Share-based Compensation

Our share-based compensation expense is based on the share-based incentive awards held by our and our subsidiaries’ employees, including share-based incentive awards related to Liberty Global shares and the shares of certain of our subsidiaries. The following table summarizes our share-based compensation expense:



	Year ended December 31,
	2013		2012		2011
	in millions
Liberty Global shares:
Performance-based incentive awards (a)	$	58.6	$	33.0	$	46.8
Other share-based incentive awards	182.9		46.0		43.4
Total Liberty Global shares (b)	241.5		79.0		90.2
Telenet share-based incentive awards (c)	56.5		31.2		40.0
Other	4.5		2.2		4.7
Total	$	302.5	$	112.4	$	134.9
Included in:
Continuing operations:
Operating expense	$	12.1	$	8.5	$	15.1
SG&A expense	288.6		101.6		114.3
Total - continuing operations	300.7		110.1		129.4
Discontinued operations (d)	1.8		2.3		5.5
Total	$	302.5	$	112.4	$	134.9

_______________


(a)	Includes share-based compensation expense related to Liberty Global performance-based restricted share units (PSUs) for all periods presented, the Challenge Performance Awards (as defined and described below) for the applicable 2013 period and our five-year performance-based incentive plans for our senior executives and certain key employees (the Liberty Global Performance Plans) for 2011.

(b)

In accordance with the terms of the Virgin Media Merger Agreement, we issued Liberty Global share-based incentive awards (Virgin Media Replacement Awards) to employees and former directors of Virgin Media in exchange for corresponding Virgin Media awards. In connection with the Virgin Media Acquisition, the Virgin Media Replacement Awards were remeasured as of June 7, 2013, resulting in an aggregate estimated fair value attributable to the post-acquisition period of $188.5 million. During the 2013 period following the Virgin Media Acquisition, Virgin Media recorded share-based compensation expense of $134.3 million, primarily related to the Virgin Media Replacement Awards, including $80.1 million that was charged to expense in recognition of the Virgin Media Replacement Awards that were fully vested on June 7, 2013 or for which vesting was accelerated pursuant to the terms of the Virgin Media Merger Agreement on or prior to December 31, 2013. The remaining June 7, 2013 estimated fair value will be amortized over the remaining service periods of the unvested Virgin Media Replacement Awards, subject to forfeitures and the satisfaction of performance conditions.

(c)

During the second quarters of 2013, 2012 and 2011, Telenet modified the terms of certain of its share-based incentive plans to provide for anti-dilution adjustments in connection with its shareholder returns. In connection with these anti-dilution adjustments, Telenet recognized share-based compensation expense of $32.7 million, $12.6 million and $15.8 million, respectively, and continues to recognize additional share-based compensation expense as the underlying options vest. In addition, during the first quarter of 2013, Telenet recognized expense of $6.2 million related to the accelerated vesting of options granted under the Telenet 2010 SSOP (as defined and described below).


(d)	Amounts relate to (i) the share-based compensation expense associated with the Liberty Global share-based incentive awards held by certain employees of the Chellomedia Disposal Group and (ii) during 2011, Austar’s long-term incentive plan.

The following table provides certain information related to share-based compensation not yet recognized for share incentive awards related to Liberty Global ordinary shares and Telenet ordinary shares as of December 31, 2013:



	Liberty Global ordinary shares (a)		Liberty Global performance- based awards		Telenet ordinary shares (b)

Total compensation expense not yet recognized (in millions)	$	155.5	$	125.0	$	13.4
Weighted average period remaining for expense recognition (in years)	2.3		2.1		2.3

_______________

(a)

Amounts relate to awards granted or assumed by Liberty Global under (i) the Liberty Global, Inc. 2005 Incentive Plan (as amended and restated effective June 7, 2013) (the Liberty Global Incentive Plan), (ii) the Liberty Global, Inc. 2005 Nonemployee Director Incentive Plan (as amended and restated effective June 7, 2013) (the Liberty Global Director Incentive Plan), (iii) the Virgin Media Inc. 2010 Stock Incentive Plan (as amended and restated effective June 7, 2013) (the VM Incentive Plan) and (iv) certain other incentive plans of Virgin Media pursuant to which awards may no longer be granted. The Liberty Global Incentive Plan, the Liberty Global Director Incentive Plan and the VM Incentive Plan are described below.


