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	•	LMI stockholders will receive, for each share of LMI Series A or Series B common stock they own, one share of the corresponding series of Liberty Global stock; and
	•	UGC stockholders (other than LMI and its wholly owned subsidiaries) will have the right to elect to receive, for each share of UGC common stock they own, 0.2155 of a share of Liberty Global Series A common stock or $9.58 in cash. The cash election will be subject to proration, so that the total cash consideration paid does not exceed 20% of the aggregate value of the merger consideration payable to the public stockholders of UGC.

	•	the “LMI election of directors proposal,” a proposal to elect David E. Rapley and Larry E. Romrell to serve as Class I members of our board of directors until the 2008 annual meeting of LMI stockholders or until their successors are elected;
	•	the “LMI incentive plan proposal,” a proposal to approve the Liberty Media International, Inc. 2004 Incentive Plan (As Amended and Restated Effective March 9, 2005);
	•	the “LMI auditors ratification proposal,” a proposal to approve the selection of KPMG LLP as LMI’s independent auditors for the year ending December 31, 2005; and
	•	such other proposals, if any, as may properly come before the annual meeting.

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	Sincerely,
	John C. Malone
	Chairman of the Board, Chief Executive Officer
	and President
	Liberty Media International, Inc.

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Liberty Media International, Inc.		UnitedGlobalCom, Inc.
12300 Liberty Boulevard		4643 South Ulster Street, Suite 1300
Englewood, Colorado 80112		Denver, Colorado 80237
Telephone: (800) 783-7676		Telephone: (303) 770-4001

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	1. To consider and vote upon a proposal (which we refer to as the merger proposal) to adopt the Agreement and Plan of Merger, dated as of January 17, 2005, among LMI, UnitedGlobalCom, Inc. (UGC), Liberty Global, Inc. and two subsidiaries of Liberty Global pursuant to which, among other things, LMI and UGC would become wholly owned subsidiaries of Liberty Global and each outstanding share of LMI common stock would be exchanged for one share of the corresponding series of Liberty Global common stock;
	2. To consider and vote upon a proposal (which we refer to as the LMI election of directors proposal) to elect David E. Rapley and Larry E. Romrell to serve as Class I members of our board of directors until the 2008 annual meeting of LMI stockholders or until their successors are elected;
	3. To consider and vote upon a proposal (which we refer to as the LMI incentive plan proposal) to approve the Liberty Media International, Inc. 2004 Incentive Plan (As Amended and Restated Effective March 9, 2005);
	4. To consider and vote upon a proposal (which we refer to as the LMI auditors ratification proposal) to ratify the selection of KPMG LLP as LMI’s independent auditors for the year ending December 31, 2005; and
	5. To transact such other business as may properly be presented at the meeting or any postponements or adjournments of the meeting.

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	•	Use the toll-free telephone number shown on the proxy card;
	•	Use the Internet website shown on the proxy card; or
	•	Complete, sign, date and promptly return the enclosed proxy card in the postage-paid envelope. It requires no postage if mailed in the United States.

	By Order of the Board of Directors,
	Elizabeth M. Markowski
	Secretary

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			Page
QUESTIONS AND ANSWERS				v
	Concerning the Mergers			v
	Concerning the LMI Annual Meeting			ix
SUMMARY				1
	The Companies			1
	Structure of the Mergers			2
	The Stockholders Meetings and Proxy Solicitations			2
	Fairness Determinations and Recommendations of the Special Committee and the UGC Board			3
	Opinion of the Financial Advisor to the Special Committee			4
	Fairness Determinations of the Boards of Directors of LMI, Liberty Global, LMI Merger Sub and UGC Merger Sub			4
	Recommendation of and Reasons for the LMI Merger			5
	Opinion of LMI’s Financial Advisor			5
	Management of Liberty Global			6
	Interests of Certain Persons in the Mergers			6
	Material United States Federal Income Tax Consequences of the Mergers			6
	Merger Agreement			7
	Appraisal or Dissenters’ Rights			7
	Regulatory Matters			8
	Voting Agreement			8
	Risk Factors			8
	Recommendations regarding the LMI Annual Business Matter Proposals			8
	Selected Summary Historical Financial Data of LMI			9
	Selected Summary Historical Financial Data of UGC			10
	Selected Unaudited Condensed Pro Forma Combined Financial Data of Liberty Global			11
	Comparative Per Share Financial Data			12
	Comparative Per Share Market Price and Dividend Information			13
SPECIAL FACTORS				15
	Background of the Mergers			15
	Fairness Determinations and Recommendations of the Special Committee and the UGC Board			21
	Opinion of the Financial Advisor to the Special Committee			28
	Fairness Determinations of the Boards of Directors of LMI, Liberty Global, LMI Merger Sub and UGC Merger Sub			35
	Recommendation of and Reasons for the LMI Merger			37
	Opinion of LMI’s Financial Advisor			38
	Availability of Opinions and Reports			45
	Conduct of the Business of UGC if the Mergers are Not Completed			46
	Amount and Source of Funds and Financing of the Mergers; Expenses			46
	Interests of Certain Persons in the Mergers			46
	Accounting Treatment			47
	Regulatory Matters			48
	Appraisal or Dissenters’ Rights			48
	Federal Securities Law Consequences			48
	Class Action Lawsuits Relating to the UGC Merger			48
	Provisions for Unaffiliated Stockholders of UGC			49
	Plans for UGC After the Mergers; Certain Effects of the Mergers			49
	Forward-Looking Information; Certain Projections			51

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			Page
RISK FACTORS				59
	Factors Relating to the Mergers			59
	Factors Relating to Overseas Operations and Regulations			60
	Factors Relating to Technology and Competition			63
	Factors Relating to Certain Financial Matters			64
	Factors Relating to Governance Matters			66
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS				68
THE COMPANIES				70
	Liberty Media International, Inc.			70
	UnitedGlobalCom, Inc.			70
	Liberty Global, Inc.			70
	Cheetah Acquisition Corp. (LMI Merger Sub)			71
	Tiger Global Acquisition Corp. (UGC Merger Sub)			71
THE STOCKHOLDERS MEETINGS AND PROXY SOLICITATIONS				72
	Time, Place & Date			72
	Purposes			72
	Quorum			72
	Record Date			73
	Shares Entitled to Vote			73
	Votes You Have			73
	Recommendation of the Board of Directors			73
	Votes Required			73
	Shares Outstanding			75
	Numbers of Holders			75
	Voting Procedures for Record Holders			75
	Voting Procedures for Shares Held in Street Name			76
	Revoking a Proxy			77
	Solicitation of Proxies			77
	Auditors			77
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGERS				79
	Tax Opinions			80
	U.S. Federal Income Tax Consequences of the LMI Merger			81
	U.S. Federal Income Tax Consequences of the UGC Merger			81
THE TRANSACTION AGREEMENTS				85
	Merger Agreement			85
	Voting Agreement			95
MANAGEMENT OF LIBERTY GLOBAL				96
	Directors and Executive Officers			96
	Involvement in Certain Proceedings			97
	Board Composition			98
	Executive Compensation			98
	Compensation of Directors			98
MANAGEMENT OF LMI				99
	Executive Officers and Directors			99
	Involvement in Certain Proceedings			100
	Section 16(a) Beneficial Ownership Reporting Compliance			100
	Code of Business Conduct and Ethics			101
	Committees of the Board of Directors			101

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			Page
	Board Meetings			104
	Director Attendance at Annual Meetings			104
	Stockholder Communication with Directors			104
	Executive Sessions			104
	Executive Compensation			104
	Employment Contracts and Termination of Employment and Change in Control Arrangements			108
	Compensation Committee Interlocks and Insider Participation			108
	Report of the Compensation Committee on Executive Compensation			108
	Director Compensation			110
	Equity Compensation Plan Information			110
	Securities Authorized for Issuance Under Equity Compensation Plans			118
	Security Ownership of Certain Beneficial Owners			119
	Security Ownership of Management			119
	Stock Performance Graphs			123
	Pro Forma Security Ownership Information of LMI Management			123
	Current Management of Liberty Global, LMI Merger Sub and UGC Merger Sub			125
EXECUTIVE OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS OF UGC				126
	Executive Officers and Directors			126
	Involvement in Certain Proceedings			128
	Security Ownership of Certain Beneficial Owners and Management			128
	Pro Forma Security Ownership Information of UGC Management			132
	Pro Forma Cash Consideration Deliverable to UGC Management			135
DESCRIPTION OF LIBERTY GLOBAL CAPITAL STOCK				136
	Authorized Capital Stock			136
	Common Stock			136
	Preferred Stock			137
	Dividend Policy			138
	Anti-Takeover Effects of Provisions of Restated Certificate of Incorporation and Bylaws			138
	Section 203 of the Delaware General Corporation Law			140
	Transfer Agent and Registrar			140
COMPARISON OF THE RIGHTS OF STOCKHOLDERS OF LMI, UGC AND LIBERTY GLOBAL				141
LIBERTY GLOBAL, INC. UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS				149
	General			149
	Proposed Mergers			149
	Consummated Transactions			150
	Unaudited Condensed Pro Forma Combined Balance Sheet			152
	Unaudited Condensed Pro Forma Combined Statement of Operations			153
	Notes to Unaudited Condensed Pro Forma Combined Financial Statements			154
LMI ANNUAL BUSINESS MATTER PROPOSALS				158
	LMI Election of Directors Proposal			158
	LMI Incentive Plan Proposal			158
	LMI Auditors Ratification Proposal			159
ADDITIONAL INFORMATION				162
	Legal Matters			162
	Experts			162
	Stockholder Proposals			163
	Where You Can Find More Information			164

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APPENDIX A:		Information Concerning Liberty Media International, Inc.
		Part 1: Description of Business
		Part 2: Certain Relationships and Related Party Transactions
		Part 3: Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk
		Part 4: Historical Financial Statements of LMI and its Significant Affiliates and Acquirees
		Part 5: Liberty Media International, Inc. 2004 Incentive Plan (As Amended and Restated Effective March 9, 2005)
		Part 6: Audit Committee Charter of Audit Committee of LMI Board of Directors
APPENDIX B:		Agreement and Plan of Merger
APPENDIX C:		Voting Agreement
APPENDIX D:		Opinion of Morgan Stanley & Co. Incorporated
APPENDIX E:		Opinion of Banc of America Securities LLC
APPENDIX F:		Form of Restated Certificate of Incorporation of Liberty Global, Inc.
APPENDIX G:		Form of Bylaws of Liberty Global, Inc.
APPENDIX H:		Section 262 of the Delaware General Corporation Law

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Q:	What is the proposed business combination transaction for which LMI stockholders and UGC stockholders are being asked to vote?
A:	LMI and UGC have agreed to combine their businesses by each merging with a separate wholly owned subsidiary of a new parent company named Liberty Global, Inc. The merger involving LMI requires the approval of the stockholders of LMI, while the merger involving UGC requires the approval of the stockholders of UGC (including a “majority of the minority” approval). Stockholders of LMI and stockholders of UGC (other than LMI and its wholly owned subsidiaries) would become stockholders of Liberty Global.
Q:	What will holders of LMI common stock receive as a result of the mergers?
A:	Each share of LMI Series A common stock or LMI Series B common stock owned by an LMI stockholder will be exchanged for one share of the corresponding series of Liberty Global common stock. Each series of Liberty Global common stock will have the same rights, powers and preferences as the corresponding series of LMI common stock.
Q:	What will holders of UGC common stock receive as a result of the mergers?
A:	Stockholders of UGC (other than LMI and its wholly owned subsidiaries) may elect to receive, for each share of UGC common stock owned by them, either:

•	0.2155 of a share of Series A common stock of Liberty Global (plus cash in lieu of any fractional share interest), which we refer to as the stock election; or
•	$9.58 in cash, without interest, which we refer to as the cash election.

Q:	Where will Liberty Global common stock trade?
A:	We expect Liberty Global Series A common stock and Liberty Global Series B common stock to trade on the Nasdaq Stock Market, following the mergers, under the symbols “LBTYA” and “LBTYB,” respectively, the same symbols under which LMI common stock currently trades.
Q:	How do UGC stockholders make their cash election or stock election?
A:	A form of election is included with the joint proxy statement/ prospectus being mailed to UGC stockholders. To make a cash election or a stock election, UGC stockholders must properly complete, sign and send the form of

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	election, together with the shares of UGC common stock as to which the election relates, to EquiServe Trust Company N.A., the exchange agent, at the following address:

By Mail:		By Overnight Delivery:		By Hand:
EquiServe Trust Company N.A.		EquiServe Trust Company N.A.		EquiServe Trust Company N.A.
LMI/UGC Transaction		LMI/UGC Transaction		LMI/UGC Transaction
Attn: Corp. Actions		Attn: Corp. Actions		Attn: Corp. Actions
P.O. Box 859208		161 Baystate Drive		17 Battery Place, 11th Floor
Braintree, MA 02185-9208		Braintree, MA 02184		New York, NY 10004

Q:	May UGC stockholders make the cash election for some of their UGC shares and the stock election for other UGC shares they own?
A:	Yes. UGC stockholders who properly complete the form of election may make the cash election for some of their shares and the stock election for other UGC shares they own. As mentioned above, a UGC stockholder who makes a cash election will be subject to possible proration.
Q:	May UGC stockholders change their election after they have submitted their form of election?
A:	Yes, as long as the exchange agent receives from the stockholder, before the election deadline, a written notice of revocation or a new election form. If an election form was submitted by a broker, bank or other nominee, the broker, bank or other nominee should be contacted as to how to revoke or change the election so submitted.
Q:	Where can UGC stockholders obtain additional forms of election?
A:	Additional forms of election can be obtained by calling D.F. King & Co. at (800) 628-8208.
Q:	May UGC stockholders trade their shares of UGC common stock after making an election and submitting their shares to the exchange agent?
A:	No. UGC stockholders will be unable to sell or otherwise transfer their shares of UGC common stock once they have been submitted to the exchange agent in connection with their election, unless and until their election is revoked and their shares are returned to them. The exchange agent will promptly return shares of UGC common stock following receipt of a written notice of revocation as to those shares or if the merger agreement is terminated.
Q:	What if a UGC stockholder fails to timely submit an election form?
A:	If the exchange agent does not receive a properly completed form of election from a UGC stockholder before the election deadline, together with the shares of UGC common stock as to which the election relates, then that stockholder will be treated as though he or she made the stock election. UGC stockholders bear the risk of delivery and should send their election form and stock certificates by courier or by hand to the appropriate addresses shown in the form of election. UGC stockholders who hold their shares in “street name” should promptly contact their broker, bank or other nominee as to their choice of election to ensure that their election and shares of UGC stock are timely received by the exchange agent.

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Q:	May a UGC stockholder who votes against the UGC merger submit a form of election?
A:	Yes. Irrespective of the manner in which a UGC stockholder votes on the merger proposal, that stockholder should submit a form of election in the event the merger proposal is adopted. UGC stockholders who do not make an election will not be entitled to any portion of the cash consideration and will be treated as though they have made the stock election as to all of their shares of UGC common stock.
Q:	Can LMI stockholders make the cash election?
A:	No. If the mergers are approved, each share of LMI Series A common stock or LMI Series B common stock owned by an LMI stockholder will be exchanged for one share of the corresponding series of Liberty Global common stock. Because LMI stockholders do not have an election, they will not receive an election form with the joint proxy statement/ prospectus being mailed to them.
Q:	What stockholder approvals are required to approve the merger proposal?
A:	In order for the mergers to occur, the LMI stockholders must approve the merger proposal at the LMI annual meeting and the UGC stockholders must approve the merger proposal at the UGC special meeting.

•	For LMI, the approval of the merger proposal requires the affirmative vote of the holders of at least a majority of the aggregate voting power of the shares of LMI common stock outstanding on the record date for the LMI annual meeting, voting together as a single class.
	Pursuant to a voting agreement entered into between John C. Malone, the Chairman of the Board, Chief Executive Officer and President of LMI, and UGC, Mr. Malone has agreed to vote the shares of LMI Series A common stock and LMI Series B common stock owned by him or which he has the right to vote (representing, as of March 31, 2005, approximately 26.5% of the aggregate voting power of LMI) in favor of the approval of the merger proposal. See “The Transaction Agreements — Voting Agreement.” In addition, the directors and executive officers of LMI (other than Mr. Malone), who together beneficially own shares of LMI common stock representing approximately 3.3% of LMI’s aggregate voting power, as of March 31, 2005, have indicated to LMI that they intend to vote “FOR” the merger proposal at the LMI annual meeting.
•	For UGC, the approval of the merger proposal requires a vote of the holders of the shares of UGC common stock outstanding on the record date for the UGC special meeting, with all classes voting together as a single class, that satisfies two criteria:

•	first, the merger proposal must be approved by the affirmative vote of the holders of at least a majority of the aggregate voting power of the outstanding shares of UGC common stock, which we refer to as the statutory approval; and
•	second, the merger proposal must be approved by the affirmative vote of the holders of at least a majority of the aggregate voting power of the outstanding shares of UGC common stock, exclusive of shares beneficially owned by LMI, Liberty Media Corporation (Liberty) or any of their respective subsidiaries or any of the executive officers or directors of LMI, Liberty or UGC, which we refer to as the minority approval.

Q:	What do LMI and UGC stockholders need to do to vote on the merger proposal?
A:	After carefully reading and considering the information contained in this joint proxy statement/ prospectus, LMI and UGC stockholders should complete, sign and date their proxy cards and mail them in the enclosed return envelope, or vote by the telephone or through the Internet, in each case as soon as possible so that their shares are represented and voted at the applicable stockholders meeting. Stockholders who have shares registered in the name of a broker, bank or other nominee should follow the voting instruction card provided by their broker, bank or other nominee in instructing them how to vote their shares.

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Q:	If shares are held in “street name” by a broker, bank or other nominee, will the broker, bank or other nominee vote those shares for the beneficial owner on the merger proposal?
A:	If you hold your shares in street name and do not provide voting instructions to your broker, bank or other nominee, your shares will not be voted on the merger proposal. Accordingly, your broker, bank or other nominee will vote your shares held in “street name” only if you provide instructions on how to vote. You should follow the directions your broker, bank or other nominee provides to you regarding how to vote your shares. If your shares are held in street name and they are not voted on the merger proposal, that will have the same effect as a vote “AGAINST” the merger proposal.
Q:	What if an LMI or UGC stockholder does not vote on the merger proposal?
A:	If you fail to respond with a vote on the merger proposal, it will have the same effect as a vote “AGAINST” the merger proposal. If you respond but do not indicate how you want to vote, your proxy will be counted as a vote “FOR” the merger proposal. If you respond and indicate that you are abstaining from voting, your proxy will have the same effect as a vote “AGAINST” the merger proposal.
Q:	May stockholders change their vote on the merger proposal after returning a proxy card or voting by telephone or over the Internet?
A:	Yes. Before their proxy is voted at the applicable stockholders meeting, LMI or UGC stockholders who want to change their vote on the merger proposal may do so by telephone or over the Internet (if they originally voted by telephone or over the Internet), by voting in person at the applicable stockholders meeting or by delivering a signed proxy revocation or a new signed proxy with a later date to the address below:

•	in the case of an LMI stockholder, to: LMI/UGC Transaction, EquiServe Trust Company, N.A., P.O. Box 8078, Edison, New Jersey 08818-8687; and
•	in the case of a UGC stockholder, to: EquiServe Trust Company, N.A., LMI/UGC Transaction, P.O. Box 859208, Braintree, Massachusetts 02185.

Q:	When do LMI and UGC expect to complete the mergers?
A:	We expect to complete the mergers as quickly as possible once all the conditions to the mergers, including obtaining the approvals of our stockholders at the respective stockholders meetings of LMI and UGC, are fulfilled. We currently expect to complete the mergers within a few days following the stockholders meetings.
Q:	Should UGC stockholders send their proxy cards to the same address as they send their forms of election and UGC shares?
A:	No. Separate envelopes are enclosed for UGC stockholders to return (1) their forms of election and UGC shares and (2) their proxy cards. UGC stockholders should check to be sure they are mailing their materials in the proper envelope and to the proper address. UGC stockholders are urged to please NOT send their election form and UGC shares with their proxy cards, or vice versa.
Q:	Should LMI stockholders send their LMI shares with their proxy cards?
A:	No. LMI stockholders will receive written instructions from the exchange agent after the mergers are completed on how to exchange their LMI shares for Liberty Global shares. LMI stockholders are urged to please NOT send their LMI shares with their proxy cards.
Q:	Who can help answer questions about the voting and election procedures and the mergers?
A:	LMI and UGC have retained D.F. King & Co. to serve as an information agent and proxy solicitor in connection with each of the stockholders meetings and the mergers.

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Q:	Why is LMI having its annual meeting at this time?
A:	LMI’s common stock is traded on the Nasdaq National Market, and it is a requirement of the Nasdaq Stock Market that all issuers of securities traded on that market hold an annual meeting once a year. LMI’s annual meeting will satisfy this requirement. If the merger proposal is approved and the mergers close, Liberty Global, as the successor to LMI, will not be required to hold an annual meeting until 2006.
Q:	In addition to the merger proposal, what other proposals are to be considered and voted upon at the LMI annual meeting?
A:	LMI stockholders are being asked to consider and vote on the following three proposals, which we refer to collectively as the “annual business matter proposals,” in addition to the merger proposal:

•	the “LMI election of directors proposal,” a proposal to elect David E. Rapley and Larry E. Romrell to serve as Class I members of LMI’s board of directors until the 2008 annual meeting of LMI stockholders or until their successors are elected;
•	the “LMI incentive plan proposal,” a proposal to approve the Liberty Media International, Inc. 2004 Incentive Plan (As Amended and Restated Effective March 9, 2005); and
•	the “LMI auditors ratification proposal,” a proposal to approve the selection of KPMG LLP as LMI’s independent auditors for the year ending December 31, 2005.

Q:	What stockholder approval is required to approve the LMI election of directors proposal?
A:	A plurality of the affirmative votes of the shares of LMI common stock outstanding on the record date, voting together as a single class, that are voted in person or by proxy at the annual meeting is required to elect Messrs. Rapley and Romrell as Class I members of LMI’s board of directors.
Q:	How will the vote on the merger proposal impact the LMI directors elected pursuant to the LMI election of directors proposal?
A:	If the merger proposal receives the requisite stockholder approvals at the respective stockholders meetings of LMI and UGC, the LMI directors elected pursuant to the LMI election of directors proposal will serve until the closing of the mergers. At that time, the LMI board of directors, including the members elected as Class I directors at the annual meeting, will be succeeded by a board of directors that we expect will be comprised of officers of Liberty Global because LMI will become a subsidiary of Liberty Global in the mergers.

Q:	What stockholder approval is required to approve the LMI incentive plan proposal?
A:	Approval of the LMI incentive plan proposal requires the affirmative vote of the holders of at least a majority of the aggregate voting power of the shares of LMI common stock outstanding on the record date for the LMI annual meeting that are present at the annual meeting, in person or by proxy, voting together as a single class.
Q:	Why are LMI stockholders being asked to vote on the LMI incentive plan proposal?
A:	The Liberty Media International, Inc. 2004 Incentive Plan was originally adopted by the LMI board of directors on May 11, 2004, and approved by LMI’s sole stockholder at that time, Liberty Media Corporation. On March 9, 2005, the compensation committee of the LMI board of directors determined to amend the incentive plan in anticipation of Liberty Global assuming the incentive plan following the completion of the mergers. Prior to the amendment, the maximum number of shares of any series of Liberty Global common stock with respect to which awards could have been granted under the incentive plan following the mergers was 20 million. LMI’s compensation committee determined to amend and restate the incentive plan to provide, among other things, that, if the mergers are completed, the maximum number of shares of any series of Liberty Global common stock with respect to which awards may be issued by Liberty Global under the incentive plan will be 25 million. The increase

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	was deemed advisable because following the mergers equity incentive awards granted to the employees of UGC and its subsidiaries will be granted under the Liberty Global plan, instead of the various UGC stock incentive plans which will no longer be available for future awards, and because Liberty Global will have a significantly larger number of shares of common stock outstanding following the mergers than LMI has currently. In order for certain awards under the incentive plan to be eligible for favorable tax treatment under Section 162(m) of the Internal Revenue Code, the incentive plan, as amended and restated, must be approved by the public stockholders of LMI.
Q:	How will the vote on the merger proposal impact the LMI incentive plan proposal?
A:	If the merger proposal receives the requisite stockholder approvals at the respective stockholders meetings of LMI and UGC and the mergers are completed, the Liberty Media International, Inc. 2004 Incentive Plan (As Amended and Restated Effective March 9, 2005) will be assumed by Liberty Global, and Liberty Global will succeed LMI as the issuer under the incentive plan. In addition, the incentive plan will automatically be renamed the “Liberty Global, Inc. 2005 Incentive Plan,” and the number of shares with respect to which awards may be issued will increase from 20 million to 25 million, as described above.
Q:	What stockholder approval is required to approve the LMI auditors ratification proposal?
A:	The LMI auditors ratification proposal requires the affirmative vote of the holders of at least a majority of the aggregate voting power of the shares of LMI common stock outstanding on the record date for the LMI annual meeting that are present at the annual meeting, in person or by proxy, voting together as a single class.
Q:	What do LMI stockholders need to do to vote on the annual business matter proposals?
A:	After carefully reading and considering the information relating to the annual business matter proposals contained in this joint proxy statement/ prospectus, LMI stockholders should complete, sign and date their proxy cards and mail them in the enclosed return envelope, or vote by the telephone or through the Internet, in each case as soon as possible so that their shares are represented and voted at the annual meeting. Stockholders who have shares registered in the name of a broker, bank or other nominee should follow the voting instruction card provided by their broker, bank or other nominee in instructing their broker, bank or other nominee how to vote their shares on each of the annual business matter proposals.
Q:	If LMI shares are held in “street name” by a broker, bank or other nominee, will the broker, bank or other nominee vote those shares for the beneficial owner on each of the annual business matter proposals?
A:	If LMI stockholders hold shares in street name and do not provide voting instructions to their broker, bank or other nominee, their shares will not be voted on the incentive plan proposal but may, in the discretion of the broker, bank or other nominee, be voted on the election of directors proposal and the auditors ratification proposal. Accordingly, their broker, bank or other nominee will vote their shares held in street name for or against the incentive plan proposal only if they provide instructions on how to vote.

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	The Special Committee

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	John P. Cole, Jr. Mr. Cole has served as a director of UGC and its predecessors since March 1998. Mr. Cole served as a member of the United Pan-Europe Communications N.V., or UPC, Supervisory Board from February 1999 to September 2003. Mr. Cole is a founder of the Washington, D.C. law firm of Cole, Raywid and Braverman, which specializes in all aspects of telecommunications and media law.
	John W. Dick. Mr. Dick has served as a director of UGC since March 2003. He served as a member of the UPC Supervisory Board from May 2001 to September 2003, and a director of UGC Europe, Inc. from September 2003 to January 2004. He is the non-executive Chairman and a director of Hooper Industries Group, a privately held U.K. group consisting of: Hooper and Co (Coachbuilders) Ltd. (building special/bodied Rolls Royce and Bentley motorcars) and Hooper Industries (China) (providing industrial products and components to Europe and the U.S.). Until 2002, Hooper Industries Group also held Metrocab UK (manufacturing London taxicabs) and Moscab (a joint venture with the Moscow city government, producing left-hand drive Metrocabs for Russia). Mr. Dick has held his positions with Hooper Industries Group since 1984. Mr. Dick is also a director of Austar United Communications Limited, a public company in which UGC has an approximate 34% interest.
	Paul A. Gould. Mr. Gould has served as a director of UGC since January 2004. Mr. Gould has served as Managing Director of Allen & Company L.L.C., an investment banking services company, and has been associated with Allen & Company and its affiliates for more than the last five years. Mr. Gould is also a director of Ampco-Pittsburgh Corporation and Liberty, and has previously served on special committees for other companies, unaffiliated with Liberty, LMI and UGC, with respect to which other companies he has served as a member of the board of directors.

	Fairness Determination and Recommendation of the Special Committee

	•	determined that the UGC merger, on the terms and conditions set forth in the merger agreement and the voting agreement, is substantively and procedurally fair to, and in the best interests of, the unaffiliated stockholders of UGC; and
	•	determined to approve, and to recommend that the UGC board of directors approve, the UGC merger, the merger agreement, the voting agreement and the transactions contemplated thereby, and that the UGC board recommend that the stockholders of UGC approve the UGC merger, the merger agreement and the transactions contemplated thereby.

	Supportive Factors

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23

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	•	5.0% with respect to the average UGC and LMI stock prices for the period since the LMI Series A common stock commenced trading on a when-issued basis on June 2, 2004;
	•	11.6% with respect to the UGC and LMI closing stock prices on December 10, 2004, the day on which LMI delivered a letter to UGC indicating that LMI wished to initiate discussions between the parties; and
	•	1.1% with respect to the UGC and LMI closing stock prices on January 11, 2005, the last trading day prior to the agreement in principle between the Special Committee and LMI on the exchange ratio.

24

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25

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26

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	Negative Factors

	Matters Not Considered

	Other Matters Considered

27

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	Fairness Determination and Recommendation of the UGC Board

	•	the UGC merger, on the terms and conditions set forth in the merger agreement and the voting agreement, is fair to, and in the best interests of, UGC and its stockholders;
	•	authorized UGC to enter into the merger agreement and the voting agreement;
	•	resolved to recommend that the UGC stockholders approve the UGC merger and approve and adopt the merger agreement; and
	•	resolved to call a special meeting of the UGC stockholders for the purpose of submitting the merger agreement and the transactions set forth therein to the UGC stockholders.

	•	reviewed certain publicly available financial statements and other information of UGC and LMI;
	•	reviewed certain internal financial statements and other financial and operating data concerning UGC and LMI prepared by the managements of UGC and LMI, respectively;
	•	reviewed certain financial projections prepared by the respective managements of UGC and LMI;
	•	discussed the past and current operations and financial condition and prospects of UGC and LMI with senior executives of UGC and LMI, respectively;
	•	considered information relating to certain strategic, financial and operational benefits anticipated from the UGC merger, discussed with the management of UGC;

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	•	discussed the strategic rationale for the UGC merger with the senior executives of UGC;
	•	reviewed the reported prices and trading activity of the UGC Class A common stock and the LMI Series A common stock;
	•	compared the financial performance of UGC and LMI, as well as the prices and trading activity of the UGC Class A common stock and the LMI Series A common stock with that of certain other comparable publicly-traded companies and their securities;
	•	reviewed the financial terms, to the extent publicly available, of selected minority buy-back transactions;
	•	participated in discussions and negotiations among representatives of UGC and LMI and their respective financial and legal advisors;
	•	reviewed the proposed merger agreement and certain related documents; and
	•	performed such other analyses and considered such other factors as Morgan Stanley deemed appropriate.

	Historical Share Price Analysis

		Appreciation/(Depreciation)				Appreciation
Company		1/20/04 to 1/14/05				6/2/04(1) to 1/14/05
UGC			(9.1	)%			29.4%
LMI			NA				13.8%
Comcast Corp.			(5.8	)%			16.6%
NTL Inc.			(0.6	)%			10.8%
Cablevision Systems Corp.			(9.9	)%			13.5%
S&P 500			4.0	%			5.3%

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(1)	Date on which LMI common stock began trading on a when-issued basis prior to LMI’s spin off from Liberty.

	Comparable Company Analysis

		Implied Equity
		Value Per Share
		of UGC
		Common Stock
		Low				High
2005E EBITDA, as provided by UGC management		$	8.17			$	9.53
2005E EBITDA, as provided by UGC management and converted at US$1.31 per Euro spot exchange rate		$	8.82			$	10.27

	Discounted Cash Flow Analysis

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		Implied Equity
		Value Per Share
		of UGC
		Common Stock
		Low				High
Analysis Utilizing Sensitivities		$	9.58			$	12.05
Analysis Utilizing UGC Management Projections and Guidance		$	12.83			$	15.89

		Implied Per Share Value
		of LMI Common Stock, Based on
		Illustrative J-COM DCF Value
		(LMI’s Stake in J-COM)
Illustrative UGC DCF Value												Implied
Per Share		Low						High				Exchange Ratio
		$2,100				(In millions)		$2,700
$10.00		$	52.80					$	56.17				0.1894x to 0.1780x
$11.00		$	55.18					$	58.56				0.1993x to 0.1879x
$12.00		$	57.57					$	60.94				0.2085x to 0.1969x

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	Sum-of-the-Parts Analysis

	•	UGC
	•	Jupiter Telecommunications Co., Ltd.
	•	Jupiter Programming Co., Ltd.
	•	Liberty Cablevision of Puerto Rico Ltd.
	•	Mediatti Communications, Inc.
	•	Chofu Cable, Inc.
	•	Pramer S.C.A.
	•	Metrópolis-Intercom S.A.
	•	Torneos y Competencias, S.A.
	•	The News Corporation Limited
	•	The Wireless Group plc
	•	ABC Family Worldwide, Inc.

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	Equity Research Analysts’ Price Targets

		Present Value of
		Research Price
		Targets for UGC
		Class A
		Common Stock
		Low				High
UGC		$	9.70			$	13.88
LMI		$	37.57			$	46.73

	Precedent Transaction Analysis

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	Exchange Ratio and Price Premium Analyses

		Ratio of UGC Price(s) to				0.2155 Exchange Ratio
Period/Benchmark		LMI Closing Price(s)				% Premium/(Discount)
January 14, 2005			0.2206	x			(2.3	)%
January 11, 2005			0.2131	x			1.1	%
December 14, 2004			0.1914	x			12.6	%
December 10, 2004			0.1931	x			11.6	%
November 11, 2004			0.2235	x			(3.6	)%
High UGC Class A Common Share Price since June 2, 2004			0.2239	x			(3.8	)%
Low UGC Class A Common Share Price since June 2, 2004			0.1853	x			16.3	%
Five Trading Day Average During the Period from June 2, 2004 to January 14, 2005			0.2178	x			(1.0	)%
Ten Trading Day Average During the Period from June 2, 2004 to January 14, 2005			0.2133	x			1.0	%
Twenty Trading Day Average During the Period from June 2, 2004 to January 14, 2005			0.2103	x			2.5	%
Three-Month Average During the Period from June 2, 2004 to January 14, 2005			0.2060	x			4.6	%
Average Since June 2, 2004			0.2053	x			5.0	%

						Implied Price Premium/(Discount)
						$9.42 Implied Stock
Time Period/Benchmark		UGC Share Price				Consideration(1)				$9.58 Cash Consideration
January 14, 2005		$	9.64				(2.3	)%			(0.6	)%
January 11, 2005		$	9.26				1.7	%			3.5	%
December 14, 2004		$	8.67				8.6	%			10.5	%
December 10, 2004		$	8.66				8.7	%			10.6	%
November 11, 2004		$	8.48				11.0	%			13.0	%
High Since June 2, 2004		$	9.78				(3.7	)%			(2.0	)%
Low Since June 2, 2004		$	6.00				56.9	%			59.7	%

(1)	Based upon 0.2155x exchange ratio and current LMI share price of $43.69 as of January 14, 2005

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	Fairness Determination of the LMI Board

	•	that the merger was negotiated with the Special Committee, which was advised by its own counsel and financial advisors;
	•	that the merger is structured so that it is a condition to the completion of the merger that it be approved by at least a majority of the outstanding shares of UGC common stock not beneficially owned by LMI or Liberty or the directors and executive officers of LMI, Liberty and UGC;
	•	that the 0.2155 to 1.0 exchange ratio represents an 8.6% premium over the closing sale price for the shares of UGC Class A common stock on December 14, 2004, the last trading day before Mr. Malone’s first conversation with the Special Committee, and a slight premium over the closing sale price of those shares on January 11, 2005, the last trading day before LMI management and the Special Committee reached an agreement in principle on the financial terms of the UGC merger. The LMI board also considered that from the time of the LMI spin off in June 2004 through the last trading day before the public announcement of the mergers, the

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		historical ratio in which the shares of UGC Class A common stock has traded relative to the LMI Series A common stock has predominantly been below the 0.2155 exchange ratio;
	•	its belief that since LMI’s spin off from Liberty in June 2004, UGC’s historical trading price has included an “acquisition premium” attributable to market speculation that LMI would buy out the public minority stockholders of UGC;
	•	its belief that LMI common stock trades with a holding company discount of between 9% and 19%, implying a larger premium to the unaffiliated stockholders of UGC on a fair value-to-fair value basis;
	•	that the unaffiliated stockholders of UGC who elect to receive Liberty Global stock will have the opportunity to participate in LMI’s Japanese cable distribution and programming businesses, as well as continue to participate in the potential growth of the businesses of UGC;
	•	that LMI was foregoing its ability to obtain a control premium for its investment in UGC, while the unaffiliated stockholders of UGC who become stockholders of Liberty Global would participate as stockholders of the new company in any control premium because there will be no single controlling stockholder of the new company;
	•	that LMI has sufficient voting power to determine a disposition of UGC, and informed the Special Committee that it would not be interested in a sale of UGC to a third party; and
	•	the fact that the Special Committee received an opinion from Morgan Stanley to the effect that, as of the date of such opinion and based upon and subject to the assumptions, qualifications and limitations set forth in the opinion, the consideration to be received by the unaffiliated stockholders of UGC pursuant to the merger agreement was fair from a financial point of view to such stockholders. LMI management recognized that Morgan Stanley’s opinion is directed solely to the Special Committee, and that LMI is not entitled to rely on that opinion.

	•	that on January 14, 2005, the last trading day prior to the LMI board meeting approving the merger agreement, the UGC Class A common stock was trading above the 0.2155 exchange ratio; and
	•	that the holders of UGC Class A common stock are not entitled to appraisal rights under Delaware law, and that no provision is included in the merger agreement to provide them that right.

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	Fairness Determinations of the Boards of Liberty Global, LMI Merger Sub and UGC Merger Sub

37

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	•	the presentation by its financial advisor, Banc of America Securities, and Banc of America Securities’ oral opinion, subsequently confirmed in writing, that as of the date of such opinion and based upon and subject to the factors, limitations and assumptions set forth in Banc of America Securities’ written opinion, the consideration to be received by LMI stockholders (other than affiliates of LMI) in the transactions contemplated by the merger agreement was fair from a financial point of view to such stockholders. In evaluating the presentation and opinion of Banc of America Securities, the LMI board was aware of the compensation arrangements with Banc of America Securities, including that a substantial portion of its fee was contingent upon completion of the mergers;
	•	the integration of the management teams of the two companies, with Mr. Malone serving as Chairman of the Board of Liberty Global and Mr. Fries as Chief Executive Officer. The LMI board believed that the strengths of the respective management teams at the corporate level of the two companies would complement each other, and that there was little if any overlap at the operating level that would impede a smooth integration of the two companies;
	•	that the consummation of the mergers would eliminate any potential competition between LMI and UGC, including in the pursuit of acquisition opportunities and capital raising activities;
	•	that the receipt of the merger consideration in the LMI merger would be tax-free to the LMI stockholders;
	•	the background of the negotiations between Mr. Malone and the Special Committee that resulted in the agreed exchange ratio and cash election alternative. Mr. Malone had advised the LMI board of his conclusion, based upon these negotiations, that the Special Committee would not approve the transaction at any lower exchange ratio. The LMI board took note of the premium that the exchange ratio represented for the shares of UGC stock, based upon the relative trading prices of the two companies prior to the initiation of discussions with the Special Committee, and the information provided by Banc of America Securities as to premiums paid in other transactions. Based upon the foregoing, the increase in the exchange ratio over the course of the negotiations did not detract from the LMI board’s conclusion that the LMI merger would be in the best interests of LMI and its stockholders;
	•	that the merger agreement included a limitation on the cash election, and that LMI had sufficient cash to fund the maximum amount of cash anticipated to be payable if the cash elections were fully exercised; and
	•	the draft of the merger agreement and the voting agreement and the summary of the terms of each provided by LMI’s counsel. In general, the terms of the merger agreement are customary for transactions of this nature and the Special Committee had insisted on the voting agreement as a condition to its approval of the merger agreement. The LMI board considered that the provision of the merger agreement requiring approval of the UGC merger by the vote of a majority of the minority stockholders of UGC was a negative factor from LMI’s perspective because of the resulting uncertainty that the transaction would be consummated. Because the merger agreement also included provisions allowing LMI to terminate the merger agreement if UGC’s annual report on Form 10-K was not filed by May 15, 2005 or if the mergers are not consummated by September 30, 2005, the uncertainty resulting from the inclusion of the minority approval requirement did not outweigh the other factors supporting the LMI board’s conclusion that the LMI merger would be in the best interests of LMI and its stockholders.

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	•	reviewed certain publicly available financial statements and other business and financial information of LMI and UGC;
	•	reviewed certain internal financial statements and other financial and operating data concerning LMI and UGC;
	•	analyzed certain financial forecasts to which Banc of America Securities was directed by the management of LMI;
	•	reviewed and discussed with senior executives of LMI information relating to certain benefits anticipated from the mergers;
	•	discussed the past and current operations, financial condition and prospects of LMI with senior executives of LMI and discussed the past and current operations, financial condition and prospects of UGC with senior executives of UGC;
	•	reviewed the reported prices and trading activity for the LMI common stock and the UGC common stock;
	•	compared the financial performance of UGC and the prices and trading activity of the UGC common stock with that of certain other publicly traded companies that Banc of America Securities deemed relevant;
	•	compared the financial terms of the mergers to the financial terms, to the extent publicly available, of certain other business combination transactions that Banc of America Securities deemed relevant;
	•	participated in discussions and negotiations among representatives of LMI and UGC and their financial and legal advisors;
	•	reviewed the January 16, 2005 draft merger agreement and certain related documents; and
	•	performed such other analyses and considered other factors as Banc of America Securities deemed appropriate.

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	•	with respect to financial forecasts for LMI and UGC, Banc of America Securities was directed by the management of LMI to rely on certain publicly available financial forecasts in performing its analyses and has assumed that, in the good faith belief of the management of LMI, such forecasts reflect the best currently available estimates of the future financial performance of LMI and UGC;
	•	that the LMI merger will qualify as a reorganization within the meaning of Section 368(a) of the Code and the regulations promulgated thereunder, and that the conversion of the UGC common stock into shares of Liberty Global Series A common stock pursuant to the merger agreement, will qualify as an exchange within the meaning of Section 351(a) of the Code and the regulations promulgated thereunder;
	•	that the final executed merger agreement will not differ in any material respect from the January 16, 2005 draft merger agreement reviewed by Banc of America Securities, and that the mergers will be consummated as provided in the January 16, 2005 draft merger agreement, with full satisfaction of all covenants and conditions set forth in it and without any waivers thereof;
	•	that all material governmental, regulatory or other consents and approvals necessary for the consummation of the mergers will be obtained without any adverse effect on LMI or UGC or the contemplated benefits of the mergers; and
	•	that the terms of the merger agreement and the mergers are the most beneficial terms from LMI’s perspective that could under the circumstances be negotiated among the parties to the merger agreement and the mergers.

	•	relied on advice of counsel to LMI as to all legal matters with respect to LMI, the mergers and the January 16, 2005 draft merger agreement; and
	•	not assumed responsibility for making an independent evaluation, appraisal or physical inspection of any of the assets or liabilities, contingent or otherwise, of LMI or UGC, nor did Banc of America Securities receive any appraisals with respect thereto.

	LMI and UGC Valuation Analyses

	Valuation Approach

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	Valuation Methodologies

		Weighted Average
Period Prior to January 14, 2005		Exchange Ratio
1 Week			0.2168
1 Month			0.2087
2 Months			0.2034
3 Months			0.2060
Since LMI common stock began trading on a when-issued basis prior to LMI’s spin off from Liberty (June 2, 2004)			0.2054

		Premium One Day				Premium One Week				Premium One Month
		Before Announcement				Before Announcement				Before Announcement
High (All Deals)			46.4	%			42.7	%			73.4	%
Low (All Deals)			(12.0	)%			(21.4	)%			(17.9	)%
Median (All Deals)			19.8	%			19.8	%			22.2	%
Mean (All Deals)			19.2	%			19.5	%			26.1	%
High (Stock Only)			29.2	%			37.0	%			73.4	%
Low (Stock Only)			(12.0	)%			(21.4	)%			(17.9	)%
Median (Stock Only)			19.2	%			13.5	%			14.6	%
Mean (Stock Only)			15.7	%			13.0	%			23.1	%

		Consideration to be Received by				Consideration to be Received by
		UGC Stockholders				LMI Stockholders
10% Premium (1 Day Prior)			0.2427				0.8879
25% Premium (1 Day Prior)			0.2758				0.7813
10% Premium (1 Month Prior)			0.2105				1.0236
25% Premium (1 Month Prior)			0.2392				0.9008

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						Net Asset
		Target				Value /				Premium (Discount) of Target Price
		Price				Share				to Net Asset Value per Share
Median		$	49.00			$	54.10				(9	)%
Low		$	51.00			$	56.81				(10	)%
High		$	41.00			$	41.89				(2	)%

						Net Asset
		Market				Value /				Premium (Discount) of Market Price
		Price				Share				to Net Asset Value per Share
Median		$	43.53			$	49.22				(14	)%
Low		$	43.37			$	56.81				(24	)%
High		$	43.68			$	41.89				4%

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	(A)	Public Market Valuation, in which the value of UGC was based upon UGC’s fully diluted shares outstanding multiplied by their market price on January 14, 2005

	(B)	Comparable Company Analysis, in which the value of UGC was calculated as its estimated 2005 cable EBITDA multiplied by the median Aggregate Value / estimated 2005 cable EBITDA multiples of its peers
	(C)	Discounted Cash Flow Analysis, in which the value of UGC was calculated as the present value of its projected unlevered free cash flows for the period 2005 through 2009, plus a range of Terminal Values

		Consideration to be Received by				Consideration to be Received by
		UGC Stockholders				LMI Stockholders
20% Holding Company Discount			0.2357				0.9143
0% Holding Company Discount			0.1886				1.1429

	•	equity value, defined as the product of the number of shares of common stock outstanding for a company multiplied by its stock price as of January 14, 2005; plus
	•	outstanding funded debt; less
	•	cash, cash equivalents and non-cable unconsolidated assets.

Aggregate Value to:		Range of Multiples				Median
2005E Cable EBITDA			7.9x to 10.0x				8.9x

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		Consideration to be Received by				Consideration to be Received by
		UGC Stockholders				LMI Stockholders
20% Holding Company Discount			0.2262				0.9529
0% Holding Company Discount			0.1809				1.1911

Multiple of Aggregate Value to 2005E Cable EBITDA

Terminal Multiple of 8.0x

Terminal Multiple of 9.0x

Terminal Multiple of 10.0x

Projected Calendar Year

Projected Calendar Year

Projected Calendar Year

Discount Rate

2009 EBITDA

2009 EBITDA

2009 EBITDA

8.0%

9.8x

10.8

x

11.7x

10.0%

9.1x

9.9

x

10.7x

12.0%

8.4x

9.1

x

9.9x

		Consideration to be Received by				Consideration to be Received by
		UGC Stockholders				LMI Stockholders
20% Holding Company Discount			0.2447				0.8807
0% Holding Company Discount			0.1957				1.1009

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	•	approximately $10.6 million in financial advisory fees;
	•	approximately $4 million of printing and mailing expenses associated with this joint proxy statement/ prospectus;
	•	approximately $3.9 million in legal and accounting fees;
	•	approximately $1.5 million in SEC filing fees; and
	•	approximately $2 million in solicitation fees and other miscellaneous expenses.

	Interests of Directors and Executive Officers

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	•	under “Management of LMI — Pro Forma Security Ownership Information of LMI Management,” the beneficial ownership interests in Liberty Global estimated to be held by the directors and executive officers of LMI immediately following the mergers, based upon their beneficial ownership interests in LMI and UGC, as of March 31, 2005, and assuming none of them elects any cash consideration in the UGC merger;
	•	under “Executive Officers, Directors and Principal Stockholders of UGC — Pro Forma Security Ownership Information of UGC Management,” the beneficial ownership interests in Liberty Global estimated to be held by the directors and executive officers of UGC immediately following the mergers, based upon their beneficial ownership interests in LMI and UGC, as of March 31, 2005, and assuming none of them elects any cash consideration in the UGC merger; and
	•	under “Executive Officers, Directors and Principal Stockholders of UGC — Pro Forma Cash Consideration Deliverable to UGC Management,” the aggregate amount of cash consideration that could be received by the directors and executive officers of UGC in the UGC merger, based upon their beneficial ownership interests in UGC as of March 31, 2005, and assuming (1) they exercise their cash election with respect to all of their UGC beneficial ownership interests (other than interests held pursuant to stock options) and (2) that their cash elections are not reduced pursuant to applicable proration procedures.

	Voting Intentions

	Transactions in UGC Securities

	•	has effected any transactions in shares of UGC common stock during the 60 days preceding the date of this joint proxy statement/ prospectus; or
	•	intends to effect any such transactions prior to the stockholders meetings.

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	•	an effective registration statement under the Securities Act covering the resale of those shares;
	•	an exemption under paragraph (d) of Rule 145 under the Securities Act; or
	•	any other applicable exemption under the Securities Act.

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	UGC Business

	UGC Directors and Officers

49

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	UGC Capital Structure

	Outstanding Convertible Notes of UGC

	Listing and Registration; Reporting Obligations

50

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	Effect on Net Book Value and Net Earnings

	Other

	•	any extraordinary transaction, such as a merger, reorganization or liquidation, involving UGC or any of its subsidiaries;
	•	any purchase, sale or transfer of a material amount of assets of UGC or any of its subsidiaries;
	•	the acquisition or disposition by any person of additional securities of UGC; or
	•	any other material change in UGC’s corporate structure and business.

