S-4/A 1 d794201ds4a.htm FORM S-4/A Form S-4/A
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As filed with the Securities and Exchange Commission on December 24, 2014

REGISTRATION NO. 333-199552

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 3

to

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

LIBERTY GLOBAL PLC

(Exact name of Registrant as specified in its charter)

 

 

 

England and Wales   4841   98-1112770

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification code number)

 

(I.R.S. Employer

Identification No.)

 

12300 Liberty Boulevard

Englewood, CO 80112

(303) 220-6600

 

38 Hans Crescent

London SW1X 0LZ

United Kingdom

+44.20.7190.6449

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

Bryan H. Hall

Executive Vice President

Liberty Global plc

38 Hans Crescent

London SW1X 0LZ

United Kingdom

+44.20.7190.6449

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

With copies to:

 

Jeremy Kutner

Shearman & Sterling (London) LLP

9 Appold Street

London, EC2A 2AP

United Kingdom

+44.20.7655.5000

 

George Casey

Robert Katz

Harald Halbhuber

Shearman & Sterling LLP

599 Lexington Avenue

New York, New York 10022

(212) 848-4000

 

Robert Murray

Renee Wilm

Jonathan Gordon

Baker Botts L.L.P.

30 Rockefeller Plaza

New York, New York 10012

(212) 408-2500

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective and all other conditions to the proposed transactions described herein have been satisfied or waived, as applicable.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering.  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

x

  

Accelerated filer

 

¨

Non-accelerated filer

 

¨  (Do not check if a smaller reporting company)

  

Smaller reporting company

 

¨

 

 

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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Information in this proxy statement/prospectus is not complete and may be changed. We may not issue the securities offered by this proxy statement/prospectus until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction where an offer or solicitation is not permitted.

 

Subject to completion, dated December 24, 2014

LOGO

December     , 2014

Dear Shareholder:

You are cordially invited to attend a general meeting of shareholders of Liberty Global plc (Liberty Global) to be held at 10:00 a.m., local time, on February 24, 2015 and, to the extent you hold shares of the applicable class, a class meeting of our Class A ordinary shareholders to be held at 10:20 a.m., local time, on February 24, 2015, a class meeting of our Class B ordinary shareholders to be held at 10:40 a.m., local time, on February 24, 2015, and a class meeting of our Class C ordinary shareholders to be held at 11:00 a.m., local time, on February 24, 2015. All such meetings will be held at the Denver Marriott South at Park Meadows, 10345 Park Meadows Drive, Lone Tree, Colorado 80124. A proxy statement/prospectus containing important information about the matters to be acted on at the general meeting and the class meetings, notices of the general meeting and the class meetings and proxy cards accompany this letter. We refer to our existing Class A, Class B and Class C Ordinary Shares as the Liberty Global Class A Ordinary Shares, Liberty Global Class B Ordinary Shares and Liberty Global Class C Ordinary Shares, respectively, and collectively, as the Liberty Global Ordinary Shares.

At the meetings, you will be asked to consider and vote on the following:

 

   

a series of resolutions that we collectively refer to as the Transaction Proposals, each of which is conditional on the other and which include:

 

   

the adoption of new articles of association which will (i) provide for the creation of new classes of ordinary shares, designated the LiLAC Class A Ordinary Shares, the LiLAC Class B Ordinary Shares and the LiLAC Class C Ordinary Shares, which we collectively refer to as the LiLAC Ordinary Shares, which are intended to track the performance of our operations in Latin America and the Caribbean (our Latin American operations) and (ii) make certain changes to the terms of the existing Liberty Global Ordinary Shares;

 

   

the approval of polices that our management will use to, among other things, attribute assets, liabilities and opportunities between the Liberty Global Group and the LiLAC Group (each as defined below); and

 

   

an administrative resolution to permit future consolidations and sub-divisions of our shares;

 

   

the approval of an amendment to our articles of association with respect to voting on the variation of rights attached to classes of our shares, which we refer to as the Voting Rights Proposal;

 

   

the approval of the form of agreement pursuant to which we may conduct certain share repurchases and the approval of certain arrangements which may relate to purchases of securities from our directors pursuant to a series of resolutions that we refer to as the Securities Purchase Proposals; and

 

   

the approval of amendments to the Liberty Global 2014 Incentive Plan to permit the grant to employees of our subsidiary Virgin Media Inc. of options to acquire shares of Liberty Global at a discount to the market value of such shares, which we refer to as the Virgin Media Sharesave Proposal,

all as described in more detail in the accompanying proxy statement/prospectus and collectively referred to as the Proposals.

HOLDERS OF LIBERTY GLOBAL CLASS C ORDINARY SHARES, WHICH ARE NON-VOTING FOR MOST MATTERS, SHOULD NOTE THAT THEY ARE ENTITLED TO VOTE ON THE ADOPTION OF OUR NEW ARTICLES AND ON THE VOTING RIGHTS PROPOSAL AT THE CLASS C MEETING AND THEREFORE WE URGE ALL SUCH HOLDERS TO REVIEW THIS LETTER AND THE MATERIALS THAT FOLLOW.


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As described above, the Transaction Proposals, if approved and implemented, will create the LiLAC Ordinary Shares, which are new classes of ordinary shares intended to track and reflect the separate economic performance of the businesses and assets of our operations in Latin America and the Caribbean, which we collectively refer to as the Liberty Latin America and Caribbean Group, or LiLAC Group. The LiLAC Group will initially comprise (i) VTR Finance B.V. (VTR Finance) and its subsidiaries, which include VTR GlobalCom SpA and VTR Wireless SpA, (ii) Lila Chile Holding BV, which is the parent entity of VTR Finance, (iii) LGI Broadband Operations, Inc. and its subsidiaries, which include our 60% controlling interest in Liberty Cablevision of Puerto Rico, and (iv) the costs associated with certain corporate employees of Liberty Global that are exclusively focused on the management of our Latin American operations. We also intend, prior to the issuance of the LiLAC Ordinary Shares, to contribute to Lila Chile Holding BV an amount of cash as determined by our board of directors to provide the LiLAC Group with additional liquidity to fund, among other things, acquisitions and ongoing operating costs and expenses. We refer to all of our other businesses, assets and liabilities not specifically attributed to the LiLAC Group collectively as the Liberty Global Group. If the Transaction Proposals are approved and the LiLAC Ordinary Shares are issued, the Liberty Global Ordinary Shares will accordingly no longer reflect the performance of the businesses and assets of Liberty Global as a whole.

If the Transaction Proposals are approved and implemented, our new articles of association will authorize the company to issue LiLAC Ordinary Shares, will set out the rights of such shares and will make certain changes to the terms of the Liberty Global Ordinary Shares. If that approval is obtained, and certain other conditions are satisfied or waived, our board of directors intends to subsequently capitalize a portion of our share premium account and issue LiLAC Ordinary Shares to the holders of Liberty Global Ordinary Shares as fully paid bonus shares in an issuance that we refer to as the Bonus Issue. We refer to the adoption of our new articles of association, including the creation of the LiLAC Ordinary Shares, and the subsequent Bonus Issue of those shares, collectively as the Transaction.

In the Transaction, each holder of Liberty Global Class A, Class B or Class C Ordinary Shares would receive, for every 20 Liberty Global Ordinary Shares held by such holder on the record date for the Bonus Issue, one share of the corresponding class of LiLAC Ordinary Shares. Based on the number of Liberty Global Ordinary Shares of the relevant classes outstanding as of December 22, 2014, we expect to issue approximately 12.6 million LiLAC Class A Ordinary Shares, 0.5 million LiLAC Class B Ordinary Shares and 31.7 million LiLAC Class C Ordinary Shares to holders of Liberty Global Class A Ordinary Shares, Liberty Global Class B Ordinary Shares and Liberty Global Class C Ordinary Shares, respectively, in the Transaction. Where the calculation of LiLAC Ordinary Shares described above would result in a holder of Liberty Global Ordinary Shares being issued with a fraction of a LiLAC Ordinary Share, such fractional entitlement will be aggregated with all other fractional entitlements and sold on behalf of all holders of fractional entitlements, and we will pay to such holders an amount equal to their proportionate proceeds of the sale.

It is important to note that, following the Transaction, holders of LiLAC Ordinary Shares will have no direct investment in the businesses or assets attributed to the LiLAC Group, and holders of Liberty Global Ordinary Shares will have no direct investment in the businesses or assets attributed to the Liberty Global Group. Rather, an investment in either type of share will represent an ownership interest in our company as a whole.

We expect to list the LiLAC Class A Ordinary Shares and LiLAC Class C Ordinary Shares on the NASDAQ Global Select Market (Nasdaq) under the symbols “LILA,” and “LILAK,” respectively. Although no assurance can be given, we currently expect that the LILAC Class B Ordinary Shares will trade on the OTC Bulletin Board under the symbol “LILAB.” Following the Transaction, the Liberty Global Class A Ordinary Shares, Liberty Global Class B Ordinary Shares and Liberty Global Class C Ordinary Shares will continue to trade on Nasdaq under the symbols “LBTYA,” “LBTYB” and “LBTYK,” respectively.

Our board of directors has unanimously approved each Proposal and unanimously recommends that you vote “FOR” each of the resolutions comprising the Transaction Proposals, the Voting Rights Proposal, the Securities Purchase Proposals and the Virgin Media Sharesave Proposal.

Your vote is important, regardless of the number or class of shares you own. Whether or not you plan to attend the meetings, please vote as soon as possible to make sure that your shares are represented.


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Thank you for your cooperation and continued support and interest in Liberty Global.

 

Very truly yours,
Michael T. Fries
Chief Executive Officer

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Transaction Proposals, the Voting Rights Proposal, the Securities Purchase Proposals, the Virgin Media Sharesave Proposal, the Transaction or the securities being offered in the Transaction or has passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.

Investing in the securities of Liberty Global involves risks. See “Risk Factors” beginning on page 26.

This proxy statement/prospectus is dated December     , 2014 and is first being mailed on or about December     , 2014 to the shareholders of record as of 5:00 p.m., New York City time/10:00 p.m., London time, on December 26, 2014.


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HOW YOU CAN FIND ADDITIONAL INFORMATION

We are subject to the information and reporting requirements of the Exchange Act and, in accordance with the Exchange Act, file periodic reports and other information with the SEC. This information is available to you without charge upon your written or oral request. You may read and copy any document that we file at the Public Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at (800) SEC-0330. You may also inspect such filings on the internet web site maintained by the SEC at www.sec.gov. Information contained in any web site referenced in this proxy statement/prospectus is not incorporated by reference in this proxy statement/prospectus. Copies of documents filed by us with the SEC are also available by writing or telephoning our office of Investor Relations:

Liberty Global plc

12300 Liberty Boulevard

Englewood, CO 80112

Telephone: (303) 220-6600

 

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LIBERTY GLOBAL PLC MEETINGS OF SHAREHOLDERS

TO BE HELD ON FEBRUARY 24, 2015

OVERVIEW OF THE PROPOSALS

The following is a summary of the proposals (collectively, the Proposals) to be voted on at the meetings of shareholders of Liberty Global plc (Liberty Global, we, or the company) to be held on February 24, 2015, as further described in this proxy statement/prospectus. We refer to our existing Class A, Class B and Class C Ordinary Shares as the Liberty Global Class A Ordinary Shares, the Liberty Global Class B Ordinary Shares and the Liberty Global Class C Ordinary Shares, respectively, and collectively, as the Liberty Global Ordinary Shares and, together with the LiLAC Ordinary Shares described below, as our Ordinary Shares.

The meetings consist of a general meeting of the shareholders of Liberty Global (the General Meeting) and separate class meetings for holders of Liberty Global Class A, Class B and Class C Ordinary Shares (the Class A Meeting, Class B Meeting and Class C Meeting, respectively, and collectively the Class Meetings and, together with the General Meeting, the Meetings).

For the full text of each of the resolutions that make up the Proposals, please see the Notice of General Meeting, Notice of Class A Meeting, Notice of Class B Meeting and Notice of Class C Meeting attached as Annex A, Annex B, Annex C and Annex D, respectively, to this proxy statement/prospectus.

The Transaction Proposals consist of the following resolutions:

 

  (i)

a special resolution of the holders of Liberty Global Class A and Class B Ordinary Shares voting together as a single class at the General Meeting (the New Articles Proposal) to adopt new articles of association, which will create and authorize the issuance of new classes of ordinary shares, designated the LiLAC Class A Ordinary Shares, the LiLAC Class B Ordinary Shares and the LiLAC Class C Ordinary Shares, which we collectively refer to as the LiLAC Ordinary Shares, which are intended to track the performance of our operations in Latin America and the Caribbean (our Latin American operations) and make certain changes to the terms of the Liberty Global Ordinary Shares, as further described in this proxy statement/prospectus. The new articles of association will give our board of directors the same general authority regarding the issue of shares and the disapplication of statutory pre-emptive rights as our current articles, thus effectively replenishing the existing authority for five years from the date of the general meeting. The new articles of association will only become effective following the approval of the board of directors immediately prior to the Bonus Issue (as defined below);

 

  (ii)

special resolutions, to be considered at the Class A, Class B and Class C Meetings, (the Class A, Class B, and Class C Articles Proposals, as applicable, and collectively the Class Articles Proposals) to approve the adoption of our new articles of association (including, without limitation, all modifications of the terms of Liberty Global Class A, Class B and Class C Ordinary Shares, as applicable, which may result from such adoption);

 

  (iii)

an ordinary resolution of the holders of Liberty Global Class A and Class B Ordinary Shares voting together as a single class at the General Meeting (the Management Policies Proposal) to approve certain management policies to be adopted by our board of directors in relation to, among other things, the allocation of assets, liabilities and opportunities between the LiLAC Group and the Liberty Global Group; and

 

  (iv)

a special resolution of the holders of Liberty Global Class A and Class B Ordinary Shares voting together as a single class at the General Meeting (the Future Consolidation/Sub-Division Proposal) to authorize the future consolidation or sub-division of any or all shares of the company and to amend our new articles of association to reflect that authority.

 

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Each of the New Articles Proposal, the Class Articles Proposals, the Management Policies Proposal and the Future Consolidation/Sub-Division Proposal is dependent on the others, and none of them will be implemented unless all receive the requisite shareholder approvals (collectively, the Transaction Approvals). If the Transaction Approvals are received and the other conditions to the Transaction are satisfied or waived, then our board of directors intends to subsequently capitalize a portion of our share premium account and issue LiLAC Ordinary Shares to holders of Liberty Global Ordinary Shares as fully paid bonus shares in an issuance that we refer to as the Bonus Issue. We refer to the adoption of our new articles of association, including the creation of the LiLAC Ordinary Shares, and the subsequent Bonus Issue of those shares, collectively as the Transaction.

The Voting Rights Proposal consists of (i) a special resolution of the holders of Liberty Global Class A and Class B Ordinary Shares voting together as a single class at the General Meeting (the Voting Rights Amendment Proposal) to approve an amendment to the provision in our articles of association governing voting on the variation of rights attached to classes of our shares, as further described in this proxy statement/prospectus, and (ii) special resolutions, to be considered at the Class A, Class B and Class C Meetings (the Class A, Class B and Class C Voting Rights Proposals, as applicable, and collectively the Class Voting Rights Proposals, and together with the Class Articles Proposals, the Class Proposals) to approve the amendment of our current and new articles of association pursuant to the Voting Rights Amendment Proposal (including, without limitation, all modifications of the terms of the Liberty Global Class A, Class B and Class C Ordinary Shares, as applicable, which may result from such amendment).

The Securities Purchase Proposals consist of (i) an ordinary resolution to approve the terms of, and to authorize repurchases under, a buy-back agreement (the Buy-Back Agreement), to be entered into by Liberty Global to acquire Liberty Global ordinary shares (the Buy-Back Shares) from a financial institution as part of our share repurchase program, and (ii) an ordinary resolution to approve possible future arrangements with our directors, which may result in Liberty Global acquiring securities from such directors, each such resolution to be adopted at the General Meeting by holders of Liberty Global Class A and Class B Ordinary Shares voting together as a single class. The authority conferred by the Securities Purchase Proposal in relation to the Buy-Back Agreement, if approved, will expire on the fifth anniversary of the general meeting.

The Virgin Media Sharesave Proposal consists of an ordinary resolution of the holders of Liberty Global Class A and Class B Ordinary Shares voting together as a single class at the General Meeting to amend the Liberty Global 2014 Incentive Plan to permit the grant of options to acquire Liberty Global Class C Ordinary Shares under the Virgin Media Sharesave with an exercise price of not less than 80% of the fair market value of such shares on the date of grant.

As noted above, each Transaction Proposal is conditional upon each other Transaction Proposal receiving the requisite shareholder approval. The Voting Rights Amendment Proposal is conditional on each Class Voting Rights Proposal receiving the requisite shareholder approval. None of the Securities Purchase Proposals or the Virgin Media Sharesave Proposal is conditional on the approval of any other Proposal.

The vote required for the approval of all the above mentioned resolutions differs by resolution.

 

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Proposal

  

Required Vote for Approval

Special Resolutions at General Meeting

 

•     New Articles Proposal

 

•     Voting Rights Amendment Proposal

 

•     Future Consolidation/Sub-Division Proposal

  

At least 75% of the votes cast by the holders of Liberty Global Class A and Class B Ordinary Shares voting together as a single class at the General Meeting

Special Resolutions at Class Meetings

 

•     Class Articles Proposals

 

•     Class Voting Rights Proposals

  

At least 75% of the votes cast by the holders of each of Liberty Global Class A, Class B and Class C Ordinary Shares, each voting separately at their respective Class Meeting

Ordinary Resolutions at General Meeting

 

•     Management Policies Proposal

 

•     Securities Purchase Proposals

 

•     Virgin Media Sharesave Proposal

  

A simple majority of votes cast by the holders of Liberty Global Class A and Class B Ordinary Shares voting together as a single class at the General Meeting

Under English law, holders of a company’s ordinary shares are generally referred to as “members,” but for clarity, they are referred to in this proxy statement/prospectus and the accompanying notices as “shareholders” or “holders” of the relevant shares.

 

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TABLE OF CONTENTS

 

HOW YOU CAN FIND ADDITIONAL INFORMATION

     i   

OVERVIEW OF THE PROPOSALS

     ii   

QUESTIONS AND ANSWERS

     1   

SUMMARY OF THE TRANSACTION

     7   

General

     7   

Liberty Latin American and Caribbean Operations Overview

     8   

LiLAC Strategic Focus and Core Strengths

     9   

LiLAC Opportunities

     11   

The Transaction

     12   

Comparative Per Share Market Price and Dividend Information

     22   

Summary Attributed Historical Financial Data

     23   

RISK FACTORS

     26   

Risks Related to our Proposed New Equity Capital Structure

     26   

Risk Factors Related to our Company, the Liberty Global Group and the LiLAC Group

     34   

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

     53   

THE GENERAL MEETING

     56   

Date, Time and Place

     56   

Purpose of the General Meeting

     56   

Quorum

     56   

Who May Vote

     56   

Votes Required

     56   

Votes You Have at the General Meeting

     57   

THE CLASS A MEETING

     58   

Date, Time and Place

     58   

Purpose of the Class A Meeting

     58   

Quorum

     58   

Who May Vote

     58   

Votes Required

     58   

Votes You Have at the Class A Meeting

     58   

THE CLASS B MEETING

     59   

Date, Time and Place

     59   

Purpose of the Class B Meeting

     59   

Quorum

     59   

Who May Vote

     59   

Votes Required

     59   

Votes You Have at the Class B Meeting

     59   

THE CLASS C MEETING

     60   

Date, Time and Place

     60   

Purpose of the Class C Meeting

     60   

Quorum

     60   

Who May Vote

     60   

Votes Required

     60   

Votes You Have at the Class C Meeting

     60   

THE MEETINGS — GENERAL

     61   

Shares Outstanding

     61   

Number of Holders

     61   

Voting Procedures for Record Holders

     61   

Voting Procedures for Shares Held in Street Name

     62   

Revoking a Proxy

     62   

 

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Solicitation of Proxies

     62   

Voting by Poll

     62   

Voting by Participants in Liberty Global 401(k) Plans

     62   

THE TRANSACTION PROPOSALS

     64   

General

     64   

Conditions to the Transaction

     64   

Treatment of Share Options and Other Awards

     65   

The Liberty Global Group and the LiLAC Group

     65   

Background and Reasons for the Transaction Proposals

     66   

Description of the New LiLAC Ordinary Shares and Liberty Global Ordinary Shares under Our New Articles  of Association and Comparison to the Liberty Global Ordinary Shares under Our Current Articles of Association

     68   

Other Provisions of the New Articles

     81   

Management and Allocation Policies

     83   

Accounting Treatment

     88   

Stock Exchange Listings

     89   

Share Transfer Agent and Registrar

     89   

Issuance Mechanics and U.K. Stamp Duty

     89   

Recommendation of the Board of Directors

     89   

MATERIAL TAX CONSEQUENCES OF THE TRANSACTION

     90   

Material U.K. Tax Consequences

     90   

Material U.S. Federal Income Tax Consequences

     92   

THE VOTING RIGHTS PROPOSAL

     98   

THE SECURITIES PURCHASE PROPOSALS

     100   

Approval of Buy-Back Agreement

     100   

Purchases of Securities from Directors

     100   

Recommendation of the Board of Directors

     101   

THE VIRGIN MEDIA SHARESAVE PROPOSAL

     102   

Purpose

     102   

Eligible Employees

     103   

Shares Available for Issuance

     103   

Administration

     103   

Terms of Sharesave Options

     103   

Adjustments of Options

     104   

Amendment and Termination of the Virgin Media Sharesave

     104   

Term

     105   

Tax Consequences

     105   

New Plan Benefits

     105   

Recommendation of the Board of Directors

     107   

ADDITIONAL INFORMATION

     108   

Legal Matters

     108   

Independent Accountants

     108   

WHERE YOU CAN FIND MORE INFORMATION

     109   

INCORPORATION BY REFERENCE

     109   

ANNEX A: NOTICE OF GENERAL MEETING

     A-1   

ANNEX B: NOTICE OF CLASS A MEETING

     B-1   

ANNEX C: NOTICE OF CLASS B MEETING

     C-1   

ANNEX D: NOTICE OF CLASS C MEETING

     D-1   

ANNEX E: DESCRIPTION OF OUR LATIN AMERICAN OPERATIONS

     E-1   

ANNEX F: ATTRIBUTED FINANCIAL INFORMATION

     F-1   

ANNEX G: MARKED COPY OF NEW ARTICLES OF ASSOCIATION

     G-1   

ANNEX H: MANAGEMENT AND ALLOCATION POLICIES

     H-1   

ANNEX I: AMENDMENT OF OUR ARTICLES UNDER THE VOTING RIGHTS PROPOSAL

     I-1   

 

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QUESTIONS AND ANSWERS

The questions and answers below highlight only selected information about the General Meeting, the Class Meetings and how to vote your shares. You should read carefully the entire proxy statement/prospectus, including the Annexes and the additional documents incorporated by reference herein, to fully understand the Proposals and the Transaction.

 

Q:

When and where is the General Meeting?

 

A:

The General Meeting will be held at 10:00 a.m., local time on February 24, 2015 at the Denver Marriott South at Park Meadows, 10345 Park Meadows Drive, Lone Tree, Colorado 80124.

 

Q:

When and where are the Class Meetings?

 

A:

The Class A Meeting will be held at 10:20 a.m., local time on February 24, 2015 at the Denver Marriott South at Park Meadows, 10345 Park Meadows Drive, Lone Tree, Colorado 80124.

The Class B Meeting will be held at 10:40 a.m., local time on February 24, 2015 at the Denver Marriott South at Park Meadows, 10345 Park Meadows Drive, Lone Tree, Colorado 80124.

The Class C Meeting will be held at 11:00 a.m., local time on February 24, 2015 at the Denver Marriott South at Park Meadows, 10345 Park Meadows Drive, Lone Tree, Colorado 80124.

 

Q:

What is the record date for the Meetings?

 

A:

The record date for all Meetings is 5:00 p.m., New York time/10:00 p.m., London time, on December 26, 2014.

 

Q:

What is the purpose of the General Meeting and the Class Meetings?

 

A:

The purpose of the General Meeting is to consider and vote on the Transaction Proposals (other than the Class Articles Proposals), the Voting Rights Amendment Proposal, the Securities Purchase Proposals and the Virgin Media Sharesave Proposal.

The purpose of the Class A Meeting, Class B Meeting and Class C Meeting is for the holders of Liberty Global Class A Ordinary Shares, Liberty Global Class B Ordinary Shares and Liberty Global Class C Ordinary Shares, respectively, to consider and vote on the relevant Class Proposals.

 

Q:

What shareholder vote is required to approve the Proposals?

 

A:

The Proposals require the following votes for approval:

 

Proposal

  

Required Vote for Approval

Special Resolutions at General Meeting

 

•       New Articles Proposal*

 

•       Voting Rights Amendment Proposal

 

•       Future Consolidation/Sub-Division Proposal*

  

At least 75% of the votes cast by the holders of Liberty Global Class A and Class B Ordinary Shares voting together as a single class at the General Meeting

Special Resolutions at Class Meetings

 

•       Class Articles Proposals*

 

•       Class Voting Rights Proposals

  

At least 75% of the votes cast by the holders of each of Liberty Global Class A, Class B and Class C Ordinary Shares, each voting at their respective Class Meeting

Ordinary Resolutions at General Meeting

 

•       Management Policies Proposal*

 

•       Securities Purchase Proposals

 

•       Virgin Media Sharesave Proposal

  

A simple majority of votes cast by the holders of Liberty Global Class A and Class B Ordinary Shares voting together as a single class at the General Meeting

 

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Proposals marked with an asterisk (*) are Transaction Proposals. Each Transaction Proposal is conditional upon each other Transaction Proposal receiving the requisite shareholder approval. The Transaction will only be implemented if all Transaction Proposals receive the requisite shareholder approval and the other conditions to the Transaction are satisfied or waived. The Voting Rights Amendment Proposal is conditional on each Class Voting Rights Proposal receiving the requisite shareholder approval. The Securities Purchase Proposals and the Virgin Media Sharesave Proposal are not conditional upon approval of the Transaction Proposals or any other Proposals.

 

Q:

How many votes do shareholders have at the General Meeting?

 

A:

At the General Meeting, where holders of Liberty Global Class A and Class B Ordinary Shares vote together as a single class:

 

   

holders of Liberty Global Class A Ordinary Shares have one vote per share; and

 

   

holders of Liberty Global Class B Ordinary Shares have ten votes per share.

Holders of Liberty Global Class C Ordinary Shares are not entitled to vote at the General Meeting. Only shares owned as of the record date are eligible to vote at the General Meeting.

As of the most recent practicable date, December 22, 2014, Liberty Global’s directors and executive officers beneficially owned approximately 25.9% of the total voting power of the Liberty Global Class A and Class B Ordinary Shares, voting together as a single class. We have been informed that all of our directors and executive officers intend to vote “FOR” each of the Proposals being voted on at the General Meeting.

 

Q:

How many votes do shareholders have at the Class Meetings?

 

A:

For the separate class votes on the Class A Articles Proposal and the Class A Voting Rights Proposal at the Class A Meeting, holders of Liberty Global Class A Ordinary Shares have one vote per share.

For the separate class votes on the Class B Articles Proposal and the Class B Voting Rights Proposal at the Class B Meeting, holders of Liberty Global Class B Ordinary Shares have one vote per share.

For the separate class votes on the Class C Articles Proposal and the Class C Voting Rights Proposal at the Class C Meeting, holders of Liberty Global Class C Ordinary Shares have one vote per share.

Only shares owned as of the record date are eligible to vote at the Class Meetings.

As of the most recent practicable date, December 22, 2014, Liberty Global’s directors and executive officers beneficially owned approximately 1.2% of the Liberty Global Class A Ordinary Shares, 87.2% of the Liberty Global Class B Ordinary Shares and 3.2% of the Liberty Global Class C Ordinary Shares. We have been informed that all of our directors and executive officers intend to vote “FOR” each of the Class Proposals being voted on at the Class Meetings.

 

Q:

Are holders of our non-voting Liberty Global Class C Ordinary Shares entitled to vote on the Proposals?

 

A:

Holders of Liberty Global Class C Ordinary Shares will be entitled to vote in separate class votes on the Class C Articles Proposal and the Class C Voting Rights Proposal at the separate Class C Meeting, but will not be entitled to vote on any of the other Proposals.

 

Q:

What if any of the Transaction Proposals are not approved?

 

A:

All Transaction Proposals are conditional upon each other and each must be approved for the Transaction to be completed. If any of the Transaction Proposals are not approved, our new articles will not be adopted and

 

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no LiLAC Ordinary Shares will be issued to holders of Liberty Global Ordinary Shares. If any of the Transaction Proposals are not approved, our board of directors may explore, and may ultimately implement, a different type of transaction to separate the LiLAC Group from the Liberty Global Group, including through a spin-off, split-off or other form of separation transaction, assuming, among other things, our board of directors determines that such separation transaction is in the best interests of our company and our shareholders and addresses the needs of our various businesses. No assurance can be given that any such alternative transaction would be implemented or, if implemented, as to the timing of such implementation.

 

Q:

Are any of the other Proposals conditional on other Proposals?

 

A:

The Voting Rights Amendment Proposal is conditional on each Class Voting Rights Proposal receiving the requisite shareholder approval. None of the Securities Purchase Proposals or the Virgin Media Sharesave Proposal is conditional on the approval of any other Proposal.

 

Q:

Will the Voting Rights Proposal amend both our existing articles and our new articles if the Transaction is implemented?

 

A:

Yes. If the Voting Rights Proposal is approved, it will amend our existing articles and, if the Transaction is implemented, our new articles, as further described under “The Voting Rights Proposal.

 

Q:

What do shareholders need to do to vote on the Proposals?

 

A:

After carefully reading and considering the information contained in this proxy statement/prospectus, you should complete, sign, date and return the applicable enclosed proxy cards by mail, or vote through the internet, in each case as soon as possible so that your shares are represented and voted at the relevant Meeting. Instructions for voting through the internet are printed on the proxy cards. In order to vote through the internet, have your proxy cards available so you can input the required information from the cards, and log onto the internet website address shown on the proxy cards. When you log onto the internet website address, you will receive instructions on how to vote your shares. The internet voting procedures are designed to authenticate votes cast by use of a personal identification number, which will be provided to each voting shareholder separately. Voting through the internet will be voting by proxy.

Shareholders who have shares registered in the name of a broker, bank or other nominee should follow the voting instruction card provided by their broker, bank or other nominee in instructing them how to vote their shares or when granting or revoking a proxy. We recommend that you vote by proxy even if you plan to attend the relevant Meeting. You may change your vote at the relevant Meeting.

If a proxy is properly executed and submitted by a record holder without indicating any voting instructions, the proxy will have authority to vote in accordance with the directors’ recommendations for all resolutions.

To be valid, the appointment of a proxy, whether completed via the internet or by returning the completed and signed proxy card, must be received by 1:00 a.m., New York time/6:00 a.m., London time on February 23, 2015.

 

Q:

Will there be separate proxy cards for each Meeting?

 

A:

Yes. There will be separate proxy cards for the General Meeting and each Class Meeting. If you wish to vote by proxy, you should complete each applicable proxy card (or vote through the internet using the information on such proxy card) for each Meeting that you are entitled to vote at.

 

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Q:

If shares are held in “street name” by a broker, bank or other nominee, will the broker, bank or other nominee vote those shares for the beneficial owner on the Proposals?

 

A:

Your broker, bank or other nominee will vote your shares held in “street name” on the Proposals only if you provide instructions on how to vote. Accordingly, if you hold your shares in “street name” and do not provide voting instructions to your broker, bank or other nominee, your shares will not be voted on any of the Proposals. If a broker, who is a record holder of shares, indicates on a form of proxy that the broker does not have discretionary authority to vote those shares on any Proposal, or if those shares are voted in circumstances in which proxy authority is defective or has been withheld with respect to any Proposal, these shares are considered “broker non-votes” with respect to each such Proposal and will not be voted, but will be counted for purposes of determining whether a quorum is present. Brokers, banks and other nominees may exercise discretion in voting on routine matters, but may not exercise discretion and vote on non-routine matters. None of the Proposals are considered routine matters and therefore your broker, bank or other nominee may not vote on these resolutions without instructions from you.

 

Q:

What constitutes a quorum at a Meeting?

 

A:

The presence, in person or by proxy, of the holders of a simple majority of the combined voting power of the relevant outstanding Liberty Global Ordinary Shares entitled to vote at a Meeting is necessary to constitute a quorum at that Meeting.

Liberty Global Ordinary Shares represented by “broker non-votes” will be counted for purposes of determining whether there is a quorum at a Meeting but will not be counted in determining the number of votes cast on a particular resolution.

 

Q:

What if I respond and indicate that I am abstaining from voting?

 

A:

A properly submitted proxy for a Meeting marked “ABSTAIN,” although counted for purposes of determining whether there is a quorum, will not be treated as votes cast at that Meeting. Accordingly, an abstention will not be taken into account in determining the outcome on any of the resolutions being voted on at that Meeting.

 

Q:

Can shareholders change their vote after returning a proxy card or voting via the internet?

 

A:

You may revoke (i.e. terminate) your proxy at any time prior to its use by attending the applicable Meeting and voting in person. Attendance at a Meeting will not in itself constitute the revocation of a proxy. Alternatively, you may revoke your proxy by delivering a signed notice of revocation or a later dated signed proxy or via the internet, regardless of how the proxy was originally granted. Any notice of revocation or subsequent proxy should be submitted via the internet, or sent or hand delivered so as to be received by us at Liberty Global plc, Attention: Secretary, 38 Hans Crescent, Knightsbridge, London SW1X 0LZ, United Kingdom or at Liberty Global plc c/o Computershare, PO Box 43102, Providence, Rhode Island 02940, at least 24 hours before the start of the applicable Meeting.

 

Q:

When will the Transaction occur?

 

A:

Following the approval of all of the Transaction Proposals at the Meetings and the satisfaction of the other conditions described in this proxy statement/prospectus (including the decision by our board of directors or a duly appointed committee to adopt our new articles of association immediately prior to the Bonus Issue), LiLAC Class A, Class B and Class C Ordinary Shares will be issued as fully paid bonus shares to holders of Liberty Global Class A, Class B and Class C Ordinary Shares, respectively. Some of the conditions to the Transaction are out of our control, so we cannot be certain when or if they will be satisfied and when or if the Bonus Issue will be made.

 

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Q:

Can the board of directors decide not to issue the LiLAC Ordinary Shares?

 

A:

Our board of directors reserves the right to elect not to adopt our new articles of association and not issue the LiLAC Ordinary Shares at any time before the Bonus Issue, even after the Transaction Proposals have been approved by our shareholders and the other conditions to the Transaction have been satisfied or waived, as applicable. In such an event, our new articles of association will not be adopted and the Transaction will not occur.

 

Q:

If the Transaction is implemented, what do I need to do with my Liberty Global Ordinary Shares?

 

A:

Regardless of how you hold your shares, you will not be required to take any action in connection with the Transaction. If you are a holder of certificated Liberty Global Ordinary Shares:

 

   

each share certificate you hold representing Liberty Global Ordinary Shares will automatically represent the same number and class of Liberty Global Ordinary Shares following the Transaction; and

 

   

you will receive a share certificate representing the number and class of LiLAC Ordinary Shares you are entitled to be issued pursuant to the Bonus Issue with respect to the Liberty Global Ordinary Shares held by you as of the bonus issue record date (defined below), and cash in lieu of any fractional shares.

If you hold Liberty Global Ordinary Shares through book-entry, your account will be credited with the applicable number and class of LiLAC Ordinary Shares you are entitled to receive in the Bonus Issue.

 

Q:

How many LiLAC Ordinary Shares will I receive if the Transaction is implemented?

 

A:

If the Transaction is implemented, each holder of Liberty Global Class A, Class B or Class C Ordinary Shares would receive, for every 20 Liberty Global Ordinary Shares held by such holder as of 5:00 p.m. New York City time/10:00 p.m. London time as of the record date that we will determine for the Bonus Issue (the bonus issue record date), one share of the corresponding class of LiLAC Ordinary Shares.

 

Q:

How will fractions of LiLAC Ordinary Shares be dealt with?

 

A:

Where the calculation of LiLAC Ordinary Shares described above would result in an existing holder of Liberty Global Class A, Class B or Class C Ordinary Shares being issued a fraction of a LiLAC Ordinary Share, such fractional entitlement will be aggregated with all other fractional entitlements and sold on behalf of the holders of such fractional entitlements, and we will pay to such holders an amount in cash equal to their proportionate proceeds of the sale.

 

Q:

What are the tax consequences of the Transaction to me?

 

A:

For U.K. income tax and corporation tax purposes, you should not recognize any taxable income, gain or loss as a result of the Bonus Issue (except, potentially, with respect to the receipt by you of any cash in lieu of fractional LiLAC Ordinary Shares, and on the basis and subject to the matters described in the section entitled “Material Tax Consequences of the Transaction — Material U.K. Tax Consequences”). For a complete summary of the material U.K. tax consequences of the Transaction to holders of Liberty Global Ordinary Shares, please see the section entitled “Material Tax Consequences of the Transaction — Material U.K. Tax Consequences.”

For U.S. federal income tax purposes, you should not recognize any taxable income, gain or loss as a result of the Bonus Issue (except with respect to the receipt by you of any cash in lieu of fractional LiLAC Ordinary Shares). For a complete summary of the material U.S. federal income tax consequences of the Transaction to holders of Liberty Global Ordinary Shares, please see the section entitled “Material Tax Consequences of the Transaction — Material U.S. Federal Income Tax Consequences.

The tax consequences of the Transaction to you will depend on your particular tax situation. We urge you to consult your own tax advisor to determine the tax consequences of the Transaction and the ownership of LiLAC Ordinary Shares to you.

 

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Q:

What do I do if I have additional questions?

 

A:

If you have any questions prior to the General Meeting or any Class Meeting or if you would like copies of any document referred to or incorporated by reference in this document, please call Liberty Global Investor Relations at (303) 202-6600 or contact Innisfree M&A Incorporated, who is acting as proxy solicitation agent for the Meetings, at (877) 825-8906 (within the U.S. and Canada) or (412) 232-3651. Banks and brokers may call collect at (212) 750-5833.

 

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SUMMARY OF THE TRANSACTION

The following summary relates to the Transaction and includes information contained elsewhere in this proxy statement/prospectus. This summary does not contain all of the important information that you should consider before voting on the Transaction Proposals or investing in our ordinary shares. You should read the entire proxy statement/prospectus, including the Annexes and the documents incorporated by reference herein, carefully.

Throughout this proxy statement/prospectus we refer to Liberty Global plc or to Liberty Global plc and its subsidiaries, as the context may require, as “Liberty Global,” “we” and “our company.” Additionally, unless otherwise stated, references to “Latin America” include the countries in South America, Middle America (Mexico and Central America) and unless separately referenced, the Caribbean (including the Commonwealth of Puerto Rico and the Bahamas), references to “our Latin American operations” refer to our existing businesses and assets in Chile and Puerto Rico that would be attributed to the LiLAC Group, and references to “our Latin American markets,” or in those sections referring only to our Latin American operations, “our markets,” refer to the video, broadband internet, fixed-line telephony and mobile markets in Latin America where we operate. Capitalized terms relating to operating data used but not defined herein are defined in the Operating Data Table contained in “Annex E: Description of Our Latin American Operations.” The information described under “Questions and Answers” above is hereby incorporated in this summary by reference.

General

Liberty Global is an international provider of video, broadband internet, fixed-line telephony and mobile services, with consolidated operations at September 30, 2014 across 14 countries in Europe and Latin America. We connect people to the digital world and enable them to discover and experience its endless possibilities. Our market-leading services are provided through next-generation networks and innovative technology platforms that, when combined with those of Ziggo N.V. (Ziggo), which we acquired in November 2014, connected 27 million customers subscribing to 56 million television, broadband internet and telephony services at September 30, 2014.

If the Transaction Proposals are approved and the Transaction is completed, our operations in Latin America will be attributed to the Liberty Latin America and Caribbean Group, or LiLAC Group, and all of our other operations, including our European broadband communications businesses, will be attributed to the Liberty Global Group. Tracking shares, such as the LiLAC Ordinary Shares, are a type of ordinary share that the issuing company intends to reflect or “track” the economic performance of a particular business or “group,” rather than the economic performance of the company as a whole. While the Liberty Global Group and the LiLAC Group will have separate collections of businesses, assets and liabilities attributed to them, neither of these groups will be separate legal entities and therefore cannot own assets, issue securities or enter into legally binding agreements. Holders of LiLAC Ordinary Shares will have no direct claim to the assets attributed to the LiLAC Group and will not be represented by a separate board of directors. Instead, holders of LiLAC Ordinary Shares, along with holders of Liberty Global Ordinary Shares, will be shareholders of Liberty Global and therefore subject to all of the risks and liabilities of Liberty Global as a whole. Liberty Global will continue to have a single board of directors following the Transaction.

Our board of directors determined, after considering various strategic options with respect to our Latin American operations, that the Transaction is in the best interests of our company and represents the best option at this time to increase shareholder value with respect to our Latin American operations compared to the other options. We expect the Transaction, if completed, to, among other things:

 

   

give investors a greater choice to own securities intended to track and reflect the particular assets and liabilities of the LiLAC Group and the Liberty Global Group;

 

 

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provide a more focused shareholder base and access to capital markets with respect to, in particular, our Latin American assets;

 

   

provide enhanced transparency and information for investors with respect to our Latin American operations;

 

   

allow us to better align management and employee incentives with the performance of the businesses of the respective groups; and

 

   

allow us the structural flexibility to pursue growth and other strategic alternatives for the LiLAC Group, including a possible spin-off, while retaining the current advantages of doing business as a single company.

For more information regarding the background and reasons for the Transaction, see “The Transaction Proposals — Background and Reasons for the Transaction Proposals.” Please also see “Risk Factors” for a discussion of the risks that should be considered in connection with the Transaction and an investment in our ordinary shares.

Although our businesses are located primarily in Europe, our management believes that our Latin American operations represent a growth opportunity for our shareholders. To facilitate a better understanding of our Latin American operations and the strengths and opportunities that we believe would be afforded to our shareholders through the issuance of the LiLAC Ordinary Shares, the business description in this summary focuses exclusively on our Latin American operations, which will be attributed to the LiLAC Group. For a complete description of our operations to be attributed to the LiLAC Group, see Annex E: Description of our Latin American Operations. For a description of our remaining operations, all of which will be attributed to the Liberty Global Group, please see the discussion under the caption “Business” in our Annual Report on Form 10-K/A for the year ended December 31, 2013, which is incorporated herein by reference thereto. See “Incorporation by Reference.”

Liberty Latin American and Caribbean Operations Overview

We are the largest cable operator in our Latin American markets in terms of number of subscribers, and a leading provider of broadband internet and fixed-line telephony services in those markets. Our operations in Chile are provided through our wholly-owned subsidiaries VTR GlobalCom SpA (VTR GlobalCom) and VTR Wireless SpA (VTR Wireless and VTR GlobalCom and their respective subsidiaries, VTR). We conduct business in Puerto Rico through our 60%-owned subsidiary Liberty Cablevision of Puerto Rico LLC (Liberty Puerto Rico). At September 30, 2014, our networks in Latin America passed approximately 3.7 million homes and had approximately 1.5 million Customer Relationships subscribing to approximately 3.2 million video, broadband internet and fixed-line telephony services (RGUs), including approximately 1.2 million video subscribers (over 90% of which are digital), 1.1 million Internet Subscribers and 0.9 million Telephony Subscribers. Additionally, in Chile, we had approximately 0.1 million mobile subscribers (approximately three-quarters of which are post-paid mobile subscribers) as of September 30, 2014.

Through our advanced broadband cable networks in both Chile and Puerto Rico, our Latin American operations offer the following residential products and services:

 

   

a full range of innovative video services including basic and premium programming, as well as advanced service offerings such as high definition (HD) channels, digital video recorder (DVR), HD DVR and video-on-demand (VoD);

 

   

next-generation broadband internet services with downstream speeds of up to 120 megabits per second, or Mbps, in Chile and 100 Mbps in Puerto Rico, the fastest speeds offered in the majority of our footprints;

 

 

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feature-rich telephony that includes unlimited usage and complementary voice services (offering unlimited network, national or international calling, unlimited off-peak calling and minute packages); and

 

   

mobile voice and data services in Chile through a mobile virtual network operator (MVNO) arrangement.

We offer our video, broadband internet and fixed-line telephony services individually as well as in “bundles,” which consist of “double-play” for two services and “triple-play” for three services. Our customers enjoy the benefit of bundled services as a result of their ease of use, simplicity and economic efficiency.

LiLAC Strategic Focus and Core Strengths

We believe that the following strategic focus and core strengths contribute to our success and are differentiating factors that set us apart from our competitors.

 

   

We Own and Operate Advanced Networks. Our high-quality broadband networks are the building blocks of our strategy. Our video, broadband internet and fixed-line telephony offerings in Latin America are transmitted over an industry standard, hybrid fiber coaxial cable network architecture that is composed primarily of fiber optic cable that connects the hub to the neighborhood and a coaxial distribution cable for connection to the home. Our networks are two-way capable over most of our Latin American footprint and are increasingly being upgraded to 1 GHz of bandwidth. Additionally, our ultra-high-speed internet service is based on DOCSIS 3.0 technology, and we plan to upgrade to DOCSIS 3.1 technology in both Chile and Puerto Rico once it becomes available. These investments in our networks and technological upgrades allow us to deliver market-leading products and services and retain our internet speed leadership.

In Chile, our network:

 

   

has nationwide presence, reaching approximately 3.0 million homes, residential multiple dwelling units or commercial units that can be connected to our network without materially extending the distribution plant (Homes Passed), approximately 53% of the homes in Chile;

 

   

is over 80% two-way capable; and

 

   

has been almost 50% upgraded to 1 GHz of capacity, with more than 85% of the VTR network upgraded to at least 750 MHz of capacity.

In Puerto Rico, our network:

 

   

reaches approximately 706,000 Homes Passed, representing approximately 54% of the homes in Puerto Rico;

 

   

is 100% digital and two-way capable; and

 

   

has been approximately 50% upgraded to at least 860 MHz of capacity, and Liberty Puerto Rico is beginning to upgrade its network to 1 GHz of capacity.

 

   

We Are the Triple-Play Leader in Each of Our Markets.

In Chile:

 

   

VTR was the first company in Latin America to launch a triple-play package in 2000;

 

   

VTR had a bundling ratio (RGUs per Customer Relationship) of approximately 2.15 at September 30, 2014, one of the highest bundling ratios in the region, with almost 70% of VTR’s customers subscribing to more than one service offering; and

 

 

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for the nine months ended September 30, 2014, approximately 65% of VTR’s new customers subscribed to a triple-play offering.

In Puerto Rico:

 

   

Liberty Puerto Rico was the first company on the island to launch a triple-play package in 2003;

 

   

Liberty Puerto Rico had a bundling ratio of approximately 2.07 at September 30, 2014, with over 60% of Liberty Puerto Rico’s customers subscribing to more than one service offering; and

 

   

for the nine months ended September 30, 2014, almost 70% of Liberty Puerto Rico’s new customers subscribed to a bundled offering.

