Summary of TIME WARNER INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
INTRODUCTION
Management's discussion and analysis of results of operations and financial condition ("MD&A") is a supplement to the accompanying consolidated financial statements and provides additional information on Time Warner Inc.'s ("Time Warner" or the "Company") businesses, current developments, financial condition, cash flows and results of operations. MD&A is organized as follows:
• Overview. This section provides a general description of Time Warner's business segments, as well as recent developments the Company believes are important in understanding the results of operations and financial condition or in understanding anticipated future trends.

• Results of operations. This section provides an analysis of the Company's results of operations for the three and six months ended June 30, 2009. This analysis is presented on both a consolidated and a business segment basis. In addition, a brief description is provided of significant transactions and events that affect the comparability of the results being analyzed.

• Financial condition and liquidity. This section provides an analysis of the Company's financial condition as of June 30, 2009 and cash flows for the six months ended June 30, 2009.

• Caution concerning forward-looking statements. This section provides a description of the use of forward-looking information appearing in this report, including in MD&A and the consolidated financial statements. Such information is based on management's current expectations about future events, which are inherently susceptible to uncertainty and changes in circumstances. Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2008 (the "2008 Form 10-K"), as well as Item 1A, "Risk Factors," in Part II of this report, for a discussion of the risk factors applicable to the Company.

On March 12, 2009, the Company completed the legal and structural separation of Time Warner Cable Inc. ("TWC") from the Company. With the completion of the separation, the Company disposed of the Cable segment in its entirety and ceased to consolidate the financial condition and results of operations of TWC in its consolidated financial statements. Accordingly, the Company has presented the financial condition and results of operations of the Cable segment as discontinued operations in the accompanying consolidated financial statements for all periods presented.

TIME WARNER INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - (Continued) OVERVIEW
Time Warner is a leading media and entertainment company, whose major businesses encompass an array of the most respected and successful media brands. Among the Company's brands are HBO, TNT, CNN, AOL, People, Sports Illustrated and Time. The Company produces and distributes films through Warner Bros. and New Line Cinema, including The Hangover, The Dark Knight, Gran Torino and the Harry Potter films, as well as television series, including Two and a Half Men, The Mentalist, The Big Bang Theory, Gossip Girl and The Closer. During the six months ended June 30, 2009, the Company generated revenues of $13.754 billion (down 8% from $14.939 billion in 2008), Operating Income of $2.381 billion (down 5% from $2.518 billion in 2008), Net Income of $1.180 billion (down 25% from $1.563 billion in 2008) and Cash Provided by Operations from Continuing Operations of $2.128 billion (down 12% from $2.411 billion in 2008). Impact of the Current Economic Environment The current global economic recession has reduced the Company's visibility into long-term business trends and has adversely affected its businesses in the first half of 2009 and is currently expected to continue to adversely affect them during the remainder of 2009. For example, during the first half of 2009, the Company's Advertising revenues declined 15% compared to the similar period in the prior year. The Company currently expects Advertising revenues to continue to decline during the remainder of 2009 as compared to the similar period in 2008. Additionally, the current economic environment is adversely affecting the Company's Content revenues due to, among other things, reduced consumer spending on DVDs.
The significant losses in the market value of the Company's pension plan assets in 2008 have resulted in an increase in pension expense of approximately $40 million and $70 million, respectively, for the three and six months ended June 30, 2009 and are expected to result in an approximately $140 million increase in pension expense for the full year of 2009. Additionally, the strengthening of the U.S. dollar relative to significant foreign currencies to which the Company is exposed has negatively affected the Company's revenues and Operating Income by approximately $200 million and $30 million, respectively, for the three months ended June 30, 2009 and approximately $440 million and $100 million, respectively, for the six months ended June 30, 2009. If exchange rates remain at levels similar to those in the first half of 2009, the Company expects a continued negative impact on revenues and Operating Income during the remainder of 2009.
The Company continues to have strong liquidity to meet its needs for the foreseeable future. At June 30, 2009, the Company had $13.921 billion of unused committed capacity, including cash and equivalents and credit facilities containing commitments from a geographically diverse group of major financial institutions. See "Financial Condition and Liquidity" for further details regarding the Company's total committed borrowing capacity. Time Warner Businesses
Time Warner classifies its operations into four reportable segments:
Networks, Filmed Entertainment, Publishing and AOL.
Time Warner evaluates the performance and operational strength of its business segments based on several factors, of which the primary financial measure is operating income before depreciation of tangible assets and amortization of intangible assets ("Operating Income before Depreciation and Amortization"). Operating Income before Depreciation and Amortization eliminates the uneven effects across all business segments of noncash depreciation of tangible assets and amortization of certain intangible assets, primarily intangible assets recognized in business combinations. Operating Income before Depreciation and Amortization should be considered in addition to Operating Income, as well as other measures of financial performance. Accordingly, the discussion of the results of operations for each of Time Warner's business segments includes both Operating Income before Depreciation and Amortization and Operating Income. For additional information regarding Time Warner's business segments, refer to Note 11, "Segment Information." Networks. Time Warner's Networks segment is comprised of Turner Broadcasting System, Inc. ("Turner") and Home Box Office, Inc. ("HBO"). For the six months ended June 30, 2009, the Networks segment generated revenues of $5.771 billion (42% of the Company's overall revenues), $2.045 billion in Operating Income before Depreciation and