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	Financial Projections Regarding UGC

		Preliminary				Approved
		Budget				Budget
Total RGUs (2)			12,526				12,526
Net Gain in RGUs (2)			1,091				1,088
Revenue		$	3,184			$	3,182
Operating Expense			(2,100	)			(2,106	)
Operating Cash Flow (“OCF”) (3)		$	1,084			$	1,076
OCF % Margin			34%				34%
Capital Expenditures			(703	)			(703	)

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		Preliminary				Approved
		Budget				Budget
Capex as % of Revenue			22%				22%
Operating FCF			381				373
Interest, working capital and other			(268	)			(260	)
Free Cash Flow (“FCF”) (4)		$	113			$	113
Foreign Exchange Rate Assumptions:
US$ per Euro 1			1.23				1.23
Chilean Pesos per US$1			610				610

	(1)	The Preliminary Budget and the Approved Budget presented in this table (other than RGUs) include the impact of certain acquisitions that were completed in 2004 or were expected to be completed in the first

	(2)	A Revenue Generating Unit (“RGU”) is separately an analog cable subscriber, digital cable subscriber, direct-to-home satellite distribution subscriber, multipoint microwave (wireless) distribution system subscriber, Internet subscriber or telephony subscriber. A home may contain one or more RGUs. For example, if a residential customer in UGC’s Austrian system subscribed to its analog cable service, digital cable service, telephony service and high-speed Internet access service, that customer would constitute four RGUs. Excludes RGUs from the Chorus acquisition, which closed in December 2004.
	(3)	Operating Cash Flow (“OCF”) is defined by UGC as revenue less operating, selling, general and administrative expenses (excluding depreciation and amortization, impairment of long-lived assets, restructuring charges and other and stock-based compensation).
	(4)	Free Cash Flow (“FCF”) is defined by UGC as net cash flows from operating activities less capital expenditures. FCF is inherently difficult to predict, primarily due to uncertainties associated with working capital forecasts.

	Material Assumptions

	Revenue. The revenue increase compared to the fiscal 2004 result is generally based on the following assumptions:

	•	Increase in RGUs primarily driven by advanced services (Voice-over-Internet Protocol (VoIP), high-speed Internet access and digital video RGUs).
	•	ARPU per RGU increases for analog cable subscribers generally in line with inflation and ARPU per RGU for other products driven by expected competition. (The definition of ARPU per RGU is provided in footnote (1) to the table below.)
	•	A full year of operations for UGC’s acquisitions that closed during 2004 (e.g., the Noos acquisition closed on July 1, 2004), as well as the Canal+ NL acquisition assumed to close in the first quarter of 2005.

	Operating Expense. The increase in estimated operating expense compared to the fiscal 2004 result is generally based on the following assumptions:

	•	Projected RGU net additions described above and corresponding marketing, customer care and support costs.

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	•	A full year of operations for UGC’s acquisitions that closed during 2004 as well as the Canal+ NL acquisition assumed to close in the first quarter of 2005.
	•	Operating expenses as a result of higher headcount to support new service deployments and for payroll increases generally in line with inflation.
	•	Programming expenses generally assumed to increase in line with UGC’s increased digital offering.

	Capital Expenditures. The increase in estimated capital expenditures compared to the fiscal 2004 result is generally based on the following assumptions:

	•	Projected RGU net additions described above, in particular VoIP, and the corresponding consumer premise equipment and network costs.
	•	A substantial increase in two-way homes passed, principally in Central and Eastern Europe, to enable UGC to offer high-speed Internet access and VoIP.
	•	Capital expenditures associated with digital video expansion plans in certain markets.
	•	A full year of operations for UGC’s acquisitions that closed during 2004.

	Interest, Working Capital and Other. The increase in net interest, working capital and other costs compared to the fiscal 2004 result is generally based on the following assumptions:

	•	Working capital impact due to RGU net additions (e.g., increase in accounts receivable).
	•	Increase in interest expense associated with the debt financing of acquisitions that closed during 2004.
	•	An increase in underlying base rates (principally Euribor) on subsidiary credit facilities associated with a higher interest rate environment, offset by a reduction in credit spreads due to refinancings that closed during 2004.

	Net Debt for 2004 and 2005

	Compound Annual Growth Rates

		UGC Consol.
RGUs			5%-7%
ARPU per RGU (1)			6%-8%
Revenue			12%-14%
OCF			18%-20%
Capex (% of Revenue)			8%-12%

(1)	Average Revenue per Revenue Generating Unit (ARPU per RGU) compound annual growth rate is calculated from the projected annual broadband revenue for each year in the period, divided by the average of the opening and closing RGUs for that year.

	Material Assumptions

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	RGUs. The projected range of RGU compound annual growth rates is generally based on the assumption that growth will be primarily driven by advanced services (VoIP, high-speed Internet access and digital video RGUs), due to UGC’s marketing efforts in general and an increase in homes serviceable for these advanced services (e.g., two-way homes passed, Internet homes serviceable and telephony homes serviceable), as well as an increase in the corresponding penetration levels for these services from existing serviceable homes.
	ARPU per RGU. The projected range of ARPU per RGU compound annual growth rates is generally based on the following assumptions:

	•	Increase in ARPU per RGU due primarily to the projected increase in advanced service RGUs.
	•	ARPU per RGU increases for analog cable subscribers generally in line with inflation.

	Revenue. The projected range of revenue compound annual growth rates is generally based on the assumed increase in RGUs and ARPU per RGU mentioned above.
	OCF. The projected range of OCF compound annual growth rates is generally based on the following assumptions:

	•	The incremental cash flow associated with the anticipated higher penetration of the advanced service RGUs.
	•	Operating expenses in general will increase at a slower rate than revenue growth.

	Capital Expenditures. The range in capital expenditures as a percent of revenue is generally based on the following assumptions:

	•	The vast majority of the upgrade costs associated with increasing the number of homes serviceable to offer the advanced services will be substantially completed prior to 2009. Management anticipates that capital expenditures will be above the forecasted range of 8% - 12% until approximately 2009.
	•	Consumer premise equipment costs will continue to decline in line with historical trends.

	Financial Projections Regarding J-COM

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		2005								2006								2007								2008
		¥				$				¥				$				¥				$				¥				$
Revenue			186,077				1,814				214,556				2,092				246,901				2,407				276,284				2,694
EBITDA			74,670				728				88,166				860				106,384				1,037				123,258				1,202
Capex			56,385				550				63,199				616				65,621				640				60,296				588
Unlevered Free Cash Flow(1)			18,226				178				19,484				190				29,721				290				44,549				434

(1)	Unlevered Free Cash Flow is determined before deduction of interest expense.

		2005								2006								2007
		¥				$				¥				$				¥				$
Revenue			185,297				1,807				214,556				2,092				246,901				2,407
EBITDA			74,280				724				88,166				860				106,384				1,037
Capex			58,410				569				64,100				625				66,532				649
Adjusted Capex(1)			39,242				383				43,482				424				42,685				416
Free Cash Flow			2,283				22				13,223				129				22,758				222

(1)	Adjusted Capex excludes assets acquired under capitalized lease arrangements.

	Material Assumptions

	•	Cable television subscriber growth is driven by take up of digital services, new content, acceptance of video-on-demand and bundling.
	•	Internet subscriber growth is driven by adoption of 30MBps service, new content and bundling.
	•	Telephony subscriber growth is driven by build out of network and bundling.
	•	External price competition continues at current levels (no price cutting) and J-COM’s prices remain largely constant.
	•	Operating costs contain a significant fixed cost element and decrease as percentage of revenue as more services are introduced to and accepted by subscribers and more customers subscribe to bundled services.
	•	Capital expenditures grows in tandem with subscriber growth. Customer premise equipment costs assumed to decline gradually over time as a result of unit price decreases and improved efficiencies in utilization of equipment.

	Financial Projections Regarding Other Assets of LMI

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	Jupiter Programming Co., Ltd.

		¥				$
Revenue			77,035				751
Operations Costs			64,573				630
EBITDA			12,462				121
Pre-Tax Income			7,072				69

	•	Revenues and EBITDA are assumed to derive primarily from JPC’s 70% owned SHOP channel. Revenue growth for SHOP channel assumes better penetration and increased sales per customer, offset by increased sales, distribution, fulfillment, telemarketing and administrative costs.
	•	Subscription and other revenue growth is realized at other established channels, offset by anticipated losses in new channel investments.

	Liberty Cablevision of Puerto Rico Ltd.

		Projections								Actual
		2005				2004				2004
Revenue		$	97.317			$	79.933			$	79.410
EBITDA			34.126				26.652				26.299
Free Cash Flow			11.625				3.543				2.590
Capex			22.500				23.109				23.709

	•	Revenue growth is driven primarily by an increase in Internet subscribers and VoIP subscribers. The growth in Internet and VoIP subscribers is being driven by Liberty Cablevision of Puerto Rico’s ability to provide cost savings to its bundled customers by virtue of its ability to deliver a number of services over a single predominantly fixed cost base network.
	•	Take up of bundled services drives EBITDA and Free Cash Flow growth due to receipt of incremental revenue over predominantly fixed cost base network.

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	•	Capital expenditures are based on assumed subscriber growth, as these expenses are driven by cost of customer premise equipment. Also assumes expansion of existing network.

	Comparison of 2004 Actual versus Projected.

	•	Actual 2004 revenue was lower than 2004 projected revenue primarily as a result of a lower number of year-end video subscribers than projected.
	•	Actual 2004 EBITDA was lower than 2004 projected EBITDA primarily as a result of the lower number of year-end video subscribers and increased marketing expenses associated with Internet access and VoIP services.
	•	Actual 2004 capital expenditures were higher than 2004 projected capital expenditures primarily as a result of a higher than expected number of Internet and VoIP installations.

	Pramer S.C.A.

Revenue		$	42.194
EBITDA			4.910
Free Cash Flow			1.356

	•	Revenue is primarily driven by increase in pay television customers as the economies in Latin America continue to recover and expand.
	•	EBITDA declines primarily due to increase in salaries, satellite and production costs.
	•	Free Cash Flow growth is driven by positive working capital changes, reduced taxes and lower bank financing costs.

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	•	longer payment cycles by customers in foreign countries that may increase the uncertainty associated with recoverable accounts;

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	•	difficulties in staffing and managing international operations;
	•	economic instability;
	•	potentially adverse tax consequences;
	•	export and import restrictions, tariffs and other trade barriers;
	•	increases in taxes and governmental royalties and fees;
	•	involuntary renegotiation of contracts with foreign governments;
	•	changes in foreign and domestic laws and policies that govern operations of foreign-based companies; and
	•	disruptions of services or loss of property or equipment that are critical to overseas businesses due to expropriation, nationalization, war, insurrection, terrorism or general social or political unrest.

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	•	borrow more funds;
	•	pay dividends or make other upstream distributions;
	•	make investments;
	•	engage in transactions with us or other affiliates; or
	•	create liens on their assets.

	•	fund capital expenditures or acquisitions that could improve their value;
	•	meet their loan and capital commitments to their business affiliates;
	•	invest in companies in which they would otherwise invest;
	•	fund any operating losses or future development of their business affiliates;
	•	obtain lower borrowing costs that are available from secured lenders or engage in advantageous transactions that monetize their assets; or
	•	conduct other necessary or prudent corporate activities.

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	•	authorizing a capital structure with multiple series of common stock: a Series B that entitles the holders to ten votes per share; a Series A that entitles the holders to one vote per share; and a Series C that, except as otherwise required by applicable law, entitles the holder to no voting rights;
	•	authorizing the issuance of “blank check” preferred stock, which could be issued by its board of directors to increase the number of outstanding shares and thwart a takeover attempt;
	•	classifying its board of directors with staggered three-year terms, which may lengthen the time required to gain control of its board of directors;
	•	limiting who may call special meetings of stockholders;
	•	prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of the stockholders;
	•	establishing advance notice requirements for nominations of candidates for election to its board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings;
	•	requiring stockholder approval by holders of at least 80% of its voting power or the approval by at least 75% of its board of directors with respect to certain extraordinary matters, such as a merger or consolidation of Liberty Global, a sale of all or substantially all of its assets or an amendment to its restated certificate of incorporation or bylaws; and
	•	the existence of authorized and unissued stock which would allow its board of directors to issue shares to persons friendly to current management, thereby protecting the continuity of its management, or which could be used to dilute the stock ownership of persons seeking to obtain control of Liberty Global.

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	•	economic and business conditions and industry trends in the countries in which we operate;
	•	currency exchange risks;
	•	consumer disposable income and spending levels, including the availability and amount of individual consumer debt;
	•	consumer acceptance of existing service offerings, including our newer digital video, voice and Internet access services;
	•	consumer acceptance of new technology, programming alternatives and broadband services that we may offer;
	•	our ability to manage rapid technological changes, and grow our digital video, voice and Internet access services;
	•	the regulatory and competitive environment in the broadband communications and programming industries in the countries in which we, and the entities in which we have interests, operate;
	•	continued consolidation of the foreign broadband distribution industry;
	•	uncertainties inherent in the development and integration of new business lines and business strategies;
	•	the expanded deployment of personal video recorders and the impact on television advertising revenue;
	•	capital spending for the acquisition and/or development of telecommunications networks and services;
	•	uncertainties associated with product and service development and market acceptance, including the development and provision of programming for new television and telecommunications technologies;
	•	future financial performance, including availability, terms and deployment of capital;
	•	the ability of suppliers and vendors to timely deliver products, equipment, software and services;
	•	the outcome of any pending or threatened litigation;
	•	availability of qualified personnel;
	•	changes in, or failure or inability to comply with, government regulations in the countries in which we operate and adverse outcomes from regulatory proceedings;
	•	government intervention which opens our broadband distribution networks to competitors;
	•	our ability to successfully negotiate rate increases with local authorities;
	•	changes in the nature of key strategic relationships with partners and joint venturers;
	•	uncertainties associated with our ability to comply with the internal control requirements of the Sarbanes-Oxley Act of 2002;
	•	competitor responses to our products and services, and the products and services of the entities in which we have interests;

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	•	spending on foreign television advertising; and
	•	threatened terrorist attacks and ongoing military action in the Middle East and other parts of the world.

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	Additional Information

	•	“— Part 1: Description of Business;”
	•	“— Part 2: Certain Relationships and Related Party Transactions;”
	•	“— Part 3: Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk;” and
	•	“— Part 4: Historical Financial Statements of LMI and its Significant Affiliates and Acquirees;”

	Additional Information

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	Additional Information

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		LMI Annual Meeting		UGC Special Meeting
Time, Place & Date		June 15, 2005 9:00 a.m., local time Denver Marriott South at Park Meadows 10345 Park Meadows Drive Littleton, Colorado 80124 The LMI annual meeting may be adjourned or postponed to another date, time or place for proper purposes, including for the purpose of soliciting additional proxies.		June 14, 2005 10:00 a.m., local time Hyatt Regency Tech Center 7800 E. Tufts Avenue Denver, Colorado 80237 The UGC special meeting may be adjourned or postponed to another date, time or place for proper purposes, including for the purpose of soliciting additional proxies.
Purposes		• To consider and vote on the merger proposal; • To consider and vote on the election of David E. Rapley and Larry E. Romrell as Class I directors pursuant to the LMI election of directors proposal; • To consider and vote on the LMI incentive plan proposal; • To consider and vote on the LMI auditors ratification proposal; and • To transact other business as may properly be presented at the LMI annual meeting or any postponements or adjournments thereof. At the present time, LMI knows of no other matters that will be presented at the LMI annual meeting.		• To consider and vote on the merger proposal; and • To transact other business as may properly be presented at the UGC special meeting or any postponements or adjournments thereof. At the present time, UGC knows of no other matters that will be presented at the UGC special meeting.
		In order to carry on the business of the applicable stockholders
Quorum		meeting, a quorum of stockholders mu least a majority of the aggregate vo outstanding shares of LMI common sto case may be, must be represented at meeting, either in person or by prox quorum, your shares will be included even if you indicate on your proxy t addition, if a broker, who is a reco a form of proxy that the broker does to		st be present. This means that at ting power represented by the ck or UGC common stock, as the the applicable stockholders y. For purposes of determining a as represented at the meeting hat you abstain from voting. In rd holder of shares, indicates on not have discretionary authority
		vote those shares on any proposal, or if those shares are voted in circumstances in which proxy authority is defective or has been withheld with respect to any proposal, these shares (which we refer to as “broker non-votes”) will be treated as present for purposes of determining the presence of a quorum. See “— Voting Procedures for Shares Held in Street Name — Effect of Broker Non-Votes” below.

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		LMI Annual Meeting		UGC Special Meeting
Record Date		5:00 p.m., New York City time, on May 3, 2005		5:00 p.m., New York City time, on May 3, 2005
Shares Entitled to Vote		Holders of LMI Series A common stock and LMI Series B common stock, as recorded in LMI’s stock register on the record date for the LMI annual meeting, may vote at the LMI annual meeting or at any adjournment or postponement thereof.		Holders of UGC Class A common stock, UGC Class B common stock and UGC Class C common stock, as recorded in UGC’s stock register on the record date for the UGC special meeting, may vote at the UGC special meeting or at any adjournment of postponement thereof.
Votes You Have		At the LMI annual meeting, holders of LMI Series A common stock will have one vote for each share of LMI Series A common stock that LMI’s records show they owned as of 5:00 p.m., New York City time, on the record date for the LMI annual meeting. At the LMI annual meeting, holders of LMI Series B common stock will have ten votes for each share of LMI Series B common stock that LMI’s records show they owned as of 5:00 p.m., New York City time, on the record date for the LMI annual meeting.		At the UGC special meeting, holders of UGC Class A common stock will have one vote for each share of UGC Class A common stock that UGC’s records show they owned as of 5:00 p.m., New York City time, on the record date for the UGC special meeting. At the UGC special meeting, holders of UGC Class B common stock and holders of UGC Class C common stock will have ten votes for each share of UGC Class B common stock or UGC Class C common stock that UGC’s records show they owned as of 5:00 p.m., New York City time, on the record date for the UGC special meeting.
Recommendation of the Board of Directors		Merger Proposal. LMI’s board of directors has unanimously approved the merger agreement and determined that the merger agreement and the transactions contemplated thereby, including the LMI merger, are advisable, fair to, and in the best interests of, LMI and its stockholders. Accordingly, LMI’s board of directors recommends that LMI stockholders vote “FOR” the merger proposal. Annual Business Matter Proposals. LMI’s board of directors has also approved the annual business matter proposals and recommends that LMI stockholders vote “FOR” each of the annual business matter proposals.		Merger Proposal. UGC’s board of directors, based upon the recommendation of the Special Committee, has unanimously determined that the UGC merger, on the terms and conditions set forth in the merger agreement and voting agreement, is fair to, and in the best interests of, UGC and its stockholders. Accordingly, UGC’s board of directors recommends that UGC stockholders vote “FOR” the merger proposal.
Votes Required		Merger Proposal. Approval of the merger proposal requires the affirmative vote of the holders of at least a majority of the aggregate voting		Merger Proposal. Approval of the merger proposal requires a vote of the holders of UGC common stock, with all classes voting together as a single

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		LMI Annual Meeting		UGC Special Meeting
		power of the LMI Series A common stock and LMI Series B common stock outstanding as of the record date for the LMI annual meeting, voting together as a single class. A common stock and LMI Series B common stock outstanding as of the record date for the LMI annual meeting, voting together as a single class. Pursuant to a voting agreement entered into between John C. Malone, the Chairman of the Board, Chief Executive Officer and President of LMI, and UGC, Mr. Malone has agreed to vote the shares of LMI Series A common stock and LMI Series B common stock owned by him or which he has the right to vote (representing, as of March 31, 2005, approximately 26.5% of the aggregate voting power of LMI) “FOR” the approval of the merger proposal. See “The Transaction Agreements — Voting Agreement.” The directors and executive officers of LMI (other than Mr. Malone), who together beneficially own shares of LMI common stock representing approximately 3.3% of LMI’s aggregate voting power, as of March 31, 2005, have indicated to LMI that they intend to vote “FOR” the merger proposal at the LMI annual meeting. Annual Business Matter Proposals. A plurality of the affirmative votes of the shares of LMI Series A common stock and LMI Series B common stock outstanding on the record date, voting together as a single class, that are voted in person or by proxy at the annual meeting is required to elect Messrs. Rapley and Romrell as Class I members of LMI’s board of directors pursuant to the LMI election of directors proposal. This means that the two nominees will be elected if they receive more affirmative votes than any other person. Approval of each of the LMI incentive plan proposal and the LMI auditors ratification proposal requires the		class, that satisfies two criteria: • statutory approval: the affirmative vote of the holders of at least a majority of the aggregate voting power of the shares of UGC Class A common stock, UGC Class B common stock and UGC Class C common stock outstanding as of the record date for the UGC special meeting; and • minority approval: the affirmative vote of the holders of at least a majority of the aggregate voting power of the shares of UGC Class A common stock, UGC Class B common stock and UGC Class C common stock outstanding as of the record date for the UGC special meeting, exclusive of any shares beneficially owned by LMI, Liberty or any of their respective subsidiaries or any of the executive officers or directors of LMI, Liberty or UGC. LMI, which beneficially owns shares of UGC common stock representing approximately 91% of the aggregate voting power of UGC, as of March 31, 2005, has agreed to vote, and to cause its subsidiaries to vote, such shares in favor of the approval of the merger proposal. See “The Transaction Agreements — Merger Agreement.” Accordingly, the statutory approval is assured. The directors and executive officers of UGC, who together beneficially own shares of UGC common stock representing less than 1% of UGC’s aggregate voting power, as of March 31, 2005, have indicated to UGC that they intend to vote “FOR” the merger proposal at the UGC special meeting. The directors and executive officers of LMI (including Mr. Malone), who together beneficially own shares of UGC common stock representing less than 1% of UGC’s aggregate voting power, as of March 31, 2005, have indicated to UGC that they intend to vote “FOR” the merger proposal at the

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		LMI Annual Meeting		UGC Special Meeting
		affirmative vote of the holders of at least a majority of the aggregate voting power of the shares of LMI Series A common stock and LMI Series B common stock outstanding on the record date for the LMI annual meeting that are present, in person or by proxy, at the LMI annual meeting, voting together as a single class.		UGC special meeting. The votes of LMI and its wholly owned subsidiaries, the votes of UGC’s directors and executive officers and the votes of LMI’s directors and executive officers will not be counted toward the minority approval.
Shares Outstanding		As of March 31, 2005, an aggregate of 165,555,331 shares of LMI Series A common stock and 7,264,300 shares of LMI Series B common stock were outstanding and would have been entitled to vote at the LMI annual meeting if March 31, 2005 had been the record date for the LMI annual meeting.		As of March 31, 2005, an aggregate of 401,894,352 shares of UGC Class A common stock, 10,493,461 shares of UGC Class B common stock and 379,603,223 shares of UGC Class C common stock were outstanding and would have been entitled to vote at the UGC special meeting if March 31, 2005 had been the record date for the UGC special meeting.
Numbers of Holders		We expect there to be, as of the record date for the LMI annual meeting, approximately 3,330 record holders of LMI Series A common stock and approximately 160 record holders of LMI Series B common stock (which amounts do not include the number of stockholders whose shares are held of record by banks, brokers or other nominees, but include each such institution as one holder).		We expect there to be, as of the record date for the UGC special meeting, approximately 170 record holders of UGC Class A common stock, one record holder of UGC Class B common stock and four record holders of UGC Class C common stock (which amounts do not include the number of stockholders whose shares are held of record by banks, brokers or other nominees, but include each such institution as one holder).
Voting Procedures for Record Holders		Holders of record of LMI common stoc record date for the applicable stock person thereat. Alternatively, they signing, dating and returning the pr with the mailing of this joint proxy voting by telephone or over the Inte revoked, shares of LMI common stock by a proxy submitted as described be applicable stockholders meeting will instructions on the proxy. YOUR VOTE IS IMPORTANT. It is reco even if you plan to attend the appli may change your vote at the applicab submit a written proxy by mail, you mail the proxy in accordance with it If any other matters are properly pr stockholders meeting, the persons yo discretion to vote or to act on thes judgment, unless you indicate otherw		k or UGC common stock as of the holders meeting may vote in may give a proxy by completing, oxy card that is being included statement/ prospectus, or by rnet. Unless subsequently or UGC common stock represented low and received at or before the be voted in accordance with the mmended that you vote by proxy cable stockholders meeting. You le stockholders meeting. To should complete, sign, date and s instructions. esented before the applicable u choose as proxies will have e matters according to their best ise on your proxy.

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		LMI Annual Meeting		UGC Special Meeting
		If a proxy is signed and returned by an LMI record holder without indicating any voting instructions, the shares of LMI common stock represented by the proxy will be voted “FOR” the approval of the merger proposal and “FOR” the approval of each of the annual business matter proposals. If a proxy is signed and returned by an LMI record holder and the LMI record holder indicates that it is abstaining from voting, the proxy will have the same effect as a vote “AGAINST” the merger proposal, the LMI incentive plan proposal and the LMI auditors ratification proposal, but it will have no effect on the vote on the LMI election of directors proposal. Failure of an LMI record holder to submit a proxy representing shares of LMI common stock or vote in person at the LMI annual meeting will have the same effect as a vote “AGAINST” the merger proposal but it will have no effect on the vote on any of the annual business matter proposals.		If a proxy is signed and returned by a UGC record holder without indicating any voting instructions, the shares of UGC common stock represented by the proxy will be voted “FOR” the approval of the merger proposal. If a proxy is signed and returned by a UGC record holder and the UGC record holder indicates that it is abstaining from voting, the proxy will have the same effect as a vote “AGAINST” the merger proposal. Failure of a UGC record holder to submit a proxy representing shares of UGC common stock or vote in person at the UGC special meeting will have the same effect as a vote “AGAINST” the merger proposal.
Voting Procedures for Shares Held in Street Name		General. If you hold your shares in the name of a broker, bank or other nominee, you should follow the instructions provided by your broker, bank or other nominee when voting your shares of LMI common stock or when granting or revoking a proxy.		General. If you hold your shares in the name of a broker, bank or other nominee, you should follow the instructions provided by your broker, bank or other nominee when voting your shares of UGC common stock or when granting or revoking a proxy.
		Effect of Broker Non-Votes. Shares represented by “broker non-votes” will be deemed shares not entitled to vote and will not be included for purposes of determining the aggregate voting power and number of shares represented and entitled to vote on a particular proposal. Broker non-votes will have the same effect as a vote “AGAINST” the merger proposal.		Effect of Broker Non-Votes. Shares represented by “broker non- votes” will be deemed shares not entitled to vote and will not be included for purposes of determining the aggregate voting power and number of shares represented and entitled to vote on a particular proposal. Broker non-votes will have the same effect as a vote “AGAINST” the merger proposal.

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		LMI Annual Meeting		UGC Special Meeting
		Broker non-votes will have no effect on any of the annual business matter proposals. YOUR VOTE IS IMPORTANT		YOUR VOTE IS IMPORTANT.
Revoking a Proxy		Before your proxy is voted, you may change your vote by telephone or over the Internet (if you originally voted by telephone or over the Internet), by voting in person at the LMI annual meeting or by delivering a signed proxy revocation or a new signed proxy with a later date to EquiServe Trust Company, N.A., LMI/UGC Transaction, P.O. Box 8078, Edison, New Jersey 08818-8687. Any signed proxy revocation or new signed proxy must be received before the start of the LMI annual meeting. Your attendance at the LMI annual meeting will not, by itself, revoke your proxy.		Before your proxy is voted, you may change your vote by telephone or over the Internet (if you originally voted by telephone or over the Internet), by voting in person at the UGC special meeting or by delivering a signed proxy revocation or a new signed proxy with a later date to UnitedGlobalCom, Inc., c/o EquiServe Trust Company, N.A., LMI/UGC Transaction, P.O. Box 859208, Braintree, Massachusetts 02185. Any signed proxy revocation or new signed proxy must be received before the start of the UGC special meeting. Your attendance at the UGC special meeting will not, by itself, revoke your proxy.
		If your shares are held in an account by a broker, bank or
		other nominee, you should contact y nominee to change your vote.		our broker, bank or other
Solicitation of Proxies		The accompanying proxy for the LMI annual meeting is being solicited on behalf of LMI’s board of directors. In addition to this mailing, LMI’s employees may solicit proxies personally or by telephone. LMI pays the cost of soliciting these proxies. LMI also reimburses brokers and other nominees for their expenses in sending these materials to you and getting your voting instructions. In addition to this mailing, LMI has hired D.F. King & Co. to solicit proxies on LMI’s behalf. D.F. King & Co. will receive $7,000 from LMI as compensation for such services, plus expenses.		The accompanying proxy for the UGC special meeting is being solicited on behalf of UGC’s board of directors. In addition to this mailing, UGC’s employees may solicit proxies personally or by telephone. UGC pays the cost of soliciting these proxies. UGC also reimburses brokers and other nominees for their expenses in sending these materials to you and getting your voting instructions. In addition to this mailing, UGC has hired D.F. King & Co. to solicit proxies on UGC’s behalf. D.F. King & Co. will receive approximately $11,500 from UGC as compensation for such services, plus expenses.
Auditors		KPMG LLP serves as LMI’s independent auditors. Representatives of KPMG plan to attend the LMI annual meeting and		KPMG LLP serves as UGC’s independent auditors. Representatives of KPMG plan to attend the UGC special meeting

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		LMI Annual Meeting		UGC Special Meeting
		will be available to answer questions. A representative of KPMG is expected to attend the LMI annual meeting with the opportunity to make a statement and/or respond to appropriate questions from LMI stockholders at the LMI annual meeting.		and will be available to answer questions. A representative of KPMG is expected to attend the UGC special meeting with the opportunity to make a statement and/or respond to appropriate questions from UGC stockholders at the UGC special meeting.

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	•	an individual who is a citizen of the United States or who is resident in the United States for U.S. federal income tax purposes;
	•	a corporation or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States, any state thereof or the District of Columbia;
	•	a trust, if either (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) the trust has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person; or
	•	an estate that is subject to U.S. federal income tax on its income regardless of its source.

	•	a financial institution or thrift;
	•	a tax-exempt organization;
	•	an S corporation or other pass-through entity or an owner thereof;
	•	an entity taxable as a partnership for U.S. federal income tax purposes or an owner thereof;
	•	an insurance company;
	•	a mutual fund;
	•	a dealer in stocks and securities or foreign currencies;
	•	a trader or an investor in LMI common stock or UGC common stock who elects the mark-to-market method of accounting for such stock;

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	•	a stockholder who received LMI common stock or UGC common stock from the exercise of employee stock options, from an employee stock purchase plan or otherwise as compensation;
	•	a stockholder who received LMI common stock or UGC common stock from a tax-qualified retirement plan, individual retirement account or other qualified savings account;
	•	a U.S. holder that has a functional currency other than the U.S. dollar;
	•	an expatriate or former long-term resident of the United States; or
	•	a stockholder who holds LMI common stock or UGC common stock as part of a hedge against currency risk, straddle or a constructive sale or conversion transaction or other risk reduction or integrated investment transaction.

	•	the LMI merger will qualify as a reorganization within the meaning of Section 368(a) of the Code;
	•	no gain or loss will be recognized by Liberty Global, LMI, any wholly owned subsidiary of LMI that owns shares of UGC common stock, or UGC as a result of the LMI merger or the UGC merger; and
	•	no gain or loss will be recognized by the stockholders of LMI with respect to shares of LMI common stock converted solely into Liberty Global common stock as a result of the LMI merger.

	•	when viewed as a collective whole with the LMI merger, the conversion of shares of UGC common stock into shares of Liberty Global Series A common stock that is effected pursuant to the UGC merger will qualify as an exchange within the meaning of Section 351 of the Code;
	•	no gain or loss will be recognized by Liberty Global or UGC as a result of the UGC merger; and
	•	no gain or loss will be recognized by the stockholders of UGC with respect to shares of UGC common stock converted solely into Liberty Global Series A common stock pursuant to the UGC merger.

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	U.S. Federal Income Tax Consequences to LMI

	U.S. Federal Income Tax Consequences to U.S. Holders and Non-U.S. Holders of LMI Common Stock

	U.S. Federal Income Tax Consequences to UGC

	U.S. Federal Income Tax Consequences to U.S. Holders of UGC Common Stock

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	•	the amount of gain realized in respect of such block, i.e., the excess (if any) of (x) the sum of the amount of cash and the fair market value of the Liberty Global common stock received that is allocable to such block of UGC common stock surrendered in the UGC merger over (y) the tax basis of such block; and
	•	the amount of cash that is allocable to such block.

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	U.S. Federal Income Tax Consequences to Non-U.S. Holders of UGC Common Stock

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	Backup Withholding and Information Reporting

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	Structure of the Mergers

	•	LMI Merger Sub will merge with and into LMI, and LMI will be the surviving corporation in that merger; and
	•	UGC Merger Sub will merge with and into UGC, and UGC will be the surviving corporation in that merger.

	Effective Time of the Mergers and Timing of Closing

	Conversion of Outstanding Shares of Common Stock of LMI and UGC

	•	each share of LMI Series A common stock issued and outstanding immediately prior to the effective time of the mergers will be converted into the right to receive one share of Liberty Global Series A common stock;
	•	each share of LMI Series B common stock issued and outstanding immediately prior to the effective time of the mergers will be converted into the right to receive one share of Liberty Global Series B common stock; and
	•	each share of common stock of LMI Merger Sub issued and outstanding immediately prior to the effective time of the mergers will be converted into one share of common stock of LMI as the surviving corporation in the LMI merger.

	•	each share of UGC common stock (other than shares of UGC common stock held by LMI or any of its wholly owned subsidiaries) will be converted into the right to receive 0.2155 of a share of Liberty Global Series A common stock plus cash in lieu of any fractional shares, unless the holder thereof has validly made and not validly revoked an election to have such share of UGC common stock converted into $9.58 in cash, subject to certain limitations described in “— UGC Stockholders Making Stock and Cash Elections; Proration” below;
	•	each share of UGC common stock held by LMI or any of its wholly owned subsidiaries will be converted into the right to receive one share of the same class of common stock of UGC; and

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	•	the issued and outstanding shares of common stock of UGC Merger Sub will be converted into a number of shares of each class of common stock of UGC, as the surviving corporation in the UGC merger, that is identical to the number of shares of the same class of UGC common stock that are converted into the right to receive Liberty Global Series A common stock and/or cash in the UGC merger.

	UGC Stockholders Making Stock and Cash Elections; Proration

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Last sales price of a share of LMI Series A common stock on the trading day immediately prior to the effective time of the mergers		×		0.2155		×		Outstanding shares of UGC Class A stock (other than shares held by “Permitted Holders”) immediately prior to the effective time of the mergers

38.32		+		(		Last sales price of a share of LMI Series A common stock on the trading day immediately prior to the effective time of the mergers		×		0.2155		)

Number of shares of UGC common stock held by such stockholder as to which a cash election is validly made and not validly revoked		×		UGC share threshold number   Total number of shares of UGC common stock as to which cash elections are validly made and not validly revoked.

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	Conversion of Shares; Exchange of Certificates; Dividends; Withholding

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	Treatment of Stock Options and Other Awards

	•	in the case of a UGC stock appreciation right issued in tandem with, and at the same base or exercise price as, a UGC option, the base or exercise price per share of the related converted UGC option; and
	•	in the case of a free standing UGC stock appreciation right or a UGC stock appreciation right issued in tandem with, and at a different base or exercise price as, a UGC option, the amount determined by dividing the base or exercise price per share of such UGC stock appreciation right immediately prior to the effective time of the mergers by 0.2155, rounded up to the nearest whole cent.

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	Conditions to Completion of the Mergers

	•	the approval by LMI stockholders and UGC stockholders, respectively, of the merger agreement and the LMI merger and UGC merger, respectively;
	•	the approval of the merger agreement and the UGC merger by the holders of a majority of the aggregate voting power of the outstanding shares of UGC common stock entitled to vote at the UGC special meeting, exclusive of any shares of UGC common stock beneficially owned by LMI, Liberty or any of their respective subsidiaries or any of the executive officers or directors of LMI, Liberty or UGC, which condition we refer to as the “minority approval” and which condition is non-waivable;
	•	the declaration of effectiveness of the registration statement of Liberty Global of which this document is a part by the Securities and Exchange Commission and the absence of any stop order or proceedings seeking a stop order or suspension of effectiveness with respect to the registration statement;
	•	the absence of any order, injunction, statute, rule or regulation prohibiting the consummation of the mergers or making such consummation illegal, or permitting such consummation subject to any condition that would have a material adverse effect on UGC or LMI or the ability of either UGC or LMI to consummate the mergers;
	•	the receipt by LMI and Liberty Global of a written opinion of Skadden, Arps, Slate, Meagher & Flom LLP or another nationally recognized law firm that, for U.S. federal income tax purposes, provided that the spin off of LMI by Liberty would otherwise have qualified as a tax-free distribution under Section 355 of the Code, the mergers should not cause such spin off to fail to qualify as a tax-free distribution to Liberty under Section 355(e) of the Code, which condition is non-waivable;
	•	the approval for listing on the Nasdaq National Market of the shares of Liberty Global common stock to be issued in the mergers, subject only to official notice of issuance; and
	•	all authorizations, consents, orders or approvals of, or declarations or filings with, or expiration of waiting periods imposed by, any governmental entity necessary for the completion of the mergers having been filed, expired or been obtained, other than those where the failure to so file, expire or obtain would not be reasonably likely to have a material adverse effect on LMI or UGC or the ability of either LMI or UGC to consummate the mergers.

	•	the performance by the other party in all material respects of its agreements and covenants contained in the merger agreement required to be performed at or before the effective time of the mergers;
	•	as a condition to LMI’s obligations, UGC’s representations and warranties contained in the merger agreement must:

	•	if specifically qualified by reference to a material adverse effect on UGC or UGC’s ability to complete the mergers, be true and correct, and
	•	if not so qualified, be true and correct except where the failure to be so true and correct would not have a material adverse effect on UGC or UGC’s ability to complete the mergers, except for UGC’s representations and warranties relating to its capitalization, which must be true and correct in all material respects,

	in each case, on the closing date (except to the extent any such representations or warranties speak only as of a specified earlier date, in which case, as of that earlier date);

	•	as a condition to UGC’s obligations, LMI’s representations and warranties contained in the merger agreement must:

	•	if specifically qualified by reference to a material adverse effect on LMI or LMI’s ability to complete the mergers, be true and correct, and
	•	if not so qualified, be true and correct except where the failure to be so true and correct would not have a material adverse effect on LMI or LMI’s ability to complete the mergers, except for:

	•	LMI’s representations and warranties relating to its capitalization, which must be true and correct in all material respects, and

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	•	LMI’s representation and warranty that, except as disclosed in its Exchange Act filings prior to January 17, 2005, since September 30, 2004 there has not been a material adverse change in the business, properties, operations or financial condition of LMI’s Japanese businesses, taken as a whole, other than any such change arising out of or resulting from (1) general business or economic conditions in Japan or from general changes in or affecting the industries in which LMI’s Japanese businesses operate (except to the extent any such change has a disproportionate impact on LMI’s Japanese businesses), (2) any changes in applicable generally accepted accounting principles that affect generally entities such as the Japanese businesses or (3) the conduct of, or failure to conduct or successfully complete, any public offering of shares by any of the Japanese businesses, which must be true and correct in all respects,

	•	as a condition to LMI’s obligations, there being no action taken, statute, rule, regulation, order, judgment or decree proposed, enacted, promulgated, entered, issued, enforced or deemed applicable by any governmental entity that imposes or is reasonably likely to result in the imposition of material limitations on the ability of Liberty Global to effectively exercise full rights of ownership of the shares of LMI and UGC after the effective time of the mergers or makes the holding by Liberty Global of such shares illegal; and
	•	the receipt of a written opinion of Baker Botts L.L.P. or another nationally recognized law firm, in the case of LMI, to the effect that the LMI merger will be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, and of a nationally recognized law firm, in the case of UGC, to the effect that, when integrated with the LMI merger, the conversion of shares of UGC common stock into shares of Liberty Global Series A common stock that is effected pursuant to the UGC merger will qualify as an exchange within the meaning of Section 351 of the Code, which condition is non-waivable by either party. Holme Roberts & Owen LLP is delivering this opinion to UGC.

	•	any change in the trading prices of, in the case of LMI, the LMI Series A common stock and, in the case of UGC, UGC Class A common stock;
	•	any changes in generally accepted accounting principles that affect entities such as LMI and UGC, as applicable;
	•	general business or economic conditions or from general changes in or affecting the industries in areas in which LMI and its subsidiaries or UGC and its subsidiaries, respectively, operate, except to the extent that any such change has a disproportionate impact on LMI or UGC, respectively; or
	•	the announcement of the merger agreement or the consummation of the mergers.

	Termination

	•	the mutual consent of UGC (with the approval of the Special Committee) and LMI;
	•	either UGC (with the approval of the Special Committee) or LMI, if the mergers have not been consummated before September 30, 2005, unless the party seeking to terminate the agreement failed to fulfill its obligations in the merger agreement and such failure resulted in the mergers having not occurred by such date;
	•	either UGC (with the approval of the Special Committee) or LMI, if the other party has breached any representation, warranty, covenant or agreement contained in the merger agreement, such that the conditions to the non-breaching party’s obligation to consummate the mergers cannot be satisfied;

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	•	either UGC (with the approval of the Special Committee) or LMI, if any order, decree or ruling that permanently restrains, enjoins or prohibits the mergers has been issued and becomes final and non-appealable;
	•	LMI, if the board of directors of UGC (with the approval of the Special Committee) has withdrawn or modified in any manner adverse to LMI its recommendation to the UGC stockholders; or
	•	either UGC (with the approval of the Special Committee) or LMI, if any of the stockholder approvals, which consist of the LMI stockholder approval, the UGC statutory approval and the UGC minority approval, has not been obtained at the applicable stockholders meeting.

	Covenants

	•	that is permitted, required or specifically contemplated by the merger agreement;
	•	as to “approved matters;”
	•	as to matters contemplated in the most recent budget approved by the board of directors of UGC, provided that such budget is itself an “approved matter;” and
	•	that is required by applicable law.

	•	amend its certificate of incorporation or bylaws or other governing instrument or document;
	•	authorize for issuance, issue, grant, sell, deliver, dispose of, pledge or otherwise encumber any shares of its capital stock or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for any shares of its capital stock or other equity or voting interests, or any rights, options, warrants, calls, commitments or other agreements of any character to purchase or acquire any shares of its capital stock or other equity or voting interests, or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for, any shares of its capital stock or other equity or voting interests, subject to certain specified exceptions;
	•	split, combine, subdivide or reclassify the outstanding shares of its capital stock or other equity or voting interests, or declare, set aside for payment or pay any dividend, or make any other actual constructive or deemed distribution in respect of any shares of its capital stock or other equity or voting interests, or otherwise make any payments to stockholders or owners of equity or voting interests in their capacity as such (other than dividends or distributions paid by any wholly owned subsidiary of UGC to UGC or another wholly owned subsidiary);
	•	redeem, purchase or otherwise acquire, directly or indirectly, any outstanding shares of capital stock or other securities or equity or voting interests of UGC or any subsidiary of UGC;
	•	make any other changes in its capital or ownership structure;
	•	sell or grant a lien or restriction with respect to any stock, equity or partnership interest owned by it in any subsidiary of UGC;
	•	enter into new employment agreements with, or increase compensation of, (a) any officer or director of UGC or (b) any member of senior executive management of any subsidiary of UGC whose annual income exceeds $100,000 per annum, other than in the case of (b), as required by written agreements in effect on the date of the merger agreement;

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	•	establish, amend or modify any of its employee benefit plans, except in the ordinary course of business, consistent with past practice and to the extent not material, and except to the extent required by applicable law or the existing terms of the plans or the provisions of the merger agreement;
	•	make any capital expenditures that individually or in the aggregate are in excess of the amount provided for capital expenditures in the most recent capital budget for UGC and its subsidiaries approved by the board of directors of UGC, provided that such budget is itself an “approved matter;”
	•	incur any material amount of indebtedness or guarantee any material amount of indebtedness other than in the ordinary course of business, provided that UGC may renew, extend or refinance existing indebtedness if there is no increase in interest rate or principal amount of indebtedness pursuant to such renewal, extension or refinancing;
	•	acquire or agree to acquire in any manner any business or any corporation or otherwise acquire any assets that are material to UGC other than in the ordinary course of business;
	•	make any material change in any accounting, financial reporting or tax practice or policy;
	•	take any action that would reasonably be expected to result in any of the conditions to the mergers not to be satisfied; and
	•	authorize or enter into any contract, agreement, commitment or arrangement to effect any of the foregoing.

	•	prepare and file with the Securities and Exchange Commission this joint proxy statement/ prospectus, the registration statement of which it is a part and the required Schedule 13E-3 transaction statement and seek to have such filings cleared and/or declared effective, as applicable, by the Securities and Exchange Commission as soon as reasonably practicable after filing;
	•	cause the shares of Liberty Global common stock issuable in the mergers (and the shares of Liberty Global common stock reserved for issuance with respect to LMI and UGC options, stock appreciation rights and restricted stock) to be eligible for quotation on the Nasdaq National Market prior to the effective time of the mergers;
	•	cause any injunctions or restraining orders to be lifted; and
	•	obtain all necessary or appropriate consents, waivers or approvals of third parties or any governmental entity in connection with the mergers.

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	Representations and Warranties

	•	corporate organization and qualification;
	•	authorization and validity of the merger agreement, absence of conflicts and board approval of the merger agreement;
	•	capital structure;
	•	documents filed with the Securities and Exchange Commission and financial statements included in those documents;
	•	information supplied in connection with this joint proxy statement/ prospectus, the registration statement of which it is a part and the Schedule 13E-3 transaction statement;
	•	absence of material breaches of organizational documents, laws or agreements as a result of the mergers;
	•	absence of certain changes or events since September 30, 2004;
	•	legal proceedings;
	•	compliance with applicable laws;
	•	tax and employee matters;
	•	brokers and finders;
	•	opinions of financial advisors; and
	•	the stockholder vote required.

	Amendment, Extension and Waiver

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	Fees and Expenses

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Name		Positions
John C. Malone Born March 7, 1941		Chairman of the Board and a director of Liberty Global. Mr. Malone has served as President, Chief Executive Officer, Chairman of the Board and a director of LMI since March 2004. Mr. Malone has served as a director of UGC and its predecessors since November 1999. Mr. Malone has served as Chairman of the Board of Liberty since 1990. Mr. Malone served as Chairman of the Board and a director of Liberty Satellite & Technology, Inc. from December 1996 to August 2000. Mr. Malone also served as Chairman of the Board of Tele-Communications, Inc., the former parent company of Liberty (TCI), from November 1996 to March 1999 and as Chief Executive Officer of TCI from January 1994 to March 1999. Mr. Malone is also a director of The Bank of New York, Cablevision Systems Corporation and Liberty.
Michael T. Fries Born February 6, 1963		Chief Executive Officer, President and a director of Liberty Global. Mr. Fries has served as Chief Executive Officer of UGC since January 2004. Mr. Fries has served as a director of UGC and its predecessors since November 1999 and as President of UGC and its predecessors since September 1998. He also served as Chief Operating Officer of UGC and its predecessors from September 1998 to January 2004. In addition, he serves or has served as an officer and/or director of various direct and indirect subsidiaries and affiliates of UGC, including as a member of the UPC Supervisory Board from September 1998 until September 2003 and as Chairman thereof from February 1999 until September 2003, a member of the Priority Telecom Supervisory Board since November 2000 and as Chairman thereof since March 2003 and as a director of Austar United Communications Limited since June 1999. He served as Chairman of Austar United from June 1999 to April 2003. Mr. Fries has been with UGC and its predecessors since 1990.
John P. Cole, Jr Born January 12, 1930		A director of Liberty Global. Mr. Cole has served as a director of UGC and its predecessors since March 1998. Mr. Cole served as a member of the UPC Supervisory Board from February 1999 to September 2003. Mr. Cole is a founder of the Washington, D.C. law firm of Cole, Raywid and Braverman, which specializes in all aspects of telecommunications and media law.
John W. Dick Born January 9, 1938		A director of Liberty Global. Mr. Dick has served as a director of UGC since March 2003. Mr. Dick served as a member of the UPC Supervisory Board from May 2001 to September 2003 and as a director of UGC Europe from September 2003 to January 2004. He is the non-executive Chairman and a director of Hooper Industries Group, a privately held U.K. group consisting of: Hooper and Co (Coachbuilders) Ltd. (building special/bodied Rolls Royce and Bentley motorcars) and Hooper Industries (China) (providing industrial products and components to Europe and the U.S.). Until 2002, Hooper Industries Group also held Metrocab UK (manufacturing London taxicabs) and Moscab (a joint venture with the Moscow city government, producing left-hand drive Metrocabs for Russia). Mr. Dick has held his positions with Hooper Industries Group since 1984. Mr. Dick is also a director of Austar United.
Paul A. Gould Born September 27, 1945		A director of Liberty Global. Mr. Gould has served as a director of UGC since January 2004. Mr. Gould has served as Managing Director of Allen & Company L.L.C., an investment banking services company, and has been associated with Allen & Company and its affiliates for more than the last five years. Mr. Gould is also a director of Ampco-Pittsburgh Corporation and Liberty.
David E. Rapley Born June 22, 1941		A director of Liberty Global. Mr. Rapley has served as a director of LMI since May 2004. Mr. Rapley served as Executive Vice President Engineering of VECO Corp. — Alaska from January 1998 to December 2001. Mr. Rapley is also a director of Liberty.

