Edgar Filing: Liberty Global, Inc.

LGI Series A,
Series B and
Series C
common
stock (a)

LGI
performance
plans (b)

Total compensation expense not yet recognized (in millions)

Weighted average period remaining for expense recognition (in years)

Form 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-51360

LOGO

Liberty Global, Inc.

(Exact name of Registrant as specified in its charter)


State of Delaware		20-2197030
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

12300 Liberty Boulevard Englewood, Colorado		80112
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:

(303) 220-6600

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

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. (Check one):

Large Accelerated Filer þ Accelerated Filer ¨ Non-Accelerated Filer ¨ Smaller Reporting Company ¨

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes ¨ No þ

The number of outstanding shares of Liberty Global, Inc.’s common stock as of July 31, 2009 was:

Series A common stock — 131,425,884 shares;

Series B common stock — 7,191,210 shares; and

Series C common stock — 125,490,607 shares.

LIBERTY GLOBAL, INC.

INDEX


		Page Number
	PART I — FINANCIAL INFORMATION

ITEM 1.	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	Condensed Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008 (unaudited)	1

	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2009 and 2008 (unaudited)	3

	Condensed Consolidated Statements of Comprehensive Earnings (Loss) for the Three and Six Months Ended June 30, 2009 and 2008 (unaudited)	4

	Condensed Consolidated Statement of Equity for the Six Months Ended June 30, 2009 (unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008 (unaudited)	6

	Notes to Condensed Consolidated Financial Statements (unaudited)	7

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	53

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	83

ITEM 4.	CONTROLS AND PROCEDURES	89

	PART II — OTHER INFORMATION

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	90

ITEM 4.	SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS	91

ITEM 6.	EXHIBITS	92

LIBERTY GLOBAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


	June 30, 2009		December 31, 2008
	in millions
ASSETS
Current assets:
Cash and cash equivalents	$	1,752.9	$	1,374.0
Trade receivables, net		820.4		1,002.8
Deferred income taxes		232.0		280.8
Derivative instruments (note 5)		105.1		193.6
Current assets of discontinued operations (note 3)		8.6		—
Other current assets		400.2		382.5

Total current assets		3,319.2		3,233.7
Restricted cash (note 8)		470.8		470.8
Investments (note 4)		1,011.1		979.8
Property and equipment, net (note 7)		11,719.5		12,035.4
Goodwill (note 7)		12,932.4		13,144.7
Intangible assets subject to amortization, net (note 7)		2,130.4		2,405.0
Long-term assets of discontinued operations (note 3)		181.2		—
Other assets, net (note 5)		1,617.0		1,716.7

Total assets	$	33,381.6	$	33,986.1

The accompanying notes are an integral part of these condensed consolidated financial statements.

LIBERTY GLOBAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)

(unaudited)


	June 30, 2009			December 31, 2008
	in millions
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	725.6		$	735.0
Deferred revenue and advance payments from subscribers and others		779.6			918.4
Current portion of debt and capital lease obligations (note 8)		516.3			513.0
Derivative instruments (note 5)		657.7			441.7
Accrued interest		121.7			142.4
Current liabilities of discontinued operations (note 3)		8.8			—
Other accrued and current liabilities		1,414.8			1,491.6

Total current liabilities		4,224.5			4,242.1
Long-term debt and capital lease obligations (note 8)		20,209.1			19,989.9
Deferred tax liabilities		786.8			902.7
Long-term liabilities of discontinued operations (note 3)		20.2			—
Other long-term liabilities (note 5)		2,275.2			2,356.7

Total liabilities		27,515.8			27,491.4

Commitments and contingencies (notes 10 and 13)

Equity (note 9):
Liberty Global, Inc. stockholders:
Series A common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 133,111,224 and 136,334,241 shares, respectively		1.3			1.4
Series B common stock, $.01 par value. Authorized 50,000,000 shares; issued and outstanding 7,191,210 and 7,191,210 shares, respectively		0.1			0.1
Series C common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 127,119,535 and 137,703,628 shares, respectively		1.3			1.4
Additional paid-in capital		3,984.5			4,124.0
Accumulated deficit		(2,266.7	)		(1,874.9	)
Accumulated other comprehensive earnings, net of taxes		1,108.7			1,141.0

Total Liberty Global, Inc. stockholders		2,829.2			3,393.0
Noncontrolling interests		3,036.6			3,101.7

Total equity		5,865.8			6,494.7

Total liabilities and equity	$	33,381.6		$	33,986.1

The accompanying notes are an integral part of these condensed consolidated financial statements.

LIBERTY GLOBAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


	Three months ended June 30,						Six months ended June 30,
	2009			2008			2009			2008
	in millions, except per share amounts

Revenue (note 12)	$	2,653.0		$	2,713.7		$	5,215.9		$	5,308.9

Operating costs and expenses:
Operating (other than depreciation and amortization) (including stock-based compensation) (notes 10 and 12)		995.9			1,058.1			1,972.4			2,075.1
Selling, general and administrative (SG&A) (including stock-based compensation) (notes 10 and 12)		522.1			552.6			1,012.2			1,079.0
Depreciation and amortization		709.7			740.0			1,403.3			1,440.3
Impairment, restructuring and other operating charges, net (note 7)		123.4			3.3			124.2			1.9

		2,351.1			2,354.0			4,512.1			4,596.3

Operating income		301.9			359.7			703.8			712.6

Non-operating income (expense):
Interest expense (note 12)		(212.8	)		(290.7	)		(423.0	)		(570.3	)
Interest and dividend income		6.6			16.9			28.1			51.8
Realized and unrealized gains (losses) on derivative instruments, net (notes 5 and 6)		(398.5	)		406.4			(545.6	)		71.0
Foreign currency transaction gains, net		258.6			210.4			84.8			383.0
Realized and unrealized gains due to changes in fair values of certain investments and debt, net (notes 4, 6 and 8)		87.3			22.8			67.2			44.8
Losses on debt modifications (note 8)		(24.3	)		—			(24.3	)		—
Share of results of affiliates, net		(1.1	)		0.3			1.0			2.8
Other income (expense), net		(1.9	)		1.2			(1.1	)		0.7

		(286.1	)		367.3			(812.9	)		(16.2	)

Earnings (loss) from continuing operations before income taxes		15.8			727.0			(109.1	)		696.4
Income tax expense		(17.2	)		(189.2	)		(139.1	)		(290.0	)

Earnings (loss) from continuing operations		(1.4	)		537.8			(248.2	)		406.4
Earnings from discontinued operations, net of taxes (note 3)		2.4			4.4			5.5			9.2

Net earnings (loss)		1.0			542.2			(242.7	)		415.6
Net earnings attributable to noncontrolling interests		(94.1	)		(114.0	)		(149.1	)		(143.0	)

Net earnings (loss) attributable to Liberty Global, Inc. stockholders	$	(93.1	)	$	428.2		$	(391.8	)	$	272.6

Earnings (loss) per share attributable to Liberty Global, Inc. stockholders — Series A, Series B and Series C common stock (note 11):
Basic:
Continuing operations	$	(0.35	)	$	1.32		$	(1.44	)	$	0.80
Discontinued operations		0.01			0.01			0.01			0.02

	$	(0.34	)	$	1.33		$	(1.43	)	$	0.82

Diluted:
Continuing operations	$	(0.35	)	$	1.10		$	(1.44	)	$	0.53
Discontinued operations		0.01			0.01			0.01			0.02

	$	(0.34	)	$	1.11		$	(1.43	)	$	0.55

The accompanying notes are an integral part of these condensed consolidated financial statements.

LIBERTY GLOBAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)

(unaudited)


	Three months ended June 30,						Six months ended June 30,
	2009			2008			2009			2008
	in millions

Net earnings (loss)	$	1.0		$	542.2		$	(242.7	)	$	415.6

Other comprehensive earnings (loss), net of taxes:
Foreign currency translation adjustments		292.2			(490.2	)		(181.8	)		477.5
Other		(0.7	)		8.5			0.1			4.5

Other comprehensive earnings (loss)		291.5			(481.7	)		(181.7	)		482.0

Comprehensive earnings (loss)		292.5			60.5			(424.4	)		897.6
Comprehensive loss (earnings) attributable to noncontrolling interests		(159.3	)		52.0			0.3			(218.0	)

Comprehensive earnings (loss) attributable to Liberty Global, Inc. stockholders	$	133.2		$	112.5		$	(424.1	)	$	679.6

The accompanying notes are an integral part of these condensed consolidated financial statements.

LIBERTY GLOBAL, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(unaudited)


	Liberty Global, Inc. stockholders
	Common stock								Additional paid-in capital			Accumulated deficit			Accumulated other comprehensive earnings, net of taxes			Total Liberty Global, Inc. stockholders			Noncontrolling interests			Total equity



	Series A			Series B		Series C
	in millions
Balance at January 1, 2009	$	1.4		$	0.1	$	1.4		$	4,124.0		$	(1,874.9	)	$	1,141.0		$	3,393.0		$	3,101.7		$	6,494.7
Net loss		—			—		—			—			(391.8	)		—			(391.8	)		149.1			(242.7	)
Other comprehensive loss, net of taxes		—			—		—			—			—			(32.3	)		(32.3	)		(149.4	)		(181.7	)
Repurchase and cancellation of common stock (note 9)		(0.1	)		—		(0.1	)		(204.7	)		—			—			(204.9	)		—			(204.9	)
Stock-based compensation, net of taxes (note 10)		—			—		—			25.4			—			—			25.4			—			25.4
Reclassification of LGI Performance Plans obligation to be settled with Liberty Global, Inc. common stock (note 10)		—			—		—			36.4			—			—			36.4			—			36.4
Dividends and distributions to noncontrolling interest owners (note 9)		—			—		—			—			—			—			—			(63.5	)		(63.5	)
Adjustments due to changes in subsidiaries’ equity and other, net		—			—		—			3.4			—			—			3.4			(1.3	)		2.1

Balance at June 30, 2009	$	1.3		$	0.1	$	1.3		$	3,984.5		$	(2,266.7	)	$	1,108.7		$	2,829.2		$	3,036.6		$	5,865.8

The accompanying notes are an integral part of these condensed consolidated financial statements.

LIBERTY GLOBAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Six months ended June 30,
	2009			2008
	in millions
Cash flows from operating activities:
Net earnings (loss)	$	(242.7	)	$	415.6
Earnings from discontinued operations		(5.5	)		(9.2	)

Earnings (loss) from continuing operations		(248.2	)		406.4
Adjustments to reconcile earnings (loss) from continuing operations to net cash provided by operating activities:
Stock-based compensation expense		59.4			83.3
Depreciation and amortization		1,403.3			1,440.3
Impairment, restructuring and other operating charges, net		124.2			1.9
Amortization of deferred financing costs and non-cash interest		30.9			22.1
Realized and unrealized losses (gains) on derivative instruments, net		545.6			(71.0	)
Foreign currency transaction gains, net		(84.8	)		(383.0	)
Realized and unrealized gains due to changes in fair values of certain investments and debt, net of dividends		(48.9	)		(43.6	)
Losses on debt modifications		24.3			—
Share of results of affiliates, net		(1.0	)		(2.8	)
Deferred income tax expense		4.8			207.2
Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions		(232.2	)		(150.4	)
Net cash provided by operating activities of discontinued operations		13.8			16.3

Net cash provided by operating activities		1,591.2			1,526.7

Cash flows from investing activities:
Capital expended for property and equipment		(1,081.9	)		(1,077.7	)
Cash paid in connection with acquisitions, net of cash acquired		(3.3	)		(135.5	)
Other investing activities, net		(6.5	)		18.6
Net cash used by investing activities of discontinued operations		(9.3	)		(6.6	)

Net cash used by investing activities		(1,101.0	)		(1,201.2	)

Cash flows from financing activities:
Borrowings of debt		1,087.1			853.7
Repayments and repurchases of debt and capital lease obligations		(846.4	)		(446.2	)
Repurchase of Liberty Global, Inc. common stock		(206.9	)		(1,613.7	)
Payment of financing costs		(61.7	)		(19.7	)
Other financing activities, net		(40.0	)		8.2

Net cash used by financing activities		(67.9	)		(1,217.7	)

Effect of exchange rates on cash		(43.4	)		67.6

Net increase (decrease) in cash and cash equivalents:
Continuing operations		374.4			(825.1	)
Discontinued operations		4.5			0.5

Net increase (decrease) in cash and cash equivalents		378.9			(824.6	)

Cash and cash equivalents, beginning of period		1,374.0			2,035.5

Cash and cash equivalents, end of period	$	1,752.9		$	1,210.9

Cash paid for interest	$	404.1		$	725.5

Net cash paid for taxes	$	123.3		$	73.7

The accompanying notes are an integral part of these condensed consolidated financial statements.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2009

(unaudited)

(1)

Basis of Presentation

Liberty Global, Inc. (LGI) is an international provider of video, voice and broadband internet services, with consolidated broadband communications and/or direct-to-home (DTH) satellite operations at June 30, 2009 in 14 countries (excluding Slovenia), primarily in Europe, Japan and Chile. In the following text, the terms “we,” “our,” “our company,” and “us” may refer, as the context requires, to LGI or collectively to LGI and its subsidiaries.

Through our indirect wholly-owned subsidiary UPC Holding BV (UPC Holding), we provide video, voice and broadband internet services in nine European countries (excluding Slovenia) and in Chile. The European broadband communications operations of UPC Broadband Holding BV (UPC Broadband Holding), a subsidiary of UPC Holding, are collectively referred to as the UPC Broadband Division. UPC Broadband Holding’s broadband communications operations in Chile are provided through its 80%-owned indirect subsidiary, VTR Global Com S.A. (VTR). Through our indirect controlling ownership interest in Telenet Group Holding NV (Telenet) (50.2% at June 30, 2009), we provide broadband communications services in Belgium. Through our indirect controlling ownership interest in Jupiter Telecommunications Co., Ltd. (J:COM) (37.8% at June 30, 2009), we provide broadband communications services in Japan. Through our indirect majority ownership interest in Austar United Communications Limited (Austar) (55.0% at June 30, 2009), we provide DTH satellite services in Australia. We also have (i) consolidated broadband communications operations in Puerto Rico and (ii) consolidated interests in certain programming businesses in Europe, Japan (through J:COM) and Argentina. Our consolidated programming interests in Europe are primarily held through Chellomedia BV (Chellomedia), which owns or manages investments in various businesses, primarily in Europe. Certain of Chellomedia’s subsidiaries and affiliates provide programming services to certain of our broadband communications operations, primarily in Europe.

On July 15, 2009, one of our subsidiaries sold 100% of its interest in our Slovenian cable operations (UPC Slovenia). Accordingly, we have presented UPC Slovenia as a discontinued operation in our June 30, 2009 condensed consolidated financial statements. See note 3.

Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all of the information required by GAAP or Securities and Exchange Commission rules and regulations for complete financial statements. In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods presented. The results of operations for any interim period are not necessarily indicative of results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto included in our 2008 Annual Report on Form 10-K.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Estimates and assumptions are used in accounting for, among other things, the valuation of acquisition-related assets and liabilities, allowances for uncollectible accounts, deferred income taxes and related valuation allowances, loss contingencies, fair values of derivative instruments, financial instruments and investments, fair values of long-lived assets and any related impairments, capitalization of internal costs associated with construction and installation activities, useful lives of long-lived assets, actuarial liabilities associated with certain benefit plans and stock-based compensation. Actual results could differ from those estimates.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

Unless otherwise indicated, convenience translations into United States (U.S.) dollars are calculated as of June 30, 2009.

Certain prior period amounts have been reclassified to conform to the current year presentation.

These condensed consolidated financial statements reflect our consideration of the accounting and disclosure implications of subsequent events through August 4, 2009, the date of issuance.

