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 June 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
 as specified in its charter)      (State or other          (I.R.S. Employer
                                    jurisdiction or       Identification Number)
                                    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>        <C>
PART I. FINANCIAL INFORMATION
Management's discussion and analysis of results of operations and financial condition.......     1         22
Consolidated balance sheets at June 30, 2000 and December 31, 1999..........................    10         26
Consolidated statements of operations for the three months and six months ended
   June 30, 2000 and 1999...................................................................    11         27
Consolidated statements of cash flows for the six months ended June 30, 2000 and 1999.......    12         29
Consolidated statements of partnership capital and shareholders' equity for the
   six months ended June 30, 2000 and 1999..................................................    13         30
Notes to consolidated financial statements..................................................    14         31




PART II. OTHER INFORMATION..................................................................    39

</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 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) 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, (ii) a
$50  million  pretax  charge  in the  second  quarter  related  to the Six Flags
Entertainment  Corporation ("Six Flags") litigation,  (iii) a pretax gain of $10
million in the first quarter  relating to the partial  recognition of a deferred
gain on the 1998 sale of Six Flags and (iv) 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  $760 million  recognized in the second quarter 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 and second  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.
                                       1

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

     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

     EBITA and operating income are as follows:
<TABLE>

                                                         Three Months Ended June 30,            Six Months Ended June 30,
                                                      ----------------------------------     ----------------------------------
                                                                           Operating                            Operating
                                                           EBITA             Income             EBITA            Income
                                                      --------------    ---------------    -------------     ---------------
                                                       2000     1999     2000      1999     2000     1999     2000     1999
                                                       ----     ----     ----     ------    ----     ----     ----     ----
                                                                                     (millions)
<S>                                                    <C>    <C>        <C>    <C>      <C>      <C>         <C>    <C>
Filmed Entertainment-Warner Bros.(a)................   $121   $  132    $  90   $  101   $  267    $ 478      $206   $  417
Broadcasting-The WB Network.........................    (21)     (30)     (22)     (31)     (52)     (71)      (54)     (73)
Cable Networks-HBO..................................    150      131      150      131      294      256       294      256
Cable(b)............................................    385    1,099      276    1,011      778    1,436       560    1,263
Digital Media.......................................    (17)       -      (17)       -      (30)       -       (30)       -
                                                       ----   ------    -----   ------   -----    ------      ----   ------

Total...............................................   $618   $1,332     $477   $1,212   $1,257   $2,099      $976   $1,863
                                                       ====   ======     ====   ======   ======   ======      ====   ======
</TABLE>

------------
(a)   Includes 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 related to the partial  recognition of a deferred gain on the 1998
      sale of Six Flags  recognized  in the first quarter of 2000 and in each of
      the first and second  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  losses  related to the sale or  exchange  of certain
      cable  television  systems and investments of  approximately $8 million in
      the  second  quarter of 2000 and net pretax  gains of  approximately  $760
      million in the second quarter of 1999.

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

Consolidated Results

     TWE had  revenues of $3.313  billion and net income of $145 million for the
three months ended June 30, 2000, compared to revenues of $3.060 billion and net
income of $767 million for the three months ended June 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 approximately $58
million of net pretax losses in 2000,  compared to approximately $770 million of
net pretax gains in 1999.

     TWE's net  income  decreased  to $145  million  in 2000,  compared  to $767
million  in 1999.  However,  excluding  the  effect  of the  nonrecurring  items
referred to earlier, net income increased by $48 million to $203 million in 2000
from $155  million  in 1999.  As  discussed  more  fully  below,  this  increase
principally  resulted  from  an  overall  increase  in  TWE's  business  segment
operating income,  offset in part by higher interest expense  principally due to
higher market interest rates on  variable-rate  debt,  higher losses  associated
with  TWE's  asset  securitization   program  and  higher  losses  from  certain
investments accounted for under the equity method.

                                       2
<PAGE>

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


     As a U.S. partnership,  TWE is not subject to U.S. federal and state income
taxation.  Income and  withholding  taxes of $25 million and $27 million for the
three months ended June 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 increased to $1.452 billion in
2000,  compared to $1.446 billion in 1999. EBITA,  including the negative effect
on operating  trends of one-time items relating to Six Flags,  decreased to $121
million in 2000 from $132 million in 1999.  Operating income similarly decreased
to $90  million  in 2000 from $101  million in 1999 due to the  one-time  items.
Revenues  principally   benefited  from  an  increase  in  the  distribution  of
television  product,  offset in part by lower revenues from the  distribution of
theatrical  product.  Revenues  from  the  distribution  of  theatrical  product
decreased  principally  due to difficult  comparisons to last year's  theatrical
success of The Matrix and lower revenues from worldwide  television  exhibition,
which  more than  offset  significant  increases  in DVD and home  video  sales.
Revenues from the distribution of television  product increased  principally due
to higher aggregate  revenues from broadcast  network and syndicated  television
exhibition,  offset  in  part by  lower  aggregate  revenues  from  basic  cable
exhibition.

     Operating  results for both periods include items related to Six Flags. The
2000 results  include a pretax  charge of $24 million  relating to the Six Flags
litigation.  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 Six  Flags,  EBITA and  operating  income  principally
increased as a result of the revenue gains and lower film costs.

     Broadcasting-The  WB Network.  Revenues  increased to $109 million in 2000,
compared to $83 million in 1999. EBITA improved to a loss of $21 million in 2000
from a loss of $30 million in 1999. Operating losses decreased to $22 million in
2000 from $31 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 due to the revenue gains,  which more
than offset higher  programming  costs associated with the expanded  programming
schedule.

     Cable Networks-HBO. Revenues increased to $570 million in 2000, compared to
$546 million in 1999.  EBITA and operating  income  increased to $150 million in
2000 from $131 million in 1999. Revenues benefited primarily from an increase in
subscriptions.  EBITA and  operating  income  increased  principally  due to the
revenue gains and increased cost savings.

     Cable.  Revenues  increased to $1.280  billion in 2000,  compared to $1.114
billion in 1999.  EBITA,  including the negative  effect on operating  trends of
one-time items recognized in each period, decreased to $385 million in 2000 from
$1.099 billion in 1999.  Operating income similarly decreased to $276 million in
2000 from $1.011 billion in 1999 due to one-time items.  Revenues  increased due
to growth in basic cable subscribers,  increases in basic cable rates, increases
in advertising  and  pay-per-view  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  $760 million 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

                                       3
<PAGE>

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


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. Digital Media had $17 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 $246 million
of  expense in 2000,  compared  to $167  million  of  expense in 1999.  Interest
expense increased to $169 million in 2000, compared to $136 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 $77 million in 2000,  compared to
$31 million in 1999,  primarily  because of higher losses  associated with TWE's
asset  securitization   program  and  higher  losses  from  certain  investments
accounted for under the equity method of accounting.

     Minority  Interest.  Minority  interest expense decreased to $43 million in
2000,  compared to $233  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 the TWE-Advance/Newhouse Partnership
("TWE-A/N")  to  the  minority  owners  of  that   partnership.   Excluding  the
significant  effect of the gains  recognized in each period,  minority  interest
expense decreased  principally due to a higher allocation of losses in 2000 to a
minority partner in The WB Network.

Six Months Ended June 30, 2000 Compared to the Six Months Ended June 30, 1999

Consolidated Results

     TWE had  revenues  of $6.624  billion,  income of $369  million  before the
cumulative effect of an accounting change and a net loss of $155 million for the
six months ended June 30, 2000,  compared to revenues of $5.994  billion and net
income of $1.079 billion for the six months ended June 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, excluding the impact of the
accounting change,  aggregated approximately $48 million of net pretax losses in
2000,  compared to  approximately  $995 million of net pretax gains in 1999.  In
addition,  net income in 2000 was reduced by an after-tax charge of $524 million
relating to the cumulative effect of the accounting change.