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Name		Positions
Larry E. Romrell Born December 30, 1939		A director of Liberty Global. Mr. Romrell has served as a director of LMI since May 2004. Mr. Romrell served as an Executive Vice President of TCI from January 1994 to March 1999. Mr. Romrell also served, from December 1997 to March 1999, as Executive Vice President and Chief Executive Officer of TCI Business Alliance and Technology Co.; and from December 1997 to March 1999, as Senior Vice President of TCI Ventures Group. Mr. Romrell is also a director of Liberty.
Gene W. Schneider Born September 8, 1926		A director of Liberty Global. Mr. Schneider has served as Chairman of the Board of UGC and its predecessors since 1989. Mr. Schneider also served as Chief Executive Officer of UGC and its predecessors from 1995 to January 2004. Mr. Schneider has served as an officer and/or director of various direct and indirect subsidiaries of UGC. In addition, from 1995 until 1999, Mr. Schneider served as a member of the UPC Supervisory Board, and an advisor to the Supervisory Board of UPC from 1999 until September 2003. Mr. Schneider has been with UGC and its predecessors since 1989. Mr. Schneider is also a director of Austar United.
J.C. Sparkman Born September 12, 1932		A director of Liberty Global. Mr. Sparkman has served as a director of LMI since November 2004. Mr. Sparkman served as the Chairman of the Board of Broadband Services, Inc. from September 1999 through December 2003. Mr. Sparkman is also a director of Shaw Communications Inc. and Universal Electronics, Inc.
J. David Wargo Born October 1, 1953		A director of Liberty Global. Mr. Wargo has served as a director of LMI since May 2004. Mr. Wargo has served as the President of Wargo & Company, Inc., a private investment company specializing in the communications industry, since January 1993. Mr. Wargo is also a director of OpenTV Corp. and Strayer Education, Inc.

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Name		Positions
John C. Malone Born March 7, 1941		President, Chief Executive Officer, Chairman of the Board and a director of LMI since March 2004. Mr. Malone has served as Chairman of the Board of Liberty since 1990. Mr. Malone served as Chairman of the Board and a director of Liberty Satellite & Technology, Inc. from December 1996 to August 2000. Mr. Malone also served as Chairman of the Board of TCI from November 1996 to March 1999 and as Chief Executive Officer of TCI from January 1994 to March 1999. Mr. Malone is also a director of The Bank of New York, Cablevision Systems Corporation, Liberty and UGC.
Miranda Curtis Born November 26, 1955		Senior Vice President of LMI and President of its Asia division since March 2004. Ms. Curtis has served as a Senior Vice President of LMI’s subsidiary, Liberty Media International Holdings, LLC (Old LMINT), since June 2004, and she served as President of Old LMINT and its predecessors from February 1999 to June 2004.
Bernard G. Dvorak Born April 19, 1960		Senior Vice President and Controller of LMI since March 2004. Mr. Dvorak served as Senior Vice President, Chief Financial Officer and Treasurer of On Command Corporation, a subsidiary of Liberty, from July 2002 until May 17, 2004. Mr. Dvorak was the Chief Executive Officer and a member of the board of directors of Formus Communications, Inc., a provider of fixed wireless services in Europe, from September 2000 until June 2002, and, from April 1999 until September 2000, he served as Chief Financial Officer of Formus. Mr. Dvorak is a director of UGC.
Graham Hollis Born January 9, 1952		Senior Vice President and Treasurer of LMI and Executive Vice President of its Asia division since March 2004. Mr. Hollis has served as a Senior Vice President of Old LMINT since June 2004, and he served as Executive Vice President and Chief Financial Officer of Old LMINT and its predecessors from May 1995 to June 2004.
David B. Koff Born December 26, 1958		Senior Vice President of LMI and President of its Europe division since March 2004. Mr. Koff served as a Senior Vice President of Liberty from February 1998 through May 2004. Mr. Koff is a director of UGC.
David J. Leonard Born March 28, 1953		Senior Vice President of LMI and President of its Latin America division since March 2004. Mr. Leonard served as the President of Liberty’s Latin America Group, a subgroup of Liberty’s International Group, from January 2004 through June 2004. From May 2002 through December 2003, Mr. Leonard was the founder and managing director of VLG Acquisition Corp., which owned interests in selected telecommunications companies in Latin America. From 1998 to 2002, Mr. Leonard was the founder, president and Chief Executive Officer of VeloCom Inc., a competitive local exchange carrier which provided wireless communications services throughout Brazil and Argentina.
Elizabeth M. Markowski Born October 26, 1948		Senior Vice President, General Counsel and Secretary of LMI since March 2004. Ms. Markowski served as a Senior Vice President of Liberty from November 2000 through December 2004. Prior to joining Liberty, Ms. Markowski was a partner in the law firm of Baker Botts L.L.P. for more than five years.
Robert R. Bennett Born April 19, 1958 c/o Liberty Media Corporation 12300 Liberty Boulevard Englewood, Colorado 80112		A director of LMI and Vice-Chairman of the Board since March 2004. Mr. Bennett has served as President and Chief Executive Officer of Liberty since April 1997, and he held various other executive positions with Liberty since its inception in 1990. Mr. Bennett served as Executive Vice President of TCI from April 1997 to March 1999. Mr. Bennett is also a director of Liberty, OpenTV Corp. and UGC.

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Name		Positions
Donne F. Fisher Born May 24, 1938 Fisher Capital Partners, Ltd. 5619 DTC Parkway, Suite 1150 Greenwood Village, Colorado 80111		A director of LMI since May 2004. Mr. Fisher has served as President of Fisher Capital Partners, Ltd., a venture capital partnership, since December 1991. Mr. Fisher is also a director of General Communication, Inc. and Liberty.
David E. Rapley Born June 22, 1941		A director of LMI since May 2004. Mr. Rapley served as Executive Vice President Engineering of VECO Corp. — Alaska from January 1998 to December 2001. Mr. Rapley is also a director of Liberty.
M. LaVoy Robison Born September 6, 1935 The Anschutz Foundation 1727 Tremont Place Denver, Colorado 80202		A director of LMI since June 2004. Mr. Robison has served as an executive director and board member of The Anschutz Foundation (a private foundation) since January 1998. Mr. Robison is also a director of Liberty.
Larry E. Romrell Born December 30, 1939		A director of LMI since May 2004. Mr. Romrell served as an Executive Vice President of TCI from January 1994 to March 1999. Mr. Romrell also served, from December 1997 to March 1999, as Executive Vice President and Chief Executive Officer of TCI Business Alliance and Technology Co.; and from December 1997 to March 1999, as Senior Vice President of TCI Ventures Group. Mr. Romrell is also a director of Liberty.
J. C. Sparkman Born September 12, 1931		A director of LMI since November 2004. Mr. Sparkman served as the Chairman of the Board of Broadband Services, Inc. from September 1999 through December 2003. Mr. Sparkman is also a director of Shaw Communications Inc. and Universal Electronics, Inc.
J. David Wargo Born October 1, 1953 Wargo & Company, Inc. 712 Fifth Avenue New York, New York 10019		A director of LMI since May 2004. Mr. Wargo has served as the President of Wargo & Company, Inc., a private investment company specializing in the communications industry, since January 1993. Mr. Wargo is also a director of OpenTV Corp. and Strayer Education, Inc.

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	Executive Committee

	Compensation Committee

	Audit Committee

	•	appointing and, if necessary, replacing LMI’s independent auditors;
	•	reviewing and approving in advance the scope and the fees of all auditing services, and all permissible non-auditing services, to be performed for LMI by LMI’s independent auditors;
	•	reviewing audited financial statements with LMI’s management and LMI’s independent auditors and making recommendations regarding inclusion of such audited financial statements in certain public filings of LMI;
	•	overseeing the performance of services by LMI’s independent auditors, including holding quarterly meetings to review the quarterly reports of LMI’s independent auditors, discussing with LMI’s independent auditors issues regarding the ability of LMI’s independent auditors to perform such services, obtaining, annually, a letter from LMI’s independent auditors addressing certain internal quality-control issues, reviewing with LMI’s independent auditors any audit-related problems or difficulties and the response of LMI’s management, and addressing other general oversight issues;
	•	reviewing compliance with and the adequacy of LMI’s existing major accounting and financial reporting policies;
	•	overseeing the implementation and maintenance of an internal audit function, discussing with LMI’s independent auditors and LMI’s management the internal audit function’s responsibilities, budget and staff, periodically reviewing with LMI’s independent auditors the results and findings of the internal audit function

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		and coordinating with LMI’s management to ensure that the issues associated with such results and findings are addressed;
	•	reviewing and overseeing compliance with, and establishing procedures for the treatment of alleged violations of, applicable securities laws, SEC and Nasdaq Stock Market rules regarding audit committees and the code of business conduct and ethics adopted by the LMI board; and
	•	preparing a report for LMI’s annual proxy statement.

	Audit Committee Report

	Submitted by the Members of the Audit Committee:
	Donne F. Fisher
	David E. Rapley
	M. LaVoy Robison
	J. David Wargo

	Nominating and Corporate Governance Committee

	•	the proposing stockholder’s name and address and documentation indicating the number of shares of LMI common stock beneficially owned by such person and the holder or holders of record of those shares, together with a statement that the proposing stockholder is recommending a candidate for nomination as a director;

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	•	the candidate’s name, age, business and residence addresses, principal occupation or employment, business experience, educational background and any other information relevant in light of the factors considered by the nominating and corporate governance committee in making a determination of a candidate’s qualifications, as described below;
	•	a statement detailing any relationship, arrangement or understanding that might affect the independence of the candidate as a member of LMI’s board;
	•	any other information that would be required under SEC rules in a proxy statement soliciting proxies for the election of such candidate as a director;
	•	a representation as to whether the proposing stockholder intends to deliver any proxy materials or otherwise solicit proxies in support of the director nominee;
	•	a representation that the proposing stockholder intends to appear in person or by proxy at the annual stockholders meeting at which the person named in such notice is to stand for election; and
	•	a signed consent of the candidate to serve as a director, if nominated and elected.

	•	independence from management;
	•	education and professional background;
	•	judgment, skill, integrity and reputation;
	•	existing commitments to other businesses as a director, executive or owner;
	•	personal conflicts of interest, if any; and
	•	the size and composition of the existing board of directors.

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	Other

	Summary Compensation

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															Long-Term Compensation
															Restricted				Securities
											Other Annual				Stock				Underlying				All Other
Name and Principal Position with Our Company			Year				Salary ($)				Compensation				Awards				Options/SARs				Compensation ($)
John C. Malone				2004			$	—			$	—			$	—				1,568,562	(4)		$	—
	President and Chief Executive Officer
Miranda Curtis				2004			$	716,330	(1)		$	—			$	—				63,830	(4)		$	22,019	(5)
	Senior Vice President
David B. Koff				2004			$	595,808			$	742,003	(3)		$	—				53,192	(4)		$	21,256	(6)
	Senior Vice President
David J. Leonard				2004			$	403,077			$	—			$	—				42,554	(4)		$	16,756	(6)
	Senior Vice President
Elizabeth M. Markowski				2004			$	676,866	(2)		$	—			$	—				63,830	(4)		$	20,500	(6)
	Senior Vice President,
	General Counsel and Secretary

(1)	Ms. Curtis’ compensation is paid in U.K. pounds, which, for purposes of the foregoing presentation, has been converted to U.S. Dollars based upon the average exchange rate in effect during 2004.
(2)	Ms. Markowski continued to be an officer and employee of Liberty through December 31, 2004, and during the period from the date of the spin off through December 31, 2004, LMI reimbursed Liberty for 75% of Ms. Markowski’s compensation expenses. This allocation was based upon the amount of time she spent on the respective businesses of LMI and Liberty. The numbers in the table represent 100% of Ms. Markowski’s compensation for 2004, rather than LMI’s allocable share.
(3)	Represents reimbursement for housing and other costs incurred by Mr. Koff as an expatriate working in London, England.
(4)	The numbers of shares reflect adjustments for LMI’s July 2004 rights offering which concluded in August 2004.
(5)	Amounts represent contributions made during 2004 to a pension fund maintained for the benefit of Ms. Curtis under applicable United Kingdom law. With respect to these contributions, Ms. Curtis is fully vested.
(6)	Amounts represent contributions to the Liberty Media 401(k) Savings Plan (Liberty 401(k) Savings Plan) during 2004 prior to the date of the spin off and, in the case of Messrs. Koff and Leonard, premiums paid for term life insurance under UGC’s group policy. The Liberty 401(k) Savings Plan provides employees with an opportunity to save for retirement. The Liberty 401(k) Savings Plan participants may contribute up to 10% of their compensation, and Liberty makes a matching contribution of 100% of the participants’ contributions. Participant contributions to the Liberty 401(k) Savings Plan are fully vested upon contribution.

		Vesting
Years of Service		Percentage
Less than 1			0	%
1-2			33	%
2-3			66	%
3 or more			100	%

	With respect to Liberty contributions made to the Liberty 401(k) Savings Plan in 2004, Mr. Koff and Ms. Markowski were fully vested and Mr. Leonard was not vested as of December 31, 2004.
	Under UGC’s group term life insurance benefits plan, each employee is provided with employer-paid coverage equal to twice the employee’s annual salary up to maximum coverage of $400,000 for employees with an annual salary of less than $266,000, and, upon an employee’s election, 1.5 times the employee’s annual salary up to maximum coverage of $1 million for employees with an annual salary of $266,000 or more. LMI reimburses UGC for the premiums paid with respect to LMI’s employees.

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	Option and SAR Grants in Last Fiscal Year

			Number of				Percent of
			Securities				Total Options				Exercise
			Underlying				Granted to				or Base								Grant Date
			Options				Employees in				Price				Expiration				Present
Name			Granted(1)				Fiscal Year				($/sh)(2)				Date				Value(3)
John C. Malone
	Series A			—				—				—
	Series B			1,568,562	(4)			100	%		$	36.75				June 7, 2014			$	20,881,827
Miranda Curtis
	Series A			63,830				14.6	%		$	33.41				June 22, 2014			$	772,600
	Series B			—				—				—				—
David B. Koff
	Series A			53,192				12.1	%		$	33.41				June 22, 2014			$	640,837
	Series B			—				—				—				—
David J. Leonard
	Series A			42,554				9.7	%		$	33.41				June 22, 2014			$	515,074
	Series B			—				—				—				—
Elizabeth M. Markowski
	Series A			63,830				14.6	%		$	33.41				June 22, 2014			$	772,600
	Series B			—				—				—				—

(1)	The numbers of shares reflect adjustments for LMI’s July 2004 rights offering which concluded in August 2004.
(2)	The exercise prices reflect adjustments for LMI’s July 2004 rights offering which concluded in August 2004. The exercise prices for the LMI Series A options were equal to the closing sale price of the LMI Series A common stock on their respective grant dates. The exercise price for the LMI Series B options was equal to 110% of the closing sale price of the LMI Series A common stock on June 22, 2004 ($39.10 before considering the impact of the July 2004 rights offering), the date that definitive terms were established for such options. The closing market price of the LMI Series B common stock on that date was $40.05 (before considering the impact of the July 2004 rights offering).
(3)	The value shown is based upon (i) the number of options granted, as adjusted for the July 2004 rights offering and (ii) the per share present value, as determined using the Black-Scholes model. The key assumptions used in the model for purposes of this calculation include the following: (a) a 4.09% discount rate; (b) a 25.25% volatility factor; (c) the 6-year expected option life; (d) the fair value of the applicable series of LMI common stock on the grant date; and (e) a per share exercise price of $33.41, in the case of LMI Series A options, and a per share exercise price of $36.75, in the case of LMI Series B options (in each case, as adjusted for the July 2004 rights offering). The actual value realized will depend upon the extent to which the stock price exceeds the exercise price on the date the option is exercised. Accordingly, the realized value, if any, will not necessarily be the value determined by the model.
(4)	The options granted to Mr. Malone were awarded as the primary form of compensation to be paid to Mr. Malone by LMI. See “— Employment Contracts and Termination of Employment and Change in Control Arrangements.”

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	Aggregate Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values

																Value of
												Number of Securities				Unexercised
												Underlying Unexercised				In-the-Money
				Shares								Options/SARs at				Options/SARs at
				Acquired on								December 31, 2004 (#)				December 31, 2004
				Exercise				Value				Exercisable/				Exercisable/
Name				(#)				Realized ($)				Unexercisable(1)				Unexercisable ($)
John C. Malone
	Series A
		Exercisable			—			$	—				221			$	2,721
		Unexercisable			—			$	—				—				—
	Series B
		Exercisable			—			$	—				1,965,665			$	23,630,664	(2)
		Unexercisable			—			$	—				213,824			$	2,377,728
Miranda Curtis
	Series A
		Exercisable			—			$	—				81,361			$	1,001,558
		Unexercisable			—			$	—				76,713			$	976,949
	Series B
		Exercisable			—			$	—				—				—
		Unexercisable			—			$	—				—				—
David B. Koff
	Series A
		Exercisable			100,551			$	657,101				21,594			$	265,822
		Unexercisable			—			$	—				127,872			$	1,601,232
	Series B
		Exercisable			—			$	—				—				—
		Unexercisable			—			$	—				—				—
David J. Leonard
	Series A
		Exercisable			—			$	—				1,596			$	19,644
		Unexercisable			—			$	—				48,937			$	624,119
	Series B
		Exercisable			—			$	—				—				—
		Unexercisable			—			$	—				—				—
Elizabeth M. Markowski
	Series A
		Exercisable			—			$	—				53,804			$	662,331
		Unexercisable			—			$	—				92,199			$	1,167,520
	Series B
		Exercisable			—			$	—				—				—
		Unexercisable			—			$	—				—				—

(1)

Includes options to acquire LMI common stock that were issued to the LMI named executive officers as a result of adjustments made, in connection with the spin off, to their outstanding Liberty stock incentive awards, all of which were granted to them by Liberty prior to January 1, 2004. Each option and stock appreciation right with respect to Liberty common stock outstanding as of the record date for the spin off was adjusted by the incentive plan committee of Liberty’s board of directors in connection with the spin off. Liberty options held, as of the spin off record date, by the LMI named executive officers, among others, were divided into two options: (1) an option to purchase the number and series of shares of LMI common stock that would have been issued in the spin off in respect of the shares of Liberty common stock subject to the applicable Liberty option, as if such Liberty option had been exercised in full immediately prior to the record date for the spin off, and (2) an adjusted Liberty option. The aggregate exercise price of each such outstanding Liberty option was allocated between the LMI option and the adjusted Liberty option. Stock appreciation rights related to Liberty Series A common stock held, as of the

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	spin off record date, by the LMI named executive officers, among others, were divided into two awards (in a manner similar to the adjustment made to outstanding Liberty options): (1) an LMI option and (2) an adjusted Liberty stock appreciation right. The aggregate base price of each outstanding Liberty stock appreciation right was allocated between the LMI option and the adjusted Liberty stock appreciation right. Each LMI option issued as a result of these adjustments had an exercise price per share equal to the fair market value per share of the applicable series of LMI common stock, which, in the case of Series A options, was $33.92 (as adjusted for LMI’s July 2004 rights offering) and, in the case of Series B options, was $37.88 (as adjusted for LMI’s July 2004 rights offering).
(2)	These options were fully exercisable as of December 31, 2004, but are subject to forfeiture. See “— Employment Contracts and Termination of Employment and Change in Control Arrangements” for more information.

	General Executive Compensation Policy

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	•	experience;
	•	responsibilities assumed;
	•	demonstrated leadership ability;
	•	overall effectiveness;
	•	the level of an executive’s compensation in relation to other executives in LMI with the same, more or less responsibilities; and
	•	the performance of the group for which the executive is primarily responsible.

	Implementation of Executive Compensation Policy

	CEO Compensation

	Submitted by the Members of the Compensation Committee:
	Donne F. Fisher
	Larry E. Romrell
	J. David Wargo

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	Cash Compensation

	Option Awards

	Liberty Media International, Inc. 2004 Incentive Plan (As Amended and Restated Effective March 9, 2005)

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	•	interpret the incentive plan and adopt any rules, regulations and guidelines for carrying out the incentive plan that it believes are proper;
	•	correct any defect or supply any omission or reconcile any inconsistency in the incentive plan or related documents;
	•	determine the form and terms of the awards made under the incentive plan, including persons eligible to receive the award and the number of shares or other consideration subject to awards; and
	•	delegate to any subcommittee its authority and duties under the incentive plan unless a delegation would adversely impact the availability of transaction exemptions under Rule 16b-3 of the Exchange Act, and the deductibility of compensation for federal income tax purposes.

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		Dollar
		Value
Name and Position		($)(1)				Number of Units
John C. Malone President and Chief Executive Officer		$	36.75				1,568,562 (Series  B)
Miranda Curtis Senior Vice President		$	33.41				63,830 (Series A)
David B. Koff Senior Vice President		$	33.41				53,192 (Series A)
David J. Leonard Senior Vice President		$	33.41				42,554 (Series A)
Elizabeth M. Markowski Senior Vice President, General Counsel and Secretary		$	33.41				63,380 (Series A)
Executive Group		$	33.41				308,514 (Series A)
		$	36.75				1,568,562 (Series  B)
Non Executive Officer Employee Group		$	35.63				140,178 (Series A)

(1)

Except in the case of the “Non Executive Officer Employee Group,” the dollar value is assumed for this purpose to equal the exercise price, which (i) in the case of the LMI Series A options listed, is equal to the closing sale price of the LMI Series A common stock on the grant date (as adjusted for LMI’s July 2004 rights offering), and (ii) in the case of the LMI Series B options listed, is equal to 110% of the closing sale price of the LMI Series A common stock on June 22, 2004 (as adjusted for LMI’s July 2004 rights offering), the date that definitive terms were established for the LMI Series B options. In the case of the “Non Executive Officer Employee Group,” the dollar value is assumed for this purpose to equal the weighted average exercise price of the options held by this group. The actual exercise prices of these options were based upon the closing sale prices of the LMI Series A common stock on the applicable grant dates and later adjusted for LMI’s July 2004 rights offering, if applicable. Any value realized by a grantee will depend upon the extent to which the market price of the stock exceeds the exercise price on the date the award is exercised.

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	•	increased revenue;
	•	net income measures (including, but not limited to, income after capital costs and income before or after taxes);
	•	stock price measures (including, but not limited to, growth measures and total stockholder return);
	•	price per share of LMI common stock;
	•	market share;
	•	earnings per share (actual or targeted growth);
	•	earnings before interest, taxes, depreciation and amortization (EBITDA);
	•	economic value added (or an equivalent metric);
	•	market value added;
	•	debt to equity ratio;
	•	cash flow measures (including, but not limited to, cash flow return on capital, cash flow return on tangible capital, net cash flow and net cash flow before financing activities);
	•	return measures (including, but not limited to, return on equity, return on average assets, return on capital, risk-adjusted return on capital, return on investors’ capital and return on average equity);
	•	operating measures (including operating income, funds from operations, cash from operations, after-tax operating income, sales volumes, production volumes and production efficiency);
	•	expense measures (including, but not limited to, overhead costs and general and administrative expense);
	•	margins;
	•	stockholder value;
	•	total stockholder return;

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	•	proceeds from dispositions;
	•	total market value; and
	•	corporate values measures (including ethics compliance, environmental and safety).

	Liberty Media International, Inc. 2004 Non-Employee Director Incentive Plan (As Amended and Restated Effective April 1, 2005)

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	•	interpret the director plan and adopt any rules, regulations and guidelines for carrying out the director plan that it believes are proper;
	•	correct any defect or supply any omission or reconcile any inconsistency in the director plan or related documents;
	•	determine the form and terms of awards made under the director plan, including directors eligible to receive awards and the number of shares or other consideration subject to awards; and
	•	delegate to company employees certain administrative or ministerial duties in carrying out the purposes of the director plan.

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	U.S. Federal Income Tax Consequences

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					Number of				Weighted				Number of Securities
					Securities to be				Average				Available for Future
					Issued upon				Exercise Price				Issuance Under Equity
					Exercise of				of Outstanding				Compensation Plans
					Outstanding				Options,				(excluding securities
					Options, Warrants				Warrants and				reflected in the first
Plan Category					and Rights				Rights				column)
Equity compensation plans approved by security holders:
	Liberty Media International, Inc. 2004 Incentive Plan (As Amended and Restated Effective March 9, 2005)(1)
			Series A common stock			438,054			$	33.45				18,113,552	(2)
			Series B common stock			1,568,562			$	36.75				—
	Liberty Media International, Inc. 2004 Nonemployee Director Incentive Plan (As Amended and Restated Effective April 1, 2005)(1)
			Series A common stock			22,152			$	33.95				4,979,000	(2)
			Series B common stock			—				—				—
	Liberty Media International, Inc. Transitional Stock Adjustment Plan(1)(3)
			Series A common stock			1,241,332			$	33.92				—
			Series B common stock			1,498,154			$	37.88				—
Equity compensation plans not approved by security holders: None						—								—
		Totals:
			Series A common stock			1,701,538								23,092,552	(2)
			Series B common stock			3,066,716								—

(1)	Prior to LMI’s spin off from Liberty, Liberty approved each plan in its capacity as the then-sole stockholder of LMI.
(2)	Each plan permits grants of, or with respect to, shares of LMI Series A common stock or LMI Series B common stock subject to a single aggregate limit. The total number of shares available for future issuances under each plan is calculated based upon the number of shares subject to the original awards granted under each plan, prior to

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	giving effect to any anti-dilution adjustments to such awards (such as the adjustments made in connection with the July 2004 rights offering).
(3)	The transitional plan was adopted in connection with LMI’s spin off from Liberty to provide for the supplemental award of options to purchase shares of LMI common stock and restricted shares of LMI Series A common stock, in each case, pursuant to adjustments made to Liberty stock incentive awards in accordance with the anti-dilution provisions of Liberty’s stock incentive plans.

Series of

Number of

Percent of

Voting

Name and Address of Beneficial Owner

Stock

Shares

Class

Power

(In thousands)

Capital Research and Management Company

LMI Series  A

8,418

*

5.0

%

*

333 South Hope Street

LMI Series  B

—

—

—

Los Angeles, CA 90071

*

The number of shares of common stock in the table is based upon the Schedule 13G dated December 31, 2004, filed by Capital Research and Management Company with respect to LMI Series A common stock. Capital Research, an investment advisor, is the beneficial owner of 8,417,960 shares of LMI Series A common stock, as a result of acting as investment advisor to various investments companies, but disclaims beneficial ownership pursuant to Rule 13d-4. The Schedule 13G reflects that Capital Research has no voting power over and sole dispositive power over these shares.

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						Amount and Nature of				Percent of				Voting
Name of Beneficial Owner		Title of Class				Beneficial Ownership				Class				Power
						(In thousands)
John C. Malone			LMI Series A				953	(1)(2)(4)(5)			*				33.2	%
			LMI Series B				8,510	(1)(3)(5)			91.1	%
			UGC Class A				95	(6)			*				*
Miranda Curtis			LMI Series A				85	(7)			*				*
			LMI Series B				0
			UGC Class A				0
David B. Koff			LMI Series A				65	(8)(9)(10)			*				*
			LMI Series B				0
			UGC Class A				1	(11)
David J. Leonard			LMI Series A				2	(12)(13)			*				*
			LMI Series B				0
			UGC Class A				8	(14)
Elizabeth M. Markowski			LMI Series A				62	(15)(16)(17)(18)			*				*
			LMI Series B				0
			UGC Class A				0	(19)
Robert R. Bennett			LMI Series A				240	(20)(21)(22)			*				3.1	%
			LMI Series B				732	(20)(22)			9.2	%
			UGC Class A				212	(23)			*				*
Donne F. Fisher			LMI Series A				15	(24)			*				*
			LMI Series B				32				*
			UGC Class A				0
David E. Rapley			LMI Series A				1	(24)			*				*
			LMI Series B				0
			UGC Class A				0
M. LaVoy Robison			LMI Series A				1	(24)			*				*
			LMI Series B				0
			UGC Class A				0
Larry E. Romrell			LMI Series A				13	(24)			*				*
			LMI Series B				0
			UGC Class A				0
J.C. Sparkman			LMI Series A				14				*				*
			LMI Series B				0				*				*
			UGC Class A				0				*				*
J. David Wargo			LMI Series A				8	(25)			*				*
			LMI Series B				0
			UGC Class A				921	(26)			*				*
All directors and executive officers as a group (14 persons)			LMI Series A				1,500	(2)(20)(25)(27)			*				35.4	%
								(28)(29)(30)
			LMI Series B				9,274	(3)(20)(27)(30)			92.1	%
			UGC Class A				1,242	(26)(31)(32)			*				*

	*	Less than one percent

	(1)	Includes 90,303 shares of LMI Series A common stock and 204,566 shares of LMI Series B common stock held by Mr. Malone’s wife, Leslie Malone, as to which shares Mr. Malone has disclaimed beneficial ownership.
	(2)	Includes 198 shares of LMI Series A common stock held by a trust with respect to which Mr. Malone is the sole trustee and, with his wife, Leslie Malone, retains a unitrust interest in the trust.
	(3)	Includes 1,046,546 shares of LMI Series B common stock held by a trust with respect to which Mr. Malone is the sole trustee and holder of a unitrust interest in the trust.
	(4)	Includes 46,907 shares of LMI Series A common stock held by the Liberty 401(k) Savings Plan.
	(5)	Includes 221 shares of LMI Series A common stock and 2,072,577 shares of LMI Series B common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005.

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		Mr. Malone has the right to convert options to purchase 504,015 shares of LMI Series B common stock into options to purchase shares of LMI Series A common stock.
	(6)	Includes 95,416 shares of UGC Class A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005.
	(7)	Includes 85,143 shares of LMI Series A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005.
	(8)	Includes 639 shares of LMI Series A common stock held by the Liberty 401(k) Savings Plan.
	(9)	Includes 1,250 restricted shares of LMI Series A common stock, none of which were vested at March 31, 2005.

(10)	Includes 53,615 shares of LMI Series A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005.
(11)	Includes 1,458 shares of UGC Class A common stock held by the UGC 401(k) Plan.
(12)	Includes 7 shares of LMI Series A common stock held by the Liberty 401(k) Savings Plan.
(13)	Includes 1,596 shares of LMI Series A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005.
(14)	Includes 3,182 shares of UGC Class A common stock held by the UGC 401(k) Plan.
(15)	Includes 136 shares of LMI Series A common stock held by Mrs. Markowski’s husband, Thomas Markowski, as to which shares Mrs. Markowski disclaims beneficial ownership.
(16)	Includes 259 shares of LMI Series A common stock held by the Liberty 401(k) Savings Plan.
(17)	Includes 44 restricted shares of LMI Series A common stock, none of which were vested at March 31, 2005.
(18)	Includes 57,214 shares of LMI Series A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005.
(19)	Includes 496 shares of UGC Class A common stock held by the UGC 401(k) Plan.
(20)	Includes 75,084 shares of LMI Series A common stock and 24 shares of LMI Series B common stock held by Hilltop Investments, Inc. which is jointly owned by Mr. Bennett and his wife, Deborah Bennett.
(21)	Includes 1,577 shares of LMI Series A common stock held by the Liberty 401(k) Savings Plan.
(22)	Includes 12,002 shares of LMI Series A common stock and 731,962 shares of LMI Series B common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005. Mr. Bennett has the right to convert the options to purchase shares of LMI Series B common stock into options to purchase shares of LMI Series A common stock.
(23)	Includes 83,332 shares of UGC Class A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005.
(24)	Includes 586 shares of LMI Series A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005.
(25)	Includes 7,142 shares of LMI Series A common stock held in various accounts managed by Mr. Wargo, as to which shares Mr. Wargo disclaims beneficial ownership.
(26)	Includes 498,757 shares of UGC Class A common stock held in various accounts managed by Mr. Wargo, as to which shares Mr. Wargo disclaims beneficial ownership.
(27)	Includes 96,003 shares of LMI Series A common stock and 204,566 shares of LMI Series B common stock held by relatives of certain directors and executive officers, as to which shares beneficial ownership by such directors and executive officers is disclaimed.
(28)	Includes 50,144 shares of LMI Series A common stock held by the Liberty 401(k) Savings Plan.
(29)	Includes 1,294 restricted shares of LMI Series A common stock, none of which were vested at March 31, 2005.
(30)	Includes 247,102 shares of LMI Series A common stock and 2,804,539 shares of LMI Series B common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005. The options to purchase 1,235,977 shares of LMI Series B common stock may be converted into options to purchase shares of LMI Series A common stock.
(31)	Includes 7,701 shares of UGC Class A common stock held by the UGC 401(k) Plan.
(32)	Includes 178,748 shares of UGC Class A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005.

121

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122

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		June 8, 2004				December 31, 2004
LMI Series A		$	100			$	127
LMI Series B			100				127
Nasdaq Telecommunications Index			100				102
Nasdaq Composite Index			100				108

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						Amount and Nature of				Percent of				Voting
Name of Beneficial Owner		Title of Class				Beneficial Ownership				Class				Power
						(In thousands)
John C. Malone			Liberty Global Series  A				974	(1)			*				23.1	%
			Liberty Global Series  B				8,510	(2)			91.1	%
Miranda Curtis			Liberty Global Series  A				85	(3)			*				*
			Liberty Global Series  B				0
David B. Koff			Liberty Global Series  A				65	(4)			*				*
			Liberty Global Series  B				0
David J. Leonard			Liberty Global Series  A				3	(5)			*				*
			Liberty Global Series  B				0
Elizabeth M. Markowski			Liberty Global Series  A				62	(6)			*				*
			Liberty Global Series  B				0
Robert R. Bennett			Liberty Global Series  A				285	(7)			*				2.1	%
			Liberty Global Series  B				732	(8)			9.2	%
Donne F. Fisher			Liberty Global Series  A				15	(9)			*				*
			Liberty Global Series  B				32				*
David E. Rapley			Liberty Global Series  A				1	(9)			*				*
			Liberty Global Series  B				0
M. LaVoy Robison			Liberty Global Series  A				1	(9)			*				*
			Liberty Global Series  B				0
Larry E. Romrell			Liberty Global Series  A				13	(9)			*				*
			Liberty Global Series  B				0
J.C. Sparkman			Liberty Global Series  A				14				*				*
			Liberty Global Series  B				0
J. David Wargo			Liberty Global Series  A				206	(10)			*				*
			Liberty Global Series  B				0
All directors and executive officers as a group (14 persons)			Liberty Global Series  A				1,768	(11)			*				25.4	%
			Liberty Global Series  B				9,274	(12)			92.1	%

	*	Less than one percent

	(1)	See footnotes 1, 2, 4, 5 and 6 in “Management of LMI — Security Ownership of Management.”
	(2)	See footnotes 1, 3 and 5 in “Management of LMI — Security Ownership of Management.”
	(3)	See footnote 7 in “Management of LMI — Security Ownership of Management.”
	(4)	See footnotes 8, 9, 10 and 11 in “Management of LMI — Security Ownership of Management.”
	(5)	See footnotes 12, 13 and 14 in “Management of LMI — Security Ownership of Management.”
	(6)	See footnotes 15, 16, 17, 18 and 19 in “Management of LMI — Security Ownership of Management.”
	(7)	See footnotes 20, 21, 22 and 23 in “Management of LMI — Security Ownership of Management.”
	(8)	See footnotes 20 and 22 in “Management of LMI — Security Ownership of Management.”
	(9)	See footnote 24 in “Management of LMI — Security Ownership of Management.”

(10)	See footnote 25 and 26 in “Management of LMI — Security Ownership of Management.”
(11)	See footnotes 2, 20, 25, 26, 27, 28, 29, 30, 31 and 32 in “Management of LMI  — Security Ownership of Management.”

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(12)	See footnotes 3, 20, 27 and 30 in “Management of LMI — Security Ownership of Management.”

125

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Name		Positions
Gene W. Schneider		Chairman of the Board of UGC and its predecessors since 1989. Mr. Schneider also served as Chief Executive Officer of UGC and its predecessors from 1995 to January 2004. Mr. Schneider has served as an officer and/or director of various direct and indirect subsidiaries of UGC. In addition, from 1995 until 1999, Mr. Schneider served as a member of the UPC Supervisory Board, and an advisor to the Supervisory Board of UPC from 1999 until September 2003. Mr. Schneider has been with UGC and its predecessors since 1989. Mr. Schneider is also a director of Austar United.
Michael T. Fries		Chief Executive Officer of UGC since January 2004. Mr. Fries has served as a director of UGC and its predecessors since November 1999 and as President of UGC and its predecessors since September 1998. He also served as Chief Operating Officer of UGC and its predecessors from September 1998 to January 2004. In addition, he serves or has served as an officer and/or director of various direct and indirect subsidiaries and affiliates of UGC, including as a member of the UPC Supervisory Board from September 1998 until September 2003 and as Chairman thereof from February 1999 until September 2003, member of the Priority Telecom Supervisory Board since November 2000 and as Chairman thereof since March 2003 and as a director of Austar United since June 1999. He served as Chairman of Austar United from June 1999 to April 2003. Mr. Fries has been with UGC and its predecessors since 1990.
Frederick G. Westerman, III		Chief Financial Officer of UGC and its predecessors since June 1999 and UGC’s Co-Chief Financial Officer since February 2004. Mr. Westerman’s responsibilities include oversight and planning of UGC’s financial and treasury operations. He also serves as an officer and/or director of various direct and indirect subsidiaries of UGC.
Charles H.R. Bracken		Co-Chief Financial Officer of UGC since February 2004. Mr. Bracken has served as the Chief Financial Officer of UGC Europe and its predecessors since November 1999. Mr. Bracken served as a member of the UPC Board of Management from July 1999 to September 2003. Prior to November 1999, Mr. Bracken served as the Managing Director of Strategy, Acquisitions and Corporate Development at UPC from March 1999. Mr. Bracken also serves as an officer and/or director of various European subsidiaries, including as a member of the Priority Telecom Supervisory Board since July 2000.
Gene M. Musselman		President and Chief Operating Officer of UPC Broadband Division of UGC Europe, Inc., a subsidiary of UGC, since September 2003. Mr. Musselman has served as UPC’s Chief Operating Officer since April 2000, and he served as a member of its Board of Management from June 2000 to September 2003. He also served as managing director of UPC from July 2003 until June 2004. Mr. Musselman serves as an officer and/or director of various European subsidiaries of UGC. Except when he was at Tevecap S.A. from 1995 to 1997, Mr. Musselman has been with UGC and its affiliates since 1991.

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Name		Positions
Shane O’Neill		Chief Strategy Officer of UGC Europe since September 2003. He has served as UPC’s Chief Strategy Officer since June 2000. Mr. O’Neill served as a member of the UPC Board of Management from June 2000 to September 2003. From November 1999 to June 2000, Mr. O’Neill served as the Managing Director, Strategy, Acquisitions and Corporate Development at UPC. Mr. O’Neill is a director of SBS Broadcasting S.A., a public company in which UGC has a 19.3% interest.
Robert R. Bennett c/o Liberty Media Corporation 12300 Liberty Boulevard Englewood, Colorado 80112		A director of UGC since January 2002. Mr. Bennett has served as President and Chief Executive Officer of Liberty since April 1997, and he held various other executive positions with Liberty since its inception in 1990. Mr. Bennett served as Executive Vice President of TCI from April 1997 to March 1999. Mr. Bennett is a Vice-Chairman of the Board and a director of LMI and is also a director of Liberty and OpenTV Corp.
John P. Cole, Jr.		A director of UGC and its predecessors since March 1998. Mr. Cole served as a member of the UPC Supervisory Board from February 1999 to September 2003. Mr. Cole is a founder of the Washington, D.C. law firm of Cole, Raywid and Braverman, which specializes in all aspects of telecommunications and media law.
John W. Dick		A director of UGC since March 2003. Mr. Dick served as a member of the UPC Supervisory Board from May 2001 to September 2003 and as a director of UGC Europe from September 2003 to January 2004. He is the non-executive Chairman and a director of Hooper Industries Group, a privately held U.K. group consisting of: Hooper and Co (Coachbuilders) Ltd. (building special/ bodied Rolls Royce and Bentley motorcars) and Hooper Industries (China) (providing industrial products and components to Europe and the U.S.). Until 2002, Hooper Industries Group also held Metrocab UK (manufacturing London taxicabs) and Moscab (a joint venture with the Moscow city government, producing left-hand drive Metrocabs for Russia). Mr. Dick has held his positions with Hooper Industries Group since 1984. Mr. Dick is also a director of Austar United.
Bernard G. Dvorak c/o Liberty Media International, Inc. 12300 Liberty Boulevard Englewood, Colorado 80112		A director of UGC since November 2004. Mr. Dvorak has served as a director of various subsidiaries of UGC since January 2005. Mr. Dvorak has served as Senior Vice President and Controller of LMI since March 2004. From July 2002 until May 2004, Mr. Dvorak served as Senior Vice President, Chief Financial Officer and Treasurer of On Command Corporation, a subsidiary of Liberty. Mr. Dvorak was the Chief Executive Officer and member of the board of directors of Formus, a provider of fixed wireless services in Europe, from September 2000 until June 2002, and, from April 1999 until September 2000, he served as Chief Financial Officer of Formus.
Paul A. Gould Allen & Company L.L.C. 711 5th Avenue, 8th Floor New York, New York 10022		A director of UGC since January 2004. Mr. Gould has served as Managing Director of Allen & Company L.L.C., an investment banking services company, and has been associated with Allen & Company and its affiliates for more than the last five years. Mr. Gould is also a director of Ampco-Pittsburgh Corporation and Liberty.
Gary S. Howard		A director of UGC since January 2002. Mr. Howard served as Executive Vice President and Chief Operating Officer of Liberty from July 1998 to February 2004. Mr. Howard served as Chief Executive Officer of Liberty Satellite & Technology, Inc. from December 1996 to April 2000.
David B. Koff c/o Liberty Media International, Inc. 12300 Liberty Boulevard Englewood, Colorado 80112		A director of UGC since August 2003. Mr. Koff has served as Senior Vice President of LMI since March 2004. Mr. Koff served as a Senior Vice President of Liberty from February 1998 through March 2004.

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Name		Positions
John C. Malone c/o Liberty Media International, Inc. 12300 Liberty Boulevard Englewood, Colorado 80112		A director of UGC and its predecessors since November 1999. Mr. Malone has served as President, Chief Executive Officer, Chairman of the Board and a director of LMI since March 2004. Mr. Malone has served as Chairman of the Board of Liberty since 1990. Mr. Malone served as Chairman of the Board and a director of Liberty Satellite & Technology, Inc. from December 1996 to August 2000. Mr. Malone also served as Chairman of the Board of TCI from November 1996 to March 1999 and as Chief Executive Officer of TCI from January 1994 to March 1999. Mr. Malone is also a director of The Bank of New York, Cablevision Systems Corporation and Liberty.

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Amount and Nature of

Percent of

Voting

Name of Beneficial Owner

Title of Class

Beneficial Ownership

Class

Power

(In thousands)

Robert R. Bennett

UGC Class A

212

(1)(2)

*

*

LMI Series A

240

(3)(4)(5)

*

3.1

%

LMI Series B

732

(3)(5)

9.2

%

Charles H.R. Bracken

UGC Class A

3

(6)

*

*

LMI Series A

0

LMI Series B

0

John P. Cole, Jr.

UGC Class A

384

(7)

*

*

LMI Series A

1

*

*

LMI Series B

0

John W. Dick

UGC Class A

54

(8)

*

*

LMI Series A

0

LMI Series B

0

Bernard G. Dvorak

UGC Class A

3

(9)

*

*

LMI Series A

0

(10)

*

*

LMI Series B

0

Michael T. Fries

UGC Class A

2,502

(11)(12)

*

*

LMI Series A

0

LMI Series B

0

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						Amount and Nature of				Percent of				Voting
Name of Beneficial Owner		Title of Class				Beneficial Ownership				Class				Power
						(In thousands)
Paul A. Gould			UGC Class A				183	(13)			*				*
			LMI Series A				101	(14)			*				*
			LMI Series B				43				*
Gary S. Howard			UGC Class A				83	(15)			*				*
			LMI Series A				389	(16)(17)			*				*
			LMI Series B				0
David B. Koff			UGC Class A				0
			LMI Series A				65	(18)(19)(20)			*				*
			LMI Series B				0
John C. Malone			UGC Class A				95	(21)			*				*
			LMI Series A				953	(22)(23)(25)(26)			*				33.2	%
			LMI Series B				8,510	(22)(24)(26)			91.1	%
Gene M. Musselman			UGC Class A				53	(27)(28)			*				*
			LMI Series A				0
			LMI Series B				0
Shane O’Neill			UGC Class A				3	(6)
			LMI Series A				0
			LMI Series B				0
Gene W. Schneider			UGC Class A				2,046	(29)(30)			*				*
			UGC Class B				2,901	(31)			21.7	%
			LMI Series A				526	(32)(33)			*				*
			LMI Series B				0
Frederick G. Westerman III			UGC Class A				874	(34)			*				*
			LMI Series A				0
			LMI Series B				0
All directors and executive officers as a group			UGC Class A				6,497	(2)(12)(30)(35)			1.6	%			*
			UGC Class B				2,901	(31)			21.7	%
			LMI Series A				2,276	(3)(5)(17)(19)(22)			1.4	%			35.7	%
								(23)(24)(26)(32)(36)
			LMI Series B				9,285	(3)(5)(22)(24)			92.2	%
								(26)
LMI(37)			UGC Class A				35,829				9.0	%			91.0	%
			UGC Class B				10,493				100.0	%
			UGC Class C				377,462				99.4	%
Capital Research and Management Company(38)			UGC Class A				55,909				13.9	%			*
Credit Suisse First Boston(39)			UGC Class A				39,286				9.8	%			*
Oppenheimer Funds, Inc.(40)			UGC Class A				31,380				7.8	%			*

	*	Less than one percent.

	(1)	Includes 83,332 shares of UGC Class A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005.
	(2)	Includes 128,186 shares of UGC Class A common stock owned by Hilltop Investments, Inc., which is jointly owned by Mr. Bennett and his spouse.
	(3)	Includes 75,084 shares of LMI Series A common stock and 24 shares of LMI Series B common stock held by Hilltop Investments, Inc. which is jointly owned by Mr. Bennett and his spouse.
	(4)	Includes 1,577 shares of LMI Series A common stock held by the Liberty 401(k) Savings Plan.
	(5)	Includes 12,002 shares of LMI Series A common stock and 731,962 shares of LMI Series B common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005. Mr. Bennett has the right to convert the options to purchase shares of LMI Series B common stock into options to purchase shares of LMI Series A common stock.
	(6)	Includes 3,689 restricted shares of UGC Class A common stock that will vest within 60 days of March 31, 2005.

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	(7)	Includes 205,416 shares of UGC Class A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005.
	(8)	Includes 54,166 shares of UGC Class A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005.
	(9)	Includes 2,032 shares of UGC Class A common stock held by the UGC 401(k) Plan.

(10)	Includes 372 shares of LMI Series A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005.
(11)	Includes 2,468,500 shares of UGC Class A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005, 6,318 restricted shares of UGC Class A common stock that will vest within 60 days of March 31, 2005 and 8,744 shares of UGC Class A common stock held by the UGC 401(k) Plan.
(12)	Includes 210 shares of UGC Class A common stock held by his spouse.
(13)	Includes 33,333 shares of UGC Class A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005.
(14)	Includes 586 shares of LMI Series A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005.
(15)	Includes 83,332 shares of UGC Class A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005.
(16)	Includes 2,229 shares of LMI Series A common stock held by the Liberty 401(k) Savings Plan and 302,640 shares of LMI Series A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005.
(17)	Includes 20,940 shares of LMI Series A common stock held by a Grantor Retained Annuity Trust. Also includes 614 shares of LMI Series A common stock owned by his spouse of which Mr. Howard disclaims beneficial ownership and 11,108 shares of LMI Series A common stock held by a Grantor Retained Annuity Trust of which Mr. Howard disclaims beneficial ownership.
(18)	Includes 639 shares of LMI Series A common stock held by the Liberty 401(k) Savings Plan.
(19)	Includes 1,250 restricted shares of LMI Series A common stock, none of which were vested at March 31, 2005.
(20)	Includes 53,615 shares of LMI Series A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005.
(21)	Includes 95,416 shares of UGC Class A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005.
(22)	Includes 90,303 shares of LMI Series A common stock and 204,566 shares of LMI Series B common stock held by Mr. Malone’s spouse, as to which shares Mr. Malone has disclaimed beneficial ownership.
(23)	Includes 198 shares of LMI Series A common stock held by a trust with respect to which Mr. Malone is the sole trustee and, with his wife, Leslie Malone, retains a unitrust interest in the trust.
(24)	Includes 1,046,546 shares of LMI Series B common stock held by a trust with respect to which Mr. Malone is the sole trustee and holder of a unitrust interest in the trust.
(25)	Includes 46,907 shares of LMI Series A common stock held by the Liberty 401(k) Savings Plan.
(26)	Includes 221 shares of LMI Series A common stock and 2,072,577 shares of LMI Series B common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005. Mr. Malone has the right to convert options to purchase 504,015 shares of LMI Series B common stock into options to purchase shares of LMI Series A common stock.
(27)	Includes 8,533 shares of UGC Class A common stock held by the UGC 401(k) Plan.
(28)	Includes 40,000 shares of UGC Class A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005, and 3,689 restricted shares of UGC Class A common stock that will vest within 60 days of March 31, 2005.
(29)	Includes 1,766,341 shares of UGC Class A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005, and 10,404 shares of UGC Class A common stock held by the UGC 401(k) Plan.
(30)	Includes 712 shares of UGC Class A common stock held by a trust of which Mr. Schneider is a beneficiary and a trustee and 66 shares of UGC Class A common stock held by his spouse.

