzig DPV Deutscher Pressevertrieb GmbH Eat the World GmbH Erste TD Gütersloh GmbH Erste WV Gütersloh GmbH European SCM Services GmbH Gütersloh FremantleMedia International Germany GmbH Suhl GGP Media GmbH Gütersloh Gütersloh Leipzig Cologne Berlin Berlin Gütersloh Gütersloh Gütersloh Gütersloh Gütersloh Gütersloh Gütersloh Schwerin Gütersloh Gütersloh Gütersloh Gütersloh Gütersloh G+J Digital Ventures GmbH G+J Electronic Media Sales GmbH G+J Enterprise GmbH G+J Innovation GmbH G+J Lifestyle GmbH G+J LIVING Digital GmbH G+J Medien GmbH G+J Vermietungsgesellschaft Sächsischer Verlag mbH G+J Wirtschaftsmedien Verwaltungs GmbH G+J Zweite Grundstücksbeteiligungsgesellschaft München mbH Global Assekuranz Vermittlungsgesellschaft mit beschränkter Haftung Gruner + Jahr Communication GmbH Gruner + Jahr GmbH Henri-Nannen-Schule Gruner+Jahr/ DIE ZEIT GmbH infoNetwork GmbH informa HIS GmbH informa Solutions GmbH BFS finance GmbH Verl infoscore Business Support GmbH Cologne Bonn Hamburg Berlin Munich Cologne Gütersloh Gütersloh Berlin Hamburg Berlin Gütersloh Gütersloh Gütersloh Potsdam Pößneck Berlin Hamburg Hamburg Hamburg Hamburg Hamburg Hamburg Dresden Hamburg Munich Gütersloh Hamburg Hamburg Hamburg Cologne Wiesbaden Baden-Baden Baden-Baden Bertelsmann Annual Report 2019 129

In addition, the exemption regulations set out in section 264b of the German Commercial Code (HGB) were used by the following companies for the financial year ended December 31, 2019: Name of the entity Place Name of the entity "Alwa" Gesellschaft für Vermögensverwaltung mbH & Co. Grundstücksvermietung KG Schönefeld Deutsche Medien-Manufaktur GmbH & Co. KG G+J Food & Living GmbH & Co. KG 11 Freunde Verlag GmbH & Co KG Berlin G+J Immobilien GmbH & Co. KG AVE II Vermögensverwaltungsgesellschaft mbH & Co. KG Cologne Place Münster Hamburg Hamburg Verl infoscore Portfolio Management GmbH & Co. KG infoscore Portfolio Management II GmbH & Co. KG Baden-Baden AZ fundraising services GmbH & Co. KG Gütersloh LV-Publikumsmedien GmbH & Co. KG Berliner Presse Vertrieb GmbH & Co. KG DDV Mediengruppe GmbH & Co. KG Berlin Prinovis GmbH & Co. KG Dresden Sellwell GmbH & Co. KG Münster Hamburg Hamburg The consolidated subsidiary Arvato SCM Ireland Limited in Balbriggan, Ireland, has used the exemption option offered in section 357 of the “Republic of Ireland Companies Act 2014” for publication requirements for its annual financial statements. 31 Additional Information in accordance with Section 315e of the German Commercial Code (HGB) Compensation of the Supervisory Board of Bertelsmann SE & Co. KGaA for the financial year 2019 amounted to €1,727,667 plus statutory value-added tax. Members of the Executive Board received total remuneration in the reporting period of €26,381,799, including €16,319,406 from Bertelsmann Management SE. Former members of the Executive Board of Bertelsmann Management SE and Bertelsmann AG and their surviving dependents received compensation of €5,789,051, including €5,393,417 from Bertelsmann SE & Co. KGaA. The provision for pension obligations to former members of the Executive Board of Bertelsmann AG and Bertelsmann Management SE accrued at Bertelsmann SE & Co. KGaA and Bertelsmann Management SE amounts to €89,532,742. The members of the Executive Board and Supervisory Board are listed on pages 150 ff. The fees for the Group auditors PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft totaled €7 million during the financial year, of which €6 million was due to fees for the audit of the financial statements. PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft was paid a total of €1 million for other audit-related services, for tax consulting services and for further services. The audit fees primarily include fees for the auditor’s review of the interim consolidated financial statements and the consolidated financial statements and the audit of the separate financial statements of Bertelsmann SE & Co. KGaA and its subsidiaries. The audit- related fees mainly cover statutory or voluntarily mandated attestation services by the auditor. Fees for other services cover fees for project-related consulting and due diligence services. Bertelsmann Annual Report 2019 131

The general partner Bertelsmann Management SE approved the Consolidated Financial Statements for submission to the Supervisory Board of Bertelsmann SE & Co. KGaA on March 16, 2020. The Supervisory Board’s task is to review the Consolidated Financial Statements and declare whether it approves these. Gütersloh, March 16, 2020 Bertelsmann SE & Co. KGaA Represented by: Bertelsmann Management SE, the general partner The Executive Board Thomas Rabe Markus Dohle Immanuel Hermreck Bernd Hirsch Bertelsmann Annual Report 2019 133

Independent Auditor’s Report To Bertelsmann SE & Co. KGaA, Gütersloh Report on the Audit of the Consolidated Financial Statements and of the Group Management Report Audit Opinions We have audited the consolidated financial statements of Bertelsmann SE & Co. KGaA, Gütersloh, and its subsidiaries (the Group), which comprise the consolidated balance sheet as at December 31, 2019, the consolidated statement of profit and loss, consolidated statement of comprehensive income, consolidated statement of cash flows and consolidated state- ment of changes in equity for the financial year from January 1 to December 31, 2019, and notes to the consolidated financial statements, including a summary of significant accounting policies. In addition, we have audited the group management report of Bertelsmann SE & Co. KGaA, which is combined with the Company’s management report, including