SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-Q

   [x]  QUARTERLY  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT of 1934 for the quarterly  period ended September 30, 2000,
        or

   [ ]  TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
        EXCHANGE ACT of 1934 for the transition period from ______________
        to ____________ .

Commission file number 001-12878
                       _________


                    TIME WARNER ENTERTAINMENT COMPANY, L.P.
             (Exact name of registrant as specified in its charter)

                   Delaware                                     13-3666692
           (State or other jurisdiction of                   (I.R.S. Employer
             incorporation or organization)                    Identification
                                                                  Number)


American Television and Communications
 Corporation                            Delaware              13-2922502
Warner Communications Inc.              Delaware              13-2696809
(Exact name of registrant            (State or other       (I.R.S. Employer
  as specified in its charter)       jurisdiction of     Identification Number)
                                     incorporation or
                                     organization)


                              75 Rockefeller Plaza
                            New York, New York 10019
                                 (212) 484-8000

          (Address, including zip code, and telephone number, including
          area code, of each registrant's principal executive offices)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes x No



<PAGE>



                     TIME WARNER ENTERTAINMENT COMPANY L.P.
                            AND TWE GENERAL PARTNERS



                               INDEX TO FORM 10-Q



<TABLE>


                                                                                   Page
                                                                               ---------------
                                                                                         TWE
                                                                                       General
                                                                                TWE    Partners
                                                                                ---    --------

<S>                                                                               <C>

PART I. FINANCIAL INFORMATION
Management's  discussion  and analysis of results of  operations  and
 financial condition............................................................  1       22
Consolidated  balance sheets at September 30, 2000 and December 31, 1999........  10      26
Consolidated  statements of  operations  for the three months and nine months
 ended September 30, 2000 and 1999..............................................  11      27
Consolidated statements of cash flows for the nine months ended September 30,
 2000 and 1999..................................................................  12      29
Consolidated statements of partnership capital and shareholders' equity for the
  nine months ended September 30, 2000 and 1999.................................  13      30
Notes to consolidated financial statements......................................  14      31




PART II. OTHER INFORMATION......................................................  38

</TABLE>


<PAGE>


                     TIME WARNER ENTERTAINMENT COMPANY, L.P.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION


Description of Business

        Time  Warner  Entertainment  Company,  L.P.  ("TWE"  or  the  "Company")
classifies its business  interests into four fundamental  areas: Cable Networks,
consisting  principally  of interests in cable  television  programming;  Filmed
Entertainment,  consisting  principally  of interests  in filmed  entertainment,
television production and television broadcasting; Cable, consisting principally
of  interests  in  cable  television  systems;  and  Digital  Media,  consisting
principally of interests in Internet-related  and digital media businesses.  TWE
also manages the cable  properties owned by Time Warner Inc. ("Time Warner") and
the combined cable  television  operations are conducted  under the name of Time
Warner Cable.

Use of EBITA

        TWE evaluates operating performance based on several factors,  including
its  primary  financial  measure of business  segment  operating  income  before
noncash   amortization   of  intangible   assets   ("EBITA").   Consistent  with
management's  financial focus on controlling  capital  spending,  EBITA measures
operating  performance  after  charges  for  depreciation.  In  addition,  EBITA
eliminates  the uneven  effect  across all  business  segments  of  considerable
amounts of noncash  amortization  of  intangible  assets  recognized in business
combinations  accounted for by the purchase method. These business  combinations
include Time Warner's $14 billion  acquisition of Warner  Communications Inc. in
1989  and  $1.3  billion  acquisition  of  the  minority  interest  in  American
Television  and  Communications  Corporation  in 1992,  which  created  over $10
billion of intangible assets that generally are being amortized over a twenty to
forty year  period.  The  exclusion  of  noncash  amortization  charges  also is
consistent with management's  belief that TWE's intangible assets, such as cable
television franchises, film and television libraries and the goodwill associated
with its brands,  generally  are  increasing  in value and  importance  to TWE's
business objective of creating,  extending and distributing  recognizable brands
and  copyrights  throughout  the  world.  As  such,  the  following  comparative
discussion of the results of operations of TWE includes, among other factors, an
analysis  of  changes  in  business  segment  EBITA.  However,  EBITA  should be
considered in addition to, not as a substitute for, operating income, net income
and  other  measures  of  financial  performance  reported  in  accordance  with
generally accepted accounting principles.

Transactions Affecting Comparability of Results of Operations

        As more fully described  herein,  the  comparability  of TWE's operating
results has been affected by certain  significant  transactions and nonrecurring
items in each period.

        For 2000, the significant, nonrecurring items included (i) a net pretax,
investment-related  gain of  approximately  $65 million  recognized in the third
quarter,  principally  relating  to  additional  proceeds  received in the third
quarter  of  2000  in   connection   with  the  1999  sale  of  an  interest  in
CanalSatellite,  a satellite  television  platform  servicing France and Monaco,
(ii) net pretax  losses of  approximately  $8 million  recognized  in the second
quarter relating to the sale or exchange of various cable television systems and
investments,  (iii) a $50 million pretax charge recognized in the second quarter
related to the Six Flags  Entertainment  Corporation  ("Six Flags")  litigation,
(iv) a pretax gain of $10 million  recognized in the first  quarter  relating to
the partial recognition of a deferred gain on the 1998 sale of Six Flags and (v)
a noncash charge of $524 million in the first quarter  reflecting the cumulative
effect of an  accounting  change in  connection  with the adoption of a new film
accounting standard.

        For 1999, the  significant,  nonrecurring  items included (i) net pretax
gains  of  approximately  $358  million  recognized  in the  third  quarter  and
approximately $1.118 billion recognized in the first nine months relating to the
sale


                                       1
<PAGE>


                     TIME WARNER ENTERTAINMENT COMPANY, L.P.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued)


or exchange of various cable  television  systems and  investments,  (ii) a
pretax  gain of $10  million  recognized  in each of the  first  three  quarters
relating to the partial  recognition  of a deferred gain on the 1998 sale of Six
Flags and (iii) an approximate  $215 million pretax gain recognized in the first
quarter in connection with the early  termination and settlement of a long-term,
home video distribution agreement.

        In order to meaningfully assess underlying operating trends,  management
believes that the results of operations for each period should be analyzed after
excluding the effects of significant  nonrecurring items. As such, the following
discussion  and analysis  focuses on amounts and trends  adjusted to exclude the
impact of these unusual items.  However,  unusual items may occur in any period.
Accordingly,  investors and other financial  statement users individually should
consider the types of events and  transactions  for which  adjustments have been
made.

RESULTS OF OPERATIONS
<TABLE>
        EBITA and operating income are as follows:

                                                  Three Months Ended September 30,     Nine Months Ended September 30,
                                                  --------------------------------   -------------------------------------
                                                                      Operating                              Operating
                                                     EBITA              Income           EBITA                 Income
                                                  -----------       --------------   -------------        ----------------
      Income
                                                  2000   1999       2000     1999    2000     1999         2000      1999
                                                  ----   ----       ----     -----   ----     ----         ----      ----
                                                                              (millions)
<S>                                               <C>     <C>       <C>      <C>     <C>      <C>        <C>        <C>
Filmed Entertainment-Warner Bros.(a)........      $215    $180      $185     $150    $  482     $658       $391       $567
Broadcasting-The WB Network.................       (15)    (24)      (17)     (25)      (67)     (95)       (71)       (98)
Cable Networks-HBO..........................       154     138       154      138       448      394        448        394
Cable(b)....................................       404     699       293      600     1,182    2,135        853      1,863
Digital Media...............................       (15)      -       (15)       -       (45)       -        (45)         -
                                                  ----   -----     -----     ----      -----   -----       ----     ------

Total.......................................      $743    $993      $600     $863    $2,000   $3,092     $1,576     $2,726
                                                  ====    ====      ====     ====    ======   ======     ======     ======
-----------
(a) Includes a net pretax,  investment-related gain of  approximately $65 million recognized  in the third  quarter of 2000,  a pre-
    tax  charge of $24  million recognized in the second  quarter of 2000 in  connection  with  the Six Flags litigation,  a  pretax
    gain of $10 million related to the partial  recognition of a deferred  gain in connection with the 1998 sale of Six Flags recog-
    nized in the first  quarter  of 2000  and in  each of  the first  three quarters of 1999 and a pretax gain of approximately $215
    million recognized  in the first  quarter of 1999  relating  to the early  termination and settlement of a long-term, home video
    distribution agreement.
(b) Includes net pretax gains  related to the sale or exchange of certain cable television  systems and investments of approximately
    $358 million recognized in the third  quarter of 1999.  Similarly,  nine-month  results  include net pretax losses of $8 million
    in 2000 and net pretax gains of $1.118  billion in 1999.

</TABLE>

Three Months Ended  September  30, 2000  Compared to the Three Months Ended
September 30, 1999

Consolidated Results

        TWE had  revenues of $3.494  billion and net income of $248  million for
the three  months  ended  September  30,  2000,  compared  to revenues of $3.474
billion and net income of $561 million for the three months ended  September 30,
1999.

        As previously  described,  the  comparability of TWE's operating results
for 2000 and 1999 has been affected by certain  significant,  nonrecurring items
recognized in each period.  These  nonrecurring items aggregated to a net pretax
income of  approximately  $65 million in 2000,  compared to  approximately  $368
million of net pretax income in 1999.



                                       2
<PAGE>


                    TIME WARNER ENTERTAINMENT COMPANY, L.P.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued)


        TWE's net income  decreased  to $248  million in 2000,  compared to $561
million  in 1999.  However,  excluding  the  effect  of the  nonrecurring  items
referred to earlier, net income decreased by $27 million to $183 million in 2000
from $210  million  in 1999.  As  discussed  more  fully  below,  this  decrease
principally  resulted from higher  interest  expense  principally  due to higher
market  interest  rates on  variable-rate  debt and higher  losses from  certain
investments  accounted for under the equity method, offset in part by an overall
increase in TWE's business segment operating income.

        As a U.S.  partnership,  TWE is not  subject to U.S.  federal  and state
income taxation. Income and withholding taxes of $57 million and $39 million for
the three  months ended  September  30, 2000 and 1999,  respectively,  have been
provided  for  the   operations  of  TWE's   domestic  and  foreign   subsidiary
corporations.

Business Segment Results

        Filmed  Entertainment-Warner  Bros. Revenues decreased to $1.686 billion
in 2000,  compared to $1.862 billion in 1999. EBITA increased to $215 million in
2000 from $180 million in 1999.  Operating  income  similarly  increased to $185
million in 2000 from $150  million in 1999 due to the one-time  items.  Revenues
decreased  primarily  due to the 1999 initial  off-network  availability  of the
popular  television  series  The  Drew  Carey  Show.  Revenues  from  theatrical
operations were  essentially  flat, as the  combination of higher  worldwide DVD
sales and domestic  theatrical  revenues offset lower  international  theatrical
revenues,  principally  relating to last year's highly successful release of The
Matrix.

        The operating  results in both periods were affected by certain one-time
items.  The 2000 results  include a net pretax,  investment-related  gain of $65
million.  The 1999 results include a pretax gain of $10 million  relating to the
partial recognition of a deferred gain on the 1998 sale of Six Flags.  Excluding
the impact of these items,  EBITA and operating  income decreased as a result of
the decline in revenues, offset in part by lower film and television costs.

        Broadcasting-The WB Network.  Revenues increased to $99 million in 2000,
compared to $84 million in 1999. EBITA improved to a loss of $15 million in 2000
from a loss of $24 million in 1999. Operating losses decreased to $17 million in
2000 from $25 million in 1999. Revenues increased principally as a result of one
additional  night of prime-time  programming in comparison to the prior year and
advertising  rate  increases,  offset  in part by  lower  prime-time  television
ratings.  Prime-time  television  ratings  were  negatively  affected  by  lower
household  delivery  associated  with  the WGN  Superstation  discontinuing  its
carriage of The WB  Network's  programming  beginning  in the fall of 1999.  The
EBITA and operating loss  improvements were principally due to the revenue gains
and lower  promotion  costs,  which more than offset  higher  programming  costs
associated with the expanded programming schedule.

        Cable Networks-HBO. Revenues increased to $559 million in 2000, compared
to $540 million in 1999. EBITA and operating income increased to $154 million in
2000 from $138 million in 1999. Revenues benefited primarily from an increase in
subscriptions.  EBITA and operating  income were higher  principally  due to the
revenue gains,  increased cost savings and higher income from Comedy Central,  a
50%-owned equity investee.

        Cable.  Revenues increased to $1.288 billion in 2000, compared to $1.124
billion in 1999.  EBITA,  including the negative  effect on operating  trends of
one-time gains  recognized in 1999,  decreased to $404 million in 2000 from $699
million in 1999.  Operating income  similarly  decreased to $293 million in 2000
from $600  million in 1999 due to  one-time  gains.  Revenues  increased  due to
growth in basic cable subscribers,  increases in basic cable rates, increases in
advertising  revenues and  increases  from the  deployment  of digital cable and
high-speed online services. The 1999 operating results of the Cable segment were
affected by net pretax gains of approximately  $358 million relating to the


                                       3
<PAGE>


                    TIME WARNER ENTERTAINMENT COMPANY, L.P.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued)


sale or  exchange of various  cable  television  systems  and  investments.
Excluding  the  effect of these  items,  EBITA and  operating  income  increased
principally as a result of the revenue gains and  pension-related  cost savings,
offset in part by higher  programming costs and higher  depreciation  related to
capital spending.

        Digital  Media.  The Digital  Media segment had $15 million of operating
losses on $2 million of  revenues  in 2000  principally  due to  start-up  costs
associated with TWE's digital media  businesses.  TWE's digital media businesses
include Entertaindom,  an advertiser-supported  entertainment  destination site,
and other entertainment-related  websites. Due to the start-up nature of most of
these businesses, losses are expected to continue in 2000.