(b)	Amounts relate to various equity incentive awards granted to employees of Telenet as described below.

The following table summarizes certain information related to the incentive awards granted and exercised with respect to Liberty Global ordinary shares:



	Year ended December 31,
	2013		2012		2011
Assumptions used to estimate fair value of options, SARs and performance-based share appreciation rights (PSARs) granted:
Risk-free interest rate	0.36 - 2.03%		0.37 - 1.68%		0.82 - 3.31%
Expected life (a)	3.2 - 7.1 years		3.3 - 7.9 years		3.4 - 8.7 years
Expected volatility (a)	26.5 - 35.8%		28.0 - 40.4%		35.5 - 45.6%
Expected dividend yield	none		none		none
Weighted average grant-date fair value per share awards granted:
Options	$	27.39	$	20.00	$	21.41
SARs	$	16.71	$	14.36	$	15.02
PSARs	$	16.63	$	—	$	—
Restricted shares and RSUs	$	71.47	$	49.14	$	44.79
PSUs	$	69.88	$	50.18	$	39.98
Total intrinsic value of awards exercised (in millions):
Options	$	175.0	$	43.9	$	93.8
SARs	$	73.2	$	52.0	$	39.2
Cash received from exercise of options (in millions)	$	81.0	$	25.6	$	32.7
Income tax benefit related to share-based compensation (in millions)	$	48.0	$	16.1	$	18.9

_______________


(a)	The 2013 ranges shown for these assumptions exclude the awards for certain former employees of Virgin Media who were expected to exercise their awards immediately or soon after the Virgin Media Acquisition. For these awards, the assumptions used for expected life and volatility were essentially nil.

Share Incentive Plans — Liberty Global Ordinary Shares

Incentive Plans

As of December 31, 2013, we were authorized to grant incentive awards under the Liberty Global Incentive Plan, the Liberty Global Director Incentive Plan and the VM Incentive Plan. Generally, we may grant non-qualified share options, SARs, restricted shares, RSUs, cash awards, performance awards or any combination of the foregoing under any of the incentive plans (collectively, awards). Ordinary shares issuable pursuant to awards made under these incentive plans will be made available from either authorized but unissued shares or shares that have been issued but reacquired by our company. Awards may be granted at or above fair value in any class of ordinary shares. As of December 31, 2013, the Liberty Global Incentive Plan, the Liberty Global Director Incentive Plan and the VM Incentive Plan had 238,907, 8,814,423 and 12,017,912 ordinary shares available for grant, respectively.

Awards under the Liberty Global Incentive Plan and the Liberty Global Director Incentive Plan issued prior to June 2005 are fully vested and expire 10 years after the grant date. In connection with the Virgin Media Acquisition, we assumed the VM Incentive Plan. Awards under the VM Incentive Plan issued prior to June 7, 2013 have a ten-year term and become fully exercisable within five years of continued employment. Certain performance-based awards that were granted during the first quarter of 2013 were canceled upon completion of the Virgin Media Acquisition. These canceled awards were subsequently replaced by PSUs that were granted under the VM Incentive Plan on June 24, 2013. For the remaining performance-based awards that were outstanding prior to June 7, 2013, the performance objectives lapsed upon the completion of the Virgin Media Acquisition and such awards will vest on the third anniversary of the grant date.