     TWE had a net loss of $155  million  in 2000,  compared  to net  income  of
$1.079  billion  in 1999.  However,  excluding  the  significant  effect  of the
nonrecurring items referred to earlier,  net income increased by $175 million to
$417 million in 2000 from $242 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.

                                       4
<PAGE>

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


Business Segment Results

     Filmed  Entertainment-Warner  Bros. Revenues increased to $3.019 billion in
2000,  compared to $2.826 billion in 1999. EBITA,  including the negative effect
on operating  trends of one-time items  recognized in each period,  decreased to
$267  million in 2000 from $478  million  in 1999.  Operating  income  similarly
decreased  to $206 million in 2000 from $417 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.  Revenues  from the  distribution  of theatrical  product  increased
principally due to higher worldwide DVD and home video sales,  offset in part by
lower revenues from worldwide  theatrical  and television  exhibition.  Revenues
from the distribution of television product increased  principally due to higher
aggregate revenues from basic cable, broadcast network and syndicated television
exhibition.

     Operating results for both periods include one-time items. The 2000 results
include 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 $20
million  relating to the partial  recognition  of the deferred  gain on the 1998
sale of Six Flags and an approximate  $215 million net pretax gain recognized in
connection with the early termination and settlement of a long-term,  home video
distribution agreement. Excluding the effect 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 investment-related income.

     Broadcasting-The  WB Network.  Revenues  increased to $211 million in 2000,
compared  to $162  million in 1999.  EBITA  improved to a loss of $52 million in
2000 from a loss of $71  million  in 1999.  Operating  losses  decreased  to $54
million in 2000 from $73 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 due to the revenue gains,  which more
than offset higher  programming  costs associated with the expanded  programming
schedule.

     Cable Networks-HBO.  Revenues increased to $1.124 billion in 2000, compared
to $1.072 billion in 1999.  EBITA and operating income increased to $294 million
in 2000 from $256 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 and increased  cost savings,  offset in part by lower gains
from the sale of certain investments.

     Cable.  Revenues  increased to $2.511  billion in 2000,  compared to $2.188
billion in 1999.  EBITA,  including the negative  effect on operating  trends of
one-time items recognized in each period, decreased to $778 million in 2000 from
$1.436 billion in 1999.  Operating income similarly decreased to $560 million in
2000 from $1.263 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 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  $760 million 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.  Digital  Media had $30 million of  operating  losses on $3
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 $426 million
of  expense in 2000,  compared  to $387  million  of  expense in 1999.  Interest
expense increased to $313 million in 2000, compared to $273 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, decreased to $113 million in 2000, compared to
$114 million in 1999.  This  decrease  principally  related to lower losses from
certain investments  accounted for under the equity method,  offset primarily by
higher losses associated with TWE's asset securitization program.

     Minority  Interest.  Minority  interest expense decreased to $83 million in
2000,  compared to $306  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 gains recognized in
each period,  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
June 30, 2000

Financial Condition

     At June 30, 2000,  TWE had $6.2  billion of debt,  $179 million of cash and
equivalents  (net debt of $6.0  billion) and $6.5 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 six  months of 2000,  TWE's cash  provided  by  operations
amounted to $1.675  billion and  reflected  $1.257  billion of business  segment
EBITA, $437 million of noncash  depreciation  expense,  $246 million of proceeds
from TWE's asset securitization  program and $86 million related to an aggregate
decrease in working  capital  requirements,  other  balance  sheet  accounts and
noncash  items,  less $263 million of interest  payments,  $51 million of income
taxes and $37 million of corporate  expenses.  Cash  provided by  operations  of
$1.519  billion  in the first six  months of 1999  reflected  $2.099  billion of
business  segment EBITA,  $406 million of noncash  depreciation  expense and $21
million of proceeds from TWE's asset securitization  program,  less $242 million
of interest  payments,  $49 million of income  taxes,  $36 million of  corporate
expenses and $680 million  related to an aggregate increase in working  capital
requirements, other balance sheet accounts and noncash items.

     Cash used by  investing  activities  was  $1.051  billion  in the first six
months of 2000,  compared  to $662  million  in the  first  six  months of 1999,
principally  as a  result  of a  decrease  in cash  proceeds  from  the  sale of
investments  and an  increase  in  capital  expenditures.  Capital  expenditures
increased  to $894  million  in the first six months of 2000,  compared

                                       6
<PAGE>
                    TIME WARNER ENTERTAINMENT COMPANY, L.P.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued)


to $649 million in the first six 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.

     Cash used by financing  activities was $962 million in the first six months
of 2000,  compared to $827  million in the first six months of 1999.  The use of
cash in 2000  principally  resulted  from the payment of $473 million of capital
distributions to Time Warner and $423 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 $280 million of
capital distributions to Time Warner and $229 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
$836 million in the six months ended June 30, 2000,  compared to $587 million in
the six months ended June 30, 1999.  Cable capital spending for the remainder of
2000 is budgeted to be approximately $850 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.

Investment in Road Runner

     In  June  1998,  Time  Warner,  TWE,  TWE-A/N,  MediaOne,  Microsoft  Corp.
("Microsoft")  and Compaq  Computer Corp.  ("Compaq")  formed a joint venture to
operate and expand Time Warner Cable's and MediaOne's existing high-speed online
businesses ("Road Runner").  In exchange for contributing these operations,  TWE
and TWE-A/N  received a collective  57.9% common equity  interest in Road Runner
and MediaOne  received a 31.4%  interest.  In exchange for  Microsoft and Compaq
contributing  $425  million of cash to Road  Runner,  Microsoft  and Compaq each
received a preferred  equity  interest  therein that is  convertible  into a 10%
common equity interest (the "Preferred Equity Interests").

     In  June  2000,  AT&T  Corp.   ("AT&T")   acquired   MediaOne  Group,  Inc.
("MediaOne").  As a  condition  to closing  the  acquisition,  AT&T  agreed to a
requirement  by the United  States  Department  of  Justice to divest  itself of
MediaOne's interest in Road Runner within an eighteen-month period of time. As a
result, TWE is evaluating strategic alternatives for restructuring Road Runner's
ownership and  operations.  In connection with some of these  alternatives,  TWE
could be  required  to record a one-time  restructuring  charge that could range
from $150-250  million.  This charge would be expected to cover any premium paid
to redeem Road Runner's Preferred Equity Interests,  lease termination and other
related  restructuring  costs.  Such a charge  would be recorded in interest and
other, net. In addition,  as part of a restructuring,  TWE's Cable segment could
begin  consolidating  a portion of the  operations  of Road  Runner.  This would
result in the Cable segment recognizing operating losses from Road Runner, which
previously had been included in interest and other, net, through TWE's equity in
the pretax losses of Road Runner.

                                       7
<PAGE>

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


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 $3.178 billion at June 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 $331 million and
to Time Warner's cable television  networks of $650 million at June 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 received  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 June 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  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"
      or  common  carrier  requirements);   increased  difficulty  in  obtaining
      franchise renewals;  the failure of new equipment (such as digital set-top
      boxes) or services
                                       8
<PAGE>

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


      (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.