        Interest  and Other,  Net.  Interest and other,  net,  increased to $214
million  of  expense  in 2000,  compared  to $185  million  of  expense in 1999.
Interest expense increased to $165 million in 2000,  compared to $138 million in
1999 as a result of higher market interest rates on  variable-rate  debt.  Other
expense, net, increased to $49 million in 2000, compared to $47 million in 1999,
primarily because of higher losses from certain investments  accounted for under
the equity method of accounting.

        Minority Interest. Minority interest expense increased to $62 million in
2000, compared to $60 million in 1999. Minority interest expense was affected by
the allocation of a portion of the net pretax gains in 1999 relating to the sale
or exchange of various cable  television  systems and  investments  owned by the
TWE-Advance/Newhouse  Partnership  ("TWE-A/N")  to the  minority  owners of that
partnership.  Excluding the effect of the 1999 gains,  minority interest expense
increased  principally due to a lower allocation of losses in 2000 to a minority
partner in The WB Network.

Nine Months  Ended  September  30, 2000  Compared to the Nine Months  Ended
September 30, 1999

Consolidated Results

        TWE had revenues of $10.118  billion,  income of $617 million before the
cumulative  effect of an accounting change and net income of $93 million for the
nine months ended September 30, 2000, compared to revenues of $9.468 billion and
net income of $1.640 billion for the nine months ended September 30, 1999.

        As previously  described,  the  comparability of TWE's operating results
for 2000 and 1999 has been affected by certain  significant,  nonrecurring items
recognized in each period.  These items aggregated  approximately $17 million of
net pretax  income in 2000,  compared  to  approximately  $1.363  billion of net
pretax income in 1999.  In addition,  net income in 2000 was reduced by a charge
of $524 million relating to the cumulative effect of an accounting change.

        TWE had net  income of $93  million in 2000,  compared  to net income of
$1.640  billion  in 1999.  However,  excluding  the  significant  effect  of the
nonrecurring items referred to earlier,  net income increased by $148 million to
$600 million in 2000 from $452 million in 1999.  As discussed  more fully below,
this increase  principally  resulted from an overall  increase in TWE's business
segment operating income and lower losses from certain investments accounted for
under the equity method,  offset in part by higher interest expense  principally
due to higher  market  interest  rates on  variable-rate  debt and higher losses
associated with TWE's asset securitization program.

Business Segment Results

        Filmed  Entertainment-Warner  Bros. Revenues increased to $4.705 billion
in 2000,  compared to $4.688  billion in 1999.  EBITA,  including  the effect on
operating trends of one-time items recognized in each period,  decreased to $482


                                       4
<PAGE>


                    TIME WARNER ENTERTAINMENT COMPANY, L.P.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued)


million in 2000 from $658 million in 1999.  Operating income similarly decreased
to $391  million in 2000 from $567  million in 1999 due to the  one-time  items.
Revenues  benefited from increases in the  distribution  of both  theatrical and
television  product,  offset in part by lower  revenues  from  consumer  product
operations.  Warner Bros.'s revenues from the distribution of theatrical product
increased principally due to higher worldwide DVD sales, offset in part by lower
revenues from  worldwide  theatrical  operations,  principally  relating to last
year's highly successful release of The Matrix. Warner Bros.'s revenues from the
distribution of television product increased principally due to higher aggregate
revenues  from basic  cable,  broadcast  network  and  international  syndicated
television exhibition, offset in part by lower revenues from domestic syndicated
television  exhibition relating to the 1999 initial off-network  availability of
the popular television series The Drew Carey Show.

        The operating  results in both periods were affected by certain one-time
items.  The 2000 results  include a net pretax,  investment-related  gain of $65
million, a pretax charge of $24 million relating to the Six Flags litigation and
a $10 million pretax gain relating to the partial recognition of a deferred gain
on the 1998 sale of Six Flags.  The 1999  results  include  pretax  gains of $30
million relating to the partial  recognition of a deferred gain on the 1998 sale
of Six Flags and a $215 million net pretax gain  recognized in  connection  with
the early  termination  and settlement of a long-term,  home video  distribution
agreement.  Excluding  the impact of these  items,  EBITA and  operating  income
increased  principally  as a result of the  revenue  gains and lower film costs,
offset in part by lower results from domestic television syndication operations.

        Broadcasting-The  WB  Network.  Revenues  increased  to $310  million in
2000, compared to $246 million in 1999.  EBITA improved to a loss of $67 million
in 2000  from a loss of $95  million  in 1999.  Operating  losses  decreased  to
$71 million in 2000 from $98 million in  1999.  Revenues  increased  principally
as a result of one  additional  night of prime-time programming in comparison to
the prior year and advertising  rate increases,  offset in part by lower  prime-
time television ratings.  Prime-time television ratings were negatively affected
by lower household delivery associated with the WGN  Superstation  discontinuing
its carriage of The WB  Network's  programming  beginning  in the  fall of 1999.
The EBITA and operating loss  improvements were  principally due to  the revenue
gains, which more than  offset  higher  programming  costs  associated  with the
expanded programming schedule.

        Cable  Networks-HBO.  Revenues  increased  to  $1.683  billion  in 2000,
compared to $1.612 billion in 1999. EBITA and operating income increased to $448
million in 2000 from $394 million in 1999.  Revenues benefited primarily from an
increase  in  subscriptions.  The  increase  in EBITA and  operating  income was
principally  due to the revenue gains,  increased cost savings and higher income
from Comedy Central, a 50%-owned equity investee.

        Cable.  Revenues increased to $3.799 billion in 2000, compared to $3.312
billion in 1999.  EBITA,  including the negative  effect on operating  trends of
one-time  items  recognized in each period,  decreased to $1.182 billion in 2000
from  $2.135  billion in 1999.  Operating  income  similarly  decreased  to $853
million in 2000 from $1.863 billion in 1999 due to the one-time items.  Revenues
increased  due to growth in basic cable  subscribers,  increases  in basic cable
rates,  increases in  advertising  revenues and increases from the deployment of
digital cable and high-speed online services. The operating results of the Cable
segment were affected by net pretax losses of  approximately  $8 million in 2000
and net pretax gains of  approximately  $1.118  billion in 1999  relating to the
sale or exchange of various cable television systems and investments.  Excluding
the effect of these items, EBITA and operating income increased principally as a
result of the revenue gains and pension-related cost savings,  offset in part by
higher programming costs and higher depreciation related to capital spending.


                                       5
<PAGE>


                    TIME WARNER ENTERTAINMENT COMPANY, L.P.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued)



        Digital  Media.  The Digital  Media segment had $45 million of operating
losses on $5 million of  revenues  in 2000  principally  due to  start-up  costs
associated with TWE's digital media  businesses.  TWE's digital media businesses
include Entertaindom,  an advertiser-supported  entertainment  destination site,
and other entertainment-related  websites. Due to the start-up nature of most of
these businesses, losses are expected to continue in 2000.

        Interest  and Other,  Net.  Interest and other,  net,  increased to $640
million  of  expense  in 2000,  compared  to $572  million  of  expense in 1999.
Interest expense increased to $478 million in 2000,  compared to $411 million in
1999 as a result of higher market interest rates on  variable-rate  debt and $26
million of additional  interest  expense recorded in 2000 in connection with the
Six Flags  litigation.  Other expense,  net,  increased to $162 million in 2000,
compared to $161 million in 1999. This marginal increase  principally related to
higher  losses  associated  with  TWE's  asset  securitization  program,  offset
primarily  by lower  losses from  certain  investments  accounted  for under the
equity method.

        Minority  Interest.  Minority interest expense decreased to $145 million
in 2000,  compared to $366 million in 1999.  The  decrease in minority  interest
expense was  principally  due to the  allocation  of a portion of the higher net
pretax  gains  in  1999  relating  to the  sale or  exchange  of  various  cable
television  systems and  investments  owned by TWE-A/N to the minority owners of
that partnership.  Excluding the significant effect of the 1999 gains,  minority
interest expense  decreased  principally due to a higher allocation of losses in
2000 to a minority partner in The WB Network.

FINANCIAL CONDITION AND LIQUIDITY
September 30, 2000

Financial Condition

        At  September  30, 2000,  TWE had $6.5 billion of debt,  $262 million of
cash and  equivalents  (net debt of $6.2  billion) and $6.4 billion of partners'
capital.  This  compares  to $6.7  billion  of debt,  $517  million  of cash and
equivalents (net debt of $6.2 billion) and $7.1 billion of partners'  capital at
December 31, 1999.

Cash Flows

        During the first nine months of 2000,  TWE's cash provided by operations
amounted to $2.172  billion and  reflected  $2.000  billion of business  segment
EBITA, $666 million of noncash depreciation expense and $221 million of proceeds
from TWE's asset securitization program, less $417 million of interest payments,
$81 million of income taxes,  $56 million of corporate expenses and $161 million
related to an aggregate increase in working capital requirements,  other balance
sheet accounts and noncash items.  Cash provided by operations of $2.205 billion
in the first nine months of 1999 reflected  $3.092  billion of business  segment
EBITA, $632 million of noncash  depreciation expense and $20 million of proceeds
from TWE's asset securitization program, less $394 million of interest payments,
$84  million of income  taxes,  $54  million of  corporate  expenses  and $1.007
billion related to an aggregate increase in working capital requirements,  other
balance sheet accounts and noncash items.

        Cash used by investing  activities  was $1.500 billion in the first nine
months of 2000,  compared  to $540  million  in the first  nine  months of 1999,
principally  as a  result  of a  decrease  in cash  proceeds  from  the  sale of
investments,  higher  capital  expenditures  and the absence in 2000 of the 1999
collection  of TWE's $400  million  loan to Time  Warner.  Capital  expenditures
increased to $1.436 billion in the first nine months of 2000, compared to $1.009
billion in the first nine months of 1999, reflecting higher spending on variable
capital to facilitate a more aggressive  roll-out of Time Warner Cable's popular
digital cable and high-speed online services.


                                       6
<PAGE>


                    TIME WARNER ENTERTAINMENT COMPANY, L.P.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued)



        Cash used by  financing  activities  was $927  million in the first nine
months of 2000, compared to $1.517 billion in the first nine months of 1999. The
use of cash in 2000  principally  resulted  from the payment of $684  million of
capital distributions to Time Warner and $168 million of debt reduction. The use
of cash in 1999 principally resulted from the redemption of preferred stock of a
subsidiary at an aggregate  cost of $217 million,  the payment of $1.116 billion
of capital distributions to Time Warner and $39 million of debt reduction.

        Management believes that TWE's operating cash flow, cash and equivalents
and  additional  borrowing  capacity  are  sufficient  to fund its  capital  and
liquidity needs for the foreseeable future.

Cable Capital Spending

        Time  Warner   Cable  has  been   engaged  in  a  plan  to  upgrade  the
technological  capability and  reliability of its cable  television  systems and
develop  new  services,  which  it  believes  will  position  the  business  for
sustained, long-term growth. Capital spending by TWE's Cable segment amounted to
$1.351  billion in the nine months ended  September  30, 2000,  compared to $910
million in the nine months ended September 30, 1999.  Cable capital spending for
the  fourth  quarter  of 2000 is  budgeted  to be  approximately  $425  million,
reflecting  higher spending on variable  capital to facilitate a more aggressive
roll-out of Time Warner  Cable's  popular  digital cable and  high-speed  online
services.  Capital  spending  is  expected  to  continue  to be  funded by cable
operating cash flow.

Warner Bros. Backlog

        Warner Bros.'s  backlog  represents the amount of future revenue not yet
recorded from cash  contracts for the  licensing of  theatrical  and  television
product  for  pay  cable,  basic  cable,   network  and  syndicated   television
exhibition.  Warner Bros.'s backlog  amounted to $2.737 billion at September 30,
2000,  compared  to $3.033  billion at  December  31,  1999  (including  amounts
relating to licensing of film product to TWE's cable television networks of $254
million  and to Time  Warner's  cable  television  networks  of $612  million at
September 30, 2000 and $365 million to TWE's cable television  networks and $599
million to Time Warner's cable television networks at December 31, 1999).

        Because  backlog  generally  relates to contracts  for the  licensing of
theatrical  and  television  product  which  have  already  been  produced,  the
recognition of revenue for such completed  product is principally only dependent
upon the commencement of the availability period for telecast under the terms of
the related licensing agreement.  Cash licensing fees are collected periodically
over the term of the related  licensing  agreements or on an  accelerated  basis
using a $500 million  securitization  facility. The portion of backlog for which
cash has not already been received has significant off-balance sheet asset value
as a source of future funding. As of September 30, 2000, including cash received
under the  securitization  facility and other advanced  payments,  approximately
$625 million of cash licensing fees had been collected against the backlog.  The
backlog excludes advertising barter contracts, which are also expected to result
in the future  realization  of revenues and cash through the sale of advertising
spots received under such contracts.

Caution Concerning Forward-Looking Statements

        The Securities and Exchange Commission (the "SEC") encourages  companies
to disclose forward-looking  information so that investors can better understand
a company's  future  prospects  and make  informed  investment  decisions.  This
document, together with management's public commentary related thereto, contains
such  "forward-looking  statements" within the meaning of the Private Securities
Litigation  Reform  Act of 1995,  particularly  statements


                                       7
<PAGE>


                    TIME WARNER ENTERTAINMENT COMPANY, L.P.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued)


anticipating future  growth in  revenues,  EBITA  and cash  flow. Words such  as
"anticipates,"   "estimates,"   "expects,"   "projects,"   "intends,"   "plans,"
"believes" and words and terms of similar  substance used in connection with any
discussion  of  future   operating  or  financial   performance   identify  such
forward-looking  statements.  Those forward-looking  statements are management's
present  expectations or beliefs about future events.  As with any projection or
forecast,  they  are  inherently  susceptible  to  uncertainty  and  changes  in
circumstances,  and TWE is under no obligation to (and  expressly  disclaims any
such obligation to) update or alter its forward-looking  statements whether as a
result of such changes, new information, future events or otherwise.

