MISSION, STRATEGY AND COMMITMENT

Our mission remains that it has always been: To be home to the world's finest journalists and creative artists, and to market and distribute the products of their minds and imaginations to an ever-expanding worldwide audience.

Our strategy for carrying out this mission is straightforward and consistent: Both through electronic and hard-copy distribution, we make aggressive use of new technologies to globalize the reach and impact of our brands.

Our commitment is every bit as straightforward and fundamental: To provide our shareholders with a consistently superior return on their investment in our company.

While our mission, strategy and commitment are constant, the rapidly evolving environment we operate in--the introduction of new technologies, the shifting needs and tastes of our customers, the non-stop mergers and alliances that are reshaping the media industry--requires that we be flexible and alert, always ready to adapt to reach our goals. The changes we completed in 1995, as well as those still under way, reflect this awareness. They derive from our determination that, whatever the future holds, Time Warner's businesses have the structure, leadership and resources needed to outperform the competition.

WHO WE ARE

Time Warner's year-to-year performance is built on the enduring strengths of our company, on its creative soul, on doing what we do better than any competitor. At root, whether in films, music, programming or journalism, we are involved in the art of storytelling. Our success begins with our capacity to engage people's mind, touch their emotions and expand their imaginations, offering choices that increase their understanding and enjoyment.

The stories we tell take many forms: internationally acclaimed feature films and primetime programming from Warner Bros.; best-selling music from Warner Music Group; award-winning docudramas on HBO; elegant, in-depth coverage of the Olympics in Sports Illustrated or of the presidential election in Time. But the end result is the same.

Whatever yardstick is used--the total of National Magazine Awards, Oscars, Emmys, Grammys, Peabodys and CableACE Awards; the demand for our brands; or the sheer scale of our global reach--Time Warner has no close rival.

THE POWER OF OUR BRANDS

Category-defining brands are the brass rings of every industry, the prize that everybody strives for but few attain. These brands are more than trusted names: They are an active commitment to consumers, a mutual bond of trust, a year-in, year-out promise to deliver the highest quality of the best price. Their extraordinary power takes years--even generations--to build and must continually be renewed.

Our brands define as well as lead their categories. Their range and reputation are without peer. They encompass the world's finest libraries of information and entertainment, libraries that we are constantly refreshing and that provide a vast programming resource for our networks. Warner Bros., HBO, Looney Tunes, TIme Life, Book-of-the-Month Club, People, Money--the list is long--are touchstones for consumers, the places they will always look first for quality and consistency. Given the current expansion of the media, with a bewildering array of new outlets and products vying for attention, the advantage of these classic brands becomes even more pronounced. We believe that the surest way to create value for our shareholders--value that will multiply far into the future--is to develop, extend and enhance the global brands that are Time Warner's alone.

POSITIONING CABLE FOR THE FUTURE

The completion of our cable mergers has had an important strategic result: We have succeeded in our objective of building the country's best-clustered broadband operations. Situated in some of the largest and most lucrative markets, our systems now pass 18 million homes, or close to 20% of the television homes in America, and total 11.7 million subscribers, the majority of whom are concentrated in 35 geographic clusters of 100,000 or more.

The passage of far-reaching telecommunications reform legislation opens an exciting range of competitive opportunities. In order to ensure that cable can make the best use of these, as well as to help simplify our structure, we are working to put in place an enterprise that will be responsible for the overall management and financing of our cable and telecommunications properties.

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"We believe that the surest way to create value for our shareholders is to develop, extend and enhance the global brands that are Time Warner's alone."

(GRAPHS OMITTED: "TIME WARNER INC. COMBINED REVENUE (IN BILLIONS), 1991, 1992, 1993, 1994, 1995"; "TIME WARNER INC. COMBINED EBITDA (IN BILLIONS), 1991, 1992, 1993, 1994, 1995")

SIMPLIFICATION, FOCUS AND TEAMWORK

When the impact of technological innovation and economic change is as seismic as it is today, unity of purpose and action--in a word, teamwork--is essential. Putting together that team goes beyond changes in individual management positions. It involves a commitment to simplifying our operations, seeing to it that they are as streamlined as we can possibly make them.

We now look at Time Warner as operating in three zones, each embodying a specific culture of value creation: Entertainment, News and Information, and Telecommunications. This organization clarifies the unifying mission of Time Warner, rationalizes reporting responsibilities and opens the way to far greater cross-company cooperation.