     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>

                     TIME WARNER ENTERTAINMENT COMPANY, L.P.
                           CONSOLIDATED BALANCE SHEET
                                   (Unaudited)

<TABLE>
                                                                                June 30,       December 31,
                                                                                  2000           1999
                                                                                --------      -------------
                                                                                      (millions)
<S>                                                                              <C>             <C>
ASSETS
Current assets
Cash and equivalents............................................................ $    179        $   517
Receivables, including $1.114 and $1.354 billion due from Time Warner,
    less allowances of $696 and $668 million....................................    2,678          3,328
Inventories.....................................................................      581            639
Prepaid expenses................................................................      179            246
                                                                                  -------         ------

Total current assets............................................................    3,617          4,730

Noncurrent inventories and film costs...........................................    2,478          2,855
Investments.....................................................................      702            774
Property, plant and equipment...................................................    6,971          6,488
Cable television franchises.....................................................    5,471          5,464
Goodwill........................................................................    3,665          3,731
Other assets....................................................................      664            801
                                                                                  -------        -------

Total assets....................................................................  $23,568        $24,843
                                                                                  =======        =======
</TABLE>

<TABLE>

<S>                                                                              <C>            <C>
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable................................................................ $  1,761       $  1,791
Participations payable..........................................................    1,077          1,258
Programming costs payable.......................................................      539            459
Debt due within one year........................................................        7              6
Other current liabilities, including $1.022 billion and $893 million
    due to Time Warner.........................................................     2,285          2,209
                                                                                    -----          -----

Total current liabilities.......................................................    5,669          5,723

Long-term debt..................................................................    6,231          6,655
Other long-term liabilities, including $1.328 and $1.292 billion
    due to Time Warner .........................................................    3,413          3,501
Minority interests..............................................................    1,802          1,815

Partners' capital
Contributed capital.............................................................    7,349          7,338
Partnership deficit.............................................................     (896)          (189)
                                                                                  -------        -------

Total partners' capital.........................................................    6,453          7,149
                                                                                  -------        -------

Total liabilities and partners' capital.........................................  $23,568        $24,843
                                                                                  =======        =======
</TABLE>

See accompanying notes.



                                       10
<PAGE>




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

<TABLE>

                                                                              Three Months                    Six Months
                                                                              Ended June 30,                 Ended June 30,
                                                                         ----------------------         --------------------
                                                                          2000             1999          2000           1999
                                                                          ----             ----          ----           ----
                                                                                               (millions)
<S>                                                                       <C>            <C>           <C>            <C>
Revenues(a)...........................................................    $3,313         $3,060        $6,624         $5,994
                                                                          ------         ------        ------         ------

Cost of revenues(a)(b)................................................    (1,976)        (1,879)       (4,002)        (3,697)
Selling, general and administrative(a)(b).............................      (711)          (609)       (1,357)        (1,173)
Amortization of goodwill and other intangible assets..................      (141)          (120)         (281)          (236)
Gain (loss) on sale or exchange of cable systems and investments......        (8)           760            (8)           760
Gain on early termination of video distribution agreement.............         -              -             -            215
                                                                          ------         ------       -------         ------

Business segment operating income.....................................       477          1,212           976          1,863
Interest and other, net(a)............................................      (246)          (167)         (426)          (387)
Corporate services(a).................................................       (18)           (18)          (37)           (36)
Minority interest.....................................................       (43)          (233)          (83)          (306)
                                                                          ------         ------       -------          -----

Income before income taxes and cumulative effect of accounting
    change............................................................       170            794           430          1,134
Income taxes..........................................................       (25)           (27)          (61)           (55)
                                                                          ------         ------        ------         ------

Income before cumulative effect of accounting change..................       145            767           369          1,079
Cumulative effect of accounting change................................         -              -          (524)             -
                                                                          ------        -------         -----          -----

Net income (loss).....................................................    $  145         $ 767         $ (155)        $1,079
                                                                          ======         =====         ======         ======

---------------
(a)   Includes the following income (expenses) resulting from transactions with the partners of TWE and other related companies:
        Revenues......................................................     $ 126          $ 152         $ 219          $ 272
        Cost of revenues..............................................       (84)           (58)         (147)          (136)
        Selling, general and administrative...........................       (23)           (12)          (47)           (16)
        Interest and other, net.......................................         6              8             9             28
        Corporate expenses............................................       (18)           (18)          (37)           (36)

(b)   Includes depreciation expense of:...............................     $ 222          $ 214         $ 437          $ 406
                                                                           =====          =====         =====          =====
</TABLE>






See accompanying notes.
                                       11
<PAGE>


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

<TABLE>

                                                                                                            Six Months
                                                                                                           Ended June 30,
                                                                                                        --------------------
                                                                                                         2000          1999
                                                                                                         ----          ----
                                                                                                            (millions)
OPERATIONS
<S>                                                                                                    <C>            <C>
Net income (loss)...............................................................                       $  (155)       $1,079
Adjustments for noncash and nonoperating items:
    Cumulative effect of accounting change......................................                           524             -
    Depreciation and amortization...............................................                           718           642
    Amortization of film costs..................................................                           732           877
    (Gain) loss on sale or exchange of cable systems and investments............                             8          (760)
    Equity in losses of investee companies after distributions..................                           111           100
Changes in operating assets and liabilities.....................................                          (263)         (419)
                                                                                                        ------         -----

Cash provided by operations.....................................................                         1,675         1,519
                                                                                                        ------        ------

INVESTING ACTIVITIES
Investments and acquisitions....................................................                          (231)         (223)
Capital expenditures............................................................                          (894)         (649)
Investment proceeds.............................................................                            74           210
                                                                                                       -------          -----

Cash used by investing activities...............................................                        (1,051)         (662)
                                                                                                        ------          -----

FINANCING ACTIVITIES
Borrowings......................................................................                           894         1,310
Debt repayments.................................................................                        (1,317)       (1,539)
Redemption of preferred stock of subsidiary.....................................                             -          (217)
Capital distributions...........................................................                          (473)         (280)
Other...........................................................................                           (66)         (101)
                                                                                                        ------         ------

Cash used by financing activities...............................................                          (962)         (827)
                                                                                                        ------          -----

INCREASE (DECREASE) IN CASH AND EQUIVALENTS.....................................                          (338)           30


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

CASH AND EQUIVALENTS AT END OF PERIOD...........................................                        $  179        $  117
                                                                                                        ======        ======

</TABLE>






See accompanying notes.


                                       12
<PAGE>




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

<TABLE>




                                                                                                             Six Months
                                                                                                           Ended June 30,
                                                                                                        --------------------
                                                                                                         2000          1999
                                                                                                         ----          ----
                                                                                                             (millions)
<S>                                                                                                    <C>           <C>
BALANCE AT BEGINNING OF PERIOD..................................................                       $7,149        $5,107

Net income (loss)...............................................................                         (155)        1,079
Other comprehensive income (loss)...............................................                          (46)           47
                                                                                                       ------         -----
Comprehensive income(a).........................................................                         (201)        1,126

Distributions...................................................................                         (509)         (497)
Allocation of income to Time Warner General Partners' Senior Capital............                            -           (24)
Other...........................................................................                           14            (1)
                                                                                                       ------         -----

BALANCE AT END OF PERIOD........................................................                       $6,453        $5,711
                                                                                                       ======        ======
-------------------
(a)   Comprehensive  income was $108  million for the three  months ended June 30, 2000 and $773 million for the three months ended
      June 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.

     The  operating  results of TWE's  various  business  segments are 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 $141 million for the three months ended June 30,
2000  and  $120  million  for  the  three  months  ended  June  30,  1999.  On a
year-to-date basis,  noncash amortization of intangible assets recorded by TWE's
business segments amounted to $281 million in 2000 and $236 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  MediaOne  Group,  Inc.
("MediaOne"), which was acquired by AT&T Corp. on June 15, 2000. Certain of Time
Warner's  subsidiaries  are the general  partners of TWE ("Time  Warner  General
Partners").

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


                                       14
<PAGE>


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


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 six months  ended June 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.

