WARNER MUSIC GROUP CORP.

Supplementary Information

Consolidating Financial Statements

The Company is the direct parent of Holdings, which is the direct parent of Acquisition Corp. Acquisition Corp. has issued and outstanding the 5.625% Senior Secured Notes due 2022, the 5.00% Senior Secured Notes due 2023, the 4.125% Senior Secured Notes due 2024, the 4.875% Senior Secured Notes due 2024 and the 6.75% Senior Notes due 2022 (together, the “Acquisition Corp. Notes”).

The Acquisition Corp. Notes are guaranteed by the Company and, in addition, are guaranteed by all of Acquisition Corp.’s domestic wholly-owned subsidiaries. The secured notes are guaranteed on a senior secured basis and the unsecured notes are guaranteed on an unsecured senior basis. The Company’s guarantee of the Acquisition Corp. Notes is full and unconditional. The guarantee of the Acquisition Corp. Notes by Acquisition Corp.’s domestic, wholly-owned subsidiaries are full, unconditional, joint and several. The following condensed consolidating financial statements are also presented for the information of the holders of the Acquisition Corp. Notes and present the results of operations, financial position and cash flows of (i) Acquisition Corp., which is the issuer of the Acquisition Corp. Notes, (ii) the guarantor subsidiaries of Acquisition Corp., (iii) the non-guarantor subsidiaries of Acquisition Corp. and (iv) the eliminations necessary to arrive at the information for Acquisition Corp. on a consolidated basis. Investments in consolidated subsidiaries are presented under the equity method of accounting. There are no restrictions on Acquisition Corp.’s ability to obtain funds from any of its wholly-owned subsidiaries through dividends, loans or advances.

The Company and Holdings are holding companies that conduct substantially all of their business operations through Acquisition Corp. Accordingly, the ability of the Company and Holdings to obtain funds from their subsidiaries is restricted by the indentures for the Acquisition Corp. Notes and the credit agreements for the Acquisition Corp. Senior Credit Facilities, including the Revolving Credit Facility and Senior Term Loan Facility.

Consolidating Balance Sheet (Unaudited)

December 31, 2016

	WMG											WMG				Warner					Warner
	Acquisition					Non-						Acquisition		WMG		Music					Music
	Corp.		Guarantor			Guarantor						Corp.		Holdings		Group					Group Corp.
	(issuer)		Subsidiaries			Subsidiaries			Eliminations			Consolidated		Corp.		Corp.		Eliminations			Consolidated
	(in millions)
Assets:
Current assets:
Cash and equivalents	$	—	$	182		$	273		$	—		$	455	$	—	$	—	$	—		$	455
Accounts receivable, net		—		196			188			—			384		—		—		—			384
Inventories		—		12			24			—			36		—		—		—			36
Royalty advances expected to be recouped within one year		—		78			49			—			127		—		—		—			127
Prepaid and other current assets		—		15			44			—			59		—		—		—			59
Total current assets		—		483			578			—			1,061		—		—		—			1,061
Due (to) from parent companies		705		(366	)		(339	)		—			—		—		—		—			—
Investments in and advances to (from) consolidated subsidiaries		2,201		1,648			—			(3,849	)		—		178		178		(356	)		—
Royalty advances expected to be recouped after one year		—		115			73			—			188		—		—		—			188
Property, plant and equipment, net		—		135			60			—			195		—		—		—			195
Goodwill		—		1,374			238			—			1,612		—		—		—			1,612
Intangible assets subject to amortization, net		—		1,140			946			—			2,086		—		—		—			2,086
Intangible assets not subject to amortization		—		71			44			—			115		—		—		—			115
Other assets		4		61			18			—			83		—		—		—			83
Total assets	$	2,910	$	4,661		$	1,618		$	(3,849	)	$	5,340	$	178	$	178	$	(356	)	$	5,340
Liabilities and Deficit:
Current liabilities:
Accounts payable	$	—	$	71		$	81		$	—		$	152	$	—	$	—	$	—		$	152
Accrued royalties		—		646			538			—			1,184		—		—		—			1,184
Accrued liabilities		—		119			200			—			319		—		—		—			319
Accrued interest		28		—			—			—			28		—		—		—			28
Deferred revenue		—		113			62			—			175		—		—		—			175
Other current liabilities		—		60			26			—			86		—		—		—			86
Total current liabilities		28		1,009			907			—			1,944		—		—		—			1,944
Long-term debt		2,755		—			—			—			2,755		—		—		—			2,755
Deferred tax liabilities, net		—		113			155			—			268		—		—		—			268
Other noncurrent liabilities		3		131			99			—			233		—		—		—			233
Total liabilities		2,786		1,253			1,161			—			5,200		—		—		—			5,200
Total Warner Music Group Corp. equity		124		3,407			442			(3,849	)		124		178		178		(356	)		124
Noncontrolling interest		—		1			15			—			16		—		—		—			16
Total equity		124		3,408			457			(3,849	)		140		178		178		(356	)		140
Total liabilities and equity	$	2,910	$	4,661		$	1,618		$	(3,849	)	$	5,340	$	178	$	178	$	(356	)	$	5,340