the non- financial report pursuant to § [Article] 289b Abs. [paragraph] 1 HGB [Handelsgesetzbuch: German Commercial Code] and § 315b Abs. 1 HGB, for the financial year from January 1 to December 31, 2019. In our opinion, on the basis of the knowledge obtained in the audit, • the accompanying consolidated financial statements comply, in all material respects, with the IFRSs as adopted by the EU, and the additional requirements of German commercial law pursuant to § [Article] 315e Abs. [paragraph] 1 HGB [Handelsgesetzbuch: German Commercial Code] and, in compliance with these requirements, give a true and fair view of the assets, liabilities, and financial position of the Group as at December 31, 2019, and of its financial performance for the financial year from January 1, 2019 through December 31, 2019, and • the accompanying group management report as a whole provides an appropriate view of the Group’s position. In all material respects, this group management report is consistent with the annual financial statements, complies with German legal requirements and appropriately presents the opportunities and risks of future development. Basis for the Audit Opinions We conducted our audit of the consolidated financial statements and of the group management report in accordance with § 317 HGB and the EU Audit Regulation (No. 537/2014, referred to subsequently as “EU Audit Regulation”) in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Our responsibilities under those requirements and principles are further described in the “Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements and of the Group Management Report” section of our auditor’s report. We are independent of the Company in accordance with the requirements of German commercial and professional law, and we have fulfilled our other German professional responsibilities in accordance with these requirements. In addition, in accordance with Article 10 (2) point (f) of the EU Audit Regulation, we declare that we have not provided non-audit services prohibited under Article 5 (1) of the EU Audit Regulation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions on the consolidated financial statements and on the group management report. Key Audit Matters in the Audit of the Consolidated Financial Statements Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the financial year from January 1 to December 31, 2019. These matters were addressed in the context of our audit of the consolidated financial state- ments as a whole, and in forming our audit opinion thereon; we do not provide a separate audit opinion on these matters. In our view, the matters of most significance in our audit were as follows: 1 Recoverability of goodwill 2 Recoverability of investments in associates 3 Pension provisions 4 Presentation of the Majorel Group Pursuant to § [Article] 322 Abs. [paragraph] 3 Satz [sentence] 1 HGB [Handelsgesetzbuch: German Commercial Code], we declare that our audit has not led to any reservations relating to the legal compliance of the consolidated financial statements and of the group management report. Our presentation of these key audit matters has been structured in each case as follows: 1 Matter and issue 2 Audit approach and findings 3 Reference to further information Bertelsmann Annual Report 2019 135

2 Recoverability of investments in associates 1 The investments accounted for using the equity method reported in the Company’s consolidated financial statements include investments in associates of EUR 0.6 billion. 2 A two-step impairment test is performed for investments in associates. The first step involves recognizing the investor’s share in the impairment losses for the assets of the associate. If there are indications that the carrying amount of the investment in the associate may be impaired, the investment as a whole is tested for impairment in a second step and, if necessary, an additional impairment loss is recognized. This involves comparing the carrying amount of the relevant investment in an associate with the corresponding recoverable amount in the context of the impairment test. In general, the recoverable amount is initially determined on the basis of fair value less costs of disposal. If this amount is higher than the carrying amount, a calculation of the value in use is no longer required. Since, with the exception of Atresmedia, there are no available prices from active markets or comparable transactions from the recent past for the investments in associates, 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 associate’s business plan forms the starting point (three- and five-year detailed planning period). Expectations relating to future market develop- ments and assumptions about the development of macroeconomic factors are also taken into account in the associate’s business plans. The discount rate used is the weighted average cost of capital (“WACC”). The recoverable amount of the investment in Atresmedia, which is material from the Group’s point of view, is derived from the value in use. The impairment test determined that it was necessary to recognize a write-down amounting to EUR 50 million with respect to the associate Atresmedia. The outcome of this valuation exercise is dependent to a large extent on the estimates made by the executive directors with respect to the future cash inflows from the respective associates, the discount rate used, the rate of growth and other assumptions, 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. As part of our audit, we assessed the methodology used for the purposes of performing the