Awards (other than performance-based awards) under the Liberty Global Incentive Plan issued after June 2005 and under the VM Incentive Plan after June 7, 2013 generally (i) vest 12.5% on the six month anniversary of the grant date and then vest at a rate of 6.25% each quarter thereafter and (ii) expire seven years after the grant date. Awards (other than restricted shares and RSUs) issued after June 2005 under the Liberty Global Director Incentive Plan generally vest in three equal annual installments, provided the director continues to serve as director immediately prior to the vesting date, and expire 10 years after the grant date. Restricted shares and RSUs vest on the date of the first annual meeting of shareholders following the grant date. These shares may be awarded at or above fair value in any class of ordinary shares.

Subsequent to December 31, 2013, our shareholders approved the Liberty Global 2014 Incentive Plan and the Liberty Global 2014 Nonemployee Director Incentive Plan (collectively, the Liberty Global 2014 Incentive Plans). Generally, we may grant non-qualified share options, SARs, restricted shares, RSUs, cash awards, performance awards or any combination of the foregoing under either of these incentive plans. Ordinary shares issuable pursuant to awards made under the Liberty Global 2014 Incentive Plans will be made available from either authorized but unissued shares or shares that have been issued but reacquired by our company. Awards may be granted at or above fair value in any series of ordinary shares. The maximum number of Liberty Global shares with respect to which awards may be issued under the Liberty Global 2014 Incentive Plan and the Liberty Global 2014 Nonemployee Director Incentive Plan is 50 million (of which no more than 25 million shares may consist of Class B ordinary shares) and five million, respectively, in each case, subject to anti-dilution and other adjustment provisions in the respective plan. As the Liberty Global 2014 Incentive Plans have now been approved by our shareholders, no further awards will be granted under the Liberty Global Incentive Plan, the Liberty Global Director Incentive Plan or the VM Incentive Plan.

Performance Awards

The following is a summary of the material terms and conditions with respect to our performance-based awards for certain executive officers and key employees, which awards were granted under the Liberty Global Incentive Plan and the VM Incentive Plan.

Liberty Global Performance Plans. The Liberty Global Senior Executive Performance Plan and the Liberty Global Management Performance Plan (collectively the Liberty Global Performance Plans) were five-year performance-based incentive plans for our senior executives and certain key employees, respectively. The Liberty Global Performance Plans had a two-year performance period, which began January 1, 2007, and a three-year service period, which began January 1, 2009. Following completion of the performance period, on February 18, 2009, participants in the Liberty Global Performance Plans that met minimum annual performance rating levels earned $316.5 million or 87.4% of their aggregate maximum achievable awards. Earned awards were to be paid in six equal semi-annual installments on each March 31 and September 30 commencing on March 31, 2009, subject to forfeiture upon certain events of termination of employment or acceleration in certain circumstances. The six installments of the awards were settled with a combination of cash and RSUs.

Liberty Global PSUs. In March 2010, the compensation committee determined to modify the equity incentive award component of our executive officers’ and other key employees’ compensation packages, whereby a target annual equity value would be set for each executive or key employee, of which approximately two-thirds would be delivered in the form of an annual award of PSUs and approximately one-third in the form of an annual award of SARs. Each PSU represents the right to receive one Class A or Class C ordinary share, as applicable, subject to performance and vesting. Generally, the performance period for the PSUs covers a two-year period and the performance target is based on the achievement of a specified compound annual growth rate (CAGR) in a consolidated operating cash flow metric (as defined in the applicable underlying agreement), adjusted for events such as acquisitions, dispositions and changes in foreign currency exchange rates that affect comparability (OCF CAGR), and the participant’s annual performance ratings during the two-year performance period. A performance range of 75% to 125% of the target OCF CAGR generally results in award recipients earning 50% to 150% of their respective PSUs, subject to reduction or forfeiture based on individual performance. The PSUs generally vest 50% on each of March 31 and September 30 of the year following the end of the performance period.

