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:



	Three months ended September 30,				Nine months ended September 30,
	2014		2013		2014		2013
	in millions
Liberty Global shares:
Performance-based incentive awards (a)	$	44.2	$	12.6	$	88.0	$	24.5
Other share-based incentive awards	25.1		79.1		77.5		140.1
Total Liberty Global shares (b)	69.3		91.7		165.5		164.6
Telenet share-based incentive awards (c)	1.9		4.9		12.6		52.4
Other	1.9		2.1		4.5		2.4
Total	$	73.1	$	98.7	$	182.6	$	219.4
Included in:
Continuing operations:
Operating expense	$	1.0	$	0.8	$	5.9	$	10.7
SG&A expense	72.1		97.4		176.7		207.2
Total - continuing operations	73.1		98.2		182.6		217.9
Discontinued operation	—		0.5		—		1.5
Total	$	73.1	$	98.7	$	182.6	$	219.4

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(a)

Includes share-based compensation expense related to (i) Liberty Global performance-based restricted share units (PSUs), (ii) a challenge performance award plan issued on June 24, 2013 for certain executive officers and key employees (the Challenge Performance Awards) and (iii) for the 2014 periods, the PGUs, as defined and described below. The Challenge Performance Awards include performance-based share appreciation rights (PSARs) and PSUs.

(b)

In connection with the Virgin Media Acquisition, 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. Virgin Media recorded share-based compensation expense of $14.4 million and $45.8 million during the three and nine months ended September 30, 2014, respectively, including compensation expense related to the Virgin Media Replacement Awards and new awards that were granted after the Virgin Media Replacement Awards were issued. During the second and third quarters of 2013, Virgin Media recorded share-based compensation expense of $35.9 million and $61.6 million, respectively, primarily related to the Virgin Media Replacement Awards, including $27.5 million and $35.4 million, respectively, 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 September 30, 2013.

(c)

During the second quarter of 2013, 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 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 specific stock option plan (Telenet 2010 SSOP).

The following table provides certain information related to share-based compensation not yet recognized for share-based incentive awards related to Liberty Global ordinary shares and Telenet ordinary shares as of September 30, 2014:



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

Total compensation expense not yet recognized (in millions)	$	150.0	$	197.3	$	5.8
Weighted average period remaining for expense recognition (in years)	2.7		1.5		2.2

_______________

(a)

Amounts relate to awards granted or assumed by Liberty Global under (i) the Liberty Global 2014 Incentive Plan, (ii) the Liberty Global 2014 Nonemployee Director Incentive Plan, (iii) the Liberty Global, Inc. 2005 Incentive Plan (as amended and restated effective June 7, 2013), (iv) the Liberty Global, Inc. 2005 Nonemployee Director Incentive Plan (as amended and restated effective June 7, 2013), (v) the Virgin Media Inc. 2010 Stock Incentive Plan (as amended and restated effective June 7, 2013) and (vi) certain other incentive plans of Virgin Media. On January 30, 2014, our shareholders approved the Liberty Global 2014 Incentive Plan and the Liberty Global 2014 Nonemployee Director Incentive Plan and, accordingly, awards are now only granted under the Liberty Global 2014 Incentive Plan and the Liberty Global 2014 Nonemployee Director Incentive Plan.


(b)	Amounts relate to (i) the Challenge Performance Awards, (ii) PSUs and (iii) the PGUs, as defined and described below.


(c)	Amounts relate to various equity incentive awards granted to employees of Telenet.

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



	Nine months ended
	September 30,
	2014		2013
Assumptions used to estimate fair value of options, share appreciation rights (SARs) and PSARs granted:
Risk-free interest rate	0.81 - 1.77%		0.36 - 1.27%
Expected life (a)	3.1 - 5.1 years		3.2 - 7.1 years
Expected volatility (a)	25.1 - 28.7%		26.5 - 35.8%
Expected dividend yield	none		none
Weighted average grant-date fair value per share of awards granted:
Options	$	11.40	$	11.09
SARs	$	8.93	$	8.36
PSARs	$	8.15	$	8.31
Restricted share units (RSUs)	$	39.77	$	35.74
PSUs and PGUs	$	42.47	$	34.94
Total intrinsic value of awards exercised (in millions):
Options	$	76.3	$	114.9
SARs	$	23.7	$	59.6
PSARs	$	0.2	$	—
Cash received from exercise of options (in millions)	$	34.3	$	57.2
Income tax benefit related to share-based compensation (in millions)	$	37.6	$	33.2

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(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.