(2)

Accounting Changes and Recent Accounting Pronouncements

Accounting Changes

SFAS 141(R)

In December 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141(R), Business Combinations (SFAS 141(R)). SFAS 141(R) replaces SFAS 141, Business Combinations, and, among other items, generally requires an acquirer in a business combination to recognize (i) the assets acquired, (ii) the liabilities assumed (including those arising from contractual contingencies), (iii) any contingent consideration and (iv) any noncontrolling interest in the acquiree at the acquisition date, at fair values as of that date. The requirements of SFAS 141(R) will result in the recognition by the acquirer of goodwill attributable to the noncontrolling interest in addition to that attributable to the acquirer. SFAS 141(R) also provides that the acquirer shall not adjust the finalized accounting for business combinations, including business combinations completed prior to the effective date of SFAS 141(R), for changes in acquired tax uncertainties or changes in the valuation allowances for acquired deferred tax assets that occur subsequent to the effective date of SFAS 141(R). SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We prospectively adopted the provisions of SFAS 141(R) effective January 1, 2009.

SFAS 157

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. SFAS 157 was effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2007. However, the effective date of SFAS 157 was deferred to fiscal years beginning after November 15, 2008 and interim periods within those years as it relates to fair value measurement requirements for (i) nonfinancial assets and liabilities that are not remeasured at fair value on a recurring basis (e.g. asset retirement obligations, restructuring liabilities and assets and liabilities acquired in business combinations) and (ii) fair value measurements required for impairments under SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142) and SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. We prospectively adopted SFAS 157 (exclusive of the deferred provisions discussed above) effective January 1, 2008. We prospectively adopted the deferred provisions of SFAS 157 effective January 1, 2009.

SFAS 160

In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements (SFAS 160). SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It also states that a noncontrolling interest in a subsidiary is an ownership interest in a consolidated entity that should be reported as equity in the consolidated financial

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

statements. In addition, SFAS 160 requires (i) that consolidated net income include the amounts attributable to both the parent and noncontrolling interest, (ii) that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated and (iii) expanded disclosures that clearly identify and distinguish between the interests of the parent owners and the interests of the noncontrolling owners of a subsidiary. SFAS 160 is effective for fiscal periods, and interim periods within those fiscal years, beginning on or after December 15, 2008. We adopted SFAS 160 effective January 1, 2009 and such adoption resulted in a change in the presentation of minority interests in subsidiaries, which was retrospectively reclassified to “noncontrolling interests” within equity.

FSP 142-3

In April 2008, the FASB issued FASB Staff Position (FSP) No. 142-3, Determination of the Useful Life of Intangible Assets (FSP 142-3). FSP 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under SFAS 142. This change is intended to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R) and other GAAP. FSP 142-3 also requires expanded disclosure related to the determination of intangible asset useful lives. This new guidance applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions. FSP 142-3 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. We prospectively adopted the provisions of FSP 142-3 on January 1, 2009.

EITF 08-06

In September 2008, the Emerging Issues Task Force (EITF) reached a consensus on EITF Issue No. 08-06, Equity Method Investment Accounting Considerations (EITF 08-06). EITF 08-06 provides guidance for the accounting of equity method investments as a result of the accounting changes prescribed by SFAS 141(R) and SFAS 160. EITF 08-06 includes clarification on the following: (i) transaction costs should be included in the initial carrying value of the equity method investment, (ii) an impairment assessment of an underlying indefinite-lived intangible asset of an equity method investment need only be performed as part of any other-than-temporary impairment evaluation of the equity method investment as a whole and does not need to be performed annually, (iii) the equity method investee’s issuance of shares should be accounted for as the sale of a proportionate share of the investment, which may result in a gain or loss in income, and (iv) a gain or loss should not be recognized when changing the method of accounting for an investment from the equity method to the cost method. EITF 08-06 is effective on a prospective basis in fiscal years and interim periods beginning on or after December 15, 2008 and early adoption is prohibited. We prospectively adopted EITF 08-06 effective January 1, 2009.

FSP 157-4

In April 2009, the FASB issued FSP No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP 157-4). FSP 157-4 clarifies that transaction or quoted prices may not be determinative of fair value when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also includes guidance with respect to the circumstances that indicate a transaction is not orderly and the resulting ramifications on the fair value measurement for the asset or liability. FSP 157-4 is effective for interim and annual periods ending after June 15, 2009 and shall be applied prospectively. We adopted FSP 157-4 effective June 30, 2009 and such adoption did not have a material impact on our condensed consolidated financial statements.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

FSP 107-1

In April 2009, the FASB issued FSP No. 107, Interim Disclosures about Fair Value of Financial Instruments (FSP 107-1). FSP 107-1 amends SFAS No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods as well as in annual financial statements. FSP 107-1 also amends Accounting Principles Board Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. FSP 107-1 is effective for interim periods ending after June 15, 2009. We adopted FSP 107-1 effective June 30, 2009 and such adoption did not have a material impact on our condensed consolidated financial statements.

Recent Accounting Pronouncements

SFAS 166

In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140 (SFAS 166). SFAS 166, among other matters, (i) eliminates the concept of a qualifying special-purpose entity, (ii) creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, (iii) clarifies other sale-accounting criteria and (iv) changes the initial measurement of a transferor’s interest in transferred financial assets. SFAS 166 is applicable for interim and annual periods beginning after November 15, 2009. We do not expect our adoption of SFAS 166 to have a material impact on our consolidated financial statements.

SFAS 167

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS 167). SFAS 167, among other matters, (i) eliminates the exceptions of FASB Interpretation No. 46(R) with respect to the consolidation of qualifying special-purpose entities, (ii) contains new criteria for determining the primary beneficiary and (iii) increases the frequency of required reassessments to determine whether a company is the primary beneficiary of a variable interest entity. SFAS 167 also contains a new requirement that any term, transaction or arrangement that does not have a substantive effect on an entity’s status as a variable interest entity, a company’s power over a variable interest entity or a company’s obligation to absorb losses or its right to receive benefits of an entity must be disregarded in applying the provisions of FASB Interpretation No. 46(R). SFAS 167 is applicable for interim and annual periods beginning after November 15, 2009. We have not completed our analysis of the impact of SFAS 167 on our consolidated financial statements.

SFAS 168

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (SFAS 162), which identified the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements that are presented in conformity with GAAP. In June 2009, SFAS 162 was replaced by SFAS No. 168, The FASB Accounting Standard Codification and the Hierarchy of Generally Accepted Accounting Principles—replacement of FASB Statement No. 162 (SFAS 168). SFAS 168 will become the source of authoritative GAAP recognized by the FASB. SFAS 168 is applicable for interim and annual periods ending after September 15, 2009. We will adopt SFAS 168 beginning in the third quarter of 2009 and do not expect this adoption to have a material impact on our consolidated financial statements.

FSP 132(R)-1

In December 2008, the FASB issued FSP No. 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets, (FSP 132(R)-1). FSP 132(R)-1 amends SFAS No. 132 (revised 2003), Employers’ Disclosures about

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

Pensions and Other Postretirement Benefits, to provide guidance on an employer’s disclosures regarding plan assets of a defined benefit pension or other postretirement plan. The guidance provided by FSP 132(R)-1 is intended to ensure that an employer meets the objectives of the plan assets’ disclosures in an employer’s defined benefit pension or other postretirement plan. FSP 132(R)-1 is applicable for fiscal years ending after December 15, 2009, with earlier application permitted. We do not expect our adoption of FSP 132(R)-1 to have a material impact on our consolidated financial statements.

(3)

Acquisitions and Disposition

Acquisition of Mediatti

Prior to December 25, 2008, Mediatti Communications, Inc. (Mediatti) was 45.5%-owned by Liberty Japan MC, LLC (Liberty Japan MC), our then 95.2%-indirectly-owned subsidiary, 44.7%-owned by affiliates of Olympus Capital and 9.8%-owned by other third parties. On December 24, 2008, we purchased the remaining 4.8% interest in Liberty Japan MC that we did not already own for ¥615.8 million ($6.8 million at the transaction date). On December 25, 2008, J:COM purchased 100% of the outstanding shares of Mediatti for total cash consideration before direct acquisition costs of ¥28,350.6 million ($310.5 million at the transaction date), of which Liberty Japan MC received ¥12,887.0 million ($141.1 million at the transaction date). The Mediatti valuation process remains open and we expect that the most significant adjustments to the preliminary allocation will involve deferred revenue and deferred income taxes. J:COM acquired Mediatti in order to achieve certain financial, operational and strategic benefits through the integration of Mediatti with J:COM’s existing operations.

Acquisition of Interkabel

Pursuant to an agreement with four associations of municipalities in Belgium, which we refer to as the pure intercommunales or the “PICs,” that was executed on June 28, 2008 (the 2008 PICs Agreement), Telenet acquired from the PICs, effective October 1, 2008, certain cable television assets (Interkabel), including (i) substantially all of the rights that Telenet did not already hold to use the broadband communications network owned by the PICs (the Telenet PICs Network) and (ii) the analog and digital television activities of the PICs, including the entire subscriber base (together with the acquisition of the rights to use the Telenet PICs Network, the Interkabel Acquisition). The Interkabel valuation process remains open and we expect that the most significant adjustments to the preliminary allocation will involve long-lived assets and deferred income taxes. Telenet completed the Interkabel Acquisition in order to achieve certain financial, operational and strategic benefits by obtaining full access to the Telenet PICs Network and integrating (i) the PICs digital and analog television activities and (ii) Telenet’s digital interactive television services with the broadband internet and telephony services already offered by Telenet over the Telenet PICs Network.

Other Acquisition

Spektrum — On September 1, 2008, Chellomedia Programming BV, a wholly-owned subsidiary of Chellomedia, acquired 100% ownership interests in (i) Spektrum-TV ZRT and (ii) Ceska programova spolecnost s.r.o. (together, Spektrum) for consideration of $99.3 million, before direct acquisition costs and cash acquired.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

Pro Forma Information

The following unaudited pro forma condensed consolidated operating results for the three and six months ended June 30, 2008 give effect to (i) J:COM’s acquisition of Mediatti and (ii) the Interkabel Acquisition as if such acquisitions had been completed as of January 1, 2008. No effect has been given to the Spektrum acquisition since it would not have had a significant impact on our results of operations for the 2008 periods. These pro forma amounts are not necessarily indicative of the operating results that would have occurred if these transactions had occurred on such date. The pro forma adjustments are based on currently available information and certain assumptions that we believe are reasonable.


	Three months ended June 30, 2008		Six months ended June 30, 2008
	in millions
Revenue	$	2,792.6	$	5,464.6

Net earnings attributable to LGI stockholders	$	423.6	$	263.4

Disposition of UPC Slovenia

On July 15, 2009, one of our subsidiaries sold 100% of UPC Slovenia to Mid Europa Partners for a cash purchase price of €119.5 million ($167.9 million), before working capital adjustments. In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived Assets, we have presented UPC Slovenia as a discontinued operation in our June 30, 2009 condensed consolidated financial statements.

The major assets and liabilities of UPC Slovenia that are classified as discontinued operations in our condensed consolidated balance sheet as of June 30, 2009 are as follows:


	June 30, 2009
	in millions
Current assets	$	8.6
Property and equipment, net		98.5
Intangible and other assets, net		82.7

Total assets	$	189.8

Current liabilities	$	8.8
Deferred income taxes		20.0
Other long-term liabilities		0.2

Total liabilities	$	29.0

The operating results of UPC Slovenia that are classified as discontinued operations in our condensed consolidated statements of operations are summarized in the following table:


	Three months ended June 30,				Six months ended June 30,
	2009		2008		2009		2008
	in millions
Revenue	$	15.4	$	16.2	$	30.2	$	32.0

Operating income	$	2.5	$	4.9	$	5.1	$	9.7

Earnings before income taxes and noncontrolling interests	$	2.5	$	5.0	$	5.2	$	9.9

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

(4)

Investments

The details of our investments are set forth below:


Accounting Method	June 30, 2009		December 31, 2008
	in millions

Fair value (a)	$	846.9	$	815.1
Equity (b)		191.1		189.7
Cost		23.2		25.0

Total	$	1,061.2	$	1,029.8

Current (c)	$	50.1	$	50.0

Long-term	$	1,011.1	$	979.8

(a)

At June 30, 2009, investments accounted for using the fair value method include our investments in Sumitomo Corporation (Sumitomo), The News Corporation Limited (News Corp.) and Canal+ Cyfrowy Sp zoo (Cyfra+). Sumitomo is the owner of a noncontrolling interest in LGI/Sumisho Super Media, LLC (Super Media), our indirect majority-owned subsidiary and the owner of a controlling interest in J:COM. During the second quarter of 2009, we received an $18.4 million dividend from Cyfra+. This dividend has been reflected as a reduction of our investment in Cyfra+.

(b)	At June 30, 2009, investments accounted for using the equity method include our investments in Discovery Japan, Inc., JSports Broadcasting Corporation and XYZ Network Pty LTD.

(c)	Represents the fair value of our investment in shares of News Corp. Class A common stock, which were surrendered on July 9, 2009 in connection with the settlement of the related prepaid forward sale contract.

We have elected the fair value method for most of our investments as we believe this method generally provides the most meaningful information to our investors. However, for investments over which we have significant influence, we have considered the significance of transactions between our company and our equity affiliates and other factors in determining whether the fair value method should be applied. In general, we have not elected the fair value option for those equity method investments with which LGI or its consolidated subsidiaries have significant related-party transactions. For additional information regarding our fair value method investments, see note 6.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

(5)

Derivative Instruments

Through our subsidiaries, we have entered into various derivative instruments to manage interest rate and foreign currency exposure with respect to the U.S. dollar ($), the euro (€), the Czech koruna (CZK), the Hungarian forint (HUF), the Polish zloty (PLN), the Romanian lei (RON), the Swiss franc (CHF), the Chilean peso (CLP), the Japanese yen (¥) and the Australian dollar (AUD). With the exception of J:COM’s interest rate swaps, which were accounted for as cash flow hedges, we did not apply hedge accounting to our derivative instruments during the reported 2009 and 2008 periods. Accordingly, changes in the fair values of all other derivative instruments are recorded in realized and unrealized gains (losses) on derivative instruments in our condensed consolidated statements of operations. The following table provides details of the fair values of our derivative instrument assets and liabilities:


	June 30, 2009						December 31, 2008
	Current		Long-term (a)		Total		Current		Long-term (a)		Total
	in millions
Assets:
Cross-currency and interest rate derivative contracts (b)	$	104.0	$	256.2	$	360.2	$	182.6	$	297.9	$	480.5
Equity-related derivatives (c)		—		519.7		519.7		—		631.7		631.7
Foreign currency forward contracts		0.4		—		0.4		10.8		—		10.8
Other		0.7		1.0		1.7		0.2		0.9		1.1

Total (d)	$	105.1	$	776.9	$	882.0	$	193.6	$	930.5	$	1,124.1

Liabilities:
Cross-currency and interest rate derivative contracts (b) (e)	$	616.3	$	860.6	$	1,476.9	$	418.8	$	904.3	$	1,323.1
Equity-related derivatives (c)		28.4		—		28.4		17.2		—		17.2
Foreign currency forward contracts		10.8		0.4		11.2		3.6		1.5		5.1
Other		2.2		2.0		4.2		2.1		1.2		3.3

Total (d)	$	657.7	$	863.0	$	1,520.7	$	441.7	$	907.0	$	1,348.7

(a)	Our long-term derivative assets and liabilities are included in other assets and other long-term liabilities, respectively, in our condensed consolidated balance sheets.