Liberty Global Challenge Performance Awards. Effective June 24, 2013, our compensation committee approved a challenge performance award plan for certain executive officers and key employees (the Challenge Performance Awards), which consisted solely of PSARs for our senior executive officers and a combination of PSARs and PSUs for our other executive officers and key employees. Each PSU represents the right to receive one Class A ordinary share or one Class C ordinary share, as applicable, subject to performance and vesting. The performance criteria for the Challenge Performance Awards will be based on the participant’s performance and achievement of individual goals in each of the years 2013, 2014 and 2015. Subject to forfeitures and the satisfaction of performance conditions, 100% of each participant’s Challenge Performance Awards will vest on June 24, 2016. The PSARs have a term of seven years and base prices equal to the respective market closing prices of the applicable class on the grant date.

Share-Based Award Activity - Liberty Global Ordinary Shares

The following tables summarize the share-based award activity during the year ended December 31, 2013 with respect to Liberty Global ordinary shares. In the following tables, the Virgin Media Replacement Awards represent the Liberty Global awards that were added as a result of the replacement of the outstanding Virgin Media stock incentive awards as of June 7, 2013 with share-based incentive awards of Liberty Global pursuant to the terms of the Virgin Media Merger Agreement.



Options — Class A ordinary shares	Number of shares		Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
					in years	in millions
Outstanding at January 1, 2013	804,617		$	25.90
Virgin Media Replacement Awards	3,934,574		$	31.16
Granted	62,314		$	73.66
Canceled	(144,436	)	$	52.75
Exercised	(1,948,624	)	$	27.47
Outstanding at December 31, 2013	2,708,445		$	32.08	6.1	$	154.2
Exercisable at December 31, 2013	1,555,700		$	26.23	4.6	$	97.7



Options — Class C ordinary shares	Number of shares		Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
					in years	in millions
Outstanding at January 1, 2013	842,771		$	24.59
Virgin Media Replacement Awards	2,935,250		$	27.16
Granted	67,334		$	68.16
Canceled	(107,797	)	$	48.74
Exercised	(1,576,096	)	$	24.06
Outstanding at December 31, 2013	2,161,462		$	28.62	6.1	$	120.4
Exercisable at December 31, 2013	1,270,181		$	22.85	4.6	$	78.1



SARs — Class A ordinary shares	Number of shares		Weighted average base price		Weighted average remaining contractual term	Aggregate intrinsic value
					in years	in millions
Outstanding at January 1, 2013	3,761,337		$	36.94
Granted	1,234,736		$	74.38
Forfeited	(50,749	)	$	52.21
Exercised	(776,566	)	$	29.03
Outstanding at December 31, 2013	4,168,758		$	49.31	4.8	$	165.4
Exercisable at December 31, 2013	1,862,169		$	36.80	3.9	$	97.2



SARs — Class C ordinary shares	Number of shares		Weighted average base price		Weighted average remaining contractual term	Aggregate intrinsic value
					in years	in millions
Outstanding at January 1, 2013	3,786,754		$	35.58
Granted	1,234,736		$	69.16
Forfeited	(50,749	)	$	49.70
Exercised	(836,355	)	$	27.47
Outstanding at December 31, 2013	4,134,386		$	47.07	4.8	$	154.0
Exercisable at December 31, 2013	1,827,797		$	35.74	3.9	$	88.8



PSARs — Class A ordinary shares	Number of shares		Weighted average base price		Weighted average remaining contractual term	Aggregate intrinsic value
					in years	in millions
Outstanding at January 1, 2013	—		$	—
Granted	2,903,750		$	69.77
Forfeited	(86,252	)	$	69.70
Outstanding at December 31, 2013	2,817,498		$	69.77	6.5	$	54.2
Exercisable at December 31, 2013	—		$	—	—	$	—



PSARs — Class C ordinary shares	Number of shares		Weighted average base price		Weighted average remaining contractual term	Aggregate intrinsic value
					in years	in millions
Outstanding at January 1, 2013	—		$	—
Granted	2,903,750		$	65.63
Forfeited	(86,252	)	$	65.56
Outstanding at December 31, 2013	2,817,498		$	65.63	6.5	$	52.6
Exercisable at December 31, 2013	—		$	—	—	$	—