 

   

Our Video Success is Underpinned by Innovation. We have a history of introducing innovative video offerings that are attractive to customers. For example, VTR was the first cable operator in Latin America to offer HD channels and the first cable operator in Chile to offer transaction and subscription VoD. Liberty Puerto Rico was the first cable operator on the island to launch a transaction VoD service. Our ability to be the first to market with new and innovative products and services has contributed to our growing video subscriber base. Currently, we are in the process of developing our advanced, cloud-based next generation user interfaces for our Latin American operations based on advanced technologies, including Liberty Global’s “Horizon TV,” which we believe will allow us to continue to retain and attract new video customers.

 

   

Our Broadband Internet Speeds Are among the Fastest Offered in Our Markets. We offer the fastest broadband speeds within the majority of our Latin American footprints, offering up to 120 Mbps in Chile and up to 100 Mbps in Puerto Rico, and we believe our speed leadership has contributed to our success in broadband. We have made significant investments in our networks to maintain our high-speed transmission rates, and we believe this is one of our key competitive advantages in the marketplace. Our strategy is to continue to increase our maximum broadband speeds and to offer varying tiers of service speed and price through a variety of bundled offerings.

 

   

We Have Strong Market Positions.

 

   

VTR is the largest cable operator in Chile in terms of number of subscribers, the largest provider of broadband internet services in its footprint and the second largest in Chile in terms of number of subscribers, and the second largest fixed-line telephony provider in Chile in terms of lines in service; and

 

   

Liberty Puerto Rico is the largest cable operator island-wide in terms of number of subscribers, the second largest provider of broadband internet services island-wide in terms of number of subscribers and the second largest fixed-line telephony provider in Puerto Rico in terms of lines in service.

 

   

We Have Premier Brands in Our Markets Reflecting Our Sustained Commitment to Our Customers, Employees and Communities. As we compete in both the Chilean and Puerto Rican markets, we believe a differentiating factor and one of the keys to our operating success has been the strength of our brands, which contributes significantly to customer loyalty and retention, as well as to the positive perception afforded us by various constituents including our employees, customers, regulators and other market participants. Our brand reputation and focus on customers, employees and communities is evidenced by various awards presented to us, led by VTR, including:

 

   

recognition of VTR as one of the 25 Best Places to Work (trademark, GPTW) in Chile, consistently every year since 2008, and as one of the Top 20 Most Socially Responsible Companies in Chile by Prohumana, consistently every year since 2010; and

 

 

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VTR has been recognized on several occasions as the best internet service provider, as well as the best fixed-line telephony service company in Chile by the Customer Satisfaction Index. Additionally, VTR has also been recognized with the 2013 Premio Lealtad del Consumidor NPS (or Consumer Loyalty and Net Promoter Score), a top award in Chile for excellence in customer service, and has won Effie Awards, which honor effective marketing communications ideas around the world.

 

   

Our Latin American Operations Benefit from a Multi-Layered Group of Highly Experienced Management. Our Latin American operations benefit from management expertise at Liberty Global as well as at the Latin American divisional and local operating levels. Liberty Global’s senior management is well-versed in capitalizing on strategic initiatives, technological innovation, and finance and acquisition strategy in multiple markets around the world. In addition, our Latin American operations benefit from an experienced and focused Latin American management team with significant industry expertise in our markets, a proven track record of technological innovation and collaboration as well as a unique knowledge of Latin American operations, finance, governance and corporate strategy.

 

   

We Have an Established Record of Strong Operating and Financial Performance. Our Latin American operations have a proven track record of growth in customers, RGUs and revenue.

 

   

Our Latin American customer and RGU base has grown from 1.4 million customers and 2.9 million RGUs at December 31, 2012 to 1.5 million customers and 3.2 million RGUs at September 30, 2014.

 

   

VTR has driven most of this performance, organically adding 55,400 customers and 129,100 RGUs during 2013 and 30,000 customers and 82,200 RGUs during the first three quarters of 2014.

 

   

Our revenue attributed to the LiLAC Group has increased from $1.0 billion for the year ended December 31, 2011 to $1.225 billion for the twelve months ended September 30, 2014, reflecting the impact of a November 2012 acquisition in Puerto Rico and strong organic growth.

 

   

On an organic basis, the revenue growth of our Latin American operations was 4% for the nine months ended September 30, 2014, 7% for fiscal 2013 and 6% for fiscal 2012.

For more information regarding our historical financial and operating results, including a description of how we calculate organic revenue growth, see “Summary Combined Financial Information and Operating Data” and “Annex F: Attributed Financial Information: Management’s Discussion and Analysis of Financial Condition and Results of Operations.

LiLAC Opportunities

We believe that the pay television and broadband communications markets in Latin America present multiple opportunities for growth, both organically and through strategic acquisitions. The key elements of our long-term strategy to grow our business in this region include:

 

   

Leverage Our Product Leadership to Drive Increases in Our Subscriber Base. We believe that our product offerings represent a compelling value proposition and are increasingly differentiated from those of our competitors. Through continued product innovation, enhancements to the speeds delivered by our broadband product and improvements to our bundled offerings, we believe we are well-positioned to capitalize on further subscriber growth, as pay television and broadband penetration expand within our footprints. By capitalizing on our suite of market-leading bundled product offerings, we have a significant opportunity to increase our RGU base and drive growth in ARPU. We believe

 

 

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that emphasizing bundled offerings, especially the triple-play, creates greater customer loyalty and decreases our churn.

 

   

Exploit Next-Generation Technology to Enhance Video Offering. Set-top boxes are becoming increasingly more interactive through the addition of menus and applications with desktop computer-like interfaces, internet browsing and the ability to view personal media content. We continue to innovate and develop our cloud-based, next-generation user interfaces for our Latin American operations, based on advanced technologies including Liberty Global’s “Horizon TV.” Implementation of our next-generation technology will allow customers to view and share content through multiple devices, such as televisions, computers, tablets and smartphones. By strengthening the attractiveness of our video offering and improving the in-home video viewing experience, we believe we will be further differentiated in the marketplace and well-positioned to drive video customer growth and reduce churn.

 

   

Develop Mobile and Business-to-Business Opportunities. Beyond our core residential distribution business, we believe there are substantial revenue growth opportunities in areas such as mobile services and business-to-business (B2B). Through the first three quarters of 2014, mobile services revenue (excluding mobile interconnect revenue and revenue from mobile handset sales) and B2B revenue accounted for only approximately 1.9% and less than 0.5%, respectively, of consolidated revenue attributed to the LiLAC Group. We intend to capitalize on these revenue growth opportunities by focusing on the Chilean post-paid mobile market, exploring potential mobile opportunities in Puerto Rico and further developing our B2B operations and service capabilities in both markets.

 

   

Improve Efficiency of Our Operations. We will look to further improve the efficiency of our operations through a combination of market-specific initiatives and joint strategies across both Chile and Puerto Rico. In particular, we believe there are opportunities to expand our use of lower cost sales channels and improve our billing and collection processes and services. We intend to increase the collaboration between our operations in Chile and Puerto Rico, as well as work together with our European counterparts, in order to leverage their respective resources and experiences to drive improvement in areas such as procurement, marketing and programming. We are also exploring ways in which we can more closely align the product development roadmap in our Latin American operations, which should result in cost benefits and improved time-to-market for our next-generation products and services.

 

   

Capitalize on Potential Investment Opportunities in Latin America. We believe that the telecommunications and pay television landscape in Latin America is highly fragmented, and that there are a number of potential investment opportunities throughout the region, including in the markets in which we currently operate. Consistent with Liberty Global practice, we will remain disciplined in our approach with respect to any potential opportunities and will look to expand our reach and scale in Latin America through transactions that could include acquisitions of, or investments in, other multi-system operators and complementary businesses. Additionally, we believe that Latin America’s attractive demographics, with younger, tech-savvy consumers and improving socioeconomic conditions, as well as the region’s improving macroeconomic conditions that lead to higher levels of disposable income and expanding purchasing power, add to the attractiveness of potential investment opportunities in Latin America.

The Transaction

If the Transaction Proposals are approved, and subject to approval of our board of directors or a duly appointed committee immediately prior to the Bonus Issue, we will adopt our new articles of association, which will authorize us to issue LiLAC Ordinary Shares, will set out the rights attaching to such shares and will make certain modifications to the terms of the Liberty Global Ordinary Shares. If that approval is obtained, and certain

 

 

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other conditions are satisfied or waived, our board of directors intends to subsequently capitalize a portion of our share premium account and issue LiLAC Ordinary Shares to the holders of Liberty Global Ordinary Shares in the Bonus Issue.

In the Transaction, each holder of Liberty Global Class A, Class B or Class C Ordinary Shares would receive, for every 20 Liberty Global Ordinary Shares held by such holder as of 5 p.m. New York City time/10 p.m. London time on the bonus issue record date, one share of the corresponding class of LiLAC Ordinary Shares. Based on the numbers of Liberty Global Ordinary Shares of the relevant classes outstanding as of December 22, 2014, we expect to issue approximately 12.6 million of LiLAC Class A Ordinary Shares, 0.5 million of LiLAC Class B Ordinary Shares and 31.7 million of LiLAC Class C Ordinary Shares to holders of Liberty Global Class A, Class B and Class C Ordinary Shares, respectively, in the Transaction as follows:

 

   

each holder of Liberty Global Class A Ordinary Shares would receive one LiLAC Class A Ordinary Share for every 20 Liberty Global Class A Ordinary Shares held by such holder as of the bonus issue record date;

 

   

each holder of Liberty Global Class B Ordinary Shares would receive one LiLAC Class B Ordinary Share for every 20 Liberty Global Class B Ordinary Shares held by such holder as of the bonus issue record date; and

 

   

each holder of Liberty Global Class C Ordinary Shares would receive one LiLAC Class C Ordinary Share for every 20 Liberty Global Class C Ordinary Shares held by such holder as of the bonus issue record date.

Any fractional entitlements to LiLAC Ordinary Shares will be aggregated and sold on behalf of the relevant shareholders, and the company will pay such holders an amount in cash equal to their proportionate proceeds of the sale.

The number of outstanding Liberty Global Class A Ordinary Shares, Liberty Global Class B Ordinary Shares and Liberty Global Class C Ordinary Shares will not change as a result of the Transaction.

The LiLAC Ordinary Shares are intended to track and reflect the separate economic performance of the LiLAC Group, which will initially comprise (i) VTR Finance B.V. (VTR Finance) and its subsidiaries, which include VTR GlobalCom and VTR Wireless, (ii) Lila Chile Holding BV, which is the parent entity of VTR Finance, (iii) LGI Broadband Operations, Inc. and its subsidiaries, which include our 60% controlling interest in Liberty Puerto Rico, and (iv) the costs associated with certain corporate employees of Liberty Global that are exclusively focused on the management of our Latin American operations (the LiLAC Corporate Costs). As of September 30, 2014, these entities had (i) cash and cash equivalents in the amount of approximately $71.1 million and (ii) approximately $2.7 billion in total liabilities, including $2.1 billion in debt and capital lease obligations, primarily related to the $1.4 billion principal amount of 6.875% senior secured notes issued by VTR Finance, the parent of VTR, and the bank facility of Liberty Puerto Rico. We have allocated cash and debt to the LiLAC Group based on the cash held and debt owed by these entities and their subsidiaries. All debt owed by these entities is non-recourse to Liberty Global plc or any entities in the Liberty Global Group. We also intend, prior to the Bonus Issue, to contribute to Lila Chile Holding BV an amount of cash as determined by our board of directors to provide the LiLAC Group with additional liquidity to fund, among other things, acquisitions and ongoing operating costs and expenses.

All of our other businesses, assets and liabilities not attributed to the LiLAC Group would be attributed to the Liberty Global Group.

 

 

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The percentage of total revenue, loss from continuing operations, total assets and total liabilities of our company that we intend to be attributable to each of the Liberty Global Group and the LiLAC Group are set forth in the table below. Our proposed management and allocation policies will give us and our board of directors’ discretion to attribute future assets and liabilities to either group and to re-attribute existing assets from one group to the other. See “The Transaction Proposals — Management and Allocation Policies.”

 

     Nine Months ended September 30, 2014     As of September 30, 2014  
     Total
Revenue
    Loss from
Continuing
Operations
    Total
Assets (1)
    Total
Liabilities (1)
 

Liberty Global Group

     93.4     99.8     95.6     95.1

LiLAC Group

     6.6     0.2     4.6     5.2

 

(1)

Due to the impact of inter-group eliminations, amounts do not total to 100%.

Tracking shares, such as the LiLAC Ordinary Shares, are a type of ordinary share that the issuing company intends to reflect or “track” the economic performance of a particular business or “group,” rather than the economic performance of the company as a whole. While the Liberty Global Group and the LiLAC Group will have separate collections of businesses, assets and liabilities attributed to them, neither of these groups will be separate legal entities and therefore cannot own assets, issue securities or enter into legally binding agreements. Holders of LiLAC Ordinary Shares have no direct claim to the LiLAC Group’s assets and are not represented by a separate board of directors. Instead, holders of LiLAC Ordinary Shares, along with holders of Liberty Global Ordinary Shares, are shareholders of Liberty Global, and they are therefore subject to all of the risks and liabilities of Liberty Global. Liberty Global will continue to have a single board of directors following the Transaction.

The following summarizes selected terms of the Transaction Proposals and the Transaction. For more information, please see “The Transaction Proposals.”

 

The Transaction Proposals; Our New Articles

Under the Transaction Proposals, you are being asked to approve our new articles of association, the related management and allocation policies and an administrative resolution required under the Companies Act to permit future sub-divisions and consolidations of our shares. The LiLAC Ordinary Shares to be authorized pursuant to the Transaction Proposals are intended to track and reflect the economic performance of the LiLAC Group. All of our businesses, assets and liabilities not attributed to the LiLAC Group would be attributed to the Liberty Global Group. However, our board of directors reserves the right to change the businesses, assets and liabilities attributable to these groups at any time in accordance with our proposed management and allocation policies. See “The Transaction Proposals — Management and Allocation Policies.

 

 

Like the Liberty Global Ordinary Shares, the LiLAC Ordinary Shares will be divided into three classes: Class A, Class B and Class C. The LiLAC Class B Ordinary Shares will entitle the holder to 10 votes per share, the LiLAC Class A Ordinary Shares will entitle the holder to one vote per share, and the LiLAC Class C Ordinary Shares will not entitle the holder to any voting rights, except as required under applicable law or our new articles.

 

 

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Differences between the Liberty Global Ordinary Shares before and after the Transaction and the LiLAC Ordinary Shares are described under “The Transaction Proposals — Description of the New LiLAC Ordinary Shares and Liberty Global Ordinary Shares under Our New Articles of Association and Comparison to the Liberty Global Ordinary Shares under Our Current Articles of Association.”

 

Reasons for the Transaction Proposals and the Transaction

If the Transaction Proposals are approved and the Transaction is implemented, we expect the Transaction to, among other things:

 

   

allow our shareholders and future investors greater choice, depending on their particular investment objectives and regional focus, and, in particular, provide an attractive option to investors focused on the broadband communications industry in Latin America;

 

   

increase investor awareness of the businesses and assets attributed to the LiLAC Group by providing enhanced information about our Latin American operations;

 

   

permit us to raise capital for the distinct needs and requirements of the Liberty Global Group or the LiLAC Group by offering equity (including in connection with acquisitions of other Latin American broadband communications companies and related businesses) that tracks the performance of the businesses and assets attributed to that group;

 

   

facilitate equity incentive compensation plans that more closely align executive compensation with the performance of the group to which employees and management devote their time;

 

   

retain the advantages of doing business as a single company, such as shared management expertise, synergies related to technology and purchasing power and potentially lower borrowing costs and corporate overhead; and

 

   

preserve flexibility regarding our future legal structure, asset segmentation and capital restructurings.

 

 

For a more detailed discussion of the background and positive and potentially negative results of the approval of the Transaction Proposals, see “The Transaction Proposals — Background and Reasons for the Transaction Proposals.”

 

Not a Spin-Off

Approval of the Transaction Proposals will not result in a spin-off of our Latin American operations. All of the businesses, assets and liabilities attributed to each group will remain part of our company as a whole. Our board of directors believes that long-term shareholder value will be enhanced by creating the LiLAC Ordinary Shares intended to track and reflect the economic performance of our Latin American operations. All of our businesses, however, will continue to benefit from the synergies of being part of the same company, such as shared managerial expertise, synergies relating to

 

 

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technology and purchasing arrangements, potentially lower borrowing costs in some instances and potential cost savings in corporate overhead and other expenses. No assurance can be given, however, that the benefits of each group being in the same company will exceed the potential value that could be realized if the LiLAC Group was a separate company.

 

Management and Allocation Policies

In connection with the Transaction and the issuance of the LiLAC Ordinary Shares, we are seeking approval of management and allocation policies, which are designed to assist us in presenting the business and operations of the LiLAC Group separately from the Liberty Global Group. These policies establish guidelines to help us, among other things, attribute debt, corporate overhead, interest, taxes and other shared benefits, liabilities or activities between the Liberty Global Group and the LiLAC Group, determine how to resolve conflicts between the two groups, determine how dividends will be paid to holders of Liberty Global Ordinary Shares and LiLAC Ordinary Shares and how share repurchases will be conducted, provide for the recognition of inter-group interests and the making of inter-group loans, and allocate corporate opportunities. Our board may, in its sole discretion, modify these policies at any time without shareholder approval. We will notify shareholders of any material modification, change or exception made to these policies or adoption of any material additions to these policies through the filing of a Current Report on Form 8-K. However, we may not notify our shareholders of any modifications, changes, exceptions or additions if we determine them not to be material.

 

No Effect on Management

No changes in senior management are currently planned as a result of the Transaction.

 

Effect on Financial Statements

For purposes of preparing the attributed financial information of the Liberty Global Group and the LiLAC Group included in this proxy statement/prospectus, we have attributed certain of our consolidated assets, liabilities, revenue, expenses and cash flows to each of these two groups. Following the Transaction, we will present unaudited attributed financial information that will show the attribution of our assets, liabilities, revenue, expenses and cash flow between the Liberty Global Group and the LiLAC Group. We will file this attributed financial information as exhibits to our future Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. In addition, we will present earnings per share for each of the Liberty Global Ordinary Shares and the LiLAC Ordinary Shares. We will, however, retain all beneficial ownership and control of the assets and operations we attribute to our two groups and you will be subject to the risks associated with an investment in our company as a whole.

 

Conditions to the Transaction

The Transaction is subject to the following conditions:

 

   

the receipt of the Transaction Approvals at the General Meeting and the Class Meetings;

 

 

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the receipt of the opinion of Shearman & Sterling (London) LLP, in form and substance reasonably acceptable to Liberty Global and subject to the accuracy of the statements, representations, covenants and assumptions upon which the opinion is based, to the effect that under applicable U.K. income tax and corporation tax law and HM Revenue & Customs (HMRC) published practice: (i) the Transaction should be treated as a “reorganisation” within the meaning of Section 126 of the U.K. Taxation of Chargeable Gains Act 1992, (ii) the LiLAC Ordinary Shares should be treated as shares in Liberty Global for U.K. tax purposes, (iii) no gain or loss should be recognized by Liberty Global (including its subsidiaries) as a result of the issuance of the LiLAC Ordinary Shares, and (iv) holders of Liberty Global Ordinary Shares should not recognize any taxable income, gain or loss as a result of the issuance of LiLAC Ordinary Shares (except, potentially, with respect to the receipt of any cash in lieu of fractional LiLAC Ordinary Shares);

 

   

the receipt of the opinion of Shearman & Sterling LLP, in form and substance reasonably acceptable to Liberty Global and subject to the accuracy of the statements, representations, covenants, and assumptions upon which the opinion is based, to the effect that under applicable U.S. federal income tax law: (i) the Transaction should be treated as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the Code), (ii) the LiLAC Ordinary Shares should be treated as stock of Liberty Global for U.S. federal income tax purposes, (iii) no gain or loss should be recognized by Liberty Global (including its subsidiaries) as a result of the issuance of the LiLAC Ordinary Shares, (iv) holders of Liberty Global Ordinary Shares should not recognize any taxable income, gain or loss as a result of the issuance of the LiLAC Ordinary Shares (except with respect to the receipt of any cash in lieu of fractional LiLAC Ordinary Shares) and (v) the LiLAC Ordinary Shares should not constitute “Section 306 stock” within the meaning of Section 306(c) of the Code;

 

   

(i) the effectiveness under the Securities Act of 1933, as amended (the Securities Act), of the registration statement on Form S-4, of which this proxy statement/prospectus forms a part, relating to the issuance of the LiLAC Ordinary Shares, and (ii) the effectiveness of the registration of the LiLAC Ordinary Shares under Section 12(b) of the Exchange Act;

 

   

the approval by Nasdaq of the listing of the LiLAC Class A Ordinary Shares and the LiLAC Class C Ordinary Shares; and

 

   

the receipt of any other regulatory or contractual approvals that our board determines to obtain.

 

 

Our board reserves the right to waive the sixth condition above. The remainder of the foregoing conditions above are non-waivable.

 

 

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No Regulatory Approvals

No material U.K. or U.S. state or federal regulatory approvals are required to effect the Transaction.

 

Board Discretion to Implement the Transaction

The allotment and issue of the LiLAC Ordinary Shares and the adoption of our new articles of association reflecting the Transaction Proposals are conditional upon the approval of our board of directors or a duly appointed committee immediately before the allotment and issue of the LiLAC Ordinary Shares, even after the Transaction Proposals have been approved by our shareholders and the other conditions to the Transaction have been satisfied or waived.

 

Material U.K. Tax Consequences of the Transaction

It is a non-waivable condition to the completion of the Transaction that we receive an opinion from Shearman & Sterling (London) LLP, in form and substance reasonably acceptable to Liberty Global and subject to the accuracy of the statements, representations, covenants, and assumptions upon which the opinion is based, to the effect that under applicable U.K. income tax and corporation tax law and HMRC published practice:

 

   

the Transaction should be treated as a “reorganisation” within the meaning of Section 126 of the U.K. Taxation of Chargeable Gains Act 1992;

 

   

the LiLAC Ordinary Shares should be treated as shares in Liberty Global for U.K. tax purposes;

 

   

no gain or loss should be recognized by Liberty Global (including its subsidiaries) as a result of the issuance of the LiLAC Ordinary Shares; and

 

   

holders of Liberty Global Ordinary Shares should not recognize any taxable income, gain or loss as a result of the issuance of the LiLAC Ordinary Shares (except, potentially, with respect to the receipt of any cash in lieu of fractional LiLAC Ordinary Shares).

 

 

Please see “Material Tax Consequences of the Transaction —Material U.K. Tax Consequences” for more information regarding the opinion of Shearman & Sterling (London) LLP and the tax consequences of the Transaction. Opinions of counsel are not binding on HMRC or a court and the conclusions expressed in such opinion could be challenged by HMRC and a court could sustain such challenge.

 

 

The tax consequences of the Transaction for you will depend on your particular tax situation. We urge you to consult your own tax advisor to determine the tax consequences of the Transaction and the ownership of LiLAC Ordinary Shares to you.

 

 

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Material U.S. Federal Income Tax Consequences of the Transaction

It is a non-waivable condition to the completion of the Transaction that we receive an opinion from Shearman & Sterling LLP, in form and substance reasonably acceptable to Liberty Global and subject to the accuracy of the statements, representations, covenants, and assumptions upon which the opinion is based, to the effect that under applicable U.S. federal income tax law:

 

   

the Transaction should be treated as a reorganization within the meaning of Section 368(a) of the Code;

 

   

the LiLAC Ordinary Shares should be treated as stock of Liberty Global for U.S. federal income tax purposes;

 

   

no gain or loss should be recognized by Liberty Global (including its subsidiaries) as a result of the issuance of the LiLAC Ordinary Shares;

 

   

holders of Liberty Global Ordinary Shares should not recognize any taxable income, gain or loss as a result of the issuance of the LiLAC Ordinary Shares (except with respect to the receipt of any cash in lieu of fractional LiLAC Ordinary Shares); and

 

   

the LiLAC Ordinary Shares should not constitute “Section 306 stock” within the meaning of Section 306(c) of the Code.

 

 

Please see “Material Tax Consequences of the Transaction — Material U.S. Federal Income Tax Consequences” for more information regarding the opinion of Shearman & Sterling LLP and the tax consequences of the Transaction. Opinions of counsel are not binding on the Internal Revenue Service (IRS) or a court and the conclusions expressed in such opinion could be challenged by the IRS and a court could sustain such challenge.

 

 

The tax consequences of the Transaction for you will depend on your particular tax situation. We urge you to consult your own tax advisor to determine the tax consequences of the Transaction and the ownership of LiLAC Ordinary Shares to you.

 

Treatment of Outstanding Equity Awards

As a result of the Transaction, all holders of an option award, a share appreciation right (SAR) or unvested restricted share unit with respect to Liberty Global Ordinary Shares will have such original award adjusted to take into account the Bonus Issue such that the fair value of such award immediately following the Bonus Issue will be substantially the same as the fair value of such award immediately prior to the Bonus Issue. For additional information on the treatment of these equity awards in the Transaction, see “The Transaction Proposals — Treatment of Share Options and Other Awards.”

 

No Dissenters’ Rights

Holders of Liberty Global Ordinary Shares will not have dissenters’ appraisal rights or similar rights in connection with the Transaction.

 

 

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Stock Exchange Listings

There is currently no public market for the LiLAC Ordinary Shares. We have applied to list the LiLAC Class A and Class C Ordinary Shares on the NASDAQ Global Select Market (Nasdaq) under the symbols “LILA,” and “LILAK,” respectively. Although no assurance can be given, we currently expect that the LiLAC Class B Ordinary Shares will trade on the OTC Bulletin Board under the symbol “LILAB.” The Liberty Global Class A, Class B and Class C Ordinary Shares will continue to trade on Nasdaq under the symbols “LBTYA,” “LBTYB” and “LBTYK” following the Transaction.

 

Transfer Agent and Registrar for the Liberty Global Ordinary Shares

Computershare Trust Company, N.A.

 

Recommendation of the Board

Our board has unanimously approved each of the Proposals and unanimously recommends that holders of Liberty Global Ordinary Shares vote “FOR” each of the resolutions comprising the Proposals.

 

Risk Factors

Please see “Risk Factors” starting on page 26 for a discussion of risks that should be considered in connection with the Transaction and an investment in our ordinary shares, including risk factors relating to our new equity capital structure and risk factors relating to our company, the Liberty Global Group and the LiLAC Group. The risk factors relating to our new equity capital structure include the following matters:

 

   

holders of Liberty Global Ordinary Shares and LiLAC Ordinary Shares will be subject to the risks associated with an investment in our company as a whole as opposed to an investment in one particular group;

 

   

our board’s ability to reattribute assets and liabilities to the Liberty Global Group and the LiLAC Group may make it difficult to assess future prospects of the LiLAC Group based on past performance;

 

   

we could be required to use assets attributed to one group to satisfy liabilities attributed to the other group;

 

   

the market price of the LiLAC Ordinary Shares could be volatile, may be affected by factors that do not affect traditional ordinary shares, may not reflect the performance of the groups and could be adversely affected by events involving assets or liabilities attributed to the other group;

 

   

we have not historically paid and do not presently intend to pay cash dividends on the Liberty Global Ordinary Shares or the LiLAC Ordinary Shares for the foreseeable future;

 

   

our tracking share structure could create conflicts of interest and our board of directors may make decisions which adversely affect only some holders of our shares and with respect to which affected holders may have no or limited remedies;

 

 

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we have not adopted any specific procedures for consideration of matters involving a divergence of interests among holders of our two groups of ordinary shares, or among holders of different classes of shares relating to a specific group, other than the management and allocation policies described in this proxy statement/prospectus;

 

   

our board of directors may change the management and allocation policies following their implementation without shareholder approval;

 

   

our management and allocation policies give our board of directors significant discretion;

 

   

our board of directors may, in its sole discretion, elect to redesignate, or convert, the LiLAC Ordinary Shares into Liberty Global Ordinary Shares, thereby changing the nature of your investment;

 

   

in connection with a distribution to holders of LiLAC Ordinary Shares of one of our subsidiaries holding assets attributed to the LiLAC Group, we may reduce the number of LiLAC Ordinary Shares outstanding proportionally, thereby reducing the voting power and liquidity of such shares;

 

   

a third party could acquire control of our company pursuant to an offer to acquire some or all of the Liberty Global Ordinary Shares only, leaving the holders of LiLAC Ordinary Shares as minority shareholders;

 

   

in the event of a sale of assets or a liquidation, holders of Liberty Global Ordinary Shares or LiLAC Ordinary Shares may receive less than if the attributable group was a separate company;

 

   

certain protections that our new articles provide to holders of LiLAC Ordinary Shares in the event of a disposition of not less than 80% of the fair value of the assets of the LiLAC Group may not apply if we do not have sufficient distributable reserves or share premium following such disposition;

 

   

in the event of a liquidation of Liberty Global, holders of Liberty Global Ordinary Shares and LiLAC Ordinary Shares will not have priority with respect to the assets attributed to a particular group;

 

   

holders of LiLAC Ordinary Shares will vote together as a single class with holders of Liberty Global Ordinary Shares for most matters and, as a result, are likely to be outvoted in those circumstances;

 

   

our capital structure may inhibit or prevent third parties from acquiring either the Liberty Global Group or the LiLAC Group;

 

   

no tax authority ruling has been obtained with respect to the income or corporate tax consequences of the Transaction;

 

 

 

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transfers of LiLAC Ordinary Shares may be subject to U.K. stamp duty or U.K. stamp duty reserve tax; and

 

   

if the LiLAC Ordinary Shares are not eligible for deposit and clearing within the facilities of the Depositary Trust Company, transactions in the shares may be disrupted.

Comparative Per Share Market Price and Dividend Information

Market Price

We have three classes of ordinary shares, Liberty Global Class A, Class B and Class C, which trade on Nasdaq under the symbols “LBTYA,” “LBTYB” and “LBTYK,” respectively. The following table sets forth the range of high and low sales prices of Liberty Global Class A, Class B and Class C Ordinary Shares for the periods indicated. Historical prices have been adjusted to account for our share dividend of Liberty Global Class C Ordinary Shares paid to holders of Liberty Global Ordinary Shares in the first quarter of 2014. For periods prior to the June 7, 2013 completion of our acquisition of Virgin Media, amounts represent prices for shares of Series A, Series B and Series C common stocks of our predecessor, Liberty Global, Inc.

 

     Liberty Global  
     Class/Series A      Class/Series B      Class/Series C  
     High      Low      High      Low      High      Low  

Year ended December 31, 2014

                 

First quarter

   $ 47.27       $ 40.01       $ 46.74       $ 40.84       $ 44.35       $ 38.43   

Second quarter

   $ 45.79       $ 37.98       $ 46.07       $ 38.46       $ 43.83       $ 36.98   

Third quarter

   $ 45.12       $ 41.14       $ 46.91       $ 42.66       $ 43.43       $ 39.64   

Fourth Quarter (through December 23)

   $ 53.47       $ 39.95       $ 53.65       $ 40.12       $ 51.46       $ 39.31   

Year ended December 31, 2013

                 

First quarter

   $ 38.20       $ 32.60       $ 37.14       $ 33.00       $ 34.99       $ 29.36   

Second quarter

   $ 41.13       $ 35.78       $ 40.03       $ 36.89       $ 37.60       $ 32.80   

Third quarter

   $ 42.89       $ 37.76       $ 42.46       $ 37.49       $ 39.99       $ 34.60   

Fourth quarter

   $ 46.52       $ 38.84       $ 46.08       $ 40.15       $ 43.19       $ 36.15   

Year ended December 31, 2012

                 

First quarter

   $ 27.03       $ 21.37       $ 26.73       $ 21.35       $ 25.36       $ 20.36   

Second quarter

   $ 26.64       $ 23.33       $ 26.51       $ 23.88       $ 25.05       $ 22.02   

Third quarter

   $ 31.71       $ 25.21       $ 30.88       $ 25.08       $ 28.96       $ 23.51   

Fourth quarter

   $ 33.24       $ 28.10       $ 32.76       $ 28.86       $ 30.39       $ 25.78   

As of October 21, 2014, the last trading day prior to the public announcement of the Liberty Global board’s intention to seek the approval of shareholders to effect the Transaction and the initial filing of the registration statement of which this proxy statement/prospectus forms a part, Liberty Global Class A Ordinary Shares closed at $43.58 and Liberty Global Class C Ordinary Shares closed at $42.51. As of October 15, 2014, the last trading day prior to the initial filing of the registration statement of which this proxy statement/prospectus forms a part, on which a price was reported by Nasdaq, Liberty Global Class B Ordinary Shares closed at $40.13. As of December 22, 2014, the most recent practicable date prior to the mailing of this proxy statement/prospectus, Liberty Global Class A Ordinary Shares closed at $50.59, Liberty Global Class B Ordinary Shares closed at $50.65 and Liberty Global Class C Ordinary Shares closed at $48.91.

Dividends

We have not paid any cash dividends on any of our ordinary shares, and we have no present intention of so doing in the future. Payment of cash dividends, if any, in the future, will be determined by our board of directors

 

 

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in light of our earnings, financial condition and other relevant considerations, including applicable laws in England and Wales. In the first quarter of 2014, our board of directors approved a share dividend of one Liberty Global Class C Ordinary Share on each outstanding Liberty Global Class A, Class B and Class C Ordinary Share. This dividend was paid on March 3, 2014.

Summary Attributed Historical Financial Data

Liberty Global

The following tables set forth our historical financial data as of September 30, 2014 and December 31, 2013 and 2012 and for the nine months ended September 30, 2014 and 2013 and each of the years in the three-year period ended December 31, 2013. The following information is qualified in its entirety by, and should be read in conjunction with, our unaudited quarterly condensed consolidated financial statements and our audited consolidated financial statements and notes thereto for the periods presented and the corresponding Management’s Discussion and Analysis of Results of Operations and Financial Condition, which have been incorporated by reference herein.

 

     September 30,
2014
     December 31,  
        2013      2012  
     in millions  

Summary Balance Sheet Data (a):

        

Property and equipment, net

   $ 22,119.6       $ 23,974.9       $ 13,437.6   

Goodwill

   $ 22,395.9       $ 23,748.8       $ 13,877.6   

Total assets

   $ 62,240.0       $ 67,714.3       $ 38,307.7   

Debt and capital lease obligations, including current portion

   $ 41,132.8       $ 44,704.3       $ 27,524.5   

Total equity

   $ 10,307.2       $ 11,541.5       $ 2,085.1   

 

     Nine months ended
September 30,
    Year ended December 31,  
     2014     2013     2013     2012     2011  
     in millions, except per share amounts  

Summary Statement of Operations Data (a):

          

Revenue

   $ 13,633.1      $ 10,006.2      $ 14,474.2      $ 9,930.8      $ 9,118.3   

Operating income

   $ 1,954.9      $ 1,494.5      $ 2,012.1      $ 1,983.1      $ 1,822.9   

Loss from continuing operations (b)

   $ (478.3   $ (777.8   $ (882.0   $ (583.9   $ (801.5

Loss from continuing operations attributable to Liberty Global shareholders

   $ (505.1   $ (828.4   $ (937.6   $ (623.7   $ (841.0

Basic and diluted loss from continuing operations attributable to Liberty Global shareholders per share

   $ (0.64   $ (1.31   $ (2.79   $ (2.33   $ (3.19

 

 

(a)

We acquired Virgin Media on June 7, 2013, OneLink Communications on November 8, 2012, KabelBW GmbH (KBW) on December 15, 2011 and Aster Sp. z.o.o. on September 16, 2011. We sold substantially all of Chellomedia’s assets (the Chellomedia Disposal Group) on January 31, 2014 and Austar United Communications Limited (Austar) on May 23, 2012. Accordingly, our summary statement of operations data presents the Chellomedia Disposal Group, Austar and a less significant entity as discontinued operations during the applicable periods. We also completed a number of less significant acquisitions during the years presented.

 

(b)

Includes earnings from continuing operations attributable to noncontrolling interests of $26.8 million and $50.6 million for the nine months ended September 30, 2014 and 2013, respectively, and $55.6 million, $39.8 million and $39.5 million for the years ended December 31, 2013, 2012 and 2011, respectively.

 

 

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Summary Attributed Financial Information — General

The summary attributed financial information set forth below reflects the financial position and results of operations of the Liberty Global Group and the LiLAC Group as of and for the periods presented. Such information, which should be read in conjunction with the attributed financial information and “Management’s Discussion and Analysis of Results of Operations and Financial Condition” included in Annex F to this proxy statement/prospectus, does not give effect to the issuance of the LiLAC Ordinary Shares or to the allocation of the costs of the Liberty Global Group’s corporate functions to the LiLAC Group that will be reflected in our attributed information following the issuance of the LiLAC Ordinary Shares. As a result, (i) the statement of operations information of the Liberty Global Group includes certain expenses that will be allocated to the LiLAC Group and (ii) we do not present earnings (loss) per share in the attributed financial information. For information concerning our policy for allocating the costs of the Liberty Global Group’s corporate functions to the LiLAC Group, see note 5 to our September 30, 2014 attributed financial information and note 5 to our December 31, 2013 attributed financial information, each included in Annex F to this proxy statement/prospectus.

The share-based compensation reflected in the accompanying attributed statement of operations information is based on the share incentive awards held by the employees of the respective entities comprising the Liberty Global Group and the LiLAC Group.

Liberty Global Group

The following tables set forth selected historical attributed unaudited financial data for the Liberty Global Group as of September 30, 2014, December 31, 2013 and 2012 and for the nine months ended September 30, 2014 and 2013 and each of the years in the three-year period ended December 31, 2013. The following information is qualified in its entirety by, and should be read in conjunction with, our unaudited quarterly condensed consolidated financial statements and our audited financial statements and notes thereto for the periods presented and the corresponding Management’s Discussion and Analysis of Results of Operations and Financial Condition, which have been incorporated by reference herein, and the attributed financial information included in Annex F to this proxy statement/prospectus.

 

     September 30,
2014
     December 31,  
        2013      2012  
     in millions  

Summary Balance Sheet Data:

        

Property and equipment, net

   $ 21,285.2       $ 23,105.8       $ 12,416.1   

Goodwill

   $ 21,602.5       $ 22,893.3       $ 12,972.8   

Total assets

   $ 59,524.2       $ 65,459.4       $ 35,961.3   

Debt and capital lease obligations, including current portion

   $ 39,069.1       $ 43,923.8       $ 26,767.9   

Total equity

   $ 10,123.0       $ 10,042.2       $ 1,122.3   

 

     Nine months ended                    
     September 30,     Year ended December 31,  
     2014     2013     2013     2012     2011  
     in millions, except per share amounts  

Summary Statement of Operations Data:

          

Revenue

   $ 12,726.8      $ 9,037.4      $ 13,186.7      $ 8,846.0      $ 8,114.3   

Operating income

   $ 1,780.7      $ 1,546.1      $ 1,989.2      $ 1,860.2      $ 1,671.8   

Earnings (loss) from continuing operations

   $ (477.4   $ (677.6   $ (829.0   $ (646.1   $ (860.9

Earnings (loss) from continuing operations attributable to Liberty Global shareholders

   $ (506.3   $ (754.5   $ (898.5   $ (667.3   $ (888.0

 

 

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LiLAC Group

The following tables set forth selected historical attributed unaudited financial data for the LiLAC Group as of September 30, 2014, December 31, 2013 and 2012 and for the nine months ended September 30, 2014 and 2013 and each of the years in the three-year period ended December 31, 2013. The following information is qualified in its entirety by, and should be read in conjunction with, our unaudited quarterly condensed consolidated financial statements and our audited financial statements and notes thereto for the periods presented and the corresponding Management’s Discussion and Analysis of Results of Operations and Financial Condition, which have been incorporated by reference herein, and the attributed financial information included in Annex F to this proxy statement/prospectus.

 

     September 30,
2014
     December 31,  
        2013      2012  
     in millions  

Summary Balance Sheet Data:

        

Property and equipment, net

   $ 834.4       $ 869.1       $ 1,021.5   

Goodwill

   $ 793.4       $ 855.5       $ 904.8   

Total assets

   $ 2,861.0       $ 3,423.1       $ 2,908.4   

Debt and capital lease obligations, including current portion

   $ 2,073.6       $ 1,333.6       $ 1,304.7   

Total equity

   $ 184.2       $ 1,499.3       $ 962.8   

 

     Nine months ended
September 30,
    Year ended December 31,  
     2014     2013     2013     2012      2011  
     in millions, except per share amounts  

Summary Statement of Operations Data:

           

Revenue

   $ 906.4      $ 969.8      $ 1,288.8      $ 1,086.1       $ 1,005.3   

Operating income (loss)

   $ 174.2      $ (51.6   $ 22.9      $ 122.9       $ 151.1   

Earnings (loss) from continuing operations

   $ (0.9   $ (100.2   $ (53.0   $ 62.2       $ 59.4   

Earnings (loss) from continuing operations attributable to Liberty Global shareholders

   $ 1.2      $ (73.9   $ (39.1   $ 43.6       $ 47.0   

Recent Developments

Choice Acquisition

On December 9, 2014, an indirect wholly-owned subsidiary of Liberty Global, together with investment funds affiliated with Searchlight Capital Partners, L.P. (collectively, Searchlight), entered into an agreement to acquire 100% of the parent of Puerto Rico Cable Acquisition Company Inc., dba Choice CableTV (Choice), the second largest cable and broadband services provider in Puerto Rico (the Choice Acquisition). The transaction values Choice at an enterprise value, before transaction costs, of approximately $272.5 million. The purchase price is expected to be substantially funded through incremental debt borrowings at the combined Puerto Rican business. The Choice Acquisition is subject to customary closing conditions, including regulatory approvals, and is expected to close in the first half of 2015. Upon completion of the Choice Acquisition, Choice’s operations will be combined with those of Liberty Puerto Rico, and the combined business will be 60%-owned by Liberty Puerto Rico and 40%-owned by Searchlight and managed consistent with and subject to the terms of governance and ownership described in Annex E: Description of Our Latin American Operations — Arrangements with Minority Interest Holder in Liberty Puerto Rico. We will attribute our 60% interest in the combined company to the LiLAC Group.

 

 

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RISK FACTORS

In addition to the other information contained in, incorporated by reference in or included as an Annex to this proxy statement/prospectus, you should carefully consider the following risk factors in deciding whether to vote to approve the Transaction Proposals.

The risk factors described in this section have been separated into two groups:

 

   

risks that relate to our proposed new equity capital structure; and

 

   

risks that relate to Liberty Global and the businesses to be attributed to the Liberty Global Group and the LiLAC Group, which have been separated into five subcategories:

 

   

risks that relate to the competition we face and the technology used in our business generally;

 

   

risks that relate to our operating in overseas markets and being subject to foreign regulation, including risks that relate to our redomiciliation in the U.K.;

 

   

risks that relate to certain financial matters;

 

   

risks that specifically relate to the operations to be attributed to the LiLAC Group; and

 

   

other risks, including risks that, among other things, relate to our capitalization and the obstacles faced by anyone who may seek to acquire us.

The risks described below and elsewhere in this proxy statement/prospectus are not the only ones that relate to the Transaction and an investment in Liberty Global. The risks described below are considered to be the most material. However, there may be other unknown or unpredictable economic, business, competitive, regulatory or other factors that also could have material adverse effects on Liberty Global or an investment in our ordinary shares. Past financial performance may not be a reliable indicator of future performance and historical trends may not foretell results or trends in future periods, especially given the current economic environment.

If any of the events described below were to occur, the businesses, prospects, financial condition, results of operations and/or cash flows of Liberty Global could be materially adversely affected. In any such case, the price of any or all of our ordinary shares could decline, perhaps significantly.

For the purposes of these risk factors, unless the context otherwise indicates, we have assumed that the Transaction Proposals have been approved and that the Transaction has been completed.

Risks Related to Our Proposed New Equity Capital Structure

Holders of LiLAC Ordinary Shares and Liberty Global Ordinary Shares will be shareholders of Liberty Global and are, therefore, subject to risks associated with an investment in our company as a whole, even if a holder does not own both LiLAC Ordinary Shares and Liberty Global Ordinary Shares. Even though we have attributed, for financial reporting purposes, all of our consolidated assets, liabilities, revenue, expenses and cash flows to either the LiLAC Group or the Liberty Global Group in order to prepare the attributed financial information included in this proxy statement/prospectus for each of those groups, we retain legal title to all of our assets and our capitalization does not limit our legal responsibility, or that of our subsidiaries, for the liabilities included in any set of financial statement schedules. Holders of LiLAC Ordinary Shares and Liberty Global Ordinary Shares will not have any legal rights related to specific assets attributed to either group and, in any liquidation, holders of LiLAC Ordinary Shares and Liberty Global Ordinary Shares will be entitled to receive a pro rata share of our available net assets based on their respective numbers of liquidation units. See “The Transaction Proposals — Description of the New LiLAC Ordinary Shares and Liberty Global Ordinary Shares under Our New Articles of Association and Comparison to the Liberty Global Ordinary Shares under Our Current Articles of Association — Liquidation.”

 

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Our board of directors’ ability to reattribute businesses, assets and liabilities between the Liberty Global Group and the LiLAC Group may make it difficult to assess the future prospects of the LiLAC Group based on its past performance. Our board of directors will be vested with discretion to reattribute businesses, assets and liabilities that are attributed to either the Liberty Global Group or the LiLAC Group to the other group, without the approval of any of our shareholders. See “The Transaction Proposals — Management and Allocation Policies.” Any such reattribution made by our board of directors, as well as the existence of the right in and of itself to effect a reattribution, may impact the ability of investors to assess the future prospects of the LiLAC Group, including its liquidity and capital resource needs, based on its past performance. Shareholders may also have difficulty evaluating the liquidity and capital resources of the LiLAC Group based on past performance, as our board of directors may use Liberty Global Group’s liquidity to fund the LiLAC Group’s liquidity and capital expenditure requirements (or vice versa) through the use of inter-group loans or other inter-group arrangements.

We could be required to use assets attributed to one group to satisfy liabilities attributed to the other group. The assets attributed to the LiLAC Group are potentially subject to the liabilities attributed to the Liberty Global Group, even if those liabilities arise from lawsuits, contracts or indebtedness that are attributed to the Liberty Global Group. While our proposed management and allocation policies provide that reattributions of assets between groups will result in the creation of an inter-group loan or an inter-group interest or an offsetting reattribution of cash or other assets, no provision of our new articles prevents us from satisfying liabilities of the Liberty Global Group with assets of the LiLAC Group, and our creditors will not in any way be limited by our equity capital structure from proceeding against any assets they could have proceeded against if we did not have such a structure. Holders of Liberty Global Ordinary Shares may face similar considerations in that assets attributed to the Liberty Global Group may be required to be used to satisfy liabilities attributed to the LiLAC Group.

The market price of LiLAC Ordinary Shares may not reflect the performance of the LiLAC Group. We cannot assure you that the market price of the LiLAC Ordinary Shares will, in fact, reflect the performance of the group of businesses, assets and liabilities attributed to the LiLAC Group. Holders of LiLAC Ordinary Shares will be ordinary shareholders of our company as a whole and, as such, will be subject to all risks (and many of the corresponding benefits) associated with an investment in our company and all of our businesses, assets and liabilities. As a result, the market price of each class of LiLAC Ordinary Shares may be affected by the performance or financial condition of our company as a whole. An adverse market reaction to events relating to the assets and businesses attributed to the Liberty Global Group, such as earnings announcements or announcements of new products or services, acquisitions or dispositions that the market does not view favorably, may have an adverse effect on the market price of LiLAC Ordinary Shares. Holders of Liberty Global Ordinary Shares may face similar considerations in that the price of the Liberty Global Ordinary Shares may not reflect the performance of the Liberty Global Group alone and may reflect the performance or financial condition of our company as a whole.

