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Information Memorandum Borsenzulassungsprospekt (gemal3 0 44 BorsZulV)

B E RT E LS MA N N media worldwide

Bertelsmann AG (Gutersloh, Federal Republic of Germany)

as Issuer and, in respect of Notes issued by Bertelsmann Capital Corporation N.V. or Bertelsmann U. S. Finance, Inc., as Guarantor Bertelsmann Capital Corporation N. V. (Amsterdam, The Netherlands)

as Issuer Bertelsmann U. S. Finance, Inc. (Wilmington, Delaware,U. SA.)

as Issuer Euro 3,000,000,000 Debt lssua nce Programme

The notes (the "Notes") to be issued under the Euro 3,000,000,000 Debt Issuance Programme (the "Programme") are admitted for official quotation on the Frankfurt Stock Exchange and application has been made to list Notes issued under the Programme on the Luxembourg Stock Exchange. Notes issued under the Programme may also be listed on an alternative stock exchange or may not be listed at all.

The payments of all amounts due in respect of Notes issued by Bertelsmann Capital Corporation N.V. and Bertelsmann U. S. Finance, Inc. will be unconditionally and irrevocably guaranteed by Bertels- mann AG. Arranger

Deutsche Bank

Dealers

ABN AMRO Commerzbank Securities Credit Suisse First Boston

Deutsche Bank Dresdner Kleinwort Wasserstein JPMorgan

Merrill Lynch International Schroder Salomon Smith Barney UBS Warburg

The date of this Information Memorandum (which for purposes of a listing of Notes on the Frankfurt Stock Exchange serves as "Borsenzulassungsprospekt") is 6 June 2002. The Information Memoran- dum is valid for one year from such date. Bertelsmann AG ("Bertelsmann" and together with all of its affiliated companies within the meaning of the German Stock Corporation Act (Aktiengeserz), the "Bertelsmann Group"), Bertelsmann Capital Corporation N.V. ("Bertelsmann N.V."), Bertelsmann U. S. Finance, Inc. ("Bertelsmann U.S.") (each an "Issuer" and together the "Issuers" Bertelsmann AG in its capacity as guarantor (the "Guarantor") and the financial institutions mentioned on page 199 jointly and severally accept responsibility pursuant to paragraph 45 of the German Stock Exchange Act for the information contained in the Infor- mation Memorandum. To the best of the knowledge and belief of each Issuer and the Guarantor (each of which has taken all reasonable care to ensure that such is the case), the information contained in the Information Memorandum is in accordance with the facts and does not omit anything likely to affect the import of such information.

The Information Memorandum should be read and construed with any amendment or supplement thereto and with any other documents incorporated by reference(') and, in relation to any Series (as defined herein) of Notes, should be read and construed together with the relevant Pricing Supple- ment(s) (as defined herein).

Each Issuer and the Guarantor has confirmed to the dealers as set forth on the cover page (the "Deal- ers'') that the Information Memorandum is true and accurate in all material respects and is not misleading; that any opinions and intentions expressed by it therein are honestly held and based on reasonable assumptions; that there are no other facts with respect to each Issuer and the Guarantor, the omission of which would make the Information Memorandum as a whole or any statement therein or opinions or intentions expressed therein misleading in any material respect; and that all reasonable enquiries have been made to verify the foregoing.

No representation or warranty is made or implied by the Dealers or any of their respective affiliates, and neither the Dealers or any of their respective affiliates make any representation or warranty or accept any responsibility, as to the accuracy or completeness of the information contained in this Information Memorandum.

No person has been authorized by either of the Issuer or the Guarantor to give any information or to make any representation not contained in or not consistent with the Information Memorandum or any other document entered into in relation to the Programme or any information supplied by either Issuer or the Guarantor or such other information as in the public domain and, if given or made, such information or representation should not be relied upon as having been authorized by the Issuers, the Guarantor, the Dealers or any of them.

Neither the delivery of the Information Memorandum nor any Pricing Supplement nor the offering, sale or delivery of any Note shall, in any circumstances, create any implication that the information contained in the Information Memorandum is true subsequent to the date upon which the Informa- tion Memorandum has been issued or most recently amended or supplemented or that there has been no adverse change in the financial situation of the Issuers since the date hereof or, as the case may be, the date upon which the Information Memorandum has been most recently amended or supplemented or the balance sheet date of the most recent financial statements which are deemed to be incorporated into the Information Memorandum by reference or that any other information supplied in connection with the Programme is correct at any time subsequent to the date on which it is supplied or, if different, the date indicated in the document containing the same.

This document may only be communicated or caused to be communicated in circumstances in which section 21 (1) of the Financial Services and Markets Act 2000 ("FSMA") does not apply.

The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended, and will include Notes in bearer form that are subject to U.S. tax law requirements. Sub- ject to certain exceptions, Notes may not be offered, sold or delivered within the United States or to U. S. persons. See "General Information - Selling Restrictions'.'

The distribution of the Information Memorandum and any Pricing Supplement and the offering, sale and delivery of the Notes in certain jurisdictions may be restricted by law. Persons into whose pos-

(l) Incorporation by reference in this Information Memorandum applies - in accordance with its rules and regulations - to the listing on the Luxembourg Stock Exchange only.

2 session the Information Memorandum or any Pricing Supplement come are required by the Issuers and the Dealers to inform themselves about and to observe any such restrictions. For a description of certain restrictions on offers, sales and deliveries of Notes and on the distribution of the Information Memorandum or any Pricing Supplement and other offering material relating to the Notes, see "General Information - Selling Restrictions'.'

Neither the Information Memorandum nor any Pricing Supplement may be used for the purpose of an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation.

Neither the Information Memorandum nor any Pricing Supplement constitutes an offer or an invitation to subscribe for or purchase any Notes and should not be considered as a recommendation by the Issuers, the Guarantor, the Dealers or any of them that any recipient of the Information Memoran- dum or any Pricing Supplement should subscribe for or purchase any Notes. Each recipient of the Information Memorandum or any Pricing Supplement shall be taken to have made its own investiga- tion and appraisal of the condition (financial or otherwise) of the Issuers and the Guarantor.

In connection with the issue of any Tranche (as defined herein) of Notes under the Programme, the Dealer (if any) who is specified in the relevant Pricing Supplement as the stabilising institution or any person acting for him may over-allot or effect transactions with a view to supporting the market price of the Notes of the Series of which such Tranche forms part and any associated securities at a level higher than that which might otherwise prevail for a limited period. However, there may be no obligation on the stabilising institution to do this. Such stabilising, if commenced, may be discontinued at any time, and must be brought to an end after a limited period. Such stabilising shall be in compliance with all applicable laws, regulations and rules.

3 TABLE OF CONTENTS

Page SummaryoftheProgramme ...... 5 Issue Procedures ...... 11 Terms and Conditions of the Notes (German Language Version) ...... 13 Terms and Conditions of the Notes (English Language Version) ...... 46 Form of Guarantee (German Version) ...... 75 Form of Guarantee (Non-Binding English Translation) ...... 78 Form of Pricing Supplement ...... 81 Useof Proceeds ...... 95 Description of Bertelsmann AG ...... 96 RecentDevelopment ...... 161 Description of Bertelsmann Capital Corporation N. V...... 162 Description of Bertelsmann U.S. Finance. Inc...... 172 Taxation ...... 186 1. Federal Republic of Germany ...... 186 2 . The Netherlands ...... 188 3 . The United States ...... 190 Generallnformation ...... 192 Sel Iing Restrictions ...... 192 Authorisation ...... 196 Listing ofthe Notes ...... 196 Documents Incorporated by Reference ...... 196 DocumentsAvailable ...... 197 Clearing Systems ...... 197 Significant or Material Change ...... 198 Litigation ...... 198 Namesand Addresses ...... 200

4 The following summary does not purport to be complete and is taken from and qualified in its entirety by the remainder of this Information Memorandum and, in relation to the terms and conditions of any particular Tranche of Notes, the applicable Pricing Supplement. Expressions defined in "Terms and Conditions of the Notes" below shall have the same meaning in this Summary unless specified otherwise.

Issuers: Bertelsmann AG ("Bertelsmann") Bertelsmann Capital Corporation N.V. ("Bertelsmann N.V.") Bertelsmann U. S. Finance, Inc. ("Bertelsmann U. S.")

Guarantor: Bertelsmann, in respect of Notes issued by Bertelsmann N.V. and Bertelsmann U. S. (in such capacity, the "Guarantor")

Arranger: Deutsche Bank Aktiengesellschaft

Dealers: Deutsche Bank Aktiengesellschaft, ABN AMRO Bank N.V., Commerzbank Aktiengesellschaft, Credit Suisse First Boston (Europe) Limited, Dresdner Bank Aktiengesellschaft, J. P Morgan Securities Ltd., Merrill Lynch International, Salomon Brothers International Limited (*I, UBS AG, acting through its business group UBS Warburg

Fiscal Agent: Deutsche Bank Aktiengesellschaft

Paying Agents: Deutsche Bank Aktiengesellschaft Deutsche Bank Luxembourg S.A. and other institutions, all as indicated in the applicable Pricing Supplement.

Listing Agent: Deutsche Bank Luxembourg S.A.

Regulatory Matters: Any Tranche of Notes denominated in a currency in respect of which particular laws, regulations, restrictions and reporting requirements apply will only be issued in circumstances which comply with such laws, regulations, restrictions and reporting requirements from time to time. Without prejudice to the gener- ality of the foregoing: Each Tranche of Notes in respect of which the issue proceeds are accepted by the relevant Issuer in the United Kingdom (including Notes denominated in Sterling) shall be made in accordance with all applicable laws, regulations and guidelines (as amended from time to time) of United Kingdom authorities and relevant in the context of the issue of Notes, and the relevant Issuer shall submit (or procure the submission on its behalf of) such reports or information as may from time to time be required for compliance with such laws, regulations and guidelines. The relevant Issuer shall ensure that such Notes have the maturities and denominations as required by such laws, regulations and guidelines. Tranches of Notes denominated in Swiss Francs or carrying a Swiss Franc related element with a maturity of more than one year will be effected in compliance with the relevant regulations of the Swiss National Bank based on Arti- cle 7 of the Federal Law on Banks and Savings Banks of 1934, as amended, and Article 15 of the Federal Law on Stock Exchanges and Securities Trading of March 24, 1995 in connection with Article 2 (2) of the Ordinance of the Federal Banking Commission on Stock Exchanges and Securities Trading of June 25, 1997. Under such regulations, the relevant Dealer(s) or, in the case of a syndicated issue, the Lead Manager, must be a bank domiciled in Switzerland

(*) Schroder is a trademark of Schroders Holdings plc and is used under licence by Salomon Brothers International Limited.

5 (which includes branches or subsidiaries of a foreign bank located in Switzer- land) or a securities dealer licensed by the Swiss Federal Banking Commission as per the Federal Law on Stock Exchanges and Securities Trading of March 24, 1995 (the "Swiss Dealer"). The Swiss Dealer must report certain details of the relevant transaction to the Swiss National Bank no later than the relevant issue date for such a transaction. The relevant Issuer shall ensure that Notes denominated or payable in Yen ("Yen Notes") will only be issued in compliance with applicable Japanese laws, regulations, guidelines and policies. The relevant Issuer or its designated agent shall submit such reports or information as may be required from time to time by applicable laws, regulations and guidelines promulgated by Japa- nese authorities in the case of Yen Notes. Each Dealer agrees to provide any necessary information relating to Yen Notes to the relevant Issuer (which shall not include the names of clients) so that the relevant Issuer may make any required reports to the competent authority of Japan for itself or through its designated agent.

Programme Amount: Up to Euro 3,000,000,000 (or its equivalent in other currencies) outstanding at any time. The Issuers may increase the amount of the Programme in accordance with the terms of the Dealer Agreement from time to time.

Distribution: Notes may be distributed by way of public or private placements and, in each case, on a syndicated or non-syndicated basis. The method of distribution of each Tranche will be stated in the relevant Pricing Supplement.

Method of Issue: Notes will be issued on a continuous basis in Tranches (each a "Tranche"), each Tranche consisting of Notes which are identical in all respects. One or more Tranches, which are expressed to be consolidated and forming a single series and identical in all respects, but having different issue dates, interest commencement dates, issue prices and dates for first interest payments may form a Series ("Series") of Notes. Further Notes may be issued as Part of existing Series. The specific terms of each Tranche (which will be supplemented, where necessary, with supplemental terms and conditions) will be set forth in the applicable Pricing Supplement.

Issue Price: Notes may be issued at an issue price which is at par or at a discount to, or premium over, par, as stated in the relevant Pricing Supplement.

Specified Currencies: Subject to any applicable legal or regulatory restrictions, and requirements of relevant central banks, Notes may be issued in Euro or any other currency or currency unit agreed by the relevant Issuer and the relevant Dealer(s).

Denominations Notes will be issued in such denominations as may be agreed between the of Notes: relevant Issuer and the relevant Dealer(s) and as indicated in the applicable Pri- cing Supplement save that the minimum denomination of the Notes will be such as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the relevant Specified Currency.

Maturities: Such maturities as may be agreed between the relevant Issuer and the relevant Dealer(s) and as indicated in the applicable Pricing Supplement, subject to such minimum or maximum maturities as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the relevant Issuer or the relevant Specified Currency. Unless otherwise permitted by the current laws and regulations, Notes in respect of which the issue proceeds are to be accepted by the Issuer in the

6 United Kingdom will have a minimum denomination off 100.00 (or its equivalent in other currencies), unless such Notes may not be redeemed until, on or after the first anniversary of their date of issue.

Form of Notes: Notes will be issued in bearer form only. Notes of Bertelsmann or Bertelsmann N.V. to which U.S. Treasury Regulation §.1.163-5(c) (2) (i)(C) (the "TEFRA C Rules") applies ("TEFRA C Notes") will be represented either initially by a temporary global note in bearer form, without interest coupons, in an initial principal amount equal to the aggregate principal amount of such Notes ("Temporary Global Note") or permanently by a permanent global Note in bearer form, without interest coupons, in a principal amount equal to the aggregate principal amount of such Notes ("Permanent Global Note"). Any Temporary Global Note will be exchanged for either definitive Notes in bearer form ("Definitive Notes") or in part for Definitive Notes and in the other part for one or more collective Notes in bearer form ("Collec- tive Notes"). Notes to which U.S. Treasury Regulation 0.1.163-5(c) (2) (i)(D) (the "TEFRA D Rules") applies ("TEFRA D Notes") will always be represented initially by a Temporary Global Note which will be exchanged either for Notes represented by one or more Permanent Global Note(s) or Definitive Notes or in part for Definitive Notes and in the other part for one or more Collective Notes, in each case not earlier than 40 days and not later than 180 days after the completion of distribution of the Notes comprising the relevant Tranche upon certification of non U.S.-beneficial ownership in the form available from time to time at the specified office of the Fiscal Agent. Bertelsmann U. S. will not issue Notes having an initial maturity of less than one year. Notes to which neither the TEFRA C Rules nor the TEFRA D Rules apply, i.e. Notes of Bertelsmann or Bertelsmann N.V. with an initial maturity of one year or less, will always be represented by a Permanent Global Note. Permanent Global Notes will not be exchanged for Definitive Notes or Collec- tive Notes, except that Permanent Global Notes issued by Bertelsmann U. S. may be exchanged for Definitive Notes or in part for Definitive Notes and in the other part for one or more Collective Notes upon request of the Clearing System acting on instructions from any Holder. The Issuers will exchange Collective Notes upon request of the relevant Clear- ing System for remaining Definitive Notes.

Description of Notes: Notes may be either interest bearing at fixed or variable rates or non-interest bearing, with principal repayable at a fixed amount or by reference to a formula as may be agreed between the relevant Issuer and the relevant Dealer(s1 as specified in the applicable Pricing Supplement.

Fixed Rate Notes: Notes for which the interest rate is fixed will be payable on such basis as may be agreed between the relevant Issuer and the relevant Dealer(s), as specified in the applicable Pricing Supplement.

Floating Rate Notes: Notes for which the interest rate is variable will bear interest on such basis as may be agreed between the relevant Issuer and the relevant Dealer(s), as specified in the applicable Pricing Supplement. The Margin, if any, relating to such variable rate will be agreed between the relevant Issuer and the relevant Deal- er(s) for each Series of Floating Rate Notes. Interest periods for Floating Rate Notes will be one, two, three, six or twelve months or such other period(s) as may be agreed between the relevant Issuer and the relevant Dealer(s),as specified in the applicable Pricing Supplement.

7 Index Linked Notes: Payments of principal in respect of Index Linked Redemption Amount Notes or of interest in respect of Index Linked Interest Notes (together "Index Linked Notes") will be calculated by reference to such index and/or formula as the relevant Issuer and the relevant Dealer may agree as indicated in the applicable Pricing Supplement. Each issue of Index Linked Notes will be made in compliance with all applicable legal and/or regulatory requirements.

Other provisions in Floating Rate Notes and Index Linked Interest Notes may also have a maxi- relation to Floating mum interest rate, a minimum interest rate or both. Rate Notes and Interest on Floating Rate Notes and Index Linked Interest Notes in respect of Index Linked Interest each Interest Period, as selected prior to issue by the relevant Issuer and the Notes: relevant Dealer(s), will be payable on such Interest Payment Dates specified in, or determined pursuant to, the applicable Pricing Supplement and will be calculated as specified in the applicable Pricing Supplement.

Dual Currency Notes: Payments (whether in respect of principal or interest and whether at maturity or otherwise) in respect of Dual Currency Notes will be made in such currencies, and based on such rates of exchange, as the relevant Issuer and the relevant Dealer(s) may agree, as specified in the applicable Pricing Supplement.

Zero Coupon Notes: Zero Coupon Notes will be offered and sold either at a discount to their principal amount or on an accumulated basis, in each case without periodic payments of interest.

Other Notes: Notes may be of any other type, such as lnstalment Notes, Credit Linked Notes, Equity Linked Notes or may have any other structure, all upon terms provided in the applicable Pricing Supplement.

Redemption: The applicable Pricing Supplement will indicate either that the Notes cannot be redeemed prior to their stated maturity (except for taxation reasons or upon the occurrence of an Event of Default) or that such Notes will be redeemable at the option of the relevant Issuer and/or the Holders upon giving notice within the notice period (if any) specified in the applicable Pricing Supplement to the Holders or the relevant Issuer, as the case may be, on a date or dates specified prior to such stated maturity and at a price or prices and on such terms as indicated in the applicable Pricing Supplement. Unless otherwise permitted by the current laws and regulations, Notes in respect of which the issue proceeds are to be accepted by the Issuer in the United Kingdom will have a minimum denomination off 100.00 (or its equivalent in other currencies), unless such Notes may not be redeemed until, on or after the first anniversary of their date of issue.

Taxation: Principal and interest shall be payable without withholding or deduction for or on account of any present or future taxes, duties or governmental charges of any nature whatsoever imposed, levied or collected by or on behalf of the Fed- eral Republic of Germany, or by or on behalf of the country where the relevant Issuer is domiciled and, in the case of payments under the Guarantee, the Fed- eral Republic of Germany, or by or on behalf of any political subdivision or authority therein having power to tax (together "Withholding Taxes"), unless such withholding or deduction is required by law. In such event, the relevant Issuer will, subject to the exceptions set out in the Terms and Conditions, pay such additional amounts as shall be necessary in order that the net amounts received by the Holders of the Notes after such withholding or deduction shall equal the respective amounts of principal and interest which would otherwise have been receivable in respect of the Notes in the absence of such withholding or deduction.

8 Early Redemption Early redemption for taxation reasons will be permitted as provided in § 5 of for Taxation Reasons: the Terms and Conditions of the Notes.

Status of the Notes: The Notes will constitute unsecured and unsubordinated obligations of the relevant Issuer ranking pari passu among themselves and pari passu with all other unsecured and unsubordinated obligations of the relevant Issuer.

Guarantee: Notes issued by Bertelsmann N.V. and Bertelsmann U. S. will have the benefit of a Guarantee (the "Guarantee") given by Bertelsmann. The Guarantee constitutes an irrevocable, unsecured and unsubordinated obligation of the Guar- antor ranking pari passu with all other unsecured and unsubordinated obligations of the Guarantor.

Negative Pledge: The Notes and the Guarantee will contain a negative pledge, see § 2 of the Terms and Conditions of the Notes - "Status, Negative Pledge" and paragraph (4) of the Guarantee.

Events of Default: The Notes will provide for events of default entitling Holders to demand immediate redemption of the Notes, see 5 9 of the Terms and Conditions of the Notes - "Events of Default'.'

Cross Default: The Terms and Conditions of the Notes will provide for a cross default, see § 9 of the Terms and Conditions of the Notes - "Events of Default'.'

Rating: Notes issued pursuant to the Programme may be rated or unrated. Where an issue of Notes is rated, its rating will not necessarily be the same as the rating applicable to the Programme, if any. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. A suspension, reduction or withdrawal of the rating assigned to the Notes may adversely affect the market price of the Notes.

Listing: The Notes to be issued under the Programme during the period of twelve months from the date of this Information Memorandum are admitted on the Frankfurt Stock Exchange for trading with official quotation. Application has been made to list Notes to be issued under the Programme on the Luxembourg Stock Exchange. The Programme provides that Notes may be listed on other or further stock exchanges, as may be agreed between the relevant Issuer and the relevant Dealer(s) in relation to each issue. Notes may further be issued under the Pro- gramme which will not be listed on any stock exchange.

Governing Law: German law.

Selling Restrictions: There will be specific restrictions on the offer and sale of Notes and the distribution of offering materials in the Federal Republic of Germany, the United States of America, the United Kingdom, The Netherlands, Japan, and such other restrictions as may be required under applicable law in connection with the offering and sale of a particular Tranche of Notes.

Jurisdiction: The exclusive place of jurisdiction for all legal proceedings arising out of or in connection with the Notes shall be Frankfurt am Main for all Notes issued by Bertelsmann AG. The non-exclusive place of jurisdiction for all legal proceedings arising out of or in connection with the Notes shall be frankfurt am Main for all Notes issued by Bertelsmann N.V. and Bertelsmann U.S. The German Courts shall have exclusive jurisdiction over the annulment of lost or destroyed Notes.

9 Clearance and Notes will be accepted for clearing through one or more Clearing Systems as Settlement: specified in the applicable Pricing Supplement. These systems will include those operated by Clearstream Banking AG, Clearstream Banking, societe anonyme and Euroclear Bank S.A./N.V. as operator of the Euroclear system.

10 ISSUE PROCEDURES General

The relevant Issuer and the relevant Dealer(s) will agree on the terms and conditions applicable to each particular Tranche of Notes (the "Conditions"). The Conditions will be constituted by the Terms and Conditions of the Notes set forth below (the "Terms and Conditions") as completed, modified, supplemented or replaced by the provisions of the Pricing Supplement (the "Pricing Supplement"). The Pricing Supplement relating to each Tranche of Notes will specify:

- whether the Conditions are to be Long-Form Conditions or Integrated Conditions (each as described below); and

- whether the Conditions will be in the German language or the English language or both (and, if both, whether the German language version or the English language version is binding).

As to whether Long-Form Conditions or Integrated Conditions will apply, the relevant Issuer anticipates that: - Long-Form Conditions will generally be used for Notes sold on a non-syndicated basis and which are not publicly offered. - Integrated Conditions will generally be used for Notes sold and distributed on a syndicated basis. Integrated Conditions will be required where the Notes are to be publicly offered, in whole or in part, or are to be distributed, in whole or in part, to non-professional investors.

As to the binding language of the respective Conditions, the relevant Issuer anticipates that, in general, subject to any stock exchange or legal requirements applicable from time to time, and unless otherwise agreed between the relevant Issuer and the relevant Dealer:

- in the case of Notes sold and distributed on a syndicated basis, German will be the binding language. - in the case of Notes publicly offered, in whole or in part, in the federal Republic of Germany ("Ger- many"), or distributed, in whole or in part, to non-professional investors in Germany, German will be the binding language. If, in the event of such public offer or distribution to non-professional investors, however, English is chosen as the binding language, a German language translation of the Conditions will be available from the principal offices of the Fiscal Agent and Bertelsmann, as specified on the back cover of this Information Memorandum.

Long-Form Conditions

If the Pricing Supplement specifies that Long-Form Conditions are to apply to the Notes, the provisions of the applicable Pricing Supplement and the Terms and Conditions, taken together, shall constitute the Conditions. Such Conditions will be constituted as follows: - the blanks in the provisions of the Terms and Conditions which are applicable to the Notes will be deemed to be completed by the information contained in the Pricing Supplement as if such information was inserted in the blanks of such provisions;

- the Terms and Conditions will be modified, supplemented or replaced by the text of any provisions of the Pricing Supplement modifying, supplementing or replacing, in whole or in part, the provisions of the Terms and Conditions; - alternative or optional provisions of the Terms and Conditions as to which the corresponding provisions of the Pricing Supplement are not completed or are deleted will be deemed to be deleted from the Conditions; and - all instructions and explanatory notes set out in square brackets in the Terms and Conditions and any footnotes and explanatory text in the Pricing Supplement will be deemed to be deleted from the Conditions.

Where Long-Form Conditions apply, each global note representing the Notes of the relevant Series will have the Pricing Supplement and the Terms and Conditions attached.

11 Integrated Conditions

If the Pricing Supplement specifies that Integrated Conditions are to apply to the Notes, the Condi- tions in respect of such Notes will be constituted as follows: - all of the blanks in all applicable provisions of the Terms and Conditions will be completed according to the information contained in the Pricing Supplement and all non-applicable provisions of the Terms and Conditions (including the instructions and explanatory notes set out in square brackets) will be deleted; and/or - the Terms and Conditions will be otherwise modified, supplemented or replaced, in whole or in part, according to the information set forth in the Pricing Supplement.

Where Integrated Conditions apply, the Integrated Conditions alone will constitute the Conditions. The Integrated Conditions will be attached to each global note representing Notes of the relevant Ser- ies and will be endorsed on any Definitive Notes exchanged for any such global note.

Notes of Bertelsmann U. S.

Permanent Global Notes will not be exchangeable for Definitive Notes, except for Permanent Global Notes issued by Bertelsmann U.S., the Conditions of which will provide that the Permanent Global Note may be exchanged for Definitive Notes or in part for Definitive Notes and in the other part for one or more Collective Notes upon request of the Clearing System acting on instructions of any Holder. If Integrated Conditions apply, the Conditions applicable to Definitive Notes will be appended to the Conditions applicable to Notes represented by the Permanent Global Note, and will replace, as of the date of exchange, the Conditions applicable to the Notes represented by the Permanent Global Note. Similarly, if Long-Form Conditions apply, a further Pricing Supplement will be appended to the Permanent Global Note specifying the Conditions applicable to the Definitive Notes and, as of the date of exchange, Definitive Notes will be delivered which will have endorsed thereon either (i)such further Pricing Supplement and the Terms and Conditions in full, (ii) the Pricing Supplement and the Terms and Conditions in a form simplified by the deletion of non-applicable provisions, or (iii)Inte- grated Conditions, as the Issuer may determine.

12 TElL I - GRUNDBEDINGUNGEN

INHABERSCHULDVERSCHREIBUNGEN, FUR DIE ElNE VERBRIEFUNG DURCH DAUERGLOBALURKUNDEN VORGESEHEN IST

Die Emissionsbedingungen (die ,,Emissionsbedingungen") sind nachfolgend in zwei Teilen aufgefuhrt:

TElL I enthalt die Grundbedingungen (die ,, Grundbedingungen"I, die die Emis- sionsbedingungen urn fassen, die Anwendung finden auf Serien von Schuldver- schreibungen, die durch auf den lnhaber lautende Globalurkunden verbrieft sind.

TElL II enthalt einen Zusatz (der ,,Zusatz") zu den Grundbedingungen, der diejenigen Bestimmungen enthalt, die Anwendung finden im Fall von Schuldverschreibun- gen, die durch auf den lnhaber lautende Einzelurkunden verbrieft sind.

Die Grundbedingungen und der dazugehorige Zusatz bilden zusammen die Emis- sionsbedingungen.

TERMS AND CONDITIONS OF THE NOTES GERMAN LANGUAGE VERSION (DEUTSCHE FASSUNG DER EMISSIONSBEDINGUNGEN)

Diese Serie von Schuldverschreibungen wird gemal3 einem Fiscal Agency Agree- ment vom 6. Juni 2002 (das ,,Agency Agreement") zwischen Bertelsmann AG (,,Bertelsmann"), Bertelsmann Capital Corporation N.V. (,,Bertelsmann N.V."), Ber- telsmann U. S. Finance, Inc. (,,Bertelsmann U. S.") (einzeln jeweils die ,,Emittentin" und tusammen die ,,Emittentinnen") und der Deutsche Bank Aktiengesellschaft als Fiscal Agent (der ,,Fiscal Agent", wobei dieser Begriff jeden Nachfolger des Fiscal Agent gemaR dem Agency Agreement einschlieat) und den anderen darin genannten Parteien begeben. Kopien des Agency Agreement konnen kostenlos bei der bezeichneten Geschaftsstelle des Fiscal Agent und bei den bezeichneten Geschafts- stellen einer jeden Zahlstelle sowie am Sit2 einer jeden Emittentin betogen werden. [Im Falle von Schuldverschreibungen, die von Bertelsmann N. V. oder Bertelsmann U.S. begeben werden, einfugen: Die Schuldverschreibungen sind mit einer unbe- dingten und unwiderruflichen Garantie der Bertelsmann AG (die ,,Garantin") versehen.]

Im Falle von [Die Bestimmungen dieser Emissionsbedingungen gelten fur diese Schuldver- nicht-konsolidierten schreibungen so, wie sie durch die Angaben des beigefugten Konditionenblattes Bedingungen (das ,,Konditionenblatt") vervollstandigt, geandert, erganzt oder gant oder teilweise einfugen: ersetzt werden. Die Leerstellen in den auf die Schuldverschreibungen anwendbaren Bestimmungen dieser Emissionsbedingungen gelten als durch die im Konditionen- blatt enthaltenen Angaben ausgefullt, als ob die Leerstellen in den betreffenden Bestimmungen durch diese Angaben ausgefullt waren; sofern das Konditionenblatt die Anderung, Erganzung oder (vollstandige oder teilweise) Ersettung bestimmter Emissionsbedingungen vorsieht, gelten die betreffenden Bestimmungen der Emis- sionsbedingungen als entsprechend geandert, erganzt oder ersetzt; alternative oder wahlbare Bestimmungen dieser Emissionsbedingungen, deren Entsprechungen im Konditionenblatt nicht ausgefullt oder die gestrichen sind, gelten als aus diesen Emissionsbedingungen gestrichen: samtliche auf die Schuldverschreibungen nicht anwendbaren Bestimmungen dieser Emissionsbedingungen (einschliel3lich der Anweisungen, Anmerkungen und der Texte in eckigen Klammern) gelten als aus diesen Emissionsbedingungen gestrichen, so dal3 die Bestimmungen des Konditio- nenblattes Geltung erhalten. Kopien des Konditionenblattes sind kostenlos bei der

13 bezeichneten Geschaftsstelle des Fiscal Agent und bei den bezeichneten Geschafts- stellen einer jeden Zahlstelle sowie bei der Hauptgeschaftsstelle der Emittentin erhaltlich; bei nicht an einer Borse notierten Schuldverschreibungen sind Kopien des betreffenden Konditionenblattes allerdings ausschliel3lich fur die Glaubiger solcher Schuldverschreibungen erhaltlich.]

EMISSIONSBEDINGUNGENFUR INHABERSCHULDVERSCHREIBUNGEN

§I WAHRUNG, STUCKELUNG, FORM, DEFINITIONEN

(1) Wahrung; Stuckelung. Diese Serie der Schuldverschreibungen (die ,,Schuldver- schreibungen") der [Emittentin einfugen] (die ,,Emittentin") wird in [festgelegte Wahrung einfiigenl (die ,,festgelegte Wahrung") im Gesamtnennbetrag von [Gesamtnennbetrag einfugen] (in Worten: [Gesamtnennbetrag in Worten einfugen]) in einer Stuckelung von [festgelegte Stuckelung einfugen] (die ,,festgelegte Stuckelung") begeben.

(2) Form. Die Schuldverschreibungen lauten auf den Inhaber.

Im Falle von [ (3) Dauerglobalurkunde. Die Sch uldversch rei bungen si nd durch ei ne Dauerg lo bal- Schuldverschrel- bungen, die urkunde (die ,,Dauerglobalurkunde") ohne Zinsscheine verbrieft. Die Dauerglobal- durch eine urkunde tragt die eigenhandigen Unterschriften zweier ordnungsgemai3 bevoll- Dauerglobal- urkunde verbrieft machtigter Vertreter der Emittentin und ist von dem Fiscal Agent oder in dessen sind, einfugen: Namen mit einer Kontrollunterschrift versehen. Einzelurkunden und Zinsscheine werden nicht ausgegeben.]

Im Falle von [(3) Vorlaufige Globalurkunde - Austausch. Schuldverschrei- bungen, die snfanglich durch (a) Die Schuldverschreibungen sind anfanglich durch eine vorlaufige Global- eine vorltiufige Globalurltunde urkunde (die ,,vorlaufige Globalurkunde") ohne Zinsscheine verbrieft. Die vor- verbrinfl sind. einfugen: Iaufige Globalurkunde wird gegen Schuldverschreibungen in den festgelegten Stuckelungen, die durch eine Dauerglobalurkunde (die ,,Dauerglobalurkunde") ohne Zinsscheine verbrieft sind, ausgetauscht. Die vorlaufige Globalurkunde und die Dauerglobalurkunde tragen jeweils die eigenhandigen Unterschriften zweier ordnungsgemal3 bevollmachtigter Vertreter der Emittentin und sind jeweils von dem Fiscal Agent oder in dessen Namen mit einer Kontrollunter- schrift versehen. Einzelurkunden und Zinsscheine werden nicht ausgegeben.

(b) Die vorlaufige Globalurkunde wird an einem Tag (der ,,Austauschtag") gegen die Dauerglobalurkunde ausgetauscht, der nicht mehr als 180 Tage nach dem Tag der Begebung der durch die vorlaufige Globalurkunde verbrieften Schuld- verschreibungen liegt. Der Austauschtag darf nicht weniger als 40 Tage nach dem Tag der Begebung liegen. Ein solcher Austausch darf nur nach Vorlage von Bescheinigungen erfolgen, wonach der oder die wirtschaftlichen Eigentumer der durch die vorlaufige Globalurkunde verbrieften Schuldverschreibungen keine U. S.-Personen sind (ausgenommen bestimmte Finanzinstitute oder bestimmte Personen, die Schuldverschreibungen uber solche Finanzinstitute halten). Zinszahlungen auf durch eine vorlaufige Globalurkunde verbriefte Schuldverschreibungen erfolgen erst nach Vorlage solcher Bescheinigungen. Eine gesonderte Bescheinigung ist fur jede solche Zinszahlung erforderlich. Jede Bescheinigung, die am oder nach dem 40. Tag nach dem Tag der Ausgabe der durch die vorlaufige Globalurkunde verbrieften Schuldverschreibungen eingeht, wird als ein Ersuchen behandelt werden, diese vorlaufige Globalurkunde gemai3 Absatz (b) dieses § 1 Absatz (3) auszutauschen. Wertpapiere, die im Aus- tausch fur die vorlaufige Globalurkunde geliefert werden, durfen nur aul3erhalb der Vereinigten Staaten (wie in 5 6 Absatz 2 definiert) geliefert werden.]

14 Im Fall von [(c) Aufgrund einer 90 Tage im voraus erteilten schriftlichen Mitteilung (wobei die Schuldverschrei. bungen, die von Mitteilungsfrist fruhestens 30 Tage nach dem Austauschtag ablauft) des Clearing Bertelsmann Systems, das auf eine entsprechende Weisung eines Glaubigers handelt, werden U.S. begeben wetden, einfu- Einzelurkunden und gegebenenfalls dazugehorige Ruckzahlungsscheine, Zins- gen: scheine und Talons [sofern Sammeiurkunden ausgegeben werden sollen, einfugen: sowie Sammelurkunden und gegebenenfalls Sammelrinsscheine] gegen diese Dau- erglobalurkunde in vollem Umfang ausgetauscht. Eine im Austausch fur diese Dau- erglobalurkunde gelieferte Einzelurkunde [oder Sammelurkundel ist aul3erhalb der Vereinigten Staaten (wie in § 6 Absatz 2 definiert) auszuliefern. Ab dem Tag eines solchen Austauschs gelten [im Fall von konsolidierten Bedingungen einfugen: anstelle dieser Bedingungen die im Anhang niedergelegten Bedingungen fur Einzelurkunden.] [im Fall von nicht-konsolidierten Bedingungen einfugen: die Emis- sionsbedingungen fur Einzelurkunden, die in dem diesen Emissionsbedingungen beigefugten Konditionenblatt fur Einzelurkunden bestimmt sind.]]

(4) Clearing System. Die Dauerglobalurkunde wird solange von einem oder im Namen eines Clearing Systems verwahrt, bis samtliche Verbindlichkeiten der Emit- tentin aus den Schuldverschreibungen erfullt sind. ,,Clearing System” bedeutet [bei mehr als einem Clearing System einfugen: jeweils] folgendes: [Clearstream Banking AGI [Clearstream Banking, societe anonyme] [Euroclear Bank S.A./N.V. als Betrei- berin des Euroclear Systems (,,Euroclear”)] [,I [und] [anderes Clearing System angebenl sowie jeder Funktionsnachfolger.

(5) Glaubiger von Schuldverschreibungen. ,,Glaubiger“ bedeutet jeder lnhaber eines Miteigentumsanteils oder anderen vergleichbaren Rechts an den Schuldver- schrei bungen.

62 STATUS, NEGATIVVERPFLICHTUNG [im Faile von Schuldverschreibungen, die von Bertelsmann N. V. oder Bertelsmann U. S. begeben werden, einfugen: UND GARANTIE]

(1) Status. Die Schuldverschreibungen begrunden nicht besicherte und nicht nachrangige Verbindlichkeiten der Emittentin, die untereinander und mit allen anderen nicht besicherten und nicht nachrangigen Verbindlichkeiten der Emittentin gleich- rangig sind, soweit diesen Verbindlichkeiten nicht durch zwingende gesetzliche Bestimmungen ein Vorrang eingeraumt wird.

(2) Negativverpflichtung. Die Emittentin verpflichtet sich solange eine Schuldver- schreibung noch aussteht (aber nur bis zu dem Zeitpunkt, in dem alle Betrage von Kapital und Zinsen dem Fiscal Agent zur Verfugung gestellt worden sind), weder ihr gesamtes noch einen Teil ihres gegenwartigen oder rukunftigen Vermogens mit Pfandrechten, Rechten aus Abtretung oder Ubertragung, Hypotheken oder Grund- pfandrechten oder sonstigen Sicherungsrechten zur Besicherung einer gegenwartigen oder zukunftigen Kapitalmarktverbindlichkeit (wie nachstehend definiert), die von der Emittentin (oder einer anderen Person) eingegangen oder garantiert ist, zu belasten oder solche Rechte zu diesem Zweck bestehen zu lassen, ohne gleichzeitig die Glaubiger an derselben Sicherheit in gleicher Weise und anteilmaaig teilnehmen zu lassen. Diese Verpflichtung findet jedoch keine Anwendung in Bezug auf Sicherungsrechte, die auf einem Vermogensgegenstand tum Zeitpunkt des Erwerbs durch die Emittentin lasten. Fur die Zwecke dieser Bedingungen bezeichnet ,,Kapi-

t a Ima rkt ve r b in d Ii c h ke it ” j ed e Verb in d Ii ch k ei t h in s ich t Ii c h de r R u ckza h Iu ng g e Ii e he- ner Geldbetrage, die durch Schuldscheine oder durch Schuldverschreibungen oder sonstige Wertpapiere, die an einer Borse oder an einem anderen anerkannten Wert- papiermarkt notiert oder gehandelt werden oder werden konnen, verbrieft, verkorpert oder dokumentiert sind.

15 Im Fall von [(3)Garantie. Schuldverschrei- bungen, die von Bertelsmann (a) Bertelsmann AG (die ,,Garantin") hat eine unbedingte und unwiderrufliche N.V. oder Ber- telsmsnn U.S. Garantie (die ,,Garantie") fur die punktliche Zahlung von Kapital und Zinsen begeben werden, einfugen: und sonstiger auf die Schuldverschreibungen zahlbarer Betrage ubernommen. Daruber hinaus hat sich die Garantin in dieser Garantie verpflichtet (die ,,Vet-- pflichtungserklarung") solange eine Schuldverschreibung noch aussteht (aber nur bis zu dem Zeitpunkt, in dem alle Betrage von Kapital und Zinsen dem Fiscal Agent zur Verfugung gestellt worden sind), weder ihr gesamtes noch einen Teil ihres gegenwartigen oder zukunftigen Vermogens mit Pfandrechten, Rechten aus Abtretung oder Ubertragung, Hypotheken oder Grundpfandrechten oder sonstigen Sicherungsrechten zur Besicherung einer gegenwartigen oder zukunftigen Kapitalmarktverbindlichkeit (wie vorstehend definiert), die von der Garan- tin (oder einer anderen Person) eingegangen oder garantiert ist, zu belasten oder solche Rechte tu diesem Zweck bestehen zu lassen, ohne gleichzeitig die Glaubiger an derselben Sicherheit in gleicher Weise und anteilmai3ig teilnehmen zu lassen. Diese Verpflichtung findet jedoch keine Anwendung in Bezug auf Sicherungsrechte, die auf einem Vermogensgegenstand zum Zeitpunkt des Erwerbs durch die Garantin lasten. Diese Garantie einschliealich der Verpflich- tungserklarung stellt einen Vertrag zugunsten eines jeden Glaubigers als begun- stigtem Dritten gem813 § 328 Absatz 1 BGB dar, welcher das Recht eines jeden Glaubigers begrundet, Erfullung aus der Garantie unmittelbar von der Garantin zu verlangen und die Garantie unmittelbar gegenuber der Garantin durchzuset- Zen. Kopien der Garantie konnen kostenlos bei der Hauptniederlassung der Garantin und bei der beteichneten Geschaftsstelle des Fiscal Agent gema13 § 6 bezogen werden.]

03 ZINSEN

Im Falle von fest [(I) Zinssatz und Zinszahlungstage. Die Schuldverschreibungen werden bezogen verzinslichen Schuldverschrel- auf ihren Nennbetrag verzinst, und zwar vom [Verzinsungsbeginn einfugenl (ein- bungen einfii- schliealich) bis zum Falligkeitstag (wie in § 5 Absatz (1) definiert) (ausschliealich) gen: mit jahrlich [Zinssatz einfugenl %. Die Zinsen sind nachtraglich am [Festrinstet- min(e) einfugenl eines jeden Jahres zahlbar (jeweils ein ,,Zinszahlungstag"). Die erste Zinszahlung erfolgt am [ersten Zinszahlungstag einfugen] [sofern der erste Zinszahlungstag nicht der erste Jahrestag des Vertinsungsbeginns ist, einfugen: und belauft sich auf [die anfanglichen Bruchteilzinsbetrage je festgelegte Stucke- lung einfugenl.] [Sofern der Falligkeitstag kein Festrinstermin ist, einfugen: Die Zin- sen fur den Zeitraum vom [den lettten dem Falligkeitstag vorausgehenden Fest- zinstermin einfugen] (einschI ieal ich) bis zu m FBI Iig keitstag (ausschlie131 ich) be- laufen sich auf [die abschlieBenden Bruchteilzinsbetrage je festgelegte Stuckelung einfugen].] [Falls die festgelegte Wahrung Euro ist und falls Actual/Actual (ISMA) anwendbar ist, einfugen: Die Anzahl der Zinszahlungstage im Kalenderjahr (jeweils ein ,,Feststellungstermin") betragt [Anzahl der regularen Zinszahlungstage im Kalenderjahr einfugenl.]

(2) Auflaufende Zinsen. Falls die Emittentin die Schuldverschreibungen bei Falligkeit nicht einlost, endet die Verzinsung der Schuldverschreibungen nicht am Tag der Fal- ligkeit, sondern erst mit der tatsachlichen Ruckzahlung der Schuldverschreibungen.

(3) Berechnung der Zinsen fur Teile von Zeitraumen. Sofern Zinsen fur einen Zeit- raum von weniger als einem Jahr tu berechnen sind, erfolgt die Berechnung auf der Grundlage des Zinstagequotienten (wie nachstehend definiert).]

[( 1) Zinszahlungstage. (a) Die Schuldverschreibungen werden bezogen auf ihren Nennbetrag ab dem [Verzinsungsbeginn einfugen] (der ,,Verzinsungsbeginn") (ein- schliel3lich) bis zum ersten Zinstahlungstag (ausschlie13lich) und danach von jedem

16 Im Falle von Zinszahlungstag (einschliel3lich) bis zum nachstfolgenden Zinszahlungstag (aus- variabel verzinslichen Schuld- schliei3lich) verzinst. Zinsen auf die Schuldverschreibungen sind an jedem Zinstah- verschrelbungen einfugen: lungstag rahlbar.

(b) ,,Zinstahlungstag” bedeutet

[im Falle von festgelegten Zinszahlungstagen einfugen: jeder [festgelegte Zinstah- lungstage einfugen].]

[im Falle von festgelegten Zinsperioden einfugen: (soweit diese Emissionsbedin- gungen keine abweichenden Bestimmungen vorsehen) jeweils der Tag, der [Zahl einfugenl [Wochenl [Monatel [andere festgelegte Zeitraume einfugenl nach dem vorhergehenden Zinszahlungstag, oder im Fall des ersten Zinszahlungstages, nach dem Verzinsungsbeginn liegt.1

(c) Fallt ein Zinszahlungstag auf einen Tag, der kein Geschaftstag (wie nachstehend definiert) ist, so wird der Zinszahlungstag

[bei Anwendung der modifizierten folgender Geschaftstag-Konvention einfugen: auf den nachstfolgenden Geschaftstag verschoben, es sei denn, jener wurde dadurch in den nachsten Kalendermonat fallen; in diesem Fall wird der Zinszah- lungstag auf den unmittelbar vorhergehenden Geschaftstag vorgezogen.]

[bei Anwendung der FRN-Konvention einfugen: auf den nachstfolgenden Ge- schaftstag verschoben, es sei denn, jener wurde dadurch in den nachsten Kalender- monat fallen; in diesem Fall (i)wird der Zinszahlungstag auf den unmittelbar vorhergehenden Geschaftstag vorgezogen und (ii) ist jeder nachfolgende Zinszahlungstag der jeweils letzte Geschaftstag des Monats, der [Zahl einfugenl Monatel [andere festgelegte Zeitraume einfugen] nach dem vorhergehenden anwendbaren Zinszah- lungstag liegt.]

[bei Anwendung der folgender Geschaftstag-Konvention einfugen: auf den nachfolgenden Geschaftstag verschoben.]

[bei Anwendung der vorhergegangener Geschaftstag-Konvention einfugen: auf den unmittelbar vorhergehenden Geschaftstag vorgezogen.]

(d) In diesem § 3 bezeichnet ,,Geschaftstag” [falls die festgelegte Wahrung nicht Euro ist, einfugen: einen Tag (auaer einem Samstag oder Sonntag), an dem Geschaftsbanken allgemein fur Geschafte in [samtliche relevanten Finanzzen- tren einfugen] geoffnet sind und Devisenmarkte Zahlungen in [samtliche relevanten Finanzzentren einfugen] abwickeln] [falls die festgelegte Wahnrng Euro ist, einfugen: einen Tag an dem das Clearing System sowie alle betroffenen Bereiche des Trans-European Automated Real-time Gross Settlement Express Transfer System (JARGET”) betriebsbereit sind, um die betreffende Zahlung abzuwickel nl.

(2) Zinssatz. [Bei Bildschirmfeststellung einfugen: Der Zinssatz (der ,,Zinssatz”) fur jede Zinsperiode (wie nachstehend definiert) ist, sofern nachstehend nichts Abwei- chendes bestimmt wird, entweder:

(a) der Angebotssatt (wenn nur ein Angebotssatz auf der Bildschirmseite (wie nachstehend definiert) angezeigt ist); oder

(b) das arithmetische Mittel (falls erforderlich, auf- oder abgerundet auf das nachste ein [falls der Referenzsatz EURIBOR ist, einfugen: Tausendstel Prozent, wobei 0,00051 [falls der Referenzsatz nicht EURIBOR ist, einfugen: Hundemausendstel Prozent, wobei 0,0000051 aufgerundet wird) der Angebotssatze,

17 (ausgedruckt als Prozentsatt per annum) fur Einlagen in der festgelegten Wahrung fur die jeweilige Zinsperiode, der bzw. die auf der Bildschirmseite am Zinsfest- legungstag (wie nachstehend definiert) gegen 11.00 Uhr ([Londoner] [Brusseler] Ortszeit) angezeigt werden [im Falle einer Marge einfugen: [zuzuglich] [abzuglich] der Marge (wie nachstehend definiert)], wobei alle Festlegungen durch die Berech- n u ngsstel Ie erfo Igen.

,, Z in s p er i ode " bezei ch net j ewe i I s den Ze it ra u m vo m Ve rz i ns u ng s be g in n (ei n sch Ii e fi - lich) bis zum ersten Zinszahlungstag (ausschliel3lich) bzw. von jedem Zinszahlungs- tag (einschliel3lich) bis zum jeweils darauffolgenden Zinszahlungstag (ausschliel3- lich).

,,Zinsfestlegungstag" bezeichnet den [falls die Festlegung am ersten Tag der Zins- periode erfolgt, einfugen: [ersten] [Londoner] [TARGET] [rutreffende andere Berug- nahmen einfugenl Geschaftstagl [falls die Festlegung nicht am ersten Tag der Zins- periode erfogt, einfugen: [zweiten] [zutreffende andere Zahl von Tagen einfugenl [Londoner] [TARGET] [zutreffende andere Bezugnahmen einfugenl Geschaftstag vor Beginn] der jeweiligen Zinsperiode. [,,[Londoner] [zutreffenden anderen Ort einfugen] Geschaftstag" bezeichnet einen Tag (aufier einem Samstag oder Sonntag), an dem Geschaftsbanken in [London] [zutreffenden anderen Ort einfugenl fur Geschafte (einschliefilich Devisen- und Sortengeschafte) geoffnet sind.] [JARGET- Geschaftstag" bezeichnet einen Tag, an dem TARGET (Trans-European Automated Real-time Gross Settlement Express Transfer System) betriebsbereit ist.]

[Im Falle einer Marge einfugen: Die ,,Marge" betragt [ I % per annum.]

,, Bildschirmseite" bedeutet [Bildschirmseite einfugenl.

Wenn im vorstehenden Fall (b) auf der mal3geblichen Bildschirmseite funf oder mehr Angebotssatze angezeigt werden, werden der hochste (falls mehr als ein solcher Hochstsatz angezeigt wird, nur einer dieser Satze) und der niedrigste Ange- botssatr (falls mehr als ein solcher Niedrigstsatz angezeigt wird, nur einer dieser Satze) von der Berechnungsstelle fur die Bestimmung des arithmetischen Mittels der Angebotssatze (das wie vorstehend beschrieben auf- oder abgerundet wird) aul3er acht gelassen; diese Regel gilt entsprechend fur diesen gesamten Absatz 2.

Sollte die mafigebliche Bildschirmseite nicht zur Verfugung stehen oder wird im Fall von oben (a) kein Angebotssatz angezeigt oder werden im Fall von oben (b) weniger als drei Angebotssatze angezeigt (in jedem dieser Falle zu der genannten Zeit), wird die Berechnungsstelle von den Referenzbanken (wie nachstehend definiert) deren jeweilige Angebotssatze (jeweils als Prozentsatz per annum ausgedruckt) fur Ein- lagen in der festgelegten Wahrung fur die betreffende Zinsperiode gegenuber fuhrenden Banken im [Londoner] [zutreffenden anderen Ort einfugenl Interbanken- Markt [in der Euro-Zone] um ca. 11.00 Uhr ([Brusseler] [Londoner] Ortszeit) am Zins- festlegungstag anfordern. Falls zwei oder mehr Referenzbanken der Berechnungs- stelle solche Angebotssatze nennen, ist der Zinssatz fur die betreffende Zinsperiode das arithmetische Mittel (falls erforderlich, auf- oder abgerundet auf das nachste ein [falls der Referenzsatr EURIBOR ist, einfugen: Tausendstel Prozent, wobei 0,00051 [falls der Referenzsatz nicht EURIBOR ist, einfugen: Hunderttausendstel Prozent, wobei 0,0000051 aufgerundet wird) dieser Angebotssatze [im Falle einer Marge einfugen: [zuzuglich] [abzuglich] der Margel, wobei alle Festlegungen durch die Berechnungsstelle erfolgen.

Falls an einem Zinsfestlegungstag nut eine oder keine der Referenzbanken der Berechnungsstelle solche im vorstehenden Absatz beschriebenen Angebotssatze nennt, ist der Zinssatz fur die betreffende Zinsperiode der Satz per annum, den die Berechnungsstelle als das arithmetische Mittel (falls erforderlich, auf- oder abgerundet auf das nachste ein [falls der Referenzsatr EURIBOR ist, einfugen: Tausendstel Prozent, wobei 0,00051 [falls der Referenzsatz nicht EURIBOR ist, einfugen: Hundert-

18 tausendstel Prozent, wobei 0,0000051 aufgerundet wird) der Angebotssatze ermittelt, die die Referenzbanken brw. zwei oder mehrere von ihnen der Berechnungs- stelle auf deren Anfrage als den jeweiligen Satz nennen, zu dem ihnen um ca. 11.00 Uhr ([Brusselerl [Londoner] Ortszeit) an dem betreffenden Zinsfestlegungstag Ein- lagen in der festgelegten Wahrung fur die betreffende Zinsperiode von fuhrenden Banken im [Londoner] Interbanken-Markt [in der Euro-Zone] angeboten werden [im Falle einer Marge einfugen: [zuzuglich] [abzuglich] der Marge]; falls weniger als zwei der Referenzbanken der Berechnungsstelle solche Angebotssatze nennen, sol1 der Zinssatz fur die betreffende Zinsperiode der Angebotssatr fur Einlagen in der festgelegten Wahrung fur die betreffende Zinsperiode oder das arithmetische Mittel (gerundet wie oben beschrieben) der Angebotssatze fur Einlagen in der festgelegten Wahrung fur die betreffende Zinsperiode sein, den bzw. die eine oder mehrere Banken (die nach Ansicht der Berechnungsstelle und der Emittentin fur diesen Zweck geeignet sind) der Berechnungsstelle als Satze bekannt geben, die sie an dem betreffenden Zinsfestlegungstag gegenuber fuhrenden Banken im [Londoner] Interbanken-Markt [in der Euro-Zone] nennen (bzw. den diese Banken gegenuber der Berechnungsstelle nennen) [im Falle einer Marge einfugen: [zuzuglichl [abzuglich] der Margel.

Fur den Fall, dal3 der Zinssatz nicht gemal3 den vorstehenden Bestimmungen dieses Absatzes ermittelt werden kann, ist der Zinssatz der Angebotssatz oder das arithmetische Mittel der Angebotssatze auf der Bildschirmseite, wie vorstehend beschrieben, an dem letzten Tag vor dem Zinsfestlegungstag, an dem diese Ange- botssatze angezeigt wurden [im Falle einer Marge einfugen: [zuzuglichl [abzuglichl der Marge (wobei jedoch, falls fur die relevante Zinsperiode eine andere Marge als fur die unmittelbar vorhergehende Zinsperiode gilt, die relevante Marge an die Stelle der Marge fur die vorhergehende Zinsperiode tritt).]

,,Referembanken” beteichnet [falls im Konditionenblatt keine anderen Referenz- banken bestimmt werden, einfugen: im vorstehenden Fall (a) diejenigen Niederlas- sungen [im Fall von EURIBOR einfugen: von mindestens funf] derjenigen Banken, deren Angebotssatze tur Ermittlung des mafigeblichen Angebotssatzes zu dem Zeitpunkt benutzt wurden, als solch ein Angebot letztmals auf der maageblichen Bildschirmseite angezeigt wurde, und im vorstehenden Fall (b) diejenigen Banken, deren Angebotssatze zuletzt zu dem Zeitpunkt auf der maageblichen Bildschirm- seite angezeigt wurden, als nicht weniger als drei solcher Angebotssatze angezeigt wurden.] [Falls im Konditionenblatt andere Referenzbanken bestimmt werden, sind sie hier eintufugenl.

[Im Fall des lnterbankenmarktes in der Euro-Zone einfugen: ,,Euro-Zone” bezeichnet das Gebiet derjenigen Mitgliedstaaten der Europaischen Union, die gemai3 dem Vertrag uber die Grundung der Europaischen Gemeinschaft (unterzeichnet in Rom am 25. Marz 1957), geandert durch den Vertrag uber die Europaische Union (unterzeichnet in Maastricht am 7. Februar 1992) und den Amsterdamer Vertrag vom 2. Oktober 1997, in seiner jeweiligen Fassung, eine einheitliche Wahrung eigefuhrt haben oder jeweils eingefuhrt haben werden.]

[Wenn der Referenzsatz ein anderer als EURIBOR oder LlBOR ist, sind die entsprechenden Einzelheiten anstelle der Bestimmungen dieses Absatzes 2 einzufugenl

[Sofern ISDA-Feststellung gelten soll, sind die entsprechenden Bestimmungen einzufugen und die von der International Swap and Derivatives Association, Inc. (,,ISDA”) veroffentlichten 2000 ISDA-Definitionen diesen Emissionsbedingungen als Anlage beizufugen]

[Sofern eine andere Methode der Feststellunghdexierung anwendbar ist, sind die entsprechenden Einrelheiten anstelle der Bestimmungen dieses Absatzes 2 einzufugenl

19 [Fails ein Mindest- undloder Hochstzinssatz gilt, einfugen:

(3)[Mindest-I [undl [Hochst-I Zinssatz.

[Falls ein Mindestzinssatz gilt einfugen: Wenn der gemai3 den obigen Bestimmun- gen fur eine Zinsperiode ermittelte Zinssatz niedriger ist als [Mindestzinssatz einfugenl, so ist der Zinssatz fur diese Zinsperiode [Mindestzinssatz einfugen].]

[Falls ein Hochstzinssatz gilt: Wenn der gemal3 den obigen Bestimmungen fur eine Zinsperiode ermittelte Zinssatz hoher ist als [Hochstzinssatz einfugenl, so ist der Zinssatz fur diese Zinsperiode [Hochstzinssatz einfugenl.

[(4)] Zinsbetrag. Die Berechnungsstelle wird zu oder baldmoglichst nach jedem Zeit- punkt, an dem der Zinssatz zu bestimmen ist, den auf die Schuldverschreibungen zahlbaren Zinsbetrag in bezug auf jede festgelegte Stuckelung (der ,,Zinsbetrag") fur die entsprechende Zinsperiode berechnen. Der Zinsbetrag wird ermittelt, indem der Zinssatz und der Zinstagequotient (wie nachstehend definiert) auf jede festgelegte Stuckelung angewendet werden, wobei der resultierende Betrag auf die kleinste Einheit der festgelegten Wahrung auf- oder abgerundet wird, wobei 0,5 solcher Einheiten aufgerundet werden.

[(5)]Mitteilung von Zinssatz und Zinsbetrag. Die Berechnungsstelle wird veranlas- sen, dai3 der Zinssatz, der Zinsbetrag fur die jeweilige Zinsperiode, die jeweilige Zinsperiode und der betreffende Zinszahlungstag der Emittentin [im Falle von Schuldverschreibungen, die von Bertelsmann N. V. oder Bertelsmann U. S. begeben werden, einfugen: und der Garantin] sowie den Glaubigern gemai3 § 12 baldmoglichst, aber keinesfalls spater als am vierten auf die Berechnung jeweils folgenden [Londoner] [TARGET] [zutreffende andere Bezugnahme einfugenl Geschaftstag (wie in § 3 Absatz 2 definiert) sowie jeder Borse, an der die betreffenden Schuldver- schreibungen zu diesem Zeitpunkt notiert sind und deren Regeln eine Mitteilung an die Borse verlangen, baldmoglichst nach der Bestimmung, aber keinesfalls spater als am ersten Tag der jeweiligen Zinsperiode mitgeteilt werden. Im Fall einer Ver- Iangerung oder Verkurzung der Zinsperiode konnen der mitgeteilte Zinsbetrag und Zinszahlungstag ohne Vorankundigung nachtraglich geandert (oder andere geeignete Anpassungsregelungen getroffen) werden. Jede solche Anderung wird umgehend allen Borsen, an denen die Schuldverschreibungen zu diesem Zeitpunkt notiert sind, sowie den Glaubigern gemal3 5 12 mitgeteilt.

[(6)1 Verbindlichkeit der Festsetzungen. Alle Bescheinigungen, Mitteilungen, Gut- achten, Festsetzungen, Berechnungen, Quotierungen und Entscheidungen, die von der Berechnungsstelle fur die Zwecke dieses § 3 gemacht, abgegeben, getroffen oder eingeholt werden, sind (sofern nicht ein offensichtlicher lrrtum vorliegt) fur die Emittentin, den Fiscal Agent, die Zahlstellen und die Glaubiger bindend.

[( 7)] Auflaufende Zinsen. Sol Ite die Em ittenti n die Sch u ldverschrei bu ngen bei Fa1 I ig- keit nicht einlosen, endet die Verzinsung der Schuldverschreibungen nicht am Fal- ligkeitstag, sondern erst mit der tatsachlichen Ruckzahlung der Schuldverschreibun- gen. Der jeweils geltende Zinssatz wird gemal3 diesem § 3 bestimmt.]

Im Falle von [(I) Keine periodischen Zinstahlungen. Es erfolgen wahrend der Laufzeit keine peri- abgezlnsten Nullkupon- odischen Zinszahlungen auf die Schuldverschreibungen. Schuldver- schreibungen I einfugen: (2) Auflaufende Zinsen. Sollte die Emittentin die Schuldverschreibungen bei Fallig- keit nicht einlosen, fallen auf den Nennbetrag der Schuldverschreibungen ab dem Falligkeitstag bis zum Tag der tatsachlichen Rucktahlung Zinsen in Hohe von [Emis- sionsrendite einfugenl per annum an.]

20 [Im Fall von indexierten Schuldverschreibungen, Credit Linked Notes oder Equity Linked Notes sind die anwendbaren Bestimmungen die Zinsen betreffend einzufugen. Dasselbe gilt fur Doppelwahrungs-Schuldverschreibungen.]

[(e)] Zinstagequotient. ,,Zinstagequotient" beteichnet im Hinblick auf die Berech- nung eines Zinsbetrages auf eine Schuldverschreibung fur einen beliebigen Zeit- ra u m (der ,, Z in s be r ec h n u ng sze it ra u m " ) :

[Im Falle von festvertinslichen Schuldverschreibungen, falls die festgelegte Wah- rung Euro ist und Actual/Actual (ISMA) anwendbar ist, einfugen:

1. wenn der Zinsberechnungzzeitraum (einschliei3lich des ersten aber ausschlieRlich des letzten Tages dieser Periode) kurzer ist als die Feststellungsperiode, in die das Ende des Zinsberechnungsteitraumes fallt oder ihr entspricht, die Anzahl der Tage in dem betreffenden Zinsberechnungszeitraum (einschliei3lich des ersten aber aus- schliei3lich des letzten Tages dieser Periode) geteilt durch das Produkt (1) der Anzahl der Tage in der Feststellungsperiode und (2) der Anzahl der Feststellungstermine (wie in § 3(1) angegeben) in einem Kalenderjahr; oder

2. wenn der Zinsberechnungszeitraum (einschliel3lich des ersten aber ausschlieRlich des letrten Tages dieser Periode) Ianger ist als die Festellungsperiode, in die das Ende des Zinsberechnungszeitraumes fallt, die Summe (A) der Anzahl der Tage in dem Zinsberechnungszeitraum, die in die Feststellungsperiode fallen, in welcher der Zinsberechnungszeitraum beginnt, geteilt durch das Produkt (1) der Anzahl der Tage in dieser Feststellungsperiode und (2) der Anzahl der Feststellungstermine (wie in § 3(1) angegeben) in einem Kalenderjahr und (6)der Anzahl der Tage in dem Zinsberechnungszeitraum, die in die nachste Feststellungsperiode fallen, geteilt durch das Produkt (1) der Anzahl der Tage in dieser Feststellungsperiode und (2) der Anzahl der Feststellungstermine (wie in § 3(1)angegeben) in einem Kalenderjahr.

,, Feststel Iu ngsperiode" ist die Periode ab ei nem Feststel Iu ngstermin (einschI ie131 ich desselben) bis zum nachsten Feststellungstermin (ausschliei3lich desselben).]

[im Falle Actual/Actual einfugen: (ISMA Regelung 251): die Anzahl von Tagen in dem Zinsberechnungszeitraum, geteilt durch (x) die Anzahl der Tage in der Zins- periode im Fall von Schuldverschreibungen, bei denen die planmaaige Zinszahlung nur durch regelmai3ige jahrliche Zahlungen erfolgt, oder (y)das Produkt der Anzahl der Tage in der Zinsperiode und der Anzahl von Zinszahlungstagen, die - angenom- men, dal3 Zinsen fur das gesamte Jahr zu zahlen waren - in ein Kalenderjahr fallen wurden, im Fall von Schuldverschreibungen, bei denen die planmafiige Zins- zahlung anders als nur durch regelmai3ige jahrliche Zahlungen erfolgt.] [andere relevante Actual/Actual-Methode einfugen]

[im Falle von ActuaV365 (Fixed) einfugen: die tatsachliche Anzahl von Tagen im Zinsberechnungszeitraum, dividiert durch 365.1

[im Falle von ActuaV360 einfugen: die tatsachliche Anzahl von Tagen im Zinsberech- nungszeitraum, dividiert durch 360.1

[im Falle von 30/360, 360/360 oder Bond Basis einfugen: die Anzahl von Tagen im Zinsberechnungszeitraum, dividiert durch 360, wobei die Anzahl der Tage auf der Grundlage eines Jahres von 360 Tagen mit zwolf Monaten zu je 30 Tagen zu ermitteln ist (es sei denn, (A) der letzte Tag des Zinsberechnungszeitraums fallt auf den 31. Tag eines Monates, wahrend der erste Tag des Zinsberechnungszeitraumes weder auf den 30. noch auf den 31. Tag eines Monats fallt, in welchem Fall der diesen Tag enthaltende Monat nicht als ein auf 30 Tage gekurzter Monat zu behandeln ist, oder (B) der letzte Tag des Zinsberechnungszeitraumes fallt auf den letzten Tag des Monats Februar, in welchem Fall der Monat Februar nicht als ein auf 30 Tage verlangerter Monat zu behandeln ist).]