impairment test, among other things. After matching the future cash inflows used for the calculation against the business plan for the associate, we assessed the appropriateness of the calculation, in particular by reconciling it with general and sector-specific market expectations. In the know- ledge that even relatively small changes in the discount rate applied can have a material impact on the recover- able amount calculated in this way, we also focused our testing in particular on the parameters used to determine the discount rate applied, and assessed the calculation model. In order to reflect the uncertainty inherent in the projections, we reproduced the sensitivity analyses performed by the Company and carried out our own sensitivity analyses with respect to those investments in associates with low headroom (recoverable amount compared with the carrying amount). Taking into account the information available, we determined that the respective carrying amounts of the investments were adequately covered by the discounted future cash flows. We assessed the measurement of the recoverable amount of the investment in Atresmedia on the basis of the value in use and evaluated the calculation for the impairment. Overall, the valuation parameters and assumptions used by the executive directors are in line with our expectations and fall within the ranges considered by us to be reason- able. 3 The Company’s disclosures relating to the recognized investments in associates are contained in section 11 of the notes to the consolidated financial statements. 3 Pension provisions 1 In the consolidated financial statements of the Company a total of EUR 2.0 billion is reported under the “Provisions for pensions and similar obligations” balance sheet item. Bertelsmann Annual Report 2019 137

involved on the Group’s net assets, financial position and results of operations. the audited group management report and our auditor’s report. 2 As part of our audit and with respect to the presentation of the merger of the customer relationship management businesses to form the Majorel Group, we first obtained an understanding of the contractual bases and assessed the executive directors’ decisions with regard to the accounting treatment. We then assessed whether Bertelsmann controls Majorel within the meaning of IFRS 10. For this purpose we exam- ined, among other things, the management structures and the decision-making powers that Bertelsmann is able to exercise within the relevant decision-making bodies. With regard to the presentation in the statement of changes in equity, we reconciled the consideration received from the perspective of the Bertelsmann shareholders with the contractual agreements and other underlying documents, and assessed the addition to the non-controlling interests. We also verified and assessed the accounting treatment of the business combination with respect to the Saham CRM businesses. Based on our audit procedures, we were able to satisfy ourselves overall that the merger of the CRM businesses of Bertelsmann and the Saham Group was properly accounted for and that the executive directors’ assump- tions underlying this accounting treatment are substanti- ated and sufficiently documented. 3 The Company’s disclosures relating to its assessment that it has control of Majorel are contained in the notes to the consolidated financial statements under “Significant accounting judgments, estimates and assumptions.” The Company’s disclosures relating to the effects of merging the customer relationship management businesses on the Group’s equity accounts are contained in section 11 “Interests in other entities” of the notes to the consolidated financial statements. Other Information The executive directors are responsible for the other infor- mation. The other information comprises the annual report – excluding cross-references to external information – with the exception of the audited consolidated financial statements, Our audit opinions on the consolidated financial statements and on the group management report do not cover the other information, and consequently we do not express an audit opinion or any other form of assurance conclusion thereon. In connection with our audit, our responsibility is to read the other information and, in so doing, to consider whether the other information • is materially inconsistent with the consolidated financial statements, with the group management report or our knowledge obtained in the audit, or • otherwise appears to be materially misstated. Responsibilities of the Executive Directors and the Supervisory Board for the Consolidated Financial Statements and the Group Management Report The executive directors are responsible for the preparation of the consolidated financial statements that comply, in all material respects, with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to § 315e Abs. 1 HGB and that the consolidated financial statements, in compliance with these requirements, give a true and fair view of the assets, liabilities, financial position, and financial performance of the Group. In addition, the executive directors are responsible for such internal control as they, in accor- dance with German Legally Required Accounting Principles, have determined necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the executive directors are responsible for assessing the Group’s ability to continue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to going concern. In addition, they are responsible for financial reporting based on the going concern basis of accounting unless there is an intention to liquidate the Group or to cease operations, or there is no realistic alternative but to do so. Furthermore, the executive directors are responsible for the preparation of the group management report that as a whole provides an appropriate view of the Group’s position and is, in all material respects, consistent with the consolidated financial statements, complies with German legal requirements, and Bertelsmann Annual Report 2019 139