The market price of LiLAC Ordinary Shares may be volatile, could fluctuate substantially and could be affected by factors that do not affect traditional ordinary shares. We do not know how the market will react to the Transaction and the issuance of LiLAC Ordinary Shares. In addition, to the extent the market price of LiLAC Ordinary Shares tracks the performance of more focused groups of businesses, assets and liabilities than Liberty Global Ordinary Shares currently do, the market prices of any class of LiLAC Ordinary Shares may be more volatile than the market price of Liberty Global Ordinary Shares has historically been. The market price of LiLAC Ordinary Shares could also be more sensitive to events or developments that are material only for the LiLAC Group but would not be material for our company as a whole. The market price of LiLAC Ordinary Shares may be materially affected by, among other things:

 

   

a potential discount that investors may apply because the LiLAC Ordinary Shares are issued by a common enterprise, rather than a standalone company;

 

   

actual or anticipated fluctuations in the LiLAC Group’s operating results or in the operating results of particular companies attributable to the group;

 

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events or developments affecting the countries or regions in which the businesses attributed to the LiLAC Group operate;

 

   

potential acquisition activity in the LiLAC Group;

 

   

issuances of debt or equity securities to raise capital by us or the companies in which we invest and the manner in which that debt or the proceeds of an equity issuance are attributed to the LiLAC Group;

 

   

changes in financial estimates by securities analysts regarding the LiLAC Ordinary Shares or the businesses attributed to the LiLAC Group;

 

   

the complex nature and the potential difficulties investors may have in understanding the terms of the LiLAC Ordinary Shares, as well as concerns regarding the possible effect of certain of those terms on an investment in our shares;

 

   

the lack of market familiarity with tracking shares issued by an English company and of directly applicable legal precedent, since we are not aware of any other English company that has issued such shares; and

 

   

general market conditions.

In addition, until an orderly trading market develops for LiLAC Ordinary Shares following the completion of the Transaction, the trading prices of such shares may fluctuate significantly.

We have not historically paid any cash dividends, and we may not pay dividends equally or at all on the LiLAC Ordinary Shares or the Liberty Global Ordinary Shares. We do not presently intend to pay cash dividends on the LiLAC Ordinary Shares or the Liberty Global Ordinary Shares for the foreseeable future. However, we will have the right to pay dividends, effect securities distributions or make bonus issues on the shares of each group in equal or unequal amounts, and we may pay dividends, effect securities distributions or make bonus issues on the shares of one group and not pay dividends, effect securities distributions or make bonus issues on shares of the other group. In addition, any dividends or distributions on, or repurchases of, shares relating to either group will reduce our “distributable reserves” (defined as our accumulated, realized profits less accumulated, realized losses, as measured for U.K. statutory purposes) legally available to be paid as dividends by our company under English law on any of our ordinary shares, including on the ordinary shares relating to the other group.

The fiduciary requirements on our board of directors may in certain circumstances mean that our board of directors makes decisions that could adversely affect only some holders of our shares or that have a disparate impact on holders of any of our shares. Our equity capital structure could give rise to occasions when the interests of holders of Liberty Global Ordinary Shares might diverge or appear to diverge from the interests of holders of LiLAC Ordinary Shares. The Liberty Global Group and the LiLAC Group are not separate entities and thus holders of Liberty Global Ordinary Shares and LiLAC Ordinary Shares will not have the right to elect separate boards of directors. As a result, our company’s directors owe fiduciary duties under English law to our company as a whole as opposed to only particular shareholders or groups of shareholders, provided that the board’s actions are not found to be unfairly prejudicial to a shareholder’s interests. Decisions deemed to promote the success of the company for the benefit of its shareholders as a whole or otherwise deemed to be in the best interest of our company and all of our shareholders could be viewed as not being in the best interest of particular shareholders or groups of shareholders when considered independently. Examples include:

 

   

decisions as to the terms of any business relationships that may be created between the Liberty Global Group and the LiLAC Group or the terms of any reattributions of businesses, assets and liabilities between the groups;

 

   

decisions as to the allocation of consideration among the holders of Liberty Global Ordinary Shares and LiLAC Ordinary Shares, or among the classes of shares relating to either of our groups, to be received in connection with a scheme of arrangement involving our company;

 

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decisions as to the allocation of corporate opportunities between the groups, especially where the opportunities might meet the strategic business objectives of both groups;

 

   

decisions as to operational and financial matters that could be considered detrimental to one group but beneficial to the other;

 

   

decisions resulting in the redesignation, or conversion, of LiLAC Ordinary Shares into Liberty Global Ordinary Shares or deferred shares;

 

   

decisions regarding the creation of, and, if created, the subsequent increase or decrease of any inter-group interest or loan that one group may have in or to the other group;

 

   

decisions as to the internal or external financing attributable to businesses or assets attributed to either of our groups;

 

   

decisions as to the dispositions of assets of either of our groups; and

 

   

decisions as to the payment of dividends on the shares or share buybacks relating to either of our groups.

Our directors’ or officers’ ownership of LiLAC Ordinary Shares and Liberty Global Ordinary Shares may create or appear to create conflicts of interest. If our directors or officers own disproportionate interests (in percentage or value terms) in LiLAC Ordinary Shares or Liberty Global Ordinary Shares, that disparity could create or appear to create conflicts of interest when they are faced with decisions that could have different implications for the holders of LiLAC Ordinary Shares or Liberty Global Ordinary Shares.

Other than pursuant to the management and allocation policies described in this proxy statement/prospectus, we have not adopted and do not currently propose to adopt any specific procedures for consideration of matters involving a divergence of interests among holders of our two groups of ordinary shares, or among holders of different classes of shares relating to a specific group. Rather than develop additional specific procedures in advance, our board of directors intends to exercise its good faith business judgment from time to time, depending on the circumstances, as to how best to:

 

   

obtain information regarding the divergence (or potential divergence) of interests;

 

   

determine under what circumstances to seek the assistance of outside advisers;

 

   

determine whether a committee of our board of directors should be appointed to address a specific matter and the appropriate members of that committee; and

 

   

assess what is in the best interests of all of the company’s shareholders and relevant other stakeholders, and act in the way that the board of directors considers, in good faith, would be most likely to promote the success of the company for the benefit of its shareholders as a whole, having considered the interests of its relevant stakeholders.

Our board of directors believes the advantage of retaining flexibility in determining how to fulfill its responsibilities in any such circumstances as they may arise outweighs any perceived advantages of adopting additional specific procedures in advance. See “The Transaction Proposals — Management and Allocation Policies.

Even though our shareholders will initially be asked to approve our management and allocation policies, our board of directors may subsequently change those policies to the detriment of either group without shareholder approval. Our board of directors has approved and, subject to shareholder approval, intends to adopt certain management and allocation policies described in this proxy statement/prospectus to serve as guidelines in making decisions regarding the relationships between the Liberty Global Group and the LiLAC Group with respect to matters such as tax liabilities and benefits, inter-group loans, inter-group interests, attribution of assets, financing alternatives, corporate opportunities, payment of dividends and similar items. These policies also set

 

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forth the initial attribution of our businesses, assets and liabilities between the two groups. See “The Transaction Proposals — Management and Allocation Policies.” Although the approval of these policies by our shareholders pursuant to the Management Policies Proposal will be a condition to the Transaction, these policies will not be part of our new articles. Our board of directors may change or make exceptions to these policies at any time after the completion of the Transaction, and no shareholder approval will be required for any such subsequent changes or exceptions. A decision to change, or make exceptions to, these policies or adopt additional policies could disadvantage one group disproportionately or exclusively advantage the other group.

Our proposed management and allocation policies give our board of directors significant discretion. In addition to being subject to change, our proposed management and allocation policies give our board of directors significant discretion. This includes discretion with respect to the recognition or adjustment of inter-group interests that the Liberty Global Group may be treated as holding in the LiLAC Group. This discretion will also extend to determining if, how and to what extent such inter-group interests will be taken into account in connection with any dividend or other distribution on the LiLAC Ordinary Shares, redesignation, or conversion, of LiLAC Ordinary Shares or any other transaction affecting the LiLAC Ordinary Shares. In making such determination, our board of directors may consider any factor that it deems appropriate, including without limitation, the tax effects of any event or transaction or the use of tax benefits. All determinations made by our board of directors in this regard will be final and binding on all holders of our ordinary shares. The broad discretion that these policies accord our board of directors also extends to other matters, including how future corporate opportunities that may present themselves in Latin America, Europe or elsewhere will be allocated between the LiLAC Group and the Liberty Global Group.

Our board of directors may, in its sole discretion, elect to redesignate, or convert, all of the LiLAC Ordinary Shares into Liberty Global Ordinary Shares, thereby changing the nature of your investment and possibly diluting your economic interest in our company, which could result in a loss of value to you. Our new articles will permit our board of directors, in its sole discretion, to redesignate, or convert, all of the LiLAC Ordinary Shares into Liberty Global Ordinary Shares. There is no current plan or intention to redesignate, or convert, the LiLAC Ordinary Shares into Liberty Global Shares. Our board of directors may elect to exercise this authority at any time if it determines that such redesignation is in the best interests of the company and all of our shareholders. This could occur, for example, if our board of directors determines that the aggregate equity valuation of our company would be increased by eliminating the separate LiLAC Ordinary Shares, or in connection with a sale or other strategic transaction. In addition, our board may determine to effect such redesignation in connection with the sale of all or substantially all of the assets of the LiLAC Group as described in “The Transaction Proposals — Description of the New LiLAC Ordinary Shares and Liberty Global Ordinary Shares under Our New Articles of Association and Comparison to the Liberty Global Ordinary Shares under Our Current Articles of Association.” A redesignation would preclude the holders of LiLAC Ordinary Shares from retaining their investment in a security that is intended to reflect separately the performance of the LiLAC Group. We cannot predict the impact on the market value of our shares of (1) our board of directors’ ability to effect any such redesignation or (2) the exercise of this redesignation right by our board of directors. In addition, our board of directors may effect such a redesignation at a time when the market value of our shares could cause the holders of the LiLAC Ordinary Shares to be disadvantaged. See “The Transaction Proposals — Description of the New LiLAC Ordinary Shares and Liberty Global Ordinary Shares under Our New Articles of Association and Comparison to the Liberty Global Ordinary Shares under Our Current Articles of Association.”

Under certain circumstances, including in connection with a distribution to holders of LiLAC Ordinary Shares of securities of another corporation, we may reduce the number of LiLAC Ordinary Shares proportionally, thereby reducing the voting power and liquidity of such shares. Our new articles permit us to reduce the number of LiLAC Ordinary Shares in connection with certain transactions, including a distribution to holders of LiLAC Ordinary Shares of securities of another corporation or a distribution to holders of LiLAC Ordinary Shares following a disposition of the LiLAC Group, each as described under “The Transaction Proposals — Description of the New LiLAC Ordinary Shares and Liberty Global Ordinary Shares under Our New Articles of Association and Comparison to the Liberty Global Ordinary Shares under Our Current Articles of Association.” We expect that our board of directors would exercise this authority, in its discretion, in

 

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connection with a distribution to holders of LiLAC Ordinary Shares that would materially reduce the amount of assets attributed to the LiLAC Group. The purpose of reducing the number of LiLAC Ordinary Shares in this case would be to readjust the per share valuation and the aggregate voting power of the LiLAC Ordinary Shares to reflect the value of the assets attributed to the LiLAC Group following such transaction. Such reduction would further decrease the aggregate voting power of the LiLAC Ordinary Shares as compared to the Liberty Global Ordinary Shares. We cannot predict the impact on the market value of LiLAC Ordinary Shares of the possibility of any such reduction in the number of such shares, including any potential effects resulting from reduced liquidity of the remaining LiLAC Ordinary Shares.

A third party could acquire control of our company pursuant to an offer to acquire some or all of the Liberty Global Ordinary Shares only, leaving holders of LiLAC Ordinary Shares as minority shareholders. An offer to acquire shares in our company may be structured such that the offer is made to acquire only the Liberty Global Ordinary Shares. If such an acquisition of Liberty Global Ordinary Shares is successful, this would result in the holders of the LiLAC Ordinary Shares not sharing in any control premium paid to holders of the Liberty Global Ordinary Shares. In that case, holders of LiLAC Ordinary Shares would continue to be minority shareholders of a company with a third party majority shareholder, with no ability to vote against such a change, participate in such offer or otherwise realize any control premium.

Holders of LiLAC Ordinary Shares may receive less consideration upon a sale of all or substantially all of the assets attributed to the LiLAC Group than if that group were a separate company. We cannot assure you whether the per share consideration to be paid to holders of LiLAC Ordinary Shares in connection with a sale of all or substantially all of the assets of the LiLAC Group will be equal to or more than the per share value of that share prior to or after the announcement of such a sale. In addition, if the LiLAC Group were a separate, independent company and its shares were acquired by another person, certain costs of that sale, including corporate level or withholding or other cross-border taxes, might not be payable in connection with that acquisition. As a result, shareholders of a separate, independent company with the same assets might receive a greater amount of proceeds than the holders of LiLAC Ordinary Shares would receive upon a sale of all or substantially all of the assets attributed to the LiLAC Group. Further, there is no requirement that the consideration paid be tax-free to the holders of the shares relating to that group. Accordingly, if we sell all or substantially all of the assets attributed to the LiLAC Group, the holders of LiLAC Ordinary Shares could suffer a loss in the value of their investment in our company.

Certain protections that our new articles provide to holders of LiLAC Ordinary Shares in connection with a sale of not less than 80% of the fair value of the assets of, or equity interests in, the LiLAC Group may not apply if we do not have sufficient distributable reserves or share premium available following such disposition. Our new articles provide that in connection with a disposition of not less than 80% of the fair value of the assets of, or equity interests in, the LiLAC Group, subject to certain exempt dispositions, our board of directors will be required to distribute cash or other assets with a fair value equal to the available net proceeds of such disposition to holders of LiLAC Ordinary Shares (with or without a concurrent proportional reduction in the number of outstanding LiLAC Ordinary Shares), redesignate, or convert, a portion of LiLAC Ordinary Shares into Liberty Global Ordinary Shares at a 10% premium, or do a combination of the foregoing. However, our company’s ability to take any of such actions at the time may depend (and in the case of a dividend or other distribution, will depend) on the availability of sufficient distributable reserves for the payment of a dividend or other distribution or sufficient share premium required for the creation of additional shares. If sufficient distributable reserves or share premium are not available at the time of the disposition, our board of directors will be permitted to effect the disposition without distributing an amount equal to the net proceeds of such disposition to holders of LiLAC Ordinary Shares or redesignating LiLAC Ordinary Shares into Liberty Global Ordinary Shares, subject to the board’s fiduciary duties. See “The Transaction ProposalsDescription of the New LiLAC Ordinary Shares and Liberty Global Ordinary Shares under Our New Articles of Association and Comparison to the Liberty Global Ordinary Shares under Our Current Articles of Association.”

 

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In the event of a liquidation of Liberty Global, holders of LiLAC Ordinary Shares will not have priority with respect to the assets attributed to the LiLAC Group remaining for distribution to shareholders. Under our new articles, upon Liberty Global’s liquidation, dissolution or winding up, holders of the LiLAC Ordinary Shares will be entitled to receive, in respect of their respective shares, their proportionate interest in all of Liberty Global’s assets, if any, remaining for distribution to holders of ordinary shares in proportion to their respective number of “liquidation units.” Liquidation units will be allocated to each Liberty Global Ordinary Share and each LiLAC Ordinary Share, respectively, in proportion to the relative market value of a Liberty Global Class C Ordinary Share and a LiLAC Class C Ordinary Share, respectively, based on their respective volume-weighted average price over the 20 trading-day period commencing shortly after the commencement of ordinary-course (regular-way) trading of the LiLAC Ordinary Shares. Hence, the assets to be distributed to a holder of LiLAC Ordinary Shares upon a liquidation, dissolution or winding up of Liberty Global will not directly relate to the value of the assets attributed to the LiLAC Group and will not reflect changes in the relative value of the Liberty Global Group and the LiLAC Group over time. Holders of the Liberty Global Ordinary Shares may face similar considerations in the event of a liquidation in that any distribution to them upon a liquidation, dissolution or winding up may not directly relate to the value of the assets attributed to the Liberty Global Group and will not reflect changes to the relative values of the groups over time.

Holders of LiLAC Ordinary Shares will have separate voting rights only on a limited set of matters and could be outvoted by holders of Liberty Global Ordinary Shares on all other matters. Holders of Liberty Global Ordinary Shares and LiLAC Ordinary Shares will vote together as a single class, except in certain limited circumstances prescribed by our new articles or as required by English law. Each Class B Ordinary Share of each group will have ten votes, and each Class A Ordinary Share of each group will have one vote. Holders of Class C Ordinary Shares of each group will have no voting rights at general meetings of the company or meetings of all of the shares relating to one group. When holders of Liberty Global Ordinary Shares and LiLAC Ordinary Shares vote together as a single class, holders having a majority of the votes (or 75%, in the case of a vote requiring a special resolution) present and voting will be in a position to control the outcome of the vote even if the matter involves a conflict of interest among our shareholders or has a greater impact on one group than the other. Immediately following the Transaction, holders of Liberty Global Ordinary Shares will collectively direct approximately 95% of the aggregate voting power in our company, and holders of LiLAC Ordinary Shares will collectively direct approximately 5% of the aggregate voting power in our company.

Our proposed new equity capital structure, as well as the fact that the LiLAC Group and the Liberty Global Group are not independent companies, may inhibit or prevent acquisition bids for either group and may make it difficult for a third party to acquire us, even if doing so may be beneficial to our shareholders. If the LiLAC Group and the Liberty Global Group were separate independent companies, any person interested in acquiring the LiLAC Group or the Liberty Global Group without negotiating with management could seek control of that group by obtaining control of its outstanding voting shares, by means of a tender offer, or by means of a scheme of arrangement. Although we intend for the LiLAC Ordinary Shares to reflect the separate economic performance of the LiLAC Group, neither the LiLAC Group nor the Liberty Global Group are separate entities, and a person interested in acquiring only one group without negotiating with our management could obtain control of that group only by obtaining control of a majority in voting power of all of the outstanding voting shares of our company. The existence of shares, and different classes of shares, relating to different groups could present complexities and in certain circumstances pose obstacles, financial and otherwise, to an acquiring person that are not present in companies that do not have capital structures similar to the structure being proposed.

No tax authority ruling has been obtained by us with respect to the income or corporate tax consequences for you or us of the Transaction. While we believe that no taxable income, gain or loss should be recognized by you or us for U.K. income tax or U.K. corporation tax or U.S. federal income tax purposes as a result of the issuance of the LiLAC Ordinary Shares (except, potentially, with respect to the receipt by you of any cash in lieu of fractional LiLAC Ordinary Shares), (a) we are not aware of any other English company that has issued shares intended to track the performance of a particular business or group of businesses within the overall company, giving rise to a lack of directly applicable precedent in relation to U.K. tax; and (b) there are no Code provisions,

 

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Treasury Regulations, court decisions, or published rulings of the IRS directly addressing the characterization for U.S. federal income tax purposes of shares with certain features that are similar to the LiLAC Ordinary Shares. In addition, the IRS has announced that it will not issue private letter rulings on the U.S. federal income tax characterization of stock similar to the LiLAC Ordinary Shares. We will receive an opinion from (i) Shearman & Sterling (London) LLP regarding the U.K. income tax and corporation tax consequences of the Transaction and (ii) Shearman & Sterling LLP regarding the U.S. federal income tax consequences of the Transaction; however, opinions of counsel are not binding on a tax authority or a court, and a tax authority may take a contrary position to the conclusions expressed in such opinion and a court may agree with a contrary position of a tax authority in the event of litigation. As a result, the U.K. income tax and corporation tax treatment, and the U.S. federal income tax treatment, of the Transaction is not entirely certain and it is possible that a tax authority could successfully assert that the Transaction could result in material adverse tax consequences to you and/or us, as described in more detail below under “Material Tax Consequences of the Transaction —” and, in particular, “Material Tax Consequences of the Transaction — Material U.S. Federal Income Tax Consequences — No IRS Ruling Will Be Requested,” which description is incorporated by reference into this risk factor.

It is also possible that the IRS could successfully assert that the LiLAC Ordinary Shares are “Section 306 stock” within the meaning of Section 306(c) of the Code. If the LiLAC Ordinary Shares were determined to be Section 306 stock, you could be required to recognize ordinary income on the subsequent sale or exchange of such stock, or dividend income on any redemption of such stock, without regard to your tax basis in such stock, and you generally would not be permitted to recognize any loss on such disposition, as described in more detail below under “Material Tax Consequences of the Transaction — Material U.S. Federal Income Tax Consequences — No IRS Ruling Will Be Requested.”

Transfers of our shares, including LiLAC Ordinary Shares, may be subject to U.K. stamp duty and/or U.K. stamp duty reserve tax. U.K. stamp duty and/or U.K. stamp duty reserve tax are taxes that are imposed on certain transfers of or agreements to transfer chargeable securities (which include shares in companies incorporated under English law) at a rate of 0.5% of the consideration for the transfer. Certain issues or transfers of shares into depositary receipt or clearance systems are charged at a higher rate of 1.5%.

An agreement to transfer an interest in our shares, including LiLAC Ordinary Shares, through a clearance service or depositary receipt system should not give rise to a liability to U.K. stamp duty reserve tax under current U.K. tax law and HMRC practice. We understand that HMRC regards the facilities of the Depository Trust Company as a clearance service for these purposes. In addition, no U.K. stamp duty should, in practice, need be paid in respect of a paperless transfer of an interest in our shares, including LiLAC Ordinary Shares, through the Depository Trust Company. A transfer of title in our shares, including LiLAC Ordinary Shares, or an agreement to transfer such shares from within the Depository Trust Company system out of the Depository Trust Company system, and any subsequent transfers or agreements to transfer outside the Depository Trust Company system, will generally attract a charge to U.K. stamp duty and/or U.K. stamp duty reserve tax at a rate of 0.5% of any consideration. Any such duty must be paid (and the relevant transfer document stamped by HMRC) before the transfer can be registered in the books of Liberty Global. Holders of our shares, including LiLAC Ordinary Shares, should note in particular that a deposit or redeposit of our shares into the Depository Trust Company system, including by means of an initial transfer into a depositary receipt system, will generally attract U.K. stamp duty and/or U.K. stamp duty reserve tax at the higher rate of 1.5%.

Certain arrangements are currently in place with respect to Liberty Global Ordinary Shares held in certificated form, and similar arrangements are expected to be put in place with respect to LiLAC Ordinary Shares. Pursuant to these arrangements, shares held in certificated form cannot be transferred into the Depository Trust Company system until the transferor of the shares has first delivered the Liberty Global shares to a depositary specified by Liberty Global so that any U.K. stamp duty and/or U.K. stamp duty reserve tax that may be due in connection with the delivery to the depositary may be collected. It is expected that any such shares will be evidenced by a receipt issued by the depositary. Before the transfer can be registered in the books of Liberty

 

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Global, it is expected that the transferor will also be required to put the depositary in funds to settle the resultant liability to U.K. stamp duty and/or U.K. stamp duty reserve tax, which will generally be charged at a rate of 1.5% of the value of the relevant shares.

In the HMRC guidance published on April 27, 2012 in response to the decisions in certain recent cases, HMRC has indicated that it will no longer seek to apply 1.5% U.K. stamp duty or U.K. stamp duty reserve tax when new shares of companies incorporated in the U.K. are first issued to a clearance service (or its nominee) or depositary receipt issuer (or its nominee or agent) anywhere in the world or are transferred to such an entity in the world as an integral part of an issue of share capital. Accordingly, we do not currently expect that U.K. stamp duty and/or U.K. stamp duty reserve tax would be imposed under current U.K. tax law and HMRC practice on a future issuance of shares by Liberty Global. However, it is possible that the U.K. government may change the relevant law in response to the cases referenced above, and that this may have a material effect on the cost of share issuances by Liberty Global and potentially on the cost of dealing in our shares.

If LiLAC Ordinary Shares are not eligible for deposit and clearing within the facilities of the Depository Trust Company, then transactions in our securities may be disrupted. We expect that, upon the consummation of the Transaction, the LiLAC Ordinary Shares will be eligible for deposit and clearing within the Depository Trust Company system. We expect to enter into arrangements with the Depository Trust Company whereby we will agree to indemnify the Depository Trust Company for any U.K. stamp duty and/or U.K. stamp duty reserve tax that may be assessed upon it as a result of its service as a depositary and clearing agency for LiLAC Ordinary Shares. These arrangements would be similar to the arrangements we have with the Depository Trust Company with respect to the Liberty Global Ordinary Shares.

The Depository Trust Company is not obligated to accept LiLAC Ordinary Shares for deposit and clearing within its facilities when initially issued and, even if the Depository Trust Company does initially accept LiLAC Ordinary Shares, it will generally have discretion to cease to act as a depositary and clearing agency for LiLAC Ordinary Shares. If the Depository Trust Company determined prior to the implementation of the Transaction that LiLAC Ordinary Shares are not eligible for clearance within the Depository Trust Company system, then we would not expect to complete the Transaction. However, if the Depository Trust Company determined at any time after the implementation of the Transaction that LiLAC Ordinary Shares were not eligible for continued deposit and clearance within its facilities, then we believe LiLAC Ordinary Shares would not be eligible for continued listing on a U.S. securities exchange and trading in LiLAC Ordinary Shares would be disrupted. While we would pursue alternative arrangements to preserve our listing and maintain trading, any such disruption could have a material adverse effect on the trading price of LiLAC Ordinary Shares and the U.K. stamp duty and/or U.K. stamp duty reserve tax treatment of trading.

Risk Factors Related to Our Company, the Liberty Global Group and the LiLAC Group

Factors Relating to Competition and Technology

We operate in increasingly competitive markets, and there is a risk that we will not be able to effectively compete with other service providers. The markets for cable television, broadband internet, fixed-line telephony and mobile services in many of the regions in which we operate are highly competitive. In the provision of video services, we face competition from DTT broadcasters, video provided over satellite platforms, networks using Digital Subscriber Line or DSL, or in some cases Asymmetrical Digital Subscriber Line or ADSL, technology, FTTx networks and, in some countries where parts of our systems are overbuilt, cable networks, among others. FTTx networks are broadband networks that use optical fiber to provide all or part of the local loop used for last mile telecommunications. Our operating businesses are facing increasing competition from video services provided by, or over the networks of, incumbent telecommunications operators and other service providers. As the availability and speed of broadband internet increases, we also face competition from over-the-top video content providers utilizing our or our competitors’ high-speed internet connections. In the provision of telephony and broadband internet services, we are experiencing increasing competition from the incumbent telecommunications operators and other service providers in each country in which we operate, as well as mobile

 

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providers of voice and data. The incumbent telecommunications operators typically dominate the market for these services and have the advantage of nationwide networks and greater resources than we have to devote to the provision of these services. Many of the incumbent operators are now offering double-play, triple-play and quadruple-play bundles of services. In many countries, we also compete with other operators using Local Loop Unbundlings, or LLU, to provide these services, other facilities-based operators and wireless providers. Developments in the DSL and other technology used by the incumbent telecommunications operators and alternative providers have improved the attractiveness of our competitors’ products and services and strengthened their competitive position. Developments in wireless technology, such as Long Term Evolution, or LTE (the next generation of ultra high-speed mobile data), are creating additional competitive challenges.

In some of our markets, national and local government agencies may seek to become involved, either directly or indirectly, in the establishment of FTTx networks, DTT systems or other communications systems. We intend to pursue available options to restrict such involvement or to ensure that such involvement is on commercially reasonable terms. There can be no assurance, however, that we will be successful in these pursuits. As a result, we may face competition from entities not requiring a normal commercial return on their investments. In addition, we may face more vigorous competition than would have been the case if there were no government involvement.

We expect the level and intensity of competition to continue to increase from both existing competitors and new market entrants as a result of changes in the regulatory framework of the industries in which we operate, advances in technology, the influx of new market entrants and strategic alliances and cooperative relationships among industry participants. Increased competition could result in increased customer churn, reductions of customer acquisition rates for some services and significant price competition in most of our markets. In combination with difficult economic environments, these competitive pressures could adversely impact our ability to increase or, in certain cases, maintain the revenue, average monthly subscription revenue per average RGU (ARPU), RGUs, operating cash flows, operating cash flow margins and liquidity of our operating segments.

Changes in technology may limit the competitiveness of and demand for our services. Technology in the video, telecommunications and data services industries is changing rapidly, including advances in current technologies and the emergence of new technologies. New technologies, products and services may impact consumer behavior and therefore demand for our products and services. The ability to anticipate changes in technology and consumer tastes and to develop and introduce new and enhanced products on a timely basis will affect our ability to continue to grow, increase our revenue and number of subscribers and remain competitive. New products, once marketed, may not meet consumer expectations or demand, can be subject to delays in development and may fail to operate as intended. A lack of market acceptance of new products and services which we may offer, or the development of significant competitive products or services by others, could have a material adverse impact on our revenue and operating cash flow.

Our property and equipment additions may not generate a positive return. The video, broadband internet and telephony businesses in which we operate are capital intensive. Significant additions to our property and equipment are required to add customers to our networks and to upgrade our broadband communications networks and customer premises equipment to enhance our service offerings and improve the customer experience. These additions require significant capital expenditures for equipment and associated labor costs. Significant competition, the introduction of new technologies, the expansion of existing technologies, such as FTTx and advanced DSL technologies, or adverse regulatory developments could cause us to decide to undertake previously unplanned upgrades of our networks and customer premises equipment in the impacted markets. In addition, no assurance can be given that any future upgrades will generate a positive return or that we will have adequate capital available to finance such future upgrades. If we are unable to, or elect not to, pay for costs associated with adding new customers, expanding or upgrading our networks or making our other planned or unplanned additions to our property and equipment, our growth could be limited and our competitive position could be harmed.

 

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We depend almost exclusively on our relationships with third party programming providers and broadcasters for programming content, and a failure to acquire a wide selection of popular programming on acceptable terms could adversely affect our business. The success of our video subscription business depends, in large part, on our ability to provide a wide selection of popular programming to our subscribers. We generally do not produce our own content and we depend on our agreements, relationships and cooperation with public and private broadcasters and collective rights associations to obtain such content. If we fail to obtain a diverse array of popular programming for our pay television services, including a sufficient selection of high-definition channels as well as non-linear content (such as video on demand and digital video recorder capability), on satisfactory terms, we may not be able to offer a compelling video product to our customers at a price they are willing to pay. Additionally, we are frequently negotiating and renegotiating programming agreements and our annual costs for programming can vary. There can be no assurance that we will be able to renegotiate or renew the terms of our programming agreements on acceptable terms or at all. We expect that programming and copyright costs will continue to rise in future periods as a result of, among other factors, higher costs associated with the expansion of our digital video content, including rights associated with ancillary product offerings and rights that provide for the broadcast of live sporting events, and retransmission or copyright fees payable to public broadcasters.

If we are unable to obtain or retain attractively priced competitive content, demand for our existing and future television services could decrease, thereby limiting our ability to attract new customers, maintain existing customers and/or migrate customers from lower tier programming to higher tier programming, thereby inhibiting our ability to execute our business plans. Furthermore, we may be placed at a competitive disadvantage if certain of our competitors, for example British Telecom and British Sky Broadcasting in the U.K., obtain exclusive programming rights, particularly with respect to popular sports and movie programming. In addition, “must carry” requirements may consume channel capacity otherwise available for more attractive programming.

We depend on third party suppliers and licensors to supply necessary equipment, software and certain services required for our businesses. We rely on third party vendors for the equipment, software and services that we require in order to provide services to our customers. Our suppliers often conduct business worldwide and their ability to meet our needs are subject to various risks, including political and economic instability, natural calamities, interruptions in transportation systems, terrorism and labor issues. As a result, we may not be able to obtain the equipment, software and services required for our businesses on a timely basis or on satisfactory terms. Any shortfall in customer premises equipment could lead to delays in connecting customers to our services, and accordingly, could adversely impact our ability to maintain or increase our RGUs, revenue and cash flows. Also, if demand exceeds the suppliers’ and licensors’ capacity or if they experience financial difficulties, the ability of our businesses to provide some services may be materially adversely affected, which in turn could affect our businesses’ ability to attract and retain customers. Although we actively monitor the creditworthiness of our key third party suppliers and licensors, the financial failure of a key third party supplier or licensor could disrupt our operations and have an adverse impact on our revenue and cash flows. We rely upon intellectual property that is owned or licensed by us to use various technologies, conduct our operations and sell our products and services. Legal challenges could be made against our use of our or our licensed intellectual property rights (such as trademarks, patents and trade secrets) and we may be required to enter into licensing arrangements on unfavorable terms, incur monetary damages or be enjoined from use of the intellectual property rights in question.

Our businesses that offer mobile telephony and data services rely on the radio access networks of third party wireless network providers to carry our mobile communications traffic. Our services to mobile customers rely on the use of MVNO arrangements in which we utilize the radio access networks of third party wireless network providers to carry our mobile communications traffic. If any of our MVNO arrangements are terminated, or if the respective third party wireless network provider fails to provide the services required under an MVNO arrangement, or if a third party wireless network provider fails to deploy and maintain its network, and we are unable to find a replacement network operator on a timely and commercial basis or at all, we could be prevented from continuing the mobile services relying on such MVNO arrangement. Additionally, as our MVNO

 

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arrangements come to term, we may not be able to renegotiate renewal or replacement MVNO arrangements on the same or more favorable terms.

Failure in our technology or telecommunications systems or leakage of sensitive customer data could significantly disrupt our operations, which could reduce our customer base and result in lost revenue. Our success depends, in part, on the continued and uninterrupted performance of our information technology and network systems as well as our customer service centers. The hardware supporting a large number of critical systems for our cable network in a particular country or geographic region is housed in a relatively small number of locations. Our systems are vulnerable to damage from a variety of sources, including telecommunications failures, power loss, malicious human acts and natural disasters. Moreover, despite security measures, our servers and systems are potentially vulnerable to physical or electronic break-ins, computer viruses, worms, phishing attacks and similar disruptive actions. Furthermore, our operating activities could be subject to risks caused by misappropriation, misuse, leakage, falsification or accidental release or loss of information maintained in our information technology systems and networks and those of our third party vendors, including customer, personnel and vendor data. As a result of the increasing awareness concerning the importance of safeguarding personal information, the potential misuse of such information and legislation that has been adopted or is being considered across all of our markets regarding the protection, privacy and security of personal information, information-related risks are increasing, particularly for businesses like ours that handle a large amount of personal customer data. Failure to comply with these data protection laws may result in, among other consequences, fines.

Despite the precautions we have taken, unanticipated problems affecting our systems could cause failures in our information technology systems or disruption in the transmission of signals over our networks or similar problems. Any disruptive situation that causes loss, misappropriation, misuse or leakage of data could damage our reputation and the credibility of our operations. Further, sustained or repeated system failures that interrupt our ability to provide service to our customers or otherwise meet our business obligations in a timely manner could adversely affect our reputation and result in a loss of customers and net revenue.

The “Virgin” brand is used by our subsidiary Virgin Media under licenses from Virgin Enterprises Limited and is not under the control of Virgin Media. The activities of the group of companies utilizing the “Virgin” brand and other licensees could have a material adverse effect on the goodwill of customers towards Virgin Media as a licensee and the licenses from Virgin Enterprises Limited can be terminated in certain circumstances. The “Virgin” brand is integral to Virgin Media’s corporate identity. Virgin Media is reliant on the general goodwill of consumers towards the Virgin brand. Consequently, adverse publicity in relation to the group of companies utilizing the “Virgin” brand or its principals, particularly Sir Richard Branson, who is closely associated with the brand, or in relation to another licensee of the “Virgin” name and logo (particularly in the U.K., where Virgin Media does business) could have a material adverse effect on Virgin Media’s reputation and on Virgin Media’s and our business and results of operations. In addition, the licenses from Virgin Enterprises Limited can be terminated in certain circumstances. For example, Virgin Enterprises Limited can terminate the licenses, after providing Virgin Media with an opportunity to cure, (i) if Virgin Media or any of its affiliates commits persistent and material breaches or a flagrant and material breach of the licenses, (ii) if Virgin Enterprises Limited has reasonable grounds to believe that the use (or lack of use) of the licensed trademarks by Virgin Media has been or is likely to result in a long-term and material diminution in the value of the “Virgin” brand, or (iii) if a third party who is not (or one of whose directors is not) a “fit and proper person,” such as a legally disqualified director or a bankrupt entity, acquires “control” of Liberty Global. Such a termination could have a material adverse effect on Virgin Media’s and our business and results of operations.

Factors Relating to Overseas Operations and Foreign Regulation

Our businesses are conducted almost exclusively outside of the United States, which gives rise to numerous operational risks. Our businesses operate almost exclusively in countries outside the United States and are thereby subject to the following inherent risks:

 

   

fluctuations in foreign currency exchange rates;

 

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difficulties in staffing and managing international operations;

 

   

potentially adverse tax consequences;

 

   

export and import restrictions, custom duties, tariffs and other trade barriers;

 

   

increases in taxes and governmental fees;

 

   

economic and political instability; and

 

   

changes in foreign and domestic laws and policies that govern operations of foreign-based companies.

Operational risks that we may experience in certain countries include disruptions of services or loss of property or equipment that are critical to overseas businesses due to expropriation, nationalization, war, insurrection, terrorism or general social or political unrest.

We are exposed to various foreign currency exchange rate risks. We are exposed to foreign currency exchange rate risks with respect to our consolidated debt in situations where our debt is denominated in a currency other than the functional currency of the operations whose cash flows support our ability to repay or refinance such debt. Although we generally seek to match the denomination of our and our subsidiaries’ borrowings with the functional currency of the operations that are supporting the respective borrowings, market conditions or other factors may cause us to enter into borrowing arrangements that are not denominated in the functional currency of the underlying operations (unmatched debt). In these cases, our policy is to provide for an economic hedge against foreign currency exchange rate movements by using derivative instruments to synthetically convert unmatched debt into the applicable underlying currency. At September 30, 2014, substantially all of our debt was either directly or synthetically matched to the applicable functional currencies of the underlying operations.

In addition to the exposure that results from the mismatch of our borrowings and underlying functional currencies, we are exposed to foreign currency risk to the extent that we enter into transactions denominated in currencies other than our or our subsidiaries’ respective functional currencies (non-functional currency risk), such as equipment purchases, programming contracts, notes payable and notes receivable (including intercompany amounts) that are denominated in a currency other than the applicable functional currency. Changes in exchange rates with respect to amounts recorded in our consolidated balance sheets related to these items will result in unrealized (based upon period-end exchange rates) or realized foreign currency transaction gains and losses upon settlement of the transactions. Moreover, to the extent that our revenue, costs and expenses are denominated in currencies other than our respective functional currencies, we will experience fluctuations in our revenue, costs and expenses solely as a result of changes in foreign currency exchange rates. In this regard, we currently expect that during 2014, (1) less than 1% of our revenue, (2) approximately 4% to 6% of our aggregate operating and SG&A expenses (exclusive of share-based compensation expense) and (3) approximately 10% to 12% of our property and equipment additions will be denominated in non-functional currencies, including amounts denominated in (a) U.S. dollars in Europe and (b) euros in Poland, the Czech Republic, Romania, Switzerland and Hungary. Our expectations with respect to our non-functional currency transactions in 2014 may differ from actual results. Generally, we will consider hedging non-functional currency risks when the risks arise from agreements with third parties that involve the future payment or receipt of cash or other monetary items to the extent that we can reasonably predict the timing and amount of such payments or receipts and the payments or receipts are not otherwise hedged. In this regard, we have entered into foreign currency forward contracts covering the forward purchase and sale of various foreign currencies to hedge certain of these risks. Certain non-functional currency risks related to our revenue, operating and SG&A expenses and property and equipment additions were not hedged as of September 30, 2014.

We also are exposed to unfavorable and potentially volatile fluctuations of the U.S. dollar (our reporting currency) against the currencies of our operating subsidiaries when their respective financial statements are translated into U.S. dollars for inclusion in our consolidated financial statements. Cumulative translation

 

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adjustments are recorded in accumulated other comprehensive earnings (loss) as a separate component of equity. Any increase (decrease) in the value of the U.S. dollar against any foreign currency that is the functional currency of one of our operating subsidiaries will cause us to experience unrealized foreign currency translation losses (gains) with respect to amounts already invested in such foreign currencies. Accordingly, we may experience a negative impact on our comprehensive earnings (loss) and equity with respect to our holdings solely as a result of foreign currency translation. Our primary exposure to foreign currency risk from a foreign currency translation perspective is to the euro and British pound sterling and, to a lesser extent, the Swiss franc and other local currencies in Europe. We generally do not hedge against the risk that we may incur non-cash losses upon the translation of the financial statements of our subsidiaries and affiliates into U.S. dollars.

Our businesses are subject to risks of adverse regulation. Our businesses are subject to the unique regulatory regimes of the countries in which they operate. Cable and telecommunications businesses are subject to licensing or registration eligibility rules and regulations, which vary by country. The provision of electronic communications networks and services requires our licensing from or registration with, the appropriate regulatory authorities and, for telephony services, entrance into interconnection arrangements with other phone companies, including the incumbent phone company. It is possible that countries in which we operate may adopt laws and regulations regarding electronic commerce, which could dampen the growth of the internet services being offered and developed by these businesses. In a number of countries, our ability to increase the prices we charge for our cable television service or to make changes to the programming packages we offer is limited by regulation or conditions imposed by competition authorities or is subject to review by regulatory authorities or is subject to termination rights of customers. In addition, regulatory authorities may grant new licenses to third parties and, in any event, in most of our markets new entry is possible without a license, although there may be registration eligibility rules and regulations, resulting in greater competition in territories where our businesses may already be active. More significantly, regulatory authorities may require us to grant third parties access to our bandwidth, frequency capacity, facilities or services to distribute their own services or resell our services to end customers. Consequently, our businesses must adapt their ownership and organizational structure as well as their pricing and service offerings to satisfy the rules and regulations to which they are subject. A failure to comply with applicable rules and regulations could result in penalties, restrictions on our business or loss of required licenses or other adverse conditions.

Adverse changes in rules and regulations could:

 

   

impair our ability to use our bandwidth in ways that would generate maximum revenue and operating cash flow;

 

   

create a shortage of capacity on our networks, which could limit the types and variety of services we seek to provide our customers;

 

   

strengthen our competitors by granting them access and lowering their costs to enter into our markets; and

 

   

have a significant adverse impact on our profitability.

Businesses, including ours, that offer multiple services, such as video distribution as well as internet and telephony, or that are vertically integrated and offer both video distribution and programming content, often face close regulatory scrutiny from competition authorities in several countries in which we operate. This is particularly the case with respect to any proposed business combinations, which will often require clearance from national competition authorities. The regulatory authorities in several countries in which we do business have considered from time to time what access rights, if any, should be afforded to third parties for use of existing cable television networks and have imposed access obligations in certain countries. This has resulted, for example, in obligations with respect to call termination for our telephony business in Europe, video “must carry” obligations in many markets in which we operate and video and broadband internet access obligations in Belgium.

 

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When we acquire additional communications companies, these acquisitions may require the approval of governmental authorities (either at country or, in the case of the EU, European level), which can block, impose conditions on, or delay an acquisition, thus hampering our opportunities for growth. In the event conditions are imposed and we fail to meet them in a timely manner, the governmental authority may impose fines and, if in connection with a merger transaction, may require restorative measures, such as mandatory disposition of assets or divestiture of operations.

New legislation may significantly alter the regulatory regime applicable to us, which could adversely affect our competitive position and profitability, and we may become subject to more extensive regulation if we are deemed to possess significant market power in any of the markets in which we operate. Significant changes to the existing regulatory regime applicable to the provision of cable television, telephony and internet services have been and are still being introduced. For example, in the EU, a large element of regulation affecting our business derives from a number of Directives that are the basis of the regulatory regime concerning many of the services we offer across the EU. The various Directives require Member States to harmonize their laws on communications and cover issues such as access, user rights, privacy and competition. These Directives are reviewed by the EU from time to time and any changes to them could lead to substantial changes in the way in which our businesses are regulated and to which we would have to adapt. In addition, we are subject to review by competition or national regulatory authorities in certain countries concerning whether we exhibit significant market power. A finding of significant market power can result in our company becoming subject to pricing, open access, unbundling and other requirements that could provide a more favorable operating environment for existing and potential competitors.

We cannot be certain that we will be successful in acquiring new businesses or integrating acquired businesses with our existing operations, or that we will achieve the expected returns on our acquisitions. Historically, our businesses have grown, in part, through selective acquisitions that enabled them to take advantage of existing networks, local service offerings and region-specific management expertise. We expect to seek to continue growing our businesses through acquisitions in selected markets, such as when we acquired Virgin Media in a stock and cash merger which was completed in June 2013 (the Virgin Media Acquisition), and when we acquired Ziggo in a cash and stock exchange offer in November 2014 (the Ziggo Acquisition). Our ability to acquire new businesses may be limited by many factors, including availability of financing, debt covenants, prevalence of complex ownership structures among potential targets, government regulation and competition from other potential acquirers, including private equity funds. Even if we are successful in acquiring new businesses, the integration of these businesses, such as Virgin Media and Ziggo, may present significant costs and challenges associated with: realizing economies of scale in interconnection, programming and network operations; eliminating duplicative overheads; integrating personnel, networks, financial systems and operational systems; greater than anticipated expenditures required for compliance with regulatory standards or for investments to improve operating results and failure to achieve the business plan with respect to any such acquisition. We cannot assure you that we will be successful in acquiring new businesses or realizing the anticipated benefits of any completed acquisition, including, for example, the Virgin Media Acquisition and the Ziggo Acquisition.

In addition, we anticipate that most, if not all, companies acquired by us will be located outside the United States. Foreign companies may not have disclosure controls and procedures or internal controls over financial reporting that are as thorough or effective as those required by U.S. securities laws. While we intend to conduct appropriate due diligence and to implement appropriate controls and procedures as we integrate acquired companies, we may not be able to certify as to the effectiveness of these companies’ disclosure controls and procedures or internal controls over financial reporting until we have fully integrated them.

The expected benefits of the Virgin Media Acquisition may not be realized. There can be no assurance that all of the anticipated benefits of our redomiciliation in the U.K. as a result of the Virgin Media Acquisition will be achievable, particularly as the achievement of the benefits are, in many important respects, subject to factors

 

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that we do not control, including the reactions of third parties with whom we enter into contracts and do business and the reactions of investors, analysts and U.K. and U.S. taxing authorities.

The expected benefits of the redomiciliation are also subject to a variety of other factors, many of which are beyond our ability to control, such as changes in the rate of economic growth in the U.K., the U.S. and everywhere else that we do business, the financial performance of our business in various jurisdictions, currency exchange rate fluctuations, and significant changes in trade, monetary or fiscal policies of the U.K., the U.S. and other jurisdictions in which we do business, including changes in interest rates. The impact of these factors, individually and in the aggregate, is difficult to predict, in part because the occurrence of the events or circumstances described in such factors may be interrelated, and the impact to us of the occurrence of any one of these events or circumstances could be compounded or, alternatively, reduced, offset, or more than offset, by the occurrence of one or more of the other events or circumstances described in such factors.

