Wall St. and Business Wednesdays: A Letter to Time Warner Shareholders by Richard D. Parsons, Chairman of The Board and CEO

Dear Fellow Shareholders,

Time Warner's Board of Directors and senior management are committed to moving your company forward with one clear priority: delivering value for you, our shareholders. We took yet another step last week in delivering on our commitment with the strong financial and operational results we reported for the fourth quarter and full year 2005.

You may have recently heard something about Carl Icahn, who is leading a handful of hedge funds, and his proposal to break up Time Warner. You also may know that Mr. Icahn is paying an investment banking firm, Lazard Ltd., led by Bruce Wasserstein, and a one-time media company executive, Frank Biondi, to promote his proposal for your company.

As we would do with respect to any shareholder, we will study the Icahn/Lazard proposal carefully and thoroughly, and then report back to you our findings, conclusions and recommendations. But rest assured that, during this process, we will continue to be focused on running the company and delivering the best possible results for you - just as we did during 2005.

2005: A Year of Very Solid Performance

We delivered a very solid financial performance in 2005, led by double-digit earnings growth at Time Warner Cable and our networks businesses. The across-the-board strength in our businesses enabled us to meet all of our full-year objectives.

Our businesses also made significant operational progress in 2005 to extend their industry leadership and lay the groundwork for future growth. For example:

-- Time Warner Cable set the industry standard with its record-breaking subscriber growth across every one of its product lines - ending 2005 with over 1 million subscribers for its Digital Phone service, its newest product offering.

-- Time Warner was once again the leading producer of filmed entertainment in the world. Led by Warner Bros., our studios topped the industry in domestic and international box office, domestic home video sales and television programming.

-- The Turner entertainment networks TNT and TBS each once again ranked #1 in their respective key audiences among advertising-supported cable networks.

-- HBO remained the preeminent premium television network with the best original television programming in the world.

-- Time Inc. continued to lead all magazine publishers in readership and advertising share in the U.S.

-- And AOL improved its competitiveness by launching AOL.com and expanding its strategic alliance with Google.

2006: Continuing to Grow

As a result of our confidence in our management teams, business operations and their competitive positions, the 2006 outlook for our businesses calls for us to continue to grow our earnings, while keeping our balance sheet strong and costs in tight control. Among our initiatives for the company in the coming year are:

First, we will continue to advance the leading competitive positions of all of our businesses in an increasingly digital landscape.

Each of our businesses is a leader today because it has continually anticipated change and adapted accordingly. With convergence in the media business finally underway, we are ready for it. In 2006, I expect all of our media businesses to allocate more resources and focus toward making our great content and brands even more relevant in a digital environment. With effective execution, we will turn what may seem like challenges to some into real opportunities for us.

Second, we will enhance AOL's competitive profile and take even greater advantage of continuing strong trends toward online media.

During the past three years, AOL stabilized its finances and operations. And now we are working to create value at AOL through both its subscription and advertising business initiatives. AOL's recently announced broadband deals are significant steps in moving the AOL broadband subscription business forward. And AOL's enhanced Google relationship will both drive more traffic to AOL's online properties and increase the capabilities of AOL's advertising sales force.

Third, we will stay focused on completing the acquisition and integration of the new cable systems from Adelphia and Comcast - enhancing Time Warner Cable's prospects for value creation.

As I mentioned above, we had outstanding operating results at Time Warner Cable in 2005. The subscriber trends continue to be very powerful - reinforcing our confidence in the strategy behind our pending Adelphia and Comcast transactions, which we expect to close during the second quarter of this year.

Our cable business is exceptionally well-positioned over the next three to five years, and we have every expectation that it will be a far more resilient business than the investment community seems to expect, given current trading valuations. Going forward, we will invest in this business to capitalize fully on technological and consumer trends that we believe are constantly improving the cable industry's competitive position and increasing its value.

Finally, we will drive incremental returns to shareholders through the efficient allocation of our capital.

Last summer, we announced a $5 billion share repurchase program. Then, in early November, we increased our share repurchase program to $12.5 billion - one of the largest buybacks ever. To date, in total, we have purchased approximately $3 billion worth of our stock.

Given the current price of Time Warner stock, we have decided to repurchase our stock even more aggressively. At current price levels, we expect to roughly double the pace of our repurchases over the next three months. We see our stock at these prices as a very attractive investment for our capital; however, we will maintain our previously stated comfort level of leverage of around 3x debt to earnings.

The Right Plan for Shareholders

Our 2005 strategy delivered excellent results, with one glaring exception - our current stock price. As you know, media companies, in general, as well as the cable industry, have traded down over the past year, largely because of questions about their future growth prospects.

I can't speak for the entire industry, but I can tell you that, from Time Warner's perspective, we are very confident about the health of our Company over the short and longer terms. We have a strong management team - as demonstrated by its track record over the past three years. We have a unique combination of assets, which provides us with competitive advantages in an evolving landscape. Over time, we think the benefits of this structure will be reflected in the market value of our shares.

Our Board of Directors and senior management are confident that we're on the right course to provide a highly attractive return, while building enduring value for all of our shareholders. We believe that - by continuing to manage and grow our businesses as effectively as any of our competitors, and by allocating our capital prudently with a view to maximizing returns to shareholders - we will be rewarded in the marketplace.

As always, we will keep you informed of our progress. For more information and updates, please go to the new "Building Value" area on our Web site at http://www.timewarner.com/corp/aboutus/building_value/legend.html.

Sincerely,

Richard D. Parsons
Chairman of the Board
and Chief Executive Officer

Source: Time Warner This letter was released on February 7, 2006.

Richard D. Parsons

Wednesday, February 8, 2006