21 [im Falle von 30E/360 oder Eurobond Basis einfugen: die Anzahl der Tage im Zins- berechnungszeitraum, dividiert durch 360 (dabei ist die Anzahl der Tage auf der Grundlage eines Jahres von 360 Tagen mit 12 Monaten zu 30 Tagen zu ermitteln, und zwar ohne Berucksichtigung des Datums des ersten oder letzten Tages des Zins- berechnungszeitraumes).]

§4 ZAHLUNGEN

(1) [(a)] Zahlungen auf Kapital. Zahlungen auf Kapital in bezug auf die Schuldver- schreibungen erfolgen nach MaRgabe des nachstehenden Absatzes 2 an das Clearing System oder dessen Order zur Gutschrift auf den Konten der jeweiligen Kontoinhaber des Clearing Systems gegen Vorlage und Einreichung der Global- urkunde bei der bereichneten Geschaftsstelle einer der Zahlstellen auaerhalb der Ve rei n ig t en St aat en .

Im Falle von [(b) Zahlung von Zinsen. Die Zahlung von Zinsen auf Schuldverschreibungen erfolgt Schuldverschrei- bungen. die nach MaRgabe von Absatz 2 an das Clearing System oder dessen Order zur Gut- keine Nullkupon- schrift auf den Konten der jeweiligen Kontoinhaber des Clearing Systems gegen Schuldverschrei- bungen sind, Vorlage der Globalurkunde bei der bezeichneten Geschaftsstelle einer der Zahlstel- einfugen: len aunerhalb der Vereinigten Staaten.

(2) Zahlungsweise. Vorbehaltlich geltender steuerlicher und sonstiger gesetzlicher Regelungen und Vorschriften erfolgen zu leistende Zahlungen auf die Schuldver- schreibungen in [festgelegte Wahrung einfugen] [bei Doppelwahrungsanleihen entsprechende Wahrungen/Wechselkursformeln einfugen].

(3) Erfiillung. Die Emittentin wird durch Leistung der Zahlung an das Clearing System oder dessen Order von ihrer Zahlungspflicht befreit.

(4) Zahltag. Fallt der Falligkeitstag einer Zahlung in bezug auf eine Schuldverschrei- bung auf einen Tag, der kein Zahltag ist, dann hat der Glaubiger keinen Anspruch auf Zahlung vor dem nachsten Zahltag am jeweiligen Geschaftsort. Der Glaubiger ist nicht berechtigt, weitere Zinsen oder sonstige Zahlungen aufgrund dieser Ver- spatung tu verlangen.

Fur diese Zwecke bezeichnet ,,Zahltag” einen Tag, [bei nicht auf Euro lautenden Schuldverschreibungen, einfugen: der ein Tag (aul3er einem Samstag oder Sonn- tag) ist, an dem Geschaftsbanken und Devisenmarkte Zahlungen in [samtliche relevanten Finanrzentren angebenl abwickelnl [bei auf Euro lautenden Schuldver- schreibungen, einfugen: der ein Tag (auaer einem Samstag oder Sonntag) ist, an dem das Clearing System sowie alle betroffenen Bereiche des Trans-European Automated Real-time Gross Settlement Express Transfer System (JARGET”) betriebsbereit sind, urn die betreffenden Zahlungen weiterzuleiten.]

(5) Bezugnahmen auf Kapital und Zinsen. Bezugnahmen in diesen Emissionsbedin- gungen auf Kapital der Schuldverschreibungen schlieBen, soweit anwendbar, die folgenden Betrage ein: den Ruckzahlungsbetrag der Schuldverschreibungen; den vorzeitigen Ruckza h Iu ngsbetrag der Schu ldverschrei bu ngen; [falls die Emittentin das Wahlrecht hat, die Schuldverschreibungen aus anderen als steuerlichen Grun- den vorzeitig ruruckturahlen, einfugen: den Wahl-Ruckzahlungsbetrag (Call) der

22 Schuldverschreibungen;] [falls der Glaubiger ein Wahlrecht hat, die Schuldver- schreibungen vorzeitig tu kundigen, einfugen: den Wahl-Ruckzahlungsbetrag (Put) der Schuldverschreibungen;] sowie jeden Aufschlag sowie sonstige auf oder in bezug auf die Schuldverschreibungen zahlbaren Betrage. Bezugnahmen in diesen Emissionsbedingungen auf Zinsen auf die Schuldverschreibungen sollen, soweit anwendbar, samtliche gemat3 § 7 zahlbaren zusatzlichen Betrage einschliei3en.

(6) Hinterlegung von Kapital und Zinsen. Die Emittentin ist berechtigt, beim Amts- gericht Frankfurt am Main Zins- oder Kapitalbetrage zu hinterlegen, die von den Glaubigern nicht innerhalb von zwolf Monaten nach dem Falligkeitstag beansprucht worden sind, auch wenn die Glaubiger sich nicht in Annahmeverzug befinden. Soweit eine solche Hinterlegung erfolgt, und auf das Recht der Rucknahme verzichtet wird, erloschen die diesbezuglichen Anspruche der Glaubiger gegen die Emittentin.

15 RUCKZAHLU NG

(1 Ruckzahlung bei Endfalligkeit. Soweit nicht zuvor bereits ganz oder teilweise zuruckgezahlt oder angekauft und entwertet, werden die Schuldverschreibungen zu ihrem Ruckzahlungsbetrag am [im Falle eines festgelegten Falligkeitstages, Fallig- keitstag einfugen] [im Falle eines Ruckzahlungsmonats einfugen: in den [Ruckzah- lungsmonat einfugen] fallenden Zinszahlungstag] (der ,,Falligkeitstag") zuruckgezahlt. Der Ruckzahlungsbetrag in berug auf jede Schuldverschreibung entspricht [falls die Schuldverschreibungen zu ihrem Nennbetrag zuruckgezahlt werden einfugen: dem Nennbetrag der Schuldverschreibungen] [ansonsten den Ruck- zahlungsbetrag fur die jeweilige Stuckelung/den Index und/oder die Formel, auf dessenideren Grundlage der Ruckzahlungsbetrag zu berechnen ist, einfugen].

(2) Vorzeitige Ruckzahlung aus steuerlichen Grunden. Die Schuldverschreibungen konnen insgesamt, jedoch nicht teilweise, nach Wahl der Emittentin mit einer Kundi- gungsfrist von nicht weniger ais 30 und nicht mehr als 60 Tagen gegenuber dem Fiscal Agent und gemal3 § 12 gegenuber den Glaubigern vorzeitig gekundigt und zu ihrem vorzeitigen Ruckzahlungsbetrag (wie nachstehend definiert) zuzuglich bis zum fur die Ruckzahlung festgesetzten Tag aufgelaufener Zinsen zuruckgezahlt werden, falls die Emittentin [im Falle von Schuldverschreibungen, die von Bertelsmann N. V. oder Bertelsmann U. S. begeben werden, einfugen: oder die Garantinl als Folge einer hderung oder Erganzung der Steuer- oder Abgabengesetze und -vorschriften [im Falle von Schuldverschreibungen, die von Bertelsmann begeben werden, einfugen: der Bundesrepublik Deutschlandl [im Falle von Schuldverschreibungen, die von Bertelsmann N. V. begeben werden, einfugen: der Bundesrepublik Deutschland oder der Niederlande] [im Falle von Schuldverschreibungen, die von Bertelsmann U. S. begeben werden, einfugen: der Bundesrepublik Deutschland oder den Ver- einigten Staaten] oder deren politischen Untergliederungen oder Steuerbehorden oder als Folge einer Anderung oder Erganzung der Anwendung oder der offiziellen Auslegung dieser Gesetze und Vorschriften (vorausgesetzt, diese hderung oder Erganzung wird am oder nach dem Tag, an dem die letzte Tranche dieser Serie von Schuldverschreibungen begeben wird, wirksam) [im Falle von Schuldverschreibun- gen, die nicht Nullkupon-Schuldverschreibungensind, einfugen: am nachstfolgenden Zinszahlungstag (wie in § 3 Absatz 1 definiert)] [im Falle von Nullkupon-Schuld- verschreibungen einfugen: bei Falligkeit oder im Fall des Kauf oder Tauschs einer Schuldverschreibungl zur Zahlung von zusatzlichen Betragen (wie in § 7 dieser Bedingungen definiert) verpflichtet sein wird und diese Verpflichtung nicht durch das Ergreifen vernunftiger, der Emittentin [im Falle von Schuldverschreibungen, die von Bertelsmann N. V. oder Bertelsmann U. S. begeben werden, einfugen: oder der Garantin] zur Verfugung stehender Mafinahmen vermieden werden kann.

Eine solche Kundigung darf allerdings nicht (i)fruher als 90 Tage vor dem fruhest- moglichen Termin erfolgen, an dem die Emittentin [im Falle von Schuldverschrei-

23 bungen, die von Bertelsmann N. V. oder Bettelsmann U. S. begeben werden, einfugen: oder die Garantin] verpflichtet ware, solche zusatzlichen Betrage oder Abzuge oder Einbehalte zu zahlen, falls eine Zahlung auf die Schuldverschreibun- gen dann fallig sein wurde, oder (ii)erfolgen, wenn zu dem Zeitpunkt, zu dem die Kundigung erfolgt, die Verpflichtung zur Zahlung von zusatzlichen Betragen nicht mehr wirksam ist. [Bei variabel verzinslichen Schuldverschreibungen einfugen: Der fur die Rucktahlung festgelegte Termin mu13 ein Zinszahlungstag sein.]

Eine solche Kundigung hat gemai3 § 12 zu erfolgen. Sie ist unwiderruflich, mu13 den fur die Ruckzahlung festgelegten Termin nennen und eine zusammenfassende Erklarung enthalten, welche die das Ruckzahlungsrecht der Emittentin begrunden- den Umstanden darlegt.

Im Falle von [(3)Vorzeitige Ruckzahlung aufgrund von Nachweispflichten. Sofern die Emittentin Schuldver- schreibungen, aufgrund eines schriftlichen Gutachtens eines unabhangigen, allgemein anerkann- die von Bartels- ten Rechtsberaters, welches dem Fiscal Agent zu ubergeben ist, feststellt, daR eine mann US. begeben werden, ein- aui3erhalb der Vereinigten Staaten durch die Emittentin oder eine ihrer Zahlstellen fugen: hinsichtlich einer Schuldverschreibung geleistete Zahlung gemai3 bereits bestehen- der oder in Zukunft geltender Gesetze oder Vorschriften der Vereinigten Staaten einer Nachweispflicht (wie nachstehend definiert) unterliegen wurde, so kann sie nach ihrer Wahl (x) die Schuldverschreibungen insgesamt, jedoch nicht teilweise, zu ihrem vorzeitigen Ruckzahlungsbetrag zuruckzahlen, zuzuglich bis zum Ruckzah- lungstermin aufgelaufener Zinsen abzuglich etwaiger US-Quellensteuerabzuge oder (y) falls und soweit die Bedingungen des § 7 in bezug auf die Zahlung zusatzlicher Betrage erfullt sind, die in § 7 Absatz 2 genannten zusatzlichen Betrage zahlen.

,,Nachweispflicht” bezeichnet die Pflicht zur Abgabe einer Bescheinigung, Identifika- tion, Dokumentation oder einer sonstigen Berichterstattung jedweder Art, deren Folge die Offenlegung der Nationalitat, des Wohnsitzes oder der Identitat eines wirtschaftlichen Eigentumers einer Schuldverschreibung, der US-Steuerauslander (wie in § 7 definiert) ist, gegenuber der Emittentin, einer Zahlstelle oder einer Regie- rungsbehorde ist. Eine Nachweispflicht, (i)die nicht bestunde, wenn die Emittentin, die Garantin oder eine Zahlstelle Zahlungen (A) direkt an den wirtschaftlichen Eigen- tumer oder (B) an einen Verwahrer, Bevollmachtigten oder sonstigen Beauftragten des wirtschaftlichen Eigentumers vornehmen wurde oder (ii) die dadurch erfullt werden kann, dal3 der Verwahrer, Bevollmachtigte oder sonstige Beauftragte des wirtschaftlichen Eigentumers bestatigt, daR der wirtschaftliche Eigentumer US- Steuerauslander ist, gilt nicht als Nachweispflicht im Sinne dieser Bedingungen. Dies gilt aber nur dann, wenn in den in (i)(B)und (ii)beschriebenen Fallen Zahlun- gen an den Verwahrer, Bevollmachtigten oder sonstigen Beauftragten des wirtschaftlichen Eigentumers nicht ihrerseits Gegenstand von solchen Nachweispflich- ten sind (wobei eine jede der vorstehend unter (i)und (ii)aufgefuhrten Nachweis-

pfI i c h t e n ,, ni ch t an we n d ba re Nach wei s pfI i ch t ” gena n nt w ird 1.

In einem solchen Fall nimmt die Emittentin diese Festlegung und diese Wahl vor und informiert den Fiscal Agent baldmoglichst hieruber. Der Fiscal Agent informiert unverzuglich die Glaubiger der Schuldverschreibungen in einer Bekanntmachung (die ,,Bekanntmachung der Festlegung”) gemaB § 12 unter Angabe des Zeitpunktes, ab dem diese Nachweispflicht wirksam wird, sowie daruber, ob die Emittentin die Schuldverschreibungen zuruckzahlen oder die zusatzlichen Betrage zahlen wird und ggf. den letzten Termin, bis zu dem die Ruckgabe der Schuldverschreibungen zu erfolgen hat. Beschliei3t die Emittentin die Ruckzahlung der Schuldverschreibungen, so erfolgt diese Ruckzahlung an einem von der Emittentin hierfur vorgesehenen Tag, der jedoch keinesfalls spater als ein Jahr nach Veroffentlichung der Bekannt- machung der Festlegung liegen darf und den die Emittentin dem Fiscal Agent spatestens 75 Tage vor diesem Datum mitteilt, sofern der Fiscal Agent nicht eine kurzere Frist genehmigt. Dessen ungeachtet zahlt die Emittentin die Schuldverschreibungen nicht zuruck, wenn die Emittentin aufgrund eines Gutachtens eines unabhangigen, allgemein anerkannten Rechtsberaters, welches dem Fiscal Agent zu ubergeben ist,

24 nachtraglich bis spatestens 30 Tage vor dem fur die Ruckzahlung festgelegten Ter- min feststellt, da13 spatere Zahlungen doch keiner Nachweispflicht unterliegen wurden; in diesem Fall wird die Emittentin den Fiscal Agent hiervon unterrichten, der seinerseits die Glaubiger unverruglich gemal3 § 12 uber diese Festlegung informie- ren wird, und in diesem Fall wurde die fruhere Kundigung damit widerrufen und annulliert werden. Sofern die Emittentin, wie vorstehend unter (y) vorgesehen, beschliefit, zusatzliche Betrage zu zahlen, und solange die Verpflichtung der Emit- tentin zur Zahlung der zusatzlichen Betrage besteht, kann die Emittentin die Schuld- verschreibungen nachtraglich jederzeit insgesamt, jedoch nicht teilweise, zu ihrem vorreitigen Ruckzahlungsbetrag zuruckzahlen, zuzuglich bis zum Zeitpunkt der Ruckzahlung aufgelaufener Zinsen, jedoch unter Ausgleich der nach dem Recht der Vereinigten Staaten abzufuhrenden Quellensteuer, die daraus resultieren, da13 ein wirtschaftlicher Eigentumer, der US-Steuerauslander ist, seine Staatsangehorigkeit, seinen Wohnsitz oder seine ldentitat nicht der Emittentin, einer Zahlstelle oder einer Regierungsbehorde mitgeteilt hat.]

Falls die Emit- [(4)Vorzeitige Ruckzahlung nach Wahl der Emittentin. tentin das Wahl- recht hat, die Schuldver schreibungen (a) Die Emittentin kann, nachdem sie gemai3 Absatz (b) gekundigt hat, die Schuld- vorreitig ruruck- verschreibungen insgesamt oder teilweise am/an den Wahl-Ruckzahlungs- zuzahlen, einfiigen: tag(en) (Call) zum/zu den Wahl-Ruckzahlungsbetrag/betragen (Call), wie nachstehend angegeben, nebst etwaigen bis zum Wahl-Ruckrahlungstag (Call) (aus- schliei3lich) aufgelaufenen Zinsen zuruckzahlen. [Bei Geltung eines Mindest- ruckzahlungsbetrages oder eines erhohten Ruckzahlungsbetrages einfugen: Eine solche Ruckzahlung mu13 in Hohe eines Nennbetrages von [mindestens [Mindestruckzahlungsbetrag einfugen]] [erhohter Ruckzahlungsbetragl erfolgen.]

Wahl-Ruckzahlungstag(e) (Call) Wahl-Ruckzahlungsbetrag/betrage (Call) [Wahl-Ruckzahlungstag(e1einfugenl [Wahl-Ruckzahlungsbetrag/betrage einfugenl 11 1 11 1

[Falls der Glaubiger ein Wahlrecht hat, die Schuldverschreibungenvorzeitig zu kundigen, einfugen: Der Emittentin steht dieses Wahlrecht nicht in bezug auf eine Schuldverschreibung zu, deren Ruckzahlung bereits der Glaubiger in Ausubung seines Wahlrechts nach Absatz [41 dieses § 5 verlangt hat.]

(b) Die Kundigung ist den Glaubigern der Schuldverschreibungen durch die Emit- tentin gemal3 § 12 bekanntzugeben. Sie beinhaltet die folgenden Angaben:

(i) die zuruckzuzahlende Serie von Schuldverschreibungen;

(ii) eine Erklarung, ob diese Serie ganz oder teilweise zuruckgezahlt wird und im letzteren Fall den Gesamtnennbetrag der zuruckzuzahlenden Schuldver- sch reibu ngen;

(iii) den Wahl-Ruckzahlungstag (Call), der nicht weniger als [Mindestkundi- gungsfrist einfugenl und nicht mehr als [Hochstkundigungsfrist einfugenl Tage nach dem Tag der Kundigung durch die Emittentin gegenuber den Glaubigern liegen darf: und

(iv) den Wahl-Ruckzahlungsbetrag (Call), zu dem die Schuldverschreibungen zuruckgezahlt werden.

(c) Wenn die Schuldverschreibungen nur teilweise zuruckgezahlt werden, werden die zuruckzuzahlenden Schuldverschreibungen in Ubereinstimmung mit den Regeln des betreffenden Clearing Systems ausgewahlt.]

25 Falls der Gliubi- [[(5)]Vorzeitige Ruckzahlung nach Wahl des Glaubigers. get eln Wahl- recht hat, die Schuldver- (a) Die Emittentin hat eine Schuldverschreibung nach Ausubung des entsprechen- schreibungen vorzeitig zu kiin- den Wahlrechts durch den Glaubiger am/an den Wahl-Ruckzahlungstag(en)(Put) digen, einfugen: zum/zu den Wahl-Ruckzahlungsbetrag/betragen (Put), wie nachstehend angegeben nebst etwaigen bis zum Wahl-Ruckzahlungstag (Put) (ausschliel3lich) aufgelaufener Zinsen zuruckzuzahlen.

Wahl-Ruckzahlungstag(e)(Put) Wahl-Ruckzahlungsbetrag/betrage (Put) [Wahl-Ruckzahlungstag(e1einfugenl [Wahl-Ruckzahlungsbetrag/betrage einfugenl I[ 1 I[ 1

Dem Glaubiger steht dieses Wahlrecht nicht in bezug auf eine Schuldverschrei- bung zu, deren Ruckzahlung die Emittentin zuvor in Ausubung eines ihrer Wahl- rechte nach diesem § 5 verlangt hat.

(b) Urn dieses Wahlrecht auszuuben, hat der Glaubiger nicht weniger als [Mindest- kundigungsfrist einfugenl und nicht mehr ais [Hochstkundigungsfristeinfugen] Tage vor dem Wahl-Ruckzahlungstag (Put), an dem die Ruckzahlung gemai3 der Ausubungserklarung (wie nachstehend definiert) erfolgen soll, bei der bezeichneten Geschaftsstelle des Fiscal Agent wahrend der normalen Geschaftszeiten eine ordnungsgemak ausgefullte Mitteilung zur vorzeitigen Ruckzahlung (,,Aus- ubungserklarung”), wie sie von der bezeichneten Geschaftsstelle des Fiscal Agent erhaltlich ist, zu hinterlegen. Die Ausubungserklarung hat anzugeben: (i)den Nennbetrag der Schuldverschreibungen, fur die das Wahlrecht ausgeubt wird und (ii) die Wertpapier-Kenn-Nummer dieser Schuldverschreibungen (soweit vergeben). Die Ausubung des Wahlrechts kann nicht widerrufen werden. Die Ruckzahlung der Schuldverschreibungen, fur welche das Wahlrecht ausgeubt worden ist, erfolgt nur gegen Lieferung der Schuldverschreibungen an die Emittentin oder deren Order.]

Im Falle von [[ (6)] Vorzeitiger Ruckzahlungsbetrag. Schuldverschrei- bungen (auRer I Nulikupon- Fur die Zwecke des 5 9 und des Absatzes 2 [im Falle von Schuldverschreibungen, die Schuldverschrei- bungen), einfu- von Bertelsmann U.S. begeben werden, einfugen: und 31 dieses § 5, entspricht der gen: vorzeitige Ruckzahlungsbetrag einer Schuldverschreibung dem Ruckzahlungsbe- trag.]

Im Falle von [[(SI] Vorzeitiger Ruckzahlungsbetrag. Nullkupon- Schuldverschrei- I bungen einfu- Fur die Zwecke des § 9 und des Absatzes 2 [im Falle von Schuldverschreibungen, die gen: von Bertelsmann U.S. begeben werden, einfugen: und 31 dieses § 5, berechnet sich der vorzeitige Ruckzahlungsbetrag einer Schuldverschreibung wie folgt:

(a) Der vorzeitige Ruckzahlungsbetrag der Schuldverschreibung entspricht der Summe aus: I (i) [Referenzpreis einfugenl (der ,,Referenzpreis”), und (ii) dem Produkt aus [Emissionsrendite in Protent einfugen] (die ,,Emissions- rendite”) und dem Referenzpreis ab dem [Tag der Begebung einfugen] (ein- schliel3lich) bis zu dem vorgesehenen Ruckzahlungstag (ausschlieklich)oder (je nachdem) dem Tag, an dem die Schuldverschreibungen fallig und ruckzahlbar werden, wobei die Emissionsrendite jahrlich kapitalisiert wird.

Wenn diese Berechnung fur einen Zeitraum, der nicht vollen Jahren ent- I spricht, durchzufuhren ist, hat sie im Fall des nicht vollstandigen Jahres (der

26 ,,Zinsberechnungszeitraum”) auf der Grundlage des Zinstagequotienten (wie vorstehend in § 3 definiert) zu erfolgen.

(b) Falls die Emittentin den vorzeitigen Ruckzahlungsbetrag bei Falligkeit nicht zahlt, wird er wie vorstehend beschrieben berechnet, jedoch mit der MaRgabe, da13 die Berugnahmen in Unterabsatz (a)(ii)auf den fur die Ruckzahlung vorgesehenen Ruckzahlungstag oder den Tag, an dem diese Schuldverschreibungen fallig und ruckzahlbar werden, durch den Tag ersettt werden, an dem die Ruck- za hlung erfolgt.]

[Im Fall von indexierten Schuldverschreibungen, Credit Linked Notes oder Equity Linked Notes sind die anwendbaren Bestimmungen, die Kapital betreffen einzufugen. Dasselbe gilt fur Doppelwahrungs-Schuldverschreibungen.]

56 DER FISCAL AGENT[,] [UNDI [DIE ZAHLSTELLEINI [UND DIE BERECHNUNGSSTELLE]

(1) Bestellung; bezeichnete Geschafisstelle. Der anfanglich bestellte Fiscal Agent [undl die anfanglich bestellte[nl [Zahlstelle[nl [und die anfanglich bestellte Berech- nungsstellel und [derenl [ihrel bezeichnete[nl Geschaftsstelle[nl laute[tl[nl wie folgt:

Fiscal Agent: Deutsche Bank Aktiengesellschaft Corporate Trust & Agency Services GroRe GallusstraRe 10-14 60272 Frankfurt am Main]

Zahlstellen: Deutsche Bank Aktiengesellschaft Corporate Trust & Agency Services GroBe Gallusstraae 10-14 60272 Frankfurt am Main

[Deutsche Bank Luxembourg S.A. 2 Boulevard Konrad Adenauer L-1115 Luxembourg]

[Berechnungsstelle:] [Namen und bezeichnete Geschaftsstelle einfiigenl

Der Fiscal Agent [,I[undl [die Zahlstelle[nll [und die Berechnungsstellel [behaltl [behalten] sich das Recht vor, jederzeit [seine] [ihrel bezeichnete[nl Geschaftsstel- le[nl durch eine andere bezeichnete Geschaftsstelle in derselben Stadt zu ersetten.

(2) Anderung der Bestellung oder Abberufung. Die Emittentin behalt sich das Recht vor, jederzeit die Bestellung des Fiscal Agent oder einer Zahlstelle [oder der Berech- nungsstelle] zu andern oder zu beenden und einen anderen Fiscal Agent oder zusatzliche oder andere Zahlstellen [oder einen anderen Berechnungsstelle] zu bestellen. Die Emittentin wird zu jedem Zeitpunkt (i) eine Fiscal Agent unterhalten [im Fall von Schuldverschreibungen, die an einer Borse notiert sind, einfugen:[,] [undl (ii) solange die Schuldverschreibungen an der [Name der Borse] notiert sind, eine Zahlstelle (die der Fiscal Agent sein kann) mit bezeichneter Geschaftsstelle in [Sitr der Borsel und/oder an solchen anderen Orten unterhalten, die die Regeln dieser Borse verlangenl [im Fall von Zahlungen in US-Dollar einfugen:[,l [undl [(iii)] falls Zahlungen bei den oder durch die Geschaftsstellen aller Zahlstellen auRerhalb der Vereinigten Staaten (wie unten definiert) aufgrund der Einfuhrung von Devisen- beschrankungen oder ahnlichen Beschrankungen hinsichtlich der vollstandigen Zahlung oder des Empfangs der entsprechenden Betrage in US-Dollar widerrecht- lich oder tatsachlich ausgeschlossen werden, eine Zahlstelle mit bezeichneter

27 Geschaftsstelle in New York City unterhaltenl [falls eine Berechnungsstelle bestellt werden SOH, einfugen:[,] [und] [(iv)] eine Berechnungsstelle [falls die Berechnungs- stelle eine bezeichnete Geschaftsstelle an einem vorgeschriebenen Ort zu unterhalten hat, einfugen: mit bezeichneter Geschaftsstelle in [vorgeschriebenen 013ein- fugenll unterhaltenl. Sollte eine Richtlinie der Europaischen Union zur Umsetzung der Schlul3folgerungen des Treffens des ECOFIN-Rates vom 26.-27. November 2000 oder eine Rechtsnorm, die zur Umsetzung einer solchen Richtlinie vorgesehen ist, dieser entspricht oder zur Anpassung an die Richtlinie eingefuhrt wird, ergehen, verpflichtet sich die Emittentin, eine Zahlstelle in einem Mitgliedstaat der Europai- schen Union zu unterhalten, welche nicht fur Vornahme von steuerlichen Einbehal- ten oder Abzugen nach Mal3gabe einer solchen Richtlinie oder Rechtsnorm verpflichtet ist, soweit dies in einem Mitgliedstaat der Europaischen Union moglich ist. Eine Anderung, Abberufung, Bestellung oder ein sonstiger Wechsel wird nur wirksam (aufier im Insolventfall, in dem eine solche Anderung sofort wirksam wird), sofern die Glaubiger hieruber gemai3 § 12 vorab unter Einhaltung einer Frist von mindestens 30 und nicht mehr als 45 Tagen informiert wurden.

Fur die Zwecke dieses Absatzes (2) [im Falle von Schuldverschreibungen, die von Bertelsmann U. S. begeben werden, einfugen: , des § 5, des § 7 und des § 91 bezeichnet Jereinigte Staaten” die Vereinigten Staaten von Amerika (einschliel3lich deren Bundesstaaten und des District of Columbia) sowie deren Territorien (einschliel3lich Puerto Ricos, der U.S. Virgin Islands, Guam, American Samoa, Wake Island und Northern Mariana Islands).

(3) Erfullungsgehilfeln! der Emittentin. Der Fiscal Agent[,] [undl [die Zahlstelle[nll [und die Berechnungsstelle] [handeltl [handelnl ausschliel3lich als Erfullungsgehil- fe[nl der Emittentin und [ubernimmtl [ubernehmenl keinerlei Verpflichtungen gegenuber den Glaubigern und es wird kein Auftrags- oder Treuhandverhaltnis zwischen [ihml [ihnenl und den Glaubigern begrundet.

87 STEUERN

Im Falle von [Samtliche auf die Schuldverschreibungen zu zahlenden Betrage sind ohne Einbe- Schuldverschrei- bungen, die von halt oder Abzug von oder aufgrund von gegenwartigen oder zukunftigen Steuern Bertelsmann oder sonstigen Abgaben gleich welcher Art zu leisten, die von oder in der Bundes- begeben werden, einfugen: republik Deutschland oder fur deren Rechnung oder von oder fur Rechnung einer politischen Untergliederung oder Steuerbehorde der oder in der Bundesrepublik Deutschland auferlegt oder erhoben werden, es sei denn, ein solcher Einbehalt oder Abzug ist gesetrlich vorgeschrieben. In diesem Fall wird die Emittentin diejenigen rusattlichen Betrage (die ,,zusatzlichen Betrage“) zahlen, die erforderlich sind, damit die den Glaubigern zufliei3enden Nettobetrage nach diesem Einbehalt oder Abzug jeweils den Betragen entsprechen, die ohne einen solchen Einbehalt oder Abzug von den Glaubigern empfangen worden waren; die Verpflichtung zur Zah- lung solcher zusatzlicher Betrage besteht jedoch nicht im Hinblick auf Steuern und Abgaben, die:

(a) von einer als Depotbank oder lnkassobeauftragter des Glaubigers handelnden Person oder sonst auf andere Weise tu entrichten sind als dadurch, dai3 die Emittentin aus den von ihr zu leistenden Zahlungen von Kapital oder Zinsen einen Abzug oder Einbehalt vornimmt; oder

(b) wegen einer gegenwartigen oder fruheren personlichen oder geschaftlichen Beziehung des Glaubigers zu der Bundesrepublik Deutschland zu tahlen sind, und nicht allein deshalb, weil Zahlungen auf die Schuldverschreibungen aus Quellen in der Bundesrepublik Deutschland stammen (oder fur Zwecke der Besteuerung so behandelt werden) oder dort besichert sind; oder

28 (c) aufgrund (i) einer Richtlinie oder Verordnung der Europaischen Union betreffend die Besteuerung von Zinsertragen oder (ii)einer zwischenstaatlichen Ver- einbarung uber deren Besteuerung, an der die Bundesrepublik Deutschland oder die Europaische Union beteiligt ist, oder (iii) einer gesetzlichen Vorschrift, die diese Richtlinie, Verordnung oder Vereinbarung umsetzt oder befolgt, abzuziehen oder einzubehalten sind; oder

(d) aufgrund einer Rechtsanderung zu zahlen sind, welche spater als 30 Tage nach Falligkeit der betreffenden Zahlung von Kapital oder Zinsen oder, wenn dies spater erfolgt, ordnungsgemaner Bereitstellung aller falligen Betrage und einer diesbezuglichen Bekanntmachung gemal3 § 12 wirksam wird; oder

(e) von einer Zahlstelle abgezogen oder einbehalten werden, wenn eine andere Zahlstelle die Zahlung ohne einen solchen Abzug oder Einbehalt hatte leisten ko n nen.I

Im Falle van [Samtliche auf die Schuldverschreibungen zu zahlenden Betrage sind ohne Einbe- Schuldverschrei- bungen, die von halt oder Abzug von oder aufgrund von gegenwartigen oder tukunftigen Steuern Eertelsmann oder sonstigen Abgaben gleich welcher Art zu leisten, die von oder in den Nieder- N.V. begeben werden, einfii- landen oder der Bundesrepublik Deutschland oder fur deren Rechnung oder von gen: oder fur Rechnung einer politischen Untergliederung oder Steuerbehorde der oder in den Niederlanden oder der Bundesrepublik Deutschland auferlegt oder erhoben werden, es sei denn, ein solcher Einbehalt oder Abzug ist gesetzlich vorgeschrieben. In diesem Fall wird die Emittentin diejenigen zusatzlichen Betrage (die ,,zusatzlichen Betrage”) zahlen, die erforderlich sind, damit die den Glaubigern zuflieaenden Nettobetrage nach diesem Einbehalt oder Abzug jeweils den Betragen entsprechen, die ohne einen solchen Einbehalt oder Abzug von den Glaubigern empfangen worden waren; die Verpflichtung zur Zahlung solcher zusatzlicher Betrage besteht jedoch nicht im Hinblick auf Steuern und Abgaben, die:

(a) von einer als Depotbank oder lnkassobeauftragter des Glaubigers handelnden Person oder sonst auf andere Weise zu entrichten sind als dadurch, daB die Emittentin aus den von ihr zu leistenden Zahlungen von Kapital oder Zinsen einen Abzug oder Einbehalt vornimmt; oder

(b) wegen einer gegenwartigen oder fruheren personlichen oder geschaftlichen Beziehung des Glaubigers zu den Niederlanden oder der Bundesrepublik Deutschland zu zahlen sind, und nicht allein deshalb, weil Zahlungen auf die Schuldverschreibungen aus Quellen in den Niederlanden oder der Bundesrepu- blik Deutschland stammen (oder fur Zwecke der Besteuerung so behandelt werden) oder dort besichert sind; oder

(c) aufgrund (i) einer Richtlinie oder Verordnung der Europaischen Union betreffend die Besteuerung von Zinsertragen oder (ii)einer zwischenstaatlichen Ver- einbarung uber deren Besteuerung, an der die Bundesrepublik Deutschland oder die Europaische Union beteiligt ist, oder (iii) einer gesetzlichen Vorschrift, die diese Richtlinie, Verordnung oder Vereinbarung umsetzt oder befolgt, abzuziehen oder einzubehalten sind; oder

(d) aufgrund einer Rechtsanderung zu zahlen sind, welche spater als 30 Tage nach Falligkeit der betreffenden Zahlung von Kapital oder Zinsen oder, wenn dies spater erfolgt, ordnungsgemaaer Bereitstellung aller falligen Betrage und einer diesbezuglichen Bekanntmachung geman § 12 wirksam wird; oder

(e) von einer Zahlstelle abgezogen oder einbehalten werden, wenn eine andere Zahlstelle die Zahlung ohne einen solchen Abzug oder Einbehalt hatte leisten konnen.]

29 Im Falle von [( 1) Verpflichtung zur Zahlung von zusatzlichen Betragen in bezug auf US-amerika- Schuldverschrei- bungen, die von nische Steuern. Alle in bezug auf die Schuldverschreibungen zahlbaren Kapital- Benelsmann oder Zinsbetrage werden frei von und ohne Einbehalt oder Abzug von oder auf- U.S.begeben werden, einfii- grund von gegenwartigen oder zukunftigen Steuern, Steuerveranlagungen oder gen: sonstigen Abgaben gleich welcher Art geleistet, die von oder in den Vereinigten Staaten oder fur deren Rechnung oder von oder fur Rechnung einer politischen Untergliederung oder Steuerbehorde der oder in den Vereinigten Staaten (,,US- Steuer") auferlegt oder erhoben werden, es sei denn, dieser Einbehalt oder Abzug ist der Emittentin gesetzlich vorgeschrieben. In diesem Fall wird die Emittentin, vorbehaltlich der nachstehenden Ausnahmeregelungen, dem Glaubiger einer Schuld- verschreibung, der US-Steuerauslander (wie nachstehend definiert) ist, diejenigen zusatzlichen Betrage (die ,,zusatzlichen Betrage") tahlen, die erforderlich sind, damit die auf die Schuldverschreibungen zu zahlenden Nettobetrage nach einem solchen Einbehalt oder Abzug von US-Steuern den zu diesem Zeitpunkt falligen und zahlbaren Betragen entsprechen, die ohne einen solchen Abzug oder Einbehalt auf die Schuldverschreibungen zahlbar waren. Die Verpflichtung zur Zahlung solcher zusatzlichen Betrage besteht jedoch nicht im Hinblick auf

(a) eine Steuer, Steuerveranlagung oder sonstige Abgabe, die nicht erhoben worden ware,

(i) bestunde nicht eine gegenwartige oder fruhere Beziehung des Glaubigers (oder des Treuhanders, Treugebers, Gesellschafters, Begunstigten oder Mit- glieds des Glaubigers oder Bevollmachtigten des Glaubigers, sofern der Glaubiger eine Erbengemeinschaft, ein Trust, eine Kapitalgesellschaft oder eine Personengesellschaft ist), zu den Vereinigten Staaten, z. B. in der Form, dal3 der Glaubiger (oder Treuhander, Treugeber, Gesellschafter, Begunstigte oder das Mitglied oder der Bevollmachtigte) Staatsangehoriger ist bzw. war oder in den Vereinigten Staaten seinen Wohnsitz oder Sitz hat oder hatte, bzw. so behandelt wird oder wurde, als hatte er seinen Sitz oder Wohnsitz dort, oder daR er ein Gewerbe ausubt oder ein Geschaft hat oder daran beteiligt ist, oder dort eine standige Betriebsstatte unterhalt oder unterhielt; oder

(ii) hatte der Glaubiger nicht in der Vergangenheit oder Gegenwart den Status einer personlichen Holding-Gesellschaft, einer auslandischen personlichen Holding-Gesellschaft, einer passiven auslandischen lnvestmentgesellschaft, einer kontrollierten auslandischen Gesellschaft, einer privaten Stiftung oder einer sonstigen steuerbefreiten Organisation fur US-Steuerzwecke oder einer Gesellschaft, die Einkommen zur Vermeidung von US-Einkommen- steuer akkumuliert;

(b) eine Steuer, Steuerveranlagung oder sonstige Abgabe bezuglich eines Glaubi- gers, der Eigentumer von mindestens 10% des gesamten stimmberechtigten Aktienkapitals samtlicher stimmberechtigter Aktiengattungen der Emittentin ist oder dem dieses Eigentum wirtschaftlich zugerechnet wird;

(c) eine Steuer, Steuerveranlagung oder sonstige Abgabe, die nicht erhoben worden ware, wenn der Glaubiger einer durch Gesetz oder durch eine Verordnung der Ve rei n ig t e n St aat en vo rg esc h r ie b en e n an w en d ba ren Be sch ei n ig u ng s- , Dokumentations-, Informations-, ldentifikations- oder sonstigen Nachweis- pflicht hinsichtlich seiner Staatszugehorigkeit, seines Sitzes oder Wohnsitzes, seiner Identitat oder seiner Beziehungen zu den Vereinigten Staaten genugt hatte, welche (ungeachtet etwaiger Doppelbesteuerungsabkommen) die Vor- aussetzung fur die Befreiung von der entsprechenden Steuer, Steuerveranla- gung oder sonstigen Abgabe ist;

(d) Nachlafisteuern, Erbschaftsteuern, Schenkungsteuern, Verkaufs- oder Umsatz- steuern oder sonstige Verkehrsteuern, Vermogensteuern oder ahnliche Steuern, Steu ervera n Iag u ngen oder A bga ben;

30 1 (e) eine Steuer, Steuerveranlagung oder sonstige Abgabe, die nicht erhoben worden ware, hatte der Glaubiger die Schuldverschreibung nicht erst zu dem spateren der folgenden Termine vorgelegt: mehr als 30 Tage nach Falligkeit der entsprechenden Zahlung oder nach dem Tag, an dem die Zahlung erstmals tatsachlich hatte erfolgen konnen;

1 (f) eine Steuer, Steuerveranlagung oder sonstige Abgabe, die durch die Zahlstelle bei Zahlung auf eine Schuldverschreibung einbehalten oder abgezogen werden mul3, wenn diese Zahlung durch eine andere Zahlstelle ohne Einbehalt oder Abzug hatte erfolgen konnen; oder

(9) eine Steuer, Steuerveranlagung, oder sonstige Abgabe, die in einer anderen Form als durch Abzug oder Einbehalt auf Zahlungen auf die Schuldverschrei- bungen zahlbar ist; oder

(h) eine Zahlung eines in bezug auf eine Schuldverschreibung falligen Betrages an einen US-Steuerauslander, der ein Treuhander oder das Mitglied einer Per- sonengesellschaft oder sonstiger nicht alleiniger wirtschaftlicher Eigentumer einer solchen Zahlung ist, sofern der Begunstigte oder Treugeber in bezug auf diesen Treuhander, das Mitglied der Personengesellschaft oder der wirtschaftliche Eigentumer nicht zum Bezug der zusatzlichen Betrage berechtigt gewesen ware, wenn dieser Begunstigte oder Treugeber, dieses Mitglied oder dieser wirtschaftliche Eigentumer der formalrechtliche lnhaber dieser Schuldverschrei- bung gewesen ware.

In diesem Zusammenhang bezeichnet ,,US-Steuerauslander” eine Person, die fur die Zwecke des US-amerikanischen Einkommensteuerrechts eine auslandische Kapitalgesellschaft, eine gebietsfremde auslandische naturliche Person, ein gebiets- fremder auslandischer Verwalter bzw. Treuhander von auslandischen Erbmassen oder Treuhandvermogen und eine auslandische Personengesellschaft, bei der ein oder mehrere Gesellschafter im Sinne der Bundes-Einkommensteuer der Vereinig- ten Staaten auslandische Kapitalgesellschaften, gebietsfremde auslandische naturliche Personen oder gebietsfremde auslandische Verwalter bzw. Treuhander von auslandischen Erbmassen oder Treuhandvermogen sind.

(2) Wahlrecht der Emittentin zur Zahlung zusatzlicher Betrage. Ungeachtet § 7 Absatz 1, sofern eine Nachweispflicht (wie in § 5 Absatz 3 definiert) durch Zahlung einer Quellensteuer, Back-up-Quellensteuer oder ahnlichen Abgabe erfullt ware, kann die Emittentin entscheiden, indem sie dies in der Bekanntmachung der Fest- legung (wie in § 5 Absatz 3 definiert) feststellt, die Bestimmungen dieses Absatzes anstelle der Vorschriften des § 5 Absatz 3 anzuwenden.

In diesem Fall zahlt die Emittentin als zusatzliche Betrage diejenigen Betrage, die erforderlich sind, damit jeder nach dem Wirksamwerden der betreffenden Nach- weispflicht aufierhalb der Vereinigten Staaten durch die Emittentin oder eine ihrer Zahlstellen auf eine Schuldverschreibung gezahlten Nettobetrag, dessen wirtschaftlicher Eigentumer ein US-Steuerauslander ist, nach Abzug oder Einbehalt einer Quellensteuer, Back-up-Quellensteuer oder ahnlichen Abgabe nicht geringer ist als der in dieser Schuldverschreibung zur Auszahlung vorgesehene Betrag. Dabei darf aber nicht die Verpflichtung bestehen, die Nationalitat, den Sitz oder Wohnsitz oder die Identitat des wirtschaftlichen Eigentumers gegenuber der Emittentin, einer Zahl- stelle oder einer Regierungsbehorde offenzulegen. Die Emittentin wiederum ist zur Zahlung zusatzlicher Betrage nur hinsichtlich solcher Back-up-Quellensteuern oder ahnlicher Abgaben verpflichtet, (a) die nicht anwendbar waren im Falle einer nicht anwendbaren Nachweispflicht (wie in § 5 Absatz 3 definiert), (b) die deshalb nicht abzufuhren sind, weil die Emittentin oder eine Zahlstelle Kenntnis daruber hat, daB der wirtschaftliche Eigentumer der Schuldverschreibungen zu der vorstehend in § 7 Absatz 1 (a) beschriebenen Personengruppe gehort. Die Emittentin ist jedoch nicht zur Zahlung zusatzlicher Betrage verpflichtet, die auf eine Schuldverschreibung auf-

31 grund der Tatsache erhoben werden, dafi diese/dieser zum spateren der zwei folgenden Zeitpunkte zur Zahlung vorgelegt wurde: mehr als 30 Tage nach Falligkeit der entsprechenden Zahlung oder nach dem Tag, an dem die Zahlung erstmals tatsachlich hatte erfolgen konnen.

(3) Verpflichtung zur Zahlung zusatzlicher Betrage in bezug auf deutsche Steuern. Samtliche auf die Schuldverschreibungen zu zahlenden Betrage sind ohne Einbe- halt oder Abzug von oder aufgrund von gegenwartigen oder zukunftigen Steuern oder sonstigen Abgaben gleich welcher Art zu leisten, die von oder in der Bundes- republik Deutschland oder fur deren Rechnung oder von oder fur Rechnung einer politischen Untergliederung oder Steuerbehorde der oder in der Bundesrepublik Deutschland auferlegt oder erhoben werden, es sei denn, dieser Einbehalt oder Abzug ist der Emittentin gesetzlich vorgeschrieben. In diesem Fall wird die Emitten- tin diejenigen zusatzlichen Betrage (die ,,rusatzlichen Betrage”) zahlen, die erforderlich sind, damit die den Glaubigern zuflieRenden Nettobetrage nach diesem Einbe- halt oder Abzug jeweils den Betragen an Kapital und Zinsen entsprechen, die ohne einen solchen Abzug oder Einbehalt von den Glaubigern empfangen worden waren; die Verpflichtung fur Zahlung solcher zusatzlicher Betrage besteht jedoch nicht im Hinblick auf Steuern und Abgaben, die:

(b) wegen einer gegenwartigen oder fruheren personlichen oder geschaftlichen Beziehung des Glaubigers zur Bundesrepublik Deutschland oder einem anderen Mitgliedstaat der Europaischen Union zu zahlen sind, und nicht allein auf der Tatsache beruhen, daR die Zahlungen auf die Schuldverschreibungen aus Quel- len in der Bundesrepublik Deutschland stammen (oder fur Zwecke der Besteue- rung so behandelt werden) oder dot? besichert sind; oder

(c) aufgrund (i)einer Richtlinie oder Verordnung der Europaischen Union betreffend die Besteuerung von Zinsertragen oder (ii) einer zwischenstaatlichen Ver- einbarung uber deren Besteuerung, an der die Bundesrepublik Deutschland oder die Europaische Union beteiligt ist, oder (iii)einer gesetzlichen Vorschrift, die diese Richtlinie, Verordnung oder Vereinbarung umsetzt oder befolgt, abzuziehen oder einzubehalten sind; oder

(d) aufgrund einer Rechtsanderung zu zahlen sind, welche spater als 30 Tage nach Falligkeit der betreffenden Zahlung von Kapital oder Zinsen oder, wenn dies spater erfolgt, ordnungsgemafier Bereitstellung aller falligen Betrage und einer diesbezuglichen Bekanntmachung gemal3 § 12 wirksam wird; oder

(e) zu zahlen sind, wenn die Schuldverschreibungen einer bestimmten Zahlstelle zur Zahlung vorgelegt werden, obwohl sie einer anderen Zahlstelle hatten vorgelegt werden konnen und in diesem Fall ein Einbehalt oder Abzug nicht erfolgt ware.]

58 VORLEGUNGSFRIST

Die in § 801 Absatz 1 Satz 1 BGB bestimmte Vorlegungsfrist wird fur die Schuldver- schreibungen auf zehn Jahre verkurzt.

32 §9 KUNDIG u NG

(1) Kundigungsgrbnde. Jeder Glaubiger ist berechtigt, seine samtlichen Forderun- gen aus den Schuldverschreibungen ganz oder teilweise durch Kundigung gegenuber dem Fiscal Agent fallig zu stellen und Ruckzahlung zu ihrem vorzeitigen Ruck- zahlungsbetrag (wie in § 5 beschrieben), zuzuglich etwaiger bis zum Tage der Ruck- zahlung aufgelaufener Zinsen zu verlangen, falls:

die Emittentin Kapital oder Zinsen nicht innerhalb von 30 Tagen nach dem betreffenden Falligkeitstag zahlt; oder

die Emittentin die ordnungsgemaae ErFullung irgendeiner anderen Verpflich- tung aus den Schuldverschreibungen [falls die Schuldverschreibungen von Ber- telsmann N. V. oder Bertelsmann U. S. begeben werden, einfugen: oder die Garantin die Erfullung einer Verpflichtung aus der Garantie, auf die in § 2 Bezug genommen wird,] unterlai3t und diese Unterlassung nicht geheilt werden kann oder, falls sie geheilt werden kann, Ianger als 30 Tage fortdauert, nachdem der Fiscal Agent hieruber eine Benachrichtigung von einem Glaubiger erhalten hat; oder

eine Kreditverbindlichkeit (wie nachstehend definiert) der Emittentin [falls die Schuldverschreibungen von Bertelsmann N. V. oder Bertelsmann U. S. begeben werden, einfugen: oder der Garantin] vorzeitig zahlbar wird aufgrund einer Nicht- oder Schlechterfullung des dieser Kreditverbindlichkeit zugrundeliegen- den Vertrages, oder die Emittentin [falls die Schuldverschreibungenvon Bertels- mann N.V. oder Bertelsmann U.S.begeben werden, einfugen: oder die Garan- tin] einer Zahlungsverpflichtung in Hohe oder im Gegenwert von mehr als US$ 25.000.000 aus einer Kreditverbindlichkeit oder aufgrund einer Burgschaft oder Garantie, die fur eine Kreditverbindlichkeit Dritter gegeben wurde, nicht innerhalb von 30 Tagen nach ihrer Falligkeit bzw. im Falle einer Burgschaft oder Garantie nicht innerhalb von 30 Tagen nach lnanspruchnahme aus dieser Burg- schaft oder Garantie nachkommt, es sei denn die Emittentin [falls die Schuldver- schreibungen von Bertelsmann N. V. oder Bertelsmann U. S. begeben werden, einfugen: oder die Garantin] bestreitet in gutem Glauben, da13 diese Zahlungs- verpflichtung besteht oder fallig ist bzw. diese Burgschaft oder Garantie berech- tigterweise geltend gemacht wird, oder falls eine fur solche Verbindlichkeiten bestellte Sicherheit fur die oder von den daraus berechtigten Glaubiger(n1 in Anspruch genommen wird; oder

die Emittentin [falls die Schuldverschreibungen van Bertelsmann N. V. oder Ber- telsmann U. S. begeben werden, einfugen: oder die Garantin] ihre Zahlungsun- fahigkeit bekanntgibt oder ihre Zahlungen einstellt; oder

ein Gericht ein lnsolvenzverfahren gegen die Emittentin [falls die Schuldver- schreibungen von Bertelsmann N. V. oder Bertelsmann U.S. begeben werden, einfugen: oder die Garantin] eroffnet, oder die Emittentin [falls die Schuldver- schreibungen von Bertelsmann N. V. oder Bertelsmann U. S. begeben werden, einfugen: oder die Garantin] ein solches Verfahren einleitet oder beantragt oder eine allgemeine Schuldenregelung zugunsten ihrer Glaubiger anbietet odertrifft [falls die Schuldverschreibungen von Bertelsmann N. V. begeben werden, einfugen: oder die Emittentin ein ,,surseance van betaling” (im Sinne des nieder- Iandischen Insolvenzrechts) beantragtl; oder

die Emittentin [falls die Schuldverschreibungen von Bertelsmann N. V. oder Ber- telsmann U.S. begeben werden, einfugen: oder die Garantin] in Liquidation tritt, es sei denn, dies geschieht im Zusammenhang mit einer Verschmelzung oder einer anderen Form des Zusammenschlusses mit einer anderen Gesellschaft und diese Gesellschaft ubernimmt alle Verpflichtungen, die die Emittentin [falls

33 die Schuldverschreibungen von Bertelsmann N. V. oder Bertelsmann U. S. begeben werden, einfugen: oder die Garantin] im Zusammenhang mit diesen Schuldverschreibungen eingegangen ist; oder

(9) in [falls die Schuldverschreibungen von Bertelsmann N. V. begeben werden, einfugen: den Niederlanden] [falls die Schuldverschreibungen von Bertelsmann U. S. begeben werden, einfugen: den Vereinigten Staaten] oder in der Bundes- republik Deutschland irgendein Gesetz, eine Verordnung oder behordliche Anordnung erlassen wird oder ergeht, aufgrund derer die Emittentin [falls die Schuldverschreibungen von Bertelsmann N.V. oder Bertelsmann U. S. begeben werden, einfugen: oder die Garantin] daran gehindert wird, die von ihr gemal3 diesen Bedingungen [falls die Schuldverschreibungen von Bertelsmann N. V. oder Bertelsmann U. S. begeben werden, einfugen: bzw. der Garantie] uber- nommenen Zahlungsverpflichtungen in vollem Umfang zu beachten und zu erfullen und diese Lage nicht binnen 90 Tagen behoben istI.1 [;oderl

[falls die Schuldverschreibungen von Bertelsmann N. V. oder Bertelsmann U. S. begeben werden, einfugen:

(h) die Garantie aus irgendeinem Grund ungultig wird oder nicht mehr rechtsver- bindlich ist.]

Im Sinne dieser Bedingungen bedeutet ,,Kreditverbindlichkeit” Schuldverschrei- bungen, Wertpapiere oder andere Kreditverbindlichkeiten in Hohe von oder im Gegenwert von mehr als US$25.000.000.

Das Kundigungsrecht erlischt, falls der Kundigungsgrund vor Ausubung des Rechts geheilt wurde.

(2) Benachrichtigung. Eine Benachrichtigung, einschliel3lich einer Kundigung der Schuldverschreibungen gemal3 vorstehendem Absatr 1 ist schriftlich in deutscher oder englischer Sprache gegenuber dem Fiscal Agent zu erklaren und personlich oder per Einschreiben an dessen bezeichnete Geschaftsstelle zu ubermitteln. Der Benachrichtigung ist ein Nachweis beizufugen, aus dem sich ergibt, daC3 der betreffende Glaubiger zum Zeitpunkt der Abgabe der Benachrichtigung lnhaber der betreffenden Schuldverschreibung ist. Der Nachweis kann durch eine Bescheini- gung der Depotbank (wie in § 13 Absatz [3] definiert) oder auf andere geeignete Weise erbracht werden.

§ 10 ERSETZUNG DER EMITENTIN

(1) Ersetzung. Die Emittentin ist jederzeit berechtigt, sofern sie sich nicht mit einer Zahlung von Kapital oder Zinsen auf die Schuldverschreibungen in Verzug befindet, ohne Zustimmung der Glaubiger [im Fall von Schuldverschreibungen, die von Ber- telsmann N. V. oder Bertelsmann U. S. begeben werden, einfugen: entweder die Garantin oder] eine Tochtergesellschaft (wie nachstehend definiert) [im Fall von Schuldverschreibungen, die von Bertelsmann begeben werden, einfugen: der Emit- tentin] [im Fall von Schuldverschreibungen, die von Bertelsmann N.V. oder Bertels- mann U.S. begeben werden, einfugen: der Garantin] an ihrer Stelle als Haupt- sch u Idne r in ( d ie ,, Na ch f o Ig esch u Idne r i n ” ) f u r a II e Ve r pfI i ch t u ng en a uch im Z us a m - menhang mit diesen Schuldverschreibungen eintusetzen, sofern:

(a) die Nachfolgeschuldnerin sich verpflichtet, jedem Glaubiger alle Steuern, Gebuhren oder Abgaben zu erstatten, die ihm in Folge der Ersetzung durch die Nachfolgeschuldnerin auferlegt werden;

(b) die Nachfolgeschuldnerin alle Verpflichtungen der Emittentin aus oder im Zu- sammenhang mit diesen Schuldverschreibungen ubernimmt;

34 (c) die Nachfolgeschuldnerin in der Lage ist, samtliche sich aus oder in dem Zusam- menhang mit diesen Schuldverschreibungen ergebenen Zahlungsverpflichtun- gen ohne die Notwendigkeit eines Einbehalts von irgendwelchen Steuern oder Abgaben an der Quelle zu erfullen sowie die hierzu erforderlichen Betrage ohne Beschrankungen an den Fiscal Agent ubertragen konnen;

(d) sichergestellt ist, da13 sich die Verpflichtungen der [im Falle von Schuldverschrei- bungen, die von Bertelsmann begeben werden, einfugen: Emittentin] [im Falle von Schuldverschreibungen, die von Bertelsmann N.V. oder Bertelsmann U. S. begeben werden, einfugen: Garantin] aus der Garantie des Debt Issuance Pro- gramms der Emittenten auch auf die Schuldverschreibungen der Nachfolge- schuldnerin erstrecken; und

(e) dem Fiscal Agent jeweils eine Bestatigung bezuglich der betroffenen Rechtsord- nungen von anerkannten Rechtsanwalten vorgelegt wird, da13 die Bestimmun- gen in den vorstehenden Unterabsatzen (a), (b), (c) und (d) erfullt wurden.

Im Sinne dieser Bedingungen bedeutet ,;Tochtergesellschaft" eine Kapital- oder Per- sonengesellschaft, an der die Bertelsmann AG direkt oder indirekt insgesamt mehr als 50% des Kapitals jeder Klasse oder der Stimmrechte halt.

(2) Bekanntmachung. Jede Ersetzung ist gema13 § 12 bekannt zu machen.

(3)Anderung von Bezugnahmen. Im Fall einer Ersetzung gilt jede Bezugnahme in diesen Emissionsbedingungen auf die Emittentin ab dem Zeitpunkt der Ersetzung als Bezugnahme auf die Nachfolgeschuldnerin und jede Bezugnahme auf das Land, in dem die Emittentin ihren Sitz oder Steuersitz hat, gilt ab diesem Zeitpunkt als Berugnahme auf das Land, in dem die Nachfolgeschuldnerin ihren Sitz oder Steuer- sitz hat. Des weiteren gilt im Fall einer Ersetzung folgendes:

Im Falle von [(a) in 5 7 und § 5 Absatr 2 gilt eine alternative Bezugnahme auf die Bundesrepublik Schuldverschrei- bungen. die von Deutschland als aufgenommen (zusatzlich zu der Bezugnahme nach Mal3gabe Bertelsmann des vorstehenden Satzes auf das Land, in dem die Nachfolgeschuldnerin ihren begeben werden, einfugen: Sitz oder Steuersitz hat);

(b) in § 9 Absatz l(c) bis (9) gilt eine alternative Bezugnahme auf die Emittentin in ihrer Eigenschaft als Garantin als aufgenommen (zusatzlich tu der Bezugnahme auf die Nachfolgeschuldnerin).l

Im Falle von [In § 7 und 5 5 Absatz 2 gilt eine alternative Bezugnahme auf die Niederlande als Schuldver- schreibungen. aufgenommen (zusatzlich zu der Bezugnahme nach Mal3gabe des vorstehenden die von Bertels- Satzes auf das Land, in dem die Nachfolgeschuldnerin ihren Sitz oder Steuersitz mann N.V. begeben werden, ein- hat).] fiigen:

Im Falle von [In 5 7 und § 5 Absatr 2 gilt eine alternative Bezugnahme auf die Vereinigten Staaten Schuldver- schreibungen. als aufgenommen (rusatzlich zu der Bezugnahme nach Mal3gabe des vorstehenden dle van BRrtels- Satzes auf das Land, in dem die Nachfolgeschuldnerin ihren Sitz oder Steuersitz mann U.S.begeben werden, ein- hat).] fiigen:

5 11 BEGEBUNG WEITERER SCHULDVERSCHREIBUNGEN, ANKAUF UND ENTWERTUNG

(1) Begebung weiterer Schuldverschreibungen. Die Emittentin ist berechtigt, jederzeit ohne Zustimmung der Glaubiger weitere Schuldverschreibungen mit gleicher Ausstattung (gegebenenfalls mit Ausnahme des Tags der Begebung, des Verzin-

35 sungsbeginns undloder des Ausgabepreises) in der Weise zu begeben, dal3 sie mit diesen Schuldverschreibungen eine einheitliche Serie bilden.

(2) Ankauf Die Emittentin ist berechtigt, jederzeit Schuldverschreibungen im Markt oder anderweitig zu jedem beliebigen Preis zu kaufen. Die von der Emittentin erwor- benen Schuldverschreibungen konnen nach Wahl der Emittentin von ihr gehalten, weiterverkauft oder bei dem Fiscal Agent zwecks Entwertung eingereicht werden. Sofern diese Kaufe durch offentliches Angebot erfolgen, mul3 dieses Angebot allen Glaubigern gemacht werden.

(3)Entwertung. Samtliche vollstandig zuruckgezahlten Schuldverschreibungen sind unverzuglich zu entwerten und konnen nicht wiederbegeben oder wiederverkauft werden.

§ 12 MllTElLUNGEN

(1) Bekanntmachung. Alle die Schuldverschreibungen betreffenden Mitteilungen sind in einer Tageszeitung mit allgemeiner Verbreitung in [Deutschlandl [Luxem- burg] [anderes Land einfugen], voraussichtlich [der Borsen-Zeitungl [Luxemburger Wort] [andere Zeitung mit allgemeiner Verbreitung einfugenl, zu veroffentlichen. Jede derartige Mitteilung gilt mit dem Tag der Veroffentlichung (oder bei mehreren Veroffentlichungen mit dem Tag der ersten solchen Veroffentlichung) als wirksam erfo Igt.

(2) Mitteilungen an das Clearing System. Die Emittentin ist berechtigt, eine Zei- tungsveroffentlichung nach vorstehendem Absatz 1 durch eine Mitteilung an das Clearing System zur Weiterleitung an die Glaubiger zu ersetzen, vorausgesetzt, da13 in Fallen, in denen die Schuldverschreibungen an einer Borse notiert sind, die Regeln dieser Borse diese Form der Mitteilung zulassen. Jede derartige Mitteilung gilt am siebten Tag nach dem Tag der Mitteilung an das Clearing System als den Glaubigern mitgeteilt. [Im Fall von Schuldverschreibungen, die an der Luxemburger Borse notiert sind, einfugen: Solange die Schuldverschreibungen an der Luxembur- ger Borse notiert sind, haben alle die Schuldverschreibungen betreffenden Mittei- lungen in der in Absatz 1 vorgesehenen Form zu erfolgen.]

0 13 ANWENDBARES RECHT, GERICHTSSTAND UND GERICHTLICHE GELTENDMACHUNG

(1) Anwendbares Recht. Form und lnhalt der Schuldverschreibungen sowie die Rechte und Pflichten der Glaubiger und der Emittentin bestimmen sich in jeder Hin- sicht nach deutschem Recht.

(2) Gerichtsstand. [Im Falle van Schuldverschreibungen, die von Bertelsmann begeben werden, einfugen: Ausschliel3licher] Gerichtsstand fur alle Rechtsstreitigkeiten aus oder im Zusammenhang mit den Schuldverschreibungen (,,Rechtsstreitigkei- ten") ist Frankfurt am Main. [Im Falle von Schuldverschreibungen, die von Bertels- mann N.V. oder Bertelsmann U.S. begeben werden, einfugen: Die Glaubiger konnen ihre Anspruche jedoch auch vor anderen zustandigen Gerichten geltend machen.] Die deutschen Gerichte sind ausschlieklich zustandig fur die Kraftloserkla- rung abhandengekommener oder vernichteter Schuldverschreibungen. Die Emit- tentin unterwidt sich hiermit der Gerichtsbarkeit der nach diesem Absatz zustandigen Gerichte.

36 Im Falle von [(3) Bestellung von Zustellungsbevollmachtigten. Fur etwaige Rechtsstreitigkeiten Schuldverschrei- bungen. dievon vor deutschen Gerichten bestellt die Emittentin die Bertelsmann AG, Carl-Bertels- Benelsmann mann-Stral3e 270, 33311 Gutersloh, Bundesrepublik Deutschland, zu ihrer Zustel- N.V. oder Benelsmann lungsbevollmachtigten in Deutschland.] U.S. begeben werden, einfugen:

[(4)] Gerichtliche Geltendmachung. Jeder Glaubiger von Schuldverschreibungen ist berechtigt, in jedem Rechtsstreit gegen die Emittentin oder in jedem Rechtsstreit, in dem der Glaubiger und die Emittentin Partei sind, seine Rechte aus diesen Schuld- verschreibungen im eigenen Namen auf der folgenden Grundlage zu schutzen oder geltend zu machen: (i)er bringt eine Bescheinigung der Depotbank bei, bei der er fur die Schuldverschreibungen ein Wertpapierdepot unterhalt, welche (a) den vollstandigen Namen und die vollstandige Adresse des Glaubigers enthalt, (b) den Gesamt- nennbetrag der Schuldverschreibungen bezeichnet, die unter dem Datum der Besta- tigung auf dem Wertpapierdepot verbucht sind und (c) bestatigt, dal3 die Depotbank gegenuber dem Clearing System eine schriftliche Erklarung abgegeben hat, die die vorstehend unter (a) und (b) bezeichneten lnformationen enthalt; und (ii)er legt eine Kopie der die betreffenden Schuldverschreibungen verbriefenden Globalurkunde vor, deren Ubereinstimmung mit dem Original eine vertretungsberechtigte Person des Clearing Systems oder des Verwahrers des Clearing Systems bestatigt hat, ohne dal3 eine Vorlage der Originalbelege oder der die Schuldverschreibungen verbriefenden Globalurkunde in einem solchen Verfahren erforderlich ware. Fur die Zwecke des Vorstehenden bezeichnet ,,Depotbank" jede Bank oder ein sonstiges anerkanntes Finanzinstitut, das berechtigt ist, das Wertpapierverwahrungsgeschaft zu betreiben und bei der/dem der Glaubiger ein Wertpapierdepot fur die Schuldver- schreibungen unterhalt, einschliel3lich des Clearing Systems.

