THROUGH OUR LENS... DIRECTOR PATTY JENKINS AND GAL GADOT ON THE SET OF WONDER WOMAN (2017). ...WE TELL THE WORLD’S BEST STORIES “2016 WAS A YEAR IN WHICH WE ONCE AGAIN DEMONSTRATED AN UNRIVALED COMBINATION OF FINANCIAL AND CREATIVE ACHIEVEMENT” NCAA MARCH MADNESS 2016 ANNUAL REPORT A MESSAGE FROM s the media and entertainment industry transforms, all of us at Time Warner are A proud to be helping lead the evolution THE CHAIRMAN while delivering a combination of consistently strong financial results and unrivaled AND CEO creative achievement. We continue to make investments and bold moves to enable us to sustain our success for many years to come, none more exciting than the agreement we announced last October to combine with AT&T Inc. In 2016, revenues increased 4% to $29.3 billion, Operating Income grew 10% to $7.5 billion and Adjusted Operating Income grew 10% to $7.6 billion, with record results at each of our divisions. Diluted Income per Common Share from Continuing Operations (“EPS”) was up 8% to $4.94 per share and Adjusted EPS was up 23% to $5.86 per share. Looking back over the past eight years, we delivered a total return to shareholders that outpaced our media and entertainment peer group average and more than doubled the S&P 500. Creatively, 2016 was another exceptional year, Jeff Bewkes with Warner Bros. leading all studios in supplying television programming to the broadcast networks and having its second-best year ever at the global theatrical box office, along with a growing consumer products business that is drawing on franchises such as DC Entertainment, LEGO and J.K. Rowling’s Wizarding World. Turner again was a leader among ad-supported cable networks, maintaining industry-leading positions at TBS, TNT and Adult Swim and garnering tremendous ratings growth at CNN. And Home Box Office continued to raise the bar in premium pay television in a year that extended its long-running streak of bringing home more Primetime Emmy Awards than any other network, while also introducing the most- watched new series in its history, Westworld, which is produced by Warner Bros. Harnessing technology to help our businesses deliver more choice, convenience and value to consumers remains one of our most important 3 strategic priorities. Among many examples are great digital-first products from CNN, Bleacher Report and Machinima; innovative direct-to-consumer offerings, such as HBO NOW; Turner’s new FilmStruck arthouse film service; Warner Archive; and our new Boomerang-branded service, which Turner and Warner Bros. have jointly launched to offer a trove of our best animation. You can read more about our divisions’ accomplishments on the following pages and see images from some of our past and upcoming hits. As always, the bedrock of our company continues to be the incredible talent we attract to work with us every day: from producers, showrunners, directors, writers and actors; to the people who make it all look so easy through set or costume designs, lighting or computer wizardry; to the brilliant business and marketing minds who ensure that all the great storytelling and programming that we capture through our lens lights up screens around the globe; of shareholders this past February. Pending the and to our dedicated and hardworking receipt of certain required regulatory consents or journalists. The way reviews, the merger is on people experience our track to close before year- content is changing end 2017. rapidly, but the global “THE BEDROCK OF appetite for it is This represents an exciting increasing, and our OUR COMPANY LIES new chapter for our collective dedication company that accelerates to telling the world’s IN THE INCREDIBLE the execution of our strategy best stories has never TALENT WE ATTRACT to satisfy consumers’ ever- been greater. evolving expectations. AT&T TO WORK WITH shares our vision that the Recognizing the future of media is going strength and potential US EVERY DAY” to be driven not just by of our businesses in creating and distributing this dynamic era, last the very best video content fall AT&T Inc. made and brands to audiences an offer to acquire Time Warner, and our around the world, but doing so in new and Board of Directors unanimously approved innovative ways that deliver value to us, to our the merger agreement on October 22, 2016. business partners and especially to consumers. Our shareholders approved and adopted By combining our leading brands and content the merger agreement at a special meeting in television, film, videogames and digital with People of Earth • Fantastic Beasts and Where to Find Them 4 2016 ANNUAL REPORT WESTWORLD AT&T’s vast distribution capabilities and customer is possible without the dedication and creativity relationships, we believe we will accelerate our of our thousands of employees worldwide. In ability to innovate, develop and deliver the next addition to their