TIME WARNER INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - (Continued)
Amortization and $1.835 billion in Operating Income.
The Turner networks - including such recognized brands as TNT, TBS, CNN, Cartoon Network, truTV and HLN (formerly CNN Headline News) - are among the leaders in advertising-supported cable TV networks. For seven consecutive years, more primetime households have watched advertising-supported cable TV networks than the national broadcast networks. The Turner networks generate revenues principally from receipt of monthly subscriber fees paid by cable system operators, satellite distribution services, telephone companies and other distributors and from the sale of advertising. Key contributors to Turner's success are its continued investments in high-quality programming focused on sports, original and syndicated series, news, network movie premieres and animation leading to strong ratings and revenue growth, as well as strong brands and operating efficiencies. For the remainder of 2009, the Company anticipates that the difficult economic environment will continue to adversely affect Advertising revenues at Turner compared to the similar period in 2008.
HBO operates the HBO and Cinemax multichannel premium pay television programming services, with the HBO service ranking as the nation's most widely distributed premium pay television service. HBO generates revenues principally from monthly subscriber fees from cable system operators, satellite distribution services, telephone companies and other distributors. An additional source of revenues is the sale of its original programming, including Sex and the City, The Sopranos, Entourage, True Blood and Rome.
The Company's Networks segment recently has focused on international expansion, including Turner's fourth quarter 2007 acquisition of seven pay networks operating principally in Latin America and HBO's acquisitions of additional equity interests in HBO Asia and HBO South Asia during the fourth quarter of 2007 and first quarter of 2008, as well as the acquisition of an additional equity interest in the HBO Latin America Group, consisting of HBO Brasil, HBO Olé and HBO Latin America Production Services (collectively, "HBO LAG"), during the fourth quarter of 2008. These acquired businesses contributed revenues and Operating Income before Depreciation and Amortization of $245 million and $66 million, respectively, for the six months ended June 30, 2009 compared to $71 million and $7 million, respectively, for the six months ended June 30, 2008. In addition, during 2008 and the first half of 2009, Turner expanded its presence in Turkey, Germany, Korea and India. The Company anticipates that international expansion will continue to be an area of focus at the Networks segment for the foreseeable future.
Filmed Entertainment. Time Warner's Filmed Entertainment segment is comprised of Warner Bros. Entertainment Group ("Warner Bros."), one of the world's leading studios, and New Line Cinema Corporation ("New Line"). For the six months ended June 30, 2009, the Filmed Entertainment segment generated revenues of $4.966 billion (34% of the Company's overall revenues), $538 million in Operating Income before Depreciation and Amortization and $357 million in Operating Income.
The Filmed Entertainment segment has diversified sources of revenues within its film and television businesses, including an extensive film library and a global distribution infrastructure, which have helped it to deliver consistent long-term operating performance. To increase operational efficiencies and maximize performance within the Filmed Entertainment segment, in 2008 the Company reorganized the New Line business to be operated as a unit of Warner Bros. while maintaining separate development, production and other operations, and the Company incurred restructuring charges primarily related to involuntary employee terminations in connection with the reorganization. Beginning in the first quarter of 2009, Warner Bros. commenced a significant restructuring, primarily consisting of headcount reductions and the outsourcing of certain functions to an external service provider. As a result, the Company incurred restructuring charges of $31 million and $68 million during the three and six months ended June 30, 2009, respectively, and expects to incur additional restructuring charges of approximately $25 million during the remainder of 2009.
Warner Bros. continues to be an industry leader in the television business. For the 2008-2009 broadcast season, Warner Bros. produced more than 20 primetime series, with at least one series airing on each of the five broadcast networks (including Two and a Half Men, The Mentalist, The Big Bang Theory, Gossip Girl, ER and Smallville), as well as original series for several cable networks (including The Closer and Nip/Tuck). In addition, for the 2009-2010 broadcast season, Warner Bros. expects to produce more than 25 primetime series.