§ 14 SPRACHE

Falls die Emissi- [Diese Emissionsbedingungen sind in deutscher Sprache abgefal3t. Eine Uberset- onsbedingungen in deutscher zung in die englische Sprache ist beigefugt. Der deutsche Text ist bindend und mal3- Sprache mit geblich. Die Ubersetzung in die englische Sprache ist unverbindlich.] einer Uberset- rung in die englische Sprache abgefalt sind, einfugen:

Falls die Emissi- [Diese Emissionsbedingungen sind in englischer Sprache abgefal3t. Eine Uberset- onsbedingungen in englischer zung in die deutsche Sprache ist beigefugt. Der englische Text ist bindend und ma& Sprache mit geblich. Die Ubersetzung in die deutsche Sprache ist unverbindlich.] einar uberset- rung in die deutsche Sprache abgefalt sind, einfugen:

Falls die Emissi- onsbedingungen ausschlieRlich in deutscher Spra- che sbgefaRt slnd. elnfugen:

37 TEIL I1 - ZUSATZZU DEN GRUNDBEDINGUNGEN

INHABERSCHULDVERSCHREIBUNGEN, FUR DIE ElNE VERBRIEFUNG DURCH EINZELURKUNDEN VORGESEHEN IST

Falls das jeweilige Konditionenblatt die an fangliche Begebung einer durch Einzel- urkunden zu ersetzenden vorlaufigen Globalurkunde vorsieht, werden die Grund- bedingungen gemafi Teil I nach Mafigabe der Bedingungen des jeweiligen Konditio- nenblattes durch die nachfolgenden Bestimmungen erganrt.

Das gleiche gilt sinngemafi, wenn im Fall einer durch eine Dauerglobalurkunde verbrieften Emission der Bertelsmann U.S. gemal3 5 I (3)(c)der Grundbedingungen nach Teil I nachtraglich der Austausch der Dauerglobalurkunde durch Einzelurkun- den verlangt wird, und zwar ab dem Tag des Austauschs.

[Im Fall von Schuldverschreibungen, die durch eine vorlaufige Globalurkunde verbrieft sind, welche durch Einzelurkunden und/oder Sammelurkunden zu ersetzen ist, ist 5 1(3)(a) (WAHRUNG, STUCKELUNG, FORM, DEFINITIONEN - Vodiufige Globalurkunde- Austausch) wie folgt zu ersetzen:

(a) Die Schuldverschreibungen sind anfanglich durch eine vorlaufige Global- urkunde (die ,,vorlaufige Globalurkunde") ohne Zinsscheine verbrieft. Die vor- Iaufige Globalurkunde wird [falls die vorlaufige Globalurkunde ausschlieRlich gegen Einzelurkunden ausgetauscht wird, einfugen: gegen Einzelurkunden in den festgelegten Stuckelungen (,,Einzelurkunden") [falls die Schuldverschrei- bungen mit Zinsscheinen, Talons und/oder Ruckzahlungsscheinen ausgegeben werden, einfiigen: mit beigefugten [Zinsscheinen (,,Zinsscheine")l [und Talons (,;Talons") fur weitere Zinsscheine] [und] [Ruckzahlungsscheinen (,,Ruckzah- lungsscheine") fur die Zahlung der Tilgungsraten]] ausgetauscht] [falls die vor- Iaufige Globalurkunde gegen Einzelurkunden und Sammelurkunden ausgetauscht wird, einfugen: zum Teil gegen Einzelurkunden in den festgelegten Stuckelungen (,, Einzel u rku nden") [falls die Schuldverschreibungen mit Zins- scheinen, Talons und/oder Ruckzahlungsscheinen ausgegeben werden, einfugen: mit beigefugten [Zinsscheinen (,,Zinsscheine")l [Talons (,;Talons") fur weitere Zinsscheinel [undl [Ruckzahlungsscheinen (,,Ruckzahlungsscheine") fur die Zahlung der Tilgungsraten]] und zum anderen Teil gegen eine oder mehrere Sammelurkunden (jeweils eine ,,Sammelurkunde") [falls die Schuldverschrei- bungen mit Zinsscheinen ausgegeben werden, einfugen: mit beigefugten Sam- melzinsscheinen (jeweils ein ,,Sammelzinsschein")1 ausgetauscht; das Recht der Glaubiger, die Auslieferung von Einzelurkunden im Austausch gegen Schuldver- schreibungen, die durch eine Sammelurkunde verbrieft sind, zu fordern, richtet sich nach § 9a(3) Satr 1 Depotgesetz]. Die vorlaufige Globalurkunde [falls die vorlaufige Globalurkunde gegen Einrelurkunden und Sammelurkunden ausgetauscht wird, einfugen: und jede Sammelurkunde [falls die Schuldverschreibun- gen mit Zinsscheinen ausgegeben werden, einfugen: und jeder Sammelzins- schein]] tragt die eigenhandigen Unterschriften zweier ordnungsgemaR bevollmachtigter Vertreter der Emittentin und die vorlaufige Globalurkunde [und jede Sammelurkunde] ist von dem Fiscal Agent oder in dessen Namen mit einer Kon- trol Iuntersch rift versehen. Die Ei ntelu rku nden [falls die Schuldverschreibungen mit finsscheinen, Talons und/oder Ruckzahlungsscheinen ausgegeben werden, einfugen: und die [Zinsscheine][,] [und] [Talons] [und Ruckzahlungsscheinel1 tragen die faksimilierten Unterschriften zweier ordnungsgemal3 bevollmachtigter Vertreter der Emittentin und die Einzelurkunden sind von dem Fiscal Agent oder in dessen Namen mit einer Kontrollunterschrift versehen.]

[(i)im Fall von Schuldverschreibungen, die keine TEFRA D Schuldverschreibungen sind, ist 5 1(3)(b) (WAHRUNG, STUCKELUNG, FORM, DEFINITIONEN - Vodiufige Globalurkunde - Austausch) wie folgt zu ersetzen:

38 (b) Die vorlaufige Globalurkunde ist an einem Tag (der ,,Austauschtag”), der nicht spater als 180 Tage nach dem Tag der Ausgabe der vorlaufigen Globalurkunde liegt, gegen Schuldverschreibungen in der in dem vorstehenden Absatz (a) vor- gese henen Form auszutauschen .I

[(ii)im Fall von Schuldverschreibungen, die TEFRA D Schuldverschreibungen sind, ist § 1(3)(b) und im Falle von Schuldverschreibungen, die van Bertelsmann U.S. begeben werden und durch eine vorlaufige Globalurkunde verbrieft sind, sind 0 1(3)(b) und (c) (WAHRUNG, STUCKELUNG, FORM, DEFINITIONEN - Vodaufige Globalurkunde - Austausch) wie folgt zu ersetzen:

(b) Die vorlaufige Globalurkunde wird an einem Tag (der ,,Austauschtag”) gegen Schuldverschreibungen in der in dem vorstehenden Absatz (a) vorgesehenen Form ausgetauscht, der nicht mehr als 180 Tage nach dem Tag der Ausgabe der vorlaufigen Globalurkunde liegt. Der Austauschtag fur einen solchen Austausch so11 nicht weniger als 40 Tage nach dem Tag der Ausgabe der vorlaufigen Globalurkunde liegen. Ein solcher Austausch sol1 nur nach Vorlage von Beschei- nigungen erfolgen, wonach der oder die wirtschaftlichen Eigentumer der durch die vorlaufige Globalurkunde verbrieften Schuldverschreibungen keine U. S.- Personen sind (ausgenommen bestimmte Finanzinstitute oder bestimmte Per- sonen, die Schuldverschreibungen uber solche Finanzinstitute halten). Zinstah- lungen auf durch eine vorlaufige Globalurkunde verbriefte Schuldverschreibun- gen erfolgen erst nach Vorlage solcher Bescheinigungen. Eine gesonderte Bescheinigung ist hinsichtlich einer jeden solchen Zinszahlung erforderlich. Jede Bescheinigung, die am oder nach dem 40. Tag nach dem Tag der Ausgabe der vorlaufigen Globalurkunde eingeht, wird als ein Ersuchen behandelt werden, diese vorlaufige Globalurkunde gemal3 dieses Absatzes (b) auszutauschen. Wertpapiere, die im Austausch fur die vorlaufige Globalurkunde geliefert werden, sind nur aukerhalb der Vereinigten Staaten zu liefern.]

[Im Fall von Schuldverschreibungen, die von der Bertelsmann U. S. begeben werden und die durch eine Dauerglobalurkunde verbrieft sind, ist 5 l(3) (WAHRUNG, STUCKELUNG, FORM, DEFINITIONEN - Vorliiufige Globalurkunde - Austausch) wie folgt zu ersetzen:

(3)Einzelurkunden [sofern Sammelutkunden ausgegeben werden sollen, einfugen: und Sammelurkunden.]

Die Schuldverschreibungen sind [falls die Dauerglobalurkunde ausschliefilich gegen Einzelurkunden ausgetauscht wird, einfugen: durch Einzelurkunden in den festgelegten Stuckelungen (,,Einzelurkunden”) [falls die Schuldverschrei- bungen mit Zinsscheinen, Talons undloder Ruckzahlungsscheinen ausgegeben werden, einfugen: mit beigefugten [Zinsscheinen (,,Zinsscheine”)l [und Talons (,,Talons”) fur weitere Zinsscheinel [undl [Ruckzahlungsscheinen (,,Ruckzah- lungsscheine”) fur die Zahlung der Tilgungsratenll verbrieft] [falls die Dauerglo- balurkunde gegen Einzelurkunden und Sammelurkunden ausgetauscht witd, einfugen: zum Teil durch Einzelurkunden in den festgelegten Stuckelungen (,, Einzel u rku nden ”) [falls die Schuldverschreibungen mit Zinsscheinen, Talons undioder Ruckzahlungsscheinen ausgegeben werden, einfugen: mit beigefugten [Zinsscheinen (,,Zinsscheine”)l [Talons (,Talons”) fur weitere Zinsscheinel [u ndl [Ruckza h Iungsscheinen (,, Ruckza h Iu ngsschei ne”) fur die Za h Iung der Ti I- gungsraten]] und zum anderen Teil gegen eine oder mehrere Sammelurkunden (jeweils eine ,,Sammelurkunde”) [falls die Schuldverschreibungen mit Zins- scheinen ausgegeben werden, einfugen: mit beigefugten Sammelzinsscheinen (jeweils ein ,,Sammelzinsschein”)l verbrieft; das Recht der Glaubiger, die Auslie- ferung von Einzelurkunden im Austausch gegen Schuldverschreibungen, die durch eine Sammelurkunde verbrieft sind, zu fordern, richtet sich nach § 9a(3) Satr 1 Depotgesetz. Jede Sammelurkunde [falls die Schuldverschreibungen mit Zinsscheinen ausgegeben werden, einfugen: und jeder Sammelzinsscheinll

39 tragt die eigenhandigen Unterschriften zweier ordnungsgemaa bevollmachtigter Vertreter der Emittentin und jede Sammelurkunde ist von dem Fiscal Agent oder in dessen Namen mit einer Kontrollunterschrift versehen.] Die Eintelurkun- den [falls die Schuldverschreibungen mit Zinsscheinen, Talons und/oder Ruck- zahlungsscheinen ausgegeben werden, einfugen: und die [Zinsscheinel[,l [undl [Talons] [und Rucktahlungsscheine]] tragen die faksimilierten Unterschriften zweier ordnungsgemaa bevollmachtigter Vertreter der Emittentin und die Einzelurkunden sind von dem Fiscal Agent oder in dessen Namen mit einer Kon- trollunterschrift versehen.]

[§ l(4) und (5) (WAHRUNG, STUCKELUNG, FORM, DEFINITIONEN - Clearing SystemIGlaubiger von Schuldverschreibungen)ist wie folgt zu ersetzen:

(4) Clearing System. ,,Clearing System” bedeutet [bei mehr als einem Clearing System einfugen: jeweils] folgendes: [Clearstream Banking AG, Frankfurt am Main (,,CBF”)I [,I[undl [Clearstream Banking, societe anonyme, Luxembourg (,,CBL”)] [,I [undl [Euroclear Bank S.A./N.V., Brussel, als Betreiberin des Euroclear Systems (,,Euroclear”)][,] [und] [anderes Clearing System angeben].

(5) Glaubiger von Schuldverschreibungen. ,,Glaubiger” bedeutet, in bezug auf die bei einem Clearing System oder einem sonstigen zentralen Wertpapierverwahrer hinterlegten Schuldverschreibungen, jeder lnhaber eines Miteigentumsanteils oder anderen vergleichbaren Rechts an den hinterlegten Schuldverschreibungen und in bezug auf nicht bei einem Clearing System oder einem sonstigen zentralen Wert- papierverwahrer hinterlegte Einzelurkunden, der lnhaber einer solchen Einzel- urkunde.

(6) Bezugnahmen auf Schuldverschreibungen. Bezugnahmen in diesen Bedingun- gen auf die ,,Schuldverschreibungen“ schlieaen Bezugnahmen auf jede die Schuld- verschreibungen verbriefende Globalurkunde und jede Einzelurkunde [falls die Schuldverschreibungen mit Zinsscheinen, Talons und/oder Ruckzahlungsscheinen begeben werden einfugen: und die zugehorigen [Zinsscheinel[,l [undl [Sammeltins- scheine] [,I[undl [Talons] [und Ruckzahlungsscheinel1 ein, es sei denn, aus dem Zusammenhang ergibt sich etwas anderes.]

[Im Fall von festverzinslichen Schuldverschreibungen ist § 3(2) (ZINSEN - INDEXIE- RUNG - Auflaufende Zinsen) wie folgt zu ersetzen:

(2) Auflaufende Zinsen. Der Zinslauf der Schuldverschreibungen endet mit Beginn des Tages, an dem sie fur Ruckzahlung fallig werden. Falls die Emittentin die Schuldverschreibungen bei Falligkeit nicht einlost, endet die Verrinsung des ausstehenden Nennbetrags der Schuldverschreibungen nicht am Tag der Falligkeit, sondern erst mit der tatsachlichen Ruckzahlung der Schuldverschreibungen, spatestens jedoch mit Ablauf des vierzehnten Tages nach der Bekanntmachung durch den Fis- cal Agent gemal3 § 12, dal3 ihm die fur die Ruckzahlung der Schuldverschreibungen erforderlichen Mittel zur Verfugung gestellt worden sind.]

[Im Fall von variabel verzinslichen Schuldverschreibungen ist 5 3(1) (ZINSEN - INDEXIERUNG - Zinszahlungstage) Unterabsatz (d) wie folgt zu ersetzen:

(d) In diesem 0 3 bezeichnet ,,Geschaftstag” einen Tag, der ein Tag (aui3er einem Samstag oder Sonntag) ist, an dem (i) Geschaftsbanken und Devisenmarkte Zahlungen am jeweiligen Ort der Vorlage abwickeln und (ii) das Clearing System sowie (iii) [falls die festgelegte Wahrung nicht Euro ist, einfugen: Geschaftsban ken u nd Devisen ma rkte in [samtliche relevanten Finanzzentren einfugenll [falls die festgelegte Wahrung Euro ist, einfugen: das Trans-European Automated Real-time Gross Settlement Express Transfer System (JARGET”)] Zahlungen abwickeln.]

40 [Im Fall von Nullkupon-Schuldverschreibungen ist § 3(2) (ZINSEN - INDEXIERUNG - Auflaufende Zinsen) wie folgt zu ersetzen:

(2) Auflaufende Zinsen. SolIte die Emittentin die Schuldverschreibungen bei Fallig- keit nicht einlosen, fallen auf den ausstehenden Nennbetrag der Schuldverschrei- bungen ab dem Falligkeitstag his zum Tag der tatsachlichen Ruckzahlung Zinsen in Hohe von [Emissionsrendite einfugenl per annum an; die Verzinsung endet jedoch spatestens mit Ablauf des vierzehnten Tages nach Bekanntmachung durch den Fis- cal Agent gema13 5 12, da13 ihm die fur die Ruckzahlung der Schuldverschreibungen erforderlichen Mittel zur Verfugung gestellt worden sind.]

[Im Fall von variabel verzinslichen Schuldverschreibungen ist 0 3[(7)] (ZINSEN - INDEXIERUNG - Auflaufende Zinsen) wie folgt zu ersetzen:

[(7)] Auflaufende Zinsen. Der Zinslauf der Schuldverschreibungen endet mit Beginn des Tages, an dem sie zur Ruckzahlung fallig werden. Sollte die Emittentin die Schuldverschreibungen bei Falligkeit nicht einlosen, endet die Verzinsung des ausstehenden Nennbetrags der Schuldverschreibungen nicht am Falligkeitstag, sondern erst mit der tatsachlichen Ruckzahlung der Schuldverschreibungen, spatestens jedoch mit Ablauf des vierzehnten Tages nach der Bekanntmachung durch den Fis- cal Agent gema13 § 12, da13 ihm die fur die Ruckzahlung der Schuldverschreibungen erforderlichen Mittel zur Verfugung gestellt worden sind. Der jeweils geltende Zins- satz wird gemal3 diesem 5 3 bestimmt.]

[§ 4(l)[(a)l(ZAHLUNGEN -2ahlungen auf Kapital) ist wie folgt zu ersetzen:

(1) [(a)] Zahlungen auf Kapital. Zahlungen auf Kapital in bezug auf die Schuldver- schreibungen erfolgen nach Maagabe des nachstehenden Absatzes 2 gegen Vorlage und (auaer im Fall von Teilzahlungen) Einreichung der entsprechenden Urkunde bei der bezeichneten Geschaftsstelle des Fiscal Agent au13er- halb der Vereinigten Staaten oder bei der bereichneten Geschaftsstelle einer anderen Zahlstelle au13erhalb der Vereinigten Staaten.]

[Im Fall von Raten-Schuldverschreibungen einfugen: Die Zahlung von Raten auf eine Raten-Schuldverschreibung mit Ruckzahlungsscheinen erfolgt gegen Vorlage der Schuldverschreibung zusammen mit dem betreffenden Ruckrahlungsschein und Einreichung dieses Ruckzahlungsscheins und, im Falle der letzten Ratenzahlung gegen Einreichung der Schuldverschreibung bei der bezeichneten Geschaftsstelle des Fiscal Agent auaerhalb der Ver- einigten Staaten oder bei der bezeichneten Geschaftsstelle einer anderen Za h Ist e I Ie au 13 er h aI b der Ve rei n ig t e n S t a at en . R uckz a h Iu ng ssche i ne si nd kein Nachweis der lnhaberschaft an den Schuldverschreibungen. Ruckzah- lungsscheine, die ohne die dazugehorige Schuldverschreibung vorgelegt werden, begrunden keine Verpflichtungen der Emittentin. Die Vorlage einer Raten-Schuldverschreibung ohne den entsprechenden Ruckzahlungsschein oder die Vorlage eines Ruckzahlungsscheins ohne die dazugehorige Schuld- verschreibung berechtigt den Glaubiger nicht, die Zahlung einer Rate zu verlangen.]

[Im Fall von Schuldverschreibungen, die keine Nullkupon-Schuldverschreibungen sind, ist § 4(l)(b)(ZAHLUNGEN -Zahlungen won Zinsen) wie folgt zu ersetzen:

(b) Zahlung yon Zinsen. Die Zahlung von Zinsen auf Schuldverschreibungen erfolgt nach MaRgabe von Absatz 2 gegen Vorlage und Einreichung der entsprechenden Zinsscheine oder, im Fall von nicht mit Zinsscheinen ausge- statteten Schuldverschreibungen oder im Fall von Zinszahlungen, die nicht an einem fur Zinszahlungen vorgesehenen Tag fallig werden, gegen Vorlage der entsprechenden Schuldverschreibungen bei der bezeichneten Ge- schaftsstelle des Fiscal Agent aul3erhalb der Vereinigten Staaten oder bei

41 der bezeichneten Geschaftsstelle einer anderen Zahlstelle auaerhalb der Ve rei n ig t e n St aate n .

[Im Fall von Schuldverschreibungen der Bertelsmann U. S., die durch eine vorlaufige Globalurkunde verbrieft sind, welche durch Einzelurkunden und/ oder Sammelurkunden TU ersetren ist, einfugen: Die Zahlung von Zinsen auf Schuldverschreibungen, die durch eine vorlaufige Globalurkunde verbrieft sind, erfolgt nach MaRgabe von Absatz 2 an das Clearing System oder dessen Order zur Gutschrift auf den Konten der jeweiligen Kontoinhaber des Clearing Systems, und zwar nach ordnungsgemafier Bescheinigung gemat3 § 1(3)(b).ll

[Im Fall von Schuldverschreibungen, die mit Zinsscheinen, Talons und/oder Ruck- zahlungsscheinen begeben werden, ist als § 4(l)(c) (ZAHLUNGEN - Einreichung von [Zinsscheinen][,I [undl [Talons] fund Riickzahlungsscheinen])einzufugen:

(c) Einreichung von [Zinsscheinenl[,l [undl [Talons] [und Ruckzahlungsschei- nenl. Jede Schuldverschreibung, die mit beigefugten [Zinsscheinen] [oder] [Talons] [oder Ruckzahlungsscheinenl ausgegeben wurde, ist bei Ruckzah- lung vorzulegen und, aul3er im Falle einer Teilrahlung des Ruckzahlungsbe- trages, zusammen mit allen dazugehorigen noch nicht falligen [Zinsschei- nen][,l [undl [Talons] [und Ruckzahlungsscheinenl einzureichen; erfolgt dies nicht [Im Fall von festverzinslichen Schuldverschreibungen einfiigen: wird der Betrag der fehlenden noch nicht falligen Zinsscheine von dem ansonsten bei der Ruckzahlung falligen Betrag abgezogen[,l [undl [.I1 [Im Fall von variabel verzinslichen Schuldverschreibungen einfugen: werden alle nicht falligen zugehorigen Zinsscheine (gleich, ob sie zusammen mit diesen eingereicht werden oder nicht) ungultig und es erfolgt ab diesem Zeitpunkt keine Zahlung mehr auf sie[,l [undl[.l] [Im Fall von Schuldverschreibungen, die mit Talons ausgegeben werden, einfiigen: werden samtliche nicht falligen Talons (gleich, ob sie zusammen mit diesen eingereicht werden oder nicht) ungultig und konnen nicht zu einem spateren Zeitpunkt gegen Zins- scheine ausgetauscht werden [und] [.I][Im Fall von Schuldverschreibungen, die mit Ruckzahlungsscheinen ausgegeben werden, einfugen: werden samtliche zugehorigen Ruckzahlungsscheine, die in bezug auf die Zahlung einer Rate, die (ware sie nicht zur Ruckzahlung fallig geworden) an einem Tag nach Ruckzahlung fallig geworden ware (gleich, ob sie mit dieser Schuldverschreibung eingereicht wurde oder nicht), ungultig.]

[Im Fall von festverzinslichen Schuldverschreibungen, die mit Zinsscheinen ausgegeben werden, einfiigen: Werden Schuldverschreibungen mit einer Falligkeit und einem Zinssatz oder Zinssatzen begeben, die dazu fuhren wurden, daR bei Vorlage zur Zahlung dieser Schuldverschreibungen ohne dazugehorige noch nicht fallige Zinsscheine der wie vorstehend dargelegt in Abzug zu bringende Betrag den ansonsten zu zahlenden Ruckzahlungs- betrag ubersteigt, so werden diese noch nicht falligen Zinsscheine (gleich, ob sie beigefugt sind oder nicht) zum Zeitpunkt der Falligkeit solcher Schuld- verschreibungen ungultig (und es erfolgt auf sie keine Zahlung), insoweit als dies erforderlich ist, damit der gemal3 der vorstehenden Regelung in Abzug zu bringende Betrag den vorgesehenen Ruckzahlungsbetrag nicht ubersteigt. Sofern die Anwendung des letzten Satzes die Entwertung eini- ger, aber nicht samtlicher noch nicht falliger Zinsscheine einer Schuldver- schreibung erfordert, bestimmt die betreffende Zahlstelle, welche nicht falligen Zinsscheine ungultig werden sollen, wobei zu diesem Zwecke spater fallige Zinsscheine vor fruher falligen Zinsscheinen fur ungultig zu erklaren sind.]

[Im Fall von Schuldverschreibungen, die mit Talons ausgegeben werden, einfugen: Am oder nach dem Zinszahlungstag, an dem der letzte Zinsschein

42 eines Zinsscheinbogens fallig wird, kann der im Zinsscheinbogen enthaltene Talon bei der bezeichneten Geschaftsstelle einer Zahlstelle im Aus- tausch gegen einen weiteren Zinsscheinbogen (einschliel3lich ggf. eines weiteren Talons) eingereicht werden. Jeder Talon gilt fur die Zwecke dieser Bedingungen als am Zinszahlungstag fallig, an dem der letzte im jeweiligen Zinsscheinbogen enthaltene Zinsschein fallig wird.]

[§ 4(2) (ZAHLUNGEN - Zahlungsweise) ist wie folgt zu ersetten:

(2) Zahlungsweise. Vorbehaltlich geltender steuerlicher und sonstiger gesetzlicher Regelungen und Vorschriften erfolgen auf die Schuldverschreibungen zu leistende Zahlungen in [festgelegte Wahrung einfugen] [bei Doppelwahrungsanleihen entsprechende Wahrungen/Wechselkursformeln einfugen]

[Im Fall von Zahlungen in einer anderen Wahrung als Euro oder U.S. Dollar einfugen:, und zwar durch in dieser Wahrung zahlbaren Scheck, ausgestellt auf eine Bank in dem Hauptfinanzzentrum des Landes der festgelegten Wahrung oder, nach Wahl des Zahlungsempfangers, durch Uberweisung auf ein auf die festgelegte Wahrung lautendes Konto des Zahlungsempfangers, das dieser bei einer Bank in diesem Finanzzentrum unterhalt.]

[Im Fall von Zahlungen in Euro einfugen:, und zwar in bar oder durch in dieser Wah- rung zahlbaren Scheck, ausgestellt auf eine Bank in einem Hauptfinanrtentrum eines Landes, das Teilnehmerstaat in der Europaischen Wirtschafts- und Wahrungs- union geworden ist, oder nach Wahl des Zahlungsempfangers, durch Uberweisung auf ein auf diese Wahrung lautendes Konto, das der Zahlungsempfanger bei einer Bank in einem solchen Finanzzentrum unterhalt.]

[Im Fall von Zahlungen in U.S. Dollar einfugen:, und zwar durch in dieser Wahrung zahlbaren Scheck, ausgestellt auf eine Bank in New York City oder, nach Wahl des Zahlungsempfangers, durch Uberweisung auf ein auf diese Wahrung lautendes Konto, das der Zahlungsempfanger bei einer Bank aul3erhalb der Vereinigten Staaten unterhalt.11

[I4(3) (ZAHLUNGEN - Erfullung) ist wie folgt zu ersetzen:

(3) Erfullung. Im Fall von Schuldverschreibungen, die uber ein Clearing System gehalten werden, wird die Emittentin [im Fall von Schuldverschreibungen, die von Bertelsmann N. V. oder Bertelsmann U. S. begeben werden, einfugen: bzw. die Garantinl durch Leistung der Zahlung an das Clearing System oder dessen Order von ihrer Zahlungspflicht befreit.]

[§ 5[(4)l(b)(ii) (RUCKZAHLUNG - Vorzeitige Riickrahlung nach Wahl der Emittentin) ist wie folgt zu ersetzen:

(ii) eine Erklarung, ob diese Serie gant oder teilweise zuruckgezahlt wird und im letzten Fall den Gesamtnennbetrag und die Seriennummern der zuruckzuzahlenden Schuldverschreibungen;l

[§ 5[(4)I(c)(RUCKZAHLUNG - Vorzeitige Riickzahlung nach Wah/ der Emittentin) ist wie folgt zu ersetzen:

(c) Wenn die Schuldverschreibungen nur teilweise zuruckgezahlt werden, werden die zuruckzuzahlenden Schuldverschreibungen durch Los oder auf eine andere Art und Weise ermittelt, die dem Fiscal Agent nach seinem Ermessen als angemessen und billig erscheint.]

43 [§ 5[(5)l(b) (RUCKZAHLUNG - Vorzeitige Ruckzahlung nach Wahl des Wiubigers) ist wie folgt zu ersetzen:

(b) Um dieses Wahlrecht austuuben, hat der Glaubiger nicht weniger als [Min- destkundigungsfrist einfugen] und nicht mehr als [Hochstkundigungsfrist einfugen] Tage vor dem Wahl-Rucktahlungstag (Put), an dem die Ruckzah- lung gemal3 der Ausubungserklarung (wie nachstehend definiert) erfolgen soll, bei der bezeichneten Geschaftsstelle des Fiscal Agent oder einer anderen Zahlstelle wahrend der normalen Geschaftszeiten eine ordnungsgemal3 ausgefullte Mitteilung zur vorzeitigen Ruckzahlung (,,Ausubungserkla- rung"), wie sie von der bezeichneten Geschaftsstelle des Fiscal Agent oder einer jeden Zahlstelle erhaltlich ist, zusammen mit der entsprechenden Schuldverschreibung zu hinterlegen. Die Ausubung des Wahlrechts kann nicht widerrufen und die so hinterlegte Schuldverschreibung kann nicht zuruckgenommen werden.]

[Im Fall van Schuldverschreibungen, die von Bertelsmann oder Bertelsmann N. V. begeben werden, ist nach 5 7 (STEUERN) Unterabsatz (d), und im Fall von Schuld- verschreibungen, die von Bertelsmann U. S. begeben werden, ist nach § 7(3) (STEUERN) Unterabsatz (d) folgender Absatz (e) einzufugen und die nachfolgenden Unterabsatze neu durchzubuchstabieren:

(e) nicht zahlbar waren, wenn die Schuldverschreibungen bei einer Bank oder einem vergleichbaren lnstitut verwahrt worden waren und die Bank oder das vergleichbare lnstitut die Zahlungen eingezogen hatte; oder]

[§ 8 (VORLEGUNGSFRIST) ist wie folgt tu ersetzen:

18 VORLEGUNGSFRIST, ERSETZUNG VON SCHULDVERSCHREIBUNGEN [falls die Schuldverschreibungen mit Zinsscheinen begeben werden, einfugen: UND ZINSSCHEINENI

Die in § 801 Absatz 1 Satz 1 BGB bestimmte Vorlegungsfrist wird fur die Schuldver- schreibungen auf zehn Jahre abgekurtt. [Falls die Schuldverschreibungen mit tins- scheinen begeben werden einfugen: Die Vorlegungsfrist fur Zinsscheine betragt gemal3 5 801 Absatz 2 BGB vier Jahre und beginnt mit dem Ablauf des Kalenderjah- res, in dem der betreffende Zinsschein zur Zahlung fallig geworden ist.] Sollte eine Schuldverschreibung [falls die Schuldverschreibungen mit Zinsscheinen begeben werden einfugen: oder ein Zinsschein] verloren gehen, gestohlen, beschadigt, un- leserlich gemacht oder zerstort werden, so kann sie[/er] bei der bezeichneten Geschaftsstelle des Fiscal Agent vorbehaltlich der betreffenden Borsenbestimmun- gen und aller anwendbaren Gesetze ersetzt werden; dabei hat der Anspruchsteller alle dabei moglicherweise entstehenden Kosten und Auslagen zu zahlen und alle angemessenen Bedingungen der Emittentin hinsichtlich des Nachweises, der Sicherheit, einer Freistellung und dergleichen zu erfullen. Eine beschadigte oder u n leserl ich gemachte Schu ldversch rei bung [falls die Schuldverschreibungen mit Zinsscheinen begeben werden einfugen: oder ein solcher Zinsscheinl mu13 eingereicht werden, bevor eine Ersatzurkunde ausgegeben wird.]

[Falls die Schuldverschreibungen mit Zinsscheinen begeben werden, ist 5 11[(3)] (BEGEBUNG WEITERER SCHULDVERSCHREIBUNGEN, ANKAUF UND ENTWER- TUNG - Entwertung) wie folgt zu ersetzen:

[(3)1 Entwertung. Samtl iche vol Istandig zu ruckgeza h Iten Sch u ldverschrei bu ngen sind unverzuglich zusammen mit allen nicht falligen und zusammen mit den Schuldverschreibungen eingereichten oder den Schuldverschreibungen beigefug-

44 ten Zinsscheinen 2u entwerten und konnen nicht wiederbegeben oder wiederverkauft werden.]

[§ 12 (2) (MITTEILUNGEN - MitCeilungen an das Clearing System) ist zu streichenl

[§ 13 [(4)] (ANWENDBARES RECHT, GERICHTSSTAND UND GERICHTLICHE GELTENDMACHUNG - Gehhfliche Geltendmachung) ist wie folgt zu ersetzen:

(3) Gerichtliche Geltendmachung. Jeder Glaubiger von Schuldverschreibungen, die uber ein Clearing System gehalten werden, ist berechtigt, in jedem Rechtsstreit gegen die Emittentin oder in jedem Rechtsstreit, in dem der Glaubiger und die Emit- tentin Partei sind, seine Rechte aus diesen Schuldverschreibungen im eigenen Namen auf der folgenden Grundlage zu schutzen oder geltend zu machen: (i)er bringt eine Bescheinigung der Depotbank bei, bei der er fur die Schuldverschreibun- gen ein Wertpapierdepot unterhalt, welche (a) den vollstandigen Namen und die vollstandige Adresse des Glaubigers enthalt, (b) den Gesamtnennbetrag der Schuldverschreibungen bezeichnet, die unter dem Datum der Bestatigung auf dem Wertpapierdepot verbucht sind und (c) bestatigt, dal3 die Depotbank gegenuber dem Clearing System eine schriftliche Erklarung abgegeben hat, die die vorstehend unter (a) und (b) bezeichneten lnformationen enthalt; und (ii)er legt eine Kopie der die betreffenden Schuldverschteibungen verbriefenden Globalurkunde oder der Einzelurkunde vor, deren Ubereinstimmung mit dem Original eine vertretungsberechtigte Person des Clearing Systems oder des Verwahrers des Clearing Systems bestatigt hat, ohne da13 eine Vorlage der Originalbelege oder der vorlaufigen Globalurkunde oder der Einzelurkunde [falls die vorlaufige Globalurkunde gegen Einrelurkunden und Sammelurkunden ausgetauscht wird, einfiigen: oder Sammel- urkunde] in einem solchen Verfahren erforderlich ware. Fur die Zwecke des Vorste- henden bezeichnet ,,Depotbank" jede Bank oder ein sonstiges anerkanntes Finanz- institut, das berechtigt ist, das Wertpapierverwahrungsgeschaft zu betreiben und bei der/dem der Glaubiger ein Wertpapierdepot fur die Schuldverschreibungen unterhalt, einschliealich des Clearing Systems.]

45 PART I - BASIC TERMS

NOTES IN BEARER FORM WHICH WILL BE REPRESENTED BYA PERMANENT GLOBAL NOTE

The Terms and Conditions of the Notes (the "Terms and Conditions") are set forth below in two Parts:

PART I sets out the basic terms (the "Basic Terms") comprising the Terms and Con- ditions that apply to Series of Notes which are represented by global Notes in bearer form.

PART I1 sets forth in the form of a supplement (the "Supplement") to the Basic Terms those provisions that apply to Notes in definitive form.

The Basic Terms and the Supplement thereto together constitute the Terms and Conditions.

TERMS AND CONDITIONS OF THE NOTES ENGLISH LANGUAGE VERSION

This Series of Notes is issued pursuant to a Fiscal Agency Agreement dated as of 6 June 2002 (the "Agency Agreement") between Bertelsmann AG ("Bertelsmann"), Bertelsmann Capital Corporation N. V. ("Bertelsmann N.V."), Bertelsmann U. S. Finance, Inc. ("Bertelsmann U. S.")(each an "Issuer" and together the "Issuers") and Deutsche Bank Aktiengesellschaft as fiscal agent (the "Fiscal Agent'; which expression shall include any successor fiscal agent thereunder) and the other parties named therein. Copies of the Agency Agreement may be obtained free of charge at the specified office of the Fiscal Agent, at the specified office of any Paying Agent and at the principal office of each Issuer. [In the case of Notes issued by Ber- telsmann N.V. or Bertelsmann U.S. insert: The Notes have the benefit of an unconditional and irrevocable guarantee by Bertelsmann AG (the "Guarantor").]

In the case of [The provisions of these Terms and Conditions apply to the Notes as completed, Long-Form Con- ditions insert: modified, supplemented or replaced, in whole or in part, by the terms of the pricing supplement which is attached hereto (the "Pricing Supplement"). The blanks in the provisions of these Terms and Conditions which are applicable to the Notes shall be deemed to be completed by the information contained in the Pricing Supplement as if such information were inserted in the blanks of such provisions; any provisions of the Pricing Supplement modifying, supplementing or replacing, in whole or in part, the provisions of these Terms and Conditions shall be deemed to so modify, supplement or replace the provisions of these Terms and Conditions; alternative or optional provisions of these Terms and Conditions as to which the corresponding provisions of the Pricing Supplement are not completed or are deleted shall be deemed to be deleted from these Terms and Conditions; and all provisions of these Terms and Conditions which are inapplicable to the Notes (including instructions, explanatory notes and text set out in square brackets) shall be deemed to be deleted from these Terms and Conditions, as required to give effect to the terms of the Pricing Supplement. Copies of the Pricing Supplement may be obtained free of charge at the specified office of the Fiscal Agent and at the specified office of any Paying Agent provided that, in the case of Notes which are not listed on any stock exchange, copies of the relevant Pricing Supplement will only be available to Holders of such Notes.]

46 CONDITIONS OF ISSUE

91 CURRENCY, DENOMINATION, FORM, CERTAIN DEFINITIONS

(1) Currency; Denomination. This Series of Notes (the "Notes") of [insert Issuer] (the "Issuer") is being issued in [insert Specified Currency] (the "Specified Currency") in the aggregate principal amount of [insert aggregate principal amount] (in words: [insert aggregate principal amount in words]) in the denomination of [insert Speci-

f ied Denomination I( t he " S pec if ie d Deno m i na t io n " 1.

(2)Form. The Notes are being issued in bearer form.

In the case of [(3)Permanent Global Note. The Notes are represented by a permanent global note Notes which are represented by a (the "Permanent Global Note") without coupons. The Permanent Global Note shall Permanent Glo- be signed manually by two authorised signatories of the Issuer and shall be authen- bal Note insert I ticated by or on behalf of the Fiscal Agent. Definitive Notes and interest coupons I will not be issued.]

In the case of [(3)Temporary Global Note - Exchange. Notes which are initially represented by a (a) The Notes are initially represented by temporary global note (the "Temporary Temporary Glo- a bal Note insert: Global Note") without coupons. The Temporary Global Note will be exchangeable for Notes in Specified Denominations represented by a permanent global note (the "Permanent Global Note") without coupons. The Temporary Global Note and the Permanent Global Note shall each be signed manually by two authorised signatories of the Issuer and shall each be authenticated by or on behalf of the Fiscal Agent. Definitive Notes and interest coupons will not be issued.

(b) The Temporary Global Note shall be exchanged for the Permanent Global Note on a date (the "Exchange Date") not later than 180 days after the date of issue of the Notes represented by the Temporary Global Note. The Exchange Date will not be earlier than 40 days after the date of issue. Such exchange shall only be made upon delivery of certifications to the effect that the beneficial owner or owners of the Notes represented by the Temporary Global Note is not a U. S. person (other than certain financial institutions or certain persons holding Notes through such financial institutions). Payment of interest on Notes represented by a Temporary Global Note will be made only after delivery of such certifications. A separate certification shall be required in respect of each such payment of interest. Any such certification received on or after the 40th day after the date of issue of the Notes represented by the Temporary Global Note will be treated as a request to exchange such Temporary Global Note pursuant to subparagraph (b) of this § l(3).Any securities delivered in exchange for the Temporary Global Note shall be delivered only outside of the United States (as defined in § 6 (211.1

In the case of [(c) Upon 90 days written notice (which period shall not be deemed to expire until at Notes which are issued by least 30 days after the Exchange Date) from the Clearing System, acting on instruc- Bertelsmann tions from any Holder, Definitive Notes with, where applicable, receipts, interest U.S.insert: coupons and talons attached [if Collective Notes are to be issued insert: as well as Collective Notes and, if applicable, Collective Interest Coupons], will be issued and delivered in full exchange for this Permanent Global Note. Any Definitive Note [or Collective Note] delivered in exchange for this Permanent Global Note shall be delivered only outside of the United States (as defined in § 6 (2)).As from the day of such exchange [in the case of Integrated Conditions insert: the Conditions concerning Definitive Notes set forth in the Annex shall replace these Conditions.] [in the case of Long-Form Conditions insert: the Terms and Conditions for Definitive Notes provided in the Pricing Supplement concerning Definitive Notes which is attached to these Terms and Conditions shall apply.]]

47 (4) Clearing System. The Permanent Global Note will be kept in custody by or on behalf of the Clearing System until all obligations of the Issuer under the Notes have been satisfied. "Clearing System" means [if more than one Cleating System insert: each of] the following: [Clearstream Banking AG] [Clearstream Banking, societe anonyme1 [Euroclear Bank S.A./N.V. as operator of the Euroclear System ("Euro- clear")] [,] [and] [specify other Cleating System] and any successor in such capacity.

(5)Holder of Notes. "Holder" means any holder of a proportionate co-ownership or other beneficial interest or right in the Notes.

52 STATUS, NEGATIVE PLEDGE [IN THE CASE OF NOTES ISSUED BY BERTELSMANN N.V. OR BERTELSMANN U. S. INSERT: AND GUARANTEE]

(1) Status. The obligations under the Notes constitute unsecured and unsubordinated obligations of the Issuer ranking pari passu among themselves and pari passu with all other unsecured and unsubordinated obligations of the Issuer, unless such obligations are accorded priority under mandatory provisions of statutory law.

(2) Negative Pledge. So long as any Note remains outstanding, but only up to the time all amounts of principal and interest have been placed at the disposal of the Fiscal Agent, the Issuer undertakes not to grant or permit to subsist any pledge, assignment, transfer, mortgage of or other charge or security interest over any or all of its present or future assets, as security for any present or future Capital Market Indebtedness (as defined below) issued or guaranteed by the Issuer (or issued or guaranteed by any other person), without at the same time having the Holders share equally and rateably in such security; provided that this obligation does not apply to security interests of any kind that are already attached to an asset at the time when such asset is acquired for by the Issuer. For the purpose of these Conditions "Capital Market Indebtedness" means any obligation for the payment of borrowed money which is in the form of, or represented or evidenced by, a certificate of indebtedness or in the form of, or represented or evidenced by, bonds, notes, loan stock or other securities which are, or are capable of being, quoted, listed, dealt in or traded on a stock exchange or other recognized securities market.

In the case of [(3)Guarantee. Notes issued by Bertelsmann N.V. or (a) Bertelsmann AG (the "Guarantor") has given its unconditional and irrevocable Benelsmann guarantee (the "Guarantee") for the due payment of principal of, and interest U.S.: on, and any other amounts expressed to be payable under the Notes. In this Guarantee, the Guarantor has further undertaken (the "Undertaking"), so long as any of the Notes remains outstanding, not to grant or permit to subsist any pledge, assignment, transfer, mortgage of or other charge or security interest over any or all of its present or future assets, as security for any present or future Capital Market Indebtedness (as defined above) issued or guauranteed by the Guarantor (or issued or guaranteed by any other person), without at the same time having the Holders share equally and rateably in such security; provided that this obligation does not apply to security interests of any kind that are already attached to an asset at the time when such asset is acquired for by the Guarantor. The Guarantee including the Undertaking constitutes a contract for the benefit of the Holders from time to time as third party beneficiaries in accordance with § 328(1) of the German Civil Code('), giving rise to the right of each Holder to require performance of the Guarantee directly from the Guarantor and to enforce the Guarantee directly against the Guarantor. Copies of the Guarantee may be obtained free of charge at the principal office of the Guarantor and at the specified office of the Fiscal Agent set forth in § 6.1 (') An English language translation of 5 328(1) German Civil Code would read as follows: "A contract may stipulate performance for the benefit of a third party, to the effect that the third party acquires the right directly to demand performance."

48 53 INTEREST

In the case of [(I) Rate of lnterest and lnterest Payment Dates. The Notes shall bear interest on Fixed Rate Notes insert: their principal amount at the rate of [insert Rate of Interest] per cent. per annum from (and including) [insert Interest Commencement Date] to (but excluding) the Maturity Date (as defined in § 5(1)). Interest shall be payable in arrear on [insert Fixed Interest Date or Dates] in each year (each such date, an "Interest Payment Date"). The first payment of interest shall be made on [insert First Interest Payment Date] [if First Interest Payment Date is not first anniversary of Interest Commence- ment Date insert: and will amount to [insert Initial Broken Amounts per Specified Denomination].] [If Maturity Date is not a Fixed Interest Date insert: Interest in respect of the period from (and including) [insert Fixed Interest Date preceding the Maturity Date] to (but excluding) the Maturity Date will amount to [insert Final Broken Amounts per Specified Denomination].] [If the Specified Currency is euro and if Actual/Actual (ISMA) is applicable insert: The number of Interest Payment Dates per calender year (each a "Determination Date") is [insert number of regular interest payment dates per calender year].]

(2)Accrual of Interest. If the Issuer shall fail to redeem the Notes when due, interest shall continue to accrue beyond the due date until the actual redemption of the Notes.

(3) Calculation of lnterest for Partial Periods. If interest is required to be calculated for a period of less than a full year, such interest shall be calculated on the basis of the Day Count Fraction (as defined below).]

In the case of [(I) Merest Payment Dates. (a) The Notes bear interest on their principal amount Floating Rate Notes insert: from (and including) [insert Interest Commencement Date] (the "Interest Com- mencement Date") to but excluding the first Interest Payment Date and thereafter from (and including) each Interest Payment Date to but excluding the next following Interest Payment Date. Interest on the Notes shall be payable on each Interest Pay- ment Date.

(b) "Interest Payment Date" means

[in the case of Specified Interest Payment Dates insert: each [insert Specified Interest Payment Dates].]

[in the case of Specified Interest Periods insert: each date which (except as otherwise provided in these Conditions) falls [insert number] [weeks] [months] [insert other specified periods] after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the Interest Commencement Date.]

(c) If any Interest Payment Date would otherwise fall on a day which is not a Busi- ness Day (as defined below), it shall be:

[if Modified Following Business Day Convention insert: postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event the Interest Payment Date shall be the immediately preceding Business Day.]

[if FRN Convention insert: postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event (i)the Interest Payment Date shall be the immediately preceding Business Day and (ii)each subsequent Interest Payment Date shall be the last Business Day in the month which falls [[insert number] months] [insert other specified periods] after the preceding applicable Interest Payment Date.]

49 [if Following Business Day Convention insert: postponed to the next day which is a Business Day.]

[if Preceding Business Day Convention insert: the immediately preceding Busi- ness Day.]

(d) In this § 3 "Business Day" means [if the Specified Currency is not Euro insert: a day which is a day (other than a Saturday or a Sunday) on which commercial banks are generally open for business in, and foreign exchange markets settle payments in [insert all relevant financial centres]] [if the Specified Currency is Euro insert: a day on which the Clearing System as well as all relevant parts of the Trans-European Automated Real-time Gross Settlement Express Transfer System ("TARGET") are operational to effect the relevant payment].

(2) Rate of Interest. [if Screen Rate Determination insert: The rate of interest (the "Rate of Interest") for each Interest Period (as defined below) will, except as provided below, be either:

(a) the offered quotation (if there is only one quotation on the Screen Page (as defined below)); or

(b) the arithmetic mean (rounded, if necessary, to the nearest one [if the Reference Rate is EURIBOR insert: thousandth of a percentage point, with 0.00051 [if the Reference Rate is not EURIBOR insert: hundred-thousandth of a percentage point, with 0.0000051 being rounded upwards) of the offered quotations,

(expressed as a percentage rate per annum) for deposits in the Specified Currency for that Interest Period which appears or appear, as the case may be, on the Screen Page as of 11:OO a.m. ([London] [Brussels] time) on the Interest Determination Date (as defined below) [if Margin insert: [plus] [minus] the Margin (as defined below)], all as determined by the Calculation Agent.

"Interest Period" means each period from (and including) the Interest Commence- ment Date to (but excluding) the first Interest Payment Date and from each Interest Payment Date to the following Interest Payment Date.

"Interest Determination Date" means the [if same-day fixing applies, insert: first [London] [TARGET] [insert other relevant location] Businees Day] [[if same-day fixing does not apply, insert: [second] [insert other applicable number of days] [London] [TARGET] [insert other relevant location] Business Day prior to the commencement] of the relevant Interest Period. ["[London] [insert other relevant location] Business Day" means a day which is a day (other than a Saturday or Sunday) on which commercial banks are open for business (including dealings in foreign exchange and foreign currency) in [London] [insert other relevant location].] ["TARGET Business Day" means a day on which TARGET (Trans-European Auto- mated Real-time Gross Settlement Express Transfer System) is open.]

[If Margin insert: "Margin" means [ ] per cent. per annum.]

"Screen Page" means [insert relevant Screen Page].

If, in the case of (b) above, five or more such offered quotations are available on the Screen Page, the highest (or, if there is more than one such highest rate, only one of such rates) and the lowest (or, if there is more than one such lowest rate, only one of such rates) shall be disregarded by the Calculation Agent for the purpose of determining the arithmetic mean (rounded as provided above) of such offered quotations and this rule shall apply throughout this subparagraph (2).

50 If the Screen Page is not available or if, in the case of (a) above, no such quotation appears or, in the case of (b) above, fewer than three such offered quotations appear, in each case as at such time, the Calculation Agent shall request each of the Reference Banks (as defined below) to provide the Calculation Agent with its offered quotation (expressed as a percentage rate per annum) for deposits in the Specified Currency for the relevant Interest Period to leading banks in the [London] interbank market [in the euro-zone] at approximately 11.00 a.m. ([Brussels] [London] time) on the Interest Determination Date. If two or more of the Reference Banks provide the Calculation Agent with such offered quotations, the Rate of Interest for such Interest Period shall be the arithmetic mean (rounded if necessary to the nearest one [if the Reference Rate is EURIBOR insert: thousandth of a percentage point, with 0.00051 [if the Reference Rate is not EURIBOR insert: hundred-thousandth of a percentage point, with 0.0000051 being rounded upwards) of such offered quotations [if Margin insert: [plus] [minus] the Margin], all as determined by the Calculation Agent.

If on any Interest Determination Date only one or none of the Reference Banks provides the Calculation Agent with such offered quotations as provided in the preceding paragraph, the Rate of Interest for the relevant Interest Period shall be the rate per annum which the Calculation Agent determines as being the arithmetic mean (rounded if necessary to the nearest one [if the Reference Rate is EURIBOR insert: thousandth of a percentage point, with 0.00051 [if the Reference Rate is not EURIBOR insert: hundred-thousandth of a percentage point, with 0.0000051 being rounded upwards) of the rates, as communicated to (and at the request of) the Cal- culation Agent by the Reference Banks or any two or more of them, at which such banks were offered, as at 11.00 a.m. ([London] [Brussels] time) on the relevant Inter- est Determination Date, deposits in the Specified Currency for the relevant Interest Period by leading banks in the [London] interbank market [in the euro-zone] [if Margin insert: [plus] [minus] the Margin] or, if fewer than two of the Reference Banks provide the Calculation Agent with such offered rates, the offered rate for deposits in the Specified Currency for the relevant Interest Period, or the arithmetic mean (rounded as provided above) of the offered rates for deposits in the Specified Currency for the relevant Interest Period, at which, on the relevant Interest Deter- mination Date, any one or more banks (which bank or banks is or are in the opinion of the Calculation Agent and the Issuer suitable for such purpose) inform(s) the Calculation Agent it is or they are quoting to leading banks in the [London] interbank market [in the euro-zone] (or, as the case may be, the quotations of such bank or banks to the Calculation Agent) [if Margin insert: [plus] [minus] the Margin]. Ifthe Rate of Interest cannot be determined in accordance with the foregoing provisions of this paragraph, the Rate of Interest shall be the offered quotation or the arithmetic mean of the offered quotations on the Screen Page, as described above, on the last day preceding the Interest Determination Date on which such quotations were offered [if Margin insert: [plus] [minus] the Margin] (though substituting, where a different Margin is to be applied to the relevant Interest Period from that which applied to the last preceding Interest Period, the Margin relating to the relevant Interest Period in place of the Margin relating to that last preceding Interest Period)].

As used herein, "Reference Banks" means [if no other Reference Banks are specified in the Pricing Supplement, insert:, in the case of (a) above, those offices [if the Reference Rate is EURIBOR insert: of not less than five1 of such banks whose offered rates were used to determine such quotation when such quotation last appeared on the Screen Page and, in the case of (b) above, those banks whose offered quotations last appeared on the Screen Page when no fewer than three such offered quotations appeared] [if other Reference Banks are specified in the Pricing Supplement, insert names here].

[In the case of the interbank market in the euro-zone insert: "Euro-Zone" means the region comprised of those member states of the European Union that have adopted, or will have adopted from time to time, the single currency in accordance with the Treaty establishing the European Community (signed in Rome on March 25,

51 19571, as amended by the Treaty on European Union (signed in Maastricht on February 7, 1992) and the Amsterdam Treaty of October 2, 1997, as further amended from time to time.]

[If Reference Rate is other than EURIBOR or LIBOR, insert relevant details in lieu of the provisions of this paragraph (2)]

[If ISDA Determination applies insert the relevant provisions and attach the 2000 ISDA Definitions published by the International Swap and Derivatives Association (“ISDA“)]

[If other method of determination/indexation applies, insert relevant details in lieu of the provisions of this paragraph (211

[If Minimum and/or Maximum Rate of Interest applies insert:

(3)[Minimuml[andl[Maximum] Rate of Interest.

[If Minimum Rate of Interest applies insert: If the Rate of Interest in respect of any Interest Period determined in accordance with the above provisions is less than [insert Minimum Rate of Interest], the Rate of Interest for such Interest Period shall be [insert Minimum Rate of Interest].]

[If Maximum Rate of Interest applies insert: If the Rate of Interest in respect of any Interest Period determined in accordance with the above provisions is greater than [insert Maximum Rate of Interest], the Rate of Interest for such Interest Period shall be [insert Maximum Rate of Interest].]

[(4)] lnterest Amount. The Calculation Agent will, on or as soon as practicable after each time at which the Rate of Interest is to be determined, calculate the amount of interest (the “Interest Amount”) payable on the Notes in respect of each Specified Denomination for the relevant Interest Period. Each Interest Amount shall be calculated by applying the Rate of Interest and the Day Count Fraction (as defined below) to each Specified Denomination and rounding the resultant figure to the nearest unit of the Specified Currency, with 0.5 of such unit being rounded upwards.

[(S)]Notification of Rate of lnterest and lnterest Amount. The Calculation Agent will cause the Rate of Interest, each Interest Amount for each Interest Period, each Inter- est Period and the relevant Interest Payment Date to be notified to the Issuer [in the case of Notes issued by Bettelsmann N.V. or Bertelsmann U.S. insert: and the Guar- antor] and to the Holders in accordance with § 12 as soon as possible after their determination, but in no event later than the fourth [London] [TARGET] [insert other relevant reference] Business Day (as defined in § 3(2))thereafter and if required by the rules of any stock exchange on which the Notes are from time to time listed, to such stock exchange as soon as possible after their determination, but in no event later than the first day of the relevant Interest Period. Each Interest Amount and Interest Payment Date so notified may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without notice in the event of an extension or shortening of the Interest Period. Any such amendment will be promptly notified to any stock exchange on which the Notes are then listed and to the Holders in accordance with § 12.

[(SI] Determinations Binding. All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this § 3 by the Calculation Agent shall (in the absence of manifest error) be binding on the Issuer, the Fiscal Agent, the Paying Agents and the Holders.

52 [(7)1Accrual of Interest. If the Issuer shall fail to redeem the Notes when due, interest shall continue to accrue beyond the due date until actual redemption of the Notes. The applicable Rate of Interest will be determined in accordance with this § 3.1

In the case of [(I) No Periodic Payments of Interest. There will not be any periodic payments of discounted Zero Coupon Nates interest on the Notes during their term. insen: (2) Accrual of Interest. If the Issuer shall fail to redeem the Notes when due, interest shall accrue on the principal amount of the Notes as from the due date to the date of actual redemption at the rate of [insert Amortisation Yield] per annum.]

[In the case of Index Linked Notes, Credit Linked Notes or Equity Linked Notes relating to interest, insert all applicable provisions regarding interest. The same applies in the case of Dual Currency Notes.]

[[*I1 Day Count Fraction. "Day Count Fraction" means with regard to the calculation of interest on any Note for any period of time (the "Calculation Period"):

[In the case of Fixed Rate Notes, if the Specified Currency is euro and if Actual/ Actual (ISMA) is applicable insert:

1. if the Calculation Period (from and including the first day of such period but excluding the last) is equal to or shorter than the Determination Period during which the Calculation Period ends, the number of days in such Calculation Period (from and including the first day of such period but excluding the last) divided by the product of (1) the number of days in such Determination Period and (2)the number of Determination Dates (as specified in § 3(1)) that would occur in one calendar year; or

2. if the Calculation Period is longer than the Determination Period during which the Calculation Period ends, the sum of: (A) the number of days in such Calculation Per- iod falling in the Determination Period in which the Calculation Period begins divided by the product of (1) the number of days in such Determination Period and (2) the number of Determination Dates (as specified in 0 3(1)) that would occur in one calendar year, and (B) the number of days in such Calculation Period falling in the next Determination Period divided by the product of (1) the number of days in such Determination Period and (2) the number of Determination Dates (as specified in § 3(1))that would occur in one calendar year.

"Determination Period" means the period from (and including) a Determination Date to, but excluding, the next Determination Date.]

[if Actual/Actual insert: (ISMA Rule 251) the number of days in the Calculation Period divided by (x) in the case of Notes where interest is scheduled to be paid only by means of regular annual payments, the number of days in the Interest Per- iod or (y) in the case of Notes where interest is scheduled to be paid other than only by means of regular annual payments, the product of the number of days in the Interest Period and the number of Interest Payment Dates that would occur in one calendar year assuming interest was to be payable in respect of the whole of that year.] [insert other relevant actual/actual methodology]

[if ActuaV365 (Fixed) insert: the actual number of days in the Calculation Period divided by 365.1

[if ActuaV360 insert: the actual number of days in the Calculation Period divided by 360.1

53 [if 30/360,360/360 or Bond Basis insert: the number of days in the Calculation Per- iod divided by 360, the number of days to be calculated on the basis of a year of 360 days with 12 30-day months (unless (A) the last day of the Calculation Period is the 31st day of a month but the first day of the Calculation Period is a day other than the 30th or 31st day of a month, in which case the month that includes that last day shall not be considered to be shortened to a 30-day month, or (E) the last day of the Cal- culation Period is the last day of the month of February in which case the month of February shall not be considered to be lengthened to a 30-day month).]

[if 30E1360 or Eurobond Basis: the number of days in the Calculation Period divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30-day months, without regard to the date of the first day or last day of the Calcu- lation Period).]

34 PAYMENTS

In the case of [(b)faymentoflnterest. Payment of interest on Notes shall be made, subjectto sub- Notes other than Zero Coupon paragraph (21, to the Clearing System or to its order for credit to the relevant Notes insert: account holders of the Clearing System upon presentation of the Global Note at the specified office of any Paying Agent outside the United States.

[In the case of interest payable on a Temporary Global Note insert: Payment of interest on Notes represented by the Temporary Global Note shall be made, subject to subparagraph (21, to the Clearing System or to its order for credit to the relevant account holders of the Clearing System, upon due certification as provided in § 1 (3)(b).ll

(2) Manner ofpayment. Subject to applicable fiscal and other laws and regulations, payments of amounts due in respect of the Notes shall be made in [insert Specified Currency] [in the case of Dual Currency Notes insert relevant currencieslexchange rate formulas].

(3) Discharge. The Issuer shall be discharged by payment to, or to the order of, the Clearing System.

(4) Payment Business Day. If the date for payment of any amount in respect of any Note is not a Payment Business Day then the Holder shall not be entitled to payment until the next such day in the relevant place and shall not be entitled to further interest or other payment in respect of such delay.

For these purposes, "Payment Business Day" means any day which is [in the case of Notes not denominated in Euro insert: a day (other than a Saturday or a Sunday) on which commercial banks and foreign exchange markets settle payments in [insert all relevant financial centres]] [in the case of Notes denominated in Euro insert: a day (other than a Saturday or a Sunday) on which the Clearing System as well as all relevant parts of the Trans-European Automated Real-time Gross Settlement Express Transfer System ("TARGET") are operational to forward the relevant payment].

(5) References to Principal and Interest. References in these Conditions to principal in respect of the Notes shall be deemed to include, as applicable: the Final Redemp-

54 tion Amount of the Notes; the Early Redemption Amount of the Notes; [if redeemable at the option of the Issuer for other than tax reasons insert: the Call Redemp- tion Amount of the Notes;] [if redeemable at the option of the Holder insert: the Put Redemption Amount of the Notes;] and any premium and any other amounts which may be payable under or in respect of the Notes. References in these Conditions to interest in respect of the Notes shall be deemed to include, as applicable, any Addi- tional Amounts which may be payable under § Z

(6)Deposit of Principal and Interest. The Issuer may deposit with the Amtsgericht in Frankfurt am Main principal or interest not claimed by Holders within twelve months after the Maturity Date, even though such Holders may not be in default of acceptance of payment. If and to the extent that the deposit is effected and the right of withdrawal is waived, the respective claims of such Holders against the Issuer shall cease.

55 REDEMPTION

(1) Final Redemption. Unless previously redeemed in whole or in part or purchased and cancelled, the Notes shall be redeemed at their Final Redemption Amount on [in the case of a specified Maturity Date insert such Maturity Date] [in the case of a Redemption Month insert: the Interest Payment Date falling in [insert Redemption Month]] (the "Maturity Date"). The Final Redemption Amount in respect of each Note shall be [if the Notes are redeemed at their principal amount insert: its principal amount] [otherwise insert Final Redemption Amount per denomination/index and/or formula by reference to which the Final Redemption Amount is to be calculated].

(2) Early Redemption for Reasons of Taxation. If as a result of any change in, or amendment to, the laws or regulations of [in the case of Notes issued by Bertels- mann insert: the Federal Republic of Germany] [in the case of Notes issued by Ber- telsmann N.V. insert: the Federal Republic of Germany or The Netherlands] [in the case of Notes issued by Bertelsmann U.S. insert: the Federal Republic of Germany or the United States] or any political subdivision or taxing authority thereto or therein affecting taxation or the obligation to pay duties of any kind, or any change in, or amendment to, an official interpretation or application of such laws or regulations, which amendment or change is effective on or after the date on which the last tranche of this series of Notes was issued, the Issuer [in the case of Notes issued by Bertelsmann N.V. or Bertelsmann U.S. insert: or the Guarantor] is required to pay Additional Amounts (as defined in § 7 herein) [in the case of Notes other than Zero Coupon Notes insert: on the next succeeding Interest Payment Date (as defined in § 3(1))1[in the case of Zero Coupon Notes insert: at maturity or upon the sale or exchange of any Note], and this obligation cannot be avoided by the use of reasonable measures available to the Issuer [in the case of Notes issued by Bertelsmann N.V. or Bertelsmann U.S. insert: or the Guarantor, as the case may be,], the Notes may be redeemed, in whole but not in part, at the option of the Issuer, upon not more than 60 days' nor less than 30 days' prior notice of redemption given to the Fiscal Agent and, in accordance with § 12 to the Holders, at their Early Redemption Amount (as defined below), together with interest accrued to the date fixed for redemption.

However, no such notice of redemption may be given (i)earlier than 90 days prior to the earliest date on which the Issuer [in the case of Notes issued by Bertelsmann N.V. or Bertelsmann U.S. insert: or the Guarantor] would be obligated to pay such Additional Amounts, withholdings or deductions were a payment in respect of the Notes then due, or (ii)if at the time such notice is given, such obligation to pay such Additional Amounts does not remain in effect. [In the case of Floating Rate Notes insert: The date fixed for redemption must be an Interest Payment Date.]

55 Any such notice shall be given in accordance with § 12. It shall be irrevocable, must specify the date fixed for redemption and must set forth a statement in summary form of the facts constituting the basis for the right of the Issuer so to redeem.

In the case of [(3)Early Redemption for Reasons of Reporting Requirements. If the Issuer determines, Notes issued by Benelsmann based upon a written opinion of independent legal counsel of recognized standing U.S. insert: delivered to the Fiscal Agent that any payment made outside the United States by the Issuer or any of its Paying Agents with respect to any Note would, under any present or future laws or regulations of the United States, be subject to any Reporting Requirement (as defined below), the Issuer at its election will either (x) redeem the Notes, as a whole but not in part, at their Early Redemption Amount, together with interest accrued to the date fixed for redemption less any applicable United States withholding tax, or (y) if and so long as the conditions set forth in 5 7 with respect to payment of Additional Amounts are satisfied, pay the Additional Amounts specified in § 7 (2).

" Report in g Requ irem en t " mea n s an y c ert if ica t io n , ident if ic at io n, doc u m en t at io n, information or other reporting requirement of any kind, the effect of which requirement is the disclosure to the Issuer, any Paying Agent or any governmental authority of the nationality, residence or identity of a beneficial owner of such Note who is a United States Alien (as defined in 0 7 hereof), other than such a requirement (i) which would not be applicable to a payment made by the Issuer, the Guarantor or any one of the Paying Agents (A) directly to the beneficial owner or (B) to any custodian, nominee or other agent of the beneficial owner, or (ii) which can be satisfied by the custodian, nominee or other agent certifying that the beneficial owner is a United States Alien; provided that in each case referred to in clauses (i)(B)and (ii) payment to such custodian, nominee or other agent of such beneficial owner is not otherwise subject to any such requirement (each such requirement identified in (i) and (ii) being referred to herein as an "Inapplicable Reporting Requirement").

In such event, the Issuer shall make such determination and election and notify the Fiscal Agent thereof as soon as practicable. The Fiscal Agent will promptly give notice of such determination to the Holders of the Notes in accordance with § 12 hereof and shall specify in such notice (the "Determination Notice") the effective date of such Reporting Requirement, whether the Issuer will redeem the Notes or pay the Additional Amounts and (if applicable) the last date by which the redemption of the Notes must take place. If the Issuer elects to redeem the Notes, such redemption shall take place on such date, not later than one year after publication of the Determination Notice, as the Issuer elects by notice to the Fiscal Agent at least 75 days before such date, unless shorter notice is acceptable to the Fiscal Agent. Not- withstanding the foregoing, the Issuer will not so redeem the Notes if the Issuer, based upon an opinion of independent legal counsel of recognized standing delivered to the Fiscal Agent subsequently determines, not less than 30 days prior to the date fixed for redemption, that subsequent payments would not be subject to any such requirement, in which case the Issuer will notify the Fiscal Agent, which will promptly give notice of that determination to the Holders of the Notes in accordance with § 12 hereof and any earlier redemption notice will thereupon be revoked and of no further effect. If the Issuer elects as provided in clause (y) above to pay Additional Amounts, and as long as the Issuer is obligated to pay such Additional Amounts, the Issuer may subsequently redeem the Notes, at any time, as a whole but not in part, at their Early Redemption Amount, together with interest accrued to the date fixed for redemption, but without reduction for applicable United States withholding taxes resulting from the fact that a beneficial owner that is a United States Alien did not disclose its nationality, residence or identity to the Issuer, any Paying Agent or any governmental authority.]