• Evaluate the consistency of the group management report with the consolidated financial statements, its conformity with German law, and the view of the Group’s position it provides. • Perform audit procedures on the prospective information 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 derivation of the prospective information from these assumptions. We do not express a separate audit opinion on the prospective information and on the assumptions used as a basis. There is a substantial unavoidable risk that future events will differ materially from the prospective information. We communicate with those charged with governance 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 during our audit. We also provide those charged with governance with a state- ment that we have complied with the relevant independence requirements, and communicate with them all relationships 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 most significance in the audit of the annual financial 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 about the matter. Other Legal and Regulatory Requirements Further Information pursuant to Article 10 of the EU Audit Regulation We were elected as group auditor by the Annual General Meeting on May 21, 2019. We were engaged by the Supervisory Board on July 4, 2019. We have been the group auditor of Bertelsmann SE & Co. KGaA, Gütersloh, without interruption since the financial year 2011. We declare that the audit opinions expressed in this auditor’s report are consistent with the additional report to the audit committee pursuant to Article 11 of the EU Audit Regulation (long-form audit report). German Public Auditor Responsible for the Engagement The German Public Auditor responsible for the engagement is Christian Landau. Bielefeld, March 16, 2020 PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft Christian Landau Volker Voelcker Wirtschaftsprüfer Wirtschaftsprüfer (German Public Auditor) (German Public Auditor) Bertelsmann Annual Report 2019 141

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 commit- tee currently has 18 members and includes members of the Executive Board as well as executives representing key busi- nesses, countries, regions and select Group-wide functions. The Supervisory Board of Bertelsmann SE & Co. KGaA super- vises the management of the business by the general partner, and uses its extensive information and control rights for this purpose. In addition, the Supervisory Boards advise the Executive Board on strategic matters and significant trans- actions. The Executive and Supervisory Boards work in close, trusting cooperation and are able to reconcile the demands of effective corporate governance with the need for rapid decision- making processes. Fundamental matters of corporate strategy and their implementation are discussed openly and coordinated in joint sessions. Any significant measures to be taken by the Executive Board are subject to the approval of the Supervisory Board. The Supervisory Board reviews the Annual and Consolidated Financial Statements, the Combined Management Report of Bertelsmann SE & Co. KGaA and the Group, and the proposal for the appropriation of net retained earnings. It approves the Annual Financial Statements of Bertelsmann SE & Co. KGaA and the Consolidated Financial Statements, taking into account the results of the preliminary review conducted by the Audit and Finance Committee and the audit reports prepared by the auditor. The Bertelsmann SE & Co. KGaA and Bertelsmann Management SE shareholders exercise their rights and vote at the respective General Meetings. The General Meetings vote on matters such as amendments to the articles of association and the appropriation of net income, and elect the members of the respective Supervisory Boards. The members of the Executive and Supervisory Boards are obliged to serve the company’s best interests in their work. For some time, the delegation of tasks to committees of experts has been an integral component of the Supervisory Boards’ work at Bertelsmann. It serves to increase the monitoring efficiency and advisory expertise of the Supervisory Boards. The Supervisory Board of Bertelsmann Management SE has formed a Personnel Committee and a Program Committee, and the Supervisory Board of Bertelsmann SE & Co. KGaA has formed an Audit and Finance Committee and the Working Group of Employee and Management Representatives. The tasks of a Nomination Committee were also assigned to the Personnel Committee, in which capacity it recommends to the plenary session of the Supervisory Board suitable candidates for the Supervisory Board, to be nominated at the General Meeting. The Program Committee, instead of the Supervisory Board, decides on the approval of the Supervisory Board to enter into program supply deals – for example, for feature films, series or sports rights. The Audit and Finance Committee of the Supervisory Board of Bertelsmann SE & Co. KGaA is also involved in the accounting process, and monitors the effectiveness of the risk monitoring and risk management system, the internal control system and the internal auditing system. One focus