     As a result of adopting the  provisions  of SOP 00-2  retroactively  to the
beginning of 2000,  TWE has restated its operating  results for the three months
ended March 31, 2000, as follows:

<TABLE>

                                                                                           As Reported          As Restated
                                                                                           -----------          -----------
                                                                                                     (millions)
<S>                                                                                         <C>                  <C>
Revenues........................................................................            $3,297               $3,311
Business segment operating income...............................................               497                  499
Income before cumulative effect of accounting change............................               222                  224
Net income (loss)...............................................................               222                 (300)
</TABLE>

Revenue Classification Changes

     In June 2000, the Securities and Exchange Commission issued an amendment to
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"), which delays the implementation  date for TWE to the fourth quarter
of 2000. While TWE's existing revenue  recognition  policies are consistent with
the  provisions of SAB 101, the new rules are expected to result in some changes
in how the filmed  entertainment  industry  classifies  its  revenues and costs,
particularly   relating  to  distribution   arrangements   for  third-party  and
co-financed joint venture product. As a result of these classification  changes,
it is expected that both annual revenues and costs in TWE's filmed entertainment
businesses will be reduced by an equal amount of  approximately  $1.5-2 billion.
Similarly,  it is expected that TWE's disclosure of the amount of backlog, which
represents the amount of future revenue not yet recorded from cash contracts for
the  licensing  of  theatrical  and  television  product,  will  be  reduced  by
approximately  $500-700  million,  depending upon the amount of third-party  and
co-financed joint venture product being licensed.  TWE is continuing to evaluate
the overall impact of SAB 101 on its consolidated financial statements; however,
other aspects of SAB 101 are not expected to have a significant  effect on TWE's
consolidated financial statements.

                                       15
<PAGE>

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


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").
The Merger  will create a leading,  fully  integrated  media and  communications
company  that  will  combine  Time  Warner's  and  TWE's  collection  of  media,
entertainment   and  news  brands  and  its   technologically   advanced   cable
infrastructure   with  America  Online's  extensive   Internet   franchises  and
technology.   Management  believes  that  the  combined  company  will  be  well
positioned to expand the use of the Internet in consumers'  everyday  lives and,
accordingly,  provide Time Warner's and TWE's content  businesses with increased
access to consumers through a new and growing  distribution  medium.  Management
further  believes  that the Merger will result in  significant  new business and
other  value-creation  opportunities,  including  additional  opportunities  for
e-commerce,  growth in subscribers for each company's products and services, and
cost and operating efficiencies from cross-promotional and other opportunities.

     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. The Merger is expected to close in the fall of 2000 and
is subject to customary closing conditions,  including all necessary  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.


                                       16
<PAGE>

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


     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.

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

     In 2000  and  1999,  largely  in an  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 for the three and six months ended
June 30, 2000 of  approximately $8 million and net pretax gains of approximately
$760 million for the three and six months ended June 30, 1999. 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 1999 business  segment
operating income in the accompanying consolidated statement of operations.

                                       17
<PAGE>


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


3.   INVENTORIES AND FILM COSTS

     Inventories and film costs consist of:

<TABLE>

                                                                                      June 30,       December 31,
                                                                                        2000             1999
                                                                                     ----------      ------------
                                                                                             (millions)
<S>                                                                                    <C>             <C>
Programming costs, less amortization............................................       $  799          $  854
Film costs-Theatrical:
    Released, less amortization.................................................          790             924
    Completed and not released..................................................          139              68
    In production...............................................................          279             468
    Development and pre-production..............................................           35              59
Film costs-Television:
    Released, less amortization.................................................          210             363
    Completed and not released..................................................           10               9
    In production...............................................................           63               8
    Development and pre-production..............................................            6               5

Film costs-Library, less amortization...........................................          482             508
Merchandise.....................................................................          246             228
                                                                                       ------          ------

Total inventories and film costs................................................        3,059           3,494
Less current portion of inventory...............................................          581             639
                                                                                       ------          ------

Total noncurrent inventories and film costs.....................................       $2,478          $2,855
                                                                                       ======          ======
</TABLE>

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 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 six months  ended June 30,  2000,  TWE accrued  $284  million of
tax-related distributions and $225 million of stock option distributions,  based
on closing  prices of Time Warner Inc.  common stock of $76 at June 30, 2000 and
$72.31 at December  31, 1999.  During the six months  ended June 30,  1999,  TWE
accrued  $138  million of  tax-related  distributions  and $359 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 six months ended June 30, 2000, TWE
paid  distributions  to the Time Warner  General  Partners in the amount of $473
million,  consisting  of $284  million  of  tax-related  distributions  and $189
million of stock option related distributions.  During the six months ended June
30, 1999,  TWE paid  distributions  to the Time Warner  General  Partners in the
amount of $280 million,  consisting of $138 million of tax-related distributions
and $142 million of stock option related distributions.

                                       18
<PAGE>

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


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,  of which the primary financial
measure is 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.

<TABLE>
                                                                        Three Months                   Six Months
                                                                        Ended June 30,               Ended June 30,
                                                                    --------------------          -------------------
                                                                     2000           1999          2000           1999
                                                                     ----           ----          ----           ----
                                                                                       (millions)
<S>                                                                <C>            <C>           <C>            <C>
Revenues
Filmed Entertainment-Warner Bros...............................    $1,452         $1,446        $3,019         $2,826
Broadcasting-The WB Network....................................       109             83           211            162
Cable Networks-HBO.............................................       570            546         1,124          1,072
Cable..........................................................     1,280          1,114         2,511          2,188
Digital Media..................................................         2              -             3              -
Intersegment elimination.......................................      (100)          (129)         (244)          (254)
                                                                   ------         ------        ------         ------

Total..........................................................    $3,313         $3,060        $6,624         $5,994
                                                                   ======         ======        ======         ======
</TABLE>
<TABLE>
                                                                       Three Months                    Six Months
                                                                       Ended June 30,                Ended June 30,
                                                                   ---------------------         --------------------
                                                                     2000           1999           2000          1999
                                                                     ----           ----           ----          ----
                                                                                       (millions)
<S>                                                                  <C>          <C>          <C>           <C>
EBITA(a)
Filmed Entertainment-Warner Bros.(b)...........................      $121         $  132       $   267       $    478
Broadcasting-The WB Network....................................       (21)           (30)          (52)           (71)
Cable Networks-HBO.............................................       150            131           294            256
Cable(c).......................................................       385          1,099           778          1,436
Digital Media..................................................       (17)             -           (30)             -
                                                                     ----         ------        ------         ------

Total..........................................................      $618         $1,332        $1,257         $2,099
                                                                     ====         ======        ======         ======

---------------
(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 second
      quarter  was  $477  million  in 2000 and  $1.212  billion  in 1999.  TWE's
      business segment operating income for the first six months of the year was
      $976 million in 2000 and $1.863 billion in 1999.
(b)   Includes 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 and second  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  losses  relating  to the sale or exchange of certain
      cable television systems of approximately $8 million in the second quarter
      of 2000 and net pretax gains of  approximately  $760 million in the second
      quarter of 1999.
</TABLE>
                                       19
<PAGE>



<TABLE>

                                                                         Three Months                   Six Months
                                                                         Ended June 30,               Ended June 30,
                                                                    ---------------------          -------------------
                                                                      2000           1999          2000           1999
                                                                      ----           ----          ----           ----
                                                                                        (millions)
<S>                                                                   <C>            <C>           <C>            <C>
Depreciation of Property, Plant and Equipment
Filmed Entertainment-Warner Bros...............................      $  22          $  36         $  43          $  65
Broadcasting-The WB Network....................................          1              1             1              1
Cable Networks-HBO.............................................          8              6            15             13
Cable..........................................................        191            171           377            327
Digital Media..................................................          -              -             1              -
                                                                      ----           ----          ----           ----

Total..........................................................       $222           $214          $437           $406
                                                                      ====           ====          ====           ====

                                                                        Three Months                    Six Months
                                                                        Ended June 30,                Ended June 30,
                                                                    ---------------------          -------------------
                                                                      2000           1999          2000           1999
                                                                      ----           ----          ----           ----
                                                                                        (millions)
Amortization of Intangible Assets (a)
Filmed Entertainment-Warner Bros...............................      $  31          $  31         $  61           $ 61
Broadcasting-The WB Network....................................          1              1             2              2
Cable Networks-HBO.............................................          -              -             -              -
Cable..........................................................        109             88           218            173
Digital Media..................................................          -              -             -              -
                                                                      ----           ----          ----           ----

Total..........................................................       $141           $120          $281           $236
                                                                      ====           ====          ====           ====

(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 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.