(b)

As of June 30, 2009, the fair values of our cross-currency and interest rate derivative contracts that represented assets have been reduced by credit risk valuation adjustments aggregating $14.0 million and the fair values of our cross-currency and interest rate derivative contracts that represented liabilities have been reduced by credit risk valuation adjustments aggregating $99.9 million. The adjustments to our derivative assets relate to the credit risk associated with counterparty nonperformance and the adjustments to our derivative liabilities relate to credit risk associated with our own nonperformance. In all cases, the adjustments take into account offsetting liability or asset positions within a given contract. Our determination of credit risk valuation adjustments generally is based on our and our counterparties’ credit risks, as observed in the credit default swap market and market quotations for certain of our subsidiaries’ debt instruments, as applicable. The change in the credit risk valuation adjustments associated with our derivative instruments resulted in a net gain of $21.3 million during the three months ended June 30, 2009 and a net loss of $20.7 million during the six months ended June 30, 2009 and these gains and losses are included in realized and unrealized gains (losses) on derivative instruments in our condensed consolidated statements of operations. For further information concerning our fair value measurements, see note 6.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

(c)

The fair values of our equity-related derivatives primarily relate to the share collar (the Sumitomo Collar) with respect to the Sumitomo shares held by our company. These fair value amounts do not include credit risk valuation adjustments as we assume that any losses incurred by our company in the event of nonperformance by the counterparty would, subject to relevant insolvency laws, be fully offset against amounts we owe to the counterparty pursuant to the secured borrowing arrangements of the Sumitomo Collar.

(d)

Excludes the prepaid forward sale contract on our News Corp. Class A common stock (the News Corp. Forward), which is included in current portion of debt and capital lease obligations in our condensed consolidated balance sheets. For reasons similar to those expressed in note (c) above, the fair values of the equity derivative embedded in the News Corp. Forward do not include credit risk valuation adjustments. On July 9, 2009, we settled the News Corp. Forward liability by surrendering our shares of News Corp. Class A common stock.

(e)

As discussed above, J:COM accounts for its interest rate swaps as cash flow hedges. At June 30, 2009 and December 31, 2008, (i) the aggregate fair values of these swaps were liabilities of $18.2 million and $18.0 million, respectively, of which $4.4 million and $3.0 million, respectively, were classified as current, and (ii) our accumulated other comprehensive earnings included net losses of $3.3 million and $3.4 million, respectively, related to J:COM’s interest rate swaps. During the three and six months ended June 30, 2009 and 2008, the net losses reclassified from J:COM’s accumulated other comprehensive earnings to interest expense with respect to these cash flow hedges were not significant.

The details of our realized and unrealized gains (losses) on derivative instruments, net, are as follows:


	Three months ended June 30,						Six months ended June 30,
	2009			2008			2009			2008
	in millions
Cross-currency and interest rate derivative contracts	$	(336.6	)	$	480.5		$	(399.3	)	$	20.5
Equity-related derivatives (a)		(53.4	)		(73.8	)		(129.1	)		56.5
Foreign currency forward contracts		(9.3	)		(0.6	)		(18.1	)		(5.8	)
Other		0.8			0.3			0.9			(0.2	)

Total	$	(398.5	)	$	406.4		$	(545.6	)	$	71.0

(a)	Includes activity related to the Sumitomo Collar and the News Corp. Forward.

The net cash received (paid) related to our derivative instruments is classified as an operating, investing or financing activity in our condensed consolidated statements of cash flows based on the classification of the applicable underlying cash flows. The classifications of these cash flows are as follows:


	Six months ended June 30,
	2009			2008
	in millions
Operating activities	$	(135.4	)	$	121.6
Investing activities		3.9			(2.0	)
Financing activities		(20.3	)		(7.2	)

Total	$	(151.8	)	$	112.4

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

Counterparty Credit Risk

We are exposed to the risk that the counterparties to our derivative contracts will default on their obligations to us. We manage these credit risks through the evaluation and monitoring of the creditworthiness of, and concentration of risk with, the respective counterparties. In this regard, credit risk associated with our derivative contracts is spread across a relatively broad counterparty base of banks and financial institutions. We generally do not require counterparties to our derivative instruments to provide collateral or other security or to enter into master netting arrangements. At June 30, 2009, our exposure to credit risk included derivative assets with a fair value of $882.0 million.

Under our derivative contracts, the exercise of termination and set-off provisions is generally at the option of the non-defaulting party only. However, in an insolvency of a derivative counterparty, a liquidator may be able to force the termination of a derivative contract. In addition, mandatory set-off of amounts due under the derivative contract and potentially other contracts between our company and the relevant counterparty may be applied under the insolvency regime of the relevant jurisdiction. Accordingly, it is possible that we could be required to make payments to an insolvent counterparty even if that counterparty had previously defaulted on its obligations under a derivative contract with our company. While we anticipate that, in the event of the insolvency of one of our derivative counterparties, we would seek to novate our derivative contracts to different counterparties, no assurance can be given that we would be able to do this on terms or pricing that would be acceptable to us. If we are unable to, or choose not to, novate to a different party, the risks that were the subject of the original derivative contract would no longer be hedged.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

Cross-currency and Interest Rate Derivative Contracts

Cross-currency Interest Rate Swaps:

The terms of our outstanding cross-currency interest rate swap contracts at June 30, 2009 are as follows:


Subsidiary (a)	Notional amount due from counterparty		Notional amount due to counterparty		Interest rate due from counterparty	Interest rate due to counterparty
	in millions
UPC Holding:
April 2016	$	400.0	CHF	441.8	9.88%	9.87%

UPC Broadband Holding:
March 2013	$	200.0	€	150.9	6 mo. LIBOR + 2.00%	5.73%
December 2014	$	725.0	€	547.3	6 mo. LIBOR + 1.75%	5.74%
December 2016	$	160.0	€	120.7	6 mo. LIBOR + 3.50%	7.56%

July 2009	€	60.0	CZK	1,703.1	5.50%	5.15%
July 2009 — July 2010	€	60.0	CZK	1,703.1	5.50%	5.33%
July 2010 — December 2014	€	60.0	CZK	1,703.1	5.50%	6.05%
February 2010	€	105.8	CZK	3,018.7	5.50%	4.88%
February 2010 — December 2014	€	105.8	CZK	3,018.7	5.50%	5.80%
December 2014	€	200.0	CZK	5,800.0	5.46%	5.30%

July 2009	€	260.0	HUF	75,570.0	5.50%	8.75%
July 2009 — July 2010	€	260.0	HUF	75,570.0	5.50%	7.80%
July 2010 — December 2014	€	260.0	HUF	75,570.0	5.50%	9.40%
December 2014	€	228.0	HUF	62,867.5	5.50%	8.98%

July 2009	€	245.0	PLN	1,000.6	5.50%	7.00%
July 2009 — July 2010	€	245.0	PLN	1,000.6	5.50%	6.52%
July 2010 — December 2014	€	245.0	PLN	1,000.6	5.50%	7.60%
December 2014	€	98.4	PLN	335.0	5.50%	7.12%
July 2009 — December 2014	€	57.1	PLN	270.0	5.50%	7.60%

December 2010	€	200.0	RON	709.1	5.50%	10.98%
December 2010 — December 2014	€	200.0	RON	709.1	5.50%	10.69%
December 2014	€	89.1	RON	320.1	5.50%	10.27%

September 2012	€	229.1	CHF	355.8	6 mo. EURIBOR + 2.50%	6 mo. CHF LIBOR + 2.46%
December 2014	€	653.0	CHF	1,066.0	6 mo. EURIBOR + 2.00%	6 mo. CHF LIBOR + 1.95%
December 2014	€	245.4	CHF	400.0	6 mo. EURIBOR + 0.82%	6 mo. CHF LIBOR + 1.94%

December 2014	$	340.0	CLP	181,322.0	6 mo. LIBOR + 1.75%	8.76%

December 2014	€	134.3	CLP	107,800.0	6 mo. EURIBOR + 2.00%	10.00%
December 2015	€	69.1	CLP	53,000.0	3.50%	5.75%

December 2014	$	171.5	CHF	187.1	6 mo. LIBOR + 2.75%	6 mo. CHF LIBOR + 2.95%
December 2016	$	340.0	CHF	370.9	6 mo. LIBOR + 3.50%	6 mo. CHF LIBOR + 4.01%

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)


Subsidiary (a)	Notional amount due from counterparty		Notional amount due to counterparty		Interest rate due from counterparty	Interest rate due to counterparty
	in millions
Chellomedia Programming Financing Holdco BV (Chellomedia PFH), an indirect subsidiary of Chellomedia:
July 2013	€	32.5	HUF	8,632.0	5.50%	9.55%
December 2013	€	19.4	CZK	517.0	3.50%	4.49%
December 2013	$	14.7	PLN	50.0	3.50%	5.56%

VTR:
September 2014	$	465.5	CLP	257,654.3	6 mo. LIBOR + 3.00%	11.16%

(a)

For each subsidiary, the notional amount of multiple derivative instruments that mature within the same calendar month are shown in the aggregate and interest rates are presented on a weighted average basis. For derivative instruments that were in effect as of June 30, 2009, we present a single date that represents the applicable final maturity date. For derivative instruments that become effective subsequent to June 30, 2009, we present a range of dates that represents the period covered by the applicable derivative instrument.

Interest Rate Swaps:

The terms of our outstanding interest rate swap contracts at June 30, 2009 are as follows:


Subsidiary (a)	Notional amount		Interest rate due from counterparty	Interest rate due to counterparty
	in millions
UPC Broadband Holding:
January 2010	€	3,890.0	1 mo. EURIBOR + 2.00%	6 mo. EURIBOR + 1.81%
January 2010	€	655.0	1 mo. EURIBOR + 2.25	6 mo. EURIBOR + 1.61
April 2012	€	555.0	6 mo. EURIBOR	3.32%
December 2014	€	659.5	6 mo. EURIBOR	4.67%
July 2009 (b)	€	31.6	5.50%	6.58%
July 2009 — July 2010 (b)	€	31.6	5.50%	5.67%
April 2010	€	1,000.0	6 mo. EURIBOR	3.28%
April 2010 — December 2014	€	1,000.0	6 mo. EURIBOR	4.66%
January 2011	€	193.5	6 mo. EURIBOR	3.83%
January 2011 — December 2014	€	193.5	6 mo. EURIBOR	4.68%
September 2012	€	500.0	3 mo. EURIBOR	2.96%
December 2013	€	90.5	6 mo. EURIBOR	3.84%
January 2014	€	185.0	6 mo. EURIBOR	4.04%
April 2012 — July 2014	€	337.0	6 mo. EURIBOR	3.94%

December 2010	CHF	618.5	6 mo. CHF LIBOR	2.19%
January 2011 — December 2014	CHF	618.5	6 mo. CHF LIBOR	3.56%
September 2012	CHF	711.5	6 mo. CHF LIBOR	2.33%
October 2012 — December 2014	CHF	711.5	6 mo. CHF LIBOR	3.65%
December 2014	CHF	1,050.0	6 mo. CHF LIBOR	3.47%
January 2015 — December 2016	CHF	370.9	6 mo. CHF LIBOR	3.82%

July 2013	CLP	110,700.0	6.77%	6 mo. TAB

January 2010	$	511.0	1 mo. LIBOR + 2.75%	6 mo. LIBOR + 2.17%
January 2010	$	1,900.0	1 mo LIBOR + 1.75%	6 mo. LIBOR + 1.54%

July 2013	HUF	5,908.8	6 mo. BUBOR	8.52%
July 2013	PLN	115.1	6 mo. WIBOR	5.41%

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)


Subsidiary (a)	Notional amount		Interest rate due from counterparty	Interest rate due to counterparty
	in millions
Chellomedia PFH:
January 2010	$	88.2	1 mo. LIBOR + 3.00%	6 mo. LIBOR + 2.90%
December 2013	$	88.2	6 mo. LIBOR	4.98%
January 2010	€	152.7	1 mo. EURIBOR + 3.00%	6 mo. EURIBOR + 2.82%
December 2013	€	152.7	6 mo. EURIBOR	4.13%

Austar Entertainment Pty Ltd. (Austar Entertainment), a subsidiary of Austar:
August 2011	AUD	250.0	3 mo. AUD BBSY	6.21%
August 2012	AUD	123.7	3 mo. AUD BBSY	3.89%
August 2013	AUD	45.0	3 mo. AUD BBSY	4.19%
August 2013	AUD	430.0	3 mo. AUD BBSY	6.78%
August 2011 — August 2013	AUD	25.0	3 mo. AUD BBSY	6.97%

Liberty Cablevision of Puerto Rico Ltd. (Liberty Puerto Rico), an indirect subsidiary of LGI:
June 2014	$	166.8	3 mo. LIBOR	5.14%
March 2010	$	166.8	1 mo. LIBOR + 2.25%	3 mo. LIBOR + 1.86%

VTR:
July 2013	CLP	110,700.0	6 mo. TAB	7.78%

Telenet NV, an indirect wholly-owned subsidiary of Telenet:
September 2010	€	50.0	3 mo. EURIBOR	4.70%
January 2010 – December 2011	€	50.0	3 mo. EURIBOR	5.29%
July 2011 – December 2015	€	200.0	3 mo. EURIBOR	3.55%
June 2011 – August 2015	€	350.0	3 mo. EURIBOR	3.54%

Telenet Bidco NV (Telenet Bidco), an indirect wholly-owned subsidiary of Telenet:
July 2009	€	130.0	1 mo. EURIBOR + 0.38%	3 mo. EURIBOR
July 2009	€	400.0	1 mo. EURIBOR + 0.37%	3 mo. EURIBOR
September 2009	€	16.8	3 mo. EURIBOR	4.52%
January 2010	€	762.5	1 mo. EURIBOR + 0.27%	3 mo. EURIBOR
January 2010	€	300.0	1 mo. EURIBOR + 2.25%	3 mo. EURIBOR + 1.98%
September 2012	€	300.0	3 mo. EURIBOR	4.35%

LGJ Holdings LLC (LGJ Holdings), an indirect subsidiary of LGI:
January 2010	¥	75,000.0	1 mo. TIBOR + 3.25%	6 mo. TIBOR + 3.18%
November 2012	¥	75,000.0	6 mo. TIBOR	1.34%

J:COM:
September 2011	¥	2,000.0	6 mo. TIBOR	1.37%
October 2011	¥	10,000.0	6 mo. ¥ LIBOR	1.35%
April 2013	¥	20,000.0	6 mo. ¥ LIBOR	1.75%
October 2013	¥	19,500.0	6 mo. ¥ LIBOR	1.63%
April 2014	¥	10,000.0	3 mo. TIBOR	1.15%

(a)

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

(b)	These contracts originated as cross-currency interest rate swaps involving the euro and the Slovakian koruna (SKK). As a result of Slovakia’s January 1, 2009 conversion to the euro, the SKK notional amounts were converted into euros at the entry rate of 30.126 SKK per euro.

Interest Rate Caps

Our interest rate cap contracts establish the maximum EURIBOR rate payable on the indicated notional amount, as detailed below:


	June 30, 2009
Subsidiary / Final maturity date (a)	Notional amount		Maximum rate
	in millions
Liberty Global Europe Financing BV (LGE Financing), the immediate parent of UPC Holding:
January 2015 — January 2020	€	1,135.0	7.00	%

Telenet NV:
September 2009	€	10.8	4.00	%
December 2017	€	4.4	6.50	%
December 2017	€	4.4	5.50	%

Telenet Bidco:
June 2011	€	550.0	3.50	%
September 2014	€	600.0	4.65	%
September 2015	€	500.0	4.75	%

(a)

For derivative instruments that were in effect as of June 30, 2009, we present a single date that represents the applicable final maturity date. For derivative instruments that become effective subsequent to June 30, 2009, we present a range of dates that represents the period covered by the applicable derivative instrument.