If the Notes are [[(4)]Early Redemption at the Option of the Issuer. subject to Early Redemption at the Option of the Issuer insert: (a) The Issuer may, upon notice given in accordance with clause (b), redeem all or some only of the Notes on the Call Redemption Date(s) at the Call Redemption

56 Amountk) set forth below together with accrued interest, if any, to (but excluding) the Call Redemption Date. [if Minimum Redemption Amount or Higher Re- demption Amount applies insert: Any such redemption must be of a principal amount equal to [at least [insert Minimum Redemption Amount]] [insert Higher Redemption Amount].

Call Redemption Date(s) Call Redemption Amount(s) [insert Call Redemption Date(s)l [insert Call Redemption Amount(s)] l 1 1 [ 1 1

[If Notes are subject to Early Redemption at the Option of the Holder insert: The Issuer may not exercise such option in respect of any Note which is the subject of the prior exercise by the Holder thereof of its option to require the redemption of such Note under subparagraph [(4)1of this § 5.1

(b) Notice of redemption shall be given by the Issuer to the Holders of the Notes in accordance with § 12. Such notice shall specify:

(i) the Series of Notes subject to redemption:

(ii) whether such Series is to be redeemed in whole or in part only and, if in part only, the aggregate principal amount of the Notes which are to be redeemed;

(iii)the Call Redemption Date, which shall be not less than [insert Minimum Notice to Holders] nor more than [insert Maximum Notice to Holders] days after the date on which notice is given by the Issuer to the Holders; and

(iv) the Call Redemption Amount at which such Notes are to be redeemed.

(c) In the case of a partial redemption of Notes, Notes to be redeemed shall be selected in accordance with the rules of the relevant Clearing System.]

If the Notes are [[(5)]Early Redemption at the Option ofa Holder. subject to Early Redemption at the Option of the (a) The Issuer shall, at the option of the Holder of any Note, redeem such Note on Holder insett: the Put Redemption Date(s) at the Put Redemption Amount(s) set forth below together with accrued interest, if any, to (but excluding) the Put Redemption Date.

Put Redemption Date(s) Put Redemption Amount(s) [insert Put Redemption Date(s)l [insert Put Redemption Amount(s)l [ I I 1 [ 1

The Holder may not exercise such option in respect of any Note which is the subject of the prior exercise by the Issuer of any of its options to redeem such Note under this § 5.

In order to exercise such option, the Holder must, not less than [insert Minimum Notice to Issuer] nor more than [insert Maximum Notice to Issuer] days before the Put Redemption Date on which such redemption is required to be made as specified in the Put Notice (as defined below), submit during normal business hours at the specified office of the Fiscal Agent a duly completed early redemption notice ("Put Notice") in the form available from the specified office of the Fiscal Agent. The Put Notice must specify (i) the principal amount of the Notes in respect of which such option is exercised, and (ii) the securities identification number of such Notes, if any. No option so exercised may be revoked or withdrawn. The Issuer shall only be

.... required to redeem Notes in respect of which such option is exercised against delivery of such Notes to the Issuer or to its order.]

In the case of [[(SI]Early Redemption Amount. Notes other than Zero Coupon I Notes insert: For purposes of § 9 and subparagraph (2) [in the case of Notes issued by Bertels- mann U.S. insert: and (3)] of this § 5, the Early Redemption Amount of a Note shall be its Final Redemption Amount.]

In the case of [[(6)1Early Redemption Amount. Zero Coupon Notes insert: For purposes of § 9 and subparagraph (2) [in the case of Notes issued by Bettels- mann U.S. insert: and (3)]of this § 5, the Early Redemption Amount of a Note shall be calculated as follows:

(a) The Early Redemption Amount of a Note shall be an amount equal to the sum of:

(i) [insert Reference Price] (the "Reference Price"), and

(ii) the product of [insert Amortisation Yield in per cent.] (the "Amortisation Yield") and the Reference Price from (and including) [insert Issue Date] to (but excluding) the date fixed for redemption or (as the case may be) the date upon which the Notes become due and payable, whereby the Amorti- sation Yield shall be compounded annually.

Where such calculation is to be made for a period which is not a whole number of years, the calculation in respect of the period of less than a full year (the "Calculation Period") shall be made on the basis of the Day Count Fraction (as defined in § 3).

(b) If the Issuer fails to pay the Early Redemption Amount when due, such amount shall be calculated as provided herein, except that references in subparagraph (a)(ii) above to the date fixed for redemption or the date on which such Note becomes due and repayable shall refer to the date on which payment is made.]

[In the case of Index Linked Notes, Credit Linked Notes or Equity Linked Notes relating to principal, insert all applicable provisions regarding principal. The same applies in the case of Dual Currency Notes.]

06 THE FISCAL AGENT[,] [AND] [THE PAYING AGENT[S]] [AND THE CALCULATION AGENT]

(1) Appointment; Specified Office. The initial Fiscal Agent[,] [and] [the initial Paying Agent[s]] [and the initial Calculation Agent] and [its] [their] initial specified office[sl shall be:

Fiscal Agent: Deutsche Bank Aktiengesellschaft Corporate Trust &Agency Services G rosse Gal Iusstrasse 10-1 4 60272 Frankfurt am Main

Paying Agents: Deutsche Bank Aktiengesellschaft Corporate Trust & Agency Services G rosse Ga Ilusstrasse 10-14 60272 Frankfurt am Main

58 [Deutsche Bank Luxembourg S.A. 2 Boulevard Konrad Adenauer L-1115 Luxembourg]

[Calculation Agent:] [insert name and specified office]]

The Fiscal Agent[,] [and] [the Paying Agent[s]] [and the Calculation Agent] reserve[s] the right at any time to change [its] [their] specified office[s] to some other specified office in the same city.

(2) Variation or Termination of Appointment. The Issuer reserves the right at any time to vary or terminate the appointment of the Fiscal Agent or any Paying Agent [or the Calculation Agent] and to appoint another Fiscal Agent or additional or other Paying Agents [or another Calculation Agent]. The Issuer shall at all times maintain (i)a Fiscal Agent [in the case of Notes listed on a stock exchange insert: [,I[and] (ii) so long as the Notes are listed on the [name of Stock Exchange], a Paying Agent (which may be the Fiscal Agent) with a specified office in [location of Stock Exchange] and/or in such other place as may be required by the rules of such stock exchange] [in the case of payments in U.S. dollars insert: [,I[and] [(iii)]if payments at or through the offices of all Paying Agents outside the United States (as defined below) become illegal or are effectively precluded because of the imposition of exchange controls or similar restrictions on the full payment or receipt of such amounts in United States dollars, a Paying Agent with a specified office in New York City] [if any Calculation Agent is to be appointed insert: [,I[and] [(iv)] a Calcula- tion Agent [if Calculation Agent is required to maintain a Specified Office in a Required Location insert: with a specified office located in [insert Required Loca- tion]]]. In the event that any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 or any law implementing or complying with, or introduced in order to conform to, such Directive is introduced, the Issuer shall at all times maintain a Paying Agent in a Member State of the European Union that will not be obliged to deduct or withhold tax pursuant to any such Directive or law, to the extent this is possible in a Member State of the European Union. Any variation, termination, appointment or change shall only take effect (other than in the case of insolvency, when it shall be of immediate effect) after not less than 30 nor more than 45 days' prior notice thereof shall have been given to the Holders in accordance with § 12.

For purposes of this subparagraph (2) [in the case of Notes issued by Bertelsmann U.S. insert: , of § 5, § 7 and § 91, "United States" means the United States of Amer- ica (including the States thereof and the District of Columbia) and its possessions (including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and Northern Mariana Islands).

(3)Agent ofthe Issuer, The Fiscal Agent[,] [and] [the Paying Agent[sll [and the Cal- culation Agent] act[s] solely as the agent[s] of the Issuer and [does] [dol not assume any obligations towards or relationship of agency or trust for any Holder.

07 TAXATION

59 net amounts received by the Holders, after such withholding or deduction shall equal the respective amounts of principal and interest which would otherwise have been receivable in the absence of such withholding or deduction; except that no such Additional Amounts shall be payable on account of any taxes or duties which:

(a) are payable by any person acting as custodian bank or collecting agent on behalf of a Holder, or otherwise in any manner which does not constitute a deduction or withholding by the Issuer from payments of principal or interest made by it, or

(b) are payable by reason of the Holder having, or having had, some personal or business connection with the Federal Republic of Germany and not merely by reason of the fact that payments in respect of the Notes are, or for purposes of taxation are deemed to be, derived from sources in, or are secured in, the Fed- eral Republic of Germany, or

(c) are deducted or withheld pursuant to (i)any European Union Directive or Regu- lation concerning the taxation of interest income, or (ii)any international treaty or understanding relating to such taxation and to which the Federal Republic of Germany or the European Union is a party, or (iii) any provision of law implementing, or complying with, or introduced to conform with, such Directive, Reg- ulation, treaty or understanding, or

(d) are payable by reason of a change in law that becomes effective more than 30 days after the relevant payment of principal or interest becomes due, or is duly provided for and notice thereof is published in accordance with § 12, whichever occurs later: or

(e) are payable because any Note was presented to a particular Paying Agent for payment if the Note could have been presented to another paying Agent without any such withholding or deduction.]

In the case of [All amounts payable in respect of the Notes shall be made at source without with- Notes issued by Bertelsmann holding or deduction for or on account of any present or future taxes or duties of N.V. insert: whatever nature imposed or levied by way of withholding or deduction by or on behalf of The Netherlands or the Federal Republic of Germany or any political subdivision or any authority thereof or therein having power to tax unless the Issuer is required by law to pay such withholding or deduction. In such event, the Issuer will pay such additional amounts (the "Additional Amounts") as shall be necessary in order that the net amounts received by the Holders, after such withholding or deduction shall equal the respective amounts of principal and interest which would otherwise have been receivable in the absence of such withholding or deduction; except that no such Additional Amounts shall be payable on account of any taxes or duties which:

(b) are payable by reason of the Holder having, or having had, some personal or business connection with The Netherlands or the Federal Republic of Germany and not merely by reason of the fact that payments in respect of the Notes are, or for purposes of taxation are deemed to be, derived from sources in, or are secured in, The Netherlands or the Federal Republic of Germany, or

60 Federal Republic of Germany or the European Union is a party, or (iii)any provision of law implementing, or complying with, or introduced to conform with, such Directive, Regulation, treaty or understanding, or

(e) are payable because any Note was presented to a particular Paying Agent for payment if the Note could have been presented to another paying Agent without any such withholding or deduction.]

In the case of [(I) Obligation to fay Additional Amounts for U. S. Taxation. All payments in respect Notes issued by Bertelsmann of the Notes shall be made free and clear of, and without withholding or deduction US. insert: for or on account of, any present or future tax, assessment or governmental charge imposed by or on behalf of the United States or any political subdivision or taxing authority thereof or therein ("U.S. Taxes") unless the Issuer is required by law to pay such withholding or deduction. In that event, subject to the exceptions set forth below, the Issuer shall pay to the Holder of any Note who is a United States Alien (as defined below) such additional amounts ("Additional Amounts") as may be necessary in order that every net payment of any amount payable in respect of the Notes, after deduction or withholding for or on account of such U.S. Taxes, will not be less than the amount provided for in such Note to be then due and payable. Such obligation to pay Additional Amounts shall not apply, however, to any one or more of the following:

(a) any tax, assessment or other governmental charge that would not have been so imposed but for

(i) the existence of any present or former connection between such Holder (or between a fiduciary, settlor, shareholder, beneficiary or member of, or a person holding a power over, such Holder, if such Holder is an estate, a trust, a corporation or a partnership) and the United States, including, without limitation, such Holder (or such fiduciary, settlor, shareholder, beneficiary or member or person holding a power) being or having been a citizen or resident or treated as a resident thereof, or being or having been engaged in trade or business or present therein, or having or having had a permanent establishment therein: or

(ii) such Holder's present or former status as a personal holding company, a foreign personal holding company, a passive foreign investment company, a controlled foreign corporation, a private foundation or other tax-exempt organisation for United States tax purposes or a corporation which accumu- lates earnings to avoid United States federal income tax;

(b) any tax, assessment or other governmental charge imposed on a Holder that is the actual or constructive owner of 10% or more of the total combined voting power of all classes of stock of the Issuer entitled to vote;

(c) any tax, assessment or other governmental charge that would not have been imposed but for the failure to comply with any applicable certification, docu- mentation, information, identification or other reporting requirements concerning the nationality, residence, identity or connection with the United States of such Holder, if, without regard to any tax treaty, compliance is required by statute or by regulation of the United States as a precondition to exemption from such tax, assessment or other governmental charge;

61 (d) any estate, inheritance, gift, sales, transfer, personal property or any similar tax, assessment or other governmental charge:

(e) any tax, assessment or other governmental charge which would not have been so imposed but for the presentation by the Holder of such Note for payment on a date more than 30 days after the date on which such payment becomes due and payable or the date on which payment thereof is duly provided for, whichever occurs later;

(f) any tax, assessment or other governmental charge required to be deducted or withheld by any Paying Agent from a payment on a Note if such payment can be made without such deduction or withholding by any other paying agent: or

(9) any tax, assessment or other governmental charge which is payable otherwise than by deduction or withholding from payments of any amount payable in respect of such Note; or

(h) any payment of any amount due in respect of a Note to any United States Alien who is a fiduciary or a member of a partnership or other than the sole beneficial owner of any such payment to the extent that a beneficiary or settlor with respect to such fiduciary, a member of such a partnership or the beneficial owner would not have been entitled to the Additional Amounts had such beneficiary, settlor, member or beneficial owner been the bearer of such Note.

As used herein, "United States Alien" means any person who, for United States federal income tax purposes, is a foreign corporation, a non-resident alien individual, a non-resident alien fiduciary of a foreign estate or trust, or a foreign partnership one or more of the members of which is, for United States federal income tax purposes, a foreign corporation, a non-resident alien individual or a non-resident alien fiduciary of a foreign estate or trust.

(2)Election by Issuer to fay Additional Amounts. Notwithstanding 5 7 (11, if and so long as a Reporting Requirement (as defined in 5 5 (3)) would be fully satisfied by payment of a withholding tax, backup withholding tax or similar charge, the Issuer may elect, by so stating in the Determination Notice (as defined in § 5 (311, to have the provisions of this section apply in lieu of the provisions of § 5 (3)).

In such event, the Issuer will pay as Additional Amounts such amounts as may be necessary so that every net payment made following the effective date of such Reporting Requirement outside the United States by the Issuer or any of its Paying Agents of any amount due in respect of any Note of which the beneficial owner is a United States Alien (but without any requirement that the nationality, residence or identity of such beneficial owner be disclosed to the Issuer, any Paying Agent or any governmental authority), after deduction or withholding for or on account of such backup withholding tax or similar charge (other than a backup withholding tax or similar charge that (a) would not be applicable in the case of an Inapplicable Report- ing Requirement (as defined in § 5 (3)),(b) is imposed as a result of the fact that the Issuer or any Paying Agent has actual knowledge that the beneficial owner of such Note is within the category of persons described in 5 7 (1) (a) above, or (c) is imposed as a result of presentation of such Note for payment more than 30 days after the date on which such payment becomes due and payable or on which payment thereof is duly provided for, whichever occurs later), will not be less than the amount provided for in such Note to be then due and payable.

(3)Obligation to Pay Additional Amounts for German Taxation. All amounts payable in respect of the Notes shall be made without withholding or deduction for or on account of any present or future taxes or duties of whatever nature imposed or levied by way of withholding or deduction by or on behalf of the United States or the Federal Republic of Germany or any political subdivision or any authority

62 thereof or therein having power to tax unless the Issuer is required by law to pay such withholding or deduction. In such event, the Issuer will pay such additional amounts (the "Additional Amounts") as shall be necessary in order that the net amounts received by the Holders, after such withholding or deduction shall equal the respective amounts of principal and interest which would otherwise have been receivable in the absence of such withholding or deduction; except that no such Additional Amounts shall be payable on account of any taxes or duties which:

(b) are payable by reason of the Holder having, or having had, some personal or business connection with the United States or the Federal Republic of Germany and not merely by reason of the fact that payments in respect of the Notes are, or for purposes of taxation are deemed to be, derived from sources in, or are secured in, the United States or the Federal Republic of Germany, or

(c) are deducted or withheld pursuant to (i)any European Union Directive or Regu- lation concerning the taxation of interest income, or (ii)any international treaty or understanding relating to such taxation and to which the United States or the Federal Republic of Germany or the European Union is a party, or (iii)any provision of law implementing, or complying with, or introduced to conform with, such Directive, Regulation, treaty or understanding, or

(e) are payable because any Note was presented to a particular Paying Agent for payment if the Note could have been presented to another Paying Agent without any such withholding or deduction.]

58 PRESENTATION PERIOD

The presentation period provided in § 801 paragraph 1, sentence 1 BGB (German Civil Code) is reduced to ten years for the Notes.

59 EVENTS OF DEFAULT

(1) Events of default. Each Holder shall be entitled to declare due and payable by notice to the Fiscal Agent its entire claims arising from the Notes and demand immediate redemption thereof at the Early Redemption Amount (as described in § 5) together with accrued interest (if any) to the date of repayment, in the event that:

(a) the Issuer fails to pay principal or interest within 30 days from the relevant due date, or

(b) the Issuer fails duly to perform any other obligation arising from the Notes [in the case of Notes issued by Bertelsmann N.V. or Bertelsmann U.S. insert: or the Guarantor fails to perform any obligation arising from the Guarantee referred to in § 21 which failure is not capable of remedy or, if such failure is cap-

63 able of remedy, such failure continues for more than 30 days after the Fiscal Agent has received notice thereof from a Holder, or

(c) any Indebtedness (as defined below) of the Issuer [in the case of Notes issued by Bertelsmann N.V. or Bertelsmann U.S. insert: or the Guarantor] becomes prematurely repayable as a result of a default in respect of the terms thereof, or the Issuer [in the case of Notes issued by Bertelsmann N. V. or Bertelsmann U. S. insert: or theGuarantor1 fails to fulfil any payment obligation in excess of US$ 25,000,000 or the equivalent thereof under any Indebtedness or under any guarantee or suretyship given for any Indebtedness of others within 30 days from its due date or, in the case of a guarantee or suretyship, within 30 days after the guarantee or suretyship has been invoked, unless the Issuer [in the case of Notes issued by Bertelsmann N. V. or Bertelsmann U. S. insert: or the Guarantor] shall contest in good faith that such payment obligation exists or is due or that such guarantee or suretyship has been validly invoked, or if a security granted therefor is enforced on behalf of or by the creditor(s) entitled thereto, or

(d) the Issuer [in the case of Notes issued by Bertelsmann N.V. or Bertelsmann U.S. insert: or theGuarantor] announces its inability to meet its financial obligations or ceases its payments, or

(e) a court opens insolvency proceedings against the Issuer [in the case of Notes issued by Bertelsmann N.V. or Bertelsmann U.S. insert: or the Guarantor] or the Issuer [in the case of Notes issued by Bertelsmann N.V. or Bertelsmann U.S. insert: orthe Guarantor] applies for or institutes such proceedings or offers or makes an arrangement for the benefit of its creditors generally, [in the case of Notes issued by Bertelsmann N.V. insert: or the Issuer applies for a "surseance van betaling" (within the meaning of Statute of Bankruptcy of The Nether- lands),] or

(f) the Issuer [in the case of Notes issued by Bertelsmann N.V. or Bertelsmann U.S. insert: or theGuarantor1 goes into liquidation unless this is done in connection with a merger, or other form of combination with another company and such company assumes all obligations contracted by the Issuer [in the case of Notes issued by Bertelsmann N.V. or Bertelsmann U.S. insert: or the Guarantor], as the case may be, in connection with this issue, or

(9) any governmental order, decree or enactment shall be made in or by [in the case of Notes issued by Bertelsmann N.V. insert: The Netherlands] [in the case of Notes issued by Bertelsmann U.S. insert: the United States] or in or by the Federal Republic of Germany whereby the Issuer [in the case of Notes issued by Bertelsmann N.V. or Bertelsmann U.S. insert: or the Guarantor] is prevented from observing and performing in full its payment obligations as set forth in these Conditions [in the case of Notes issued by Bertelsmann N.V. or Bertels- mann U.S. insert: and in the Guarantee, respectively,] and this situation is not cured within 90 days[.] [, or]

[in the case of Notes issued by Bertelsmann N. V. or Bertelsmann U. S. insert:

(h) the Guarantee ceases to be valid and legally binding for any reason whatsoever.]

For the purposes of these Conditions "Indebtedness" means any bonds, deben- tures, notes or other instruments of Indebtedness or any other loan indebtedness in excess of US$25,000,000 (or its equivalent in any other currency).

The right to declare Notes due shall terminate if the situation giving rise to it has been cured before the right is exercised.

64 (2) Notice. Any notice, including any notice declaring Notes due, in accordance with subparagraph (1) above shall be made by means of a written declaration in the Ger- man or English language delivered by hand or registered mail to the specified office of the Fiscal Agent together with proof that such Holder at the time of such notice is a holder of the relevant Notes by means of a certificate of his Custodian (as defined in § 13 [(3)1) or in other appropriate manner.

5 10 SUBSTITUTION OF THE ISSUER

(1) Substitution. The Issuer shall be entitled at any time, without the consent of the Holders, if no payment of principal or interest on any of the Notes is in default, to substitute forthe Issuer [in the case of Notes issued by Bertelsmann N.V. or Bertels- mann U.S. insert: either the Guarantor or] any Subsidiary (as defined below) [in the case of Notes issued by Bertelsmann insert: of it] [in the case of Notes issued by Bertelsmann N.V. or Bertelsmann U.S. insert: of the Guarantor] as principal debtor in respect to all obligations arising from or in connection with the Notes (the "Sub- stituted Debtor"), provided that:

(a) the Substituted Debtor undertakes to reimburse any Holder for such taxes, fees or duties which may be imposed upon it as a consequence of assumption of the obligations of the Issuer by the Substituted Debtor;

(b) the Substituted Debtor assumes all obligations of the Issuer arising from or in connection with the Notes;

(c) the Substituted Debtor is in a position to fulfil all payment obligations arising from or in connection with the Notes without the necessity of any taxes or duties being withheld at source and to transfer all amounts which are required therefor to the Fiscal Agent without any restrictions:

(d) it is guaranteed that the obligations of the [in the case of Notes issued by Ber- telsmann insert: Issuer] [in the case of Notes issued by Bertelsmann N.V. or Ber- telsmann U.S. insert: Guarantor] from the Guarantee of the Debt Issuance Pro- gramme of the Issuers apply also to the Notes of the Substituted Debtor; and

(e) there shall have been delivered to the Fiscal Agent one opinion for each jurisdiction affected of lawyers of recognised standing to the effect that subparagraphs (a), (b), (c) and (d) above have been satisfied.

For purposes of these Conditions "Subsidiary" shall mean any corporation or partnership in which Bertelsmann AG directly or indirectly in the aggregate holds 50% of the capital of any class or of the voting rights.

(2) Notice. Notice of any such substitution shall be published in accordance with 0 12.

(3) Change of References. In the event of any such substitution, any reference in these Conditions to the Issuer shall from then on be deemed to refer to the Substi- tuted Debtor and any reference to the country in which the Issuer is domiciled or resident for taxation purposes shall from then on be deemed to refer to the country of domicile or residence for taxation purposes of the Substituted Debtor. Further- more, in the event of such substitution the following shall apply:

In the case of [(a) in § 7 and § 5(2) an alternative reference to the Federal Republic of Germany Notes issued by Bertelsmann shall be deemed to have been included in addition to the reference according to inuert: the preceding sentence to the country of domicile or residence for taxation pur- I poses of the Substituted Debtor;

65 (b) in § 9(1)(c)to (9) an alternative reference to the Issuer in its capacity as guarantor shall be deemed to have been included in addition to the reference to the I Substituted Debtor.]

In the case of [In § 7 and § 5(2) an alternative reference to The Netherlands shall be deemed to Notes issued by BeKelSmann have been included in addition to the reference according to the preceding sentence N.V. insert: to the country of domicile or residence for taxation purposes of the Substituted I Debtor.] In the case of [In § 7 and § 5(2) an alternative reference to the United States shall be deemed to Notes issued by Bertelsmann have been included in addition to the reference according to the preceding sentence U.S. insert: to the country of domicile or residence for taxation purposes of the Substituted I Debtor.]

§ 11 FURTHER ISSUES, PURCHASES AND CANCELLATION

(1) Further Issues. The Issuer may from time to time, without the consent of the Holders, issue further Notes having the same terms and conditions as the Notes in all respects (or in all respects except for the settlement date, interest commencement date and/or issue price) so as to form a single Series with the Notes.

(2) Purchases. The Issuer may at any time purchase Notes in the open market or otherwise and at any price. Notes purchased by the Issuer may, at the option of the Issuer, be held, resold or surrendered to the Fiscal Agent for cancellation. If purchases are made by tender, tenders for such Notes must be made available to all Holders of such Notes alike.

(3)Cancellation. All Notes redeemed in full shall be cancelled forthwith and may not be reissued or resold.

§ 12 NOTICES

(1) Publication. All notices concerning the Notes shall be published in a leading daily newspaper having general circulation in [Germany] [Luxembourg] [specify other location]. [This] [These] newspaper[s] [is] [are] expected to be the [Borsen- Zeitung] [Luxemburger Wort] [insert other applicable newspaper having general circulation]. Any notice so given will be deemed to have been validly given on the date of such publication (or, if published more than once, on the date of the first such publication).

(2) Notification to Clearing System. The Issuer may, in lieu of publication in the newspapers set forth in subparagraph (1) above, deliver the relevant notice to the Clearing System, for communication by the Clearing System to the Holders, provided that, so long as any Notes are listed on any stock exchange, the rules of such stock exchange permit such form of notice. Any such notice shall be deemed to have been given to the Holders on the seventh day after the day on which the said notice was given to the Clearing System. [In the case of Notes listed on the Luxembourg Stock Exchange insert: So long as any Notes are listed on the Luxembourg Stock Exchange, all notices concerning the Notes shall be published in accordance with subsection (11.1

5 13 APPLICABLE LAW, PLACE OFJURISDICTION AND ENFORCEMENT

(1) Applicable Law. The Notes, as to form and content, and all rights and obligations of the Holders and the Issuer, shall be governed by German law.

66 (2) Submission to Jurisdiction. The [in the case of Notes issued by Bertelsmann insert: exclusive] place of jurisdiction for all proceedings arising out of or in connection with the Notes ("Proceedings") shall be Frankfurt am Main. [In the case of Notes issued by Bertelsmann N. V. or Bertelsmann U. S. insert: The Holders, however, may also pursue their claims before any other court of competent jurisdiction.] The German courts shall have exclusive jurisdiction over the annulment of lost or destroyed Notes. The Issuer hereby submits to the jurisdiction of the courts referred to in this subparagraph.

In the case of [(3)Appointment ofAuthorised Agent. For any Proceedings before German courts, the Notes issued by Bertelsmann Issuer appoints Bertelsmann AG, Carl-Bertelsmann-Strasse 270, 33311 Gutersloh, Fed- N.V. or eral Republic of Germany as its authorised agent for service of process in Germany.] Bertelsmann I U.S. insert: [(4)1 Enforcement. Any Holder of Notes may in any proceedings against the Issuer, or to which such Holder and the Issuer are parties, protect and enforce in his own name his rights arising under such Notes on the basis of (i)a statement issued by the Custodian with whom such Holder maintains a securities account in respect of the Notes (a) stating the full name and address of the Holder, (b) specifying the aggregate principal amount of Notes credited to such securities account on the date of such statement and (c) confirming that the Custodian has given written notice to the Clearing System containing the information pursuant to (a) and (b) and (ii)a copy of the Note in global form certified as being a true copy by a duly authorised officer of the Clearing System or a depository of the Clearing System, without the need for production in such proceedings of the actual records or the global note representing the Notes. For purposes of the foregoing, "Custodian" means any bank or other financial institution of recognised standing authorised to engage in securities custody business with which the Holder maintains a securities account in respect of the Notes and includes the Clearing System.

5 14 LANGUAGE

If the Conditions [These Conditions are written in the German language and provided with an English shall be in the German lan- language translation. The German text shall be controlling and binding. The English guage with an language translation is provided for convenience only.] Engllsh language translation insert:

If the Conditions [These Conditions are written in the English language and provided with a German shall be in the English lan- language translation. The English text shall be controlling and binding. The German guage with a language translation is provided for convenience only.] German language translation inserk

If the Conditions [These Conditions are written in the English language only.] shall be in the English language only insert:

In the case of [Eine deutsche Ubersetzung der Emissionsbedingungen wird bei der Bertelsmann Notes that are publicly offered, AG, Carl-Bertelsmann-Strasse 270, 33311 Gutersloh, fur kostenlosen Ausgabe in whole or in bereitgehalten.] part, in Germany ordistributed, in whole or in part, to non- professional investors in Germany with English language Condi- tions insert:

67 NOTES IN BEARER FORM WHICH WILL BE REPRESENTED BY DEFINITIVE NOTES

If the relevant Pricing Supplement provides for the initial issue of a Temporary Global Note to be replaced by Definitive Notes, the Basic Terms in Part I shall be supplemented by the following provisions, subject to the terms of the relevant Pricing Supplement.

In the case of an issue of Bertelsmann U.S. represented by a Permanent Global Note the same applies correspondingly if the exchange of such Permanent Global Note for a Definitive Note is requested under 4 1 (3)(c)of the Basic Terms in Part I as from the day of such exchange.

[In the case of Notes represented by a Temporary Global Note to be replaced by Definitive and/or Collective Notes § 1 (3)(a) (CURRENCY, DENOMINATION, FORM, CERTAIN DEFINITIONS - Temporary Global Note - Exchange) shall be replaced by:

(a) The Notes are initially represented by a temporary global note (the "Temporary Global Note") without coupons. The Temporary Global Note will be exchangeable for [if Temporary Global Note is exchangeable for Definitive Notes only insert: individual Notes in the Specified Denominations in definitive form ("Definitive Notes") [if the Notes are issued with Coupons, Talons and/or Receipts insert: with attached [interest coupons ("Coupons")l [and talons ("Talons") for further Coupons] [and] [payment receipts ("Receipts") in respect of the instalments of principal payable]]] [if the Temporary Global Note is exchangeable for Definitive Notes and Collective Notes insert: in part, individual Notes in the Specified Denominations in definitive form ("Definitive Notes") [if the Notes are issued with Coupons, Talons and/or Receipts insert: with attached

[ in t e rest co u pons ( " Co u PO ns " 11 [a nd t a Io ns ( " Ta Io ns " ) for f u rth e r Co u PO nSI [and] [payment receipts ("Receipts") in respect of the instalments of principal payable] and in the other part, one or more collective Notes (each, a "Collective Note") [if the Notes are issued with Coupons insert: with attached collective interest coupons ("Collective Interest Coupons")]; the right of Holders to require delivery of Definitive Notes in exchange for Notes which are represented by a Collective Note shall be governed by § 9a (3),first sentence Depotgesett (Ger- man Securities Custody Act)]. The Temporary Global Note [if the Temporary Global Note is exchangeable for Definitive Notes and Collective Notes insert: and any Collective Note [if the Notes are issued with Coupons insert: and any Collective Interest Coupon]] shall be signed manually by two authorized signatories of the Issuer and the Temporary Global Note [and any Collective Note1 shall be authenticated by or on behalf of the Fiscal Agent. Definitive Notes [if the Notes are issued with Coupons, Talons and/or Receipts insert: and [Cou- pons] [and] [,I[Talons] [and Receipts]] shall be signed in facsimile by two authorized signatories of the Issuer and the Definitive Notes shall be authenticated by or on behalf of the Fiscal Agent.]

[(i) in the case of Notes which are not TEFRA D Notes, replace § 1 (3)(b) (CURRENCY, DENOMINATION, FORM, CERTAIN DEFINITIONS - Temporary Global Note - Exchange) by:

[(ii) in the case of Notes which are TEFRA D Notes replace 5 1 (3)(b) and in the case of Notes which are issued by Bertelsmann U.S. and represented by a Temporary Global Note to be replaced by Definitive and/or Collective Notes, replace § 1 (3) (b)

68 and (c) (CURRENCY, DENOMINATION, FORM, CERTAIN DEFINITIONS - Temporary Global Note - Exchange) by:

(b) The Temporary Global Note shall be exchanged for Notes in the form provided in Clause (a) above on a date (the "Exchange Date") not later than 180 days after the date of issue of the Temporary Global Note. The Exchange Date for such exchange will not be earlier than 40 days after the date of issue of the Temporary Global Note. Such exchange shall only be made upon delivery of certifications to the effect that the beneficial owner or owners of the Notes represented by the Temporary Global Note is not a U. S. person (other than certain financial institutions or certain persons holding Notes through such financial institutions). Pay- ment of interest on Notes represented by a Temporary Global Note will be made only after delivery of such certifications. A separate certification shall be required in respect of each such payment of interest. Any such certification received on or after the 40th day after the date of issue of the Temporary Global Note will be treated as a request to exchange such Temporary Global Note pursuant to this subparagraph (b). Any securities delivered in exchange for the Temporary Global Note shall be delivered only outside of the United States.]

[In the case of Notes issued by Bertelsmann U. S. and represented by a Permanent Global Note 5 1 (3) (CURRENCY, DENOMINATION, FORM, CERTAIN DEFINITIONS - Temporary Global Note - Exchange) to be replaced by:

(3) Definitive Notes [if Collective Notes are to be issued insert: and Collective Notes.]

The Notes are represented [if the Permanent Global Note is exchangeable for Definitive Notes only insert: by individual Notes in the Specified Denominations in definitive form ("Definitive Notes") [if the Notes are issued with Coupons, Talons and/or Receipts insert: with attached [interest coupons ("Coupons")l [and talons ("Talons") for further Coupons] [andl [payment receipts ("Receipts") in respect of the instalments of principal payable]]] [if the Permanent Global Note is exchangeable for Definitive Notes and Collective Notes insert: in part, by individual Notes in the Specified Denominations in definitive form ("Definitive Notes") [if the Notes are issued with Coupons, Talons and/or Receipts insert: with attached [interest coupons ("Coupons")l [and talons ("Talons") for further Coupons] [andl [payment receipts ("Receipts") in respect of the instalments of principal payable] and in the other part, by one or more collective Notes (each, a "Collective Note") [if the Notes are issued with Coupons insert: with attached collective interest coupons ("Collective Interest Coupons")]; the right of Holders to require delivery of Definitive Notes in exchange for Notes which are represented by a Collective Note shall be governed by § 9a (31, first sentence Depotgesetz (German Securities Custody Act). Any Collective Note [if the Notes are issued with Coupons insert: and any Collective Interest Coupon]] shall be signed manually by two authorized signatories of the Issuer and any Collective Note shall be authenticated by or on behalf of the Fiscal Agent.] Definitive Notes [if the Notes are issued with Cou- pons, Talons and/or Receipts insert: and [Coupons] [andl [,I[Talons] [and Receipts]] shall be signed in facsimile by two authorized signatories of the Issuer and the Definitive Notes shall be authenticated by or on behalf of the Fiscal Agent.]

[§ 1 (4) and (5) (CURRENCY, DENOMINATION, FORM, CERTAIN DEFINITIONS - Clearing System/Holder of Notes) to be replaced by:

(4) Clearing System. "Clearing System" as used herein means [if more than one Clearing System insert: each of] the following: [Clearstream Banking AG, Frankfurt am Main ("CBF")] [,I[andl [Clearstream Banking, societe anonyme, Luxembourg

69 ("CBL')] [,I[and] [Euroclear Bank S.A./N.V., Brussels, as operator of the Euroclear System (Euroclear)] [,I[and] [specify other Clearing System].

(5) Holder of Notes. "Holder" as used herein means, in respect of Notes deposited with any Clearing System or other central securities depositary, any holder of a proportionate co-ownership or other beneficial interest or right in the Notes so deposited and in respect of Definitive Notes not deposited with any Clearing System or other central securities depositary the bearer of such Definitive Note.

(6)References to Notes. References herein to the "Notes" include (unless the context otherwise requires) references to any global note representing the Notes and any Definitive Notes [if the Notes are issued with Coupons, Talons and/or Receipts insert: and the [Couponsl[,l [andl [Collective Interest Coupons][,] [and] [Talons] [and Receipts] appertaining thereto].]

[In the case of Fixed Rate Notes replace § 3 (2) (INTEREST-INDEXATION -Accrual of Interest) by:

(2) Accrual of Interest. The Notes shall cease to bear interest from the beginning of the day on which they are due for redemption. If the Issuer shall fail to redeem the Notes when due, interest shall continue to accrue on the outstanding principal amount of the Notes beyond the due date until the actual redemption of the Notes, but not beyond the fourteenth day after notice has been given by the fiscal Agent in accordance with § 12 that the funds required for redemption have been provided to the Fiscal Agent.]

[In the case of Floating Rate Notes replace 5 3 (1) (INTEREST-INDEXATION -/nterest Payment Dates) subparagraph (d) by:

(d) In this § 3 "Business Day" means a day which is a day (other than a Saturday or a Sunday) on which (i)commercial banks and foreign exchange markets settle payments in the relevant place of presentation, and (ii)the Clearing System, and (iii) [if the Specified Curreny is not Euro insert: commercial banks and foreign exchange markets in [insert all relevant financial centres]] [if the Specified Currency is Euro insert: the Trans-European Automated Real-time Gross Settle- ment Express Transfer System ("TARGET")] settle payments.]

[In the case of Zero Coupon Notes replace 5 3 (2) (INTEREST-INDEXATION -Accrual of Interest) by:

(2)Accrual of Interest. If the Issuer shall fail to redeem the Notes when due, interest shall accrue on the outstanding principal amount of the Notes as from the due date to the date of actual redemption at the rate of [insert Amortisation Yield] per annum, but not beyond the fourteenth day after notice has been given by the Fiscal Agent in accordance with § 12 that the funds required for redemption have been provided to the Fiscal Agent.]

[In the case of Floating Rate Notes replace 53 [(7)] (INTEREST-INDEXATION -Accrual of Interest) by:

[(7)] Accrual of Interest. The Notes shall cease to bear interest from the beginning of the day on which they are due for redemption. If the Issuer shall fail to redeem the Notes when due, interest shall continue to accrue on the outstanding principal amount of the Notes beyond the due date until actual redemption of the Notes, but not beyond the fourteenth day after notice has been given by the Fiscal Agent in accordance with § 12 that the funds required for redemption have been provided to the Fiscal Agent. The applicable Rate of Interest will be determined in accordance with this § 3.1

70 [§ 4 (l)[(a)l(PAYMENTS -PaymentofPrincipal) to be replaced by:

(l)[(a)]Payment of Principal. Payment of principal in respect of Notes shall be made, subject to subparagraph (2) below, against presentation and (except in the case of partial payment) surrender of the relevant Note at the specified office of the Fiscal Agent outside the United States or at the specified office of any other Paying Agent outside the United States.]

[In the case of lnstalment Notes insert: Payment of lnstalment Amounts in respect of an lnstalment Note with Receipts will be made against presentation of the Note together with the relevant Receipt and surrender of such Receipt and, in the case of the final lnstalment Amount, surrender of the Note at the specified office of the Fiscal Agent outside the United States or at the specified office of any other Paying Agent outside the United States. Receipts are not documents of title to the Notes and, if separated from the Note to which they relate, shall not represent any obligation of the Issuer. The presentation of an lnstalment Note without the relevant Receipt or the presentation of a Receipt without the Note to which it pertains shall not entitle the Holder to any payment in respect of the relevant lnstalment Amount.]

[In the case of Notes other than Zero Coupon Notes replace 5 4 (l)(b) (PAYMENTS - Payment of Interest) by:

(b) Payment ofInterest. Payment of interest on Notes shall be made, subject to subparagraph (2) below, against presentation and surrender of the relevant Coupons or, in the case of Notes in respect of which Coupons have not been issued or in the case of interest due otherwise than on a scheduled date for the payment of interest, against presentation of the relevant Notes, at the specified office of the Fiscal Agent outside the United States or at the specified office of any other Paying Agent outside the United States.]

[In the case of Notes issued by Bertelsmann U. S. and represented by a Tem- porary Global Note to be replaced by Definitive and/or Collective Notes insert: Payment of interest on Notes represented by a Temporary Global Note shall be made, subject to subparagraph (2).to the Clearing System or to its order for credit to the relevant account holders of the Clearing System, upon due certification as provided in § 1 (3)(b).ll

[In the case of Notes with Coupons, Talons and/or Receipts insert as § 4 (l)(c) (PAY- MENTS - Surrender of [Coupons] [,I[andl [ Talons] [and Receipts]):

(c) Surrender of[Coupons][,] [and [Talons] [and Receipts]. Each Note delivered with [Coupons] [or] [Talons] [or Receipts] attached thereto must be presented and, except in the case of partial payment of the redemption amount, surrendered for final redemption together with all unmatured [Coupons][,] [and] [Talons] [and Receipts] relating thereto, failing which [In the case of Fixed Rate Notes insert: the amount of any missing unmatured Coupons shall be deducted from the amount otherwise payable on such final redemption[,] [and][.]] [In the case of Floating Rate Notes insert: all unmatured Coupons relating to such Notes (whether or not surrendered therewith) shall become void and no payment shall be made thereafter in respect of them[,] [and][.]] [In the case of Notes delivered with Talons insert: all unmatured Talons (whether or not surrendered therewith) shall become void and no exchange for Coupons shall be made thereafter in respect of them [and][.]] [In the case of Notes delivered with Receipts insert: all Receipts relating to such Notes in respect of payment of an lnstalment Amount which (but for such redemption) would have fallen due on a date after such

71 due date for redemption (whether or not surrendered therewith) shall become void.]

[In the case of Fixed Rate Notes delivered with Coupons insert: If the Notes should be issued with a Maturity Date and an interest rate or rates such that, on the presentation for payment of any such Note without any unmatured Coupons attached thereto or surrendered therewith, the amount required to be deducted in accordance with the foregoing would be greater than the redemption amount otherwise due for payment, then, upon the due date for redemption of any such Note, such unmatured Coupons (whether or not attached) shall become void (and no payment shall be made in respect thereof) as shall be required so that the amount required to be deducted in accordance with the foregoing would not be greater than the redemption amount otherwise due for payment. Where the application of the preceding sentence requires some but not all of the unmatured Coupons relating to a Note to become void, the relevant Paying Agent shall determine which unmatured Coupons are to become void, and shall select for such purpose Coupons maturing on later dates in preference to Coupons maturing on earlier dates.]

[In the case of Notes delivered with Talons insert: On or after the Interest Payment Date on which the final Coupon in any Coupon sheet matures, the Talon comprised in the Coupon sheet may be surrendered at the specified office of any Paying Agent, in exchange for a further Coupon sheet (including any appropriate further Talon). Each Talon shall, for the purpose of these Conditions, be deemed to mature on the Interest Payment Date on which the final Coupon in the relative Coupon sheet matures.]

[§ 4 (2)(PAYMENTS -Manner of Payment) to be replaced by:

(2) Manner of Payment. Subject to applicable fiscal and other laws and regulations, payments of amounts due in respect of the Notes shall be made in [insert Specified Currency] [in the case of Dual Currency Notes insert relevant currencies/exchange rate formulas]. Such payments shall be made

[In the case of payments in a currency other than Euro or U.S. dollars insert: by check payable in such currency drawn on a bank in the principal financial centre of the country of the Specified Currency or, at the option of the payee, by transfer to an account denominated in such currency maintained by the payee with a bank in such financial centre.]

[In the case of payments in Euro insert: in cash or by Euro check drawn on, or, at the option of the payee, by transfer to a Euro account maintained by the payee with, a bank in a principal financial centre of a country which has become a participating member state in the European Economic and Monetary Union.]

[in the case of payments in U.S. dollars insert: by U. S. dollar check drawn on a bank in New York City or, at the option of the payee, by transfer to a U. S. dollar account maintained by the payee at a bank outside the United States.]

[§ 4 (3)(PAYMENTS -Discharge) to be replaced by:

(3)Discharge. In the case of any Notes held through any Clearing System, the Issuer [in the case of Notes issued by Bettelsmann N.V. or Bertelsmann U.S. insert: or, as the case may be, the Guarantor] shall be discharged by payment to, or to the order of, the Clearing System.]

72 [§ 5 [(4)l(b) (ii) (REDEMPTION - Eady Redemption at the Option of the Issuer) to be replaced by:

(ii) whether such Series is to be redeemed in whole or in part only and, if in part only, the aggregate principal amount of the Notes and the serial numbers of the Notes which are to be redeemed;]

[§ 5 [(4)l(c) (REDEMPTION - €ady Redemption at the Option of the Issuer) to be replaced by:

(c) In the case of a partial redemption of Notes, Notes to be redeemed shall be drawn by lot or identified in such other manner as the Fiscal Agent may in its sole discretion deem appropriate and fair.]

[§ 5 [(5)l(b) (REDEMPTION - Eady Redemption at the Option of a Holder) to be replaced by:

(b) In order to exercise such option, the Holder must, not less than [insert Mini- mum Notice to Issuer] and not more than [insert Maximum Notice to Issuer] days before the Put Redemption Date on which such redemption is required to be made as specified in the Put Notice (as defined below), submit during normal business hours at the specified office of the Fiscal Agent or any other Paying Agent a duly completed early redemption notice ("Put Notice") in the form available from the specified office of the Fiscal Agent or any of the other Paying Agents and deposit the relevant Note at such office with the Put Notice. No option so exercised or Note so deposited may be revoked or withdrawn.I

[In the case of Notes issued by Bertelsmann or Bertelsmann N.V. insert after § 7 (TAXATION) sub-clause (d) and in the case of Notes issued by Bertelsmann U.S. insert after 0 7(3)(TAXATION) sub-clause (d) the following sub-clause (e) and re- letter the following letters:

(e) would not be payable if the Notes had been kept in safe custody with, and the payments had been collected by, a banking institution; or]

[§ 8 (PRESENTATION PERIOD) to be replaced by:

58 PRESENTATION PERIOD, REPLACEMENT OF NOTES [IF THE NOTES ARE ISSUED WITH COUPONS INSERT AND COUPONS]

The presentation period provided in § 801 subparagraph 1, sentence 1 BGB (Ger- man Civil Code) is reduced to ten years for the Notes. [If the Notes are issued with Coupons insert: The presentation period for the Coupons shall, in accordance with § 801 subparagraph 2 BGB (German Civil Code), be four years, beginning with the end of the calendar year in which the relevant Coupon falls due.] Should any Note [if the Notes are issued with Coupons insert: or Coupon] be lost, stolen, mutilated, defaced or destroyed, it may be replaced at the specified office of the Fiscal Agent, subject to relevant stock exchange requirements and all applicable laws, upon payment by the claimant of such costs and expenses as may be incurred in connection therewith and on such terms as to evidence, security and indemnity and otherwise as the Issuer may reasonably require. Mutilated or defaced Notes [if the Notes are issued with Coupons insert: or Coupons] must be surrendered before replacements will be issued.]

73 [If the Notes are issued with Coupons replace 5 11 [(3)] (FURTHER ISSUES, PURCHASES AND CANCELLATION - Cancellation) by:

[(3)1Cancellation. All Notes redeemed in full shall be cancelled forthwith together with all unmatured Coupons surrendered therewith or attached thereto and may not be reissued or resold.]

[P 12 (2) (NOTICES -Notification to Clearing System) to be deleted1

[§ 13 [(4)] (APPLICABLE LAW, PLACE OF JURISDICTION AND ENFORCEMENT - Enforcement) to be replaced by:

(4) Enforcement. The Holder of any Notes held through a Clearing System may in any proceedings against the Issuer, or to which such Holder and the Issuer are parties, protect and enforce in his own name his rights arising under such Notes on the basis of (i)a statement issued by the Custodian with whom such Holder maintains a securities account in respect of the Notes (a) stating the full name and address of the Holder, (b) specifying the aggregate principal amount of Notes credited to such securities account on the date of such statement and (c) confirming that the Custodian has given written notice to the Clearing System containing the information pursuant to (a) and (b) and (ii)a copy of the Note in global or definitive form certified as being a true copy by a duly authorised officer of the Clearing System or a depository of the Clearing System, without the need for production in such proceedings of the actual records or the Temporary Global Note or Definitive Note [if the Temporary Global Note is exchangeable for Definitive Notes and Collective Notes insert: or Collective Note]. For purposes of the foregoing, "Custodian" means any bank or other financial institution of recognized standing authorized to engage in securities custody business with which the Holder maintains a securities account in respect of the Notes and includes the Clearing System.]

74 GARANTIE

der Bertelsmann AG, Gutersloh, Bundesrepublik Deutschland, zugunsten der Glaubiger von Schuldverschreibungen (die ,,Schuldverschreibungen"), die von der Bertelsmann Capital Corporation N. V., Amsterdam, Niederlande, und der Bertelsmann U. S. Finance, Inc., Wilmington, Delaware, USA im Rahmen des Debt Issuance Programms (das ,,Programm") begeben werden

PRAAM BE L

(A) Die Bertelsmann AG (,,Bertelsmann"), die Bertelsmann Capital Corporation N.V. (,,Bertelsmann N.V.") und die Bertelsmann U. S. Finance, Inc. (,,Bertelsmann U. S.")beabsichtigen, von Zeit zu Zeit Schuldverschreibungen im Rahmen des Programms zu begeben, deren jeweils ausstehen- der Gesamtnennbetrag das von Zeit zu Zeit bestehende Programm-Limit nicht ubersteigt.

(6) Die Schuldverschreibungen unterliegen den Emissionsbedingungen der Schuldverschreibungen nach deutschem Recht (in der durch das anwendbare Konditionenblatt jeweils geanderten, erganzten oder modifirierten Fassung, die ,,Bedingungen").

(C) Die Bertelsmann AG (die ,,Garantin") beabsichtigt, mit dieser Garantie die Zahlung von Kapital und Zinsen sowie von jeglichen sonstigen Betragen zu garantieren, die aufgrund der von der Bertelsmann N.V. oder der Bertelsmann U.S. zu irgendeiner Zeit im Rahmen des Programms begebenen Schuldverschreibungen zu leisten sind.

HlERMlT WlRD FOLGENDES VEREINBART

1. Die Garantin ubernimmt gegenuber den Glaubigern jeder einzelnen Schuldverschreibung (wobei dieser Begriff jede (vorlaufige oder Dauer-) Globalurkunde, Sammel- oder Einzelurkunde, die Schuldverschreibungen verbrieft, einschlieEt), die jetzt oder spater von der Bertelsmann N.V. oder der Bertelsmann U.S. im Rahmen des Programms begeben wird, die unbedingte und unwiderrufliche Garantie fur die ordnungsgemal3e Zahlung von Kapital und Zinsen auf die Schuldver- schreibungen sowie von jeglichen sonstigen Betragen, die in Ubereinstimmung mit den Bedin- gungen auf irgendeine Schuldverschreibung zahlbar sind, und zwar zu den in den Bedingungen bestimmten Falligkeiten.

2. Diese Garantie begrundet eine unwiderrufliche, nicht nachrangige und (vorbehaltlich der Bestim- mungen in Ziffer 4 dieser Garantie) nicht besicherte Verpflichtung der Garantin, die mit allen sonstigen nicht nachrangigen und nicht besicherten Verpflichtungen der Garantin wenigstens im gleichen Rang steht (soweit nicht zwingende gesetzliche Bestimmungen entgegenstehen).

3. Samtliche auf die Schuldverschreibungen zu zahlenden Betrage sind ohne Einbehalt oder Abzug von oder aufgrund von gegenwartigen oder tukunftigen Steuern oder sonstigen Abgaben gleich welcher Art zu leisten, die von oder in der Bundesrepublik Deutschland oder fur deren Rechnung oder von oder fur Rechnung einer politischen Untergliederung oder Steuerbehorde der oder in der Bundesrepublik Deutschland auferlegt oder erhoben werden, es sei denn, ein solcher Einbe- halt oder Abzug ist gesetrlich vorgeschrieben. In diesem Fall wird die Garantin diejenigen zusatzlichen Betrage (die ,,zusatzlichen Betrage") zahlen, die erforderlich sind, damit die den Glaubi- gern zufliei3enden Nettobetrage nach diesem Einbehalt oder Abzug jeweils den Betragen entsprechen, die ohne einen solchen Einbehalt oder Abzug von den Glaubigern empfangen worden waren; die Verpflichtung zur Zahlung solcher zusatzlicher Betrage besteht jedoch nicht im Hin- blick auf Steuern und Abgaben, die:

(a) von einer als Depotbank oder lnkassobeauftragter des Glaubigers handelnden Person oder sonst auf andere Weise zu entrichten sind als dadurch, da13 die Garantin aus den von ihr zu leistenden Zahlungen von Kapital oder Zinsen einen Abzug oder Einbehalt vornimmt; oder

75 wegen einer gegenwartigen oder fruheren personlichen oder geschaftlichen Beziehung des Glaubigers zu der Bundesrepublik Deutschland tu zahlen sind, und nicht allein deshalb, weil Zahlungen auf die Schuldverschreibungen aus Quellen in der Bundesrepublik Deutsch- land stammen (oder fur Zwecke der Besteuerung so behandelt werden) oder dort besichert sind; oder

aufgrund (i) einer Richtlinie oder Verordnung der Europaischen Union betreffend die Besteuerung von Zinsertragen oder (ii)einer zwischenstaatlichen Vereinbarung uber deren Besteuerung, an der die Bundesrepublik Deutschland oder die Europaische Union beteiligt ist, oder (iii)einer gesetzlichen Vorschrift, die diese Richtlinie, Verordnung oder Vereinba- rung umsetzt oder befolgt, abzuziehen oder einzubehalten sind; oder

aufgrund einer Rechtsanderung zu zahlen sind, welche spater als 30 Tage nach Falligkeit der betreffenden Zahlung von Kapital oder Zinsen oder, wenn dies spater erfolgt, ordnungsgemafier Bereitstellung aller falligen Betrage und einer diesbezuglichen Bekanntmachung gema13 § 12 wirksam wird; oder

nicht zahlbar waren, wenn die Schuldverschreibungen bei einer Bank oder einem vergleichbaren lnstitut verwahrt worden waren und die Bank oder das vergleichbare lnstitut die Zah- lungen eingezogen hatte; oder

von einer Zahlstelle abgezogen oder einbehalten werden, wenn eine andere Zahlstelle die Zahlung ohne einen solchen Abzug oder Einbehalt hatte leisten konnen.

4. Die Verpflichtungen der Garantin aus dieser Garantie (i) sind selbstandig und unabhangig von den Verpflichtungen der Bertelsmann N.V. und der Bertelsmann U.S. aus den Schuldverschrei- bungen, (ii) bestehen ohne Rucksicht auf die RechtmaRigkeit, Gultigkeit, Verbindlichkeit und Du rchsetzba rkeit der Sch u ldversch rei bungen u nd (iii) werden nicht durch irgendei n Ereig nis, eine Bedingung oder einen Umstand tatsachlicher oder rechtlicher Natur beruhrt, aufier durch die volle, endgultige und unwiderrufliche Erfullung jedweder in den Schuldverschreibungen aus- drucklich eingegangener Zahlungsverpflichtungen.

5. Solange eine von ihr, der Bertelsmann N.V. oder der Bertelsmann U.S. unter dem Programm begebene Schuldverschreibung aussteht (aber nur bis zu dem Zeitpunkt, an dem Kapital und Zin- sen aus oder im Zusammenhang mit den Schuldverschreibungen dem Fiscal Agent zur Ver- fugung gestellt worden sind), verpflichtet sich die Garantin, weder ihr gesamtes noch einen Teil ihres gegenwartigen oder zukunftigen Vermogens mit Pfandrechten, Rechten aus Abtretung oder Ubertragung, Hypotheken oder Grundpfandrechten oder sonstigen Sicherungsrechten zur Be- sicherung einer gegenwartigen oder rukunftigen Kapitalmarktverbindlichkeit (wie nachstehend definiert), die von der Garantin (oder einer anderen Person) eingegangen oder garantiert ist, zu belasten oder solche Rechte tu diesem Zweck bestehen zu lassen, ohne gleichzeitig die Glaubi- ger an derselben Sicherheit in gleicher Weise und anteilmal3ig teilnehmen zu lassen. Diese Ver- pflichtung findet jedoch keine Anwendung in Bezug auf Sicherungsrechte, die auf einem Ver- mogensgegenstand zum Zeitpunkt des Erwerbs durch die Garantin lasten. Fur die Zwecke dieser

Bed in g u ng en bezeich n et ,, Ka pita I ma r ktver bi nd I ich keit ” j ede Ve r bin d I ich keit h in si ch t Ii ch der Ruckzahlung geliehener Geldbetrage, die durch Schuldscheine oder durch Schuldverschreibun- gen oder sonstige Wertpapiere, die an einer Borse oder an einem anderen anerkannten Wertpa- piermarkt notiert oder gehandelt werden oder werden konnen, verbrieft, verkorpert oder dokumentiert sind.

6. Die Verpflichtungen der Garantin aus dieser Garantie erstrecken sich, ohne da13 eine weitere Handlung vorgenommen werden oder ein weiterer Umstand vorliegen muR, auf die Verpflich- tungen einer nicht mit der Garantin identischen Nachfolgeschuldnerin, die infolge einer Schuld- nerersettung gemaR den anwendbaren Bestimmungen der Bedingungen in bezug auf jedwede Schuldverschreibung entstehen.

7. Diese Garantie und alle hierin enthaltenen Vereinbarungen sind ein Vertrag zugunsten der Glau- biger der Schuldverschreibungen als begunstigte Dritte gemal3 § 328 Abs. 1 BGB und begrunden das Recht eines jeden Glaubigers, die Erfullung der hierin eingegangenen Verpflichtungen

76 unmittelbar von der Garantin zu fordern und diese Verpflichtungen unmittelbar gegenuber der Garantin durchzusetzen.

8. Die Deutsche Bank Aktiengesellschaft mit der die hierin enthaltenen Vereinbarungen getroffen werden, handelt als Fiscal Agent nicht als Beauftragte, Treuhanderin oder in einer ahnlichen Eigenschaft fur die Glaubiger von Schuldverschreibungen.

9. Die hierin verwendeten und nicht anders definierten Begriffe haben die ihnen in den Bedingun- gen zugewiesene Bedeutung.

10. Diese Garantie unterliegt dem Recht der Bundesrepublik Deutschland.

11. Diese Garantie ist in deutscher Sprache abgefaat und in die englische Sprache ubersetzt. Die deutschsprachige Fassung ist verbindlich und allein maageblich.

12. Das Original dieser Garantie wird der Deutsche Bank Aktiengesellschaft ausgehandigt und von dieser verwahrt.

13. AusschlieElicher Gerichtsstand fur alle Rechtsstreitigkeiten gegen die Garantin aus oder im Zusammenhang mit dieser Garantie ist Frankfurt am Main.

14. Jeder Glaubiger einer Schuldverschreibung kann in jedem Rechtsstreit gegen die Garantin und in jedem Rechtsstreit, in dem er und die Garantin Partei sind, seine aus dieser Garantie hervor- gehenden Rechte auf der Grundlage einer von einer vertretungsberechtigten Person der Deut- sche Bank Aktiengesellschaft beglaubigten Kopie dieser Garantie ohne Vorlage des Originals im eigenen Namen wahrnehmen und durchsetzen.

6. Juni 2002

BERTELSMANN AG

Wir akzeptieren die Bestimmungen der vorstehenden Garantie ohne Obligo, Gewahrleistung oder Ruck- griff auf uns.

6. Juni 2002

DEUTSCHE BANK AKTIENGESELLSCHAFT

77 GUARANTEE

(non-binding English translation) of Bertelsmann AG, Gutersloh, Federal Republic of Germany, for the benefit of the holders of notes (the "Notes"), issued by Bertelsmann Capital Corporation N. V., Amsterdam, The Netherlands, and by Bertelsmann U. S. Finance, Inc., Wilmington, Delaware, U. S. A., under the Debt Issuance Programme (the "Programme")

WHEREAS:

(A) Bertelsmann AG ("Bertelsmann"), Bertelsmann Capital Corporation N.V. ("Bertelsmann N. V.") and Bertelsmann U.S. Finance, Inc. ("Bertelsmann U. S. ''1 intend to issue Notes under the Pro- gramme from time to time, the outstanding aggregate nominal amount of which will not exceed the Programme Amount.

(B) The Notes will be issued with Terms and Conditions under German law (as amended, supplemented or modified by the applicable Pricing Supplement, the "Conditions").

(C) Bertelsmann AG (the "Guarantor") wishes to guarantee the due payment of principal and interest and any other amounts payable in respect of any and all Notes that may be issued by Bertels- mann N.V. or Bertelsmann U. S. under the Programme.

IT IS AGREED AS FOLLOWS:

The Guarantor unconditionally and irrevocably guarantees to the holder of each Note (which expression shall include any Temporary Global Note or Permanent Global Note, Collective Note or Definitive Note representing Notes) (each a "Holder") issued by Bertelsmann N.V. or Bertels- mann U. S. now or at any time hereafter under the Programme, the due and punctual payment of the principal of, and interest on, the Notes and any other amounts which may be expressed to be payable under any Note, as and when the same shall become due, in accordance with the Condi- tions.

This Guarantee constitutes an irrevocable, unsecured (subject to paragraph (4) hereunder) and unsubordinated obligation of the Guarantor and ranks pari passu with all other present or future unsecured and unsubordinated obligations of the Guarantor outstanding from time to time, subject to any obligations preferred by law.

All amounts payable in respect of the Notes shall be made at source without withholding or deduction for or on account of any present or future taxes or duties of whatever nature imposed or levied by way of withholding or deduction by or on behalf of the Federal Republic of Germany or any political subdivision or any authority thereof or therein having power to tax unless the Guarantor is required by law to pay such withholding or deduction. In such event, the Guarantor will pay such additional amounts (the "Additional Amounts") as shall be necessary in order that the net amounts received by the Holders, after such withholding or deduction shall equal the respective amounts of principal and interest which would otherwise have been receivable in the absence of such withholding or deduction; except that no such Additional Amounts shall be payable on account of any taxes or duties which:

(a) are payable by any person acting as custodian bank or collecting agent on behalf of a Holder, or otherwise in any manner which does not constitute a deduction or withholding by the Guarantor from payments of principal or interest made by it, or

(b) are payable by reason of the Holder having, or having had, some personal or business connection with the Federal Republic of Germany and not merely by reason of the fact that payments in respect of the Notes are, or for purposes of taxation are deemed to be, derived from sources in, or are secured in, the Federal Republic of Germany, or

78 are deducted or withheld pursuant to (i) any European Union Directive or Regulation concerning the taxation of interest income, or (ii)any international treaty or understanding relating to such taxation and to which the Federal Republic of Germany or the European Union is a party, or (iii)any provision of law implementing, or complying with, or introduced to conform with, such Directive, Regulation, treaty or understanding, or

are payable by reason of a change in law that becomes effective more than 30 days after the relevant payment of principal or interest becomes due, or is duly provided for and notice thereof is published in accordance with § 12, whichever occurs later, or

would not be payable if the Notes had been kept in safe custody with, and the payments had been collected by, a banking institution, or

are payable because any Note was presented to a particular Paying Agent for payment if the Note could have been presented to another Paying Agent without any such withholding or deduction.

The obligations of the Guarantor under this Guarantee (i)shall be separate and independent from the obligations of Bertelsmann N.V. and Bertelsmann U. S. under the Notes, (ii)shall exist irrespective of the legality, validity and binding effect or enforceability of the Notes, and (iii)shall not be affected by any event, condition or circumstance of whatever nature, whether factual or legal, save the full, definitive and irrevocable satisfaction of any and all payment obligations expressed to be assumed under the Notes.

So long as any Note issued by the Guarantor, Bertelsmann N.V. or Bertelsmann U. S. under the Programme remains outstanding, but only until such time as principal and interest payable under or in respect of the Notes, have been placed at the disposal of the Fiscal Agent, the Guar- antor has undertaken not to grant or permit to subsist any pledge, assignment, transfer, mortgage of or other charge or security interest over any or all of its present or future assets, as security for any present or future Capital Market Indebtedness (as defined below) issued or guaranteed by the Guarantor (or issued or guaranteed by any other person), without at the same time having the Holders share equally and rateably in such security; provided that this obligation does not apply to security interests of any kind that are already attached to an asset at the time when such asset is acquired for by the Guarantor. For the purpose of these Terms and Conditions "Capital Market Indebtedness" means any obligation for the payment of borrowed money which is in the form of, or represented or evidenced by, a certificate of indebtedness or in the form of, or represented or evidenced by, bonds, notes, loan stock or other securities which are, or are capable of being, quoted, listed, dealt in or traded on a stock exchange or other recognized securities market.

The obligations of the Guarantor under this Guarantee shall, without any further act or thing being required to be done or to occur, extend to the obligations of any Substituted Debtor which is not the Guarantor arising in respect of any Note by virtue of a substitution pursuant to the Conditions.

This Agreement and all undertakings contained herein constitute a contract for the benefit of the Holders from time to time as third party beneficiaries pursuant to § 328 (1) BGB (German Civil Code) (l). They give rise to the right of each such Holderto require performance ofthe obligations undertaken herein directly from the Guarantor, and to enforce such obligations directly against the Guarantor.

Deutsche Bank Aktiengesellschaft which accepted this Guarantee, in its capacity as Fiscal Agent does not act in a relationship of agency or trust, a fiduciary or in any other similar capacity for the Holders.

(1) An English language translation of § 328 (1) BGB (German Civil Code) reads as follows: "A contract may stipulate performance for the benefit of a third party, to the effect that the third party acquires the right directly to demand performance."

79 (9) Terms used in this Agreement and not otherwise defined herein shall have the meaning attribut- ed to them in the Conditions.

(IO)This Agreement shall be governed by, and construed in accordance with, German law.

(11) This Agreement is written in the German language and attached hereto is a non-binding English translation.

(12) The original version of this Agreement shall be delivered to, and kept by, Deutsche Bank Aktien- gesellschaft.

(13) Exclusive place of jurisdiction for all legal proceedings arising out of or in connection with this Agreement against the Guarantor shall be Frankfurt am Main.