                                       20
<PAGE>

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


7.   ADDITIONAL FINANCIAL INFORMATION

Cash Flows

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

                                                                                                                Six Months
                                                                                                               Ended June 30,
                                                                                                            --------------------
                                                                                                            2000           1999
                                                                                                            ----           ----
                                                                                                                (millions)
<S>                                                                                                         <C>            <C>
           Cash payments made for interest......................................                            $263           $242
           Cash payments made for income taxes, net.............................                              51             49
           Noncash capital distributions........................................                             225            359
</TABLE>

Interest and Other, Net

     Interest and other, net, consists of:
<TABLE>

                                                                                      Three Months              Six Months
                                                                                     Ended June 30,           Ended June 30,
                                                                                   ------------------        -----------------
                                                                                   2000         1999         2000         1999
                                                                                   ----         ----         ----         ----
                                                                                                      (millions)
<S>                                                                                <C>          <C>         <C>          <C>
           Interest expense.....................................................   $(169)       $(136)      $(313)       $(273)
           Other investment-related activity, principally net losses
             on corporate-related equity investees..............................     (47)         (21)        (61)         (87)
           Corporate finance-related activity, including losses on
             asset securitization programs......................................     (36)          (9)        (43)         (18)
           Miscellaneous........................................................       6           (1)         (9)          (9)
                                                                                   -----        -----       -----        -----
           Total interest and other, net........................................   $(246)       $(167)      $(426)       $(387)
                                                                                   =====        =====       =====        =====

</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 June 30, 2000 Compared to the Three Months Ended June 30,
1999

     WCI had  revenues  of $956  million  and net income of $41 million in 2000,
compared  to revenues  of $828  million and net income of $353  million in 1999.
EBITA  increased  to $109  million in 2000 from $98 million in 1999 after giving
effect to the  Columbia  House  reclassification  described  earlier.  Operating
income  increased  to $47 million in 2000 from $33 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 matchbox twenty, Kid Rock and the Red Hot Chili Peppers. 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 $101 million in 2000, compared
to $470 million in 1999.  TWE's pretax  income  decreased in 2000 as compared to
1999 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   $58  million  of  net  pretax   losses  in  2000,   compared  to
approximately  $770  million  of  net  pretax  gains  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,  offset in part by higher interest expense  principally due to
higher market interest rates on  variable-rate  debt,  higher losses  associated
with  TWE's  asset  securitization   program  and  higher  losses  from  certain
investments accounted for under the equity method of accounting.

     Interest and other,  net,  was $26 million of expense in 2000,  compared to
$76 million of income in 1999. Interest expense was $4 million in 2000, compared
to $3 million in 1999.  There was other  expense,  net,  of $22 million in 2000,
compared  to other  income,  net, of $79 million in 1999.  Other  expense,  net,
increased  principally  because  of 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  (the "Time  Warner  Telecom  IPO"),  an
integrated  communications  provider that provides a wide range of telephony and
data services to businesses.

     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.

Six Months Ended June 30, 2000 Compared to the Six Months Ended June 30, 1999

     WCI had  revenues  of $1.873  billion,  income of $40  million  before  the
cumulative  effect of an accounting change and net loss of $162 million in 2000,
compared to revenues of $1.764  billion and net income of $471  million in 1999.
EBITA  increased  to $189 million in 2000 from $187 million in 1999 after giving
effect to the  Columbia  House  reclassification  described  earlier.  Operating
income  increased  to $68 million in 2000 from $60 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 matchbox twenty, Kid Rock and the Red Hot Chili Peppers. EBITA and
operating income increased  principally as a result of the revenue gains, offset
in part by higher marketing and artist royalty costs.


                                       23
<PAGE>

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


    WCI's equity in the pretax income of TWE was $255 million in 2000, compared
to $672 million in 1999.  TWE's pretax  income  decreased in 2000 as compared to
1999 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   $48  million  of  net  pretax   losses  in  2000,   compared  to
approximately  $995 million of pretax gains 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 $170 million of expense in 2000,  compared to
$84 million of income in 1999. Interest expense was $6 million in 2000, compared
to $5 million in 1999.  There was other  expense,  net, of $164 million in 2000,
compared  to other  income,  net, of $89 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  and the  absence in 2000 of an  approximate  $53  million
pretax gain recognized in 1999 in connection with the Time Warner Telecom IPO.

     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
June 30, 2000

Financial Condition

     WCI had $8.4 billion of equity at June 30,  2000,  compared to $8.7 billion
of equity at December 31, 1999. Cash and equivalents decreased to $52 million at
June 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 June 30,  2000,  compared to $2.1 billion
of equity at December 31, 1999.

Cash Flows

     During the first six  months of 2000,  WCI's cash  provided  by  operations
amounted to $157 million and  reflected  $189  million of EBITA,  $41 million of
noncash depreciation  expense,  $280 million of distributions from TWE, less $20
million of proceeds repaid under WCI's asset securitization  program, $5 million
of interest payments, $36 million of income taxes ($37 million of which was paid
to TW Companies  under a tax sharing  agreement) and $292 million  related to an
aggregate increase in working capital requirements, other balance sheet accounts
and  noncash  items.  In the first six months of 1999,  WCI's cash  provided  by
operations  of $15  million  reflected  $187  million of EBITA,  $35  million of
noncash  depreciation  expense,  $166  million of  distributions  from TWE,  $42
million of proceeds received under WCI's asset securitization  program,  less $6
million of interest  payments,  $352  million of income  taxes ($284  million of
which was paid to TW Companies under a tax sharing  agreement),  and $57 million
related to an aggregate increase in working capital requirements,  other balance
sheet accounts and noncash items.


                                       24
<PAGE>

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


     Cash used by investing  activities  was $75 million in the first six months
of 2000, compared to $55 million in 1999,  principally as a result of a decrease
in investment proceeds and an increase in capital spending.

     Cash used by financing  activities was $137 million in the first six months
of 2000, compared to $7 million in the first six months of 1999,  principally as
a result of increased advances to TW Companies and increased 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>



                              TWE GENERAL PARTNERS
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
<TABLE>

                                                                          WCI                         ATC
                                                                -------------------------   ---------------------------
                                                                 June 30,    December 31,    June 30,      December 31,
                                                                   2000          1999          2000            1999
                                                                ---------    ------------    -------      -------------
                                                                                        (millions)
<S>                                                             <C>            <C>            <C>            <C>
Assets
Current assets
Cash and equivalents............................................$    52       $    107      $      -        $     -
Receivables, less allowances of $264 and $290 million...........  1,198          1,528             -              -
Inventories.....................................................    164            155             -              -
Prepaid expenses................................................    860            727             -              -
                                                                  -----        -------       -------        -------

Total current assets............................................  2,274          2,517             -              -

Investments in and amounts due to and from TWE..................  2,392          2,476         1,912          2,170
Investments in TW Companies.....................................    103            103            60             60
Other investments...............................................  1,330          1,497           451            449
Music catalogues, contracts and copyrights......................    724            779             -              -
Goodwill........................................................  3,542          3,612             -              -
Other assets, primarily property, plant and equipment...........    512            497             -              -
                                                                -------        -------        ------         ------

