1. TIME WARNER(NYSE:MOS) NOVEMBER 7, 2013 Zijian (Paddy) Gu, Zige (Z) He, Charalampos (Haris) Ntantanis Dec. 5, 2013

2. Agenda ● Company overview ● Macroeconomic analysis ● Industry Analysis ● Equity market performance ● Financial analysis ● Valuation ● Recommendation

3. Company Analysis World’s Third Largest Media Conglomerate Well Known Brand: CNN,TBS, TNT,Time Inc. 70% of Revenue comes from U.S. Three business segments: Networks, Filmed Entertainment, and Publishing Adjusted Operating Income increased 8% to $1.7 billion Adjusted EPS rose 20% Source: Hoover’s - Time Warner Inc, 2012 10 - K P46, 2013 Q3 CFO Earning Presentation P1,P10

4. Company Analysis Film and TV Entertainment 12.018B in Revenue - 39% of Total Revenue Produce and distribute feature films, television, video games and other programming Feature Films and Television- Warner Bros Home Entertainment - Warner Home Video, Warner Bros. Digital Distribution, Warner Bros. Interactive Entertainment Revenue from Subscription grow at 30% and 36% for 2011 and 2012 accordingly Revenue change for the segment decreased from 9% in 2011 to (5%) in 2012 mainly due to decrease in advertising revenue and content revenue Source: Mergent - Time Warner Inc, 2012 10 - K P47,57

5. Company Analysis Network Division: 14.204B in Revenue - 50% of Company’s Total Revenue Turner Networks TBS, TNT, Cartoon Network, truTV, Turner Home Box Office Services 114,000,000 worldwide subscribers( 41,000,000 domestic pay subscribers and 73,000,000 international pay and basic tier television service subscribers ) Revenue growth at an average of 6% per year from 2010 to 2012 Operating Income growth at an average of 6% per year from 2010 to 2012 For year end 2012, Company recognized 208 Million of Charges relative to the TNT Turkey Shutdowns. 174 million related to asset impairments of long-lived assets, inventories and goodwill Source: Mergent - Time Warner Inc, 2012 10 - K P46, 54

6. Company Analysis Publishing 3.436B - 12% of Total Revenue Time Inc. magazine publisher operates a number of websites, book publishing business and marketing businesses. Operating Income has a change of (25%) in 2012 Subscription and Advertising Revenue both decreased by 5% in 2012 11 Million trade name impairment Incurred 60 million charges related to restructuring cost in first quarter 2013 Source: Mergent - Time Warner Inc, 2012 10 - K P46,P61

7. Company Analysis International Expansion will be the focus for Network Segment Expect Subscriptions revenue to grow at constant rate Transforming into a pure global entertainment company, Keep their Most profitable businesses and get rid off others March 2009 - announced that it would spin off Time Warner Cable May 28, 2009 - announced that it would spin off AOL March 2013 - announced that it would spin off Time. Inc Source: Capital IQ - Time Warner Inc.

8. Company Analysis - Risk Factors Source: 10-K 2012 P24 - P27

9. Company Analysis-SWOT Source: OneSource - Time Warner Inc.

10. Recent Financial Information Data from: Capital IQ, Financials, TimeWarner Inc.

11. Recent Financial Information Data from: Capital IQ, Financials, TimeWarner Inc.

12. Revenues Breakdown by segment Data from: Capital IQ, Financials, TimeWarner Inc.

13. Marco Analysis - Key Factors TV Industry - Increase in Disposable Income drives Advertising Revenue Publishing Industry – Increase Discretionary Purchase Movie and Video Production Industry – Increase Discretionary Purchase Source: IBIS World

14. Marco Analysis - Key Factors Television Production Industry: Total advertising expenditure is expected to increase slowly until 2016 The number of cable TV subscriptions is expected to decrease slowly in 2013 Source: IBIS World

15. Marco Analysis - Key Factors Magazine & Periodical Publishing Industry: Growing number of ways for advertisers to market products Internet – only advertisement require lower production and distribution cost Printing Advertising Expenditure is expected to decrease Source: IBIS World

16. Marco Analysis - Key Factors Movie & Video Production Industry: Digital technology advancement increase potential opportunity for the industry lower consumer demand for feature films negatively affect this industry Increase interest rate will reduce producer’s ability to acquire capital Source: IBIS World