We may be treated as a U.S. corporation for U.S. federal income tax purposes. Although we are a U.K. public limited company, under Section 7874 of the Code, we would be treated as a U.S. corporation for U.S. federal income tax purposes if, in connection with the Virgin Media Acquisition, our “expanded affiliated group” was not treated as having “substantial business activities” in the U.K. For this purpose, “expanded affiliated group” generally includes our greater-than-50% subsidiaries, and “substantial business activities” generally means at least 25% of employees (by number and compensation), assets and gross income of our expanded affiliated group are based, located and derived, respectively, in the U.K.

This 25% test generally is measured as of, or on the month-end prior to, the date of the Virgin Media Acquisition. We believe that we have satisfied this 25% test because substantially all of the operations of Virgin Media occur in the U.K. (and some of our other operations occur in the U.K.). We caution, however, that there could be adverse factual developments or unknown circumstances that could make the satisfaction of this 25% test more challenging than we anticipate or adverse changes to Section 7874 of the Code or the Treasury Regulations promulgated thereunder.

If, notwithstanding our belief, it were determined that we should be taxed as a U.S. corporation for U.S. federal income tax purposes, as a U.K. resident company incorporated under English law, we could be liable for both U.K. and U.S. federal income tax, which could have a material adverse effect on our financial condition and results of operations.

We may have exposure to additional tax liabilities. We are subject to income taxes as well as non-income based taxes in the U.K., the U.S. and many other jurisdictions around the world. Significant judgment is required in determining our worldwide provision for income taxes and other tax liabilities. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. We are regularly under audit by tax authorities in many of the jurisdictions in which we operate. Although we believe that our tax estimates are reasonable, any material differences as a result of final determinations of tax audits or tax disputes could have an adverse effect on our financial position and results of operations in the period or periods for which determination is made.

Since a majority of our subsidiaries are owned through U.S. corporations, our worldwide effective tax rate is subject to provisions in U.S. tax law that defer the imposition of U.S. tax on certain foreign active income until that income is repatriated to the United States. Any repatriation, through our U.S. ownership structure, of assets currently held by subsidiaries in foreign jurisdictions or recognition of income that fails to meet the U.S. tax requirements related to deferral of U.S. income tax, may result in a higher effective tax rate for our company. While the company may mitigate this increase in its effective tax rate through claiming a foreign tax credit against its U.S. federal income taxes or potentially have foreign or U.S. taxes reduced under applicable income tax treaties, we are subject to various limitations.

We are subject to changing tax laws, treaties and regulations in and between countries in which we operate, including treaties between the U.K., the U.S. and the many other jurisdictions in which we have a presence. Also,

 

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various income tax proposals in the jurisdictions in which we operate could result in changes to the existing laws on which our deferred taxes are calculated. A change in these tax laws, treaties or regulations, or in the interpretation thereof, could result in a materially higher income or non-income tax expense. Any such material changes could cause a material change in our effective tax rate.

Factors Relating to Certain Financial Matters

Our substantial leverage could limit our ability to obtain additional financing and have other adverse effects. We seek to maintain our debt at levels that provide for attractive equity returns without assuming undue risk. In this regard, we generally seek to cause our operating subsidiaries to maintain their debt at levels that result in a consolidated debt balance that is between four and five times our consolidated operating cash flow. As a result, we are highly leveraged. At September 30, 2014, our outstanding consolidated debt and capital lease obligations aggregated $41.1 billion, including $1,669.0 million that is classified as current in our consolidated balance sheet and $37.5 billion that is not due until 2019 or thereafter. We believe that we have sufficient resources to repay or refinance the current portion of our debt and capital lease obligations and to fund our foreseeable liquidity requirements during the next 12 months. As our debt maturities grow in later years, however, we anticipate that we will seek to refinance or otherwise extend our debt maturities. In this regard, we completed refinancing transactions in 2013 and 2014 that, among other things, resulted in the extension of certain of our subsidiaries’ debt maturities. No assurance can be given that we will be able to complete additional refinancing transactions or otherwise extend our debt maturities. In this regard, it is difficult to predict how political and economic conditions, sovereign debt concerns or any adverse regulatory developments will impact the credit and equity markets we access and our future financial position.

Our ability to service or refinance our debt and to maintain compliance with the leverage covenants in the credit agreements and indentures of certain of our subsidiaries is dependent primarily on our ability to maintain or increase the operating cash flow of our subsidiaries and to achieve adequate returns on our property and equipment additions and acquisitions. For example, if the operating cash flow of our subsidiary, UPC Broadband Holding, were to decline, we could be required to partially repay or limit our borrowings under the UPC Broadband Holding Bank Facility in order to maintain compliance with applicable covenants. Accordingly, if our cash provided by operations declines or we encounter other material liquidity requirements, we may be required to seek additional debt or equity financing in order to meet our debt obligations and other liquidity requirements as they come due. In addition, our current debt levels may limit our ability to incur additional debt financing to fund working capital needs, acquisitions, property and equipment additions, or other general corporate requirements. We can give no assurance that any additional debt or equity financing will be available on terms that are as favorable as the terms of our existing debt or at all. During 2013, we purchased $1,151.9 million (including direct acquisition costs) of Liberty Global Class A and Class C Ordinary Shares and LGI Series A and Series C common stock. During the first three quarters of 2014, we purchased $949.9 million (including direct acquisitions costs) of Liberty Global Class A and Class C Ordinary Shares. Any cash used by our company in connection with any future purchases of our ordinary shares would not be available for other purposes, including the repayment of debt.

Certain of our subsidiaries are subject to various debt instruments that contain restrictions on how we finance our operations and operate our businesses, which could impede our ability to engage in beneficial transactions. Certain of our subsidiaries are subject to significant financial and operating restrictions contained in outstanding credit agreements, indentures and similar instruments of indebtedness. These restrictions will affect, and in some cases significantly limit or prohibit, among other things, the ability of those subsidiaries to:

 

   

incur or guarantee additional indebtedness;

 

   

pay dividends or make other upstream distributions;

 

   

make investments;

 

   

transfer, sell or dispose of certain assets, including subsidiary stock;

 

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merge or consolidate with other entities;

 

   

engage in transactions with us or other affiliates; or

 

   

create liens on their assets.

As a result of restrictions contained in these credit facilities, the companies party thereto, and their subsidiaries, could be unable to obtain additional capital in the future to:

 

   

fund property and equipment additions or acquisitions that could improve their value;

 

   

meet their loan and capital commitments to their business affiliates;

 

   

invest in companies in which they would otherwise invest;

 

   

fund any operating losses or future development of their business affiliates;

 

   

obtain lower borrowing costs that are available from secured lenders or engage in advantageous transactions that monetize their assets; or

 

   

conduct other necessary or prudent corporate activities.

In addition, most of the credit agreements to which these subsidiaries are parties include financial covenants that require them to maintain certain financial ratios, including ratios of total debt to operating cash flow and operating cash flow to interest expense. Their ability to meet these financial covenants may be affected by adverse economic, competitive, or regulatory developments and other events beyond their control, and we cannot assure you that these financial covenants will be met. In the event of a default under such subsidiaries’ credit agreements or indentures, the lenders may accelerate the maturity of the indebtedness under those agreements or indentures, which could result in a default under other outstanding credit facilities or indentures. We cannot assure you that any of these subsidiaries will have sufficient assets to pay indebtedness outstanding under their credit agreements and indentures. Any refinancing of this indebtedness is likely to contain similar restrictive covenants.

We are exposed to interest rate risks. Shifts in such rates may adversely affect the debt service obligation of our subsidiaries. We are exposed to the risk of fluctuations in interest rates, primarily through the credit facilities of certain of our subsidiaries, which are indexed to EURIBOR, LIBOR or other base rates. Although we enter into various derivative transactions to manage exposure to movements in interest rates, there can be no assurance that we will be able to continue to do so at a reasonable cost or at all. If we are unable to effectively manage our interest rate exposure through derivative transactions, any increase in market interest rates would increase our interest rate exposure and debt service obligations, which would exacerbate the risks associated with our leveraged capital structure.

We are subject to increasing operating costs and inflation risks which may adversely affect our earnings. While our operations attempt to increase our subscription rates to offset increases in programming and operating costs, there is no assurance that they will be able to do so. In certain countries in which we operate, our ability to increase subscription rates is subject to regulatory controls. Also, our ability to increase subscription rates may be constrained by competitive pressures. Therefore, operating costs may rise faster than associated revenue, resulting in a material negative impact on our cash flow and net earnings (loss). We are also impacted by inflationary increases in salaries, wages, benefits and other administrative costs in certain of our markets.

Continuing uncertainties and challenging conditions in the global economy and in the countries in which we operate may adversely impact our business, financial condition and results of operations. The current macroeconomic environment is highly volatile, and continuing instability in global markets, including the ongoing struggles in Europe related to sovereign debt issues and the stability of the euro, has contributed to a challenging global economic environment. Future developments are dependent upon a number of political and economic factors, including the effectiveness of measures by the European Commission to address debt burdens

 

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of certain countries in Europe and the overall stability of the eurozone. As a result, we cannot predict how long challenging conditions will exist or the extent to which the markets in which we operate may deteriorate. Additional risks arising from the ongoing economic challenges in Europe are described below under “— We are exposed to sovereign debt and currency instability risks in Europe that could have an adverse impact on our liquidity, financial condition and cash flows.

Unfavorable economic conditions may impact a significant number of our subscribers and, as a result, it may be (1) more difficult for us to attract new subscribers, (2) more likely that subscribers will downgrade or disconnect their services and (3) more difficult for us to maintain ARPUs at existing levels. Countries may also seek new or increased revenue sources due to fiscal deficits. Such actions may further adversely affect our company. Accordingly, our ability to increase, or, in certain cases, maintain, the revenue, ARPUs, RGUs, operating cash flow, operating cash flow margins and liquidity of our operating segments could be adversely affected if the macroeconomic environment remains uncertain or declines further. We are currently unable to predict the extent of any of these potential adverse effects.

We are exposed to sovereign debt and currency instability risks in Europe that could have an adverse impact on our liquidity, financial condition and cash flows. Our operations are subject to macroeconomic and political risks that are outside of our control. For example, high levels of sovereign debt in the U.S. and certain European countries (including Ireland and Hungary), combined with weak growth and high unemployment, could lead to fiscal reforms (including austerity measures), sovereign debt restructurings, currency instability, increased counterparty credit risk, high levels of volatility and, potentially, disruptions in the credit and equity markets, as well as other outcomes that might adversely impact our company. With regard to currency instability issues, concerns exist in the eurozone with respect to individual macro-fundamentals on a country-by-country basis, as well as with respect to the overall stability of the European monetary union and the suitability of a single currency to appropriately deal with specific fiscal management and sovereign debt issues in individual eurozone countries. The realization of these concerns could lead to the exit of one or more countries from the European monetary union and the re-introduction of individual currencies in these countries, or, in more extreme circumstances, the possible dissolution of the European monetary union entirely, which could result in the redenomination of a portion or, in the extreme case, all of our euro-denominated assets, liabilities and cash flows to the new currency of the country in which they originated. This could result in a mismatch in the currencies of our assets, liabilities and cash flows. Any such mismatch, together with the capital market disruption that would likely accompany any such redenomination event, could have a material adverse impact on our liquidity and financial condition. Furthermore, any redenomination event would likely be accompanied by significant economic dislocation, particularly within the eurozone countries, which in turn could have an adverse impact on demand for our products, and accordingly, on our revenue and cash flows. Moreover, any changes from euro to non-euro currencies within the countries in which we operate would require us to modify our billing and other financial systems. No assurance can be given that any required modifications could be made within a timeframe that would allow us to timely bill our customers or prepare and file required financial reports. In light of the significant exposure that we have to the euro through our euro-denominated borrowings, derivative instruments, cash balances and cash flows, a redenomination event could have a material adverse impact on our company.

We may not freely access the cash of our operating companies. Our operations are conducted through our subsidiaries. Our current sources of corporate liquidity include (1) our cash and cash equivalents and (2) interest and dividend income received on our cash and cash equivalents and investments. From time to time, we also receive (1) proceeds in the form of distributions or loan repayments from our subsidiaries or affiliates, (2) proceeds upon the disposition of investments and other assets and (3) proceeds in connection with the incurrence of debt or the issuance of equity securities. The ability of our operating subsidiaries to pay dividends or to make other payments or advances to us depends on their individual operating results and any statutory, regulatory or contractual restrictions to which they may be or may become subject and in some cases our receipt of such payments or advances may be limited due to tax considerations or the presence of noncontrolling interests. Most of our operating subsidiaries are subject to credit agreements or indentures that restrict sales of assets and prohibit or limit the payment of dividends or the making of distributions, loans or advances to

 

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shareholders and partners, including us. In addition, because these subsidiaries are separate and distinct legal entities they have no obligation to provide us funds for payment obligations, whether by dividends, distributions, loans or other payments.

We are exposed to the risk of default by the counterparties to our derivative and other financial instruments, undrawn debt facilities and cash investments. Although we seek to manage the credit risks associated with our derivative and other financial instruments, cash investments and undrawn debt facilities, we are exposed to the risk that our counterparties could default on their obligations to us. Also, even though we regularly review our credit exposures, defaults may arise from events or circumstances that are difficult to detect or foresee. At September 30, 2014, our exposure to counterparty credit risk included (1) derivative assets with an aggregate fair value of $780.9 million, (2) cash and cash equivalent and restricted cash balances of $972.1 million and (3) aggregate undrawn debt facilities of $3,630.0 million. While we currently have no specific concerns about the creditworthiness of any counterparty for which we have material credit risk exposures, the current economic conditions and uncertainties in global financial markets have increased the credit risk of our counterparties and we cannot rule out the possibility that one or more of our counterparties could fail or otherwise be unable to meet its obligations to us. Any such instance could have an adverse effect on our cash flows, results of operations and financial condition. In this regard, (1) additional financial institution failures could reduce amounts available under committed credit facilities, adversely impact our ability to access cash deposited with any failed financial institution and cause a default under one or more derivative contracts, and (2) further deterioration in the credit markets could adversely impact our ability to access debt financing on favorable terms, or at all.

Under our derivative contracts, it is generally only the non-defaulting party that has a contractual option to exercise early termination rights upon the default of the other counterparty and to set off other liabilities against sums due upon such termination. In an insolvency of a derivative counterparty under the laws of certain jurisdictions, however, the defaulting counterparty or its insolvency representatives may be able to compel the termination of one or more derivative contracts and trigger early termination payment liabilities payable by us, reflecting any mark-to-market value of the contracts for the counterparty. Alternatively, or in addition, the insolvency laws of certain jurisdictions may require the mandatory set-off of amounts due under such derivative contracts against present and future liabilities owed to us under other contracts between us and the relevant counterparty. Accordingly, it is possible that we may be subject to obligations to make payments, or may have present or future liabilities owed to us partially or fully discharged by set-off as a result of such obligations, in the event of the insolvency of a derivative counterparty, even though it is the counterparty that is in default and not us. To the extent that we are required to make such payments, our ability to do so will depend on our liquidity and capital resources at the time. In an insolvency of a defaulting counterparty, we will be an unsecured creditor in respect of any amount owed to us by the defaulting counterparty, except to the extent of the value of any collateral we have obtained from that counterparty.

The risks we would face in the event of a default by a counterparty to one of our derivative instruments might be eliminated or substantially mitigated if we were able to novate the relevant derivative contracts to a new counterparty following the default of our counterparty. While we anticipate that, in the event of the insolvency of one of our derivative counterparties, we would seek to effect such novations, no assurance can be given that we would obtain the necessary consents to do so or that we would be able to do so on terms or pricing that would be acceptable to us or that any such novation would not result in substantial costs to us. Furthermore, the underlying risks that are the subject of the relevant derivative contracts would no longer be effectively hedged due to the insolvency of our counterparty, unless and until we novate or replace the derivative contract.

We may not report net earnings. We reported losses from continuing operations of $478.3 million for the nine months ended September 30, 2014 and $882.0 million, $583.9 million and $801.5 million during 2013, 2012 and 2011, respectively. In light of our historical financial performance, we cannot assure you that we will report net earnings in the near future or ever.

 

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Additional Factors Specifically Relating to the Operations to be Attributed to the LiLAC Group

We operate in competitive markets, and competitive pressures could have a material adverse effect on our business. The video, broadband internet and fixed-line and mobile telephony service markets in Latin America are highly competitive and rapidly evolving. We face competition from incumbent and non-incumbent telecommunications companies, mobile operators (including MVNOs) and fixed-line telecommunications operators, some of which have substantial resources. The nature and level of the competition we face vary by market and for each of the products and services we offer. Some of the companies we compete against have greater scale, easier access to financing, more comprehensive suites of product offerings, greater personnel resources, greater brand name recognition and experience and/or longer-established relationships with consumers.

As to our video offerings, we compete primarily with Direct-to-Home Satellite Broadcasting, or DTH, service providers and incumbent fixed-line telephony operators that offer video services (using internet protocol technology) as part of double and triple-play packages. Our competitors aggressively target video customers, including our subscribers and other potential customers that reside in our network footprint, with low price video packages. In Puerto Rico, our primary competitors offer low introductory offers, free high definition channels and in some top tier packages, a free multi-room digital video recorder service. In Chile, two competitors have launched internet protocol television, or IPTV, services over FTTx networks. The incumbent fixed-line telephony providers with which we compete offer digital video services over their networks using DSL, or in some cases, ADSL, technology. These providers present formidable competition as they typically have long-standing relationships with potential video subscribers as their fixed-line telephony provider.

As to our broadband internet and telephony offerings, we face significant competition from the incumbent fixed-line telephony providers and from mobile broadband providers. Our most significant competitors in Chile, ENTEL, Movistar and Claro, have launched their LTE networks for high-speed mobile data. In Puerto Rico, we face competition primarily from Claro, as well as independent retailers that sell internet services provided by the incumbent telephone operator. The incumbent fixed-line telephony providers with whom we compete have significantly more experience in offering telephony services, devote significant resources to the upgrade and expansion of their networks and have long-standing relationships with customers as their fixed-line telephony provider. Additionally, consumers in Puerto Rico are increasingly switching to mobile services offered by our competitors, which we do not offer in that market.

We expect competition to continue to increase as a result of regulatory changes, including those affecting price competition, advances in technology, the influx of new market entrants and strategic alliances and cooperative relationships among industry participants. For additional information on competition, see “Annex E: Description of Our Latin American Operations — Competition.”

Our growth and profitability depend on the prosperity and stability of economies in Latin America, which may be adversely affected by numerous economic developments. All of our businesses, operations and assets that are attributed to the LiLAC Group are currently located in Chile and Puerto Rico. For this reason, the results of operations attributable to the LiLAC Group are sensitive to, and dependent upon, the level of economic activity in Chile, Puerto Rico and other Latin American markets that we may enter in the future. Historically, growth in the broadband and telecommunications industry in emerging markets has been tied to the state of local and regional economies, particularly levels of consumer confidence, discretionary spending and demand.

In Chile, the economy is closely tied to the strength of the metals and mining industry, especially copper. A downturn in that industry may negatively impact the Chilean economy. Although Chile has one of the stronger economies in Latin America, lingering negative effects of the most recent global recession may continue to adversely affect its economy, and unfavorable general economic conditions and declining consumer confidence and discretionary income could negatively affect the affordability of and demand for some of our products and services in that country.

 

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In Puerto Rico, the economy is experiencing a long running recession that began in 2006. Puerto Rico is a U.S. territory that has historically been dependent on U.S. aid, and has relied on offering federal and local tax incentives to attract business. However, federal tax incentives have been significantly reduced in recent years, although local tax incentives have increased. Puerto Rico also has high levels of government debt with uncertain credit quality and decreasing tax revenue due, in part, to the significant migration of younger members of the population of Puerto Rico to the U.S. mainland. Significant further job losses, an inability to raise debt at acceptable yields in the municipal bond markets, delays in raising more tax revenue or implementing other budget solutions and a further reduction in federal funds and tax incentives could negatively impact the Puerto Rican economy and our subscribers, as well as our earnings and operations in Puerto Rico.

In response to difficult economic conditions and a reduction in consumer confidence and income, Latin American consumers may seek to reduce discretionary spending by forgoing purchases of our products and services, electing to use fewer premium services or obtaining products and services under lower-cost programs offered by our competitors. Furthermore, adverse economic conditions may lead to an increased number of our customers that are unable to pay for services, leading to a possible increase in our bad debt account. If any of these events were to occur, it could have a negative effect on the business, financial condition and results of operations attributed to the LiLAC Group.

Currency devaluations and foreign exchange fluctuations may adversely affect our financial position. The foreign exchange rates of many local currencies in Latin America, including the Chilean peso, have been subject to volatility in the past, and could be subject to significant fluctuations in the future given the prevalence of free float exchange regimes. The main drivers of exchange rate volatility in the past have been significant fluctuations of commodity prices as well as general uncertainty and trade imbalances with regional and foreign trading partners. In recent years, the primary driver of exchange rate volatility in stronger Latin American economies, including Chile, has been the substantial appreciation of their currencies relative to the U.S. dollar. The value of the Chilean peso against the U.S. dollar may fluctuate significantly in the future, which may negatively impact the strength of the Chilean economy and therefore adversely affect the demand for our products and services in Chile.

Substantially all of the indebtedness incurred by our Chilean subsidiary, VTR GlobalCom, is denominated in U.S. dollars, while its revenue and most of its operating and SG&A expenses are denominated in Chilean pesos. When the Chilean peso’s value declines against the dollar, we require more Chilean pesos to repay the same amount of dollar-denominated debt. As of September 30, 2014, 100% of VTR Finance B.V.’s interest-bearing debt was denominated in U.S. dollars and was hedged against exchange rate variations between the Chilean peso and the U.S. dollar through financial instruments such as cross-currency swaps. Although we have adopted a hedging policy to protect us against foreign exchange fluctuations, we cannot assure you that our hedging policy will be sufficient to protect us from future losses related to exchange rate variations or that our hedging counterparties will not default on their contractual obligations to us.

Inflationary pressures in the Chilean economy and government measures to curb inflation may reduce demand for our services, thereby adversely affecting our financial position. Although inflation in Chile has been relatively modest in recent years, it remains higher than that experienced in the United States. Measures taken by the Chilean Central Bank to control inflation have often included maintaining a tight monetary policy with high interest rates, thereby restricting the availability of credit and limiting economic growth. Such measures to combat inflation and public speculation about possible future governmental actions may contribute materially to economic uncertainty in Chile and to heightened volatility in its capital markets, which could adversely affect the disposable income of our Chilean subscribers and potential subscribers, resulting in reduced demand for our products and services in that country. An increase in inflation would also likely increase our operating costs in Chile, given that some of our supply contracts in that country are denominated in Chilean pesos.

We are subject to regulations that can limit our ability to increase our revenue, which could adversely affect our earnings. Our operations in Chile are subject to rate regulations. Interconnect charges, access charges,

 

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charges for network unbundling services and charges for some ancillary telephony services are often determined by the regulatory authorities in Chile, which establish the maximum rates that may be charged by each operator for each type of service. This rate regulation is applicable to all fixed-line and mobile telephony companies in Chile.

In September 2014, VTR received a tariff proposal from the Chilean Undersecretary of Telecommunications (SubTel) that would have retroactive effect to June 2012. The tariff proposal represents a significant reduction in the fixed-line interconnection rates currently charged by VTR. VTR is in the process of formulating its objections and comments to the tariff proposal and is unable at this time to reasonably predict the outcome of the tariff setting process. Final resolution of the tariff setting process in Chile is expected to occur during 2015. If the September 2014 tariff proposal was ultimately upheld, including retroactive application to June 2012, VTR would be required to issue credit notes of approximately CLP 6.7 billion ($11.2 million at September 30, 2014) for revenue previously recognized through September 30, 2014.

Our cable operations in Chile are subject to the Chilean Consumer’s Rights Protection Law (the CRPL). Certain provisions of the CRPL have been interpreted by Chile’s National Consumer Service (Servicio Nacional del Consumidor or Sernac) as requiring prior approval by our Chilean subscribers of any increase, over the inflation rate, in the subscription rates charged to them. Although we disagree with this interpretation, we have agreed with Sernac to adjust our Chilean subscription rates for inflation semi-annually. We may also seek rate adjustments in excess of inflation once each year, subject to our receipt of prior approval from any subscriber whose subscription fee is to be increased. If a subscriber does not accept a rate increase, they may terminate their subscription contract. Due to the rate regulation to which we are subject in Chile, we may be unable to pass through cost increases, which could have a material adverse effect on our earnings and financial condition.

Our operations in Puerto Rico are subject to the Puerto Rico Telecommunications Act of 1996 (Law 213), which requires that rates for telecommunication services be cost-based and prohibits cross-subsidies. Although Law 213 does not require us to obtain any prior approval for rate increases, any such increase must comply with Law 213’s requirements.

Current and proposed “must carry” and retransmission consent rules may limit our ability to provide our subscribers with programming content that is profitable for our business. The Television Act in Chile has recently been amended to provide, among other changes, that once a broadcast operator achieves digital coverage of 85% of the population within a concession area, the broadcast operator may require a prior agreement for the retransmission of its digital signals by pay television operators. This law also contains a requirement for pay television operators to distribute, on a “must carry” basis, up to four local broadcast television channels in each operating area. Currently, SubTel is studying ancillary regulations to the Chilean Telecommunications Law to implement its retransmission consent and must carry obligations. The payment of retransmission fees may increase our operating costs in Chile, while compliance with “must carry” obligations may use valuable network capacity that we would otherwise devote to alternative programs or services that may be more attractive to our subscribers and more profitable for our business.

Our operations in Puerto Rico are subject to the Cable Television Consumer Protection and Competition Act of 1992, which imposes “must carry” or “retransmission consent” regulations on pay television providers. These regulations require cable and DTH providers to carry local broadcast stations without payment of retransmission fees regardless of the demand for their programming. Broadcast stations have the ability to opt-out of this “must carry” regulation in favor of negotiating a retransmission consent arrangement directly with cable and DTH providers. This has resulted in our having to negotiate several retransmission consent arrangements and pay fees in order to retransmit the more desirable local broadcast content on our Puerto Rico systems, while being obligated to carry less desirable broadcast content under the “must carry” rules. Broadcast stations with desirable programming are becoming increasingly aggressive in their demands for retransmission consent, which has resulted in higher operating costs or our not carrying one or more popular local broadcast channels, which may adversely affect our competitiveness.

 

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A failure in our telecommunications systems in Chile could subject our operations in that country to significant financial penalties. Under the Chilean telecommunications law, Ley General de Telecomunicaciones (Chilean Telecommunications Law), we are subject to financial penalties in the event of certain technological failures to our network systems. Article 27 of the Chilean Telecommunications Law requires us to reimburse subscribers three times the amount of their per diem subscription fees during the period of a network outage lasting 48 hours or more. In the event of a network outage lasting less than 48 hours, the Chilean Telecommunications Law requires that we reimburse subscribers the amount of their per diem subscription fees if the outage event exceeds six consecutive hours or if multiple outage events exceed 12 non-consecutive hours in any given month. We have experienced prolonged network outages in the past due to earthquakes and other natural disasters.

Our operations in Latin America may be negatively impacted by extreme weather conditions and other natural disasters. Our operations in Chile have experienced natural disasters, including earthquakes, tsunamis and floods, while our operations in Puerto Rico frequently experience tropical storms and hurricanes. Extreme weather conditions and natural disasters can result in network outages and damage to our equipment and facilities.

Chile lies on the Nazca tectonic plate, one of the world’s most seismically active regions. Chile has been adversely affected by powerful earthquakes in the past, including a 9.5 magnitude earthquake in 1960, which was the largest earthquake ever recorded, an 8.0 magnitude earthquake that struck Santiago in 1985 and more recently, an 8.8 magnitude earthquake that struck south-central Chile in 2010, followed by a tsunami that significantly damaged cities and port facilities. According to the United Nations Office for Disaster Risk Reduction, the economic losses from the 2010 earthquake were estimated at $30 billion, or 18% of Chile’s gross domestic product. The 2010 earthquake and tsunami’s primary impact on our Chilean operations was damage to our equipment and network infrastructure in the affected regions. In addition to the cost of repairing this damage, the earthquake and tsunami resulted in lost sales and profits and required us to increase our advertising and promotional offers in order to prevent increased subscriber losses. We also voluntarily provided certain discounts and benefits to our subscribers who lost service, which exceeded reimbursements required by law in 2010. Under current Chilean law, any event, whether natural or otherwise, that results in disruption of service to our subscribers requires us to reimburse subscribers three times the amount of their per diem subscription fees during the period of a network outage lasting 48 hours or more, and if lasting less than 48 hours, we are required to reimburse the amount of their per diem subscription fees if the outage event exceeds 6 consecutive hours or if multiple outage events exceed 12 non-consecutive hours in any given month.

Puerto Rico experiences the Atlantic hurricane season, with a quarter of its annual rainfall contributed from tropical cyclones. A cyclone of tropical storm strength passes near Puerto Rico on average every five years and a hurricane passes in the vicinity of the island on average every seven years. These storms have the ability to disrupt our operations and adversely affect our ability to provide services to our customers.

We are subject to piracy risk in Chile, as our analog systems in that country are not encrypted and satellite television receivers, which can illegally decode the digital content of DTH providers, may be purchased legally in Chile. Although we continue to roll out digital video services to our video subscribers, as of September 30, 2014, approximately 12% of our video subscribers in Chile either live in areas that have not yet been upgraded to digital cable service or have chosen to retain their analog subscription despite the availability of digital subscription. Analog systems are more susceptible to piracy because they lack encryption technology. Persons may view our analog content without paying subscription fees by illegally accessing those portions of our network that transmit analog signals. While we combat this form of piracy through audits of decoder installations and verifying payment streams with services provided, we lose revenue for each potential customer relationship in which our unencrypted analog cables are compromised. We also incur costs related to the investigation and remediation of instances of piracy and for the measures we undertake to combat and prevent it.

Satellite television receiver digital decoders may be purchased from third parties that are capable of decoding the encrypted content of DTH providers, with whom we compete for customers, without paying for such content. Although neither on a widespread scale nor through large vendor franchises, receivers are currently available for legal purchase in Chile, despite the fact that accessing and decoding encrypted channels through these devices is

 

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illegal. We have partnered with other telecommunications and major content providers in Latin America to create the Alliance Against Piracy to advocate for the enactment of stricter legislation to make illegal the importation, sale and distribution of these devices across the Latin American countries where the Alliance Against Piracy is active, including Chile. We estimated in June 2014 that approximately 50,000 homes within our footprint in Chile were illegally viewing video content by means of these receivers. Should the availability of these receivers become more widespread, we could face a risk of increased churn if existing subscribers were to choose to access competing DTH programming content by means of these receivers in lieu of continuing to pay for our video services. Also, we may be hampered in our ability to attract new customers who elect to view DTH programming illegally for free by means of these devices instead of subscribing to our video services.

Taxes in Chile can be unpredictable, and any increase in such taxes could adversely affect the financial performance of our Chilean operations. The Chilean government regularly implements changes to tax laws that may increase our tax burden. These changes may include modifications in our tax rates and, on occasion, the enactment of temporary taxes that in some cases have become permanent taxes. For example, in the aftermath of the 2010 earthquake and tsunami, legislation was passed to raise the corporate income tax rate in order to finance reconstruction, which had an adverse effect on our financial results. The legislation temporarily increased the corporate tax rate from its previous rate of 17.0% to 20.0%. In 2012, the Chilean government introduced amendments to existing tax legislation, which, among other things, permanently maintained the corporate income tax rate at 20%.

On September 26, 2014, the Chilean President signed an extensive tax reform bill, including changes to the corporate tax rate, changes to the thin capitalization rules, taxation of certain Chilean investments abroad and changes to the stamp tax rate, among other relevant changes. The bill became law upon its publication in the Official Gazette (Diario Oficial) on September 29, 2014.

According to this new law, the current corporate tax rate of 20% will be increased progressively as follows: 2014 (21%), 2015 (22.5%) and 2016 (24%). Beginning in 2017, there will be two optional income tax regimes: the “attributed system” and the “partially integrated system.” Under the “attributed system,” the corporate tax rate will be 25% and the 35% withholding tax will be paid on an accrual basis by the corporation on behalf of the shareholder, with the corporate tax fully creditable against the withholding tax. Under the “partially integrated system,” the corporate tax rate will be 25.5% in 2017 and 27% in 2018 and future years, and the 35% withholding tax will be paid only upon actual distributions to shareholders. However, under this partially integrated system, only 65% of the corporate tax paid by a Chilean company can be used as a credit against the withholding tax imposed on non-Chilean resident shareholders, which implies a final tax burden of 44.45%. In the case of shareholders resident in countries that have tax treaties in force with Chile, there will be a full credit for the corporate tax paid, which implies a final tax burden of 35% for such shareholders. Corporations must elect the relevant tax regime before December 31, 2016. This election, once made, is irrevocable for a period of five years.

Strikes and other industrial actions, as well as the negotiation of new collective bargaining agreements, could disrupt our operations or make it more costly to operate our facilities. We are exposed to the risk of strikes and other industrial actions. We negotiate our collective bargaining agreements with eight labor unions in Chile and one in Puerto Rico. The agreements are renegotiated every three to four years on a staggered basis in Chile and every three years in Puerto Rico. The agreements cover, among other things, the general labor conditions of covered employees such as working hours, holidays, benefits, termination, provisions and general payment schemes for wages. Our Chilean operations have experienced strikes in the past, most recently in 2007. In Puerto Rico, members of two major unions representing public utility employees voted in June 2014 to implement an island-wide strike. Although no labor stoppage has been carried out to date and our employees in Puerto Rico would not be included in any such strike, potential sabotage on the island’s infrastructure during an island-wide strike could adversely affect our network. Strikes and other industrial actions, as well as increasingly stricter labor legislation and regulations and the negotiation of new collective bargaining agreements in the future, could disrupt our operations and/or make it more costly to operate our facilities, which in turn could have a material adverse effect on our business, financial condition and results of operations.

 

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Our ability to make decisions related to our Puerto Rico operations that we may deem to be in the best interests of our shareholders may be negatively impacted by arrangements with the holders of a minority interest in Liberty Puerto Rico. We indirectly own 60% of Liberty Puerto Rico, while Searchlight indirectly owns the remaining 40%. We and Searchlight are party to certain agreements that provide the terms of the governance and ownership of Liberty Puerto Rico, its indirect sole member and the general partner of its indirect sole member (the parent entities). Under these agreements, we and Searchlight have a veto right on certain material matters, including, without limitation, a sale of Liberty Puerto Rico or its parent entities and certain acquisitions or mergers, incurrences of debt, large expenditures and issuances of equity interests in Liberty Puerto Rico’s parent entities. Our agreement with Searchlight also includes certain transfer restrictions and liquidity rights. These arrangements give Searchlight a certain amount of influence over the conduct of Liberty Puerto Rico’s business and future sales of the business. See “Annex E: Description of Our Latin American Operations — Arrangements with Minority Interest Holder in Liberty Puerto Rico” for a description of our arrangements with the minority interest holder in Liberty Puerto Rico.

As a result of Searchlight’s rights, including rights of first offer, tag-along rights and liquidity rights, among others, Searchlight could prevent Liberty Puerto Rico from making certain decisions or taking certain actions that would protect or advance the interests of our company, including forcing a sale of Liberty Puerto Rico and its parent entities against our wishes. No assurances can be given that we and Searchlight will be able to reach agreement with respect to any such matters in the future, and if we are unable to, our Puerto Rico operations could be adversely affected.

Other Factors

The loss of certain key personnel could harm our business. We have experienced employees at both the corporate and operational levels who possess substantial knowledge of our business and operations. We cannot assure you that we will be successful in retaining their services or that we would be successful in hiring and training suitable replacements without undue costs or delays. As a result, the loss of any of these key employees could cause significant disruptions in our business operations, which could materially adversely affect our results of operations.

John C. Malone has significant voting power with respect to corporate matters considered by our shareholders. John C. Malone beneficially owns outstanding ordinary shares of Liberty Global representing approximately 25.3% of our aggregate voting power as of December 22, 2014. By virtue of Mr. Malone’s voting power in our company, as well as his position as Chairman of our board of directors, Mr. Malone may have significant influence over the outcome of any corporate transaction or other matters submitted to our shareholders for approval. For example, under English law and our articles of association, certain matters (including amendments to the articles of association) require the approval of 75% of the votes of shareholders who vote (in person or by proxy) on the relevant resolution. Because Mr. Malone beneficially owns more than 25% of our aggregate voting power and more than 75% of the outstanding Liberty Global Class B Ordinary Shares, he has the ability to prevent the requisite approval threshold from being met even though the other shareholders may determine that such action or transaction is beneficial for the company. Mr. Malone’s rights to vote or dispose of his equity interests in our company are not subject to any restrictions in favor of us other than as may be required by applicable law and except for customary transfer restrictions pursuant to equity award agreements. Following the Transaction and the issuance of the LiLAC Ordinary Shares, we expect that Mr. Malone will continue to hold a similar proportion of our voting power.

It may be difficult for a third party to acquire us, even if doing so may be beneficial to our shareholders. Certain provisions of our articles of association and of English law may discourage, delay, or prevent a change in control of our company that a shareholder may consider favorable. These provisions include the following:

 

   

authorizing a capital structure with multiple classes of ordinary shares: a Class B that entitles the holders to 10 votes per share; a Class A that entitles the holders to one vote per share; and a Class C

 

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that, except as otherwise required by applicable law or our articles, entitles the holder to no voting rights;

 

   

authorizing the issuance of “blank check” shares (both ordinary and preference), which could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt;

 

   

classifying our board of directors with staggered three-year terms, which may lengthen the time required to gain control of our board of directors, although under English law, shareholders of our company can remove a director without cause by ordinary resolution;

 

   

prohibiting shareholder action by written resolution, thereby requiring all shareholder actions to be taken at a meeting of the shareholders;

 

   

requiring the approval of 75% in value of the shareholders (or class of shareholders) and/or English court approval for certain statutory mergers or schemes of arrangements;

 

   

establishing advance notice requirements for nominations of candidates for election to our board of directors or for proposing matters that can be acted upon by shareholders at shareholder meetings; and

 

   

following the Transaction, our tracking share structure.

Change in control provisions in our employment and service agreements and in our incentive plan and related award agreements may also discourage, delay, or prevent a change in control of our company, even if such change of control would be in the best interests of our shareholders.

The enforcement of civil liabilities against us may be more difficult. Because we are a public limited company incorporated under the laws of England and Wales, investors could experience more difficulty enforcing judgments obtained against us in U.S. courts than would currently be the case for U.S. judgments obtained against a U.S. company. It may also be more difficult (or impossible) to bring some types of claims against us in courts sitting in England than it would be to bring similar claims against a U.S. company in a U.S. court. In particular, English law significantly limits the circumstances under which shareholders of English companies may bring derivative actions. Under English law generally, only the company can be the proper plaintiff in proceedings in respect of wrongful acts committed against us. Our articles of association provide for the exclusive jurisdiction of the English courts for shareholder lawsuits against us or our directors.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This proxy statement/prospectus, including documents incorporated by reference herein, includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the anticipated consequences of the Transaction, our business, product, foreign currency and finance strategies, our property and equipment additions, subscriber growth and retention rates, competitive, regulatory and economic factors, the anticipated impacts of new legislation (or changes to existing rules and regulations), anticipated revenue decreases or cost increases, liquidity, credit risks, foreign currency risks and target leverage levels and other information and statements that are not historical fact. In some cases, you can identify these statements by our use of forward-looking words such as “may,” “will,” “should,” “anticipate,” “estimate,” “expect,” “plan,” “believe,” “predict,” “potential,” “intend” and other terms of similar substance used in connection with any discussion of the future operations or financial performance of our company. To the extent that statements in this proxy statement/prospectus (or incorporated by reference herein) are not recitations of historical fact, such statements constitute forward-looking statements, which, by definition, involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

You should be aware that any forward-looking statements in this proxy statement/prospectus, including documents incorporated by reference herein, only reflect our expectations and are not guarantees of performance. These statements involve risks, uncertainties and assumptions. Many of these risks, uncertainties and assumptions are beyond our control and may cause actual results and performance to differ materially from our expectations.

Known risk factors that could cause results or events to differ from current expectations are identified and discussed under “Risk Factors” and in our filings with the SEC, including our most recent Forms 10-K/A and 10-Q. Some, but not all, of the factors that could cause actual results or events relating to Liberty Global to differ materially from those anticipated include the following:

 

   

economic and business conditions and industry trends in the countries in which we operate;

 

   

the competitive environment in the industries in the countries in which we operate, including competitor responses to our products and services;

 

   

fluctuations in currency exchange rates and interest rates;

 

   

instability in global financial markets, including sovereign debt issues and related fiscal reforms;

 

   

consumer disposable income and spending levels, including the availability and amount of individual consumer debt;

 

   

changes in consumer television viewing preferences and habits;

 

   

consumer acceptance of our existing service offerings, including our digital video, broadband internet, fixed-line telephony, mobile and business service offerings, and of new technology, programming alternatives and other products and services that we may offer in the future;

 

   

our ability to manage rapid technological changes;

 

   

our ability to maintain or increase the number of subscriptions to our digital video, broadband internet, fixed-line telephony and mobile service offerings and our average revenue per household;

 

   

our ability to provide satisfactory customer service, including support for new and evolving products and services;

 

   

our ability to maintain or increase rates to our subscribers or to pass through increased costs to our subscribers;

 

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our ability to maintain our revenue from channel carriage arrangements, particularly in Germany;

 

   

the impact of our future financial performance, or market conditions generally, on the availability, terms and deployment of capital;

 

   

changes in, or failure or inability to comply with, government regulations in the countries in which we operate and adverse outcomes from regulatory proceedings;

 

   

government intervention that opens our broadband distribution networks to competitors, such as the obligations imposed in Belgium;

 

   

our ability to obtain regulatory approval and satisfy other conditions necessary to close acquisitions and dispositions, and the impact of conditions imposed by competition and other regulatory authorities in connection with acquisitions, including the impact of the present and any future conditions imposed in connection with the acquisition of KBW on our operations in Germany;

 

   

our ability to successfully acquire new businesses and, if acquired, to integrate, realize anticipated efficiencies from, and implement our business plan with respect to, the businesses we have or may acquire, such as the Ziggo Acquisition;

 

   

changes in laws or treaties relating to taxation, or the interpretation thereof, in the U.K., U.S. or in other countries in which we operate;

 

   

changes in laws and government regulations that may impact the availability and cost of credit and the derivative instruments that hedge certain of our financial risks;

 

   

the ability of suppliers and vendors to timely deliver quality products, equipment, software and services;

 

   

the availability of attractive programming for our digital video services and the costs associated with such programming, including retransmission and copyright fees payable to public and private broadcasters;

 

   

uncertainties inherent in the development and integration of new business lines and business strategies;

 

   

our ability to adequately forecast and plan future network requirements;

 

   

the availability of capital for the acquisition and/or development of telecommunications networks and services;

 

   

problems we may discover post-closing with the operations, including the internal controls and financial reporting process of businesses we acquire;

 

   

leakage of sensitive customer data;

 

   

the outcome of any pending or threatened litigation;

 

   

the loss of key employees and the availability of qualified personnel;

 

   

changes in the nature of key strategic relationships with partners and joint venturers;

 

   

our new equity capital structure that would result from the Transaction; and

 

   

events that are outside of our control, such as political unrest in international markets, terrorist attacks, malicious human acts, natural disasters, pandemics and other similar events.

The broadband distribution services industries are changing rapidly and, therefore, the forward-looking statements of expectations, plans and intent contained or incorporated in this proxy statement/prospectus are subject to a significant degree of risk. These forward-looking statements and the above-described risks,

 

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uncertainties and other factors speak only as of the date of this proxy statement/prospectus, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained or incorporated herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based. Readers are cautioned not to place undue reliance on any forward-looking statement.

 

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THE GENERAL MEETING

Date, Time and Place

The General Meeting will be held at 10:00 a.m., local time, on February 24, 2015, at the Denver Marriott South at Park Meadows, 10345 Park Meadows Drive, Lone Tree, Colorado 80124.

Purpose of the General Meeting

At the General Meeting, holders of Liberty Global Ordinary Shares will be asked to consider and vote on the resolutions comprising the Transaction Proposals (other than the Class Proposals), the Voting Rights Amendment Proposal, the Securities Purchase Proposals and the Virgin Media Sharesave Proposal, which are described in greater detail under “The Transaction Proposals,” “The Voting Rights Proposal,” “The Securities Purchase Proposals” and “The Virgin Media Sharesave Proposal,” respectively. The full text of the resolutions to be voted on at the General Meeting can be found in the Notice of General Meeting provided as Annex  A to this proxy statement/prospectus.

Quorum

In order to conduct the business of the General Meeting, a quorum must be present. The presence, in person or by proxy, of the holders of a simple majority of the combined voting power of the Liberty Global Class A and Class B Ordinary Shares entitled to vote is necessary to constitute a quorum at the General Meeting.

For purposes of determining a quorum, your shares will be included as represented at the meeting even if you indicate on your proxy that you abstain from voting. Shares represented by “broker non-votes” will also be counted for purposes of determining whether there is a quorum at the General Meeting but will not be included for purposes of determining the number of votes cast. A broker non-vote occurs when shares held by a broker, bank or other nominee are represented at the meeting, but the nominee has not received voting instructions from the beneficial owner and does not have the discretion to direct the voting of the shares on a particular resolution. None of the Proposals are considered routine matters and your broker, bank or other nominee may not vote on these resolutions without instructions from you.

Who May Vote

For all of the proposals put forward at the General Meeting, holders of Liberty Global Class A and Class B Ordinary Shares, as recorded in Liberty Global’s share register as of 5:00 p.m., New York time/10:00 p.m., London time, on December 26, 2014, the record date for the General Meeting, vote together at the General Meeting or at any adjournment or postponement thereof. Holders of Liberty Global Class C Ordinary Shares will not be entitled to vote at the General Meeting.

Votes Required

The Proposals to be voted on at the General Meeting require the following votes for approval:

 

Proposal

  

Required Vote for Approval

Special Resolutions

 

•       New Articles Proposal

 

•       Voting Rights Amendment Proposal

 

•       Future Consolidation/Sub-Division Proposal

  

At least 75% of the votes cast by the holders of Liberty Global Class A and Class B Ordinary Shares voting together as a single class at the General Meeting

Ordinary Resolutions

 

•       Management Policies Proposal

 

•       Securities Purchase Proposals

 

•       Virgin Media Sharesave Proposal

  

A simple majority of votes cast by the holders of Liberty Global Class A and Class B Ordinary Shares voting together as a single class at the General Meeting

 

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As of the most recent practicable date, December 22, 2014, Liberty Global’s directors and executive officers beneficially owned approximately 25.9% of the total voting power of the Liberty Global Class A and Class B Ordinary Shares, voting together as a single class. We have been informed that all of our directors and executive officers intend to vote “FOR” each of the Proposals being voted on at the General Meeting.

Votes You Have at the General Meeting

 

   

Holders of Liberty Global Class A Ordinary Shares as of the record date for the General Meeting have one vote per share; and

 

   

Holders of Liberty Global Class B Ordinary Shares as of the record date for the General Meeting have ten votes per share.