Total assets....................................................$10,877        $11,481        $2,423         $2,679
                                                                =======        =======        ======         ======

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts and royalties payable..................................$ 1,028       $  1,115        $    -         $    -
Other current liabilities.......................................    414            534             -              -
                                                                 ------         ------        ------         ------

Total current liabilities.......................................  1,442          1,649             -              -

Long-term liabilities, including $787, $766, $557 and
   $542 million due to TW Companies.............................  1,038          1,095           557            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.................................................  9,931          9,926         2,341          2,338
Retained earnings (accumulated deficit).........................   (185)           833            35            172
                                                                -------        -------       -------        -------
                                                                  9,747         10,760         2,377          2,511

Due from TW Companies, net......................................   (764)        (1,437)         (175)           (38)
Reciprocal interest in TW Companies stock.......................   (586)          (586)         (336)          (336)
                                                                -------        --------       ------         ------

Total shareholders' equity......................................  8,397          8,737         1,866          2,137
                                                                -------        -------        ------         ------

Total liabilities and shareholders' equity......................$10,877        $11,481        $2,423         $2,679
                                                                =======        =======        ======         ======

See accompanying notes.

</TABLE>




                                       26
<PAGE>




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


<TABLE>

                                                                               WCI                           ATC
                                                                       --------------------         -------------------
                                                                       2000           1999          2000           1999
                                                                       ----           ----          ----           ----
                                                                                            (millions)
<S>                                                                    <C>            <C>
Revenues(a).....................................................       $956           $828        $    -          $   -
                                                                       ----           ----        ------          -----

Cost of revenues(a)(b)..........................................       (475)          (426)            -              -
Selling, general and administrative(a)(b).......................       (372)          (304)            -              -
Amortization of goodwill and other intangibles..................        (62)           (65)            -              -
                                                                       ----          -----         -----          -----

Business segment operating income...............................         47             33             -              -
Equity in pretax income of TWE(a)...............................        101            470            69            324
Interest and other, net(a)(c)...................................        (26)            76            12             44
                                                                      -----           ----          ----           ----

Income before income taxes......................................        122            579            81            368
Income taxes(a).................................................        (81)          (226)          (45)          (144)
                                                                      -----           ----         -----          -----

Net income......................................................      $  41           $353         $  36           $224
                                                                      =====           ====         =====           ====
------------------
(a)     Includes the following  income  (expenses)  resulting from  transactions
        with Time Warner,  TW Companies,  TWE or equity investees of the General
        Partners:

             Revenues................................................ $  68          $  49        $    -          $   -
             Cost of revenues........................................    (2)            (7)            -              -
             Selling, general and administrative.....................   (11)            (9)            -              -
             Equity in pretax income of TWE..........................   (25)            (9)            -              -
             Interest and other, net.................................    (4)            35             -              -
             Income taxes............................................   (50)          (199)          (35)          (133)

(b)     Includes depreciation expense of:.......................      $  21          $  18        $    -          $   -
                                                                      =====          =====        ======          =====

(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.




                                       27
<PAGE>




                              TWE GENERAL PARTNERS
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                            Six Months Ended June 30,
                                   (Unaudited)

<TABLE>
                                                                               WCI                           ATC
                                                                       --------------------         -------------------
                                                                       2000           1999          2000           1999
                                                                       ----           ----          ----           ----
                                                                                            (millions)
<S>                                                                 <C>            <C>             <C>            <C>
Revenues(a).....................................................     $1,873         $1,764        $    -        $     -
                                                                     ------         ------        ------        -------

Cost of revenues(a)(b)..........................................       (936)          (911)            -              -
Selling, general and administrative(a)(b).......................       (748)          (666)            -              -
Amortization of goodwill and other intangibles..................       (121)          (127)            -              -
                                                                      -----        -------        ------         ------

Business segment operating income...............................         68             60             -              -
Equity in pretax income of TWE(a)...............................        255            672           175            462
Interest and other, net(a)(c)...................................       (170)            84            21             48
                                                                      -----          -----         -----          -----

Income before income taxes and cumulative effect of accounting
        change..................................................        153            816           196            510
Income taxes(a).................................................       (113)          (345)          (93)          (205)
                                                                      -----          -----         -----          -----

Income before cumulative effect of accounting change............         40            471           103            305
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)...............................................    $  (162)       $   471         $ (33)         $ 305
                                                                    =======        =======         =====          =====
------------------
(a)     Includes the following  income  (expenses)  resulting from  transactions
        with Time Warner,  TW Companies,  TWE or equity investees of the General
        Partners:

             Revenues...........................................     $  143          $ 113        $    -        $     -
             Cost of revenues...................................         (5)            (6)            -              -
             Selling, general and administrative................         (5)           (10)            -              -
             Equity in pretax income of TWE.....................        (58)           (25)            -              -
             Interest and other, net............................          2             59             -              -
             Income taxes.......................................        (37)          (284)          (68)          (183)

(b)     Includes depreciation expense of:.......................     $   41         $   35        $    -        $     -
                                                                     =======        ======        ======        =======

(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>



                                       28




See accompanying notes.
<PAGE>




                              TWE GENERAL PARTNERS
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            Six Months Ended June 30,
                                   (Unaudited)

<TABLE>

                                                                               WCI                           ATC
                                                                      ---------------------        ---------------------
                                                                       2000           1999          2000           1999
                                                                       ----           ----          ----           ----
                                                                                          (millions)
<S>                                                                   <C>             <C>          <C>             <C>
OPERATIONS
Net income (loss)...............................................      $(162)          $471         $ (33)          $305
Adjustments for noncash and nonoperating items:
      Cumulative effect of accounting change....................        202              -           136              -
      Depreciation and amortization.............................        162            162             -              -
      Excess (deficiency) of distributions over equity in pretax
        income of TWE...........................................         25           (506)           18           (348)
      Equity in losses (income) of other investee companies after
        distributions...........................................         37              -           (10)            (2)
Changes in operating assets and liabilities.....................       (107)          (112)          103            (34)
                                                                      -----           ----          ----           ----

Cash provided (used) by operations..............................        157             15           214            (79)
                                                                       ----           ----          ----           ----

INVESTING ACTIVITIES
Investments and acquisitions....................................        (10)           (20)            -              -
Capital expenditures............................................        (65)           (60)            -              -
Investment proceeds.............................................          -             25             -              -
                                                                     ------           ----        ------          -----

Cash used by investing activities...............................        (75)           (55)            -              -
                                                                      -----           ----        ------          -----

FINANCING ACTIVITIES
Dividends.......................................................       (115)           (87)          (77)           (58)
Decrease (increase) in amounts due from TW Companies, net.......        (22)            80          (137)           137
                                                                      -----           ----          ----           ----

Cash provided (used) by financing activities....................       (137)            (7)         (214)            79
                                                                       ----          -----          ----          -----

DECREASE IN CASH AND EQUIVALENTS................................        (55)           (47)            -              -


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

CASH AND EQUIVALENTS AT END OF PERIOD...........................     $   52           $113        $    -          $   -
                                                                     ======           ====        ======          =====


</TABLE>






See accompanying notes.