of the Audit and Finance Committee is a review of the Annual and Consolidated Financial Statements, a detailed discussion of the auditor’s reports, and the preparation of draft resolutions for submission to the plenary session of the Supervisory Board. Furthermore, the Committee addresses issues relating to compliance, in particular the effectiveness and proper functioning of the com- pliance organization, as well as with the related topics of integrity within the Group and audits of the Non-Financial Statement. Other important topics of the Audit and Finance Committee are data protection and cybersecurity in the Group. These com- mittees prepare the topics to be addressed during the plenary meetings of the Supervisory Boards. The committee chairs – or, where applicable, their representatives – then report to the plenary meetings on the work performed. The Supervisory Boards’ decision-making powers have been transferred to the committees to the extent permitted by law. The breadth and range of responsibilities and tasks delegated to these commit- tees are continuously reviewed through various evaluation pro- cesses. The appropriate size of the Supervisory Boards and the experience and professional expertise of their members, who are drawn from a broad range of industries and areas of activity, are key factors in the effectiveness and independence of the work carried out by the Supervisory Board and reflect the specific ownership structure at Bertelsmann. With the exception of Supervisory Board members who are also members of the Mohn family (Dr. Brigitte Mohn, Christoph Mohn, Liz Mohn) and the employee representatives on the Supervisory Board (Kai Brettmann, Günter Göbel, Christiane Sussieck) or the representative of the Bertelsmann Management Representative (Ian Hudson), the Supervisory Board con- Committee siders all other members of the Supervisory Board (Prof. Dr. Werner Bauer, Dr. Thomas Buberl, Bernd Leukert, Gigi Levy-Weiss, Hans Dieter Pötsch, Bodo Uebber) to be independent for the purposes of the German Corporate Governance Code. Accordingly, the Supervisory Board has an appropriate number of independent members among the shareholders. For details of the work of the Supervisory Board, please refer to the Report of the Supervisory Board (p. 145 ff.). Diversity in Practice At a global company like Bertelsmann, diversity within the workforce is a key foundation for the Group’s creativity and Bertelsmann Annual Report 2019 143

Report of the Supervisory Board Christoph Mohn Chairman of the Supervisory Board of Bertelsmann SE & Co. KGaA Dear shareholders, The global economy continued to experience moderate growth in the financial year 2019, although the rate of expansion decreased somewhat, particularly in the more advanced economies. As expected, growth was uneven in markets relevant to Bertelsmann. The TV advertising markets reported declines in Germany, France, Belgium and Spain, but remained stable in the Netherlands and showed significant growth in Hungary. The video-on-demand markets in Germany, France and the Netherlands registered strong growth. The relevant markets for printed books achieved slightly positive growth overall. Publishing sales of e-books in the United States and the United Kingdom fell moderately, while the markets for audiobooks continued to exhibit strong growth. The magazine markets in Germany and France were characterized by strongly declining print advertising business and a moderate to significant decline in the circulation business, while the digital business again posted strong growth. The global music markets for publishing and recording rights and the related service markets continued to show sustained growth in sectors relevant to Bertelsmann. The European printing markets showed further decline, with the offset printing markets seeing more robust development than the gravure printing markets. The educational markets that are relevant to Bertelsmann, in contrast, continued to grow. In this diverse market environ- ment, the Bertelsmann Group again increased its operating result and the revenue share represented by growth busi- nesses while seeing slight organic revenue growth. In the reporting period, the Supervisory Board of Bertelsmann SE & Co. KGaA again diligently fulfilled the duties incumbent upon it by law and under the articles of association and bylaws. Its members regularly advised and monitored the general partner, Bertelsmann Management SE, represented by its Executive Board, in the task of managing and directing the company’s operations. This report covers the activities of the Supervisory Board of Bertelsmann SE & Co. KGaA. The activities of the Supervisory Board of Bertelsmann Management SE, which in turn serves as the Supervisory Board of the general partner of Bertelsmann SE & Co. KGaA, are not the subject of this report. Advising and Monitoring the Executive Board of Bertelsmann Management SE As part of its advisory and monitoring activities, the Supervisory Board of Bertelsmann SE & Co. KGaA was directly involved in important company decisions and transactions at an early stage, and discussed and reviewed these at length on the basis of reports from the Executive Board. The general partner, represented by the Executive Board of Bertelsmann Management SE, provided the Supervisory Board with regular, prompt and comprehensive written and verbal reports on all significant issues of strategy, planning, business performance, intended business policies and other fundamental management issues. A wide range of topics and projects were presented for discussion at the meetings