Consolidating Balance Sheet

September 30, 2016

	WMG											WMG				Warner					Warner
	Acquisition					Non-						Acquisition		WMG		Music					Music
	Corp.		Guarantor			Guarantor						Corp.		Holdings		Group					Group Corp.
	(issuer)		Subsidiaries			Subsidiaries			Eliminations			Consolidated		Corp.		Corp.		Eliminations			Consolidated
	(in millions)
Assets:
Current assets:
Cash and equivalents	$	—	$	180		$	179		$	—		$	359	$	—	$	—	$	—		$	359
Accounts receivable, net		—		177			152			—			329		—		—		—			329
Inventories		—		16			25			—			41		—		—		—			41
Royalty advances expected to be recouped within one year		—		79			49			—			128		—		—		—			128
Prepaid and other current assets		1		13			37			—			51		—		—		—			51
Total current assets		1		465			442			—			908		—		—		—			908
Due (to) from parent companies		750		(312	)		(438	)		—			—		—		—		—			—
Investments in and advances to (from) consolidated subsidiaries		2,260		1,458			—			(3,718	)		—		195		195		(390	)		—
Royalty advances expected to be recouped after one year		—		120			76			—			196		—		—		—			196
Property, plant and equipment, net		—		138			65			—			203		—		—		—			203
Goodwill		—		1,372			255			—			1,627		—		—		—			1,627
Intangible assets subject to amortization, net		—		1,165			1,036			—			2,201		—		—		—			2,201
Intangible assets not subject to amortization		—		71			45			—			116		—		—		—			116
Other assets		3		62			19			—			84		—		—		—			84
Total assets	$	3,014	$	4,539		$	1,500		$	(3,718	)	$	5,335	$	195	$	195	$	(390	)	$	5,335
Liabilities and Deficit:
Current liabilities:
Accounts payable	$	—	$	124		$	80		$	—		$	204	$	—	$	—	$	—		$	204
Accrued royalties		—		606			498			—			1,104		—		—		—			1,104
Accrued liabilities		—		112			185			—			297		—		—		—			297
Accrued interest		38		—			—			—			38		—		—		—			38
Deferred revenue		—		143			35			—			178		—		—		—			178
Current portion of long-term debt		—		—			—			—			—		—		—		—			-
Other current liabilities		—		3			18			—			21		—		—		—			21
Total current liabilities		38		988			816			—			1,842		—		—		—			1,842
Long-term debt		2,778		—			—			—			2,778		—		—		—			2,778
Deferred tax liabilities, net		—		109			160			—			269		—		—		—			269
Other noncurrent liabilities		3		126			107			—			236		—		—		—			236
Total liabilities		2,819		1,223			1,083			—			5,125		—		—		—			5,125
Total Warner Music Group Corp. equity (deficit)		195		3,314			404			(3,718	)		195		195		195		(390	)		195
Noncontrolling interest		—		2			13			—			15		—		—		—			15
Total equity (deficit)		195		3,316			417			(3,718	)		210		195		195		(390	)		210
Total liabilities and equity (deficit)	$	3,014	$	4,539		$	1,500		$	(3,718	)	$	5,335	$	195	$	195	$	(390	)	$	5,335

Consolidating Statement of Operations (Unaudited)