        TWE operates in highly competitive, consumer driven and rapidly changing
media and entertainment  businesses that are dependent on government  regulation
and  economic,  political  and social  conditions in the countries in which they
operate,  consumer  demand  for  their  products  and  services,   technological
developments and (particularly in view of technological  changes)  protection of
their intellectual property rights. TWE's actual results could differ materially
from management's  expectations because of changes in such factors.  Some of the
other  factors  that also  could  cause  actual  results  to differ  from  those
contained in the  forward-looking  statements  include those identified in TWE's
other filings with the SEC and:

 .   For TWE's cable business,  more aggressive than expected  competition  from
    new  technologies  and  other  types  of  video  programming  distributors,
    including DBS and DSL; increases in government regulation of basic cable or
    equipment  rates or other terms of service  (such as "digital  must-carry,"
    open  access or  common  carrier  requirements);  increased  difficulty  in
    obtaining franchise renewals; the failure of new equipment (such as digital
    set-top  boxes) or  services  (such as  digital  cable,  high-speed  online
    services,  telephony  over  cable or video on  demand)  to appeal to enough
    consumers or to be available at  reasonable  prices to function as expected
    and  to be  delivered  in a  timely  fashion;  and  greater  than  expected
    increases in programming or other costs.

 .   For TWE's cable programming and television businesses, greater than expected
    programming or production  costs;  public and cable  operator  resistance to
    price increases (and the negative impact on premium programmers of increases
    in basic cable rates); increased regulation of distribution agreements;  the
    sensitivity  of  advertising  to  economic  cyclicality;  and  greater  than
    expected  fragmentation of consumer viewership due to an increased number of
    programming   services  or  the  increased  popularity  of  alternatives  to
    television.

 .   For TWE's film and  television  businesses,  their  ability to  continue  to
    attract and select desirable talent and scripts at manageable costs; general
    increases  in  production  costs;  fragmentation  of  consumer  leisure  and
    entertainment  time (and its possible  negative effects on the broadcast and
    cable  networks,  which  are  significant  customers  of these  businesses);
    continued   popularity  of  merchandising;   and  the  uncertain  impact  of
    technological developments such as DVD and the Internet.

 .   For TWE's  digital media  businesses,  their ability to locate and invest in
    profitable businesses, to develop products and services that are attractive,
    accessible and commercially viable in terms of content, technology and cost;
    their ability to manage costs and generate revenues;  aggressive competition
    from existing and developing  technologies  and products;  the resolution of
    issues  concerning  commercial   activities  via  the  Internet,   including
    security,  reliability, cost, ease of use and access; and the possibility of
    increased government regulation of new media services.


                                       8
<PAGE>


                    TIME WARNER ENTERTAINMENT COMPANY, L.P.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued)


        In addition,  TWE's  overall  financial  strategy,  including  growth in
operations,  maintaining its financial  ratios and  strengthened  balance sheet,
could be  adversely  affected  by  increased  interest  rates,  failure  to meet
earnings   expectations,   significant   acquisitions  or  other   transactions,
consequences of the euro  conversion and changes in TWE's plans,  strategies and
intentions.


                                       9
<PAGE>


<TABLE>


                     TIME WARNER ENTERTAINMENT COMPANY, L.P.
                           CONSOLIDATED BALANCE SHEET
                                   (Unaudited)
                                                                                     September 30,   December 31,
                                                                                         2000            1999
                                                                                     -------------   ------------
                                                                                               (millions)
<S>                                                                                     <C>         <C>
ASSETS
Current assets
Cash and equivalents......................................................              $   262     $   517
Receivables, including $1.138 and $1.354 billion due from Time Warner,
   less allowances of $602 and $668 million................................               2,912       3,328
Inventories................................................................                 630         639
Prepaid expenses...........................................................                 200         246
                                                                                        -------      ------

Total current assets.......................................................               4,004       4,730

Noncurrent inventories and film costs......................................               2,526       2,855
Investments................................................................                 728         774
Property, plant and equipment..............................................               7,259       6,488
Cable television franchises................................................               5,322       5,464
Goodwill...................................................................               3,709       3,731
Other assets...............................................................                 781         801
                                                                                       --------     -------

Total assets...............................................................             $24,329     $24,843
                                                                                        =======     =======


LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable...........................................................             $ 1,858     $ 1,791
Participations payable.....................................................               1,072       1,258
Programming costs payable..................................................                 518         459
Debt due within one year...................................................                   6           6
Other current liabilities, including $1.106 billion and $893 million due to
 Time Warner...............................................................               2,628       2,209
                                                                                         ------       -----

Total current liabilities..................................................               6,082       5,723

Long-term debt.............................................................               6,487       6,655
Other long-term liabilities, including $1.368 and $1.292 billion due to
 Time Warner...............................................................               3,473       3,501
Minority interests.........................................................               1,846       1,815

Partners' capital
Contributed capital........................................................               7,349       7,338
Partnership deficit........................................................                (908)       (189)
                                                                                        -------      -------

Total partners' capital....................................................               6,441       7,149
                                                                                        -------     -------

Total liabilities and partners' capital....................................             $24,329     $24,843
                                                                                        =======     =======




See accompanying notes.
</TABLE>




                                       10
<PAGE>


<TABLE>

                     TIME WARNER ENTERTAINMENT COMPANY, L.P.
                      CONSOLIDATED STATEMENT OF OPERATIONS
                                   (Unaudited)


                                                                                        Three Months          Nine Months
                                                                                     Ended September 30,    Ended September 30,
                                                                                    -------------------     -------------------
                                                                                     2000          1999      2000          1999
                                                                                     ----          ----      ----          ----
                                                                                                    (millions)


<S>                                                                              <C>          <C>          <C>         <C>
Revenues(a)..............................................................        $ 3,494      $ 3,474      $ 10,118    $ 9,468
                                                                                 -------      -------      -------     -------

Cost of revenues(a)(b)...................................................         (2,094)      (2,246)       (6,096)    (5,943)
Selling, general and administrative(a)(b)................................           (657)        (593)       (2,014)    (1,766)
Amortization of goodwill and other intangible assets.....................           (143)        (130)         (424)      (366)
Gain (loss) on sale or exchange of cable systems and investments(a)......              -          358            (8)     1,118
Gain on early termination of video distribution agreement................              -            -             -        215
                                                                                 -------       ------       -------     ------

Business segment operating income........................................            600          863         1,576      2,726
Interest and other, net(a)...............................................           (214)        (185)         (640)      (572)
Corporate services(a)....................................................            (19)         (18)          (56)       (54)
Minority interest........................................................            (62)         (60)         (145)      (366)
                                                                                 -------       ------        ------     ------

Income before income taxes and cumulative effect of accounting
   change................................................................            305          600           735      1,734
Income taxes.............................................................            (57)         (39)         (118)       (94)
                                                                                 -------       ------        ------     ------

Income before cumulative effect of accounting change.....................            248          561           617      1,640
Cumulative effect of accounting change...................................              -            -          (524)         -
                                                                                 -------      -------        ------     ------

Net income...............................................................        $   248      $   561      $     93    $ 1,640
                                                                                 =======      =======      ========    =======

---------------
(a) Includes the following income  (expenses)  resulting from  transactions with the partners of TWE and other related companies:
      Revenues...........................................................           $224         $150          $443       $422
      Cost of revenues...................................................           (111)         (62)         (258)      (198)
      Selling, general and administrative................................             (6)          (7)          (53)       (23)
      Gain on sale or exchange of cable systems and investments                        -          308             -        308
      Interest and other, net............................................             11           (8)           20         20
      Corporate services.................................................            (19)         (18)          (56)       (54)

(b) Includes depreciation expense of:....................................           $229         $226          $666       $632
                                                                                   =====         ====          ====       ====









See accompanying notes.

</TABLE>



                                       11
<PAGE>



                     TIME WARNER ENTERTAINMENT COMPANY, L.P.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)
<TABLE>


                                                                                     Nine Months
                                                                                 Ended September 30,
                                                                                 -------------------
                                                                                 2000           1999
                                                                                 ----           ----
                                                                                     (millions)
<S>                                                                             <C>           <C>
OPERATIONS
Net income...............................................................       $   93        $1,640
Adjustments for noncash and nonoperating items:
   Cumulative effect of accounting change................................          524             -
   Depreciation and amortization.........................................        1,090           998
   Amortization of film costs............................................        1,160         1,397
   (Gain) loss on sale or exchange of cable systems and investments......            8        (1,118)
   Equity in losses of investee companies after distributions............          164           157
Changes in operating assets and liabilities..............................         (867)         (869)
                                                                                 -----        ------

Cash provided by operations..............................................        2,172         2,205
                                                                                ------        ------

INVESTING ACTIVITIES
Investments and acquisitions.............................................         (275)         (273)
Capital expenditures.....................................................       (1,436)       (1,009)
Investment proceeds......................................................          211           342
Collection of loan to Time Warner........................................            -           400
                                                                                 -----       -------

Cash used by investing activities........................................       (1,500)         (540)
                                                                                ------       -------

FINANCING ACTIVITIES
Borrowings...............................................................        1,250         1,854
Debt repayments..........................................................       (1,418)       (1,893)
Redemption of preferred stock of subsidiary..............................            -          (217)
Capital distributions....................................................         (684)       (1,116)
Other....................................................................          (75)         (145)
                                                                                ------        ------

Cash used by financing activities........................................         (927)       (1,517)
                                                                                ------        ------

INCREASE (DECREASE) IN CASH AND EQUIVALENTS..............................         (255)          148

CASH AND EQUIVALENTS AT BEGINNING OF PERIOD..............................          517            87
                                                                                ------        ------

CASH AND EQUIVALENTS AT END OF PERIOD....................................       $  262       $   235
                                                                                =======      =======



</TABLE>




See accompanying notes.




                                       12
<PAGE>



                     TIME WARNER ENTERTAINMENT COMPANY, L.P.
                  CONSOLIDATED STATEMENT OF PARTNERSHIP CAPITAL
                                   (Unaudited)




<TABLE>



                                                                                      Nine Months
                                                                                  Ended September 30,
                                                                                  -------------------
                                                                                  2000           1999
                                                                                  ----           ----
                                                                                       (millions)

<S>                                                                               <C>          <C>
BALANCE AT BEGINNING OF PERIOD...........................................         $7,149       $5,107

Net income.................................................................           93        1,640
Other comprehensive income (loss)..........................................          (57)           6
                                                                                  ------     --------
Comprehensive income(a)....................................................           36        1,646

Distributions..............................................................         (760)        (383)
Allocation of income to Time Warner General Partners' Senior Capital.......            -          (24)
Other......................................................................           16           (4)
                                                                                  ------      -------

BALANCE AT END OF PERIOD...................................................       $6,441       $6,342
                                                                                  ======       ======
-------------------
(a) Comprehensive  income was $237 million for the three months ended  September
    30, 2000 and $520 million for the three months ended September 30, 1999.




</TABLE>











See accompanying notes.


                                       13
<PAGE>



                     TIME WARNER ENTERTAINMENT COMPANY, L.P.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

        Time Warner Entertainment  Company, L.P., a Delaware limited partnership
("TWE"),  classifies its business  interests into four fundamental  areas: Cable
Networks,  consisting principally of interests in cable television  programming;
Filmed   Entertainment,   consisting   principally   of   interests   in  filmed
entertainment,   television  production  and  television  broadcasting;   Cable,
consisting  principally of interests in cable  television  systems;  and Digital
Media, consisting principally of interests in Internet-related and digital media
businesses.

        Each  of  the  business   interests   within  Cable   Networks,   Filmed
Entertainment,  Cable and  Digital  Media is  important  to TWE's  objective  of
increasing  partner value through the creation,  extension and  distribution  of
recognizable  brands  and  copyrights  throughout  the  world.  Such  brands and
copyrights include (1) HBO and Cinemax, the leading pay-television services, (2)
the unique and extensive  film,  television  and  animation  libraries of Warner
Bros. and trademarks such as the Looney Tunes characters and Batman,  (3) The WB
Network, a national broadcasting network launched in 1995 as an extension of the
Warner Bros. brand and as an additional  distribution  outlet for Warner Bros.'s
collection of children's  cartoons and television  programming,  (4) Time Warner
Cable, the second largest  operator of cable television  systems in the U.S. and
(5) Internet websites, such as Entertaindom.com.

        Financial  information for TWE's various business  segments is presented
herein as an indication of financial  performance  (Note 5). Except for start-up
losses  incurred in  connection  with The WB Network and  Digital  Media,  TWE's
principal business segments generate significant  operating income and cash flow
from  operations.  The cash  flow from  operations  generated  by such  business
segments is considerably  greater than their operating income due to significant
amounts of noncash  amortization of intangible assets recognized  principally in
Time  Warner  Inc.'s  ("Time   Warner")  $14  billion   acquisition   of  Warner
Communications Inc. ("WCI") in 1989 and $1.3 billion acquisition of the minority
interest in American Television and Communications  Corporation ("ATC") in 1992,
a  portion  of  which  was  allocated  to TWE  upon  the  capitalization  of the
partnership.  Noncash  amortization  of  intangible  assets  recorded  by  TWE's
business  segments amounted to $143 million for the three months ended September
30, 2000 and $130 million for the three months ended  September  30, 1999.  On a
year-to-date basis,  noncash amortization of intangible assets recorded by TWE's
business segments amounted to $424 million in 2000 and $366 million in 1999.

        Certain of Time  Warner's  wholly owned  subsidiaries  collectively  own
general and limited partnership interests in TWE consisting of 74.49% of the pro
rata  priority   capital  ("Series  A  Capital")  and  residual  equity  capital
("Residual  Capital"),  and  100% of the  junior  priority  capital  ("Series  B
Capital").  The remaining 25.51% limited  partnership  interests in the Series A
Capital  and  Residual  Capital  of TWE are held by a  subsidiary  of AT&T Corp.
Certain of Time  Warner's  subsidiaries  are the general  partners of TWE ("Time
Warner General Partners").