commitment to our business generation of video services. This will make our goals, our employees and management care content more valuable, and spur innovation across about the communities in which we work and the media and entertainment industry. live, and we are committed to continuing to foster a workforce that reflects both the global In addition to the strategic opportunities marketplace in which we operate and the diversity presented by putting our businesses together of voices and perspectives within it. under one roof, the AT&T transaction also represents a very good outcome for shareholders. On behalf of all of us at Time Warner, thank you The merger consideration includes an attractive again for your trust and confidence. premium and a mix of cash and AT&T stock, which allows our shareholders to participate in the upside of a combined company that will be uniquely situated to help define the future of telecommunications, media and technology and strengthen our position as home to the world’s best storytellers. Jeff Bewkes As we look forward to this exciting new era for Chairman and CEO both Time Warner and AT&T, we’re also mindful April 28, 2017 that nothing we have achieved and will achieve 5 ANDERSON COOPER 360° TURNER DELIVERS THE • In sports, the NCAA Division I Men’s Basketball National Championship game aired for the first time BEST IN ENTERTAINMENT, on cable and the tournament generated record revenue across platforms; NBA on TNT had the SPORTS, KIDS AND NEWS network’s most-watched telecast ever; and ELEAGUE, our entry into the growing eSports category, debuted. 2016 HIGHLIGHTS • CNN had its best year on record and was the #1 digital news destination. On the night of the U.S. • TBS, TNT and Adult Swim held three of the top presidential election, CNN ranked #1 in primetime five slots for ad-supported cable networks in across both cable and broadcast networks. the U.S. in primetime among adults 18 to 49. • Turner increased its international networks by 12, • TBS was the #1 entertainment network in primetime bringing its worldwide total to more than 175. for the fourth consecutive year, and successfully introduced new originals, including The Detour • In Latin America, Turner had the #1-rated pay and Full Frontal with Samantha Bee. TV network portfolio and the most-watched pay TV channel, Cartoon Network, for the third straight year. • Adult Swim was the #1 network among 18- to 34-year-olds for the 12th year • Turner debuted streaming video-on-demand (SVOD) in a row. service FilmStruck for fans of arthouse films and developed new Boomerang-branded SVOD service in partnership with Warner Bros., which launched in 2017. 6 2016 ANNUAL REPORT Impractical Jokers • NBA on TNT • Rick and Morty • Full Frontal with Samantha Bee • Good Behavior • The Powerpuff Girls • AngieTribeca 7 GAME OF THRONES HOME BOX OFFICE • Game of Thrones’ sixth season hit a record of close to 26 million average viewers per episode. SETS THE GOLD STANDARD It has now won more Emmy Awards than any other IN PREMIUM VIDEO scripted series in history. • Strong pipeline of original series with well-received debuts of Insecure, Divorce, Vice Principals and High 2016 HIGHLIGHTS Maintenance and acclaimed limited series The Night Off and Big Little Lies (in 2017). • Under the HBO and Cinemax brands, operated television and over-the-top (OTT) services with • Record viewership in late night for Last Week Tonight 134 million subscribers at year end in more than with John Oliverr and Real Time with Bill Maher. 60 countries in Latin America, Europe and Asia. HBO’s programming is also licensed in over • In early 2017, HBO surpassed 2 million domestic OTT 150 countries. subscribers less than two years after launching. • Winner of 22 Primetime Emmy Awards, more than • HBO expanded OTT distribution on Microsoft’s Xbox, any other network for the 15th straight year. Samsung smart TVs, Sony’s PlayStation and Amazon Prime Channels. • Westworld, produced by Warner Bros., was the biggest debut of a new series in HBO history, • Launched new OTT services in Spain, Brazil and with viewership surpassing Game of Thrones’ Argentina. first season. 8 2016 ANNUAL REPORT Veep • Real Sports with Bryant Gumbel • Last Week Tonight with John Oliver • Silicon Valley • Insecure • Ballers • Big Little Lies (2017) 9 JUSTICE LEAGUE (2017) WARNER BROS. IS • Strong franchise focus on DC Entertainment characters included cinematic hits Batman v THE GLOBAL LEADER Superman: Dawn of Justice and Suicide Squad; 10 series on television for the 2016-2017 season IN ENTERTAINMENT and videogames like the upcoming Injustice 2. Fans spent $4.5 billion on DC-related consumer products. 2016 HIGHLIGHTS • Warner Bros. ranked #1 in home entertainment, a position it has held for 15 years, drawing on its vast • The #1 producer of primetime television series for the content library with more than 80,000 hours of film U.S.