Restricted shares and RSUs — Class A ordinary shares	Number of shares		Weighted average grant-date fair value per share		Weighted average remaining contractual term
					in years
Outstanding at January 1, 2013	332,008		$	40.53
Virgin Media Replacement Awards (a)	900,408		$	76.24
Granted	128,958		$	74.05
Forfeited	(46,605	)	$	67.64
Released from restrictions	(589,093	)	$	64.65
Outstanding at December 31, 2013	725,676		$	69.47	5.9



Restricted shares and RSUs — Class C ordinary shares	Number of shares		Weighted average grant-date fair value per share		Weighted average remaining contractual term
					in years
Outstanding at January 1, 2013	332,301		$	39.13
Virgin Media Replacement Awards (a)	671,923		$	71.51
Granted	128,958		$	68.89
Forfeited	(38,726	)	$	62.13
Released from restrictions	(485,060	)	$	58.64
Outstanding at December 31, 2013	609,396		$	64.14	5.4

______________


(a)	The amounts shown as the grant-date fair values per share for these awards represent the June 7, 2013 market prices of the applicable LGI Series A or Series C common stock that were assigned to these awards when they were remeasured in connection with the Virgin Media Acquisition.



PSUs — Class A ordinary shares	Number of shares		Weighted average grant-date fair value per share		Weighted average remaining contractual term
					in years
Outstanding at January 1, 2013	759,585		$	46.54
Granted	580,459		$	71.97
Performance adjustment	(11,720	)	$	40.75
Forfeited	(75,273	)	$	69.70
Released from restrictions	(328,403	)	$	40.75
Outstanding at December 31, 2013	924,648		$	62.75	1.4



PSUs — Class C ordinary shares	Number of shares		Weighted average grant-date fair value per share		Weighted average remaining contractual term
					in years
Outstanding at January 1, 2013	759,585		$	44.68
Granted	549,047		$	67.69
Performance adjustment	(11,720	)	$	39.21
Forfeited	(58,607	)	$	65.56
Released from restrictions	(328,403	)	$	39.21
Outstanding at December 31, 2013	909,902		$	59.25	1.4

Share-based Incentive Plans - Telenet Ordinary Shares

Telenet Stock Option Plans

General. During the second quarters of 2013, 2012 and 2011, Telenet modified the terms of certain of its share-based incentive plans to provide for anti-dilution adjustments in connection with shareholder returns that, as further described in note 11, were approved by Telenet shareholders on April 24, 2013, April 25, 2012 and April 27, 2011, respectively. These anti-dilution adjustments, which were finalized in May 2013, August 2012 and July 2011, respectively, provided for increases in the number of options and warrants outstanding and proportionate reductions to the option and warrant exercise prices such that the fair value of the options and warrants outstanding before and after the distributions remained the same for all option and warrant holders. In connection with these anti-dilution adjustments, Telenet recognized share-based compensation expense of $32.7 million, $12.6 million and $15.8 million during the second quarters of 2013, 2012 and 2011, respectively, and continues to recognize additional share-based compensation as the underlying options vest.

Telenet Specific Stock Option Plans. Telenet has authorized the grant of performance-based stock options to its former Chief Executive Officer pursuant to a plan that was authorized in 2010 (the Telenet 2010 SSOP) and to its current Chief Executive Officer pursuant to plans that were authorized in 2013 (the Telenet 2013 SSOP) and 2014 (the Telenet 2014 SSOP, and together, with the Telenet 2010 SSOP and Telenet 2013 SSOP, the Telenet Specific Stock Option Plans). Vesting of options granted under the Telenet Specific Stock Option Plans are subject to the achievement of relevant performance criteria. In March 2013, Telenet set the performance criteria for 256,490 options under the Telenet 2010 SSOP and vesting was subsequently accelerated for all options under the Telenet 2010 SSOP in connection with the resignation of Telenet’s former Chief Executive Office during the first quarter of 2013. As a result of this accelerated vesting, Telenet recorded additional share-based compensation of $6.2 million during the first quarter of 2013. In October 2013, Telenet granted 200,000 options under the Telenet 2013 SSOP of which 50,000 options vest on July 4, 2014, 100,000 options vest on July 4, 2015 and 50,000 options vest on July 4, 2016. On February 5, 2014, Telenet granted an additional 185,000 stock options under the Telenet 2014 SSOP, with an exercise price of €38.88 ($53.61) per option. Under the Telenet 2014 SSOP, 138,750 options vest on June 26, 2016 and 46,250 options vest on March 1, 2017.