                                       14
<PAGE>



                     TIME WARNER ENTERTAINMENT COMPANY, L.P.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
                                   (Unaudited)


Basis of Presentation

Interim Financial Statements

        The accompanying consolidated financial statements are unaudited but, in
the opinion of management, contain all the adjustments (consisting of those of a
normal recurring  nature)  considered  necessary to present fairly the financial
position and the results of operations and cash flows for the periods  presented
in  conformity  with  generally  accepted  accounting  principles  applicable to
interim periods.  The accompanying  consolidated  financial statements should be
read in conjunction with the audited  consolidated  financial  statements of TWE
included in its Annual Report on Form 10-K for the year ended  December 31, 1999
(the "1999 Form 10-K").

Cumulative Effect of Change in Film Accounting Principle

        In June 2000,  TWE adopted  Statement of Position  00-2,  "Accounting by
Producers and Distributors of Films" ("SOP 00-2"). SOP 00-2 established new film
accounting  standards,  including changes in revenue  recognition and accounting
for advertising, development and overhead costs. Specifically, SOP 00-2 requires
advertising  costs for  theatrical  and  television  product to be  expensed  as
incurred.  This compares to TWE's previous policy of first capitalizing and then
expensing  advertising  costs for  theatrical  product over the related  revenue
streams. In addition, SOP 00-2 requires development costs for abandoned projects
and certain indirect  overhead costs to be charged directly to expense,  instead
of those costs being  capitalized  to film costs,  which was required  under the
previous  accounting  model.  SOP  00-2  also  requires  all  film  costs  to be
classified in the balance sheet as noncurrent assets.  Provisions of SOP 00-2 in
other areas,  such as revenue  recognition,  generally are consistent with TWE's
existing accounting policies.

        TWE  has  adopted  the  provisions  of  SOP  00-2  retroactively  to the
beginning  of 2000.  As a result,  TWE's net  income for the nine  months  ended
September  30,  2000  includes  a  one-time,  noncash  charge  of $524  million,
primarily to reduce the carrying  value of its film  inventory.  This charge has
been  reflected  as  a  cumulative   effect  of  an  accounting  change  in  the
accompanying consolidated statement of operations.

Reclassifications

        Certain  reclassifications  have been made to the prior year's financial
statements to conform to the 2000 presentation.

2.   SIGNIFICANT TRANSACTIONS

America Online-Time Warner Merger

        In January 2000, Time Warner and America Online, Inc. ("America Online")
announced  that they had entered into an  agreement  to merge (the  "Merger") by
forming a new holding company named AOL Time Warner Inc. ("AOL Time Warner"). As
a result of the Merger,  the former  shareholders of America Online will have an
approximate 55% interest in AOL Time Warner and the former  shareholders of Time
Warner will have an approximate 45% interest in the combined  entity,  expressed
on a fully diluted basis. The Merger is expected to be accounted for by AOL Time
Warner as an acquisition of Time Warner under the purchase  method of accounting
for business combinations.



                                       15
<PAGE>



                     TIME WARNER ENTERTAINMENT COMPANY, L.P.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
                                   (Unaudited)



        The Merger was approved by the  shareholders  of America Online and Time
Warner on June 23, 2000. In addition, the European Union Commission approved the
Merger on October 11, 2000.  The Merger is expected to close in the fall of 2000
and is subject to customary  closing  conditions,  including all necessary  U.S.
government regulatory  approvals.  There can be no assurance that such approvals
will be obtained.

Six Flags

        In 1998, TWE sold its remaining 49% interest in Six Flags  Entertainment
Corporation  ("Six  Flags") to Premier Parks Inc.  ("Premier,"  now known as Six
Flags Inc.), a regional theme park operator, for approximately $475 million. TWE
initially  deferred a $400  million  gain on the  transaction  principally  as a
result of uncertainties surrounding its realization. Those uncertainties related
to litigation and TWE's  guarantees of Premier's  long-term  obligations to make
minimum  payments  to the  limited  partners of the Six Flags Over Texas and Six
Flags Over Georgia theme parks (the "Co-Venture Guarantees").

        TWE management  periodically had evaluated its reasonably  possible risk
of loss relating to the Six Flags litigation and Co-Venture Guarantees. Based on
the improving financial  performance of Premier and the Six Flags Over Texas and
Six Flags Over  Georgia  theme parks,  management  believed  that its  aggregate
financial  exposure  had  declined  steadily.   Accordingly,   TWE  periodically
recognized a portion of the deferred gain as its  realization  became more fully
assured.  For each  quarter  of 1999 and in the  first  quarter  of 2000,  a $10
million pretax gain was recognized. These amounts have been included in business
segment  operating  income  in  the  accompanying   consolidated   statement  of
operations.

        In December  1998, a jury  returned an adverse  verdict in the Six Flags
litigation in the amount of $454 million.  TWE and its former 51% partner in Six
Flags are financially  responsible for this judgment.  TWE appealed the verdict,
but, in July 2000, an appellate court unexpectedly  affirmed the jury's verdict.
As a result,  TWE revised its estimate of its financial  exposure and recorded a
one-time,  pretax  charge of $50 million in the second  quarter of 2000 to cover
its  additional  financial  exposure in excess of  established  reserves.  These
reserves consisted of the unrecognized  portion of the deferred gain and accrued
interest.  The $50  million  charge is  classified  in two  components  in TWE's
accompanying  consolidated  statement of operations:  $26 million of the charge,
representing  an accrual for  additional  interest,  is included in interest and
other,  net,  and the  remaining  $24 million is  included  in business  segment
operating income.

Filmed Entertainment Investment-Related Gains

        During the third quarter of 2000, Warner Bros.  recognized a net pretax,
investment-related  gain of approximately $65 million,  principally  relating to
additional proceeds received in the third quarter of 2000 in connection with the
1999 sale of an interest in  CanalSatellite,  a  satellite  television  platform
servicing France and Monaco. This gain is included in business segment operating
income in the accompanying consolidated statement of operations.

Gains (Losses) on Sale or Exchange of Cable Television Systems and Investments

        In 2000  and  1999,  largely  in an  ongoing  effort  to  enhance  their
geographic  clustering  of cable  television  properties,  TWE sold or exchanged
various cable  television  systems and  investments.  In  connection  with these
transactions,  TWE's cable segment recognized net pretax losses of approximately
$8 million for the nine months ended  September  30, 2000.  In 1999,  net pretax
gains were  approximately  $358 million in the third quarter and $1.118  billion


                                       16
<PAGE>



                    TIME WARNER ENTERTAINMENT COMPANY, L.P.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
                                   (Unaudited)


for the year-to-date period. Such amounts have been included in business segment
operating income in the accompanying consolidated statement of operations.

1999 Gain on Termination of Video Distribution Agreement

        In March  1999,  Warner  Bros.  and  Metro-Goldwyn-Mayer,  Inc.  ("MGM")
terminated a long-term  distribution  agreement  under which  Warner  Bros.  had
exclusive  worldwide  distribution  rights  for  MGM/United  Artists  home video
product.  In  connection  with the  early  termination  and  settlement  of this
distribution   agreement,   Warner  Bros.   recognized  a  net  pretax  gain  of
approximately  $215  million,  which  has  been  included  in  business  segment
operating income in the accompanying consolidated statement of operations.

3.      INVENTORIES AND FILM COSTS

        Inventories and film costs consist of:
<TABLE>

                                                                                    September 30,      December 31,
                                                                                        2000               1999
                                                                                    ------------       ------------
                                                                                               (millions)
<S>                                                                                 <C>                   <C>
Programming costs, less amortization....................................            $  806                $  854
Film costs-Theatrical:
   Released, less amortization..........................................               762                   924
   Completed and not released...........................................                78                    68
   In production........................................................               361                   468
   Development and pre-production.......................................                34                    59
Film costs-Television:
   Released, less amortization..........................................               105                   363
   Completed and not released...........................................               194                     9
   In production........................................................                78                     8
   Development and pre-production.......................................                 6                     5

Film costs-Library, less amortization...................................               469                   508
Merchandise.............................................................               263                   228
                                                                                     -----                ------

Total inventories and film costs........................................             3,156                 3,494
Less current portion of inventory.......................................               630                   639
                                                                                   -------                ------

Total noncurrent inventories and film costs.............................            $2,526                $2,855
                                                                                    ======                ======
</TABLE>

        Approximately  $798 million of released and  completed  and not released
film costs are expected to be amortized during the next twelve months.

4.      PARTNERS' CAPITAL

        TWE is required to make  distributions  to  reimburse  the  partners for
income  taxes at  statutory  rates  based on their  allocable  share of  taxable
income,  and to reimburse Time Warner for stock options  granted to employees of
TWE based on the amount by which the market  price of Time  Warner  Inc.  common
stock exceeds the option exercise price on the exercise date or, with respect to
options granted prior to the TWE capitalization on June 30, 1992, the greater of
the exercise  price or the $13.88 market price of Time Warner Inc.  common stock
at the time of the TWE  capitalization.  TWE accrues a stock option distribution
and a  corresponding  liability  with  respect to  unexercised  options when the



                                       17
<PAGE>


                    TIME WARNER ENTERTAINMENT COMPANY, L.P.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
                                   (Unaudited)


market price of Time Warner Inc.  common stock  increases  during the accounting
period,  and reverses  previously  accrued  stock option  distributions  and the
corresponding  liability when the market price of Time Warner Inc.  common stock
declines.

        During the nine months  ended  September  30,  2000,  TWE  accrued  $471
million  of  tax-related   distributions   and  $289  million  of  stock  option
distributions,  based on closing  prices of Time  Warner  Inc.  common  stock of
$78.33 at September  30, 2000 and $72.31 at December  31, 1999.  During the nine
months  ended  September  30,  1999,  TWE accrued  $316  million of  tax-related
distributions  and $67 million of stock option  distributions  as a result of an
increase  at that time in the market  price of Time Warner  Inc.  common  stock.
During the nine months ended September 30, 2000, TWE paid  distributions  to the
Time Warner General  Partners in the amount of $684 million,  consisting of $471
million of  tax-related  distributions  and $213 million of stock option related
distributions.  During  the nine  months  ended  September  30,  1999,  TWE paid
distributions to the Time Warner General Partners in the amount of $489 million,
consisting  of $316  million of  tax-related  distributions  and $173 million of
stock option related distributions.

        In July 1999, TWE borrowed $627 million under its bank credit  agreement
and paid a  distribution  to the Time  Warner  General  Partners  to redeem  the
remaining  portion of their  senior  priority  capital  interests,  including  a
priority  capital  return of $173  million.  Time  Warner  used a portion of the
proceeds   received  from  this  distribution  to  repay  all  $400  million  of
outstanding borrowings under its credit agreement with TWE.

5.   SEGMENT INFORMATION

        TWE classifies its business interests into four fundamental areas: Cable
Networks,  consisting principally of interests in cable television  programming;
Filmed   Entertainment,   consisting   principally   of   interests   in  filmed
entertainment,   television  production  and  television  broadcasting;   Cable,
consisting  principally of interests in cable  television  systems;  and Digital
Media, consisting principally of interests in Internet-related and digital media
businesses.  TWE's  Digital  Media  segment  commenced  operations in the fourth
quarter of 1999.

        Information as to the operations of TWE in different  business  segments
is set forth below based on the nature of the products and services offered. TWE
evaluates performance based on several factors,  including its primary financial
measure of business  segment  operating  income before noncash  amortization  of
intangible  assets ("EBITA").  The accounting  policies of the business segments
are the  same as  those  described  in the  summary  of  significant  accounting
policies under Note 1 in TWE's 1999 Form 10-K.  Intersegment sales are accounted
for at fair value as if the sales were to third parties.