(14) On the basis of a copy of this Agreement certified as being a true copy by a duly authorised officer of Deutsche Bank Aktiengesellschaft each Holder may protect and enforce in his own name his rights arising under this Agreement in any legal proceedings against the Guarantor or to which such Holder and the Guarantor are parties, without the need for production of this Agree- ment in such proceedings.

6 June 2002

BERTELSMANN AG

We accept the terms of the above Guarantee without recourse, warranty or liability.

6 June 2002

DEUTSCHE BANK AKTl EN G ES E LLS C HAFT

80 FORM OF PRICING SUPPLEMENT (MUSTER - KONDITIONENBLATT) [Date] [Datum] Pricing Supplement Konditionenblatt

[Further Pricing Supplement] [Zusatzliches Konditionenblatt] ( ' )

[Title of relevant Series of Notes] [Bezeichnung der betreffenden Serie der Schuldverschreibungen] issued pursuant to the begeben aufgrund des

Euro 3,000,000,000 Debt Issuance Programme

and the Information Memorandum dated June 6,2002

of der

Bertelsmann AG

and und

Bertelsmann Capital Corporation N. V.

and und

Bertelsmann U. S. Finance, Inc.

dated 6 June 2002 vom 6. Juni 2002

Issue Price: [ ] per cent. Ausgabepreis: [ 1%

Settlement Date: 1PI Tag der Begebung: f I Series No.: [ ] Serien Nr.: [ 1

(I) In the case of Notes issued by Bertelsmann U. S. Finance, Inc. which will be represented by a Permanent Global Note, a second Pricing Supplement applicable to Definitive Notes must be completed in addition to the Pricing Supple- ment applicable to the Permanent Global Note, as described in more detail in footnote 5 below. In such further Pric- ing Supplement, no information needs to be provided in respect of the Issue Price, the Settlement Date, the Series No. as well as in respect of the section herein entitled "General Provisions Applicable to the Note(s)'.' Im Fall von Schuldverschreibungen der Bertelsmann U. S. Finance, Inc., die durch eine Dauerglobalurkunde verbrieft werden, ist, wie naher in FuRnote 5 beschrieben, ein zweites auf Einzelurkunden anwendbares Konditionenblatt zusatzlich zu dem auf die Dauerglobalurkunde anwendbaren Konditionenblatt zu erstellen. In diesem zusatzlichen Konditionenblatt sind keine Angaben uber den Ausgabepreis, den Tag der Begebung, die Serien Nr. sowie zu dem hierin enthaltenen Abschnitt mit der Uberschrift ,,Allgemeine Bestimmungen hinsichtlich der Schuldverschreibun- glenl"zu machen. The Settlement Date is the date of payment and settlement of the Notes. In the case of free delivery, the Settlement Date is the delivery date. Der Tag der Begebung ist der Tag, an dem die Schuldverschreibungen begeben und bezahlt werden. Bei freier Liefe- rung ist der Tag der Begebung der Tag der Lieferung.

81 The Pricing Supplement is to be read in conjunction with the Information Memorandum dated 6 June 2002.

Das Konditionenblatt ist in Verbindung mit dem Information Memorandum vom 6. Juni 2002 zu lesen.

[This Pricing Supplement is issued to give details of an issue of Notes under the Euro 3,000,000,000 Debt Issuance Programme of Bertelsmann AG, Bertelsmann Capital Corporation N.V. and Bertels- mann U.S. Finance, Inc. (the "Programme") and is to be read in conjunction with the Terms and Con- ditions of the Notes (the "Terms and Conditions") set forth in the Information Memorandum pertaining to the Programme dated 6 June 2002. Capitalised Terms not otherwise defined herein shall have the meanings specified in the Terms and Conditions.

Dieses Konditionenblatt enthalt Angaben zur Emission von Schuldverschreibungen unter dem Euro 3.000.000.000 Debt Issuance Programme der Bertelsmann AG, der Bertelsmann Capital Corpo- ration N. V: und der Bertelsmann U. S. Finance, Inc. (das ,, Programm") und ist in Verbindung mit den Emissionsbedingungen der Schuldverschreibungen (die ,, Emissionsbedingungen") zu lesen, die in der Fassung vom 6. Juni 2002 des Information Memorandum uber das Programm enthalten sind. Begriffe, die in den Emissionsbedingungen definiert sind, haben, falls das Konditionenblatt nicht etwas anderes bestimmt, die gleiche Bedeutung, wenn sie in diesem Konditionenblatt verwendet ~erden.l(~)

[The Conditions applicable to the Notes (the ,,Conditions") and the German or English language translation thereof, if any, are attached to this Pricing Supplement. They replace in full the Terms and Conditions of the Notes as set out in the Information Memorandum and take precedence over any conflicting provisions of this Pricing Supplement.

Die fur die Schuldverschreibungen geltenden Bedingungen (die ,, Bedingungen "1 sowie eine etwaige deutsch- oder englischsprachige Ubersetzung sind diesem Konditionenblatt beige fugt. Die Bedingun- gen ersetzen in Ganze die im Information Memorandum abgedruckten Emissionsbedingungen und gehen etwaigen abweichenden Bestimmungen dieses Konditionenblattes VO~.](~)

All references in this Pricing Supplement to numbered Articles and sections are to Articles and sections of the Terms and Conditions.

Bezugnahmen in diesem Konditionenblatt auf Paragraphen und Absatze beziehen sich auf die Para- graphen und Absatze der Emissionsbedingungen.

All provisions in the Terms and Conditions corresponding to items in this Pricing Supplement which are either not selected or completed or which are deleted shall be deemed to be deleted from the terms and conditions applicable to the Notes (the "Conditions").

Samtliche Bestimmungen der Emissionsbedingungen, die sich auf Variablen dieses Konditionenblat- tes beziehen und die weder angekreuzt noch ausgefullt werden oder die gestrichen werden, gelten als in den auf die Schuldverschreibungen anwendbaren Emissionsbedingungen (die "Bedingun- gen 'I) gestrichen.

(3) To be inserted in the case of Long-Form Conditions. Einzufugen im Falle von nicht-konsolidierten Bedingungen. (4) To be inserted in the case of Integrated Conditions. Einzufugen im Falle von konsolidierten Bedingungen.

82 Issuer Emittentin

0 Bertelsmann AG

0 Bertelsmann Capital Corporation N.V.

0 Bertelsmann U.S. Finance, Inc. (5)

Form of Conditions PI Form der Bedingungen

0 Long-Form Nicht-konsolidierte Bedingungen

0 Integrated Konsolidierte Bedingungen

In the case of Bertelsmann U.S. Finance, Inc., Permanent Global Notes will be exchangeable in full for Definitive Notes (or in part for Definitive Notes and in the other part for one or more Collective Notes) upon request of the Clearing System acting on instructions of any Holder. If Integrated Conditions apply, the Conditions applicable to Definitive Notes must be appended to the Conditions applicable to Notes represented by the Permanent Global Note. If Long-Form Conditions apply, a further Pricing Supplement must be appended to the Permanent Global Note specifying the Conditions applicable to the Definitive Notes. As ofthe date of exchange, Definitive Notes will have to be delivered which will have endorsed thereon either (i)such further Pricing Supplement and the Terms and Conditions in full, (ii)the Pricing Supplement and the Terms and Con- ditions in a form simplified by the deletion of non-applicable provisions, or (iii)Integrated Conditions, as the Issuer may determine. Also see footnote 1 above. Im Fall von Schuldverschreibungen der Bertelsmann U.S. Finance, Inc., sind auf Verlangen des Clearing Systems, das auf Weisung eines Glaubigers handelt, Dauerglobalurkunden in vollem Umfang gegen Einzelurkunden (oder zum Teil gegen Einzel- und zum anderen Teil gegen Sammelurkunden) austauschbar. Sofern konsolidierte Bedingungen verwendet werden, sind den Bedingungen, die auf durch eine Dauerglobalur- kunde verbriefte Schuldverschreibungen Anwendung finden, die auf Einzelurkunden anwendbaren Bedingungen anzuhangen. Sofern nicht-konsolidierte Bedingungen verwendet werden, ist der Dauerglobalurkunde ein zusatzliches Konditio- nenblatt anzuhangen, das die Bedingungen festlegt, die auf Einzelurkunden Anwendung finden. Ab dem Tag des Austauschs, sind Einzelurkunden zu liefern, denen nach Wahl der Emittentin (1) das zusatzliche Kon- ditionenblatt und die vollstandigen nich t-konsolidierten Emissionsbedingungen, (ii) das zusatzliche Konditionenblatt und die nicht-konsolidierten Emissionsbedingungen in einer durch Streichung nictit anwendbarer Bestimmungen vereinfachten Form oder (iii) konsolidierte Bedingungen anzuhangen sind. Siehe auch oben FuRnote 1. To be determined in consultation with the Issuer. It is anticipated that Long-Form Conditions will generally be used for Notes in bearer form sold on a non-syndicated basis and which are not publicly offered. Integrated Conditions will generally be used for Notes in bearer form sold and distributed on a syndicated basis. Integrated Conditions will be required where the Notes are to be publicly offered, in whole or in part, orto be distributed, in whole or in part, to non-professional investors. Die Form der Bedingungen ist in Abstimmung mit der Emittentin festzulegen. Es ist vorgesehen, dal3 nicht-konsolidierte Bedingungen fur Inhaberschuldverschreibungen verwendet werden, die auf nicht syndizierter Basis verkaufi und die nicht offentlich zum Verkauf angeboten werden. Konsolidierte Bedingungen werden in der Regel fur Inha- berschuldverschreibungen verwendet, die auf syndizierter Basis verkauft und vertrieben werden. Konsolidierte Bedingungen sind erforderlich, wenn die Schuldverschreibungen insgesamt oder teilweise an nicht berufsmaaige oder gewerbliche lnvestoren verkaufi werden.

83 Language of Conditions ('1 Sprache der Bedingungen

0 Germanonly ausschliefilich Deutsch

0 English only ausschlieljllich Englisch

0 English and German (English binding) Englisch und Deutsch (englischer Text maageblich)

0 German and English (German binding) Deutsch und Englisch (deutscher Text maageblich)

CURRENCY, DENOMINATION, FORM, CERTAIN DEFINITIONS (I1) WAHRUNG, STUCKELUNG, FORM, DEFINITIONEN (§ 1)

Currency and Denomination Wahrung und Stiickelung

Specified Currency [I Festgelegte Wahrung

Aggregate Principal Amount [I Gesamtnennbetrag

Specified Denomination [I Festgelegte Stuckelung

Minimum Principal Amount for Transfers (specify) [I Mindestnennbetrag fur Ubertragungen (angeben)

0 TEFRAC(8) TEFRA C

0 Permanent Global Note Dauerglo balurkunde

0 Temporary Global Note exchangeable for Definitive Notes Vorlaufige Globalurkunde austauschbar gegen Einzelurkunden

(') To be determined in consultation with the Issuer. It is anticipated that, subject to any stock exchange or legal requirements applicable from time to time, and unless otherwise agreed, in the case of Notes in bearer form sold and distributed on a syndicated basis, German will be the controlling language. In the case of Notes in bearer form publicly offered, in whole or in part, in the Federal Republic of Germany, or distributed, in whole or in part, to non-professional investors in the Federal Republic of Germany, German will be the controlling language. If, in the event of such public offer or distribution to non-professional investors, however, English is chosen as the controlling language, a German language translation of the Conditions will be available from the principal office of Bertelsmann AG. In Abstimmung mit der Emittentin festzulegen. Es wird erwartet, dal3 vorbehaltlich geltender Borsen- oder anderer Bestimmungen und soweit nicht anders vereinbatf, die deutsche Sprache fur lnhaberschuldverschreibungen mal3geblich sein wird, die auf syndiziefler Basis verkauft und vertrieben werden. Falls lnhaberschuldverschreibungen insgesamt oder teilweise offentlich zum Verkauf in der Bundesrepublik Deutschland angeboten oder an nicht berufsmaRige oder gewerbliche lnvestoren in der Bundesrepublik Deutschland verkaufi werden, wird die deutsche Sprache maRgeblich sein. Falls bei einem solchen offentlichen Verkaufsangebot oder Verkauf an nicht berufsmaRige oder gewerbliche lnvestoren die englische Sprache als mal3geblich bestimmt wird, wird eine deutschsprachige Uber- setzung der Bedingungen bei der Hauptgeschaftsstelle der Bertelsmann AG erhaltlich sein. TEFRA C Notes are only to be issued by Bertelsmann AG or Bertelsmann Capital Corporation N.V. TEFRA C Schuldverschreibungen sind nur durch die Bertelsmann AG oder die Bertelsmann Capital Corporation N. V. zu begeben.

84 n TEFRA D TEFRA D

c1 Temporary Global Note exchangeable for: Vorlaufige Globalurkunde austauschbar gegen:

0 Permanent Global Note Dauerglobalurkunde

0 Definitive Notes Einrelurkunden n Neither TEFRA D nor TEFRA C (lo) Weder TEFRA D noch TEFRA C

fl Permanent Global Note Dauerglobalurkunde

fl Temporary Global Note exchangeable for Definitive Notes Vorlaufige Globalurkunde austauschbar gegen Einzelurkunden

Definitive Notes [Yes/Nol Einzelurkunden [Ja/Neinl

0 Coupons Zinsscheine

0 Talons Talons

0 Receipts Ruckzahlungsscheine

Certain Definitions Definitionen

Clearing System

0 Clearstream Banking AG n Clearstream Banking, societe anonyme fl Euroclear Bank S.A./N.V. as Operator of the Euroclear System

0 Other - specify sonstige (angeben)

Calculation Agent [Yes/N 01 Berechnungsstelle [Ja/Neinl n Fiscal Agent

0 Other (specify) [I sonstige (angeben)

~~ (9) Bertelsmann U. S. Finance, Inc. will not issue Notes having an initial maturity of less than one year. Bertelsmann U. S. Finance, Inc. wird keine Schuldverschreibungen mit einer ursprunglichen Laufzeit von weniger als einem Jahr begeben (lo) Applicable only for Notes issued by Bertelsmann AG or Bertelsmann Capital Corporation N.V. which have an initial maturity of one year or less. Nur anwendbar bei Schuldverschreibungen, die von Bertelsmann AG oder Bertelsmann Capital Corporation N. I/ mit einer ursprunglichen Laufzeit von einem Jahr oder weniger begeben werden.

85 INTEREST (§ 3) ZINSEN (§ 3)

0 Fixed Rate Notes Festverzinsliche Schuldverschreibungen

Rate of Interest and Interest Payment Dates Zinssatz und Zinszahlungstage

Rate of Interest [ ] per cent. per annum Zinssatz [ ]%perannum

Interest Commencement Date [I Verzinsungsbeginn

Fixed Interest Date(s) [I Festzinstermin(e)

First Interest Payment Date [I Erster Zinszahlungstag

Initial Broken Amount(s) (for the Specified Denomination) [I Anfanglichelr) Bruchteilzinsbetrag(-betrage) (fur die festgelegte Stuckelung)

Fixed Interest Date preceding the Maturity Date I1 Festzinstermin, der dem Falligkeitstag vorangeht

Final Broken Amount(s) (per Specified Denomination) Abschliefiende(r) Bruchteilzinsbetrag(-betrage) (furjede festgelegte Stuckelung)

0 Floating Rate Notes Variabel verzinsliche Schuldverschreibungen

Interest Payment Dates Zinsza hlungstage

Interest Commencement Date [I Verzinsungsbeginn

Specified Interest Payment Dates [I Festgelegte Zinszahlungstage

Specified Interest Period(s) [ I[weeks/months/other - specify] Festgelegte Zinsperiodeln) I[Wochen/Monate/andere - angebenl

Business Day Convention Geschaftstagskonvention

0 Modified Following Business Day Convention Modifizierte-Folgender-Geschaftstag-Konvention

0 FRN Convention (specify period(s1) 1 [monthdother - specify] FRN Konvention (Zeitraum angeben) 1 [Monatelandere - angeben]

0 Following Business Day Convention Folgender-Geschaftstag-Konvention

86 0 Preceding Business Day Convention Vorhergegangener-Geschaftstag-Konvention

Relevant Financial Centres for interest determination Relevante Finanzzentren fur die Zinsfestlegung

Rate of Interest Zinssatz

Screen Rate Determination Bildschirmfes tstellung

EURIBOR (11.00 a.m. Brussels time/TARGET Business Day/ lnterbankmarket in the euro-zone) EURIBOR (11.00 Brusseler OrtszeiUTARGET Geschaftstag/ lnterbankenmarkt in der Euro-Zone) Screen page I1 Bildschirmseite

LlBOR (London time/London Business Day/London Interbank Market) LIBOR (Londoner Ortszeit/londoner Geschaftstag/Londoner Interbankmarkt) Screen page Bildschirmseite

Other (specify) [I Sonstige (angeben) Screen page [I Bildsch irmseite

Other applicable rounding provision (specify) Andere anwendbare Rundungsbestimmung (angeben)

Margin [ ] per cent. per annum Marge [ Phperannum

0 plus plus

0 minus minus

Interest Determination Date Zinsfes tleg ungstag

n second Business Day prior to commencement of Interest Period zweiter Geschaftstag vor Beginn der jeweiligen Zinsperiode

0 first day of each Interest Period erster Tag der jeweiligen Zinsperiode

0 other (specify) [I sonstige (angeben)

Reference Banks (if other than as specified in 0 3(2)) (specify) [I Referenzbanken (sofem abweichend von § 3 Absatz 2) (angeben)

87 0 ISDA Determination ("1 [specify details] ISDA- Feststellung [Details einfugen]

0 Other Method of Determination (insert details (including Margin, [I Interest Determination Date, Reference Banks, fall-back provisions))

Andere Methoden der Bestimmung (Einzelheiten angeben (einschliel3lich Zinsfestlegungstag, Marge, Referenzbanken, Ausweichungsbestimmungen))

Minimum and Maximum Rate of Interest Mindest- und Hochstzinssatz

L7 Minimum Rate of Interest [ ] per cent. per annum Mindestzinssatz [ ]%perannum

0 Maximum Rate of Interest 1 per cent. per annum Hochstzinssatz [ I%perannum

Interest Amount Zinsbetrag

0 0.5 of applicable unit to be rounded upwards Aufrundung von 0,s der anwendbaren Einheit

0 Insert other applicable rounding provisions [I Andere anwendbare Rundungsbestimmungen einfugen

0 Zero Coupon Notes Nullkupon-Schuldverschreibungen

Accrual of Interest Auflaufende Zinsen

Amortisation Yield [I Emissionsrendite

Dual Currency Notes [I Doppelwahnmgs-Schuldverschreibungen (set forth details in full here (including exchange rate(s) or basis for calculating exchange rate(s) to determine interesvfall-back provisions)) (Einzelheiten einfugen (einschlieBlich Wechselkurs(e)oder Grundlage fur die Berechnung des/der Wechselkurs(e)zur Bestimmung von Zinsbetragen/Ausweichbestimmungen))

lnstalment Notes Raten-Schuldverschreibungen (set forth details in full here) (Einzelheiten einfugen)

(11) ISDA Determination should only be applied in the case of Notes permanently represented by a Global Note because the ISDAAgreement and the ISDA Definitions have to be attached to the relevant Notes. ISDA-Feststellung sollte nur dann gewahlt wwrden, wenn die betreffenden Schuldverschreibungendurch eine Dauer- globalurkunde verbriefi werden, weil das ISDA-Agreement und die ISDA Definitionen den Schuldverschreibungen beizufugen sind.

88 0 Index Linked Notes [I lndexierte Schuldverschreibungen (set forth details in full here or in an attachment) (Einzelheiten hier oder in einer Anlage ein fugen)

0 Equity Linked Notes [I Equity Linked Notes (set forth details in full here or in an attachment) (Einzelheiten hier oder in einer Anlage ein fugen)

0 Credit Linked Notes [I Credit Linked Notes (set forth details in full here or in an attachment) (Einzelheiten hier oder in einer Anlage einfugen)

Day Count Fraction ('*I Zinstagequotien t fl ActuaVActual (ISMA251)

0 ActuaV365 (Fixed)

0 ActuaV360

0 30/360or 360/360 (Bond Basis)

0 30E/360 (Eurobond Basis)

0 Other

PAYMENTS (5 4) ZAHLUNGEN (§ 4)

Payment Business Day Zahltag

Relevant Financial Centre(s) (specify all) [I Relevante Finanzzentren (alle angeben)

REDEMPTION (0 5) RUCKZAHLUNG(s 5)

Final Redemption Riickzahlung bei Endfalligkeit

Maturity Date [I Falligkeitstag

Redemption Month [I Ruckzahlungsmonat

(12) Complete for all Notes. Fur alle Schuldverschreibungen auszufullen.

89 Final Redemption Amount Riickzahlungsbetrag

0 Principal amount Nennbetrag

0 Final Redemption Amount (for the Specified Denomination) [I Ruckzahlungsbetrag (fur die festgelegte Stuckelung)

Early Redemption Vorzeitige Riickzahlung

Early Redemption at the Option of the Issuer [Yes/Nol Vorzeitige Riickzahlung nach Wahl der Emittentin [Ja/Neinl

Minimum Redemption Amount [I Mindestruckzahlungsbetrag

Higher Redemption Amount [I Hoherer Ruckzahlungsbetrag

Call Redemption Date($) [I Wahlruckzahlungstag(e) (Call)

Call Redemption Amount(s) [I Wahlriickzahlungsbetrag/-betrage(Call)

Minimum Notice to Holders Mindestkundigungsfrist

Maximum Notice to Holders [I Hochstkiindigungsfrist

Early Redemption at the Option of a Holder [Yes/N01 Vorzeitige Ruckzahlung nach Wahl des Glaubigers [Ja/Neinl

Put Redemption Date($) [I Wah lruckza h lu ngstag (e) (Put)

Put Redemption Amount(s) [I Wahlruckzahlungsbetrag/-betrage(Put)

Minimum Notice to Issuer Mindestkun dig u ngs frist

Maximum Notice to Issuer (never more than 60 days) Hochstkundigungsfrist (nie mehr als 60 Tage)

Early Redemption Amount Vorzeitiger Riickzahlungsbetrag

Zero Coupon Notes: Nullkupon-Schuldverschreibungen

Reference Price Referenzpreis

90 n Dual Currency Notes [I Doppelwahnmgs-Schuldverschreibungen (set forth details in full here (including exchange rate(s) or basis for calculating exchange rate(s) to determine principal/fall-back provisions)) (Einzelheiten einfugen (einschliealich Wechselkurs(e)oder Grundlage fur die Berechnung des/der Wechselkurs(e)zur Bestimmung von Kapitalbetragen/Ausweich bestimmungen))

0 Index Linked Notes [I Indexierte Schuldverschreibungen (set forth details in full here or in an attachment) (Einzelheiten hier oder in einer Anlage einfugen)

0 Equity Linked Notes [I Equity Linked Notes (set forth details in full here or in an attachment) (Einzelheiten hier oder in einer Anlage ein fugen)

0 Credit Linked Notes [I Credit Linked Notes (set forth details in full here or in an attachment) (Einzelheiten hier oder in einer Anlage ein fugen)

AGENTS (§ 6)

Ca Icu tat ion Ag ent/s pecif ied off ice ( 13) [I Berechnungsstelle/bezeichnete Geschaftsstelle

Required location of Calculation Agent (specify) [I Vorgeschriebener Ort fur Berechnungsstelle (angeben)

0 Paying Agents Zah lstellen fl Additional Paying Agent(s)/specified office(s) [I Zahlstelle(n)/bezeichnete Geschaftsstelle(n)

NOTICES (0 12) MITEILUNGEN (I 12)

Place and medium of publication Ort und Medium der Bekanntmachung

0 Germany (Borsen-Zeitung) Deutschland (Borsen-Zeitung)

0 Luxembourg (Luxemburger Wort) Luxemburg (Luxemburger Wort)

0 Other (specify) [I sonstige (angeben)

(13) Not to be completed if Fiscal Agent is to be appointed as Calculation Agent. Nicht auszufiillen, falls Fiscal Agent als Berechnungsstelle bestellt werden soll.

91 GENERAL PROVISIONS APPLICABLE TO THE NOTE(S) ALLGEMEINE BESTIMMUNCEN HlNSlCHTLlCH DER SCHULDVERSCHREIBUNG(EN)

Listing(s) [Yes/Nol Borsenzulassung(en) [Ja/Neinl

0 Frankfurt am Main

0 Luxembourg

0 Other (insert details) [I sonstige (Einzelheiten einfugen)

Method of distribution [insert details] Verttiebsmefhode [Einzelheiten einfugen]

0 Non-syndicated Nicht s yndiziert

0 Syndicated Syndiziert

Management Details Einzelheiten beziiglich des Bankenkonsortiums

Management Group or Dealer (specify) [I Bankenkonsortium oder Plazeur (angeben)

Commissions Provisionen

ManagemenWnderwriting Commission (specifiy) [I Management- und Ubernahmeprovision (angeben)

Selling Concession (specify) [I Verkaufsprovision (angeben)

Listing Commission (specify) [I Borsenzulassungsprovision (angeben)

Other (specifiy) [I Andere (angeben)

Stabilising Dealer/Manager [insert details/Nonel Kursstabilisierender Dealer/Manager [Einzelheiten einfugen/keinerl

Securities Identification Numbers Wertpapierkennnummem

Common Code Common Code

ISlN lSlN

German Securities Code Wertpapierkennummer (WKN)

92 Any other securities number [I Sonstige Wertpapiernummer

Supplemental Tax Disclosure (specify) (14) [I Zusatzliche Steueroffenlegung (einfugen)

Selling Restrictions Verkaufsbeschrankungen

0 TEFRAC(15) TEFRA C

0 TEFRA D(16) TEFRA D

0 Neither TEFRA C nor TEFRA D (171 Weder TEFRA C noch TEFRA D

Additional Selling Restrictions (specify) [I Zusatzliche Verkaufsbeschrankungen (angeben)

[Notes may only be offered anywhere in the world if the conditions of one or more of the Netherlands securities law options (a. through 9.) of pages [I94 and 1951 of the Information Memorandum are met. Accordingly, choose one or more of the options below, verify that the conditions thereof (as set forth on pages [I94 and 1951 of the Information Memorandum) are met and delete the remaining options:]

[a. (Euronext Amsterdam listing)] [b. (Prospectus recognition)] [c. The Notes are not offered to persons other than persons who trade or invest in securities in the conduct of their profession or trade (which includes banks, securities intermediaries (including dealers and brokers) insurance companies, pension funds, other institutional investors and commercial enterprises which as an ancillary activity regularly invest in securities.)] [d. (The Notes are not offered to persons other than persons who are established, domiciled or have their residence outside the Netherlands.)] [e. (Note denomination off45,378.02 or more)] [f. (Euro securities)] [g. (other)]

Governing law German law Anwendbares Recht Deutsches Recht

Rating [I Rating

Other Relevant Terms and Conditions (specify) [I Andere relevante Bestimmungen (einfugen)

(14) Supplemental tax disclosure should be provided if the Notes would be classified as financial innovations (Finanzin- novationen) under German tax law. Zusatzliche Angaben zur steuerlichen Situationen sollten erfolgen, wenn die Schuldverschreibungen nach deutschem Steuerrecht als Finanzinnovationen eingeordnet wurden. (15) TEFRA C Notes are only to be issued by Bertelsmann AG or Bertelsmann Capital Corporation N.V. TEFRA C Schuldverschreibungen sind nur durch die Bertelsmann AG oder die Bertelsmann Capital Corporation N. V. zu begeben. (16) Bertelsmann U. S. Finance, Inc. will not issue Notes having an initial maturity of less than one year. Bertelsmann U. S. Finance, Inc. wird keine Schuldverschreibungen mit einer ursprunglichen Laufzeit yon weniger als einem Jahr begeben. ("1 Applicable only for Notes issued by Bertelsmann AG or Bertelsmann Capital Corporation N.V. which have an initial maturity of one year or less. Nur anwendbar bei Schuldverschreibungen, die von Bertelsmann AG oder Bertelsmann Capital Corporation N. V mit einer ursprunglichen Laufzeit von einem Jahr oder weniger begeben werden.

93 [Listing: (18) [Borsenzulassung:

The above Pricing Supplement comprises the details required to list this issue of Notes (as from [insert Settlement Date for the Notes]) pursuant to the listing of the Euro 3,000,000,000 Debt Issuance Programme of Bertelsmann AG, Bertelsmann Capital Corporation N.V. and Bertelsmann U. S. Finance, Inc.

Das vorstehende Konditionenblatt enthalt die Angaben, die fur die Zulassung dieser Emission von Schuldverschreibungen gemaa Borsenzulassung des Euro 3.000.000.000,- Debt Issuance Pro- gramme der Bertelsmann AG, der Bertelsmann Capital Corporation N. V: und der Bertelsmann U. s. Finance, Inc. (ab dem [Tag der Begebung der Schuldverschreibungen einfiigenl) erforderlich sind.

RESPONSIBILITY VERANTWORTLICHKEIT

The Issuer accepts responsibility for the information contained in this Pricing Supplement.

Die Emittentin ubernimmt fur die in diesem Konditionenblatt enthaltenen lnformationen die Verant- wortung.

[Bertelsmann AG

(as Issuer) (als Emittentin)]

[Bettelsmann Capital Corporation N. V.

(as Issuer) (ais Emittentin)]

[Bettelsmann U. S. Finance, Inc.

(as Issuer) (aIs Em itten tinlll

(la)Include only in the version of the Pricing Supplement which is submitted to the relevant stock exchange in the case of Notes to be listed on such stock exchange. Nur in deijenigen Fassung des Konditionenblattes einzufugen, die der betreffenden Borse, bei der die Schuldver- schreibungen zugelassen werden sollen, vorgelegt wird.

94 USE OF PROCEEDS

The net proceeds from each issue of Notes will be used by the relevant Issuer to meet part of its general financing requirements.

95 Bertelsmann AG -The Issuer and the Guarantor -

Incorporation, Seat and Objects

Bertelsmann AG was incorporated on October 25,1971 for an unlimited period of time under the laws of the federal Republic of Germany. It originated from the transformation of C. Bertelsmann Verlag oHG into a joint stock corporation and its seat is Gutersloh, where it is registered in the Commercial Register under No. HRB 3100.

Its registered office is at Carl-Bertelsmann-Strasse 270, D-33311 Gutersloh, Federal Republic of Ger- many.

As the Group Holding, the Company manages a group of companies which transact business, in particular, in the following business fields: Book production and publishing, in particular, the operation of book publishing and trading companies and related companies including specialist trade magazines and specialist information publishers; Operation of printing and printing technology companies for the manufacture and the sale of publishing, printing and electronic-technical products of all kinds including the operation of paper fac- tories; Manufacture and sale of products within the field of music and movies as well as radio, television and other forms of electronic individual and mass communication, in particular, the manufacture and sale of music contributions and programs, cinema and television movies as well as radio and television contributions and programs of all kinds; manufacture and sale of audio, data and video carriers of all kinds; dissemination of radio and television programs and other electronic communications offerings as well as respective program segments as radio and television organizer and as provider of electronic communications services of all kinds; Publication and sale of newspapers, magazines and other printed products of all kinds.

The Company can also transact business itself in the above designated fields, in particular, also individual business transactions. It shall be entitled to undertake all actions and measures which are related to the company objects or which are appropriate directly or indirectly to serve such, also for preceding or succeeding market levels. The same shall apply also for financing transactions and other legal transactions and measures which concern the Company as a holding company or which are in the interest of the companies managed by it.

The Company can incorporate, acquire and participate as shareholder in other companies, in particular, in such which have respective company objects which cover either entirely or partially the Com- pany Object designated above. For the purpose of the investment of financial resources, the Com- pany shall be entitled to participate as shareholder in companies of any kind. It can change companies structurally of which it participates as a shareholder, consolidate them under common management or restrict itself to their administration.

The Company can establish both domestic and foreign branches.

Share Capital

As of December 2001, the issued and fully paid share capital of Bertelsmann AG amounted to Euro 606 million. The share capital is divided into 83,760 common bearer shares ("common stock A"), 6,720 bearer shares with a guaranteed dividend right for each business year until December 31,2005 ("common stock B"), 149 non-voting registered shares with a preferred dividend right ("preferred stock A") and 27,920 voting registered shares with a preferred dividend right ("preferred stock B").

96 Presently, Bertelsmann Foundation, Groupe Bruxelles Lambert, the Mohn family and the ZElT Foun- dation are the shareholders of Bertelsmann AG. The stakes of the Bertelsmann Foundation and the Mohn family are indirectly held through two holding companies.

After Group Bruxelles Lambert had contributed RTL Group shares in July 2001, Bertelsmann AG undertook to repurchase Bertelsmann shares currently held by the ZElT Foundation.

The shareholder structure of Bertelsmann AG after completion of the buyback of the shares of ZElT Foundation will be as follows:

Capital holdings: Bertelsmann foundation ...... 57.6% Mohnfamily ...... 17.3 % GroupeBruxelles Lambert ...... 25.1 %

Voting rights: Bertelsmann Verwaltungsgesellschaft ...... 75.0 % GroupeBruxellesLambert ...... 25.0 %

In addition, as of December 31, 2001 Bertelsmann AG had outstanding Euro 516 million par value of non-voting profit participation certificates. They are issued in bearer form, fully paid and participate in profits and losses of Bertelsmann AG.

Capitalisation

The following table shows the unaudited consolidated capitalisation of Bertelsmann AG as of March 31,2002: As of March 31.2002 (Euro millions) Subscribed Capital...... 606 Capital Reserve ...... 2,725 Bank loans and other financial debt ...... 1,880 thereofmaturity

There has been no material change in the consolidated capitalisation of Bertelsmann AG since March 31,2002.

97 Executive Board

Bertelsmann AG is managed by an Executive Board which presently consists of the following members:

Dr. Thomas Middelhoff Chairman of the Board and Chief Executive Officer of Bertelsmann AG, Gutersloh, New York Dr. Arnold Bahlmann Chairman and Chief Executive Officer of Bertelsmann Capital, Gutersloh, Munich, New York Dr. Klaus Eierhoff Chairman and Chief Executive Officer of DirectGroup, Gutersloh Dr. Bernd Kundrun Chairman and Chief Executive Officer of Gruner + Jahr, Hamburg Dr. Siegfried Luther Chief Financial Officer and Head of the Corporate Center of Bertelsmann, Gutersloh Peter Olson Chairman and Chief Executive Officer of Random House, New York Hartmut Ostrowski Deputy Member of the Executive Board of Bertelsmann AG and Executive Board Member of Arvato, Gutersloh Rolf Schmidt-Holtz Chairman and Chief Executive Officer of BMG, New York Dr. Gunther Thielen Chairman and Chief Executive Officer of Arvato, Gutersloh Dr. Ewald Walgenbach Chief Operating Officer of Bertelsmann, Gutersloh

Supervisory Board

The Supervisory Board of Bertelsmann AG presently consists of the following members:

Gerd Sch u Ite-Hi Ilen Chairman; Vice-chairman of the Executive Board of Bertelsmann Foundation and shareholder of Bertelsmann Verwaltungsgesellschaft mbH (BVG), Gutersloh, Hamburg Dr. Dieter H. Vogel Vice-chairman; Partner of Bessemer, Vogel und Treichl GmbH, Dusseldorf Dr. Rolf-E. Breuer Spokesman of the Group Board of Deutsche Bank AG, Frankfurt Dr. Hugo Butler Editor-in-Chief and Managing Director of Neue Zurcher Zeitung, Zurich, Switzerland Andre Desmarais President and Co-Chief Executive Officer of Power Corporation of Canada, Montreal, Quebec, Canada Dr. Michael Hoffmann- Lawyer, Dusseldorf Becking OswaId Lexer Member of Bertelsmann Corporate Works Council, Gutersloh Liz Mohn Member of the Executive Board of Bertelsmann Foundation and shareholder of Bertelsmann Verwaltungsgesellschaft mbH (BVG), Gutersloh Willi Pfannkuche Vice-chairman of Bertelsmann Corporate Works Council, Gutersloh Erich Ruppik Chairman of Bertelsmann Corporate Works Council, Gutersloh Gilles Samyn Managing Director of CNP Compagnie Nationale a Portefeuille S.A., Loverval, Belgium Prof. Dr. Jurgen Strube Chairman of the Board of Executive Directors of BASF AG, Ludwigshafen Dr. Uwe Swientek Chairman of the Management Representative Committee of Bertelsmann, Gutersloh Hei n rich Weiss Chairman of the Management Board of SMS AG, Dusseldorf Bernd Wrede Former Chairman of the Executive Board of Hapag-Lloyd AG, Hamburg

98 General Meeting of Shareholders

The Annual Meeting of Shareholders is convened by the Executive Board or the Supervisory Board.

Those shareholders holding common stock A and B shares as well as those shareholders holding preferred stock B shares who are registered in the register of shareholders of the Company on the date of the Annual Shareholders' Meeting shall be entitled to participate and vote in the Annual Shareholders' Meeting. Shareholders holding preferred stock A shares shall be entitled to participate in the Annual Shareholders' Meeting if they are registered in the register of shareholders of the Com- pany on the day of the Annual Shareholders' Meeting.

Each common stock A and B share and each preferred stock B share entitle one vote at the meeting.

Auditors

The Auditors of Bertelsmann AG are KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft; Wirtschaftsprufungsgesellschaft, Nikolaus-Durkopp-Strasse 2a, 33602 Bielefeld, Federal Republic of Germany. They have audited the consolidated financial statements of Bertelsmann AG for the fiscal years ended June 30, 2000, 2001 and December 31, 2001 and have given their unqualified opinion in each case.

Fiscal Year

The fiscal year of the Bertelsmann AG commences on January 1 and ends on December 31 of each year.

The time period from July 1, 2001 to December 31, 2001, was a stub fiscal year of the Bertelsmann Group. Beginning in 2002, the fiscal year of the Bertelsmann Group commences on January 1 and ends on December 31 of each year.

Business of the Bertelsmann Group

General

Bertelsmann AG was founded as a regional publishing house under the name C. Bertelsmann Verlag in Gutersloh in 1835. In its more than 160-year history, Bertelsmann AG has grown into an international media group with a strong presence in many parts of the world. Bertelsmann AG is a management holding company without operating businesses of its own. Most of its income is derived from the profit distributions by its subsidiaries. The general make-up of the balance sheet is also characterised by financial investments in and loans to subsidiary companies.

Bertelsmann Group provides its customers with information and entertainment through television and radio stations, book publishing, magazines and newspapers, music labels and music publishing, professional information, science and trade publishing, printing and media services, book clubs and music clubs and e-commerce, focusing on creative content and customer relationship.

Distribution of Revenues according to Geographical Regions June - Dec. 2001 FY 2000/01 (%I Germany ...... 31.2 28.5 Other European Countries...... 32.0 29.1 United States ...... 31.3 35.7 Othercountries ...... 5.5 6.7

99 Revenues by Divisions

June - Dec. 2001 FY 2000/01 (Euro million) RTLGroup ...... 2,054 1,520 Random House ...... 1,085 2,074 Gruner&Jahr ...... 1,476 3,054 BMG ...... 1,633 3,109 BertelsmannSpringer ...... 370 749 Arvato ...... 1,889 3,535 DirectGroup ...... 1,494 3,102 Other ...... 36 405 Total Revenue ...... 10,037 17,548 Intercompany Sales ...... - 352 - 800 Consolidated Revenues ...... 9,685 16,748

Description of the Divisions

RTL Group

Publicly listed RTL Group is - as to the believe of Bertelsmann AG - Europe's largest commercial broadcaster in terms of audience and number of television stations, with holdings in 23 TV channels in eight countries. RTL Group's business operations include television and radio broadcasting, content production and distribution, as well as online activities. RTL Group's main television broadcasting interests are RTLTelevision in Germany, M6 in France, Channel 5 in the UK, Antena 3 in Spain and the RTL channels in The Netherlands, Belgium and Luxembourg. RTL Group's content operations focus on the production and distribution of content to distributors around the world, including RTL Group's television channels. RTL Group's content predominantly covers sports, TV films, dramas, light entertainment and news. RTL Group is also one of Europe's leading commercial radio broad- casters with radio stations in France, Germany, Belgium, The Netherlands and Luxembourg.

RTL Group has online operations in most European countries with more than 85 branded web-sites in multiple languages.

Bertelsmann directly participates in RTL Group with 53% and holds an additional 37% of the shares together with the WAZ Group through the BW-TV Holding.

Random House

Bertelsmann believes that Random House unites Bertelsmann's worldwide book-publishing activities. Its operations span over 15 countries. In Germany, these include C. Bertelsmann, Siedler Verlag, Karl Blessing, Goldmann paperbacks and Mosaik Verlag. Together with its English-language publishers which include Ballantine Books, Doubleday, Dell and the Knopf Publishing Group, they make Ran- dom House as to the knowledge of Bertelsmann the world's leading publisher in the consumer book market and the world's largest English language consumer book publisher. In 2001, a joint venture with Mondadori resulted in the second-largest publishing house in the Spanish-speaking world.

Gruner + Jahr

Gruner + Jahr is - as to the believe of Bertelsmann - Europe's largest magazine publisher, and also enjoys a growing presence in the US. Its best known titles include stern, Brigitte, Capital, Parent, GEO, Inc. and Fast Company. Gruner + Jahr, in which Bertelsmann owns a 74.9% stake, publishes 100 magazines in over 10 countries and 8 daily newspapers in 4 countries.

100 Bertelsmann Music Group (BMG)

The Bertelsmann Music Group owns 200 labels in 42 countries working with world-class stars. Its activities focus on music recording, music production and music publishing. With an 8.8% market share worldwide (based on controlled repertoire only, distributed labels excluded) BMG is one of the leading music companies in the world. The reputation of its labels are a key component in attracting new talent in a competitive market place. The group's best-known labels include RCA, Arista Records and Ariola.

BertelsmannSpringer

The BertelsmannSpringer division (Publishing Group for Scientific and Professional Literature) is active throughout the world and is believed to hold a leading position on the German market. The product range includes, among others, professional magazines and newsletters as well as databases and online services. The BertelsmannSpringer publishing group produces roughly 700 special-interest magazines and some 25,000 book titles for target audiences in medicine, natural sciences, engi- neering, industry, construction and transportation.

Arvato

Arvato represents the Media Services business field in the Bertelsmann Group. With its approximately 55 subsidiaries all over the world, Arvato is believed to be one of the biggest internationally networked media service providers. The group is comprised of state-of-the-art offset and rotogravure printers in Germany and abroad, along with Arvato Services and Arvato Systems, which offer its customers services in the fields of management of information, data and merchandise flows, service centers and IT. Arvato also includes Sonopress, a globally leading manufacturer of CD-ROMs, DVDs and Audio-CDs and the Encyclopedia publisher inmediaone.

DirectGroup

Bertelsmann's direct-to-customer businesses are pooled in the DirectGroup. This division includes the worldwide book and music clubs as well as the global e-commerce businesses with their more than 60 million customers and members. Through its book and music clubs DirectGroup is the global leader in community-based businesses, and through BOL, CDNOW and its 36.2%-stake in barnesandnoble.com Bertelsmann considers the DirectGroup to be the second largest media e-commerce company world wide. Based on its online and offline ventures, DirectGroup is driving the evolution of its direct-to-customer businesses into community-based businesses with a focus on media.

101 Major Subsidiaries

The following table sets out information on some of the major subsidiaries of Bertelsmann AG as of December 31. 2001 : Reve- nues(') July 1. 2001 . Share- Decem- Cur- hold- ber 31. Name/Location Principal Business rency Share Capital ing 2001 (%I million EUR)

RTL Group S.A., Luxembourg (2) ...... Television. film and radio EUR 186,526,076.00 59.51 2,044.7 Random House. Inc., New York ...... Publishing USD 10.00 100.00 706.6 BMG Music (Partnership). New York ...... Music and video entertainment USD 460,869,631.13 100.00 636.1 Gruner + Jahr Printing and Publishing Company. New York . . Printing and Publishing USD 277,032,555.65 74.84 383.3 Gruner + Jahr Aktiengesellschaft & Co., ltzehoe ...... Printing and Publishing EUR 151,020,400.00 74.90 376.5 BMG Direct Marketing. Inc., Wilmington ...... Music club USD 10.00 100.00 336.9 Bookspan (Partnership). Delaware P) ...... Bookclub USD 208,397,149.94 50.00 225.5 RM Buch und Medien Vertrieb GmbH. Gutersloh ...... Book club DEM 800,000.00 100.00 215.5 Prisma Presse. S.n.c., Paris ...... Publishing EUR 3,000,000.00 74.90 204.7 FRANCE LOlSlRS S.A. R . L., Paris ...... Book club EUR 3,344,000.00 100.00 178.5 Mohn Media Sales GmbH. Gutersloh ...... Printing EUR 100.000.00 100.00 162.5 maul + co . - Chr . Belser GmbH. Nurnberg ...... Printing EUR 50,000,000.00 75.00 160.2 The Random House Group Limited. London ...... Publishing GBP 81,956,072.00 100.00 133.9 Bertelsmann Music Group GmbH. Gutersloh ...... Music and video entertainment EUR 50,000.00 100.00 129.8 Book Club Associates. London ...... Book club GBP 7,500,000.00 100.00 99.1 BMG Entertainment International UK & Ireland Limited. London ...... Music and video entertainment GBP 1,010.000.00 100.00 89.7 BertelsmannSpringer Science+Business Media Gm bH. Gutersloh ...... Special Interest Publishing EUR 2,580,000.00 100.00 88.6 Verlagsgruppe Random House GmbH. Gutersloh ...... Publishing DEM 200,000.00 100.00 88.0 Bertelsmann Distribution GmbH. Gutersloh ...... Service DEM 200,000.00 100.00 82.6 Springer-Verlag GmbH & Co . KG. Berlin ...... Special Interest Publishing EUR 56,460.00 87.08 79.0 LaFace Records NYGP, New York ...... Music and video entertainment USD 0.00 100.00 76.0 Verlagsgruppe NEWS GmbH. Tulln ...... Publishing EUR 70,000.00 41.96 73.9 Arvato Storage Media GmbH ...... Electronic storage media DEM 10,000.000.00 100.00 73.1 ECI voor Boeken en Platen B.V., Vianen ...... Book club N LG 4,001,937.36 89.80 70.2 Circulo de Lectores. S.A., Barcelona ...... Book club EUR 6.01 0,121.04 100.00 67.0 Sonopress LLC. Wilmington ...... Electronic storage media USD 1,000.00 100.00 62.7 Arista Records Inc., Wilmington ...... Music and video entertainment USD 19,000.000.00 100.00 61.8 Dresdner Druck- und Verlagshaus GmbH & Co . KG. Dresden . Printing and Publishing EUR 180,050,000.00 44.94 61.5 Bertelsmann Kalender & Promotion Service GmbH. Gutersloh Printing and Publishing DEM 1,051,000.00 100.00 61 .0 inmediaONE GmbH. Gutersloh ...... Special Interest Publishing EUR 120,000.00 100.00 58.9 BMG Special Products Inc.. Delaware ...... Music and video entertainment USD 1,000.00 100.00 57.9 Nuovo lstituto Italian0 dArti Grafiche S . p.A., Bergamo ...... Printing EUR 18,963,000.00 98.83 56.6 BMG FUNHOUSE. Inc., Tokyo ...... Music and video entertainment J PY 1,960,000,000.00 100.00 56.5 CDnow Inc., New York(2) ...... E-Commerce USD 10.00 100.00 54.7 Printer Industria Grafica. S.A., Sant Vicenc dels Horts (Barcelona)...... Printing EUR 6,010,000.00 100.00 54.0 Berliner Verlag GmbH & Co., Berlin ...... Publishing EUR 49,932,206.00 74.90 51.4 Random House of Canada Limited. Toronto ...... Publishing CAD 33,601,170.00 100.00 48.3 Bertelsmann Marketing Service GmbH. Gutersloh ...... Service DEM 195,583.00 100.00 46.4 BMG RlCORDl S.p.A., Rom ...... Music and video entertainment EUR 12,110,000.00 100.00 46.4 BMG France S.A., Paris ...... Music and video entertainment EUR 5,198,958.00 100.00 42.6 Bertelsmann Industry Services. Inc., Valencia ...... Service USD 58,345.00 100.00 41.7

('1 net revenues after elimination of intercompany sales (z) consolidated figure (3) proportionally consolidated (50%)

102 Management Report Financial Statement of Bertelsmann AG as at December 31,2001

References to any page numbers are to the pages of the annual report of Bertelsmann AG as of December 31,2001.

103 104

Management Report

Hcrtelsm;inti has aligned thc Group's fiscal year, which IC, date riirl from mid-year to rnid-yeur. to the

calendar yeiir. To this erid, it reported ari al.ibteviatitr1 fiscal year froiri .July 1 through Drxerilher 31,

%00l.~i7ii:prcseiit drii.iiJiil report refers tCJ this sixmonth stub period. In :xklition, !he Group's accounting standards vwte cotrvi!rted from the Gerrriari Cuininerr:ial Code (HGH)tu Inti:-rriatii)niiI Accouritillq Standards (IAS). Ahhough both these ineawi'f:s will itnpiiir comparability in the sliort term, they will ini;ikt: flerklsrriann'!; financial results more transpari!rit and intt:rrlatioiidlly comparahlt! in the future. 'The tigi.iie:; for fiscal year %000/0~1were rstroxtively cmnverteti to IAS to riiw! tiit: rec-liJirumniits..This

rnc>ansthat t.he pwjerit report comparcs tht: six-irioiitti sttit) pt-.riodwith a twelve month fiscal r;i:ar.Thc

cuiriparatiility of thew figures is further irnpaired t~yrht: fact that thc HTL Group is reportad 01'1 a fully ccmsolidated basis for the sriiti period, while the IAS ti

HTL Iii-oup 011 only 21 propoitionately consolidated basis.

Rertclsmann's revenues during the stub period totaled e 9.7 billion (fiscal year 2000/0 I : C 16.7 billion).Approximately one third of consolidated revenue was equally generated in Germany, the other European countries, and the United States (I1.S.). Net inconie before minority interests totaled E 931 million during the six-month reporting period, and was substantially due to capital gains (fiscal year 2000/01: f: 907 million). Earnings before interest, axes and amortization amounted to f: 1.7 billion (fiscal year 2000/01: E 4.2 billion). The number of emplovecs rose from 74,548 at June 30,2001 10 80.296 at December 31,2001.

July 1 - Dec. 31, 2001 r 6 in millions RTL Group 2,054 1,520 Random House 1,085 2,074 Gruner + Jahr 1,476 3.054 EMG 1,633 3,109 BertelsmannSpringer 370 749 Arvato 1,889 3,535 DirectGroup 1,494 3,102 Total revenues 10,001 17,143 Other 36 405 Intercompany revenues (352) (800) Consolidated revenues 9,685 16,748 . .. . ---I RTL Group 20.5 \ BertelsmannSpringer 3.7

Random House 10.9 Atvato 18.9

Gruner + Jahr 14.8 DiractGroup 14.9 / BMG

-1’/ Total Revenues by Division in percent

It should 1~ noted that the change to IAS reporting had a number of cffccts on the present consolidated Financial statements. For instance, undei- IAS, joint ventures are generally consolidated proportionately rather than fully. This means that the revenues, earnings and numbcr of employees of joint ventures such as the US. book club BOOKSPAN, which is jointly controlled by Bertels- triatiri and AOT. Time Wimer, are now consolidated proportionately rather than fully as they were in the past. Another exarnple involves the reporting of acquisitions of enterprises by means of stock swaps. Whereas such acquisitions were shown at book valuc undcr HGB, they are reported at their fair value under LAS, meaning that any goodwill is amortized over the following accounting periods. Please SCC thc Consolidated Notcs for detailed information on the conversion to IAS. In changing to TAS. Rei-telsinann is responding to the growing internationali~ationof its businesses and improving thc comparability of its financial results with thosc of other multinational corporations. Busincss performance during the stub period was irnpacted by an economic downturn in the U.S. and Europe, which was exacerbated by thc events of Scptemhcr 11. At thc same timc. Bertels- rnann earned capital gains of E 2.2 billion, primarily from the sale of further shares in the Internet service providei-AOL Europe, and fi-om the disposal ofAOLTime Warner stocks during the period under review. ‘lhesccapital gains cnablcd Bcrtelsrnatin to tnore than offset the weak consumcr activity and the sharp down turn in the advertising industry. It also allowed high one-time restructuring charges to be absorbcd during a rcporting period marked by a nurnber of far-reaching changes. Much or this restructuring was due to the Bertelsmann Excellence Initiative (BEX),which was launched in the spring of 2001. BEX covers cost management, portfolio managernent, innovation. and integration, and aims to ensure outstanding perforniance and enhanced returns throughout the Group. The economic downturn was noticeable in all divisions, hut particularly in ad-financed businesses and in the Group’s U.S. operations. The divisional results - i.c. currcnt earnings on business before interest, taxes. and amortization and excluding the Internet arid one-time gains and losses - totaled f: 251 rnillion in the six months of the stub period (fiscal year 2000/01: 731 million). Total assets amountcd to C23.7 billion at December 31,200I, which represents an increase ofe6.5 billion, or 38 percent, ovel- fiscal year 2000/01 (E17.2 billion). Investments amounted to E 1.1 billion (fiscal ycar 2000/0I : C 2.7 billion).

... . JULY 1-Dec. 31,2001 Percentage share Germany 1,035 50.7 - Other European countries 852 41.6

USA 157

Earnings Remain High = Net iricomc hcforc minority interests amounted to 931 million as a result of the high level of capital gains (fiscal year 2000/01: E 987 million). Earnings before interest, taxes, and amortization totalrd C 1.7 billion (fiscal year 2000/01: C 4.2 billion). The financial result totaled minus e208 million (fiscal year 2000/01: minus f: 436 tnillion), while goodwill amortization reduced net incorne hy C 57 I million (fiscal vcar 2000/01: E 1.7 billion).

Revenues and Earnings = As a result of a stock swap with Groupe Bruxellcs Lambert (CBIJ, Rertelsmann inci-eased its by Division RTL Group stake from 37 to 67 percent in July 2001. Due to this majority, RTL Group has been hilly

f.h:h ,II~J the dwi..CI corisolidatcd in the IAS financial statements for the 2001 stub period. The retroactively converted IAS

in,lrk,:t 11 ftcid vvltlt amounts for fiscal year 2000lOl reported KTL Group on a proportionately consolidated basis, r:ucttii:iii. 1tiidz;i ccmrr.nt corresponding 10the 37 percent stake held by Bcrtclsmann at the time. RTL (;roup, Europe's largest a:id wwic,::. tclcvision, radio and 'IV production group, posted revenues ofE 2.1 billion during the period under review (fiscal year 2000101: 1.5 billion -proportionately consolidated). The divisional result totaled 8 107 inillion (fiscal year 2000/01: f: 108 million -proportionately consolidated). Business was characterized both hy the sharp downturn in advertising and by encouraging market succcsscs. Overall, the European advertising market decreased significantly year on year. RTT.. Group managed to buck this trend, slightly increasing its advertising market share in its major niarkcts during the stub period. 'The main growth drivers for KTL Television in Germany were successful programs such ;is the quiz show Who Wants to be a Millionaire?. ski jumping and Formula 1 broadcasts. and its own realityTV productions Loftstory and Popstars on M6 in France. Fremantle- Media, the international production unit of RTL Group, recently broke all viewer-ratings records in the UK with its live enterlainment show Pop Idol. In the IJK market, major program investments enabled Channcl5 to increase its market share and enhance its image. Hestructuringwas needed at FremantleMedia in the 1J.S. and ai RTT. Radio in France. RTI. Group aims to further strengthen its competitive position by appl)ing consistent cost and portfolio management pi-ocedures and investing in innovative programming. Shortly before the end of thc stuh period, Rertelsinann announced that it was acquiring the UK-based Pearson Group's 22-percent stake in KTL Group. The completion of this deal in January2002 raised Rertelsmann's stake in RTL Group to approximately 90 percent.

...... I Management Report lQ7

July 1-Dec. 31,2001 Percentage share Fy,

# I

Consolidated Revenues Random House by Region f in millions

With its more than 250 publishing imprints. Random House, the world's leading trade book publisher, generated revenues of8 1.1 billion in the six months of the stub period, cornpared to f: 2.1 hillion in the whole of fiscal year 2000/0 1. The divisional rcsult amounted to minus 15 million (fisciil year 2000/01: f: 176 million). Randoin ITouse's business was hit by slowing consumer book purchases in thc [J.S.,which fell even more sharply aftcr the terrorist attacks of September 11, as well as by the Argentine econoniic crisis and its dampening effect on the Spanish-language book market. Despite the difficult market situation, Random Ilouse achieved a nurnhcr of publishing mile- stones: During 1he period under rrview, triore than 100 of its titles madc the national NewYorkTimes

bestseller lists - fiftecn of thcrn in the numbcr one position - an unequalled industry achievement. Tn the IJ,S., Random T-Jo~seincreased its statlire as the country's largest children's hook puhlishcr by acquiring thc book publishing propcrtics of Golden Books Farnilv Entertainment, the home of many children's books classics. Random TTouse also purchased Rooks on Tape, a pioneering publisher of unabridged audio books, further cnharicing its leadership in that marketplace sector. Random House celebrated the selection in October 2001 ofV S. Naipaul, whose books it publishes in the U.S.

(Knopf) and Spain (Debate),iis its newest Nohel Pi-ize in Tdteralure laureate. In addition, its Alfrcd A. Knopf division secured the world puhlishirig rights to the rnemoirs of forrricr U.S. Prcsidcnt Bill Clinton. The Random House Group in the UK and Verlagsgruppe Handom House in Germany solidified thcir local market preeminenw with an industry-leading number ofhesisellers. In the latter market, the company announced its decision to exit the consumer reference book business by discontinuing its Falken and Mosaik imprints, and to cxpand its tradc papcrback publishing program with the suc-

cessful launch of the new BVT line. In ii joint venture with Italy's Arnold0 Mondadori SPA, Random Housc cstahlisticd Random ITouse Mondadnri, which irnmediatelv hecanie the world's sccond- largest Spanish-language tradc hook puhlishcr.

Gruner + Jahr. Europe's lai-gesl magazine puhlisher, generated revenues of C 1.5 hillion in the stub period, as compared to f: 3.1 billion in fiscal vcar 2000/01.The divisional rcsult amounted to E 98 million (fiscal year 2000/01: t: 266 million). The rconomic environment and the sharp downturn in the advei-tising markets worldwide adversely impacted Gruner + Jahr'sbusinesses during the stub pcriod. Gruner + Jahr responded quicklv to the changing economic: envii-onment. To more effectively

exploit synergies, the company linked its multimcdia activities morc closcly to its SUCCCSS~U~print-

tnudia t)rands, under the motto "One I

July I-Dec. 31,2001 Percentage

Jahr Region € i

program (CAP - Costs and Processes) was implemented to improve processes and costs. Publica- tions that had no prospect of success in the current market climate (Homestyle in the 1J.S. and BIZ2 in Germany) were discontinucd. Uespitc thc difficult market erivironrrient, the company was able to further internationalize successful magazine concepts, such as GALA in Poland and Russia, and now Parents/Fomu in China's capital Rejing. In the U.S., the relaunching of publications such as YM, Fitness, Family Circle and Rosie were highly successful in both the advertising and distribution markets. In an American distribution market hat decreased overall, Fitness substantially increased its circulation to a new record level. Especially in view of the shrinking US. advcrtising markct for gcneral-interest magazines, the fact that the company's teenager magazine YM managed to raise its gross advertising revenues by almost 50 percent may be seen as a hugc success. In Cermany. just one year after its launch, Living at Home magdzine hits become the number two in its sales market segment, second only to the market leader SchonerWohnen, another G+J magazine. Financial Tirnes Deutschland also continues to achicvc high circulation rates. Stern has increased its total readership to 7.77 million, i.e. it continues to enjoy thc largcst rcadership by far in the segment of current weekly magazines. In Austria, the leading magazine publisher News Vcrlag achieved the most successful magazine launch of the past decade with the women's magazine Woman, published biweekly. The initial print run of330,000 copies sold out in just four days.

BMG (the Bertelsmann Music Group). which was totally restructured and repositioned during thc 2001 calendar year, gcncratcd revcnucs of E 1.6 billion during the period under review (fiscal year 2000/01: 6 3.1 billion, already taking into account the divisional change of the Storage Media unit kom RMG to Atvato). In a shrinking global rriusic market hit by product piracy and weak consumer demand, RMG managed to maintain its market positiori thanks to a number of successfiil releases. BMG artists such as Alicia Keys, P!NK, Usher, Dido, Christina Aguilera,Westlife, The Strokes, and The Dave Matthews Band all either scored sevcral chart hits, won major music awards, or received critical acclaim. Newcomer Alicia Keys in particular won plaudits from public and critics alike with hcr alhutn Songs in A Minor. Hcr succcss also marks a high point in thc carccr of CIive Davis, whose new label J Records has exceeded expectations. Management ~ep& lo8

Other countries 240 14.8

Consolidated Revenues BMG by Region E in millions

BMG's focus on its core r:ompctcncics - developing artists and rnarkcting music - had far- reaching organizational and pcrsnnnel consequences. The company continued the streamlining of irs organization bcgun under a new managernerlt team in fiscal year 2000/01, eliminating inany jobs and substantially reducing its costs. In thc stub period, BMG's divisional result amounted to rninus f: 43 rnilliori (fiscal war 2000/01: minus f: 42 million).

Analysis of Net Income 6 in millions Divisional results RTL Group Random House Gruner + Jahr BMG BertelsmannSpringer Arvato DirectGroup Total divisional results Corporate/BeCapitaI/Consolidation Internet start-up losses One-time charges Capital gains Earnings before interest, taxes and amortization Goodwill amortization Financial result Income taxes Net income before minority interests Minority interests Net income after minority interests

...... - Bettelsmann A

July 1-Dec. 31,2001 Percentage

Consolidated Revenues BettblmannSpringer by Region e in millions

The specialist-publishing group BertelsmannSpringer, a leading international provider of academic and trade literature and the number one in its segment in Germany, generatcd revenues of E 370 million (fiscal year 2000/01: E 749 million). The divisional result amounted LO C 30 million after achieving E 69 million in the full fiscal year 2000101. 'l'he Group managed to win niarkct share with its science publications, especially in its international markets. It cven tapped new markets in some currently contracting Busincss-to-Business specialist-informationmarkcts, such as the construction segment. Overall. I he Group's earnings were impacted hy restructuring costs and thc sharp fall in advertising revenues. Bucking the general trend in the media market, BertelsmannSpringer managed to place its Internet activities, such as its BSMO cmline service (BertelsmannSpringer Medizin Online), on a solid financial basis. In its science opcrations, the extension of its range of 1T and physics publications and thc cxpansion of its LINK online inforniation offering havc had 3 positive effect.

Arvato, the intcrnationally networked media service provider, reported revenues of6 1.9 billion in the 2001 stub period (fiscal ycar 2000/01: f: 3.5 billion - taking into account the integration of thc Storage Media unit, which previouslywas part of RMG). During the period under review, Arvato used thc weak global economic environment, which dcteriorated in the wake of the tcrrorist attacks on September 11, to consolidate and further optimize its products and services involving logistics, customer care centers for major international clients, and state-of-the-art printing operations. In its service activities, Arvato developed its business at a stable level; as part of the ongoing and dynamic internationalization of its business, the company launched new projects in countries such as India and China. Its Gcrman and international printing operations rcmaincd largely at their previous year lcvel - or even slightly above it - despite dwindling demand and growing competition from electronic media. 'l'hc Storage Media unit came under stronger prcssurc. Bertelsmann mediasystems (BmS), Rertelsmann AG's in-house IT service provider, met its growth and earnings targets. Arvato's divisional rcsult in the six-month reporting period reached E 114 million compared to 8 173 million in the full fiscal year 2000/01.

DirectGroup, which includes Rertelsmann's book clubs, music clubs and e-commerce activities, generated revenues ofe 1.5 billion from its direct-to-customer businesses in thc 2001 stuh period (fiscal year 2000/01: € 3.1 billion - with the proportionate consolidation of the BOOKSPAN and France Loisirs book cluhs). The divisional result amounted to minus e 40 million (fiscal year 2000101: minus 8 19 million).

...... iWmaCment Report 111

Consolidated Revenues Aweto by Region E in millions

'l'hc hook clubs in the core markets of Germany, France and the US, which generate two-thirds of total club revenucs, continued on their upward trend, substantially 1-aisingtheir earnings despite slightly depressed rcvcnucs. At the same time, ROI. delivered an encouraging performance, and Internet start-up losses wcrc down by ncarly half vear-on-year. DirectCroup's overall earnings were inipactcd by the lack of consumer demand arising froin the economic climate. and by thc nced for write-downs on US. busincsscs. Bcrtclsmann's e-commerce group (ReCG) was discontinued at the end of2001 and its businesses were integrated into the ReMusic unit; the integration of DOL and clubs was continued. The stub period was charactcrized by the ongoing modernization of the club businesses. This includcd author's advisory councils in German and IJ.S. book clubs, Europc-widc exclusivc progran- niing highlights, the exploitation of synergies in printing and purchasing, and the cost-intensive im- plenientation of statc-of-the-art cluh softwai-r (CCIT) in Europe and the U.S. In the e-commerce sector, the L)ircctGroup acquired rnyplay, R digital-locker firm that offers custonicrs a virtual, iridividually stocked music archive on the Intcrnct. mvplay was integrated into BcMusic. In July, the DirectGroup became thc solc sharcholder in ihe French hook club Fi-ance 1.oi- sirs, which was previously jointly controlled withviventii Universal.