The following table summarizes the activity during 2013 related to the Telenet Specific Stock Option Plans:



Options — Telenet ordinary shares	Number of shares	Weighted average exercise price			Weighted average remaining contractual term	Aggregate intrinsic value
					in years	in millions
Outstanding at January 1, 2013	833,594	€	18.66
Granted (a)	456,490	€	26.43
Net impact of anti-dilution adjustments (b)	252,540	€	(3.58	)
Outstanding at December 31, 2013	1,542,624	€	17.91		3.8	€	39.3
Exercisable at December 31, 2013 (c)	—	€	—		—	€	—

_______________

(a)

Represents the number of options for which the performance criteria was set during the period. The fair value of these options was calculated on the date that the performance criteria was set using an expected volatility ranging from 20.5% to 23.3%, an expected life ranging from 3.3 years to 4.1 years, and a risk-free return ranging from 0.33% to 1.07%. The grant date fair value of these options ranged from €7.91 ($10.91) to €18.24 ($25.15).


(b)	Amount relates to options granted under the Telenet 2010 SSOP.


(c)	All of the vested options pursuant to the Telenet 2010 SSOP become exercisable during defined exercise periods following January 1, 2014 and have an expiration date of September 4, 2017. Vested options pursuant to the Telenet 2013 SSOP become exercisable during defined exercise periods following July 4, 2016 and have an expiration date of July 4, 2018.

Telenet Employee Stock Warrant Plans. Telenet has granted warrants to members of senior management under various share-based compensation plans (the Telenet Employee Stock Warrant Plans). Each warrant provides the employee with the option to acquire a new ordinary share of Telenet at a specified exercise price. No further warrants are authorized for issuance under the Telenet Employee Stock Warrant Plans. Warrants generally vest at a rate of 6.25% per quarter over four years and expire on dates through August 2016.

Telenet 2013 Employee Stock Option Plan. In July 2013, Telenet’s board of directors authorized a new employee stock option plan (the Telenet 2013 Employee Stock Option Plan). The maximum aggregate number of options authorized for issuance under the Telenet 2013 Employee Stock Option Plan is 1,200,000. Options granted under the Telenet 2013 Employee Stock Option Plan (i) vest quarterly over a period of four years at a rate of 10.00% per quarter for the first four quarters and then 5.00% per quarter thereafter and (ii) expire five years after the grant date. During 2013, a total of 799,448 stock options were granted and accepted pursuant to the Telenet 2013 Employee Stock Option Plan.

The following table summarizes the activity during 2013 related to the Telenet Employee Stock Warrant Plans and the Telenet 2013 Employee Stock Option Plan:



Warrants / Options— Telenet ordinary shares	Number of shares		Weighted average exercise price			Weighted average remaining contractual term	Aggregate intrinsic value
						in years	in millions
Outstanding at January 1, 2013	3,185,709		€	13.95
Granted	799,448		€	34.51
Forfeited	(9,212	)	€	17.78
Exercised	(2,312,516	)	€	11.64
Net impact of anti-dilution adjustments	406,378		€	(2.86	)
Outstanding at December 31, 2013	2,069,807		€	21.71		3.6	€	44.8
Exercisable at December 31, 2013	958,071		€	14.39		1.6	€	27.8