                                       18
<PAGE>



                     TIME WARNER ENTERTAINMENT COMPANY, L.P.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
                                   (Unaudited)


<TABLE>
                                                                                       Three Months             Nine Months
                                                                                    Ended September 30,     Ended September 30,
                                                                                    -------------------    --------------------
                                                                                     2000       1999        2000           1999
                                                                                     ----       ----        ----           ----
                                                                                                    (millions)
Revenues
<S>                                                                                <C>        <C>           <C>          <C>
Filmed Entertainment-Warner Bros.............................................      $1,686     $1,862        $ 4,705      $4,688
Broadcasting-The WB Network..................................................          99         84            310         246
Cable Networks-HBO...........................................................         559        540          1,683       1,612
Cable........................................................................       1,288      1,124          3,799       3,312
Digital Media................................................................           2          -              5           -
Intersegment elimination.....................................................        (140)      (136)          (384)       (390)
                                                                                   ------     -------         -----      ------

Total........................................................................      $3,494     $3,474        $10,118      $9,468
                                                                                   ======     ======        =======      ======

                                                                                       Three Months             Nine Months
                                                                                    Ended September 30,     Ended September 30,
                                                                                    -------------------     -------------------
                                                                                     2000      1999         2000           1999
                                                                                     ----      ----         ----           ----
                                                                                                    (millions)
EBITA(a)
Filmed Entertainment-Warner Bros.(b).........................................        $215       $180           $482        $658
Broadcasting-The WB Network..................................................         (15)       (24)           (67)        (95)
Cable Networks-HBO...........................................................         154        138            448         394
Cable(c).....................................................................         404        699          1,182       2,135
Digital Media................................................................         (15)         -            (45)          -
                                                                                    -----     ------         ------       -----

Total........................................................................        $743       $993         $2,000      $3,092
                                                                                     ====       ====         ======      ======
---------------
(a) EBITA   represents   business   segment   operating  income  before  noncash
    amortization  of  intangible   assets.   After  deducting   amortization  of
    intangible  assets,  TWE's business  segment  operating income for the third
    quarter was $600  million in 2000 and $863 million in 1999.  TWE's  business
    segment  operating  income for the first nine  months of the year was $1.576
    billion in 2000 and $2.726 billion in 1999.
(b) Includes a net pretax,  investment-related gain of approximately $65 million
    recognized  in the third  quarter of 2000,  a pretax  charge of $24  million
    recognized in the second  quarter of 2000 in  connection  with the Six Flags
    litigation, a pretax gain of $10 million relating to the partial recognition
    of a deferred gain in connection with the 1998 sale of Six Flags  recognized
    in the first quarter of 2000 and in each of the first three quarters of 1999
    and a pretax gain of  approximately  $215  million  recognized  in the first
    quarter  of 1999  relating  to the early  termination  and  settlement  of a
    long-term, home video distribution agreement.
(c) Includes net pretax gains  relating to the sale or exchange of certain cable
    television  systems of  approximately  $358 million in the third  quarter of
    1999. Similarly,  nine-month results include net pretax losses of $8 million
    in 2000 and net pretax gains of $1.118 billion in 1999.
</TABLE>

<TABLE>
                                                                                       Three Months            Nine Months
                                                                                    Ended September 30,     Ended September 30,
                                                                                    -------------------     -------------------
                                                                                     2000       1999         2000        1999
                                                                                     ----       ----         ----        ----
                                                                                                    (millions)
Depreciation of Property, Plant and Equipment
<S>                                                                                <C>        <C>          <C>          <C>
Filmed Entertainment-Warner Bros.............................................      $  18      $  44        $  61        $109
Broadcasting-The WB Network..................................................          -          -            1           1
Cable Networks-HBO...........................................................          8          7           23          20
Cable........................................................................        203        175          580         502
Digital Media................................................................          -          -            1           -
                                                                                   -----     ------        -----        -----

Total........................................................................       $229       $226         $666        $632
                                                                                    ====       ====         ====        ====
</TABLE>

                                       19
<PAGE>

                    TIME WARNER ENTERTAINMENT COMPANY, L.P.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
                                   (Unaudited)

<TABLE>
                                                                                       Three Months            Nine Months
                                                                                    Ended September 30,     Ended September 30,
                                                                                    -------------------     -------------------
                                                                                      2000       1999         2000       1999
                                                                                      ----       ----         ----       ----
                                                                                                    (millions)
<S>                                                                                  <C>         <C>        <C>         <C>
Amortization of Intangible Assets (a)
Filmed Entertainment-Warner Bros.............................................      $   30     $    30       $ 91        $ 91
Broadcasting-The WB Network..................................................           2           1          4           3
Cable Networks-HBO...........................................................           -           -          -           -
Cable........................................................................         111          99        329         272
Digital Media................................................................           -           -          -           -
                                                                                     ----        ----       ----        ----

Total........................................................................        $143        $130       $424        $366
                                                                                     ====        ====       ====        ====

(a) Includes amortization relating to all business combinations accounted for by
    the purchase method,  including Time Warner's $14 billion acquisition of WCI
    in 1989 and $1.3  billion  acquisition  of the  minority  interest in ATC in
    1992.
</TABLE>

6.      COMMITMENTS AND CONTINGENCIES

        TWE is subject to a civil action  brought by a former  cable  television
competitor in New York City alleging  violations of the antitrust laws. The case
is presently  scheduled for trial in February 2001. Although management believes
these  allegations  are without merit, an adverse jury verdict could result in a
material  loss to TWE.  Due to the vague nature of both  plaintiffs'  claims and
their assertions of damages, a range of loss is not determinable at this time.

        TWE is subject to certain litigation  relating to Six Flags. In December
1998, a jury  returned an adverse  verdict in the Six Flags matter in the amount
of $454  million.  TWE and its former 51%  partner in Six Flags are  financially
responsible for this judgment. As described in Note 2, TWE appealed the verdict,
but, in July 2000, an appellate court unexpectedly  affirmed the jury's verdict.
As a result,  TWE revised its estimate of its financial  exposure and recorded a
one-time,  pretax  charge of $50 million in the second  quarter of 2000 to cover
its additional financial exposure in excess of established reserves.

        TWE is subject to numerous  other  legal  proceedings.  In  management's
opinion and considering  established  reserves,  the resolution of these matters
will not have a material  effect,  individually  and in the aggregate,  on TWE's
consolidated financial statements.

7.      ADDITIONAL FINANCIAL INFORMATION

Cash Flows

        Additional  financial  information  with  respect  to cash  flows  is as
follows:
<TABLE>

                                                                                           Nine Months
                                                                                        Ended September 30,
                                                                                        -------------------
                                                                                        2000           1999
                                                                                        ----           ----
                                                                                             (millions)
<S>                                                                                       <C>           <C>
        Cash payments made for interest....................................               $417          $394
        Cash payments made for income taxes, net...........................                 81            84
        Noncash capital distributions......................................                289            67
</TABLE>


                                       20
<PAGE>



                    TIME WARNER ENTERTAINMENT COMPANY, L.P.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
                                   (Unaudited)

<TABLE>

Interest and Other, Net

        Interest and other, net, consists of:

                                                                                      Three Months             Nine Months
                                                                                    Ended September 30,     Ended September 30,
                                                                                    -------------------     -------------------
                                                                                     2000       1999          2000         1999
                                                                                     ----       ----          ----         ----
                                                                                                    (millions)
<S>                                                                                <C>        <C>              <C>       <C>
        Interest expense................................                           $(165)     $(138)           $(478)    $(411)
        Other investment-related activity, principally net losses
         on corporate-related equity investees..........                             (41)       (35)            (102)     (122)
        Corporate finance-related activity, including losses on
         asset securitization programs..................                             (10)        (8)             (53)      (26)
        Miscellaneous...................................                               2         (4)              (7)      (13)
                                                                                  ------     ------           ------     -----
        Total interest and other, net...................                           $(214)     $(185)           $(640)    $(572)
                                                                                   =====     ======           ======     =====

</TABLE>


                                       21
<PAGE>

                              TWE GENERAL PARTNERS
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION


        On June 30,  1992,  thirteen  direct or  indirect  subsidiaries  of Time
Warner Companies,  Inc. ("TW Companies")  contributed the assets and liabilities
or the rights to the cash flows of  substantially  all of TW Companies's  Filmed
Entertainment-Warner  Bros.,  Cable  Networks-HBO  and Cable  businesses to Time
Warner Entertainment  Company, L.P., a Delaware limited partnership ("TWE"), for
general  partnership  interests,  and each general partner guaranteed a pro rata
portion of  substantially  all of TWE's debt and accrued  interest  based on the
relative  fair value of the net assets  each  contributed  to TWE (the  "General
Partner  Guarantees").  Since  then,  eleven of the  thirteen  original  general
partners have been merged or dissolved into the other two. Warner Communications
Inc. ("WCI") and American Television and Communications  Corporation ("ATC") are
the  two  remaining  general  partners  of  TWE   (collectively,   the  "General
Partners").  They have succeeded to the general  partnership  interests and have
assumed the General Partner Guarantees of the eleven former general partners.

        Set  forth  below is a  discussion  of the  results  of  operations  and
financial  condition of WCI, the only General Partner with independent  business
operations.  WCI conducts  substantially all of TW Companies's Music operations,
which  include  copyrighted  music from many of the  world's  leading  recording
artists  that is produced  and  distributed  by a family of  established  record
labels such as Warner Bros. Records, Atlantic Records, Elektra Entertainment and
Warner Music International.  The financial position and results of operations of
ATC are principally  derived from its  investments in TWE, TW Companies,  Turner
Broadcasting  System, Inc. and Time Warner Telecom Inc. ("Time Warner Telecom"),
and its revolving credit agreement with TW Companies.  Capitalized  terms are as
defined and described in the accompanying  consolidated financial statements, or
elsewhere herein.

Use of EBITA

        WCI evaluates operating performance based on several factors,  including
its primary financial measure of operating income before noncash amortization of
intangible  assets ("EBITA").  Consistent with  management's  financial focus on
controlling capital spending, EBITA measures operating performance after charges
for depreciation.  The exclusion of noncash  amortization  charges is consistent
with management's  belief that WCI's intangible assets, such as music catalogues
and  copyrights  and the  goodwill  associated  with its brands,  generally  are
increasing  in value and  importance  to WCI's  business  objective of creating,
extending and  distributing  recognizable  brands and copyrights  throughout the
world.  As  such,  the  following  comparative  discussion  of  the  results  of
operations  of WCI  includes,  among  other  factors,  an analysis of changes in
business segment EBITA. However,  EBITA should be considered in addition to, not
as a  substitute  for,  operating  income,  net  income  and other  measures  of
financial  performance reported in accordance with generally accepted accounting
principles.

RESULTS OF OPERATIONS

        WCI's operating  results for 1999 reflect a change in the way management
evaluates its investment in the Columbia House Company  Partnerships  ("Columbia
House"),  an  equity  investee.   Effective  on  January  1,  2000,   management
reclassified  WCI's  share of the  operating  results  of  Columbia  House  from
business  segment   operating  income  to  interest  and  other,   net,  in  the
accompanying   consolidated  statement  of  operations.   This  reclassification
resulted   primarily  from  the  planned   restructuring   of  Columbia  House's
traditional  direct-marketing  business and an increasing dependency on the sale
of video product.



                                       22
<PAGE>

                        TWE GENERAL PARTNERS
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued)


Three Months Ended September 30, 2000 Compared to the Three Months Ended
September 30, 1999

        WCI had  revenues of $938 million and net income of $96 million in 2000,
compared  to revenues  of $852  million and net income of $193  million in 1999.
EBITA  increased  to $87 million in 2000 from $79  million in 1999 after  giving
effect to the  Columbia  House  reclassification  described  earlier.  Operating
income  increased  to $27 million in 2000 from $19 million in 1999 after  giving
effect to the Columbia House reclassification.  Revenues increased primarily due
to higher  domestic and  international  recorded music sales and higher revenues
from DVD manufacturing  operations.  Revenues benefited  principally from higher
compact disc sales of a broad range of popular  releases,  including  the latest
releases  from  Madonna,  The Corrs and Eric Clapton with B.B.  King.  EBITA and
operating income increased  principally as a result of the revenue gains, offset
in part by higher marketing and artist royalty costs.

        WCI's  equity  in the  pretax  income of TWE was $181  million  in 2000,
compared to $356  million in 1999.  TWE's  pretax  income  decreased  in 2000 as
compared  to 1999  principally  because  of the  effect of  certain  significant
nonrecurring  items recognized in each period, as described more fully in Note 3
to the accompanying consolidated financial statements.  These nonrecurring items
aggregated  approximately $65 million of net pretax income in 2000,  compared to
approximately  $368  million  of  net  pretax  income  in  1999.  Excluding  the
significant  effect of these  nonrecurring  items, TWE's pretax income decreased
principally as a result of higher  interest  expense  principally  due to higher
market  interest  rates on  variable-rate  debt and higher  losses from  certain
investments accounted for under the equity method of accounting,  offset in part
by an overall increase in TWE's business segment operating income.

        WCI's  interest  and  other,  net,  was $35  million of expense in 2000,
compared  to $14 million of income in 1999.  Interest  expense was $3 million in
2000,  compared  to $2 million in 1999.  There was other  expense,  net,  of $32
million in 2000,  compared to other income,  net, of $16 million in 1999.  Other
expense, net, increased principally due to merger-related costs relating to Time
Warner's  recently  terminated  merger  agreement with EMI Group plc ("EMI") and
higher losses from certain investments  accounted for under the equity method of
accounting.

        The  relationship  between  income  before  income  taxes and income tax
expense for the General Partners is principally  affected by the amortization of
goodwill and certain other financial  statement expenses that are not deductible
for income tax  purposes.  Income tax expense  for each of the General  Partners
includes all income taxes related to its allocable  share of partnership  income
and its equity in the income tax expense of corporate subsidiaries of TWE.

Nine Months Ended September 30, 2000 Compared to the Nine Months Ended
September 30, 1999

        WCI had revenues of $2.811  billion,  income of $136 million  before the
cumulative  effect of an accounting  change and net loss of $66 million in 2000,
compared to revenues of $2.616  billion and net income of $664  million in 1999.
EBITA  increased  to $276 million in 2000 from $266 million in 1999 after giving
effect to the  Columbia  House  reclassification  described  earlier.  Operating
income  increased  to $95 million in 2000 from $79 million in 1999 after  giving
effect to the Columbia House reclassification.  Revenues increased primarily due
to higher  domestic and  international  recorded music sales and higher revenues
from DVD manufacturing  operations.  Revenues benefited  principally from higher
compact disc sales of a broad range of popular  releases,  including  the latest
releases from the Red Hot Chili Peppers, The Corrs, Eric Clapton with B.B. King,
and matchbox  twenty.  EBITA and operating  income  increased  principally  as a
result of the  revenue  gains,  offset in part by higher  marketing  and  artist
royalty costs.

        WCI's  equity  in the  pretax  income of TWE was $436  million  in 2000,
compared to $1.028  billion in 1999.  TWE's pretax  income  decreased in 2000 as
compared to 1999 because of the effect of certain significant nonrecurring

                                       23
<PAGE>

                              TWE GENERAL PARTNERS
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued)


items  recognized  in  each period,  as described  more fully in Note  3  to the
accompanying   consolidated  financial  statements.   These  nonrecurring  items
aggregated  approximately $17 million of net pretax income in 2000,  compared to
approximately $1.363 billion of pretax income in 1999. Excluding the significant
effect of these nonrecurring items, TWE's pretax income increased principally as
a result of an overall increase in TWE's business  segment  operating income and
lower losses from certain  investments  accounted for under the equity method of
accounting,  offset in part by higher interest expense principally due to higher
market interest rates on  variable-rate  debt and higher losses  associated with
TWE's asset securitization program.