                                       29
<PAGE>




                              TWE GENERAL PARTNERS
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                            Six Months Ended June 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)...............................................       (162)           471           (33)          305
Other comprehensive income (loss)...............................        (25)            (6)          (15)            9
                                                                     ------         ------        ------        ------
Comprehensive income (loss)(a)..................................       (187)           465           (48)          314

Increase in stock option distribution liability to
    TW Companies(b).............................................       (133)          (213)          (92)         (146)
Dividends.......................................................       (698)            (3)            -             -
Transfers to TW Companies, net..................................        673             80          (137)          137
Other...........................................................          5              1             6             -
                                                                     ------          -----        ------        ------


BALANCE AT END OF PERIOD........................................     $8,397         $8,031        $1,866        $1,787
                                                                     ======         ======        ======        ======

------------------
(a)   Comprehensive  income (loss) for WCI was $(1) million for the three months
      ended June 30, 2000 and $354  million for the three  months ended June 30,
      1999.  Comprehensive income  for  ATC was $24  million  for  the  three
      months  ended June 30, 2000 and $225  million for the three  months  ended
      June 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 $133 million for WCI and $92 million for ATC were accrued
      in the first six months of 2000.  For the first six months of 1999,  stock
      option  distributions  accrued  were $213 million for WCI and $146 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 six months ended June 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.

     As a result of Time  Warner and TWE  adopting  the  provisions  of SOP 00-2
retroactively  to the  beginning  of  2000,  WCI and  ATC  have  restated  their
operating results for the three months ended March 31, 2000, as follows:

<TABLE>

                                                                       As Reported                     As Restated
                                                                  -----------------------         -------------------
                                                                  WCI               ATC            WCI            ATC
                                                                  ---               ---            ---            ---
                                                                                       (millions)
<S>                                                              <C>              <C>            <C>             <C>
Equity in pretax income of TWE.................................. $ 153            $ 105          $ 154           $ 106
Interest and other, net.........................................  (143)              10           (144)              9
Income (loss) before cumulative effect of accounting change.....    (1)              67             (1)             67
Net income (loss)...............................................    (1)              67           (203)            (69)

</TABLE>

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
part of the Merger,  each issued and  outstanding  share of each class of common
stock of Time Warner will be converted into 1.5 shares of an identical series of
common stock of AOL Time Warner. In addition,  each issued and outstanding share
of each class of preferred stock of Time Warner will be converted into one share
of preferred stock of AOL Time Warner,  which will have substantially  identical
terms except that such shares will be convertible into approximately 6.25 shares
of AOL Time Warner common stock.  Lastly,  each issued and outstanding  share of
common stock of America  Online will be converted into one share of common stock
of 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.


                                       32
<PAGE>

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


     The Merger was  approved  by the  shareholders  of America  Online and Time
Warner on June 23, 2000. The Merger is expected to close in the fall of 2000 and
is subject to customary closing conditions,  including all necessary  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.  WCI
will control the ventures  through  majority board  representation,  among other
factors,  and will  account for the  transaction  under the  purchase  method of
accounting for business combinations.

     As  part  of the  transaction,  each  company  will  contribute  its  music
operations to the ventures,  subject to a comparable amount of debt. As of March
31, 2000, EMI had approximately  $1.5 billion of net debt. EMI shareholders also
will receive an aggregate,  special cash dividend of approximately $1.3 billion.
This dividend is expected to be financed  through a combination of proceeds from
debt  incurred or assumed by the ventures and  consideration  to be paid by Time
Warner directly to EMI for a new class of EMI equity  securities.  The new class
of EMI equity  securities  to be held by Time Warner will convert  automatically
into an 8% common  equity  interest in EMI, on a fully diluted  basis,  if EMI's
share  price  reaches  (pound)9  for a short  period  of time  within  the first
three-and-a-half years after closing.

     The transaction  was approved by the  shareholders of EMI on June 26, 2000.
The  transaction  is expected to close by the end of 2000,  subject to customary
closing conditions,  including all necessary regulatory approvals.  There can be
no assurance that such approvals will be obtained.

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.

     Time Warner and WCI are continuing to evaluate  strategic  alternatives for
Columbia House's operations. Those alternatives are focused primarily on ways to
improve  Columbia  House's  declining  operating  performance,  including online
initiatives,  joint ventures and other strategic  actions.  Management  believes
that such  strategies are important to achieve a turnaround in Columbia  House's
operating  performance  and to  position  it for  long-term  growth  in a highly
competitive and rapidly changing business environment.

     With the termination of the CDNOW merger in March 2000, the risk associated
with the timely execution of these strategies and the transformation of Columbia
House's traditional business model to an online one has increased.  As a result,
management has concluded that the decline in Columbia  House's business is going
to continue  through the near term. As such, WCI recorded a $115 million noncash
pretax charge  during the first quarter of 2000 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.

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


3.   TWE

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

<TABLE>
June 30, 2000                                                                         WCI             ATC
-------------                                                                         ---             ---
                                                                                          (millions)
<S>                                                                                  <C>            <C>
Investment in TWE...............................................................     $1,946         $1,371
Stock option related distributions due from TWE.................................        787            541
Other net liabilities due to TWE, principally related to home video distribution       (341)             -
                                                                                     ------         ------
Total...........................................................................     $2,392         $1,912
                                                                                     ======         ======

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 MediaOne  Group,
Inc., which was acquired by AT&T Corp. on June 15, 2000.

     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.

                                       34
<PAGE>
                              TWE GENERAL PARTNERS
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                   (Unaudited)


Summarized Financial Information of TWE

      Set forth below is summarized financial information of TWE.
<TABLE>
                                                                                  Three Months                  Six Months
                                                                                 Ended June 30,               Ended June 30,
                                                                             ----------------------        --------------------
                                                                              2000            1999          2000           1999
                                                                              ----            ----          ----           ----
                                                                                                  (millions)
<S>                                                                           <C>            <C>           <C>            <C>
Operating Statement Information
Revenues.................................................................     $3,313         $3,060        $6,624         $5,994
Depreciation and amortization............................................       (363)          (334)         (718)          (642)
Business segment operating income(a).....................................        477          1,212           976          1,863
Interest and other, net(b)...............................................       (246)          (167)         (426)          (387)
Minority interest........................................................        (43)          (233)          (83)          (306)
Income before income taxes and cumulative effect of accounting
      change.............................................................        170            794           430          1,134
Cumulative effect of accounting change...................................          -              -          (524)             -
Net income (loss)........................................................        145            767          (155)         1,079
------------------

(a)   Includes a pretax charge of $24 million  recognized in the second  quarter
      of 2000 in connection with the Six Flags  Entertainment  Corporation ("Six
      Flags")  litigation,  a pretax gain of $10 million  related to the partial
      recognition of a deferred gain on the 1998 sale of Six Flags recognized in
      the first quarter of 2000 and in each of the first and second  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 losses related to the sale or exchange of certain cable  television
      systems and investments of  approximately $8 million in the second quarter
      of 2000 and net pretax gains of  approximately  $760 million in the second
      quarter of 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>

                                                                                          Six Months
                                                                                         Ended June 30,
                                                                                      2000           1999
                                                                                      ----           ----
                                                                                          (millions)
<S>                                                                                  <C>            <C>
Cash Flow Information
Cash provided by operations.....................................................     $1,675         $1,519
Investments and acquisitions....................................................       (231)          (223)
Capital expenditures............................................................       (894)          (649)
Investment proceeds.............................................................         74            210
Borrowings......................................................................         94          1,310
Debt repayments.................................................................     (1,317)        (1,539)
Redemption of preferred stock of subsidiary.....................................          -           (217)
Capital distributions...........................................................       (473)          (280)
Other ..........................................................................        (66)          (101)
Increase (decrease) in cash and equivalents.....................................       (338)            30

</TABLE>

<TABLE>
                                                                                     June 30,      December 31,
                                                                                       2000           1999
                                                                                     ---------    ------------
                                                                                          (millions)
<S>                                                                                  <C>           <C>
Balance Sheet Information
Cash and equivalents...........................................................      $   179       $    517
Total current assets...........................................................        3,617          4,730
Total assets...................................................................       23,568         24,843
Total current liabilities......................................................        5,669          5,723
Long-term debt ................................................................        6,231          6,655
Minority interests.............................................................        1,802          1,815
Partners' capital..............................................................        6,453          7,149
</TABLE>