Revenues by Region tkvcnues generated by Bertelsmann coinpanics outside Gcrmany amounted to f: 6.7 hillion l'r~~~p<>rtiiir~of - (fiscal year 2000/01: f: 12.0 billion). Thus, at 68.8 percent their share in the Group's consolidatcd rcvc-

intcrii;itti)niil tt~vi:~iii~:; nues is slightly down, from 71.5 percent in fiscal year 2000/01. The Group earned 31.2 percent of its diilhrly dec.~c+awd consolidatcd revenues in Germany 32.0 percent in thc othcr Europcan countries, 31.3 percent in Ihe [J.S., arid 5.5 percent in other countrics. internet Start-up Losses Bcrtclsrnann has integrated the lnternct into all of its businesses. Start-up losses, which peaked CWA-, wlv. rr~ntw!~yiit E 866; million in fiscal year 2000/01, have since been sharply rcduccd, amounting to C 254 million iehwd for the stub period. Ofthesc losscs, 59 rnilliori originated froin the RTL Group, f:4 million from Han- dom HOLISC,f: 40 million from Gruner + Jahr, +; 6 million from BertelstnannSpringer, € 14 million from Arvato, and 127 million from the DirectGroup, which contains Bcrtclstnann's e-commerce aciivities. A further 4 million is attributable to Rertelsniann Capital, which incorporates Bcrtclsmann's vcnture capital activities and its investment in Lycos Europc. 112 Bertelsmann Ann

July l-DEC. 31,2001 ',

Consofldated Revenues DirectGroup by Region d in millions

This reduction in Internet start-up losses is due primarily to the integration of online media vendor ROL into the book clubs and the incorporation of CDNOW into the music cluhs, along with RTT. NEWhWDTA's growing market success, and rcducing Gruncr + Jahr's liitcrnet ventures to publication-specific online activities. - Jn the 2001 stuh period, Rertelsrnann realized capital gains of E 2.2 billion, primarily by divcst- ing a further tranche of its stake in the online service provider AOT, Europe (C 1.41. billion) and hy selling its reniainiiig AOLTime Warner Tnc. stock. generating another C 669 million. One-time income

in fiscal year 2000/01 amounted to 4.9 billion - largelv from the disposal of the first tranche ofAOL Europe shares and the salc of mediaways to 'I'elefhica, the Spanish telecoms company.

Ow-timc charges totaled f;: 432 million (fiscal year 2000/01: ti82 million). DirectGroup's one-time expenses off: 297 million related mainly 10 value adjusrrnents within the music distrihu- tion company ReMusic, value adjustments on claims pertaining to Napster, and one-time costs related to the rollout of the cluhs' state-of-the-art CUT software. At BMC;, 66 million in writc-downs on investments became necessary. Itandom House spent =E25 million on the restructuring of its North American operations and on its withdrawal from the consumer reference seclor, while Arvato spent 32 million on the restructuring of RmS. MUHN Media, and its Spanish printing businesses. 'lhc RTI, Group incurred a one-time charge ofE 23 inillion for the restructuring of Freinaiitlehledia and the salc of its Polish'lV channel KI'L7. In the Corporate Center, Rertelsmann Capital spent e43 million on restructuring the multimedia agency Pixelpark and on value adjustments to Bertels- Inam's venture fund. A further E 8 million was spent on finalizing the Group-wide PC:/WEB OFFER FOR AI.1, campaign, which offered all Bertelsmann employees it free computer and Internet access at home. Overall, Corporate Center/Bertelsmann Capital reported a positive result off;:11 million due to the reversal of provisions.

- At f;: 1.1 billion, Bertelsmann's investments remained high during the stub period. In the twelve months of fiscal year 2000/01, capital expenditures totaled t: 2.7 billion. Investments in property, plant and equipment, such as the modernization of operating facili- ties at Arvato and Gruner + Jahr. amnunted tn f: 392 million. A further E 454 million was spent on acquisitions, such as the purchase of the remaining share capital in the French book club 1:rance Loisirs and the acquisition of the 1J.S. childrcn's book publisher Golden Books by the Random ITouse publishing group. An additional f: 221 million was invesled in movie and publishing rights, primarily at the RTL Group.

. ... Management Report l'ld

July I-Dac. 31,2001 Percentage

---__/- ______~~

Consolidated Revenues of the Bettelsmann Group by Region e in milllons

Cash Flow and = Adjustcd for capital gains. cash flnwduririg the 2001 stuh period amounted to f. 127 rnillion Cash Flow Statement (fiscal year 2000/01: 1ti0 million), and was adversely impacted by one-time charges and Internet stari-up losses. However, gains on the disposal of AOL Time Warner and parts of AOL Europe, which were carniarkcd to cover these losses, are no1 included in the cash flow. Rertelsmann applies the

principle of financing Internet start-up losscs from capital gains rcalizcd 011 divcstrncnts in this scc- tor. Taking into account the change in net current assets, net cash from operating activities totaled (1: 226 million (fiscal year 2000/01: minus 6 453 million). During the stub period, investment expenditures amounted to e 1.1 billion (fiscal year 2000/01: E 2.7 billion), whilc procccds from thc disposal of fixed assets stood at f: 2.4 billion (fiscal year 2000101: f: 4.0 billion), This ntially comprised the disposal of the second tranche of the AOL Europc stakc, and of the rerriaining AOT. Time Warner shares. The net cash from operating and investing activities was used for dividend payouls of 6 75 million (fiscal year 2000/01: f: 227 million) and the E 320 million reduction in financial debt (fiscal vcar 2000/01: reduction off:.118 million). In general, cash and cash equivalents rose sharply bye 1.6 billion to 6 2.0 billion.

1, Consolidated Cash .! 1\ i\f !11. Flow Statement ,', . ,..: 6 in millions Cash Flow 127 160 Net cash provided/used by operations 226 (453) Net cash provided by investing activities 1,323 1,232 Net cash used by financing activities (1621 (645) Change in cash and cash equivalents 1,387 134

Cash and cash equivalents at end of year 2,044 399 Net financial debt at end of year 422 1,905

+See page 24 far the full consolidated cash flow statement. ' Intangible assets and financial assets '*I ,J Equity including minority interests Property, plant and equipment Profit participation certificates Current assets Financial debt Cash and cash equivalents Provisions for pensions Other provisions/other liabilities

Total Assets At the end of the stub period, total assets amounted to E: 23.7 billion. This represents a 38 per-

5?ftlt1!t qrutv~h - cent. or C6.5 billion increase from fiscal year 2000/01, when assets totaled C 17.2 billion.This increase

)/I +: iririt.y was priniarilv due to Bertelsmann's acquisition of the majority stake in the RI'L Group through a stock swap with Groupe Rruxelles 1.ambert (GRI.). a transaction that was agreed on in February 2001 and completed in July 2001, and to the increase in cash and cash equivalents. Current assets amounted to 37 percent of total iissets. Equity rose sharply by € 3.9 billion to E 8.4 billion: the equity ratio grcw from 26 pcrcent in fiscal year 2000/01 to 35.3 pcrcent in thc stub period. Financial debt fell to 10.4 percent of total assets, three percentage points lower than on June 30,2001.

Key Financial Figures D lhe Group's financial targets mostly concerned its capital structure and financial debt. At 35.3

f.~;~li7wma(j+:bt percent, the equity ratio, including minority interests, was well above the target of 25 percent.

.,I I I.,, t ., 1 I rr ;b 1 :L' !.$,I I, I(''>(I Net of cash and cash equivalents, financial dcbt dcclincd froni f: 1.9 billion in fiscal year 2000/01 to f: 422 million at the end of thc stub period. Bertelsmann therefore has a low level of debt compared to its iiiarket peers, which provides the company with financial latitude even in periods of weak economic activity.

BertelsmannValue Added = Thc key financial figurc Bcrtelsmann uses to measure its return 011 capital is UertelsmannValue AII{~!IIWw~.t , Added (BVA). The calculation of BVAwas changed from a pretax figurr lo an after-tax rigtire. RVA, which therefore amounts to net operating profit aftcr tax (NOPAT), lcss 10 pcrccnt return on capital cniplovcd pcr ycar, totaled 6 878 million in the stub period. Bertelsmann Excellence - The Bel-telsmann Excellence Initiative (REX) launched Group-wide in the spring of 2001 is now Initiative (BEX) for achieving its desired effects. The aim of BEX is to continually and sustainably enhance the quality of Greater Earnings Power Bertelsmann's products and services, to improve cooperation arid processes within the Croup, and to Is Achieving Desired Effects raise earnings and returns in all areas of the Group. including the Corporate Center. This initiative is

r,I$ . y. .. t yrutct,; tlesigned as an ongoing internal process and involvcs utilizing existing arid new revenue potential,

s+~i.it iwz . rriii till dft:c..:!: tighter cost managcmcnt, nicasures to optimize processes, and a more effective exploitation of cross- .IIIIW!~ w:jt~l.edilok divisional synergies. The aim of REX is to raise the (;roup's average return on sales to ten percent (EBITA)within the next few years. Much has been achieved over the past few months. Bertclsmann's divisions have cntered into a dialog with the Group's head office tn forrnulatc targct yiclds. tied to exteriial benchmarking figures, for the ncxt thrce years. At the divisional level, the measures required to raise profitability have been identified and their implementation has already begun. 'The BEX initiative is already achieving the desired effect: the RTL Group redefined its target portfolio and sold off its Polish 1'V channel Management Report 115

HTL7 for stratcgic and ritiancial ireasons. IIead office functions were streamlined at Bertelsmann Music (;roup, where the REX initiative runs under thc programmatic hcading “Fast and Flcxiblc”. Throughout the club businesses, the organization of work processes was tailored io the new club

software CClK, with the help of REX project consultants. In NewYork, where R number of Bertels- inann’s subsidiaries are based, redundant back-officc functions are being consolidated. In the future, Sonopress will niatiufacture rriost of RMG’s Cns . In December, thc Group’s efforts to step up [he process of integration found expression in the firs1 Rertelsmnnn Synergy Award for excmplary cross-divisional cooperation within the Bertelsmann

Group. The wiriners were “Mujer”,ii project involving Bertclsmannk cntirc Spanish family, and the RTL Club relaunch, a highly successful joint venture between RTL and DirectGroup’s club experts.

Employees = At the end of the stub pcriod. the nutritwr of employees totaled 80,296, or 5,748 more than six months carlier (74.548).This increase is attributable to the full consolidation of the RI’L. (koup. This technical effect inore than nffsei the reduction in headcount during the period under review. A largc proportion of the job cuts was rclatcd to the restructuring ai Rertelsmann Music Group (BMG). On a smaller scale. however, jobs were created in othcr units within the (;roup: for example, DirectCroup increased its headcount in China. At the end of the stub period, Bertclsrnann cmployed 943 trainees.

The Position of Bertelsnianti A(;, which is a management holding conipariy without any operating husinesses Bertelsmann AG - of its own, alrtwly converted its fiscal year to the calendar year in 2001. Cei-tifiedfinancial statements were preparcd for the full 2001 fisciil year at December 31,2001. Its majjor revenue items arc thc dividend payouts and proceeds from services provided to its subsidiaries. Total shareholders’ equity amounted to f: 7.2 billion, which corresponds to 122 percent of fixed assets.

Profit Participation = The par value of profit participation capital was C 516 million at the balance sheet date. In- Certificates cluding the premium, the total volumc of profit Ixwtiuipation capital at December 31, 2001 reniain-

1jivdt:tv.i 11mpi17 ed unchanged at E 706 million. rjl 75 l-ji.!r‘*t.iit Profit participation rapital is divided into profit participation certiricates from 2001 (hereinafter referred to as “PPC 2001”) and profit pariicipation certificates from 1992 (hereinaftcr rcfcrrcd to as “PPC 1992’7, which are publicly traded on thc Diisseldorf arid Frankfurt stock exchanges. Over 90 percent of the par value of profit participation capital is accountcd for by PPC 200 I, which therefore has a large listed volume. Bertelsmenn A

The tcrms and conditions governing PPC 2001 stipulate that a dividend of 15 percent of par value he paid for each full fiscal year (12 months) if Bertelsmann AG earns sufficient net income and consolidated net income. For shortcr fiscal years, the dividend payout is calculated proportionately. For a fiscal year of six months, therefore, the dividend will be 7.5 percent. The preconditions for the payment of the target dividend of 7.5 percent were met in thc stub period just ended. Furthermore, the terms and conditions governing PPC 2001 stipulate a dividend payment exceeding 15 percent or the respective proportionate figurc calculated for shorter fiscal years if the Ierms arid conditions governing PPC 1992 stipulate a higher dividend entitlement in this amount.

As thc ternis arid conditions governing PPC 1992 stipulate ii dividend entitlertient of 7.5 pcrccnt of par vijlue for the six months of thc stub period, PPC 1992 and PIT 2001 both entitle the holder to a dividend of 7.5 percent of par value. A total dividend off: 39 rnillioii will therefore be paid for both types of profit participation certificate on May 28, 2002. IJnder the tcrms and conditions of Profit Participation Certificates, Rettelsmaiiri’s auditors must ascertain whether the dividend payment has heen correctly determined. The auditors have issued an unqualified opinion on this matter.

Risk Management = The risk rtianagcment system is designed to fully capture 1-eliahleinformation on a tiniclv basis for each division and to integrate it into the overall system. This is done on the basis of appropriate reporting structures, an annual risk invcntory. and internal ad hoc reporting. As in the past years. the risk management system was subjected to close scrutiny by auditors from KPM(; and by the l3ertelsmann Corporate Audit arid Consulting Division. Using the risk managernen t system, the divisions identified the following material risks. Appropriate measures have been ittiplcmentcd. RTT. Group continucd to integrate the businesses acquired in 2000, especially FremantlcMcdia. As a result of its risk analysis, management discontinued some of its activities, such as rlrama and Syndication in the U.S. as well as certain activities in rights trading. Thc year 2002 has been adversely affected hy ~wnlawsuits concerning the use of broadcasting rights, which, if the decision goes against lWL Group, would have a negative impact on its advertising and sponsorship revenues.

.. .. . Managemant Report 1 1 7.h '(

Random House's risk managcmcnt stratepy addresses the overall deterioration in the economic situation, the risk of losing major authors, and significant credit risks emanating from key customers. For 2002, Gruner + Jalir sces risks, largely due to the economic situation, in its advertising and distribution businesses. Should these risks materialize, they would impact the printing volumes of its printing plants. 'lhc Exccutivc Board has drawn up specific countermeasures. In addition, the Cost and Processes prograin implemented in 2001 will show the desired effects this fiscal ycar. The restructuring of BMG, which was begun at the beginning of2001, is nearly complete. Management has introduced legal and technical meiisiires to prevent the unauthorized digital downloading of music. Noncthclcss, BMC; hclicvcs that rcvcnucs may continue to fall ticcausc of this. and hecause of recessions in certain markets. Attractive products and targeted marketing are seen as effectivc countcrrneasures. With pressure to develop new products and forms of distribution, BertelsmaiinSpringer is witnessing a sustained structural transformation in the dissemination of academic and vocational information. Management considers this process to be controllable, so that the resultant risks will decrease. For Arvato, the possiblc classification of the solvent Toluol as a poisonous substance presents a risk for its gravure printing business. It will closely monitor further dcvclopmcnts. No action is ncccssary at present. Furthermore, excess printing capacity in the market and the cost advantage enjoyed by Eastern European compe!itors ;ire causing a steady decline in the price of printed materials in Europe. The selling prices of storage media are undcr prcssurc worldwidc due to cxccss capacity. In the Serviccs business. the possible tightening of datir protection laws in Germany presents a risk. as more stringent legislation may reinovc thc lcgal basis for dircct-to-customcr business in direct markcting. Arvalo is responding to these developments by taking appropriate measures, in particular constant efforts to raise its productivity. At Dircct(;roup, management continues to place top priority on the successfully launched economic regeneration of the traditional hook cluh business. Potential risks ai-king from pressure on its margins, such iis the deregdation of book prices in a given country, have also heen notcd. 'fhc risks resulting froiii thc new (:(:IT operaring software, which is still at the introductory stage, also dcmand managcment’s close attention, as does the ongoing proccss of integrating BOL’s busincss into the book clubs. ‘Thc foreign-exchange business conducted by the Corporatc Center’s ‘Ikcasury Dcpartmcnt presents no significant risks. The possible exercise of a put option by the proprietors of the Zomba Record & Music Publishing companies, to sell their shares in these music businesses, may require funding of approximately U.S.$3 billion from Bertelsmann. Bertclsniann A[; has madc thc ncccssary preparations for this scenario, and its financial security is therefore not in danger.

After the End = After the end of the stub period, Bertelsmann considerably strengthened its 1‘V business, pay- of the Fiscal Year ing< 1.5 billion to acquire the UK-based Pearson Group’s 22-percent stake in the RTT. Croup, which raised Sertelsmann’s shareholding from 67 percent to approximately YO percent. In January 2002, Bertelsniann received the final tranche of U.S.52.8 billion for its stake in AOL Europe. Bertelsmann has now received the total settlement amount of U.S.$li.75 billion (approximately f: 7.5 billion), which was agreed with AOT. Tnc. for its approximately 50-percent holding in AOL Europe. In Fcbruarv, Bertelsmann realigned its management structure to meet the new challenges facing the company. Mr. Ewald Walgenbach was appointed 10 the Executive Board of Rertelsmann AC; and was named Chief Operating Officer (COO). Hc is responsible for thc Bertelsmann Exccllcncc Initiative (SEX) as well as integration and synergy management. Further duties include operational cor1 trol, the managcmcnt of Bertelsmann’s strategic alliances, in-house consulting, and the har- monization of internal processes and services. Mr. Walgenbach has also been put in charge of the Bertelsmann Content Network. Outlook - For Bertelsmann, fiscal year2002 will continue to be characterized bv weak econotnic activity arid low advcrtising revenues, but also by a resurgence in earnings power in its operating businesses. In thc first three months of the new 2002 fiscal year, almost all divisicms performed according to plan. Despite the difficult environment, Bcrtelsniann will nianage to extend its market leadership so that it can strengthen its competitive position once the ecoriotny recovers. Other focal points include the coriiinuous irnprovcment of operational perfornyance, synergy and integration management, and thy ongoing enhancement of the portfolio. Report of the Supervisory Board

...

Chairman of the Supervisory Board of Bertelsmann AG Report of the Supervisory Board

In divergence from the fiscal year of Bertelsmann AG from January 1 through December 3 I, 2001, the Bertclsmann Group had a stuh period From July 1 through December 31,2001,During this period, the Supervisorv Board received regular written and oral rcports on business developments and operations, the company's position, and plans for major investments. It also reviewed significant business transactions with thc Exccutivc Hoard and monitored the management of the company. The company's consolidated financial statements wei-e prepared in ar:cordance with International Accounting Standards (IAS) for the first time. By adopting IAS, Rertelsinann is responding both to the growing internationalization of its business activity and to its greater focus on the capital market. Accounting urider TAS allows for an easier comparison of Bcrtelsmann's figures with those of listed multinational corporations. At meetings with the auditors, the Supervisory Rnard was informed in detail about the effects and consequences of the company changing its accounting standards from the German Commercial Code (HGRj to IAS. Rertelsmann AGb consolidated financial statements and the consnlidated management report for thc stub period from J~ly1 through Ucccrnhcr 31,2001 were audi led hy KPMC; Dcutschc Trcuhand-C;cscllscha~Wirtschaftspriifungsgesellschaft, Berlin, and received an unqualified auditor's opinion. The auditors attended the financial review meeting of the Supervisory Board and submitted their report. 'The Supervisory Board noted and accepted the findings of the audit. After its own, final scrutiny of the Consolidated financial stateincnts and the consolidated rrianagernent report, the Supervisory hard raised no objections. The Supervisory Rnard approves thc consolidated financial statctneiits as prepared by the Fxeuutive Board. During the course ofthe stub pel-iotl,the composition of the Supervisory Roard changed as follows: when Groupe Bruxcl- ICs Lambert SA. (GR1.j became a Rertelsmann AG shareholder effective July 6,2001, the Rerrelsmann AC; Supervisory Board was expanded frnrri 12 to 15 members. New appointees were T.iz hfohn, member of the Rertelsmann Foundation Board and sharcholder in thc Bcrtclsrnann Ver\Yaltungsgesellschart rnbH (RVC;); Aridre nestnarais, President and Co-Chicf Exccutivc Officer of the Power Corporation of' Canada; and Gilles Samyn, Managing Director of CNP Compagnie Nationale jPortefeuille. Two new mein bel-s were appointed to the Uertelsinann Executive Board: Hartniut Ostrowski was appointed deputy member of thc Executive Board effective October 1,2001, and will become a full member on September 1,2002. On February 6,2002, Le. after the end nf the stub period, Ewald Wrtlgenbach was appointed to the Executive Board of Bertelsmann AG as Chief Operat- ing Officer ((:OO)with irrimediate effect. The Group's performance during the stub period was strongly influenced by the economic downturn in the US. and Europe, which was exacerbated by the events of September 11. Substantial one-time gains from the sale of AOL Europe shares enabled Rertelsniann to continue its heavy investments in strengthening its businesses. The Group substantially increased its equity and considerably enhant:ed its earnings power. The Supervisory Board actively lent its support to the Bertelsmann Excellence Initiative (BWC), which was launched throughout the Gmup in spring of 2001. Rertelsmann took advantage of thc radical transformation in the media and communications markets to put the cornpariv firmly on track for a successful future. 'lhe Super- visory Board would like to take this oppoi-tunity to thank the company's Executive Board, managers and employees for their valuahlc contributions and excellent performance during the period under I-eview.

Giitersloh, April 19,2002

y Gcrd Schulte-Hillen 120 Bertelemann Andual de$R 2w1

Consolidated Income Statement

Revenues 9,685 16,748 Other operating income 970 3,763 Changes in inventories (15) 160 Own costs capitalized 18 34 I' Cost of materials ". (3,267) (5.614) Royalty and license expenses (1,015) ( 1,738) Personnel costs (2.343) (4,319) Amortization of intangible assets and depreciation of prOp8rty, plant and equipment (948) (2,357) Other operating expenses (3,598) (5,943) Income from associates (257) (302) Income from other participations 1,902 2,083 Profit before financial result and taxes 1,132 2,515

Net interest Other financial expenses and income Financial result

Income taxes 7 (1,092) Net income before minority interests 93 1 987

Minority interests 18 (246) Net hcome after minority interests 949 741 C o ri:XI Ii d a ted Ba Ia nce Sheet

Dec. 31, 2001 € in millions Non-current assets Goodwill 7,289 4,070 Other intangible assets 1,158 913 Property, plant and equipment 3,017 2,816 Investments in associates 579 354 Other financial assets 737 726 12,780 8.879

Current assets Inventories 1,941 1,303 Trade accounts receivable 3,631 2,922 Other receivables and other assets 2,959 3,407 Cash and cash equivalents 2,044 399 10,575 8,031

Deferred tax assets 190 169 Prepaid expenses 189 166 23,734 17.245

Dec. 31, 2001 € in millions Equity Subscribed capital 606 463 Capital reserve 2,725 17 Retained earnings 2,023 2,464 Net income after minority interests 949 741 Shareholders' equity 6,303 3,685 Minority interests 2,081 792 8,384 4,477

Profit participation certificates 106 706

Provisions Provisions for pensions and similar obligations 1,682 1,589 Provisions for deferred tax liabilities 150 162 Other urovisions 3,854 3,632 5,686 5,383

Liabilities Financial debt I 2,466 2,304 2- Leasing Liabilities 437 393 Trade accounts payable 2,713 2,106 Other liabilities 2,862 1,536 8.418 6,339 Deferred income 480 340 23,734 17.245 122 Bsrtelsmann Annual Repart dboJ

Consolidated Cash Flow Staternent

July 1- Dec. 31,2001 € in millions Net income before minority interests 93 1 907 ...... , ...... Depreciation and amortization 1,142- 2,573 Increase in long-term provisions 41 109 Other cash and non-cash items (1,987) (3,509) Cash flow according to DVFA/SG 127 160 ...... Result from disposal of fixed assets (13) (30) Decrease in inventories 50 63 Increase in receivables, other assets and prepaid expenses (433) Change in short-term provisions, other liabilities and deferred income 76 Net cash providedlused by operations .. 226 Investments in: intangible assets (221) (286) property, plant and equipment (392) (943) associates and other financial assets (155) (794) purchase price for acquired enterprises (less cash and cash equivalents acquired) (299) Proceeds from disposal of fixed assets 2,390 Net cash provided by investing activities .. .. 1,323 Increase in profit participation certificates Repayment of bonds - Repayment of other financial debt (320) Change in shareholders' equity 233 Dividends to Bertelsmann AG and minority interests (75) Net cash used by financing activities .. (162) Change in cash and cash equivalents 1,387 Exchange rate movements and other changes in cash and cash equivalents .. . 258 7 Cash and cash equivalents at June 30,2001 399 258 Cash and equivalonts at Dee. 31,2001 cash .. 2,044 399 Consolidated Cash Flow Stetement Consolidated Statement of Changes in Shareholders' Equity

Consolidated Statement of Changes in Shareholders' Equity

Share- holders' equity

€ in millions Balance at June 30,2000 463 1,614 28 2,585 ...... -. Change in shareholders' equity due to Dividend - (88) (88) Other comprehensive income Currency translation differences - - 129 Other changes - - 318 Change recognized in income Net income after minority interests - - - 741 141 Balance at June 30,2001 463 1,526 13 741 3,685 ...... Change in shareholders' equity due to Dividend - - (501 Capital contribution 143 - 2,851 Purchase obligation of ZElT shares - (409) (4091 Other comprehensive income Currency translation differences - - (10) Other changes - - (713) Change recognized in income Allocations to retained earnings - 69 1 - (691) - Net income after minority interests - - - 949 949 Balance at Dec. 31,2001 606 1,808 45 949 6.303

...... 124

Notes

I IV~I lAS 22 states that the acquisition of holdings in companies through stock swaps involving marketable secii-

8 rities must be accounted for at fair value. lJnder HGB, by contrast, such acquisitions are reported at bookvalue. In contrast to HGB, IAS does nor allow goodwill to be offset against shareholders’ equity. Under IAS, hidden reserves and liabilities identified as part of the first-time consolidation are subject to deferred taxes, unless these reserves and liabilities arc recognized for tax purposes. In addit ion, deferred tax assets must be reported as carried forward losses by the acquired company, provided their future utilizatioii appeal-ssufficiently certain. Notes

’ I Under IAS 31, joint ventures itre consolidated proportionatelv. Consequentlv, 270 companies previously fully consolidated under TJGR are proportionalelv cnrisolidated Lindcr LAS at June 30, 2001 (particularly the companics in thc RTI. (;roup. Francc Loisirs, and BOOKSPAN). In addition, 3 joint ventures reported at equity under HGB are proportionately consolidated under LAS. The application of proportionate consolidation under IAS caused a sharp decrease in consolidated revenues and a substantial reduction in minority interests compared to the HGB methods of consolidation.

,I. In contrast to HGB, IAS state that self-produced intangible assels as defined by lAS 38 must be capitalized. Uiider IAS 38, self-produced intangible assets are capitalized if the Group is likely to hencfit froni them in the future and their production costs can be reliably estimated. noth the ITGR and TAS state that intangible assets purchased must be reported at theii- acquisition cost. Capitalized intangible assets arc amortized over their estimated useful life.

3, J Long-term leased assets that, in commercial terms, constitute it debt-financed acquisition arc accounted for according to IAS 17. This rcquires that the leased assets be capitalized at the present value of fulure lease payments at tlie time the lease is concluded, providing that the Rertelsmann Croup is the bcneficial owicr. Similarly, liahilitics from such leases are carried as a liability on the balance sheet. Owing to other definitions of what constitutes thc bcneficial owner, leased assets were not reported in the previous TTGR consolidated financial statcmcnts.

’ ’ Write-downs are rnade on intangitilu assets and or1 property, plant and cquipment if their bookvalue exceeds their nct rcalizablc valuc at the balance sheet date. ‘The realizable value is the highei- of the net selling price and the utility value of the asset. If the reitsons for the impairment write-down no longer apply, thc valuc ofthe asset is written up, unless the write-down relates to goodwill. In such cases, the value of the asset is wrii- ten up to no more than tlie value that would have been reported if the impairment write-down had not been made in the first place.

i 8z Participations in companies ovcr which no significant influcnce can be exerted as well as available-for- salc sccuritics arc rccognized at thcir fair value at thc balaricc shect datc, provided it can be determined. The resulting difference between this amount and tlie historical cost is reported in accordance with TAS 39 as par1 of shareholders’ equity under “01her coi-ripi-ehensivrincorne”. Otherwise, participations and sccuritics arc carried at aniortizcd historical cost. In the HGB consolidatcd financial statements, these securities were reported according to the lower-of-cost-and-market method.

IAS 39 states that sold receiwtbles niay only be derecogiiized ifa substantial part of the risk inheren1 in the receivables portfolio is transferred to the buyer. The regular sale of rcccivables as part of Bertelsmann’s Lexikothek business did not meet the preconditions of IAS 39 at June 30,2001 (derecognition of financial assets), as the interest-rate risk remained with the Lexiko- tbek business. In divergence from HGB reporting, LAS require that sales of receivables be accounted for as lending transactions, i.r. the 1-eceiuablessold continue to be capitalized and a corresponding liahilitv is reported for the funds rcccivcd.

; The Rertelsmrtnn Group applied LIS 39 for tlie first time effective July 1,2000. This standard requires that all financial derivatives used in the Group must be reported at their fair value as assets or liabilities at the balance sheei date. They rnay not be offset against each other. IAS 39 itlso requires the recognition of so-called ernhedded derivatives that form an integral part of other agreements. All gains and losses on financial deriva- lives resulting from movements in their fair value are recognized in income. If currency and interest-rate derivatives used to hedge future cash flows from pending or planned transactions meet the requirements of TAS 39, changes in the fair value of derivatives are reported as other comprehensive income until the hcdgcd item affects the income statement. However, changes in a derivatives’ fair value that do not relate sufficiently to an underlving transaction arc recognized imrriediately iri the income statement. Under previously applicd HGB accounting rulcs, financial derivatives were only carried on the balance sheet aftcr thc idcntical derivatives and underlying transactions had been netted and resulted in ii loss. However, unrealized gains were not been recognized.

’ 8 1 8 1% *:t: Inventories arc rcported at acquisition or production cost, unless these costs exceed their fair market value. In addition to the direct costs of niatcrials and manufacturing, production costs also include overheads incurred by the production process. If the acquisition or production cost exceeds the fair value at the balance sheet date, inventories are written down lo theii-net. realizable value.

,’ 1 W& 1.Jnder TAS, customer-specific contracts are reported to a small extent according to the percentage-of- cotriplet ion method, which requires that revenues and profits from contracts be recognized according to the percentage of completion of the respective project. The percentage of completion is the ratio of contract costs incurred by year-end to the total estimated project costs (cost-to-costmethod). Irrespective of a project’s percentage orcornpletion, losses resulting frotn customer-specific contracts are irnmediately recognized in full in the period in which thev arc incurred. Compared to HGB. the application of the percentage-of-completion method under LAS increases the level of inventories and recognizes revenues and profits in proportion to the project’s progress.

>. 4 jttf lJnless they yield market interest rates, long-term receiuables, provisions and liabilities are djscoiinted ,, under TAS, while under ITGR they are carried at their nominal value.

I Cash and cash equivalents essentially consist of cash on hand and cash held at banks. This item also contains securities that can be converted into cash at any time and are subject to only an insignificant risk of price movements.

I AW:~ Under LRS 12, deferred tax assets and liabilities are recognized for all temporary differences between the carrying aniounts reported for tax purposes and those reported in the IAS consolidated balance sheet - with the exception of goodwill which is not recognizable for tax purposes - and for tax loss carryforwards. Through the deduction of a valuation allowance. deferred tax assets are only reported to the extent to which they can be subsequently utilized. Such taxes are calculared using the tax rates that will apply in the future according to the prevailing legal position. The effects of changes in tax rates on deferred tax assets and liabilities are recognized in the period in which the relevant legislation has been enacted. LJnder 1 IGR, the various consolidated companies utilized the option of not recognizing any remaining excess of deferred tax assets over liabilities after they had been netted.

t Under US, the profit participation certificates of Rertelsmann AG are not reported as a component of I shaieholders’ equity, In contrast to TTGR, therefore, the distrihutiori of profit participation certificates for the fiscal year ended is reported as a provision. 127 Notes

’, Under IAS 19. provisions for pensions and siiiiilar comiiiitments are reported according to the projected unit credit mcthod. ‘lhis mcthod is based on biomctric calculations, the prevailing long-term capital market interest ratc. and tlic latcst assumptions about future salary and pcnsion increases. Under HGB accounting rules, by contrast, the recognition of provisions for pensions is based on 6a Income Tax Act, which assumes a constant discount rate of 6 percent and does not recognize future increases in salaries and pensions.

‘ i’ lAS 37 requircs that provisions bc set asidc whcn it is probable that an obligation has arisen and will therefore lead to a fiiture diminution of asscts and its amount can be reliably quantified. Provisions for guarantees mid for accrued losses arc calculatcd at full production-rclatcd costs. llndcr HGB rules, provisions were already reported whcn thc future diminution of asscts was only possible. ‘l’hcHGB also allowed expense provisions to bc cstablished, which is not allowed undcr thc IAS.

.‘ J Segnieiit reporting brcaks down by division the information provided in an aggregated form in the c:onsolid;ited financial statements. This is performed in order to provide more transparent information on the financial position of the Rertelsmann Group. The segments are hased on the segmentation used for intcrnal management-accounting purposcs and corrcspond to tlic Group’s individual business lines.

Consolidation Methods

.’ J’ I All material su bsidiriries controlled either directly or indirectly by Bertelsinann AG RS defined by IAS 27 have been consolidated. Jointly managed companies as defined by IAS 31 have been proportionately consolidated. Material associated companies as defined by IAS 28 are reported at equity if significant influence can be exerted. This is the case if between 20% and 50% of the company’s voting stock is held. A list of material subsidiarics and participations can be found in Note 39. The consolidated financial statements of Rertelsmann AG. as parent company, and thc financial statcrrierits of its consolidated sutisidiaries are prepared in accordancc with uniforni accounting and valuation tnethods. Tnvestinents in subsidiaries arc consolidated using tlic purchase mcthod, undcr which thc acquisition cost of (he equity investment is offset against the interest hcld in sharcholdcrs’ cquity at tlic timc of the acquisition. The 91bsidiary’s assets and liabilities are recognized at rclative fair valuc in proportion to tlic investmcnt hcld, prc-rvided fair value exceeds book value. Hidden rescrvcs and liabilitics discloscd during thc first-timc consolidation are suhjeut to deferred taxes. unless these reserves and liabilities are recognized for tax purposes. Any cxcess purchase price of an investment over the relative fair market value of the iiet assets acquired is capital- izcd as goodwill and arnorrixerl on a straight-line basis over its estimated useful life. Any hidden reserves and es disclosed as a rcsult of such consolidatiori are amortized or reversed in the following periods in line with the treatment of the corrcsponding asscts and liabilities. A~iynegative goodwill, provided it does not result from anticipated losses, is reversed in accordancc with IAS 22. Investments in proportionately consolidated corripanies are consolidated according to the samc principlcs. Investments reported at equity are shown at the proportionatc sharcholdcrs’ equity of thc respcctivc investment. Any difference between this amount and thc acquisition cost of the investment (goodwill) increases the rcportcd shareholders’ equity. The subsequent amortization of goodwill reduces the amount of iiet incoiiie from associated companies. The proportionate profits and losses reported by these coiiipanics are after-tax amounts. I 128 Bertelsmann AnriuM Rep6rt'$aOii

All intercompany gains, losses, revenues, expenses, income, assets, liabilities, and provisions falling within the scope of consolidation are eliminated. Deferred taxes are recognized for income-related consolidation events in accordance with IAS 12. Proportionate consolidations are carried out according to the same principles.

' 1 I 'Ihc scopc of consolidation, including Bertelsmann AG, comprises 1,034 fully consolidated companies, compared to 804 companies in the previous year. All domestic and international affiliated companies are consolidated, with the exception of 165 companies (previous year 154), which are not consolidated because they do riot havc significant business operations of their own and have no material impact on the Group's net assets, financial position and rcsults of operations. The scope of consolidation changed as follows during the period under review:

Already consolidated at June 30,2001 261 543 804 Consolidated during reporting period 63 210 273 Deconsolidated during reporting period 13 30 43 Consolidated at December 31,2001 31 1 723 1,034

Subsidiarics wcrc acquired at a total cost of approximately 8 3 billion. Of this amount, approximately € 260 million was cash-cffective. Material acquisitions were as follows: As part of a capital incrcase by means of a non-cash capital contribution, a further 29.88 percent of RTL Group was contributed to Bertelsmann AG with R commercial effective date of from July 2,2001, IJnder TAS 22.24. this noli-cash capital contribution is reporkd at thc fair valuc af the sliarcs contributcd, as no niarkct price exists for the Rei-telsmann AC; shares issued. The assumed market price of E 61.663 per sharc rcsults in a contribution value off: 2,Ml rnillioti to thc Bcrtclsmanii Group. 'Thc ricw shareholder, Groupe Bruxelles Lam- bert (GRI.), holds 2n.069 preferred sharcs in Bcrtclsmann AG, 149 ofwhich are non-voting shares. The acquisition of these additional shares nieans that IUL Group has bccn fully corisolidatcd from the time of the acquisition. The goodwill ofC 1,572 million crcatcd by thc purchasc of these additional shares will be amortized over its estinialed useful life of 15 ycars. Rrrielsmnriri AC; acquired thc rcmaining 50 percent of the share capital in the France Loisirs Group, previously a joint vcnture, for a purchase price of E 154 million effective July 1.2001. The acquisition of these additional shares resulted in goodwill totaling C 126 million, which will he arnortized over a period of 15 ycars. The France Loisirs Group was fully consolidaled as soon as this additional sharcholding was acquired. The acquisition and divestment of subsidiaries had thc folloivirig impact on thc assets and liabilities ofthe Bertelsmann Group at the time the respective cotnpanics wcrc consolidated for the first time or deconsolidated:

Fixed assets 4,523 3 Current assets 1,754 34 Total assets 6.277 37

Provisions 221 7 Other liabilities 2,186 41 Total liabilities 2.407 4.0 'I

Notes

Tri the current period, 91 joint ventures wei-e proportionately consolidated (previous year 307). Bertelsrnarin A(; contributed its 100 percent holding in the Plaza!: Jan& Editores SA.Group as anon-cash capital contrihurinn lo the joint venture Grupo Editorid Randorri Tlouse hloridadori (GERHM) cffectivc July 1, 2001. As Bertelsmann holds only 50 percent of the share capital in this joint venture. 50 percent of the previous holding in the Plaza y Jan& Fditoi-es SA. Group is to be regartled as ii disposal and therefore deuon- solidatcd. Since July I, 2001, the companies belonging to this group have heen proportinnatcly consolidated in the Bcrtclsmann (;roup. The acquisition costs of thc 50 percent inrestmcnt in GERHM amounted to e 39 million and resulted in n negative goodwill totaling +; 3 million which was hillv realized in the stub period. Since December 18,2001, the KTL Group owns 44.4 percent of Sportfive, an European TV and sporting- rights rnarketing agency. Sportfive is it joint venture with Sport+ (Canal+ Group) and is proportionately consoli- rlatetl. In return for the contribution of UFA-Sports GmbH, in which the RTL Group held a 99.6 percent stake, its holding in Groupe Jean-Claude Darnion (now Sportfive), in which the KTL Group previously held a 28 percent stake. was 1-aisedto 44.4 percent through the issuance of new shares. The contribution of UFA-Sports increased the shareholders' equity by 144 million, which was reported in the consolidated financial statements as a gain on the disposal of ccmsolitlated companies. The merge]- created atlditional goodwill in the RTT. Group off: 117 million, which will be arnnrtized over 20 years. The proportionate consolidation of joint ventures had the following effect on the Bertelsinanii Group's assets, liabilities, income and expenses:

Fixed assets 727 1,942 Current assets 988 1,155 Liabilities (short-term) 806 1,179 Liabilities (long-term) 516 114

Income 650 2,466 Expenses 700 4,296

Of the 183 (previous vear 175) associared companies. 75 (previous year 50) are reported using the eqiliry rriet hod; the I-emainingare reported at acquisition cost owing to thcir minor importance to thc Bertelsmann consolidated financial stittements. A list of the Bertelsmann Group's sharchnldings is filed with the commercial 1-egisterat the district court in Giitersloh (Dcpartmcnt H No. 3 100). 1)uring the period undei- review. the domestic subsidiaries disclosed under Note 40 utilized thc cxcmpting option to prepare their iinnunl financial statements pursuant to 5264 (3) HGB and $264 b No. 4 HGB.

2 In Rertelsmann AG's consolidated financial statcnicnts. the financial starernenls of international suhsidi- arks itre translated into euros according to thc reporting-currericy coricept as described under TAS 21, Since all subsidiaries conduct their businesses independentlv in financial, cornrricrcial and organizational terms, their respective local currency is the repoi-tingcurrency. Assets and liabilities are thereforc translatcd at the closing- date rate, while the lncomc Statement is translated at the average rate for the period under review and the previous vear.Yeear-oii-year diffcrcnccs arising from the translation of Balance Sheet items and translation differences hetween the Income Stateinent and thc Balancc Shcct are offset in sharehnlders' equity. When subsidiaries arc dcconsolidated, the respective cumulative translation diffcrcrices are rcversed arid recngriized in incnme. The following euro exchange rates were used to translate the currencies ofthc countrics which arc signifi- can1 to (he Rertelsmiinn Group:

U.S. dollars USD 0.8889 0.89 I 4 0.8813 0.8480 Canadian dollars CAD 1.3889 1.3536 1.4077 1.2927 British pounds GBP 0.6143 0.61 43 0.6085 0.6031 Japaneseyen JPY 109.65 101.92 115.33 105.36 Swiss francs CHF 1.4924 1.5314 1.4829 1.5228

Notes to the Consolidated Income Statement and the Consolidated Balance Sheet

Revenues from the sale of goods and merchandise 6,332 11,147 Revenues from the performance of services 3,316 4,886 Revenues from the lending of assets 226 1,348 Gross revenues 9,874 17,380 Discounts (189) (632) Revenues ... 9,685 16.748

Revenues are reported only when the service has been performed and the risks have been passed. Revenues froin the application of the percentage-of-completion method are of minor importance. Total revenues include revenues of 8 49 inillion (previous year 42 40 million) from barter transactions. Hcvenucs by division and by region arc shown under Notc 36 in the section on scgmcnt rcporting.

Other operating income 970 ...... 3,763

Othcr opcrating income includcs rebates, rental income and e 115 million attributable to prcvious periods, as well as inconie of8 118 million from the reversal of other provisions. The prior-year amount included gains on the disposal of the equity investment in mediaways off: 924 million. In addition, the prior-year amount includes a profit of 1,628 million from the increase in RTL's proportionate shareholders' equity. Resulting from the inclusion of FremantleMedia (former Pearson TV) into the RTT. CJOU~its the result of a capital increase against nun-cash capital contribution July, 2000. Although Rertelsinann AG's propor- lionale equity investment in the RTL Group decreased by 13 pcrccntagc points as a result of the capital incrcasc and the addition of a ncw shareholder to the KIL Group, this effect was inore than offset by the increased contribution of FreniantleMedia at fair value. The incrrase in RTL's proportionate shareholders' equity was recognixed iis other operating income. This profit was not reported in the HGR financial statements at June30,2001, as HGH statcs that the contribution of Fremantlehfedia into the RI'I. (;roup should he rcported at book valuc rather than fair valuc. I I 131 Notes

July 1- Dec. 31, 2001 f in millions Raw materials and manuf. supplies 2,144 2,558 Services purchased 1,123 3,056 3,267 5,614 . ...

July 1- Dec. 31, 2001 f in millions Wages and salaries 1,962 3,684 Compulsory social security contributions 288 475 Profit sharing 19 44 Cost of pension plans 51 64 Cost of other employee benefits 23 52 2,343 4.3 19

l'he interest that is associated with the pension provisic)ns is reported under other financial expenses arid income.

,:j ,:j Amortization of Intangible Assets and Depreciation of Property, Plant and Equipment Amortitationldepreciation of goodwill 418 1,614 other intangible assets 257 252 property, plant and equipment 273 49 1 948 2,357 ......

Amortization of other intangible assets iricludcs differcnccs rcsultirig from applying IAS 22. For the purposes of the Group's ririancial rriariagerTierit rcporting, this amortization is classified as goodwill amortization and arnountcd to C33 million (prcvious year E 70 million) in the stub period.

Expenses

Administrative costs 826 1,070 Advertising costs 112 1,688 Distribution and selling costs 434 93 1 Rental costs 232 418 Sundry operating expenses 1,394 1,836 3,598 5,943

Sundry operating expenses include expenses off 14 million for [hewrite-down of license prepayments made to Napster Inc. (see Note 18). g$''f~

132 Bertelsmann Annual Regod ado$'

!;I income from Associates and Other Participations Income from associates 24 37 Losses from associates (281) (339) income from other participations 2,096 2,303 Losses from other participations - (4) Write-downs of other financial assets (194) (216) 1,645 1,781

A large proportion of the income from othcr participations is the result of the disposal of sharcholdings in AOI. Europe and AOI.TimeWarner (formerly AOL Inc.). Kertelsrnanri held 49.5 percent of AOL Europe's share capital through varioi~saffiliates. Since March 2000, these shares have been the subject of a put/call agreemcnt with AOI. lnc. Undel- this put/call agreemcnt, Bcr- telsmann has the right to offer 80 percent of these shares for sale to AOT, lnc. foi-U.S.$5.3 billion in January 2002. Furthermore, Bertelsinanii has the right to scll thc remaining 20 percent of these sharcs to AOL Inc. for lJ.S.$ 1.45 hillion effective July 2002. AOL originally had the option of paying the purchase price either in cash, its own stock. 01- ii wmbination of both. llndcr an additional agreement signed in March 2001, AOL and Bertclsmann decided that if the first put was cscrciscd, at lcast lJ.S.9; 2.5 1)illion had to be paid in cash. On Julv 27, 2001, the shares underlying this cash component wcre sold to a third party. After deduction of the book value (E 293 million) plus transaction costs, this generated a prior-ycar capital gain off: 2.28 hillinti, which is reported under investmcnt incomc at June 30,2001. Furthermore, the partics agrccd in Dccembcr 200 I that all other payments resulting from Bertclsmann having exercised put options must bc rnadc in cash. On Dccernber 28,2001, the shares underlying the second tranche were also sold to a third party. Aftcr dcduction of thc book value (C 192 million) plus transaction costs, this genernted a capital gain of8 1.41 billion, which is reported undcr income from other participations at Ueccmhcr31,2001. The shares held in AOL Europe are classified as available-for-salc securities and are reported under "other receivables and other assets" as part of current assets. As no value derived from an active market exists for these shares, it is riot possible to determine their fair value. These shares arc thcrcfore reported at their acquisition cost. For the aforementioned reasons, it is also not possible to determine a fair valuc for the put/call agrecmcnt itsclf. Thcrcfore the agreement has no impact on the balance sheet until the relevant options arc exercised. During the period under review, Bertelsmann AG also sold 1 1,230.400 AOT. Time Warner lnc. shares, which were classified as available-for-sale securities and included in ciirrcnt assets. These shares had been hedged through the use of various put and call options (zerrr-cost collars), whose terms and conditions wcrc amended during the period undcr review without affecting their fair value. The shares together with thc put and call options wcrc rcportcd at thcir fair values at the respective balance sheet dates (the shares were recognized at their market price and thc puts and calls wcrc valucd using the Black-Scholes model). The effects resulting from these fair values werc reported under sharcholders' equity. The put options were excrciscd during the pcriod under review through physical delivery of the shares. The capital gain aftcr deduction of transaction costs totaled C 669 rnillion and is reported as income from other participations at Ucccmher 3 I, 200 I. Income from other participations also includes write-downs off: 66 million on shareholdings in Zomba Publishing and Zoimba Records and an expense ofE 89 million for writing off the loans extended to Napster lnc. (sccNote 15). 'l'hc losscs from associatcs includcs a goodwill arnortization of C 120 million (previous year f: 20 million), which largely resulted from the amortization of E 112 million in goodwill on Antena 3.T.osses suffered by barnesandnoble.com (E 68 million) and Bertelsmann Ventures (E 32 million) had a significant impact on the level of expenses incurred by associates. 133 Notes

July 1- Dec. 31, 2001 € in millions Interest and similar income 73 114 Interest and similar expenses (168) (306) (95) (192)

J: Other Financial July 1- Expenses and Income Dec. 31, 2001 f in millions Interest on provisions for pensions (61) Dividend entitlement on profit part. capital (39) Interest on finance leases (13) Other - (113)

"Other" comprises mark-ups and disr:ounts on long-term receivables, other provisions arid liabiliries, and non-operating net income on r:iirrt.nc:y changes of the Group.

', Income Taxes

Income taxes 7 (1,092)

Net i ticorn? hefore jncome taxes for domestic and internatioiial operations are RS follows:

Net income before income taxes Domestic 1,739 2,230 International (815) (151)

(:iirreni and deferred iiiconie taxes for doniestir and international operations are as follows:

Current taxes Domestic 10 (967) International 6 (217) Deferred taxes Domestic (33) 56 International 24 36 Total 7 ( 1,092)

Uuriiig thc ycar under review, tax loss carryfoi-wards off: 170 million (previousyear tj. ti1 million) were utilized; this reduced current t,uc expcnscs byC 61 million (prcvious year C 24 million). Deferred tax assets and liabilities resulted from thc following itcins and factors: Deferred tax assets Dec. 31, 2001 E in millions Goodwill 49 59 84 24 Property, plant and equipment 7 66 178 265 Investments 39 53 68 15 Inventories 140 66 3 2 Accounts receivable 223 164 58 16 Prepayments and other assets 122 112 96 80 Provisions 144 226 119 50 Financial debt 180 115 - 45 Accounts payable 145 47 19 63 Prepayments and other liabilities 203 175 38 38 Loss carryforwards 995 462 Valuation allowance ( 1,544) (940) Total 703 595 663 588 Netting (513) (426) (513) (426) Carrying amount 190 169 150 162

Entitlements and provisions are offset against each other if they relate to the same tax authority and can be netted. Valuation allowances were deducted from deferred tax assets in those cases where it is improbable that they can be utilized in the foreseeable future. The temporary differences and tax loss carryforwards on which a valuation allowance WRS recognized can be applied for the following limited periods:

Can be carried forward for more than five years 3,780 2,217 Can be carried forward for up to five years 207 193

A reconciliation of expected net t,w income/expense to actual tax income/expense is shown in the following table:

Earnings before income taxes 924 2,079 Income tax rate paid by Eertelsmann AG 38.29 % 38.29 % Expected tax expense (354) (796) Differences between the actual from the expected tax expense Adjustment due to divergent national tax rate 30 9 Amortization of goodwill not capitalized for tax purposes (150) (664) Changes of tax factors in previous year 111 - Change in valuation allowance on deferred tax assets with effect on income statement (471) (425) Permanent differences resulting from consolidation 75 139 Tax adjustment for AOL Europe in fiscal 99/00 & 00/01 782 - Increase in shareholders' equity due to RTL contribution - 674 Non-deductible operating expenses (23) (12) Other adjustments 7 (117) Total 361 (299) 7 Actual tax income/expense ...... (1.092) . .. The income tax rate paid by Bcrtclsmann At; consist of a corporation tax of 25 percent, a solidarity surcharge of 5.5 percent on the corporation tax liability and trade tax of 16.18 pcrccnt, which is dcductible from thc corporation tax. nut. to the tax situation, the tax rate was assumed to be the same in the previous year, even though the incorne tax rate paid by Bertelsmann AG for the period July 1 through December 31, 2000 amounted to 51 .SS prrcent (based on a corporation tax rate of40 percent and solidarity surcharge and trade tax of the aforementioned amounts). The change in the income tax rate had onlv a minor impact on net dcfcrred taxes. as deferred tax assets and liabilities in Gcrmany niorc or lcss offset cach othcr.

Non-current Assets Changcs in non-current assets during the period under review were as follows:

‘I ’, Goodwill Q&W PrOp6fiY, Intangible plant and asssts equipment fi in milllons @inmillions € in millions Acquisition/manufacturing cost Balance et July 1,2001 10,715 2,030 5,955 536 980 20.21 6 Translation differences (183) (52) (78) (10) (18) (341) Acquisitions 3,912 1,100 584 3 657 6,256 Additions - 239 389 24 533 1,185 Disposals 394 149 303 145 326 1,317 Reclassifications (78) 23 (3) 604 (546) - Balance at Dec. 31,2001 13,972 3,191 6.544 1,012 1,280 25,999 Depreciation/amortization Balance at July 1,2001 6,645 1,117 3,139 182 254 11,337 Translation differences (79) (35) (37) (3) (2) (156) Acquisitions - 830 335 166 147 1,478 Additions 418 257 273 136 194 I ,278 Disposals 282 138 181 67 50 718 Reclassifications (19) L (2) 19 - - Balance at Dec. 31,2001 6,683 2,033 3,527 433 543 13,219 Book value at Dec. 31,2001 7,289 1,158 3,017 579 737 12,780 Book value at June 30,2001 4,070 913 2,816 354 726 8,879

Goodwill Under lAS 22. goodwill is capitalized and amortized 011 a straight-line hasis over its estimated useful life of 3 to 20 years. Goodwill is subjected to impairment tests in accordance with IAS 36. Where necessary, appropriate value adjustments arc made. Of ihe reportrd goodwill ofe 7,289 million (prcvious year f: 4,070 million), C 6,902 rnillion (previous year f: 3,590 million) results from the consolidation of investments in subsidiaries and f: 387 inillion (previous year E 480 million) from subsidiaries’ annual financial statements. The total acquisition balance contains an amount totaling, C 1,572 million that is attributable to the increase in the shareholding in the RTI. Croup (see scope of consolidation). Additions totaling C 1,809 million resulted from the transition from proportionate 10 full consolidation of the RI‘L Group. Wi-ite-downsof goodmill approxirnated t: 55 million during the period undcr rcvicw (previous year f: 1,l 11 million) and miiiiily comprised thc arnoriizaiion of goodwill on McCall’s (E 30 million) and Pixclpark (C 20 million). Tn the previous year write-downs cssent idly related to Fremantlebledia (former Pcarson IV) (E 862 triillinn). Other Intangible

Acquisitionlmanufacturing cost Balance at July 1, 2001 945 1,025 60 2,030 Translation differences (37) (15) - (52) Acquisitions 988 101 11 1,100 Additions 159 46 34 239 Disposals 79 56 14 149 Reclassifications 15 35 (27) 23 Balance at Dec. 31,2001 1,991 1,136 64 3,191 Depreciation/amortization Balance at July 1,2001 641 476 1,117 Translation differences (31) (4) (35) Acquisitions 778 52 - 830 Additions 176 ao 1 257 Disposals 77 61 138 Reclassifications 4 (2) - 2 Balance at Dec. 31,2001 1,491 541 1 2,033 Book value at Dec. 31,2001 500 595 63 1,158 Book value at June 30,2001 304 549 60 913

Intangible assets that are produced by the Group are capitalized at iheir rnanufacturing cost (including borrowing costs in accordance with IAS 23), provided they rneel the preconditions stipulated by IXS 38. Intangi- ble assets produced by the Group itself consist of software, which approxiniatcd f: 53 million (previous year 56 million). Purchased intangible assets are carried at their acquisition cost. Intangible assets are nmor- tized on a straight-line basis over their estimated useful life. Capitalized software is amortized ovei- a 3 to 4 year period, licenses according to the term of their license agreement. Trademarks are amortized over a maxirriurn period of 15 years, supply rights and long-term subsr~ibersover maximal 5 years, and music righls over a maximum period of 15 years. Advanced payments include rights accruing from (co-)pi-oduciions,audiovisual rights and sports rights of the IWL Group. l'he relevant movie rights are amortized on the basis of total estimated future revenues. Acquisition costs are amortized using the sitnit: method according to the ratio of net revenues already received to total estimated revenues. Sports rights are amortized over the tcrm of their licensing agreements. If there is evidence that the value of the assets is impaired and the realizable amount is below the amortized acquisition or tnanufacturing cost, write-downs are performed in accordance with IAS 36. If the reasons for such impairment no longer apply. the value of the assets is written up to no more than their aiiioi-- tized acquisition or manufacturing cost. The amortization rcportcd includes write-downs of 21 millioti (previous year E 11 million) and results horn the amortization of music rights and software that was produced by the Group itself. 137 Notes

Property, Plant and Equipment

I Land, lend Plant, technical Office furniture AdvaMe pe+hkni 76f# titles and equipment and and other and coiwrucrion buildings machinery equipment in pr6grsss € in millions E in millions E in millions € in millions € in millions Acquisition/ manufacturing cost Balance at July 1,2001 1,548 2,565 1,436 406 5,955 Translation difference (12) (33) (20) (13) (78) Acq u isti ons 201 235 140 2 584 Additions 36 78 103 172 389 Disposals 19 78 147 59 303 Reclassifications 22 80 (18) (87) (3) Balance at Dec. 31, 2001 1,782 2,847 1,494 421 6,544 Depreciation Balance at July 1,2001 482 1,713 943 1 3,139 Translation difference (4) (20) (13) - (37) Acquistions 76 169 90 - 335 Additions 37 123 113 - 273 Disposals 10 70 101 - iai Reclassifications 2 9 (13) - (2) Balance at Dec. 31,2001 583 1,924 1,019 1 3,527 Book value at Dec. 31,2001 1,199 923 475 420 3,017 Book value at June 30, 2001 1,066 852 493 405 2,816

Property, plant and equipment are reportcd at acquisition or manufitcturing cost less dcprcciation. l'hc cost of property, planl and equipmcnt that was produced by the Group includes direct costs and that priiori or ovei-- hcad that is directly attributablc to thcir production. For property, plant and equipment whose production takes place ~verit lengthy pcriod, the cos1 includes debt interest accrucd up to the time of completion. If there is evidence that the value of the assets is impaired and their book value exceeds the amount that would be rcalizcd if sold in the market, a writc-down to their realizable value is recorded in accordancc with IAS :Hi It' the reasons for such impaii-ment no Iongcr apply, thc value of the assets is wi-itten up to 110 more than thcir dcprecialed acquisition or manufacturing wst.

Pi-operty,plant and cquipnient are depreciated on a straight-line basis over their estimated useful lifc. Such depreciation is based ciri the following Group-wide useful lives: Buildings 10 to 3.5 years Plant, technical equipment and machinery 4 10 10 years Office furniturc and or her equipment 3 to 12 years Depreciation of property plant and equipmcnt in thc stub period 2001 totaling 273 million (prcvious year C 51 i million) includes write-downs ofe 10 million (previous year C 5 million). Property. plant rind equipmcnt also include leased assets with a book value of f: 289 rnillion (previous year f? 314 million). of which the Group, as lcsscc, is deerned to be the beneficial owncr since it hears all the rewards and I-isks arising from [he use of the leased asscts (finance lease). Assets available to the (;roup under a finance lease are capitalized, at the present value of the mitiitnutn lease payments or, if lower, at the fair value of the leased asset. If the subsequent passing of title to the leased assets is sufficiently certain, the assets are depreciated ovcr their useful life. Otherwise, they are depreciated ovcr the term of the lease. 'There does not exist any conditional rental payments, nor any subleases. 'The payment obligations resulting from finance leases are reported as leasing liab [If the leased assets, an amount totaling f: 279 million (previous year 269 million) pertains to leased buildings. The finance leases on the leased buildings arc gcncrally subject to a non-terminable basic tenancy term of approximately 20 years. Upon expiry of this term, thc lcssce is entitled to purchase the leased asset at its residual value. The installments paid by the lessee under the lease vary in accordance with the changes in ititer- cst rates paid by the lessor. The leases contain no option to extend the lease. In addition to finance leases, the Group has also entered into operating lease agreements. This means that, in commercial terms, the leased assets are owned by the lessor. 'The minimum lease payments due in subsequent periods are reported as other financial commitments. The oprrating leases are essentially tenancy agreements on buildings, most of which are subject to non- terminable basic tenancy ternis of between 10 and 20 years. Some of these leases grant thc lessee an option to extend the term of the leasc. 'I'hcrc does not exist any conditional rental payments. nor subleases. Although the leases generally grant a purchase option, this does nor necessarily require the lessee to capitalize the buil- ding under IAS 17 regulations.

Investments in These items essentially comprise investments in nun-consolidated subsidiarics, invcstnients in associates, Associates and Other other participations, and securities and loans. Financial Assets Changes in these items during the period under review were as follows:

Gross values Balance at July 1,2001 74 86 536 5 531 76 205 1,518 Translation difference - - (10) - (6) - (12) (28) Acquisitions 23 131 3 21 39 1 8 83 660 Additions 20 6 24 8 296 16 187 557 Disposals 21 1 145 3 2 43 16 39 47 1 Reclassifications 47 187 604 (16) (580) 1 (185) 58 Balance at Dec. 31,2001 143 409 1,012 15 389 85 239 2,292 Write-downs Balance at July 1,2001 46 12 182 - 185 - 11 438

Translation difference I - (3) - (1) - (1) (5) Acquisitions 1 20 166 - 78 - 40 313 Additions 7 - 136 - 94 - 93 330 Disposals 1 - 67 - 41 - 8 117 Reclassifications 37 (32) 19 - (37) - 32 19 Balance at Dec. 31, 2001 90 - 433 - 278 - 175 970 Book value at Dec. 31,2001 53 409 579 15 111 85 64 1,316 354 76 194 1,080 Book value at June 30,2001 28 74 5 346 .. 189 Notes

Owing to the principle of materiality stipulatcd by the LIS, subsidiaries of minor importance for the presentation of tlic Group's financial position were not consolidated. No investrnents were acquired with the intention of rcsclling them, nor are there severe long-term restrictions as defined by 1RS 27. These invest- trierits are valucd at cost. Other participations owl-which a significant influence can be exerted within the meaning of TAS 28, but which are not controlled (associates), are reported iit equity. IJridcr the equity method, investments are initially rccognizcd at their proportionate sharehclldcrs' equity and then adjusted for the proportionate changes in the company's net assets. Jnvestnients in associates are therefore reported at thcir original investment amounts plus other rtddjtions rind proportionatc net income, less dividends, capital repayments, and aniorti- zation of recognized hidden reserves and goodwill. 'The MAS state that losses resulting from associates that ex- cccd the book value of the investment should not hc rccognized, provided here is no obligation to pay any further capital. l'hc Bertelsmann Group has non-recognizcd cuniulative losses of C 1 million (previous year C 1 million). Invcstmcnts in associates are shown under Nntc 39. In accordance with TAS 39. other participations and some of the other securities (f: 196 millicin) are classified as available-for-salc invcstmcnts. Since their fair value cannot be determined, other participations over which no significant influence can be exerted are regularlv rcported at historical cost. Howcvcr, if the values of thc aforcnientioned investments and securities can lic dcteriniiied on the basis of stock market listings, they are recognized at their current niarket value, as required by lAS 39. Unrealized gains and losses arising from such fair niarket valuation are recognized in shareholdcrs' equity, including deferred taxes. Where their value is likcly to bc impaired for a longer time, however. they arc written-down. If the reasons for a write-down no longcr apply, the value of the assets is written up accordingly. If these investments are sold, any impact on equity is rccognized in the Income Statement. Ihrough UhiG Holding n.V, T3ei-telsrnann owns 25 pcrcent of Zombn Publishing and 20 pcrcent of Zombri Records. which are shown under othcr participations. The remaining share capital in these two companies is held hy Summer Shore N.V. Ncdcrlande, with which Rertelsmann has had shareholder agreements siricc Novemher I99 1 that contain various put/call options. After several amendments, most rccently on Uecember 17,200I, the agrecmcnt between Bertelsmann and Summer Shore N.V. stipulales that Sumtncr Shore N.V can exercise il put option to sell to BMG Holding R.V. its shareholdings in Zomba Records arid Zornba Publishing before the end of the 2002 calendar year. The put can only be exercised foi- both cornpanics simultaneous. 'lhe option price payable by RMG Holding B.K is calculated using a formula based on the financial results reported by the two companies for fiscal years 1999,2000, and 2001. According to Suinrner Shore N.V., this option price could ainount to approximately IJ.S.$3 billion. If the piit is exercised, this ariiount dlliavc to be verified by due diligence and. if necessary, adjusted. Since fair values as defined by IAS 39 cannot be determined for either Zornha Records or Zornba Publishing, the put option could not hc valucd or rcported in Uertelsmann's consolidated financial statements. If Surnmer Shore N.V. docs not cxercise its put, it will receive for the period January 1,2003through Decem- bcr 31,2006 a call option on BMG Holding I3.W shareholding in Zomha llecords and Zomba Publishing for a svniliolic pricc. 'Ihc invcstmciits in these companies were therefore written-down by 8 ti6 million in Rertels- tnann's consolidated financial statements at December 31,200 I. The resulting expense was recognized under income from other participations. 140 Bertelsmann An

Available-for-saleinvestments were as follows:

Other participations 93 255 18 91 111 346 Securities 19 - 66 76 85 76 Total 112 255 84 167 196 422 . ..

During the period undcr review, Rertelsmiinn sold securitics and other participations that had previously been carried at historical cost. This resulted in a net profit off: 12 million (previous year net loss of F: 34 rnillion). Securitics off: 13 million (previous year 16 million) that are riot ;wailable for sale arc classified as held to rnalurity. For these securities, there is both :i firm intention on the part of management and the financial ability to hold them until their maturity. l'hesc securities are recognized at amortized historical cos( using the effective interest-rate method. Other participations and securities are first recognized or dcrccognized at the date of settlement. Depending on their interest rate, long-term loans are carried at either their nominiil value or, iflowcr, at their present valuc. 'l'heir preseri t values were ralculated using customary national interest rates with match- ing rnaturitics. In thc vears 2000 and 2001, Bertelsinanii RG cxtcnded loans totaling 8 89 million (including interest) to Napster Inc.. IJSA. Owing to the current financial position of Nripster Inc., thesc loans wcrc wril- ten-clown effective Uccember 3 1,2001. This expense was recognized under income from other participations.

Inventories Inventories are segregated as follows:

Movie rights 1,061 40 1 Raw materials and supplles 180 204 Work in process 160 176 Finished goods and merchandise 517 506 Advance payments 23 16 1,941 1,303 .. .. .

Invcntorics are recognized at iicqiiisitioii or manufacturing cost. Similar inventories are reported at avcragc cost or according to the FIFO (first-in, first-out) mcthod. Inventories resulting from intra-Group supplics arc adjusted for intercornany profits and itre recognized at consolidated tnanufacturing cost. Ifthcir acquisition or manufacturing cost exceeds their current fair value at the balance sheet date, invcntorics arc writteri dowrl to their net realizable value. Thc tnovie rights are held by RTL Group and are intendcd to he sold or broadcast on television. Quiz, game and music shows. sporting events, soaps and documentaries arc carried at 100 percent of their value in the Income Statenlent when they are first broadcast. Children's movies are written-down by at leas1 50 percent when they are first shown. and their residual valuc is written-down when they are broadcast for the second time. All othcr formats - including blockbusters, television series, '1V movics, and (co-)prodiictions - we written-down by at least 67 pcrcent when Lhey are first shown, and their residual value is written-down when they are broadcast for the second time. 141 Notes

I! Trade Accounts Receivable

I Trade accounts receivable 43 3,631 2,922

Ar:r:ounts receivable Imrn custonicrs are reported at their nominal valuc: long-term receivables are discountcd. Rcccivablcs denominated in foreign cui-1-encyai-e (1-anslatcd at closing-date rates at the balance shcct date. Value adjustments are recognized for any discernible risks. 'lrade accounts receivable werc thcrefore written down bye 214 million (previous year E: 43.5 millinn) during thc period under review.