        Interest and other,  net, was $205 million of expense in 2000,  compared
to $98  million  of income in 1999.  Interest  expense  was $9  million in 2000,
compared to $7 million in 1999. There was other expense, net, of $196 million in
2000,  compared to other income,  net, of $105 million in 1999.  Other  expense,
net, increased principally because of an approximate $115 million noncash pretax
charge in 2000 to reduce the  carrying  value of WCI's  investment  in  Columbia
House,  higher  losses from certain  investments  accounted for under the equity
method of accounting,  merger-related  costs relating to Time Warner's  recently
terminated  merger  agreement with EMI and the absence in 2000 of an approximate
$53 million pretax gain in 1999 in connection  with the initial public  offering
of a 20%  interest  in Time Warner  Telecom,  a leading  fiber  facilities-based
provider of integrated communications services and solutions.

        The  relationship  between  income  before  income  taxes and income tax
expense for the General Partners is principally  affected by the amortization of
goodwill and certain other financial  statement expenses that are not deductible
for income tax  purposes.  Income tax expense  for each of the General  Partners
includes all income taxes related to its allocable  share of partnership  income
and its equity in the income tax expense of corporate subsidiaries of TWE.

FINANCIAL CONDITION AND LIQUIDITY
September 30, 2000

Financial Condition

        WCI had $8.4 billion of equity at September  30, 2000,  compared to $8.7
billion of equity at December 31, 1999.  Cash and  equivalents  decreased to $98
million at September  30,  2000,  compared to $107 million at December 31, 1999.
WCI had no  long-term  debt  due to TW  Companies  under  its  revolving  credit
agreement at the end of either period.

        ATC had $1.9 billion of equity at September  30, 2000,  compared to $2.1
billion of equity at December 31, 1999.

Senior Capital Distributions

        In July  1999,  TWE  paid a $627  million  distribution  to the  General
Partners  to redeem the  remaining  portion  of their  senior  priority  capital
interests,  including a priority  capital  return of $173  million.  Of the $627
million  distribution,  WCI and ATC  received  $372  million  and $255  million,
respectively.

Cash Flows

        During the first nine months of 2000,  WCI's cash provided by operations
amounted to $271 million and  reflected  $276  million of EBITA,  $62 million of
noncash depreciation  expense,  $405 million of distributions from TWE, less $37
million of proceeds repaid under WCI's asset securitization program, $10 million
of interest payments, $12


                                       24
<PAGE>

                              TWE GENERAL PARTNERS
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued)



million  of income  taxes ($68  million  of which was paid to TW Companies under
a  tax  sharing  agreement)  and  $413  million related to an aggregate increase
in working capital requirements, other balance sheet accounts and noncash items.
In the first nine  months of 1999,  WCI's cash  provided by  operations  of $119
million  reflected  $266 million of EBITA,  $54 million of noncash  depreciation
expense,  $392  million  of  distributions  from  TWE  (excluding  $269  million
representing  the return of a portion of the General  Partners'  Senior  Capital
interests  that  has  been  classified  as  a  source  of  cash  from  investing
activities),  $90 million of proceeds received under WCI's asset  securitization
program,  less $8 million of interest  payments,  $550  million of income  taxes
($445 million of which was paid to TW Companies under a tax sharing  agreement),
and  $125  million   related  to  an  aggregate   increase  in  working  capital
requirements, other balance sheet accounts and noncash items.

        Cash used by  investing  activities  was $132  million in the first nine
months of 2000,  compared  to cash  provided  by  investing  activities  of $156
million in 1999,  principally  as a result of the  absence  in 2000 of  proceeds
received from the distribution of TWE Senior Capital in 1999.

        Cash used by  financing  activities  was $148  million in the first nine
months of 2000,  compared  to $292  million  in the first  nine  months of 1999,
principally  as a result of  increased  advances to TW Companies  and  decreased
dividend payments.

        The assets and cash flows of TWE are restricted by certain borrowing and
partnership  agreements  and are  unavailable  to the  General  Partners  except
through the payment of certain  fees,  reimbursements,  cash  distributions  and
loans, which are subject to limitations. Under its bank credit agreement, TWE is
permitted to incur additional  indebtedness to make distributions and other cash
payments to the General Partners  subject to its individual  compliance with the
cash flow coverage and leverage ratio covenants contained therein.

        Management believes that WCI's operating cash flow, cash and equivalents
and additional  borrowing  capacity under its revolving credit agreement with TW
Companies  are  sufficient  to fund its  capital  and  liquidity  needs  for the
foreseeable  future  without  distributions  from TWE above those  permitted  by
existing agreements.  Although ATC has no independent operations, it is expected
that  additional  tax-related  and  other  distributions  from  TWE,  as well as
availability  under ATC's  revolving  credit  agreement with TW Companies,  will
continue to be sufficient to satisfy ATC's  obligations  with respect to its tax
sharing agreement with TW Companies for the foreseeable future.



                                       25
<PAGE>

<TABLE>

                              TWE GENERAL PARTNERS
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

                                                                                WCI                              ATC
                                                                      ------------------------        ----------------------------
                                                                      September 30,  December 31,     September 30,  December 31,
                                                                         2000          1999                2000          1999
                                                                      -------------  -----------      -------------  ------------
                                                                                              (millions)
<S>                                                                    <C>            <C>              <C>              <C>
ASSETS
Current assets
Cash and equivalents................................                  $     98       $    107          $    -         $      -
Receivables, less allowances of $262 and $290 million                    1,191          1,528               -                -
Inventories.........................................                       176            155               -                -
Prepaid expenses....................................                       867            727               -                -
                                                                      --------        -------          ------          -------

Total current assets................................                     2,332          2,517               -                -

Investments in and amounts due to and from TWE......                     2,444          2,476           1,929            2,170
Investments in TW Companies.........................                       103            103              60               60
Other investments...................................                     1,325          1,497             456              449
Music catalogues, contracts and copyrights..........                       710            779               -                -
Goodwill............................................                     3,505          3,612               -                -
Other assets, primarily property, plant and equipment                      530            497               -                -
                                                                      --------        -------          ------           ------

Total assets........................................                   $10,949        $11,481          $2,445           $2,679
                                                                       =======        =======          ======           ======

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts and royalties payable......................                  $  1,018       $  1,115         $     -           $    -
Other current liabilities...........................                       432            534               -                -
                                                                       -------         ------         -------            -----

Total current liabilities...........................                     1,450          1,649               -                -

Long-term liabilities, including $811, $766, $574 and
   $542 million due to TW Companies.................                     1,057          1,095             574              542

Shareholders' equity
Common stock........................................                         1              1               1                1
Preferred stock of WCI, $.01 par value, 90,000 shares
   outstanding, $90 million liquidation preference..                         -              -               -                -
Paid-in capital.....................................                     9,932          9,926           2,341            2,338
Retained earnings (accumulated deficit).............                      (146)           833              88              172
                                                                       -------        -------       ---------           ------
                                                                         9,787         10,760           2,430            2,511

Due from TW Companies, net..........................                      (759)        (1,437)           (223)             (38)
Reciprocal interest in TW Companies stock...........                      (586)          (586)           (336)            (336)
                                                                       -------         ------          ------            ------

Total shareholders' equity..........................                     8,442          8,737           1,871            2,137
                                                                       -------         ------          ------            ------

Total liabilities and shareholders' equity..........                   $10,949        $11,481          $2,445           $2,679
                                                                       =======        =======          ======           ======

See accompanying notes.
</TABLE>

                                       26
<PAGE>

                              TWE GENERAL PARTNERS
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                        Three Months Ended September 30,
                                   (Unaudited)

<TABLE>
                                                                                      WCI                 ATC
                                                                                --------------     -----------------
                                                                                2000        1999    2000        1999
                                                                                ----        ----    ----        ----
                                                                                            (millions)
<S>                                                                            <C>          <C>     <C>        <C>
Revenues(a)............................................                        $ 938        $852    $    -     $   -
                                                                                ----        ----    ------     -----

Cost of revenues(a)(b).................................                         (551)       (403)        -         -
Selling, general and administrative(a)(b)..............                         (300)       (370)        -         -
Amortization of goodwill and other intangibles.........                          (60)        (60)        -         -
                                                                               -----       -----    ------     -----

Business segment operating income......................                           27          19         -         -
Equity in pretax income of TWE(a)......................                          181         356       124       244
Interest and other, net(a).............................                          (35)         14         8         8
                                                                               -----       -----     -----     -----

Income before income taxes.............................                          173         389       132       252
Income taxes(a)........................................                          (77)       (196)      (50)     (113)
                                                                               -----        ----     -----     -----

Net income.............................................                        $  96        $193     $  82      $139
                                                                               =====        ====     =====      ====
------------------
(a)  Includes the following income  (expenses)  resulting from transactions with
     Time Warner, TW Companies, TWE or equity investees of the General Partners:

        Revenues.......................................                        $  46        $42     $   -     $    -
        Cost of revenues...............................                           (3)        (3)        -          -
        Selling, general and administrative............                           (7)       (12)        -          -
        Equity in pretax income of TWE.................                          (14)       (17)        -          -
        Interest and other, net........................                           (1)        33         -          -
        Income taxes...................................                          (31)      (161)      (27)       (97)

(b)  Includes depreciation expense of:.................                        $  21     $   19     $   -      $   -
                                                                               =====     ======     =====      =====

</TABLE>










See accompanying notes.




                                       27
<PAGE>

                              TWE GENERAL PARTNERS
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                         Nine Months Ended September 30,
                                   (Unaudited)

<TABLE>

                                                                                      WCI                 ATC
                                                                               ------------------   ----------------
                                                                                2000        1999    2000        1999
                                                                                ----        ----    ----        ----
                                                                                              (millions)
<S>                                                                             <C>         <C>      <C>        <C>
Revenues(a)............................................                         $2,811      $2,616  $     -     $   -
                                                                                ------      ------  -------     -----

Cost of revenues(a)(b).................................                         (1,487)     (1,314)       -         -
Selling, general and administrative(a)(b)..............                         (1,048)     (1,036)       -         -
Amortization of goodwill and other intangibles.........                           (181)       (187)       -         -
                                                                                ------      ------  -------     -----

Business segment operating income......................                             95          79        -         -
Equity in pretax income of TWE(a)......................                            436       1,028      299       706
Interest and other, net(a)(c)..........................                           (205)         98       29        56
                                                                                ------      ------  -------     -----

Income before income taxes and cumulative effect of accounting
     change............................................                            326       1,205      328       762
Income taxes(a)........................................                           (190)       (541)    (143)     (318)
                                                                                ------      ------  -------     -----

Income before cumulative effect of accounting change...                            136         664      185       444
Cumulative effect of accounting change, net of $135 million income
     tax benefit for WCI and $91 million income tax benefit
     for ATC...........................................                           (202)          -     (136)        -
                                                                                ------      ------  -------     -----

Net income (loss)......................................                         $  (66)     $  664   $   49     $ 444
                                                                                ======      ======  =======     =====
------------------
(a)  Includes the following income  (expenses)  resulting from transactions with
     Time Warner, TW Companies, TWE or equity investees of the General Partners:

        Revenues.......................................                          $ 189     $ 155    $    -   $     -
        Cost of revenues...............................                             (8)       (9)        -         -
        Selling, general and administrative............                            (12)      (22)        -         -
        Equity in pretax income of TWE.................                            (72)      (42)        -         -
        Interest and other, net........................                              1        92         -         -
        Income taxes...................................                            (68)     (445)      (95)     (280)

(b)  Includes depreciation expense of:.................                          $  62     $  54    $    -   $     -
                                                                                 =====     =====    ======   =======

(c)  Includes an approximate  $53 million pretax gain  recognized by WCI and $36
     million  recognized by ATC in the second quarter of 1999 in connection with
     the initial public offering of a 20% interest in Time Warner Telecom Inc.




</TABLE>

See accompanying notes.



                                       28
<PAGE>

                              TWE GENERAL PARTNERS
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                         Nine Months Ended September 30,
                                   (Unaudited)


<TABLE>
                                                                                      WCI                  ATC
                                                                               ----------------     ---------------
                                                                                2000      1999       2000      1999
                                                                                ----      ----       ----      ----
                                                                                            (millions)
<S>                                                                             <C>       <C>       <C>       <C>
OPERATIONS
Net income (loss)......................................                        $ (66)     $664     $  49      $444
Adjustments for noncash and nonoperating items:
    Cumulative effect of accounting change.............                          202         -       136         -
    Depreciation and amortization......................                          243       241         -         -
    Excess (deficiency) of distributions over equity in pretax
      income of TWE....................................                          (31)     (636)      (20)     (436)
    Equity in losses (income) of other investee companies after
      distributions....................................                           59        14       (13)       (4)
Changes in operating assets and liabilities............                         (136)     (164)      120       (18)
                                                                               -----      ----     -----      ----

Cash provided (used) by operations.....................                          271       119       272       (14)
                                                                               -----      ----     -----      ----

INVESTING ACTIVITIES
Investments and acquisitions...........................                          (21)      (37)        -         -
Capital expenditures...................................                         (111)     (101)        -         -
Investment proceeds....................................                            -        25         -         -
Proceeds received from distribution of TWE Senior Capital                          -       269         -       185
                                                                                ----      ----     -----      ----

Cash provided (used) by investing activities...........                         (132)      156        -        185
                                                                                ----      ----     -----      ----

FINANCING ACTIVITIES
Dividends..............................................                         (131)     (479)      (87)     (326)
Decrease (increase) in amounts due from TW Companies, net                        (17)      187      (185)      155
                                                                                ----      ----     -----      ----

Cash used by financing activities......................                         (148)     (292)     (272)     (171)
                                                                                ----      ----     -----      ----

DECREASE IN CASH AND EQUIVALENTS.......................                           (9)      (17)        -         -

CASH AND EQUIVALENTS AT BEGINNING OF PERIOD............                          107       160         -         -
                                                                                ----       ----    -----      ----

CASH AND EQUIVALENTS AT END OF PERIOD..................                         $ 98      $143    $    -    $    -
                                                                                ====      ====    ======    ======

</TABLE>




See accompanying notes.