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(31)	Includes 2,900,702 shares of UGC Class B common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005.
(32)	Includes 199,261 shares of LMI Series A common stock held by G. Schneider Holdings, LLP of which Mr. Schneider is the general partner, 1,155 shares of LMI Series A common stock held by a trust of which Mr. Schneider is a beneficiary and a trustee, 1,577 shares of LMI Series A common stock held by his spouse, and an aggregate of 1,555 shares of LMI Series A common stock held by separate trusts for the benefit of his children and two of his grandchildren, respectively, of which Mr. Schneider is the sole trustee.
(33)	Includes 68 shares of LMI Series A common stock held by the UGC 401(k) Plan.
(34)	Includes 865,000 shares of UGC Class A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005, 2,305 restricted shares of UGC Class A common stock that will vest within 60 days of March 31, 2005, and includes 6,765 shares of UGC Class A common stock held by the UGC 401(k) Plan.
(35)	Includes 5,694,836 shares of UGC Class A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005, 19,690 restricted shares of UGC Class A common stock that will vest within 60 days of March 31, 2005, and 36,478 shares of UGC Class A common stock held by the UGC 401(k) Plan for the benefit of the directors and executive officers.
(36)	Includes 369,436 shares of LMI Series A common stock that are subject to options which were exercisable as of, or will be exercisable within 60 days of, March 31, 2005, 51,352 shares of LMI Series A common stock held by the Liberty 401(k) Savings Plan and 68 shares of LMI Series A common stock held by the UGC 401(k) Savings Plan.
(37)	The number of shares of UGC Class A common stock, UGC Class B common stock and UGC Class C common stock in the table is based upon Amendment No. 1 to the Schedule 13D dated January 17, 2005, filed by LMI. The address of LMI is 12300 Liberty Boulevard, Englewood, Colorado 80112. Robert R. Bennett, Bernard G. Dvorak, David B. Koff, and John C. Malone, all directors of UGC, are also officers and/or directors of LMI.
(38)	The number of shares of UGC Class A common stock in the table is based upon Amendment No. 8 to the Schedule 13G dated December 31, 2004, filed by Capital Research and Management Company and The Growth Fund of America, Inc. with respect to the UGC Class A common stock. Capital Research, an investment advisor, is the beneficial owner of 55,909,250 shares of UGC Class A common stock, as a result of acting as investment advisor to various investments companies, but disclaims beneficial ownership pursuant to Rule 13d-4. Growth Fund, an investment company advised by Capital Research, is the beneficial owner of 25,200,000 shares of UGC Class A common stock. The Schedule 13G reflects that Capital Research has no voting power over said shares and sole dispositive power over the shares of UGC Class A common stock and that Growth Fund has sole voting power over its shares but no dispositive power. The address of Capital Research and Growth Fund is 333 South Hope Street, Los Angeles, CA 90071.
(39)	The number of shares of UGC Class A common stock in the table is based upon a Schedule 13G dated December 31, 2004, filed by Credit Suisse First Boston on behalf of Credit Suisse First Boston business unit (“CSFB”). CSFB is a bank and provides financial advisory services and through Credit Suisse Asset Management provides asset management and investment advisory services. CSFB also filed as a parent holding company or control person. Its ultimate parent is Credit Suisse Group, which disclaims beneficial ownership of the shares reported by CSFB. The Schedule 13G reflects that CSFB has shared voting and shared dispositive powers over the UGC Class A common stock. The address of CSFB is: Uetlibergstrasse 231, P.O. Box 900, CH 8070 Zurich, Switzerland. The address of Credit Suisse Group is: Paradeplatz 8, P.O. Box 1, CH 8070 Zurich, Switzerland.
(40)	The number of shares of UGC Class A common stock in the table is based upon a Schedule 13G dated December 31, 2004, filed by OppenheimerFunds, Inc. OppenheimerFunds is an investment advisor and disclaims beneficial ownership pursuant to Rule 13d-4 of the Exchange Act of 1934. The Schedule 13G reflects that OppenheimerFunds has no voting power and shared dispositive power over the UGC Class A common stock. The address of OppenheimerFunds is 225 Liberty Street, 11th Floor, New York, NY 10018.

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						Amount and Nature of
						Beneficial Ownership				Percent of				Voting
Name of Beneficial Owner		Title of Class				(In thousands)				Class				Power
Robert R. Bennett			Liberty Global Series  A				285	(1)			*				2.1	%
			Liberty Global Series  B				732	(2)			9.2	%
Charles H.R. Bracken			Liberty Global Series  A				1	(3)			*				*
			Liberty Global Series  B				0
John P. Cole, Jr.			Liberty Global Series  A				84	(4)			*				*
			Liberty Global Series  B				0
John W. Dick			Liberty Global Series  A				12	(5)			*				*
			Liberty Global Series  B				0
Bernard G. Dvorak			Liberty Global Series  A				1	(6)			*				*
			Liberty Global Series  B				0
Michael T. Fries			Liberty Global Series  A				539	(7)			*				*
			Liberty Global Series  B				0
Paul A. Gould			Liberty Global Series  A				141	(8)			*				*
			Liberty Global Series  B				43				*
Gary S. Howard			Liberty Global Series  A				407	(9)			*				*
			Liberty Global Series  B				0
David B. Koff			Liberty Global Series  A				65	(10)			*				*
			Liberty Global Series  B				0
John C. Malone			Liberty Global Series  A				974	(11)			*				23.1	%
			Liberty Global Series  B				8,510	(12)			91.1	%
Gene M. Musselman			Liberty Global Series  A				12	(13)			*				*
			Liberty Global Series  B				0
Shane O’Neill			Liberty Global Series  A				1	(3)
			Liberty Global Series  B				0
Gene W. Schneider			Liberty Global Series  A				1,592	(14)			*				*
			Liberty Global Series  B				0

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						Amount and Nature of
						Beneficial Ownership				Percent of				Voting
Name of Beneficial Owner		Title of Class				(In thousands)				Class				Power
Frederick G. Westerman III			Liberty Global Series  A				188	(15)			*				*
			Liberty Global Series  B				0
All directors and executive officers as a group			Liberty Global Series  A				4,301	(16)			1.7	%			27.9	%
			Liberty Global Series  B				9,285	(17)			92.2	%

	*	Less than one percent.

	(1)	See footnotes 1, 2, 3, 4 and 5 in “Executive Officer, Directors and Principal Stockholders of UGC — Security Ownership of Certain Beneficial Owners and Management.”
	(2)	See footnotes 3 and 5 in “Executive Officer, Directors and Principal Stockholders of UGC — Security Ownership of Certain Beneficial Owners and Management.”
	(3)	See footnote 6 in “Executive Officer, Directors and Principal Stockholders of UGC — Security Ownership of Certain Beneficial Owners and Management.”
	(4)	See footnote 7 in “Executive Officer, Directors and Principal Stockholders of UGC — Security Ownership of Certain Beneficial Owners and Management.”
	(5)	See footnote 8 in “Executive Officer, Directors and Principal Stockholders of UGC — Security Ownership of Certain Beneficial Owners and Management.”
	(6)	See footnotes 9 and 10 in “Executive Officer, Directors and Principal Stockholders of UGC — Security Ownership of Certain Beneficial Owners and Management.”
	(7)	See footnotes 11 and 12 in “Executive Officer, Directors and Principal Stockholders of UGC — Security Ownership of Certain Beneficial Owners and Management.”
	(8)	See footnotes 13 and 14 in “Executive Officer, Directors and Principal Stockholders of UGC — Security Ownership of Certain Beneficial Owners and Management.”
	(9)	See footnotes 15, 16 and 17 in “Executive Officer, Directors and Principal Stockholders of UGC — Security Ownership of Certain Beneficial Owners and Management.”

(10)	See footnotes 18, 19 and 20 in “Executive Officer, Directors and Principal Stockholders of UGC — Security Ownership of Certain Beneficial Owners and Management.”
(11)	See footnotes 21, 22, 23, 25 and 26 in “Executive Officer, Directors and Principal Stockholders of UGC — Security Ownership of Certain Beneficial Owners and Management.”
(12)	See footnotes 22, 24 and 26 in “Executive Officer, Directors and Principal Stockholders of UGC — Security Ownership of Certain Beneficial Owners and Management.”
(13)	See footnotes 27 and 28 in “Executive Officer, Directors and Principal Stockholders of UGC — Security Ownership of Certain Beneficial Owners and Management.”
(14)	See footnotes 29, 30, 31, 32 and 33 in “Executive Officer, Directors and Principal Stockholders of UGC — Security Ownership of Certain Beneficial Owners and Management.”
(15)	See footnote 34 in “Executive Officer, Directors and Principal Stockholders of UGC — Security Ownership of Certain Beneficial Owners and Management.”
(16)	See footnotes 2, 3, 5, 12, 17, 19, 22, 23, 24, 26, 30, 31, 32, 35 and 36 in “Executive Officer, Directors and Principal Stockholders of UGC — Security Ownership of Certain Beneficial Owners and Management.”
(17)	See footnotes 3, 5, 22, 24 and 26 in “Executive Officer, Directors and Principal Stockholders of UGC — Security Ownership of Certain Beneficial Owners and Management.”

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		Approximate
		Amount of Cash
Name of Beneficial Owner		Consideration
Robert R. Bennett		$	1,232,639
Charles H.R. Bracken		$	35,341
John P. Cole, Jr.*		$	1,710,835
John W. Dick*			—
Bernard G. Dvorak		$	28,740
Michael T. Fries		$	320,930
Paul A. Gould*		$	1,433,810
Gary S. Howard			—
David B. Koff			—
John C. Malone			—
Gene M. Musselman		$	124,540
Shane O’Neill			—
Gene W. Schneider		$	2,681,988
Frederick G. Westerman III		$	86,220
All directors and executive officers as a group		$	7,655,043

*	Member of the Special Committee

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	Voting Rights

	Dividends; Liquidation

	Conversion

	Distributions

	•	a share distribution (1) consisting of shares of Liberty Global Series A common stock (or securities convertible therefor) to holders of Liberty Global Series A common stock, Liberty Global Series B common stock and

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		Liberty Global Series C common stock, on an equal per share basis; or (2) consisting of shares of Liberty Global Series B common stock (or securities convertible therefor) to holders of Liberty Global Series A common stock, Liberty Global Series B common stock and Liberty Global Series C common stock, on an equal per share basis; or (3) consisting of shares of Liberty Global Series C common stock (or securities convertible therefor) to holders of Liberty Global Series A common stock, Liberty Global Series B common stock and Liberty Global Series C common stock, on an equal per share basis; or (4) consisting of shares of Liberty Global Series A common stock (or securities convertible therefor) to holders of Liberty Global Series A common stock and, on an equal per share basis, shares of Liberty Global Series B common stock (or securities convertible therefor) to holders of Liberty Global Series B common stock and, on an equal per share basis, shares of Liberty Global Series C common stock (or securities convertible therefor) to holders of Liberty Global Series C common stock; and
	•	a share distribution consisting of shares of any class or series of securities of Liberty Global or any other person, other than Liberty Global Series A common stock, Liberty Global Series B common stock or Liberty Global Series C common stock (or securities convertible therefor) on the basis of a distribution of (1) identical securities, on an equal per share basis, to holders of Liberty Global Series A common stock, Liberty Global Series B common stock and Liberty Global Series C common stock; or (2) separate classes or series of securities, on an equal per share basis, to holders of Liberty Global Series A common stock, Liberty Global Series B common stock and Liberty Global Series C common stock; or (3) a separate class or series of securities to the holders of one or more series of Liberty Global’s common stock and, on an equal per share basis, a different class or series of securities to the holders of all other series of Liberty Global’s common stock, provided that, in the case of (2) or (3) above, the securities so distributed do not differ in any respect other than their relative voting rights and related differences in designation, conversion and share distribution provisions, with the holders of shares of Liberty Global Series B common stock receiving securities of the class or series having the highest relative voting rights and the holders of shares of each other series of Liberty Global’s common stock receiving securities of the class or series having lesser relative voting rights, and provided further that, if different classes or series of securities are being distributed to holders of Liberty Global Series A common stock and Liberty Global Series C common stock, then such securities shall be distributed either as determined by Liberty Global’s board of directors or such that the relative voting rights of the securities of the class or series of securities to be received by the holders of Liberty Global Series A common stock and Liberty Global Series C common stock corresponds, to the extent practicable, to the relative voting rights of each such series of Liberty Global’s common stock, and provided further that, in each case, the distribution is otherwise made on a equal per share basis.

	Liquidation and Dissolution

	•	the designation of the series;
	•	the number of authorized shares of the series, which number Liberty Global’s board may thereafter increase or decrease but not below the number of such shares then outstanding;
	•	the dividend rate or amounts, if any, payable on the shares and, in the case of cumulative dividends, the date or dates from which dividends on all shares of the series shall be cumulative and the relative preferences or rights of priority or participation with respect to such dividends;
	•	the rights of the series in the event of Liberty Global’s voluntary or involuntary liquidation, dissolution or winding up and the relative preferences or rights of priority of payment;

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	•	the rights, if any, of holders of the series to convert into or exchange for other classes or series of stock or indebtedness and the terms and conditions of any such conversion or exchange, including provision for adjustments within the discretion of Liberty Global’s board;
	•	the voting rights, if any, of the holders of the series;
	•	the terms and conditions, if any, for us to purchase or redeem the shares; and
	•	any other relative rights, preferences and limitations of the series.

	Board of Directors

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	No Shareowner Action by Written Consent; Special Meetings

	Advance Notice Procedures

	(1) with respect to an annual meeting of Liberty Global stockholders that is called for a date not more than 30 days before or 70 days after the anniversary date of the immediately preceding annual meeting of Liberty Global stockholders, such notice shall be given no earlier than the close of business on the 120th day prior to such anniversary and no later than the close of business on the 90th day prior to such anniversary;
	(2) with respect to an annual meeting of Liberty Global stockholders that is called for a date which is more than 30 days before or 70 days after the anniversary date of the immediately preceding annual meeting of Liberty Global stockholders, such notice shall be given no earlier than the close of business on the 120th day prior to the current annual meeting and not later than the close of business on the later of (A) the 90th day prior to the current annual meeting or (b) the 10th day following the day on which Liberty Global first publicly announces the date of the current annual meeting; and
	(3) with respect to an election to be held at a special meeting of Liberty Global stockholders, not earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting.

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	Amendments

	Supermajority Voting Provisions

	•	Liberty Global’s merger or consolidation with or into any other corporation, provided, that the foregoing voting provision shall not apply to any such merger or consolidation (1) as to which the laws of the State of Delaware, as then in effect, do not require the consent of Liberty Global stockholders, or (2) that at least 75% of the members of Liberty Global’s board of directors then in office have approved;
	•	the sale, lease or exchange of all, or substantially all, of Liberty Global’s assets, provided, that the foregoing voting provisions shall not apply to any such sale, lease or exchange that at least 75% of the members of Liberty Global’s board of directors then in office have approved; or
	•	Liberty Global’s dissolution, provided, that the foregoing voting provision shall not apply to such dissolution if at least 75% of the members of Liberty Global’s board of directors then in office have approved such dissolution.

140

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LMI		UGC		Liberty Global
The authorized capital stock of LMI consists of (i) 1,050,000,000 shares of common stock, par value $.01 per share, of which 500,000,000 shares are designated LMI Series A common stock 50,000,000 shares are designated LMI Series B common stock and 500,000,000 shares are designated LMI Series C common stock and (ii) 50,000,000 shares of LMI preferred stock, par value $.01 per share. LMI’s restated certificate of incorporation authorizes the board of directors to authorize the issuance of one or more series of preferred stock.		The authorized capital stock of UGC consists of (i) 2,400,000,000 shares of UGC common stock, par value $.01 per share, of which 1,000,000,000 shares are designated UGC Class A common stock, 1,000,000,000 shares are designated UGC Class B common stock and 400,000,000 shares are designated UGC Class C common stock and (ii) 10,000,000 shares of UGC preferred stock, par value $.01 per share. UGC’s amended and restated certificate of incorporation authorizes the board of directors to authorize the issuance of one or more series of preferred stock.		Same as LMI.

LMI		UGC		Liberty Global
Under LMI’s restated certificate of incorporation, holders of LMI Series A common stock are entitled to one vote for each share of such stock held, and holders of LMI Series B common stock are entitled to ten votes for each share of such stock held, on all matters submitted to a vote of LMI stockholders at any annual or special meeting. Holders of LMI Series C common stock are not entitled to any voting powers, except as required by Delaware law (in which case holders		Under UGC’s amended and restated certificate of incorporation, holders of UGC Class A common stock are entitled to one vote for each share of such stock held, holders of UGC Class B common stock are entitled to ten votes for each share of such stock held and holders of Class C common stock are entitled to ten votes for each share of such stock held.		Same as LMI.

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LMI		UGC		Liberty Global
of LMI Series C common stock are entitled to 1/100th of a vote per share).

LMI		UGC		Liberty Global
Under Delaware law, stockholders of a Delaware corporation do not have the right to cumulate their votes in the election of directors, unless that right is granted in the certificate of incorporation of the corporation. LMI’s restated certificate of incorporation does not permit cumulative voting by LMI stockholders.		Same as LMI.		Same as LMI.

LMI		UGC		Liberty Global
LMI’s board of directors has eight members. LMI’s restated certificate of incorporation provides that the minimum number of directors is three, and that the actual number of directors may be fixed by the board of directors.		UGC’s board of directors has ten members. UGC’s amended and restated certificate of incorporation provides that the number of directors shall not be fewer than nine nor more than twelve, and that the actual number of directors may be fixed by the board of directors.		Liberty Global’s board of directors initially will have ten members. Liberty Global’s restated certificate of incorporation and bylaws will provide that the minimum number of directors is three, and that the actual number of directors may be fixed by the board of directors.

LMI		UGC		Liberty Global
LMI’s restated certificate of incorporation provides that its board of directors is divided into three classes of directors with each class being elected to a staggered three-year term.		Same as LMI.		Same as LMI.

LMI		UGC		Liberty Global
Under LMI’s restated certificate of incorporation, a director may be removed from office only for cause upon the affirmative vote of the holders of a majority of the aggregate voting power of the outstanding shares of LMI Series A common stock, LMI Series B common stock and any series of preferred stock entitled to vote upon matters that may be submitted to an LMI stockholder vote.		Under UGC’s amended and restated certificate of incorporation, any and all directors may be removed from the board of directors with or without cause upon the affirmative vote of holders of at least 662/3% of the aggregate combined voting power of the UGC Class A common stock, UGC Class B common stock and UGC Class C common stock, voting together as a single class.		Same as LMI.

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LMI		UGC		Liberty Global
LMI’s restated certificate of incorporation provides that vacancies resulting from death, resignation, removal, disqualification or other cause, and newly created directorships resulting from any increase in the number of directors on the board of directors, shall be filled only by the affirmative vote of a majority of the remaining directors then in office.		UGC’s amended and restated certificate of incorporation provides that any newly created directorship resulting from an increase in the number of directors or any other vacancy, however caused, shall be filled by a majority of the directors then in office.		Same as LMI.

LMI		UGC		Liberty Global
Under Delaware law, a corporation may include in its certificate of incorporation a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director; however, the provision may not eliminate or limit the liability of a director for a breach of the duty of loyalty, acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, unlawful payments of dividends, certain stock repurchases or redemptions or any transaction from which the director derived an improper personal benefit. LMI’s restated certificate of incorporation limits the personal liability of LMI directors for monetary damages for breach of fiduciary duty as a director to the fullest extent permitted by Delaware law.		Same as LMI.		Same as LMI.

LMI		UGC		Liberty Global
Delaware law provides that, subject to certain limitations in the case of derivative suits brought by a corporation’s stockholders in its name, a corporation may indemnify any person who is made a party to any third-party action, suit or proceeding (other than an action by or in the right of the corporation) on account of being a current or former director, officer, employee or agent of the corporation (or is or was		Same as LMI.		Same as LMI.

143

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LMI		UGC		Liberty Global
serving at the request of the corporation in such capacity for another corporation, partnership, joint venture, trust or other enterprise) against expenses, including attorney’s fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with the action, suit or proceeding through, among other things, a majority of directors who were not parties to the suit or proceeding, if the person (i) acted in good faith and in a manner reasonably believed to be in the best interests of the corporation (or in some circumstances, at least not opposed to its best interests), and (ii) in a criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. Delaware corporate law also permits indemnification by a corporation under similar circumstances for expenses (including attorneys’ fees) actually and reasonably incurred by such persons in connection with the defense or settlement of a derivative action or suit, except that no indemnification may be made in respect of any claim, issue or matter as to which the person is adjudged to be liable to the corporation unless the Delaware Court of Chancery or the court in which the action or suit was brought determines upon application that the person is fairly and reasonably entitled to indemnity for the expenses which the court deems to be proper. To the extent that a current or former director, officer, employee or agent is successful in the defense of such an action, suit or proceeding, the corporation is required by Delaware corporate law to indemnify such person for reasonable expenses incurred thereby. Expenses (including attorneys’ fees) incurred by such persons in defending any action, suit or proceeding may be paid in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of that

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LMI		UGC		Liberty Global
person to repay the amount if it is ultimately determined that person is not entitled to be so indemnified. LMI’s restated certificate of incorporation provides for (i) the indemnification of its current or former directors and officers to the fullest extent permitted by law, and (ii) the prepayment of expenses (including attorneys’ fees) upon receipt of an undertaking to repay such amounts if it is ultimately determined that the director or officer is not entitled to indemnification.

LMI		UGC		Liberty Global
LMI’s restated certificate of incorporation specifically denies LMI stockholders the power to consent in writing, without a meeting, to the taking of any action.		UGC’s amended and restated Certificate of incorporation allows UGC stockholders to take action by written consent.		Same as LMI.

LMI		UGC		Liberty Global
LMI’s restated certificate of incorporation requires, for the amendment, alteration or repeal of any provision of or the addition or insertion of any provision in LMI’s restated certificate of incorporation, the affirmative vote of the holders of at least 80% of the aggregate voting power of the outstanding shares of LMI Series A common stock, LMI Series B common stock and any series of preferred stock entitled to vote upon matters submitted to a stockholder vote, unless the amendment (i) is not required to be approved by LMI stockholders under Delaware Law or (ii) has been approved by 75% of the LMI directors then in office.		UGC’s amended and restated certificate of incorporation requires the affirmative vote of the holders of 662/3% of the aggregate voting power of the outstanding UGC common stock, voting together as a single class, to amend, alter, repeal or adopt provisions of the amended and restated certificate of incorporation relating to the following matters: (1) the classification of directors, (2) the election of directors, (3) the term of office of directors, (4) the filling of vacant directorships, (5) the removal of directors, (6) the nominations of directors, (7) the calling of special meetings of stockholders, (8) requirements concerning amendments to the bylaws and (9) requirements concerning amendments to the amended and restated certificate of incorporation. The items listed under (1) through (6) also require the affirmative vote of the holders of a majority of the voting power of the outstanding UGC Class C common stock, voting separately.		Same as LMI.

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LMI		UGC		Liberty Global
Delaware law provides that stockholders have the power to amend the bylaws of a corporation unless the certificate of incorporation grants such power to the board of directors, in which case either the stockholders or the board of directors may amend the bylaws. LMI’s restated certificate of incorporation authorizes the board of directors, by the affirmative vote of not less than 75% of the directors then in office, to adopt, amend or repeal any provision of the bylaws.		Delaware law provides that stockholders shall have the power to amend the bylaws of a corporation unless the certificate of incorporation grants such power to the board of directors, in which case either the stockholders or the board of directors may amend the bylaws. UGC’s amended and restated certificate of incorporation provides that the board of directors has the power to adopt, alter, amend or repeal the bylaws of UGC by a vote of the majority of the directors then in office. The holders of shares of outstanding equity securities of UGC entitled to vote in the election of directors, to the extent such power is conferred on them by application of law, also have the power to adopt, alter, amend or repeal the bylaws of UGC if approved by at least 662/3% of the aggregate voting power of the outstanding UGC common stock, voting together as a single class.		Same as LMI.

LMI		UGC		Liberty Global
LMI’s restated certificate of incorporation and bylaws provide that the secretary may call special meetings of the stockholders, only at the request of 75% of the members of the board of directors then in office.		UGC’s bylaws provide that special meetings may be called only (i) by the board of directors pursuant to a resolution approved by a majority of the directors then in office, (ii) by the chairman of the board of directors or (iii) at the request of holders of common stock representing a majority of the aggregate voting power of the outstanding equity securities entitled to vote in the election of director.		Same as LMI.

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LMI		UGC		Liberty Global
Under Delaware law, a sale or other disposition of all or substantially all of a corporation’s assets, a merger or consolidation of a corporation with another corporation or a dissolution of a corporation requires the affirmative vote of the corporation’s board of directors (except in limited circumstances) plus, with limited exceptions, the affirmative vote of a majority of the outstanding stock entitled to vote on the transaction. LMI’s restated certificate of incorporation requires the affirmative vote of holders of at least 80% of the aggregate voting power of the outstanding shares of LMI Series A common stock, LMI Series B common stock and any series of preferred stock entitled to vote upon matters submitted to an LMI stockholder vote to authorize: (i) a merger or consolidation with and into any other corporation, unless (a) the laws of the state of Delaware do not require stockholder consent or (b) 75% of the members of the board of directors have approved the merger or consolidation, (ii) the sale, lease or exchange of all, or substantially all, assets of LMI, unless 75% of the members of the board of directors then in office have approved the transaction or (iii) the dissolution of LMI, unless 75% of the members of the board of directors then in office have approved the dissolution.		Under Delaware law, a sale or other disposition of all or substantially all of a corporation’s assets, a merger or consolidation of a corporation with another corporation or a dissolution of a corporation requires the affirmative vote of the corporation’s board of directors (except in limited circumstances) plus, with limited exceptions, the affirmative vote of a majority of the outstanding stock entitled to vote on the transaction. UGC’s amended and restated certificate of incorporation and bylaws include no additional provisions in this regard, and the Delaware law applies without modification.		Same as LMI.

LMI		UGC		Liberty Global
Subject to certain exceptions, Section 203 of the Delaware corporate statute generally prohibits public corporations from engaging in significant business transactions, including mergers, with a holder of 15% or more of the corporation’s stock, referred to as an interested stockholder, for a period of three years after the interested stockholder becomes an interested stockholder, unless the certificate of incorporation contains a provision expressly		Same as LMI.		Same as LMI.

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LMI		UGC		Liberty Global
electing not to be governed by such a section. LMI’s restated certificate of incorporation expressly elects not to be governed by Section 203.

LMI		UGC		Liberty Global
Under LMI’s bylaws, for director nominations or other business to be properly brought before an LMI annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of LMI and any such proposed business other than the nominations of persons for election to the board of directors, must constitute a proper matter for stockholder action. To be timely, a stockholder’s notice must be delivered to the Secretary at the principal executive offices of LMI not later than the close of business on the ninetieth (90th) day nor earlier than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the preceding year’s annual meeting (provided, however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than seventy (70) days after such anniversary date, notice by the stockholder must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by LMI).		Under UGC’s bylaws, for director nominations or other business to be properly brought before a UGC annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of UGC and any such proposed business other than the nominations of persons for election to the board of directors, must constitute a proper matter for stockholder action. To be timely, a stockholder’s notice must be delivered to the Secretary at the principal executive offices of UGC not later than the close of business on the ninetieth (90th) day nor earlier than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the preceding year’s annual meeting (provided, however, that in the event that the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year’s annual meeting, notice by the stockholder must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by UGC).		Same as LMI.

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	•	0.2155 of a share of Liberty Global Series A common stock (plus cash in lieu of any fractional share interest) (the stock election); or
	•	$9.58 in cash, without interest (the cash election).

149

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150

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151

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													Pro forma																Pro forma
					Historical								(Consummated Transactions)																(Proposed Mergers)
													Adjustments —
													increase (decrease)
																													Adjustments —				Liberty
													Super Media/				UPC Broadband				TyC/				As				increase				Global
					LMI				J-COM				J-COM				France				FPAS				adjusted				(decrease)				as adjusted
					as restated*
					amounts in thousands
Assets:
Cash and cash equivalents					$	2,531,486				101,749				—				(122,876	)(5)			13,601	(6)			2,523,960				(11,000	)( 7)			2,512,960
Receivables and other current assets						661,097				165,535				—				—				—				826,632				—				826,632
Investments and related receivables						2,704,250				65,178				(2,517	)(1)			—				(22,667	)(6)			1,694,293				—				1,694,293
														(1,049,951	)(2)
Property and equipment, net						4,303,099				2,441,196				—				—				—				6,744,295				—				6,744,295
Intangible assets not subject to amortization						2,897,953				1,373,486				501,799	(3)			29,348	(5)			—				4,802,586				2,357,519	(7)			7,160,105
Other assets						604,478				142,392				—				—				7,940	(6)			754,810				—				754,810
		Total assets			$	13,702,363				4,289,536				(550,669	)			(93,528	)			(1,126	)			17,346,576				2,346,519				19,693,095
Liabilities and Stockholders’ Equity:
Current liabilities					$	1,421,092				375,794				(2,517	)(1)			—				—				1,794,369				—				1,794,369
Debt, excluding current portion						4,955,919				2,112,722				—				—				—				7,068,641				—				7,068,641
Deferred income tax liabilities, excluding current portion						458,138				—				—				—				—				458,138				—				458,138
Other liabilities						409,998				440,371				—				—				—				850,369				—				850,369
		Total liabilities				7,245,147				2,928,887				(2,517	)			—				—				10,171,517				—				10,171,517
Minority interests in subsidiaries						1,216,710				9,513				802,984	(4)			(93,528	)(5)			(2,801	)(6)			1,932,878				(1,112,310	)(7)			820,568
Stockholders’ Equity:
	Common stock					1,758				—				—				—				—				1,758				(1,758	)(7)			2,517
																														2,517	(7)
	Additional paid-in capital					7,001,635				—				—				—				—				7,001,635				3,330,180	(7)			10,331,815
	Accumulated deficit					(1,649,007	)			—				—				—				(53,884	)(6)			(1,702,891	)			—				(1,702,891	)
	Accumulated other comprehensive loss, net of taxes					14,010				—				—				—				55,559	(6)			69,569				—				69,569
	Treasury stock					(127,890	)			—				—				—				—				(127,890	)			127,890	(7)			—
	J-COM equity					—				1,351,136				(1,351,136	)(2)			—				—				—				—				—
		Total stockholders’ equity				5,240,506				1,351,136				(1,351,136	)			—				1,675				5,242,181				3,458,829				8,701,010
			Total liabilities and stockholders’ equity		$	13,702,363				4,289,536				(550,669	)			(93,528	)			(1,126	)			17,346,576				2,346,519				19,693,095

*	See note 23 to the consolidated financial statements of LMI, included elsewhere herein.

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																Pro forma																				Pro forma
				Historical												(Consummated Transactions)																				(Proposed Mergers)
																Adjustments —
																increase (decrease)
																				UPC				Super												Adjustments —				Liberty
																				Broadband				Media/				TyC/				As				increase				Global as
				LMI				Noos**				J-COM				Noos**				France				J-COM				FPAS				adjusted				(decrease)				adjusted
				as restated*
				amounts in thousands
Revenue				$	2,644,284				199,880				1,504,709				—				—				—				—				4,348,873				—				4,348,873
Operating, selling, general and administrative expenses					(1,756,136	)			(147,126	)			(915,112	)			—				—				—				—				(2,818,374	)			—				(2,818,374	)
Stock compensation					(142,762	)			—				(783	)			—				—				—				—				(143,545	)			—				(143,545	)
Depreciation and amortization					(960,888	)			(73,052	)			(378,868	)			(2,978	)(8)			—				—				—				(1,415,786	)			—				(1,415,786	)
Other operating expenses					(98,371	)			—				—				—				—				—				—				(98,371	)			—				(98,371	)
	Operating income (loss)				(313,873	)			(20,298	)			209,946				(2,978	)			—				—				—				(127,203	)			—				(127,203	)
Other income (expense):
	Interest expense				(307,015	)			(40,394	)			(94,958	)			37,702	(9)			—				9,428	(13)			—				(395,237	)			—				(395,237	)
	Share of earnings of affiliates, net				38,710				—				5,677				—				—				(45,092	)(14)			23,488	(14)			22,783				—				22,783
	Gain on exchange of investment security				178,818				—				—				—				—				—				—				178,818				—				178,818
	Gain on extinguishment of debt				35,787				—				—				—				—				—				—				35,787				—				35,787
	Other, net				164,730				727				337				—				—				(9,428	)(13)			—				156,366				—				156,366
					111,030				(39,667	)			(88,944	)			37,702				—				(45,092	)			23,488				(1,483	)			—				(1,483	)
		Earnings (loss) before income tax and minority interest			(202,843	)			(59,965	)			121,002				34,724				—				(45,092	)			23,488				(128,686	)			—				(128,686	)
Income tax benefit (expense)					17,449				(101	)			(17,315	)			—	(10)			—	(10)			15,640	(10)			—	(10)			15,673				—	(10)			15,673
Minority interests in losses (earnings) of subsidiaries					167,336				—				(4,231	)			11,759	(11)			(3,844	) (12)			(54,251	)(15)			—				116,769				(179,433	)(16)			(62,664	)
	Net earnings (loss)			$	(18,058	)			(60,066	)			99,456				46,483				(3,844	)			(83,703	)			23,488				3,756				(179,433	)			(175,677	)
Earnings (loss) per common share				$	(0.11	)																											0.02								(0.70	)
Weighted average shares outstanding (17)					162,481																												162,481								251,726

*	See note 23 to the consolidated financial statements of LMI, included elsewhere herein.

**	For the 6 months ended June 30, 2004.

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	(1)	Represents the elimination of intercompany balances between LMI and J-COM.
	(2)	Represents the elimination of LMI’s equity method investment in J-COM and the elimination of J-COM’s stockholders’ equity.
	(3)	Represents the increase in goodwill for the aggregate amount of the excess of Super Media’s investment in J-COM over its proportionate share of J-COM’s equity. Super Media’s investment in J-COM was originally recorded at the respective historical cost bases of LMI and Sumitomo on the date that their J-COM interests were combined in Super Media.
	(4)	Represents the minority interests in Super Media and J-COM, as set forth below (amounts in thousands):

Minority interest in J-COM		$	480,457
Minority interest in Super Media			322,527
		$	802,984

	(5)	Represents the adjustments required to reflect the acquisition of the remaining 19.9% minority interest in UPC Broadband France for a cash payment of €90,105,000 ($122,876,000 at April 1, 2005). For purposes of these unaudited condensed pro forma combined financial statements, it has been assumed that the historical cost of UPC Broadband France’s existing assets and liabilities approximate their fair value. Accordingly, the excess purchase price, after the elimination of the carrying value of the UPC Broadband France minority interest, has been allocated to goodwill. Consistent with the requirements of Statement of Financial Accounting No. 142, Goodwill and Other Intangible Assets (Statement 142), the unaudited condensed pro forma combined statements of operations do not reflect any amortization of this goodwill. The final allocation of the purchase price will be based upon appraisals and may result in the allocation of consideration to identifiable assets and liabilities, including assets with definitive lives. To the extent that consideration is allocated to assets with definitive lives, the final allocation of the purchase price could result in additional depreciation and or amortization expense that in turn would result in higher operating losses, net losses and net loss per share in subsequent periods. For example, if the entire excess consideration of $29,348,000 had been allocated to property and equipment that had a weighted average life of 10 years, the accompanying unaudited condensed pro forma combined statements of operations of Liberty Global for the year ended December 31, 2004 would have reflected increases in (i) the pro forma operating loss and pro forma net loss of $2,935,000; and (ii) the pro forma loss per share of $0.01.
	(6)	On April 29, 2005, LMI sold its entire equity interest in FPAS, and a $4 million convertible subordinated note issued by FPAS, to another unaffiliated member of FPAS for a cash purchase price of $5,000,000. In addition, LMI’s majority owned subsidiary, LPA LLC, sold its entire equity interest in TyC to an unrelated entity for total consideration of $20,940,000, consisting of $13,000,000 in cash and a $7,940,000 secured promissory note issued by FPAS and assigned to LMI by the purchaser. The minority owner of LPA LLC is entitled to approximately $4,399,000 of the total consideration received in connection with the sale of TyC. At December 31, 2004, the carrying value of LMI’s investment in (i) the equity of TyC was $18,000,000 and (ii) the debt and equity of FPAS was $4,667,000. In addition, cumulative foreign currency translation losses related to TyC of $86,446,000, net of related taxes of $30,887,000, were included in accumulated other comprehensive earnings, net of taxes at

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		December 31, 2004. The adjustments required to the unaudited condensed pro forma combined balance sheet to account for the disposition of LMI’s interests in TyC & FPAS are as follows:

		TyC				FPAS				Total
		amounts in thousands
Record cash consideration allocable to LMI		$	8,601				5,000				13,601
Record promissory note from FPAS			7,940				—				7,940
Eliminate investments in TyC and FPAS			(18,000	)			(4,667	)			(22,667	)
Eliminate cumulative foreign currency translation losses related to TyC, net of taxes, from accumulated comprehensive earnings			(55,559	)			—				(55,559	)
Adjust minority interest in LPA LLC to zero			2,801				—				2,801
Record decrease (increase) in accumulated deficit resulting from nonrecurring gain (loss) incurred in connection with the dispositions		$	(54,217	)			333				(53,884	)

	The increase to LMI’s accumulated deficit presented above, which is directly attributable to the disposition of TyC and FPAS, has not been reflected in the unaudited condensed pro forma combined statement of operations due to its nonrecurring nature.

	(7)	Represents the adjustments required to reflect the Proposed Mergers, including adjustments to (i) record the issuance of 244,462,021 Liberty Global Series A shares and 7,264,300 Liberty Global Series B shares in connection with the Proposed Mergers, (ii) eliminate the minority interests in UGC’s equity, (iii) record the preliminary allocation of the step acquisition purchase price, (iv) eliminate LMI’s common stock and treasury stock, and (v) reflect the payment of $11,000,000 of direct acquisition costs. The number of shares assumed to be issued in connection with the proposed mergers is based upon (A) the number of issued and outstanding shares of LMI and UGC common stock as of December 31, 2004, and (B) the assumption that all UGC stockholders (other than LMI and its wholly owned subsidiaries) will make an election to receive shares of Liberty Global Series A common stock.

As discussed in the headnote to these unaudited condensed pro forma combined financial statements, UGC stockholders (other than LMI and its wholly owned subsidiaries) may make a stock or cash election. Stockholders who make the cash election will be subject to proration so that, in the aggregate, the cash consideration paid to UGC stockholders does not exceed 20% of the aggregate value of the merger consideration payable to UGC public stockholders. The accompanying unaudited condensed pro forma combined balance sheet and statements of operations for Liberty Global assume that all UGC stockholders (other than LMI and its wholly owned subsidiaries) make the stock election. A comparison of the preliminary purchase price calculation and allocation assuming UGC stockholders (other than LMI and its wholly owned subsidiaries) receive (i) all stock consideration or (ii) 80% stock and 20% cash consideration is set forth below (dollar amounts in thousands):

							80% stock and
			All Stock				20% cash (d)
Liberty Global Series A shares issued to UGC public stockholders(a):				78,947,059				63,157,647
Fair value of shares issued(b)			$	3,458,829				2,767,063
Cash consideration				—				701,914
Estimated direct acquisition costs				11,000				11,000
	Total purchase price			3,469,829				3,479,977
Eliminate minority interest in UGC				(1,112,310	)			(1,112,310	)
Allocate residual to goodwill(c)			$	2,357,519				2,367,667

	(a)	Represents the number of shares that would have been issued to UGC stockholders (other than LMI and its wholly owned subsidiaries) based upon the number of shares of UGC common stock that were issued and outstanding on December 31, 2004. The actual number of shares issued in the Proposed Mergers will depend on

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		the number of shares of UGC common stock outstanding on the closing date and the portion of the consideration that is paid in Liberty Global shares.
	(b)	The fair value of the shares issued is based upon a fair value of $43.812 per share, which is the average of the quoted market price of LMI Series A common stock for the period beginning two trading days before and ending two trading days after the date that the Proposed Mergers were announced (January 18, 2004).
	(c)	For purposes of these unaudited condensed pro forma combined financial statements, it has been assumed that the historical cost of UGC’s existing assets and liabilities approximate their fair value. Accordingly, the excess purchase price after the elimination of the UGC minority interest has been allocated to goodwill. Consistent with the requirements of Statement 142, the unaudited condensed pro forma combined statements of operations do not reflect any amortization of this goodwill. The final allocation of the purchase price will be based upon appraisals and may result in the allocation of consideration to identifiable assets and liabilities, including assets with definitive lives. To the extent that consideration is allocated to assets with definitive lives, the final allocation of the purchase price could result in additional depreciation and or amortization expense that in turn would result in higher operating losses, net losses and net loss per share in subsequent periods. For example, if $500 million of the excess consideration had been allocated to property and equipment that had a weighted average life of 10 years, the accompanying unaudited condensed pro forma combined statements of operations of Liberty Global for the year ended December 31, 2004 would have reflected increases in, (i) the pro forma operating loss of $50,000,000; (ii) the pro forma net loss of $32,135,000 (based upon LMI’s weighted average statutory income tax rate); and (iii) the pro forma loss per share of $0.13.
	(d)	As noted above, the amount of cash consideration payable to UGC stockholders is limited to 20% of the total consideration payable to UGC public stockholders, namely UGC stockholders other than “Permitted Holders” within the meaning of UGC’s indenture with respect to its 13/4% convertible senior notes due 2024 (Permitted Holders). Permitted Holders include LMI, Liberty Media Corporation (Liberty), and the Chief Executive Officer and each member of the board of directors of UGC, LMI and Liberty as of April 1, 2004 and each of the “Affiliated Persons,” as defined, of the foregoing). The pro forma calculations of the number of shares of Liberty Global Series A common stock to be issued, the fair value of such shares to be issued, and the cash consideration to be paid under the “80% stock and 20% cash” column have not been adjusted to give effect to the number of shares of UGC Class A common stock held by Permitted Holders other than LMI and its wholly owned subsidiaries. If the shares held by Permitted Holders other than LMI and its wholly owned subsidiaries had been considered in the aforementioned pro forma calculations, the pro forma amounts would not have been materially different. If the number of shares of UGC Class A common stock held by Permitted Holders were to be increased by 1 million shares above the amount currently reflected in these pro forma financial statements, the maximum cash consideration to be paid would be decreased by $1,916,000 and the number of shares of Liberty Global Series A common stock to be issued would be increased by 215,500.

	(8)	The pro forma adjustment to depreciation and amortization expense consists of the depreciation and amortization of Noos purchase price allocations to property and equipment (estimated weighted average life of 9.5 years) and amortizable intangible assets (estimated lives ranging from 3 to 6 years).
	(9)	Represents the elimination of $40,394,000 of Noos’ historical interest expense, as UPC Broadband France did not assume the related debt, less $2,692,000 of interest expense on the debt incurred by UGC to finance a portion of the Noos acquisition.

(10)	Represents the tax effects of the pro forma adjustments related to the consolidation of Super Media and J-COM. The pro forma adjustments associated with the (i) acquisitions of Noos and the remaining 19.9% minority interest in UPC Broadband France (ii) sale of LMI’s equity interests in TyC and FPAS, and (iii) Proposed Mergers are expected to have no significant impact on pro forma income tax benefit (expense) due primarily to the fact that the pro forma adjustments relate to jurisdictions where valuation allowances have been provided against deferred tax assets.
(11)	Represents the share of Noos’ pro forma operating results for the six months ended June 30, 2004 that is allocable to the owners of the minority interests in UGC.

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(12)	Represents the pro forma adjustment to eliminate the minority interest’s $7,172,000 share of UPC Broadband France’s historical net loss for the six months ended December 31, 2004, and to reflect the $3,328,000 share of such adjustment that is allocable to the owners of the minority interests in UGC.
(13)	Represents the elimination of (i) intercompany interest on shareholder loans between J-COM and LMI and (ii) guarantee fees earned by LMI from J-COM.
(14)	Represents the elimination of LMI’s (i) share of earnings of J-COM as a result of the consolidation of Super Media and J-COM and (ii) share of losses of TyC and FPAS as a result of LMI’s sale of its equity interests in TyC and FPAS.
(15)	Represents pro forma adjustments to minority interests in losses (earnings) of subsidiaries as a result of the consolidation of Super Media and J-COM as follows (amounts in thousands):

Minority interest in J-COM (34.77%)		$	(34,581	)
Minority interest in Super Media (30.32%)			(19,670	)
		$	(54,251	)

(16)	Represents the elimination of the minority interests’ share of UGC’s net loss as a result of the Proposed Mergers.
(17)	The historical and pro forma weighted average shares outstanding assume that the June 7, 2004 distribution of LMI common stock to the stockholders of Liberty occurred on January 1, 2004. In addition, the pro forma weighted average shares outstanding assume that the number of Liberty Global common shares that would have been issued and outstanding had the Proposed Mergers occurred on December 31, 2004 were outstanding since January 1, 2004.

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	LMI Board of Directors

	•	birth date;
	•	positions held with LMI;
	•	principal occupation, if any;
	•	business address;
	•	certain other directorships held; and
	•	the year in which such person became a director of LMI.

	Vote and Recommendation

	Background and Reason

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	Liberty Media International, Inc. 2004 Incentive Plan (As Amended and Restated Effective March 9, 2005)

	Vote and Recommendation

	Audit Fees and All Other Fees

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			2004				2003
			(amounts in thousands)
Audit fees(1)			$	11,796				N/A
Audit related fees(2)				256				N/A
	Audit and audit related fees			12,052				N/A
Tax fees(3)				805				N/A
All other fees				153				N/A
	Total fees(4)		$	13,010				N/A

(1)	Audit fees include fees for the audit of the consolidated financial statements and fees for professional consultations with respect to accounting issues, services related to reviews of quarterly financial statements, registration statement filings and issuance of consents, statutory audits, audits of internal control over financial reporting and similar matters.
(2)	Audit related fees include fees for due diligence related to potential business combinations and audits of certain employee benefit plans.
(3)	Tax fees include fees for tax compliance and consultations regarding the tax implications of certain transactions.
(4)	Total fees include $11,996,000 incurred by UGC.

	Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditor

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	Vote and Recommendation

161

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	LMI

	UGC

162

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	Jupiter Telecommunications Co., Ltd.

	Jupiter Programming Co. Ltd.

	Torneos y Competencias S.A.

	Cordillera Comunicaciones Holding Limitada

	Fox Pan American Sports, LLC

	Suez Lyonnaise Telecom S.A.

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	Liberty Global

	LMI

Liberty Media International, Inc. 12300 Liberty Boulevard Englewood, Colorado 80112 Telephone: (800) 783-7676		UnitedGlobalCom, Inc. 4643 South Ulster Street, Suite 1300 Denver, Colorado 80237 Telephone: (303) 770-4001

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	•	UGC’s Annual Report on Form 10-K/A for the year ended December 31, 2004; and
	•	UGC’s Current Reports on Form 8-K as follows (other than the portions of those documents not deemed filed):

Date of Report		Date of Filing
April 25, 2005			April 28, 2005
April 13, 2005			April 19, 2005
March 14, 2005			March 14, 2005
January 17, 2005			January 24, 2005
January 17, 2005			January 18, 2005
January 10, 2005			January 12, 2005

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A1-1

---

 

A1-2

---

 

A1-3

---

 

	Broadband Distribution

A1-4

---

 

											Video(1)
							Two-way
			Homes				Homes				Basic Cable				Digital Cable				DTH				MMDS
			Passed(2)				Passed(3)				Subscribers(4)				Subscribers(5)				Subscribers(6)				Subscribers(7)
Europe:
UGC*
	Western Europe			9,528,600				7,463,300				5,191,200				725,100				—				89,000
	Central and Eastern Europe			4,552,200				1,739,800				2,618,100				—				245,100				32,200
Total Europe				14,080,800				9,203,100				7,809,300				725,100				245,100				121,200
Japan:
J-COM**				6,287,800				6,276,200				1,482,600				232,000				—				—
Total Japan				6,287,800				6,276,200				1,482,600				232,000				—				—
Latin America:
UGC*
	VTR GlobalCom			1,793,900				1,070,700				504,600				—				4,500				13,900
	Other			82,200				45,700				12,400				—				—				15,300
Liberty Cablevision Puerto Rico				324,600				302,800				120,800				43,700				—				—
Total Latin America				2,200,700				1,419,200				637,800				43,700				4,500				29,200
Total				22,569,300				16,898,500				9,929,700				1,000,800				249,600				150,400

[Additional columns below]

[Continued from above table, first column(s) repeated]

			Internet(1)								Telephony(1)
			Homes								Homes
			Serviceable(8)				Subscribers(9)				Serviceable(10)				Subscribers(11)
Europe:
UGC*
	Western Europe			7,453,600				1,042,000				4,044,100				424,600
	Central and Eastern Europe			1,733,100				178,500				415,600				68,900
Total Europe				9,186,700				1,220,500				4,459,700				493,500
Japan:
J-COM**				6,276,200				708,600				5,799,200				726,500
Total Japan				6,276,200				708,600				5,799,200				726,500
Latin America:
UGC*
	VTR GlobalCom			1,070,700				176,300				1,052,700				310,000
	Other			45,700				4,300				—				—
Liberty Cablevision Puerto Rico				302,800				20,500				302,800				9,000
Total Latin America				1,419,200				201,100				1,355,500				319,000
Total				16,882,100				2,130,200				11,614,400				1,539,000

A1-5

---

 

	*	Excludes systems owned by affiliates that were not consolidated with UGC for financial reporting purposes as of December 31, 2004 or that were acquired by UGC after December 31, 2004.