For The Three Months Ended December 31, 2016

	WMG												WMG					Warner					Warner
	Acquisition						Non-						Acquisition			WMG		Music					Music
	Corp.			Guarantor			Guarantor						Corp.			Holdings		Group					Group Corp.
	(issuer)			Subsidiaries			Subsidiaries			Eliminations			Consolidated			Corp.		Corp.		Eliminations			Consolidated
	(in millions)
Revenues	$	—		$	490		$	521		$	(94	)	$	917		$	—	$	—	$	—		$	917
Costs and expenses:
Cost of revenue		—			(220	)		(341	)		65			(496	)		—		—		—			(496	)
Selling, general and administrative expenses		(1	)		(176	)		(128	)		29			(276	)		—		—		—			(276	)
Amortization of intangible assets		—			(25	)		(26	)		—			(51	)		—		—		—			(51	)
Total costs and expenses		(1	)		(421	)		(495	)		94			(823	)		—		—		—			(823	)
Operating (loss) income		(1	)		69			26			—			94			—		—		—			94
Loss on extinguishment of debt		(32	)		—			—			—			(32	)		—		—		—			(32	)
Interest (expense) income, net		(23	)		1			(18	)		—			(40	)		—		—		—			(40	)
Equity gains (losses) from equity method investments		83			40			—			(123	)		—			22		22		(44	)		—
Other income, net		12			3			4			—			19			—		—		—			19
Income before income taxes		39			113			12			(123	)		41			22		22		(44	)		41
Income tax (expense) benefit		(17	)		(18	)		(9	)		27			(17	)		—		—		—			(17	)
Net income		22			95			3			(96	)		24			22		22		(44	)		24
Less: income attributable to noncontrolling interest		—			—			(2	)		—			(2	)		—		—		—			(2	)
Net income attributable to Warner Music Group Corp.	$	22		$	95		$	1		$	(96	)	$	22		$	22	$	22	$	(44	)	$	22

Consolidating Statement of Operations (Unaudited)

For The Three Months Ended December 31, 2015

	WMG												WMG						Warner					Warner
	Acquisition						Non-						Acquisition			WMG			Music					Music
	Corp.			Guarantor			Guarantor						Corp.			Holdings			Group					Group Corp.
	(issuer)			Subsidiaries			Subsidiaries			Eliminations			Consolidated			Corp.			Corp.		Eliminations			Consolidated
	(in millions)
Revenues	$	—		$	448		$	439		$	(38	)	$	849		$	—		$	—	$	—		$	849
Costs and expenses:
Cost of revenue		—			(221	)		(260	)		32			(449	)		—			—		—			(449	)
Selling, general and administrative expenses		—			(137	)		(144	)		5			(276	)		—			—		—			(276	)
Amortization of intangible assets		—			(31	)		(31	)		—			(62	)		—			—		—			(62	)
Total costs and expenses		—			(389	)		(435	)		37			(787	)		—			—		—			(787	)
Operating income (loss)		—			59			4			(1	)		62			—			—		—			62
Interest income (expense), net		(20	)		1			(21	)		—			(40	)		(5	)		—		—			(45	)
Equity gains (losses) from equity method investments		47			19			—			(66	)		—			32			27		(59	)		—
Other income (expense), net		2			(1	)		7			—			8			—			—		—			8
Income (loss) before income taxes		29			78			(10	)		(67	)		30			27			27		(59	)		25
Income tax benefit (expense)		3			(5	)		4			1			3			—			—		—			3
Net income (loss)		32			73			(6	)		(66	)		33			27			27		(59	)		28
Less: income attributable to noncontrolling interest		—			—			(1	)		—			(1	)		—			—		—			(1	)
Net income (loss) attributable to Warner Music Group Corp.	$	32		$	73		$	(7	)	$	(66	)	$	32		$	27		$	27	$	(59	)	$	27

Consolidating Statement of Comprehensive Income (Unaudited)

For The Three Months Ended December 31, 2016

	WMG												WMG						Warner						Warner
	Acquisition						Non-						Acquisition			WMG			Music						Music
	Corp.			Guarantor			Guarantor						Corp.			Holdings			Group						Group Corp.
	(issuer)			Subsidiaries			Subsidiaries			Eliminations			Consolidated			Corp.			Corp.			Eliminations			Consolidated
	(in millions)
Net income	$	22		$	95		$	3		$	(96	)	$	24		$	22		$	22		$	(44	)	$	24
Other comprehensive (loss) income, net of tax:
Foreign currency adjustment		(37	)		—			37			(37	)		(37	)		(37	)		(37	)		74			(37	)
Deferred losses on derivative financial instruments		(2	)		(2	)		—			2			(2	)		(2	)		(2	)		4			(2	)
Other comprehensive (loss) income, net of tax:		(39	)		(2	)		37			(35	)		(39	)		(39	)		(39	)		78			(39	)
Total comprehensive (loss) income		(17	)		93			40			(131	)		(15	)		(17	)		(17	)		34			(15	)
Less: income attributable to noncontrolling interest		—			—			(2	)		—			(2	)		—			—			—			(2	)
Comprehensive (loss) income attributable to Warner Music Group Corp.	$	(17	)	$	93		$	38		$	(131	)	$	(17	)	$	(17	)	$	(17	)	$	34		$	(17	)

Consolidating Statement of Comprehensive Income (Unaudited)