of the Supervisory Board. Reporting of the Executive Board concerned, but was not limited to, the position and development of the company, especially the current business and financial position, and material business transactions, particularly major planned investments and divestments. Instances where business performance deviated from official projections and targets were discussed in detail with the Supervisory Board, which reviewed these matters on the basis of the documentation submitted. The Supervisory Board regularly obtained information concerning financial debt levels. The Supervisory Board also focused on the risk situation and risk management. The internal control system, risk management system and internal auditing system were the subjects of regular reports and discussions. The Supervisory Board also received regular reports on corporate governance and compliance developments at Bertelsmann. The Executive Board and the Supervisory Board report jointly on corporate governance and compliance at Bertelsmann on pages 142–144. Another focus of the Supervisory Board’s activities involved addressing management development and routine succession planning for the Executive Board. Bertelsmann Annual Report 2019 145

point, the Supervisory Board made the decision to present the following proposal to the Annual General Meeting for a vote: that the Berlin-based KPMG Aktiengesellschaft Wirtschaftsprüfungsgesellschaft be elected as auditor for the Annual Financial Statements and the Combined Management Report that is consolidated with the Group Management Report, as auditor for the Consolidated Financial Statements for the financial year 2020, and as auditor for a review of the interim consolidated financial statements and interim combined management report (“Interim Report”) as of June 30, 2020. The Supervisory Board Chairman maintained ongoing contact 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 business situation and significant transactions. All Supervisory Board members attended at least half the Supervisory Board meetings convened. No potential conflicts of interest arose on the Supervisory Board. The Supervisory Board discussed the standards set out in the German Corporate Governance Code and Bertelsmann’s compliance with the code. A joint report by the Supervisory and Executive Boards of Bertelsmann Management SE on corporate governance within the company is provided on page 142 ff. of this Annual Report. As an unlisted company, Bertelsmann does not issue a formal declaration of compliance as per section 161 of the German Stock Corporation Act. Supervisory Board Audit and Finance Committee Within its sphere of responsibility, the Supervisory Board of Bertelsmann SE & Co. KGaA established the Audit and Finance Committee to perform its tasks efficiently. The Audit and Finance Committee has four members; the Chair of the Supervisory Board does not lead this committee. The Chair of the Audit and Finance Committee is Bodo Uebber. The German Corporate Governance Code stipulates that the Chair of the Audit and Finance Committee is independent as defined by the Code and has special knowledge and experience in the application of accounting standards and internal control procedures. All members of the Audit and Finance Committee are familiar with the sectors in which Bertelsmann SE & Co. KGaA operates. In particular, and in accordance with its mandate for the reporting year, the Audit and Finance Committee discussed issues of corporate financing, the financial position of the Group, financial planning, fiscal policy and individual negative deviations of the performance of Group businesses from budgeted performance. The committee also extensively addressed the accounting process and monitored the effec- tiveness 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 Consulting. Furthermore, the Committee addressed issues relating to compliance, in par- ticular the effectiveness and proper functioning of the compli- ance management system. In this connection, the Committee heard reports on significant compliance-related events in the Group. In addition, the Audit and Finance Committee reviewed at length the implementation of the EU General Data Protection Regulation (GDPR) at Bertelsmann, a process that has progressed well. During this part of the meeting, the Audit and Finance Committee was briefed on the further develop- ment of the data protection strategy and the structure of the data protection organization within the Group. An issue regularly addressed in the meetings of the Audit and Finance Committee was the situation and ongoing development of the Group’s cybersecurity and IT security structure. One focus of the Audit and Finance Committee in the financial year 2019 involved conducting and managing two separate public tendering processes for the auditor contract for reviewing the Annual and Consolidated Financial Statements of Bertelsmann SE & Co. KGaA in accordance with the regulations and provisions of the EU Audit Regulation No. 537/2014 (referred to subsequently as the “EU Audit Regulation”) and the EU Statutory Audit Directive for the financial year 2020 as well as for the financial year 2021. Since PwC has served as auditor for Bertelsmann SE & Co. KGaA since the financial year 2011, the contract needed to be tendered for the financial year 2021 at the latest. The Audit and Finance Committee stipulated the structure of the selection process, including the timetable, the selection criteria and the applicable scoring model. The operational implementation of the selection process was delegated to a project