 

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THE CLASS A MEETING

Date, Time and Place

The Class A Meeting will be held at 10:20 a.m., local time, on February 24, 2015, at the Denver Marriott South at Park Meadows, 10345 Park Meadows Drive, Lone Tree, Colorado 80124.

Purpose of the Class A Meeting

At the Class A Meeting, holders of Liberty Global Class A Ordinary Shares will be asked to consider and vote on the Class A Articles Proposal and the Class A Voting Rights Proposal, which are described in greater detail under “The Transaction Proposals” and “The Voting Rights Proposal,” respectively. The full text of the resolutions to be voted on at the Class A Meeting can be found in the Notice of Class A Meeting provided as Annex B to this proxy statement/prospectus.

Quorum

In order to conduct the business of the Class A Meeting, a quorum must be present. The presence, in person or by proxy, of the holders of a simple majority of the voting power of our outstanding Liberty Global Class A Ordinary Shares entitled to vote is necessary to constitute a quorum at the Class A Meeting.

For purposes of determining a quorum, your shares will be included as represented at the meeting even if you indicate on your proxy that you abstain from voting. Shares represented by “broker non-votes” will also be counted for purposes of determining whether there is a quorum at the Class A Meeting but will not be included for purposes of determining the number of votes cast. A broker non-vote occurs when shares held by a broker, bank or other nominee are represented at the Class A Meeting, but the nominee has not received voting instructions from the beneficial owner and does not have the discretion to direct the voting of the shares on a particular resolution. Neither the Class A Articles Proposal nor the Class A Voting Rights Proposal is considered a routine matter and your broker, bank or other nominee may not vote on either resolution without instructions from you.

Who May Vote

Holders of Liberty Global Class A Ordinary Shares, as recorded in Liberty Global’s share register as of 5:00 p.m., New York time/10:00 p.m., London time, on December 26, 2014, the record date for the Class A Meeting, may each vote at the Class A Meeting or at any adjournment or postponement thereof.

Votes Required

The approval of the Class A Articles Proposal and the Class A Voting Rights Proposal each requires the affirmative vote of at least 75% of the votes cast by holders of Liberty Global Class A Ordinary Shares at the Class A Meeting.

As of the most recent practicable date, December 22, 2014, Liberty Global’s directors and executive officers beneficially owned approximately 1.2% of the Liberty Global Class A Ordinary Shares. We have been informed that all of our directors and executive officers intend to vote “FOR” each of the Class Proposals being voted on at the Class A Meeting.

Votes You Have at the Class A Meeting

Holders of Liberty Global Class A Ordinary Shares have one vote per share at the Class A Meeting. Only holders of Liberty Global Class A Ordinary Shares as of the record date for the Class A Meeting will be entitled to attend and vote at the Class A Meeting.

 

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THE CLASS B MEETING

Date, Time and Place

The Class B Meeting will be held at 10:40 a.m., local time, on February 24, 2015, at the Denver Marriott South at Park Meadows, 10345 Park Meadows Drive, Lone Tree, Colorado 80124.

Purpose of the Class B Meeting

At the Class B Meeting, holders of Liberty Global Class B Ordinary Shares will be asked to consider and vote on the Class B Articles Proposal and the Class B Voting Rights Proposal, which are described in greater detail under “The Transaction Proposals” and “The Voting Rights Proposal,” respectively. The full text of the resolutions to be voted on at the Class B Meeting can be found in the Notice of Class B Meeting provided as Annex C to this proxy statement/prospectus.

Quorum

In order to conduct the business of the Class B Meeting, a quorum must be present. The presence, in person or by proxy, of the holders of a simple majority of the voting power of our outstanding Liberty Global Class B Ordinary Shares entitled to vote is necessary to constitute a quorum at the Class B Meeting.

For purposes of determining a quorum, your shares will be included as represented at the meeting even if you indicate on your proxy that you abstain from voting. Shares represented by “broker non-votes” will also be counted for purposes of determining whether there is a quorum at the Class B Meeting but will not be included for purposes of determining the number of votes cast. A broker non-vote occurs when shares held by a broker, bank or other nominee are represented at the Class B Meeting, but the nominee has not received voting instructions from the beneficial owner and does not have the discretion to direct the voting of the shares on a particular resolution. Neither the Class B Articles Proposal nor the Class B Voting Rights Proposal is considered a routine matter and your broker, bank or other nominee may not vote on either resolution without instructions from you.

Who May Vote

Holders of Liberty Global Class B Ordinary Shares, as recorded in Liberty Global’s share register as of 5:00 p.m., New York time/10:00 p.m., London time, on December 26, 2014, the record date for the Class B Meeting, may each vote at the Class B Meeting or at any adjournment or postponement thereof.

Votes Required

The approval of the Class B Articles Proposal and the Class B Voting Rights Proposal each requires the affirmative vote of at least 75% of the votes cast by holders of Liberty Global Class B Ordinary Shares at the Class B Meeting.

As of the most recent practicable date, December 22, 2014, Liberty Global’s directors and executive officers beneficially owned approximately 87.2% of the Liberty Global Class B Ordinary Shares. We have been informed that all of our directors and executive officers intend to vote “FOR” each of the Class Proposals being voted on at the Class B Meeting.

Votes You Have at the Class B Meeting

Holders of Liberty Global Class B Ordinary Shares have one vote per share at the Class B Meeting. Only holders of Liberty Global Class B Ordinary Shares as of the record date for the Class B Meeting will be entitled to attend and vote at the Class B Meeting.

 

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THE CLASS C MEETING

Date, Time and Place

The Class C Meeting will be held at 11:00 a.m., local time, on February 24, 2015, at the Denver Marriott South at Park Meadows, 10345 Park Meadows Drive, Lone Tree, Colorado 80124.

Purpose of the Class C Meeting

At the Class C Meeting, holders of Liberty Global Class C Ordinary Shares will be asked to consider and vote on the Class C Articles Proposal and the Class C Voting Rights Proposal, which are described in greater detail under “The Transaction Proposals” and “The Voting Rights Proposal,” respectively. The full text of the resolutions to be voted on at the Class C Meeting can be found in the Notice of Class C Meeting provided as Annex D to this proxy statement/prospectus.

Quorum

In order to conduct the business of the Class C Meeting, a quorum must be present. The presence, in person or by proxy, of the holders of a simple majority of the voting power of our outstanding Liberty Global Class C Ordinary Shares entitled to vote is necessary to constitute a quorum at the Class C Meeting.

For purposes of determining a quorum, your shares will be included as represented at the meeting even if you indicate on your proxy that you abstain from voting. Shares represented by “broker non-votes” will also be counted for purposes of determining whether there is a quorum at the Class C Meeting but will be not be included for purposes of determining the number of votes cast. A broker non-vote occurs when shares held by a broker, bank or other nominee are represented at the Class C Meeting, but the nominee has not received voting instructions from the beneficial owner and does not have the discretion to direct the voting of the shares on a particular resolution. Neither the Class C Articles Proposal nor the Class C Voting Rights Proposal is considered a routine matter and your broker, bank or other nominee may not vote on either resolution without instructions from you.

Who May Vote

Holders of Liberty Global Class C Ordinary Shares, as recorded in Liberty Global’s share register as of 5:00 p.m., New York time/10:00 p.m., London time, on December 26, 2014, the record date for the Class C Meeting, may each vote at the Class C Meeting or at any adjournment or postponement thereof.

Votes Required

The approval of the Class C Articles Proposal and the Class C Voting Rights Proposal each requires the affirmative vote of at least 75% of the votes cast by holders of Liberty Global Class C Ordinary Shares at the Class C Meeting.

As of the most recent practicable date, December 22, 2014, Liberty Global’s directors and executive officers beneficially owned approximately 3.2% of the Liberty Global Class C Ordinary Shares. We have been informed that all of our directors and executive officers intend to vote “FOR” each of the Class Proposals being voted on at the Class C Meeting.

Votes You Have at the Class C Meeting

Holders of Liberty Global Class C Ordinary Shares have one vote per share at the Class C Meeting. Only holders of Liberty Global Class C Ordinary Shares as of the record date for the Class C Meeting will be entitled to attend and vote at the Class C Meeting.

 

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THE MEETINGS — GENERAL

Shares Outstanding

As of the most recent practicable date, December 22, 2014, an aggregate of 251,155,984 Liberty Global Class A Ordinary Shares, 10,139,184 Liberty Global Class B Ordinary Shares and 633,074,429 Liberty Global Class C Ordinary Shares were issued and outstanding and entitled to vote at the relevant Meetings.

Number of Holders

As of the most recent practicable date, December 22, 2014, there were approximately 94, 9 and 159 record holders of Liberty Global Class A Ordinary Shares, Liberty Global Class B Ordinary Shares and Liberty Global Class C Ordinary Shares, respectively (which amounts do not include the number of shareholders whose shares are held of record by banks, brokers or other nominees, but include each such institution as one holder).

Voting Procedures for Record Holders

You may appoint the person indicated in the enclosed proxy card or a person of your choice to be your proxy to attend, speak and vote on your behalf at such Meeting. A proxy need not be a shareholder of Liberty Global.

After carefully reading and considering the information contained in this proxy statement/prospectus, you should complete, sign, date and return the applicable enclosed proxy cards by mail, or vote through the internet, in each case as soon as possible so that your shares are represented and voted at the relevant Meeting. Instructions for voting through the internet are printed on the proxy cards. In order to vote through the internet, have your proxy cards available so you can input the required information from the cards, and log onto the internet website address shown on the proxy cards. When you log onto the internet website address, you will receive instructions on how to vote your shares. The internet voting procedures are designed to authenticate votes cast by use of a personal identification number, which will be provided to each voting shareholder separately. Voting through the internet will be voting by proxy.

Shareholders who have shares registered in the name of a broker, bank or other nominee should follow the voting instruction card provided by their broker, bank or other nominee in instructing them how to vote their shares or when granting or revoking a proxy.

Any corporation which is a shareholder of Liberty Global can appoint one or more corporate representatives who may, at the relevant Meeting, exercise on its behalf all of its powers as a shareholder provided that, if it is appointing more than one corporate representative, it does not do so in relation to the same share or shares. Any such representative should bring to the relevant Meeting written evidence of his appointment, such as a certified copy of a board resolution of, or a letter from, the corporation concerned confirming the appointment.

If a proxy is properly executed and submitted by a record holder without indicating any voting instructions, the proxy will have authority to vote in accordance with the directors’ recommendations for all resolutions.

YOUR VOTE IS IMPORTANT. It is recommended that you vote by proxy even if you plan to attend the relevant Meeting. You may change your vote at the Meeting.

To be valid, the appointment of proxy, whether completed via the internet or by returning the completed and signed proxy card, must be received by 1:00 a.m., New York time/6:00 a.m., London time on February 23, 2015.

 

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Voting Procedures for Shares Held in Street Name

If your shares are held in your name, you have the right to attend, speak and vote in person at the relevant Meeting. If your shares are held in an account with a broker, banker or other nominee, you are considered the beneficial owner of such shares held in street name. As a beneficial owner, you may also attend and speak at the relevant Meeting. You may not, however, vote such shares held in street name unless you obtain a “proxy” from your broker, bank or other nominee that holds the shares, which gives you the right to vote the shares at the relevant Meeting.

Revoking a Proxy

You may revoke (i.e. terminate) your proxy at any time prior to its use by attending the relevant Meeting and voting in person. Attendance at a Meeting will not in itself constitute the revocation of a proxy. Alternatively, you may revoke your proxy by delivering a signed notice of revocation or a later dated signed proxy or via the internet, regardless of how the proxy was originally appointed. Any notice of revocation or subsequent proxy should be submitted via the internet, or sent or hand delivered so as to be received by us at Liberty Global plc, Attention: Secretary, 38 Hans Crescent, Knightsbridge, London SW1X 0LZ, United Kingdom or at Liberty Global plc c/o Computershare, PO Box 43102, Providence, Rhode Island 02940, at least 24 hours before the start of the relevant Meeting. If your shares are held in the name of a bank, broker or other nominee, you should contact them to change your vote.

Solicitation of Proxies

We will solicit the proxies and will pay the entire cost, if any, for such solicitation. Our directors, officers and employees may solicit proxies by mail, email, telephone or by personal interviews. These persons will receive no additional compensation for such services. We have also retained Innisfree M&A Incorporated to assist in the solicitation of proxies at a cost of $25,000, plus reasonable out of pocket expenses. Brokerage houses, nominees, fiduciaries and other custodians will be requested to forward soliciting material to the beneficial owners of Liberty Global Ordinary Shares held of record by them and will be reimbursed for their reasonable expenses in connection therewith.

If you have any further questions about voting or attending the relevant Meeting, please contact Liberty Global Investor Relations at (303) 202-6600 or our proxy solicitor, Innisfree M&A Incorporated, at (877) 825-8906 (within the U.S. and Canada) or (412) 232-3651. Banks and brokers may call collect at (212) 750-5833.

Voting by Poll

Voting on each of the Proposals will be by a poll. This means that voting for each resolution will be determined by the number of votes cast for and against each resolution and not by a show of hands or the number of shareholders voting for and against each resolution.

Voting by Participants in Liberty Global 401(k) Plans

If you hold Liberty Global Class A Ordinary Shares or Liberty Global Class C Ordinary Shares through your account in the Liberty Global 401(k) Savings and Stock Ownership Plan (the 401(k) Plan), which plan is for employees of our subsidiary Liberty Global, Inc., the trustee is required to vote your Liberty Global Class A or Class C Ordinary Shares as you specify or, if you do not specify how to vote your Liberty Global Class A or Class C Ordinary Shares, the trustee is required to vote your Liberty Global Class A or Class C Ordinary Shares in the same proportion on each resolution as it votes all Liberty Global Class A or Class C Ordinary Shares, respectively, in the 401(k) Plan as to which voting instructions were properly provided. To allow sufficient time for the trustee to vote your Liberty Global Class A or Class C Ordinary Shares, your voting instructions must be received by 1:00 a.m., New York time/6:00 a.m., London time on February 20, 2015. If you hold Liberty Global

 

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Class A or Class C Ordinary Shares through your account in the Liberty Global 401(k) Savings Plan-Puerto Rico, which plan is for employees of our subsidiary Liberty Puerto Rico, your Liberty Global Class A or Class C Ordinary Shares will be voted as you specify. To vote such Liberty Global Class A or Class C Ordinary Shares, please follow the instructions provided by the trustee for such plan. The voting instructions for the Puerto Rico plan must be received by the trustee for such plan by 1:00 a.m., New York time/6:00 a.m., London time on February 20, 2015.

 

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THE TRANSACTION PROPOSALS

General

The Transaction Proposals to be voted on at the Meetings consist of the New Articles Proposal, the Class Articles Proposals, the Management Policies Proposal and the Future Consolidation/Sub-Division Proposal. Each of the Transaction Proposals is described in more detail under “Overview of the Proposals.” While each Transaction Proposal is being voted on separately, each Transaction Proposal is conditioned on approval of the other Transaction Proposals. None of the Transaction Proposals will become effective, and the Transaction will not be implemented, unless all of the Transaction Proposals receive the requisite approvals.

Conditions to the Transaction

The Transaction is subject to the following conditions:

 

  (1)

the receipt of the Transaction Approvals at the General Meeting and the Class Meetings;

 

  (2)

the receipt of the opinion of Shearman & Sterling (London) LLP, in form and substance reasonably acceptable to Liberty Global and subject to the accuracy of the statements, representations, covenants and assumptions upon which the opinion is based, to the effect that under applicable U.K. income tax and corporation tax law and HMRC published practice: (i) the Transaction should be treated as a “reorganisation” within the meaning of Section 126 of the U.K. Taxation of Chargeable Gains Act 1992, (ii) the LiLAC Ordinary Shares should be treated as shares in Liberty Global for U.K. tax purposes, (iii) no gain or loss should be recognized by Liberty Global (including its subsidiaries) as a result of the issuance of the LiLAC Ordinary Shares, and (iv) holders of Liberty Global Ordinary Shares should not recognize any taxable income, gain or loss as a result of the issuance of the LiLAC Ordinary Shares (except, potentially, with respect to the receipt of any cash in lieu of fractional LiLAC Ordinary Shares);

 

  (3)

the receipt of the opinion of Shearman & Sterling LLP, in form and substance reasonably acceptable to Liberty Global and subject to the accuracy of the statements, representations, covenants, and assumptions upon which the opinion is based, to the effect that under applicable U.S. federal income tax law: (i) the Transaction should be treated as a “reorganization” within the meaning of Section 368(a) of the Code, (ii) the LiLAC Ordinary Shares should be treated as stock of Liberty Global for U.S. federal income tax purposes, (iii) no gain or loss should be recognized by Liberty Global (including its subsidiaries) as a result of the issuance of the LiLAC Ordinary Shares, (iv) holders of Liberty Global Ordinary Shares should not recognize any taxable income, gain or loss as a result of the issuance of the LiLAC Ordinary Shares (except with respect to the receipt of any cash in lieu of fractional LiLAC Ordinary Shares) and (v) the LiLAC Ordinary Shares should not constitute “Section 306 stock” within the meaning of Section 306(c) of the Code;

 

  (4)

(i) the effectiveness under the Securities Act of the registration statement on Form S-4, of which this proxy statement/prospectus forms a part, relating to the issuance of the LiLAC Ordinary Shares, and (ii) the effectiveness of the registration of the LiLAC Ordinary Shares under Section 12(b) of the Exchange Act;

 

  (5)

the approval by Nasdaq of the listing of the LiLAC Class A Ordinary Shares and the LiLAC Class C Ordinary Shares; and

 

  (6)

the receipt of any other regulatory or contractual approvals that our board determines to obtain.

Our board reserves the right to waive condition (6) above. The remainder of the foregoing conditions are non-waivable. In addition, the issue of the LiLAC Ordinary Shares and adoption of our new articles of association is conditioned upon the approval of our board of directors or a duly appointed committee immediately before the allotment and issue of the LiLAC Ordinary Shares, even after the Transaction Proposals have been approved by our shareholders and the other conditions to the Transaction have been satisfied or waived, as applicable.

 

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Treatment of Share Options and Other Awards

We currently expect that as a result of the Transaction, option awards, unvested restricted share units or share appreciation awards granted to members of our board of directors and executive officers, including our named executive officers, with respect to Liberty Global Ordinary Shares will generally be divided into two awards: one related to the applicable class of Liberty Global Ordinary Shares, and one related to the applicable class of LiLAC Ordinary Shares. The number of LiLAC Ordinary Shares subject to such adjusted awards will be based on the 0.05 distribution ratio for the Transaction. All other equity awards will be adjusted, as determined by the compensation committee of our board of directors, to take into account the Bonus Issue such that the fair value of such award immediately following the Bonus Issue will be substantially the same as the fair value of such award immediately prior to the Bonus Issue. Any adjustments to the exercise prices and other terms of these awards will be determined by our board of directors in accordance with the terms of the applicable plans (and the regulations and guidance of any applicable taxing authority) and to preserve, to the extent possible, the fair value of the underlying awards.

The Liberty Global Group and the LiLAC Group

Our new articles will create a new type of ordinary shares, the LiLAC Ordinary Shares, which are intended to track and reflect the economic performance of the LiLAC Group, and will make certain changes to the terms of the Liberty Global Ordinary Shares, which will be intended to track and reflect the separate performance of the Liberty Global Group.

The LiLAC Group will initially comprise (i) VTR Finance and its subsidiaries, which include VTR GlobalCom and VTR Wireless, (ii) Lila Chile Holding BV, which is the parent entity of VTR Finance, (iii) LGI Broadband Operations, Inc. and its subsidiaries, which include our 60% controlling interest in Liberty Puerto Rico, and (iv) the LiLAC Corporate Costs. As of September 30, 2014, these entities had (i) cash and cash equivalents in the amount of approximately $71.1 million and (ii) approximately $2.7 billion in total liabilities, including $2.1 billion in debt and capital lease obligations, primarily related to the $1.4 billion principal amount of 6.875% senior secured notes issued by VTR Finance, the parent of VTR, and the bank facility of Liberty Puerto Rico. We have allocated cash and debt to the LiLAC Group based on the cash held and debt owed by these entities and their subsidiaries. All debt owed by these entities is non-recourse to Liberty Global plc or any entities in the Liberty Global Group. We also intend, prior to the Bonus Issue, to contribute to Lila Chile Holding BV an amount of cash as determined by our board of directors to provide the LiLAC Group with additional liquidity to fund, among other things, acquisitions and ongoing operating costs and expenses.

All of our businesses, assets and liabilities not attributed to the LiLAC Group will be attributed to the Liberty Global Group.

The percentage of total revenue, loss from continuing operations, total assets and total liabilities of our company that we intend to be attributable to each of the Liberty Global Group and the LiLAC Group, as of and for the nine months ended September 30, 2014, are set forth in the table below. Our proposed management and allocation policies give us and our board of directors’ discretion to attribute future assets and liabilities to either group and to re-attribute existing assets from one group to the other. See “—Management and Allocation Policies.”

 

     Nine Months ended September 30, 2014     As of September 30, 2014  
     Total
Revenue
    Loss from
Continuing
Operations
    Total
Assets 
(1)
    Total
Liabilities 
(1)
 

Liberty Global Group

     93.4     99.8     95.6     95.1

LiLAC Group

     6.6     0.2     4.6     5.2

 

(1)

Due to the impact of inter-group eliminations, amounts do not total to 100%.

 

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A more complete description of the business and assets to be attributed to the LiLAC Group can be found in Annex E to this proxy statement/prospectus.

We expect that both groups will include, in the future, other businesses, assets and liabilities that are complementary or related to the businesses and assets attributed to that group as our board of directors may determine. In addition, we may acquire and attribute to either group other businesses, assets and liabilities that are consistent with the focus or strategy of that group or which have financial or other attributes that fit well within a group. In cases where a business or an asset may fit into both groups, subject to our management and allocation policies, our board will have discretion to determine to which group that business or asset should be attributed. See “— Management and Allocation Policies.”

Background and Reasons for the Transaction Proposals

Positive Aspects of the Transaction Proposals

In arriving at its determination and recommendation, our board of directors, with the assistance of its advisors, considered, among other things, the following:

 

   

Greater shareholder choice. The creation of the LiLAC Ordinary Shares will allow our shareholders and future investors greater choice, depending on their particular investment objectives and regional focus, to own one or two separate securities intended to track and reflect the economic performance of the businesses and assets attributed to the Liberty Global Group and/or the LiLAC Group. In particular, we believe that this may be attractive to investors that are focused on the broadband communications industry in Latin America and other emerging markets.

 

   

More focused shareholder base and access to capital markets. The creation of the LiLAC Ordinary Shares will increase investor awareness of the businesses and assets attributed to the LiLAC Group, which will potentially provide a better alignment of investor bases and permit our investors to pursue distinct investment strategies. This will also permit the company to raise capital for the distinct needs and requirements of the LiLAC Group by offering equity that tracks the performance of the businesses and assets attributed to that group.

 

   

Enhanced transparency for investors, including enhanced information about our Latin American operations. The creation of the LiLAC Ordinary Shares and attribution of our businesses, assets and liabilities between the LiLAC Group and the remaining Liberty Global Group will permit the market to review more detailed information about the groups of businesses and assets, and associated liabilities, attributed to the LiLAC Group. This will provide increased focus and additional clarity with respect to the LiLAC Group, allowing it to be viewed clearly as a Latin American business and providing enhanced information focused on its operations and performance.

 

   

Tailored management and employee incentives. The attribution of our Latin American operations to the LiLAC Group and the related LiLAC Ordinary Shares will enable us to develop and adopt incentive compensation that more closely addresses the objectives and goals of the LiLAC Group, thereby allowing our company to reward our management and employees based solely on the performance of the underlying businesses and assets attributed to the LiLAC Group. It will also enable a corresponding tailoring of incentive compensation for the operations attributed to the Liberty Global Group.

 

   

Advantages of doing business under common ownership. The implementation of the tracking share structure will allow us to retain the advantages of doing business as a single company. As part of a single company, the businesses within each group will be able to take advantage of the strategic, financial and other benefits of shared managerial expertise, synergies relating to technology and purchasing arrangements, potentially lower borrowing costs in some instances and potential cost savings in corporate overhead and other expenses.

 

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Preserves structural flexibility. The terms of our new articles of association preserve the ability for our board of directors to unwind the tracking share structure, thus retaining flexibility regarding our future legal structure, asset segmentation and capital restructurings.

 

   

Creation and issuance of the LiLAC Ordinary Shares will not be taxable. We expect that the creation and issuance of the LiLAC Ordinary Shares will not be taxable for U.K. income tax or corporation tax purposes or U.S. federal income tax purposes to us or to our shareholders (except with respect to the receipt of any cash in lieu of fractional LiLAC Ordinary Shares).

Potential Negative Aspects of the Transaction Proposals

Our board of directors also evaluated, with the assistance of its advisors, the potential negative aspects of the Transaction Proposals, including the following:

 

   

Uncertainty of market valuation. There can be no assurance as to the degree to which the market price of the LiLAC Ordinary Shares will reflect the separate economic performance of the businesses, assets and liabilities attributed to the LiLAC Group, or whether the combined market prices of the Liberty Global Ordinary Shares and the LiLAC Ordinary Shares following the Transaction will not be lower than the market price of the Liberty Global Ordinary Shares immediately prior to the Transaction. In addition, we cannot predict the impact of the Transaction Proposals on the market price of Liberty Global Ordinary Shares prior to the Meetings or whether the implementation of the Transaction Proposals through the issuance of the LiLAC Ordinary Shares will increase or decrease our aggregate market capitalization.

 

   

Capital structure complexity, board discretion and legal novelty may depress market price. Historically, tracking shares have traded at a discount to the fair market value of their attributed assets and liabilities as a result of the more complex capital structure, organizational documents, and financial and legal disclosures. The ability of our board of directors to change our current management and allocation policies, reattribute assets between the LiLAC Group and the Liberty Global Group, recognize, adjust or take into account inter-group interests, or convert LiLAC Ordinary Shares into Liberty Global Ordinary Shares without the prior approval of or, in some cases, prior notice to our shareholders may also depress the market price of the LiLAC Ordinary Shares and, to some extent, Liberty Global Ordinary Shares. As with other tracking shares, investors have no guarantee that the businesses attributed to the shares in which they invest will remain the same over time. The market price of LiLAC Ordinary Shares may also be affected by the lack of market familiarity and legal precedent regarding tracking shares issued by an English company.

 

   

Additional considerations for the board of directors and potentially conflicting interests. Our new equity capital structure can be expected to require the board to spend additional time when making and executing certain decisions, due to the need for the board to consider how both the Liberty Global Group and the LiLAC Group would be impacted. In particular, the board may need to consider the allocation of a business or corporate opportunity to the Liberty Global Group or the LiLAC Group, a potential conflict of interest between or among the holders of the Liberty Global Ordinary Shares and the LiLAC Ordinary Shares, or the movement of assets and creation of inter-group interests between the groups.

 

   

Uncertainty of market reaction to decisions affecting the two groups. The market values of the Liberty Global Ordinary Shares and the LiLAC Ordinary Shares could be affected by the market reaction to decisions by our board of directors and management that investors perceive as affecting differently Liberty Global Ordinary Shares and LiLAC Ordinary Shares, respectively. These decisions could include decisions regarding business transactions among the groups or the allocation of assets, expenses, debt or other financial liabilities between the groups.

 

   

Potential adverse tax consequences. The tax treatment of the Transaction is subject to some uncertainty, and the board considered the possibility that HMRC or the IRS could successfully assert that the Transaction is taxable to the holders of Liberty Global Ordinary Shares and/or to us. The board considered the fact that if HMRC or the IRS was successful in such a claim, material adverse tax consequences could result to holders of Liberty Global Ordinary Shares and/or us.

 

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Our board of directors determined that the positive aspects of the Transaction Proposals outweighed the negative aspects and concluded that the Transaction is in the best interest of our company and our shareholders. Our board of directors also considered various options with respect to our Latin American operations, including a spin-off, and determined that the Transaction Proposals represented the best approach for our company as a whole at this time, after careful consideration of all factors including those discussed above. In light of the number and variety of factors that our board of directors considered, our board of directors believes it is not practicable to assign relative weights to the factors discussed above, and accordingly, our board of directors did not do so.

Description of the New LiLAC Ordinary Shares and Liberty Global Ordinary Shares under Our New Articles of Association and Comparison to the Liberty Global Ordinary Shares under Our Current Articles of Association

The following is a summary description of the terms of the new LiLAC Ordinary Shares under our new articles if the Transaction Proposals are adopted and implemented. In addition, the following also provides a summary comparison of the material terms of the new LiLAC Ordinary Shares with the corresponding terms of the existing Liberty Global Ordinary Shares. Finally, it summarizes certain modifications to the Liberty Global Ordinary Shares resulting from the adoption of our new articles.

WE HAVE PROVIDED AS ANNEX G TO THIS PROXY STATEMENT/PROSPECTUS A MARKED COPY OF OUR NEW ARTICLES OF ASSOCIATION, WHICH SHOWS CHANGES TO OUR EXISTING ARTICLES OF ASSOCIATION THAT WILL BE EFFECTED IF OUR NEW ARTICLES ARE ADOPTED. SHAREHOLDERS ARE URGED TO READ THE FULL TEXT OF OUR NEW ARTICLES. IN THE CASE OF ANY DISCREPANCIES BETWEEN THE FOLLOWING SUMMARY AND OUR NEW ARTICLES, THE NEW ARTICLES WILL CONTROL.

Summary of Effect of Transaction on Key Provisions of Our Articles

The following table summarizes, in a very high level format, the key features of our articles and how they will be affected by the proposed amendments in connection with the Transaction, each of which is discussed in more detail below in the text following the table.

 

Liberty Global Ordinary Shares

Under Current Articles

  

Liberty Global Ordinary Shares

Under New Articles

  

LiLAC Ordinary Shares

Under New Articles

     Basic Investment     

Liberty Global Ordinary Shares reflect the performance of all of our businesses.

  

Liberty Global Ordinary Shares are intended to reflect the performance of all of our businesses other than those attributed to the LiLAC Group.

  

LiLAC Ordinary Shares are intended to reflect the separate economic performance of the business attributed to the LiLAC Group.

   Sources of Dividends   

Under English law, we cannot pay dividends in respect of the Liberty Global Ordinary Shares unless Liberty Global has sufficient available distributable reserves to do so and the assets of our company are not, and following the dividend will not be, less than the aggregate of its issued and called-up share capital and undistributable reserves.

  

No change.

  

Under English law, we cannot pay dividends in respect of the LiLAC Ordinary Shares unless Liberty Global has sufficient available distributable reserves to do so and the assets of our company are not, and following the dividend will not be, less than the aggregate of its issued and called-up share capital and undistributable reserves.

 

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Liberty Global Ordinary Shares

Under Current Articles

  

Liberty Global Ordinary Shares

Under New Articles

  

LiLAC Ordinary Shares
Under New Articles

Not applicable.

  

Although no further restriction is contained in our new articles, our board has adopted management and allocation policies that will limit the amount of cash dividends paid in respect of Liberty Global Ordinary Shares by reference to the net assets or net earnings of the Liberty Global Group. See “— Management and Allocation Policies — Equity Issuances and Repurchases and Dividend Policy.

  

Although no further restriction is contained in our new articles, our board has adopted management and allocation policies that will limit the amount of cash dividends paid in respect of LiLAC Ordinary Shares by reference to the net assets or net earnings of the LiLAC Group. See “— Management and Allocation Policies — Equity Issuances and Repurchases and Dividend Policy.

   Declaration of Dividends   

Each class of Liberty Global Ordinary Shares ranks equally in the capital of the company with all other classes of Liberty Global Ordinary Shares for any dividend declared or in respect of the capitalization of profits.

  

No change, but supplemented by provision regarding the allocation of dividends as between Liberty Global Ordinary Shares and LiLAC Ordinary Shares, as further described in the next paragraph.

  

Each class of LiLAC Ordinary Shares ranks equally in the capital of the company with all other classes of LiLAC Ordinary Shares for any dividend declared or in respect of the capitalization of profits.

  

Dividends may be declared and paid, including dividends consisting of securities of another corporation, in favor of Liberty Global Ordinary Shares and LiLAC Ordinary Shares, in equal or unequal amounts, or only in favor of Liberty Global Ordinary Shares or LiLAC Ordinary Shares.

     Securities Distributions     

Unless otherwise recommended by three-quarters of our board of directors and approved by an ordinary resolution of the Liberty Global Class A and Class B Ordinary Shares, voting together as a single class, securities of another corporation distributed to holders of Liberty Global Ordinary Shares must be distributed on the basis that (i) holders of each class of Liberty Global Ordinary Shares receive the same class of securities, on an equal per share basis, or (ii) holders of Liberty Global Class B Ordinary Shares receive higher voting securities and holders of Liberty Global Class A and Class C Ordinary Shares receive lower voting securities.

  

No change.

  

Unless otherwise recommended by three-quarters of our board of directors and approved by an ordinary resolution of the LiLAC Class A and Class B Ordinary Shares, voting together as a single class, securities of another corporation distributed to holders of LiLAC Shares must be distributed on the basis that (i) holders of each class of LiLAC Ordinary Shares receive the same class of securities, on an equal per share basis, or (ii) holders of LiLAC Class B Ordinary Shares receive higher voting securities and holders of LiLAC Class A and Class C Ordinary Shares receive lower voting securities.

 

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Liberty Global Ordinary Shares

Under Current Articles

  

Liberty Global Ordinary Shares

Under New Articles

  

LiLAC Ordinary Shares
Under New Articles

   Reduction in Number of LiLAC Ordinary Shares in Connection with Distribution of Securities of Another Corporation   

Not applicable.

  

Not applicable.

  

In connection with a distribution of securities of another cor–poration to holders of LiLAC Ordinary Shares, the number of LiLAC Ordinary Shares outstanding may be reduced by redesignating a number of LiLAC Ordinary Shares as so-called “deferred shares” following the distribution.

   Scrip Dividends   

In connection with offering any holder of Liberty Global Ordinary Shares the right to elect to receive fully paid shares instead of cash in respect of the whole or some part of all or any dividend, each shareholder is only entitled to new shares (as our board of directors may determine) of either the identical class to which the dividend relates or Liberty Global Class C Ordinary Shares.

  

No change.

  

In connection with offering any holder of LiLAC Ordinary Shares the right to elect to receive fully paid shares instead of cash in respect of the whole or some part of all or any dividend, each shareholder is only entitled to new shares (as our board of directors may determine) of either the identical class to which the dividend relates or LiLAC Class C Ordinary Shares.

   Bonus Issues   

Unless recommended by three-quarters of our board of directors and approved by an ordinary resolution of the Liberty Global Class A and Class B Ordinary Shares, voting together as single class, our board of directors may only declare bonus issues to holders of Liberty Global Ordinary Shares:

 

(1) consisting of Liberty Global Class C Ordinary Shares to all holders of Liberty Global Ordinary Shares, on an equal per share basis;

  

No change.

  

Unless recommended by three-quarters of our board of directors and approved by an ordinary resolution of the LiLAC Class A and Class B Ordinary Shares, voting together as single class, our board of directors may only declare bonus issues to holders of LiLAC Ordinary Shares:

 

(1) consisting of LiLAC Class C Ordinary Shares to all holders of LiLAC Ordinary Shares, on an equal per share basis;

 

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Liberty Global Ordinary Shares

Under Current Articles

  

Liberty Global Ordinary Shares

Under New Articles

  

LiLAC Ordinary Shares
Under New Articles

(2) consisting of the identical class of Liberty Global Ordinary Shares held by each shareholder to holders of each class of Liberty Global Ordinary Shares, on an equal per share basis; or

 

(3) consisting of any other class of our securities to all holders of Liberty Global Ordinary Shares, on the basis referred to above for distributions of securities issued by another corporation.

     

(2) consisting of the identical class of LiLAC Ordinary Shares held by each shareholder to holders of each class of LiLAC Ordinary Shares, on an equal per share basis; or

 

(3) consisting of any other class of our securities to all holders of LiLAC Ordinary Shares, on the basis referred to above for distributions of securities issued by another corporation.

   Redesignation at Option of Holder   

Each Liberty Global Class B Ordinary Share may be redesignated at any time at the election of the holder into a Liberty Global Class A Ordinary Share.

  

No change.

  

Each LiLAC Class B Ordinary Share may be redesignated at any time at the election of the holder into a LiLAC Class A Ordinary Share.

   Redesignation at Option of Issuer   

No redesignation of Liberty Global Ordinary Shares is permitted at the option of the company.

  

No change.

  

The company will be able to redesignate all LiLAC Ordinary Shares of each class into shares of the corresponding class of Liberty Global Ordinary Shares at a ratio determined based on the relative trading prices of Liberty Global Class C Ordinary Shares and LiLAC Class C Ordinary Shares over a specified trading period preceding the date of determination.

 

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Liberty Global Ordinary Shares

Under Current Articles

  

Liberty Global Ordinary Shares

Under New Articles

  

LiLAC Ordinary Shares
Under New Articles

   LiLAC Group Disposition   

Not applicable.

  

A LiLAC Group Disposition has no direct effect on the rights of Liberty Global Ordinary Shares, except for the economic or voting impact of any action taken by our board of directors with respect to the LiLAC Ordinary Shares in connection with a disposition of the LiLAC Group.

  

If, in the good faith opinion of our board of directors, we dispose, in one transaction or a series of transactions, of not less than 80% of the fair value of the assets of, or equity interests in, the LiLAC Group, then under our new articles we will be required to either (i) pay a dividend in favor of the LiLAC Ordinary Shares in cash and/or securities or other assets with a fair value equal to the net proceeds of such disposition; (ii) redesignate all LiLAC Ordinary Shares of each class into shares of the corresponding class of Liberty Global Ordinary Shares at a ratio representing a premium of 10% to the ratio determined based on the relative trading prices of Liberty Global Class C Ordinary Shares and LiLAC Class C Ordinary Shares over a specified trading period following the consummation of the disposition; or (iii) a combination of the preceding two alternatives.

   Deferred Shares   

Not applicable.

  

Our board of directors may designate ordinary shares as deferred shares in certain limited circumstances, including a reduction in the number of outstanding LiLAC Ordinary Shares in connection with a distribution to holders of LiLAC Ordinary Shares of securities of another corporation, a dividend or other distribution following a disposition, as described under “— LiLAC Group Disposition,” or the elimination of excess shares that may be required to achieve the specified ratio in connection with a redesignation of LiLAC Ordinary Shares into Liberty Global Ordinary Shares.

   Alteration of Share Capital   

We may, from time to time (i) increase our share capital by allotting and issuing new shares; (ii) consolidate and divide our share capital into shares of a larger nominal value; (iii) subdivide any of our shares into shares of a smaller nominal value; and (iv) redenominate our share capital or any class of share capital.

  

No change.

   Same provision applies.

 

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Liberty Global Ordinary Shares

Under Current Articles

  

Liberty Global Ordinary Shares

Under New Articles

  

LiLAC Ordinary Shares
Under New Articles

We may not consolidate, divide, sub-divide or redenominate any class of ordinary shares without consolidating, dividing, sub-dividing or redenomi–nating (as the case may be) the other classes of ordinary shares, on an equal per share basis.

  

We may not consolidate, divide, sub-divide or redenominate any one or more Liberty Global Ordinary Shares or LiLAC Ordinary Shares without consolidating, dividing, sub-dividing or redenominating (as the case may be) all of the Liberty Global Ordinary Shares or LiLAC Ordinary Shares, respectively, on an equal per share basis.

   Voting Rights   

Each Liberty Global Class A Ordinary Share has one vote, each Liberty Global Class B Ordinary Share has ten votes, and each Liberty Global Class C Ordinary Share is non-voting.

  

No change.

  

Each LiLAC Class A Ordinary Share has one vote, each LiLAC Class B Ordinary Share has ten votes, and each LiLAC Class C Ordinary Share is non-voting.

Not applicable.

  

LiLAC Class A Ordinary Shares and LiLAC Class B Ordinary Shares will form a single voting class with Liberty Global Class A Ordinary Shares and Liberty Global Class B Ordinary Shares for most ordinary business of the company.

Rights attached to a class of shares may only be varied: (i) in such manner (if any) as may be provided by those rights; (ii) with the written consent of the holders of three-quarters in nominal amount of the issued shares of that class; or (iii) by a special resolution passed at a separate meeting of the holders of that class.

  

No change.

  

Same provision applies.

   Liquidation   

Upon any voluntary winding up, the holders of Liberty Global Class A Ordinary Shares, Liberty Global Class B Ordinary Shares and Liberty Global Class C Ordinary Shares (and any other shares outstanding at the relevant time which rank equally with such shares) will share equally, on a share for share basis, in our assets remaining for distribution to the holders of our ordinary shares.

  

Upon our liquidation, dissolution or winding up, holders of LiLAC Ordinary Shares and Liberty Global Ordinary Shares will be entitled to receive their proportionate interests, expressed in liquidation units, in any assets available for distribution to our ordinary shares (regardless of whether such assets are then attributed to the LiLAC Group or the Liberty Global Group). Liquidation units will be allocated to each LiLAC Ordinary Share and each Liberty Global Ordinary Share, respectively, in proportion to the relative market value of a LiLAC Class C Ordinary Share and a Liberty Global Class C Ordinary Share, respectively, based on their respective volume-weighted average price over a 20 trading-day averaging period commencing on the first trading day on which the LiLAC Ordinary Shares commence ordinary-course (regular-way) trading, subject to subsequent adjustments for consolidations, subdivisions, redesignations or certain other events.

Basic Investment

Currently, Liberty Global Ordinary Shares reflect the performance of all of our businesses.

We intend the LiLAC Ordinary Shares to reflect the separate economic performance of the businesses, assets and liabilities to be attributed to the LiLAC Group. The LiLAC Group will initially comprise (i) VTR

 

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Finance and its subsidiaries, which include VTR GlobalCom and VTR Wireless, (ii) Lila Chile Holding BV, which is the parent entity of VTR Finance, (iii) LGI Broadband Operations, Inc. and its subsidiaries, which include our 60% controlling interest in Liberty Puerto Rico, and (iv) the LiLAC Corporate Costs. We also intend, prior to the Bonus Issue, to contribute to Lila Chile Holding BV an amount of cash as determined by our board of directors to provide the LiLAC Group with additional liquidity to fund, among other things, acquisitions and ongoing operating costs and expenses. After the Transaction becomes effective, the LiLAC Group will also include such other of our businesses, assets and liabilities that our board of directors may in the future determine to attribute to the LiLAC Group, including as may be acquired in the future and attributed to the LiLAC Group. All of our businesses, assets and liabilities not attributed to the LiLAC Group will be attributed to the Liberty Global Group. Determinations made by our board of directors with respect to the attribution between the two groups will be final and binding on all shareholders of the company.

We cannot assure you that the market value of the LiLAC Ordinary Shares will in fact reflect the performance of the LiLAC Group as we intend. Holders of LiLAC Ordinary Shares, just like holders of Liberty Global Ordinary Shares, will be holders of ordinary shares in our company and, as such, will be subject to all risks associated with an investment in Liberty Global and all of its businesses, assets and liabilities. In addition, we could determine to pursue future business opportunities in Latin America, Europe or elsewhere in the world through one group instead of the other group, or jointly through both groups.

Our new articles will contemplate that from time to time the Liberty Global Group may be treated as holding a notional inter-group interest in the LiLAC Group in accordance with our management and allocation policies. Inter-group interests are not represented by any shares or securities, but rather may have a value attributed to them for certain accounting purposes in connection with the transfer of value between the two groups. If an inter-group interest is recognized, we may reflect the effective economic consequences for shareholders of the events or transactions giving rise to such interest in a manner similar to the equity method of accounting by including appropriate adjustments in the relevant group accounts. See “— Management and Allocation Policies Intercompany Transactions Inter-Group Interests.”

Sources of Dividends

As is the case for dividends payable in respect of Liberty Global Ordinary Shares, our company cannot under English law pay dividends in respect of the LiLAC Ordinary Shares unless Liberty Global has sufficient available distributable reserves (defined as accumulated, realized profits less accumulated, realized losses) to do so and the assets of our company are not, and following the dividend will not be, less than the aggregate of its issued and called-up share capital and undistributable reserves.

In addition to these English law restrictions, pursuant to the dividend policy set forth in the Management Policies Proposal, our board of directors will not approve any cash dividend in respect of the Liberty Global Ordinary Shares or the LiLAC Ordinary Shares unless the amount of dividend to be paid does not exceed either (i) an amount equal to the net assets of the Liberty Group or the LiLAC Group, as applicable, over the nominal value of the our shares attributable to the relevant group or (ii) if there is no such excess, an amount equal to our company’s net earnings that are attributable to the Liberty Global Group or the LiLAC Group, as applicable, for the fiscal year in which such date occurs and/or the preceding fiscal year. See “— Management and Allocation Policies — Equity Issuances and Repurchases and Dividend Policy.”

Declaration of Dividends

We have never paid cash dividends on any class of our ordinary shares, and we do not expect to pay cash dividends on any class of our ordinary shares in the future, including the new LiLAC Ordinary Shares, in the foreseeable future because we expect to retain future earnings for use in the operation and expansion of our business and for share repurchases.

 

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Under our current articles, following the recommendation of the board of directors, the shareholders may declare dividends by ordinary resolution, except that no dividend may exceed the amount recommended by our board of directors. Furthermore, our current articles also provide that a general meeting declaring a dividend may, upon recommendation by our board of directors, direct by ordinary resolution that the dividend shall be satisfied wholly or partly by the distribution of assets, including (without limitation) paid up shares or debentures of another corporation. Moreover, under our current articles, our directors are authorized to declare interim dividends (including wholly or partly by the distribution of assets) if our board of directors considers that they are justified by the profits of Liberty Global available for distribution.

Under both our current and our new articles, each class of Liberty Global Ordinary Shares ranks equally in the capital of the company with all other classes of Liberty Global Ordinary Shares for any dividend declared or in respect of the capitalization of profits, in favor of the Liberty Global Ordinary Shares. Our new articles will add a corresponding provision with respect to the LiLAC Ordinary Shares.

Under our new articles, the provisions of our current articles with respect to the declaration of dividends will otherwise remain substantially unchanged, but will be supplemented by a provision permitting dividends to be declared and paid, including, without limitation, dividends consisting of securities of another corporation, in favor of Liberty Global Ordinary Shares and LiLAC Ordinary Shares, in equal or unequal amounts, or only in favor of the Liberty Global Ordinary Shares or the LiLAC Ordinary Shares. The proportion of securities of another corporation to be distributed may be determined by our board of directors in its discretion to take into account such things as it deems relevant, including any inter-group interests determined in good faith in accordance with our management and allocation policies, which determination will be final and binding on all shareholders of the company.

As under our current articles, the provisions in our new articles relating to dividends will be subject to the more specific provisions relating to dividends paid in securities of another corporation described under “— Securities Distributions.”

Securities Distributions

Dividends paid in securities of another corporation are subject to the provisions governing dividends generally, as described above.