.' '. Other Receivables and Other Assets :, Dec. 31, 2001 E in millions Accounts receivable from equity investments - 119 258 Other assets 135 2,840 3,149 135 2,959 3.407

Other receivables and other assets ai-e recognimd at their notnitial value or, where appropriate, at thcir fair value. Long-term receivables are discounted. (hher receivables dcnominated in foreign currency arc translated at closing-date rates. Value adjustiiients are recngnizcd for any discernible risks. Such adjustmcnts on other receivables and other assets totaled C 9fl rnillion during thc period under review (previous vcar f: 125 million), and steniiiied largely from adjustmeri~soii prepa!"mts to authors and artists. Other assets include E 373 million (previous vear f: 959 dlion) in available-for-sale financial asscts. NO securities are held for trading purposes. The treatment of available-for-sale assets is the same as that for available-for-sale investments (see Note 15). Nnn-dcrivativc financial instruments are broken down as follows:

Available-for-Sale 373 258 - 701 373 959

'The majority of other assets (f: 1,191 million) pertains to advaticc paymcnts for royalties and fees 10 authors and artists (previous year 'i 1,15i million). In addition olher assets also includes gains ofE 101 million (previous year f: 82 million) resul~ingfrom the valuation of financial derivatives at fair value. Further information can he found in Notc 34. In 2001, Bcrtclsiiiann AG made prepayments of C 14 million to Napster fnc. for fivc-ycar liccnsing rights, which were capitalized undei- other asuets. Owing to thcir lack of commercial use, these licenses wcre written-down effective December 31,2001, This expense was rccognized under other operating expenses. Furthermore, until December 14, 2001 Dertelsinrinn AG held shares in AOL l'ime Warner, which, iis available-for-sale securities, were included in other iissets (for delails scc Note 7). Shai-esin AOI. F.urope totaling C 373 rnillinn (previous ycar C 258 million) were also reported under other assets at Decernher 3 I, 200 I. Furthcr details of thcsc shareholdings and their sale can be found under Notc 7. Bertelsmann Ann

,:* Cash and Cash Equivalents Other securities 116 50 Cash 1,928 349 2.044 399

Cash denorninated in foreign curreiicyis translated at closing-date rates.

Deferred Tax Deferred taxes are recognized for temporary valuation differences hetween the consolidated financial statc- Assets incnts and the tax accounts prepared according to national taxation laws as well as for tax loss carryforwards. Details of these valuation differences and their tax impact can he found under Note 10 (Inconic'laxcs).

8 Prepaid Expenses Prepaid expenses 189 166..

, Equity 'l'hc numhet or outstanding shares changed as follows during the period under review:

Subscribed Capital

June 30,2001 90,480 - 90,480 Shares issued during the period - 28,069 28,069 Dec. 31,2001 90,480 .. . 28,069...... 11 .8,549 . .

The subscribed capital of Bertelsrnann A(; at June30.2001 totaled e163 million, which was divided up into 90,480 ordinary shares of DM 10,000cach. On October 15,2001. the Annual General Meeting adopted a rcsolu- tion to convert Bertelsmann's sharc capital to euros and to no par value shares. Furthermore, a capital increase was incurrcd with a commercial effect from July 2,2001, which incrcascd the subscribed capital bye 143 million to E 606 million. The new shareholder GBL received 27,920 voting and 149 rion-voting preferred shares of Bertelsmann AG in compensation for the 29.88 percent ownership of the share capital in the RTI. Croup. Although the shares issued to GBL have 110 par value. they confer preferential dividend rights. l'hc total number of issued shares thus rose to 118,519 at Ueceniber 31,2001.

Capital Reserve The capital reserve contains the amounts realized in excess of the nominal amount when prcferrcd and ordinary shares are issued. The increase in the capital reserve from C 17 million at June 30,2001 to e 2,725 million at December 31,2001 resulted from the capital increase described in the above section 011 subscribed capital.

Retained Earnings The retained earnings contain the profits achieved by consolidated companies in the past that are not paid out as dividends. Aftcr GBL had contributed RTT. Group shares, Rertelsmann AG undertook to repurchase 6,720 Bcrtels- mann ordinary shares currently hcld by the ZEIT Foundation. For thjs obligation, the Bertelsniann Group reported a reclassification of e 409 million froni retained carriings to other liahilities. 143 Notes

Other Comprehensive The changes of othei- comprehensive income in the year under review were as follows: Income ., Cash flow hedge Total ,;,$, Pretax Taxes After-tax ;!i I: amount amount s;v $!&I ,'€in millions €in millions €in millions in millions ;;$ June 30,2000 832 (361) 47 1 39 (111 28 (8) 49 1 Subsequent value (21) 354 333 (16) 1 (15) 129 447 June 30,2001 811 (7) a04 23 (101 13 121 938 Subsequent value (80) 7 (73) 30 2 32 (10) (51) Reclassified value Income Statement (672) (672) (672) Dec. 31,2001 59 - 59 53 (81 45 111 215 ..

In coiitiection with the sale of AOLTime Warner Inc. stock in the current fiscal year, 8 672 inillion ofthe unrealized prorits irecognized in shareholders' equity until the time of thc salc was rcalizcd in thc Income Statcmcnt. Between JulyI. 2001 arid the time of the stile, the value of AOL Time Warner Inc. stock fell by 35 million.

Stock Option Plans Various stock option plans are in operation at subsidiaries. At the KIL Group in particular, stock option plans at Subsidiaries were introduccd for senior management in the yex 2000. The option price is derived from the capital market at the time the options are granird.Wiihin the RTT. Group there are also stock option plans at MetropoleTele- vision (Mti) and Sportfive. If options are exercised, minority interests increase and shareholders' equity is diluted.

Minority Interests Minority inreresis in the consolidated subsidiaries' shareholders' equity csscmially consist of tninority intcrcsts in the IUL Group arid in the GI-uner t Jahi-and mad-belser groups.

Profit Participation 'Ihc value or the profit participation certificates of Bertelsmann A(; is scgrcgatcd as follows: Certificates

Par value 516 516 Premium 190 190 706 706 ......

The profit participation ccrtificatcs are segregated and I-elateto the profit participation certificates with conditions or2001 (SIN 522 994 and 522 995, hcrcinafter "PPI: 2001") and io the profit participation certificates with thc conditions of 1992 (SIN 522 990, hereinafter "PPC 1992"). 'I'hc PPC 2001 havc an individual par value of 10. whilc thc par value of the PPC 1992 amounts tu 0,01. As of December 31,2001the par value of PPC 2001 reaches 8 479 million (whereas C 11 million relate to the profit participation certificates with the SIN 522 995, which currcntly do not have a stock exchange listing) and € 37 million for the PPC 1992. The PPC 1992 and PPC 2001 with SIN 522 994 are rnai-ketable due to a stock exchange listing.

,J Provisions for Pensions (I. Dec. 31, 2001 '., '?.I' .;,. and Similar Obligations :;,2 1'. ,$'Ii f in millions ,'; , I'. :I,' Pensions 1,636 1,536 Similar obligations 46 53 1,682 1,589 .. . 144 Bertelsmann Annual Report 2001

The Rertelsrnann Group operatcs various forms of pcnsion plans for currcnt and formcr employees and thcir surviving dcpendants, which are determined by the legal, tax and economic situation of each country in question. These cornpany pension plans include both defined contribution and dcfincd benefit schcmes. In ihe case of defined contribution plans, thc cornpany makcs pavmcnts into an cxtcriial fund or othcr pension srheine on a statutory, contractual or voluntary Insis. Once thc cotnpany has rnadc thcsc payments, it is not obliged 10 provide any further benefits. All othcr pcnsion plans are defined benefit schemes. Some of these are funded via an external fund (plan assets), and others are not. Provisions are set aside for these schemes. Most of them are fixed-salary plans. The provisions to be sei aside are calculated in accordancc with IAS 19 and on thc hasis of actuarial rcports. The iiiiioiin t or provisions depends on cmploycs' numbcr of ycars' scrvicc for thc cornpany and their perisioniihle salary. 13"sions are cotnputcd using the projcctcd unit credit method. 'I'his takes into account biometric calculniions, prevailing long-tcrm capital markct intercst rates, and assumptions about future salary and pension increases. In Germany the hiomctric calculations arc hascd on thc 1998 Hcubcck mortality tables. The following actuarial assurnptions are also applicd for (;crrnany:

Discount rate 6.0 6.0 Rate of salary increase 2.5 3.0 Rate of pension increase 1.7 1.7 Fluctuation empirical figures empirical figures

htcrnational pcnsion provisions are computed using country-specific figures and pnrarneiers. 'The "corridor rule" is used to calculate defined heridit plans and related expenses. This method docs riot take into at:count actuarial gains and losses rcsulting from the difference between actual amounts and the assumptions iindcrlying the calculations unless they exceed ten percent of either the a~nountof defined 1)cncfit obligation or any plan assets, whichever is the greater. The amouril in excess of this corridor is sprcad ovcr cni- ployccs' avcragc rcmaining period of service. Thc cost of dcfined benefit plans in the period under review totaled C 67 rriilliori (previous year f: 148 million), comprising pcrsonncl costs of8 6 million (previous year C35 million) and interest costs off: 61 million (previous year f: 1 1.3 million). 'l'hcse costs are broken down iis follows:

July 1- Dec. 31, 2001 E in millions Current service cost 16 Interest cost 61 Expected return on plan assets (13) Expected return on any reimbursement right 3 Amortized actuarial gainshosses (1) Amortized past service cost 2 Effect of any curtailment or settlement (1) 67 14% Notes

The net pension liability reported on the Balance Sheet is twoken down as follows:

4 Dec. 31, 2001

,I.

,, I' Defined benefit obligation that is wholly unfunded 1,629 1,591 Defined benefit obligation that is wholly or partly funded 385 352 Total defined benefit obligation 2,014 1,943 Fair value of plan assets (336) (346) Actuarial gains/losses not yet recognized (64) (66) Past service cost not yet recognized - 2 Amount not yet recognized as an asset because of the limit of IAS 19.58 (b) - 3 Net pension liability 1.61 4 1,536

The net peiisiori liability of 1,614 million (prcvious year C 1,536million) results from a pension provision of 1,636 million (previous year 1.556) arid an asset off 22 million (previous ycar f: 20 million). The asset is recognized in otlicr assets in the Balance Sheet.

'The net pension liability changed as fnllwvs in the period under review:

Dec. 31, 2001 6 in millions Net pension liability at beginning of year 1,536 1,462 Cost of pension plans 67 148 Correction expected return on any reimbursement right (3) - Pension payments (45) (49) Release of provisions (2) (4) Change in scope of consolidation 65 (191 Currency-related effects (4) (2) Net pension liability at end of year 1,614 1,536

The U.S. subsidiaries' liab es for their f3TIplOveeS'healthcare costs once they have retired constitute a dcfined benefit obligation anti account for 90 million (previous year f: 86 million) of the provisions. They were calculated according to the iiiteriiatiorial standards described abovc. 11 long-rerm rate increase oft% was assumed for healthcare costs. The similar conirriitrrieiits include provisions for employees' anniversarics arid old age part-time schemes. Provisions for employees' anniversaries arc calculated I he same as obligations for dcfined- benefit plans, but without applying the corridor rule. Employees in Germany who are at least 55 years old and have an unlimited eniploymcrit contract with the company qualify fur its old agc part-time scheme. This sclicmc lasts for a period of two to five years. The slatiitory working hours during this period are on average half of the regular weekly working hours and are ~isuallyorganized in such ii way that they arc pcrfmmetl in the first half of the part-time retirement period, so that t he employee is subsequently exempted frnrri woi-k (block model). Employees receive half of their previous gross compensation for the duration of the part-time retirement period. During the period while the ernployee is still working, the employer sets aside R provision to cover thc liabilily amounting to the working hours for which the cniployee has not yet bccn compensated. Under lAS 19. this provision is reported at its present value. In addition, employees receive top-up payments in proportion to their underlying net incornc. These top-Lip payments constitute termination benefits as defined by IAS 19 and are recogriized at their present value at the time the obligation arises. * Provisions for Deferred tax liabilities arc rccognized for temporary valuation diffcrcticcs (that will have a tax impact in the Deferred Tax Liabilities future) between the cotisolidatcd financial statements and [he tax accounts prepared according to national taxation laws. Details of thcsc valuation differences and their tax impact can be found in Note 10 (Income Taxes).

Other Provisions are set aside in accordance with IAS 37 where a legal or constructive obligation to a third party Provisions exists. The arnount recognized is the best estimate of thc cxpenditure. The valuation of provisions occasionally applics thc weighted averages and is based on full costs. Long-term provisions arc recognized at their present value. The following groups of provisions were used in the period under rcvicw:

Provisions for taxes 1,157 (13) (4) (66) 653 - (552) 1,175 116 Provisions for staff 593 36 (38) (364) 328 1 (42) 524 67 Restructuring provisions 194 2 (5) (172) 134 - (4) 149 19 Other provisions 1,688 77 32 (1,347) 1,627 1 (72) 2,006 78 3,632 102 (15) (1,939) 2,742 2 (670) 3,854 280

A large proportion (e 809 million) of the t,w provisions consists of the taxable gains on disposal of AOL Europe and mediaways. Long-tcrm provisions for staff largely rclate to severance pay for em ployccs outside Germany (t: 41 million). Provisions for staff also cover employcc profit-sharing schemes, hnuscs and outstanding vacation entitlc- ments. TheVirtual Stock Option Plan (VSOP) grants a long-term performance-related compensation component to cxccutives. In addition to the number of “options” granted, this compensation is based on the value added - mcasured in tcrms of EBUA and capital invested - by the business managed by the respective executive and on thc value addcd to the Bertelsmarlri Group. lfvalue has been added at the cnd of the period, the executive concerned reccivcs a payment. Thc anticipated compensation cntitlcmeiit from theVS0P is allocatcd pro rata in equal arlnual amounts to the provision over the term which, owing to the stub period. has becn shortened to 4.5 years. Recausc of the long-term character of the provisions, they are discounted at country-specific interest rates. Provisions for two tranches totaling C: 22 million (previous year t: 2.3 million) arc rcported at December 31, 2001. Thcsc traiiches expii-eeffective December 31., 2003 arid Dcccmber 31,2004. Changing assumptions about the hiture performance of the options cause a slight rcduction in the provision in the pcriod under review. An “option“ uridcr thcVSOP constitutes neither an ownership interest nor an option to acquire an ownership interest in the cmployer, Bertelsmnrln AG or other companies. It serves solcly to calculate the compcn- sation component. IAS 37 states whcn and to what extent restructuring provisions are to be sct aside. A provision can only be set aside if. ror example, the implementation of a restructuring plan has already been started or thc cssciitial ci)mponerits of the plan wei-e already announced before the halancc sheet date. The cost of such provisions primarily covers redundancy costs and other I:(:IS~Siticurrcd in connection with the discontinuation of business activities. Total provisions of f: 148 million (previous year f: 194 million) were set aside for various restructuring programs within the Rertelsmann Group. The major portion of the amount is associatcd with the reorganization and cost-containment program for the Rertelsmann Music Group (RMC;) in rcspoiise to the 147 Notes

transformation of the music industry. ErTlpInveeS volunteering Iokave the company were guarantccd appropriate severance payments. 'Ihc cost of redundancics is thc largcst componcnt of the provision. The provision also covers the cost of discontinuing business activities. Implementation of the program was started in the first half of 2001. The program is likely to be completed by the end of 2002. A total provision of C 65 rnillion (prcvious ycar f: 149 rnillion) was set aside for this restructuring. 1,'urthcr restructuring look place within DirectCroup (C 26 million, previous year C 31 million). Arvato (e 15 million, prcvinus year C.3 rriillion),Grurier + Jahr (C 14 milliori, previous year C 1 million), and Randorn Housc (f: 12 rnilliori, previous year C 0 million). Restructuring totaling f: 16 million (previous year C 10 tnillion) was applicable to other businesses. The other prnvisiniis off: 1.1 06 inillion (previous year E 974 million) largely relate to fees and licensing commitments.

Financial Debt Financial debt iricludes all of the Rei-telsinann Group's interest-bearing obligations existing at the balaiice sheet date. which arc as follows:

Bonds 164 384 198 746 707 Promissory notes - 113 164 277 289 Liabilities to banks 538 255 17 810 1,188 Other financial debt 63 1 2 - 633 120 1,333 7 54 319 2,466 2,304 ..

Long-term financial liabilities arc reportcd at thcir prcscnt valuc, including transaciion costs, and are arnortized over time. The cost rccognizcd in nct financial iricorne represents an effwlive interest rate or1 existing financial debt. Liabilities dcnominatcd in foreign currencies are translated at closing-date rates. This financial debt is not secured.

The Ronds amount is as follows:

Bertelsmann US. Finance Inc. U.S.5 200 m. 233 235 5.60 199912004 Bertelsmann U.S.Finance Inc. E 200 m. 198 198 4.53 1999/2009 Bertelsmann U.S. Finance Inc. € 153 m. 151 149 4.62 1998/2005 Bertelsmann U.S.Finance Inc. E 102 m. 102 102 4.87 1997/2002 RTL Group 662 m. 62 23 4.90 1997/2002 146 707

Tlic Bcrtelsrnann Group had exclusively fixcd-incomc tiorids wilh a par value off:744 million at the balance shcet dale. Notc loans with a par value ofU.S.5 200 million (e227 rnillion) were raised via Rerielsmann U.S. Finance, Inc. l'hcsc are floating-rate loans. In addition, Bcrtclsmann (hpiral Corporation N.V. issurd ii promissoi-y note with a fixed interest rate and par value ofE 50 million. The hotids issued by Bertelsmann 1J.S. Finance, Inc. were converted into floating-rate U.S. dollar liabilities, primarily using interest rates and currency swaps. IJrider IAS 39, t hese hedging instruments are classified as fair value hcdgcs. (;airis and losses on changes in the fair valuc of bonds and thc corrcspnnding derivatives are recognized in the lnconic Statcrnent. 148 Bertalsmann Anriwal hedOtt2667 I

l'hc following tablc shows thc intcrest paid on bonds and notc loans issucd, allowing for iritcrcst rate swaps.

Par value at December 31,2001 Fixed- Floating- Total ::$; income rate ?: 1 ;,t,; € in millions E in millions E in millions Bonds 164 582 7 46 125 582 707 Note loans 50 227 277 50 239 289 Total 214 809 1,023 175 821 996

Leasing Liabilities Pinancc lcascs arc cxplaincd undcr Note 14. Liabilities from finance leases are as follows:

Nominal Discount Present value value of lease payments Dec. 31, 2001 Dec. 31, 2001 Dec. 31, 2001 € in millions € in millions € in millions Up to 1 year 53 17 36 62 11 51 1 to 5 years 249 124 125 185 52 113 Over 5 years 329 53 276 392 163 229 Total 63 1 194 437 619 228 393

I Trade Accounts Trade accounts payable are reported at their nominal value. Long-term liabilities are discounted. Payahlcs Payable dcnominatcd in foreign currency are converted at closing- date ]-lites.

Trade accounts payable 8 2.713 2,106

Other Liabilities Other liabilities are reported at their nominal value. Long-tcrm liabilitics are discounted. Liabilities denominated in foreign currency are translated at closing-date rates. Other liabilities consist of the following:

Liabilities to associates and related companies 92 240 Other liabilities: obligation to repurchase ZElT shares 205 409 - liabilities for taxes - 266 230 derivatives 130 277 liabilities for social security benefits - 83 64 sundry other liabilities 48 1,882 725 253 2,862 1,536 149 Notes

Deferred I / Income I Deferred income 480 340

As in thc prcvious !'car, dcfcrred incomc mainly consists of prcpayincnts for magazine subscriptions.

1 Dec. 31, 2001

Guarantees 596 331 Warranties 44 47 Other obligations 6 27 646 405

'1.11~rcalizatinn of tlic above contingcnt liabilitics is considcrcd to bc unlikclv. Bertelsmann AG's share of these contingcnt liabilities, which are exclusively rcportcd for assnciatcs. amountcd to 6 48 million at December 31, 2001 (prcvious yearc50 tnillinn).

Other Financial Commitments

Rental and lease obligations 1.37 1 1,257 Other commitments 3,698 1,064 5,069 2,321

Of thc othcr cnrntnitments of C 3,(iF)fl rriillinri (previo~isyear C 1,064 tnillion), C 2,591 million (prcvious ycar E 1,039 tnillion) relates to supply agretinieiiis for I-ighis, (co-)productinnsand programming of the 1UL Group. Liabilitics frorn finance leases arc detailed urider Note 28. The following payment obligations rclatcd to npcrating leases:

Nominal value

Up to 1 year 228 205 1 to 5 years 741 600 Over 5 years 402 452 1,371 1,257

These obligations essentially 1-elateto long-term red-estate tenancy agreements. In addition to the Zomba option already explained under Investments (see Note 15).the Bertelsmariii Group has further options to purchase shares. As rio fair value as defined by IAS 39 can be determined for these options, they have no impact on the Coiisolidated Balaricc Sheet. The following tablc show thc main options with their applicalde term and condilions:

$bjm 6f optian Percent ,, ), ' ., , ' 8 acquired '' '. I ,' '

BW-TV Verwaltungs GmbH 20 Until 2022 504 J Records 50 June 30,2005 through June 30,2009 50 to 320 Springer Verlag 13.5 Until end of 2005 65 Mondolibri, Italy 50 Exercisable at any time 65 Sportfive 5 June 30,2005 through November 30,2005 50 150 Bertelsmarm Annual Report hotUl

Derivatives Because of its international activities, the Bertelsmann Group is exposed to a varietv of mal-ket risks, especially Financial Risk the effecls of rnovements in exchange and interest ]-ares.As such, the goal of the Bertclsniann Group's risk Management nianagcincnt function is to mitigate these risks. 'lhc Exccutivc Hoard lays down the general risk rnariagemeni guidelines and stipulates the generid proce- durcs for hcdging cxcharige rate and interest rate risk and for the use of financial derivatives. A'lkcasury Dcpartnient located at thc Corporatc Center advises the subsidiaries on financial risk and, where appropriatc. hedgcs risks using dcrivativcs. Howcver, the suhsidiaries are riot obliged to use the services providcd by this dcpartnicnt. Although certain companies, such as RTT. Group, have thrir own Treasury Departments, they must report their hedging activities to thc 'Treasury Dcpartmcnt located a1 the Corporate Center on a quarterly basis.

Exchange Rate Risk Thc Bcrtclsmann Group is cxposed to exchange rate risk in various currencies. Its subsidiaries are advised, but not obligcd. to hcdgc thcinsclvcs against cxcharige rate risks in the local reporting currency by concluding forward agrcctncnts with banks of inipcccablc crcdit standing. The Treasury nepartnierit located at thr Corpo- rate Ccntcr bundlcs and nianagcs the forward transactions concluded in Germany 'lhc Bcrtclsmann Group opcratcs intcrnationally. 'lhc net assets of its subsidiaries outside Germany are exposed to exchange rate risk. This risk is tnanaged iri accordance with the currency-hedging guidelines laid down by the Executivc Board. Loans in the Bertelsmann Croup that are exposed to exchange 1-ate risk are licdgcd using derivativcs.

Interest Rate Risk Interest rate risk is managed in accordance with the Group's planned net financial dehl. The proportion of financial dcbt bcaring a fixed intcrest ratc is minimal. Funds are generally invested on a floating-rate basis for periods of less than one year. Financing agreements, which have maturity terms of up to eight years, are concluded either on a floating-ratc basis from thc outsct or are converted to floating-rate financings through the use of interest rate swaps.

Default Risk The Hertelsmann (;roup is exposed to default risks amounting to the positive fair values of derivatives used. TToweuer, :is derivatives are only concluded with hanks of impeccable credit standing, these risks are deemed to be rnininial.

Accounting for All derivatives are reported at their fair value.When a derivative is r:oncluded. it is stipulated whether it is Derivatives and Hed- intcndcd to bc a fair value hedge or a cash flow hedge. However, sonie derivatives do not qualify as hedges ges dcspitc thc fact that thcy constitute a hedgc against risk positions in the financial scnsc.

(:hangcs in thc fair valuc of dcrivativcs arc rccognized in one of three ways.

I. Fair Value Hedges: Changcs in thc fair value of a highly cffcctive derivative that is used to hedge a fair value arid meets henecessary preconditions arc rcportcd in the lncoinc Statcmcnt. 'lhc sanic applies to thc offset- ting changes in the fair vnlue of the assets and liabilities belonging to this derivative.

2. (.:ash Flow Hedges: Changcs in thc fair valuc of a highlv cffective derivative that is used to hedge a cash flow are reported as a scparatc itcm of sharcholders' equity. 'lhe amounts reported here are recognized in income in thosc pcriods in which the hedged underlying transaction also affects income.

3. Non-Hcdgcs: Changes in the fair value of derivatives that do not qualify as hedges are shown in the Iucome Statcrncnt. 151 Notes

The Uertelsiiiann Group docunicnts all relatinnships between hedging instruments and hedged posi tions as well as its risk managcmcnt objcctives and strategies iri cnnneciinn with the various hedges. This meihod includes linking all dcrivatiws used for hedging purposes io specific assets, liabilities, firm commitments, and foreseeable transactions. hrthcrrnorc, the Rertelsrriann Gtnup assesses and documents - bo1h when derivatives are c:oncluded and on an ongoing basis - to what cxtcrit the dcrivativcs used are either fair valcic hedges or cash flow hedges.

Financial Derivatives 'Ihc vast majority of financial riel-iuativesused by the Bertelsmann Group arc OK dcrivativcs, which are not traded on an organizcd exchange. 'Thest? rnairil!~(:(insist of forward agreements, currency swaps, currency options, interest ratc swaps, and ititcrcst rate npiic)ris,and iiw only concluded with banks of impeccable credit standing that have bccn approved by the ExecLitive Board. The notional amount is the total of all buying and selling amounts underlying thc dcrivativcs.

Notional amounts at Dec. 31,2001 ! < 1 year 1-5 years > 5 years € in E in E in millions millions millions Currency derivatives Forward deals and currency swaps 4,726 375 204 5,305 3,181 336 212 3.729 Interest rate derivatives Interest rate swaps 27 1 472 - 743 295 456 6 757

Interest rate options 47 - - 47 29 - I 29 Other - - - 197 693 - 7 700 Total 5.044 847 204 6,292 4,198 792 225 5,215

The C 197 rriillion in other derivatives at Ucccmhcr 31, 2001 is hased on an smortizing interest rate swap that cannot he allocated to the iiiaturity categories shown.

Determination of The fair values of publicly tradcd financial derivatives iii-e determined on the basis of published iiiarkct prices Fair Value at the halance sheet date. In order io detei-mine the fair values ofderivativcs that are nnt publicly traded, the Rertelsmann Group uses various firiaricial methods that are based on the market conditions arid risks prevailing at the halance sheet date.

Currency derivatives Forward contracts and currency swaps 5,305 3,729 Currency options - - Interest rate derivatives Interest rate swaps 940 7 57 Interest rate options 47 29 Other - 700 - Total 6,292 5,215 (291

.... 152 Bertelsmann Annual Raport 2001

Factoring Whrrr factoring involves the risk being transferred to the purchaser of receivables, thc reccivablcs arc dclcted fi-om the seller’s books once they have been sold. During the pel-iod under review, the interest rate risk attached to the receivahles sold in the form of factoring at Junc30,200 1 was transfcrrcd to thc buycr. ‘l‘hcrcforethis mccts thc preconditions for dclcting these receivables from Bertelsniann’s accounts at December 31,2001. ‘lhctotal valuc of European receivables that had been sold at December 31,2001 amounted to t: 260 million. In each case, tlie Bertelsmann Group bears only part of the default risk attached to these receivables. ‘Theseresultant risks are reported as provisions. The book value of this debt amounted tot: 20 million at the balance sheet date.

Cash Flow The Cash Flow Statement of the Rertelsmanri Croup is based on IAS 7 and enables to asscss thc company’s Statement ability to generate cash and cash equivalents. Cash flo~sare hroken down into the net cash providcd or used by operating, investing and financing activities. The net cash provided or uscd by opcrating activities is shown using tlie so-called indirect rnethod, which adjusts net income for noli-cash items. An amount for DVFA/SG cash flow is included voluntarilv in the Cash Flow Statement. The (:ash Ihw Statcmcnt recognizes the effects of niovements in exchange rates and changes in the scope of consolidation. lnvcstirig activities include the purchases of fixed assets, payments for the acquisition of participations, and procccds from disposals of fixed assets. Financing activities include cash-effective changes in shareholders’ equity and changes in financial debt. The aiiiount for cash and cash equivalents cornprises the total volurne of liquid funds as described in Note 19. Interest payments off: 260 million (previous year C 388 million), intcrcst income of e 67 inillion (previous year 91 million) and incnme tax payments off: 359 million (prcvious year e 318 million) are included in the net cash provided/uscd by operating activitics.

Segment Segment reporting is performed in accnrdancc with IAS 14. The primary reporting format used is the divisions Reporting of the nertelsmrinn Group. The secondary rcporting format is broken down by geographical location arid t)y the main markets in which thr Rertelsmann Group opcratcs.

Information on Segment reporting, comprising seven operating scgmcnts, is based on the internal management and report- Segments ing structures applied within the Rcrtclsrnann Group. Due to the financial management of the Croup, the segrnen ts deviate from the Group’s legal structure. As Uertelsiiiann AG is ii holding company for the Group without any opcrating businesses of its own, it is reported as a separate segment under “(:orporatc/Bc(,apital”, together with the Corporate Center unit Bertelsmann Capital and the other non-operating subsidiaries.

Information on The definition of the various segtncnt data is the same as that applied to the Group‘s data. Segment data arc Segment Data reconciled to the relevant Group figurcs in tlie column “Consolidation”. Tn tercornpariy revenues arc rccognized at the customary market rates applied to transactions with non-Group cornpanics. An amount for carnings before interest and tax (ERTT) is repnrted for each scgmcnt in accordance with IAS 14. Segiiiental earnings tire derived from divisional rcsults, which forin the basis for the Group’s financial management. Divisional results arc dcfincd as carnings before interest, taxes and amortization. The earnings arr adjusted for one-titnc gains and losses (one-time charges and capital gains) and for intcrnct start-up Notes

losses. Including one-time charges and internet start-up losses, divisional results become earnings hcforc intercst, taxes and amortization (EHI’IA).One-time gains in the form of capital gains are only reported under ERlM for the (:orporate/Re(:apital scgmcnt. as the disposal of investments is part of this segment’s rcmit owing to its function as a holding company for thc Group. Capital gains generated in other segrncnts arc shown i ti the column “(:onsolidation”.Dcdiicting goodwill amortization from ERITA gives an ERIT amount for each segment. .Ihe depreciation, aiiiortization and write-downs reported for each segment iricludcs dcpreciation of property plant and equipment, amortization of intarigiblc assets. goodwill amortization, and write-downs of o th c r fi nan ci a1 assets.

‘Ihc matcrial writc-downs reported for the period under review were: (;nodwill amortization of C 30 million on McCall‘s in the Gruner + Jahr segment (hodwill amortization of C 20 million on Pixclpark in the Corporate/BeCapital segment; Write-downc of C 103 million on a loan and liccnsc prcpaymeiits to Napster in the Corporate/ReCapital segment; Write-downs of E 66 million on the participation in Zoinba Records and Zoinba Publishing in the RMG segment.

Significant writc-downs pertaining to the prcvious year included the goodwill amortization of C 862 million for FrcrnantlcMcdia (formcr Pcarson ‘IV) in thc KIL Group scgnient. The scgnicnt asscts constitutc the operating assets needed by each segment. They consist of property, plant and cquipmcnt: intangiblc assets, including goodwill: and invcstments. ‘They also include current assets with the exception of cash arid cash equivalents. tax claims. and othcr non-opcrating assets. es consist ofoperatingliah es and operating provisions. Thcv therefore do not include provisions for perisions arid similar cornrnitrnents, provisions for dcfcrrcd taxes, financial debt, or non-operat- iiig liabilities and provisions. l3r:Ii segment shows the earnings of and investments in associated companies, provided tlicsc conipanics can lie unatribiguously allocated to the segment. Inves~mentsconsist of purchases of property, plant and equipment; intarigiblc assets. including goodwill; and other financial assets. For the secondary reporting format. reverities are broken down by customer location, whilc scgnient assets and segment investments are broken clown by coinpimy location. In ridrlition. the number of employees both at the balance sheet date and as an average for the period under review is given foi- the primary reportirig forrnat. 154 Bertelsmenn Annual kep5rt 20661

Dec. 31, 2001 f in millions Consolitated Financial Earnings before interest and taxes (EBIT) 1,132 2,515 Statements Financial result (208) (436) Income taxes 7 (1,092) Net income before minority interests 93 1 987 Segment assets 21,274 16,448 Other current assets 226 229 Cash and cash equivalents 2,044 399 Deferred tax assets 190 1 69 Total assets 23,734 17,245 Segment liabllities 8,367 6.344 Equity inclusive minority interests 8,384 4.477 Profit participation certificates 706 706 Provisions for pensions and similar obligations 1,682 1,589 Other provitions 1,457 1,158 Financial debts 2,466 2,304 Other liabilities 672 667 Total liabilities 23,734 17,245 ......

Secondary Reporting Format

Germany Other USA Other Bertels- European :ountries mann countries Group Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2001 2001 2001 200 1 2001 6 in E in E in f in f in millions millions millions millions millions Consolidated revenue 3,027 4,775 3,097 4,866 3,031 5,981 530 1,126 9,685 16,748 Sement assets 8,370 4,517 7,527 6,169 4,721 5,225 656 537 21,274 16,448 Investments 331 470 380 650 329 1,522 27 102 1,067 2,744

Related-Party nertelsmann Verwal tungsgesellschaft mbH, Giitersloh, a non-operating holding company, exerts control over Transactions the Bertelsmanii Group. Johannes Mohn GinbH and Reinhard Mohn Verwaltungsgesellschaft nibH have informed Bertelsmnnn AG that they each own more than one-quarter of its share capital. The remuneration paid to the Supervisory Board for the stub period from July 1 through December 31,2001 tolaled C 388,037 (including statutory VAT). During the period under review, the members of the Executive RoartJ received remuneration totaling f: 16,580,712, of which 12,944,685 was paid by Bertelsmann AG. For- riicr members of the Executive Rnard or their surviving dependariis received pensions totaling C 1,356,906 from Bcrtclsmanri AG. l'hc provision establishcd by Bertclsmaiiri AG for pcrision liabilities to fornicr riicmbcrs of the Executive Board amounted to E 27,334,946.The members of the Supervisory Board and the Executive Roarti are listed on pages 20.

Subsequent Afier he close of the period tinder review. Rerlelsrriatiti AC acquired a further 22 percent stake in RTT. Group Events frnrri Pearmn plc in January 2002. The cost of this acquisition arnoutited to f: 1.5 hillion. which correspnnds to a purchase price of C 44 per share. The amount of goodwill generated by this acquisition is yet 10 be determined. Notes

' Material Subsidiaries and UFA Film & Fernseh GmbH, Hamburg 59.33 Bertelsmann Capital Corporation N.V., Participations at December 31,2001 UFA International Film & TV Produktions Amsterdam, Netherlands 100 GmbH, Berlin 59.33 Bertelsmann Nederland B.V., Universitatsdruckerei H. Sturtz Amsterdam, Netherlands 100 Aktisngesellschaft, Wurzburg 82.69 BMG Holding B.V., 4' Germany VOX Film iind Fernseh GmbH & Co. KG, Vianen , Netherlands 100 A2 Bertelsmann Direct GmbH, Gutersloh 100 Cologne 59.15 BMG Nederland B.V., Berliner Verlag GmbH & Co., Berlin 74.9 Hilversum, Netherlands 100 Bertelsmann Distribution GmbH, Gutersloh 100 Europe ECI voor Boeken en Platen B.V., Bertelsmann Finanz Service GmbH, Verl 100 IP Belgique SA., Belgium 39.16 Vianen, Netherlands 89.8 Bertelsmann Marketing Service GmbH, IP PlurimBdia S.A., Belgium 39.16 Holland FM Produkties B.V., Gutersloh 100 Suprafin S.A., Belgium 59.33 Hilversum, Netherlands 59.33 Bertelsmann Medien Service GmbH, Bertelsmann Communication Services France RTLA Productions B.V.. Gutersloh 100 SARL, Noyelles sous Lens, France 100 Hilversum, Netherlands 59.33 Bertelsmann Multimedia GmbH, BMG France S.A., Paris, France 100 Yorin TV B.V. (ex Veronica RTV B.V.), Gutersloh 100 BMG Music Publishing France S.A.R.L., Hilversum. Netherlands 59.33 Bertelsmann Music Group GmbH. Paris, France 100 Buchgemeinschaft Donauland Kremayr & Gutersloh 100 Ediradio S.A.. Paris, France 59.33 Scheriau, Vienna, Austria 75 Bartelsmann Online FRANCE LOISIRS S.A.R.L., Verlagsgruppe NEWS Gesellschaft m.b.H., Beteiligungsgesellschaft mbH, Paris, France 100 Vienna, Austria 41.96 Gutersloh 100 IP France S.A., Paris, France 59.33 Bertelsmann Portuguesa SGPS Lda.. Bertelsmann Online International GmbH, Media Communication S.A., Lisbon, Portugal 100 Gutersloh 100 Paris, France 100 Circulo de Leitores, S.A., Lisbon, Portugal 100 Bertelsrnann Services GmbH, Prisma Presse, Societe en nom collectif. Arcadia Verlag AG, Zug, Switzerland 100 Giitersloh 100 Paris, France 74.9 Bertelsmann Holding Spain, S.A., BertelsmannSpringer Bertelsmann Books and Magazines Sant Vincenc dels Horts (Barcelona), Spain 100 Science+Business Media GmbH, Limited, London. Great Britain 100 BMG Music Spain, S.A., Madrid, Spain 100 Gutersloh 100 Bertelsmann UK Limited. Circulo de Lectores, S.A., Barcelona, Spain 100 BMG Ariola Miller GmbH & Co. KG, London, Great Britain 100 Cobrhi. S.A., Ajalvir (Madrid), Spain 100 Quickhorn 100 BMG Entertainment Inlernational Eurohueco, S.A., Castellbisbal (Barcelonal, BMG Berlin Musik GmbH. UK & Ireland Limited, London, Great Britain 100 Spain 65 Berlin 100 BMG Music Publishing International Novo Sistema Actuaciones y Servicios, S.L., BMG Deutschland GmbH, Gutersloh 100 Limited, London, Great Britain 100 Tres Cantos (Madrid), Spain 100 BMG Music International Service GmbH, BMG Music Publishing Limited, Printer Industria Grdfica. SA., Munich 100 London, Great Britain 100 Sant Vicenc dels Horts (Barcelona), Spain 100 bol.com AG, Berlin 100 BOL UK Holding Limited, Rotedic, S.A.. Tres Cantos (Madrid). Spain 100 BW TV und Film Verwaltungs GmbH, London, Great Britain 100 Gutersloh 80 Book Club Associates Limited, Overseas CLT UFA Multi Media GmbH, Hamburg 59.33 London, Great Britain 100 FremantleMedia Australia Pty Ltd COLOGNE SITCOM Produktions GmbH 29.87 Book Club Associates, (ex Pearson TV Australia Pty Ltd), Australia 59.51 DPV Deutscher Pressevertrieb GmbH, London, Great Britain 100 Grundy Films Fty Ltd, Australia 59.51 Hamburg 74.9 Channel Five Holdings Limited, London, Random House Australia Pty. Ltd., Druck und Verlagshaus Gruner + Jahr Great Britain 29.75 Melbourne, Australia 100 Aktiengesellschaft, Hamburg 74.9 Fremantle (UK) Productions Limited, BMG Brasil Ltda., Rio de Janeiro, Brazil 100 Fireball Internet GmbH, Hambury 74.9 Great Britain 59.51 BMG FUNHOUSE, Inc., Tokyo, Japan 100 G+J Berliner Zeitungsdruck GmbH, The Book Service Limited, BMG Canada Inc., Toronto, Canada 100 Berlin 74.9 London, Great Britain 100 Random House of Canada Limited, G-rJ Electronic Media Service GmbH, The Random Hou$e Group Limited, Toronto, Canada 100 Hamburg 74.9 London, Great Britain 100 Printer Colombiana, S.A., Santafd Game Channel GmbH & Co. KG, Hamburg 59.33 Sonopress Ireland Limited, de Bogota, D.C., Colombia 50.89 GGP Media GmbH, PoRneck 100 Dublin, Ireland 100 1745 Broadway LLC, New York, USA 100 GVG Genussrechtsverwaltungs- BMG RlCORDl 5.p.A.. Rome, Italy 100 Ariola Eurodisc, Inc.. Wilmington, USA 100 gesellschaft mbH, ltzehoe 74.9 Editoriale Johnson S.p.A., Seriate, Italy 98.82 Arista Good Girls, Inc., Wilmington, USA 100 GZSZ GmbH, Cologne 59.33 Eurogravure S.p.A., Bergamo, Italy 69.18 Arista Records, Inc., Wilmington, USA 100 House of Talent GmbH, Berlin 54.81 lstituto ltaliano d'Arti Grafiche S.p.A., Arista Ventures, Inc., Wilmington, USA 100 maul + co Chr. Belsar GmbH, Bergamo, Italy 98.82 Berryville Graphics, Inc.. Wilmington, USA 100 Nuremberg 75 Nuovo lstituto ltaliano d'Arti Grafiche 5.p.A,, Bertelsmann 56th Street Mohn Media Print GmbH, Gutersloh 100 Bergamo, Italy 98.82 Commercial LLC, Delaware. USA 100 Mohn Media Sales GmbH. Gutersloh 100 Societh Holding Industriale di Grafica 5.p .A,, Bortelsmann Music Group, Inc., Wilmington, Pixelpark AG, Berlin 60.27 Rome. Italy 100 USA 100 Reinhard Mohn GmbH, Gutersloh 100 Audiomedia S.A., Luxembourg 59.51 Bertelsmann Property, Inc., Wilmington. USA 100 RM Buch und Medien Vertrieb GmbH, Broadcasting Center Europe S.A., Bertelsmann Publishing Group, Inc., Gutersloh 100 Luxembourg 59.33 Wilmington, USA 100 RTL Club GmbH. Rheda-Wiedenbrirck 29.75 CLF-UFA Holding S.A., Luxembourg 59.51 Bertelsmann Services, Inc., Valencia, USA 100 RTL Radio Deutschland GmbH, Berlin 59.33 CLF-UFA S.A., Luxembourg 59.33 Bertelsmann US. Finance, Inc., Wilmington, RTL Shop GmbH, Cologne 51.18 Pearson Television Holdings S.A.. USA 100 RTL Television GmbH. Cologne 59.33 Luxembourg 59.51 Bertelsmann, Inc., Wilmington, USA 100 ,,S 4 M" Solutions for Media GmbH, Cologne 39.57 RTLide Holland Media Groep S.A., BGJ Enterprises, Inc., Wilmington, USA 100 Springer Beteiligungs GmbH, Berlin 87.08 Luxembourg 59.33 BMG Direct Marketing, Inc., Wilmington, USA 100 Springer-Verlag GmbH & Co. KG, Berlin 87.08 RTL 4 Holding S.A., Luxembourg 59.33 BMG Songs, Inc., Beverly Hills, USA 100 UFA-Fernsehproduktion GmbW, Berlin 59.33 RTL Group S.A., Luxembourg 59.51 BMG Special Products, Inc., Wilmington, USA 100 UFA Filmproduktion GmbH, Berlin 59.33 BMGJ, LLC, New York, USA 100 B0L.US Online, Inc., Delaware, USA 100 156

CDnow, Inc., New York, USA 100 I.,* Material Associates 8 Exemption of Domestic Coral Graphic Services, Inc., Horsham, USA 95.1 Germany DD Garden City Property, Inc., New York. USA 100 active-film.com AG, Frankfurt am Main 32.09 Companies from Reporting, Audit Doubleday & Company, Inc., New York, USA 100 CM 4 GmbH & Co. KG, Gijtersloh 49 and Disclosure Doubleday Direct, Inc.. Garden City, USA 100 Deutsche Post Adress GmbH, Bonn 49 Dynamic Graphic Finishing. Inc.. G+J Berlin Online GmbH & Co. KG. Berlin 33.71 Horsham, USA 95.1 I Fi U Information und Unterhaltung /w The exempting regulations of § 264 (3) Fremantle Productions North America, Inc, TV Produktion GmbH, Cologne 18.73 HGB on the supplemental rules governing stock USA 59.51 manager magazin Verlagsgesellschaft mit corporations in their preparation of annual financial G+J Rosie's Magazine LLC, New York, USA 74.84 beschrankter Haftung, Hamburg 18.65 statements and management reports as well as Gruner + Jahr Printing and Publishing medicforma.com GmbH, Dortmund 31.98 in their audits and disclosure were applied to the Company, New York, USA 74.84 RTL 2 Fernsehen Geschaftsfuhrungs Gmbl-1. following companies for the stub period 2001 LaFace Records, New York, USA 100 Munich 21.3 ending on December 31, 2001: Offset Paperback MFRS., Inc., RTL 2 Fernsehen GmbH & Co. KG, Munich 21.3 DallaslPennsylvania, USA 100 SPIEGEL-Verlag Rudolf Augstein Arabella Musikverlag GmbH. Munich Random House TPR, inc., New York, USA 100 GmbH & Co. KG, Hamburg 18.54 Arvato Storage Media GmbH, Gutersloh Random House, Inc., New York, USA 100 W.E. Saarbach Gesellschaft mit A2 Bertelsmann Direct GmbH, Gutersloh Sonopross LLC, Wiimington, USA 100 beschrankter Haftung, Cologne 18.65 B.G. Teubner Gesellschaft mit beschrankter Springer-Verlag New York, Inc.. Haftuny, Wiesbaden New York, USA 86.42 Europe Bauverlag Gesellschaft mit beschrankter Haftung, The Malibu Branch Production BOL societe en nom collectif, Walluf Company, USA 59.51 Paris, France 50 Bavariaton-Verlag Gesellschaft mit beschrankter Tuneful Assets, Inc., Wilniington, USA 100 G+J/RBA Snc, Paris, France 37.45 Haftung, Munich Television Par Satellite S.N.C., Benelsmann Arvato Aktiengesellschaft, Gutersloh lssy les Moulineaux, France 6.72 Bertelsmann Buch Aktiengesellschaft, Gutersloh

8 , Material Proportionately Consolidated TPS Spon S.N.C., lssy les Moulineaux, Bertelsmann Content Network GmbH, Hamburg Companies France 6.72 Bertelsmann Direkt Marketing Fabrik GmbH, Germany HD Thames Limited, Great Britain 14.28 Gutersloh UFA Sports GmbH. Hamburg 26.36 Mondolibri S.p.A., Milan, Italy 50 Bertelsmann Distribution GmbH, Gutersloh RTL Disney Fernsehen GmbH & Co. KG, RTL 9 S.A. &S.E.C.S., Luxembourg 20.71 Bertelsmann Event Media GmhH. Gutersloh Cologne 29.64 RTL 9 S.A., Luxembourg 20.77 Bertelsmann Finanz Service GmbH, Gutersloh Financial Tmes Deutschland GmbH & Lycos Europe N.V., Amsterdam, Netherlar ids 15.08 Bertelsmann lmmobilien GmbH. Gutersloh Co. KG, Hamburg 37.45 Cheiron Aktiebolag, Stockholm, Sweden 50 Bertelsmann Interactive Studios GmbH, Gutersloh bedirect GmbH & Co. KG, Gutersloh 50 Publicidad 3 S.A., Spain 10.24 Bertelsmann Korea Beteiligungs GmbH. Gutersloh FCB FREIZEIT-CLUB Betreuungs-GmbH & M-RTL Rt, Budapest, Hungary 29.04 Bertelsmann Marketing Service Dortmund GmbH, Co., Hamburg 50 Dortmund Overseas Bertelsmann Marketing Service GmbH, Gutersloh Europe Market Self S.A., Bertelsmann Marketing Service Munster GmbH, Media Foot Belgique SARL, Belgium 26.36 Buenos Aires. Argentina 21 Munster Girondins de Bordeaux SAS, France 17.67 Antena 3 Producciones S.A., Peru 10.24 Bertelsmann Marketing Service Neumunster Groupe JC Darmon S.A., France 26.36 Antena 3 International, Inc., USA 10.24 GmbH, Neumunster M6 Bordeaux S.A., France 26.84 barnesandnoble.com IIc, New York, USA 36.2 Bertelsmann Marketing Service Wuppertal GmbH, M6 Web S.A., Neuilly sur Seine, France 26.84 Bertalsmann Venturas II L.P., DOvBr, USA 99 Wuppertal Societe Generale d'Edition et Bertelsmann Ventures L.P., Dover, USA 99 Bertolsmann Medien Service GmbH, Gutersloh de Diffusion SGED, S.n.c., Paris, France 50 Joe Lies Records LLC, Delaware, USA 50 Bertelsmann Multimedia GmbH, Gutersloh Sky Five Text Limited, Great Britain 19.22 TopicalNet Europe, Inc., New York, USA 55 Bertelsmann Music Group GmbH. Gutersloh Sports UK Limited, Great Britain 26.36 Xlibris Corporation, New Vork, USA 41.5 Benelsmann Online Beteiligungsgeselischaft mbH, Channel 5 Broadcasting Limited, London, Gutersloh Great Britain 38.38 Bertelsmann Online International GmbH, Gruner + JahrlMondadori S.p.A., Gutersloh Milan, Italy 37.45 Bertelsmann Services GmbH, Giitersloh Grupo Editorial Random House Bertelsmann Valley GmbH, Gutersloh Mondadori, S.L., Barcelona, Spain 50 BertolsmannSpringer Science+Business Media Plaza y Jan& Editores. S.A., Esplugas GmbH, Gutersloh do Llobregat (Barcelonal, Spain 50 BIP Industrieplanungs-GmbH, Gutersloh Total DistribuciOn, S.A., AlcorOn BMG Berlin Musik GmbH, Berlin (Madrid), Spain 66.67 BMG Deutschland GmbH, Gutersioh BMG Music International Service GmbH, Munich Overseas BmS Holding GmbH, Gutersloh Editorial Sudamericana, S.A., bol.com AG, Berlin Buerlos Aires. Argentina 49.38 BS Autoflotte Medien GmbH, Walluf Editorial Sudamericana Chilena, BS Gesellschaft fur Bauinformationsprodukte S.A., Santiago de Chile, Chile 50 mbH, Walluf PiBMG Music Indonesia, Chr. Belser Offsetdruck GmbH, Gutersloh Jakarta Kota, Indonesia 51 Crescendo Musikverlag GmbH, Munich Editorial Grijalbo, S.A. de C.V., Cutup GmbH, Cologne Mexico D.F., Mexico 50 Dinter Verlag GmbH, Kirchseeon Bookspan (Partnership), Delaware, USA 50 Dreiklang-Dreimasken, Buhnen- und Musikverlag Gesellschaft mit beschrankter Haftung, Munich Druckhaus Maack GmbH, Ludenscheid empolis catalog management GmbH, Gutersloh empolis GmbH, Gutersloh

158 Bertelsmann Ann

Segrrien-t Reportit-ig

,. Random House

Consolidated revenues 2,044 1,506 1,080 2,056 Intercompany revenues 10 14 5 18 Revenues 2,054 1,520 1,085 ...... 2,074 Divlalonal results 107 108 (15) 176 Internet start-up losses (59) (19) (4) (19) One-time charges (23) (8) (25) - Capital gains - - Earning6 before interest, taxes and amortization (EBITA) 25 81 (44) 157 Amortization of goodwill and similar rights (129) (1,011) (24) (93) Amortization of goodwill from associates (114) - (1) (5) Earnings before interest and taxes (EBIT) ...... (218) (9301 169) 59 Depreciation, amortizmtion and write-down6 1368) 11,2231 146) (126) Investments 318 335 126 60 Segment assets 9,048 3,559 2,075 2,146 Segment liabilities 1,981 830 694 596 lnaome from &$sociatea 1109) e (1) (16) Investments in associates 333 17 23 24 Employees (at balance sheet date) 6,625 2,564 6,121 6,235 Employees (average) 6,625 2,448 6,171 6,026

DirectGroup I.'' Total Divisions Dec 31, 2001 fin millions Consolidated revenues 1.492 3,095 9,650 6,378 Intercompany revenues 2 7 351 785 Revenues 1,494 3,102 10,001 1,143 ...... Divisional rsSul& (40) ii9). 251 731 Internet start-up losses (127) (500) (250) (720) One-time charges (297) 1101) (443) (397) Capital gains - - - Earnings before interest, taxes and amortization (EBITA) (464) (620) (442) (386) Amortization of goodwill and similar rights (48) ( 104) (359) (1.618) Amortization of goodwill from associates (1) (1) (120) (20) Earnings before interest and taxms (EBIT) 1513) 17251 (9211 (2,024) Depreciation, amortization and write-down$ (90) 11901. (940). 12.347) Investments 242 300 948 2,346 ...... Segment assets 1,500 1,662 1iio6 14.577 Segment liabilities 779 716 7,083 5,600 Income from associates (69) (149) (214) (249) Investments in associates ...... 39 113 510 217 Employees (at balancr-sheet datal 13,535 12,034 18,572 72.553 Employees (average) 13,240 12,584 78,970 71,813 189 Notes

Bertelsmann Arvato Springer Dec 31,2001 Dec 31, 2001 E in millions E in millions 1,467 3,039 1,620 3,084 369 748 1,578 2,850 9 15 13 25 1 1 31 1 685 1,476 3,054 1,633 3,109 370 749 1,889 3,535 .. -...... 98 266 (431 1421 30 69 114 173 140) (98) - (22) (6) (18) (14) (44) - - (66) (288) - - (32) - -

58 168 (109) (3521 24 51 68 129

(121) (263) (8) (46) (2) (37)

(2) (12) (1) (1) - - (1) (1) (65) (1071 (137) (417) 16 5 65 91 (1791 (356) (1161 11091 (21) 1701 (1201 1273) 64 a22 62 233 18 ...67 ...118 529 2,161 2349 2,346 1,974 663 864 1,913 2,023 61 1 744 1,834 1,617 290 341 894 756 .. .. - (34) (41) (62) 1 (2) 5 6 67 41 35 12 1 1 12 9

13,033 12.986 5,010 5.749 5,356 51284 ' 28,892 27,711 13.371 12,604 5.175 5,858 5,351 5,208.. 29,037 27,085

Corporate/ Total Group Becapital Dec 31, 2001 i Dec 31, 2001 E in millions E in millions 35 370 9,685 16,748 1 35 - - 36 405 9,685 16,748 ...... (901 166 164 826 (4) (146) (254) (866) 11 (285) (432) (682) 2.081 4,841 2,225 4,941

1,998 4,576 1,703 4.2 19

(92) (64) (451) (1,684)

- - (120) (20) 1,906 4,512 1,132 2,515 ...... 12031 1230) ii ,.I 421 (2.573) 119 398 1,067 2,744 ...... 1,593 1.886 21,274 16.U8 ' 1,569 734 8.367 6.344 ...... 143) (57) (257) (3021 69 137 579 354 ...... 1.724 1,955 80,296 74,548 . - 1,793 1,982 80,763 73,795 ...... Independent Auditors' Report

Wc havc audited the consolidated financial statements, comprising the balance sheet, the income statement and the staterricnts of changes in shareholders' equity and cash flows as well as the notes to the fjnaricinl sta- iements prepared hy thc Hertelsmann AG for the six month business year from July 1.2001 tu December 31, 2001. The preparation and the content of the consolidated financial statements in accordance with Inter- national Accounting Standards (IAS) are the responsibility of the company's managemmt. Our responsibility is to express an opinion on thcse consolidated financial statements hased on oui- audit. We conducted our audit of the consolidated financial statcmcnts in accordancc with German auditing regulations arid German generally accepted standards for the audit of financial stateinents promulgaied by the lristitut der Wirtschaftspriifer (IDW) and in supplementary compliance wilh Tnternalional Standards on Auditing (ISA).~lhosestandards require that we plan and perfortn the audit such that it can bc asscssed with reasonable assurance whether thc consolidated financial statements are free of material misstatements. Knowlcdgc of the business activities and the economic and legal environment of the (;roup and cvaluatioiis of possible niisstatemcnts arc taken into account in the determination of audit procedures. The evidence supporting the amounts and disclosures in the consolidated financial statements are examined on a test basis withiri the framework of the audit. 'The audit includes assessing the acrounting principles used and significant estiniatcs tnadc by management, as well as evaluating the cwerall presentation of the consolidated financial statements. We believe that OUJ iiudii provides a rcasonablc basis for our opinion. In our opinion, the consolidated financial statements give a true and fair view of the net assets, financial position, results of operations and cash flows of the Group for the six month business year in accordance with International Accounting Standards. Our audit, which also extends to the group management report prepared by the Company's rrianage- inent for the six month business year from July 1,2001 to Dcceinber 31,2001 has not led to any reservations. In our opinion on the whole the group tnanagemcnt report provides a suitable understanding of the Group's position and suitably presents the risks of future dcvelopment. In addition, we confirm that the consolidated financial statements and the group rnanageinent report for the six month business year from July I, 2001 to December 31,2001 satisfy the conditions required for the Company's exemption from its duty to prepare consolidatcd financial statements and the group management report in accordance with German law.

Bielefeld, April 9,2002

KPMG Ueutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtscliaftspriifungs~~sellscha~t

Heinke Kimpf Wirtschaftspriifer Wirtschaftspriifer [German Public Audilor] [German Public Auditor] Recent Development

Zomba is the world's leading independent music company, renowned for developing new artists into stars with a worldwide reputation. Recent examples include Britney Spears, The Backstreet Boys and Nsync. Bertelsmann indirectly owns 25% of Zomba Publishing and 20% of Zomba Records. Summer Shore N.V. Nederlande, the other shareholder, holds a put option entitling to sell to BMG Holding B.V. (a 100% Bertelsmann subsidiary) its holdings in said companies. This agreement is explained in greater detail on page 139 (note 15, of Bertelsmann's most recent annual report as included in this Information Memorandum). The exercise of the put option could amount to approximately U.S.$ 3 billion. Bertelsmann anticipates that the option may be exercised and is taking appropriate measures to secure the financing of the potential purchase price.

Despite revenues characterized by weak economic activity in the first three months of the new fiscal year 2002, the result of Bertelsmann's core business was above plan, mainly due to an improved cost structure.

161 Bertelsmann Capital Corporation N. V. -The Issuer-

Incorporation, Seat and Objects

Bertelsmann Capital Corporation N.V. ("Bertelsmann N.V.") was incorporated on September 6, 1996 under the laws of The Netherlands as a limited liability company ("naamloze vennootschap") for an indefinite period of time. The company has its corporate seat in Amsterdam and is registered in the trade register of the Chamber of Commerce in Utrecht under number 230 85 512. Its address is Laanakkerweg 16,4131 PB Vianen, The Netherlands.

According to its Articles of Association, the main objects of Bertelsmann N.V. are to borrow and lend money as well as to participate in and to finance legal persons and other enterprises.

Bertelsmann N.V. is a wholly owned subsidiary of Bertelsmann Nederland B.V., which in turn is a wholly owned subsidiary of Bertelsmann AG. Bertelsmann N.V. acts as a finance company by raising funds in the capital markets and by providing loans to other companies within the Group.

Share Capital

As of December 31, 2001, the authorized capital of Bertelsmann N.V. amounted to Euro 200,000 and was divided into 2,000 shares with a par value of Euro 100 each of which 454 shares are issued and fully paid.

Capitalisation

As of March 31,2002, the unaudited capitalisation of Bertelsmann N.V. was as follows:

As of March 31, 2002 (Euro) Subscribed Capital ...... 45,400 Liabilities ...... 51,500,183 (*) Retained Earnings ...... 348.71 5 Total ...... 51,894,298

(') Unconditionally and irrevocably guaranteed by Bertelsmann AG.

There has been no material change in the capitalisation of Bertelsmann N.V. since March 31,2002.

Management

The business affairs of Bertelsmann N.V. are managed by a Management Board which consists of one or more managing directors. Presently the managing directors are: Dr. Siegfried Luther Member of the Executive Board of Bertelsmann AG Yvonne Resina Catharina van Oort General Manager ECI Holland Udo Schoenwald Head of International Finance Department, Bertelsmann AG

The management of Bertelsmann N.V. may be contacted via its business address.

162 General Meetings

The annual meeting of shareholders will be held each year within six months of the end of the fiscal year.

Business of Bertelsmann N.V.

Bertelsmann N.V. is a wholly owned subsidiary of Bertelsmann Nederland B.V., which is wholly owned by Bertelsmann AG.

Bertelsmann N.V. acts as a finance company by raising funds in the capital markets and providing loans to other companies within the Bertelsmann Group.

Fiscal Year

The time period from July 1, 2001 to December 31, 2001, was a stub fiscal year of Bertelsmann N.V. Beginning in 2002, the fiscal year of Bertelsmann N.V. commences on January 1 and ends on December 31 of each year.

Independent Auditors

The independent auditors of Bertelsmann N.V. are PricewaterhouseCoopers N. V., Archimedeslaan 21, 3584 BA Utrecht, The Netherlands, who have examined the financial statements of Bertelsmann N.V. for the financial years ended June 30,2000,2001 and December 31,2001 and have given their unqualified opinion in each case.

Recent Development and Outlook

There has been no material change in the operations of Bertelsmann N.V. since December 31,2001.

163 Financial Statement for the six months ended December 31,2001 Bertelsmann Capital Corporation N.V. - non-consolidated -

References to any page numbers are to the pages of the annual report of Bertelsmann Capital Corporation N.V.

The financial year of the company has been changed to 31 December (pls. also refer to page 167).

164 1 General information

Bertelsmann Capital Corporation N.V. was incorporated on September 6, 1996. The company has its corporate seat in Amsterdam and is registered in the trade register of the Chamber of Commerce in Utrecht, The Netherlands under number 230.85.512. The legal address of the company is Laanakker- weg 14,4131 PB Vianen, The Netherlands.

Bertelsmann Capital Corporation N.V. is a wholly owned subsidiary of Bertelsmann Nederland B.V., which in turn is a wholly owned subsidiary of Bertelsmann AG.

Bertelsmann Capital Corporation N.V. acts as a finance company by raising funds in the capital markets and providing loans to other companies within the group.

2 Income statement for the six months ended December 31,2001 December 31, Note 2001 20 0 0/20 01 (EUR 1,000) Operating expenses ...... (15) Operating result ...... (15) Net financial income...... 7.1 61 Profit before taxation ...... 46 Taxation ...... 7.2 (16) Net profit ...... 30 69

3 Statement of changes in shareholder’s equity Share Retained Note capital earnings Total (EUR 1,000) Year ended June 30,2001 Balance as at July 1,2000 ...... 45 251 296 Net profit ...... 0 69 69 Balance as at June 30,2001 ...... 45 320 365 Six months ended December 31,2001 Balance as at July 1,2001 ...... 45 320 365 Net profit ...... 0 30 30 Balance as at December 31,2001 ...... 45 350 395

165 4 Balance sheet as at December 31,2001 Note December 31,2001 June 30,2001 (EUR 1,000) (EUR 1,000) Non-current assets Receivables ...... 7.3 50,000 50,000

Current assets Receivables and prepayments ...... 7.4 1,957 898 Cash and cash equivalents...... 1 2 51,958 50,900 Shareholder's equity Share capital...... 7.7 45 45 Retained earnings ...... -350 320 395 365 Non-current liabilities ...... 7.5 50,000 50,000

Current liabilities Corporate income tax payable...... 53 143 Other current Iia biI ities ...... 1.510 392 51,958 50,900

5 Cash flow statement December 31, June 30, Note 2001 2001 (EUR 1,000) Cash flow from operating activities Cash generated from operations ...... 7.8 65 (311) Interest paid ...... 0 (2,240) Tax paid ...... (106) (33) Net cash (used in)/from operating activities ...... (411 (2,584)

Cash flows from investing activities Interest received ...... 40 2,572 Net cash from investing activities...... 40 2,572 (Decrease)/increase in cash and cash equivalents...... (11 (12)

Movements in cash and cash equivalents At the beginning of the year ...... (Decrease)/increase ...... Attheendoftheyear ......

6 Accounting policies

6.1 Basis of preparation

The annual accounts are prepared in thousands of Euro.

The financial statements have been prepared in accordance with International Accounting Standards. The financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies below. The carrying amount of recognised liabilities that are hedged is adjusted to record changes in the fair value attributable to the risks that are being hedged. Fair value gains and losses on hedging instruments and hedged items are recognised in the income statement.

166

.... The financial year-end of the company has been changed to December 31 through an amendment to the Articles of Association. The current financial period includes the six months from July 1, 2001 till December 31, 2001 and the comparative period includes the twelve months from July 1, 2000 till June 30,2001. The next financial year-end will be December 31,2002.

6.2 Investments

Investments comprise a loan to the ultimate parent company that was originated by the enterprise. The loan is stated at amortised cost.

6.3 Receivables and prepayments

Receivables comprise interest receivable on the loan to the ultimate parent company and a short term loan to Bertelsmann Nederland B.V.

6.4 Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand and deposits held at call with banks.

6.5 Borrowings

Borrowings are recognised initially at the proceeds received, net of transaction costs incurred. In subsequent periods, borrowings are stated at the original amount adjusted for fair value changes related to the interest rate risk. This is done because the borrowings are hedged by means of a fair value hedge. The fair value changes are recognised in the net profit or loss for the period.

6.6 Current liabilities

Current liabilities comprise interest payable on long-term borrowings and accruals for other operational charges.

6.7 Revenue recognition

Interest income is recognised on an effective yield basis.

6.8 Financial instmments

Interest rate risk

The company borrows at fixed interest rates and subsequently lends to other group companies at variable interest rates. The company entered into a receive-fixed-pay-variable interest rate swap agreement with the ultimate parent company in order to hedge the fair value exposure of the company's fixed-rate borrowings from credit institutions. (See also note 6.5). The swap is carried at fair value, with the fair value changes recognised in the net profit or loss for the period.

The company is not exposed to any material risks other than the interest rate risk.

6.9 Taxation

Tax on result is calculated by applying the current rate to the result for the financial year in the profit and loss account, taking into account tax exempt profit elements and after inclusion of non-deductible costs.