Telenet Interest Rate Collars

Telenet’s interest rate collar contracts establish the minimum and maximum EURIBOR rate payable on the indicated notional amount, as detailed below:


	June 30, 2009
Subsidiary / Final maturity date	Notional amount		Minimum rate		Maximum rate
	in millions
Telenet NV:
December 2011	€	50.0	2.50	%	4.50	%
December 2011	€	25.0	2.50	%	5.50	%

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

UPC Holding Cross-Currency Options

Pursuant to its cross-currency option contracts, UPC Holding has the option to require the counterparty to deliver U.S. dollars in exchange for Swiss francs at a fixed exchange rate of 1.10 Swiss francs per one U.S. dollar, in the notional amounts listed below:


Contract expiration date	Notional amount at June 30, 2009
	in millions
October 13, 2016	$	19.8
April 12, 2017	$	19.8
October 12, 2017	$	19.8
April 12, 2018	$	419.8

Foreign Currency Forward Contracts

The following table summarizes our outstanding foreign currency forward contracts at June 30, 2009:


LGI subsidiary	Currency purchased forward		Currency sold forward		Maturity dates
	in millions
J:COM	$	21.5	¥	2,222.6	July 2009 — December 2010
VTR	$	64.4	CLP	38,786.1	July 2009 — June 2010
Telenet NV	$	10.2	€	7.4	July 2009 — December 2009
Austar Entertainment	$	9.5	AUD	11.3	July 2009 — December 2009
LGE Financing	$	19.4	CLP	10,877.0	July 2009

(6)

Fair Value Measurements

We use the fair value method to account for (i) certain of our investments, (ii) our derivative instruments and (iii) the 1.75% euro-denominated convertible senior notes issued by UnitedGlobalCom, Inc. (the UGC Convertible Notes) (see note 8). UnitedGlobalCom, Inc. (UGC) is an indirect subsidiary of LGI and the indirect parent of UPC Holding, Telenet, VTR and Austar. The reported fair values of these assets and liabilities as of June 30, 2009 likely will not represent the value that will be realized upon the ultimate settlement or disposition of these assets and liabilities. In the case of the investments that we account for using the fair value method, the values we realize upon disposition will be dependent upon, among other factors, market conditions and the historical and forecasted financial performance of the investees at the time of any such disposition. With respect to our equity-related derivative instruments, we expect settlement to occur through the surrender of the underlying shares. With respect to our foreign currency and interest rate derivative instruments, we expect that the values realized generally will be based on market conditions at the time of settlement, which may occur at the maturity of the derivative instrument or at the time of the repayment or refinancing of the underlying debt instrument.

SFAS 157 provides for a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

All of our Level 2 inputs (interest rates, yield curves, dividend yields and certain of the inputs for our weighted average cost of capital calculations) and certain of our Level 3 inputs (forecasted volatilities and credit spreads) are obtained from pricing services. These inputs, or interpolations or extrapolations thereof, are used in our internal models to calculate, among other items, yield curves, forward interest and currency rates and weighted average cost of capital rates. In the normal course of business, we receive fair value assessments from the counterparties to our derivative contracts. Although we compare these assessments to our internal valuations and investigate unexpected differences, we do not otherwise rely on counterparty quotes to determine the fair values of our derivative instruments. As allowed by SFAS 157, the midpoints of applicable bid and ask ranges generally are used as inputs for our internal valuations.

For our investments in Sumitomo common stock and News Corp. Class A common stock, the fair value measurement is based on the quoted closing price of the respective shares at each reporting date. Accordingly, the valuation of these investments falls under Level 1 of the SFAS 157 fair value hierarchy. Our other investments that we account for at fair value are privately-held companies, and therefore, quoted market prices are unavailable. The valuation technique we use for such investments is a combination of an income approach (discounted cash flow model based on forecasts) and a market approach (market multiples of similar businesses). With the exception of certain inputs for our weighted average cost of capital calculations that are derived from pricing services, the inputs used to value these investments are based on unobservable inputs derived from our assumptions. Therefore, the valuation of our privately-held investments falls under Level 3 of the SFAS 157 fair value hierarchy.

The fair value measurements of our equity-related derivative instruments are based on the Black-Scholes option pricing model, which requires the input of observable and unobservable variables such as exchange traded equity prices, risk-free interest rates, dividend yields and forecasted volatilities of the underlying equity securities. The valuations of our equity-related derivative instruments are based on a combination of Level 1 inputs (exchange traded equity prices), Level 2 inputs (interest rates and dividend yields) and Level 3 inputs (forecasted volatilities). As changes in volatilities could have a significant impact on the overall valuations of our equity-related derivative instruments, we believe that these valuations fall under Level 3 of the SFAS 157 fair value hierarchy.

As further described in note 5, we have entered into cross-currency interest rate swaps, interest rate swaps and caps, cross-currency options and foreign currency forward contracts. The fair value measurements of these derivative instruments are determined using cash flow models. All but one of the inputs to these cash flow models consist of, or are derived from, observable Level 2 data for substantially the full term of these derivative instruments. This observable data includes interest rates, swap rates and yield curves, which are retrieved or derived from available market data. Although we may extrapolate or interpolate this data, we do not otherwise alter this data in performing our valuations. SFAS 157 requires the incorporation of a credit risk valuation adjustment in our fair value measurements to estimate the impact of both our own nonperformance risk and the nonperformance risk of our counterparties. Our and our counterparties’ credit spreads are Level 3 inputs that are used to derive the credit risk valuation adjustments with respect to our various interest rate and foreign currency derivative valuations. As we would not expect changes in our or our counterparties’ credit spreads to have a significant impact on the overall valuations of our cross-currency interest rate swaps, interest rate swaps and our foreign currency forward contracts, we believe that the valuations of these derivative instruments fall under Level 2 of the SFAS 157 hierarchy. Our credit risk valuation adjustments with respect to our cross-currency and interest rate swaps are quantified and further explained in note 5.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

The UGC Convertible Notes are traded, but not in a market that could be considered “active” under the provisions of SFAS 157. Fair value is determined using a cash flow valuation model, consisting of inputs such as quoted market prices for LGI Series A and Series C common stock, risk-free interest rates, yield curves, credit spreads and forecasted stock volatility. The stock volatility input is based on the historical volatilities of the LGI Series A and Series C common stock. The valuation of the UGC Convertible Notes is based on Level 1 inputs (quoted market prices for LGI Series A and Series C common stock), Level 2 inputs (interest rates and yield curves) and Level 3 inputs (forecasted volatilities and credit spreads). As changes in volatilities and credit spreads could have a significant impact on the overall valuation of the UGC Convertible Notes, we believe that this valuation falls under Level 3 of the SFAS 157 fair value hierarchy. Our credit risk valuation adjustment with respect to the UGC Convertible Notes is quantified and explained in note 8.

Fair value measurements are also used in connection with nonrecurring valuations performed in connection with impairment assessments and acquisition accounting. These nonrecurring valuations typically involve the use of discounted cash flow analyses to assess enterprise values, the values of customer relationship intangible assets, the implied value of goodwill and the values of certain other assets and liabilities. With the exception of certain inputs for our weighted average cost of capital calculations that are derived from pricing services, the inputs used in our discounted cash flow analyses, such as forecasts of future cash flows, are based on our assumptions. Accordingly, nonrecurring valuations that involve the use of discounted cash flow analyses fall under Level 3 of the SFAS 157 fair value hierarchy. During June 2009, we performed nonrecurring fair value measurements in connection with a goodwill impairment assessment. See note 7.

A summary of the assets and liabilities that are measured at fair value is as follows:


			Fair value measurements at June 30, 2009 using:
Description	June 30, 2009		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	in millions
Assets:
Derivative instruments (a)	$	921.2	$	—	$	362.3	$	558.9
Investments		846.9		515.5		—		331.4

Total assets	$	1,768.1	$	515.5	$	362.3	$	890.3


Liabilities:
UGC Convertible Notes	$	469.2	$	—	$	—	$	469.2
Derivative instruments		1,520.7		—		1,492.3		28.4

Total liabilities	$	1,989.9	$	—	$	1,492.3	$	497.6

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)


			Fair value measurements at December 31, 2008 using:
Description	December 31, 2008		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	in millions
Assets:
Derivative instruments (a)	$	1,164.4	$	—	$	492.4	$	672.0
Investments		815.1		442.2		—		372.9

Total assets	$	1,979.5	$	442.2	$	492.4	$	1,044.9


Liabilities:
UGC Convertible Notes	$	574.5	$	—	$	—	$	574.5
Derivative instruments		1,348.7		—		1,331.5		17.2

Total liabilities	$	1,923.2	$	—	$	1,331.5	$	591.7

(a)	Includes the embedded derivative component of the News Corp. Forward, which is included within current portion of debt and capital lease obligations in our condensed consolidated balance sheets.

A reconciliation of the beginning and ending balances of our assets and liabilities measured at fair value using significant unobservable, or Level 3, inputs is as follows:


	Investments			Equity-related derivatives			UGC Convertible Notes			Total
	in millions
Balance of asset (liability) at January 1, 2009	$	372.9		$	654.8		$	(574.5	)	$	453.2
Gains (losses) included in net loss (a):
Realized and unrealized losses on derivative instruments, net		—			(129.1	)		—			(129.1	)
Realized and unrealized gains (losses) due to changes in fair values of certain investments and debt, net		(22.2	)		—			16.1			(6.1	)
Interest expense		—			—			(5.2	)		(5.2	)
Repurchase of UGC Convertible Notes (note 8)		—			—			90.1			90.1
Purchases, settlements, foreign currency translation adjustments and other		(19.3	)		4.8			4.3			(10.2	)

Balance of asset (liability) at June 30, 2009	$	331.4		$	530.5		$	(469.2	)	$	392.7

(a)

With the exception of a $25.9 million gain recognized in connection with our March 2009 repurchases of portions of the UGC Convertible Notes, all of the gains (losses) recognized during the six months ended June 30, 2009 relate to assets and liabilities that we continue to carry on our condensed consolidated balance sheet as of June 30, 2009.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

(7)

Long-lived Assets

Property and Equipment, Net

The details of our property and equipment and the related accumulated depreciation are set forth below:


	June 30, 2009			December 31, 2008
	in millions
Distribution systems	$	17,949.0		$	17,349.7
Support equipment, buildings and land		2,447.3			2,288.1

		20,396.3			19,637.8
Accumulated depreciation		(8,676.8	)		(7,602.4	)

Total property and equipment, net	$	11,719.5		$	12,035.4

Goodwill

Changes in the carrying amount of goodwill for the six months ended June 30, 2009 were as follows:


	January 1, 2009		Acquisition- related adjustments			Impairments			Reclassified to discontinued operations			Foreign currency translation adjustments and other			June 30, 2009
	in millions
UPC Broadband Division:
The Netherlands	$	1,279.5	$	—		$	—		$	—		$	1.9		$	1,281.4
Switzerland		2,658.6		—			—			—			(39.8	)		2,618.8
Austria		841.6		—			—			—			5.9			847.5
Ireland		249.0		—			—			—			1.7			250.7

Total Western Europe		5,028.7		—			—			—			(30.3	)		4,998.4

Hungary		384.2		—			—			—			(7.8	)		376.4
Other Central and Eastern Europe		889.7		—			(118.8	)		(55.5	)		2.9			718.3

Total Central and Eastern Europe		1,273.9		—			(118.8	)		(55.5	)		(4.9	)		1,094.7

Total UPC Broadband Division		6,302.6		—			(118.8	)		(55.5	)		(35.2	)		6,093.1

Telenet (Belgium)		2,204.8		74.4			—			—			15.4			2,294.6
J:COM (Japan)		3,551.2		(3.8	)		—			—			(190.5	)		3,356.9
VTR (Chile)		418.5		—			—			—			82.2			500.7
Corporate and other		667.6		0.3			—			—			19.2			687.1

Total LGI	$	13,144.7	$	70.9		$	(118.8	)	$	(55.5	)	$	(108.9	)	$	12,932.4

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

During the fourth quarter of 2008, we recorded a $144.8 million goodwill impairment charge with respect to our broadband communications reporting unit in Romania. During June 2009, we concluded that an additional goodwill impairment charge was warranted for this reporting unit, due largely to adverse competitive and economic factors, including changes in foreign currency exchange rates that adversely impacted U.S. dollar and euro denominated cash outflows. These factors have led to (i) lower than expected levels of revenue, cash flows and subscribers during the first six months of 2009 and (ii) declines in the forecasted cash flows of our Romanian reporting unit. Consistent with our approach to the valuation of this reporting unit during the fourth quarter of 2008, our June 2009 fair value assessment was based primarily on a discounted cash flow analysis due to the limited number of recent transactions involving businesses similar to our Romanian reporting unit. Based on this discounted cash flow analysis, which reflected the aforementioned declines in forecasted cash flows and a discount rate of 19%, we determined that an additional goodwill impairment charge of $118.8 million was necessary to reflect a further decline in the fair value of our Romanian reporting unit. This impairment charge is included in impairment, restructuring and other operating charges, net, in our condensed consolidated statements of operations. Further hypothetical decreases of 20% and 30% in the fair value of our Romanian reporting unit at June 30, 2009 would have resulted in additional estimated goodwill impairment charges ranging from approximately $45 million to $75 million and from approximately $75 million to $105 million, respectively.

We continue to experience difficult economic environments and significant competition in most of our markets. If, among other factors, (i) our or our subsidiaries’ equity values decline or (ii) the adverse impacts of economic or competitive factors are worse than anticipated, we could conclude in future periods that impairment charges are required in order to reduce the carrying values of our goodwill, and to a lesser extent, other long-lived assets. Depending on (i) our or our subsidiaries’ equity values, (ii) economic and competitive conditions and (iii) other factors, any such impairment charges could be significant.

Intangible Assets Subject to Amortization, Net

The details of our intangible assets subject to amortization are set forth below:


	June 30, 2009			December 31, 2008
	in millions
Gross carrying amount:
Customer relationships	$	3,052.0		$	3,150.3
Other		352.4			345.3

	$	3,404.4		$	3,495.6

Accumulated amortization:
Customer relationships	$	(1,142.0	)	$	(973.0	)
Other		(132.0	)		(117.6	)

	$	(1,274.0	)	$	(1,090.6	)

Net carrying amount:
Customer relationships	$	1,910.0		$	2,177.3
Other		220.4			227.7

	$	2,130.4		$	2,405.0

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

(8)

Debt and Capital Lease Obligations

The U.S. dollar equivalents of the components of our consolidated debt and capital lease obligations are as follows:


	June 30, 2009						Estimated fair value (c)				Carrying value (d)
	Weighted average interest rate (a)		Unused borrowing capacity (b)				Estimated fair value (c)				Carrying value (d)
	Weighted average interest rate (a)		Borrowing currency		U.S. $ equivalent		June 30, 2009		December 31, 2008		June 30, 2009			December 31, 2008
			in millions
Debt:
UPC Broadband Holding Bank Facility	3.74	%	€	323.1	$	454.0	$	7,782.4	$	7,463.7	$	8,723.7		$	8,823.1
UPC Holding Senior Notes	8.80	%	€	—		—		2,011.9		1,141.3		2,180.8			1,534.8
Telenet Credit Facility	3.52	%	€	310.0		435.6		2,643.7		2,695.8		2,795.9			2,769.6
J:COM Credit Facility	0.95	%	¥	30,000.0		311.5		139.7		411.3		139.9			440.2
Other J:COM debt	1.18	%	¥	10,000.0		103.8		1,769.8		1,412.4		1,769.8			1,641.9
UGC Convertible Notes (e)	1.75	%		—		—		469.2		574.5		469.2			574.5
Sumitomo Collar Loan	1.88	%		—		—		972.4		1,031.6		972.4			1,031.6
Austar Bank Facility	4.49	%		—		—		642.1		535.4		685.4			598.0
LGJ Holdings Credit Facility	3.59	%		—		—		707.4		740.2		778.7			826.1
VTR Bank Facility (f)	3.86	%	CLP	136,391.6		255.6		465.5		465.5		465.5			465.5
Chellomedia Bank Facility	3.73	%	€	25.0		35.1		247.3		269.4		267.5			301.2
Liberty Puerto Rico Bank Facility	2.34	%		—		—		156.8		154.1		176.8			167.6
Other	8.18	%		—		—		176.3		156.3		176.3			156.3

Total debt	3.95	%			$	1,595.6	$	18,184.5	$	17,051.5		19,601.9			19,330.4

Capital lease obligations:
J:COM												657.0			704.2
Telenet												434.7			438.0
Other subsidiaries												31.8			30.3

Total capital lease obligations												1,123.5			1,172.5

Total debt and capital lease obligations												20,725.4			20,502.9
Current maturities												(516.3	)		(513.0	)

Long-term debt and capital lease obligations											$	20,209.1		$	19,989.9

(a)

Represents the weighted average interest rate in effect at June 30, 2009 for all borrowings outstanding pursuant to each debt instrument including the applicable margin. The interest rates presented represent stated rates and do not include the impact of our interest rate derivative agreements, deferred financing costs, discounts or commitment fees, all of which affect our overall cost of borrowing. For information concerning our derivative instruments, see note 5.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

(b)

Unused borrowing capacity represents the maximum availability under the applicable facility at June 30, 2009 without regard to covenant compliance calculations. At June 30, 2009, our availability under the UPC Broadband Holding Bank Facility was limited to €241.1 million ($338.8 million). Additionally, when the June 30, 2009 bank reporting requirements have been completed, we anticipate that our availability under (i) the UPC Broadband Holding Bank Facility will be limited to €196.7 million ($276.4 million) and (ii) the Chellomedia Bank Facility will be limited to €21.5 million ($30.2 million). To the extent we were to draw on the VTR Bank Facility (as defined below) commitments, we would be required to set aside an equivalent amount of cash collateral.