	**	Excludes systems owned by affiliates that were not consolidated with J-COM for financial reporting purposes as of December 31, 2004 or that were acquired by J-COM after December 31, 2004. Also excludes households to which J-COM provides only retransmission services of terrestrial television signals.

(1)	In some cases, non-paying subscribers are counted by UGC as subscribers during their free promotional service period. Some of these subscribers choose to disconnect after their free service period. The number of non-paying subscribers at December 31, 2004 was immaterial.
(2)	Homes Passed are homes that can be connected to our networks without further extending the distribution plant, except for DTH and MMDS homes. With respect to DTH, we do not count homes passed. With respect to MMDS, one home passed is equal to one MMDS subscriber.
(3)	Two-way Homes Passed are homes passed by our networks where customers can request and receive the installation of a two-way addressable set-top converter, cable modem, transceiver and/or voice port which, in most cases, allows for the provision of video and Internet services and, in some cases, telephony services.
(4)	Basic Cable Subscriber is comprised of basic cable video customers (both analog and digital) that generally are counted on a per connection basis. Except in the case of UGC, residential multiple dwelling units with a discounted pricing structure are counted on an equivalent bulk unit (EBU) basis. Commercial contracts such as hotels and hospitals are counted by all our subsidiaries on an EBU basis. EBU is calculated by dividing the bulk price charged to accounts in an area by the prevalent price charged to non-bulk residential customers in that market for the comparable tier of service. UGC also has “lifeline” customers (approximately 1.34 million at December 31, 2004) that are counted on a per connection basis, representing the least expensive regulated tier of basic cable service, with only a few channels.
(5)	Digital Cable Subscriber is a customer with one or more digital converter boxes that receives our digital video service. Each Digital Cable Subscriber is included in the Basic Cable Subscriber column of the above table whether such customer receives only our digital video service or both analog and digital video services.
(6)	DTH Subscriber is a home or commercial unit that receives our video programming broadcast directly to the home via a geosynchronous satellite.
(7)	MMDS Subscriber is a home or commercial unit that receives our video programming via a multipoint microwave (wireless) distribution system.
(8)	Internet Homes Serviceable are homes that can be connected to our networks, where customers can request and receive Internet access services.
(9)	Internet Subscriber is a home or commercial unit with one or more cable modems connected to our networks, where a customer has requested and is receiving high-speed Internet access services.

(10)	Telephony Homes Serviceable are homes that can be connected to our networks, where customers can request and receive voice services.
(11)	Telephony Subscriber is a home or commercial unit connected to our networks, where a customer has requested and is receiving voice services.

	Programming Services

A1-6

---

 

	Europe — UnitedGlobalCom, Inc.

	The Netherlands

	France

A1-7

---

 

	Austria

	Norway

A1-8

---

 

	Sweden

	Ireland

	Belgium

A1-9

---

 

	Poland

	Hungary

	Czech Republic

A1-10

---

 

	Romania

	Slovak Republic

	Slovenia

	chellomedia and Other

	•	Interactive Services. We expect the development of interactive television services to play an important role in increasing subscriptions to UGC Europe’s digital television offerings. The chellomedia division’s Interactive Services Group is responsible for developing its core digital products, such as an electronic program guide,

A1-11

---

 

		walled garden, television-based email, and PC/ TV portals as well as other television and PC-based applications supporting various areas, including communications services and enhanced television services. A base set of interactive services has been launched by UGC-Netherlands and UGC-Austria, as discussed above.
	•	Transactional Television. Transactional television, branded as “Arrivo,” is another component of UGC Europe’s digital service offerings. UGC-Netherlands currently offers 42 channels of NVOD programming and UGC-Austria currently offers 56 channels of NVOD programming. Arrivo provides digital customers with a wide range of Hollywood blockbusters and other movies. Arrivo is also in the process of developing video-on-demand, or “VOD”, services for UGC Europe’s UPC Broadband division and third-party cable operators. The VOD service will provide VOD subscribers with enhanced playback functionality and will give subscribers access to a broad array of on-demand programming, including movies, live events, local drama, music videos, kids programming and adult programming.
	•	Pay Television. UPCtv, a wholly owned subsidiary of UGC Europe, produces and markets its own pay television products, currently consisting of three thematic channels. The channels target the following genres: extreme sports and lifestyles; women’s information and entertainment; and real life documentaries. All three channels originate from UGC Europe’s digital media center, or “DMC,” located in Amsterdam. The DMC is a technologically advanced production facility that services UPCtv and third-party clients with channel origination, post-production and satellite and fiber transmission. The DMC delivers high-quality, customized programming by integrating different video elements, languages (either in dubbed or sub-titled form) and special effects, then transmits the final product to various customers in numerous countries through affiliated and unaffiliated cable systems and DTH platforms.
	•	Priority Telecom. Priority Telecom is a facilities-based business telecommunications provider that provides voice services, high-speed Internet access, private data networks and customized network services to over 7,000 business customers primarily in its core metropolitan markets in The Netherlands, Austria and Norway. UGC Europe owns an approximate 72% economic interest in Priority Telecom.
	•	Investments. Chellomedia is an investor in branded equity ventures for the development of country-specific programming, including Iberian Programming Services, Xtra Music, MTV Networks Polska, Fox Kids Poland and Sports 1. In January 2005, chellomedia acquired an 87.5% interest in Zone Vision Networks Ltd. Zone Vision owns and operates three thematic programming channels, Reality TV, Europa Europa and Romantica, which are broadcast in over 125 countries in 18 languages, and represents over 30 international programming channels. Zone Vision’s minority shareholders have the right to put 60% of their 12.5% shareholding to chellomedia on the third anniversary, and 100% of their shareholding on the fifth anniversary, of completion of the transaction. Chellomedia has corresponding call rights. The price payable upon exercise of the put or call will be the fair market value of the shareholdings purchased.

Chellomedia also owns or manages UGC’s minority interests in other European businesses. These include a 25% interest in PrimaCom AG, which owns and operates a cable television and broadband network in Germany and The Netherlands; a 50% interest in Melita Cable PLC, the only cable television and broadband network in Malta; a 25% interest in Telewizyjna Korporacja Partycypacyjna S.A., a DTH programming platform in Poland; and the recently acquired indirect investment in Telenet Group Holding NV through Belgian Cable Investors.

	Standstill Agreement with UGC.

	Europe — Other

A1-12

---

 

	Japan

	Jupiter Telecommunications Co., Ltd.

A1-13

---

 

A1-14

---

 

	Jupiter Programming Co., Ltd.

A1-15

---

 

	Japan — Other

	Australia

	Latin America

A1-16

---

 

	VTR GlobalCom S.A.

A1-17

---

 

	Liberty Cablevision of Puerto Rico Ltd.

	Pramer S.C.A.

	Latin America — Other

A1-18

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	Overview

	European Union

	Communications Services and Competition Directives

	•	Directive for a New Regulatory Framework for Electronic Communications Networks and Services (referred to as the Framework Directive);
	•	Directive on the Authorization of Electronic Communications Networks and Services (referred to as the Authorization Directive);
	•	Directive on Access to and Interconnection of Electronic Communications Networks and Services (referred to as the Access Directive);
	•	Directive on Universal Service and Users’ Rights relating to Electronic Networks and Services (referred to as the Universal Service and Users’ Rights Directive);

A1-19

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	•	Directive on Privacy and Electronic Communications (referred to as the Privacy Directive); and
	•	Directive on Competition in the Markets for Electronic Communications and Services (referred to as the Competition Directive).

A1-20

---

 

	Competition Law and Other Matters

	Austria

	France

A1-21

---

 

	The Netherlands

	Japan

A1-22

---

 

	Latin America

	Chile

A1-23

---

 

	Puerto Rico

	Argentina

	Broadband Distribution

	Video Distribution

A1-24

---

 

	Internet

	Telephony

	Programming Services

A1-25

---

 

A1-26

---

 

A1-27

---

 

	UGC Merger Agreement

	Senior Notes

	Registration Rights Agreement

	Old Standstill Agreement; Letter Agreement

A2-1

---

 

	Founders Transaction

	Noncompetition and Nonsolicitation Agreements

	New Standstill Agreement

	UGC Services Agreement

A2-2

---

 

	Other

	Reorganization Agreement

	Liberty Services Agreement

	•	the lease of office space at Liberty’s executive headquarters, including furniture and furnishings and the use of building services;
	•	telephone, utilities, technical assistance (including information technology, management information systems, network maintenance and data storage), computers, office supplies, postage, courier service, cafeteria access and other office and administrative services;
	•	insurance administration and risk management services;
	•	other services typically performed by Liberty’s accounting, treasury, engineering, legal, investor relations and tax department personnel; and
	•	such other services as LMI and Liberty may from time to time mutually determine to be necessary or desirable.

A2-3

---

 

	Agreements for Aircraft Joint Ownership and Management

	Tax Sharing Agreement

A2-4

---

 

A2-5

---

 

A2-6

---

 

	Operating subsidiaries at December 31, 2004:

	UGC Liberty Cablevision Puerto Rico Pramer

	Significant equity method investments at December 31, 2004:

	Super Media JPC

A3-1

---

 

	Years ended December 31, 2004 and 2003

	Stock-based compensation charges

	Impairment of long-lived assets

A3-2

---

 

	Restructuring and other charges

	Interest and dividend income

	Share of earnings of affiliates, net

	Realized and Unrealized Gains (Losses) on Derivative Instruments, Net

		Year ended December 31,
		2004				2003
		as restated(1)
		amounts in thousands
Foreign exchange derivatives		$	196				(22,626	)
Total return debt swaps			2,384				37,804
Cross-currency and interest rate swaps			(43,779	)			—
Interest rate caps			(20,318	)			—
Embedded equity and other derivatives			23,032				—
Variable forward transaction			1,013				—
Call agreements on LMI Series A common stock			1,713				—
Other			(16	)			(2,416	)
		$	(35,775	)			12,762

(1)	See note 23 to the accompanying consolidated financial statements.

A3-3

---

 

	Foreign currency transaction gains (losses), net

		Year ended December 31,
		2004				2003
		as restated(1)
		amounts in thousands
Repayment of yen denominated shareholder loans(2)		$	56,061				—
U.S. dollar debt issued by UGC’s European subsidiaries			35,684				—
Intercompany notes denominated in a currency other than the entities’ functional currency			46,349
U.S. dollar debt issued and cash held by VTR			3,929				—
Euro denominated debt issued by UGC			(51,903	)			—
Euro denominated cash held by UGC			26,192				—
Pramer (primarily U.S. dollar denominated debt)			(730	)			2,461
Telewest bonds			333				1,750
Yen denominated cash held by LMI			7,408				—
Other			(5,666	)			1,201
		$	117,657				5,412

(1)	See note 23 to the accompanying consolidated financial statements.
(2)	On December 21, 2004, we received cash proceeds of ¥43,809 million ($420,188,000 at December 21, 2004) in connection with the repayment by J-COM and another affiliate of all principal and interest due to our company pursuant to then outstanding shareholder loans. In connection with this transaction, we recognized in our statement of operations the foreign currency translation gains that previously had been reflected in accumulated other comprehensive earnings.

	Gains on exchanges of investment securities

	Other-than-temporary declines in fair values of investments

	Gains on extinguishment of debt

A3-4

---

 

	Gains (losses) on disposition of investments, net

	Income tax benefit (expense)

	Years ended December 31, 2003 and 2002

	Revenue

	Operating costs and expenses

	Selling, general and administrative (SG&A) expenses

A3-5

---

 

	Stock-based compensation charges (credits)

	Depreciation and amortization

	Impairment of long-lived assets

	Interest and dividend income

	Share of earnings (losses) of affiliates, net

		Year ended December 31,
		2003				2002
		amounts in thousands
J-COM		$	20,341				(21,595	)
JPC			11,775				5,801
Metrópolis			(8,291	)			(80,394	)
UGC			—				(190,216	)
Other			(10,086	)			(44,821	)
		$	13,739				(331,225	)

A3-6

---

 

	Realized and unrealized gains (losses) on derivative instruments, net

		Year ended December 31,
		2003				2002
		amounts in thousands
Foreign exchange derivatives		$	(22,626	)			(11,239	)
Total return debt swaps			37,804				(1,088	)
Other			(2,416	)			(4,378	)
		$	12,762				(16,705	)

	Foreign currency transaction gains (losses), net

		Year ended December 31,
		2003				2002
		amounts in thousands
Pramer (primarily U.S. dollar denominated debt)(a)		$	2,461				(12,290	)
Telewest bonds			1,750				3,603
Other			1,201				420
		$	5,412				(8,267	)

(a)	The foreign currency losses experienced by Pramer during 2002 are attributable to the devaluation of the Argentine peso.

	Gains on exchanges of investment securities

	Other-than-temporary declines in fair values of investments

		Year ended December 31,
		2003				2002
		amounts in thousands
Sky Latin America		$	6,884				105,250
Telewest bonds			—				141,271
Other			—				865
		$	6,884				247,386

A3-7

---

 

	Income tax benefit (expense)

	Cumulative effect of accounting change, net of taxes

A3-8

---

 

	Revenue — Years ended December 31, 2004 and 2003

																			Increase (decrease)
			Year ended December 31,								Increase (decrease)								excluding FX
			2004				2003				$				%				$				%
			amounts in thousands, except % amounts
UGC Broadband — The Netherlands			$	716,932				592,223				124,709				21.1	%			60,999				10.3	%
UGC Broadband — France				312,792				113,946				198,846				174.5	%			187,462				164.5	%
UGC Broadband — Austria				299,874				260,162				39,712				15.3	%			13,268				5.1	%
UGC Broadband — Other Europe				752,900				561,737				191,163				34.0	%			134,926				24.0	%
UGC Broadband — Total Europe				2,082,498				1,528,068				554,430				36.3	%			396,655				26.0	%
UGC Broadband — Chile (VTR)				299,951				229,835				70,116				30.5	%			36,314				15.8	%
J-COM				1,504,709				1,233,492				271,217				22.0	%			156,706				12.7	%
Corporate and all other				400,818				369,072				31,746				8.6	%			(3,835	)			(1.0	%)
Elimination of intercompany transactions				(138,983	)			(127,055	)			N.M.				N.M.				N.M.				N.M.
Elimination of equity affiliates				(1,504,709	)			(3,125,022	)			N.M.				N.M.				N.M.				N.M.
	Total consolidated LMI		$	2,644,284				108,390				N.M.				N.M.				N.M.				N.M.

	UGC Broadband — The Netherlands

	UGC Broadband — France

	UGC Broadband — Austria

A3-9

---

 

	UGC Broadband — Other Europe

	UGC Broadband — Chile (VTR)

	J-COM

	Revenue — Years ended December 31, 2003 and 2002

																			Increase (decrease)
			Year ended December 31,								Increase (decrease)								excluding FX
			2003				2002				$				%				$				%
			amounts in thousands, except % amounts
UGC Broadband — The Netherlands			$	592,223				459,044				133,179				29.0	%			35,346				7.7	%
UGC Broadband — France				113,946				92,441				21,505				23.3	%			2,681				2.9	%
UGC Broadband — Austria				260,162				198,189				61,973				31.3	%			19,026				9.6	%
UGC Broadband — Other Europe				561,737				461,149				100,588				21.8	%			34,034				7.4	%
UGC Broadband — Total Europe				1,528,068				1,210,823				317,245				26.2	%			91,087				7.5	%
UGC Broadband — Chile (VTR)				229,835				186,426				43,409				23.3	%			42,319				22.7	%
J-COM				1,233,492				930,736				302,756				32.5	%			211,703				22.7	%
Corporate and all other				369,072				326,722				42,350				13.0	%			(8,448	)			(2.6	)%
Elimination of intercompany transactions				(127,055	)			(108,695	)			N.M.				N.M.				N.M.				N.M.
Elimination of equity affiliates				(3,125,022	)			(2,445,757	)			N.M.				N.M.				N.M.				N.M.
	Total consolidated LMI		$	108,390				100,255				N.M.				N.M.				N.M.				N.M.

	UGC Broadband — The Netherlands

A3-10

---

 

	UGC Broadband — France

	UGC Broadband — Austria

	UGC Broadband — Other Europe

	UGC Broadband — Chile (VTR)

	J-COM

A3-11

---

 

	Operating expenses — Years ended December 31, 2004 and 2003

																			Increase (decrease)
			Year ended December 31,								Increase (decrease)								excluding FX
			2004				2003				$				%				$				%
			amounts in thousands, except % amounts
UGC Broadband — The Netherlands			$	243,975				229,653				14,322				6.2	%			(8,038	)			(3.5	)%
UGC Broadband — France				168,634				67,160				101,474				151.1	%			94,427				140.6	%
UGC Broadband — Austria				136,675				118,457				18,218				15.4	%			5,686				4.8	%
UGC Broadband — Other Europe				329,669				259,045				70,624				27.3	%			44,952				17.4	%
UGC Broadband — Total Europe				878,953				674,315				204,638				30.3	%			137,027				20.3	%
UGC Broadband — Chile (VTR)				116,131				96,965				19,166				19.8	%			5,818				6.0	%
J-COM				502,488				429,911				72,577				16.9	%			34,243				8.0	%
Corporate and all other				201,819				181,581				20,238				11.1	%			5,909				3.3	%
Elimination of intercompany transactions				(128,611	)			(117,423	)			N.M.				N.M.				N.M.				N.M.
Elimination of equity affiliates				(502,488	)			(1,215,043	)			N.M.				N.M.				N.M.				N.M.
	Total consolidated LMI		$	1,068,292				50,306				N.M.				N.M.				N.M.				N.M.

	General

	UGC Broadband — Total Europe

	(i) an increase in customer operation expenses as a result of higher numbers of new and reconnecting subscribers during 2004, as compared to 2003. This higher activity level required UGC to hire additional staff and use outsourced contractors;
	(ii) an increase in direct programming costs related to subscriber growth and, in certain markets, an increase in channels on the analog and digital platforms;
	(iii) a decrease due to net cost reductions across network operations, customer care and billing and collection activities. These reductions were due to improved cost controls across all aspects of the business, including more effective procurement of support services, lower billing and collections charges, with bad debt charges in particular reduced in The Netherlands, and the increasing operational leverage of the business;
	(iv) an increase in intercompany costs for broadband Internet services under the revenue sharing agreement between UPC Broadband and chellomedia;
	(v) a decrease related to reduced telephone direct costs in 2004, as compared to 2003, primarily due to decreases in outbound interconnect rates;
	(vi) an increase due to annual wage increases; and
	(vii) a decrease due to cost savings in The Netherlands resulting from a restructuring plan implemented in the second quarter of 2004 whereby the management structure was changed from a three-region model to a centralized management organization.

A3-12

---

 

	UGC Broadband — Chile (VTR)

	J-COM

	Operating expenses — Years ended December 31, 2003 and 2002

																			Increase (decrease)
			Year ended December 31,								Increase (decrease)								excluding FX
			2003				2002				$				%				$				%
			amounts in thousands, except % amounts
UGC Broadband — The Netherlands			$	229,653				251,614				(21,961	)			(8.7	)%			(58,878	)			(23.4	)%
UGC Broadband — France				67,160				72,120				(4,960	)			(6.9	)%			(15,794	)			(21.9	)%
UGC Broadband — Austria				118,457				100,849				17,608				17.5	%			(1,412	)			(1.4	)%
UGC Broadband — Other Europe				259,045				236,685				22,360				9.4	%			(6,750	)			(2.9	)%
UGC Broadband — Total Europe				674,315				661,268				13,047				2.0	%			(82,834	)			(12.5	)%
UGC Broadband — Chile (VTR)				96,965				93,243				3,722				4.0	%			3,730				4.0	%
J-COM				429,911				366,828				63,083				17.2	%			31,348				8.5	%
Corporate and all other				181,581				175,639				5,942				3.4	%			(19,118	)			(10.9	)%
Elimination of intercompany transactions				(117,423	)			(96,762	)			N.M.				N.M.				N.M.				N.M.
Elimination of equity affiliates				(1,215,043	)			(1,156,285	)			N.M.				N.M.				N.M.				N.M.
	Total consolidated LMI		$	50,306				43,931				N.M.				N.M.				N.M.				N.M.

	UGC Broadband — Total Europe

	(i) a decrease associated with improved cost control across all aspects of the business, including the benefit of restructuring activities, other cost cutting initiatives, continued improvements in processes and systems and organizational rationalization. In addition, more effective procurement processes resulted in improved terms from major vendors; and
	(ii) a decrease in billing and collection charges, reflecting improved receivables management and lower bad debt charges, particularly in The Netherlands and France, where reduced bad debt charges accounted for over 75% of the total reduction;
	(iii) a decrease in telephone outbound interconnect costs, which offset an increase in intercompany cost for broadband Internet services under the revenue sharing agreement between UPC Broadband and chellomedia;
	(iv) a decrease in programming costs resulting from a year over year reduction in the DTH business, due to the closure of an uplink facility, which was only partially offset by the impact of subscriber growth.

A3-13

---

 

	UGC Broadband — Chile (VTR)

	J-COM

	SG&A expenses — Years ended December 31, 2004 and 2003

											Increase								Increase (decrease)
			Year ended December 31,								(decrease)								excluding FX
			2004				2003				$				%				$				%
			amounts in thousands, except % amounts
UGC Broadband — The Netherlands			$	111,692				95,495				16,197				17.0	%			6,016				6.3	%
UGC Broadband — France				90,468				32,866				57,602				175.3	%			54,257				165.1	%
UGC Broadband — Austria				51,249				43,427				7,822				18.0	%			3,344				7.7	%
UGC Broadband — Other Europe				141,833				99,197				42,636				43.0	%			32,448				32.7	%
UGC Broadband — Total Europe				395,242				270,985				124,257				45.9	%			96,065				35.5	%
UGC Broadband — Chile (VTR)				75,068				62,919				12,149				19.3	%			3,775				6.0	%
J-COM				412,624				375,263				37,361				10.0	%			6,009				1.6	%
Corporate and all other				227,906				193,581				34,325				17.7	%			10,238				5.3	%
Elimination of intercompany transactions				(10,372	)			(9,632	)			N.M.				N.M.				N.M.				N.M.
Elimination of equity affiliates				(412,624	)			(852,779	)			N.M.				N.M.				N.M.				N.M.
	Total consolidated LMI		$	687,844				40,337				N.M.				N.M.				N.M.				N.M.

	General

	UGC Broadband — Total Europe

	(i) an increase in marketing expenditures to support subscriber growth and new digital programming services;
	(ii) annual wage increases; and
	(iii) increased consulting and other information technology support costs associated with the implementation of new customer care systems in several countries and a subscriber management system in Austria.

A3-14

---

 

	UGC Broadband — Chile (VTR)

	J-COM

	SG&A expenses — Years ended December 31, 2003 and 2002

																			Increase (decrease)
			Year ended December 31,								Increase (decrease)								excluding FX
			2003				2002				$				%				$				%
			amounts in thousands, except % amounts
UGC Broadband — The Netherlands			$	95,495				88,101				7,394				8.4	%			(9,691	)			(11.0	)%
UGC Broadband — France				32,866				30,767				2,099				6.8	%			(3,538	)			(11.5	)%
UGC Broadband — Austria				43,427				32,678				10,749				32.9	%			2,680				8.2	%
UGC Broadband — Other Europe				99,197				92,582				6,615				7.1	%			(2,381	)			(2.6	)%
UGC Broadband — Total Europe				270,985				244,128				26,857				11.0	%			(12,930	)			(5.3	)%
UGC Broadband — Chile (VTR)				62,919				51,224				11,695				22.8	%			11,321				22.1	%
J-COM				375,263				352,762				22,501				6.4	%			(5,380	)			(1.5	)%
Corporate and all other				193,581				188,040				5,541				2.9	%			(19,513	)			(10.4	)%
Elimination of intercompany transactions				(9,632	)			(11,933	)			N.M.				N.M.				N.M.				N.M.
Elimination of equity affiliates				(852,779	)			(781,952	)			N.M.				N.M.				N.M.				N.M.
	Total consolidated LMI		$	40,337				42,269				N.M.				N.M.				N.M.				N.M.

	UGC Broadband — Total Europe

	UGC Broadband — Chile (VTR)

	J-COM

A3-15

---

 

	Operating Cash Flow — Years ended December 31, 2004 and 2003

																			Increase (decrease)
			Year ended December 31,								Increase (decrease)								excluding FX
			2004				2003				$				%				$				%
			amounts in thousands, except % amounts
UGC Broadband — The Netherlands			$	361,265				267,075				94,190				35.3	%			63,021				23.6	%
UGC Broadband — France				53,690				13,920				39,770				285.7	%			38,778				278.6	%
UGC Broadband — Austria				111,950				98,278				13,672				13.9	%			4,238				4.3	%
UGC Broadband — Other Europe				281,398				203,495				77,903				38.3	%			57,526				28.3	%
UGC Broadband — Total Europe				808,303				582,768				225,535				38.7	%			163,563				28.1	%
UGC Broadband — Chile (VTR)				108,752				69,951				38,801				55.5	%			26,721				38.2	%
J-COM				589,597				428,318				161,279				37.7	%			116,454				27.2	%
Corporate and all other				(28,907	)			(6,090	)			(22,817	)			374.7	%			(19,982	)			328.1	%
Elimination of equity affiliates				(589,597	)			(1,057,200	)			N.M.				N.M.				N.M.				N.M.
	Total consolidated LMI		$	888,148				17,747				N.M.				N.M.				N.M.				N.M.

A3-16

---

 

	Operating Cash Flow — Years ended December 31, 2003 and 2002

																			Increase (decrease)
			Year ended December 31,								Increase (decrease)								excluding FX
			2003				2002				$				%				$				%
			amounts in thousands, except % amounts
UGC Broadband — The Netherlands			$	267,075				119,329				147,746				123.8	%			103,915				87.1	%
UGC Broadband — France				13,920				(10,446	)			24,366				(233.3	)%			22,013				(210.7	)%
UGC Broadband — Austria				98,278				64,662				33,616				52.0	%			17,758				27.5	%
UGC Broadband — Other Europe				203,495				131,882				71,613				54.3	%			43,165				32.7	%
UGC Broadband — Total Europe				582,768				305,427				277,341				90.8	%			186,851				61.2	%
UGC Broadband — Chile (VTR)				69,951				41,959				27,992				66.7	%			27,268				65.0	%
J-COM				428,318				211,146				217,172				102.9	%			185,735				88.0	%
Corporate and all other				(6,090	)			(36,957	)			30,867				(83.5	)%			30,183				(81.7	)%
Elimination of equity affiliates				(1,057,200	)			(507,520	)			N.M.				N.M.				N.M.				N.M.
	Total consolidated LMI		$	17,747				14,055				N.M.				N.M.				N.M.				N.M.

	Sources and Uses of Cash

	Corporate Liquidity

A3-17

---

 

A3-18

---

 

A3-19

---

 

	Subsidiary Liquidity

A3-20

---

 

A3-21

---

 

	Consolidated Cash Flow Statements

A3-22

---

 

	Carrying Value of Long-lived Assets

A3-23

---

 

	Carrying Value of Investments

	Fair Value of Acquisition Related Assets and Liabilities

	Capitalization of Construction and Installation Costs

A3-24

---

 

	Income Tax Accounting

	Derivative Instruments

	Off Balance Sheet Arrangements and Aggregate Contractual Obligations

	Off Balance Sheet Arrangements

A3-25

---

 

A3-26

---

 

	Contractual Commitments

			Payments due during years ended December 31,
			2005				2006-2007				2008-2009				Thereafter				Total
			amounts in thousands
Debt			$	29,518				1,308,328				2,112,967				1,509,094				4,959,907
Capital leases				2,585				5,995				7,166				32,608				48,354
Other debt				4,724				2,145				1,533				2,124				10,526
			$	36,827				1,316,468				2,121,666				1,543,826				5,018,787
Operating leases			$	101,440				142,630				94,811				124,092				462,973
Purchase obligations:
	Programming			95,911				34,181				8,838				17,086				156,016
	Other			22,717				1,957				—				—				24,674
Other commitments				53,697				15,636				7,925				14,313				91,571
Total contractual payments			$	310,592				1,510,872				2,233,240				1,699,317				5,754,021

	Cash and Investments

A3-27

---

 

	Foreign Currency Risk

		Spot rate
						Japanese				Chilean
		Euro				yen				peso
December 31, 2004			0.7333				102.41				559.19
December 31, 2003			0.7933				107.37				593.80
December 31, 2002			0.9545				118.76				718.61

			Average rate
							Japanese				Chilean
			Euro				yen				peso
Year ended:
	December 31, 2004			0.8059				107.44				609.22
	December 31, 2003			0.8806				116.06				686.04
	December 31, 2002			1.0492				125.31				689.54

	Inflation and Foreign Investment Risk

A3-28

---

 

	Interest Rate Risks

	Derivative Instruments

A3-29

---

 

	Credit Risk

A3-30

---

 

		Page
Liberty Media International, Inc.
Report of Independent Registered Public Accounting Firm			A4-3
Consolidated Balance Sheets as of December 31, 2004 and 2003			A4-4
Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002			A4-6
Consolidated Statements of Comprehensive Earnings (Loss) for the years ended December 31, 2004, 2003 and 2002			A4-7
Consolidated Statement of Stockholder’s Equity for the years ended December 31, 2004, 2003 and 2002			A4-8
Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002			A4-9
Notes to Consolidated Financial Statements			A4-11
Report of Independent Registered Public Accounting Firm on Financial Statement Schedules			A4-66
Schedule I — Condensed Financial Information of Registrant (Parent Company Information)			A4-67
Condensed Balance Sheet (Parent Company Only)			A4-67
Condensed Statement of Operations (Parent Company Only)			A4-68
Condensed Statement of Stockholders’ Equity (Parent Company Only)			A4-69
Condensed Statement of Cash Flows (Parent Company Only)			A4-70
Schedule II — Valuation and Qualifying Accounts			A4-71
Jupiter Telecommunications Co., Ltd. and Subsidiaries
Report of Independent Registered Public Accounting Firm			A4-72
Consolidated Balance Sheets as of December 31, 2003 and 2004			A4-73
Consolidated Statements of Operations for the years ended December 31, 2002, 2003 and 2004			A4-75
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2002, 2003 and 2004			A4-76
Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2003 and 2004			A4-77
Notes to Consolidated Financial Statements			A4-78
Jupiter Programming Co. Ltd. and Subsidiaries
Report of Independent Registered Public Accounting Firm			A4-97
Consolidated Balance Sheets as of December 31, 2003 and 2004			A4-98
Consolidated Statements of Operations for the years ended December 31, 2002, 2003 and 2004			A4-100
Consolidated Statements of Shareholders’ Equity and Comprehensive Income for the years ended December 31, 2002, 2003 and 2004			A4-101
Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2003 and 2004			A4-102
Notes to Consolidated Financial Statements			A4-103
Torneos y Competencias S.A.
Independent Auditors’ Report			A4-123
Consolidated Balance Sheets as of December 31, 2004 and 2003			A4-124
Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2004, 2003 and 2002			A4-125
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2004, 2003 and 2002			A4-126
Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002			A4-127
Notes to Consolidated Financial Statements			A4-128

A4-1

---

 

		Page
UnitedGlobalCom, Inc.
Report of Independent Registered Public Accounting Firm			A4-144
Report of Independent Public Accountants			A4-145
Consolidated Balance Sheets as of December 31, 2003 and 2002			A4-146
Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2003, 2002 and 2001			A4-147
Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2003, 2002 and 2001			A4-148
Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001			A4-151
Notes to Consolidated Financial Statements			A4-152
Cordillera Comunicaciones Holding Limitada and Subsidiaries
Report of Independent Registered Public Accounting Firm			A4-198
Consolidated Balance Sheets as of December 31, 2003 and 2004			A4-199
Consolidated Income Statements for the years ended December 31, 2002, 2003 and 2004			A4-200
Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2003 and 2004			A4-201
Notes to the Consolidated Financial Statements			A4-203
Fox Pan American Sports, LLC and Subsidiary
Independent Auditors’ Report			A4-234
Consolidated Balance Sheets at December 31, 2004 and 2003			A4-235
Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and period from February 5, 2002 through December 31, 2002			A4-236
Consolidated Statements of Changes in Members’ (Deficit) Equity for the years ended December 31, 2004, 2003 and period from February 5, 2002 through December 31, 2002			A4-237
Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and period from February 5, 2002 through December 31, 2002			A4-238
Notes to Consolidated Financial Statements			A4-239
Suez Lyonnaise Telecom SA
Independent Auditors’ Report			A4-246
Consolidated Balance Sheets as of December 31, 2001, 2002 and 2003			A4-247
Consolidated Statements of Income for the years ended December 31, 2001, 2002 and 2003			A4-248
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2002 and 2003			A4-249
Notes to Consolidated Financial Statements			A4-250

A4-2

---

 

	KPMG LLP

A4-3

---

 

				December 31,
				2004				2003
				as restated
				(note 23)
				amounts in thousands
ASSETS
Current assets:
	Cash and cash equivalents			$	2,531,486				12,753
	Trade receivables, net				201,519				14,162
	Other receivables, net				165,631				968
	Other current assets				293,947				16,453
		Total current assets			3,192,583				44,336
Investments in affiliates, accounted for using the equity method, and related receivables (note 6)					1,865,642				1,740,552
Other investments (note 7)					838,608				450,134
Property and equipment, net (note 9)					4,303,099				97,577
Intangible assets not subject to amortization:
	Goodwill (note 9)				2,667,279				525,576
	Franchise rights and other				230,674				163,450
					2,897,953				689,026
Intangible assets subject to amortization, net (note 9)					382,599				4,504
Deferred tax assets (note 11)					77,313				583,945
Other assets, net					144,566				76,963
		Total assets		$	13,702,363				3,687,037

A4-4

---

 

				December 31,
				2004*				2003
				as restated
				(note 23)
				amounts in thousands
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable			$	363,549				20,629
	Accrued liabilities				526,382				12,556
	Subscriber advance payments and deposits				353,069				283
	Accrued interest				89,612				976
	Current portion of accrued stock-based compensation (notes 3 and 13)				37,017				15,052
	Derivative instruments (note 8)				14,636				21,010
	Current portion of debt (note 10)				36,827				12,426
		Total current liabilities			1,421,092				82,932
Long-term debt (note 10)					4,955,919				41,700
Deferred tax liabilities (note 11)					458,138				135,811
Other long-term liabilities					409,998				7,948
	Total liabilities				7,245,147				268,391
Commitments and contingencies (note 19)
Minority interests in subsidiaries					1,216,710				78
Stockholders’ Equity:
	Series A common stock, $.01 par value. Authorized 500,000,000 shares; issued 168,514,962 and nil shares at December 31, 2004 and 2003, respectively				1,685				—
	Series B common stock, $.01 par value. Authorized 50,000,000 shares; issued and outstanding 7,264,300 and nil shares at December 31, 2004 and 2003, respectively				73				—
	Series C common stock, $.01 par value. Authorized 500,000,000 shares; no shares issued at December 31, 2004 or 2003				—				—
	Additional paid-in capital				7,001,635				—
	Accumulated deficit				(1,649,007	)			(1,630,949	)
	Accumulated other comprehensive earnings (loss), net of taxes (note 18)				14,010				(46,566	)
	Treasury stock, at cost (note 12)				(127,890	)			—
	Parent’s investment				—				5,096,083
		Total stockholders’ equity			5,240,506				3,418,568
		Total liabilities and stockholders’ equity		$	13,702,363				3,687,037

A4-5

---

 

					Year ended December 31,
					2004				2003				2002
					as restated
					(note 23)
					amounts in thousands, except per share amounts
Revenue (note 14)					$	2,644,284				108,390				100,255
Operating costs and expenses:
	Operating (other than depreciation) (note 14)					1,068,292				50,306				43,931
	Selling, general and administrative (SG&A) (note 14)					687,844				40,337				42,269
	Stock-based compensation charges (credits) — primarily SG&A (notes 3 and 13)					142,762				4,088				(5,815	)
	Depreciation and amortization					960,888				15,114				13,087
	Impairment of long-lived assets (note 9)					69,353				—				45,928
	Restructuring and other charges (note 17)					29,018				—				—
						2,958,157				109,845				139,400
			Operating loss			(313,873	)			(1,455	)			(39,145	)
Other income (expense):
	Interest expense (note 14)					(307,015	)			(2,178	)			(3,943	)
	Interest and dividend income (note 14)					65,607				24,874				25,883
	Share of earnings (losses) of affiliates, net (note 6)					38,710				13,739				(331,225	)
	Realized and unrealized gains (losses) on derivative instruments, net (note 8)					(35,775	)			12,762				(16,705	)
	Foreign currency transaction gains (losses), net					117,657				5,412				(8,267	)
	Gains on exchanges of investment securities (notes 6 and 7)					178,818				—				122,618
	Other-than-temporary declines in fair values of investments (note 7)					(18,542	)			(6,884	)			(247,386	)
	Gains on extinguishment of debt (note 10)					35,787				—				—
	Gains (losses) on disposition of investments, net (notes 6 and 7)					43,714				(4,033	)			(287	)
	Other income (expense), net					(7,931	)			6,651				2,476
						111,030				50,343				(456,836	)
			Earnings (loss) before income taxes and minority interests			(202,843	)			48,888				(495,981	)
Income tax benefit (expense)						17,449				(27,975	)			166,121
Minority interests in losses (earnings) of subsidiaries						167,336				(24	)			(27	)
Earnings (loss) before cumulative effect of accounting change						(18,058	)			20,889				(329,887	)
Cumulative effect of accounting change, net of taxes (note 3)						—				—				(238,267	)
			Net earnings (loss)		$	(18,058	)			20,889				(568,154	)
Pro forma earnings (loss) per common share (note 3):
		Basic and diluted			$	(0.11	)			0.14

A4-6

---

 

			Year ended December 31,
			2004				2003				2002
			as restated
			(note 23)
			amounts in thousands
Net earnings (loss)			$	(18,058	)			20,889				(568,154	)
Other comprehensive earnings (loss), net of taxes (note 18):
	Foreign currency translation adjustments			165,315				102,321				(173,715	)
	Reclassification adjustment for foreign currency translation gains included in net earnings (loss)			(36,174	)			(27	)			—
	Unrealized gains (losses) on available-for-sale securities			(1,450	)			111,594				(39,526	)
	Reclassification adjustment for net (gains) losses on available-for-sale securities included in net earnings (loss)			(120,842	)			—				86,175
	Effect of change in estimated blended state income tax rate (note 11)			2,745				—				—
	Other comprehensive earnings (loss)			9,594				213,888				(127,066	)
Comprehensive earnings (loss)			$	(8,464	)			234,777				(695,220	)

A4-7

---

 

																							Accumulated other
			Common stock												Additional								comprehensive				Treasury								Total
															paid-in				Accumulated				earnings (loss),				stock, at				Parent’s				stockholders’
			Series A				Series B				Series C				capital				deficit				net of taxes				cost				investment				equity
			amounts in thousands
Balance at January 1, 2002			$	—				—				—				—				(1,083,684	)			(133,388	)			—				3,256,665				2,039,593
	Net loss			—				—				—				—				(568,154	)			—				—				—				(568,154	)
	Other comprehensive loss (note 18)			—				—				—				—				—				(127,066	)			—				—				(127,066	)
	Reallocation of enterprise-level goodwill from parent (note 3)			—				—				—				—				—				—				—				118,000				118,000
	Intercompany tax allocation (note 11)			—				—				—				—				—				—				—				3,988				3,988
	Allocation of corporate overhead (note 14)			—				—				—				—				—				—				—				10,794				10,794
	Net cash transfers from parent			—				—				—				—				—				—				—				1,231,738				1,231,738
Balance at December 31, 2002				—				—				—				—				(1,651,838	)			(260,454	)			—				4,621,185				2,708,893
	Net earnings			—				—				—				—				20,889				—				—				—				20,889
	Other comprehensive earnings (note 18)			—				—				—				—				—				213,888				—				—				213,888
	Intercompany tax allocation (note 11)			—				—				—				—				—				—				—				(14,774	)			(14,774	)
	Allocation of corporate overhead (note 14)			—				—				—				—				—				—				—				10,873				10,873
	Net cash transfers from parent			—				—				—				—				—				—				—				478,799				478,799
Balance at December 31, 2003				—				—				—				—				(1,630,949	)			(46,566	)			—				5,096,083				3,418,568
	Net loss (as restated — note 23)			—				—				—				—				(18,058	)			—				—				—				(18,058	)
	Other comprehensive earnings (note 18)			—				—				—				—				—				9,594				—				—				9,594
	Intercompany tax allocation (note 11)			—				—				—				—				—				—				—				6,133				6,133
	Allocation of corporate overhead (note 14)			—				—				—				—				—				—				—				9,357				9,357
	Issuance of Liberty Media Corporation common stock in acquisition (note 5)			—				—				—				—				—				—				—				152,122				152,122
	Contribution of cash, investments and other net liabilities in connection with spin off (note 2)			—				—				—				—				—				50,982				—				304,578				355,560
	Assumption by Liberty Media Corporation of obligation for stock appreciation rights in connection with spin off (note 2)			—				—				—				—				—				—				—				5,763				5,763
	Adjustment due to issuance of stock by subsidiaries and affiliates and other changes in subsidiary equity, net of taxes (note 12)			—				—				—				6,049				—				—				—				1,025				7,074
	Net cash transfers from parent			—				—				—				—				—				—				—				654,250				654,250
	Change in capitalization in connection with spin off (note 2)			1,399				61				—				6,227,851				—				—				—				(6,229,311	)			—
	Common stock issued in rights offering (note 2)			283				12				—				735,366				—				—				—				—				735,661
	Stock issued for stock option exercises (note 13)			3				—				—				11,987				—				—				—				—				11,990
	Repurchase of common stock (note 12)			—				—				—				—				—				—				(127,890	)			—				(127,890	)
	Stock-based compensation (notes 3 and 13)			—				—				—				20,382				—				—				—				—				20,382
Balance at December 31, 2004 (as restated — note 23)			$	1,685				73				—				7,001,635				(1,649,007	)			14,010				(127,890	)			—				5,240,506

A4-8

---

 

					Year ended December 31,
					2004				2003				2002
					as restated
					(note 23)
					amounts in thousands
Cash flows from operating activities:
	Net earnings (loss)				$	(18,058	)			20,889				(568,154	)
	Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
		Stock-based compensation charges (credits)				142,762				4,088				(5,815	)
		Cumulative effect of accounting change				—				—				238,267
		Depreciation and amortization				960,888				15,114				13,087
		Impairment of long-lived assets				69,353				—				45,928
		Restructuring and other charges				29,018				—				—
		Amortization of deferred financing costs and non-cash interest				40,218				117				134
		Share of losses (earnings) of affiliates, net				(38,710	)			(13,739	)			331,225
		Realized and unrealized losses (gains) on derivative instruments, net				35,775				(12,762	)			16,705
		Foreign currency transaction losses (gains), net				(117,657	)			(5,412	)			8,267
		Gain on exchanges of investment securities				(178,818	)			—				(122,618	)
		Other-than-temporary declines in fair values of investments				18,542				6,884				247,386
		Gains on extinguishment of debt				(35,787	)			—				—
		Losses (gains) on disposition of investments, net				(43,714	)			(3,759	)			287
		Deferred income tax expense (benefit)				(84,149	)			42,278				(169,606	)
		Minority interests in (losses) earnings of subsidiaries				(167,336	)			24				27
		Non-cash charges (credits) from Liberty Media Corporation				15,490				(3,901	)			14,782
		Other noncash items				—				(1,750	)			(7,069	)
		Changes in operating assets and liabilities, net of the effects of acquisitions:
			Receivables, prepaids and other			(50,358	)			9,653				12,064
			Payables and accruals			168,781				(1,728	)			(28,165	)
			Net cash provided by operating activities		$	746,240				55,996				26,732
Cash flows from investing activities:
	Cash paid for acquisitions, net of cash acquired				$	(508,836	)			—				—
	Cash paid for acquisition to be refunded by seller					(52,128	)			—				—
	Investments in and loans to affiliates and others					(256,959	)			(494,193	)			(1,204,242	)
	Proceeds received upon repayment of principal amounts loaned to affiliates					535,074				—				—
	Proceeds received upon repayment of debt securities					115,592				—				—
	Purchases of short-term liquid investments					(293,734	)			—				—
	Proceeds received from sale of short-term liquid investments					246,981				—				—
	Capital expended for property and equipment					(508,347	)			(22,869	)			(24,910	)
	Net cash received (paid) to purchase or settle derivative instruments					(158,949	)			19,580				(15,346	)
	Proceeds received upon dispositions of investments					315,792				8,230				—
	Deposits received in connection with pending asset sales					80,264				—				—
	Change in restricted cash					(27,298	)			—				—
	Other investing activities, net					(22,103	)			(16,042	)			1,940
			Net cash used by investing activities		$	(534,651	)			(505,294	)			(1,242,558	)

A4-9

---

 

					Year ended December 31,
					2004				2003				2002
					as restated
					(note 23)
					amounts in thousands
Cash flows from financing activities:
	Borrowings of debt				$	2,301,211				41,700				—
	Repayments of debt					(1,849,381	)			(22,954	)			(12,784	)
	Net proceeds received from rights offering					735,661				—				—
	Proceeds from issuance of stock by subsidiaries					488,437				—				—
	Change in cash collateral					41,700				(41,700	)			—
	Contributions from Liberty Media Corporation					704,250				478,799				1,231,738
	Treasury stock purchase					(127,890	)			—				—
	Deferred financing costs					(65,951	)			—				—
	Other financing activities, net					12,351				—				—
		Net cash provided by financing activities				2,240,388				455,845				1,218,954
		Effect of exchange rates on cash				66,756				614				(2,238	)
		Net increase in cash and cash equivalents				2,518,733				7,161				890
		Cash and cash equivalents:
			Beginning of period			12,753				5,592				4,702
			End of period		$	2,531,486				12,753				5,592
			Cash paid for interest		$	280,815				932				18,603
			Net cash paid for taxes		$	4,264				4,651				2,895

A4-10

---

 

(1)	Basis of Presentation

		UnitedGlobalCom, Inc. (UGC) Liberty Cablevision of Puerto Rico Ltd. (Liberty Cablevision Puerto Rico) Pramer S.C.A. (Pramer)

A4-11

---

 

	Significant equity method investments at December 31, 2004:

(2)	Spin Off Transaction and Rights Offering

Cash and cash equivalents		$	50,000
Available-for-sale securities			561,130
Net deferred tax liability			(253,163	)
Other net liabilities			(2,407	)
		$	355,560

A4-12

---

 

	Estimates

A4-13

---

 

	Reclassifications

	Principles of Consolidation

	Cash and Cash Equivalents, Restricted Cash and Short-Term Liquid Investments

	Receivables

	Investments

A4-14

---

 

	Financial Instruments

	Derivative Instruments

	Property and Equipment

A4-15

---

 

	Intangible Assets

A4-16

---

 

	Impairment of Long-Lived Assets

	Income Taxes

	Foreign Currency Translation

A4-17

---

 

	Revenue Recognition

	Earnings (Loss) per Common Share

		Year ended December 31,
		2004				2003
Basic and diluted:
Weighted average common shares outstanding before adjustment			158,597,222				145,974,318
Adjustment for July 2004 LMI Rights Offering			3,883,504				6,866,484
Weighted average common shares, as adjusted			162,480,726				152,840,802

*	The weighted average share amounts for all periods assume that the shares of LMI common stock issued in connection with the spin off were issued and outstanding since January 1, 2003.

A4-18

---

 

	Stock Based Compensation

A4-19

---

 

				Year ended December 31,
				2004				2003				2002
				as restated
				(note 23)
				amounts in thousands,
				except per share amounts
Net earnings (loss)				$	(18,058	)			20,889				(568,154	)
	Add stock-based compensation charges as determined under the intrinsic value method, net of taxes				51,524				—				—
	Deduct stock compensation charges as determined under the fair value method, net of taxes				(29,904	)			(832	)			(1,498	)
Pro forma net earnings (loss)				$	3,562				20,057				(569,652	)
Basic and diluted earnings (loss) from continuing operations per share:
		As reported		$	(0.11	)			0.14
		Pro forma		$	0.02				0.13

	Acquisition of Controlling Interest in UGC

A4-20

---

 

Cash			$	310,361
Other current assets				298,826
Property and equipment				3,386,252
Goodwill				2,023,374
Customer relationships(1)				379,093
Trade names				62,441
Other intangible assets				4,532
Investments and other assets				347,542
Current liabilities				(1,407,275	)
Long-term debt				(3,615,902	)
Deferred income taxes				(754,111	)
Other liabilities				(259,492	)
Minority interest				(607,692	)
	Aggregate purchase price			167,949
Issuance of Liberty common stock				(152,122	)
	Aggregate cash consideration (including direct acquisition costs)		$	15,827

(1)	The estimated weighted-average amortization period on January 1, 2004 for the intangible asset associated with customer relationships was 4.9 years.

