AMERICA ONLINE UPDATE REPORT (NYSE: AOL)

The initial coverage report on America Online, Inc. (AOL) was prepared as of 2 February 2000. This update report on AOL reviews the current (5 July 2000) status of AOL within the context of the major factors addressed in the initial coverage report.

AOL has continued the expansion of its customer base and the scope of the services it offers since the issuance of the initial coverage report in February 2000. While the merger with Time-Warner continues to be investigated by regulatory authorities in both the European Community and the United States, we believe that the merger ultimately will be approved on both sides of the Atlantic. The promise by AOL that competitors will be allowed access to its post-merger broadband networks, we believe, provides an incentive for regulators to approve the merger. The secret for speedy approval of the merger by regulators may lie in assurances by AOL that open access will not be impeded by unreasonable fees, limitations on services or content, or preferences. Such assurances, we believe, will go a long way toward softening opposition to the merger by major competitors, such as Walt Disney. Further, the European Union (EU) already has rejected the AOL overture divest some of its European operations as a means of gaining approval for the merger. The EU rejection of the AOL overture appears to us to imply that AOL must be willing to change the way it opera