(c)	The fair values of our debt instruments were determined using discounted cash flow models. The discount rates used in these models are based on the estimated credit spread of each entity, taking into account market data, to the extent available, and other relevant factors.

(d)	Amounts are net of discounts, where applicable.

(e)

The UGC Convertible Notes are measured at fair value. Our assessment of the fair value of the UGC Convertible Notes included an estimated credit risk component of $107.5 million at June 30, 2009. This credit risk component is estimated as the difference between (i) the fair value of the UGC Convertible Notes and (ii) the value of the UGC Convertible Notes derived by holding all other inputs constant and replacing the market credit spread with a credit spread of nil. The estimated change in UGC’s credit risk during the three and six months ended June 30, 2009 resulted in a gain (loss) of $5.1 million and ($3.5 million), respectively, that are included in realized and unrealized gains due to changes in fair values of certain investments and debt, net, in our condensed consolidated statements of operations. For information regarding our fair value measurements, see note 6.

(f)

Pursuant to the deposit arrangements with the lender in relation to VTR’s amended and restated senior secured credit facility (the VTR Bank Facility), we are required to fund a cash collateral account in an amount equal to the outstanding principal and interest under the VTR Bank Facility. This cash collateral account had a balance of $465.5 million at June 30, 2009, of which $4.7 million is reflected as a current asset and $460.8 million is presented as a long-term asset in our condensed consolidated balance sheet.

UPC Broadband Holding Bank Facility

The UPC Broadband Holding Bank Facility, as amended, is the senior secured credit facility of UPC Broadband Holding. In March 2009, two additional facility accession agreements (Facilities Q and R) were entered into under the UPC Broadband Holding Bank Facility. Facility Q is a redrawable term loan facility with an initial principal amount of €267.0 million ($375.2 million). Facility R is a non-redrawable term loan facility with an initial principal amount of €236.0 million ($331.6 million). Both Facility Q and Facility R closed on March 25, 2009, whereby certain of the lenders under the €830.0 million ($1,166.2 million) Facility L, which was fully drawn at such date, novated, in whole or in part, their drawn commitments (in the aggregate amount of €503.0 million ($706.8 million)) to Liberty Global Europe BV (LGE), a direct subsidiary of UPC Broadband Holding, and entered into either the new Facility Q or new Facility R. On April 27, 2009, UPC Broadband Holding entered into two new facility accession agreements to increase the sizes of Facilities Q and R by €70.0 million ($98.4 million) and €27.3 million ($38.4 million), respectively. In connection with these new accession agreements, certain lenders under Facility L novated, in whole or in part, their drawn commitments in the amount of €97.3 million ($136.7 million) to LGE and entered into either Facility Q or Facility R.

On May 6, 2009, two additional facility accession agreements (Facilities S and T) were entered into under the UPC Broadband Holding Bank Facility. UPC Broadband Holding and the existing Facility M and Facility N lenders under the UPC Broadband Holding Bank Facility agreed to roll (i) €1.67 billion ($2.35 billion) of the existing Facility M commitments into Facility S, a non-redrawable term loan facility denominated in euros and (ii) $500.0 million of the existing Facility N commitments into Facility T, a non-redrawable term loan facility denominated in

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

U.S. dollars. Following the execution of the Facility S accession agreement and the Facility T accession agreement, the Facility M and Facility N lenders that decided to roll their commitments (the Rolling Lenders) novated their existing Facility M and Facility N commitments to LGE and entered into either the new Facility S or Facility T. LGE was the initial lender under Facility S and Facility T and novated its Facility S and Facility T commitments to the Rolling Lenders. On May 22, 2009, Facility S was increased by €30.0 million ($42.2 million) (Facility S2) pursuant to an additional facility accession agreement. Following the execution of the Facility S2 accession agreement, the Facility M lender that decided to roll its commitment (the Rolling S2 Lender) novated its existing Facility M commitment to LGE and entered into the new Facility S2. LGE was the initial lender under Facility S2 and novated its Facility S2 commitment to the Rolling S2 Lender.

On June 3, 2009, an additional facility accession agreement (Facility U) was entered into under the UPC Broadband Holding Bank Facility. UPC Broadband Holding and the existing Facility M lenders under the UPC Broadband Holding Bank Facility agreed to roll €1,235.8 million ($1,736.4 million) of the existing Facility M commitments into Facility U, a non-redrawable term loan facility denominated in euros. Following the execution of the Facility U accession agreement, the Facility M lenders that agreed to roll their commitments (the Rolling M Lenders) novated their existing Facility M commitments to LGE and entered into the new Facility U. LGE was the initial lender under Facility U and novated its Facility U commitments to the Rolling M Lenders. The process of novating Facility M commitments to the new Facility U was completed in July 2009, with all but €16.4 million ($23.0 million) of the novations completed by June 30, 2009.

Fees and third-party costs incurred during the first six months of 2009 in connection with the partial refinancings of Facilities L, M and N included $32.6 million related to the completion of Facilities Q and R and $20.1 million related to the completion of Facilities S, T and U. In accordance with applicable guidance, the fees and third-party costs related to Facilities Q and R were capitalized as deferred financing costs and the fees and third-party costs related to Facilities S, T and U were charged to expense and included in losses on debt modifications in our condensed consolidated statements of operations.

The details of our borrowings under the UPC Broadband Holding Bank Facility as of June 30, 2009 are summarized in the following table:


			June 30, 2009
Facility	Final maturity date		Interest rate		Facility amount (in borrowing currency) (a)			Unused borrowing capacity		Outstanding principal amount
					in millions
I	April 1, 2010		EURIBOR + 2.50	%	€	48.1		$	67.6	$	—
L	July 3, 2012		EURIBOR + 2.25	%	€	229.7			245.9		76.8
M	(b	)	EURIBOR + 2.00	%	€	970.7			—		1,363.8
N	(b	)	LIBOR + 1.75	%	$	1,400.0			—		1,400.0
O	July 31, 2013		(c	)		(c	)		—		67.0
P	September 2, 2013		LIBOR + 2.75	%	$	511.5			—		511.5
Q	(d	)	EURIBOR + 2.75	%	€	337.0			140.5		333.0
R	(d	)	EURIBOR + 3.25	%	€	263.3			—		369.9
S	(e	)	EURIBOR + 3.75	%	€	1,700.0			—		2,388.5
T	(e	)	LIBOR + 3.50	%	$	500.0			—		500.0
U	(f	)	EURIBOR + 4.00	%	€	1,219.4			—		1,713.2

Total								$	454.0	$	8,723.7

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

(a)

The total committed amounts of Facilities I and L are €250.0 million ($351.3 million) and €830.0 million ($1,166.2 million), respectively, however, €202.0 million ($283.8 million) and €600.3 million ($843.5 million), respectively, had been novated to LGE at June 30, 2009. Therefore, total third-party commitments at June 30, 2009 under Facilities I and L were €48.1 million ($67.6 million) and €229.7 million ($322.7 million), respectively.

(b)

The final maturity date for Facilities M and N is the earlier of (i) December 31, 2014 and (ii) October 17, 2013, the date falling 90 days prior to the date on which the UPC Holding Senior Notes due 2014 (see below) fall due, if such Senior Notes have not been repaid, refinanced or redeemed prior to such date.

(c)

The applicable interest payable under Facility O is 2.75% per annum plus the specified percentage rate per annum determined by the Polish Association of Banking Dealers—Forex Poland or the National Bank of Hungary, as appropriate for the relevant period. The principal amount of Facility O is comprised of (i) a HUF 5,962.5 million ($30.7 million) sub-tranche and (ii) a PLN 115.1 million ($36.3 million) sub-tranche.

(d)

The final maturity dates for Facilities Q and R are the earlier of (i) July 31, 2014 and December 31, 2015, respectively, and (ii) October 17, 2013, the date falling 90 days prior to the date on which the UPC Holding Senior Notes due 2014 (see below) fall due, if such Senior Notes have not been repaid, refinanced or redeemed prior to such date.

(e)

The final maturity dates for Facilities S and T are the earlier of (i) December 31, 2016 and (ii) October 17, 2013, the date falling 90 days prior to the date on which the UPC Holding Senior Notes due 2014 (see below) fall due, if, on such date, such Senior Notes are outstanding in an aggregate principal amount of €250.0 million ($351.3 million) or more.

(f)

The final maturity date for Facility U is the earlier of (i) December 31, 2017 and (ii) October 17, 2013, the date falling 90 days prior to the date on which the UPC Holding Senior Notes due in 2014 (see below) fall due, if, on such date, such Senior Notes are outstanding in an aggregate amount of €250.0 million ($351.3 million) or more.

UPC Holding Senior Notes

On April 30, 2009, UPC Holding (i) exchanged €115.4 million ($162.1 million) aggregate principal amount of its existing 7.75% Senior Notes due 2014, together with a cash payment of €4.6 million ($6.5 million), and (ii) €69.1 million ($97.1 million) aggregate principal amount of its 8.625% Senior Notes due 2014, together with a cash payment of €4.1 million ($5.8 million), for €184.4 million ($259.1 million) aggregate principal amount of new 9.75% Senior Notes due April 2018 (the 9.75% Senior Notes). In connection with this exchange transaction, UPC Holding paid the accrued interest on the exchanged Senior Notes and incurred applicable commissions and fees, including fees paid to third parties of $4.2 million that were recognized as a loss during the second quarter of 2009 and included in losses on debt modifications in our condensed consolidated statements of operations.

On April 30, 2009, UPC Holding also issued €65.6 million ($92.2 million) principal amount of additional 9.75% Senior Notes at an original issue discount of 16.5%, resulting in cash proceeds before commissions and fees of €54.8 million ($77.0 million).

On May 29, 2009, UPC Holding issued €150.0 million ($210.8 million) principal amount of additional 9.75% Senior Notes at an original issue discount of 10.853% and $400.0 million principal amount of new 9.875% Senior Notes due April 2018 (the 9.875% Senior Notes) at an original issue discount of 7.573%, resulting in cash proceeds before commissions and fees of €133.7 million ($187.9 million) and $369.7 million, respectively. The net proceeds from the issuance of the 9.75% and 9.875% Senior Notes, after deducting applicable commissions and fees, were used for general corporate purposes.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

The terms of the 9.75% and 9.875% Senior Notes are substantially identical (other than as to interest, maturity and redemption) to the terms of the existing UPC Holding Senior Notes.

At any time prior to April 15, 2013 in the case of the 9.75% Senior Notes and April 15, 2014 in the case of the 9.875% Senior Notes, UPC Holding may redeem some or all of such Senior Notes by paying a “make-whole” premium, which is the present value of all scheduled interest payments until April 15, 2013 or 2014, as the case may be, using the discount rate (as specified in the applicable indenture) as of the redemption date, plus 50 basis points.

UPC Holding may redeem some or all of the 9.75% and 9.875% Senior Notes at the following redemption prices (expressed as a percentage of the principal amount) plus accrued and unpaid interest and additional amounts, if any, to the applicable redemption date, if redeemed during the twelve-month period commencing on April 15 of the years set out below:


	Redemption Price
Year	9.75% Senior Notes		9.875% Senior Notes
2013	104.875	%	N.A.
2014	102.437	%	104.938	%
2015	100.000	%	102.469	%
2016 and thereafter	100.000	%	100.000	%

In addition, at any time prior to April 15, 2012, UPC Holding may redeem up to 35% of the 9.75% and 9.875% Senior Notes (at a redemption price of 109.75% and 109.875% of the principal amount, respectively) with the net proceeds from one or more specified equity offerings. UPC Holding may redeem all of the 9.75% and 9.875% Senior Notes at prices equal to their respective principal amounts, plus accrued and unpaid interest, upon the occurrence of certain changes in tax law. If UPC Holding or certain of its subsidiaries sell certain assets or experience specific changes in control, UPC Holding must offer to repurchase the 9.75% and 9.875% Senior Notes at a redemption price of 101%.

The details of the UPC Holding Senior Notes as of June 30, 2009 are summarized in the following table:


			June 30, 2009
UPC Holding Senior Notes due:	Interest rate		Outstanding principal amount (in borrowing currency)		Outstanding principal amount (U.S. $ equivalent)		Estimated fair value		Carrying amount (a)
					in millions
January 2014	7.750	%	€	384.6	$	540.4	$	483.3	$	540.4
January 2014	8.625	%	€	230.9		324.5		297.5		324.5
November 2016	8.000	%	€	300.0		421.5		356.6		421.5
April 2018	9.750	%	€	400.0		562.0		507.0		524.4
April 2018	9.875	%	$	400.0		400.0		367.5		370.0

					$	2,248.4	$	2,011.9	$	2,180.8

(a)	Amounts are net of discounts, where applicable.

Telenet Credit Facility

In June 2009, Telenet Bidco amended its existing senior credit facility agreement (the Telenet Credit Facility), whereby the undrawn €225.0 million ($316.1 million) term loan B2 facility (the Initial B2 Facility), which was

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

available to be drawn up to June 30, 2009, was divided into two separate facilities: (i) a €135.0 million ($189.7 million) term loan facility (the B2A Facility), which is available to be drawn up to and including June 30, 2010, and (ii) a €90.0 million ($126.5 million) term loan facility (the B2B Facility), which was available to be drawn up to and including June 30, 2009. The B2B Facility was drawn in full on June 29, 2009. The applicable terms and conditions of the B2A Facility and the B2B Facility are the same as the Initial B2 Facility, with an applicable margin of 2.50% over EURIBOR.

Other J:COM Debt

In March 2009, J:COM entered into (i) a ¥15.0 billion ($155.7 million) variable-rate term loan agreement, of which ¥5.0 billion ($51.9 million) is due in March 2012 and ¥10.0 billion ($103.8 million) is due in March 2015, (ii) a ¥10.0 billion variable-interest rate term loan agreement due in March 2014, (iii) a ¥4.0 billion ($41.5 million) variable-interest rate term loan agreement due in March 2014 and (iv) a ¥1.0 billion ($10.4 million) fixed-interest rate term loan agreement due in March 2016. All amounts under these agreements were fully drawn in March 2009 and proceeds were used to repay borrowings outstanding on certain other J:COM revolving credit facilities. The interest rate on the new variable-interest rate loans are based on three-month TIBOR plus a margin ranging from 0.43% to 0.65%. The new ¥1.0 billion fixed-interest loan bears interest at 1.85%. These new loan agreements contain covenants similar to those of J:COM’s existing credit facilities.