TIME WARNER INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - (Continued)
The Screen Actors Guild ("SAG"), which covers performers in feature films and filmed television programs and the producers of such content including the Company's Filmed Entertainment and Networks segments, recently ratified a new collective bargaining agreement, which became effective on June 10, 2009 and expires on June 30, 2011.
The sale of DVDs has been one of the largest drivers of the segment's profit over the last several years. The industry and the Company experienced a decline in DVD sales in 2008 and the first half of 2009 as growing consumer interest in high definition Blu-ray DVDs and the effect of increased electronic delivery only partially offset softening consumer demand for standard definition DVDs. Also contributing to the overall decline in DVD sales are several factors, including the general economic downturn in the U.S. and many regions around the world, increasing competition for consumer discretionary time and spending, piracy and the maturation of the standard definition DVD format.
Piracy, including physical piracy as well as illegal online file-sharing, continues to be a significant issue for the filmed entertainment industry. Due to technological advances, piracy has expanded from music to movies, television programming and interactive games. The Company has taken a variety of actions to combat piracy over the last several years, including the launch of new services for consumers at competitive price points, aggressive online and customs enforcement, compressed release windows and educational campaigns, and will continue to do so, both individually and together with cross-industry groups, trade associations and strategic partners.
The Company enters into co-financing arrangements with other companies as a way of securing funding for its films and mitigating risk. During 2008, one of the Company's largest co-financing partners informed the Company that difficulties in the credit markets had led to a delay in securing the financing necessary to fund the partner's 50% share (approximately $100 million) of the production costs on four films released during the second half of 2008. As a result, the Company accounted for these four films as if they were wholly owned. During the second quarter of 2009, this co-financing partner secured the necessary financing and funded its share of the 2008 production costs. Additionally, the co-financing partner has indicated that it intends to provide funding for up to five films to be released theatrically during 2009 and 2010. In connection with the co-financing partner's securing of financing, the Company agreed to advance the partner, in 2013, a percentage of the net present value of estimated future profit participations owed to the partner on all films co-financed with this partner through 2010. The delay in the partner's funding of its share of the 2008 production costs did not have a significant impact on the Company's results of operations for the three and six months ended June 30, 2009.
Publishing. Time Warner's Publishing segment consists principally of magazine publishing and related websites as well as a number of direct-marketing and direct-selling businesses. For the six months ended June 30, 2009, the Publishing segment generated revenues of $1.721 billion (12% of the Company's overall revenues), $156 million in Operating Income before Depreciation and Amortization and $70 million in Operating Income.
As of June 30, 2009, Time Inc. published 23 magazines in the U.S., including People, Sports Illustrated, Time, InStyle, Real Simple, Southern Living and Fortune, and over 90 magazines outside the U.S., primarily through IPC Media ("IPC") in the U.K. and Grupo Editorial Expansión ("GEE") in Mexico. The Publishing segment generates revenues primarily from advertising (including advertising on digital properties), magazine subscriptions and newsstand sales. Time Inc. also owns the magazine subscription marketer, Synapse Group, Inc. ("Synapse"), and the school and youth group fundraising company QSP, Inc. and its Canadian affiliate, Quality Service Programs Inc. (collectively, "QSP"). Advertising sales at the Publishing segment, particularly print advertising sales, continue to be significantly adversely affected by the current economic environment as evidenced by their continuing decline during the first half of 2009. Online advertising sales at the Publishing segment have also been adversely affected by the current economic environment, although, on a percentage basis, to a lesser degree than print advertising sales. Time Inc. continues to develop digital content, including the relaunch of RealSimple.com and the expansion of People.com and Time.com, as well as the expansion of digital properties owned by IPC and GEE. Online Advertising revenues were 12% of Time Inc.'s total Advertising revenues for both the three and six months ended June 30, 2009 compared to 9% for both the three and six months ended June 30, 2008. On July 16, 2009, Time Inc. completed the sale of its direct-selling division, Southern Living At Home, which sells home decor products through independent consultants at parties hosted in people's homes throughout the U.S.
AOL. AOL LLC (together with its subsidiaries, "AOL") is a leading global web services company with an extensive suite of brands and offerings and a substantial worldwide audience. Its business spans online content, products and services that it offers to consumers, publishers and advertisers. AOL is focused on attracting and engaging consumers and providing