In addition, under our current articles, if a distribution includes securities issued by another corporation, unless otherwise recommended by three-quarters of our board of directors and approved by an ordinary resolution of the Liberty Global Class A Ordinary Shares and Liberty Global Class B Ordinary Shares, which we collectively refer to as the Liberty Global Voting Shares, voting together as a single class, these securities must be distributed on the basis that:

(1) the holders of Liberty Global Class A Ordinary Shares, Liberty Global Class B Ordinary Shares and Liberty Global Class C Ordinary Shares receive the identical class of securities, on an equal per share basis; or

(2) the holders of Liberty Global Class A Ordinary Shares, Liberty Global Class B Ordinary Shares and Liberty Global Class C Ordinary Shares each receive a different class of securities or the holders of one or more classes of ordinary shares receives a different class of securities than the holders of all other classes of ordinary shares (in which cases: (i) the holders of Liberty Global Class B Ordinary Shares shall receive the securities having higher value voting rights and the holders of Liberty Global Class A Ordinary Shares and Liberty Global Class C Ordinary Shares will receive the securities having lower value voting rights, and (ii) if different classes of securities are being distributed to holders of the Liberty Global Class A Ordinary Shares and the Liberty Global Class C Ordinary Shares, then such securities shall be distributed either as determined by our board of directors or such that the relative voting rights of the class of securities to be received by the holders of Liberty Global Class A Ordinary Shares and Liberty Global Class C Ordinary Shares corresponds, to the extent practicable, to the relative voting rights of each such class of shares), on an equal per share basis.

 

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Under our new articles, the provisions governing the distribution of securities of another corporation to holders of Liberty Global Ordinary Shares will remain substantially unchanged, but will be supplemented by corresponding provisions relating to the distribution of securities to holders of LiLAC Ordinary Shares. Specifically, in the case of such a distribution of securities to the holders of LiLAC Ordinary Shares, our new articles will provide that unless otherwise recommended by three-quarters of our board of directors and approved by an ordinary resolution of holders of the LiLAC Class A Ordinary Shares and LiLAC Class B Ordinary Shares, which we refer to collectively as the LiLAC Voting Shares, voting together as a single class, the relevant securities must be distributed on the basis that:

(1) the holders of LiLAC Class A Ordinary Shares, LiLAC Class B Ordinary Shares, and LiLAC Class C Ordinary Shares receive the identical class of securities, on an equal per share basis; or

(2) the holders of LiLAC Class A Ordinary Shares, LiLAC Class B Ordinary Shares, and LiLAC Class C Ordinary Shares each receive a different class of securities or the holders of one or more classes of LiLAC Ordinary Shares receives a different class of securities than the holders of all other classes of LiLAC Ordinary Shares (in which cases: (i) the holders of LiLAC Class B Ordinary Shares shall receive the securities having higher value voting rights and the holders of LiLAC Class A Ordinary Shares and LiLAC Class C Ordinary Shares will receive the securities having lower value voting rights, and (ii) if different classes of securities are being distributed to holders of the LiLAC Class A Ordinary Shares and the LiLAC Class C Ordinary Shares, then such securities shall be distributed either as determined by our board of directors or such that the relative voting rights of the class of securities to be received by the holders of LiLAC Class A Ordinary Shares and LiLAC Class C Ordinary Shares corresponds, to the extent practicable, to the relative voting rights of each such class of shares), on an equal per share basis.

Reduction in Number of LiLAC Ordinary Shares in Connection with Distribution of Securities of Another Corporation

In connection with a distribution of securities of another corporation to holders of LiLAC Ordinary Shares, the number of LiLAC Ordinary Shares outstanding may be reduced, taking into account any inter-group interest and such other adjustments as our board determines are necessary, which determination will be final and binding on all shareholders, by redesignating a number of LiLAC Ordinary Shares as so-called “deferred shares” following the distribution. Deferred shares remain technically outstanding, but have very limited rights under our new articles. See “— Deferred Shares.

The number of LiLAC Ordinary Shares to be so redesignated will be in the discretion of our board of directors, but will not exceed the number of LiLAC Ordinary Shares outstanding as of the relevant determination date multiplied by the percentage of the market capitalization of the LiLAC Group represented by the fair value of the distributed securities. Our new articles will define fair value, for purposes of this provision and other provisions, by reference to the publicly traded market value of the relevant securities or, in the absence of a publicly traded market, as determined by an independent investment bank experienced in the valuation of securities selected in good faith by our board of directors or as determined in the good faith judgment of our board of directors, which determination will be final and binding on all shareholders.

Scrip Dividends

Under our current articles, our board of directors may offer any shareholder the right to elect to receive fully paid shares instead of cash in respect of the whole or some part (to be determined by our board of directors) of all or any dividend. In that case, each shareholder is only entitled to new shares (as our board of directors may determine) of either the identical class to which the dividend relates or Class C Ordinary Shares.

Under our new articles, the relevant provisions will remain substantially unchanged, except that a holder of Liberty Global Ordinary Shares or LiLAC Ordinary Shares will only be entitled to new shares of the identical class to which the dividend relates or Liberty Global Class C Ordinary Shares or LiLAC Class C Ordinary Shares, as the case may be.

 

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Bonus Issues

Subject to the U.K. Companies Act 2006, under our current articles, our board of directors has the authority to capitalize certain undistributed profits of our company, our company’s share premium account, and certain other reserves for the purpose of issuing shares or other securities of our company to shareholders in a so-called “bonus issue.” Unless recommended by three-quarters of our board of directors and approved by an ordinary resolution of the Liberty Global Voting Shares, voting together as single class, our board of directors may only declare bonus issues:

(1) consisting of Liberty Global Class C Ordinary Shares to all holders of Liberty Global Ordinary Shares, on an equal per share basis;

(2) consisting of the identical class of Liberty Global Ordinary Shares held by each shareholder to holders of each class of Liberty Global Ordinary Shares, on an equal per share basis; or

(3) consisting of any other class of our securities to all holders of Liberty Global Ordinary Shares, on the basis referred to above for distributions of securities issued by another corporation. See “— Securities Distributions.”

Under our new articles, the relevant provision governing bonus issues will apply only to bonus issues to holders of Liberty Global Ordinary Shares, but will otherwise remain substantially unchanged. It will be supplemented by a corresponding provision governing bonus issues of LiLAC Ordinary Shares. Accordingly, our new articles will provide that, unless recommended by three-quarters of our board of directors and approved by an ordinary resolution of LiLAC Voting Shares, subject to the U.K. Companies Act 2006, our board of directors may only declare bonus issues to holders of LiLAC Ordinary Shares:

(1) consisting of LiLAC Class C Ordinary Shares to all holders of LiLAC Ordinary Shares, on an equal per share basis;

(2) consisting of the identical class of LiLAC Ordinary Shares held by each shareholder to holders of each class of LiLAC Ordinary Shares, on an equal per share basis; or

(3) consisting of any other class of our securities to all holders of LiLAC Ordinary Shares, on the basis referred to above for distributions of securities issued by another corporation. See “— Securities Distributions.”

Redesignation at Option of Holder

Under our current articles, each Liberty Global Class B Ordinary Share may be redesignated, or converted, at any time at the election of the holder into a Liberty Global Class A Ordinary Share.

Under our new articles, this provision will be supplemented by a corresponding provision for our new LiLAC Ordinary Shares. According to that provision, each LiLAC Class B Ordinary Share may be redesignated at any time at the election of the holder into a LiLAC Class A Ordinary Share.

Redesignation at Option of Issuer

Under our current articles, we cannot redesignate, or convert, your ordinary shares.

Under our new articles, we will be able to redesignate, or convert, all LiLAC Ordinary Shares of each class into shares of the corresponding class of Liberty Global Ordinary Shares and, if necessary to achieve the required redesignation ratio and to comply with share capital maintenance requirements under English law, deferred shares. The redesignation ratio will be subject to adjustments determined by our board of directors in respect of inter-group interests, which determination will be final and binding on all shareholders. The number of

 

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LiLAC Ordinary Shares of each class to be redesignated into shares of the corresponding class of Liberty Global Ordinary Shares will be determined based on a ratio of the relative trading prices of Liberty Global Class C Ordinary Shares and LiLAC Class C Ordinary Shares over a specified trading period (with the creation of additional Liberty Global Ordinary Shares of the relevant class through the capitalization of any relevant reserves if necessary). Any excess Liberty Global Ordinary Shares will be designated as deferred shares. The steps involved in this redesignation process are illustrated in the examples below.

For example, a redesignation of 10,000 LiLAC Class A Ordinary Shares at an assumed ratio of 0.82534 would result in 8,253 Liberty Global Class A Ordinary Shares and cash in respect of 0.4 fractional Liberty Global Class A Ordinary Shares. This would involve the following steps. We would redesignate all of the 10,000 LiLAC Class A Ordinary Shares into an equal number of Liberty Global Class A Ordinary Shares. Of those 10,000 Liberty Global Class A Ordinary Shares, we would redesignate 1,746 as deferred shares, leaving 8,254 Liberty Global Class A Ordinary Shares. Of those, one would then be transferred to a third party for purposes of the aggregation and sale of fractions, leaving 8,253 Liberty Global Class A Ordinary Shares.

As another example, a redesignation of 10,000 LiLAC Class A Ordinary Shares at an assumed ratio of 1.22534 would result in 12,253 Liberty Global A Ordinary Shares and cash in respect of 0.4 fractional Liberty Global Class A Ordinary Shares. We would redesignate all of the 10,000 LiLAC Class A Ordinary Shares into an equal number of Liberty Global Class A Ordinary Shares. We would also capitalize our reserves to issue a further 2,254 Liberty Global Class A Ordinary Shares, of which one would be transferred to a third party for purposes of the aggregation and sale of fractions, leaving 2,253 Liberty Global Class A Ordinary Shares. Together with the 10,000 Liberty Global Class A Ordinary Shares created through redesignation, this yields 12,253 Liberty Global Class A Ordinary Shares.

LiLAC Group Disposition

If, in the good faith opinion of our board of directors, we dispose, in one transaction or a series of transactions, of not less than 80% of the fair value of the assets of, or equity interests in, the LiLAC Group, then under our new articles we will be required to effect one of the following three alternatives on or prior to the 120th trading day following the consummation of such disposition, unless our board of directors obtains approval of the holders of the LiLAC Voting Shares, voting together as a single class, to not take such action or the disposition qualifies under a specified exemption (in which case we will not be required to take any of the following actions):

 

   

subject to the availability of sufficient distributable reserves, pay a dividend in favor of the LiLAC Ordinary Shares in cash and/or securities or other assets with a fair value equal to the net proceeds of such disposition (after the payment of such dividend, the board may, if it so chooses, reduce the number of outstanding LiLAC Ordinary Shares (through redesignation as deferred shares) pro rata in proportion to the market capitalization of the total LiLAC Group represented by the net proceeds from the disposition, as determined in good faith by the board); or

 

   

subject to the availability of sufficient distributable reserves or other reserves being available for capitalization if necessary, redesignate all LiLAC Ordinary Shares of each class into shares of the corresponding class of Liberty Global Ordinary Shares at a ratio representing a premium of 10% to the ratio determined based on the relative trading prices of Liberty Global Class C Ordinary Shares and LiLAC Class C Ordinary Shares (with the creation of additional Liberty Global Ordinary Shares of the relevant class through the capitalization of reserves, and with any excess Liberty Global Ordinary Shares being redesignated as deferred shares, in each case to the extent necessary to achieve the required redesignation ratio and to comply with share capital maintenance requirements under English law); or

 

   

subject to the availability of sufficient reserves, a combination of the preceding two alternatives. In the case of such a combination, our board of directors would not redesignate, or convert, all LiLAC Ordinary Shares at a 10% premium. Instead, of the portion of the LiLAC Ordinary Shares that corresponds to the portion of the market capitalization of the LiLAC Group represented by the

 

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disposition proceeds, a part corresponding to the portion of the disposition proceeds that are retained in the LiLAC Group (and not dividended to holders of LiLAC Ordinary Shares) would be redesignated into Liberty Global Ordinary Shares at a 10% premium, as further described under the second bullet point above, and the remaining part could be redesignated as deferred shares, as further described under the first bullet above. In any event, at least a portion of the LiLAC Ordinary Shares corresponding to the balance of the market capitalization of the LiLAC Group not represented by the disposition proceeds would remain outstanding (subject to potential redesignation into Liberty Global Ordinary Shares, as further described under “— Redesignation at Option of Issuer” above).

The actions to be taken by our board of directors in connection with such a disposition will be subject to adjustment in respect of inter-group interests made in good faith by our board of directors in accordance with our inter-group interest management policy. See “— Management and Allocation Policies — Intercompany Transactions — Inter-Group Interests.” Determinations made by the board in connection with such a disposition will be final and binding on all shareholders.

Deferred Shares

Deferred shares are a type of share permitted by English law that has been used by other English companies to manage their capital structure and eliminate virtually all rights for classes of shares that no longer represent a true economic interest in the relevant company but that need to remain outstanding in order to comply with English legal rules relating to the maintenance of share capital.

Our current articles do not contemplate deferred shares. Our new articles will authorize our board of directors to designate ordinary shares as deferred shares in certain limited circumstances described in our new articles. These relate to a reduction in the number of outstanding LiLAC Ordinary Shares in connection with a distribution to holders of LiLAC Ordinary Shares of securities of another corporation, in connection with a dividend or other distribution following a disposition, as described under “— LiLAC Group Disposition,” or the elimination of excess shares that may be required to achieve the specified ratio in connection with a redesignation of LiLAC Ordinary Shares into Liberty Global Ordinary Shares. Consistent with the practice used by other English companies that have employed deferred shares, our new articles will define the terms of deferred shares such that they confer virtually no economic interest in our company, have no voting rights, and can be repurchased by us for an aggregate consideration of one cent for all deferred shares then being transferred, all as further described in our new articles.

Alteration of Share Capital

Under our current articles, subject to the provisions of the U.K. Companies Act 2006, and without prejudice to any relevant special rights attached to any class of shares, Liberty Global may, from time to time:

 

   

increase its share capital by allotting and issuing new shares;

 

   

consolidate and divide all or any of its share capital into shares of a larger nominal value than the existing shares;

 

   

subdivide any of its shares into shares of a smaller nominal value than its existing shares; and

 

   

redenominate its share capital or any class of share capital.

Under our new articles, this provision will remain substantially unchanged. In addition, under our new articles as amended pursuant to the Future Consolidation/Sub-Division Proposal, our board of directors will have the authority to effect one or more consolidations and/or subdivisions, on any ratio that our board of directors may determine in its sole and absolute discretion, of any or all of our shares. We believe that having this flexibility will be useful for our board of directors in managing our capital structure in compliance with applicable English law requirements.

 

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In addition, under our current articles, we may not consolidate, divide, sub-divide or redenominate any class of ordinary shares without consolidating, dividing, sub-dividing or redenominating (as the case may be) the other classes of ordinary shares, on an equal per share basis. Under our new articles, this provision will be revised to provide that we may not consolidate, divide, sub-divide or redenominate any one or more Liberty Global Ordinary Shares or LiLAC Ordinary Shares without consolidating, dividing, sub-dividing or redenominating (as the case may be) all of the Liberty Global Ordinary Shares or LiLAC Ordinary Shares, respectively, on an equal per share basis.

Voting Rights

General. Under our current articles, each Liberty Global Class A Ordinary Share has one vote, each Liberty Global Class B Ordinary Share has ten votes, and each Liberty Global Class C Ordinary Share is non-voting, except where otherwise required by English law or our articles of association.

Under our new articles, each LiLAC Ordinary Share will generally have the same voting rights attaching to it as a Liberty Global Ordinary Share of the corresponding class. Specifically, each LiLAC Class A Ordinary Share will have one vote and each LiLAC Class B Ordinary Share will have ten votes, in each case, in respect of all matters on which voting shares in our capital have voting rights. LiLAC Class A Ordinary Shares and LiLAC Class B Ordinary Shares will form a single class with the other voting shares in our capital (Liberty Global Class A Ordinary Shares and Liberty Global Class B Ordinary Shares) for most purposes. LiLAC Class C Ordinary Shares will be non-voting, except where otherwise required by English law or our articles of association. LiLAC Class C Ordinary Shares will also be issued without the right to receive notice of general meetings, unless otherwise determined by our board of directors.

LiLAC Voting Shares will vote as a separate class in an ordinary resolution on, among other things, whether to exempt us from the requirement to take certain actions in connection with the disposition of not less than 80% of the fair value of the assets of, or equity interests in, the LiLAC Group described above under “— LiLAC Group Disposition.”

Variation of Class Rights. Our current articles provide that rights attached to a class of shares may only be varied: (i) in such manner (if any) as may be provided by those rights; (ii) with the written consent of the holders of three-quarters in nominal amount of the issued shares of that class; or (iii) by a special resolution passed at a separate meeting of the holders of that class. This provision would remain substantially unchanged in our new articles. Certain changes to this provision could result from the separate Voting Rights Proposal. See “The Voting Rights Proposal.

Our current articles further provide that the following will be deemed not to vary the rights attached to any class of shares, unless expressly provided by the rights attached to such shares: the issue of further shares ranking pari passu with, or subsequent to, the relevant share or class of shares, the purchase or redemption by our company of its own shares, or the exercise by our board of directors of its authority under certain provisions of our articles relating to dividends and securities distributions, scrip dividends, and bonus issues, all as further described above.

Under our new articles, in addition to items listed in the preceding paragraph, the following will be deemed not to vary the rights attached to any class of shares, unless expressly provided by the rights attached to such shares: the redesignation, or conversion, of LiLAC Ordinary Shares into Liberty Global Ordinary Shares or the redesignation of any class of shares into deferred shares, in each case in accordance with our new articles; and the exercise by our board of directors of its authority under certain provisions of our new articles relating to dividends and distributions, scrip dividends, bonus issues, and in connection with a LiLAC Group disposition, all as further described above.

 

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Amendment of Articles. Under English law, any amendment to our current and new articles requires a special resolution of our company in which all classes of our voting ordinary shares vote together as one class. This is in addition to any separate class vote that may be required for an amendment that varies the rights attached to shares of a particular class.

Liquidation

Under our current articles, in the event of a voluntary winding-up of our company, the liquidator may, with the sanction of a special resolution and any other sanction required by law, divide among our shareholders the whole or any part of the assets of our company, whether or not the assets consist of property of one kind or of different kinds. Upon any such winding up, after payment or provision for payment of our debts and liabilities and, subject to the prior payment in full of any preferential amounts to which holders of our preference shares may be entitled, the holders of Liberty Global Class A Ordinary Shares, Liberty Global Class B Ordinary Shares and Liberty Global Class C Ordinary Shares (and any other shares outstanding at the relevant time which rank equally with such shares) will share equally, on a share for share basis, in our assets remaining for distribution to the holders of our ordinary shares. The liquidator may also, with the same authority, transfer the whole or any part of the assets to trustees upon any trusts for the benefit of the shareholders as the liquidator decides. No past or present shareholder can be compelled to accept any asset which could subject him or her to a liability.

Under our new articles, upon our liquidation, dissolution or winding up, holders of LiLAC Ordinary Shares and Liberty Global Ordinary Shares will be entitled to receive their proportionate interests, expressed in liquidation units, in any assets available for distribution to our ordinary shares (regardless of whether such assets are then attributed to the LiLAC Group or the Liberty Global Group). Liquidation units will be allocated to each LiLAC Ordinary Share and each Liberty Global Ordinary Share, respectively, in proportion to the relative market value of a LiLAC Class C Ordinary Share and a Liberty Global Class C Ordinary Share, respectively, based on their respective volume-weighted average price over a 20 trading-day averaging period commencing on the first trading day on which the LiLAC Ordinary Shares commence ordinary-course (regular-way) trading. The number of liquidation units per LiLAC Ordinary Share and Liberty Global Ordinary Share, as applicable, will be subject to subsequent adjustments for consolidations, sub-divisions, redesignations or certain other events so as to avoid any dilution in the aggregate relative liquidation rights of the LiLAC Ordinary Shares and Liberty Global Ordinary Shares.

Allotment Authority

Our current articles authorize our board of directors, for a period up to five years from the date on which the articles were adopted, to (i) allot and issue equity securities, or to grant rights to subscribe for or to convert or exchange any security into shares of Liberty Global up to an aggregate nominal amount of $20,000,000 and (ii) exclude preemptive rights in respect of such issuances for the same period of time. We refer to this as general authority. Our new articles contain an article with the same terms. As a result, our new articles will give the directors a new general authority in place of their existing general authority on the same terms (irrespective of any shares issued under their existing general authority since the adoption of our current articles). This new general authority will be for a five-year period starting on the date of the shareholder resolution for the adoption of the new articles.

Other Provisions of the New Articles

The following terms of the new articles and provisions of English law are substantially similar to the corresponding provisions contained in and applicable to our current articles.

General Meetings and Notices

The notice of a general meeting shall be given to the shareholders (other than any who, under the provisions of the new articles or the terms of allotment or issue of shares, are not entitled to receive notice), to our board of

 

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directors and to our auditors. Under English law, we are required to hold an annual general meeting of shareholders within six months from the day following the end of our fiscal year and, subject to the foregoing, the meeting may be held at a time and place determined by our board of directors, whether within or outside of the U.K.

Disclosure of Ownership Interests in Shares

Section 793 of the U.K. Companies Act 2006 gives our company the power to require persons whom it knows have, or whom it has reasonable cause to believe have, or within the previous three years have had, any ownership interest in any Liberty Global shares to disclose specified information regarding those shares. Failure to provide the information requested within the prescribed period (or knowingly or recklessly providing false information) after the date the notice is sent can result in criminal or civil sanctions being imposed against the person in default.

Under both our current and our new articles, if any shareholder, or any other person appearing to be interested in Liberty Global shares held by such shareholder, fails to respond to a Section 793 notice, or, in purported compliance with such a notice, makes a statement which is materially false or misleading then our board of directors may withdraw voting and certain other rights, place restrictions on the rights to receive dividends and transfer such shares (including any shares allotted or issued after the date of the Section 793 notice in respect of those shares).

Transfer of Shares

Shareholders may transfer all or any of their shares by instrument of transfer in writing in any usual form or in any other form which is permitted by the U.K. Companies Act 2006 and is approved by our board of directors. The instrument of transfer must be executed by or on behalf of the transferor and (in the case of a transfer of a share which is not fully paid) by or on behalf of the transferee.

Our board of directors may refuse to register a transfer if:

 

   

it is with respect to shares in certificated form that are not fully paid, so long as the refusal does not prevent dealings in Liberty Global shares from taking place on an open and proper basis;

 

   

it is with respect to shares on which Liberty Global has a lien, including with respect to shares that are not fully paid;

 

   

the instrument of transfer is not duly stamped to show payment of stamp duty (if such stamp is required) and presented with the share certificate or other evidence of title reasonably required by the directors;

 

   

the instrument of transfer is in respect of more than one class of shares;

 

   

the instrument of transfer is in respect of more than four persons jointly; or

 

   

in certain circumstances, if the holder has failed to provide the information requested by Liberty Global referred to in “— Disclosure of Ownership Interests in Shares” above.

If our board of directors refuses to register a transfer of a share, it shall, within two months after the date on which the transfer was delivered to the company, send to the transferee notice of the refusal, together with its reasons for refusal.

Liability of Liberty Global and its Directors and Officers

Our current and new articles provide that English courts have exclusive jurisdiction with respect to any suits brought by shareholders (in their capacity as such) against the company or our directors.

 

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English law does not permit our company to exempt any director from any liability arising from negligence, default, breach of duty or breach of trust in relation to our company. However, despite this prohibition, we are permitted to purchase and maintain limited insurance for any of our directors. Shareholders can ratify by ordinary resolution a director’s conduct amounting to negligence, default, breach of duty or breach of trust in relation to our company.

Takeover Provisions

An English public limited company is potentially subject to the U.K. City Code on Takeovers and Mergers, which we refer to in this proxy statement/prospectus as the Takeover Code if, among other factors, (i) its place of central management and control is within the U.K., the Channel Islands or the Isle of Man or (ii) if any of its securities are admitted to trading on a regulated market or a multilateral trading facility in the United Kingdom or on any stock exchange in the Channel Islands or the Isle of Man. The Takeover Panel will generally look to the residency of a company’s directors to determine where it is centrally managed and controlled.

Based upon the residency of our directors and management and listing of our securities, the Takeover Code would not presently apply to us. It is possible that, in the future, circumstances could change that may cause the Takeover Code to apply to us. If we become subject to the Takeover Code, the ability of our directors to engage in defensive measures to seek to frustrate bids will, in addition to being subject to the directors’ statutory and fiduciary duties, be subject to the provisions of the Takeover Code.

Issuance of Preference Shares and Other Shares

The shares allotted and issued pursuant to the board’s general authority described above may comprise (in whole or in part) preference shares or other shares, in one or more classes with such rights, preferences and restrictions as our board of directors shall determine. The issuance of preference shares on various terms could adversely affect the holders of other Liberty Global shares. The potential issuance of preference shares may discourage bids for our shares at a premium over the market price, may adversely affect the market price of our shares and may discourage, delay or prevent a change of control of our company.

Management and Allocation Policies

We have established management and allocation policies relating to the attribution of our businesses and operations between the Liberty Global Group and the LiLAC Group, inter-group transactions, equity issuances and dividends, the allocation of corporate opportunities, taxes, and other matters.

As a general principle, we expect that all material matters in which holders of Liberty Global Ordinary Shares and holders of LiLAC Ordinary Shares may have divergent interests will generally be resolved in a manner that will promote the success of the company for the benefit of all of our shareholders after giving fair consideration to the interests of the holders of Liberty Global Ordinary Shares and holders of LiLAC Ordinary Shares, as well as such other or different factors and stakeholders considered relevant by our board of directors (or any committee of the board of directors authorized for this purpose).

Set forth below are summaries of the management and allocation policies that will be effective upon the consummation of the Transaction and the creation and issuance of LiLAC Ordinary Shares. Shareholder approval of these policies is being sought in connection with the Transaction pursuant to the Management Policies Proposal and the full text of these policies is attached to this proxy statement/prospectus as Annex H.

Policies Subject to Change without Shareholder Approval

While it has no present intention to do so, our board of directors may, without shareholder approval, modify, change, rescind or create exceptions to these policies, or adopt additional policies. Such actions could have different effects on holders of Liberty Global Ordinary Shares and holders of LiLAC Ordinary Shares. Our board

 

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of directors will make any such decision in accordance with its fiduciary duties and in particular in such a way as our board of directors believes, in good faith, will promote the success of the company for the benefit of all of our shareholders as a whole, after giving due consideration to all relevant stakeholders.

Any such modifications, changes, rescissions, exceptions or additional policies will be binding and conclusive unless otherwise determined by our board of directors. We will notify our shareholders of any material modification, change or exception made to these policies, any rescission of these policies and the adoption of any material additions to these policies through the filing of a Current Report on Form 8-K within four business days after the modification, change, exception or addition is made. However, we will not notify our shareholders of any modification, change, exception, rescission or addition to these policies if we determine that it is not material to the holders of Liberty Global Ordinary Shares, on the one hand, or the holders of LiLAC Ordinary Shares, on the other hand.

Attribution

The LiLAC Group will initially comprise (i) VTR Finance and its subsidiaries, which include VTR GlobalCom and VTR Wireless, (ii) Lila Chile Holding BV, which is the parent entity of VTR Finance, (iii) LGI Broadband Operations, Inc. and its subsidiaries, which include our 60% controlling interest in Liberty Puerto Rico, and (iv) the LiLAC Corporate Costs, as further discussed under “— The Liberty Global Group and the LiLAC Group.” We also intend, prior to the Bonus Issue, to contribute to Lila Chile Holding BV an amount of cash as determined by our board of directors to provide the LiLAC Group with additional liquidity to fund, among other things, acquisitions and ongoing operating costs and expenses.

The Liberty Global Group will initially consist of all of our other operations. All assets and liabilities not initially attributed to the LiLAC Group will therefore initially be attributed to the Liberty Global Group.

Our board of directors currently contemplates that businesses, assets and liabilities acquired by Liberty Global following the Transaction will be attributed to one of these two groups, in whole or in part, as it considers in good faith to be most likely to promote the success of the company for the benefit of its shareholders as a whole, having given due consideration to all relevant stakeholders.

Fiduciary and Management Responsibilities

Because the Liberty Global Group and the LiLAC Group will not be separate companies, but will both be part of Liberty Global, our directors and officers will have the same fiduciary duties to all shareholders of our company as a whole (and not separately to the holders of Liberty Global Ordinary Shares or holders of LiLAC Ordinary Shares). Our board of directors and chief executive officer, in establishing and applying policies with regard to inter-group matters such as business transactions between the two groups and attribution of assets, liabilities, debt, corporate overhead, taxes, interest, corporate opportunities and other matters, will consider various factors and information which could benefit or cause relative detriment to the relevant groups of shareholders and will seek to make determinations which are most likely to promote the success of the company for the benefit of our shareholders as a whole. If and when there are conflicting interests between the Liberty Global Group and the LiLAC Group, our board of directors will use its good faith business judgment to resolve such conflicts.

Equity Issuances and Repurchases and Dividend Policy

Our board of directors will issue and repurchase Liberty Global Ordinary Shares and LiLAC Ordinary Shares and issue dividends on the Liberty Global Ordinary Shares and LiLAC Ordinary Shares at times and in relative proportions (including issuing, repurchasing or paying dividends on only one group of ordinary shares) as it in good faith determines to be most likely to promote the success of the company for the benefit of its shareholders as a whole.

 

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We will reflect all financial effects of issuances and repurchases of, and dividends or other distributions on, shares relating to either group in our attributed financial information. Where, for any reason, proceeds from the issuance of shares of one group are attributed to the other group, repurchases of shares of one group are made using funds attributed to the other group, or dividends are paid on shares of one group out of cash, property or other assets attributed to the other group, this may be reflected by recognizing or adjusting an inter-group interest or loan, among other options. See “— Intercompany Transactions” below.

We have never paid cash dividends on any class of our ordinary shares, and we do not expect to pay cash dividends on any class of our ordinary shares in the foreseeable future because we expect to retain future earnings for use in the operation and expansion of our business and for share repurchases. However, given that our company’s intention in creating the LiLAC Ordinary Shares is that they track and reflect the economic performance of the LiLAC Group, and that the Liberty Global Ordinary Shares track and reflect the economic performance of the Liberty Global Group, our board of directors intends to restrict the maximum amount of any cash dividend that may be paid by the LiLAC Group or the Liberty Global Group to, at any date, either (i) an amount equal to the excess of the net assets of the LiLAC Group or the Liberty Global Group, as applicable, over the aggregate nominal value of our shares attributed to the relevant group or (ii) if there is no such excess, an amount equal to our company’s net earnings that are attributable to the LiLAC Group for the fiscal year in which such date occurs and/or the preceding fiscal year, as shown on the consolidating schedules to our company’s consolidated financial statements for such periods on a substantially consistent basis. In addition to this maximum amount for cash dividends pursuant to our dividend policy, any dividend will also be subject to the limitations of English law that apply to any dividend paid by our company, including the availability of distributable reserves.

Intercompany Transactions

General. If we change the attribution of cash or other property from one group to the other group, we will account for such change as a short term loan, long-term loan, an inter-group interest, as a reduction of an inter-group interest or as a transfer in exchange for cash or other assets. See “— Inter-Group Loans” and “— Inter-Group Interests” below.

Our board of directors will make these determinations, either in specific instances or by setting applicable policies generally, in such a way as it considers, in good faith, will promote the success of the company for the benefit of all its shareholders. Factors our board of directors may consider in making this determination include:

 

   

the financing needs and objectives of the receiving group;

 

   

the investment objectives of the transferring group;

 

   

the current and projected capital structure of each group;

 

   

the relative levels of internally generated funds of each group; and

 

   

the availability, cost and time associated with alternative financing sources, prevailing interest rates and general economic conditions.

Our board of directors will make all changes in the attribution of material assets from one group to the other on a fair value basis, as determined by our board of directors. For accounting purposes, all such assets will be deemed reattributed at their carryover basis. To the extent that this amount is different than the fair value of the inter-group loan or inter-group interest created in the transaction, this difference will be recorded as an adjustment to the group equity. No gain or loss will be recognized in the statement of operations information for the groups due to the related party nature of such transactions.

In determining fair value, we will use the relevant definition in our new articles of association. According to that definition, fair value means, in the case of any publicly traded security, the market value thereof (as determined in accordance with the articles), in the case of other securities, the fair value thereof as determined by

 

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an independent investment banking firm selected by the board or, if no such firm is selected, as determined in the good faith judgment of our board of directors, and in the case of other assets, the fair value thereof as determined by our board of directors in good faith based on such information as the board shall in good faith determine to be appropriate.

Inter-Group Loans. If one group makes a loan to the other group, our board of directors will determine the terms of the loan, including the rate at which it will bear interest. Our board of directors will determine the terms of any inter-group loans, either in specific instances or by setting applicable policies generally, in the exercise of its good faith business judgment. Factors our board of directors may consider in making this determination include:

 

   

our company’s needs;

 

   

the use of proceeds and creditworthiness of the receiving group;

 

   

the capital expenditure plans of, and the investment opportunities available to, each group; and

 

   

the availability, cost and time associated with alternative financing sources.

If an inter-group loan is made, we intend to account for the loan based on its stated terms, and the resulting activity, such as interest amounts, will be recorded in our attributed financial information to be included as exhibits to our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q, but will be eliminated in preparing our consolidated financial statement balances.

Inter-Group Interests. An inter-group interest is a notional interest that the Liberty Global Group may be treated as holding in the LiLAC Group from time to time. Inter-group interests are not represented by any shares or securities, but rather may have a value attributed to them for certain accounting purposes. If an inter-group interest is recognized, we may reflect the effective economic consequences for shareholders of the events or transactions giving rise to such interest in a manner similar to the equity method of accounting by including appropriate adjustments in the relevant group accounts. Appropriate eliminating entries would be made in preparing our consolidated financial statement balances.

An inter-group interest treated as being held by the Liberty Global Group in the LiLAC Group will be recognized when our board of directors deems it fair and equitable to all holders of our ordinary shares. This could be the case where cash or property is reattributed from the Liberty Global Group to the LiLAC Group and our board of directors determines that the reattribution will not be treated as an inter-group loan or as a transfer in exchange for cash or other assets. Other examples include when funds attributed to the Liberty Global Group are used to effect an acquisition which is attributed to the LiLAC Group, where proceeds from the issuance of Liberty Global Ordinary Shares are attributed to the LiLAC Group, or where LiLAC Ordinary Shares are redesignated, or converted, into Liberty Global Ordinary Shares.

We currently do not expect that any inter-group interest will be recognized when the LiLAC Ordinary Shares are initially created and issued. However, such an inter-group interest may be recognized in the future.

Once recognized, the amount of the Liberty Global Group’s inter-group interest in the LiLAC Group, if any, would be subject to adjustment from time to time, as our board of directors deems fair and equitable to all holders of our ordinary shares, to reflect changes in the economic interest that the Liberty Global Group is treated as holding in the LiLAC Group. The events or transactions that could give rise to such an adjustment being recognized include, without limitation, the following:

 

   

subdivisions (by share split or otherwise) and combinations (by reverse share split or otherwise) of the LiLAC Ordinary Shares and dividends payable in LiLAC Ordinary Shares;

 

   

the redesignation of LiLAC Ordinary Shares into deferred shares;

 

   

allocations of cash, property or other assets or liabilities from the Liberty Global Group to the LiLAC Group (or vice versa);

 

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repurchases of LiLAC Ordinary Shares made using funds attributed to the Liberty Global Group (or vice versa);

 

   

issuances of LiLAC Ordinary Shares to the extent the proceeds are attributed to the Liberty Global Group (or vice versa); and

 

   

dividends or other distributions in favor of holders of LiLAC Ordinary Shares out of cash, property or other assets attributed to the Liberty Global Group (or vice versa).

Whenever we pay a dividend or make any other distribution on the LiLAC Ordinary Shares, redesignate any LiLAC Ordinary Shares as Liberty Global Ordinary Shares, or take any other action with respect to the LiLAC Ordinary Shares, we will take into account any inter-group interest that the Liberty Global Group may then be treated as holding in the LiLAC Group in such manner as our board of directors deems fair and equitable to all holders of our ordinary shares. This could include, for example, allocating a portion of any cash dividend that might otherwise be paid on the LiLAC Ordinary Shares to the Liberty Global Group. It could also include retaining an interest for the Liberty Global Group in connection with a distribution of shares in a subsidiary of the LiLAC Group that holds assets and businesses attributed to the LiLAC Group to holders of LiLAC Ordinary Shares. In connection with any transaction in which economic benefits are conferred on the LiLAC Ordinary Shares at such time as the Liberty Global Group holds an inter-group interest in the LiLAC Group, our board of directors may decide that one appropriate way to take into account such a transaction is through the participation in such transaction by the Liberty Global Group or an adjustment to any such interest.

In recognizing any inter-group interest or making any adjustments to any such inter-group interest, or in reflecting any inter-group interest in connection with any transaction, our board of directors may consider any factors that it deems appropriate, including without limitation the tax effects of any event or transaction on the Liberty Global Group and the LiLAC Group or the use of tax benefits. All determinations that our board of directors makes in recognizing, adjusting or taking into account inter-group interests will be final and binding on all holders of our ordinary shares.

Inter-Group Contracts. The terms of all current and future material transactions, relationships and other matters between the groups, including those as to which the groups may have potentially divergent interests, will be determined in a manner considered in good faith by our board of directors to promote the success of the company for the benefit of our shareholders as a whole.

Review of Corporate Opportunities

In cases where a material corporate opportunity may appropriately be viewed as one that could be pursued by either the Liberty Global Group or the LiLAC Group, or by both, our board of directors may, independently or at the request of management, review the allocation of that corporate opportunity to one of, or between, the two groups. This includes corporate opportunities that may present themselves in Latin America, Europe or elsewhere in the world. In accordance with English law, our board of directors will make its determination with regard to the allocation of any such opportunity and the benefit of such opportunity in accordance with their duty to act in good faith in the manner in which they consider will promote the success of the company for the benefit of our shareholders as a whole. Among the factors that our board of directors may consider in making this allocation are:

 

   

whether a particular corporate opportunity is principally related or complementary to the principal focus or strategy of the LiLAC Group;

 

   

the financial resources and capital structure of each group;

 

   

whether one group, because of operational expertise, will be better positioned to undertake the corporate opportunity than the other group; and

 

   

existing contractual agreements and restrictions.

 

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Financial Statements; Allocation Matters

We will present consolidated financial statements in accordance with generally accepted accounting principles in the U.S., consistently applied. We will also provide consolidating financial statement information that will show the attribution of our assets, liabilities, revenue, expenses and cash flows to each of the Liberty Global Group and the LiLAC Group.

Consolidating financial statement information will also include attributed portions of our debt, interest, corporate overhead and costs of administrative shared services and taxes. We will make these allocations for the purpose of preparing such information; however, holders of Liberty Global Ordinary Shares and LiLAC Ordinary Shares will continue to be subject to all of the risks associated with an investment in our company as a whole.

In general, corporate overhead will be attributed to each group based primarily on the estimated percentage of time spent by corporate personnel providing services for each group. Corporate overhead includes costs of personnel and employee benefits, legal, accounting and auditing, insurance, investor relations and shareholder services and services related to the company’s board of directors. We will attribute in a similar manner a portion of costs of administrative shared services, such as information technology services. Where determinations based on use alone are not practical, we will use other methods and criteria that we believe are equitable and that provide a reasonable estimate of the cost attributable to each group.

Taxes

The tax sharing policy described below, which will become effective on the date that we distribute the LiLAC Ordinary Shares, may be changed in future periods at the discretion of the board of directors of Liberty Global.

Liberty Global’s tax assets, liabilities, benefits or expenses (tax attributes) generally are expected to be allocated to the Liberty Global Group and the LiLAC Group based on the tax attributes of the legal entities attributed to each of the groups. Nevertheless, to the extent that Liberty Global management concludes that the actions or results of one group give rise to changes in the tax attributes of the other group, the change in those tax attributes will generally be allocated to the group whose actions or results gave rise to such changes. Similarly, in cases where legal entities in one group join in a common tax filing with members of the other group, changes in the tax attributes of the group that includes the filing entity that are the result of the actions or financial results of one or more members of the other group are expected to be allocated to the group that does not include the filing entity. In addition, the allocation of any taxes and losses resulting from the ultimate tax treatment of Liberty Global tax attributes related to the issuance of the LiLAC Ordinary Shares are expected to be allocated in proportion to each group’s respective number of “liquidation units.” Liquidation units will be allocated to each Liberty Global Ordinary Share and each LiLAC Ordinary Share, respectively, in proportion to the relative market value of a Liberty Global Class C Ordinary Share and a LiLAC Class C Ordinary Share, respectively, based on their respective volume weighted average price over the 20 trading-day period commencing shortly after the commencement of ordinary-course (regular-way) trading of the LiLAC Ordinary Shares. Intercompany payables and receivables that are recorded in connection with the allocation of tax attributes from one group to another are expected to be non-interest bearing and are expected to be cash settled annually within 90 days following the filing of the relevant tax return.

Accounting Treatment

The Transaction, if completed, would not cause any accounting related adjustments. Following the Bonus Issue, we will disclose earnings per share information for each of the Liberty Global Group and the LiLAC Group based on the earnings attributable to each group and the weighted average shares (both outstanding and on a fully diluted basis) of each group.

 

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Stock Exchange Listings

We have applied to list the LiLAC Class A Ordinary Shares and LiLAC Class C Ordinary Shares on Nasdaq under the symbols “LILA,” and “LILAK,” respectively. Although no assurance can be given, we currently expect that the LiLAC Class B Ordinary Shares will trade on the OTC Bulletin Board under the symbol “LILAB.” The Liberty Global Class A Ordinary Shares, the Liberty Global Class B Ordinary Shares and the Liberty Global Class C Ordinary Shares will continue to trade on Nasdaq under the symbols “LBTYA,” “LBTYB” and “LBTYK,” respectively.

Share Transfer Agent and Registrar

Computershare Trust Company, N.A. is the transfer agent and registrar for all classes of our ordinary shares.

Issuance Mechanics and U.K. Stamp Duty

Upon issuance in the Transaction, it is anticipated that the LiLAC Ordinary Shares (other than LiLAC Ordinary Shares issued in respect of Liberty Global Ordinary Shares that are not held through the facilities of the Depository Trust Company as of the bonus issue record date) may initially be issued to one or more nominees for a non-EU issuer of depositary receipts and subsequently transferred to, and held through the facilities of, the Depository Trust Company. Any such depositary receipts would be cancelled in connection with the transfer of the shares to the Depository Trust Company or its nominee. A holder whose LiLAC Ordinary Shares are not held through the facilities of the Depository Trust Company as of the bonus issue record date, whether at the election of that holder or otherwise, should note that transfers of or agreements to transfer LiLAC Ordinary Shares which are not held through the facilities of the Depository Trust Company system will generally attract a charge to U.K. stamp duty and/or U.K. stamp duty reserve tax.

Recommendation of the Board of Directors

Liberty Global’s board of directors has unanimously approved the Transaction Proposals and believes that their adoption is in the best interests of Liberty Global and its shareholders, having considered the interests of the company’s stakeholders. Accordingly, the Liberty Global board unanimously recommends that the holders of Liberty Global Ordinary Shares vote in favor of each of the Transaction Proposals on which they are entitled to vote at the General Meeting and the applicable Class Meetings.

For the complete text of the resolutions comprising the Transaction Proposals, see Annexes A through D to this proxy statement/prospectus. Liberty Global’s board of directors unanimously recommends a vote “FOR” each of the relevant resolutions.

 

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MATERIAL TAX CONSEQUENCES OF THE TRANSACTION

The discussion under the caption “— Material U.K. Tax Consequences” below addresses various U.K. income tax and corporation tax consequences with respect to the Transaction.

The discussion under the caption “— Material U.S. Federal Income Tax Consequences” below addresses the material U.S. federal income tax consequences with respect to the Transaction.

The discussion below is for general purposes only and is not a substitute for your own analysis of the tax consequences with respect to the Transaction. We urge you to consult your own tax advisor regarding the U.K., U.S. (federal, state and local) and other non-U.K. or U.S. tax considerations for these matters in light of your particular circumstances.

Material U.K. Tax Consequences

The following discussion, subject to the limitations set forth below, describes the material U.K. tax consequences relevant to the Transaction. The following paragraphs are intended as a general guide to current U.K. tax law and HMRC published practice applying as at the date of this document (both of which are subject to change at any time, possibly with retroactive effect) relating to the Transaction. They do not constitute legal or tax advice to any particular holder and do not purport to be a complete analysis of all U.K. tax considerations relating to the Transaction. They relate only to persons who are absolute beneficial owners of Liberty Global Ordinary Shares and, after the Transaction, will be absolute beneficial owners of Liberty Global Ordinary Shares and LiLAC Ordinary Shares. These paragraphs may not relate to certain classes of holders, such as persons who are connected with Liberty Global, insurance companies, charities, collective investment schemes, pension schemes, brokers or dealers in securities or persons who hold Liberty Global Ordinary Shares and/or LiLAC Ordinary Shares otherwise than as an investment, persons who have (or are deemed to have) acquired their Liberty Global Ordinary Shares and/or LiLAC Ordinary Shares by virtue of an office or employment or who are or have been officers or employees of Liberty Global or any of its affiliates and individuals who are subject to U.K. taxation on the remittance basis. These paragraphs do not describe all of the circumstances in which holders may benefit from an exemption or relief from U.K. taxation.

Holders of Liberty Global Ordinary Shares are urged to consult their own tax advisors as to the U.K. tax treatment of the Transaction and the ownership of LiLAC Ordinary Shares in light of their particular situation. In particular, non-U.K. resident or domiciled persons are advised to consider the potential impact of any relevant double tax agreements.

U.K. Tax Implications of the Transaction

It is a non-waivable condition to the completion of the Transaction that we receive the opinion of Shearman & Sterling (London) LLP, dated as of the date of the Transaction, to the effect that, under current U.K. income tax and corporation tax law and HMRC published practice:

 

   

the Transaction should be treated as a “reorganisation” within the meaning of Section 126 of the U.K. Taxation of Chargeable Gains Act 1992;

 

   

the LiLAC Ordinary Shares received in the Transaction should be treated as shares in Liberty Global for U.K. tax purposes;

 

   

no gain or loss should be recognized by Liberty Global (including its subsidiaries) as a result of the issuance of the LiLAC Ordinary Shares; and

 

   

holders of Liberty Global Ordinary Shares should not recognize any taxable income, gain or loss as a result of the issuance of the LiLAC Ordinary Shares (except, potentially, with respect to cash received in lieu of fractional LiLAC Ordinary Shares).

 

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The opinion of Shearman & Sterling (London) LLP will be conditioned upon the accuracy of the statements, representations and covenants provided to counsel by Liberty Global, and assumptions upon which the opinion is based and will be subject to the conditions, limitations, and qualifications referenced in the opinion and in this discussion under the heading “— Material U.K. Tax Consequences.” If any of the statements, representations, covenants or assumptions is or becomes inaccurate or is not complied with, in all material respects, then the opinion (and the discussion below) may no longer be valid and the U.K. tax consequences of the Transaction could differ from those described below and in the opinion, and there could be adverse tax consequences for Liberty Global (or certain of its subsidiaries) and its shareholders. The discussion below assumes that the opinion of Shearman & Sterling (London) LLP is delivered to us on the date of the Transaction, as described above, and that the treatment of the Transaction is respected. Opinions of counsel are not binding on HMRC or a court. We are not aware of any other English company that has issued shares intended to track the performance of a particular business or group of businesses within the overall company, giving rise to a lack of directly applicable precedent in relation to U.K. tax. There can be no assurance, therefore, that HMRC will not take a contrary position to the conclusions expressed in such opinion or that a court will not agree with a contrary position of HMRC in the event of litigation.