UGC Convertible Notes

In March 2009, we repurchased €101.0 million ($136.9 million at the transaction dates) principal amount of the UGC Convertible Notes at a purchase price equal to 65% of face value, for a total of €66.4 million ($90.1 million at the transaction dates), including accrued interest thereon. The $25.9 million change in the fair value of the repurchased UGC Convertible Notes from December 31, 2008 through the repurchase dates is included in realized and unrealized gains due to changes in fair values of certain investments and debt, net, in our condensed consolidated statement of operations for the six months ended June 30, 2009.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

Maturities of Debt and Capital Lease Obligations

Maturities of our debt and capital lease obligations for the indicated periods are presented below for the named entity and its subsidiaries, unless otherwise noted. Amounts presented represent U.S. dollar equivalents based on June 30, 2009 exchange rates:

Debt:


	UPC Holding (excluding VTR) (a)			VTR (b)		Telenet		J:COM		Austar		Other (c)			Total
	in millions
Year ended December 31:
Remainder of 2009	$	8.1		$	4.7	$	—	$	134.5	$	—	$	93.4		$	240.7
2010		0.7			4.7		—		133.5		—		5.2			144.1
2011		0.2			4.7		—		199.8		181.7		566.0			952.4
2012		77.1			4.7		744.7		162.0		99.9		784.0			1,872.4
2013		1,443.6			4.7		372.3		725.5		403.8		259.3			3,209.2
2014		3,096.8			442.0		186.2		419.6		—		169.3			4,313.9
Thereafter		6,355.1			—		1,573.9		134.8		—		1,003.8			9,067.6

Total debt maturities		10,981.6			465.5		2,877.1		1,909.7		685.4		2,881.0			19,800.3
Net embedded equity derivative, fair value adjustment and unamortized discounts		(67.6	)		—		—		—		—		(130.8	)		(198.4	)

Total debt	$	10,914.0		$	465.5	$	2,877.1	$	1,909.7	$	685.4	$	2,750.2		$	19,601.9

Current portion	$	8.1		$	4.7	$	—	$	203.9	$	—	$	55.3		$	272.0

Noncurrent portion	$	10,905.9		$	460.8	$	2,877.1	$	1,705.8	$	685.4	$	2,694.9		$	19,329.9

(a)

For purposes of this table, we have assumed that (i) the €800.0 million ($1,124.1 million) principal amount of the UPC Holding Senior Notes due 2014 will be repaid, refinanced or redeemed in 2013, (ii) Facilities M, N and Q of the UPC Broadband Holding Bank Facility will be repaid in 2014, (iii) Facility R of the UPC Broadband Holding Bank Facility will be repaid in 2015, (iv) Facilities S and T of the UPC Broadband Holding Bank Facility will be repaid in 2016 and (v) Facility U of the UPC Broadband Holding Bank Facility will be repaid in 2017.

(b)	Amounts represent borrowings under the VTR Bank Facility, for which the source of repayment is expected to be the related cash collateral account.

(c)

The remainder of 2009 amount includes $89.3 million of borrowings under the News Corp. Forward, which we settled in July 2009 by surrendering the underlying shares of News Corp. Class A common stock held by our company. The 2011 amount includes the €399.0 million ($560.6 million) principal amount outstanding under the UGC Convertible Notes. Although the final maturity date of the UGC Convertible Notes is April 15, 2024, holders have the right to tender all or part of their UGC Convertible Notes for purchase by UGC on April 15, 2011, April 15, 2014 and April 15, 2019, for a purchase price in euros equal to 100% of the principal amount.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

Capital lease obligations:


	J:COM			Telenet			Other			Total
	in millions
Year ended December 31:
Remainder of 2009	$	109.3		$	32.6		$	4.9		$	146.8
2010		198.5			63.1			4.5			266.1
2011		154.6			61.1			3.8			219.5
2012		114.1			58.9			3.4			176.4
2013		70.4			55.2			2.9			128.5
2014		32.4			53.5			2.7			88.6
Thereafter		27.2			306.7			27.9			361.8

		706.5			631.1			50.1			1,387.7
Amounts representing interest		(49.5	)		(196.4	)		(18.3	)		(264.2	)

Present value of net minimum lease payments	$	657.0		$	434.7		$	31.8		$	1,123.5

Current portion	$	203.9		$	35.1		$	5.3		$	244.3

Noncurrent portion	$	453.1		$	399.6		$	26.5		$	879.2

Non-cash Refinancing Transactions

During the six months ended June 30, 2009 and 2008, we completed certain refinancing transactions that resulted in non-cash borrowings and repayments of debt aggregating $5,585.0 million and $389.0 million, respectively.

(9)

Equity

Stock Repurchases

At December 31, 2008, we were authorized to purchase an additional $94.8 million of our LGI Series A and Series C common stock, pursuant to our then existing stock repurchase program. In February 2009, our board of directors authorized a new stock repurchase program under which we were authorized to acquire from time to time up to $250 million of our LGI Series A and Series C common stock through open market transactions or privately negotiated transactions, which may include derivative transactions. The timing of the repurchase of shares pursuant to our stock repurchase programs, which may be suspended or discontinued at any time, will depend on a variety of factors, including market conditions.

During the first six months of 2009, we acquired 3,249,238 shares of our LGI Series A common stock at a weighted average price of $14.93 per share and 10,656,292 shares of our LGI Series C common stock at a weighted average price of $14.68 per share, for an aggregate purchase price of $204.9 million, including direct acquisition costs. At June 30, 2009, the remaining amount authorized under our current repurchase program was $140.2 million. In July 2009, the amount authorized under our current repurchase program was increased by an additional $250 million. The timing of the repurchase of shares pursuant to this program, which may be suspended or discontinued at any time, will depend on a variety of factors, including market conditions. Subsequent to June 30, 2009 and through July 31, 2009, we purchased an additional 1,689,674 shares of our LGI Series A common stock at a weighted average price of $17.23 per share and 1,652,766 shares of our LGI Series C common stock at a weighted average price of $17.22 per share, for an aggregate purchase price of $57.6 million, including direct acquisition

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

costs. After giving effect to these repurchases and the increased authorization, the remaining amount authorized under our current repurchase program was $332.7 million.

Subsidiary Dividends and Distributions

Telenet — On May 28, 2009, Telenet announced that its Board of Directors had approved a distribution to its shareholders of €0.50 per share or €55.9 million ($76.1 million at the average rate for the period). This distribution, which was accrued by Telenet following the approval of its Board of Directors, will be paid on September 1, 2009. Our share of this capital distribution will be €28.0 million ($38.1 million at the average rate for the period) and the noncontrolling interest owners’ share will be €27.9 million ($38.0 million at the average rate for the period). The noncontrolling interest owners’ share of this distribution has been reflected as a reduction of noncontrolling interests’ equity in our condensed consolidated statement of equity.

J:COM — During the third quarter of 2008 and the first quarter of 2009, J:COM paid dividends to its shareholders of ¥500 per share or ¥3.428 billion ($31.8 million at average rate for the period) and ¥250 per share or ¥1.715 billion ($18.3 million at the average rate for the period), respectively. During the second quarter of 2009, Super Media distributed substantially all of its share of the proceeds from these J:COM dividends to our company and Sumitomo. After deducting withholding taxes, our share of these J:COM dividends was ¥1.853 billion ($19.1 million at the average rate for the period) and the noncontrolling interest owners’ share was ¥3.112 billion ($31.0 million at the average rate for the period). The noncontrolling interest owners’ share of the J:COM dividends has been reflected as a reduction of noncontrolling interests’ equity in our condensed consolidated statement of equity.

(10)

Stock Incentive Awards

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


	Three months ended June 30,				Six months ended June 30,
	2009		2008		2009		2008
	in millions
LGI common stock:
LGI performance plans	$	18.8	$	22.9	$	31.0	$	50.2
Stock options, stock appreciation rights (SARs), restricted shares and restricted share units		11.3		11.9		20.7		21.6

Total LGI common stock		30.1		34.8		51.7		71.8
Other		3.8		8.2		7.7		11.5

Total	$	33.9	$	43.0	$	59.4	$	83.3

Included in:
Operating expense	$	1.9	$	3.5	$	4.4	$	5.5
SG&A expense		32.0		39.5		55.0		77.8

Total	$	33.9	$	43.0	$	59.4	$	83.3

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

The following table provides certain information related to stock-based compensation not yet recognized for stock incentive awards related to LGI common stock as of June 30, 2009:

(a)

Amounts relate to (i) the Liberty Global, Inc. 2005 Incentive Plan (as amended and restated October 31, 2006) (the LGI Incentive Plan), (ii) the Liberty Global, Inc. 2005 Nonemployee Director Incentive Plan (as amended and restated November 1, 2006) (the LGI Director Incentive Plan), (iii) the LMI Transitional Stock Adjustment Plan (the Transitional Plan) and (iv) certain UGC incentive plans. The LGI Incentive Plan had 25,474,546 shares available for grant as of June 30, 2009 before considering any shares that might be issued to satisfy the 2010 and 2011 payments under the LGI performance-based incentive plans. These shares may be awarded at or above fair value in any series of stock, except that no more than 23,372,168 shares may be awarded in LGI Series B common stock. Any shares issued in satisfaction of our obligations under the LGI performance-based incentive plans will reduce the shares available for grant under the LGI Incentive Plan. The LGI Director Incentive Plan had 9,246,845 shares available for grant as of June 30, 2009. These shares may be awarded at or above fair value in any series of stock, except that no more than 5,000,000 shares may be awarded in LGI Series B common stock. No new grants will be made under the Transitional Plan and the UGC incentive plans.

(b)

Amounts relate to the LGI performance-based incentive plans. Compensation expense under these performance-based incentive plans is reported as stock-based compensation in our condensed consolidated statements of operations, notwithstanding the fact that the compensation committee of our board of directors could elect to cash settle all or any portion of the vested awards under these performance-based incentive plans.

The following table summarizes certain information related to the incentive awards granted and exercised pursuant to the LGI and UGC incentive plans described below:


	Six months ended June 30,
LGI common stock:	2009	2008
Assumptions used to estimate fair value of awards granted:
Risk-free interest rate	1.82 – 3.09%	2.63 – 3.96%
Expected life	3.2 – 8.2 years	4.5 – 6.0 years
Expected volatility	43.00 – 54.50%	24.10 – 26.10%
Expected dividend yield	none	none

Weighted average grant-date fair value per share of awards granted:
Options	$ 8.08	$ 10.90
SARs	$ 6.25	$ 9.94
Restricted stock	$ 12.70	$ 35.52

Total intrinsic value of awards exercised (in millions):
Options	$ —	$ 4.4
SARs	$ 0.2	$ 7.1
Cash received from exercise of options (in millions)	$ —	$ 7.9
Income tax benefit related to stock-based compensation (in millions)	$ 13.8	$ 16.9

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

Stock Award Activity — LGI Common Stock

The following tables summarize the LGI stock award activity during the six months ended June 30, 2009 under the LGI and UGC incentive plans. The tables also include activity related to LGI stock awards granted to directors and employees of Liberty Media Corporation (Liberty Media) in connection with the June 2004 spin-off of LGI International, Inc. to Liberty Media shareholders. Liberty Media is the former parent company of LGI International, the predecessor to LGI.


Options — LGI Series A common stock:	Number of shares		Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
					in years	in millions
Outstanding at January 1, 2009	5,435,145		$	21.83
Granted	65,000		$	14.91
Expired or canceled	(403,664	)	$	41.02
Forfeited	(71,311	)	$	25.54
Exercised	—		$	—

Outstanding at June 30, 2009	5,025,170		$	20.15	3.54	$	9.4

Exercisable at June 30, 2009	4,530,749		$	19.82	3.33	$	9.4


Options — LGI Series B common stock:	Number of shares	Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
				in years	in millions
Outstanding at January 1, 2009	3,066,716	$	20.01
Granted	—	$	—
Expired or canceled	—	$	—
Forfeited	—	$	—
Exercised	—	$	—

Outstanding at June 30, 2009	3,066,716	$	20.01	3.34	$	—

Exercisable at June 30, 2009	3,066,716	$	20.01	3.34	$	—


Options — LGI Series C common stock:	Number of shares		Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
					in years	in millions
Outstanding at January 1, 2009	8,353,012		$	20.00
Granted	65,000		$	14.82
Expired or canceled	(403,664	)	$	38.26
Forfeited	(71,311	)	$	24.11
Exercised	—		$	—

Outstanding at June 30, 2009	7,943,037		$	19.00	3.50	$	9.1

Exercisable at June 30, 2009	7,448,616		$	18.78	3.37	$	9.0

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)


Restricted stock and restricted stock units — LGI Series A common stock:	Number of shares		Weighted average grant-date fair value per share		Weighted average remaining contractual term
					in years
Outstanding at January 1, 2009	639,792		$	31.79
Granted	2,483,328		$	12.76
Expired or canceled	—		$	—
Forfeited	(31,852	)	$	31.74
Released from restrictions	(151,703	)	$	28.11

Outstanding at June 30, 2009	2,939,565		$	15.91	1.07


Restricted stock and restricted stock units — LGI Series B common stock:	Number of shares		Weighted average grant-date fair value per share		Weighted average remaining contractual term
					in years
Outstanding at January 1, 2009	11,854		$	22.23
Granted	—		$	—
Expired or canceled	—		$	—
Forfeited	—		$	—
Released from restrictions	(11,854	)	$	22.23

Outstanding at June 30, 2009	—		$	—	—


Restricted stock and restricted stock units — LGI Series C common stock:	Number of shares		Weighted average grant-date fair value per share		Weighted average remaining contractual term
					in years
Outstanding at January 1, 2009	651,450		$	29.78
Granted	2,403,874		$	12.64
Expired or canceled	—		$	—
Forfeited	(31,852	)	$	29.90
Released from restrictions	(163,003	)	$	26.25

Outstanding at June 30, 2009	2,860,469		$	15.58	1.10


SARs — LGI Series A common stock:	Number of shares		Weighted average base price		Weighted average remaining contractual term	Aggregate intrinsic value
					in years	in millions
Outstanding at January 1, 2009	3,958,980		$	25.27
Granted	2,054,691		$	15.82
Expired or canceled	(1,486,389	)	$	36.81
Forfeited	(72,654	)	$	33.76
Exercised	(16,694	)	$	10.90

Outstanding at June 30, 2009	4,437,934		$	16.94	5.25	$	5.2

Exercisable at June 30, 2009	2,012,814		$	17.10	3.84	$	4.1

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)


SARs — LGI Series C common stock:	Number of shares		Weighted average base price		Weighted average remaining contractual term	Aggregate intrinsic value
					in years	in millions
Outstanding at January 1, 2009	3,993,297		$	23.75
Granted	2,053,991		$	15.63
Expired or canceled	(1,484,989	)	$	34.43
Forfeited	(72,654	)	$	31.73
Exercised	(23,288	)	$	10.45

Outstanding at June 30, 2009	4,466,357		$	16.41	5.24	$	5.8

Exercisable at June 30, 2009	2,040,874		$	16.28	3.83	$	4.5

At June 30, 2009, total SARs outstanding included 136,538 LGI Series A common stock capped SARs and 136,538 LGI Series C common stock capped SARs, all of which were exercisable. The holder of an LGI Series A common stock capped SAR will receive the difference between $6.84 and the lesser of $10.90 or the market price of LGI Series A common stock on the date of exercise. The holder of a LGI Series C common stock capped SAR will receive the difference between $6.48 and the lesser of $10.31 or the market price of LGI Series C common stock on the date of exercise.

Exchange Offer for LGI Options and SARs

On May 13, 2009, our board of directors authorized an option and SAR exchange offer for certain outstanding LGI equity awards (Eligible Awards) granted under the LGI Incentive Plan. Under the terms of the exchange offer, certain LGI employees, other than those of our senior executives who hold Eligible Awards, were given the opportunity to exchange Eligible Awards for the grant of new SARs on a 2-for-1 basis (exchange two existing options or SARs for one new SAR). Pursuant to the exchange offer, which was completed on June 16, 2009, eligible participants tendered, and LGI accepted for cancellation and exchange, Eligible Awards consisting of options and SARs covering an aggregate of 1,789,210 shares of LGI Series A common stock and 1,787,810 shares of LGI Series C common stock from 170 participants, representing approximately 99% of the total Series A and Series C shares underlying the options and SARs eligible for exchange. On June 16, 2009, after the cancellation of the tendered Eligible Awards, LGI granted new SARs to the exchange offer participants in respect of 894,627 shares of LGI Series A common stock and 893,927 shares of LGI Series C common stock, as applicable. The new SARs have a base price equal to $14.73 per share and $14.50 per share of LGI Series A and Series C common stock, respectively, which represents the closing price of such stock on June 16, 2009. The new SARs (i) vest 12.5% on November 1, 2009 and then vest at a rate of 6.25% each quarter thereafter and (ii) expire on May 1, 2016. This exchange did not have a significant impact on our stock-based compensation expense for the three or six months ended June 30, 2009.