167 6.10 Dividends

Dividends are recognised in the year when they are announced.

7 Notes to the financial statements

Z 1 Net financial income

Among others, included in the net finance income are: December 31, 2000/ 2001 2001 (EUR 1,000) Interest expense ...... (1,120) ( 2,240) Interest income ...... 1,192 2,580

t2 Taxation December 31, 20001 2001 2001 (EUR 1,000) Currenttax ...... 16 37

The taxation on profit before taxation equals the theoretical amount that arises using the tax rate in The Netherlands of 35%.

23 Receivables December 31, June 30, 2001 2001 (EUR 1,000) Non-current receivables: - Loans to group companies ...... 50,000 50,000

The loan to the ultimate parent company bears variable interest of Euribor (six months) + 0.33%. The loan is fully redeemable in May 2009.

The current receivables relating to the above receivable are disclosed in note 7.4. The non-current receivable is due within more than 5 years from the balance sheet date.

24 Receivables and prepayments December 31, June 30, 2001 2001 (EUR 1,000) Interest receivable from group companies ...... 1,496 344 Loanstogroupcompanies ...... 407 49 1 Otherreceivables ...... 54 63 1,957 898

The loans to group companies comprise a short term receivable from Bertelsmann Nederland B.V. and bears interest at Euribor (one month) - 0.075%.

168 25 Non-current liabilities

Non-current liabilities include borrowings from credit institutions: December 31, June 30, 2001 2001 (EUR 1,000) Loan from credit institutions ...... 47,871 46,679 Interest rate swaps...... 2,129 3,321 Total borrowings ...... 50,000 50,000

The loans from credit institutions amounting to E 50 million are subscribed according to the debt issuance programme introduced by Bertelsmann AG. The loan bears interest at a rate of 4.48% and will be fully repaid in May 2009. The fair values are based on discounted cash flows using a discount rate, which is a market rate based upon the borrowing rate on a borrowing with a similar term to maturity and similar risks.

On May 7, 1999, the company entered into a contractual interest-swap agreement with Bertelsmann AG (the ultimate parent company) in order to hedge the fair value of the borrowings from credit institutions described in this note. In terms of the interest-swap agreement Bertelsmann AG is liable to pay interest at a fixed rate of 4.48% and Bertelsmann Capital Corporation N.V. pays interest to Ber- telsmann AG at a variable interest rate of Euribor (six months) +0.16%. The principal amount covered by the interest-swap agreement amounts to € 50 million and the maturity date is May 2009.

As the interest rate corresponds with the market rate on a loan with the same principal and the same term to maturity, the fair value of the loan approximates the book value. Management assumes the hedge as 100% effective.

16 Contingencies and commitments

The company forms a fiscal unity with Bertelsmann Nederland B.V. for corporation tax purposes. In accordance with the standard terms and conditions, the company and the subsidiary that is part of the fiscal unity are severally liable for taxation payable by the entity. The following group companies are part of the fiscal unity: Euroboek B.V., Utrecht Boekhandel Zwaan & Ter Burg B.V., Alkmaar Mohndruck Kalenders B.V., Breda

27 Share capital

The authorised share capital of the company as at December 31,2001 amounts to f 200,000 (June 30, 2001: NLG 100,000) and consists of 2,000 (June 30,2001: 100) ordinary shares with a par value of E 100 (June 30,2001: NLG 1,000) each.

The issued share capital at December 31, 2001 amounts to E 45,400 (June 30,2001: NLG 100,000) and consists of 454 (June 30, 2001: 100) ordinary shares with a par value of E 100 (June 30, 2001: NLG 1,000) each. All issued shares are fully paid in and called up.

169 78 Cash generated from operations July 1,2001 - December 31, 20001 2001 2001 (EUR 1,000) Net profit ...... 30 69 Adjustments for: - Taxation ...... 16 37 - lnterestincome ...... (1,192) (2,580) - lnterestexpense ...... 1,I 20 2,240 - Fair value change of interest-rate swap...... (1,192) (1,683) - Fair value change of loans payable ...... 1,192 1,683

Changes in working capital: - Trade and other receivables ...... 93 (69) - Payables ...... (2) (8) Cash generated from operations ...... 65 (31 1)

Approved by the Board of Directors

Vianen, February 1,2002

Y.R.C. van Oort

170 8 Report of the auditors

The auditors' report is included on page 15.

Report of the Auditors

We have audited the accompanying balance sheet of Bertelsmann Capital Corporation N.V. (the Com- pany) as of December 31, 2001 and the related income and cash flow statements for the six months then ended. These financial statements set out on pages 3 to 13 are the responsibility of the Compa- ny's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evil dence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion the financial statements present fairly in all material respects the financial position of the Company as of December 31,2001 and of the results of its operations and its cash flows for the six months then ended in accordance with International Accounting Standards.

Utrecht, February 1, 2002

PricewaterhouseCoopers N.V.

171 Bertelsmann U.S. Finance, Inc. -The Issuer -

Incorporation, Seat and Purpose

Bertelsmann U.S. Finance, Inc. ("Bertelsmann U.S.") was incorporated on August 15, 1996 under the laws of the State of Delaware for an indefinite period of time, with registered number 265 3808. Its registered agent is Corporation Service Company located at 2711 Centerville Road, Suite 400, Wil- mington, Delaware 19808, U.S.A.

The principal office of Bertelsmann U.S. is 1540 Broadway, New York, N.Y. 10036, U.S.A.

The purpose of Bertelsmann U.S. is to engage in any lawful act or activity for which corporations may be organised under the General Corporation Law of Delaware.

Bertelsmann U.S. is a wholly owned subsidiary of Bertelsmann, Inc. and an indirect wholly owned subsidiary of Bertelsmann AG. The issuer acts as a finance company by raising funds in the capital markets and by providing loans to other companies within the Group.

Share Capital

As of December 31, 2001, the authorised share capital of Bertelsmann US. amounted to U.S.$3,000 and was divided in 3,000 registered shares with a par value of U.S.$ 1.00 each of which 1,000 shares are issued and fully paid.

Capitalisation

As of March 31,2002, the unaudited capitalisation of Bertelsmann U.S. was as follows: As of March 31, 2002 (U.S.$ thousands) Short-term debt ...... 303,947 (*) Long-term debt ...... 392,997(') Subscribedcapital ...... 1 Capital reserve ...... 119 Retainedearnings ...... 53 1 Total ...... 697,595

(*) Unconditionally and irrevocably guaranteed by Bertelsmann AG.

There has been no material change in the capitalisation of Bertelsmann U.S. since March 31,2002.

Management

The business affairs of Bertelsmann U.S. are managed by the Board of Directors which has three members: Jacqueline Chasey Senior Vice President, Legal Affairs and Assistant Secretary, Bertelsmann, Inc. Robert Sorrentino President and Chief Operating Officer, Bertelsmann, Inc. Dr. Verena Volpert Executive Vice President Corporate Treasury and Finance, Bertelsmann, AG

The Management of Bertelsmann U.S. may be contacted via its business address.

172 General Meetings

The annual meeting of stockholders shall be held at 10 A.M. on the 1st day of March, if not a legal holiday, and if a legal holiday, then on the next succeeding day not a legal holiday, at 10 A.M., or at such other date and time as shall be designated from time to time by the Board of Directors and stated in the notice of meeting or in a duly executed waiver thereof.

Fiscal Year

The time period beginning from July 1, 2001 to December 31, 2001, was a stub fiscal year of Bertels- mann U.S. Beginning in 2002, the fiscal year of Bertelsmann U.S. commences on January 1 and ends on December 31 of each year.

Independent Auditors

For the purpose of auditing the financial statements according to International Accounting Standards (IAS) prepared in connection with this programme, the independent auditors of Bertelsmann U.S. a re KPM G Deutsche Treu hand-Gesel lschaft Aktiengesel Ischaft, Wi rtschaftsprufungsgesel Ischaft, Nikolaus-Durkopp-Strasse 2 a, 33602 Bielefeld, Germany. They have audited the financial statements of Bertelsmann U.S. for the fiscal years ended June 30, 2000 and 2001 and the six months ended December 31,2001 and have given their unqualified opinion in each case.

Recent Development and Outlook

In February Bertelsmann US. redeemed its bonds issued in 1997 with a nominal value of EUR 102 million.

The repayment was organized by a reduction of existing intercompany loans to Bertelsmann Inc.

173 Financial Statements as of June 30,2000,2001 and December 31,2001 Bertelsmann US. Finance, Inc. - non-consolidated -

References to any page numbers are to the pages of the annual report of Bertelsmann U.S. Finance, Inc.

174 Independent Auditor's Report

The Board of Directors Bertelsmann U.S. Finance, Inc.

We have audited the accompanying balance sheet of Bertelsmann U.S. Finance, Inc., Wilmington as of

June 30,2000, June 30,2001 and December 31,2001 and the related statements of operations

for the year July 1,1999 to June 30,2000, for the year from July 1,2000 to June 30,2001 and for the half year from July 1,2001 to December 31,2001, stockholder's equity and cash flows for the referred periods ended. These financial statements are in the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with International Standards on Auditing (ISA). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bertelsmann U.S. Finance, Inc. as of June 30, 2000, June 30, 2001 and December 31, 2001, and the results of its operations and its cash flows for the periods from July 1, 1999 to June 30, 2000, from July 1, 2000 to June 30, 2001 and from July 1, 2001 to December 31, 2001, in accordance with International Accounting Standards.

April 19, 2002

KPMG Deutsche Treuhand Gesellschaft Aktiengesellschaft Wi rtschaftsprufungsgesel lschaft

Kampf Hansjurgens Wirtschaftsprufer Wirtschafts p rufe r

175 Bertelsmann U.S. Finance, Inc., Wilmington

Balance Sheets (U.S.$ in thousands except per share amounts)

December 31, June 30, June 30, 2001 2001 2000 Assets Current assets Due from affiliate , ...... , . . , , ...... 139,421 137,923 33,691 Other assets (fair value of derivatives) , ...... 5,204 0 9,223 Accrued interest from swaps . . . . , ...... 15,055 11,115 1 1,904 Total current assets ...... 159,680 149,038 54,818 Non-current assets Due from affiliatemotal non-current assets ...... 763,289 763,754 888,517 Totalassets ...... 922,969 912,792 943,335

Liabilities and Stockholders‘ Equity Current liabilities Accrued interest payable to bondholders . . . . . 18,734 10,366 11,181 Liabilities due to affiliates. , ...... , , . . . 745 1,282 1,200 Other liabilities (fair value derivatives). , ...... 98,494 121,085 105,051 Accrued interest payable ...... 9,480 12,422 15.31 4

Total current liabilities , ...... , , . , , ...... 127,453 145155 132,746 Other liabilities Long-term borrowings/TotaI other liabilities. . . . . 795,671 769,060 809,847

Total liabilities ...... , ...... 923,124 914,215 942,593 Commitments and contingencies Stockholder’ equity Common stock, $1 par value. Authorized 3,000 shares; issued and outstanding 1,000 shares , ...... , , ...... 1 1 1 Additional paid-in capital ...... , ...... 119 119 119 Retained earnings incl. first time IAS adjustment , , ...... , , ...... 398 314 69 Subsequent measurement under IAS 39 , . . . . . - 673 - 1.857 553

Total stockholder’s equity . . , ...... , . . , , . . . - 155 - 1,423 742 ~ Total liabilities and stockholder’s equity , ...... 922,969 912,792 943,335

See accompanying notes to financial statements.

176 Bertelsmann U.S. Finance. Inc., Wilmington

Statements of Operations (U.S.$ in thousands)

half year from July 1. 2001 year from year from to July 1. 2000 July 1. 1999 December 31. to June 30. to June 30. 2001 2001 2000 Revenues Interest income from affiliate ...... 27. 522 76. 607 56. 174 Other interest income ...... 5. 827 2. 247 34. 699 Total interest revenues ...... 33. 349 78. 854 90. 873

Interest expense due to affiliate ...... 3. 611 .9. 092 .21. 515 Other interest expense ...... 29. 167 .69. 678 .68. 592

Total interest expense ...... 32. 778 .78. 770 .90. 107 Net interest revenue ...... 57 1 84 766 Other currency gains ...... 0 261 0 Other currency losses ...... 337 0 .434 General and administrative expense ...... 150 .100 .105 Income before income tax provision ...... 84 245 227 Income tax provision ...... 0 0 0 Net income ...... 84 245 227 Result brought forward incl. first time IAS ajdustment ...... 314 69 .158 Retained earnings ...... 398 314 69

See accompanying notes to financial statements .

177 Bertelsmann U.S. Finance, Inc., Wilmington

Statements of Cash Flows (U.S.$ in thousands)

half year from July 1, 2001 year from year from to July 1,2000 July 1, 1999 December 31, to June 30, to June 30, 2001 2001 2000 Cash flows from operating activities Net income ...... 84 245 227 Adjustments to reconcile net income to net cash Change in assets and liability accounts Accrued interest payable...... - 2,942 - 2,892 3,244 Change in fair value of derivatives ...... - 27,795 25,257 44,483 Change in valuation of borrowings ...... 26,611 - 22,847 - 43,128 Change in valuation of Subsequent measurement under IAS 39...... 1,184 - 2,410 - 1,354 Change in accrued interest income...... - 5,510 3,462 - 3,862 Change in payable to bondholders . . , , , , , 8,368 - 815 390 Net cash provided by operating activities ...... 0 0 0 Cash flows from financing activities Repayment of debt ...... 0 - 17,940 - 66,258 Proceeds from the issuance of debt, net of discount on notes ...... 0 0 200,940

Net cash provided by financing activities ...... n - 17,940 134,682

Cash floes from investing~ activities Change in due from affiliate,, ...... 0 17,940 - 134,682 Net cash provided by investing activities ...... 0 17,940 - 134,682 Net change in cash ...... 0 0 0 Cash at the beginning of period ...... 0 0 0 Cash at end of period ...... 0 0 0

See accompanying notes to financial statements.

178 Bertelsmann U.S. Finance, Inc., Wilmington

Statements of Stockholders' Equity (U.S.$ in thousands)

Fair Value adjust- Common Additional Retained ments on stock Paid in earnings Derivates Total

Balance at June 30,2000...... 1 119 69 553 742 Net income ...... 0 0 245 0 245 Subsequent measurement under IAS39 ...... - 2,410 - 2,410 0 - 0 0 Balance at June 30,2001 ...... 1 119 314 - 1,857 - 1,423 Net income ...... 0 0 84 0 84 Subsequent measurement under IAS39 ...... 0 0 0 1,184 1,184 Balance at December 31,2001 ... 1 119 398 - 673 - 155

See accompanying notes to financial statement.

179 Bertelsmann US. Finance, Inc., Wilmington

Notes to Financial Statements December 31,2001 (half-year) June 30,2001 and 2000 (U.S.$ or foreign currency in thousands)

(1) Company Background

Bertelsmann U.S. Finance, Inc. (the "Company") is a wholly owned subsidiary of Bertelsmann, Inc. ("BINC"), Wilmington, and an indirect wholly owned subsidiary of Bertelsmann AG ("BAG"), Guters- loh, a privately owned German Corporation. The Company was incorporated on August 15, 1996 under the laws of the State of Delaware. The Company was formed to act as a finance company.

The Company, in conjunction with BAG and Bertelsmann Capital Corporation, N.V. ("BCC"),an indirect wholly owned subsidiary of BAG, is participating in a 750,000,000 EURO Debt Issuance Program. Notes under the program will be issued in bearer form only, in a series, may be distributed by way of private or public placement, and will mature as may be agreed between the issuer and the relevant dealer. Bertelsmann AG issued an unconditionally and irrevocable guarantee for the Debt Issuance Program.

(2) Summary of Significant Accounting Policies and Practices

(a) Basis of Accounting

The accompanying financial statements have been prepared in accordance with International Accounting Standards (IAS) and Interpretations on an accrual basis of accounting. In accordance to SIC-8, the prior periods were also restated.

In accordance with the Transition of IAS 39, this Standard was applied the first time for the fiscal year ending June, 30 1999.

(b) Fiscal Year

On September 1,2001 the Board of Directors have passed the resolution that the fiscal year, which so far ended on June 30, shall end on December 31, 2001 and on December 31 in each year thereafter. This change complies with the change of fiscal year for Bertelsmann group.

Therefore the fiscal year ending on December 31, 2001 covers only a period of 6 months and is not comparable with the previous years.

180 (3) Loans to BlNC

Due from affiliates consists of the following: December 31, June 30, June 30, Debtor Duration 2001 2001 2000

Non current BlNC ...... due May 12,2009 (a) 183,000 183,000 183,000 BlNC ...... due February 19,2002 (b) 0 0 125,000 BlNC ...... due December 15,2003 (c) 100,000 100,000 100,000 BlNC ...... due January 28,2004 (d) 200,000 200,000 200,000 BlNC ...... due November 25,2005 (c) 180,289 180,289 180,289 BlNC ...... due February 11,2009 (f) 100,000 100,000 100,000 Other...... 0 465 228 ~ 763.289 763.754 888.51 7 Current BlNC ...... due February 19,2002 (b) 125,000 125,000 0 BlNC ...... due December 4,2000 (9) 0 0 8,183 BlNC ...... due March 6,2001 (h) 0 0 9,757 Accrued Interest . . 9,108 11,954 14,476 Other I/C BlNC .... 472 0 183 Other I/C BAG .... 4,841 969 1,092 139,421 137,923 33,691

a) The loan bears interest at the six month LlBOR rate plus 0.185% per annum in effect on the first business day of each interest period. Interest is paid on May 13 and November 13. b) The loan bears interest at the fixed rate of 6.7% per annum. Interest is paid on February 19 and August 19. c) The loan bears interest at the six month LlBOR rate plus 0.30% per annum in effect on the first business day of each interest period. Interest is paid on June 15 and December 15. d) The loan bears interest at the six month LIBOR rate plus 0.245% per annum in effect on the first business day of each interest period. Interest is paid on January 28 and July 28. e) The loan bears interest at the six month LlBOR rate plus 0.32% per annum in effect on the first business day of each interest period. Interest is paid on May 25 and November 25. f) The loan bears interest at the six month LlBOR rate plus 0.32% per annum in effect on the first business day of each interest period. Interest is paid on February 11 and August 11. 9) The loan bears interest at the six month LlBOR rate plus 0.01 YO per annum in effect on the first business day of each interest period. Interest is paid on June 4 and December 4. h) The loan bears interest at the six month LlBOR rate plus 0.02% per annum in effect on the first business day of each interest period. Interest is paid on March 6 and September 6. All amounts due from the related companies are balanced with its face value.

(4) Financial instruments

Financial instruments entail contractual claims on financial assets. Under IAS 32 financial instruments include both primary instruments, such as trade accounts receivable and payable, investments, and financial obligations; and derivative financial instruments, which are used to hedge risks arising from changes in currency exchange and interest rates.

181 (a) Primary financial instruments

Primaryfinancial instruments are reflected in the balance sheet. In compliance with IAS 39 the existing asset instruments are categorized as "loans and receivables originated by the enterprise" and meas- ured at amortized cost. Most of the Financial instruments constituting liabilities are recognized at fair value due to their Hedge-Accounting context. The loans are balanced with their face value.

The remaining receivables and liabilities have such short terms that there is no significant discrepancy between their fair values and carrying amounts.

Bonds and Loans 31.12.2001 30.6.2001 30.6.2000 Nominal Fair Nominal Fair Nominal Fair value value value value value value Bonds 1,000 Mio.; JPY 12/00; 0.1 % . . ... 0 0 0 0 8,183 9,488 1,000 Mio.; JPY 03/01; 0.01 % . ... 0 0 0 0 8,295 9,496 102 Mio.; EUR 02/02; 4.5% ...... 125,000 90,087 125,000 86,537 125,000 97,181 200 Mio.; USD 01/04; 5.375% . . . . 200,000 205,203 200,000 199,352 200,000 186,423 153 Mio.; EUR 11/05; 4.5% ...... 180,289 133,194 180,289 125,932 180,289 136,657 200 Mio.; EUR 05/09; 4.375% . . . . 183,000 167,187 183,000 157,239 183,000 170,602

Loans 100 Mio. USD 12/03; interest rate of LlBOR + 26 b.p. , , , , ...... , , . , , 100,000 100,000 100,000 100,000 100,000 100,000 100 Mio. USD 02/09; interest rate of LlBOR + 32 b.p. . , , . . , , . . . , . . , . 100,000 100,000 100,000 100,000 100,000 100,000 Total ...... 888,289 795,671 888,289 769,060 904,767 809,847

Credit risk

Credit risk arises from the possibility of asset impairment occuring because counterparties cannot meet their obligations in transactions involving financial instruments.

The total of the amounts recognised in assets represents intragroup loans without any credit risk.

Currency and interest rate risks

The given intragroup loans are made only to borrowers in the same currency zone, so no currency risk is involved. They are mostly floating rate loans at market rates of interest.

The currency and interest rate risks of the bonds are hedged by derivative financial instruments.

(b) Derivative financial instnrments

The derivatives the company uses are only over-the-counter instruments, particularly interest rate swaps and cross currency swaps. The company deals only with banks of high credit standing to reduce credit risks arising from positive fair values of derivatives. The instruments are employed according to uniform guidelines and are subject to strict internal controls. Their use is confined to the hedging of the operating business and of the related investments and financing transactions.

The main objective in using derivative financial instruments is to reduce fluctuations in cash flows and earnings associated with changes in interest and foreign exchange rates. The company does not enter into swap agreements for trading or other speculative purposes.

182 Derivative financial instruments are exclusively used for hedging purposes. Now that we have applied IAS 39, all derivative financial instruments are accounted for as assets or liabilities. All derivatives are stated at fair value regardless of their purpose. Gains and losses on the fair values are usually recognized in the income statement, except for the contract accounted for as a cash flow hedge.

Hedge accounting

Under the conditions of hedge accounting to IAS 39 the accounting is as follows: If the "fair value" is being hedged, the changes in the value of the derivative as well as the opposite movements in the value of the underlying transaction are recognized directly in the income statement.

If "cash flows"are being hedged, the gains and losses on the derivatives are recognized in equity until the hedge underlying transaction occurs. After accounting for the hedged items, the amounts so far recognized in the equity are - depending on the type of hedging transaction - reclassified either to the accounted assets or liabilities or directly recognized in the income statement.

Most interest rate swaps and cross currency swaps are performed to allow the company to maintain a target range of floating rate debt and reduce borrowing costs. All swap contracts amount to permis- sible hedge accounting relationships and there is no major ineffectiveness related to these hedges. Changes in the fair values of derivatives that hedge interest rate risk are recorded as interest expense for the respective periods, as are offseting changes in the fair value of the related hedged debt items.

One cross currency instrument involves a swap from fixed (Euro) to fixed (U.S.$) interest rate. This contract is accounted for as cash flow hedges as defined in IAS 39.

Market risk

Market risk arises from the fact that the value of financial instruments may be positively or negatively affected by fluctuating prices on the financial markets. The fair values quoted are the current values of the derivative financial instruments, disregarding any opposite movements in the values of the respective hedged transactions. The fair value is the repurchase value of the derivatives on the closing date, based on quoted prices or determined by standard methods. The nominal amount is the total volume of the contracted purchases or sales of the respective derivatives.

The nominal amounts and fair values of the derivative financial instruments held at the closing date were as follows: December 31,2001 June 30,2001 June 30,2000 Positive Negative Positive Negative Positive Negative Nominal fair fair Nominal fair fair Nominal fair fair ---~~~~~~value value value value value value value value value Cross Cumency Swaps . 488,280 488,280 506,220 5years ...... 0 -7,367 0 - 13,599 7,918 - 34,361 Interest rate swaps .... 200,000 200,oo 200,oo 5years ...... o -8,446 0 -12,162 0 29,585 ~~ -- -- Total ...... 5,204 - 98,494 0 -121,085 9,223 - 105,051 ~~ -~~~ ~- --

183 (5) Stockholder's equity

Changes in stockholder's equity mainly results from a contract which is accounted for as a cash flow hedge in accordance with IAS 39. The temporary market fluctuations regarding this Cash-Flow-Hedge leads to the negative equity balance.

No deferred taxes are applicable on the calculation of the subsequent measurement.

The retained earnings contains U.S.$180 due to the first time application of IAS.

(6) Income Taxes and deferred taxes

The Company is part of the Bertelsmann Inc. consolidated tax group. Therefore the company does not pay taxes by itself. The pre-tax result is taxable at Bertelsmann Inc. For the periods under consideration the total tax group Bertelsmann Inc. was in a loss position. It is expected that the whole tax group will not create sufficient income to use the tax loss carry forwards. Therefore no deferred tax assets have been set up for the tax group and accordingly to Bertelsmann U.S. Finance, Inc. Bertelsmann Inc. did not charge or credit any income taxes to the members of the tax group. Therefore the current tax expense is zero for the company. Because for all periods under consideration no deferred taxes were set up the deferred tax expense is also zero.

The difference between the expected tax expenselbenefit and the actual expense of zero is due to the change in the valuation allowance. The expected taxes are calculated with the tax rate of 39.55%, which includes federal and state taxes in the U.S.

Deferred taxes on temporary differences relate to the following positions of the balance sheet:

December 31, June 30, June 30, 2001 2001 2000 Deferred tax assets Debt issuance fees ...... 2.722 2,383 3,200 Short term borrowings ...... 0 0 51 6 Negative Fair value Derivatives ...... 38,954 47,889 41,548 Accrued interest ...... 5,607 3,910 4,709 Long term borrowings...... 2,058 0 0 Intercompany paya bles ...... 295 469 47 5 Valuation allowance for deferred tax assets...... - 298 - 807 0 Net deferred tax assets ...... 49,338 53,844 50,448 Deferred tax liabilities Positive fair value Derivatives ...... 2,058 0 3,648 Intercompany receivables...... 255 383 432 Accrued interest ...... 5,640 3,957 4,708 Premium on swaps ...... 2,697 2,350 3,152 Short term borrowings ...... 13,808 15,212 103 Long term borrowings...... 24,880 31,942 38,531 Not accounted for because of tax group consideration ...... 0 0 - 126 Total deferred tax liabilities ...... 49,338 53,844 50,448 Net deferred taxes ...... 0 0 0

(7) Interest income

Interest income results from loans given to BlNC and from interest income from swap agreements.

184 (8)Interest expense

Interest expenses results from the interest due to bondholders and from swap agreements.

(9) Cash-flow-statement

The Cash Flow Statements fo the Bertelsmann U.S. Finance, Inc. are based on IAS 7. With their help, the yearly conclusion becomes about information, that should put the reader into the position, the ability of the business to judge supplements means of payment and equivalent payment to obtain. It finds a division of the payment streams in finance middle changes from current operations - investment and funding activity instead of. The representation of the payment streams from current activity takes place by means of the so-called indirect method, with which the yearly excess is modified around not payment-effective stations.

Cash paid to financial institutions for interest was U.S.$ 22,837 for the stub period ended December 31, 2001, US.$ 63,247 for the year ended June 30, 2001 and U.S.$ 51,653 for the period ended June 30,2000.

(IO) Segment Reporting

The company was formed to act exclusively as a finance company. Therefore, further segment information are not regarded as necessary.

185 TAXATION

PROSPECTIVE PURCHASERS OF NOTES ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES, INCLUDING THE EFFECT OF ANY STATE OR LOCAL TAXES, UNDER THE TAX LAWS APPLICABLE IN THE JURISDICTIONS MENTIONED BELOW AND EACH COUNTRY OF WHICH THEYARE RESIDENTS.

1. Federal Republic of Germany

The following is a general discussion of certain German tax consequences of the acquisition and ownership of Notes. This discussion does not purport to be a comprehensive description of all tax considerations which may be relevant to a decision to purchase Notes. In particular, this discussion does not consider any specific facts or circumstances that may apply to a particular purchaser. This summary is based on the laws of Germany currently in force and as applied on the date of this Infor- mation Memorandum, which are subject to change, possibly with retroactive effect.

Tax Residents

Payments of interest on the Notes, including interest having accrued up to the sale of a Note and credited separately ("Accrued Interest") to persons who are tax residents of Germany (i.e., persons whose residence, habitual abode, statutory seat, or place of effective management and control is located in Germany) are subject to German personal or corporate income tax (plus solidarity surcharge (Solidarit~tszuschlag)at a rate of 5.5% thereon). Such interest is also subject to trade tax if the Notes form part of the property of a German trade or business.

Upon maturity of a Note the initial subscriber to the Note receives, in addition to, or, as in the case of a zero coupon Note or a discounted Assignable Loan, instead of the current interest, taxable investment income in an amount equal to the difference between the issue price of the Note and the redemption amount ("Original Issue Discount"), in the case of Notes only if the Original Issue Discount exceeds certain thresholds. Provided that the Note can be classified as a financial innovation (Finanz- innovation) under German tax law, including, among other things, zero coupon Notes, discounted Notes and discounted Assignable Loans, and is purchased or disposed of while outstanding, the Ori- ginal Issue Discount to the extent attributable to the period over which the holder of a Note has held such Note or, alternatively, the difference between the proceeds from the sale or redemption and the purchase price is subject to personal or corporate income tax in the year of the sale or maturity of the Note, unless the Note forms part of the property of a German trade or business, in which case the annual increase in value of the Note, as calculated at the time of its acquisition, must be taken into account pro rata temporis as interest income and may also be subject to trade tax.

Capital gains from the disposal of Notes, other than income from Original Issue Discount, as defined above, are only taxable to a German tax-resident individual if the Notes are disposed of within one year after their acquisition or form part of the property of a German trade or business, in which case the capital gains may also be subject to trade tax. Capital gains derived by German-resident corporate holders of Notes will be subject to corporate income tax (plus solidarity surcharge at a rate of 5.5% thereon) and trade tax.

If the Notes are held in a custodial account which the Noteholder maintains with a German branch of a German or non-German financial or financial services institution (the "Disbursing Agent") a 30% withholding tax on interest payments (Zinsabschlagsteuer), plus 5.5% solidarity surcharge on such tax, will be levied, resulting in a total tax charge of 31.65% ofthe gross interest payment. Withholding tax on interest is also imposed on Accrued Interest. If the Notes qualify as financial innovations, as explained above, and are kept in a custodial account which the Noteholder maintains with a Disbur- sing Agent such custodian will generally withhold tax at a rate of 30% (plus solidarity surcharge at a rate of 5.5% thereon) from the difference between the issue or purchase price of the Notes and the redemption amount or sales proceeds if the Noteholder has kept the Note in the custodial account since the time of issuance or acquisition, respectively. Otherwise the 30% withholding tax is applied

186 to 30% of the amounts paid in partial or final redemption of the Notes or the proceeds from the sale of the Notes, respectively.

In computing the tax to be withheld the Disbursing Agent may deduct from the basis of the withholding tax any Accrued Interest paid by the holder of a Note to the Disbursing Agent during the same calendar year; this does not apply with respect to Assignable Loans. In general, no withholding tax will be levied if the holder of a Note is an individual (i)whose Note does not form part of the property of a German trade or business nor gives rise to income from the letting and leasing of property, and (ii)who filed a withholding certificate (Freistellungsauftrag)with the Disbursing Agent but only to the extent the interest income derived from the Note together with other investment income does not exceed the maximum exemption amount shown on the withholding certificate. Similarly, no withholding tax will be deducted if the holder of the Note has submitted to the Disbursing Agent a certificate of non-assessment (Nichtveranlagungsbescheiningung) issued by the relevant local tax office.

If the Notes are not kept in a custodial account with a Disbursing Agent the withholding tax will apply at a rate of 35% of the gross amount of interest paid by a Disbursing Agent upon presentation of a Coupon (whether or not presented with the Note to which it appertains) to a holder of such Coupon (other than a non-German financial or financial services institution). In this case proceeds from the disposal or redemption of a Coupon, and if the Notes qualify as financial innovations 30% of the proceeds from the disposal or redemption of a Note, will also be subject to withholding tax at a rate of 35%. Where the 35% withholding tax applies no Accrued Interest paid can be taken into account in determining the withholding tax base. Again solidarity surcharge at a rate of 5.5% of the withholding tax applies so that the total tax burden to be withheld is 36.925%.

Withholding tax and solidarity surcharge thereon are credited as prepayments against the German personal or corporate income tax and the solidarity surcharge liability of the German resident. Amounts overwithheld will entitle the holder of a Note to a refund, based on an assessment to tax.

Nonresidents

Interest, including Accrued Interest and Original Issue Discount, and capital gains are not subject to German taxation, unless (i)the Notes form part of the business property of a permanent establishment, including a permanent representative, or a fixed base maintained in Germany by the holder of a Note or (ii)the interest income otherwise constitutes German-source income (such as income from the letting and leasing of certain German-situs property). In the latter case a tax regime similar to that explained above at "Tax Residents" applies; capital gains from the disposition of Notes are, however, only taxable in the case of (i).

Nonresidents of Germany are, in general, exempt from German withholding tax on interest and solidarity surcharge thereon. However, where the interest is subject to German taxation as set forth in the preceding paragraph and the Notes are held in a custodial account with a Disbursing Agent, withholding tax is levied as explained above at "Tax Residents'.' Where Notes are not kept in a custodial account with a Disbursing Agent and interest or proceeds from the disposition or redemption of a Note are paid by a Disbursing Agent to a nonresident, the 35% withholding tax will apply as explained above at "Tax Residents','

Proposed EU Savings Tax Directive

On December 13, 2001, the Council of the European Union approved a new draft directive regarding the taxation of savings income. It is proposed that each EU Member State under its domestic law requires paying agents (within the meaning of the directive) established within its territory to provide to the competent authority of its EU Member State of establishment details of the payment of interest within the meaning of the directive to an individual resident in another EU Member State. The competent authority of the EU Member State of the paying agent shall then communicate this information to the competent authority of the EU Member State of which the recipient is a resident. The proposed directive is to be implemented by the Member States by January 1, 2004. However, for a transitional period of seven years Austria, Belgium and Luxembourg may opt instead to withhold tax from such

187 payments. During the first three years after the directive has come into force tax will have to be withheld by these EU Member States at a rate of 15% and thereafter of 20%. It is envisaged that the Council of the European Union will decide on a final text of the directive no later than December 31, 2002. However, since the implementation of the proposal is subject to certain non EU Member States and associated territories and dependencies of EU Member States also agreeing to supply information or imposing a withholding tax it is currently not possible to predict whether, when, or in what form the proposal will ultimately be adopted.

Holders who are individuals should note that, if this proposal is adopted, the Issuer will not pay additional amounts under § 7 of the Terms and Conditions of the Notes in respect of any withholding tax imposed as a result thereof.

2. The Netherlands

GENERAL

The following is intended as general information only and it does not purport to present any comprehensive or complete picture of all aspects of Netherlands tax laws which could be of relevance to a holder of a Note (hereinafter referred to as the "Holder"). Prospective Holders should therefore consult their tax adviser regarding the tax consequences of any purchase, ownership or disposal of Notes.

Bertelsmann N.V. (hereinafter the "Issuer") has been advised that under existing Netherlands tax law, subject to any change in law, possibly with retrospective effect, the following treatment will apply to the Notes, provided that the Notes (i) will not carry interest or any other payment which is wholly or partially contingent or deemed to be contingent on the profits or on the distribution of profits of the Issuer, or a related party (verbonden lichaam), or if the Notes will carry such interest or other payment the term of the Notes does not exceed 10 years, and (ii)will not carry interest or any other payment which becomes only due dependent on the profits, or on a distribution of profits by the Issuer, or a related party (verbonden lichaam), or if the Notes will carry such interest or other payment the Notes are not subordinated and the term of the Notes does not exceed 50 years.

WITHHOLDING TAX

All payments under the Notes can be made free of withholding or deduction for or on account of any taxes of whatsoever nature imposed, levied, withheld or assessed by the Netherlands or any political subdivision or taxing authority thereof or therein.

PERSONAL AND CORPORATE INCOME TAX

A Holder will not be subject to any Netherlands taxation on income or capital gains in respect of any payment under the Notes or in respect of any gain on the disposal or deemed disposal or redemption of a Note, provided that: (i) the Holder is neither resident nor deemed resident in the Netherlands for Netherlands tax purposes; and (ii) the Holder is not an individual who opts to be taxed as a resident of the Netherlands for Nether- lands tax purposes; and (iii) the Holder does not have an enterprise or an interest in an enterprise which is, in whole or in part, carried on through a permanent establishment or a permanent representative in the Netherlands and to which enterprise or part of an enterprise the Notes are attributable; and (iv) the Holder is not an individual who performs other activities in relation to the Notes in the Netherlands, including but not limited to, activities that exceed "normal investment activities"; and (v) the Holder is not an individual who has a substantial interest in the Issuer; and

188 (vi) the Holder is not a corporate entity who has a substantial interest or a deemed substantial interest in the Issuer or, if such a Holder does have such an interest, it forms part of the assets of an enterprise other than an enterprise of the Netherlands.

Generally, a Holder will have a substantial interest if he, or his partner holds, alone or together, whether directly or indirectly, the ownership of, or certain other rights over, shares representing 5% or more of the total issued and outstanding capital (or the issued and outstanding capital of any class of shares) of the Issuer, or rights to directly or indirectly acquire shares, whether or not already issued, that represent at any time (and from time to time) 5% or more of the total issued and outstanding capital (or the issued and outstanding capital of any class of shares) of the Issuer or the ownership of certain profit participating certificates that relate to 5% or more of the annual profit of the Issuer and/or to 5% or more of the liquidation proceeds of the Issuer. A substantial interest is also present if a holder of Notes does not, but his, or his partner's children (including foster children), certain other relatives or certain persons sharing his household do have a substantial interest, or a deemed substantial interest, in the Issuer. A deemed substantial interest is present if a substantial interest has been disposed on a non-recognition basis.

GIFT ESTATE AND INHERITANCE TAX

Netherlands gift, estate or inheritance taxes will not be levied on the occasion of the acquisition of a Note by way of gift by, or on the death of, a Holder unless: (i) the Holder is, or is deemed to be, resident of the Netherlands for the purpose of the relevant provisions; or

(ii) the Holder at the time of the gift has, or at the time of his death had an enterprise that is or was, in whole or in part, carried on through a permanent establishment or a permanent representative in the Netherlands and to which enterprise or part of an enterprise the Notes are or were attributable; or (iii) in the case of gift of a Note by any individual who, at the date of gift, was not a resident or deemed resident in the Netherlands, such individual dies within 180 days after the date of gift, while being resident or deemed resident in the Netherlands.

CAPITAL TAX

There is no Netherlands capital tax payable in respect of or in connection with the execution, delivery and enforcement by legal proceedings (including any foreign judgement in the courts of the Nether- lands) of the Notes or the performance by the Issuer of its obligations under the Notes, other than capital tax that may be due by the Issuer on capital contributions made or deemed made to the Issuer under the Guarantee.

VAT

There is no Netherlands value added or turnover tax payable in respect of the payment by the Holder in consideration for the issue of the Notes, in respect of any payment by the Issuers of interest or principal under the Notes, or the transfer of the Notes or bv the Guarantor under the Guarantee.

OTHER TAXES AND DUTIES

There is no Netherlands registration tax, stamp duty or any other similar tax or duty payable in the Netherlands in respect of or in connection with the execution, delivery and enforcement by legal proceedings (including any foreign judgement in the courts of the Netherlands) of the Notes or the performance by the Issuer or the Guarantor of their obligations under the Notes or under the Guarantee.

Subject to the exceptions of the "Income tax" section above, a Holder will not become resident, or deemed resident in the Netherlands, or become subject to taxation in the Netherlands by reason only of the holding of a Note or the execution, delivery and/or enforcement of the Notes or per-

189 formance by the Issuer or the Guarantor of their obligations thereunder or under the Notes or under the Guarantee, respectively.

3. United States of America

The following is a summary of the principal United States federal income and estate tax considerations of the ownership of Notes issued by Bertelsmann US. by a person that is a United States Alien (as defined in § 7 (1) of the Terms and Conditions).

Under current United States federal income and estate tax law,

(a) payment on a Note, Coupon or Receipt by the Issuer or any Paying Agent to a holder that is a United States Alien will not be subject to withholding of United States federal income tax, provided that, with respect to payments of interest, the holder does not actually or constructively own 10% or more of the combined voting power of all classes of stock of the Issuer and is not a controlled foreign corporation related to the Issuer through stock ownership;

(b) a holder of a Note, Coupon, Receipt or Talon that is a United States Alien will not be subject to United States federal income tax on gain realized on the sale, exchange or redemption of the Note, Coupon, Receipt or Talon, provided that such holder does not have a connection with or status with respect to the United States described in subparagraph (a) of § 7 (1) of the Terms and Conditions;

(c) a beneficial owner of a Note, Coupon or Receipt that is a United States Alien will not be required to disclose its nationality, residence or identity to the Issuer, a Paying Agent (acting in its capacity as such) or any United States governmental authority in order to receive payment on such Note, Cou- pon or Receipt from the Issuer or a Paying Agent outside the United States; and

(d) a Note, Coupon, Receipt or Talon will not be subject to United States federal estate tax as a result of the death of a holder who is not a citizen or resident of the United States at the time of death, provided that such holder did not at the time of death actually or constructively own 10% or more of the combined voting power of all classes of stock of the Issuer and, at the time of such holder’s death, payments of interest on such Note, Coupon, Receipt or Talon would not have been effectively connected with the conduct by such holder of a trade or business in the United States.

United States information reporting requirements and backup withholding tax will not apply to payments on a Note, Coupon or Receipt made outside the United States by the Issuer or any Paying Agent to a holder that is a United States Alien.

Information reporting requirements and backup withholding tax will not apply to any payment on a Note, Coupon or Receipt outside the United States by a foreign office of a foreign custodian, foreign nominee or other foreign agent of the beneficial owner of such Note or Coupon, provided that such custodian, nominee or agent (i)derives less than 50% of its gross income for certain periods from the conduct of a trade of business in the United States, (ii) is not a controlled foreign corporation for United States federal income tax purposes and (iii) is not a foreign partnership that, at any time during its taxable year, is 50% or more (by income or capital interest) owned by U.S. persons or is engaged in the conduct of a U.S. trade or business. Payment on a Note, Coupon or Receipt outside the United States to the beneficial owner thereof by a foreign office of any other custodian, nominee or agent will not be subject to backup withholding tax, but will be subject to information reporting requirements unless such custodian, nominee or agent has documentary evidence in its records that the beneficial owner is a United States Alien or the beneficial owner otherwise establishes an exemption. Payment on a Note, Coupon or Receipt by the United States office of a custodian, nominee or other agent of the beneficial owner of such Note, Coupon or Receipt will be subject to information reporting requirements and backup withholding tax unless the beneficial owner certifies its non-U.S. status under penalties of perjury or otherwise establishes an exemption.

Information reporting requirements and backup withholding tax will not apply to any payment of the proceeds of the sale of a Note, Coupon, Receipt or Talon effected outside the United States by a for-

190 eign office of a foreign "broker" (as defined in applicable Treasury regulations), provided that such broker (i)derives less than 50% of its gross income for certain periods from the conduct of a trade or business in the United States, (ii) is not a controlled foreign corporation for United States federal income tax purposes and (iii)is not a foreign partnership that, at any time during its taxable year, is 50% or more (by income or capital interest) owned by U.S. persons or is engaged in the conduct of a U.S. trade or business. Payment of the proceeds of the sale of a Note, Coupon, Receipt or Talon effected outside the United States by a foreign office of any other broker will not be subject to backup withholding tax, but will be subject to information reporting requirements unless such broker has documentary evidence in its records that the beneficial owner is a United States Alien and certain other conditions are met, or the beneficial owner otherwise establishes an exemption. Payment of the proceeds of a sale of a Note, Coupon, Receipt or Talon by the United States office of a broker will be subject to information reporting requirements and backup withholding tax unless the beneficial owner certifies its non-U.S. status under penalties of perjury or otherwise establishes an exemption.

For purposes of applying the rules set forth under this heading "United States of America" to an entity that is treated as fiscally transparent (e.g., a partnership) for U.S. federal income tax purposes, the beneficial owner means each of the ultimate beneficial owners of the entity.

191 The Dealers have, in a dealer agreement (the "Dealer Agreement ") dated 6 June 2002 agreed with the Issuers a basis upon which they or any of them may from time to time agree to purchase Notes.

SELLING RESTRICTIONS

1. General

Each Dealer has represented and agreed that it will comply with all applicable securities laws and regulations in force in any jurisdiction in which it purchases, offers, sells or delivers Notes or pos- sesses or distributes the Information Memorandum and will obtain any consent, approval or permis- sion required by it for the purchase, offer, sale or delivery by it of Notes under the laws and regulations in force in any jurisdiction to which it is subject or in which it makes such purchases, offers, sales or deliveries and neither the Issuer nor any Dealer shall have any responsibility therefor.

With regard to each Tranche, the relevant Dealer will be required to comply with such other additional restrictions as the Issuer and the relevant Dealer shall agree and as shall be set out in the applicable Pricing Supplement.

2. United States of America (the "United States") (a) Each Dealer has acknowledged that the Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Each Dealer has represented and agreed that it has not offered or sold, and will not offer or sell, any Note constituting part of its allotment within the United States except in accordance with Rule 903 of Regulation S under the Securities Act. Accordingly, each Dealer further has represented and agreed that neither it, its affiliates nor any persons acting on its or their behalf have engaged or will engage in any directed selling efforts with respect to a Note. (b) From and after the time that the Issuer notifies the Dealers in writing that it is no longer able to make the representation set forth in Article 4 (1) (m) (i) of the Dealer Agreement, each Dealer (i) acknowledges that the Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U. S. persons except in accordance with Regulation S under the Securities Act or pursuant to an exemption from the registration requirements of the Securities Act; (ii) has represented and agreed that it has not offered and sold any Notes, and will not offer and sell any Notes, (x) as part of its distribution at any time and (y) otherwise until 40 days after the later of the commencement of the offering and closing date, only in accordance with Rule 903 of Regulation S under the Secu- rities Act; and accordingly, (iii)has further represented and agreed that neither it, its affiliates nor any persons acting on its or their behalf have engaged or will engage in any directed selling efforts with respect to any Note, and it and they have complied and will comply with the offering restrictions requirements of Regulation S; and (iv) has also agreed that, at or prior to confirmation of any sale of Notes, it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Notes from it during the distribution compliance period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the "Securities Act") and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons by any person referred to in Rule 903 (b)(2)(iii)(i) as part of its distribution at any time or (ii)otherwise until 40 days after the later of the commencement of the offering and the closing date, except in either case in accordance with Regulation S under the Securities Act. Terms used above have the meanings given to them by Regulation S." (c) Each Dealer who has purchased Notes of a Tranche hereunder (or in the case of a sale of a Tranche of Notes issued to or through more than one Dealer, each of such Dealers as to the Notes of such Tranche purchased by or through it or, in the case of a syndicated issue, the relevant Lead Man- ager) shall determine and notify the Fiscal Agent of the completion of the distribution of the Notes

192 of such Tranche. On the basis of such notification or notifications, the Fiscal Agent agrees to notify such Dealer/Lead Manager of the end of the distribution compliance period with respect to such Tranche.

Terms used above in this paragraph 2 have the meanings given to them by Regulation S.

(d) Each Dealer has represented and agreed that it has not entered and will not enter into any contractual arrangement with respect to the distribution or delivery of Notes, except with its affiliates or with the prior written consent of the Issuer.

(e) Notes, other than Notes with an initial maturity of one year or less issued by Bertelsmann or Ber- telsmann N.V. will be issued in accordance with the provisions of United States Treasury Regula- tion § 1.163-5(c)(2)(i)(C)(the "C Rules"), or in accordance with the provisions of United States Treasury Regulation § 1.163-5(~)(2)(i)(D)(the "D Rules"), as specified in the applicable Pricing Sup- plement.

In addition, where the C Rules are specified in the relevant Pricing Supplement as being applicable to any Tranche of Notes, Notes in bearer form must be issued and delivered outside the United States and its possessions in connection with their original issuance. Each Dealer has represented and agreed that it has not offered sold or delivered and will not offer, sell or deliver, directly or indirectly, Notes in bearer form within the United States or its possessions in connection with their original issuance. Further, each Dealer has represented and agreed in connection with the original issuance of Notes in bearer form, that it has not communicated, and will not communicate, directly or indirectly, with a prospective purchaser if either such Dealer or purchaser is within the United States or its possessions and will not otherwise involve its U.S. office in the offer or sale of Notes in bearer form. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code and regulations thereunder, including the C Rules.

In addition, in respect of Notes issued in accordance with the D Rules, each Dealer has represented and agreed that:

(i) except to the extent permitted under U.S.Treas. Reg. Section 1.163-5(~)(2)(i)(D),(i) it has not offered or sold, and during the restricted period will not offer or sell, Notes in bearer form to a person who is within the United States or its possessions or to a United States person, and (ii) such Dealer has not delivered and will not deliver within the United States or its possessions definitive Notes in bearer form that are sold during the restricted period;

(ii) it has and throughout the restricted period will have in effect procedures reasonably designed to ensure that its employees or agents who are directly engaged in selling Notes in bearer form are aware that such Notes may not be offered or sold during the restricted period to a person who is within the United States or its possessions or to a United States person, except as permitted by the D Rules;

(iii) if such Dealer is a United States person, it represents that it is acquiring the Notes in bearer form for purposes of resale in connection with their original issuance and if such Dealer retains Notes in bearer form for its own account, it will only do so in accordance with the requirements of U. S.Treas. Reg. Section 1.163-5(~)(2)(i)(D)(6);and

(iv) with respect to each affiliate that acquires from such Dealer Notes in bearer form for the purposes of offering or selling such Notes during the restricted period, such Dealer either (x) repeats and confirms the representations and agreements contained in sub-clauses (i),(ii) and (iii)on such affiliate's behalf or (y) agrees that it will obtain from such affiliate for the benefit of the Issuer the representations and agreements contained in sub-clauses (i),(ii) and (iii).

Terms used in this paragraph (e) have the meanings given to them by the U. S. Internal Revenue Code and regulations thereunder, including the D Rules.

(f) Each issue of index-, commodity- or currency-linked Notes shall be subject to such additional U.S. selling restrictions as the Issuer and the relevant Dealer may agree as a term of the issue and purchase of such Notes, which additional selling restrictions shall be set out in the Pricing Supple- ment. Each Dealer agrees that it shall offer, sell and deliver such Notes only in compliance with such additional U. S. selling restrictions.

193 3. United Kingdom of Great Britain and Northem Ireland ("United Kingdom")

Each Dealer has represented and agreed that: (i) in relation to Notes which have a maturity of one year or more, it has not offered or sold and, prior to the expiry of a period of six months from the Issue Date of such Notes, will not offer or sell any such Notes to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) in relation to any Notes which must be redeemed before the first anniversary of the date of their issue, (a) it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business and (b) it has not offered or sold and will not offer or sell any Notes other than to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses where the issue of the Notes would otherwise constitute a contravention of Section 19 of the FSMA by the Issuer; (iii) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer or the Guarantor; and (iv) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to such Notes in, from or otherwise involving the United Kingdom.

4. Federal Republic of Germany

Each Dealer agrees not to offer or sell Notes in the Federal Republic of Germany other than in compliance with the Securities Selling Prospectus Act (Wertpapier-Verkaufsprospektgesetz) of December 13, 1990 (as amended), or any other laws applicable in the Federal Republic of Germany governing the issue, offering and sale of securities.

5. The Netherlands

Notes may only be offered in the Netherlands or by Bertelsmann N.V. anywhere in the world, and such an offer may only be announced: a. if those Notes have been, or will likely shortly be, admitted to listing on the Official Segment of the stock market of Euronext Amsterdam N.V.; or b. if: (i) the Information Memorandum and the applicable Pricing Supplement (the "Offer Docu- ments") (a) comply with Section 2 of the 1995 Decree on the Supervision of the Securities Trade (Besluit toezicht effectenverkeer 19951, (b) are submitted to the Netherlands Authority for the Financial Markets (Stichting Autoriteit Financiele Markten, the "Authority-FM") before the offer is made, and (c) are generally available as of the time when the offer is made; or the Offer Documents (a) have been approved by the competent authority as referred to in Arti- cle 20 or Article 21 of EC Directive 89/298/EEC, (b) are recognised by the Authority-FM, and (c) are generally available as of the time when the offer is made; and (ii) each announcement of the offer states where and when the Offer Documents will be or have been made generally available, and any such announcement made before the offer is made, is submitted to the Authority-FM before the applicable Pricing Supplement is published; and

194 (iii) if after the date of the Information Memorandum new relevant facts occur or are discovered, Section 6 of the Securities Decree is complied with: all provided that the offer is made within one year after the date of the Information Memorandum; or c. to persons who trade or invest in securities in the conduct of their profession or trade (which includes banks, securities intermediaries (including dealers and brokers), insurance companies, pension funds, other institutional investors and commercial enterprises which as an ancillary activity regularly invest in securities), provided that (i)the offer, the applicable Pricing Supplement and any announcements of the offer state that the offer is exclusively made to those persons and, (ii)a copy of the Offer Documents is submitted to the Authority-FM before the offer is made; or d. (in the case of Bertelsmann N.V. only) to persons who are established, domiciled or have their residence (collectively, "are resident") outside the Netherlands, provided that (i)the offer, the applicable Pricing Supplement and any announcements of the offer state that the offer is not and will not be made to persons who are resident in the Netherlands, (ii)the offer, the Offer Documents and any announcements of the offer comply with the laws and regulations of any State where persons to whom the offer is made are resident, (iii) a statement by Bertelsmann N.V. that those laws and regulations are complied with is submitted to the Authority-FM before the offer is made and is included in the applicable Pricing Supplement and any such announcements; or e. if those Notes have a denomination of at least C 45,378.02 (or its foreign currency equivalent): or f. if: (i) those Notes qualify as Euro-securities (Euro-effecten)(which they do if (a) they are subscribed for and placed by a syndicate of which at least two members are established in different States party to the Agreement on the European Economic Area, (b) at least 60% of those Notes are placed by syndicate members established in one or more states other than the state where the relevant Issuer is established, and (c) the Notes may only be subscribed for or initially be purchased through a credit institution or another institution which in the conduct of its business or profession provides one or more of the services referred to under 7 and 8 of the Annex to the EC Second Council Directive 89/646/EEC); and (ii)no general advertising or canvassing campaign is conducted in respect of the Notes anywhere in the world; or g. otherwise in accordance with the Dutch 1995 Act on the Supervision of the Securities Trade (Wet toezicht effectenverkeer 7995). In addition, Bearer Zero Coupon Notes and other Notes which qualify as savings certificates as defined in the Dutch Savings Certificates Act (Wet inrake spaarbewijzen) may only be transferred or accepted through the mediation of either the Issuer or an admitted institution of Euronext Amsterdam N.V. with due observance of the Savings Certificates Act and its implementing regulations (including registration requirements), provided that no mediation is required in respect of (i) the initial issue of those Notes to the first holders thereof, (ii) any transfer and delivery by individuals who do not act in the conduct of a profession or trade, and (iii)the issue and trading of those Notes, if they are physically issued outside the Netherlands and are not distributed in the Nether- lands in the course of primary trading or immediately thereafter.

6. Japan

Each Dealer has acknowledged that the Notes have not been and will not be registered under the Securities and Exchange Law of Japan (the "Securities and Exchange Law"). Each Dealer has represented and agreed that it will not offer or sell any Notes, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organised under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan except only pursuant to an exemption which will result in compliance with the Securities and Exchange Law and any applicable laws, regulations and guidelines of Japan.

195 Authorisation

The establishment of the Programme and the issue of Notes (and in the case of the Guarantor, the giving of the guarantee) have been duly authorised by resolutions of the Management Board of Bertelsmann AG dated November 20, 2001, the Board of Directors of Bertelsmann Capital Corpora- tion N.V. dated January 17, 2002 and the Board of Directors of Bertelsmann U.S. Finance, Inc. dated March 1,2002.

Listing of the Notes

The Notes to be issued under the Programme are admitted on the Frankfurt Stock Exchange for listing with official quotation. Notes which are suitable with regard to currency and other specific conditions may be officially quoted on such Exchange. The Issuer anticipates that only Series of Notes which are denominated in Euro will be so quoted on said Stock Exchange.

Application has been made to list Notes issued under the Programme on the Luxembourg Stock Exchange. A legal notice relating to the Programme and the constitutional documents of the Issuers are being lodged with the Registrar of the District Court in Luxembourg (Greffier en Chef du Tribunal darrondissement de et a Luxembourg) where such documents may be examined and copies obtained. The Luxembourg Stock Exchange has allocated the number 12731 to the Programme for listing purposes.

As long as any Notes remain outstanding, a Luxembourg Paying Agent will be appointed.

Documents Incorporated by Reference (7

The following documents published or issued from time to time after the date hereof shall be deemed to be incorporated in, and to form part of, this Information Memorandum: (a) the published audited consolidated (forthe last two fiscal years, June 30,20OI/December 31,2001) and non-consolidated (for the last two fiscal years, December 31,20OO/December 31,2001) annual financial statements of Bertelsmann AG; (b)the published audited non-consolidated annual financial statements (for the last two fiscal years, June 30,20Ol/December 31,2001) of Bertelsmann Capital Corporation N.V.; (c) the published audited non-consolidated annual financial statements (for the last two fiscal years, June 30,20Ol/December 31,2001) of Bertelsmann U. S. Finance, Inc.; (d) all supplements or amendments to this Information Memorandum circulated by any Issuer and/or Guarantor from time to time: and (e) in relation to each Tranche of Notes, the Pricing Supplement relating to such Tranche, save that any statement contained herein or in a document which is deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purpose of this Information Memorandum to the extent that a statement contained in any such subsequent document which is deemed to be incorporated by reference herein modifies or supersedes such earlier statement (whether expressly, by implication or otherwise). Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Information Memoran- dum.

The Issuers do not publish any interim reports.

The Issuers and the Guarantor will provide, without charge, to each person to whom a copy of this Information Memorandum has been delivered, upon the request of such person, a copy of any or all of the documents deemed to be incorporated herein by reference unless such documents have been modified or superseded as specified above. Requests for such documents should be directed to Ber-

(*) Incorporation by reference in this Information Memorandum applies - in accordance with its rules and regulations - to the listing on the Luxembourg Stock Exchange only.

196 telsmann AG at its office set out at the end of this Information Memorandum. In addition, such documents will be available free of charge from the principal office in Luxembourg of Deutsche Bank Luxembourg S.A. (the "Listing Agent") for Notes listed on the Luxembourg Stock Exchange.

If the terms of the Programme are modified or amended in a manner which would make this Informa- tion Memorandum, as so modified or amended, inaccurate or misleading, a new Information Mem- orandum will be prepared.

U nderta ki ng

Each of the Issuers and the Guarantor have undertaken, in connection with the listing of the Notes, that if, while Notes of an Issuer are outstanding and listed on the Frankfurt Stock Exchange and/or on the Luxembourg Stock Exchange, there shall occur any adverse change in the business, financial position or otherwise of such Issuer that is material in the context of Issuance under the Programme which is not reflected in the Information Memorandum (or any of the documents incorporated by reference in the Information Memorandum), such Issuer and Guarantor will prepare or procure the preparation of an amendment or supplement to the Information Memorandum or, as the case may be, publish a new Information Memorandum for use in connection with any subsequent offering by such Issuer of Notes to be listed on the Frankfurt Stock Exchange and/or Luxembourg Stock Exchange.

Documents Available

So long as Notes are capable of being issued under the Programme, copies of the following documents will, when published, be available from the registered office of the relevant Issuer and from the specified offices of the Paying Agents for the time being in Frankfurt am Main and Luxembourg: (i) the constitutional documents (with an English translation where applicable) of each of the Issuers; (ii) the audited consolidated (in respect of the last financial years, June 30, 2001JDecember 31, 2001) and non-consolidated annual financial statements of Bertelsmann AG in respect of the financial years ended December 31, 2000, the year ended December 31, 2001 and any future annual financial statement (with an English translation thereof); (iii) the audited non-consolidated annual financial statements of Bertelsmann Capital Corporation N.V. in respect of the financial years ended June 30, 2001, the year ended December 31, 2001 and any future annual financial statement (with an English translation thereof); (iv) the audited non-consolidated annual financial statements of Bertelsmann U. S. Finance, Inc. in respect of the financial years ended June 30,2001, the year ended December 31,2001 and any future annual financial statement (with an English translation thereof);

(VI the Dealer Agreement, the Fiscal Agency Agreement and the Procedures Memorandum; (vi) a copy of this Information Memorandum; (vii) any future information memoranda, prospectuses and supplements including Pricing Supple- ments (save that a Pricing Supplement relating to an unlisted Note will only be available for inspection by a holder of such Note and such holder must produce evidence satisfactory to the relevant Issuer and the Paying Agent as to its holding of Notes and identity) to this Information Memorandum and any other documents incorporated herein or therein by reference; and (viii) in the case of each issue of listed Notes subscribed pursuant to a subscription agreement, the subscription agreement (or equivalent document).

Any documents referring to the Issues and named in this Information Memorandum and not listed above, will also be available at the offices of the relevant Issuers and Paying Agents.

197 Clearing Systems

The Notes have been accepted for clearance through Clearstream Banking AG, Frankfurt am Main ("CBF "), Clearstream Banking societe anonyme, Luxembourg ("CBL") and Euroclear Bank S.A./N.V. as operator of the Euroclear system ("Euroclear"). The appropriate German securities number ("WKN ") (if any), Common Code and ISlN for each Tranche of Notes allocated by CBF, CBL and Euro- clear will be specified in the applicable Pricing Supplement. If the Notes are to clear through an additional or alternative clearing system the appropriate information will be specified in the applicable Pricing Supplement.

Significant or Material Change

Save as disclosed in this Information Memorandum, there has been no significant change in the financial or trading position of any Bertelsmann AG or the Bertelsmann Group and there has been no material adverse change in the financial position or prospects of any of Bertelsmann or the Bertels- mann Group since December 31,2001.

Save as disclosed in the Information Memorandum, there has been no significant change in the financial or trading position of Bertelsmann N.V. and Bertelsmann U. S. and there has been no material adverse change in the financial position or prospects of Bertelsmann N.V. and Bertelsmann U.S. since its date of incorporation.

Litigation

There are no, nor have there been (within the last two fiscal years) any legal or arbitration proceedings (including any proceedings which are pending or threatened of which the Issuers are aware) which may have or have had in the 12 months preceding the date of this document a significant effect on the financial position of Bertelsmann AG, Bertelsmann N.V. and Bertelsmann U.S.

GuterslohlAmsterdamNVilmington, June 2002

Bertelsmann AG Bertelsmann Capital Corporation N.V. Bertelsmann U.S. Finance, Inc.

198 Aufgrund des vorstehenden Prospekts sind unter dem f 3.000.000.000 Debt Issuance Programme der Bertelsmann AG Gutersloh, Bundesrepublik Deutschland als Emittentin und Garantin fur Schuldverschreibungen der Bertelsmann Capital Corporation N.V. Amsterdam, The Netherlands Bertelsmann U.S. Finance, Inc. Wilmington, USA begebene Schuldverschreibungen gemal3 § 44 Borsenzulassungs-Verordnung an der Frankfurter Wertpapierborse zum Handel mit amtlicher Notierung zugelassen worden.

Frankfurt am Main, im Juni 2002

Deutsche Bank Aktiengesellschaft

ABN AMRO BANK N.V. Com merz bank Credit Suisse First Boston Aktiengesellschaft (Europe) Limited

Dresdner Bank J.F? Morgan Securities Ltd. Merrill Lynch Aktiengesellschaft Capital Markets Bank Ltd.

Salomon Brothers UBS Warburg AG International Limited

199 THE ISSUERS Bertelsmann AG Carl-Bertelsmann-Strasse 270 D-33311 Gutersloh

Bertelsmann Capital Corporation N. V. Laanakkerweg 16 NL-4131 Vianen

Bertelsmann U. S. Finance, Inc. 1540 Broadway New York, N.Y. 10036

ISSUING AND PRINCIPAL PAYING AGENT Deutsche Bank Aktiengesellschaft Grosse Gal Iusstrasse 10-1 4 D-60272 Frankfurt am Main

PAYING AGENT Deutsche Bank Luxembourg S.A. 2 Boulevard Konrad Adenauer L-1115 Luxembourg

LISTING AGENT Deutsche Bank Luxembourg S.A. 2 Boulevard Konrad Adenauer L-I115 Luxembourg

LEGAL ADVISERS

To the Dealers as to German law

Hengeler Mueller Bockenheimer Landstrasse 51 D-60325 Frankfurt am Main

To the Dealers as to Dutch law De Brauw Blackstone Westbroek N.V. Tripolis 300 Burgerweeshuispad 301 NL-1076 HR Amsterdam Members of Linklaters +Alliance

To the Dealers as to U.S. law Cleary, Gottlieb, Steen + Hamilton Neue Mainzer Strasse 52 D-60311 Frankfurt am Main

200 AUDITORS TO THE ISSUERS

For Bertelsmann AG For Bertelsmann Capital Corporation N. k

KPMG Deutsche Treuhand-Gesellschaft PricewaterhouseCoopers N. V. Aktiengesellschaft, Archimedeslaan 21 Wirtschaftsprufungsgesellschaft NL-3584 EA Utrecht Nikolaus-Durkopp Strasse 2a D-33602 Bielefeld

For Bertelsmann U. S. Finance, Inc.

KPMG Deutsche Treu hand-Gesellschaft Aktiengesellschaft, Wirtschaftsprufungsgesellschaft Nikolaus-Durkopp Strasse 2a D-33602 Bielefeld

ARRANGER

Deutsche Bank Aktiengesellschaft Grosse Ga Ilusstrasse 10-1 4 0-60272 Frankfurt am Main

DEALERS

Deutsche Bank Aktiengesellschaft G rosse Ga Ilusstrasse 10-1 4 D-60272 Frankfurt am Main

ABN AMRO Bank N.V. Commerzbank Aktiengesellschaft 250 Bishopsgate 60 Gracechurch Street London EC2M 4AA London EC3V OHR

Credit Suisse First Boston (Europe) Limited Dresdner Bank Aktiengesellschaft One Cabot Square Jurgen-Ponto-Platz 1 London E14 4QJ D-60301 Frankfurt am Main

J. I? Morgan Securities Ltd. Merrill Lynch International 125 London Wall Merrill Lynch Financial Centre London EC2Y 5AJ 2 King Edward Street London EClA 1HQ

Salomon Brothers International Limited UBS AG, acting through its business group Citigroup Centre UBS Warburg 33 Canada Square 1 Finsbury Avenue London E14 5LB London EC2M 2PP ’