team under the leadership of the Chief Financial Officer, whereby the Audit and Finance Committee reserved the right to make the final decision concerning all issues within the tendering process. An external consultant was commissioned to ensure compliance and provide support throughout the selection process. As part of a pre-qualification process, interested audit firms were invited to submit initial offers and an assessment was made concerning their fulfillment of minimum criteria. Before the full written offers were requested, the project team conducted several workshops with all concerned audit firms, who were also given access to a virtual data room. The tendering process also included presentations by the prospective audit teams, which were given in front of the project group and representatives of the Audit and Finance Committee. After a comprehensive review and evaluation of the final offers, the Audit and Finance Committee resolved in its meeting on August 28, 2019, to recommend that the Supervisory Board propose to the Annual General Meeting the nomination of either KPMG or PwC as auditor for the Annual Financial Statements, the Consolidated Bertelsmann Annual Report 2019 147

recommendations of the Audit and Finance Committee and those contained in the audit reports and following further dis- cussion with the auditor. The Supervisory Board concurred with the audit findings. After its own final scrutiny of the Annual and Consolidated Financial Statements and the Combined Management Report, the Supervisory Board – acting in accordance with the Audit and Finance Committee’s recom- mendation – raised no objections. The financial statements prepared by the Bertelsmann Management SE Executive Board were thus approved. Moreover, the Supervisory Board approved the Report of the Supervisory Board for the Annual General Meeting and the Corporate Governance Report, as well as its resolution proposals concerning the agenda items for the ordinary Annual General Meeting on May 8, 2020. The Supervisory Board has furthermore reviewed the Bertelsmann Management SE Executive Board proposal as to the amount of net retained earnings for appropriation to shareholders, and concurs with said proposal. The amount of the dividend proposed by the Executive Board of Bertelsmann Management SE is appropriate, in the view of the Supervisory Board, in consideration of the level of net retained profits, the economic environment, the company’s economic situation and the interests of the shareholders. 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 general partner, Bertelsmann Management SE, represented by its Executive Board. No personnel changes were made to the composition of the Executive Board of Bertelsmann Management SE during the financial year 2019. However, as approved by the Personnel Committee of Bertelsmann Management SE, Thomas Rabe assumed the role of CEO of RTL Group S.A., effective April 1, 2019, alongside his role as Chairman of Bertelsmann Management SE. The financial year also saw the following changes to the Supervisory Board: Murat Cetin left the Supervisory Board of Bertelsmann SE & Co. KGaA on February 28, 2019. Kasper Rorsted left the Supervisory Board of Bertelsmann SE & Co. KGaA on March 31, 2019. Ian Hudson will leave the Supervisory Board on April 30, 2020. The Supervisory Board would like to thank all three individuals for the many years of excellent and trusting cooperation. At present, all nine members of the Supervisory Board of Bertelsmann Management SE are also members of the currently 13-strong Supervisory Board of Bertelsmann SE & Co. KGaA. The “Equal Participation of Women and Men in Leadership Positions in the Private and Public Sector Act” does not apply to the Supervisory Board of Bertelsmann SE & Co. KGaA as it is an unlisted company. However, the Supervisory Board does support the aim of the act. From a strategic point of view, the Supervisory Board also aims to properly fulfill its monitoring and consulting function by ensuring diversity among its members. The Supervisory Board will not at this time, however, set any target quota for women on the Supervisory Board. It firmly believes that suitable measures have been taken within the company in the areas of succession planning, management development and the selection processes to ensure the equal participation of men and women on an ongoing basis. In the Supervisory Board, the aim is to ensure that the existing proportion of women will not be reduced when new members are appointed. Ideally, the backgrounds of new members will show links to Bertelsmann’s growth regions and markets. (See also the “Diversity in Practice” section in the Corporate Governance Report on page 143 f.) Apart from the three representatives of the Mohn family and the four employee representatives, the Supervisory Board of Bertelsmann SE & Co. KGaA consists exclusively of independent Supervisory Board members. The Supervisory Board recognizes the intention of the Government Commission on the German Corporate Governance Code in its call for a specification of targets for an age limit and a standard limit for length of service on the Supervisory Board. In view of Bertelsmann’s particular shareholder structure and the age limit regulations already contained in the company’s articles of association, the Supervisory Board does not feel it is necessary or appropriate to introduce further or more extensive specifications on age limit and length of service at Bertelsmann. The Supervisory Board would like to express its gratitude for the great dedication and commendable performance of the Executive Board during the financial year 2019. The Supervisory Board also wishes to thank all employees of the Bertelsmann Group and its corporate management for their commitment and contribution to a successful financial year 2019. Gütersloh, March 16, 2020 Christoph Mohn Chairman of the Supervisory Board Bertelsmann Annual Report 2019 149