17. Industry Analysis - Industry Performances Television Production Industry has the best performance forecast Going online has become the trend for all three industries Source: IBIS World

18. Industry Analysis Movie & Video Production Magazine & Periodical Publishing Television Production Television Production Contribution to GDP is increasing Number of Channel has increased Online TV program increase revenue Movie & Video Production Digital technology increase competition Competition for talent drives revenue down Magazine & Periodical Publishing Huge decline in printing advertisement Advertising revenue has largely shift to online competitors Source: IBIS World

19. Industry Analysis Source: IBIS World Similar players in the Movie and Video Production and the Television Production Industries Concentration is low in the Magazine and Periodical Publishing Industry but high in the other two Large corporations have high ability to minimize production risk

20. Industry Analysis - Key Success Factor Source: IBIS World Strong Brand Name Establish positive perceptions Skilled and Talented Workforce Enable great product and strong brand Cost Control Meet contractual agreement Adaptation to New Technology Improve outcome and reduce cost

21. Equity Performance Source: Google Finance

22. Technical Analysis Source: Yahoo finance

23. Financial Analysis Liquidity Ratios 20082009201020112012 Current Ratio 1.18 1.48 1.52 1.51 1.35 Quick Ratio 0.44 1.12 1.17 1.04 Cash Ratio 0.08 0.54 0.42 0.39 0.29 Profitability Ratios 20082009201020112012 Gross Profit Margin43.59%43.93%44.13%43.70%44.54% Operating Profit Margin-11.52%17.61%20.19%20.04%20.60% Net Margin-50.68%9.76%9.59%9.96%10.51% ROA-11.75%3.77%3.88%4.26%4.42% ROE (Book Value)-29.34%7.34%7.83%9.63%10.10% Solvency Ratios 20082009201020112012 Debt/Assets 0.17 0.23 0.25 0.29 0.28 Debt/Equity 0.43 0.46 0.50 0.65 0.64 Interest Coverage (2.24) 3.83 4.61 4.80 4.72

24. Financial Analysis Activity Ratios 20082009201020112012 A/R Turnover4.05 4.96 4.68 4.35 4.02 Days Sales Outstanding 90.09 73.62 77.94 83.99 90.88 Inventory Turnover 7.56 7.88 8.14 8.56 8.07 Days Inventory on Hand 48.31 46.29 44.81 42.63 45.24 A/P Turnover 2.29 1.82 1.92 2.10 2.01 Days Payables Outstanding 159.71 200.97 189.87 173.96 181.93 Fixed Asset Turnover 6.44 6.41 6.94 7.31 7.29 Total Asset Turnover 0.23 0.39 0.40 0.43 0.42 Greenblat Ratios 20082009201020112012 EBIT/Tangible Assets (0.16) 0.19 0.21 0.22 0.23 EBIT/EV (0.32) 0.33 0.26 0.23 0.22

25. DuPont Analysis 20082009201020112012 Tax Burden304.71%76.52%65.78%66.10%66.47% Interest Burden144.45%72.42%72.20%75.21%76.75% Operating Profit Margin-11.52%17.61%20.19%20.04%20.60% Asset Turnover 0.23 0.39 0.40 0.43 0.42 Leverage 2.50 1.95 2.02 2.26 2.29 ROE-29.34%7.34%7.83%9.63%10.10%

26. Cost of Capital CAPM Risk-Free Rate2.83% Market Risk Premium6.00% 5-Year Beta1.11 CAPM Cost of Equity9.48% Weighted Average Cost of Capital Share Price* $65.44 Shares Outstanding (millions)904.72 Market Value of Equity $ 59,204.88 Debt$19,145.00 Percent Equity Weight75.56% Percent Debt Weight24.44% Cost of Debt6.84% Cost of Equity CAPM Cost of Equity9.48%30.00%Cost of Equity Weightings ROE8.73%70.00% Cost of Equity8.95% Tax Rate34.0% Business Premium2.0% WACC9.9% *As of December the 4th