For The Three Months Ended December 31, 2015

	WMG												WMG						Warner						Warner
	Acquisition						Non-						Acquisition			WMG			Music						Music
	Corp.			Guarantor			Guarantor						Corp.			Holdings			Group						Group Corp.
	(issuer)			Subsidiaries			Subsidiaries			Eliminations			Consolidated			Corp.			Corp.			Eliminations			Consolidated
	(in millions)
Net income (loss)	$	32		$	73		$	(6	)	$	(66	)	$	33		$	27		$	27		$	(59	)	$	28
Other comprehensive (loss) income, net of tax:
Foreign currency adjustment		(24	)		—			(24	)		24			(24	)		(24	)		(24	)		48			(24	)
Deferred losses on derivative financial instruments		(1	)		(1	)		—			1			(1	)		(1	)		(1	)		2			(1	)
Other comprehensive (loss) income, net of tax:		(25	)		(1	)		(24	)		25			(25	)		(25	)		(25	)		50			(25	)
Total comprehensive income (loss)		7			72			(30	)		(41	)		8			2			2			(9	)		3
Less: income attributable to noncontrolling interest		—			—			(1	)		—			(1	)		—			—			—			(1	)
Comprehensive income (loss) attributable to Warner Music Group Corp.	$	7		$	72		$	(31	)	$	(41	)	$	7		$	2		$	2		$	(9	)	$	2

Consolidating Statement of Cash Flows (Unaudited)

For The Three Months Ended December 31, 2016

	WMG												WMG						Warner						Warner
	Acquisition						Non-						Acquisition			WMG			Music						Music
	Corp.			Guarantor			Guarantor						Corp.			Holdings			Group						Group Corp.
	(issuer)			Subsidiaries			Subsidiaries			Eliminations			Consolidated			Corp.			Corp.			Eliminations			Consolidated
	(in millions)
Cash flows from operating activities
Net income	$	22		$	95		$	3		$	(96	)	$	24		$	22		$	22		$	(44	)	$	24
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		—			35			28			—			63			—			—			—			63
Unrealized (gains)/losses and remeasurement of foreign denominated loans		(21	)		(9	)		13			—			(17	)		—			—			—			(17	)
Deferred income taxes		—			—			(2	)		—			(2	)		—			—			—			(2	)
Loss on extinguishment of debt		32			—			—			—			32			—			—			—			32
Non-cash interest expense		3			—			—			—			3			—			—			—			3
Non-cash stock-based compensation expenses		—			10			—			—			10			—			—			—			10
Equity (gains) losses, including distributions		(83	)		(40	)		—			123			—			(22	)		(22	)		44			—
Changes in operating assets and liabilities:
Accounts receivable		—			(19	)		(46	)		—			(65	)		—			—			—			(65	)
Inventories		—			2			1			—			3			—			—			—			3
Royalty advances		—			7			(6	)		—			1			—			—			—			1
Accounts payable and accrued liabilities		—			6			9			(27	)		(12	)		—			—			—			(12	)
Royalty payables		—			40			72			—			112			—			—			—			112
Accrued interest		(10	)		—			—			—			(10	)		—			—			—			(10	)
Deferred revenue		—			(33	)		32			—			(1	)		—			—			—			(1	)
Other balance sheet changes		—			12			3			—			15			—			—			—			15
Net cash provided by (used in) operating activities		(57	)		106			107			—			156			—			—			—			156
Cash flows from investing activities
Acquisition of music publishing rights, net		—			—			(1	)		—			(1	)		—			—			—			(1	)
Capital expenditures		—			(6	)		(2	)		—			(8	)		—			—			—			(8	)
Investments and acquisitions of businesses, net		—			(3	)		—			—			(3	)		—			—			—			(3	)
Advances to issuer		95			—			—			(95	)		—			—			—			—			—
Net cash (used in) provided by investing activities		95			(9	)		(3	)		(95	)		(12	)		—			—			—			(12	)
Cash flows from financing activities
Proceeds from issuance of Acquisition Corp. 4.125% Senior Secured Notes		380			—			—			—			380			—			—			—			380
Proceeds from issuance of Acquisition Corp. 4.875% Senior Secured Notes		250			—			—			—			250			—			—			—			250
Proceeds from issuance of Acquisition Corp. Senior Term Loan Facility		22			—			—			—			22			—			—			—			22
Repayment of Acquisition Corp. 6.00% Senior Secured Notes		(450	)		—			—			—			(450	)		—			—			—			(450	)
Repayment of Acquisition Corp. 6.25% Senior Secured Notes		(173	)		—			—			—			(173	)		—			—			—			(173	)
Repayment of Acquisition Corp. 5.625% Senior Secured Notes		(28	)		—			—			—			(28	)		—			—			—			(28	)
Financing costs paid		(27	)		—			—			—			(27	)		—			—			—			(27	)
Deferred financing costs paid		(12	)		—			—			—			(12	)		—			—			—			(12	)
Change in due to (from) issuer		—			(95	)		—			95			—			—			—			—			—
Net cash provided by (used in) financing activities		(38	)		(95	)		—			95			(38	)		—			—			—			(38	)
Effect of exchange rate changes on cash and equivalents		—			—			(10	)		—			(10	)		—			—			—			(10	)
Net increase (decrease) in cash and equivalents		—			2			94			—			96			—			—			—			96
Cash and equivalents at beginning of period		—			180			179			—			359			—			—			—			359
Cash and equivalents at end of period	$	—		$	182		$	273		$	—		$	455		$	—		$	—		$	—		$	455