The most important impact of this change is in Entertainment. By combining the studio and music assets under one superb management team, we have created an entertainment powerhouse that includes recorded music, film and television production, animation, home video, music publishing, The WB Network, theme parks, licensing and Warner Bros. Studio Stores. This includes, of course, the worldwide packaging and distribution companies that are intrinsic to the performance and growth of these operations.

Each of our management teams has unsurpassed experience and expertise, as well as a proven track record of achievement. These are leaders who know how to drive the growth of their businesses and increase the appeal of their branded franchises. They will work closely for the overall success of our company and its shareholders.

STRENGTHENING OUR BALANCE SHEET

In addition to the steady rise of EBITDA, Time Warner's capacity to grow is built on the health of our balance sheet. Our commitment to improve our financial strength and credit status resulted in 1995 in the sale of 1.6 billion worth of non-strategic assets. We refinanced 4 billion of public debt, extending maturities and lowering the rates of interest we pay. Managing our businesses with a focus on strengthening our balance sheet and enhancing our financial ratios is an ongoing priority.

OUR STRATEGIC CONSENSUS WITH TURNER

A big part of our original decision to invest in Turner was our admiration for the creative genius of its founder, Ted Turner. Ted built a global media empire that combined branded entertainment and information with the ownership of cable networks. Just as important, Ted developed strong relationships with cable operators like Time Warner, which carry these networks directly into consumers' homes.

As separate companies, Time Warner and Turner each recognizes the intimate connection between creativity and distribution--the contribution programming makes to the success of networks, and networks to expanding the audience for programming. We both know that only when a company feels confident about recouping its costs by spreading them across several forms of distribution will it invest in developing quality programming on a regular, long-term basis.

The announced merger of Time Warner and Turner represents a strategic consensus. We each start from the belief that the vitality of our journalistic and artistic enterprises is the wellspring of our strength. We are each committed to extending the leadership of our brands and driving their worldwide growth. We each understand the necessity of linking creative enterprises to distribution in as many forms as possible, whether through theatrical exhibition, hard copy and merchandise, or across broadcast, satellite and cable networks.

A CYCLE OF ADDED VALUE

Time Warner comprises the full continuum of communication--supporting and maintaining a culture of creativity; translating concepts into marketable products; distributing them globally, so it can reap the fullest possible return.

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"Turner is a perfect fit with what we already have in place. Our merger will allow us to grow together in ways neither of us could achieve as rapidly on our own."

The relationship that joins our creative enterprises, our distribution networks and our cable systems is what makes Time Warner not merely a collection of related businesses but a uniquely integrated media company.

Turner is a perfect fit with what we already have in place. Our merger will allow us to grow together in ways neither of us could achieve as rapidly on our own.

Animation is a case in point. Along with helping brand our theme parks and retail stores, the Looney Tunes characters in our cartoon library and the characters our animators add to it are an important part of putting The WB Network on the programming map. The WB, in turn, offers another distribution outlet for our animators, increasing their audience and bringing added value to their creations. The WB is also helped by its distribution on our cable systems, and the cable systems draw new subscribers when they can offer the kind of quality animation for which Warner Bros. is famous.

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The market for television animation is--and will be--highly competitive. Yet here, as throughout our entertainment and news and information operations, it is the integration of our creative, distribution and cable capacities that generates a cycle of added value and steady growth in global revenues.

LOOKING AHEAD

Storytelling is magic. Any media company that loses sight of this truth--of the role of creativity and imagination--isn't going to be a global leader. But bringing these stories to the world's audiences, and doing it profitably across the decades, is a business at which only a handful of companies has succeeded. And only one company does it with equal success in print, programming, film, video and music: Time Warner.

The astounding multiplication of media and distribution channels is giving consumers an open-ended range of choices. If a company wants to reap maximum benefit from this brave and burgeoning new world of consumer choice, it must have the creative genius to establish potent brand identities, the widest and best forms of distribution, and access to broadcast viewers, cable subscribers and computer users. Time Warner
has all of these.

No one can say with certainty what the final configuration of the media landscape will look like. The process of transforming change will continue far into the future. But this much is already clear: Time Warner is entering the most exciting and rewarding period of innovation and growth in its history.

Ultimately, the success of our strategies and plans is built on the support of you, our shareholders. I am grateful for your continuing support and, along with the thousands of dedicated, talented women and men throughout. Time Warner, will keep working to justify and reward your faith in us.

Gerald M. Levin
Chairman and Chief Executive Officer
March 16, 1996