A4-21

---

 

	PHL

Cash and cash equivalents			$	14,473
Other current assets				7,423
Property and equipment				75,172
Customer relationships(1)				10,239
Goodwill				24,023
Current liabilities				(26,078	)
Subscriber advance payments and deposits				(12,851	)
Debt				(89,483	)
	Aggregate cash consideration (including acquisition costs)		$	2,918

(1)	The estimated weighted-average amortization period at acquisition for the intangible asset associated with customer relationships was 4 years.

	Noos

A4-22

---

 

Working capital		$	(106,744	)
Property, plant and equipment			769,852
Intangible assets(1)			11,815
Other long-term assets			4,066
Other long-term liabilities			(7,099	)
Minority interest			(91,033	)
Equity in UPC Broadband France			11,776
Cash consideration for Noos			592,633
Less cash acquired			(18,791	)
Net cash consideration for Noos		$	573,842

(1)	The estimated weighted-average amortization period for the intangible assets (favorable programming contract and tradename) at acquisition was 3.8 years.

	Pro Forma Information

A4-23

---

 

		Years ended December 31,
		2004				2003
		as restated
		(note 23)
		amounts in thousands,
		except per share amounts
Revenue		$	2,877,159				2,429,548
Net loss		$	(30,458	)			(690,869	)
Loss per share		$	(0.19	)			(4.52	)

										December 31,
		December 31, 2004								2003
		Percentage				Carrying				Carrying
		Ownership				Amount				Amount
		amounts in thousands,
		except percent amounts
Super Media/ J-COM			70%			$	1,052,468				1,330,602
JPC			50%				290,224				259,571
Telenet Group Holdings N.V. (Telenet)			19%				232,649				—
Mediatti Communications, Inc. (Mediatti)			37%				58,586				—
Metrópolis-Intercom S.A. (Metrópolis),			50%				57,344				52,223
Other			Various				174,371				98,156
						$	1,865,642				1,740,552

		Year ended December 31,
		2004				2003				2002
		amounts in thousands
Super Media/ J-COM		$	45,092				20,341				(21,595	)
JPC			14,644				11,775				5,801
Mediatti			(2,331	)			—				—
Metrópolis			(8,355	)			(8,291	)			(80,394	)
UGC			—				—				(190,216	)
Other			(10,340	)			(10,086	)			(44,821	)
		$	38,710				13,739				(331,225	)

A4-24

---

 

	Super Media/ J-COM

A4-25

---

 

			December 31,
			2004				2003
			amounts in thousands
Financial Position
Investments			$	65,178				52,962
Property and equipment, net				2,441,196				2,274,632
Intangible and other assets, net				1,783,162				1,601,596
	Total assets		$	4,289,536				3,929,190
Debt			$	2,260,805				2,378,698
Other liabilities				677,595				649,229
Owners’ equity				1,351,136				901,263
	Total liabilities and equity		$	4,289,536				3,929,190

			Year ended December 31,
			2004				2003				2002
			amounts in thousands
Results of Operations
Revenue			$	1,504,709				1,233,492				930,736
Operating, selling, general and administrative expenses				(915,112	)			(805,174	)			(719,590	)
Stock-based compensation				(783	)			(840	)			(494	)
Depreciation and amortization				(378,868	)			(313,725	)			(240,042	)
	Operating income (loss)			209,946				113,753				(29,390	)
Interest expense, net				(94,958	)			(68,980	)			(33,381	)
Other, net				(15,532	)			1,335				2,579
	Net earnings (loss)		$	99,456				46,108				(60,192	)

	JPC

	Telenet

A4-26

---

 

	Mediatti

A4-27

---

 

	Metrópolis

	UGC

A4-28

---

 

A4-29

---

 

			December 31, 2003
			amounts in thousands
Financial Position
Current assets			$	622,321
Property and equipment, net				3,342,743
Intangible and other assets, net				3,134,607
	Total assets		$	7,099,671
Debt, including liabilities subject to compromise			$	4,351,905
Other liabilities				1,252,513
Minority interest				22,761
Shareholders’ equity				1,472,492
	Total liabilities and equity		$	7,099,671

			Year ended December 31,
			2003				2002
			amounts in thousands
Results of Operations
Revenue			$	1,891,530				1,515,021
Operating, selling, general and administrative expenses				(1,262,648	)			(1,218,647	)
Depreciation and amortization				(808,663	)			(730,001	)
Impairment of long-lived assets, restructuring charges and stock-based compensation				(476,233	)			(465,655	)
	Operating loss			(656,014	)			(899,282	)
Interest expense				(327,132	)			(680,101	)
Gain on extinguishment of debt				2,183,997				2,208,782
Share of earnings (losses) of affiliates				294,464				(72,142	)
Foreign currency transaction gains, net				153,808				485,938
Minority interest in losses (earnings) of subsidiaries				183,182				(67,103	)
Other, net				163,063				12,176
	Net income from continuing operations		$	1,995,368				988,268

A4-30

---

 

			December 31,
			2004				2003
			amounts in thousands
ABC Family			$	387,380				—
SBS Broadcasting S.A. (SBS)				241,500				—
News Corp.				102,630				—
Sky Latin America				85,846				94,347
Telewest Global, Inc., the successor to Telewest Communications plc (Telewest)				—				281,392
Cable Partners Europe (CPE)				—				74,068
Other				21,252				327
	Total other investments		$	838,608				450,134

	ABC Family

	SBS

	News Corp.

	Sky Latin America

A4-31

---

 

	Telewest

A4-32

---

 

	Unrealized holding gains and losses

		December 31,
		2004								2003
		Equity				Debt				Equity				Debt
		securities				securities				securities				securities
		amounts in thousands
Gross unrealized holding gains		$	92,195				18,516				156				210,925
Gross unrealized holding losses		$	—				—				—				—

			December 31,
			2004				2003
			amounts in thousands
Foreign exchange derivatives			$	(5,305	)			(18,594	)
Total return debt swaps				23,731				22,983
Interest rate caps				2,384				—
Cross-currency and interest rate swaps				(25,648	)			—
Variable forward transaction				(3,305	)			—
Call agreements on LMI Series A common stock				49,218				—
Other				—				(2,416	)
	Total		$	41,075	(1)			1,973
Current asset			$	73,507				—
Current liability				(14,636	)			(21,010	)
Long-term asset				2,568				22,983
Long-term liability				(20,364	)			—
	Total		$	41,075	(1)			1,973

(1)	Excludes embedded equity derivative component of the UGC Convertible Notes as amount is presented in long-term debt in the accompanying consolidated balance sheet.

			Year ended December 31,
			2004				2003				2002
			as restated
			(note 23)
			amounts in thousands
Foreign exchange derivatives			$	196				(22,626	)			(11,239	)
Total return debt swaps				2,384				37,804				(1,088	)
Cross-currency and interest rate swaps				(43,779	)			—				—
Interest rate caps				(20,318	)			—				—
Embedded equity and other derivatives				23,032				—				—
Variable forward transaction				1,013				—				—
Call agreements on LMI Series A common stock				1,713				—				—
Other				(16	)			(2,416	)			(4,378	)
	Total		$	(35,775	)			12,762				(16,705	)

A4-33

---

 

	Foreign Exchange Contracts

	Total Return Debt Swaps

	UGC Interest Rate and Cross-currency Derivative Contracts

A4-34

---

 

	Embedded Equity Derivative

	Variable Forward Transaction

	Call Agreements on LMI Series A common stock

	Property and Equipment

		December 31,
		2004				2003
		amounts in thousands
Cable distribution systems		$	5,280,307				116,962
Support equipment, buildings and land			23,601				11,051
			5,303,908				128,013
Accumulated depreciation			(1,000,809	)			(30,436	)
Net property and equipment		$	4,303,099				97,577

A4-35

---

 

	Goodwill

											Release of								Foreign
											pre-acquisition								currency
			January 1,								valuation								translation				December 31,
			2004				Acquisitions				allowance				Impairments				adjustments				2004
			amounts in thousands
UGC Broadband — The Netherlands			$	—				680,349				(6,374	)			—				55,960				729,935
UGC Broadband — Austria				—				460,810				(2,893	)			—				37,416				495,333
UGC Broadband — Other Europe				—				506,854				(34,133	)			—				56,869				529,590
UGC Broadband — Chile (VTR)				—				191,785				(4,575	)			—				11,876				199,086
J-COM				203,000				—				—				—				—				203,000
All other				322,576				211,590				(10,105	)			(29,000	)			15,274				510,335
	Total LMI		$	525,576				2,051,388				(58,080	)			(29,000	)			177,395				2,667,279

A4-36

---

 

	Intangible Assets Subject to Amortization, Net

		December 31,
		2004				2003
		amounts in thousands
Gross carrying amount
Customer relationships		$	426,213				—
Other			31,420				6,083
		$	457,633				6,083
Accumulated amortization
Customer relationships		$	(71,311	)			—
Other			(3,723	)			(1,579	)
		$	(75,034	)			(1,579	)
Net carrying amount
Customer relationships		$	354,902				—
Other			27,697				4,504
		$	382,599				4,504

2005			$	78,803
2006				73,235
2007				68,935
2008				65,601
2009				65,601
Thereafter				30,424
	Total		$	382,599

			December 31,
			2004				2003
			as restated
			(note 23)
			amounts in thousands
UPC Broadband Bank Facility			$	3,927,830				—
UGC Convertible Notes				655,809				—
Other UGC debt				269,269				—
Other subsidiary debt and capital lease obligations				139,838				54,126
	Total debt			4,992,746				54,126
Current maturities				(36,827	)			(12,426	)
	Total long-term debt		$	4,955,919				41,700

A4-37

---

 

	UPC Broadband Bank Facility

A4-38

---

 

							December 31, 2004								December 31, 2003
Facility			Currency				Euros				US dollars				Euros				US dollars				Interest rate(3)
							amounts in thousands
A(1)(2)				Euro				€ —			$	—				€ 230,000			$	289,946			EURIBOR + 2.25% — 4.0%
B(1)				Euro				1,160,026				1,581,927				2,333,250				2,941,380			EURIBOR + 2.25% — 4.0%
C1				Euro				44,338				60,464				95,000				119,760			EURIBOR + 5.5%
C2				USD				—				176,020				—				347,500			LIBOR + 5.5%
E				Euro				1,021,853				1,393,501				—				—			EURIBOR + 3.0%
F1(1)				Euro				140,000				190,918				—				—			EURIBOR + 3.25% — 4.0%
F2(1)				USD				—				525,000				—				—			LIBOR + 3.00% — 3.5%
	Total							€2,366,217			$	3,927,830				€2,658,250			$	3,698,586

(1)	The interest rate margin is variable based on certain leverage ratios.
(2)	Facility A is a revolving credit facility that has availability of €666,750,000 ($909,247,000) as of December 31, 2004, which can be used to finance additional permitted acquisitions and/or to refinance indebtedness, subject to covenant compliance. Facility A provides for an annual commitment fee of 0.5% for the unused portion of this facility.
(3)	As of December 31, 2004, six month EURIBOR and LIBOR rates were approximately 2.2% and 2.8%, respectively. The weighted-average interest rate on all Facilities in 2004 was approximately 6.0%.

	UGC Convertible Notes

A4-39

---

 

	Other UGC Debt

A4-40

---

 

	Other Subsidiary Debt

	General

2005			$	36,827
2006				571,464
2007				745,004
2008				588,484
2009				1,533,182
Thereafter				1,543,826
	Total debt maturities			5,018,787
Unamortized discount on UGC Convertible Notes, net of fair value of embedded equity derivative (as restated — note 23)				(26,041	)
	Total debt (as restated — note 23)		$	4,992,746

A4-41

---

 

			Current				Deferred				Total
			amounts in thousands
Year ended December 31, 2004:
	Federal		$	(51,851	)			75,974				24,123
	State and local			(4,554	)			13,694				9,140
	Foreign			(10,295	)			(5,519	)			(15,814	)
			$	(66,700	)			84,149				17,449
Year ended December 31, 2003:
	Federal		$	14,774				(28,630	)			(13,856	)
	State and local			—				(5,589	)			(5,589	)
	Foreign			(471	)			(8,059	)			(8,530	)
			$	14,303				(42,278	)			(27,975	)
Year ended December 31, 2002:
	Federal		$	(3,988	)			140,533				136,545
	State and local			—				26,527				26,527
	Foreign			503				2,546				3,049
			$	(3,485	)			169,606				166,121

A4-42

---

 

		Year ended December 31,
		2004				2003				2002
		as restated
		(note 23)
		amounts in thousands
Computed “expected” tax benefit (expense)		$	70,995				(17,111	)			173,593
State and local income taxes, net of federal income taxes			(774	)			(4,315	)			15,472
Foreign taxes			(308	)			(7,922	)			1,841
Enacted tax law changes, case law and rate changes			(149,294	)			—				—
Gain on extinguishment of debt			107,863				—				—
Losses on sale of investments, affiliates and other assets			78,693				—				—
Non-deductible interest and other expenses			(74,966	)			—				(16,153	)
Non-deductible or taxable foreign currency exchange results			(27,702	)
Income recognized for tax purposes, but not for financial reporting purposes			(25,820	)			—				(2,679	)
Change in valuation allowance			(22,131	)			—				—
Change in estimated blended state tax rate			22,938				—				—
Non-taxable investment income			20,481				—				—
Financial instruments			6,711				—				—
International rate differences			6,511				—				—
Other, net			4,252				1,373				(5,953	)
		$	17,449				(27,975	)			166,121

			December 31,
			2004				2003
			amounts in thousands
Current deferred tax assets			$	38,355				9,697
Non-current deferred tax assets				77,313				583,945
Non-current deferred tax liabilities				(458,138	)			(135,811	)
	Deferred tax assets (liabilities), net		$	(342,470	)			457,831

A4-43

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					December 31,
					2004				2003
					amounts in thousands
Deferred tax assets:
	Investments				$	66,862				499,214
	Net operating loss carryforwards					1,770,957				7,263
	Property and equipment, net					556,507				—
	Intangible assets, net					44,303				—
	Deferred compensation and severance					41,686				7,315
	Other future deductible amounts					100,596				8,508
	Deferred tax assets					2,580,911				522,300
	Valuation allowance					(2,281,253	)			—
		Deferred tax assets, net of valuation allowance				299,658				522,300
Deferred tax liabilities:
	Investments					(344,871	)			—
	Property and equipment					(53,124	)			(14,749	)
	Intangible assets					(127,712	)			(19,038	)
	Unrealized gains on investments					(25,287	)			—
	Other future taxable amounts					(91,134	)			(30,682	)
		Deferred tax liabilities				(642,128	)			(64,469	)
			Net deferred tax asset (liability)		$	(342,470	)			457,831

			Tax loss				Related tax				Expiration
Country			carryforward				asset				date
France			$	2,425,612				835,138				Indefinite
The Netherlands				1,910,476				574,542				Indefinite
Ireland				293,686				36,711				Indefinite
Austria				249,025				62,257				Indefinite
Luxembourg				243,936				74,108				Indefinite
Chile				241,232				41,009				Indefinite
Norway				117,856				33,000				2007-2012
Poland				69,901				13,281				2005-2008
United States				23,193				8,118				2021-2024
Other				401,906				92,793				Various
	Total		$	5,976,823				1,770,957

A4-44

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	Capitalization

A4-45

---

 

	Treasury Stock

	Spin Off and LMI Rights Offering

	Issuance of Shares by Subsidiaries

	Restricted Net Assets

	LMI

	Stock Incentive Plans

A4-46

---

 

A4-47

---

 

		LMI 2004								LMI 2004 Directors
		Incentive Plan								Incentive Plan								Transitional Plan								Total
						Weighted								Weighted								Weighted								Weighted
						average								average								average								average
						exercise								exercise								exercise								exercise
LMI Series A common stock:		Number				price				Number				price				Number				price				Number				price
Outstanding at January 1, 2004			—				NA				—				NA				—				NA				—				NA
Issued in connection with the spin-off and related adjustments to Liberty’s stock incentive awards			—				NA				—				NA				1,595,709			$	33.92				1,595,709			$	33.92
Granted			438,054			$	33.45				22,152			$	33.95				—				NA				460,206			$	33.47
Canceled			—				NA				—				NA				(892	)		$	33.92				(892	)		$	33.92
Exercised			—				NA				—				NA				(353,485	)		$	33.92				(353,485	)		$	33.92
Outstanding at December 31, 2004			438,054			$	33.45				22,152			$	33.95				1,241,332			$	33.92				1,701,538			$	33.82
Exercisable at December 31, 2004			—				NA				—				NA				794,245			$	33.92				794,245			$	33.92

		LMI 2004 Incentive Plan								Transitional Plan								Total
						Weighted								Weighted								Weighted
						average								average								average
						exercise								exercise								exercise
LMI Series B common stock:		Number				price				Number				price				Number				price
Outstanding at January 1, 2004			—				NA				—				NA				—				NA
Issued in connection with the spin-off and related adjustments to Liberty’s stock incentive awards			—				NA				1,498,154			$	37.88				1,498,154			$	37.88
Granted			1,568,562			$	36.75				—				NA				1,568,562			$	36.75
Canceled			—				NA				—				NA				—				NA
Exercised			—				NA				—				NA				—				NA
Outstanding at December 31, 2004			1,568,562			$	36.75				1,498,154			$	37.88				3,066,716			$	37.30
Exercisable at December 31, 2004			1,568,562	(1)		$	36.75				973,800			$	37.88				2,542,362			$	37.18

(1)	Amount represents Mr. Malone’s options that are fully exercisable, but not vested as of December 31, 2004. The options or shares issued upon exercise vest at the rate of 20% per year on each anniversary of the date on which the spin off was completed (which was June 7, 2004), provided that Mr. Malone meets certain conditions regarding his relationship with LMI. See discussion above.

A4-48

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			Options outstanding												Options exercisable
							Weighted
							average				Weighted								Weighted
							remaining				average								average
							contractual life				exercise								exercise
Exercise price range			Number				(years)				price				Number				price
LMI Series A common stock
	$33.41			453,206				9.47			$	33.41				—			$	33.41
	$33.92			1,241,332				6.60			$	33.92				794,245			$	33.92
	$37.42			7,000				9.86			$	37.42				—			$	37.42
				1,701,538				7.38			$	33.82				794,245			$	33.92
LMI Series B common stock
	$36.75			1,568,562				9.47			$	36.75				1,568,562	(1)		$	36.75
	$37.88			1,498,154				6.16			$	37.88				973,800			$	37.88
				3,066,716				7.86			$	37.30				2,542,362			$	37.18

(1)	Amount represents Mr. Malone’s options that are fully exercisable, but not vested as of December 31, 2004. The options or shares issued upon exercise vest at the rate of 20% per year on each anniversary of the date on which the spin off was completed (which was June 7, 2004), provided that Mr. Malone meets certain conditions regarding his relationship with LMI. See discussion above.

Risk-free interest rate			4.09%
Expected lives			6 years
Expected volatility			25%
Expected dividend yield			0%

	Junior Stock Plan

A4-49

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	UGC

	UGC Equity Incentive Plan

		Options(1)								Restricted stock(1)								SARs(1)
		Number of				Weighted				Number of				Weighted								Weighted
		stock				average				restricted				average				Number of				average
		options				exercise price				stock awards				stock price				SARs				base price
Outstanding at January 1			—			$	—				—			$	—				32,087,270			$	3.82
Granted			4,780,000			$	7.72				224,587			$	8.24				5,062,138			$	7.31
Canceled			(80,000	)		$	7.48				—			$	—				(1,851,904	)		$	4.39
Exercised			—			$	—				—			$	—				(5,215,510	)		$	3.66
Outstanding at December 31			4,700,000			$	7.72				224,587			$	8.24				30,081,994			$	4.43
Exercisable at December 31			—			$	—				—			$	—				1,972,906			$	4.39

(1)	These UGC options and restricted stock awards vest over 5 years, with quarterly vesting beginning six months from date of grant. The UGC SARs that were outstanding at January 1, 2004 vest in 5 equal annual increments from the date of grant. The UGC SARs granted in 2004 vest over 5 years, with quarterly vesting beginning six months from the date of grant.

A4-50

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			Options												Restricted stock
							Fair				Exercise								Fair				Exercise
Exercise/Stock price			Number				value				price				Number				value				price
Less than market price				—			$	—			$	—				—			$	—			$	—
Equal to market price				4,780,000			$	6.19			$	7.72				224,587			$	8.24			$	8.24
Greater than market price				—			$	—			$	—				—			$	—			$	—
	Total			4,780,000			$	6.19			$	7.72				224,587			$	8.24			$	8.24

							Fair				Base
Base price			Number				value				price
Less than market price(1)				154,500			$	4.57			$	2.87
Equal to market price				154,500			$	8.31			$	4.57
Equal to market price				4,753,138			$	6.02			$	7.55
Greater than market price				—			$	—			$	—
	Total			5,062,138			$	6.17			$	7.31

(1)	UGC originally granted these SARs below fair market value on date of grant; however, upon exercise the holder will only receive the difference between $2.87 and the lesser of $4.57 or the market price of UGC Class A common stock on the date of exercise.

			Options outstanding												Options exercisable
							Weighted
							average				Weighted								Weighted
							remaining				average								average
							contractual				exercise								exercise
Exercise price range			Number				life (years)				price				Number				price
$7.48				3,215,000				9.84			$	7.48				—			$	—
$8.24				1,485,000				9.90			$	8.24				—			$	—
	Total			4,700,000				9.86			$	7.72				—			$	—

			SARs outstanding												SARs exercisable
							Weighted
							average				Weighted								Weighted
							remaining				average								average
							contractual				base								base
Base price range			Number				life (years)				price				Number				price
$2.87				11,523,022				8.49			$	2.87				507,378			$	2.87
$4.57				12,084,784				8.37			$	4.57				1,069,140			$	4.57
$5.26-$6.33				1,981,050				8.86			$	5.38				268,250			$	5.26
$7.10-$8.24				4,493,138				9.83			$	7.63				128,138			$	7.10
	Total			30,081,994				8.67			$	4.43				1,972,906			$	4.39

A4-51

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Restricted stock outstanding

Weighted

average

Weighted

remaining

average

contractual

stock

Base price range

Number

life (years)

price

$8.24

224,587

4.95

$

8.24

Risk-free interest rate			3.61%
Expected lives			6 years
Expected volatility			100%
Expected dividend yield			0%

	UGC Stock Option Plans

A4-52

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		UGC Employee Plan								UGC Director Plans
						Weighted								Weighted
						average								average
						exercise								exercise
		Number				price				Number				price
Outstanding at January 1			13,745,692			$	7.49				920,000			$	10.66
Granted			—			$	—				200,000			$	5.94
Canceled			(247,586	)		$	14.63				(130,000	)		$	47.75
Exercised			(617,077	)		$	4.94				(260,000	)		$	3.94
Outstanding at December 31			12,881,029			$	7.52				730,000			$	5.11
Exercisable at December 31			12,881,029			$	7.52				492,498			$	5.01

Exercise price			Number				Fair value				Exercise price
Less than market price				200,000			$	7.22			$	5.94
Equal to market price				—			$	—			$	—
Greater than market price				—			$	—			$	—
	Total			200,000			$	7.22			$	5.94

			Options outstanding												Options exercisable
							Weighted
							average				Weighted								Weighted
							remaining				average								average
							contractual				exercise								exercise
Exercise price range			Number				life (years)				price				Number				price
$3.29-$3.88				258,282				4.68			$	3.44				258,282			$	3.44
$4.13				10,426,709				6.71			$	4.13				10,266,291			$	4.13
$4.25-$67.51				2,914,038				4.41			$	19.08				2,836,954			$	19.39
$85.63				12,000				5.23			$	85.63				12,000			$	85.63
	Total			13,611,029				6.17			$	7.39				13,373,527			$	7.43

A4-53

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A4-54

---

 

	VLG Acquisition Corp.

A4-55

---

 

	Restructuring Charges

			Employee								Programming
			severance								and lease
			and				Office				contract
			termination				closures				termination				Other				Total
			amounts in thousands
Restructuring liability as of January 1, 2004			$	8,405				16,821				34,399				2,442				62,067
Restructuring charges				8,176				16,862				—				794				25,832
Cash paid				(6,938	)			(5,741	)			(7,566	)			(1,057	)			(21,302	)
Foreign currency translation adjustments				980				1,983				3,695				(657	)			6,001
Restructuring liability as of December 31, 2004			$	10,623				29,925				30,528				1,522				72,598
Short-term portion			$	4,973				5,271				3,817				345				14,406
Long-term portion				5,650				24,654				26,711				1,177				58,192
	Total		$	10,623				29,925				30,528				1,522				72,598

A4-56

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	Other Charges

		Foreign
		currency				Unrealized				Other
		translation				gains (losses)				comprehensive
		adjustment				on securities				earnings (loss)
		amounts in thousands
Balance at January 1, 2002		$	(102,988	)			(30,400	)			(133,388	)
Other comprehensive earnings (loss)			(173,715	)			46,649				(127,066	)
Balance at December 31, 2002			(276,703	)			16,249				(260,454	)
Other comprehensive earnings			102,294				111,594				213,888
Balance at December 31, 2003			(174,409	)			127,843				(46,566	)
Other comprehensive earnings (loss)			129,141				(122,292	)			6,849
Effect of change in estimated blended state income tax rate (note 11)			2,222				523				2,745
Spin off transaction (note 2)			—				50,982				50,982
Balance at December 31, 2004		$	(43,046	)			57,056				14,010

						Tax
		Before-tax				benefit				Net-of-tax
		amount				(expense)				amount
		amounts in thousands
Year ended December 31, 2004:
Foreign currency translation adjustments		$	204,392				(75,251	)			129,141
Unrealized holding losses arising during period			(189,465	)			67,173				(122,292	)
Effect of change in estimated blended state income tax rate (note 11)			—				2,745				2,745
Other comprehensive earnings		$	14,927				(5,333	)			9,594
Year ended December 31, 2003:
Foreign currency translation adjustments		$	168,239				(65,945	)			102,294
Unrealized holding gains arising during period			182,941				(71,347	)			111,594
Other comprehensive earnings		$	351,180				(137,292	)			213,888
Year ended December 31, 2002:
Foreign currency translation adjustments		$	(284,779	)			111,064				(173,715	)
Unrealized holding gains arising during period			76,474				(29,825	)			46,649
Other comprehensive loss		$	(208,305	)			81,239				(127,066	)

A4-57

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	Commitments

			Payments due during years ended December 31,
			2005				2006				2007				2008				2009				Thereafter				Total
			amounts in thousands
Operating Leases			$	101,440				74,519				68,111				49,892				44,919				124,092				462,973
Purchase obligations:
	Programming			95,911				23,877				10,304				6,191				2,647				17,086				156,016
	Other			22,717				1,957				—				—				—				—				24,674
Other commitments				53,697				9,753				5,883				3,953				3,972				14,313				91,571
Total contractual payments			$	273,765				110,106				84,298				60,036				51,538				155,491				735,234

	Contingent Obligations

A4-58

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	Guarantees and Other Credit Enhancements

	Legal Proceedings

A4-59

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(20)	Information About Operating Segments

A4-60

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	•	UGC Broadband — The Netherlands
	•	UGC Broadband — France
	•	UGC Broadband — Austria
	•	UGC Broadband — Other Europe
	•	UGC Broadband — Chile (VTR)
	•	Super Media/ J-COM

	Performance Measures

			Year ended December 31,
			2004								2003								2002
							Operating								Operating								Operating
			Revenue				cash flow				Revenue				cash flow				Revenue				cash flow
			amounts in thousands
UGC Broadband — The Netherlands			$	716,932				361,265				592,223				267,075				459,044				119,329
UGC Broadband — France				312,792				53,690				113,946				13,920				92,441				(10,446	)
UGC Broadband — Austria				299,874				111,950				260,162				98,278				198,189				64,662
UGC Broadband — Other Europe				752,900				281,398				561,737				203,495				461,149				131,882
UGC Broadband — Chile (VTR)				299,951				108,752				229,835				69,951				186,426				41,959
J-COM				1,504,709				589,597				1,233,492				428,318				930,736				211,146
Corporate and all other				261,835				(28,907	)			242,017				(6,090	)			218,027				(36,957	)
Elimination of equity affiliates				(1,504,709	)			(589,597	)			(3,125,022	)			(1,057,200	)			(2,445,757	)			(507,520	)
	Total consolidated LMI		$	2,644,284				888,148				108,390				17,747				100,255				14,055

A4-61

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			Investments in affiliates								Long-lived assets								Total assets
			December 31,								December 31,								December 31,
			2004				2003				2004				2003				2004				2003
			amounts in thousands
UGC Broadband — The Netherlands			$	—				222				1,099,118				1,334,294				2,024,365				2,458,724
UGC Broadband — France				—				—				1,065,874				246,307				1,198,372				274,180
UGC Broadband — Austria				—				—				302,820				307,758				827,506				700,209
UGC Broadband — Other Europe				11,797				16,757				1,026,989				873,221				1,832,761				1,845,202
UGC Broadband — Chile (VTR)				—				—				351,314				322,606				682,270				602,762
Super Media/J-COM				36,846				26,027				2,441,196				2,274,632				4,289,536				3,929,190
Corporate and all other				1,853,845				1,818,811				456,984				356,134				7,137,089				4,905,631
Elimination of equity affiliates				(36,846	)			(121,265	)			(2,441,196	)			(5,617,375	)			(4,289,536	)			(11,028,861	)
	Total consolidated LMI		$	1,865,642				1,740,552				4,303,099				97,577				13,702,363				3,687,037

			Year ended December 31,
			2004				2003				2002
			as restated
			(note 23)
			amounts in thousands
Total segment operating cash flow			$	888,148				17,747				14,055
Stock-based compensation credits (charges)				(142,762	)			(4,088	)			5,815
Depreciation and amortization				(960,888	)			(15,114	)			(13,087	)
Impairment of long-lived assets				(69,353	)			—				(45,928	)
Restructuring and other charges				(29,018	)			—				—
	Operating loss			(313,873	)			(1,455	)			(39,145	)
Interest expense				(307,015	)			(2,178	)			(3,943	)
Interest and dividend income				65,607				24,874				25,883
Share of earnings (losses) of affiliates, net				38,710				13,739				(331,225	)
Realized and unrealized gains (losses) on derivative instruments, net				(35,775	)			12,762				(16,705	)
Foreign currency transaction gains (losses), net				117,657				5,412				(8,267	)
Gains on exchanges of investment securities				178,818				—				122,618
Other-than-temporary declines in fair values of investments				(18,542	)			(6,884	)			(247,386	)
Gains on extinguishment of debt				35,787				—				—
Gains (losses) on disposition of investments, net				43,714				(4,033	)			(287	)
Other income (expense), net				(7,931	)			6,651				2,476
	Earnings (loss) before income taxes and minority interests		$	(202,843	)			48,888				(495,981	)

A4-62

---

 

		Capital expenditures
		Year ended December 31,
		2004				2003				2002
		amounts in thousands
UGC Broadband — The Netherlands		$	(84,698	)			(63,451	)			(97,841	)
UGC Broadband — France			(65,435	)			(48,810	)			(19,688	)
UGC Broadband — Austria			(53,660	)			(43,751	)			(38,388	)
UGC Broadband — Other Europe			(146,965	)			(75,873	)			(53,142	)
UGC Broadband — Chile (VTR)			(41,685	)			(41,391	)			(80,006	)
J-COM			(295,914	)			(279,841	)			(383,913	)
Corporate and all other			(115,904	)			(82,717	)			(71,037	)
Elimination of equity affiliates			295,914				612,965				719,105
Total consolidated LMI		$	(508,347	)			(22,869	)			(24,910	)

					1st				2nd				3rd				4th
					quarter				quarter				quarter				quarter
									as restated				as restated				as restated
									(note 23)				(note 23)				(note 23)
					amounts in thousands, except per share amounts
2004:
	Revenue				$	576,303				580,659				708,807				778,515
	Operating loss				$	(83,627	)			(34,192	)			(43,061	)			(152,993	)
	Net earnings (loss):
		As previously reported			$	(83,951	)			(1,040	)			74,365				(21,132	)
		Restatement adjustment				—				30,066				4,184				(20,550	)
		As restated			$	(83,951	)			29,026				78,549				(41,682	)
	Historical and pro forma earnings (loss) per common share (note 3)
		— Basic and diluted:
			As previously reported		$	(0.55	)			(0.01	)			0.44				(0.12	)
			Restatement adjustment			—				0.20				0.02				(0.12	)
			As restated		$	(0.55	)			0.19				0.46				(0.24	)
2003:
	Revenue				$	24,947				27,076				28,031				28,336
	Operating income (loss)				$	1,777				(787	)			1,625				(4,070	)
	Net earnings (loss)				$	6,802				10,499				9,051				(5,463	)
	Historical and pro forma earnings (loss) per common share (note 3) — Basic and diluted				$	0.04				0.07				0.06				(0.04	)

	Movieco Settlement

A4-63

---

 

	Zone Vision

	EWT Holding GmbH

	Telemach

A4-64

---

 

		December 31, 2004
		Previously
		reported				Adjustment				As restated
		amounts in thousands
Balance Sheet
Long-term debt		$	4,981,960				(26,041	)			4,955,919
Total liabilities		$	7,271,188				(26,041	)			7,245,147
Minority interest in subsidiaries		$	1,204,369				12,341				1,216,710
Accumulated deficit		$	(1,662,707	)			13,700				(1,649,007	)
Total stockholders’ equity		$	5,226,806				13,700				5,240,506

		Year Ended December 31, 2004
		Previously
		reported				Adjustment				As restated
		amounts in thousands,
		except per share amounts
Statement of Operations
Interest expense		$	(288,532	)			(18,483	)			(307,015	)
Realized and unrealized losses on derivative instruments, net		$	(54,947	)			19,172				(35,775	)
Foreign currency transaction gains, net		$	92,305				25,352				117,657
Loss before income taxes and other items		$	(228,884	)			26,041				(202,843	)
Minority interests in losses of subsidiaries		$	179,677				(12,341	)			167,336
Net loss		$	(31,758	)			13,700				(18,058	)
Pro forma basic and diluted loss per common share		$	(0.20	)			0.09				(0.11	)

A4-65

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	KPMG LLP

A4-66

---

 

				December 31,
				2004
				as restated (1)
ASSETS
Current assets:
	Cash and cash equivalents			$	1,069,996
	Derivative instruments				56,011
	Other current assets				621
		Total current assets			1,126,628
Investments in consolidated subsidiaries					4,146,985
Property and equipment, at cost					7,597
Accumulated depreciation					(387	)
					7,210
		Total assets		$	5,280,823
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accrued liabilities			$	3,927
	Derivative instruments				5,257
		Total current liabilities			9,184
Other long-term liabilities					31,133
		Total liabilities			40,317
Commitments and contingencies
Stockholders’ Equity:
	Series A common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding; 168,514,962 and nil shares at December 31, 2003 and 2004, respectively				1,685
	Series B common stock, $.01 par value. Authorized 50,000,000 shares; issued and outstanding; 7,264,300 and nil shares at December 31, 2003 and 2004, respectively				73
	Series C common stock, $.01 par value. Authorized 500,000,000 shares; no shares issued at December 31, 2004 or 2003				—
	Additional paid-in capital				7,001,635
	Accumulated deficit				(1,649,007	)
	Accumulated other comprehensive loss, net of taxes				14,010
	Treasury stock, at cost				(127,890	)
		Total stockholders’ equity			5,240,506
		Total liabilities and stockholders’ equity		$	5,280,823

A4-67

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				Seven months
				ended
				December 31,
				2004
				as restated (1)
Operating costs and expenses:
	Selling, general and administrative (SG&A)			$	8,535
	Stock-based compensation charges				20,382
	Depreciation and amortization				387
		Operating loss			(29,304	)
Other income (expense):
	Interest and dividend income				8,673
	Realized and unrealized losses on derivative instruments, net				(4,146	)
	Other income, net				1,465
					5,992
		Loss before income taxes and equity in income of consolidated subsidiaries, net			(23,312	)
Equity in income of consolidated subsidiaries, net					90,443
Income tax benefit					5,763
		Net income		$	72,894

A4-68

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																							Accumulated
																							other
			Common stock												Additional								comprehensive				Treasury				Total
															paid-in				Accumulated				earnings (loss),				stock,				stockholders’
			Series A				Series B				Series C				capital				deficit				net of taxes				at cost				equity
			amounts in thousands
Balance at June 1, 2004			$	1,399				61				—				6,227,851				(1,721,901	)			(56,388	)			—				4,451,022
	Net earnings (as restated)(1)			—				—				—				—				72,894				—				—				72,894
	Other comprehensive earnings			—				—				—				—				—				70,398				—				70,398
	Adjustment due to issuance of stock by subsidiaries and affiliates and other changes in subsidiary equity, net of taxes			—				—				—				6,049				—				—				—				6,049
	Common stock issued in rights offering			283				12				—				735,366				—				—				—				735,661
	Stock issued for stock option exercises			3				—				—				11,987				—				—				—				11,990
	Repurchase of common stock			—				—				—				—				—				—				(127,890	)			(127,890	)
	Stock-based compensation			—				—				—				20,382				—				—				—				20,382
Balance at December 31, 2004 (as restated)(1)			$	1,685				73				—				7,001,635				(1,649,007	)			14,010				(127,890	)			5,240,506

A4-69

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							Seven months
							ended
							December 31,
							2004
							as restated (1)
Cash flows from operating activities:
	Net earnings						$	72,894
	Adjustments to reconcile net earnings to net cash provided by operating activities:
		Equity in income of consolidated subsidiaries, net						(90,443	)
		Stock-based compensation charges						20,382
		Realized and unrealized losses on derivative instruments, net						4,146
		Deferred income tax expense						(4,417	)
		Other noncash items, net						30,582
		Changes in operating assets and liabilities
			Receivables, prepaids and other					(329	)
			Payables and accruals					2,242
				Net cash provided by operating activities				35,057
Cash flows from investing activities:
	Investments in and loans to consolidated subsidiaries, affiliates and others							400,281
	Net cash paid to purchase or settle derivative instruments							(35,653	)
	Other investing activities, net							(36	)
				Net cash used by investing activities				364,592
Cash flows from financing activities:
	Net proceeds received from rights offering							735,661
	Treasury stock purchase							(127,890	)
	Proceeds from stock option exercises							11,990
				Net cash provided by financing activities				619,761
				Net increase in cash and cash equivalents				1,019,410
				Cash and cash equivalents:
					Beginning of period			50,586
					End of period		$	1,069,996
					Cash paid for interest			—
					Net cash paid for taxes		$	4,383

(1)	See note 23 to the accompanying consolidated financial statements of Liberty Media International, Inc.

A4-70

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			Allowance for Doubtful Accounts
							Additions
			Balance at				to costs																				Balance at
			beginning				and								Deductions												end of
			of period				expenses				Acquisition				or write-offs				FCTA				Other				period
			amounts in thousands
Year ended December 31:
	2002		$	11,208				6,689				—				(1,162	)			(3,631	)			—				13,104
	2003		$	13,104				1,450				—				(2,076	)			1,469				—				13,947
	2004		$	13,947				22,663				51,400				(30,765	)			3,644				501				61,390

A4-71

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A4-72

---

 

				December 31,
				2003				2004
				(Yen in thousands)
Current assets:
	Cash and cash equivalents			¥	7,785,978			¥	10,420,109
	Restricted cash				1,773,060				—
	Accounts receivable, less allowance for doubtful accounts of ¥229,793 thousand in 2003 and ¥245,504 thousand in 2004				7,907,324				8,823,311
	Loans to related party (Note 5)				—				4,030,000
	Prepaid expenses and other current assets (Note 8)				1,596,150				4,099,032
		Total current assets			19,062,512				27,372,452
Investments:
	Investments in affiliates (Notes 3 and 5)				2,794,533				3,773,360
	Investments in other securities, at cost				2,891,973				2,901,566
					5,686,506				6,674,926
Property and equipment, at cost (Notes 5 and 7):
	Land				1,826,787				1,796,217
	Distribution system and equipment				312,330,187				344,207,670
	Support equipment and buildings				11,593,849				12,612,896
					325,750,823				358,616,783
	Less accumulated depreciation				(81,523,580	)			(108,613,916	)
					244,227,243				250,002,867
Other assets:
	Goodwill, net (Notes 2 and 4)				139,853,596				140,658,718
	Other (Note 4 and 8)				13,047,229				14,582,383
					152,900,825				155,241,101
				¥	421,877,086			¥	439,291,346

A4-73

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				December 31,
				2003				2004
				(Yen in thousands)
Current liabilities:
	Short-term loans			¥	—			¥	250,000
	Long-term debt — current portion (Notes 6 and 12)				2,438,480				5,385,980
	Capital lease obligations — current portion (Notes 5, 7 and 12):
		Related parties			7,673,978				8,237,323
		Other			1,800,456				1,291,918
	Accounts payable				17,293,932				17,164,463
	Accrued expenses and other liabilities				3,576,708				6,155,380
		Total current liabilities			32,783,554				38,485,064
Long-term debt, less current portion (Notes 6 and 12):
	Related parties				149,739,250				—
	Other				72,092,465				194,088,485
Capital lease obligations, less current portion (Notes 5, 7 and 12):
	Related parties				17,704,295				19,714,799
	Other				3,951,900				2,560,511
Deferred revenue					41,635,426				41,699,497
Severance and retirement allowance (Note 9)					2,023,706				2,718,792
Redeemable preferred stock of consolidated subsidiary (Note 10)					500,000				500,000
Other liabilities					3,411,564				180,098
		Total liabilities			323,842,160				299,947,246
Minority interest					1,266,287				974,227
Commitments and contingencies (Note 14)
Shareholders’ equity (Note 11):
	Ordinary shares no par value				63,132,998				78,133,015
		Authorized 15,000,000 shares; issued and outstanding 4,684,535.74 shares at December 31, 2003 and 5,146,074.74 shares at December 31, 2004
	Additional paid-in capital				122,837,273				137,930,774
	Accumulated deficit				(88,506,887	)			(77,685,712	)
	Accumulated other comprehensive loss				(694,745	)			(8,204	)
		Total shareholders’ equity			96,768,639				138,369,873
				¥	421,877,086			¥	439,291,346

A4-74

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				Year Ended December 31,
				2002				2003				2004
				(Yen in thousands, except share and
				per share amounts)
Revenue (Note 5):
	Subscription fees			¥	97,144,356			¥	123,214,958			¥	140,826,446
	Other				19,486,170				19,944,074				20,519,825
					116,630,526				143,159,032				161,346,271
Operating costs and expenses:
	Operating and programming costs (Note 5)				45,967,220				49,895,426				53,869,646
	Selling, general and administrative (inclusive of stock compensation expense of ¥61,902 thousand in 2002, ¥120,214 thousand in 2003 and ¥84,267 thousand in 2004) (Notes 5 and 11)				44,266,444				43,650,593				44,311,685
	Depreciation and amortization				30,079,753				36,410,894				40,573,166
					120,313,417				129,956,913				138,754,497
		Operating income (loss)			(3,682,891	)			13,202,119				22,591,774
Other income (expense):
	Interest expense, net:
		Related parties (Note 5)			(2,847,551	)			(4,562,594	)			(4,055,343	)
		Other			(1,335,400	)			(3,360,674	)			(6,045,939	)
	Other income, net				147,639				316,116				37,574
		Income (loss) before income taxes and other items			(7,718,203	)			5,594,967				12,528,066
Equity in earnings of affiliates (inclusive of stock compensation expense of ¥2,156 thousand in 2002, ¥(2,855) thousand in 2003 and ¥9,217 thousand in 2004) (Note 11)					235,792				414,756				610,110
Minority interest in net (income) losses of consolidated subsidiaries					196,498				(448,668	)			(458,624	)
	Income (loss) before income taxes				(7,285,913	)			5,561,055				12,679,552
Income taxes (Note 8)					(256,763	)			(209,805	)			(1,858,377	)
		Net income (loss)		¥	(7,542,676	)		¥	5,351,250			¥	10,821,175
Per share data:
	Net income (loss) per share — basic and diluted			¥	(1,917	)		¥	1,214			¥	2,221
Weighted average number of ordinary shares outstanding — basic and diluted					3,934,286				4,407,046				4,871,169

A4-75

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																			Accumulated
							Additional				Comprehensive								Other				Total
			Ordinary				Paid-in				Income				Accumulated				Comprehensive				Shareholders’
			Shares				Capital				(Loss)				Deficit				Loss				Equity
			(Yen in thousands, except per share amounts)
Balance at January 1, 2002			¥	47,002,623			¥	106,525,481							¥	(86,315,461	)		¥	—			¥	67,212,643
Net loss				—				—			¥	(7,542,676	)			(7,542,676	)			—				(7,542,676	)
Other comprehensive income												—
Comprehensive loss											¥	(7,542,676	)
Stock compensation (Notes 1 and 11)				—				64,058								—				—				64,058
Balance at December 31, 2002			¥	47,002,623			¥	106,589,539							¥	(93,858,137	)		¥	—			¥	59,734,025
Net income				—				—			¥	5,351,250				5,351,250				—				5,351,250
Other comprehensive loss:
	Unrealized loss on cash flow hedge											(694,745	)							(694,745	)			(694,745	)
Comprehensive income											¥	4,656,505
Stock compensation (Notes 1 and 11)				—				117,359								—				—				117,359
Ordinary shares issued upon conversion of long-term debt; 750,250 shares at ¥43,000 per share (Note 6)				16,130,375				16,130,375								—				—				32,260,750
Balance at December 31, 2003			¥	63,132,998			¥	122,837,273							¥	(88,506,887	)		¥	(694,745	)		¥	96,768,639
Net income				—				—			¥	10,821,175				10,821,175				—				10,821,175
Other comprehensive gain:
	Unrealized gain on cash flow hedge											686,541								686,541				686,541
Comprehensive income											¥	11,507,716
Stock compensation (Notes 1 and 11)				—				93,484								—				—				93,484
Ordinary shares issued; 461,539 shares at ¥65,000 per share (Note 1)				15,000,017				15,000,017								—				—				30,000,034
Balance at December 31, 2004			¥	78,133,015			¥	137,930,774							¥	(77,685,712	)		¥	(8,204	)		¥	138,369,873

A4-76

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						Year Ended December 31,
						2002				2003				2004
						(Yen in thousands)
Cash flows from operating activities:
	Net income (loss)					¥	(7,542,676	)		¥	5,351,250			¥	10,821,175
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Gain on forgiveness of subsidiary debt					—				(400,000	)			—
		Depreciation and amortization					30,079,753				36,410,894				40,573,166
		Equity in earnings of affiliates					(235,792	)			(414,756	)			(610,110	)
		Minority interest in net income (losses) of consolidated subsidiaries					(196,498	)			448,668				458,624
		Stock compensation expense					61,902				120,214				84,267
		Deferred income taxes					—				—				45,591
		Provision for retirement allowance					412,692				417,335				647,592
		Changes in operating assets and liabilities, excluding effects of business combinations:
			Decrease/(increase) in accounts receivable, net				1,368,081				1,712,904				(431,162	)
			Decrease in prepaid expenses and other current assets				553,192				349,147				4,866
			(Increase)/decrease in other assets				(1,651,599	)			(325,769	)			2,443,960
			(Decrease)/increase in accounts payable				(3,124,486	)			171,705				(1,184,539	)
			Increase in accrued expenses and other liabilities				188,537				2,665,162				39,279
			Increase/(decrease) in deferred revenue				2,768,512				458,315				(380,578	)
				Net cash provided by operating activities			22,681,618				46,965,069				52,512,131
Cash flows from investing activities:
	Capital expenditures						(48,108,176	)			(32,478,389	)			(31,792,956	)
	Acquisition of new subsidiaries, net of cash acquired						1,856,230				—				(442,910	)
	Investments in and advances to affiliates						(665,575	)			(172,500	)			(359,500	)
	(Increase)/decrease in restricted cash						—				(1,773,060	)			1,773,060
	Loans to related party						—				—				(4,030,000	)
	Acquisition of minority interest in consolidated subsidiaries						(164,590	)			(25,565	)			(4,960,484	)
	Other investing activities						(650,729	)			(76,891	)			(69,427	)
				Net cash used in investing activities			(47,732,840	)			(34,526,405	)			(39,882,217	)
Cash flows from financing activities:
	Proceeds from issuance of common stock						—				—				30,000,034
	Net increase/(decrease) in short-term loans						36,984,965				(228,785,000	)			250,000
	Proceeds from long-term debt						2,620,000				239,078,000				185,302,000
	Principal payments of long-term debt						(2,082,335	)			(8,184,980	)			(210,097,730	)
	Principal payments under capital lease obligations						(9,293,487	)			(10,843,024	)			(11,887,363	)
	Other financing activities						(738,854	)			(3,464,440	)			(3,562,724	)
				Net cash provided by (used in) financing activities			27,490,289				(12,199,444	)			(9,995,783	)
Net increase in cash and cash equivalents							2,439,067				239,220				2,634,131
Cash and cash equivalents at beginning of year							5,107,691				7,546,758				7,785,978
Cash and cash equivalents at end of year						¥	7,546,758			¥	7,785,978			¥	10,420,109

A4-77

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1.	Description of Business, Basis of Financial Statements and Summary of Significant Accounting Policies

LMI/Sumisho Super Media, LLC (“SM”)			65.23%
Microsoft Corporation (“Microsoft”)			19.46%
Sumitomo Corporation (“SC”)			12.25%
Mitsui & Co., Ltd.			1.53%
Matsushita Electric Industrial Co., Ltd.			1.53%

	Basis of Financial Statements

	(a) Consolidation Policy

A4-78

---

 

	(b) Cash and Cash Equivalents

	(c) Allowance for Doubtful Accounts

	(d) Investments

	(e) Property and Equipment

	(f) Goodwill

A4-79

---

 