27. DCF Analysis Time Warner Discounted Cash Flow Analysis ($ millions) 2013E2014E2015E2016E2017ETerminal Value Net Income$2,697.69$3,519.10$3,631.71$3,751.56$3,875.36 Depreciation$1,026.54$1,059.39$1,099.41$1,129.37$1,166.64 Capital Expenditures (709) (763) (804) (846) (874) Changes in Net Working Capital Less Increases in A/R (13) (237) (244) (260) (269) Less Increases in Inventories (71) (68) (70) (75) (77) Plus Increases in A/P$474.02$273.38$282.12$300.25$310.16 Free Cash Flow$3,405.76 3,784 3,895 4,000 4,132 71,806 Present Value 3,157 3,252 3,103 2,954 2,829 49,166 Terminal Value Terminal Growth Rate2.00% * All years above represent fiscal years ended December 31 Calculation of Implied Share Price Implied Enterprise Value $ 47,949 Less Debt($19,145.00) Implied Market Cap $ 28,804 Implied Share Price $ 31.84

28. Ben Graham Formula Benjamin Graham Formula Current (normal earnings) $ 2,697.69 Expected annual growth rate (%)2 Number of shares904.7 Estimated price per share $ 31.31

29. Comparable Analysis Company Comp Set Company NameTEV/Total Revenues TEV/EBITD A TEV/EBITTEV/Forward Total Revenue (Capital IQ) TEV/Forward EBITDA (Capital IQ) Forward P/E (Capital IQ) Weight CBS Corporation (NYSE:CBS)2.7x11.3x13.0x2.68x10.5x17.51x25% DIRECTV (NasdaqGS:DTV)1.7x6.7x9.8x1.60x6.4x11.61x10% The Walt Disney Company (NYSE:DIS) 3.1x11.1x13.5x2.89x10.3x18.09x10% Twenty-First Century Fox, Inc. (NasdaqGS:FOXA) 3.1x13.2x15.3x2.86x12.6x20.68x25% Viacom, Inc. (NasdaqGS:VIAB)3.3x10.6x11.3x3.11x9.9x14.48x30% Time Warner Inc. (NYSE:TWX)2.6x9.8x11.1x2.54x9.9x16.16x100%

30. Comparable Analysis TEV/Total Revenues TEV/EBITD A TEV/EBITTEV/Forward Total Revenue TEV/Forward EBITDA Forward P/E P/TangBV High3.3x13.2x15.3x3.1x12.6x20.7x15.5x Low1.7x6.7x9.8x1.6x6.4x11.6x11.8x Mean2.8x10.6x12.6x2.6x9.9x16.5x13.7x Median3.1x11.1x13.0x2.9x10.3x17.5x13.7x Weighted Average2.9x11.1x12.8x2.8x10.4x

31. Comparable Analysis Implied Equity Value High 102,918.4 208,322.5 218,243.0 86,742.98 245,540.73 79,983.62 406,985.72- Low 5,918.2 35,513.9 51,395.0 2,725.03 32,227.9 47,762.73 42,749.52- Mean 61,766.8 83,755.4 92,729.9 58,345.22 77,381.71 66,905.73 111,247.64- Median 69,115.3 70,392.7 76,035.0 67,937.52 61,032.91 69,559.22 66,609.71- Weighted Average 67,606.7 71,588.8 73,794.8 67,645.0 64,800.2 Shares Outstanding 904.7 Implied Price per Share High 113.8 230.3 241.2 95.88 271.41 88.41 449.86- Low 6.5 39.3 56.8 3.01 35.62 52.79 47.25- Mean 68.3 92.6 102.5 64.49 85.53 73.95 122.97- Median 76.4 77.8 84.0 75.09 67.46 76.89 73.63- Weighted Average 74.7 79.1 81.6 74.8 71.6 Mean Equity Value Across Multiples Price Per Share High 212.97 Low 34.47 Mean 87.18 Median 75.9 Weighted Average $ 76.36

32. Decision Drivers Positive drivers Better Market prospect Spin-off of Time. Inc Constant Growth in Network Segment and better prospect from Film Segment Negative drivers Constant Asset Impairment Underperform the Market

33. Valuation Results Current Price* $ 65.44 DCF Analysis $ 31.84 Graham Formula $ 31.31 Relative Price $ 76.36 *As of December the 4th

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35. Q&As Thank you for your attention! Any questions??