TIME WARNER INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - (Continued) valuable online advertising services on both its owned and operated properties and third-party websites. As of June 2009, AOL has the largest display advertising network in terms of online consumer reach in the U.S. For the six months ended June 30, 2009, AOL generated revenues of $1.671 billion (12% of the Company's overall revenues), $526 million in Operating Income before Depreciation and Amortization and $315 million in Operating Income.
Historically, AOL's primary strategic focus was its dial-up Internet access services business, which operated one of the largest Internet subscription access services in the U.S. As broadband penetration in the U.S. increased, AOL experienced a decline, which it continues to experience, in subscribers to its access service. At the same time, online advertising experienced significant growth. In August 2006, AOL fundamentally shifted the primary strategic focus of its business from generating Subscription revenues to attracting and engaging Internet consumers and generating Advertising revenues. In connection with this shift, AOL began offering the vast majority of its content, products and services to consumers for free in an effort to attract and engage a broader group of consumers. While this strategic shift was announced in 2006, AOL is still in the process of completing this transition. Consequently, AOL's subscription access service remains an important source of its total revenues and cash flows.
The Company has been evaluating potential transactions involving, and structural alternatives for, AOL for some time, including the possibility of separating AOL's global web services and subscription access services businesses, which share infrastructure such as data centers and network operations centers. Historically, the global web services business had three units: (i) the first focused on content published on a variety of websites with related applications and services; (ii) the second focused on social networking, community and instant communications products and services; and (iii) the third focused on providing advertising services on both AOL's owned and operated properties and third-party websites. The subscription access services business included the AOL-branded Internet access service as well as the CompuServe and Netscape Internet access services.
In April 2009, Tim Armstrong was appointed AOL's Chairman and Chief Executive Officer, and he commenced a review of AOL's strategy and operations while the Company continued its evaluation of structural alternatives. The Company's evaluation resulted in the announcement on May 28, 2009 that it would move forward with plans for the complete legal and structural separation of AOL from Time Warner. Refer to "Recent Developments" for further details regarding the separation of AOL from Time Warner.
In connection with the strategic review conducted by Mr. Armstrong, which factored in the Company's decision to separate AOL from Time Warner, AOL has updated its organizational structure and developed the next phase in the strategic shift begun in 2006. AOL's strategy remains focused primarily on attracting and engaging Internet consumers and generating Advertising revenues, with the subscription access service managed as a valuable distribution channel for AOL's content, product and service offerings. As a result, AOL intends to continue to operate as a single integrated business rather than as two separate businesses.
AOL's strategy is to focus its resources on its core competitive strengths in web content production, local and mapping, communications and advertising networks while expanding the presence of its content, products and service offerings globally and on multiple platforms and digital devices. AOL also aims to reorient its culture and reinvigorate the AOL brand by prioritizing the consumer experience and making greater use of data-driven insights. AOL also aims to encourage innovation through the entrepreneurial environment of AOL Ventures.
AOL's business operations are focused on the following two areas:
• AOL Media. AOL seeks to be a global publisher of relevant and engaging online content by utilizing open and highly scalable publishing platforms and content management systems, as well as a leading online provider of consumer products and services.