Gigi Levy-Weiss Angel Investor • Bertelsmann Management SE • Beach Bum Ltd. • BrandShield Ltd. • Caja Elastic Dynamic Solutions Ltd. • Constru Ltd. (since July 18, 2019) • Correlsense Ltd. (until April 15, 2019) • Driveway Software Corporation • Elmik Touristic Services Ltd. • Fusic Ltd. (until April 29, 2019) • Hip Mobility, Inc. (since January 24, 2019) • Hola NFX UK, Ltd (until December 8, 2019) • IMA Ventures Ltd. • Inception VR, Inc. • Inception VR (Israel) Ltd. • Inception VR (UK) Ltd. • Jeeng Application Ltd. • Landa Holdings, Inc. (since September 23, 2019) • Mov.Al Ltd. • MyHeritage Ltd. • NFX Capital UK, Ltd • Papaya Gaming Ltd. (since April 30, 2019) • Premium Domains Ltd. • Reach Digital Inc. • SimilarWeb, Ltd • Tectonic Labs Ltd. • Theator Inc. (since August 5, 2019) • TrustMed Ltd. • Volunteer Directly Ltd. • Zengaming, Inc. Dr. Brigitte Mohn Member of the Executive Board, Bertelsmann Stiftung • Bertelsmann Management SE • Phineo gAG • Rhön-Klinikum AG • Stiftung RTL – Wir helfen Kindern e. V. (since April 1, 2019) • Clue by Biowink GmbH Liz Mohn Chairwoman of the Board of Bertelsmann Verwaltungsgesellschaft mbH (BVG) Vice Chairwoman of the Executive Board, Bertelsmann Stiftung • Bertelsmann Management SE Hans Dieter Pötsch Chairman of the Supervisory Board, Volkswagen AG Chairman of the Executive Board / Chief Financial Officer, Porsche Automobil Holding SE • AUDI AG, Ingolstadt • Autostadt GmbH, Wolfsburg • Bertelsmann Management SE • Dr. Ing. h.c. F. Porsche AG • TRATON SE, München (Chairman) • Wolfsburg AG • Porsche Austria Gesellschaft m.b.H., Salzburg • Porsche Holding Gesellschaft m.b.H., Salzburg • Porsche Retail GmbH, Salzburg Kasper Rorsted (until March 31, 2019) Chairman of the Executive Board, Adidas AG • Bertelsmann Management SE (until March 31, 2019) • Nestlé S.A. Christiane Sussieck Chairwoman of the Corporate General Works Council, Bertelsmann SE & Co. KGaA Vice Chairwoman of the Corporate Works Council, Bertelsmann SE & Co. KGaA Bodo Uebber Former Member of the Executive Board, Daimler AG Finance & Controlling / Daimler Financial Services • Adidas AG (since May 9, 2019) • Bertelsmann Management SE • Daimler Financial Services AG (Chairman) (until May 22, 2019) • BAIC Motor Corporation Ltd. (until May 22, 2019) • Delta Topco Ltd. (until May 22, 2019) • Mercedes-Benz Grand Prix Ltd. (until May 22, 2019) • Membership of statutory domestic supervisory boards • Membership of comparable domestic and foreign supervisory bodies of business enterprises Bertelsmann Annual Report 2019 151

Immanuel Hermreck Chief Human Resources Officer • RTL Group S.A. (since January 1, 2019) Bernd Hirsch Chief Financial Officer • Evotec AG, Hamburg1) (until June 19, 2019) • Symrise AG1) • Bertelsmann, Inc. (Chairman) • Penguin Random House LLC • RTL Group S.A. Executive Board Thomas Rabe Chairman • Adidas AG (since May 9, 2019) • Symrise AG1) (Chairman until August 7, 2019, Member until December 31, 2019) • Majorel Group Luxembourg S.A. (since January 4, 2019) (formerly ACR – Advanced Customer Relation S.à.r.l.) • Penguin Random House LLC (Chairman) • RTL Group S.A. (Chairman) (until March 31, 2019) Markus Dohle Chief Executive Officer, Penguin Random House • Direct Group Grandes Obras S.L. • Editora Schwarcz S.A. • Frederick Warne & Co. LLC • Golden Treasures LLC • Penguin Random House Foundation, Inc. • Penguin Random House Grupo Editorial S.A.U. • Penguin Random House Grupo Editorial (USA) LLC • Penguin Random House LLC • Random House Children’s Entertainment LLC • Sasquatch Books LLC • Sputnik 84, LLC • Membership of statutory domestic supervisory boards • Membership of comparable domestic and foreign supervisory bodies of business enterprises 1) External mandates. Bertelsmann Annual Report 2019 153

IFRS Special Items Income and expense items that are distinguished by their nature, amount or frequency of occurrence, and the dis- closure of which is relevant for assessing the earnings power of the company or its segments in the period affected. They include, for example, restructuring measures, impairments and capital gains or losses. Not included in the special items are disposal effects of strategic real estate transactions. Syndicated Credit Facility A credit facility involving a consortium of banks. Abbreviation of International Financial Reporting Standards. Accounting standards intended to ensure internationally comparable accounting and reporting. Leverage Factor The leverage factor is the ratio of economic debt to operating EBITDA. In order to enable Bertelsmann’s actual financial strength to be reflected on an economic level, the figures reported in the Consolidated Financial Statements are modified. Operating EBITDA Earnings before interest, taxes, amortization, depreciation, impairment and reversals, and special items. Rating An expression of the creditworthiness of a creditor or financial instrument by an agency specialized in evaluating credit risk. SE & Co. KGaA A partnership limited by shares (KGaA) with a European stock corporation (Societas Europaea, or SE) as the general partner. The general partner is responsible for the management and representation of the KGaA. Bertelsmann Annual Report 2019 155

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