Chargeable Gains

For the purposes of U.K. capital gains tax and corporation tax on chargeable gains (CGT), the issue of LiLAC Ordinary Shares of a certain class to a holder of Liberty Global Ordinary Shares in respect of, and in proportion to, such holder’s Liberty Global Ordinary Shares of the equivalent class pursuant to the Transaction should constitute a “reorganisation” of Liberty Global’s share capital. On that basis, a holder of Liberty Global Ordinary Shares should not be treated as making a disposal of any part of the existing holding of Liberty Global Ordinary Shares of the relevant class by reason of receiving LiLAC Ordinary Shares of the equivalent class pursuant to the Transaction and, therefore, no liability to CGT should arise in respect of the issue of LiLAC Ordinary Shares pursuant to the Transaction. For the purposes of CGT, a holder’s Liberty Global Ordinary Shares and LiLAC Ordinary Shares will be treated as the same asset, acquired at the time such holder acquired their Liberty Global Ordinary Shares. As a result of the Transaction, the original base cost that a holder of Liberty Global Ordinary Shares of a certain class has in such Liberty Global Ordinary Shares will be apportioned between such Liberty Global Ordinary Shares and the LiLAC Ordinary Shares of the equivalent class that such holder receives pursuant to the Transaction by reference to their respective market values on the day on which the LiLAC Ordinary Shares are admitted to trading on Nasdaq.

The proceeds on the sale, on behalf of holders of Liberty Global Ordinary Shares, of fractional entitlements to LiLAC Ordinary Shares of a certain class pursuant to the Transaction will be treated as a capital distribution to such holder by Liberty Global, in which case such holder will be treated as disposing of a part of such holder’s Liberty Global Ordinary Shares of the equivalent class and such holder may, depending on the particular circumstances, incur a liability to CGT. However, if the proceeds are “small” as compared with the market value (at the date of the sale of the fractional entitlement to the LiLAC Ordinary Shares) of the relevant holding of Liberty Global Ordinary Shares, the holder should not generally be treated as making a disposal for the purposes of CGT. The proceeds will instead reduce the base cost of the relevant holding of Liberty Global Ordinary Shares used to compute any chargeable gain or allowable loss on a subsequent disposal. This treatment will not apply where such proceeds are greater than the base cost of the relevant holding of Liberty Global Ordinary Shares.

The current practice of HMRC is generally to treat proceeds as “small” where either (i) the proceeds do not exceed five percent of the market value (at the date of the sale of the fractional entitlement to the LiLAC Ordinary Shares) of the relevant holding of Liberty Global Ordinary Shares or (ii) the amount of the proceeds is £3,000 or less, regardless of whether the five percent test is satisfied.

You should be aware that the Voting Rights Proposal is not conditional on the Transaction Proposals. In the event that the Voting Rights Proposal is approved by our shareholders, and the Transaction Proposals are not so approved and implemented, a holder of Liberty Global Ordinary Shares should not be treated as making a

 

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disposal of any part of the existing holding of Liberty Global Ordinary Shares and, therefore, no liability to CGT should arise by reason thereof.

Tax on Income

The issue of LiLAC Ordinary Shares to a holder in respect of that holder’s Liberty Global Ordinary Shares pursuant to the Transaction should not be treated as giving rise to a distribution for U.K. tax purposes which would be chargeable to U.K. income tax or corporation tax on income. This is on the basis (which Liberty Global expects to be the case) that, at the time of the issue of LiLAC Ordinary Shares, Liberty Global has and applies sufficient share premium, representing new consideration for prior share issues, to pay up the nominal value of the LiLAC Ordinary Shares so issued and which has not been taken into account so as to enable a distribution to be treated as a repayment of share capital.

Status of LiLAC Ordinary Shares

The LiLAC Ordinary Shares received in the Transaction should be treated as shares in Liberty Global for U.K. tax purposes.

Stamp Duty and Stamp Duty Reserve Tax

We anticipate that holders of Liberty Global Ordinary Shares should not incur any charge to U.K. stamp duty or U.K. stamp duty reserve tax on the issue of the LiLAC Ordinary Shares pursuant to the Transaction.

You should be aware that certain features of the LiLAC Ordinary Shares provide for the conversion of such shares or the distribution of cash or other property in respect of such shares in the future. These transactions may or may not have U.K. tax consequences to you depending on the type of transaction, your particular situation and applicable U.K. tax law at the time of the transaction. The opinion of Shearman & Sterling (London) LLP will be dated as of the date of the Transaction and will be based on the terms of the LiLAC Ordinary Shares and the Liberty Global Shares at such time and will not reflect or take into account any factual matters, transactions or other developments that could potentially arise subsequent to that date. Holders of Liberty Global Ordinary Shares are urged to consult their own tax advisors regarding the U.K. tax consequences of the ownership of the LiLAC Ordinary Shares, including in light of their particular situation and the potential tax consequences of any future transactions in respect of or relating to the LiLAC Ordinary Shares or other  shares of Liberty Global.

Material U.S. Federal Income Tax Consequences

The following discussion, subject to the limitations set forth below, describes the material U.S. federal income tax consequences relevant to the Transaction. This discussion constitutes the opinion of Shearman & Sterling LLP, insofar as it relates to matters of U.S. federal income tax law and legal conclusions with respect to those matters. The opinion of Shearman & Sterling LLP is conditioned upon the accuracy of the statements, representations, covenants, and assumptions upon which the opinion is based and is subject to the conditions, limitations and qualifications referenced below and in the opinion. Opinions of counsel are not binding on the IRS or a court. The IRS has announced that it will not issue private letter rulings on the U.S. federal income tax characterization of stock with certain features that are similar to the LiLAC Ordinary Shares and Liberty Global will not request a private letter ruling from the IRS in respect of the Transaction. There can be no assurance, therefore, that the IRS will not take a contrary position to the conclusions expressed in such opinion or that a court will not agree with a contrary position of the IRS in the event of litigation.

This discussion is based upon the Code, Treasury Regulations promulgated thereunder (the Treasury Regulations), judicial and administrative interpretations thereof and the Convention Between the United States of America and the United Kingdom for the Avoidance of Double Taxation with respect to Taxes on Income (the

 

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U.S.-U.K. Tax Treaty), each as of the date of this proxy statement/prospectus, all of which are subject to change or differing interpretations at any time, possibly with retroactive effect. In particular, changes in the Code or applicable Treasury Regulations could adversely affect the U.S. federal income tax treatment of shares with certain features that are similar to the LiLAC Ordinary Shares. Any future legislation, Treasury Regulation or other guidance could be enacted or promulgated so as to apply retroactively to the Transaction. Any such changes could materially affect the continuing validity of this discussion.

This discussion addresses only shareholders who hold their Liberty Global Ordinary Shares as capital assets and will, after the Transaction, hold Liberty Global Ordinary Shares and LiLAC Ordinary Shares as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address any aspects of U.S. taxation other than U.S. federal income taxation, is not a complete analysis or listing of all potential tax consequences with respect to the Transaction and does not address all potential tax consequences that may be relevant to Liberty Global shareholders in light of their particular circumstances. Further, this discussion does not address holders of Liberty Global Ordinary Shares who are subject to special treatment under U.S. federal income tax laws, such as:

 

   

tax-exempt organizations;

 

   

banks, financial institutions and insurance companies;

 

   

regulated investment companies;

 

   

dealers in stocks and securities;

 

   

traders or investors in Liberty Global Ordinary Shares who elect the mark-to-market method of accounting for such shares;

 

   

persons who received Liberty Global Ordinary Shares from the exercise of employee share options or otherwise as compensation;

 

   

persons who hold Liberty Global Ordinary Shares in a tax-qualified retirement plan, individual retirement account or other qualified savings account;

 

   

shareholders who hold their shares as part of a hedge, straddle or a constructive sale or conversion transaction or other risk reduction or integrated investment transaction;

 

   

certain U.S. expatriates;

 

   

entities taxable as a partnership for U.S. federal income tax purposes and owners thereof; and

 

   

individuals who are not citizens or residents of the United States, foreign corporations and other foreign entities.

This discussion also does not address the effect of any U.S. state or local or foreign tax laws that may apply or the application of the U.S. federal estate and gift tax or the alternative minimum tax. In addition, this discussion does not address the U.S. federal income tax consequences of the Transaction to current holders of options, warrants or rights to acquire shares of our stock.

Holders of Liberty Global Ordinary Shares are urged to consult their own tax advisors as to the U.S. federal income tax treatment of the Transaction and the ownership of LiLAC Ordinary Shares in light of their particular situation, as well as the applicability of any U.S. federal estate and gift, U.S. state or local or foreign tax laws to which you may be subject.

 

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U.S. Federal Income Tax Implications of the Transaction

It is a non-waivable condition to the completion of the Transaction that we receive the opinion of Shearman & Sterling LLP, dated as of the date of the Transaction, to the effect that, under current U.S. federal income tax law:

 

   

the Transaction should be treated as a reorganization within the meaning of Section 368(a) of the Code;

 

   

the LiLAC Ordinary Shares received in the Transaction should be treated as stock of Liberty Global for U.S. federal income tax purposes;

 

   

no gain or loss should be recognized by Liberty Global (including its subsidiaries) as a result of the issuance of the LiLAC Ordinary Shares;

 

   

holders of Liberty Global Ordinary Shares should not recognize any taxable income, gain or loss as a result of the issuance of the LiLAC Ordinary Shares (except with respect to cash received in lieu of fractional LiLAC Ordinary Shares); and

 

   

the LiLAC Ordinary Shares should not constitute “Section 306 stock” within the meaning of Section 306(c) of the Code.

The opinion of Shearman & Sterling LLP will be conditioned upon the accuracy of the statements, representations and covenants provided to counsel by Liberty Global, and assumptions upon which the opinion is based and will be subject to the conditions, limitations, and qualifications referenced in the opinion and in this discussion under the heading “— Material U.S. Federal Income Tax Consequences.” If any of the statements, representations, covenants or assumptions is or becomes inaccurate or is not complied with, in all material respects, or the rights with respect to the LiLAC Ordinary Shares are varied in the future by Liberty Global in a manner that is inconsistent with their intended U.S. federal income tax treatment as stock of Liberty Global, then the opinion (and the discussion below) may no longer be valid and the U.S. federal income tax consequences of the Transaction ultimately could differ from those described below and in the opinion, and there could be adverse tax consequences for Liberty Global (or certain of its subsidiaries) and its shareholders. Please see the discussion below under the heading “— No IRS Ruling Will Be Requested” for further information.

Assuming that the opinion of Shearman & Sterling LLP is delivered to us on the date of the Transaction, as described above, and that the treatment of the Transaction is respected, then for holders of Liberty Global Ordinary Shares:

 

   

your aggregate tax basis in your Liberty Global Ordinary Shares immediately following the Transaction will equal a portion of your aggregate tax basis in your Liberty Global Ordinary Shares immediately prior to the Transaction based on the relative fair market values of your Liberty Global Ordinary Shares and LiLAC Ordinary Shares immediately following the Transaction;

 

   

your aggregate tax basis in your LiLAC Ordinary Shares, including any fractional shares deemed received, will equal a portion of your aggregate tax basis in your Liberty Global Ordinary Shares immediately prior to the Transaction based on the relative fair market values of your Liberty Global Ordinary Shares and LiLAC Ordinary Shares immediately following the Transaction;

 

   

the holding period of your Liberty Global Ordinary Shares and LiLAC Ordinary Shares will include the holding period of the Liberty Global Ordinary Shares held by you immediately prior to the Transaction; and

 

   

no gain or loss will be recognized by us (including any of our subsidiaries) in respect of the issuance of the LiLAC Ordinary Shares.

If you have acquired different blocks of their Liberty Global Ordinary Shares at different times or at different prices, you should consult their tax advisors regarding the allocation of your aggregate tax basis among, and your holding period of, Liberty Global Ordinary Shares and LiLAC Ordinary Shares held immediately after the Transaction.

 

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If you receive any cash in lieu of fractional LiLAC Ordinary Shares, you generally will recognize gain or loss for U.S. federal income tax purposes, measured by the difference between the amount of cash received for such fractional shares and your tax basis in such fractional shares (determined as described above), which gain or loss will be capital gain or loss.

You should be aware that the Voting Rights Proposal is not conditional on the Transaction Proposals. In the event that the Voting Rights Proposal is approved by our shareholders and implemented, and the Transaction Proposals are not so approved and implemented, holders of Liberty Global Ordinary Shares should not recognize any gain or loss for U.S. federal income tax purposes by reason thereof.

No IRS Ruling Will Be Requested

We have not sought any private letter ruling from the IRS, and do not intend to seek any private letter ruling, relating to the Transaction. The IRS has announced that it will not issue private letter rulings on the U.S. federal income tax characterization of shares with certain features that are similar to the LiLAC Ordinary Shares. In addition, there are no Code provisions, Treasury Regulations, court decisions, or published rulings of the IRS directly addressing the U.S. federal income tax characterization of shares with certain features that are similar to the LiLAC Ordinary Shares. Thus, the U.S. federal income tax treatment of the Transaction is not entirely certain and it is possible that the IRS could successfully assert that the Transaction could result in material adverse U.S. federal income tax consequences to you and/or us (including certain of our subsidiaries).

If the LiLAC Ordinary Shares represent property other than stock of Liberty Global for U.S. federal income tax purposes, the receipt of LiLAC Ordinary Shares by you in the Transaction may be treated as a fully taxable dividend up to an amount equal to the fair market value of such shares. Furthermore, certain Liberty Global U.S. subsidiaries could recognize significant taxable income as a result of the Transaction due to deemed transfers with respect to the assets of the LiLAC Group.

Pursuant to the management and allocation policies described under “The Transaction Proposals — Management and Allocation Policies,” the cash for the payment of any taxes imposed on the Liberty Global U.S. subsidiaries generally would be drawn proportionately from funds attributed to the Liberty Global Group and the LiLAC Group based upon the relative market capitalization of the Liberty Global Ordinary Shares and LiLAC Ordinary Shares (in each case determined based upon the volume weighted average price for the Liberty Global Class A Ordinary Shares and the LiLAC Class A Ordinary Shares, as applicable, over the first three trading days following the commencement of ordinary-course (regular-way) trading of the LiLAC Ordinary Shares after the Transaction, multiplied by the number of outstanding Liberty Global Ordinary Shares or LiLAC Ordinary Shares, as applicable).

In addition to the foregoing, there is a risk that the IRS could successfully assert that the LiLAC Ordinary Shares are “Section 306 stock,” within the meaning of Section 306(c) of the Code. Shares will be treated as Section 306 stock if, among other requirements, the shares are not “not common stock” within the meaning of Section 306(c)(1)(B) of the Code. The IRS has publicly ruled that shares are other than common stock, for this purpose, if the shares do not participate in corporate growth of the issuing corporation to any significant extent. There are no Code provisions, Treasury Regulations, court decisions or published rulings of the IRS directly addressing whether shares with certain features that are similar to the LiLAC Ordinary Shares would constitute Section 306 stock.

In general, if the LiLAC Ordinary Shares constitute Section 306 stock, then, except as provided below with respect to dispositions that completely terminate your interest in us, the amount realized by you (without reduction for your tax basis in such shares) on a subsequent taxable disposition of such shares:

 

   

that is a redemption would be dividend income to the extent of Liberty Global’s available earnings and profits (as determined for U.S. federal income tax purposes); or

 

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that is other than a redemption would be ordinary income to the extent that your earlier deemed receipt or receipt in the Transaction would have been treated as a dividend if Liberty Global had distributed cash in lieu of such shares in the Transaction.

Any excess of the amount realized from a subsequent taxable disposition over (i) the amount treated as ordinary income or dividend income plus (ii) the tax basis of the stock will be treated as capital gain. Except as provided below, no loss may be recognized on the disposition of Section 306 stock.

Under current U.S. federal income tax law, non-corporate holders that satisfy certain holding period and other requirements will be subject to tax on the above dividend income and ordinary income at the same rates that apply to long-term capital gains.

No amount realized on the disposition of Section 306 stock generally will be treated as ordinary income or dividend income if the disposition completely terminates your entire actual and constructive share ownership interest (as defined in the Code) in Liberty Global. Moreover, the limitation on the recognition of loss, if any, generally will not apply in the case of such a complete termination.

You should also be aware that the U.S.-U.K. Tax Treaty contains a provision that denies certain treaty benefits to a U.K. resident company if (i) the U.K. resident company has a class of shares outstanding that entitles holders to a disproportionately larger portion of the U.K. resident company’s income, profit or gain derived from the United States, and (ii) 50% or more of the U.K. resident company’s shares (by vote and value) are held by persons not entitled to benefits under the U.S.-U.K. Tax Treaty or equivalent benefits under certain other income tax treaties. If applicable, treaty benefits generally would be denied to the U.K. resident company based on the excess portion of the U.S. income, profit or gain for which the holders of such class of shares are entitled. In general, substantially all of Liberty Global’s non-U.S. operations (including the LiLAC Group operations) are held through U.S. subsidiaries. Liberty Global, however, does not have significant income, profit or gain from U.S. operations. Thus, Liberty Global should not be viewed as having significant income, profit or gain derived from the United States for purposes of this provision of the U.S.-U.K. Tax Treaty.

Passive Foreign Investment Company Status

U.S. holders of Liberty Global Ordinary Shares and LiLAC Ordinary Shares could have adverse U.S. federal income tax consequences if, at any relevant time, Liberty Global was “a passive foreign investment company” or “PFIC” for U.S. federal income tax purposes.

For U.S. federal income tax purposes, a foreign corporation is classified as a PFIC for any taxable year if either (i) 75% or more of its gross income is “passive income” (as defined for such purposes) or (ii) the average percentage of assets held by such corporation which produce passive income or which are held for the production of passive income is at least 50%. For purposes of applying the tests in the preceding sentence, the foreign corporation is deemed to own its proportionate share of the assets, and to receive directly its proportionate share of the income, of any other corporation of which the foreign corporation owns, directly or indirectly, at least 25% (by value) of the stock. In addition, a “start-up” exception provides that a newly-formed foreign corporation will not be treated as a PFIC even if it meets the passive income and asset tests described above for its first taxable year so long as, in general, the foreign corporation is not expected to and actually does not meet such tests for any of the following two taxable years.

In connection with the transactions pursuant to which Liberty Global became the publicly-held parent company of the successors by merger of Liberty Global, Inc. and Virgin Media Inc., Liberty Global may have had significant passive income. Liberty Global believes, however, that it should not be a PFIC, including taking into account the start-up exception. The tests for determining PFIC status are applied annually and it is difficult to accurately predict future income and assets relevant to this determination. Accordingly, Liberty Global cannot assure U.S. holders that Liberty Global is not or will not become a PFIC. If Liberty Global should determine that

 

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it is a PFIC, it will attempt to notify U.S. holders, although there can be no assurance that it will be able to do so in a timely and complete manner. If Liberty Global was to be treated as a PFIC, then, unless a U.S. holder elects to be taxed annually on a mark-to-market basis with respect to Liberty Global Ordinary Shares, gain realized on any sale or other disposition of any such shares and certain distributions with respect to any such shares could be subject to additional U.S. federal income taxes, plus an interest charge on certain taxes treated as having been deferred under the PFIC rules. In addition, dividends that a U.S. holder receives from Liberty Global would not be eligible for the reduced U.S. federal income tax rates applicable to certain dividends received from qualified foreign corporations if Liberty Global is treated as a PFIC with respect to such U.S. holder, either in the taxable year of the dividend or the preceding taxable year, but instead would be subject to U.S. federal income tax rates applicable to ordinary income.

You should be aware that certain features of the LiLAC Ordinary Shares provide for the conversion of such shares or the distribution of cash or other property in respect of such shares in the future. These transactions may or may not have U.S. federal income tax consequences to you depending on the type of transaction, your particular situation and applicable U.S. federal income tax law at the time of the transaction. You should also be aware that, as described in this proxy statement/prospectus, the Articles provide Liberty Global with the ability under certain circumstances to modify the terms of the LiLAC Ordinary Shares and/or issue additional shares that may modify or otherwise affect the terms of the LiLAC Ordinary Shares. In the event that any such changes or additional share issuances vary the rights of the LiLAC Ordinary Shares in the future in a manner that is inconsistent with their intended U.S. federal income tax treatment as stock of Liberty Global, the U.S. federal income tax consequences of the Transaction ultimately could be different from those described above and in the opinion, and there could be adverse tax consequences for Liberty Global (or certain of its subsidiaries) and its shareholders. The opinion of Shearman & Sterling will be dated as of the date of the Transaction and will be based on the terms of the LiLAC Ordinary Shares and the Liberty Global Shares at such time and will not reflect or take into account any factual matters, transactions or other developments that could potentially arise subsequent to that date. Holders of Liberty Global Ordinary Shares are urged to consult their own tax advisors regarding the U.S. federal income tax and other tax consequences of the ownership of the LiLAC Ordinary Shares, including in light of their particular situation and the potential tax consequences of any future transactions in respect of or relating to LiLAC Ordinary Shares or other shares of Liberty Global.

Information Reporting and Backup Withholding

U.S. holders that own at least 5% (by vote or value) of the Liberty Global Ordinary Shares immediately prior to the Transaction will be required to file with the IRS certain information statements that apply to reorganizations under Section 368(a) of the Code. Holders should consult their own tax advisors about the information reporting requirements that could be applicable to the Transaction and any potential penalties associated with a failure to satisfy such requirements.

In general, information reporting to the IRS and backup withholding may apply to your receipt of any cash in lieu of fractional LiLAC Ordinary Shares. Backup withholding (currently at a rate of 28%) may apply to “reportable payments” if you fail to provide a correct taxpayer identification number (TIN) and certain other information, fail to provide a certification of exempt status or fail to report your full dividend and interest income. Backup withholding is not an additional tax; any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against a holder’s U.S. federal income tax liability provided the required information is timely furnished to the IRS. In addition, the IRS may impose a penalty upon any taxpayer that fails to provide the correct TIN.

 

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THE VOTING RIGHTS PROPOSAL

Pursuant to the Voting Rights Proposal, we are seeking the approval of an amendment to the provisions in our articles of association governing the variation of rights attached to classes of our shares, both by vote of the Liberty Global Class A and Class B Ordinary Shares, voting together as a single class at the General Meeting on the Voting Rights Amendment Proposal, and by separate class votes at each of the Class Meetings on the Class Voting Rights Proposals.

According to Article 18 of our current articles (renumbered as Article 19 in our new articles if the Transaction is implemented), rights attached to a class of our shares may only be varied: (a) in such manner (if any) as may be provided by those rights; (b) with the written consent of the holders of three-quarters in nominal amount of the issued shares of that class; or (c) by a special resolution passed at a separate meeting of the holders of that class. In addition, under English law, unless the articles provide otherwise, even if the rights of different classes of shares are varied in substantially the same manner, each affected class of shares votes separately on such a variation.

The Voting Rights Proposal, if approved, would amend Article 18 (renumbered as Article 19 in our new articles if the Transaction is implemented) such that if the rights attached to more than one class of our shares are, in the good faith opinion of three quarters of our board of directors (which shall be final and binding on all shareholders) varied in the same, or substantially the same, manner, such shares will together comprise a single class for purposes of the special resolution required for the variation of their rights. The Voting Rights Proposal would also revise Article 70 (renumbered as Article 71 in our new articles if the Transaction is implemented) to provide that when voting together as a single class in this manner, each affected class will have the same number of votes per share that it would have in a general meeting of the company, except that if the affected classes comprise only shares that have no voting rights in a general meeting, they will have one vote per share.

If the Voting Rights Proposal is approved, with respect to any matter that varies the rights attached to several classes of our shares in substantially the same manner, holders of any one of the affected classes will no longer be entitled to vote on the variation of their rights separately from the other affected class or classes. This could mean that with respect to any variation of their rights holders of one or more of the affected classes could be outvoted by holders of the other affected class or classes. Some of the affected classes may have a greater number of votes per share than the other affected classes. If a matter varies the rights attached to any of our Class C Ordinary Shares in substantially the same manner as the rights attached to any other class or classes of our shares and Class C ordinary shares therefore vote together with the other affected class or classes, holders of Class C ordinary shares will always be outvoted by holders of the other affected class or classes because Class C Ordinary Shares have no voting rights in a general meeting of the company. If we create LiLAC Ordinary Shares pursuant to the Transaction and the Voting Rights Proposal is approved, on a matter that varies the rights attached to LiLAC Ordinary Shares in substantially the same manner as rights attached to Liberty Global Ordinary Shares, holders of LiLAC Ordinary Shares and Liberty Global Ordinary Shares would vote together as one class. Given the greater number of Liberty Global Ordinary Shares, holders of Liberty Global Ordinary Shares would generally outvote holders of LiLAC Ordinary Shares on such a matter.

We believe that, as modified by the proposed amendment, the provisions in our articles on voting would more closely resemble the voting rules that applied to our Series A, Series B and Series C common stock prior to our combination with Virgin Media in 2013. In addition, the modified provisions would allow our board of directors to implement changes to our articles that it concludes are in the best interests of the company and our shareholders without undergoing the cost, expense and risk of seeking the separate approval of each of our classes if the rights attached to our shares are varied in substantially the same manner for all classes. For example, if the Voting Rights Proposal is approved, we may be able to create a new class of tracking shares in the future without separate approvals of each class of our shares, assuming the tracking shares vary the rights attached to our other shares in substantially the same manner for all classes.

 

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Attached to this proxy statement/prospectus as Annex I is the full text of the relevant provisions of our articles as they would be modified by the proposed amendment. The general description above is qualified in its entirety by reference to the full text of the amendment in Annex I to this proxy statement/prospectus. If the Voting Rights Proposal receives all requisite approvals, the proposed amendment will become effective as soon as the last one of these approvals has been received.

Recommendation of the Board of Directors

Liberty Global’s board of directors has unanimously approved the Voting Rights Proposal and believes that its adoption is in the best interests of Liberty Global and its shareholders, having considered the interests of the company’s stakeholders. Accordingly, the Liberty Global board unanimously recommends that the holders of Liberty Global Ordinary Shares vote in favor of each of the resolutions comprising the Voting Rights Proposal on which they are entitled to vote at the General Meeting and the applicable Class Meetings.

For the full text of the resolutions comprising the Voting Rights Proposal, see Annexes A through D to this proxy statement/prospectus. Liberty Global’s board of directors unanimously recommends a vote “FOR” the approval of each of the relevant resolutions.

 

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THE SECURITIES PURCHASE PROPOSALS

Approval of Buy-Back Agreement

Under the Companies Act, we, like other U.K. companies, are prohibited from purchasing our outstanding ordinary shares unless such purchase has been approved by a resolution of our shareholders. Shareholders may approve two different types of such share purchases: “on-market” purchases or “off-market” purchases. “On-market” purchases may only be made on a “recognized investment exchange,” as defined in section 693(5) of the Companies Act. This U.K. statutory definition does not include Nasdaq, which is the only exchange on which our shares are traded. As such, we may only conduct “off-market” purchases pursuant to a form of share repurchase contract which has been approved by our shareholders. Shareholder authorization for share purchases may only be for a maximum period of up to five years.

We are seeking approval of the Master Put/Call Agreement to be entered into with Goldman Sachs & Co. (the Share Buy-Back Agreement Proposal) through which some of our “off-market” share repurchases may be conducted. We are seeking approval to enter into a new agreement with Goldman Sachs & Co., which will apply for five years. The proposed Master Put/Call Agreement is substantially similar to the Master Put/Call Agreements that we currently have in place with several other investment banks. The Master Put/Call Agreement grants to Goldman Sachs & Co. the option to require the Company to purchase, and grants to the Company the option to require Goldman Sachs & Co. to sell, shares of the Company owned by Goldman Sachs & Co. in consideration of the payment by the Company to Goldman Sachs & Co. of an amount in cash which may include a premium over the price paid by Goldman Sachs & Co. for such shares. The Master Put/Call Agreement permits for multiple exercises of the options granted pursuant to it.

Under the Companies Act, any shares owned by the counterparty to the Buy-Back Agreement being voted upon cannot be counted towards determining whether or not the resolution approving the Buy-Back Agreement has been passed.

Approval of the forms of contract and counterparties is not an approval of the share repurchase program or the amount or timing of any repurchase activity. Liberty Global will continue to repurchase shares at its discretion in accordance with its previously disclosed Master Put/Call Agreements. There can be no assurance as to whether the Liberty Global will repurchase any of its shares or as to the amount of any such repurchases.

If the Master Put/Call Agreement with Goldman Sachs & Co. is not approved, we will continue to repurchase shares under our currently approved forms of contracts with other existing counterparties.

The Master Put/Call Agreement will be made available for inspection by our shareholders at the General Meeting.

Purchases of Securities from Directors

Section 190 of the Companies Act requires shareholder approval of, among other things, any arrangement under which we are to acquire (directly or indirectly) a substantial non-cash asset with a value exceeding £100,000, including the purchase of our ordinary shares or other securities of our company or any other company, from any of our directors, or a person “connected” with such a director, as defined in Section 252 of the Companies Act.

We are seeking authorization in respect of any arrangement under which Liberty Global, or any of its subsidiaries, purchases securities, directly or indirectly, from any of its directors (the Director Securities Purchase Proposal). Liberty Global could desire to purchase securities from its directors under various circumstances, including termination of directorship or employment, a repurchase in connection with a transaction our company seeks to enter into, tax, financial or estate planning for the director or other situations. Our directors presently include our CEO, and some of our directors have substantial share holdings. Reasons could arise for us to act with expediency, given the nature of our international businesses and our financing and M&A activity. As of the date of this proxy statement/prospectus, we have no arrangements, understandings or

 

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commitments to purchase any of our or our subsidiaries’ securities from any director of Liberty Global or any person connected (as determined by the Companies Act) with any such director.

The terms of any such arrangements we may enter into with our directors (including securities transactions), and the consideration therefore, would be determined based on then current market conditions or as negotiated between a director and our company and approved by the disinterested directors of the board. The disinterested directors may seek the advice of a financial advisor and counsel in assessing any proposed transaction.

For the complete text of the resolutions comprising the Securities Purchase Proposals, see the Notice of General Meeting attached as Annex  A to this proxy statement/prospectus.

Recommendation of the Board of Directors

Liberty Global’s board of directors has unanimously approved the Securities Purchase Proposals and believes that their adoption is in the best interests of Liberty Global and its shareholders, having considered the interests of the company’s stakeholders. Accordingly, the Liberty Global board unanimously recommends that the holders of Liberty Global Class A and Class B Ordinary Shares vote in favor of each of the Securities Purchase Proposals on which they are entitled to vote at the General Meeting.

For the full text of the resolutions comprising the Securities Purchase Proposals, see Annex A to this proxy statement/prospectus. Liberty Global’s board of directors unanimously recommends a vote “FOR” the approval of each of the relevant resolutions.

 

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THE VIRGIN MEDIA SHARESAVE PROPOSAL

On December 13, 2013, our board of directors approved the Liberty Global 2014 Incentive Plan (the 2014 Plan). Our shareholders approved the 2014 Plan and it became effective on March 1, 2014. The 2014 Plan provides for the grant of options, share appreciation rights, restricted shares, restricted share units, performance awards, cash awards or any combination of the foregoing, to eligible employees and independent contractors. The 2014 Plan also provides for the adoption of sub-plans under the 2014 Plan.

On July 28, 2014, the compensation committee of our board of directors approved the adoption of the Virgin Media Inc. 2014 Sharesave by Virgin Media Inc. (Virgin Media Sharesave) as a sub-plan to the 2014 Plan. The Virgin Media Sharesave provides U.K. resident employees of Liberty Global’s subsidiary Virgin Media Inc. and participating companies in the Virgin Media group (collectively, Virgin Media) with the opportunity to participate in a Save As You Earn (SAYE) option scheme by applying for options to purchase Liberty Global Class C Ordinary Shares with accumulated payroll deductions out of net pay held in an approved savings account. It is intended that the Virgin Media Sharesave will comply with and will be operated within the requirements of Schedule 3 to the U.K. Income Tax (Earnings & Pensions) Act 2003 (Schedule 3) so that the Virgin Media Sharesave qualifies as a Schedule 3 SAYE option scheme under the legislation. The Virgin Media Sharesave is comparable to an employee stock purchase plan or ESPP offered to employees by companies in the U.S.

In connection with the adoption of the Virgin Media Sharesave, the compensation committee of our board of directors recommended that the 2014 Plan be amended to permit the grant of options under the Virgin Media Sharesave with an exercise price per Liberty Global Class C Ordinary Share of not less than 80% of the fair market value per Liberty Global Class C Ordinary Share on the date of grant of such option. Currently options under the 2014 Plan may only be granted over Liberty Global Class C Ordinary Shares with an exercise price per Liberty Global Class C Ordinary Share of no less than the fair market value of Liberty Global Class C Ordinary Shares as of the date of grant. The purpose of the amendment to the 2014 Plan is to allow for the grant of options to acquire Liberty Global Class C Ordinary Shares to U.K. resident employees of Virgin Media with a discounted exercise price under the Virgin Media Sharesave. The amendment will not apply to other equity grants under the 2014 Plan.

We are requesting that our shareholders approve the amendment to the 2014 Plan at the General Meeting as part of our commitment to encourage our employees to have an interest in Liberty Global. We believe that providing U.K. resident Virgin Media employees with an opportunity to purchase Liberty Global Class C Ordinary Shares at a discount in a tax efficient manner through the Virgin Media Sharesave is in the best interests of our shareholders as it will encourage ownership of Liberty Global Class C Ordinary Shares by Virgin Media employees. We believe that share ownership enhances our ability to attract and retain highly qualified people capable of assuring Virgin Media’s growth, profitability and long-term success, which will also benefit Liberty Global.

A summary of the Virgin Media Sharesave is provided below.

Purpose

The purpose of the Virgin Media Sharesave is to provide U.K. resident Virgin Media employees a benefit in the form of options to acquire Liberty Global Class C Ordinary Shares. Virgin Media operated a similar tax favored SAYE plan for its U.K. resident employees before its acquisition by Liberty Global in 2013. Subject to shareholder approval of the amendment to the 2014 Plan at the special meeting, when the Virgin Media Sharesave is operated, eligible employees will be invited to apply for options to acquire Liberty Global Class C Ordinary Shares with an exercise price of not less than 80% of the fair market value of a Liberty Global Class C Ordinary Share on the date of grant.

 

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Eligible Employees

All U.K. resident employees of Virgin Media participating group companies who have been continuously employed for a minimum period of not more than five years, as determined by the board of directors of Virgin Media Inc. or a duly authorized committee of the board of directors of Virgin Media Inc. (Virgin Media Board), will be eligible to participate in the Virgin Media Sharesave. Over one third of the total number of Liberty Global’s worldwide employees are U.K. resident Virgin Media employees (approximately 13,600 employees as of September 30, 2014).

Shares Available for Issuance

The aggregate number of Liberty Global Class C Ordinary Shares that may be subject to future grants under the Virgin Media Sharesave is subject to the limits set out in Section 4.1 of the 2014 Plan. A maximum of 500,000 Liberty Global Class C Ordinary Shares have been allocated for the first Virgin Media Sharesave offer (which is expected to be in early 2015). To the extent that options are outstanding under the Virgin Media Sharesave, the number of ordinary shares over which awards can be granted under the 2014 Plan will be reduced accordingly.

Under the terms of the Virgin Media Sharesave, participants enter into an HMRC-approved savings contract under which they agree to make monthly savings deducted from their net salary over a period of three or five years (savings contracts must be for either 36 or 60 monthly contributions under the relevant legislation). Savings are held in pounds sterling. These sums are held in special savings accounts which are operated by an independent savings carrier. A tax-free bonus may be paid on maturity of the savings contract. A participant’s option can only be exercised to the extent possible using an amount equal to the proceeds of the related savings contract plus any tax-free bonus. Under current U.K. legislation, savings must be at least £5 per month and cannot exceed £500 per month. Within these statutory limits the Virgin Media Board can specify different maximum and minimum limits.

Administration

The Virgin Media Sharesave will be administered by the Virgin Media Board. If the Virgin Media Board decides to offer options at any time to eligible employees under the Virgin Media Sharesave, the Virgin Media Board must first obtain consent from our board of directors or a duly authorized committee of our board of directors. An independent savings carrier will assist in administering the Virgin Media Sharesave.

Terms of Sharesave Options

Exercise Price

The exercise price per Liberty Global Class C Ordinary Share will be set in pounds sterling by the Virgin Media Board and cannot be less than 80% of the fair market value of a Liberty Global Class C Ordinary Share on the date of grant. The fair market value per Liberty Global Class C Ordinary Share will be determined by the Virgin Media Board and will be equal to the closing price of a Liberty Global Class C Ordinary Share in U.S. dollars as reported by Nasdaq on the date of grant. This will be converted at the same time into an exercise price for the option in pounds sterling using the Wall Street Journal’s closing exchange rate on the date of grant.

Payment of Exercise Price

A sharesave option may only be exercised using an amount equal to the proceeds of the participant’s savings contract which is the total of his or her savings, plus any tax-free bonus due under the terms of the savings contract on maturity of the savings contract.

The number of Liberty Global Class C Ordinary Shares subject to an option will be such that the total amount payable on exercise will be equal to the proceeds on maturity of the related savings contract.

 

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Exercise and Lapse of Options

Sharesave options must normally be exercised within the period of six months following maturity of an optionholder’s savings contract, which will usually be three or five years from the date of entering into the savings contract. Liberty Global Class C Ordinary Shares subject to Sharesave options will only be issued once a participant has elected to exercise his or her option and submitted a valid exercise notice. If the participant does not want to exercise his or her option, he or she can instead take his or her savings and any tax-free bonus and allow his or her option to lapse.

Termination of Employment

Sharesave options will be treated as follows on termination of a participant’s employment:

 

   

Termination because of death, injury, disability, redundancy, retirement or, where appropriate, the business or the company by which the participant is employed, is transferred out of the Liberty Global Group: a participant may exercise his or her option until six months following the termination of employment (twelve months if termination is due to death) or the expiry of the option, whichever comes first; options can only be exercised to the extent of the proceeds of the savings contract at that point;

 

   

Termination for any other reason before the third anniversary of grant: options lapse on termination;

 

   

Termination for any other reason after third anniversary of grant: a participant may exercise his or her option until six months following the termination of employment or the expiry of the option, whichever comes first; options can only be exercised to the extent of the proceeds of the savings contract at that point, except that if a participant ceases employment because of his or her misconduct, the options lapse on termination.

Change of Control

If Liberty Global experiences a change of control or is liquidated, sharesave options will be exercisable for a specified period of time. On a change of control, a participant may agree with the acquiring company to release his or her options for the grant of equivalent options over shares in the acquiring company.

Transferability

Sharesave options are not transferable, except in the event of a participant’s death the participant’s options may be exercised by his or her personal representative within 12 months of death.

Adjustments of Options

As set out in the U.K. SAYE legislation, on any variation of our share capital by way of capitalization or rights issue, or by consolidation, subdivision or reduction of capital or otherwise, the Virgin Media Board, with the consent of our board of directors or a duly authorized committee of our board of directors, may make any adjustments it considers appropriate to the exercise price and the number of Liberty Global Class C Ordinary Shares subject to an option, so that the aggregate exercise price remains substantially the same and there is no reduction in the exercise price per share below nominal value. Adjustments will be agreed with HMRC where necessary.

Amendment and Termination of the Virgin Media Sharesave

The Virgin Media Board may amend the Virgin Media Sharesave at any time in any respect except that no amendments may be made which would affect the status of the Virgin Media Sharesave as a Schedule 3 SAYE option scheme. No amendment may be made to alter to the material disadvantage of any optionholder any rights already acquired by them (other than minor administrative changes) without the consent of optionholders.

 

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Our board of directors or a duly authorized committee of our board of directors may terminate the Virgin Media Sharesave at any time. The rights of existing participants, however, will not be affected by any termination.

Term

No options may be granted under the Virgin Media Sharesave after February 28, 2024.

Tax Consequences

It is intended that the Virgin Media Sharesave will comply with and will be operated within the requirements of Schedule 3 as a Schedule 3 SAYE option scheme. This gives participants the benefit of favorable U.K. tax treatment as summarized below:

 

   

any bonus received under the related savings contract is tax-free;

 

   

no U.K. tax is payable on grant of an option; and

 

   

no U.K. income tax or social security contributions, including any employer’s social security contributions which are usually payable at a rate of 13.8%, are payable on exercise of an option if the exercise takes place more than three years after grant in accordance with the rules of the Virgin Media Sharesave. In addition, no income tax or social security contributions are payable if an option is exercised within three years of the date of grant because either a participant ceases employment or because there is a corporate event and in both cases the specific provisions set out in Schedule 3 apply.

On exercise of an option, the participant’s employing company should be able to claim a U.K. corporation tax deduction for any excess of the exercise price of the option over the market value of the Liberty Global Class C Ordinary Share on the date of exercise, subject to the requirements of U.K. tax legislation. Any deduction is available for the tax year in which the participant exercises his or her option.

New Plan Benefits

It is not possible to determine specific amounts that may be awarded under the Virgin Media Sharesave in the future because it is not possible to determine who will elect to participate, which participants will exercise their option or elect to withdraw his or her savings or which participants will remain in employment during the prescribed period of time. None of Liberty Global’s directors or executive officers will be entitled to participate in the Virgin Media Sharesave.

The following table provides information relating to Liberty Global’s equity compensation plans approved by shareholders, as of September 30, 2014. Unless otherwise defined herein, the capitalized terms used below are defined in the notes to our September 30, 2014 condensed consolidated financial statements included in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2014.

 

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Plan Category

   Number of
securities to be
issued upon
exercise of

outstanding
options, warrants
and rights (1) (2)
     Weighted
average

exercise
price of

outstanding
options,
warrants

and rights (1) (2)
     Number of
securities
available for
future issuance
under equity
compensation
plans (excluding
securities
reflected in the
first column)
 

Equity compensation plans approved by security holders:

        

Liberty Global 2014 Incentive Plan (3):

        

Liberty Global Class A Ordinary Shares

     2,161,290       $           40.94         89,372,282   

Liberty Global Class C Ordinary Shares

     4,322,580       $ 39.12      

Liberty Global 2014 Director Incentive Plan (4):

        

Liberty Global Class A Ordinary Shares

     78,677       $ 42.54         9,748,999   

Liberty Global Class C Ordinary Shares

     157,346       $ 40.86      

Liberty Global 2005 Incentive Plan (5):

        

Liberty Global Class A Ordinary Shares

     6,307,471       $ 29.02         —     

Liberty Global Class C Ordinary Shares

     18,874,170       $ 27.80      

Liberty Global 2005 Director Incentive Plan (5):

        

Liberty Global Class A Ordinary Shares

     410,368       $ 18.98         —     

Liberty Global Class C Ordinary Shares

     1,199,864       $ 18.67      

VM Incentive Plan (5):

        

Liberty Global Class A Ordinary Shares

     1,859,948       $ 18.69         —     

Liberty Global Class C Ordinary Shares

     4,465,171       $ 18.38      

UGC Plans:

        

Liberty Global Class A Ordinary Shares

     42,563         9.65         —     

Liberty Global Class C Ordinary Shares

     127,689         9.25      

Equity compensation plans not approved by security holders:

        

None

     —              —     
  

 

 

       

 

 

 

Totals:

        

Liberty Global Class A Ordinary Shares

     10,860,317                  99,121,281   
  

 

 

       

 

 

 

Liberty Global Class C Ordinary Shares

           29,146,820         
  

 

 

       

 

 

(1)

This table includes SARs with respect to 5,928,352 and 15,575,522 Liberty Global Class A and Class C Ordinary Shares, respectively and PSARs with respect to 2,811,041 and 8,433,124 Liberty Global Class A and Class C Ordinary Shares, respectively. Upon exercise, the appreciation of a SAR, which is the difference between the base price of the SAR and the then-market value of the underlying class of Liberty Global Ordinary Shares or in certain cases, if lower, a specified price, may be paid in shares of the applicable class of Liberty Global Ordinary Shares. Based upon the respective market prices of Liberty Global Class A and Class C Ordinary Shares at September 30, 3014 and excluding any related tax effects, 1,640,554 and 4,872,693 Liberty Global Class A and Class C Ordinary Shares, respectively, would have been issued if all outstanding SARs had been exercised on September 30, 2014. For further information, see note 11 to our September 30, 2014 condensed consolidated financial statements.

 

(2)

In addition to the option, SAR and PSAR information included in this table, there are outstanding under the various incentive plans restricted shares and RSU awards (including PSUs and PGUs) with respect to an aggregate of 2,633,352 Liberty Global Class A Ordinary Shares, 1,000,000 Liberty Global Class B Ordinary Shares and 4,019,359 Liberty Global Class C Ordinary Shares.

 

(3)

The Liberty Global 2014 Incentive Plan permits grants of, or with respect to, Liberty Global Class A, Class B or Class C Ordinary Shares subject to a single aggregate limit of 100 million shares (of which no

 

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more than 50 million shares may consist of Class B shares), subject to anti-dilution adjustments. As of September 30, 2014, an aggregate of 89,372,282 Ordinary Shares were available for issuance pursuant to the incentive plan. For further information, see note 11 to our September 30, 2014 condensed consolidated financial statements.

 

(4)

The Liberty Global 2014 Nonemployee Director Incentive Plan permits grants of, or with respect to, Liberty Global Class A, Class B or Class C Ordinary Shares subject to a single aggregate limit of 10 million shares, subject to anti-dilution adjustments. As of September 30, 2014, an aggregate of 9,748,999 Ordinary Shares were available for issuance pursuant to the Liberty Global 2014 Nonemployee Director Incentive Plan. For further information, see note 11 to our September 30, 2014 condensed consolidated financial statements.

 

(5)

On January 30, 2014, our shareholders approved the Liberty Global 2014 Incentive Plan and the Liberty Global 2014 Nonemployee Director Incentive Plan and, accordingly, no further awards will be granted under the Liberty Global 2005 Incentive Plan, the Liberty Global 2005 Director Incentive Plan or the VM Incentive Plan.

Recommendation of the Board of Directors

Liberty Global’s board of directors has unanimously approved the Virgin Media Sharesave Proposal and believes that its adoption is in the best interests of Liberty Global and its shareholders, having considered the interests of the company’s stakeholders. Accordingly, the Liberty Global board unanimously recommends that the holders of Liberty Global Class A and Class B Ordinary Shares vote in favor of the Virgin Media Sharesave Proposal at the General Meeting.

For the full text of the resolution of the Virgin Media Sharesave Proposal, see Annex A to this proxy statement/prospectus. Liberty Global’s board of directors unanimously recommends a vote “FOR” the approval of the resolution.

 

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ADDITIONAL INFORMATION

Legal Matters

The validity of the LiLAC Ordinary Shares to be issued in the Transaction will be passed upon for us by Shearman & Sterling (London) LLP.

Independent Accountants

The consolidated financial statements and schedules of Liberty Global plc and subsidiaries (Liberty Global) as of December 31, 2013 and 2012, and for each of the years in the three-year period ended December 31, 2013, and Liberty Global management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2013, have been incorporated by reference herein in reliance upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.