Consolidating Statement of Cash Flows (Unaudited)

For The Three Months Ended December 31, 2015

	WMG												WMG						Warner						Warner
	Acquisition						Non-						Acquisition			WMG			Music						Music
	Corp.			Guarantor			Guarantor						Corp.			Holdings			Group						Group Corp.
	(issuer)			Subsidiaries			Subsidiaries			Eliminations			Consolidated			Corp.			Corp.			Eliminations			Consolidated
	(in millions)
Cash flows from operating activities
Net income (loss)	$	32		$	73		$	(6	)	$	(66	)	$	33		$	27		$	27		$	(59	)	$	28
Adjustments to reconcile net (loss) income to net cashprovided by operating activities:
Depreciation and amortization		—			41			34			—			75			—			—			—			75
Unrealized gains/losses and remeasurement of foreign denominated loans		120			19			(147	)		—			(8	)		—			—			—			(8	)
Deferred income taxes		—			—			(9	)		—			(9	)		—			—			—			(9	)
Non-cash interest expense		2			—			—			—			2			—			—			—			2
Non-cash share-based compensation expense		—			1			—			—			1			—			—			—			1
Equity losses (gains), including distributions		(47	)		(19	)		—			66			—			(32	)		(27	)		59			—
Changes in operating assets and liabilities:
Accounts receivable		—			(5	)		(58	)		—			(63	)		—			—			—			(63	)
Inventories		—			2			(3	)		—			(1	)		—			—			—			(1	)
Royalty advances		—			(3	)		(13	)		—			(16	)		—			—			—			(16	)
Accounts payable and accrued liabilities		—			(184	)		173			—			(11	)		—			—			—			(11	)
Royalty payables		—			7			51			—			58			—			—			—			58
Accrued interest		(6	)		—			—			—			(6	)		(5	)		—			—			(11	)
Deferred revenue		—			(2	)		3			—			1			—			—			—			1
Other balance sheet changes		—			—			15			—			15			—			—			—			15
Net cash provided by (used in) operating activities		101			(70	)		40			—			71			(10	)		—			—			61
Cash flows from investing activities
Acquisition of music publishing rights, net		—			(6	)		(1	)		—			(7	)		—			—			—			(7	)
Capital expenditures		—			(7	)		(3	)		—			(10	)		—			—			—			(10	)
Investments and acquisitions of businesses, net		—			(1	)		—			—			(1	)		—			—			—			(1	)
Advances to issuer		(88	)		—			—			88			—			—			—			—			—
Net cash provided by (used in) investing activities		(88	)		(14	)		(4	)		88			(18	)		—			—			—			(18	)
Cash flows from financing activities
Dividend by Acquisition Corp. to Holdings Corp.		(10	)		—			—			—			(10	)		10			—			—			—
Repayment of Acquisition Corp. Senior Term Loan Facility		(3	)		—			—			—			(3	)		—			—			—			(3	)
Distribution to noncontrolling interest holder		—			—			(3	)		—			(3	)		—			—			—			(3	)
Change in due to (from) issuer		—			88			—			(88	)		—			—			—			—			—
Net cash provided by (used in) financing activities		(13	)		88			(3	)		(88	)		(16	)		10			—			—			(6	)
Effect of exchange rate changes on cash and equivalents		—			—			(5	)		—			(5	)		—			—			—			(5	)
Net increase (decrease) in cash and equivalents		—			4			28			—			32			—			—			—			32
Cash and equivalents at beginning of period		—			73			173			—			246			—			—			—			246
Cash and equivalents at end of period	$	—		$	77		$	201		$	—		$	278		$	—		$	—		$	—		$	278