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Case Status:    SETTLED
On or around 04/26/2006 (Date of order of final judgment)

Filing Date: July 18, 2002

According to a press June 8, 2007, an appeal is holding up, at least temporarily, initial distribution of a $2.65 billion class-action settlement involving the 2001 combination of America Online Inc. and Time Warner Inc. A notice of appeal was filed in U.S. District Court in New York on June 1 by a group called BizProLink LLC. The brief docket entry for the notice did not specify a basis for the appeal. An active telephone listing for Biz- ProLink could not be found and the court docket did not list an attorney for the entity. Last month, U.S. District Judge Shirley Wohl Kram signed an order directing payment of an initial distribution of the settlement, in an amount equal to 91 percent of the net settlement and accrued interest.

According to a press release dated July 17, 2006, the Commission today announced that the Honorable Gladys Kessler, United States District Court Judge for the District of Columbia, has approved the Commission's plan to distribute to injured investors $300 million paid by Time Warner Inc. (formerly known as AOL Time Warner) in connection with its settlement of the Commission's accounting fraud suit against it (the "SEC Fair Fund"). In that suit, the Commission charged Time Warner with materially overstating online advertising revenue and the number of its Internet subscribers, with aiding and abetting three other securities frauds and with violating a Commission cease-and-desist order. See Litigation Release No. 19147 dated March 21, 2005. The Commission's distribution plan substantially adopts and uses the court-approved plan of allocation in the class action settlement of a similar case in In re AOL Time Warner, Inc. Securities and "ERISA" Litigation, Case No. 02 Civ. 5575 (SKW) (S.D.N.Y.). The claims administrator is Gilardi and Co. LLC.

In a press release dated April 9, 2006, a judge has approved a $2.65 billion class-action settlement of claims that advertising revenue was counted in a fraudulent manner prior to the merger of America Online Inc. and Time Warner Inc. U.S. District Judge Shirley Wohl Kram signed a ruling approving the deal Thursday. She had given the settlement tentative approval in September 2005. The settlement resulted from lawsuits brought by shareholders who complained that AOL improperly accounted for dozens of advertising transactions, inflating revenue for 15 quarters between 1998 and 2002. AOL and Time Warner announced they were merging in early 2000. AOL's steadily declining dial-up subscriber base became a drain on Time Warner, though the Internet provider has risen in stature with the recent boom in online advertising. According to the deal approved by Kram, Time Warner will pay the bulk of the settlement while its auditor, Ernst & Young LLP, will pay $100 million. The judge noted in her ruling that the settlement resulted from seven months of intense negotiations overseen by a court-appointed special master. She said it was clear that class members will not recover their entire loss, but added that the settlement was "all the more impressive" when the parties continue to dispute the very existence of damages.

In a press release dated February 7, 2006, securities lawyer William Lerach said yesterday that he will pursue individual lawsuits against Time Warner Inc. on behalf of more than 100 institutional investors who opted out of a tentative $2.4 billion class-action settlement with the media company. Lerach said his clients are seeking more than $3.3 billion in damages over stock-market losses suffered after the ill-fated merger between Time Warner and America Online Inc. and after revelations about improper accounting at AOL.

In a press release dated August 3, 2005, the Company has reached an agreement in principle for the settlement of the primary securities class action pending against it. The tentative settlement is reflected in a Memorandum of Understanding, dated as of July 29, 2005, between the lead plaintiff and the Company. Under the proposed settlement, $2.4 billion will be paid by Time Warner into a settlement fund for the members of the class represented in the action. In addition, the $150 million previously paid by Time Warner into a fund in connection with the settlement of the investigation by the Department of Justice will be made available to the class, and Time Warner will use its best efforts to have the $300 million, which it previously paid in connection with the settlement of its Securities and Exchange Commission investigation, transferred to the settlement fund for the class. The proposed settlement is subject to completion of final documentation and preliminary and final court approval, as well as other conditions. At this time, there can be no assurance that these conditions will be met and that the settlement of the securities class action litigation will receive preliminary or final court approval. Ernst & Young also has agreed to a settlement in this litigation matter and will pay $100 million.

On September 9, 2002, the Honorable Shirley Wohl Kram issued an Order consolidating the related cases into one class action lawsuit entitled In re AOL Time Warner, Inc. Securities Litigation, 02 Civ. 5575 (SWK). Competing motions for the appointment of Lead Plaintiff and Lead Counsel were filed with Court on September 16, 2002. The Court issued an Order appointing Lead Plaintiff and Lead Counsel on January 8, 2003 and Plaintiffs filed a Consolidated and Amended Class Action Complaint (the “Amended Complaint”) on April 14, 2003, which extended the class period to include all persons and entities who purchased, exchanged or otherwise acquired publicly traded securities of American Online, Inc. during the period January 27, 1999 through January 11, 2001 and persons or entities who purchased, exchanged or otherwise acquired publicly traded securities of AOL Time Warner, Inc. during the period January 12, 2001 through and including July 24, 2002. Defendants filed their Motion to Dismiss the Amended Complaint on July 14, 2003. Defendants then filed their Reply to Plaintiffs Opposition to the Motion to Dismiss on November 14, 2003 and the Court issued an Order granting in part and denying in part Defendants’ Motions to Dismiss on May 5, 2004. All claims based on the bond offerings were dismissed as well as all claims against Morgan Stanley & Co. The Court also granted the Plaintiffs permission to submit a proposed Second Amended Complaint to address the remaining dismissed claims, which Plaintiffs filed on June 8, 2004.

Thereafter, Defendants filed a Motion for Summary Judgment on July 30, 2004. On August 11, 2004, the Court issued an Order granting Lead Plaintiffs leave to file a Second Amended Complaint. Plaintiffs then filed a Second Amended Complaint (“2nd Amended Complaint”) on August 23, 2004. On February 14, 2005 Defendants filed their answers to the 2nd Amended Complaint. The docket reflects no further significant activity at this time.

The original Complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between April 18, 2001 and April 24, 2002, thereby artificially inflating the price of AOL Time Warner securities. As alleged in the complaint, defendants issued numerous materially false and misleading statements concerning the Company, the synergies derived from the merger of America Online Inc. and Time Warner, Inc. (the "Merger") and the Company's prospects and earnings projections. The complaint alleges that these statements were materiallyfalse and misleading because they failed to disclose: (i) that the Merger was not generating the synergies as represented by defendants; (ii) that the Company was experiencing declining advertising revenues; and (iii) that the Company had failed to properly write down the value of more than $50 billion of goodwill, thereby artificially inflating its reported financial results and rendering its published financial statements materially false and misleading and in violation of Generally Accepted Accounting Principles.

On April 24, 2002, the last day of the Class Period, AOL Time Warner issued a press release announcing its financial results for the first quarter of 2002, and revealed that it would be taking a "one-time, non-cash charge that reduced the carrying value of the Company's goodwill by approximately $54 billion (Emphasis added.)." Following this announcement, AOL Time Warner stock closed at $19.30 per share, a decline of more than 66% from a Class Period high of $56.60 per share. During the Class Period, prior to the disclosure of the true facts about the Company, AOL Time Warner insiders sold their personal holdings of AOL Time Warner common stock to the unsuspecting public for proceeds in excess of $250 million.

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