With respect to the unaudited financial information of Liberty Global for the three-month periods ended March 31, 2014 and 2013 incorporated by reference herein, KPMG LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their separate report dated May 6, 2014 incorporated by reference herein states that they did not audit and they do not express an opinion on that unaudited financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. KPMG LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their report on the unaudited financial information because that report is not a “report” or a “part” of the registration statement (of which this proxy statement/prospectus forms a part) prepared or certified by KPMG LLP within the meaning of Sections 7 and 11 of the Securities Act of 1933.

The consolidated financial statements of Ziggo N.V., Utrecht, the Netherlands, and subsidiaries as of and for the year ended December 31, 2013 have been incorporated by reference herein in reliance upon the report of Ernst & Young Accountants LLP, independent auditor, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.

 

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WHERE YOU CAN FIND MORE INFORMATION

Liberty Global files annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information that Liberty Global files with the SEC at the SEC’s public reference room at the following location:

Public Reference Room 100 F Street, N.E. Washington, D.C. 20549

Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. These SEC filings are also available to the public from commercial document retrieval services and at the website maintained by the SEC at www.sec.gov. You may also access the SEC filings and obtain other information about Liberty Global through the website maintained by Liberty Global, which is www.libertyglobal.com. The information contained in this website is not incorporated by reference in this proxy statement/prospectus.

INCORPORATION BY REFERENCE

The SEC allows us to “incorporate information” into this proxy statement/prospectus “by reference,” which means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is deemed to be part of this proxy statement/prospectus, except for any information superseded by information contained directly in this proxy statement/prospectus. We incorporate by reference the documents listed below and any future filings made by us with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (other than any report or portion thereof furnished or deemed furnished under any Current Report on Form 8-K) prior to the date on which the Meetings are held:

 

   

Liberty Global’s Annual Report on Form 10-K/A, as amended by Amendment No. 1 and Amendment No. 2 thereto, for the year ended December 31, 2013, filed on February 13, 2014, April 3, 2014 and June 4, 2014, respectively;

 

   

Liberty Global’s Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2014, filed on May 6, 2014, as amended by Amendment No.1 thereto, filed on June 4, 2014, Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, filed on August 5, 2014 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, filed on November 5, 2014;

 

   

Liberty Global’s Definitive Proxy Statement on Schedule 14A, filed on April 30, 2014; and

 

   

Liberty Global’s Current Reports on Form 8-K, filed on January 3, 2014, January 24, 2014, January 27, 2014, January 31, 2013, February 24, 2014, March 13, 2014, March 19, 2014, March 20, 2014 (as amended by the Current Report on Form 8-K/A filed on April 3, 2014), March 24, 2014, April 4, 2014, April 15, 2014, April 23, 2014, April 30, 2014, June 27, 2014, August 11, 2014, August 19, 2014, August 26, 2014, September 11, 2014, October 10, 2014, October 22, 2014, November 5, 2014, November 19, 2014, November 21, 2014 and December 8, 2014, as amended on December 18, 2014.

The company may have previously sent you some of the documents incorporated by reference, but you can obtain any of them through the company, the SEC or the SEC’s website at www.sec.gov. Documents incorporated by reference are available from the company without charge, excluding all exhibits, except that if the company has specifically incorporated by reference an exhibit in this proxy statement/prospectus, the exhibit will also be provided without charge. Shareholders may obtain documents incorporated by reference in this proxy statement/prospectus by requesting them in writing or by telephone from the company at the following address:

LIBERTY GLOBAL PLC
12300 Liberty Boulevard
Englewood, CO 80112
Attention: Investor Relations
Telephone: (303) 220-6600

 

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You should rely only on the information contained or incorporated by reference in this proxy statement/prospectus. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement/prospectus. You should assume that the information in this proxy statement/prospectus supplement is accurate only as of December     , 2014. You should also assume that the information contained in any document incorporated by reference herein is accurate only as of the date of such document. The mailing of this proxy statement/prospectus to shareholders does not create any implication to the contrary.

 

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ANNEX A: NOTICE OF GENERAL MEETING

A general meeting of shareholders of Liberty Global Plc (Liberty Global) will be held at 10:00 a.m., local time, on February 24, 2015, at the Denver Marriott South at Park Meadows, 10345 Park Meadows Drive, Lone Tree, Colorado 80124.

Holders of our existing Class A and Class B Ordinary Shares (the Liberty Global Class A Ordinary Shares and Liberty Global Class B Ordinary Shares, respectively) will be asked to consider and vote upon the following resolutions (together, the Proposals), which are being proposed as special and ordinary resolutions as indicated:

 

  (1)

Special Resolution: New Articles Proposal

 

  (2)

Ordinary Resolution: Management Policies Proposal

 

  (3)

Special Resolution: Future Consolidation/Sub-Division Proposal

 

  (4)

Special Resolution: Voting Rights Amendment Proposal

 

  (5)

Ordinary Resolution: Share Buy-Back Agreement Proposal

 

  (6)

Ordinary Resolution: Director Securities Purchase Proposal

 

  (7)

Ordinary Resolution: Virgin Media Sharesave Proposal

New Articles Proposal

Special Resolution

 

  1.

THAT, subject to and conditional on the approval of the Class A Articles Proposal, Class B Articles Proposal and Class C Articles Proposal (together the Class Proposals to be proposed at each of the meeting of holders of Liberty Global Class A Ordinary Shares, the meeting of holders of Liberty Global Class B Ordinary Shares and the meeting of holders of Liberty Global Class C Ordinary Shares, respectively (together the Class Meetings)) and resolutions 2 and 3, and the subsequent approval by the board of directors or a duly appointed committee of the board of directors, the articles of association set forth in Annex G to the proxy statement/prospectus dated December     , 2014 be, and hereby are, approved and adopted as the articles of association of Liberty Global.

Management Policies Proposal

Ordinary Resolution

 

  2.

THAT, subject to and conditional on the approval of the Class Proposals to be proposed at the Class Meetings and resolutions 1 and 3, the terms of certain management policies set forth in Annex H to the proxy statement/prospectus relating to the exercise of the board of directors of its powers and authorities under the articles be, and hereby are, approved.

Future Consolidation or Sub-Division Proposal

Special Resolution

 

  3.

THAT, subject to and conditional on the approval of the Class Proposals to be proposed at the Class Meetings and resolutions 1 and 2, any one or more consolidations and/or sub-divisions, on any ratio the board of directors may determine in its sole and absolute discretion, of any or all shares of the company, be and hereby is, approved, and if and when the new articles of association proposed in resolution 1 are adopted and effective in accordance with such resolution, the new articles of association be amended by making the changes set forth below with respect to the new articles of association.

 

38 Hans Crescent, London SW1X 0LZ, United Kingdom, Registered in England Nr 8379990

 

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Amendments to New Articles

In Article 69 of the new articles, insert new text as marked by underlining below:

69. (a) Subject to Article 69(b), the Board may, without any further resolution of the Company, from time to time and on any one or more occasions consolidate or sub-divide, on any ratio the Board may determine in its sole and absolute discretion, any or all shares of the Company.

(b) The Company shall not consolidate, divide, subdivide or redenominate any one or more Liberty Global Ordinary Shares or LiLAC Ordinary Shares without consolidating, dividing, subdividing or redenominating (as the case may be) all of the Liberty Global Ordinary Shares or LiLAC Ordinary Shares, respectively, on an equal per share basis subject to the treatment of fractions in accordance with Article 67.

Voting Rights Amendment Proposal

Special Resolution

 

  4.

THAT, subject to and conditional on the approval of the Class A Voting Rights Proposal, Class B Voting Rights Proposal and Class C Voting Rights Proposal to be proposed at the Class Meetings, (i) the current articles of association be amended in Articles 18 and 70 thereof by making the changes set forth in Annex I to the proxy statement/prospectus with respect to the current articles and (ii) if and when the new articles of association proposed in resolution 1 are adopted and effective in accordance with such resolution, the new articles of association be amended in Articles 19 and 71 thereof by making the changes set forth in Annex I to the proxy statement/prospectus with respect to the new articles.

Share Buy-Back Agreement Proposal

Ordinary Resolution

 

  5.

THAT the terms of the proposed Master Put/Call Agreement between Goldman Sachs & Co. and Liberty Global (a copy of which has been proposed at the meeting) relating to the purchase by Liberty Global of shares in the capital of Liberty Global be, and hereby are, approved and the directors of Liberty Global be and are each hereby authorized to enter into and complete and make purchases of shares in the capital of Liberty Global pursuant to such Master Put/Call Agreement. The authority conferred by this resolution shall, unless varied, revoked or renewed prior to such time, expire on the fifth anniversary of the general meeting.

Director Securities Purchase Proposal

Ordinary Resolution

 

  6.

THAT any arrangement under which the Company or any direct or indirect subsidiary acquires securities, whether or not issued by the Company, at any price, directly or indirectly from directors of the Company, or from any persons “connected” with such directors (within the meaning of section 252 of the Companies Act 2006), be and hereby is authorised for the purposes of section 190 of the Companies Act 2006.

Virgin Media Sharesave Proposal

Ordinary Resolution

 

  7.

THAT the amendment to the Liberty Global 2014 Incentive Plan to permit the grant of options to acquire Liberty Global Class C Ordinary Shares under the Virgin Media Inc. 2014 Sharesave with an exercise price of not less than 80% of the fair market value of such shares be, and hereby is, approved.

 

38 Hans Crescent, London SW1X 0LZ, United Kingdom, Registered in England Nr 8379990

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Complete descriptions of the resolutions comprising the above Proposals, along with our board of directors’ recommendation that you vote your shares “FOR” each such Proposal, are set forth in the accompanying proxy statement/prospectus. You are encouraged to read the proxy statement/prospectus in its entirety before voting.

All shareholders of Liberty Global are cordially invited to attend the general meeting. All shareholders of record of Liberty Global Class A Ordinary Shares, Liberty Global Class B Ordinary Shares, and Class C Ordinary Shares (Liberty Global Class C Ordinary Shares), as of 10:00 p.m. GMT (5:00 p.m., Eastern time) on December 26, 2014, the record date for the general meeting, are entitled to notice of the general meeting or any adjournment thereof, but only shareholders of record of Liberty Global Class A Ordinary Shares or Liberty Global Class B Ordinary Shares as of the record date are entitled to vote at the general meeting or any adjournment thereof. The holders of Liberty Global Class A Ordinary Shares and Liberty Global Class B Ordinary Shares will vote together as a single class on each of the above resolutions. A list of shareholders entitled to vote at the general meeting will be available at Liberty Global’s principal offices at 38 Hans Crescent, Knightsbridge, London, SW1X 0LZ, United Kingdom (the Registered Office) and at offices located at 12300 Liberty Boulevard, Englewood, Colorado 80112, for review by any shareholder for any purpose relevant to the meeting, for at least 10 days prior to the general meeting.

Liberty Global is incorporated under the laws of England and Wales. Liberty Global’s governance is generally provided for under the Companies Act 2006 and its articles of association. Voting on the resolutions will be by a poll. Voting by a poll means that, assuming a quorum is present, each Liberty Global Class A Ordinary Share and each Liberty Global Class B Ordinary Share present, in person or by proxy, and entitled to vote at the general meeting will be counted in the vote. Under applicable law, resolutions 2, 5, 6 and 7 are “ordinary” resolutions, which means that each of these resolutions must be approved by a simple majority of the total votes of shareholders (voting together as a single class) who vote on the resolution and are entitled to vote. Resolutions 1, 3 and 4 are “special” resolutions, which means that each of these resolutions must be approved by shareholders representing at least 75% of the total voting rights of shareholders who vote on the resolution and are entitled to vote.

You can appoint the person indicated in the enclosed proxy card or a person of your choice as your proxy to exercise all or any of your rights to attend, speak and vote at the general meeting. You may appoint more than one proxy in relation to the general meeting, provided that you appoint each proxy to exercise the rights attached to a different ordinary share or shares held by you. A proxy need not be a shareholder of Liberty Global. On a poll, the number of Liberty Global Class A Ordinary Shares and Liberty Global Class B Ordinary Shares you hold on the record date for the general meeting will decide the number of votes that you may cast. The Liberty Global Class A Ordinary Shares and Liberty Global Class B Ordinary Shares are the only voting shares. Each Liberty Global Class A Ordinary Share has one vote and each Liberty Global Class B Ordinary Share has ten votes on each matter on which holders of such classes are entitled to vote at the meeting. When you appoint a proxy over the internet or by returning a completed proxy card, your proxy will be given to the officers of Liberty Global.

Your vote is important, regardless of the number of ordinary shares you own. To make sure your ordinary shares are represented at the general meeting, please appoint a proxy to vote as soon as possible, whether or not you plan to attend the general meeting. You may appoint a proxy either over the internet or by promptly returning a completed and signed proxy card to the Registered Office or in the postage-paid envelope (if mailed in the United States).

 

38 Hans Crescent, London SW1X 0LZ, United Kingdom, Registered in England Nr 8379990

 

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To be valid, the appointment of proxy, whether completed via the internet or by returning the completed and signed proxy card, must be received by 1:00 a.m., New York time/6:00 a.m., London time on February 23, 2015. You may revoke your proxy in the manner described in the proxy statement/prospectus.

By Order of the Board of Directors,

 

Bryan H. Hall

Secretary

Liberty Global plc

London, United Kingdom

December     , 2014

WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE GENERAL MEETING, PLEASE APPOINT A PROXY VIA THE INTERNET AS PROMPTLY AS POSSIBLE. ALTERNATIVELY, COMPLETE AND SIGN THE ENCLOSED PAPER PROXY CARD AND RETURN BY MAIL.

 

38 Hans Crescent, London SW1X 0LZ, United Kingdom, Registered in England Nr 8379990

 

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ANNEX B: NOTICE OF CLASS A MEETING

A Meeting of holders of existing Class A Ordinary Shares (Liberty Global Class A Ordinary Shares) of Liberty Global plc (Liberty Global) will be held at 10:20 a.m., local time, on February 24, 2015, at the Denver Marriott South at Park Meadows, 10345 Park Meadows Drive, Lone Tree, Colorado 80124. Holders of Liberty Global Class A Ordinary Shares will be asked to consider and vote upon the following Class A Articles Proposal and Class A Voting Rights Proposal (together, the Proposals), which are each being proposed as special resolutions.

Class A Articles Proposal

THAT the holders of the Liberty Global Class A Ordinary Shares hereby approve, subject to and conditioned upon the subsequent approval by the board of directors, the adoption of the articles of association set forth in Annex G to the proxy statement/prospectus dated December     , 2014 (including any variations or abrogations to the rights of the holders of the Liberty Global Class A Ordinary Shares as a result of such adoption).

Class A Voting Rights Proposal

THAT the holders of the Liberty Global Class A Ordinary Shares hereby approve that (i) the current articles of association be amended in Articles 18 and 70 thereof by making the changes set forth in Annex I to the proxy statement/prospectus with respect to the current articles and (ii) if and when the new articles of association proposed set forth in Annex G to the proxy statement/prospectus are adopted and effective in accordance, the new articles of association be amended in Articles 19 and 71 thereof by making the changes set forth in Annex I to the proxy statement/prospectus with respect to the new articles (including any variations or abrogations to the rights of the holders of the Liberty Global Class A Ordinary Shares as a result of such adoption).

A complete description of the Class A Articles Proposal and the Class A Voting Rights Proposal, along with our board of directors’ recommendation that you vote your shares “FOR” each such Proposal, is set forth in the proxy statement/prospectus to which this notice is attached. See “The Transaction Proposals” and “The Voting Rights Proposal.” You are encouraged to read the proxy statement/prospectus in its entirety before voting.

All shareholders of Liberty Global Class A Ordinary Shares are cordially invited to attend the class meeting. All shareholders of record of Liberty Global Class A Ordinary Shares, as of 10:00 p.m. GMT (5:00 p.m. Eastern time) on December 26, 2014, the record date for the class meeting, are entitled to notice of the class meeting or any adjournment thereof. A list of shareholders entitled to vote at the class meeting will be available at Liberty Global’s principal offices at 38 Hans Crescent, Knightsbridge, London, SW1X 0LZ, United Kingdom (the Registered Office) and at offices located at 12300 Liberty Boulevard, Englewood, Colorado 80112, for review by any shareholder for any purpose relevant to the meeting, for at least 10 days prior to the class meeting.

Liberty Global is incorporated under the laws of England and Wales. Liberty Global’s governance is generally provided for under the Companies Act 2006 and its articles of association. Voting on the resolutions will be by a poll. Voting by a poll means that, assuming a quorum is present, each Liberty Global Class A Ordinary Share present, in person or by proxy, and entitled to vote at the class meeting will be counted in the vote. Under applicable law, the resolutions must be approved by holders of Liberty Global Class A Ordinary Shares representing at least 75% of the total voting rights of holders of Liberty Global Class A Ordinary Shares who vote on the resolution and are entitled to vote.

You can appoint the person indicated in the enclosed proxy card or a person of your choice as your proxy to exercise all or any of your rights to attend, speak and vote at the class meeting. You may appoint more than one proxy in relation to the class meeting, provided that you appoint each proxy to exercise the rights attached to

 

38 Hans Crescent, London SW1X 0LZ, United Kingdom, Registered in England Nr 8379990

 

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a different ordinary share or shares held by you. A proxy need not be a shareholder of Liberty Global. On a poll, the number of Liberty Global Class A Ordinary Shares you hold on the record date for the class meeting will decide the number of votes that you may cast. Each Liberty Global Class A Ordinary Share has one vote on each matter on which holders of such class are entitled to vote at the meeting. When you appoint a proxy over the internet or by returning a completed proxy card, your proxy will be given to the officers of Liberty Global.

Your vote is important, regardless of the number of Liberty Global Class A Ordinary Shares you own. To make sure your Liberty Global Class A Ordinary Shares are represented at the class meeting, please appoint a proxy to vote as soon as possible, whether or not you plan to attend the class meeting. You may appoint a proxy either over the internet or by promptly returning a completed and signed proxy card to the Registered Office or in the postage-paid envelope (if mailed in the United States).

To be valid, the appointment of proxy, whether completed via the internet or by returning the completed and signed proxy card, must be received by 1:00 a.m., New York time/6:00 a.m., London time on February 23, 2015. You may revoke your proxy in the manner described in the accompanying proxy statement/prospectus.

By Order of the Board of Directors,

Bryan H. Hall

Secretary

Liberty Global plc

London, United Kingdom

December     , 2014

WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE CLASS MEETING, PLEASE APPOINT A PROXY VIA THE INTERNET AS PROMPTLY AS POSSIBLE. ALTERNATIVELY, COMPLETE AND SIGN THE ENCLOSED PAPER PROXY CARD AND RETURN BY MAIL.

 

38 Hans Crescent, London SW1X 0LZ, United Kingdom, Registered in England Nr 8379990

 

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ANNEX C: NOTICE OF CLASS B MEETING

A Meeting of holders of existing Class B Ordinary Shares (Liberty Global Class B Ordinary Shares) of Liberty Global plc (Liberty Global) will be held at 10:40 a.m., local time, on February 24, 2015, at the Denver Marriott South at Park Meadows, 10345 Park Meadows Drive, Lone Tree, Colorado 80124. Holders of Liberty Global Class B Ordinary Shares will be asked to consider and vote upon the following Class B Articles Proposal and Class B Voting Rights Proposal (together, the Proposals), which are each being proposed as special resolutions.

Class B Articles Proposal

THAT the holders of Liberty Global Class B Ordinary Shares hereby approve, subject to and conditioned upon the subsequent approval by the board of directors, the adoption of the articles of association set forth in Annex G to the proxy statement/prospectus dated December     , 2014 (including any variations or abrogations to the rights of the holders of the Liberty Global Class B Ordinary Shares as a result of such adoption).

Class B Voting Rights Proposal

THAT the holders of Liberty Global Class B Ordinary Shares hereby approve that (i) the current articles of association be amended in Articles 18 and 70 thereof by making the changes set forth in Annex I to the proxy statement/prospectus with respect to the current articles and (ii) if and when the new articles of association proposed set forth in Annex G to the proxy statement/prospectus are adopted and effective in accordance, the new articles of association be amended in Articles 19 and 71 thereof by making the changes set forth in Annex I to the proxy statement/prospectus with respect to the new articles (including any variations or abrogations to the rights of the holders of the Liberty Global Class B Ordinary Shares as a result of such adoption).

A complete description of the Class B Articles Proposal and the Class B Voting Rights Proposal, along with our board of directors’ recommendation that you vote your shares “FOR” each such Proposal, is set forth in the proxy statement/prospectus to which this notice is attached. See “The Transaction Proposals” and “The Voting Rights Proposal.” You are encouraged to read the proxy statement/prospectus in its entirety before voting.

All shareholders of Liberty Global Class B Ordinary Shares are cordially invited to attend the class meeting. All shareholders of record of Liberty Global Class B Ordinary Shares, as of 10:00 p.m. GMT (5:00 p.m. Eastern time) on December 26, 2014, the record date for the class meeting, are entitled to notice of the class meeting or any adjournment thereof. A list of shareholders entitled to vote at the class meeting will be available at Liberty Global’s principal offices at 38 Hans Crescent, Knightsbridge, London, SW1X 0LZ, United Kingdom (the Registered Office) and at offices located at 12300 Liberty Boulevard, Englewood, Colorado 80112, for review by any shareholder for any purpose relevant to the meeting, for at least 10 days prior to the class meeting.

Liberty Global is incorporated under the laws of England and Wales. Liberty Global’s governance is generally provided for under the Companies Act 2006 and its articles of association. Voting on the resolutions will be by a poll. Voting by a poll means that, assuming a quorum is present, each Liberty Global Class B Ordinary Share present, in person or by proxy, and entitled to vote at the class meeting will be counted in the vote. Under applicable law, the resolutions must be approved by holders of Liberty Global Class B Ordinary Shares representing at least 75% of the total voting rights of holders of Liberty Global Class B Ordinary Shares who vote on the resolution and are entitled to vote.

You can appoint the person indicated in the enclosed proxy card or a person of your choice as your proxy to exercise all or any of your rights to attend, speak and vote at the class meeting. You may appoint more than one proxy in relation to the class meeting, provided that you appoint each proxy to exercise the rights attached to

 

38 Hans Crescent, London SW1X 0LZ, United Kingdom, Registered in England Nr 8379990

 

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a different ordinary share or shares held by you. A proxy need not be a shareholder of Liberty Global. On a poll, the number of Liberty Global Class B Ordinary Shares you hold on the record date for the class meeting will decide the number of votes that you may cast. Each Liberty Global Class B Ordinary Share has one vote on each matter on which holders of such class are entitled to vote at the meeting. When you appoint a proxy over the internet or by returning a completed proxy card, your proxy will be given to the officers of Liberty Global.

Your vote is important, regardless of the number of Liberty Global Class B Ordinary Shares you own. To make sure your Liberty Global Class B Ordinary Shares are represented at the class meeting, please appoint a proxy as soon as possible, whether or not you plan to attend the class meeting. You may vote by proxy either over the internet or by promptly returning a completed and signed proxy card to the Registered Office or in the postage-paid envelope (if mailed in the United States).

To be valid, the appointment of proxy, whether completed via the internet or by returning the completed and signed proxy card, must be received by 1:00 a.m., New York time/6:00 a.m., London time on February 23, 2015. You may revoke your proxy in the manner described in the accompanying proxy statement/prospectus.

By Order of the Board of Directors,

 

Bryan H. Hall

Secretary

Liberty Global plc

London, United Kingdom

December      , 2014

WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE CLASS MEETING, PLEASE APPOINT A PROXY VIA THE INTERNET AS PROMPTLY AS POSSIBLE. ALTERNATIVELY, COMPLETE AND SIGN THE ENCLOSED PAPER PROXY CARD AND RETURN BY MAIL.

 

38 Hans Crescent, London SW1X 0LZ, United Kingdom, Registered in England Nr 8379990

 

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ANNEX D: NOTICE OF CLASS C MEETING

A Meeting of holders of existing Class C Ordinary Shares (Liberty Global Class C Ordinary Shares) of Liberty Global plc (Liberty Global) will be held at 11:00 a.m., local time, on February 24, 2015, at the Denver Marriott South at Park Meadows, 10345 Park Meadows Drive, Lone Tree, Colorado 80124. Holders of Liberty Global Class C Ordinary Shares will be asked to consider and vote upon the following Class C Articles Proposal and Class C Voting Rights Proposal (together, the Proposals), which are each being proposed as special resolutions.

Class C Articles Proposal

THAT the holders of the Liberty Global Class C Ordinary Shares hereby approve, subject to and conditioned upon the subsequent approval of the board of directors, the adoption of the articles of association set forth in Annex G to the proxy statement/prospectus dated December     , 2014 (including any variations or abrogations to the rights of the holders of the Liberty Global Class C Ordinary Shares as a result of such adoption).

Class C Voting Rights Proposal

THAT the holders of the Liberty Global Class C Ordinary Shares hereby approve that (i) the current articles of association be amended in Articles 18 and 70 thereof by making the changes set forth in Annex I to the proxy statement/prospectus with respect to the current articles and (ii) if and when the new articles of association proposed set forth in Annex G to the proxy statement/prospectus are adopted and effective in accordance, the new articles of association be amended in Articles 19 and 71 thereof by making the changes set forth in Annex I to the proxy statement/prospectus with respect to the new articles (including any variations or abrogations to the rights of the holders of the Liberty Global Class C Ordinary Shares as a result of such adoption).

A complete description of the Class C Articles Proposal and the Class C Voting Rights Proposal, along with our board of directors’ recommendation that you vote your shares “FOR” each such Proposal, is set forth in the proxy statement/prospectus to which this notice is attached. See “The Transaction Proposals” and “The Voting Rights Proposal.” You are encouraged to read the proxy statement/prospectus in its entirety before voting.

All shareholders of Liberty Global Class C Ordinary Shares are cordially invited to attend the class meeting. All shareholders of record of Liberty Global Class C Ordinary Shares, as of 10:00 p.m. GMT (5:00 p.m. Eastern time) on December 26, 2014, the record date for the class meeting, are entitled to notice of the class meeting or any adjournment thereof. A list of shareholders entitled to vote at the class meeting will be available at Liberty Global’s principal offices at 38 Hans Crescent, Knightsbridge, London, SW1X 0LZ, United Kingdom (the Registered Office) and at offices located at 12300 Liberty Boulevard, Englewood, Colorado 80112, for review by any shareholder for any purpose relevant to the meeting, for at least 10 days prior to the class meeting.

Liberty Global is incorporated under the laws of England and Wales. Liberty Global’s governance is generally provided for under the Companies Act 2006 and its articles of association. Voting on the resolutions will be by a poll. Voting by a poll means that, assuming a quorum is present, each Liberty Global Class C Ordinary Share present, in person or by proxy, and entitled to vote at the class meeting will be counted in the vote. Under applicable law, the resolutions must be approved by holders of Liberty Global Class C Ordinary Shares representing at least 75% of the total voting rights of holders of Liberty Global Class C Ordinary Shares who vote on the resolution and are entitled to vote.

You can appoint the person indicated in the enclosed proxy card or a person of your choice as your proxy to exercise all or any of your rights to attend, speak and vote at the class meeting. You may appoint more than

 

38 Hans Crescent, London SW1X 0LZ, United Kingdom, Registered in England Nr 8379990

 

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one proxy in relation to the class meeting, provided that you appoint each proxy to exercise the rights attached to a different ordinary share or shares held by you. A proxy need not be a shareholder of Liberty Global. On a poll, the number of Liberty Global Class C Ordinary Shares you hold on the record date for the class meeting will decide the number of votes that you may cast. Each Liberty Global Class C Ordinary Share has one vote on each matter on which holders of such class are entitled to vote at the meeting. When you appoint a proxy over the internet or by returning a completed proxy card, your proxy will be given to the officers of Liberty Global.

Your vote is important, regardless of the number of Liberty Global Class C Ordinary Shares you own. To make sure your Liberty Global Class C Ordinary Shares are represented at the class meeting, please appoint a proxy as soon as possible, whether or not you plan to attend the class meeting. You may appoint a proxy either over the internet or by promptly returning a completed and signed proxy card to the Registered Office or in the postage-paid envelope (if mailed in the United States).

To be valid, the appointment of proxy, whether completed via the internet or by returning a completed and signed proxy card, must be received by 1:00 a.m., New York time/6:00 a.m., London time on February 23, 2015. You may revoke your proxy in the manner described in the accompanying proxy statement/prospectus.

By Order of the Board of Directors,

 

Bryan H. Hall

Secretary

Liberty Global plc

London, United Kingdom

December     , 2014

WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE CLASS MEETING, PLEASE APPOINT A PROXY VIA THE INTERNET AS PROMPTLY AS POSSIBLE. ALTERNATIVELY, COMPLETE AND SIGN THE ENCLOSED PAPER PROXY CARD AND RETURN BY MAIL.

 

38 Hans Crescent, London SW1X 0LZ, United Kingdom, Registered in England Nr 8379990

 

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ANNEX E: DESCRIPTION OF OUR LATIN AMERICAN OPERATIONS

General

Liberty Global plc (Liberty Global, we or our company) is an international provider of video, broadband internet, fixed-line telephony and mobile services, with consolidated operations at September 30, 2014 across 14 countries in Europe and Latin America. We connect people to the digital world and enable them to discover and experience its endless possibilities. Our market-leading services are provided through next-generation networks and innovative technology platforms that, when combined with those of Ziggo N.V. (Ziggo), connected 27 million customers subscribing to 56 million television, broadband internet and telephony services at September 30, 2014. If the Transaction Proposals are approved and certain other conditions are satisfied or waived, we intend to issue the LiLAC Ordinary Shares, which will be a separate class of our ordinary shares intended to track and reflect the economic performance of our operations in Latin America and the Caribbean (our Latin American operations), which we collectively refer to as the Liberty Latin America and Caribbean Group, or the LiLAC Group.

Set forth in this Annex E is a description of the businesses to be attributed to the LiLAC Group. It assumes the Transaction Proposals have been approved and that the Transaction has been completed. For a description of the businesses to be attributed to the Liberty Global Group, which are all of our businesses other than our Latin American operations, please see the discussion under the caption “Business” in our most recent Annual Report on Form 10-K/A, which is incorporated herein by reference. Our board of directors may change the businesses, assets and liabilities attributed to each group at any time in accordance with our management and allocation policies then in effect. Although the businesses described below will be attributed to the LiLAC Group, the LiLAC Group will not be a separate legal entity. Holders of the LiLAC Ordinary Shares and the Liberty Global Ordinary Shares will not be shareholders of the LiLAC Group or the Liberty Global Group, respectively, or any of the subsidiaries or entities attributed to such group. Rather, the holders of the LiLAC Ordinary Shares and the Liberty Global Ordinary Shares will remain shareholders of our company as a whole. Holders of LiLAC Ordinary Shares and Liberty Global Ordinary Shares will not have any legal rights related to specific assets attributed to the LiLAC Group or the Liberty Global Group.

Unless otherwise indicated, convenience translations into United States (U.S.) dollars are calculated as of September 30, 2014, and operational data, including subscriber statistics and ownership percentages, are as of September 30, 2014.

Overview

Our Latin American operations are currently located in Chile and Puerto Rico, where we offer a variety of broadband services over our cable distribution systems. We refer to Latin America as the region including the countries in South America, Middle America (Mexico and Central America), and unless separately referenced, the Caribbean (including the Commonwealth of Puerto Rico and the Bahamas). The core of our offering to customers in Chile and Puerto Rico is the “triple-play,” which we use to describe bundled services of video, broadband internet and fixed-line telephony in one subscription. We also offer a range of broadband communications services to business customers passed by our networks, as well as advertising services. In addition, in Chile we offer mobile voice and data services through a full mobile virtual network operator (MVNO) arrangement with a nationwide wireless network provider.

Our Chilean businesses that would be attributed to the LiLAC Group operate through VTR GlobalCom SpA (VTR GlobalCom) and VTR Wireless SpA (VTR Wireless and together with VTR GlobalCom, VTR), each a wholly-owned subsidiary. Our Puerto Rico business is operated through Liberty Cablevision of Puerto Rico LLC (Liberty Puerto Rico), our 60%-owned subsidiary.

We are the largest cable operator in Chile in terms of number of subscribers and we are the largest provider of broadband internet services in our footprint and the second largest nationally in terms of number of subscribers. We are also the second largest fixed-line telephony provider in Chile in terms of lines in service. We also offer mobile telephony and data services to our customers under an MVNO agreement. We provide our

 

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broadband communication services over our networks in Santiago, Chile’s capital and largest city, and the large regional cities of Iquique, Antofagasta, Concepción, Viña del Mar, Valparaiso and Rancagua.

We are the largest cable operator island-wide in Puerto Rico in terms of number of subscribers. We are also the second largest provider of broadband internet services island-wide in terms of number of subscribers, and the second largest fixed-line telephony provider in Puerto Rico in terms of lines in service. We offer the triple-play of services over our networks in San Juan, Puerto Rico’s capital and largest city, seven surrounding municipalities, as well as other areas that collectively encompass two-thirds of the island’s seventy-eight municipalities.

We classify our customers based on our main subscription-based business activities. The following table presents our Latin American operating statistics as of the dates indicated:

 

     As of and for the nine months ended September 30, 2014  
         Chile (VTR)         Liberty Puerto
Rico
    LiLAC Group    

Footprint

      

Homes Passed(1)

     2,968,900        705,600        3,674,500   

Two-way Homes Passed(2)

     2,449,200        705,600        3,154,800   

Subscribers (RGUs)

      

Analog Cable(3)

     116,200        —          116,200   

Digital Cable(4)

     892,800        217,900        1,110,700   
  

 

 

   

 

 

   

 

 

 

Total Video

     1,009,000        217,900        1,226,900   

Internet(5)

     932,600        205,300        1,137,900   

Telephony(6)

     705,400        154,200        859,600   
  

 

 

   

 

 

   

 

 

 

Total RGUs

     2,647,000        577,400        3,224,400   
  

 

 

   

 

 

   

 

 

 

Organic RGU net additions (losses)

      

Analog Cable

     (18,600     —          (18,600

Digital Cable

     38,200        7,400        45,600   
  

 

 

   

 

 

   

 

 

 

Total Video

     19,600        7,400        27,000   

Internet

     46,900        13,100        60,000   

Telephony

     15,700        21,100        36,800   
  

 

 

   

 

 

   

 

 

 

Total RGUs

     82,200        41,600        123,800   
  

 

 

   

 

 

   

 

 

 

Penetration

      

Digital Cable as % of Total Video Subs(7)

     88.5     100.0     90.5

Internet as % of Two-way Homes Passed(8)

     38.1     29.1     36.1

Telephony as % of Two-way Homes Passed(8)

     28.8     21.9     27.2

Customer relationships(9)

      

Customer Relationships

     1,229,900        278,800        1,508,700   

RGUs per Customer Relationship

     2.15        2.07        2.14   

Monthly ARPU per Customer Relationship(10)

   $ 56.64      $ 84.09      $ 61.71   

Customer bundling

      

Single-Play

     31.5     36.5     32.5

Double-Play

     21.7     19.9     21.3

Triple-Play

     46.8     43.6     46.2

Mobile subscribers

      

Postpaid

     78,500        —          78,500   

Prepaid

     22,200        —          22,200   
  

 

 

   

 

 

   

 

 

 

Total Mobile Subscribers

     100,700        —          100,700   
  

 

 

   

 

 

   

 

 

 

 

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(1)

Homes Passed are homes, residential multiple dwelling units or commercial units that can be connected to our network without materially extending the distribution plant. Our Homes Passed counts are based on census data that can change based on either revisions to the data or from new census results.

 

(2)

Two-way Homes Passed are Homes Passed by those sections of our network that are technologically capable of providing two-way services, including video, internet and telephony services, up to the street cabinet, with drops from the street cabinet to the building generally added, and in-home wiring generally upgraded, on an as-needed, success-based basis.

 

(3)

Analog Cable Subscriber is a home, residential multiple dwelling unit or commercial unit that receives our analog cable service over our broadband network in Chile.

 

(4)

Digital Cable Subscriber is a home, residential multiple dwelling unit or commercial unit that receives our digital cable service over our broadband network. We count a subscriber with one or more digital converter boxes that receives our digital cable service in one premises as just one subscriber. A Digital Cable Subscriber is not counted as an Analog Cable Subscriber. As we migrate customers from analog to digital cable services in Chile, we report a decrease in our Analog Cable Subscribers equal to the increase in our Digital Cable Subscribers.

 

(5)

Internet Subscriber is a home, residential multiple dwelling unit or commercial unit that receives internet services over our network.

 

(6)

Telephony Subscriber is a home, residential multiple dwelling unit or commercial unit that receives voice services over our network. Telephony Subscribers exclude mobile telephony subscribers in Chile.

 

(7)

Digital cable penetration is calculated by dividing the number of digital cable RGUs by the total number of digital and analog cable RGUs.

 

(8)

Internet and telephony penetration is calculated by dividing the number of internet and telephony RGUs by the number of two-way homes passed.

 

(9)

Customer Relationships are the number of customers who receive at least one of our video, internet or telephony services that we count as RGUs, without regard to which, or to how many services they subscribe. Customer Relationships generally are counted on a unique premises basis. Accordingly, if an individual receives our services in two premises (e.g., a primary home and a vacation home), that individual generally will count as two Customer Relationships. We exclude mobile customers from Customer Relationships in Chile.

 

(10)

Average Revenue Per Unit (ARPU) refers to the average monthly subscription revenue per average customer relationship and is calculated by dividing the average monthly subscription revenue (excluding interconnect, late fees, mobile services in Chile, and installation revenue) for the indicated period, by the average of the opening and closing balances for customer relationships for the period. Customer relationships of entities acquired during the period are normalized.

Products and Services

Our Latin American operations provide a broad range of broadband communications and other services, including video, broadband internet, fixed-line local and long distance telephony service and, in Chile, mobile telephony and data services. Available broadband service offerings depend on network bandwidth capacity and whether the network serving an area has been upgraded for two-way communications. 100% of our network in Puerto Rico and over 80% of our network in Chile is bi-directional, which enables us to provide customers access to our triple-play of services.

We generate revenue principally from relationships with our customers who pay subscription fees for the services we provide. Subscription fees for basic cable video services are typically paid directly by customers who live in single family homes or single dwelling units, or SDUs, subscribing to the service (which includes bars, restaurants and other establishments). Some of our SDU customers are counted on an equivalent billing unit, or EBU, basis, including certain commercial establishments such as hotels and hospitals which subscribe only to our video services at flat rate pricing. SDU customers also pay us directly for the subscription fees associated with our digital cable services, as well as the broadband internet, fixed-line telephony and any mobile services they purchase from us. In addition to monthly subscription fees, subscribers generally pay an activation fee upon connecting or re-connecting to our network. This activation fee is sometimes waived, for example when a subscriber is reconnecting to our network or as part of periodic marketing promotions.

 

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Discounts to our monthly service fees are available to our subscribers who select a bundle of two or more of our services (bundled services): video, internet and fixed-line telephony. Bundled services consist of “double-play” for two services and “triple-play” for three services.

Video

Our Latin American operations offer a full range of video services, including basic and premium programming, which can be accessed on the television. 100% of our network in Puerto Rico and over 80% of our network in Chile have bi-directional capabilities through which we provide advanced service offerings such as HD channels, DVR, HD DVR and video-on-demand (VoD), which give our customers the ability to control when they watch their programming.

To receive our digital services in most portions of our network, a subscriber must either rent or purchase a set-top box and obtain from us a conditional access security card or “smart card” for purchased boxes. Neither a set-top box nor a smart card is required to receive basic digital television channels in those portions of our network in which the signal is unencrypted. Accordingly, where our basic digital television channels are unencrypted, subscribers are able to watch our basic digital television channels, provided that they pay the monthly subscription fee for our analog package and have televisions capable of receiving digital signals. Regardless of whether basic digital channels are offered on an unencrypted basis, expanded channel packages and premium channels and services are made available to all of our Latin American customers for an incremental monthly fee. To enhance our customers’ video experience, we are developing advanced, cloud-based next generation user interfaces for our Latin American operations based on advanced technologies, including our “Horizon TV.” Horizon TV is a home multimedia platform with a sophisticated user interface that enables customers to view and share content across the television, computer, tablet and smartphone.

Our Latin American cable operations generally offer two or three tiers of digital video programming and audio services for a fixed monthly fee with a range of programming options. Our basic tier service, except for the small portion of our network that has not been upgraded to bi-directional capability, also includes VoD access, an electronic programming guide and access to HD channels, DVR and HD DVR. Digital subscribers may subscribe to one or more packages of premium channels, including additional HD channels. Premium channels include movies, sports, kids, international and adult channels. Our VoD services are available on a subscription basis or a transaction basis, depending on location. In addition to our digital video services, we offer limited analog services in Chile (but not in Puerto Rico). Our Chilean analog service is offered only in areas where our digital service is not available or where legacy analog customers decided not to upgrade to digital service. Subscribers to our digital services also receive the channels available through our analog service.

Broadband Internet

Our Latin American operations offer multiple tiers of broadband internet service in the majority of our markets. Depending on location, this service includes download speeds ranging from less than 2 Mbps to an ultra high-speed internet service of up to 120 Mbps. Generally, we provide our broadband internet service without any time or data volume restrictions. Our ultra high-speed internet service is based on DOCSIS 3.0 technology, and we plan to upgrade to DOCSIS 3.1 technology in both Chile and Puerto Rico once it becomes available. We also offer value-added broadband services, such as anti-virus, anti-spyware, firewall, spam protection, a child-proof lock, parental controls, online storage and web spaces, through certain of our operations for an incremental charge. In Chile we offer mobile broadband services as described under “— Mobile Telephony” below.

Our residential subscribers generally access the internet via cable modems connected to their internet capable devices, including personal computers, at various speeds depending on the tier of service selected. Our broadband internet service is available on a stand-alone basis or in combination with one or more of our other services. Subscribers to our internet service pay a monthly fee based on the tier of service selected. This one-time fee may be waived for promotional reasons. We determine pricing for each different tier of internet service through an analysis of speed, data limits, market conditions and other factors.

 

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Fixed-Line Telephony

We offer multi-feature fixed-line telephony service within the bi-directional portion of our network. We offer this telephony service via traditional circuit-switched telephony or voice-over-internet-protocol (VoIP), depending on location. We pay interconnection fees to telephony providers when calls by our subscribers terminate on another network and, in Chile; we receive similar fees from providers when calls by their users terminate on our network through interconnection points.

Our fixed-line telephony service includes a basic fixed-line telephony product for line rental and various calling plans, which may consist of any of the following: unlimited network, national or international calling, unlimited off-peak calling and minute packages, including calls to fixed and mobile phones. We also offer a second or third phone line at an incremental cost (which additional lines are not counted as additional RGUs).

Mobile Telephony

In Chile we offer mobile services, both data and voice, as an MVNO pursuant to an agreement with a third party nationwide mobile network operator. We own the core network, including switching, backbone and interconnections and lease the third party’s radio access network. This arrangement permits us to tailor our own packages and rates and to offer our Chilean customers all mobile services using our core network without having to build and operate a cellular radio tower network and without being limited to offering customers packages and rates designated by the wireless network provider.

Subscribers to our mobile services in Chile pay varying monthly fees depending on whether the mobile service is included with our fixed-line telephony service or includes mobile data services via mobile phones, tablets or laptops. Our mobile services typically include telephony, short message service (SMS) and internet. Mobile voice services in Chile are offered on a “calling-party pays” basis. Under this structure, telephone companies pay other telephone companies an interconnection charge for calls originated from their networks to third party networks. With respect to fixed-to-mobile calls, fixed-line telephone companies may pass this charge on to their subscribers. Therefore, the carrier of a subscriber calling a subscriber on another network pays, in the case of a fixed-line company, a rate comprised of a local fee that is part of the basic fixed-line telephony service plus an interconnection fee from the fixed network to the mobile network. Fixed network subscribers can choose to block the ability to make calls to mobile telephones from their fixed-line phones. The carrier of a mobile subscriber receiving a collect call is also required to pay mobile usage charges. Our revenue from mobile services mainly consists of monthly subscription and usage fees for calls and SMS and interconnection revenue.

We are currently exploring adding MVNO arrangements in Puerto Rico and other technological and strategic alternatives to add features of mobility to our services.

Technology

Our video, broadband internet and fixed-line telephony services in Latin America are transmitted over a hybrid fiber coaxial cable network. This network is composed primarily of glass fiber with only the last part that connects the home to the network composed of coaxial cable.

We continue to explore new technology strategies that will enhance the customer experience, such as:

 

   

recapturing bandwidth and optimizing our networks by increasing the number of nodes in our networks and using digital compression technologies;

 

   

using wireless technologies to extend our services outside the home;

 

   

caching websites from outside of Chile and Puerto Rico to improve customer service, save on international bandwidth and provide faster internet speeds;

 

   

upgrading our current DOCSIS 3.0 technology to DOCSIS 3.1 technology; and

 

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introducing advanced, cloud-based next generation set-top boxes with computer-like interfaces and multi-device (television, computer, tablet and smartphone) capability, as well as enhanced next-generation user interfaces for existing set-top boxes.

Our principal plant and equipment consists of outside plant and switching equipment, as well as operating units that are located throughout our Latin American footprint. Our networks are comprised of two main components, which are our access networks and our hubs. The access network, which connects customers’ homes with the hubs, is built with hybrid technology using fiber optic and coaxial cable. Our hubs house data switches, digital television processing equipment, telephone switches, data centers, cable modem termination systems, optical transmitters and receivers that provide or facilitate the transmission of telephony, data and video services over our network.

Supply Sources

For our video services, we license almost all of our programming and on-demand offerings from broadcast and cable programming networks. For such licenses, we generally pay a monthly fee on a per channel or per subscriber basis. We generally enter into long-term programming licenses with volume discounts and marketing support. For on-demand programming and streaming services, we generally enter into shorter-term agreements. For our distribution agreements, we seek to include the rights to offer the licensed programming to our customers through multiple delivery platforms.

We purchase each type of customer premises equipment from a number of different suppliers with at least two or more suppliers for our high-volume products. Customer premises equipment includes set-top boxes, modems, DVRs, tuners and similar devices. For our broadband services, we use a variety of suppliers for our network equipment and the various services we offer. Similarly, we use a variety of suppliers for the mobile handsets we offer customers in Chile.

We license software products, including email and security software, and content, such as news feeds, from several suppliers for our internet services. The agreements for these products require us to pay a per subscriber fee for software licenses and a share of advertising revenue for content licenses. For our fixed-line telephony services, we license software products, such as voicemail, text messaging and caller ID, from a variety of suppliers. For these licenses we attempt to enter into long-term contracts, which generally require us to pay based on usage of the services.

 

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The following table presents certain penetration and network data as of September 30, 2014, with respect to the cable systems whose operations are to be attributed to the LiLAC Group. The table reflects 100% of the data applicable to our consolidated subsidiaries operating in Chile and Puerto Rico regardless of our ownership percentage. Percentages are rounded to the nearest whole number.

 

     Chile      Puerto Rico  

LiLAC Network Data:

     

Two-way homes passed (HP) percentage (1)

     82         100   

Digital video availability percentage (2)

     82         100   

Broadband internet availability percentage (2)

     82         100   

Fixed-line telephony availability percentage (2)

     82         100   

Bandwidth percentage: (3)

     

at least 860 MHz

     62         50   

750 MHz to 859 MHz

     24         —     

less than 750 MHz

     14         50