LGI Performance Plans

On February 18, 2009, the compensation committee of our board of directors determined the method of payment for the March 31, 2009 and September 30, 2009 installments of the awards that had been earned by participants in our senior executive performance incentive plan and management incentive plan (the LGI Performance Plans). These installments represent the first two of six equal semi-annual installments that began on March 31, 2009. In accordance with the compensation committee’s determination, we (i) paid cash aggregating $56.4 million and granted on February 18, 2009 9,464 restricted share units with respect to LGI Series A common stock and 9,094 restricted share units with respect to LGI Series C common stock to settle the first installment of the

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

awards earned under the LGI Performance Plans and (ii) granted restricted share units on February 18, 2009 with respect to 2,016,351 shares of LGI Series A common stock and 1,937,265 shares of LGI Series C common stock to settle the second installment of the awards earned under the LGI Performance Plans. The restricted share units granted in partial satisfaction of the first installment of the awards vested on March 31, 2009, and the restricted share units granted in satisfaction of the second installment of the awards vest on September 30, 2009. For purposes of determining the number of restricted share units to be granted, the compensation committee assigned a value of $13.50 to each restricted share unit, which represented a premium of approximately 13.5% to the closing price of LGI Series A common stock on February 18, 2009. As required by the terms of the LGI Performance Plans, the restricted share units were allocated between LGI Series A and Series C common stock in the same relative proportions as the then outstanding LGI Series A and Series C common stock (51%/49%). The compensation committee has not determined the method of payment of the remaining four installments of the earned awards. The decision by the compensation committee to settle the second installment of each earned award with restricted share units represents a modification that resulted in the reclassification of this portion of the earned awards from a liability to equity. The $5.1 million difference between the February 18, 2009 grant date market value of the restricted share units issued and the value assigned to the restricted share units by the compensation committee is reflected as a reduction of our stock-based compensation expense for the six months ended June 30, 2009. Our stock-based compensation expense for the six months ended June 30, 2009 also includes a reduction of $10.7 million related to the first quarter 2009 forfeiture of certain awards under the LGI Performance Plans.

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Earnings (Loss) per Common Share

Basic earnings (loss) per share attributable to LGI stockholders is computed by dividing net earnings (loss) attributable to LGI stockholders by the weighted average number of common shares (excluding nonvested common shares) outstanding for the period. Diluted earnings (loss) per share attributable to LGI stockholders presents the dilutive effect, if any, on a per share basis of potential common shares (e.g., options, nonvested common shares and convertible securities) as if they had been exercised, vested or converted at the beginning of the periods presented.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

The details of the calculations of our basic and diluted EPS are set forth in the following table:


	Three months ended June 30,						Six months ended June 30,
	2009			2008			2009			2008
	in millions, except share amounts
Numerator:
Net earnings (loss) attributable to LGI stockholders (basic EPS computation)	$	(93.1	)	$	428.2		$	(391.8	)	$	272.6
Reversal of impact of certain obligations that may be settled in shares, net of taxes		—			14.0			—			0.7
Reversal of impact of UGC Convertible Notes, net of taxes		—			(23.6	)		—			(67.3	)

Net earnings (loss) attributable to LGI stockholders (diluted EPS computation)	$	(93.1	)	$	418.6		$	(391.8	)	$	206.0

Denominator:
Weighted average common shares (basic EPS computation)		271,793,361			321,874,916			274,005,741			332,824,462
Incremental shares attributable to the assumed conversion of the UGC Convertible Notes		—			22,497,658			—			22,448,834
Incremental shares attributable to obligations that may be settled in shares		—			23,389,967			—			8,459,915
Incremental shares attributable to the assumed exercise of outstanding options, SARs and the release of restricted shares and share units upon vesting (treasury stock method)		—			8,103,083			—			8,341,339

Weighted average common shares (diluted EPS calculation)		271,793,361			375,865,624			274,005,741			372,074,550

Amounts attributable to LGI stockholders:
Earnings (loss) from continuing operations, net of taxes	$	(94.9	)	$	424.4		$	(395.9	)	$	264.8
Earnings from discontinued operations, net of taxes		1.8			3.8			4.1			7.8

Net earnings (loss)	$	(93.1	)	$	428.2		$	(391.8	)	$	272.6

We reported net losses attributable to LGI stockholders during the three and six months ended June 30, 2009. Therefore, the dilutive effect at June 30, 2009 of (i) the aggregate number of then outstanding options, SARs and nonvested shares of approximately 30.7 million, (ii) the aggregate number of shares issuable pursuant to the then outstanding convertible debt securities and other obligations that may be settled in cash or shares of approximately 43.0 million and (iii) the number of shares contingently issuable pursuant to LGI performance-based incentive plans of 13.3 million were not included in the computation of diluted loss per share attributable to LGI stockholders because their inclusion would have been anti-dilutive to the computation.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

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Related Party Transactions

Our related party transactions consist of the following:


	Three months ended June 30,						Six months ended June 30,
	2009			2008			2009			2008
	in millions
Revenue earned from related parties of:
J:COM (a)	$	18.8		$	32.5		$	46.6		$	64.8
LGI and consolidated subsidiaries other than J:COM (b)		5.2			8.5			8.8			14.2

Total LGI	$	24.0		$	41.0		$	55.4		$	79.0

Operating expenses charged by related parties of:
J:COM (c)	$	30.5		$	32.7		$	69.9		$	64.3
LGI and consolidated subsidiaries other than J:COM (d)		7.3			7.9			13.2			14.9

Total LGI	$	37.8		$	40.6		$	83.1		$	79.2

SG&A expenses charged by (to) related parties of:
J:COM (e)	$	6.9		$	6.2		$	13.9		$	12.7
LGI and consolidated subsidiaries other than J:COM (f)		(0.3	)		(0.4	)		(0.6	)		(0.7	)

Total LGI	$	6.6		$	5.8		$	13.3		$	12.0

Interest expense charged by related parties of J:COM (g)	$	3.3		$	3.5		$	8.8		$	7.0

Capital lease additions — related parties of J:COM (h)	$	44.2		$	27.2		$	82.7		$	64.1

(a)

J:COM earns revenue from programming services provided to J:COM affiliates and distribution fee revenue from SC Media & Commerce, Inc., a majority-owned subsidiary of Sumitomo. During the 2008 periods, (i) J:COM also provided construction, programming, management, administrative, call center and distribution services to certain of its and LGI’s affiliates and (ii) J:COM sold construction materials to certain of such affiliates. As a result of certain transactions completed by J:COM during 2008, these affiliates became J:COM subsidiaries and, accordingly, the revenue derived from these entities during the 2009 periods is eliminated in consolidation.

(b)	Amounts consist primarily of management, advisory and programming license fees and fees for uplink services and construction services charged to our equity method affiliates.

(c)	Amounts consist primarily of programming, billing system, program guide and other services provided to J:COM by its and Sumitomo’s affiliates.

(d)	Amounts consist primarily of programming costs and interconnect fees charged by equity method affiliates.

(e)	J:COM has management service agreements with Sumitomo under which officers and management level employees are seconded from Sumitomo to J:COM. Amounts also include rental and IT support expenses paid to certain subsidiaries of Sumitomo.

(f)	Amounts represent the reimbursements charged by Austar for marketing and director fees incurred on behalf of one of its equity affiliates.

(g)	Amounts consist of related party interest expense, primarily related to assets leased from the aforementioned Sumitomo entities.

In December 2008, J:COM acquired Mediatti, our then equity method affiliate. For additional information, see note 3.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

(h)

J:COM leases, in the form of capital leases, customer premise equipment, various office equipment and vehicles from certain subsidiaries and affiliates of Sumitomo. At June 30, 2009 and December 31, 2008, capital lease obligations of J:COM aggregating ¥54.2 billion ($562.7 million) and ¥54.1 billion ($561.7 million), respectively, were owed to these Sumitomo subsidiaries and affiliates.

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Commitments and Contingencies

Commitments

In the ordinary course of business, we have entered into agreements that commit our company to make cash payments in future periods with respect to non-cancellable operating leases, programming contracts, satellite carriage commitments, purchases of customer premise equipment and other items. We expect that in the ordinary course of business, operating leases that expire generally will be renewed or replaced by similar leases.

Contingent Obligations

In connection with the April 13, 2005 combination of VTR and Metrópolis Intercom SA (Metrópolis), Cristalerías de Chile SA (Cristalerías) acquired the right to require UGC to purchase Cristalerías’ equity interest in VTR at fair value, subject to a $140 million floor price. This put right is exercisable by Cristalerías until April 13, 2015. Upon the exercise of this put right by Cristalerías, UGC has the option to use cash or shares of LGI common stock to acquire Cristalerías’ interest in VTR. The fair value of this put right at June 30, 2009 was a liability of $15.3 million.

The minority owner of Chello Central Europe Zrt (Chello Central Europe), a subsidiary of Chellomedia in Hungary, has the right to put all (but not part) of its interest in Chello Central Europe to one of our subsidiaries each year between January 1 and January 31. This put option lapses if not exercised by February 1, 2011. Chellomedia has a corresponding call right. The price payable upon exercise of the put or call right will be the fair value of the minority owner’s interest in Chello Central Europe. In the event the fair value of Chello Central Europe on exercise of the put right exceeds a multiple of ten times EBITDA, as defined in the underlying agreement, Chellomedia may in its sole discretion elect not to acquire the minority interest and the put right lapses for that year, with the minority shareholder being instead entitled to sell its minority interest to a third party within three months of such date, subject to Chellomedia’s right of first refusal. After this three-month period elapses, the minority shareholder cannot sell its shares to third parties without Chellomedia’s consent. The put and call rights are to be settled in cash. Based on our current assessment of the fair value of Chello Central Europe’s net assets, we do not expect the amount to be paid upon any future exercise of this put right to be material to our financial condition.

Three individuals, including one of our executive officers and an officer of one of our subsidiaries, own a 14.3% common stock interest in Liberty Jupiter, Inc. (Liberty Jupiter), which owned a 4.0% indirect interest in J:COM at June 30, 2009. In addition to our 85.7% common stock interest in Liberty Jupiter, we also own Liberty Jupiter preferred stock with an aggregate liquidation value of $165.2 million at June 30, 2009. Under the amended and restated shareholders agreement, the individuals can require us to purchase all of their Liberty Jupiter common stock interest, and we can require them to sell us all or part of their Liberty Jupiter common stock interest, in exchange for LGI common stock with an aggregate market value equal to the fair market value of the Liberty Jupiter shares so exchanged, as determined by agreement of the parties or independent appraisal. Based on our current assessment of the fair value of Liberty Jupiter’s net assets, we do not expect the aggregate amount to be paid upon any future exercise of these purchase rights to be material to our financial condition.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

Guarantees and Other Credit Enhancements

In the ordinary course of business, we have provided indemnifications to purchasers of certain of our assets, our lenders, our vendors and certain other parties. In addition, we have provided performance and/or financial guarantees to local municipalities, our customers and vendors. Historically, these arrangements have not resulted in our company making any material payments and we do not believe that they will result in material payments in the future.

Legal and Regulatory Proceedings and Other Contingencies

Cignal — On April 26, 2002, Liberty Global Europe NV (Liberty Global Europe), an indirect subsidiary of UGC, received a notice that the former shareholders of Cignal Global Communications (Cignal) filed a lawsuit (the 2002 Cignal Action) against Liberty Global Europe in the District Court of Amsterdam, the Netherlands, claiming damages for Liberty Global Europe’s alleged failure to honor certain option rights that were granted to those shareholders pursuant to a Shareholders Agreement entered into in connection with the acquisition of Cignal by Priority Telecom NV (Priority Telecom). The Shareholders Agreement provided that in the absence of an initial public offering (IPO), as defined in the Shareholders Agreement, of shares of Priority Telecom by October 1, 2001, the Cignal shareholders would be entitled until October 30, 2001 to exchange their Priority Telecom shares into shares of Liberty Global Europe, with a cash equivalent value of $200 million in the aggregate, or cash at Liberty Global Europe’s discretion. Liberty Global Europe believes that it complied in full with its obligations to the Cignal shareholders through the successful completion of the IPO of Priority Telecom on September 27, 2001, and accordingly, that the option rights were not exercisable.

On May 4, 2005, the District Court rendered its decision in the 2002 Cignal Action, dismissing all claims of the former Cignal shareholders. On August 2, 2005, an appeal against the district court decision was filed. Subsequently, when the grounds of appeal were filed in November 2005, nine individual plaintiffs, rather than all former Cignal shareholders, continued to pursue their claims. Based on the share ownership information provided by the nine plaintiffs, the damage claims remaining subject to the 2002 Cignal Action are approximately $28 million in the aggregate before statutory interest. A hearing on the appeal was held on May 22, 2007. On September 13, 2007, the Court of Appeals rendered its decision that no IPO within the meaning of the Shareholders Agreement had been realized and accordingly the plaintiffs should have been allowed to exercise their option rights. In the same decision, the Court of Appeals directed the plaintiffs to present more detailed calculations and substantiation of the damages they claimed to have suffered as a result of Liberty Global Europe’s nonperformance with respect to their option rights, and stated that Liberty Global Europe will be allowed to respond to the calculations submitted by the plaintiffs by separate statement. The Court of Appeals gave the parties leave to appeal to the Dutch Supreme Court and deferred all further decisions and actions, including the calculation and substantiation of the damages, pending such appeal. Liberty Global Europe filed an appeal with the Dutch Supreme Court on December 13, 2007. On February 15, 2008, the plaintiffs filed a conditional appeal against the decision with the Dutch Supreme Court, challenging certain aspects of the Court of Appeals’ decision in the event that Liberty Global Europe’s appeal is not dismissed by the Dutch Supreme Court.

On June 13, 2006, Liberty Global Europe, Priority Telecom, Euronext NV and Euronext Amsterdam NV were each served with a summons for a new action (the 2006 Cignal Action) purportedly on behalf of all the other former Cignal shareholders and provisionally for the nine plaintiffs in the 2002 Cignal Action. The 2006 Cignal Action claims, among other things, that the listing of Priority Telecom on Euronext Amsterdam NV in September 2001 did not meet the requirements of the applicable listing rules and, accordingly, the IPO was not valid and did not satisfy Liberty Global Europe’s obligations to the Cignal shareholders. Aggregate claims of $200 million, plus statutory interest, are asserted in this action, which amount includes the amount provisionally claimed by the nine plaintiffs in

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

the 2002 Cignal Action. A hearing in the 2006 Cignal Action took place on October 9, 2007 following which, on December 19, 2007, the District Court rendered its decision dismissing the plaintiffs’ claims against Liberty Global Europe and the other defendants. The plaintiffs appealed the District Court’s decision to the Court of Appeals on March 12, 2008. Oral pleadings in this appeal took place on April 17, 2009 and a decision is currently scheduled for August 11, 2009.

In light of the September 13, 2007 decision by the Court of Appeals and other factors, we recorded a provision of $146.0 million during the third quarter of 2007, representing our estimate of the loss that we may incur upon the ultimate disposition of the 2002 and 2006 Cignal Actions. This provision has been recorded notwithstanding our appeal of the Court of Appeals decision in the 2002 Cignal Action to the Dutch Supreme Court and the fact that the Court of Appeals decision is not binding with respect to the 2006 Cignal Action. We have not adjusted the provision as a result of the December 19, 2007 District Court decision in the 2006 Cignal Action, because the plaintiffs have appealed that decision.

