Bertelsmann Continues on Growth Course in First Half of 2006

• Acquisitions and operating strength boost revenues by 14.5 percent to €9.1 billion
• Operating EBIT grows by 8.9 percent to €701 million
• Number of employees rises to 92,772
• Restrained investment policy through the end of 2007 after share buyback
• Up to 10 percent increase in revenues and results expected for full fiscal year

Bertelsmann continued on its expansionist course during the first half of the 2006 fiscal year, increasing both its revenues and its operating profit. The international media company announced on Wednesday that revenues grew by 14.5 percent to €9.1 billion (H’1/2005: €8.0 billion) due to acquisitions and a strong operating performance. Organic growth improved year-on-year to 4.0 percent (H’1/2005: 1.2 percent). Operating EBIT for the period under review grew by 8.9 percent year on year to €701 million (H’1/2005: €644 million). The main contributors to this growth were RTL Group with improved TV advertising sales and a thriving TV production business, and Direct Group, which improved performance in all its lines of business (primarily book and music clubs). The book business Random House and the media and communications services provider Arvato remained stable at a high earnings level, while operating profits at Gruner + Jahr were slightly below previous year. In the music division BMG, a very positive performance in publishing only partly cushioned a marked decline in the recorded music business, where numerous album releases scheduled for the second half will increase business performance. In general, the second half of the year is traditionally stronger in the media business.

Gunter Thielen, Chairman and CEO of Bertelsmann AG, said: “Bertelsmann started the year with a great deal of momentum. Our business is going well; last year’s investment offensive is bearing results. Our multifaceted portfolio and broad international presence puts us in an excellent position to generate profit-oriented growth. We will actively pursue the opportunities offered by rapid technological progress in the media sector. For example, we are setting up a Venture Capital fund, initially endowed with €50 million, designed to ensure direct access to emerging technologies and businesses.”

Bertelsmann’s net income for the first half-year was €339 million, after €330 million last year, which included one-time positive tax items. Dynamic growth in the group’s operations led to an increase in the number of employees to 92,772 as of June 30, 2006 (December 31, 2005: 88,516).

The buyback of Groupe Bruxelles Lambert’s (GBL) 25.1-percent stake in Bertelsmann for €4.5 billion, agreed to in May 2006, increased the group’s economic debt to €8.7 billion as of June 30, 2006 (December 31, 2005: €3.9 billion). The sale of the music publishing business, a strong flow of funds from operations, a restrained investment policy at present, and a moderate dividend policy will contribute to a rapid repayment of the debt.

Following a roadshow scheduled for next week and depending on market conditions, Bertelsmann will issue a benchmark-sized Eurobond to partially repay the bridge loan taken to finance the share buyback. The mandated banks are Barclays Capital, BNP Paribas, Deutsche Bank, and RBS.

Thomas Rabe, Chief Financial Officer of Bertelsmann AG, stated: “We are confident that by the end of 2007 we will again have achieved our internal financing targets. Consequently, given the reaction we have so far had from the capital markets and the rating agencies, this means that by 2008 we should be in a position where, once again, we have at our disposal €1 billion per year. For the current fiscal year we can confirm our forecast of an increase of up to 10 percent in both revenue and profits, giving Bertelsmann another record year.”

Corporate Divisions:

RTL Group (Revenues: €2.9 billion; Operating EBIT: €471 million), Europe’s leading television and radio broadcaster and TV production firm recorded a sharp increase in revenues and profits during the first half of 2006. This growth was due mainly to improved ad sales in all key European markets except the U.K. In particular, RTL Television in Germany and M6 in France increased their advertising income. RTL Netherlands kept its market share stable and posted a considerable profit increase despite a new competitor in the Dutch TV market. The production arm Fremantle Media also made a significant contribution to the increase in revenues and earnings, with popular formats such as “Idol,” “Quizmania,” and “The X-Factor.” M6 managed to underscore its pioneering role in building diversification businesses: Additional businesses such as M6 Mobile, the mobile service that was successful from the beginning and now has over half a million subscribers, represent a steadily growing share of non-advertising revenue.

Random House (Revenues: €859 million; Operating EBIT: €48 million), the world’s largest trade book publishing group, increased its first-half revenues, despite a book market that continues flat, and kept operating profits stable. This was due mainly to year-on-year performance improvements in North America and Germany and a continued high level of profitability in the United Kingdom. In the U.S., Random House had more #1 New York Times bestsellers in the first six months of 2006—twenty-four—than in all of 2005. In the U.K., Random House titles accounted for over 25 percent of the rankings on the Sunday Times of London bestseller lists. The record-breaking sale of Dan Brown’s „The Da Vinci Code“ continued with seven million copies in print of the movie tie-in paperback edition in North America and the U.K. alone. Verlagsgruppe Random House’s business in Germany expanded with the purchase of Gerth Media and the first-time inclusion of books published by the DVA, Kösel, and Manesse imprints acquired last year.