Liberty Global Performance Grant Award

Effective May 1, 2014, our compensation committee authorized the grant to our Chief Executive Officer a total of one million Class A PSUs and one million Class B PSUs (the Performance Grant Units or PGUs). The PGUs, which were approved by our shareholders on June 26, 2014, are subject to the achievement of a performance condition measured in 2014 and, once the performance condition is met, the awards will vest in three equal annual installments commencing on March 15, 2015.

Share-Based Award Activity - Liberty Global Ordinary Shares

The following tables summarize the share-based award activity during the nine months ended September 30, 2014 with respect to Liberty Global ordinary shares:



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, 2014	2,708,445		$	16.12
Granted	78,677		$	42.54
Cancelled	(47,205	)	$	22.14
Exercised	(618,993	)	$	14.90
Outstanding at September 30, 2014	2,120,924		$	17.33	5.8	$	53.5
Exercisable at September 30, 2014	1,212,064		$	13.83	4.7	$	34.8



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, 2014	7,031,369		$	14.95
Granted	157,346		$	40.86
Cancelled	(116,915	)	$	20.78
Exercised	(1,933,626	)	$	12.64
Outstanding at September 30, 2014	5,138,174		$	16.47	5.9	$	126.2
Exercisable at September 30, 2014	2,876,361		$	13.36	4.8	$	79.5



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, 2014	4,168,758		$	24.78
Granted	2,192,672		$	40.90
Forfeited	(148,111	)	$	30.17
Exercised	(284,967	)	$	21.12
Outstanding at September 30, 2014	5,928,352		$	30.77	5.0	$	69.8
Exercisable at September 30, 2014	2,333,076		$	20.71	3.4	$	50.9



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, 2014	12,437,530		$	23.87
Granted	4,408,368		$	39.07
Forfeited	(435,969	)	$	29.27
Exercised	(834,407	)	$	20.84
Outstanding at September 30, 2014	15,575,522		$	28.18	4.8	$	199.9
Exercisable at September 30, 2014	6,950,992		$	20.04	3.4	$	145.8



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, 2014	2,817,498		$	35.07
Granted	10,000		$	43.58
Forfeited	(10,209	)	$	35.03
Exercised	(6,248	)	$	35.03
Outstanding at September 30, 2014	2,811,041		$	35.10	5.7	$	20.9
Exercisable at September 30, 2014	7,291		$	35.03	2.0	$	0.1



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, 2014	8,452,494		$	33.44
Granted	30,000		$	43.03
Forfeited	(30,626	)	$	33.41
Exercised	(18,744	)	$	33.41
Outstanding at September 30, 2014	8,433,124		$	33.48	5.7	$	63.6
Exercisable at September 30, 2014	21,874		$	33.86	2.0	$	0.2



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, 2014	725,676		$	35.48
Granted	207,408		$	40.98
Forfeited	(39,038	)	$	32.53
Released from restrictions	(269,816	)	$	34.66
Outstanding at September 30, 2014	624,230		$	37.72	4.8



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, 2014	1,944,468		$	32.79
Granted	414,816		$	39.17
Forfeited	(110,193	)	$	30.31
Released from restrictions	(721,392	)	$	31.96
Outstanding at September 30, 2014	1,527,699		$	34.98	4.7



PSUs and PGUs — 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, 2014	924,648		$	32.05
Granted	1,518,276		$	42.74
Performance adjustment (a)	(138,668	)	$	26.17
Forfeited	(21,564	)	$	32.89
Released from restrictions	(273,570	)	$	26.23
Outstanding at September 30, 2014	2,009,122		$	41.32	2.0



PGUs — Class B ordinary shares	Number of shares	Weighted average grant-date fair value per share		Weighted average remaining contractual term
				in years
Outstanding at January 1, 2014	—	$	—
Granted	1,000,000	$	44.55
Outstanding at September 30, 2014	1,000,000	$	44.55	2.5



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, 2014	2,744,452		$	29.99
Granted	1,048,614		$	39.83
Performance adjustment (a)	(416,004	)	$	24.73
Forfeited	(64,692	)	$	30.77
Released from restrictions	(820,710	)	$	24.78
Outstanding at September 30, 2014	2,491,660		$	36.70	1.5

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(a)	Represents the reduction in PSUs associated with the first quarter 2014 determination that 66.3% of the PSUs that were granted in 2012 (the 2012 PSUs) had been earned. As of September 30, 2014, all of the earned 2012 PSUs have been released from restrictions.