Bertelsmann operates in the core business fields of media and services in around 50 countries worldwide. Its geographic core markets are in Western Europe, in particular Germany, France, the UK and Spain, as well as in the United States. In addition, Bertelsmann is strengthening its involvement in growth markets such as China, India and Brazil. Bertelsmann’s divisions are RTL Group, with television, radio and television production operations; the book publishing group Penguin Random House; the magazine publisher Gruner + Jahr; the international service provider Arvato and the international printing group Be Printers. Bertelsmann’s other operating activities are grouped under Corporate Investments. Among others, these include the music rights company BMG and the remaining club and direct marketing businesses. In addition, the funds Bertelsmann Digital Media Investments (BDMI) and Bertelsmann Asia Investments (BAI), as well as other fund activities in the education sector and in the growth regions, are allocated to Corporate Investments.

Bertelsmann SE & Co. KGaAA partnership limited by shares (KGaA) with a European stock corporation (Societas Europaea, or SE) as the personally liable partner. The personally liable partner is responsible for the management and representation of the KGaA. is a capital-market-oriented but unlisted partnership limited by shares. As a Group holding company, it exercises central corporate functions. Internal corporate management and reporting follow the Group’s organizational structure, which consists of the operating divisions plus the Corporate Investments and Corporate Center.

Three foundations (Bertelsmann Stiftung, Reinhard Mohn Stiftung and BVG-Stiftung) indirectly hold 80.9 percent of Bertelsmann SE & Co. KGaA shares, with the remaining 19.1 percent held indirectly by the Mohn family. Bertelsmann Verwaltungsgesellschaft (BVG) controls all of the voting rights at the Bertelsmann SE & Co. KGaA and Bertelsmann Management SE General Meeting.

As an international media and services company, Bertelsmann develops offerings that excite people around the world and provide customers with innovative solutions. Bertelsmann occupies leading market positions in its core sectors of television, books, newspapers, services and print. Bertelsmann’s primary objective is continuous growth of the company’s value through a sustained increase in profitability (see section “Value-Oriented Management System”).

Bertelsmann aims to achieve a more rapidly growing digital and international portfolio with an overall broader revenue structure. In the medium term, the company’s two main earnings pillars at present, Media and Services, will be supplemented by a third pillar, Education. Against this backdrop, a strategy was defined on the basis of four directions: strengthening the core businesses, driving the digital transformation forward, developing growth platforms and expanding into growth regions.

In the first half of 2014 and in the following two months, Bertelsmann made significant progress with all four strategic directions. Strengthening the core businesses was achieved, e.g., through investment and acquisitions. For example, RTL Group further expanded its family of channels. Penguin Random House took over the Spanish and Portuguese-language book business from Santillana. The scaling back of structurally declining businesses was continued by the gradual withdrawal from the book club businesses in Germany and Spain and the sale of the US print business Brown Printing. The digital transformation was intensified through acquisitions such as RTL Group’s majority share in SpotXchange, a marketing platform for online videos, and the growth of existing digital businesses such as the expanded e-book range offered by Penguin Random House. The growth platforms were expanded further. RTL Group secured a majority share in the TV production company 495 Productions, Arvato took over Netrada in the e-commerce services segment and BMG acquired the music publisher Talpa Music and the music catalogs Montana and Hal David. With an investment commitment as a strategic investor in the University Ventures Fund II, Bertelsmann is continuing to drive forward the expansion of its education business. In view of regional expansion, the music rights subsidiary BMG entered the Chinese market. In India, Bertelsmann acquired shares in the e-commerce platform Pepperfry and invested in an Indian digital fund. Together with a Brazilian investment company Bertelsmann also set up a new ventures capital fund focusing on technologies in the education sector in Brazil.

In order to manage and control the Group, Bertelsmann uses revenue, operating EBITDAEarnings before interest, taxes, depreciation, amortization and special items. and Bertelsmann Value Added (BVA)A performance indicator for assessing the profitability of operations and return on invested capital. The BVA is the difference between net operating profit after tax (NOPAT), defined as operating EBIT adjusted for a flat 33-percent tax, and cost of capital. Cost of capital is the product of the weighted average cost of capital (a uniform 8 percent after taxes) and invested capital (operating assets less non-interest-bearing operating liabilities). as strictly defined central performance indicators to directly assess business development; these correspondingly form the basis of the outlook report. In view of the Bertelsmann Group’s growth strategy and the associated expansion of its investment activity, operating EBITDA has been used as a central performance indicator since the start of the 2014 financial year for determining the operating earnings power. Operating EBITDA is determined as earnings before interest, tax, depreciation and amortization and is adjusted for special itemsIncome and expense items which are distinguished by their nature, amount or frequency of occurrence, and the disclosure of which is relevant for assessing the earnings power of the company or its segments in the period affected. They include, for example, restructuring measures, impairments and capital gains or losses.. This makes it a meaningful key performance indicator for determining a sustainable operating result.

Revenue as a growth indicator of businesses increased significantly in the first half of 2014 by 6.7 percent to €7.8 billion (H1 2013: €7.4 billion). Operating EBITDA of €1,015 million during the reporting period was above the previous year’s figure (H1 2013: €1,011 million).