AOL generates Advertising revenues from its owned and operated content, products and services, which are referred to as "AOL Media," through the sale of display and search advertising. AOL seeks to provide effective and efficient advertising solutions utilizing data-driven insights that help advertisers decide how best to engage consumers.

TIME WARNER INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - (Continued) AOL also generates revenues through its subscription access service. AOL views its subscription access service as a valuable distribution channel for AOL Media. AOL's access service subscribers are important users of AOL Media and engaging both present and former access service subscribers is an important component of its strategy. In addition, AOL's subscription access service will remain an important source of revenue and cash flow for AOL in the near term.

• Third Party Network. AOL also generates Advertising revenues through the sale of advertising on third-party websites and on digital devices, which are referred to as the "Third Party Network," and AOL markets these advertising services to advertisers and publishers under the brand "Advertising.com." AOL's mission is to provide an open and transparent advertising system that is easy-to-use and offers its publishers and advertisers unique and valuable insights. AOL seeks to significantly increase the number of publishers and advertisers utilizing the network.

AOL markets its advertising offerings on both AOL Media and the Third Party Network under the brand "AOL Advertising." During the first half of 2009, AOL's Advertising revenues were negatively affected by weakening global economic conditions, which contributed to lower demand from a number of advertiser categories. In addition, Advertising revenues on AOL Media were affected by downward pricing pressure on advertising inventory. During the remainder of 2009, the Company anticipates that these factors and trends may continue to negatively affect AOL's Advertising revenues.
Google Inc. ("Google") is, except in limited circumstances, the exclusive web search provider for AOL Media. In connection with these search services, Google provides AOL with a share of the revenues generated through paid text-based search advertising on AOL Media. For the six months ended June 30, 2009, Advertising revenues associated with the Google relationship (substantially all of which were generated on AOL Media) were $285 million. In addition, AOL sells search-based keyword advertising directly to advertisers on AOL Media through the use of a white-labeled, modified version of Google's advertising platform, for which AOL provides a share of the revenues generated through such sales to Google. Domestically, AOL has agreed, except in certain limited circumstances, to use Google's search services on an exclusive basis through December 19, 2010. Upon expiration of this agreement, AOL expects to continue to generate Advertising revenues by providing paid-search advertising on AOL Media, either through the continuation of its relationship with Google or an agreement with another search provider.
AOL views its subscription access service, which is offered to consumers in the U.S. for a monthly fee, as a valuable distribution channel for AOL Media content, product and service offerings. In general, subscribers to the subscription access service are among the most engaged consumers on AOL Media. However, the domestic AOL-brand access subscriber base has been declining, which has had an adverse impact on AOL's Subscription revenues. AOL's domestic AOL-brand access subscribers declined 1.1 million and 1.2 million in the six months ended June 30, 2009 and 2008, respectively. The continued decline in subscribers is the result of several factors, including the increased availability of high-speed broadband Internet connections, the fact that a significant amount of online content, products and services has been optimized for use with Internet broadband connections and the effects of AOL's strategic shift announced in 2006, which resulted in significantly reduced marketing efforts for its subscription access service, and the free availability of the majority of its products and services. AOL expects the net number of domestic AOL-brand access subscribers to continue to decline. Accordingly, because Advertising revenues associated with AOL Media in large part are generated from the activity of current and former AOL subscribers, as AOL's subscriber base declines, AOL needs to maintain the engagement of former subscribers similar to historical levels and increase the number and engagement of other consumers on AOL Media. AOL seeks to do this by continuing to develop and offer engaging content, products and services and continuing to transition those access service subscribers who are terminating their paid access subscriptions to the free AOL Media offerings.
In the first quarter of 2009, in an effort to better align its cost structure with its revenues, AOL initiated a restructuring. As a result, for the three and six months ended June 30, 2009, the Company incurred restructuring charges of $15 million and $73 million, respectively, primarily related to involuntary employee terminations and facility closures, and currently expects to incur up to approximately $80 million in restructuring charges at the AOL segment during the remainder of 2009.

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