	(g) Long-Lived Assets

	(h) Other Assets

	(i) Derivative Financial Instruments

A4-80

---

 

	(j) Severance and Retirement Plans

A4-81

---

 

A4-82

---

 

			2002				2003				2004
Net income (loss), as reported			¥	(7,542,676	)		¥	5,351,250				¥10,821,175
	Add stock-based compensation expense included in reported net income (loss)			—				—				—
	Deduct stock-based compensation expense determined under fair value based method for all awards, net of applicable taxes			(510,246	)			(454,172	)			(607,655	)
Pro forma net income (loss)			¥	(8,052,922	)		¥	4,897,078				¥10,213,520
Basic and diluted per share data:
Net income (loss) per share, as reported (Yen)				(1,917	)			1,214				2,221
Net income (loss) per share, pro forma (Yen)				(2,047	)			1,111				2,097

A4-83

---

 

A4-84

---

 

		2002				2004
Cash, receivables and other assets		¥	7,039,726			¥	2,073,191
Property and equipment			16,565,501				791,856
Goodwill			3,690,538				4,228,117
Debt and capital lease obligations			(15,881,589	)			—
Other liabilities			(6,110,058	)			(1,395,471	)
		¥	5,304,118			¥	5,697,693

				2003				2004
Combined Financial Position:
	Property and equipment, net			¥	29,696,602			¥	29,578,096
	Other assets, net				6,201,251				7,545,469
		Total assets		¥	35,897,853			¥	37,123,565
	Debt			¥	17,998,825			¥	15,577,345
	Other liabilities				16,030,950				17,224,152
	Shareholders’ equity				1,868,078				4,322,068
		Total liabilities and equity		¥	35,897,853			¥	37,123,565

				2002				2003				2004
Combined Operations:
	Total revenue			¥	18,218,205			¥	19,776,603			¥	21,784,795
	Operating, selling, general and administrative expenses				(13,001,409	)			(13,430,881	)			(15,080,471	)
	Depreciation and amortization				(3,180,977	)			(3,682,641	)			(4,164,827	)
		Operating income			2,035,819				2,663,081				2,539,497
	Interest expense, net				(410,278	)			(478,609	)			(427,400	)
	Other expense, net				(558,636	)			(1,013,158	)			(428,107	)
		Net income		¥	1,066,905			¥	1,171,314			¥	1,683,990

A4-85

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		2003				2004
Goodwill, net, beginning of year		¥	139,827,277			¥	139,853,596
Goodwill acquired during the year			26,319				4,228,117
Initial recognition of acquired tax benefits allocated to reduce goodwill of acquired entities (Note 8)			—				(3,422,995	)
Goodwill, net, end of year		¥	139,853,596			¥	140,658,718

			2003				2004
Lease and other deposits			¥	4,295,947			¥	4,313,742
Deferred financing costs				3,763,785				3,540,302
Capitalized computer software, net				3,022,557				3,351,115
Long-term loans receivable, net				300,380				270,885
Deferred tax assets				—				1,308,582
Other				1,664,560				1,797,757
	Total other assets		¥	13,047,229			¥	14,582,383

A4-86

---

 

A4-87

---

 

		2003				2004
¥140 billion Facility term loans, due fiscal 2005 — 2009		¥	53,000,000			¥	—
¥175 billion Facility term loans, due fiscal 2005 — 2011			—				130,000,000
Mezzanine Facility Subordinated loan due fiscal 2012			—				50,000,000
8 yr Shareholder Subordinated loans, due fiscal 2011			117,739,250				—
8 yr Shareholder Tranche B Subordinated loans, due fiscal 2011			32,000,000				—
0% unsecured loans from Development Bank of Japan, due fiscal 2005 — 2019			12,223,720				—
Unsecured loans from Development Bank of Japan, due fiscal 2005 — 2019, interest from 0.65% to 6.8%			3,895,400				—
0% secured loans from Development Bank of Japan, due fiscal 2005 — 2019			5,354,735				15,810,095
Secured loans from Development Bank of Japan, due fiscal 2005 — 2019, interest at 0.95% to 6.8%			—				3,614,200
0% unsecured loans from others, due fiscal 2012			57,090				50,170
Total			224,270,195				199,474,465
Less: current portion			(2,438,480	)			(5,385,980	)
Long-term debt, less current portion		¥	221,831,715			¥	194,088,485

A4-88

---

 

A4-89

---

 

Year Ending December 31,
2005		¥	5,385,980
2006			11,648,720
2007			20,461,660
2008			31,474,610
2009			42,981,060
Thereafter			87,522,435
		¥	199,474,465

A4-90

---

 

		2003				2004
Distribution system and equipment		¥	45,170,512			¥	48,061,224
Support equipment and buildings			6,656,913				6,594,499
Less: accumulated depreciation			(22,111,664	)			(24,129,460	)
Other assets, at cost, net of depreciation			292,511				209,669
		¥	30,008,272			¥	30,735,932

			Capital				Operating
Year ending December 31,			Leases				Leases
	2005		¥	10,479,258			¥	901,131
	2006			8,298,826				750,754
	2007			5,997,212				626,332
	2008			4,102,122				399,496
	2009			2,810,622				383,100
	More than five years			2,686,635				703,288
Total minimum lease payments				34,374,675			¥	3,764,101
Less: amount representing interest (rates ranging from 1.10% to 5.99%)				(2,570,124	)
Present value of net minimum payments				31,804,551
Less: current portion				(9,529,241	)
Noncurrent portion			¥	22,275,310

			2002				2003				2004
Current			¥	256,763			¥	209,805			¥	1,812,786
Deferred				—				—				45,591
	Income tax expense		¥	256,763			¥	209,805			¥	1,858,377

A4-91

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			2002				2003				2004
Normal effective statutory tax rate				(42.0	)%			42.0	%			42.0	%
	Adjustment to deferred tax assets and liabilities for enacted changes in tax laws and rates			—				—				0.1
	Increase/(decrease) in valuation allowance			42.0				(41.2	)			(27.4	)
	Other			3.5				3.0				—
Effective tax rate				3.5	%			3.8	%			14.7	%

			2003				2004
Deferred tax assets:
	Operating loss carryforwards		¥	29,921,448			¥	21,649,833
	Deferred revenue			14,165,581				14,455,010
	Lease obligation			12,452,252				12,721,820
	Retirement and other allowances			1,390,741				1,459,068
	Investment in affiliates			794,896				567,766
	Accrued expenses and other			2,485,228				3,978,505
	Total gross deferred tax assets			61,210,146				54,832,002
	Less: valuation allowance			(45,846,086	)			(35,240,909	)
	Deferred tax assets			15,364,060				19,591,093
Deferred tax liabilities:
	Property and equipment			12,680,631				13,796,923
	Tax deductible goodwill			633,155				—
	Other			2,050,274				2,416,766
	Total gross deferred tax liabilities			15,364,060				16,213,689
	Net deferred tax assets		¥	—			¥	3,377,404

A4-92

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Year Ending December 31,
2005		¥	17,501,242
2006			20,094,037
2007			—
2008			55,494
2009			10,751,591
2010-2011			5,722,217
		¥	54,124,581

		2002				2003				2004
Service cost — benefits earned during the year		¥	205,094			¥	257,230			¥	265,608
Interest cost on projected benefit obligation			35,074				40,159				40,120
Recognized actuarial loss			232,507				158,371				463,216
Net periodic cost		¥	472,675			¥	455,760			¥	768,944

		2003				2004
Change in benefit obligation:
Benefit obligation, beginning of year		¥	1,606,371			¥	2,006,011
Service cost			257,230				265,608
Interest cost			40,159				40,120
Acquisitions (Note 2)			—				30,630
Actuarial loss			158,371				432,586
Benefits paid			(56,120	)			(93,288	)
Benefit obligation, end of year		¥	2,006,011			¥	2,681,667

		2002				2003				2004
Projected benefit obligation
Discount rate			2.5%				2.0%				2.0%
Net pension cost
Discount rate			3.0%				2.0%				2.0%

A4-93

---

 

Estimated Future Benefit Payments
2005		¥	105,753
2006			116,145
2007			172,494
2008			138,000
2009			167,641
2010 to 2014			996,298
		¥	1,696,331

	Dividends

	Stock-Based Compensation Plans

A4-94

---

 

		2002				2003				2004
Outstanding at beginning of the year			132,712				159,004				191,764
Granted			30,576				41,958				29,730
Canceled			(4,284	)			(9,198	)			(8,418	)
Outstanding at end of the year			159,004				191,764				213,076
Weighted average exercise price		¥	92,000			¥	92,000			¥	92,000
Weighted average remaining contractual life			8.0 years				7.4 years				6.6 years
Options exercisable, end of period			—				—				—
Weighted average fair value of options granted		¥	14,604			¥	18,340			¥	24,545

		2003								2004
		Carrying				Fair				Carrying				Fair
		Amount				Value				Amount				Value
Long-term debt		¥	224,270,195			¥	220,114,532				¥199,474,465				¥199,127,222
Lease obligation			31,130,629				32,328,048				31,804,551				30,125,734
Interest rate swap agreements			694,745				694,745				8,204				8,204

A4-95

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				2002				2003				2004
				(Yen in thousands)
Cash paid during the year for:
	Interest			¥	4,696,332			¥	4,408,426			¥	8,588,285
	Income tax			¥	—			¥	378,116			¥	323,144
Cash acquisitions of new subsidiaries:
	Fair value of assets acquired			¥	20,135,417			¥	—			¥	1,688,442
	Liabilities assumed				21,991,647				—				1,245,532
		Cash paid, net of cash acquired		¥	(1,856,230	)		¥	—			¥	442,910
Property acquired under capital leases during the year				¥	10,990,909			¥	6,057,250			¥	12,561,285
Conversion of long-term debt into equity				¥	—			¥	32,260,750			¥	—

A4-96

---

 

A4-97

---

 

					2003				2004
					(Yen in thousands)
ASSETS
Current assets:
	Cash and cash equivalents:
		Related party			¥	2,350,000			¥	3,100,000
		Other				2,554,768				2,252,611
	Accounts receivable (less allowance for doubtful accounts of ¥10,618 thousand in 2003 and ¥7,723 thousand in 2004):
			Related party			307,160				380,826
			Other			3,036,190				4,298,811
	Retail inventories					2,235,952				2,999,404
	Program rights and language versioning, net (Note 3)					646,758				599,480
	Deferred income taxes (Note 13)					1,165,550				1,334,560
	Prepaid and other current assets					378,606				401,840
Total current assets						12,674,984				15,367,532
Investments (Note 4)						3,359,563				6,929,961
Property and equipment, net (Note 5)						2,012,286				5,327,068
Software development costs, net (Note 6)						1,450,388				1,902,244
Program rights and language versioning, excluding current portion, net (Note 3)						140,372				86,289
Goodwill (Note 8)						188,945				470,131
Other intangible assets, net (Note 7)						59,393				251,959
Deferred income taxes (Note 13)						236,975				357,606
Other assets, net						506,321				680,365
Total assets					¥	20,629,227			¥	31,373,155

A4-98

---

 

				2003				2004
				(Yen in thousands)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Short-term debt (Note 12)			¥	46,000			¥	—
	Obligations under capital leases, current installments (related party) (Note 11)				329,764				290,031
	Accounts payable:
		Related party			485,416				557,851
		Other			3,722,456				4,848,307
	Accrued liabilities
		Related party			232,172				276,938
		Other			1,228,563				1,515,453
	Income taxes payable				1,516,200				2,191,203
	Advances from affiliate				—				938,000
	Other current liabilities				517,910				512,501
Total current liabilities					8,078,481				11,130,284
Long-term debt (Note 12):
		Related party			2,016,000				1,000,000
		Other			4,000,000				4,000,000
Obligations under capital leases, excluding current installments (related party) (Note 11)					174,946				823,170
Accrued pension and severance cost (Note 14)					216,611				284,796
Deferred income taxes (Note 13)					—				81,380
Total liabilities					14,486,038				17,319,630
Minority interests					1,539,900				3,055,893
Shareholders’ equity (Note 15):
	Common stock, no par value; 2003 — authorized 450,000 shares; issued and outstanding 336,680 shares
		2004 — authorized 460,000 shares; issued and outstanding 360,680 shares			16,834,000				11,434,000
	Additional paid-in capital				—				6,788,054
	Accumulated deficit				(12,230,711	)			(7,207,717	)
	Accumulated other comprehensive loss				—				(16,705	)
Total shareholders’ equity					4,603,289				10,997,632
Total liabilities and shareholders’ equity				¥	20,629,227			¥	31,373,155

A4-99

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				2002				2003				2004
				(unaudited)
				(Yen in thousands)
Revenues:
	Retail sales, net			¥	27,432,871			¥	38,699,329			¥	50,010,854
	Television programming revenue:
		Related party			1,457,731				1,655,215				1,762,782
		Other			4,247,036				5,802,030				6,664,584
	Services and other revenue:
		Related party			524,849				755,244				866,157
		Other			634,336				906,453				1,176,418
Total revenues					34,296,823				47,818,271				60,480,795
Operating costs and expenses:
	Cost of retail sales:
		Related party			1,251,413				1,597,880				2,212,430
		Other			15,141,176				21,658,902				28,038,763
	Cost of programming and distribution:
		Related party			851,475				2,487,545				2,742,401
		Other			5,417,193				6,271,783				7,482,238
	Selling, general and administrative expenses:
		Related party			895,979				943,439				1,318,449
		Other			6,728,610				8,532,952				10,084,322
	Depreciation and amortization				1,107,040				1,210,163				1,380,432
Total operating expenses					31,392,886				42,702,664				53,259,035
Operating income					2,903,937				5,115,607				7,221,760
Other income (expense):
	Interest expense:
		Related party			(77,899	)			(60,073	)			(45,258	)
		Other			(74,482	)			(66,204	)			(77,245	)
	Foreign exchange (loss) gain				(309,017	)			(141,368	)			126,572
	Equity in (losses) income of equity method affiliates (Note 4)				(163,758	)			(64,472	)			22,888
	Other (expense) income, net				(214,087	)			9,763				(9,241	)
Total other (expense) income					(839,243	)			(322,354	)			17,716
Income before income taxes and minority interests					2,064,694				4,793,253				7,239,476
Income tax expense (Note 13)					(703,947	)			(1,519,225	)			(2,951,446	)
Minority interests in earnings, net of tax					(343,027	)			(608,738	)			(1,077,972	)
Net income				¥	1,017,720			¥	2,665,290			¥	3,210,058

A4-100

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					2002				2003				2004
					(unaudited)
					(Yen in thousands)
Common stock (Note 15):
	Balance at beginning of year				¥	16,834,000			¥	16,834,000			¥	16,834,000
	Transfer from common stock					—				—				(8,400,000	)
	Issuance of common stock					—				—				3,000,000
	Balance at end of year					16,834,000				16,834,000				11,434,000
Additional paid-in capital (Note 15):
	Balance at beginning of year					—				—				—
	Transfer from common stock					—				—				6,587,064
	Issuance of common stock					—				—				3,000,000
	Carryover basis adjustment related to LJS acquisition (Note 2)					—				—				(2,799,010	)
	Balance at end of year					—				—				6,788,054
Accumulated deficit:
	Balance at beginning of year					(15,913,721	)			(14,896,001	)			(12,230,711	)
	Transfer from common stock					—				—				1,812,936
	Net income					1,017,720				2,665,290				3,210,058
	Balance at end of year					(14,896,001	)			(12,230,711	)			(7,207,717	)
Accumulated other comprehensive income:
	Balance at beginning of year					—				—				—
		Unrecognized losses on derivative instruments (Note 9):
			Unrealized holding losses arising during the year, net of tax benefit, ¥11,460 thousand in 2004			—				—				(16,705	)
	Balance at end of year					—				—				(16,705	)
Treasury stock at cost:
	Balance at beginning of year					—				—				—
	Redemption of common stock, to be held as treasury stock (Note 15)					—				—				(6,000,000	)
	Issuance of treasury stock related to LJS acquisition (Note 2)					—				—				6,000,000
	Balance at end of year					—				—				—
Total shareholders’ equity					¥	1,937,999			¥	4,603,289			¥	10,997,632
Comprehensive income:
	Net income for the year				¥	1,017,720			¥	2,665,290			¥	3,210,058
	Other comprehensive loss for the year, net of tax benefit, ¥11,460 thousand in 2004					—				—				(16,705	)
	Total comprehensive income				¥	1,017,720			¥	2,665,290			¥	3,193,353

A4-101

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					2002				2003				2004
					(unaudited)
					(Yen in thousands)
Cash flows from operating activities:
	Net income				¥	1,017,720			¥	2,665,290			¥	3,210,058
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization				1,107,040				1,210,163				1,380,432
		Amortization of program rights and language versioning				1,298,054				1,570,670				1,732,435
		Provision for doubtful accounts				1,501				1,975				(3,519	)
		Equity in losses (income) of equity method affiliates				163,758				64,472				(22,888	)
		Write-down of cost method investment				215,650				—				—
		Deferred income taxes				(536,017	)			(553,039	)			(278,181	)
		Minority interest in earnings				343,027				608,738				1,077,972
		Changes in assets and liabilities, net of effects of acquisitions:
			Purchase of program rights and language versioning			(1,433,219	)			(1,608,392	)			(1,631,074	)
			Increase in accounts receivable			(515,809	)			(740,650	)			(1,307,561	)
			(Increase) decrease in retail inventories, net			(777,383	)			252,870				(763,453	)
			Increase (decrease) in accounts payable			1,242,235				777,510				883,283
			Increase in accrued liabilities			169,642				425,674				263,015
			Increase in income taxes payable			939,964				369,587				674,288
			Other, net			457,341				210,947				(22,218	)
Net cash provided by operating activities						3,693,504				5,255,815				5,192,589
Cash flows from investing activities:
	Capital expenditures					(1,378,218	)			(1,299,228	)			(3,886,668	)
	Acquisition of subsidiary, net of cash acquired					(188,844	)			—				(391,887	)
	Investments in affiliates					(626,050	)			(1,259,945	)			(748,500	)
	Other, net					(113,998	)			4,500				—
Net cash used in investing activities						(2,307,110	)			(2,554,673	)			(5,027,055	)
Cash flows from financing activities:
	Proceeds (repayments) on short-term debt					—				46,000				(46,000	)
	Proceeds from advances from affiliate					—				—				938,000
	Proceeds from issuance of long-term debt					60,000				4,040,000				—
	Principal payments on long-term debt					—				(4,000,000	)			(176,000	)
	Principal payments on obligations under capital leases					(527,935	)			(460,262	)			(429,014	)
	Proceeds from issuance of common stock					—				—				6,000,000
	Payments to acquire treasury stock					—				—				(6,000,000	)
Net cash used in financing activities						(467,935	)			(374,262	)			286,986
Net effect of exchange rate changes on cash and cash equivalents						(25,895	)			(23,095	)			(4,677	)
Net increase in cash and cash equivalents						892,564				2,303,785				447,843
Cash and cash equivalents at beginning of year						1,708,419				2,600,983				4,904,768
Cash and cash equivalents at end of year					¥	2,600,983			¥	4,904,768			¥	5,352,611
Supplemental information:
	Cash paid during the year for:
		Income taxes			¥	299,999			¥	1,702,678			¥	2,551,301
		Interest				152,381				126,277				90,711
	Acquisition of BBF (Note 2)
		Fair value of assets acquired (including cash acquired of ¥158,113 thousand)				—				—				705,657
		Fair value of liabilities assumed				—				—				(87,657	)
		Accrued estimated additional purchase consideration				—				—				(68,000	)
	Non-cash activities:
		Assets acquired under capital leases				5,457				142,644				1,037,505
		Acquisition of LJS through issuance of treasury stock (Note 2)				—				—				3,200,990
		Elimination of long-term loan from LJS				—				—				840,000

A4-102

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(1)	Description of Business and Summary of Significant Accounting Policies and Practices

(a)	Description of Business

(b)	Basis of Consolidated Financial Statements

(c)	Principles of Consolidation

(d)	Cash Equivalents

A4-103

---

 

(e)	Allowance for Doubtful Accounts

(f)	Retail Inventories

(g)	Program Rights and Language Versioning

(h)	Investments

(i)	Derivative Financial Instruments

A4-104

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(j)	Property and Equipment

Furniture and fixtures			2-20 years
Leasehold and building improvements			3-18 years
Equipment and vehicles			2-15 years
Buildings			37-50  years

(k)	Software Development Costs

(l)	Goodwill and Other Intangible Assets

A4-105

---

 

(m)	Long-Lived Assets and Long-Lived Assets to Be Disposed of

(n)	Accrued Pension and Severance Costs

(o)	Revenue Recognition

A4-106

---

 

(p)	Cost of Retail Sales

(q)	Cost of Programming and Distribution

(r)	Advertising Expense

(s)	Income Taxes

(t)	Foreign Currency Transactions

(u)	Use of Estimates

A4-107

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(v)	New Accounting Standards

(w)	Reclassification

(2)	Acquisitions

Current assets		¥	139,787
Goodwill			183,655
Total assets acquired			323,442
Current liabilities assumed			(134,598	)
Net assets acquired		¥	188,844

A4-108

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Purchase accounting:
	50% of acquisition consideration		¥	3,000,000
	Fair value of 50% of underlying net assets acquired			200,990
	Equity method goodwill		¥	2,799,010
Carryover basis:
	50% of acquisition consideration		¥	3,000,000
	Historical cost of 50% of underlying net assets acquired			200,990
	Carryover basis adjustment to additional paid in capital		¥	2,799,010

Current assets		¥	224,471
Intangible assets			200,000
Goodwill			281,186
Total assets acquired			705,657
Current liabilities assumed			(6,277	)
Deferred tax liabilities			(81,380	)
Net assets acquired		¥	618,000

A4-109

---

 

(3)	Program Rights and Language Versioning

		2003				2004
Program rights		¥	1,616,603			¥	1,308,623
Language versioning			206,884				116,910
			1,823,487				1,425,533
Less accumulated amortization 557,638			(1,036,357	)			(739,764	)
			787,130				685,769
Less current portion			(646,758	)			(599,480	)
		¥	140,372			¥	86,289

(4)	Investments

			2003								2004
			percentage				carrying				percentage				carrying
			ownership				amount				ownership				amount
Investments accounted for under the equity method:
	Discovery Japan, Inc.			50.0	%		¥	281,692				50.0	%		¥	580,455
	Animal Planet Japan, Co. Ltd.			33.3	%			342,423				33.3	%			223,510
	InteracTV Co., Ltd.			42.5	%			38,805				42.5	%			38,586
	JSports Broadcasting Corporation			28.5	%			1,110,431				42.8	%			4,045,414
	AXN Japan, Inc.			35.0	%			825,112				35.0	%			879,630
	Jupiter VOD Co., Inc.			—				—				50.0	%			401,266
Total equity method investments								2,598,463								6,168,861
Investments accounted for at cost:
	NikkeiCNBC Japan, Inc.			9.8	%			100,000				9.8	%			100,000
	Kids Station, Inc.			15.0	%			304,500				15.0	%			304,500
	AT-X, Inc.			12.3	%			266,000				12.3	%			266,000
	Nihon Eiga Satellite Broadcasting Corporation			10.0	%			66,600				10.0	%			66,600
	Satellite Service Co. Ltd.			12.0	%			24,000				12.0	%			24,000
Total cost method investments								761,100								761,100
							¥	3,359,563							¥	6,929,961

	Discovery Japan, Inc., a general documentary channel;
	Animal Planet Japan, Co. Ltd., an animal-specific documentary channel;
	JSports Broadcasting Corporation, a sports channel business currently operating three channels;
	AXN Japan, Inc., an action and adventure channel;
	NikkeiCNBC Japan, Inc., a news service channel;
	Kids Station, Inc., a children’s entertainment channel;
	AT-X, Inc., an animation genre channel;

A4-110

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	Nihon Eiga Satellite Broadcasting Corporation, a Japanese period drama and movie channels business
	currently operating two channels; and
	Jupiter VOD Co., Inc. a multi-genre video on demand programming service

	InteracTV Co., Ltd., holds licenses for Movie Plus, Lala, Golf Network and Shop channels, among
	others;
	Satellite Service Co. Ltd., holds licenses for Discovery and Animal Planet channels, among others.

		2002				2003				2004
		(unaudited)
Discovery Japan, Inc.		¥	(92,949	)		¥	143,445			¥	298,763
Animal Planet Japan, Co. Ltd.			(260,929	)			(311,673	)			(283,913	)
InteracTV Co., Ltd.			(1,142	)			(1,272	)			(219	)
JSports Broadcasting Corporation			191,262				143,227				135,973
AXN Japan, Inc.			—				(38,199	)			(43,982	)
Jupiter VOD Co., Inc.			—				—				(83,734	)
		¥	(163,758	)		¥	(64,472	)		¥	22,888

A4-111

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			2003				2004
Combined financial position at December 31,
	Current assets		¥	6,747,882			¥	8,533,233
	Other assets			1,780,915				634,175
	Total assets		¥	8,528,797			¥	9,167,408
	Current liabilities		¥	2,983,359			¥	3,056,756
	Other liabilities			2,543,293				1,413,948
	Shareholders’ equity			3,002,145				4,696,704
	Total liabilities and shareholders’ equity		¥	8,528,797			¥	9,167,408

			2002				2003				2004
			(unaudited)
Combined operations for the year ended December 31,
	Revenues		¥	16,034,608			¥	15,256,112			¥	21,682,192
	Operating expenses			15,720,997				15,270,229				21,998,685
	Operating income (loss)			313,611				(14,117	)			(316,493	)
	Other income, net, including income taxes			364,935				319,099				783,921
	Net income		¥	678,546			¥	304,982			¥	467,428

(5)	Property and Equipment

		2003				2004
Furniture and fixtures		¥	143,364			¥	187,233
Leasehold and building improvements			671,028				1,362,537
Equipment and vehicles			2,698,152				4,295,113
Buildings			—				851,485
Land			437,147				437,147
Construction in progress			253,678				183,254
			4,203,369				7,316,769
Less accumulated depreciation and amortization			(2,191,083	)			(1,989,701	)
		¥	2,012,286			¥	5,327,068

A4-112

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(6)	Software Development Costs

		2003				2004
Software development costs		¥	2,722,942			¥	3,773,137
Less accumulated amortization			(1,272,554	)			(1,870,893	)
		¥	1,450,388			¥	1,902,244

(7)	Intangibles

			2003				2004
Intangible assets subject to amortization, net of accumulated amortization of ¥6,420 thousand in 2003 and ¥28,417 thousand in 2004:
	Channel packaging arrangements		¥	—			¥	200,000
	Other			54,525				46,886
				54,525				246,886
Other intangible assets not subject to amortization:				4,868				5,073
Total other intangible assets			¥	59,393			¥	251,959

Year ending December 31,
2005		¥	45,892
2006			26,146
2007			22,466
2008			22,466
2009			22,466

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(8)	Goodwill

		2002				2003				2004
		(unaudited)
Balance at beginning of year		¥	—			¥	191,482			¥	188,945
Acquisitions			191,482				—				281,186
Adjustment			—				(2,537	)			—
Balance at end of year		¥	191,482			¥	188,945			¥	470,131

2002		Misawa Satellite Broadcasting Co		¥191,482 thousand
2004		BB Factory		¥281,186 thousand

(9)	Derivative Instruments and Hedging Activities

(10)	Fair Value of Financial Instruments

A4-114

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(11)	Leases

		2003				2004
Equipment and vehicles		¥	1,794,097			¥	1,839,215
Others			99,667				126,368
Less accumulated amortization			(1,417,805	)			(865,908	)
		¥	475,959			¥	1,099,675

Year ending December 31,
	2005		¥	313,917
	2006			247,663
	2007			224,818
	2008			190,961
	2009			170,756
	Thereafter			24,479
Total minimum lease payments				1,172,594
Less amount representing interest (at rates ranging from 1.25% to 2.6%)				(59,393	)
Present value of future minimum capital lease payments				1,113,201
Less current installments				(290,031	)
			¥	823,170

A4-115

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Year ending December 31,
	2005		¥	293,418
	2006			4,980
	2007			4,980
	2008			4,980
	2009			4,980
	Thereafter			111,635
Total minimum lease payments			¥	424,973

(12)	Debt

		2003				2004
Promissory note		¥	46,000			¥	—

		2003				2004
Borrowings from banks		¥	4,000,000			¥	4,000,000
Loans from shareholders			1,000,000				1,000,000
Loans from subsidiary minority shareholders			1,016,000				—
Total long-term debt			6,016,000				5,000,000
Less: current maturities			—				—
Long-term debt		¥	6,016,000			¥	5,000,000

A4-116

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A4-117

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			2004
Year ending December 31,
	2005		¥	—
	2006			1,600,000
	2007			1,600,000
	2008			1,800,000
	2009			—
Total debt			¥	5,000,000

(13)	Income Taxes

		2002				2003				2004
		(unaudited)
Current taxes		¥	1,239,964			¥	2,072,264			¥	3,229,627
Deferred taxes			(536,017	)			(553,039	)			(278,181	)
Income tax expense		¥	703,947			¥	1,519,225			¥	2,951,446

			2003				2004
Deferred tax assets:
	Retail inventories		¥	617,970			¥	811,289
	Property and equipment			195,223				297,238
	Accrued liabilities			372,529				330,995
	Enterprise tax payable			142,709				195,588
	Unrealized foreign exchange			101,371				62,581
	Equity method investments			711,645				944,389
	Operating loss carryforwards			1,892,339				895,097
	Others			270,394				320,361
				4,304,180				3,857,538
	Less valuation allowance			(2,901,655	)			(2,165,372	)
Total deferred tax assets				1,402,525				1,692,166
Deferred tax liabilities:
	Intangibles			—				(81,380	)
Net deferred tax assets			¥	1,402,525			¥	1,610,786

A4-118

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Year ending December 31,
	2005		¥	1,116,701
	2006			143,308
	2007			—
	2008			—
	2009			351,540
	2010			229,485
	2011			358,761
			¥	2,199,795

		2002				2003				2004
		(unaudited)
Statutory tax rate			42.1	%			42.1	%			42.1	%
Non-deductible expenses			2.8				1.9				1.4
Change in valuation allowance			(27.1	)			(9.9	)			(1.2	)
Income tax credits			—				—				(0.8	)
Reduction of tax net operating loss due to intercompany transfer of assets			19.6				—				—
Additional tax deduction due to intercompany transfer of assets			(3.9	)			(1.7	)			(1.1	)
Effect of tax rate change			—				—				0.7
Others			0.6				(0.7	)			(0.3	)
Effective income tax rate			34.1	%			31.7	%			40.8	%

A4-119

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(14)	Accrued Pension and Severance Cost

		2002				2003				2004
		(unaudited)
Service cost — benefits earned during the year		¥	43,652			¥	44,743			¥	49,768
Interest cost on projected benefit obligation			2,625				3,951				4,332
Recognized actuarial loss			10,341				15,972				24,317
Net periodic cost		¥	56,618			¥	64,666			¥	78,417

			2003				2004
Change in projected benefit obligations:
	Benefit obligations, beginning of year		¥	158,031			¥	216,611
	Service cost			44,743				49,768
	Interest cost			3,951				4,332
	Actuarial loss			15,973				24,317
	Benefits paid			(6,087	)			(10,232	)
Projected benefit obligations, end of year			¥	216,611			¥	284,796
Accumulated benefit obligations, end of year			¥	164,662			¥	210,159

Year ending December 31,
	2005		¥	16,206
	2006			25,570
	2007			25,291
	2008			29,482
	2009			34,715
	Years 2010-2014			174,596

(15)	Shareholders’ Equity

A4-120

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	1) Issuance of 24,000 newly issued shares of common stock to Sumitomo Corporation at a rate of ¥250,000 per common share (¥6,000,000 thousand), ¥3,000,000 thousand of which was allocated to common stock with the remaining ¥3,000,000 thousand allocated to additional paid-in capital;
	2) Redemption of 12,000 shares of common stock from Sumitomo Corporation at a rate of ¥250,000 per common share (¥3,000,000 thousand) to be held as treasury stock;
	3) Redemption of 12,000 shares of common stock from Liberty Programming Japan at a rate of ¥250,000 per common share (¥3,000,000 thousand) to be held as treasury stock;
	4) Issuance of 24,000 shares of common stock held in treasury shares to Liberty Programming Japan II Inc. in return for 1,000 shares of common stock in Liberty J Sports Inc. Liberty J Sports Inc. was then converted to a limited liability company with the Certificate of Conversion filed with the Delaware Secretary of State, and was subsequently renamed J Sports LLC. J Sports LLC is a wholly owned subsidiary of JPC.

(16)	Related Party Transactions

A4-121

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(17)	Concentration of credit risk

(18)	Commitments, Other Than Leases

Year ending December 31,
	2005		¥	1,131,527
	2006			822,490
	2007			37,864
	2008			14,205
Total program rights purchase commitments			¥	2,006,086

Year ending December 31,
	2005		¥	1,217,059
	2006			1,265,173
	2007			642,872
	2008			523,984
	2009			403,459
	Thereafter			140,142
Total transponder and uplink services commitments			¥	4,192,689

A4-122

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A4-123

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				December 31,
				2004				2003
				in thousands of
				Argentine pesos
ASSETS
Current Assets
Cash				A$	2,641			A$	2,224
Accounts receivable, net					19,007				15,116
Related party receivables (Note 6)					15,426				9,087
Programming rights, net					3,210				7,268
Advances to soccer clubs					1,180				2,216
Tax receivables					2,805				5,877
Building held for sale (Notes 6.d and 11.a)					2,940				—
Prepaid expenses and other current assets					3,466				2,375
		Total current assets			50,675				44,163
Related party receivables (Note 6)					2,885				774
Programming rights, net					19,050				9,291
Advances to soccer clubs					2,421				4,660
Deferred income taxes (Note 9)					1,360				2,054
Investments in affiliates accounted for under the equity method (Note 4)					21,132				19,185
Property and equipment, net (Note 5)					15,690				15,914
Other assets					1,214				1,165
Assets associated with discontinued operations (Note 6.d)					—				5,909
TOTAL ASSETS				A$	114,427			A$	103,115
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities				A$	28,532			A$	11,743
Related party liabilities (Note 6)					6,216				15,880
Debt (Note 7)
	Related party debt				8,419				8,306
	Third party debt				8,333				9,024
Taxes payable					6,588				5,331
Deferred income					6,906				16,133
Other liabilities					4,816				4,203
		Total current liabilities			69,810				70,620
Investments in affiliates accounted for under the equity method (Note 4)					—				3,715
Other liabilities					2,076				3,476
Liabilities associated with discontinued operations (Note 6.d)					3,700				3,208
TOTAL LIABILITIES				A$	75,586			A$	81,019
Commitments and contingencies (Note 10)
Minority interest in subsidiaries					(31	)			8
Stockholders’ equity:
	Common stock, A$1 par value. 50,160,000 shares authorized, issued and outstanding				50,160				50,160
	Additional paid-in capital				—				107,812
	Accumulated other comprehensive losses, net of taxes				(6,768	)			(6,717	)
	Legal reserve				—				1,597
	Accumulated deficit				(4,520	)			(130,764	)
		Total stockholders’ equity		A$	38,872			A$	22,088
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY				A$	114,427			A$	103,115

A4-124

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				Year ended December 31,
				2004				2003				2002
				in thousands of Argentine pesos, except number of
				shares and per share amounts
Revenue
		Related party (Note 6)		A$	74,941			A$	76,977			A$	69,974
		Third party			28,126				18,553				10,729
Operating costs and expenses
	Operating (other than depreciation)
		Related party (Note 6)			(814	)			(1,676	)			(1,253	)
		Third party			(58,948	)			(44,970	)			(36,490	)
	Selling, general and administrative
		Related party (Note 6)			(70	)			(143	)			(400	)
		Third party			(25,565	)			(23,360	)			(20,003	)
Provision for doubtful accounts and other receivables					(3,798	)			(709	)			(7,293	)
Depreciation					(1,404	)			(1,424	)			(1,719	)
Impairment of goodwill (Note 2)					—				—				(95,663	)
Operating income (loss)					12,468				23,248				(82,118	)
Share of earnings (losses) from equity affiliates (Note 4)					12,901				9,427				(10,589	)
Interest expense					(7,215	)			(10,042	)			(18,321	)
Foreign currency transaction gains (losses)					4,167				5,365				(9,236	)
Other income (expenses), net					(709	)			459				(2,082	)
Income (loss) from continuing operations before income tax and minority interest					21,612				28,457				(122,346	)
Income tax expense (Note 9)					(5,027	)			(7,886	)			(1,698	)
Minority interest in losses (earnings) of subsidiaries					11				(16	)			116
Income (loss) from continuing operations					16,596				20,555				(123,928	)
Discontinued operations, net of tax (including gain on disposal of A$239 during 2004 and impairment of goodwill of A$6,074 during 2002) (Note 6.d)					239				(604	)			(9,658	)
Net income (loss)				A$	16,835			A$	19,951			A$	(133,586	)
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustment					(51	)			1,136				(6,222	)
Comprehensive income (loss)				A$	16,784			A$	21,087			A$	(139,808	)
Income (loss) per share from continuing operations					0.33				0.41				(2.47	)
Income (loss) per share from discontinued operations					0.01				(0.01	)			(0.19	)
Net income (loss) per share					0.34				0.40				(2.66	)
Weighted average number of common shares outstanding					50,160,000				50,160,000				50,160,000

A4-125

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										Accumulated
										other
						Additional				comprehensive												Total
		Common				paid-in				losses,				Legal				Accumulated				stockholders’
		stock				capital				net of taxes				reserve				deficit				equity
		in thousands of Argentine pesos
Balance as of January 1, 2002		A$	50,160			A$	107,812			A$	(1,631	)		A$	1,597			A$	(17,129	)		A$	140,809
Foreign currency translation adjustment			—				—				(6,222	)			—				—				(6,222	)
Net loss			—				—				—				—				(133,586	)			(133,586	)
Balance as of December 31, 2002			50,160				107,812				(7,853	)			1,597				(150,715	)			1,001
Foreign currency translation adjustment			—				—				1,136				—				—				1,136
Net income			—				—				—				—				19,951				19,951
Balance as of December 31, 2003			50,160				107,812				(6,717	)			1,597				(130,764	)			22,088
Foreign currency translation adjustment			—				—				(51	)			—				—				(51	)
Absorption of accumulated deficit as required under Argentine law (Note 8)			—				(107,812	)			—				(1,597	)			109,409				—
Net income			—				—				—				—				16,835				16,835
Balance as of December 31, 2004		A$	50,160			A$	—			A$	(6,768	)		A$	—			A$	(4,520	)		A$	38,872

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					Year ended December 31,
					2004				2003				2002
					in thousands of Argentine pesos
Cash flows from operating activities:
Income (loss) from continuing operations					A$	16,596			A$	20,555			A$	(123,928	)
Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used in) operating activities:
	Provision for doubtful accounts and other receivables					3,798				709				7,293
	Depreciation					1,404				1,424				1,719
	Share of (earnings) losses from equity affiliates					(12,901	)			(9,427	)			10,589
	Impairment of goodwill					—				—				95,663
	Minority interest in losses (earnings) of subsidiaries					(11	)			16				(116	)
	Deferred tax expense					694				4,170				1,698
	Changes in operating assets and liabilities, net of the effect of dispositions:
		Receivables, programming rights and others				(17,098	)			13,847				3,775
		Payable and other current liabilities				2,194				(24,639	)			30,019
		Net cash provided by (used in) operating activities				(5,324	)			6,655				26,712
Cash flows from investing activities:
	Capital expenditures					(1,430	)			(1,162	)			—
	Cash distribution from equity affiliates					7,500				—				2,718
	Proceeds from the sale of property and equipment					250				—				732
		Net cash provided by (used in) investing activities				6,320				(1,162	)			3,450
Cash flows from financing activities:
	Debt proceeds					4,338				1,213				10,537
	Repayment of debt					(4,917	)			(5,063	)			(43,649	)
		Net cash used in financing activities				(579	)			(3,850	)			(33,112	)
		Net cash provided by (used in) discontinued operations				—				(26	)			172
		Net increase (decrease) in cash				417				1,617				(2,778	)
			Cash at beginning of year			2,224				607				3,385
			Cash at end of year		A$	2,641			A$	2,224			A$	607

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1.	Description of Business, Liquidity and Basis of Presentation

		Ownership
Shareholders		percentage
ACH Acquisitions Co.			20%
Telefónica de Contenidos S.A. Unipersonal			20%
A y N Argentina LLC			20%
Liberty Argentina, Inc, a subsidiary of Liberty Media International, Inc (“LMI”)			40%

A4-128

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	Operating subsidiaries as of December 31, 2004
	Avilacab S.A. (“Avilacab”)
	South American Sports S.A. (“SAS”)
	TyC Minor S.A. (“TyC Minor”)
	Significant equity affiliates as of December 31, 2004
	TSC
	TRISA
	T&T

2.	Summary of Significant Accounting Policies

A4-129

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		Estimated useful
		life (years)
Buildings			50
Furniture and fixtures			10
Technical equipment, vehicles and TV studio			5
Computer hardware			2 to 3

A4-130

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A4-131

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Entity			Impairment loss
SAS			A$	7,132
Sobre Golf S.A.				420
TSC				50,317
TRISA and Tele Net Image Corp.				37,794
	Total enterprise-level goodwill		A$	95,663

	Income Taxes

	Minority interest

	Foreign currency translation

	Revenue recognition

	Broadcasting Program rights: Broadcast program rights revenue are recognized when the matches are broadcasted.
	Sport TV programs production: Revenue from sports TV programs production services are recognized when the services are rendered.
	Others: Other revenue includes, among others, advertising and sports event organization. Advertising revenue, including the stadium based advertising, are recognized in the period during which underlying advertisements are broadcast. Sports events organization revenue are recognized when services are rendered.
	Deferred income: corresponds to revenue collected by TyC in advance, whose recognition is deferred until matches or related advertising are available for telecast.

A4-132

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	Earnings per share

3.	Supplemental Consolidated Statements of Cash Flows Disclosures

	a)     Income tax, minimum presumed income tax and interests

	b)     Noncash investing and financing activities

Related party receivable		A$	3,700	(1)
Building			2,940	(2)
		A$	6,640

(1)	The accounts receivable will be settled by AISA by effectively assuming the obligation to repay up to A$3,700 of principal and interest of a financial debt payable by TyC, currently in default. See Notes 6.d and 7. If as a result of the renegotiation of the loan in default, TyC pays an amount lower than A$3.7 million, the difference will be settled by AISA through the provision of advertising by América T.V. S.A. (“América TV”), a related company of the purchasers.
(2)	Fair value was determined based on an option held by TyC to return the building to CAE for an amount of US$1 million as per the related sales agreement signed between the parties. See note 6.d.

4.	Investments in Affiliates Accounted for Under the Equity Method

		December 31, 2004								December 31, 2003
		Percentage				Carrying				Carrying
		ownership				amount				amount
TSC			50	%		A$	10,062			A$	7,196
TRISA			50	%			9,162				11,983
T&T			50	%			1,902				(3,715	)(1)
Others			—				6				6
Total						A$	21,132			A$	15,470

(1)	As the Company’s investment in T&T was negative as of December 31, 2003, it has been classified in Non-current liabilities-Investments in affiliates accounted for under the equity method because the Company is ready to provide financial support, as may be necessary, to allow T&T to continue operating as going concern.

A4-133

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		Year ended December 31,
		2004				2003				2002
TSC		A$	2,868			A$	3,502			A$	(193	)
TRISA			4,678				8,539				(10,084	)
T&T			5,668				4,055				2,492
Sale of Pro Entertainment S.A.(1)			—				(5,706	)			—
Others			(313	)			(963	)			(2,804	)
Total		A$	12,901			A$	9,427			A$	(10,589	)

(1)	Relates to TyC forgiveness in 2003 of an accounts receivable maintained with Pro Entertainment S.A., as a result of the sale of such company by T&T in fiscal year 2002.

	TSC

		December 31,
		2004				2003
Financial Position
Current assets(1)		A$	50,111			A$	45,716
Non-current assets			10,487				8,661
Total assets		A$	60,598			A$	54,377
Current portion of long term debt		A$	11,500			A$	5,728
Other current liabilities(2)			24,863				30,905
Non current liabilities			4,111				3,352
Stockholders’ equity			20,124				14,392
Total liabilities and stockholders’ equity		A$	60,598			A$	54,377

(1)	Includes outstanding amounts receivable from Cablevisión S.A. (“Cablevisión”), a related party, of A$2,497 and A$2,497 at December 31, 2004 and 2003, respectively. See Note 6.
(2)	Includes outstanding amounts payable to TyC of A$3,893 and A$5,466 at December 31, 2004 and 2003, respectively. See Note 6.

A4-134

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		Year ended December 31,
		2004				2003				2002
Results of Operations
Revenue(1)		A$	127,023			A$	128,762			A$	117,833
Operating, selling, general and administrative expense(2)			(118,149	)			(113,599	)			(104,423	)
Operating income			8,874				15,163				13,410
Interest expense			(2,459	)			(4,638	)			(14,773	)
Interest income			56				984				680
Foreign exchange gain (loss)			35				(671	)			2,370
Other, net			(123	)			91				(1,701	)
Income tax expense			(647	)			(3,925	)			(372	)
Net income (loss)		A$	5,736			A$	7,004			A$	(386	)

(1)	Includes revenue from Cablevisión, a related party, for an amount of A$39,172, A$39,899 and A$29,052 for the years ended December 31, 2004, 2003 and 2002, respectively. See Note 6.
(2)	Includes services provided by TyC for an amount of A$10,468, A$10,205 and A$8,456 for the years ended December 31, 2004, 2003 and 2002, respectively. See Note 6.

	TRISA

		December 31,
		2004				2003
Financial Position
Current assets(1)		A$	68,196			A$	80,357
Property and equipment, net			11,813				9,812
Investments			853				794
Other non-current assets			28,621				17,827
Total assets		A$	109,483			A$	108,790
Current portion of long term debt		A$	4,348			A$	4,272
Other current liabilities(2)			43,721				43,384
Non-current debt			25,986				29,808
Other non-current liabilities			17,105				7,359
Stockholders’ equity			18,323				23,967
Total liabilities and stockholders’ equity		A$	109,483			A$	108,790

(1)	Includes outstanding amounts receivable from Cablevisión, a related party, of A$3,136 and A$3,036 at December 31, 2004 and 2003, respectively. See Note 6.
(2)	Includes outstanding amounts payable to TyC of A$3,202 and A$2,173 at December 31, 2004 and 2003, respectively. See Note 6.

A4-135

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		Year ended December 31,
		2004				2003				2002
Results of Operations
Revenue(1)		A$	125,011			A$	109,598			A$	98,041
Operating, selling, general and administrative expenses(2)			(115,732	)			(97,707	)			(81,911	)
Operating income			9,279				11,891				16,130
Interest expense			(5,490	)			(3,451	)			(2,291	)
Interest income			2,367				4,487				4,379
Foreign exchange gain (loss)			(636	)			5,379				(31,575	)
Share of earnings (losses) from equity affiliates			61				(356	)			(1,462	)
Other, net			926				509				4,234
Income tax benefit (expense)			2,849				(1,381	)			(9,583	)
Net income (loss)		A$	9,356			A$	17,078			A$	(20,168	)

(1)	Includes revenues from Cablevisión, a related party, for an amount of A$32,938, A$34,126 and A$25,902 and from TyC for an amount of A$532, A$184 and A$149 for the years ended December 31, 2004, 2003 and 2002, respectively. See Note 6.
(2)	Includes services provided by TyC for an amount of A$14,272, A$10,119 and A$5,713 for the years ended December 31, 2004, 2003 and 2002, respectively. See Note 6.

	T&T

		December 31,
		2004				2003
Financial Position
Current assets(1)		A$	10,441			A$	11,987
Non-current assets			60				1,411
Total assets		A$	10,501			A$	13,398
Current portion of long term debt		A$	—				288
Other current liabilities(2)			6,697				19,806
Non-current liabilities			—				735
Stockholders’ equity			3,804				(7,431	)
Total liabilities and stockholders’ equity		A$	10,501			A$	13,398

(1)	Includes outstanding amounts receivable from Fox Sports Latin America S.A. (“Fox Sports”), a related party, of A$0 and A$374 at December 31, 2004 and 2003, respectively. See Note 6.
(2)	Includes outstanding amounts payable to Fox Sports, a related party, of A$3,675 and A$5,438 at December 31, 2004 and 2003, respectively. See Note 6.

A4-136

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		Year ended December 31,
		2004				2003				2002
Results of Operations
Revenue(1)		A$	117,713			A$	110,962			A$	127,827
Operating, selling, general and administrative expenses(2)			(106,351	)			(103,556	)			(126,113	)
Operating income		A$	11,362			A$	7,406			A$	1,714
Share of earnings from equity affiliates			—				—				3,312
Other, net			(26	)			705				(42	)
Net income		A$	11,336			A$	8,111			A$	4,984

(1)	Includes revenues from Fox Sports, a related party, for an amount of A$93,933, A$85,689 and A$115,254 for the years ended December 31, 2004, 2003 and 2002, respectively. See Note 6.
(2)	Includes services provided by TyC for an amount of A$9,239, A$2,938 and A$3,227, for the years ended December 31, 2004, 2003 and 2002, respectively. See Note 6.

