General Statement by Company Management on the Economic Situation

2015 was a successful year for Bertelsmann. The Group improved its revenues, Operating EBITDA and in particular the Group profit year on year and also exceeded the expectations stated at the beginning of the year. Bertelsmann also made significant progress in its strategic transformation into a faster-growing, more digital and more international Group.

In the reporting period, Group revenues rose 2.8 percent to €17.1 billion (previous year: €16.7 billion). The revenue development was ahead of expectations in particular thanks to the positive exchange rate effects (outlook in 2014 Annual Report: stable revenue development/adapted outlook in 2015 Interim Report: slight increase). Operating EBITDA of €2,485 million (previous year: €2,374 million) was moderately above the previous year (outlook in 2014 Annual Report: slight increase/ adapted outlook in 2015 Interim Report: moderate increase). At €155 million, the BVA used for Group management was strongly below the previous year’s figure of €188 million (outlook in 2014 Annual Report: strongly declining BVA). The expected development reflects the strong increase in average invested capital, which is primarily due to acquisitions and exchange rate developments.

Bertelsmann’s four strategic priorities – strengthening the core businesses, driving the digital transformation forward, developing growth platforms, and expanding into growth regions – continued to be the focus. Besides the expansion of the families of channels at RTL Group, the positive integration of Penguin and Random House and the modernization and expansion of Gruner + Jahr’s magazine portfolio, it was the restructuring of Arvato and the bundling of the print businesses in the Bertelsmann Printing Group as of January 1, 2016, which helped to strengthen the core businesses. As part of the digital transformation, RTL Group continued to expand its online video offering and also bundled the participations in the multichannel networks and digital advertising marketing in the RTL Digital Hub. Penguin Random House remains the global market leader in the e-book sector, and Gruner + Jahr expanded its digital content and advertising marketing offerings organically and through acquisitions. The growth platforms were reinforced in the education segment – in particular through the organic and acquisitive expansion of Relias Learning, the increase in the share of the online education provider Udacity and the acquisition of participations in the online education technology provider HotChalk and Alliant International University – and bundled in the newly established Bertelsmann Education Group. Bertelsmann also made progress in China, India and Brazil with investments in a large number of startups in particular.

The net assets and financial position improved over the last financial year. In particular, the financial profile was optimized through the issuance of two hybrid bonds with a total volume of €1.25 billion. As of December 31, 2015, the cash and cash equivalents reported at €1.3 billion represent sufficient liquidity. The ratings agencies Moody’s and S&P continued to rate Bertelsmann as “Baa1” and “BBB+,” respectively, with a stable outlook. Overall, Bertelsmann ended the financial year 2015 with a successful performance and has a solid financial basis.