The Netherlands Regulatory Developments — During 2008, the Dutch national regulatory authority (OPTA) conducted a second round analysis of certain markets to determine if any operator or service provider has “Significant Market Power” within the meaning of certain directives originally promulgated by the European Union (EU) in 2003. With respect to television services, OPTA issued a draft decision on August 5, 2008, again finding UPC Nederland BV (UPC NL), as well as other cable operators, to have Significant Market Power in the market for wholesale broadcasting transmission services and imposing new obligations. Following a national consultation procedure, OPTA issued a revised decision and submitted it to the EU Commission on January 9, 2009. On February 9, 2009, the EU Commission informed OPTA of its approval of the draft decision. The decision became effective on March 17, 2009. The new market analysis decision imposes on the four largest cable operators in the Netherlands a number of access obligations in respect of television services. The two largest cable operators, including UPC NL, have a number of additional access obligations.

The access obligations consist of (i) access to capacity for the transmission of the television signal (both analog and digital), (ii) resale of the analog television signal and, in conjunction with any such resale, the provision of customer connection, and (iii) access to UPC NL’s digital conditional access system, including access to its operational supporting systems and co-location. OPTA has stated that any operator with its own infrastructure, such as Royal KPN NV, the incumbent telecommunications operator in the Netherlands, will not be allowed to resell the analog television signal or avail itself of access to UPC NL’s digital platform.

The resale obligation will enable third parties to take over the customer relationship as far as the analog television signal is concerned. The decision includes the possibility for resale of an analog package that is not identical to the analog packages offered by UPC NL. Potential resellers will need to negotiate the relevant copyrights directly with program providers in order to resell the analog television signals. In case of non-identical resale, the decision imposes a number of preconditions, including that the reseller must bear the costs of filtering and that OPTA will determine the reasonableness of such request on a case by case basis.

In respect of transmission of the analog television signal, a number of preconditions were established to ensure that such transmission will not cause unreasonable use of scarce capacity. A request for transmission of analog signals that are not included in UPC NL’s analog television package, as well as parallel transmission of analog signals that are already part of the analog package, will in principle be deemed unreasonable.

Regarding digital, the new market analysis decision requires UPC NL to enable providers of digital television signals to supply their digital signals using their own or UPC NL’s digital conditional access system. This

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

allows the third parties to have their own customer relationship for those digital television signals and, to bundle their offer with the resale of the analog television signal.

Pricing of the wholesale offer for analog and digital transmission capacity will be at cost-oriented prices. Pricing of the wholesale offer for resale of the analog package, including access to UPC NL’s transmission platform for purposes of resale, will be based on a discount to UPC NL’s retail rates, at a level to be determined by OPTA and, if no retail offer of UPC NL is available, on cost-oriented basis. Both access obligations come with the obligation to provide access to the relevant network elements and facilities, including set-top boxes, co-location, software systems and operational supporting systems, at cost-oriented prices if no relevant retail tariff is available to define the retail minus tariff.

UPC NL will also be required to make its tariffs publicly available on a rate card. Furthermore, UPC NL will not be allowed to discriminate between third parties and its own retail business in making these services available. This includes for example a prohibition on offering loyalty discounts to its own customers.

We believe that the proposed measures are unnecessary and disproportionate and we filed an appeal against the decision on April 15, 2009. Pending the outcome of this appeal, UPC NL will be required to comply with the decision.

Interkabel Acquisition — On November 26, 2007, Telenet and the PICs announced a non-binding agreement-in-principle to transfer the analog and digital television activities of the PICs, including all existing subscribers to Telenet. Subsequently, Telenet and the PICs entered into the 2008 PICs Agreement, which closed effective October 1, 2008. Beginning in December 2007, Belgacom NV/SA (Belgacom), the incumbent telecommunications operator in Belgium, instituted several proceedings seeking to block implementation of these agreements. It lodged summary proceedings with the President of the Court of First Instance of Antwerp to obtain a provisional injunction preventing the PICs from effecting the agreement-in-principle and initiated a civil procedure on the merits claiming the annulment of the agreement-in-principle. In March 2008, the President of the Court of First Instance of Antwerp ruled in favor of Belgacom in the summary proceedings, which ruling was overturned by the Court of Appeal of Antwerp in June 2008. Belgacom has brought this appeal judgment before the Cour de Cassation (Belgian Supreme Court), which could overrule the appeal judgment, but only on matters of law or procedure. On April 6, 2009, the Court of First Instance of Antwerp ruled in favor of the PICs and Telenet in the civil procedure on the merits, dismissing Belgacom’s request for the rescission of the agreement-in-principle and the 2008 PICs Agreement. On June 12, 2009, Belgacom appealed this judgment with the Court of Appeal of Antwerp. In its appeal, Belgacom is now also seeking compensation for damages should the 2008 PICs Agreement not be rescinded. The claim for compensation is however not yet quantified. The proceedings on appeal are expected to take at least one year.

In parallel with the above proceedings, Belgacom filed a complaint with the Government Commissioner seeking suspension of the approval by the PICs’ board of directors of the agreement-in-principle and initiated suspension and annulment procedures before the Council of State against these approvals and subsequently against the Board resolutions of the PICs approving the 2008 PICs Agreement. Belgacom’s efforts to suspend approval of these agreements were unsuccessful. Final judgment in the Council of State annulment cases, which may be joined, is expected to take more than one year.

It is possible that Belgacom will initiate further legal proceedings in an attempt to block the integration of the PICs’ analog and digital television activities or obtain the rescission of the 2008 PICs Agreement. No assurance can be given as to the outcome of these or other Belgacom proceedings. However, an unfavorable outcome of existing

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

or future Belgacom proceedings could potentially lead to the rescission of the 2008 PICs Agreement and/or to an obligation for Telenet to pay compensation for damages, subject to the relevant provisions of the 2008 PICs Agreement.

Chilean Antitrust Matter — On December 12, 2006, Liberty Media announced publicly that it had agreed to acquire an approximate 39% interest in The DirecTV Group, Inc. (DirecTV). On August 1, 2007, VTR received formal written notice from the Chilean Federal Economic Prosecutor (FNE) that Liberty Media’s acquisition of the DirecTV interest would violate one of the conditions imposed by the Chilean Antitrust Court on VTR’s combination with Metrópolis prohibiting VTR and its control group from participating, directly or indirectly through related persons, in Chilean satellite or microwave television businesses. On March 10, 2008, following the closing of Liberty Media’s investment in DirecTV, the FNE commenced an action before the Chilean Antitrust Court against John C. Malone who is chairman of our board of directors and of Liberty Media’s board of directors. In this action, the FNE alleges that Mr. Malone is a controller of VTR and either controls or indirectly participates in DirecTV’s satellite operations in Chile, thus violating the condition. The FNE requests the Antitrust Court to impose a fine on Mr. Malone and order him to effect the transfer of the shares, interests or other assets that are necessary to restore the independence, in ownership and administration, of VTR and DirecTV. We currently are unable to predict the outcome of this matter or its impact on VTR.

Other Regulatory Issues — Video distribution, broadband internet, telephony and content businesses are regulated in each of the countries in which we operate. The scope of regulation varies from country to country, although in some significant respects regulation in European markets is harmonized under the regulatory structure of the EU. Adverse regulatory developments could subject our businesses to a number of risks. Regulation could limit growth, revenue and the number and types of services offered and could lead to increased operating costs and capital expenditures. In addition, regulation may restrict our operations and subject them to further competitive pressure, including pricing restrictions, interconnect and other access obligations, and restrictions or controls on content, including content provided by third parties. Failure to comply with current or future regulation could expose our businesses to various penalties.

Other — In addition to the foregoing items, we have contingent liabilities related to (i) legal proceedings, (ii) wage, property, sales and other tax issues, (iii) disputes over interconnection fees and (iv) other matters arising in the ordinary course of business. We expect that the amounts, if any, which may be required to satisfy these contingencies will not be material in relation to our financial position or results of operations.

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Segment Reporting

We own a variety of international subsidiaries and investments that provide broadband communications services, and to a lesser extent, video programming services. We identify our reportable segments as those consolidated subsidiaries that represent 10% or more of our revenue, operating cash flow (as defined below), or total assets. In certain cases, we may elect to include an operating segment in our segment disclosure that does not meet the above-described criteria for a reportable segment. We evaluate performance and make decisions about allocating resources to our operating segments based on financial measures such as revenue and operating cash flow. In addition, we review non-financial measures such as subscriber growth, as appropriate.

Operating cash flow is the primary measure used by our chief operating decision maker to evaluate segment operating performance and to decide how to allocate resources to segments. As we use the term, operating cash flow is defined as revenue less operating and SG&A expenses (excluding stock-based compensation, depreciation and amortization, provisions for litigation, and impairment, restructuring and other operating charges or credits). Other

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

operating charges or credits include gains and losses on the disposition of long-lived assets and, effective with our adoption of SFAS 141(R), due diligence, legal, advisory and other third-party costs directly related to our efforts to acquire controlling interests in entities. We believe operating cash flow is meaningful because it provides investors a means to evaluate the operating performance of our segments and our company on an ongoing basis using criteria that is used by our internal decision makers. Our internal decision makers believe operating cash flow is a meaningful measure and is superior to other available GAAP measures because it represents a transparent view of our recurring operating performance and allows management to (i) readily view operating trends, (ii) perform analytical comparisons and benchmarking between segments and (iii) identify strategies to improve operating performance in the different countries in which we operate. For example, our internal decision makers believe that the inclusion of impairment and restructuring charges within operating cash flow would distort the ability to efficiently assess and view the core operating trends in our segments. In addition, our internal decision makers believe our measure of operating cash flow is important because analysts and investors use it to compare our performance to other companies in our industry. However, our definition of operating cash flow may differ from cash flow measurements provided by other public companies. Operating cash flow should be viewed as a measure of operating performance that is a supplement to, and not a substitute for, operating income, net earnings (loss), cash flow from operating activities and other GAAP measures of income or cash flows. A reconciliation of total segment operating cash flow to our earnings (loss) from continuing operations before income taxes is presented below.

During the first quarter of 2009, we changed our reporting such that we no longer include video-on-demand costs within the central and corporate operations category of the UPC Broadband Division. Instead, we present these costs within the individual operating segments of the UPC Broadband Division. Segment information for all periods presented has been recast to reflect the reclassification of these costs. Additionally, our reportable segments have been reclassified for all periods to present UPC Slovenia as a discontinued operation. Previously, UPC Slovenia was included in our Other Central and Eastern Europe segment. We present only the reportable segments of our continuing operations in the tables below.

We have identified the following consolidated operating segments as our reportable segments:

•

UPC Broadband Division:

•

The Netherlands

•

Switzerland

•

Austria

•

Ireland

•

Hungary

•

Other Central and Eastern Europe

•

Telenet (Belgium)

•

J:COM (Japan)

•

VTR (Chile)

All of the reportable segments set forth above derive their revenue primarily from broadband communications services, including video, voice and broadband internet services. Certain segments also provide Competitive Local Exchange Carrier (CLEC) and other business-to-business (B2B) services and J:COM provides certain programming distribution services. At June 30, 2009, our operating segments in the UPC Broadband Division provided services in nine European countries (excluding Slovenia). Our Other Central and Eastern Europe segment includes our

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)

operating segments in the Czech Republic, Poland, Romania and Slovakia. Telenet, J:COM and VTR provide broadband communications services in Belgium, Japan and Chile, respectively. Our corporate and other category includes (i) Austar, (ii) other less significant consolidated operating segments that provide broadband communications services in Puerto Rico and video programming and other services in Europe and Argentina and (iii) our corporate category. Intersegment eliminations primarily represent the elimination of intercompany transactions between our broadband communications and programming operations, primarily in Europe.

Performance Measures of Our Reportable Segments

The amounts presented below represent 100% of each of our reportable segment’s revenue and operating cash flow. As we have the ability to control Telenet, J:COM, VTR and Austar, GAAP requires that we consolidate 100% of the revenue and expenses of these entities in our condensed consolidated statements of operations despite the fact that third parties own significant interests in these entities. The noncontrolling owners’ interests in the operating results of Telenet, J:COM, VTR, Austar and other less significant majority-owned subsidiaries are reflected in net earnings attributable to noncontrolling interests in our condensed consolidated statements of operations. Our ability to consolidate J:COM is dependent on our ability to continue to control Super Media, which will be dissolved in February 2010 unless we and Sumitomo mutually agree to extend the term. If Super Media is dissolved and we do not otherwise control J:COM at the time of any such dissolution, we will no longer be in a position to consolidate J:COM. When reviewing and analyzing our operating results, it is important to note that other third-party entities own significant interests in Telenet, J:COM, VTR and Austar and that Sumitomo effectively has the ability to prevent our company from consolidating J:COM after February 2010.


	Revenue
	Three months ended June 30,						Six months ended June 30,
	2009			2008			2009			2008
	in millions
UPC Broadband Division:
The Netherlands	$	277.4		$	310.6		$	544.3		$	611.7
Switzerland		248.7			268.5			486.8			520.9
Austria		118.2			143.9			232.8			283.7
Ireland		84.4			95.6			164.2			184.0

Total Western Europe		728.7			818.6			1,428.1			1,600.3

Hungary		79.6			108.5			155.9			208.5
Other Central and Eastern Europe		189.3			237.4			364.7			456.6

Total Central and Eastern Europe		268.9			345.9			520.6			665.1

Central and corporate operations		2.1			2.9			4.3			5.6

Total UPC Broadband Division		999.7			1,167.4			1,953.0			2,271.0
Telenet (Belgium)		400.5			387.9			777.1			762.3
J:COM (Japan)		839.1			691.1			1,702.1			1,370.4
VTR (Chile)		172.7			194.6			328.5			381.1
Corporate and other		259.1			294.8			492.0			569.9
Intersegment eliminations		(18.1	)		(22.1	)		(36.8	)		(45.8	)

Total LGI	$	2,653.0		$	2,713.7		$	5,215.9		$	5,308.9

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 30, 2009

(unaudited)


	Operating cash flow
	Three months ended June 30,						Six months ended June 30,
	2009			2008			2009			2008
	in millions
UPC Broadband Division:
The Netherlands	$	159.2		$	168.4		$	311.9		$	334.7
Switzerland		138.9			137.5			269.4			269.8
Austria		59.0			76.0			117.0			144.4
Ireland		35.3			35.7			66.1			69.6

Total Western Europe		392.4			417.6			764.4			818.5

Hungary		40.1			55.1			78.4			106.2
Other Central and Eastern Europe		93.6			123.2			183.3			233.6

Total Central and Eastern Europe		133.7			178.3			261.7			339.8

Central and corporate operations		(44.9	)		(58.2	)		(94.4	)		(115.2	)

Total UPC Broadband Division		481.2			537.7			931.7			1,043.1
Telenet (Belgium)		208.4			189.9			399.0			364.8
J:COM (Japan)		356.5			275.8			732.3			559.4
VTR (Chile)		70.2			81.9			131.6			157.5
Corporate and other		52.6			60.7			96.1			113.3

Total LGI	$	1,168.9		$	1,146.0		$	2,290.7		$	2,238.1

The following table provides a reconciliation of total segment operating cash flow to earnings (loss) from continuing operations before income taxes:


	Three months ended June 30,						Six months ended June 30,
	2009			2008			2009			2008
	in millions
Total segment operating cash flow	$	1,168.9		$	1,146.0		$	2,290.7		$	2,238.1
Stock-based compensation expense		(33.9	)		(43.0	)		(59.4	)		(83.3	)
Depreciation and amortization		(709.7	)		(740.0	)		(1,403.3	)		(1,440.3	)
Impairment, restructuring and other operating charges, net		(123.4	)		(3.3	)		(124.2	)		(1.9	)

Operating income		301.9			359.7			703.8			712.6
Interest expense		(212.8	)		(290.7	)		(423.0	)		(570.3	)
Interest and dividend income		6.6			16.9			28.1			51.8
Realized and unrealized gains (losses) on derivative instruments, net		(398.5	)		406.4			(545.6	)		71.0