Gruner + Jahr (Revenues: €1.4 billion; Operating EBIT: €111 million), Europe’s leading magazine publisher, reported visible revenue growth; the first-half operating result remained below that of the previous year. Revenues from the division’s largely stable core business increased in Germany and beyond, due to the inclusion of Motor Presse and Prinovis, the gravure joint venture operated with Arvato the Axel Springer AG, as well as due to new titles launched in 2005, such as “Park Avenue,” “View” and “Healthy Living” in Germany and “Glamour” in the Netherlands. The publishing group continued its growth offensive with new launches in the first half of 2006, adding more international publications to the GEO family, and launching the women’s magazine “emotion” in Germany. Though Operating EBIT was impacted by start-up losses from new launches and by intensified competition in the printing sector, the gratifying profit performance of established titles in Germany and France essentially offset this.

In the BMG division (Revenues: €888 million; Operating EBIT: €2 million), consisting of Bertelsmann’s 50 percent stake in Sony BMG and the BMG Music Publishing unit, which is currently up for sale, revenues and profits were below previous year. The very positive performance of the publishing business only partly offset a significant decline in the recorded music business that is the result of market deterioration and the delay of key releases to the second half. These releases by international artists in the second half will have a positive impact on the business. Considerable cost savings achieved by the joint venture cushioned the margin decline, but could not wholly offset it. The contribution of digital business to Sony BMG’s total revenue has nearly doubled since last year to approximately 13 percent.

Arvato (Revenues: 2.2 billion €; Operating EBIT: 96 million €), the media and communications services division, increased its revenues substantially and posted stable operating profits in a difficult market environment. Revenues grew based on organic strengths as well as portfolio effects, such as the consolidation of Prinovis and the Infoscore group. The services sector benefited from heightened demand in the service center arena, resulting in an excellent performance in France and gratifying customer loyalty sales in Germany. This was underscored by the continuing trend toward outsourcing communications and logistics services. Business in the Benelux region and in mobile phone repairs is slightly more difficult at present. The printing arm did well in a competitive market. Though results at the printers in the U.S. and Italy and at Prinovis were impacted by high pricing pressures and surplus capacity; this was offset by good business at Mohn Media.

Direct Group (Revenues: €1.3 billion; Operating EBIT: €13 million) posted a sizeable increase in revenues and profits, with all business units contributing to the rise in earnings. The division’s expansionist course was boosted by acquisitions; adjusted, its revenues declined slightly. Cost management and the swift integration of acquisitions led to the division’s much-improved profitability. In Europe, Direct Group managed to enhance its position as a leading retailer of books. In spring, France Loisirs acquired the Forum Alsatia bookselling chain. In Portugal, Direct Group’s purchase of the Bertrand chain of shops (effective July 1, 2006) made it the country’s leading bookseller. The combining of clubs and book retail opens up new customer pools for Direct Group with its roughly 35 million club members all over the world. In the U.S., the merger of the DVD specialist retailer Columbia House with the BMG Direct music club was achieved quickly and cost-effectively.

Figures at a Glance (in € millions)

	Jan 1, 2006 to Jun 30, 2006	Jan 1, 2005 to Jun 30, 2005
Group revenues	9,144	7,988
Operating EBIT by divisions Corporate/Consolidation	741 (40)	682 (38)
Operating EBIT	701	644
Special items	(8)	(80)
EBIT (Earnings before interest and taxes)	693	564
Net interest	(57)	(40)
Other financial expenses	(115)	(107)
Income taxes	(182)	(87)
Net income	339	330
of which: Share of profit of Bertelsmann shareholders	243	224
of which: Minority interest	96	106

Investments

553

765

	At Jun 30, 2006	At Dec 31, 2005
Economic Debt*	8,723	3,931
Employees	92,772	88,516

Definition of Operating EBIT: Operating EBIT refers to earnings before interest, taxes and special items.

* Net financial debt plus provisions for pensions, profit participation capital and purchase price for the GBL stake.

* BMG division up for sale in H’2/2006

About Bertelsmann AG

The media company Bertelsmann commands globally leading positions in the major markets. Its core business is the creation of first-class media content. Bertelsmann includes RTL Group, Europe’s No.1 in television and radio, as well as the world’s biggest book-publishing group, Random House, with more than 100 publishing imprints (Alfred A. Knopf, Bantam, Goldmann). Gruner + Jahr, the European No.1 in magazine publishing (Stern, Geo, Capital) and the BMG music division – comprised of the Sony BMG joint venture (Anastacia, Alicia Keys, Beyoncé, Dido, Usher) and BMG Music Publishing – also stand for creativity and powerful brands. The Arvato division bundles the group’s media and communications services, which include the expanding units Arvato Logistics Services and Arvato Direct Services (distribution, service centers, customer relationship management), along with state-of-the-art printers, storage media production and comprehensive IT-services. Bertelsmann’s direct-to-customer businesses are bundled in Direct Group: book and music clubs with more than 35 million members all over the world.

For further questions, please contact:

Andreas Grafemeyer

Senior Vice President Media Relations

Phone: +49 – 52 41 – 80 24 66

andreas.grafemeyer@bertelsmann.de

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