The central performance indicator for assessing the profitability from operations and return on invested capital is BVA. BVA measures the profit realized above and beyond the appropriate return on invested capital. This form of value orientation is reflected in strategic investment and portfolio planning and the management of Group operations and is the basis for management compensation. BVA is calculated as the difference between net operating profit after tax (NOPAT) and the cost of capital. NOPAT is calculated as operating EBITEarnings before interest, taxes and special items. less a standard 33 percent flat rate of tax. Cost of capital is the product of the weighted average cost of capital and the level of capital invested. The uniform weighted average cost of capital after taxes is 8 percent. Invested capital is calculated on the basis of the Group’s operating assets less non-interest-bearing operating liabilities. The present value of operating leases is also taken into account when calculating the invested capital. BVA was €4 million in the first half of 2014 (H1 2013: €102 million). The decline is primarily attributable to the increase in invested capital as a result of the increased acquisition activity.

Bertelsmann’s management and controlling system also includes the internal financial targets outlined under “Net Assets and Financial Position.” The Group is managed and controlled on the basis of these financing principles and they form part of the value-oriented management system in the broader sense of the term, along with the EBITDA margin, the Cash Conversion Rate and non-financial performance indicators.

The gradual recovery of the global economy continued despite a slight weakness in the first quarter of 2014.

The economic upturn in the euro zone remained modest once more at the start of 2014. Compared to the previous quarter, real gross domestic product (GDP) in the euro zone rose by 0.2 percent in the first quarter of 2014 according to the Statistical Office of the European Union. Growth stagnated in the second quarter of 2014.

The economic situation in Germany improved during the first months of the current financial year. Compared to the previous quarter, real GDP rose by 0.7 percent in the first quarter of 2014, according to the Federal Statistical Office. In view of weaker foreign trade and a decline in investments, real GDP fell by -0.2 percent in the second quarter of 2014 compared to the previous quarter.

The French economy recorded zero growth in the first half of 2014. According to Insee, the French Statistical Office, real GDP in France stagnated in both the first and second quarters of 2014 compared to the previous quarters. France is suffering from high unemployment, which is undermining private consumption.

Projected over the whole year and in view of an unusually harsh winter, real GDP in the United States declined at an annual rate of -2.1 percent in the first quarter of 2014. According to the Bureau of Economics, real GDP is set to grow by an annualized rate of 4.0 percent in the second quarter.

So far, the overall economic developments are within the current-year trend anticipated in the 2013 Group Management Report.

The European TV advertising markets largely grew in the first six months of 2014. In particular, the TV advertising markets in the Netherlands, Spain and Croatia recorded significant growth in the reporting period. The German TV advertising market showed positive development, whereas the French TV advertising market declined.

Overall, the book markets in the United States, UK and Germany remained largely stable. Both in the United States and in the UK, the physical book trade developed largely in line with the previous year’s level, while in Germany this market declined. On the other hand, the e-book business continued to grow, albeit at a slower pace.

The advertising and circulation markets for consumer magazines declined in the first half of 2014 in Europe and in China as a result of increased structural change and a shift of advertising budgets.

The service markets for Customer Relationship ManagementCustomer Relationship Management (CRM) is a strategic approach which establishes, maintains and reinforces companies’ customer relationships using state-of-the-art information and communication technologies., Supply Chain ManagementSupply Chain Management (SCM) is a strategic approach which uses integrated logistics chains to establish, implement and optimize the organization of all logistics processes from companies to end customers., Financial Solutions, IT Solutions and Digital Marketing grew in the first six months of 2014. However, the storage media markets fell significantly due to the increasing significance of electronic means of distribution.

The European print markets for magazines, catalogs and promotional materials continued to shrink and were dogged by persistent price and volume competition.

So far, the developments in the relevant markets are essentially within the current-year trend anticipated in the 2013 Group Management Report.

On February 1, 2014, Arvato acquired major parts of the business operations of the German Netrada Group and has since been combining both companies’ e-commerce operations. As a result of the takeover, Arvato has become one of the leading European service providers for e-commerce services and, at the same time, benefits from Netrada’s strong position in the growing fashion and lifestyle market segment. The range of services includes the development and operation of web shops, financial services, transport and logistics as well as customer service.

Likewise in February 2014, BMG acquired 100 percent of the Dutch music publisher Talpa Music B.V. As a result of the acquisition, BMG is becoming one of the leading publishers of local repertoire in the Benelux countries.

Based on an investment commitment announced at the end of March 2014, the education business will be further expanded. Bertelsmann is now a strategic investor in the University Ventures Fund II, a fund that is managed by experienced entrepreneurs and investors from the education segment. Bertelsmann is already the anchor investor in the predecessor fund University Ventures Fund I, which invests in innovative education providers in the United States and Europe and has also founded individual companies.

On May 30, 2014, Gruner + Jahr completed the sale of its US print business Brown Printing Company to Quad/Graphics, Inc for strategic reasons.

In June 2014, Bertelsmann announced that the German-speaking club businesses will be gradually closed down by the end of 2015 due to a lack of economic prospects. In addition, Bertelsmann divested itself of its shares in the book club Círculo de Lectores in Spain. The shares were taken over by the Spanish publisher Grupo Planeta, which has held half of the shares in the Spanish book club since 2010. The business was closed at the end of July 2014.