                                       29
<PAGE>

                              TWE GENERAL PARTNERS
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                         Nine Months Ended September 30,
                                   (Unaudited)





<TABLE>

                                                                                     WCI                 ATC
                                                                               ---------------    ----------------
                                                                               2000      1999     2000        1999
                                                                               ----      ----     ----        ----
                                                                                           (millions)
<S>                                                                           <C>       <C>       <C>       <C>
BALANCE AT BEGINNING OF PERIOD................................................$8,737    $7,701    $2,137    $1,482


Net income (loss).............................................................   (66)      664        49       444
Other comprehensive loss......................................................   (42)      (35)      (17)        -
                                                                              ------   -------  --------    ------
Comprehensive income (loss)(a)................................................  (108)      629        32       444

Increase in stock option distribution liability to
   TW Companies(b)............................................................  (171)      (40)     (118)      (27)
Dividends.....................................................................  (700)     (377)        -      (255)
Transfers to TW Companies, net................................................   678       187      (185)      155
Other.........................................................................     6         1         5       (2)
                                                                              ------   -------   -------     -----


BALANCE AT END OF PERIOD......................................................$8,442    $8,101    $1,871    $1,797
                                                                              ======    ======    ======    ======

------------------
(a) Comprehensive  income for WCI was $79  million  for the three  months  ended
    September 30, 2000 and $164 million for the three months ended September 30,
    1999.  Comprehensive  income for ATC was $80  million  for the three  months
    ended  September  30,  2000 and $130  million  for the  three  months  ended
    September 30, 1999.

(b) The  General   Partners   record   distributions   to  TW  Companies  and  a
    corresponding  receivable  from TWE as a result of the stock option  related
    distribution  provisions  of the TWE  partnership  agreement.  Stock  option
    distributions  of $171 million for WCI and $118 million for ATC were accrued
    in the first nine months of 2000.  For the first nine months of 1999,  stock
    option  distributions  accrued  were $40 million for WCI and $27 million for
    ATC.  These amounts were accrued  because of an increase in the market price
    of Time Warner common stock (Note 3).


</TABLE>











See accompanying notes.


                                       30
<PAGE>

                              TWE GENERAL PARTNERS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.   DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

        On June 30,  1992,  thirteen  direct or  indirect  subsidiaries  of Time
Warner Companies,  Inc. ("TW Companies")  contributed the assets and liabilities
or the rights to the cash flows of  substantially  all of TW Companies's  Filmed
Entertainment-Warner  Bros.,  Cable  Networks-HBO  and Cable  businesses to Time
Warner Entertainment  Company, L.P., a Delaware limited partnership ("TWE"), for
general  partnership  interests,  and each general partner guaranteed a pro rata
portion of  substantially  all of TWE's debt and accrued  interest  based on the
relative  fair value of the net assets  each  contributed  to TWE (the  "General
Partner  Guarantees," see Note 5). Since then,  eleven of the thirteen  original
general  partners  have been  merged or  dissolved  into the other  two.  Warner
Communications   Inc.  ("WCI")  and  American   Television  and   Communications
Corporation  ("ATC") are the two  remaining  general  partners of TWE. They have
succeeded  to the general  partnership  interests  and have  assumed the General
Partner  Guarantees of the eleven former general  partners.  WCI, ATC and, where
appropriate,  the former general partners are referred to herein as the "General
Partners."

        WCI conducts substantially all of TW Companies's Music operations, which
include  copyrighted  music from many of the world's leading  recording  artists
that is produced and  distributed by a family of established  record labels such
as Warner Bros.  Records,  Atlantic  Records,  Elektra  Entertainment and Warner
Music  International.  ATC  does  not  conduct  operations  independent  of  its
ownership interests in TWE and certain other investments.

Basis of Presentation

Interim Financial Statements

        The accompanying consolidated financial statements are unaudited but, in
the opinion of management, contain all the adjustments (consisting of those of a
normal recurring  nature)  considered  necessary to present fairly the financial
position and the results of operations and cash flows for the periods  presented
in  conformity  with  generally  accepted  accounting  principles  applicable to
interim periods.  The accompanying  consolidated  financial statements should be
read in conjunction with the audited  consolidated  financial  statements of the
General Partners included in TWE's Annual Report on Form 10-K for the year ended
December 31, 1999 (the "1999 Form 10-K").

Cumulative Effect of Change in Film Accounting Principle

        In June 2000, Time Warner Inc. ("Time Warner") and TWE adopted Statement
of Position  00-2,  "Accounting  by Producers and  Distributors  of Films" ("SOP
00-2"). SOP 00-2 established new film accounting standards, including changes in
revenue  recognition  and accounting for  advertising,  development and overhead
costs.  Specifically,  SOP 00-2 requires  advertising  costs for  theatrical and
television  product to be expensed as incurred.  This  compares to Time Warner's
and TWE's previous policy of first  capitalizing and then expensing  advertising
costs for theatrical product over the related revenue streams. In addition,  SOP
00-2  requires  development  costs for abandoned  projects and certain  indirect
overhead costs to be charged  directly to expense,  instead of those costs being
capitalized  to film costs,  which was required  under the  previous  accounting
model.  SOP 00-2 also  requires all film costs to be  classified  in the balance


                                       31
<PAGE>
                              TWE GENERAL PARTNERS
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                   (Unaudited)


sheet as  noncurrent  assets.  Provisions  of SOP 00-2 in other  areas,  such as
revenue  recognition,  generally  are  consistent  with Time  Warner's and TWE's
existing accounting policies.

        Time  Warner  and  TWE  have   adopted  the   provisions   of  SOP  00-2
retroactively to the beginning of 2000.  Because WCI and ATC have investments in
TWE and other Time Warner  consolidated  subsidiaries,  which are  accounted for
under the equity method, net income for the nine months ended September 30, 2000
includes a one-time,  noncash, after-tax charge of $202 million for WCI and $136
million for ATC. These charges have been reflected as a cumulative  effect of an
accounting change in the accompanying consolidated statement of operations.

Reclassifications

        Certain  reclassifications  have been made to the prior year's financial
information to conform to the 2000 presentation, including a reclassification of
WCI's  operating  results  for  1999  to  reflect  a  change  in how  management
classifies  WCI's share of the operating  results of the Columbia  House Company
Partnerships  ("Columbia  House"),  an equity investee.  Effective on January 1,
2000,  management  reclassified WCI's share of the operating results of Columbia
House from business segment  operating  income to interest and other,  net. This
reclassification  resulted primarily from the planned  restructuring of Columbia
House's traditional  direct-marketing  business and an increasing  dependency on
the sale of video product.

2.   SIGNIFICANT TRANSACTIONS

America Online-Time Warner Merger

        In January 2000, Time Warner and America Online, Inc. ("America Online")
announced  that they had entered into an  agreement  to merge (the  "Merger") by
forming a new holding company named AOL Time Warner Inc. ("AOL Time Warner"). As
a result of the Merger,  the former  shareholders of America Online will have an
approximate 55% interest in AOL Time Warner and the former  shareholders of Time
Warner will have an approximate 45% interest in the combined  entity,  expressed
on a fully diluted basis. The Merger is expected to be accounted for by AOL Time
Warner as an acquisition of Time Warner under the purchase  method of accounting
for business combinations.

        The Merger was approved by the shareholders  of America  Online and Time
Warner on June 23, 2000. In addition, the European Union Commission approved the
Merger on October 11, 2000.  The Merger is expected to close in the fall of 2000
and is subject to customary  closing  conditions,  including all necessary  U.S.
government regulatory  approvals.  There can be no assurance that such approvals
will be obtained.

Warner-EMI Music Merger

        In January 2000,  Time Warner and EMI Group plc ("EMI")  announced  they
had entered into an agreement to combine their global music  operations into two
50-50 joint  ventures,  to be referred to  collectively  as Warner EMI Music. On
October 5,  2000,  Time  Warner and EMI  terminated  the  merger  agreement  and
withdrew their application seeking approval of the transaction from the European
Union Commission.  Time Warner and EMI intend to continue  discussions with each
other, the European Union  Commission and other regulatory  authorities in order
to attempt to agree to a combination  which is acceptable to all parties.  There
can be no assurance that these parties will be able to reach an agreement.



                                       32
<PAGE>
                              TWE GENERAL PARTNERS
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                   (Unaudited)


        In connection with the proposed merger, WCI has been incurring one-time,
merger-related  costs,  which are permitted to be capitalized in accordance with
generally accepted accounting  principles.  In the third quarter of 2000,because
the  merger  agreement  was  terminated,  WCI  expensed  all of  its  previously
capitalized  merger-related  costs. These costs have been classified in interest
and other, net, in the accompanying consolidated statement of operations.

Columbia House Investment Write-Down

        In July 1999, Time Warner  announced an agreement with Sony  Corporation
of America ("Sony") to merge their jointly owned music and video club operations
of  Columbia  House with CDNOW,  Inc.  ("CDNOW"),  a music and video  e-commerce
company. While awaiting the receipt of regulatory approvals,  the March 13, 2000
termination date in the merger agreement was reached, and the parties terminated
the agreement. Accordingly, the merger will not occur.

        In March 2000,  WCI recorded a $115  million  noncash  pretax  charge to
reduce the carrying  value of its investment in Columbia House to an estimate of
its fair value. The charge has been included in interest and other,  net, in the
accompanying consolidated statement of operations.

3.  TWE
<TABLE>

        The General  Partners'  investment in and amounts due to and from TWE at
September 30, 2000 and December 31, 1999 consists of the following:

September 30, 2000                                                                        WCI        ATC
------------------                                                                        ---        ---
                                                                                            (millions)
<S>                                                                                     <C>        <C>
Investment in TWE..........................................................             $1,947     $1,372
Stock option related distributions due from TWE............................                811        557
Other net liabilities due to TWE, principally related to home video distribution          (314)         -
                                                                                        ------     ------
Total......................................................................             $2,444     $1,929
                                                                                        ======     ======

December 31, 1999                                                                         WCI        ATC
-----------------                                                                        ----        ---
                                                                                            (millions)
Investment in TWE..........................................................             $2,342     $1,644
Stock option related distributions due from TWE............................                766        526
Other net liabilities due to TWE, principally related to home video distribution          (632)         -
                                                                                       ------      ------
Total......................................................................             $2,476     $2,170
                                                                                        ======     ======
</TABLE>

Partnership Structure and Allocation of Income

        TWE is a Delaware  limited  partnership  that was capitalized in 1992 to
own and  operate  substantially  all of the Filmed  Entertainment-Warner  Bros.,
Cable  Networks-HBO  and  Cable  businesses  previously  owned  by  the  General
Partners.  The General  Partners in the aggregate hold,  directly or indirectly,
63.27% of the pro rata priority  capital and residual  equity capital of TWE and
100% of the junior priority capital of TWE. TW Companies holds 11.22% of the pro
rata priority capital and residual equity capital limited partnership interests.
The  remaining  25.51%  limited  partnership  interests in the pro rata priority
capital and  residual  equity  capital of TWE are held by a  subsidiary  of AT&T
Corp.

        The TWE  partnership  agreement  provides  for  special  allocations  of
income,  loss and  distributions  of  partnership  capital,  including  priority
distributions  in the event of  liquidation.  No  portion of TWE's net income or
losses has been allocated to the limited partnership interests.


                                       33
<PAGE>
                              TWE GENERAL PARTNERS
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                   (Unaudited)

<TABLE>

Summarized Financial Information of TWE

        Set forth below is summarized financial information of TWE.

                                                                                        Three Months           Nine Months
                                                                                     Ended September 30,   Ended September 30,
                                                                                    -------------------   -------------------
                                                                                    2000           1999    2000          1999
                                                                                    ----           ----    ----          ----
                                                                                                  (millions)
<S>                                                                                <C>          <C>        <C>        <C>

Operating Statement Information
Revenues...............................................                            $3,494       $3,474     $10,118    $9,468
Depreciation and amortization..........................                              (372)        (356)     (1,090)     (998)
Business segment operating income(a)...................                               600          863       1,576     2,726
Interest and other, net(b).............................                              (214)        (185)       (640)     (572)
Minority interest......................................                               (62)         (60)       (145)     (366)
Income before income taxes and cumulative effect of accounting
    change.............................................                               305          600         735     1,734
Cumulative effect of accounting change.................                                 -            -        (524)        -
Net income.............................................                               248          561          93     1,640
------------------
(a) Includes a net pretax,  investment-related gain of approximately $65 million
    recognized  in the third  quarter of 2000,  a pretax  charge of $24  million
    recognized in the second  quarter of 2000 in  connection  with the Six Flags
    litigation, a pretax gain of $10 million relating to the partial recognition
    of a deferred gain in connection with the 1998 sale of Six Flags  recognized
    in the first quarter of 2000 and in each of the first three quarters of 1999
    and a pretax gain of  approximately  $215  million  recognized  in the first
    quarter  of 1999  relating  to the early  termination  and  settlement  of a
    long-term,  home video  distribution  agreement.  In addition,  includes net
    pretax gains  relating to the sale or exchange of certain  cable  television
    systems  of  approximately  $358  million  in the  third  quarter  of  1999.
    Similarly,  nine-month  results  include net pretax  losses of $8 million in
    2000 and net pretax gains of $1.118 billion in 1999.
(b) Includes $26 million of additional interest expense recognized in the second
    quarter of 2000 in connection with the Six Flags litigation.