                                       35
<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 June 30, 2000 and December  31,  1999,  the General
Partners had recorded $1.328 billion and $1.292 billion,  respectively, of stock
option  related  distributions  due from TWE,  based on  closing  prices of Time
Warner common stock of $76 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 six months
ended June 30, 2000, the General Partners received distributions from TWE in the
amount of $473 million,  consisting of $284 million of tax-related distributions
and $189 million of stock option  related  distributions.  During the six months
ended June 30, 1999, the General Partners received distributions from TWE in the
amount of $280 million,  consisting of $138 million of tax-related distributions
and $142  million  of stock  option  related  distributions.  Of such  aggregate
distributions  in 2000 and 1999,  WCI received  $280  million and $166  million,
respectively, and ATC received $193 million and $114 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) 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, (ii) a
$50  million  pretax  charge  in the  second  quarter  related  to the Six Flags
litigation,  (iii) a pretax gain of $10 million in the first quarter relating to
the  partial  recognition  of a deferred  gain on the 1998 sale of Six Flags and
(iv) 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  $760 million  recognized in the second quarter 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 and second  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"), an
integrated  communications  provider that provides a wide range of telephony and
data services to businesses,  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
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 six months ended June
30, 1999.

                                       36
<PAGE>

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


5.   GENERAL PARTNER GUARANTEES

     Each General  Partner has  guaranteed  a pro rata portion of  approximately
$4.9 billion of TWE's debt and accrued  interest at June 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 June 30, 2000 that
was guaranteed by each General Partner is set forth below (dollars in millions):

<TABLE>

                                                                                       Total Guaranteed by
                                                                                      Each General Partner
                                                                                      --------------------
General Partner                                                                           %         Amount
---------------                                                                        -------      ------
<S>                                                                                     <C>         <C>
WCI   ...................................................................               59.27       $2,917
ATC   ...................................................................               40.73        2,005
                                                                                       ------       ------
Total ...................................................................              100.00       $4,922
                                                                                       ======       ======
</TABLE>
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 also 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 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.

7.   ADDITIONAL FINANCIAL INFORMATION

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

<TABLE>

                                                                               Six Months Ended June 30,
                                                                     ------------------------------------------
                                                                            2000                       1999
                                                                      ----------------            --------------
                                                                       WCI        ATC             WCI        ATC
                                                                      -----      -----            ---        ---
                                                                                      (millions)
<S>                                                                   <C>       <C>            <C>        <C>
           Cash payments made for interest......................      $   5     $    -         $    6     $    -
           Cash payments made for income taxes, net.............         36         68            352        183
           Tax-related distributions received from TWE..........        168        116             82         56
           Noncash capital distributions, net...................        133         92            213        146
</TABLE>

                                       37
<PAGE>


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.

                                       38
<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.,  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").  On July
13, 2000, the Georgia Court of Appeals affirmed the trial court's judgment.  TWE
filed a motion for reconsideration with the Court of Appeals, which the Court of
Appeals  denied  on July 27,  2000.  Defendants  will seek  certiorari  from the
Supreme Court of Georgia.

     Reference  is made to  Ottinger & Silvey et al. v. EMI Music  Distribution,
Inc.,  described on page I-25 of the 1999 Form 10-K. The  defendants'  motion to
dismiss has been briefed and is pending before the Court.

     Reference is made to Digital Distribution Inc. d/b/a Compact Disc Warehouse
v. CEMA  Distribution  et al., and the related suits described on pages I-24 and
I-25 of the 1999 Form  10-K.  On June 15,  2000,  the Court  denied  plaintiffs'
motion  for  class  certification.  On June 28,  2000,  plaintiffs  applied  for
interlocutory  review  by the  United  States  Court of  Appeals  for the  Ninth
Circuit.  On July  17,  2000,  the  Ninth  Circuit  issued  an  order  directing
plaintiffs to move for voluntary dismissal of their application or to show cause
why the application should not be dismissed,  on the ground that the application
was untimely filed.  Plaintiffs have filed their response to the Ninth Circuit's
Order to Show Cause.

     Bauman v. EMI Music  Distribution  et al.,  filed in  Supreme  Court of the
State of New  York,  County  of New  York on May 12,  2000  and  numerous  other
lawsuits  have been  brought in various  state and federal  courts by  purported
classes  of direct  and/or  indirect  purchasers  of  compact  discs,  including
consumers,  alleging vertical and/or horizontal  conspiracies by distributors of
compact discs, including  Warner-Elektra-Atlantic Corp. ("WEA Corp."), to engage
in price fixing in violation  of state and federal law.  Many of these  lawsuits
focus on the Consent Order signed by the major record companies with the Federal
Trade  Commission  ("FTC")  with respect to the FTC's  investigation  of minimum
advertised price ("MAP") programs described on pages I-20 and I-24 of TWE's 1999
Form 10-K.  The Consent  Order was on public notice for comment until June 3 and
is now before the FTC for final approval.

     On August 8, 2000,  attorneys  general of 30 states filed an action  titled
State of Florida et al. v. BMG Music et al., in the United States District Court
for the  Southern  District  of New  York,  alleging  that a  number  of  record
distributors,  including WEA Corp.,  and several  record  retailers had violated
state and federal antitrust laws through the adoption and  implementation of MAP
programs.

     On April 12, 2000, Chambers et al. v. Time Warner Inc. et al., was filed in
the United  States  District  Court for the Southern  District of New York.  The
plaintiffs,  purportedly  representing a class of recording  artists,  challenge
whether defendants, including record companies within Warner Music Group, have a
federal  copyright in certain sound  recordings  created and published  prior to
1972.  Defendants  have filed a motion to dismiss,  as well as an  opposition to
plaintiffs' motion for class certification. Both motions are pending.

                                       39
<PAGE>


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 June 30, 2000.




                                       40
<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:  August 14, 2000

<PAGE>

                                  EXHIBIT INDEX
                     Pursuant to Item 601 of Regulations S-K



Exhibit No.    Description of Exhibit

10.1           Amendment  No. 1 dated as of June 30,  2000 to the Credit
               Agreement dated as of November  10, 1997 among Time  Warner Inc.,
               Time Warner Companies, Inc., Time Warner Entertainment Company,
               L.P., Turner Broadcasting System, Inc., Time Warner  Entertain-
               ment-Advance/Newhouse Partnership  and TWI Cable Inc., as Credit
               Parties,  The Chase Manhattan Bank, as  Administrative  Agent,
               Bank of America National Trust and Savings Association,  The
               Bank of New York and Morgan Guaranty Trust Company of New York,
               as  Documentation  and Syndication  Agents, Chase Securities,
               as Arranger,  and the lenders party thereto from time to time
               (which is incorporated herein by reference to Exhibit 10.1 to
               Time Warner Inc.'s Quarterly  Report on Form 10-Q for the
               quarter  ended  June 30,  2000 (File No. 1-12259)).

10.2           Transaction  Agreement No. 4, dated as of July 12, 2000, among
               Advance Publications, Inc.,  Newhouse   Broadcasting Corporation,
               Advance/Newhouse Partnership, Time Warner Entertainment
               Company, L.P., Paragon Communications and Time Warner
               Entertainment-Advance/Newhouse Partnership and Related Side
               Letter (which is incorporated herein by reference to Exhibit
               10.4 to Time Warner Inc.'s Quarterly Report on Form  10-Q
               for the quarter ended June 30, 2000 (File No. 1-12259)).


27.1           Financial Data Schedule with respect to the period ending
               June 30, 2000.

27.2           Restated Financial Data Schedule with respect to the period
               ending March 31, 2000.