</TABLE>

<TABLE>
                                                                                         Nine Months
                                                                                     Ended September 30,
                                                                                     -------------------
                                                                                     2000          1999
                                                                                     ----          ----
                                                                                         (millions)
<S>                                                                                <C>           <C>
Cash Flow Information
Cash provided by operations................................................        $2,172        $2,205
Investments and acquisitions...............................................          (275)         (273)
Capital expenditures.......................................................        (1,436)       (1,009)
Investment proceeds........................................................           211           342
Collection of loan to Time Warner..........................................             -           400
Borrowings.................................................................         1,250         1,854
Debt repayments............................................................        (1,418)       (1,893)
Redemption of preferred stock of subsidiary................................             -          (217)
Capital distributions......................................................          (684)       (1,116)
Other......................................................................           (75)         (145)
Increase (decrease) in cash and equivalents................................          (255)          148
</TABLE>
<TABLE>
                                                                                September 30,    December 31,
                                                                                    2000             1999
                                                                                ------------     ------------
                                                                                         (millions)
<S>                                                                                <C>           <C>
Balance Sheet Information
Cash and equivalents.......................................................        $  262       $   517
Total current assets.......................................................         4,004         4,730
Total assets...............................................................        24,329        24,843
Total current liabilities..................................................         6,082         5,723
Long-term debt ............................................................         6,487         6,655
Minority interests.........................................................         1,846         1,815
Partners' capital..........................................................         6,441         7,149
</TABLE>


                                       34
<PAGE>


                              TWE GENERAL PARTNERS
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                   (Unaudited)

Capital Distributions

        The assets and cash flows of TWE are  restricted by the TWE  partnership
and credit agreements and are unavailable for use by the partners except through
the payment of certain fees, reimbursements, cash distributions and loans, which
are subject to  limitations.  At September  30, 2000 and December 31, 1999,  the
General  Partners had recorded $1.368 billion and $1.292 billion,  respectively,
of stock option related  distributions  due from TWE, based on closing prices of
Time  Warner  common  stock of $78.33  and  $72.31,  respectively.  The  General
Partners  are paid when the options are  exercised.  The General  Partners  also
receive  tax-related  distributions from TWE on a current basis. During the nine
months ended  September 30, 2000, the General  Partners  received  distributions
from  TWE in  the  amount  of  $684  million,  consisting  of  $471  million  of
tax-related   distributions   and  $213   million   of  stock   option   related
distributions.  During the nine months ended  September  30,  1999,  the General
Partners  received  distributions  from TWE in the  amount  of  $1.116  billion,
consisting of $627 million of Senior  Capital  distributions  (representing  the
return of $454 million of  contributed  capital and the  distribution  of a $173
million priority capital return), $316 million of tax-related  distributions and
$173  million  of  stock  option  related   distributions.   Of  such  aggregate
distributions  in 2000 and 1999,  WCI received  $405  million and $661  million,
respectively, and ATC received $279 million and $455 million, respectively.

Significant Items and Transactions

        The  comparability  of TWE's summarized  financial  information has been
affected by a number of  significant  items and  transactions  occurring  in all
periods.  These  transactions  are summarized  below.  For a more  comprehensive
description  of  these  transactions,   see  Note  2  to  the  accompanying  TWE
consolidated financial statements.

        For 2000, the significant, nonrecurring items included (i) a net pretax,
investment-related  gain of  approximately  $65 million  recognized in the third
quarter,  principally  relating  to  additional  proceeds  received in the third
quarter  of  2000  in   connection   with  the  1999  sale  of  an  interest  in
CanalSatellite,  a satellite  television  platform  servicing France and Monaco,
(ii) net pretax  losses of  approximately  $8 million  recognized  in the second
quarter relating to the sale or exchange of various cable television systems and
investments,  (iii) a $50 million pretax charge recognized in the second quarter
related to the Six Flags  Entertainment  Corporation  ("Six Flags")  litigation,
(iv) a pretax gain of $10 million  recognized in the first  quarter  relating to
the partial recognition of a deferred gain on the 1998 sale of Six Flags and (v)
a noncash charge of $524 million in the first quarter  reflecting the cumulative
effect of an  accounting  change in  connection  with the adoption of a new film
accounting standard.

        For 1999, the  significant,  nonrecurring  items included (i) net pretax
gains  of  approximately  $358  million  recognized  in the  third  quarter  and
approximately $1.118 billion recognized in the first nine months relating to the
sale or exchange of various cable  television  systems and  investments,  (ii) a
pretax  gain of $10  million  recognized  in each of the  first  three  quarters
relating to the partial  recognition  of a deferred gain on the 1998 sale of Six
Flags and (iii) an approximate  $215 million pretax gain recognized in the first
quarter in connection with the early  termination and settlement of a long-term,
home video distribution agreement.

4.   GAIN ON TIME WARNER TELECOM'S INITIAL PUBLIC OFFERING

        In May 1999, Time Warner Telecom Inc. ("Time Warner Telecom"), a leading
fiber  facilities-based  provider  of  integrated  communications  services  and
solutions,  completed an initial public offering of 20% of its common stock (the
"Time Warner Telecom IPO").  In connection  with the Time Warner Telecom IPO and
certain related  transactions,  WCI's ownership  interest in Time Warner Telecom
was diluted from 28% to 22% and ATC's ownership  interest in Time


                                       35
<PAGE>


                              TWE GENERAL PARTNERS
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                   (Unaudited)


Warner  Telecom  was  diluted  from 19% to 15%.  As a  result,  WCI and ATC
recognized   pretax  gains  of  approximately   $53  million  and  $36  million,
respectively.  These gains have been included in interest and other, net, in the
accompanying consolidated statements of operations for the three and nine months
ended September 30, 1999.

5.   GENERAL PARTNER GUARANTEES

        Each General Partner has guaranteed a pro rata portion of  approximately
$5.2 billion of TWE's debt and accrued  interest at September 30, 2000, based on
the  relative  fair  value  of the  net  assets  each  General  Partner  (or its
predecessor)  contributed to TWE. Such  indebtedness is recourse to each General
Partner only to the extent of its guarantee.  There are no  restrictions  on the
ability of the General  Partner  guarantors to transfer  assets,  other than TWE
assets, to parties that are not guarantors.

        The portion of TWE debt and accrued  interest at September 30, 2000 that
was guaranteed by each General Partner is set forth below (dollars in millions):

                                                         Total Guaranteed by
                                                        Each General Partner
                                                        --------------------
General Partner                                            %         Amount
---------------                                          -------     ------
WCI ...................................................  59.27       $3,054
ATC ...................................................  40.73        2,099
                                                         ------      ------
Total.................................................. 100.00       $5,153
                                                        ======       ======

6.   COMMITMENTS AND CONTINGENCIES

        WCI is subject to various class action  lawsuits as well as actions that
have been brought by various  state  attorneys  general  alleging  collusive and
other illegal pricing  practices by the major record companies in their capacity
as distributors of compact discs.  Although  management believes these cases are
without merit, adverse jury verdicts could result in a material loss to WCI. Due
to the  lack of  specificity  to  plaintiffs'  claims,  a  range  of loss is not
determinable at this time.

        TWE is subject to a civil action  brought by a former  cable  television
competitor in New York City alleging  violations of the antitrust laws. The case
is presently  scheduled for trial in February 2001. Although management believes
these  allegations  are without merit, an adverse jury verdict could result in a
material  loss to TWE.  Due to the vague nature of both  plaintiffs'  claims and
their assertions of damages, a range of loss is not determinable at this time.

        TWE is subject to certain litigation  relating to Six Flags. In December
1998, a jury  returned an adverse  verdict in the Six Flags matter in the amount
of $454  million.  TWE and its former 51%  partner in Six Flags are  financially
responsible for this judgment.  As described in Note 2 to the  accompanying  TWE
consolidated financial statements,  TWE appealed the verdict, but, in July 2000,
an appellate court  unexpectedly  affirmed the jury's verdict.  As a result, TWE
revised its estimate of its financial  exposure and recorded a one-time,  pretax
charge of $50  million  in the second  quarter  of 2000 to cover its  additional
financial exposure in excess of established reserves.

        The General  Partners and TWE are also  subject to numerous  other legal
proceedings.  In management's opinion and considering  established reserves, the
resolution of these matters will not have a material effect, individually and in
the aggregate, on the General Partners' financial statements.


                                       36
<PAGE>

                              TWE GENERAL PARTNERS
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                   (Unaudited)


7.   ADDITIONAL FINANCIAL INFORMATION

        Additional  financial  information  with  respect  to cash  flows  is as
follows:
<TABLE>

                                                                                          Nine Months Ended September 30,
                                                                                          -------------------------------
                                                                                             2000                 1999
                                                                                        -------------         ------------
                                                                                        WCI       ATC         WCI      ATC
                                                                                        ---       ---         ---      ---
                                                                                                     (millions)
<S>                                                                                    <C>      <C>         <C>      <C>
        Cash payments made for interest.....................                           $  10    $   -       $  8     $  -
        Cash payments made for income taxes, net............                              12       95        550      280
        Tax-related distributions received from TWE.........                             279      192        187      129
        Noncash capital distributions, net..................                             171      118         40       27
</TABLE>

        Noncash  financing  activities in 2000 included the  settlement of WCI's
note receivable  from TW Companies  through a WCI dividend in the amount of $695
million to TW Companies.



                                       37
<PAGE>


                           Part II. Other Information

Item 1.   Legal Proceedings

        Reference  is made to Six Flags Over  Georgia  LLC et al. v. Time Warner
Entertainment  Company,  L.P.  et al.,  described  on page I-24 of TWE's  Annual
Report on Form 10-K for the year ended  December 31, 1999 (the "1999 Form 10-K")
and page 39 of TWE's  Quarterly  Report on Form 10-Q for the quarter  ended June
30, 2000 (the "June 30, 2000 Form 10-Q"). On August 16, 2000, defendants filed a
petition for certiorari  with the Supreme Court of Georgia seeking review of the
decision of the Georgia  Court of Appeals that had  affirmed  the trial  court's
judgment. The Court is expected to act on the petition by the end of the year.

        Reference is made to the Consent  Order signed by Warner Music Group and
the other major record companies with the Federal Trade Commission  ("FTC") with
respect  to the  FTC's  investigation  of  minimum  advertised  price  programs,
described on pages I-20 and I-24 of TWE's 1999 Form 10-K and page 39 of the June
30, 2000 Form 10-Q. On September 6, 2000, the FTC gave its final approval of the
Consent Order.

        Reference  is made to  Digital  Distribution  Inc.  d/b/a  Compact  Disc
Warehouse v. CEMA Distribution et al., and the related suits,  described on page
I-24 of TWE's  1999 Form 10-K and page 39 of the June 30,  2000  Form  10-Q.  On
September 22, 2000,  the United States  District  Court of Appeals for the Ninth
Circuit denied the plaintiffs'  application  for review of the district  court's
denial of the motion for class  certification.  On October 23, 2000,  defendants
filed a motion for summary  judgment.  Trial in this matter is now scheduled for
early next year.

        Reference  is made to the actions  pending in various  Federal  district
courts alleging claims of price fixing in the recorded music industry, described
on page 39 of the June 30, 2000 Form 10-Q under Bauman v. EMI Music Distribution
et al. The Federal actions have been  consolidated for pretrial  proceedings and
transferred  for such  purpose  to the  United  States  District  Court  for the
District of Maine. A number of similar cases are pending in various state courts
around the country, although the cases are generally at a very preliminary stage
of the proceedings.

        Reference  is made to  State of  Florida  et al.  v.  BMG  Music et al.,
described on page 39 of the June 30, 2000 Form 10-Q. The attorneys general of 12
additional  states,  along with Puerto  Rico,  the U.S.  Virgin  Islands and the
Northern  Mariana Islands,  have since joined the lawsuit.  This action has been
consolidated  in the United States District Court for the District of Maine with
the Federal actions described in the preceding paragraph.

     Reference is made to Chambers et al. v. Time Warner Inc. et al.,  described
on page 39 of the June 30, 2000 Form 10-Q. On August 28, 2000,  the Court orally
granted Time Warner's motion to dismiss.

     Reference is made to Bartholdi  Cable Company,  Inc. v. Time Warner Inc. et
al.,  described  on page  I-25 of TWE's  1999 Form  10-K.  Trial has been set to
commence February 5, 2001.

     Reference  is made to Parker et al. v. Time  Warner  Entertainment  et al.,
described  on page  I-25 of TWE's  1999 Form  10-K.  On  October  2,  2000,  the
Magistrate Judge issued a recommendation to grant the defendants' motion to deny
class certification as to the claims for money damages.

Item 6.  Exhibits and Reports on Form 8-K.

        (a)  Exhibits.
             --------

        The  exhibits  listed  on the  accompanying  Exhibit  Index are filed or
incorporated  by reference  as a part of this report and such  Exhibit  Index is
incorporated herein by reference.

        (b)  Reports on Form 8-K.
             -------------------

        No Current  Report on Form 8-K was filed by TWE during the quarter ended
September 30, 2000.


                                       38
<PAGE>


                     TIME WARNER ENTERTAINMENT COMPANY, L.P.
                            AND TWE GENERAL PARTNERS

                                   SIGNATURES



        Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,
each of the  registrants  has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.

                              TIME WARNER ENTERTAINMENT COMPANY, L.P.
                              By: Warner Communications Inc.,
                                        as General Partner


                              By:       /s/  Joseph A. Ripp
                                     ------------------------------------------
                              Name:  Joseph A. Ripp
                              Title: Executive Vice President and
                                      Chief Financial Officer

                              AMERICAN TELEVISION AND COMMUNICATIONS CORPORATION
                              WARNER COMMUNICATIONS INC.


                               By:       /s/  Joseph A. Ripp
                                      -----------------------------------------
                               Name:  Joseph A. Ripp
                              Title:  Executive Vice President and
                                       Chief Financial Officer


Dated: November 10, 2000


                                       39
<PAGE>


                                  EXHIBIT INDEX
                     Pursuant to Item 601 of Regulations S-K




Exhibit No.    Description of Exhibit

27             Financial Data Schedule.