			December 31,
			2004				2003
Buildings			A$	14,544			A$	14,794
Furniture and fixtures				7,267				5,311
Technical equipment, vehicles and TV studio				7,339				6,109
Computer hardware				1,367				1,429
	Total property and equipment			30,517				27,643
Less: Accumulated depreciation				(14,827	)			(11,729	)
	Net property and equipment		A$	15,690			A$	15,914

	(a)     Company’s affiliated entities:

	(b)     Balances and transactions with related parties

A4-137

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		December 31,
		2004				2003
Receivables — Current:
América TV		A$	1,458			A$	1,091
TRISA			3,202				2,173
TSC			3,893				5,466
FPAS			5,047				—
AISA			1,550	(1)			357
Others			276				—
		A$	15,426			A$	9,087
Receivables — Non Current:
América TV		A$	735			A$	774
AISA			2,150	(1)			—
		A$	2,885			A$	774
Payables — Current:
América TV		A$	1,297			A$	312
FPAS			4,207				14,921
Others			712				647
		A$	6,216			A$	15,880

(1)	Accounts receivable related to the sale of La Red — See item (d) below in this note.

				Year ended December 31,
Revenue		Transaction description		2004				2003				2002
TRISA		Advertising, Production, Rights and Others		A$	14,272				10,119				5,713
TSC		Production and Rights			10,468				10,205				8,456
T&T		Production and Rights			9,239				2,938				3,227
América TV		Production			1				855				343
FPAS		Advertising, Production, Rights and Others			40,918				52,679				51,783
Others					43				181				452
				A$	74,941			A$	76,977			A$	69,974

A4-138

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				Year ended December 31,
Services received		Transaction description		2004				2003				2002
Operating (other than depreciation) expenses
América TV				A$	(282)				(1,477)				(849)
TRISA		Production and rights			(532)				(184)				(149)
Pramer S.C.A.		Production			—				(15)				(255)
		Total operating (other than depreciation) expenses		A$	(814)				(1,676)				(1,253)
Selling, general and administrative expenses
CAE		Other			(39)				(100)				(296)
Others		Rights and others			(31)				(43)				(104)
		Total selling, general and administrative expenses		A$	(70)			A$	(143)			A$	(400)

(c)	Agreement with FPAS

(d)	Discontinued operations — Sale of La Red

A4-139

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		December 31, 2003
Current assets		A$	4,357
Non-current assets			1,552
Total assets		A$	5,909
Current liabilities		A$	2,790
Non-current liabilities			418
Total liabilities		A$	3,208
Stockholders’ equity		A$	2,701

		Year ended December 31,
		2003				2002
Revenue		A$	5,672			A$	3,820
Pre-tax loss (including impairment of goodwill of A$6,074 in 2002)		A$	(253	)		A$	(9,658	)
Loss from discontinued operations, net of tax		A$	(604	)		A$	(9,658	)

7.	Debt

			2004				2003
Bank loans			A$	8,333			A$	9,024
Related Party				8,419				8,306
	Total		A$	16,752			A$	17,330

Past due			A$	4,927
2005			A$	3,406
	Total debt		A$	8,333	(1)

(1)	Includes A$2,635 for which one of the purchasers of La Red has effectively assumed the obligation to repay up to A$3,700 of principal and interest. See Note 6.

8.	Stockholders’ Equity

A4-140

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9.	Income Tax

			Year ended December 31,
			2004				2003				2002
Current tax expense			A$	(4,231	)		A$	(3,611	)		A$	—
Deferred tax expense				(694	)			(4,170	)			(1,698	)
	Sub-total			(4,925	)			(7,781	)			(1,698	)
Minimum presumed income tax				(102	)			(105	)			—
Income tax expense			A$	(5,027	)		A$	(7,886	)		A$	(1,698	)

			December 31,
			2004				2003
Allowance for doubtful accounts			A$	2,506			A$	1,467
Directors’ fees				—				660
Accumulated tax losses				499				567
Accumulated tax losses from the sale of controlled subsidiaries				5,754				—
Items accrued not yet deducted				597				884
Deferred income				—				1,202
Programming rights				(2,133	)			(1,623	)
Unpaid interest on foreign loans from related parties				1,290				—
Others				48				91
	Sub-total			8,561				3,248
Less: Valuation allowance on deferred tax asset				(7,201	)			(1,194	)
Net deferred tax asset at tax rate (35%)			A$	1,360			A$	2,054

A4-141

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			2004				2003				2002
Income (loss) before taxes and discontinued operations			A$	21,623			A$	28,441			A$	(122,230	)
Prevailing tax rate				35	%			35	%			35	%
Expected tax benefit (expense) from continuing operations				(7,568	)			(9,954	)			42,781
	Impairment of intangible assets			—				—				(33,482	)
	Increase in accumulated tax losses from the sale of controlled subsidiaries			5,754				—				—
	Imputed interest			—				(246	)			(1,075	)
	Directors’ fees			—				—				(1,268	)
	Share of earnings (losses) from equity affiliates			4,515				3,299				(3,706	)
	Non-recoverable receivables			(236	)			(363	)			(1,824	)
	Non-deductible expenses			(1,485	)			(467	)			(2,747	)
	Change in valuation allowance on deferred tax assets			(6,007	)			(155	)			(377	)
	Income tax expense from continuing operations		A$	(5,027	)		A$	(7,886	)		A$	(1,698	)

10.	Commitments and Contingencies

	(a)     Long-term Rights Contracts

2005		A$	8,625
2006		A$	16,755
2007		A$	5,589
2008		A$	1,589
2009		A$	1,589
Thereafter		A$	723

	(b)     Litigation

A4-142

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11.	Subsequent Events

	(a)     Sale of Building Held for Sale

	(b)     Agreement with FPAS

		2004				2005
Administrative services			658				658
Production of content			4,344				5,544
Advertising commission (range)			From 17.5% to 20%				From 17.5% to 20%

A4-143

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	KPMG LLP

A4-144

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	Arthur Andersen LLP

A4-145

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					December 31,
					2003				2002
					in thousands, except par value
					and number of shares
ASSETS
Current Assets
	Cash and cash equivalents				$	310,361			$	410,185
	Restricted cash					25,052				48,219
	Marketable equity securities and other investments					208,459				45,854
	Subscriber receivables, net of allowance for doubtful accounts of $51,109 and $71,485, respectively					140,075				136,796
	Related party receivables					1,730				15,402
	Other receivables					63,427				50,759
	Deferred financing costs, net					2,730				62,996
	Other current assets, net					76,812				95,340
			Total Current Assets			828,646				865,551
Long-Term Assets
	Property, plant and equipment, net					3,342,743				3,640,211
	Goodwill					2,519,831				1,250,333
	Intangible assets, net					252,236				13,776
	Other assets, net					156,215				161,723
			Total Assets		$	7,099,671			$	5,931,594
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities
	Not subject to compromise:
		Accounts payable			$	224,092			$	190,710
		Accounts payable, related party				1,448				1,704
		Accrued liabilities				405,546				328,927
		Subscriber prepayments and deposits				141,108				127,553
		Short-term debt				—				205,145
		Notes payable, related party				102,728				102,728
		Current portion of long-term debt				310,804				3,366,235
		Other current liabilities				82,149				16,448
			Total Current Liabilities not Subject to Compromise			1,267,875				4,339,450
	Subject to compromise:
		Accounts payable and accrued liabilities				14,445				271,250
		Short-term debt				5,099				—
		Current portion of long-term debt				317,372				2,812,988
			Total Current Liabilities Subject to Compromise			336,916				3,084,238
Long-Term Liabilities
	Not subject to compromise:
		Long-term debt				3,615,902				472,671
		Net negative investment in deconsolidated subsidiaries				—				644,471
		Deferred taxes				124,232				107,596
		Other long-term liabilities				259,493				165,896
			Total Long-Term Liabilities not Subject to Compromise			3,999,627				1,390,634
Guarantees, commitments and contingencies (Note 13)
Minority interests in subsidiaries						22,761				1,402,146
Stockholders’ Equity (Deficit)
	Preferred stock, $0.01 par value, 10,000,000 shares authorized, nil shares issued and outstanding					—				—
	Class A common stock, $0.01 par value, 1,000,000,000 shares authorized, 287,350,970 and 110,392,692 shares issued, respectively					2,873				1,104
	Class B common stock, $0.01 par value, 1,000,000,000 shares authorized, 8,870,332 shares issued					89				89
	Class C common stock, $0.01 par value, 400,000,000 shares authorized, 303,123,542 shares issued and outstanding					3,031				3,031
	Additional paid-in capital					5,852,896				3,683,644
	Deferred compensation					—				(28,473	)
	Treasury stock, at cost					(70,495	)			(34,162	)
	Accumulated deficit					(3,372,737	)			(6,797,762	)
	Accumulated other comprehensive income (loss)					(943,165	)			(1,112,345	)
			Total Stockholders’ Equity (Deficit)			1,472,492				(4,284,874	)
			Total Liabilities and Stockholders’ Equity (Deficit)		$	7,099,671			$	5,931,594

A4-146

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					Year ended December 31,
					2003				2002				2001
					in thousands, except per share data
Statements of Operations
	Revenue				$	1,891,530			$	1,515,021			$	1,561,894
	Operating expense					(768,838	)			(772,398	)			(1,062,394	)
	Selling, general and administrative expense					(493,810	)			(446,249	)			(690,743	)
	Depreciation and amortization — Operating expense					(808,663	)			(730,001	)			(1,147,176	)
	Impairment of long-lived assets — Operating expense					(402,239	)			(436,153	)			(1,320,942	)
	Restructuring charges and other — Operating expense					(35,970	)			(1,274	)			(204,127	)
	Stock-based compensation — Selling, general and administrative expense					(38,024	)			(28,228	)			(8,818	)
			Operating income (loss)			(656,014	)			(899,282	)			(2,872,306	)
	Interest income, including related party income of $985, $2,722 and $35,336, respectively					13,054				38,315				104,696
	Interest expense, including related party expense of $8,218, $24,805 and $58,834, respectively					(327,132	)			(680,101	)			(1,070,830	)
	Foreign currency exchange gain (loss), net					121,612				739,794				(148,192	)
	Gain on extinguishment of debt					2,183,997				2,208,782				3,447
	Gain (loss) on sale of investments in affiliates, net					279,442				117,262				(416,803	)
	Provision for loss on investments					—				(27,083	)			(342,419	)
	Other (expense) income, net					(14,884	)			(93,749	)			76,907
			Income (loss) before income taxes and other items			1,600,075				1,403,938				(4,665,500	)
	Reorganization expense, net					(32,009	)			(75,243	)			—
	Income tax (expense) benefit, net					(50,344	)			(201,182	)			40,661
	Minority interests in subsidiaries, net					183,182				(67,103	)			496,515
	Share in results of affiliates, net					294,464				(72,142	)			(386,441	)
			Income (loss) before cumulative effect of change in accounting principle			1,995,368				988,268				(4,514,765	)
	Cumulative effect of change in accounting principle					—				(1,344,722	)			20,056
			Net income (loss)		$	1,995,368			$	(356,454	)		$	(4,494,709	)
	Earnings per share (Note 20):
		Basic net income (loss) per share before cumulative effect of change in accounting principle			$	7.41			$	2.29			$	(41.47	)
		Cumulative effect of change in accounting principle				—				(3.13	)			0.18
			Basic net income (loss) per share		$	7.41			$	(0.84	)		$	(41.29	)
		Diluted net income (loss) per share before cumulative effect of change in accounting principle			$	7.41			$	2.29			$	(41.47	)
		Cumulative effect of change in accounting principle				—				(3.12	)			0.18
			Diluted net income (loss) per share		$	7.41			$	(0.83	)		$	(41.29	)
Statements of Comprehensive Income
	Net income (loss)				$	1,995,368			$	(356,454	)		$	(4,494,709	)
	Other comprehensive income, net of tax:
		Foreign currency translation adjustments				61,440				(864,104	)			11,157
		Change in fair value of derivative assets				10,616				13,443				(24,059	)
		Change in unrealized gain on available-for-sale securities				97,318				4,029				37,526
		Other				(194	)			(77	)			271
			Comprehensive income (loss)		$	2,164,548			$	(1,203,163	)		$	(4,469,814	)

A4-147

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		Class A								Class B								Class C
		Common Stock								Common Stock								Common Stock								Additional
																										Paid-In				Deferred
		Shares				Amount				Shares				Amount				Shares				Amount				Capital				Compensation
		in thousands, except number of shares
December 31, 2002			110,392,692			$	1,104				8,870,332			$	89				303,123,542			$	3,031			$	3,683,644			$	(28,473	)
Issuance of Class A common stock for subsidiary preference shares			2,155,905				21				—				—				—				—				6,082				—
Issuance of Class A common stock in connection with stock option plans			311,454				3				—				—				—				—				1,351				—
Issuance of Class A common stock in connection with 401(k) plan			58,272				1				—				—				—				—				258				—
Issuance of common stock by UGC Europe for debt and other liabilities			—				—				—				—				—				—				966,362				—
Equity transactions of subsidiaries			—				—				—				—				—				—				(129,904	)			1,896
Amortization of deferred compensation			—				—				—				—				—				—				—				26,577
Receipt of common stock in satisfaction of executive loans			—				—				—				—				—				—				—				—
Issuance of Class A common stock in connection with the UGC Europe exchange offer			174,432,647				1,744				—				—				—				—				1,325,103				—
Net income			—				—				—				—				—				—				—				—
Foreign currency translation adjustments			—				—				—				—				—				—				—				—
Change in fair value of derivative assets			—				—				—				—				—				—				—				—
Unrealized gain (loss) on available-for-sale securities			—				—				—				—				—				—				—				—
Amortization of cumulative effect of change in accounting principle			—				—				—				—				—				—				—				—
December 31, 2003			287,350,970			$	2,873				8,870,332			$	89				303,123,542			$	3,031			$	5,852,896			$	—

[Additional columns below]

[Continued from above table, first column(s) repeated]

		Class A								Class B												Accumulated
		Treasury Stock								Treasury Stock												Other
																		Accumulated				Comprehensive
		Shares				Amount				Shares				Amount				Deficit				Income (Loss)				Total
		in thousands, except number of shares
December 31, 2002			7,404,240			$	(34,162	)			—			$	—			$	(6,797,762	)		$	(1,112,345	)		$	(4,284,874	)
Issuance of Class A common stock for subsidiary preference shares			—				—				—				—				1,423,102				—				1,429,205
Issuance of Class A common stock in connection with stock option plans			—				—				—				—				—				—				1,354
Issuance of Class A common stock in connection with 401(k) plan			—				—				—				—				—				—				259
Issuance of common stock by UGC Europe for debt and other liabilities			—				—				—				—				—				—				966,362
Equity transactions of subsidiaries			—				—				—				—				6,555				—				(121,453	)
Amortization of deferred compensation			—				—				—				—				—				—				26,577
Receipt of common stock in satisfaction of executive loans			188,792				—				672,316				—				—				—				—
Issuance of Class A common stock in connection with the UGC Europe exchange offer			4,780,611				(36,333	)			—				—				—				—				1,290,514
Net income			—				—				—				—				1,995,368				—				1,995,368
Foreign currency translation adjustments			—				—				—				—				—				61,440				61,440
Change in fair value of derivative assets			—				—				—				—				—				10,616				10,616
Unrealized gain (loss) on available-for-sale securities			—				—				—				—				—				97,318				97,318
Amortization of cumulative effect of change in accounting principle			—				—				—				—				—				(194	)			(194	)
December 31, 2003			12,373,643			$	(70,495	)			672,316			$	—			$	(3,372,737	)		$	(943,165	)		$	1,472,492

			December 31,
			2003				2002
			in thousands
Foreign currency translation adjustments			$	(1,057,074	)		$	(1,118,514	)
Fair value of derivative assets				—				(10,616	)
Other				113,909				16,785
	Total		$	(943,165	)		$	(1,112,345	)

A4-148

---

 

		Series C								Series D								Class A								Class B								Class C
		Preferred Stock								Preferred Stock								Common Stock								Common Stock								Common Stock
		Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount
		in thousands, except number of shares
Balances, December 31, 2001			425,000			$	425,000				287,500			$	287,500				98,042,205			$	981				19,027,134			$	190				—			$	—
Accrual of dividends on Series B, C and D convertible preferred stock			—				—				—				—				—				—				—				—				—				—
Merger/reorganization transaction			(425,000	)			(425,000	)			(287,500	)			(287,500	)			11,628,674				116				(10,156,802	)			(101	)			21,835,384				218
Issuance of Class C common stock for financial assets			—				—				—				—				—				—				—				—				281,288,158				2,813
Issuance of Class A common stock in exchange for remaining interest in Old UGC			—				—				—				—				600,000				6				—				—				—				—
Issuance of Class A common stock in connection with 401(k) plan			—				—				—				—				121,813				1				—				—				—				—
Equity transactions of subsidiaries and other			—				—				—				—				—				—				—				—				—				—
Amortization of deferred compensation			—				—				—				—				—				—				—				—				—				—
Purchase of treasury shares			—				—				—				—				—				—				—				—				—				—
Net income			—				—				—				—				—				—				—				—				—				—
Foreign currency translation adjustments			—				—				—				—				—				—				—				—				—				—
Change in fair value of derivative assets			—				—				—				—				—				—				—				—				—				—
Change in unrealized gain on available-for-sale securities			—				—				—				—				—				—				—				—				—				—
Amortization of cumulative effect of change in accounting principle			—				—				—				—				—				—				—				—				—				—
Balances, December 31, 2002			—			$	—				—			$	—				110,392,692			$	1,104				8,870,332			$	89				303,123,542			$	3,031

[Additional columns below]

[Continued from above table, first column(s) repeated]

																						Other
		Additional								Treasury Stock												Comprehensive
		Paid-In				Deferred												Accumulated				Income
		Capital				Compensation				Shares				Amount				Deficit				(Loss)				Total
		in thousands, except number of shares
Balances, December 31, 2001		$	1,537,944			$	(74,185	)			5,604,948			$	(29,984	)		$	(6,437,290	)		$	(265,636	)		$	(4,555,480	)
Accrual of dividends on Series B, C and D convertible preferred stock			(156	)			—				—				—				(4,018	)			—				(4,174	)
Merger/reorganizatio transaction			770,448				—				(35,708	)			923				—				—				59,104
Issuance of Class C common stock for financial assets			1,396,469				—				—				—				—				—				1,399,282
Issuance of Class A common stock in exchange for remaining interest in Old UGC			(6	)			—				—				—				—				—				—
Issuance of Class A common stock in connection with 401(k) plan			340				—				—				—				—				—				341
Equity transactions of subsidiaries and other			(21,395	)			12,794				—				—				—				—				(8,601	)
Amortization of deferred compensation			—				32,918				—				—				—				—				32,918
Purchase of treasury shares			—				—				1,835,000				(5,101	)			—				—				(5,101	)
Net income			—				—				—				—				(356,454	)			—				(356,454	)
Foreign currency translation adjustments			—				—				—				—				—				(864,104	)			(864,104	)
Change in fair value of derivative assets			—				—				—				—				—				13,443				13,443
Change in unrealized gain on available-for-sale securities			—				—				—				—				—				4,029				4,029
Amortization of cumulative effect of change in accounting principle			—				—				—				—				—				(77	)			(77	)
Balances, December 31, 2002		$	3,683,644			$	(28,473	)			7,404,240			$	(34,162	)		$	(6,797,762	)		$	(1,112,345	)		$	(4,284,874	)

A4-149

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		Series C								Series D								Class A								Class B
		Preferred Stock								Preferred Stock								Common Stock								Common Stock
		Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount
		in thousands, except number of shares
Balances, December 31, 2000			425,000			$	425,000				287,500			$	287,500				83,820,633			$	838				19,221,940			$	192
Exchange of Class B common stock for Class A common stock			—				—				—				—				194,806				2				(194,806	)			(2	)
Issuance of Class A common stock in connection with stock option plans and 401(k) plan			—				—				—				—				76,504				1				—				—
Issuance of Class A common stock for cash			—				—				—				—				11,991,018				120				—				—
Accrual of dividends on Series B, C and D convertible preferred stock			—				14,875				—				10,063				—				—				—				—
Issuance of Class A common stock in lieu of cash dividends on Series C and D convertible preferred stock			—				(14,875	)			—				(10,063	)			1,959,244				20				—				—
Equity transactions of subsidiaries and others			—				—				—				—				—				—				—				—
Amortization of deferred compensation			—				—				—				—				—				—				—				—
Loans to related parties, collateralized with common shares and options			—				—				—				—				—				—				—				—
Net loss			—				—				—				—				—				—				—				—
Foreign currency translation adjustments			—				—				—				—				—				—				—				—
Change in fair value of derivative assets			—				—				—				—				—				—				—				—
Unrealized gain (loss) on available-for-sale securities			—				—				—				—				—				—				—				—
Cumulative effect of change in accounting principle			—				—				—				—				—				—				—				—
Amortization of cumulative effect of change in accounting principle			—				—				—				—				—				—				—				—
Balances, December 31, 2001			425,000			$	425,000				287,500			$	287,500				98,042,205			$	981				19,027,134			$	190

[Additional columns below]

[Continued from above table, first column(s) repeated]

																						Other
		Additional								Treasury Stock												Comprehensive
		Paid-In				Deferred												Accumulated				Income
		Capital				Compensation				Shares				Amount				Deficit				(Loss)				Total
		in thousands, except number of shares
Balances, December 31, 2000		$	1,531,593			$	(117,136	)			5,604,948			$	(29,984	)		$	(1,892,706	)		$	(290,531	)		$	(85,234	)
Exchange of Class B common stock for Class A common stock			—				—				—				—				—				—				—
Issuance of Class A common stock in connection with stock option plans and 401(k) plan			386				—				—				—				—				—				387
Issuance of Class A common stock for cash			19,905				—				—				—				—				—				20,025
Accrual of dividends on Series B, C and D convertible preferred stock			(1,873	)			—				—				—				(49,875	)			—				(26,810	)
Issuance of Class A common stock in lieu of cash dividends on Series C and D convertible preferred stock			24,918				—				—				—				—				—				—
Equity transactions of subsidiaries and others			(29,122	)			22,159				—				—				—				—				(6,963	)
Amortization of deferred compensation			(1,292	)			20,792				—				—				—				—				19,500
Loans to related parties, collateralized with common shares and options			(6,571	)			—				—				—				—				—				(6,571	)
Net loss			—				—				—				—				(4,494,709	)			—				(4,494,709	)
Foreign currency translation adjustments			—				—				—				—				—				11,157				11,157
Change in fair value of derivative assets			—				—				—				—				—				(24,059	)			(24,059	)
Unrealized gain (loss) on available-for-sale securities			—				—				—				—				—				37,526				37,526
Cumulative effect of change in accounting principle			—				—				—				—				—				523				523
Amortization of cumulative effect of change in accounting principle			—				—				—				—				—				(252	)			(252	)
Balances, December 31, 2001		$	1,537,944			$	(74,185	)			5,604,948			$	(29,984	)		$	(6,437,290	)		$	(265,636	)		$	(4,555,480	)

A4-150

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				Year ended December 31,
				2003				2002				2001
				in thousands
Cash Flows from Operating Activities
Net income (loss)				$	1,995,368			$	(356,454	)		$	(4,494,709	)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
	Stock-based compensation				38,024				28,228				8,818
	Depreciation and amortization				808,663				730,001				1,147,176
	Impairment of long-lived assets				402,239				437,427				1,525,069
	Accretion of interest on senior notes and amortization of deferred financing costs				50,733				234,247				492,387
	Unrealized foreign exchange (gains) losses, net				(84,258	)			(745,169	)			125,722
	Loss on derivative securities				12,508				115,458				—
	Gain on extinguishment of debt				(2,183,997	)			(2,208,782	)			3,447
	(Gain) loss on sale of investments in affiliates and other assets, net				(279,442	)			(117,262	)			416,803
	Provision for loss on investments				—				27,083				342,419
	Reorganization expenses, net				32,009				75,243				—
	Deferred tax provision				(18,161	)			104,068				(43,167	)
	Minority interests in subsidiaries, net				(183,182	)			67,103				(496,515	)
	Share in results of affiliates, net				(294,464	)			72,142				386,441
	Cumulative effect of change in accounting principle				—				1,344,722				(20,056	)
Change in assets and liabilities:
	Change in receivables, net				49,238				42,175				68,137
	Change in other assets				(8,368	)			4,628				2,489
	Change in accounts payable, accrued liabilities and other				55,182				(148,466	)			(135,604	)
		Net cash flows from operating activities			392,092				(293,608	)			(671,143	)
Cash Flows from Investing Activities
Purchase of short-term liquid investments					(1,000	)			(117,221	)			(1,691,751	)
Proceeds from sale of short-term liquid investments					45,561				152,405				1,907,171
Restricted cash released (deposited), net					24,825				40,357				(74,996	)
Investments in affiliates and other investments					(20,931	)			(2,590	)			(60,654	)
Proceeds from sale of investments in affiliated companies					45,447				—				120,416
New acquisitions, net of cash acquired					(2,150	)			(22,617	)			(39,950	)
Capital expenditures					(333,124	)			(335,192	)			(996,411	)
Purchase of interest rate caps					(9,750	)			—				—
Settlement of interest rate caps					(58,038	)			—				—
Other					7,806				27,595				(45,192	)
		Net cash flows from investing activities			(301,354	)			(257,263	)			(881,367	)
Cash Flows from Financing Activities
Issuance of common stock					1,354				200,006				24,054
Proceeds from notes payable to shareholder					—				102,728				—
Proceeds from short-term and long-term borrowings					23,161				42,742				1,673,981
Retirement of existing senior notes					—				(231,630	)			(261,309	)
Financing costs					(2,233	)			(18,293	)			(17,771	)
Repayments of short-term and long-term borrowings					(233,506	)			(90,331	)			(766,950	)
Other					—				—				(6,571	)
		Net cash flows from financing activities			(211,224	)			5,222				645,434
Effects of Exchange Rates on Cash					20,662				35,694				(49,612	)
Decrease in Cash and Cash Equivalents					(99,824	)			(509,955	)			(956,688	)
Cash and Cash Equivalents, Beginning of Year					410,185				920,140				1,876,828
Cash and Cash Equivalents, End of Year				$	310,361			$	410,185			$	920,140
Supplemental Cash Flow Disclosure
	Cash paid for reorganization expenses			$	27,084			$	33,488			$	—
	Cash paid for interest			$	185,591			$	304,274			$	519,221
	Cash paid for income taxes			$	1,947			$	14,260			$	—
Non-Cash Investing and Financing Activities
	Issuance of subsidiary common stock for financial assets			$	966,362			$	—			$	—
	Issuance of common stock for acquisitions			$	1,326,847			$	1,206,441			$	—

A4-151

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1.	Organization and Nature of Operations

2.	Summary of Significant Accounting Policies

	Use of Estimates

A4-152

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Customer premise equipment		4-10 years
Commercial		3-20 years
Scaleable infrastructure		3-20 years
Line extensions		5-20 years
Upgrade/rebuild		3-20 years
Support capital		1-33 years

A4-153

---

 

A4-154

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			Year ended December 31,
			2003				2002				2001
			in thousands, except per share amounts
Net income (loss), as reported			$	1,995,368			$	(356,454	)		$	(4,494,709	)
	Add: Stock-based employee compensation expense included in reported net income, net of related tax effects(1)			29,242				28,228				8,818
	Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of related tax effects			(57,101	)			(102,837	)			(98,638	)
Pro forma net income (loss)			$	1,967,509			$	(431,063	)		$	(4,584,529	)
Basic net income (loss) per common share:
	As reported		$	7.41			$	(0.84	)		$	(41.29	)
	Pro forma		$	7.35			$	(1.01	)		$	(42.10	)
Diluted net income (loss) per common share:
	As reported		$	7.41			$	(0.83	)		$	(41.29	)
	Pro forma		$	7.35			$	(1.01	)		$	(42.10	)

(1)	Not including SARs. Compensation expense for SARs is the same under APB 25 and SFAS 123.

A4-155

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	2003

	Acquisition of UPC Preference Shares

A4-156

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	United Pan-Europe Communications N.V. Reorganization

	UGC Europe Exchange Offer and Merger

A4-157

---

 

Property, plant and equipment			$	717
Goodwill				1,005,148
Customer relationships and tradename				243,212
Other assets				10,556
Other liabilities				55,271
	Total consideration		$	1,314,904

	•	Our ability to create a simpler, unified capital structure in which equity investors would participate in our equity at a single level, which would lead to greater liquidity for investors, due to the larger combined public float;
	•	Our ability to facilitate the investment and transfer of funds between us and UGC Europe and its subsidiaries, thereby creating more efficient uses of our consolidated financial resources; and
	•	Our assessment that the elimination of public stockholders at the UGC Europe level would create opportunities for cost reductions and organizational efficiencies through, among other things, the combination of UGC Europe’s and our separate corporate functions into a better integrated, unitary corporate organization.

				Year ended December 31,
				2003				2002
				in thousands, except share
				and per share amounts
Revenue				$	1,891,530			$	1,515,021
Income before cumulative effect of change in accounting principle				$	1,805,225			$	1,014,908
Net income (loss)				$	1,805,225			$	(329,814	)
Earnings per share:
	Basic net income (loss) per share before cumulative effect of change in accounting principle			$	4.99			$	1.63
	Cumulative effect of change in accounting principle				—				(2.17	)
		Basic net income (loss) per share		$	4.99			$	(0.54	)
Diluted net income (loss) per share before cumulative effect of change in accounting principle				$	4.98			$	1.63
Cumulative effect of change in accounting principle					—				(2.17	)
		Diluted net income (loss) per share		$	4.98			$	(0.54	)

A4-158

---

 

	2002

	Merger Transaction

	•	Liberty contributed approximately 9.9 million shares of Old UGC Class B common stock and approximately 12.0 million shares of Old UGC Class A common stock to us and in exchange for these contributions, we issued Liberty approximately 21.8 million shares of our Class C common stock;
	•	Certain long-term stockholders of Old UGC (the “Founders”) transferred their shares of Old UGC Class B common stock to limited liability companies, which limited liability companies then merged into us. As a result of such mergers, the Founders received approximately 8.9 million shares of our Class B common stock, which number of shares equals the number of shares of Old UGC Class B common stock transferred by them to the limited liability companies; and
	•	Four of the Founders (the “Principal Founders”) contributed $3.0 million to Old UGC in exchange for securities that, at the effective time of the merger, converted into securities representing a 0.5% interest in Old UGC and entitled them to elect one-half of Old UGC’s directors.

	•	Old UGC became our 99.5%-owned subsidiary, and the Principal Founders held the remaining 0.5% interest in Old UGC;
	•	Each share of Old UGC’s Class A and Class B common stock outstanding immediately prior to the merger was converted into one share of our Class A common stock;
	•	The shares of Old UGC’s Series B, C and D preferred stock outstanding immediately prior to the merger were converted into an aggregate of approximately 23.3 million shares of our Class A common stock, which amount is equal to the number of shares of Old UGC Class A common stock the holders of Old UGC’s preferred stock would have received had they converted their preferred stock immediately prior to the merger;
	•	Liberty had the right to elect four of our 12 directors;
	•	The Founders had the effective voting power to elect eight of our 12 directors; and
	•	We had the right to elect half of Old UGC’s directors and the Principal Founders had the right to elect the other half of Old UGC’s directors (see discussion below regarding a transaction that occurred on May 14, 2002, pursuant to which Old UGC became our wholly-owned subsidiary and we became entitled to elect the entire board of directors of Old UGC).

	•	Liberty contributed to us the UPC Exchangeable Loan which had an accreted value of $891.7 million as of January 30, 2002 and, as a result, UPC owed the amount payable under such loan to us rather than to Liberty;
	•	Liberty contributed $200.0 million in cash to us;
	•	Liberty contributed to us certain UPC bonds (the “United UPC Bonds”) and, as a result, UPC owed the amounts represented by the United UPC Bonds to us rather than to Liberty; and
	•	In exchange for the contribution of these assets to us, an aggregate of approximately 281.3 million shares of our Class C common stock was issued to Liberty.

A4-159

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	•	Our assumption of approximately $304.6 million of indebtedness owed by Liberty to Old UGC; and
	•	Cash in the amount of approximately $143.9 million.

			Fair value
			at acquisition				Book value				Gain/(loss)
			in thousands
Old UGC Senior Notes			$	540,149			$	1,210,974			$	670,825
United UPC Bonds				312,831				1,451,519				1,138,688
UPC Exchangeable Loan				891,671				891,671				—
Write-off of deferred financing costs				—				(52,224	)			(52,224	)
	Total gain on extinguishment of debt		$	1,744,651			$	3,501,940			$	1,757,289

	Transfer of German Shares

A4-160

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Working capital			$	(74,809	)
Property, plant and equipment				74,169
Goodwill and other intangible assets				69,912
Long-term liabilities				(84,288	)
Minority interest				(142,158	)
Gain on reversal of net negative investment				147,925
	Net cash deconsolidated		$	(9,249	)

	Other

	2001

4.	Marketable Equity Securities and Other Investments

			December 31, 2003								December 31, 2002
			Fair				Unrealized				Fair				Unrealized
			value				gain				value				gain
			in thousands
SBS common stock			$	195,600			$	105,790			$	—			$	—
Other equity securities				10,725				6,098				—				—
Corporate bonds and other				2,134				856				45,854				14
	Total		$	208,459			$	112,744			$	45,854			$	14

A4-161

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5.	Property, Plant and Equipment

																							Foreign
																			UGC Europe				currency
			December 31,																exchange				translation				December 31,
			2002				Additions				Disposals				Impairments(1)				offer(2)				adjustments				2003
			in thousands
Customer premises equipment			$	1,003,950			$	95,834			$	(2,459	)		$	(89,971	)		$	20,936			$	201,941			$	1,230,231
Commercial				5,670				—				—				—				—				235				5,905
Scaleable infrastructure				637,171				44,177				—				(23,806	)			(8,973	)			138,000				786,569
Line extensions				2,055,614				66,216				—				(302,280	)			(3,806	)			373,306				2,189,050
Upgrade/rebuild				846,406				30,287				—				(4,854	)			(5,653	)			151,127				1,017,313
Support capital				696,362				70,972				(473	)			(30,874	)			4,824				127,250				868,061
Priority Telecom(3)				306,233				17,074				—				(415	)			(5,357	)			43,521				361,056
UPC Media				83,598				5,833				—				(6,438	)			(1,254	)			16,447				98,186
	Total			5,635,004				330,393				(2,932	)			(458,638	)			717				1,051,827				6,556,371
Accumulated depreciation				(1,994,793	)			(804,937	)			2,123				64,788				—				(480,809	)			(3,213,628	)
	Net property, plant and equipment		$	3,640,211			$	(474,544	)		$	(809	)		$	(393,850	)		$	717			$	571,018			$	3,342,743

(1)	See Note 17.
(2)	See Note 3.
(3)	Consists primarily of network infrastructure and equipment.

A4-162

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6.	Goodwill

																Foreign
												UGC Europe				currency
				December 31,								exchange				translation				December 31,
				2002				Acquisitions				offer(1)				adjustments				2003
				in thousands
Europe:
	Austria			$	140,349			$	383			$	167,209			$	31,640			$	339,581
	Belgium				14,284				—				24,467				1,747				40,498
	Czech Republic				—				—				67,138				1,240				68,378
	Hungary				73,878				229				142,809				11,723				228,639
	The Netherlands				705,833				—				256,415				149,310				1,111,558
	Norway				9,017				—				28,553				930				38,500
	Poland				—				—				36,368				672				37,040
	Romania				20,138				—				2,698				324				23,160
	Slovak Republic				3,353				—				22,644				1,133				27,130
	Sweden				142,771				—				30,823				31,270				204,864
	chellomedia				—				—				122,304				2,258				124,562
	UGC Europe, Inc.				—				—				103,720				1,915				105,635
		Total			1,109,623				612				1,005,148				234,162				2,349,545
Latin America:
	Chile				140,710				—				—				29,576				170,286
		Total		$	1,250,333			$	612			$	1,005,148			$	263,738			$	2,519,831

(1)	See Note 3.

A4-163

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				Year ended
				December 31,
				2001
Net loss as reported				$	(4,494,709	)
	Goodwill amortization
		UPC and subsidiaries			379,449
		VTR			11,310
		Austar United and subsidiaries			12,765
		Other			2,881
	Amortization of excess basis on equity investments
		UPC affiliates			35,940
		Austar United affiliates			2,823
		Other			2,027
Adjusted net loss				$	(4,047,514	)
Basic and diluted net loss per common share as reported				$	(41.29	)
	Goodwill amortization
		UPC and subsidiaries			3.45
		VTR			0.10
		Austar United and subsidiaries			0.12
		Other			0.03
	Amortization of excess basis on equity investments
		UPC affiliates			0.33
		Austar United affiliates			0.03
		Other			0.02
Adjusted basic and diluted net loss per common share				$	(37.21	)

A4-164

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7.	Intangible Assets

																								Foreign
																				UGC Europe				currency
				December 31,																exchange				translation				December 31,
				2002				Additions				Impairments(1)				Disposals				offer				adjustments				2003
				in thousands
Intangible assets with definite lives:
	Customer relationships			$	—			$	—			$	—			$	—			$	220,290			$	4,068			$	224,358
	License fees				25,075				1,489				(13,871	)			(3,815	)			—				2,870				11,748
	Other				10,493				233				—				(4,132	)			—				1,925				8,519
Intangible assets with indefinite lives:
	Tradename				—				—				—				—				22,922				424				23,346
		Total			35,568				1,722				(13,871	)			(7,947	)			243,212				9,287				267,971
	Accumulated amortization				(21,792	)			(3,726	)			5,482				7,537				—				(3,236	)			(15,735	)
	Net intangible assets			$	13,776			$	(2,004	)		$	(8,389	)		$	(410	)		$	243,212			$	6,051			$	252,236

(1)	See Note 17.

		Year ended December 31,
		2003				2002				2001
		in thousands
Amortization expense		$	3,726			$	16,632			$	19,136

		Year ended December 31,
		2004				2005				2006				2007				2008				Thereafter
		in thousands
Estimated amortization expense		$	33,043			$	31,816			$	30,515			$	30,515			$	30,515			$	72,486

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8.	Long-Term Debt

			December 31,
			2003				2002
			in thousands
UPC Distribution Bank Facility			$	3,698,586			$	3,289,826
UPC Polska notes				317,372				377,110
VTR Bank Facility				123,000				—
Old UGC Senior Notes				24,627				24,313
Other				80,493				133,148
PCI notes				—				14,509
UPC July 1999 senior notes(1)				—				1,079,062
UPC January 2000 senior notes(1)				—				1,075,468
UPC October 1999 senior notes(1)				—				658,458
	Total			4,244,078				6,651,894
	Current portion			(628,176	)			(6,179,223	)
	Long-term portion		$	3,615,902			$	472,671

(1)	These senior notes and senior discount notes were converted into common stock of UGC Europe in connection with UPC’s reorganization.

Currency/tranche

Amount outstanding

amount

December 31, 2003

Payment

Final

Tranche

Euros

US dollars

Euros

US dollars

Interest rate(4)

Description

begins

maturity

in thousands

Facility A(1)(2)(3)

€

666,750

$

840,529

€

230,000

$

289,946

EURIBOR +2.25%–4.0%

Revolving credit

June-06

June-08

Facility B(1)(2)

2,333,250

2,941,380

2,333,250

2,941,380

EURIBOR +2.25%–4.0%

Term loan

June-04

June-08

Facility C1(1)

95,000

119,760

95,000

119,760

EURIBOR +5.5%

Term loan

June-04

March-09

Facility C2(1)

405,000

347,500

275,654

347,500

LIBOR +5.5%

Term loan

June-04

March-09

Total

€

2,933,904

$

3,698,586

(1)	An annual commitment fee of 0.5% over the unused portions of each facility is applicable.
(2)	Pursuant to the terms of the October 2000 agreement, this interest rate is variable depending on certain leverage ratios.
(3)	The availability under Facility A of €436.8 ($550.6) million can be used to finance additional permitted acquisitions and/or to refinance indebtedness, subject to covenant compliance.
(4)	As of December 31, 2003, six month EURIBOR and LIBOR rates were 2.2% and 1.2%, respectively.

	•	Permit indebtedness under a new facility (“Facility D”). The new facility has substantially the same terms as the existing facility and consists of five different tranches totaling €1.072 billion. The proceeds of Facility D are

A4-166

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		limited in use to fund the scheduled payments of Facility B under the existing facility between December 2004 and December 2006;
	•	Increase and extend the maximum permitted ratios of senior debt to annualized EBITDA (as defined in the bank facility) and lower and extend the minimum required ratios of EBITDA to senior interest and EBITDA to senior debt service;
	•	Include a total debt to annualized EBITDA ratio and EBITDA to total cash interest ratio;
	•	Include a mandatory prepayment from proceeds of debt issuance and net equity proceeds received by UGC Europe; and
	•	Permit acquisitions depending on certain leverage ratios and other restrictions.

			Principal
			amount at
			maturity
			in thousands
UGC			$	638,008	(1)
IDT United				599,173	(1)
Third parties				24,627
	Total		$	1,261,808

(1)	Eliminated in consolidation.

A4-167

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Year Ended December 31, 2004			$	628,176
Year Ended December 31, 2005				718,903
Year Ended December 31, 2006				1,002,106
Year Ended December 31, 2007				671,704
Year Ended December 31, 2008				813,423
Thereafter				409,766
	Total		$	4,244,078

9.	Fair Value of Financial Instruments

			December 31, 2003								December 31, 2002
			Carrying				Fair				Carrying				Fair
			value				value				value				value
			in thousands
UPC Distribution Bank Facility			$	3,698,586			$	3,698,586	(1)		$	3,289,826			$	3,289,826	(2)
UPC Polska Notes				317,372				194,500	(3)			377,110				99,133	(4)
VTR Bank Facility				123,000				123,000	(5)			144,000				144,000	(5)
Note payable to Liberty				102,728				102,728	(6)			102,728				102,728	(6)
Old UGC Senior Notes				24,627				20,687	(7)			24,313				8,619	(4)
UPC July 1999 Senior Notes				—				—				1,079,062				64,687	(4)
UPC October 1999 Senior Notes				—				—				658,458				41,146	(4)
UPC January 2000 Senior Notes				—				—				1,075,468				68,152	(4)
UPC FiBI Loan				—				—				57,033				—	(8)
Other				85,592				85,592	(9)			151,769				151,769	(9)
	Total		$	4,351,905			$	4,225,093			$	6,959,767			$	3,970,060

(1)	In the absence of quoted market prices, we determined the fair value to be equivalent to carrying value because: a) interest on this facility is tied to variable market rates; b) Moody’s Investor Service rated the facility at B+; and c) the credit agreement was amended in January 2004 to add a new €1.072 billion tranche on similar credit terms as the previous facility.

A4-168

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(2)	In the absence of quoted market prices, we determined the fair value to be equivalent to carrying value because: a) the restructuring plan of UPC assumed this facility was valued at par (100% of carrying amount); b) the reorganization plan of UPC assumed, in liquidation, that the lenders of the facility would be paid back 100%, based on seniority in liquidation (i.e., the assets of UPC Distribution were sufficient to repay the facility in a liquidation scenario); c) certain lenders under the facility confirmed to us they did not mark down the facility on their books; and d) when the facility was amended in connection with the restructuring agreement on September 30, 2002, the revised terms included increased fees and margin (credit spread), resetting the terms of this variable-rate facility to market.
(3)	Fair value represents the consideration UPC Polska note holders received from the consummation of UPC Polska’s second amended Chapter 11 plan of reorganization.
(4)	Fair value is based on quoted market prices.
(5)	In the absence of quoted market prices, we determined the fair value to be equivalent to carrying value because: a) interest on this facility is tied to variable market rates; b) VTR is not highly leveraged; c) VTR’s results of operations exceeded budget in 2002 and 2003; d) the Chilean peso strengthened considerably in 2003; and e) in May 2003 the credit agreement was amended and restated on similar credit terms to the previous facility.
(6)	We extinguished this obligation at its carrying amount in January 2004 through the issuance of our Class A common stock at fair value.
(7)	Fair value is based on an independent valuation analysis.
(8)	Fair value of our Israeli investment was determined to be nil by an independent valuation firm in 2002. The FiBI Loan was secured by this investment. On October 30, 2002, the First International Bank of Israel (“FiBI”) and we agreed to sell our Israeli investment to a wholly-owned subsidiary of FiBI in exchange for the extinguishment of the FiBI Loan. This transaction closed on February 24, 2003.
(9)	Fair value approximates carrying value.

10.	Derivative Instruments

A4-169

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11.	Bankruptcy Proceedings

A4-170

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							UPC Polska				UPC
							December 31,
							2003				2002
							in thousands
Balance Sheet
Assets
	Current assets						$	240,131			$	54,650
	Long-term assets							—				328,422
			Total assets				$	240,131			$	383,072
Liabilities and Stockholders’ Equity (Deficit)
	Current liabilities
		Not subject to compromise:
				Accounts payable, accrued liabilities, debt and other			$	10,794			$	631
					Total current liabilities not subject to compromise			10,794				631
		Subject to compromise:
				Accounts payable				14,445				38,647
				Short-term debt				6,000				—
				Accrued liabilities				—				232,603
				Intercompany payable(1)				4,668				135,652
				Current portion of long-term debt(1)				456,992				2,812,954
				Debt(1)				481,737				1,533,707
					Total current liabilities subject to compromise			963,842				4,753,563
Long-term liabilities not subject to compromise								—				725,008
Convertible preferred stock subject to compromise(2)								—				1,744,043
Stockholders’ equity (deficit)								(734,505	)			(6,840,173	)
			Total liabilities and stockholders’ equity (deficit)				$	240,131			$	383,072

(1)	Certain amounts are eliminated in consolidation.
(2)	99.6% is eliminated in consolidation.

A4-171

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				UPC Polska				UPC
				December 31,
				2003(1)				2002(2)
				in thousands
Statement of Operations
	Revenue			$	—			$	19,037
	Expense				—				(42,696	)
	Depreciation and amortization				—				(16,562	)
	Impairment and restructuring charges				(6,000	)			(1,218	)
		Operating income (loss)			(6,000	)			(41,439	)
	Share in results of affiliates and other expense, net				(6,669	)			(1,870,430	)
		Net income (loss)		$	(12,669	)		$	(1,911,869	)

(1)	For the period from July 7, 2003 (the petition date) to December 31, 2003.
(2)	For the year ended December 31, 2002.

				2003				2002
				in thousands
Interest expense on liabilities subject to compromise(1)				$	55,270			$	—
Contractual interest expense on liabilities subject to compromise				$	106,858			$	709,571
Reorganization expense:
	Professional fees			$	43,248			$	37,898
	Adjustment of debt to expected allowed amounts				(19,239	)			—
	Write-off of deferred finance costs				—				36,203
	Other				8,000				1,142
		Total reorganization expense		$	32,009			$	75,243

(1)	In accordance with SOP 90-7, interest expense on liabilities subject to compromise is reported in the accompanying consolidated statement of operations only to the extent that it will be paid during the bankruptcy proceedings or to the extent it is considered an allowed claim.

12.	Net Negative Investment in Deconsolidated Subsidiaries

A4-172

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A4-173

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			Capital				Operating
			leases				leases
Year ended December 31, 2004			$	7,791			$	60,501
Year ended December 31, 2005				8,790				39,376
Year ended December 31, 2006				7,887				32,020
Year ended December 31, 2007				7,899				26,109
Year ended December 31, 2008				7,917				21,511
Thereafter				61,826				42,092
	Total minimum payments		$	102,110			$	221,609
Less amount representing interest and executory costs				(37,268	)
	Net lease payments			64,842
Lease obligations due within one year				(3,073	)
Long-term lease obligations			$	61,769

A4-174

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A4-175

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14.	Minority Interests in Subsidiaries

			December 31,
			2003				2002
			in thousands
UPC convertible preference shares held by third parties(1)			$	—			$	1,094,668
UPC convertible preference shares held by Liberty(2)				—				297,753
IDT United				20,858				7,986
Other				1,903				1,739
	Total		$	22,761			$	1,402,146

(1)	We acquired 99.4% of these convertible preference shares in February and April 2003. The remainder was exchanged for UGC Europe common stock in connection with UPC’s restructuring.
(2)	Acquired by us in April 2003.

			Year ended December 31,
			2003				2002				2001
			in thousands
Minority interest share of UGC Europe net loss			$	181,046			$	—			$	—
Accrual of dividends on UPC’s convertible preference shares held by third parties				—				(78,355	)			(70,089	)
Accrual of dividends on UPC’s convertible preference shares held by Liberty				—				(18,728	)			(19,113	)
Minority interest share of UPC net loss				—				—				54,050
Subsidiaries of UGC Europe				(91	)			28,080				484,780
Other				2,227				1,900				46,887
	Total		$	183,182			$	(67,103	)		$	496,515

15.	Stockholders’ Equity (Deficit)

	•	1,000,000,000 shares of Class A common stock;
	•	1,000,000,000 shares of Class B common stock;
	•	400,000,000 shares of Class C common stock; and
	•	10,000,000 shares of preferred stock, all $0.01 par value per share.

	•	Each share of Class A common stock, Class B common stock and Class C common stock entitles the holders thereof to one, ten and ten votes, respectively, on each matter to be voted on by our stockholders, excluding, until our next annual meeting of stockholders, the election of directors, at which time the holders of Class A

A4-176

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		common stock, Class B common stock and Class C common stock will vote together as a single class on each matter to be voted on by our stockholders, including the election of directors; and
	•	Each share of Class B common stock is convertible, at the option of the holder, into one share of Class A common stock at any time. Each share of Class C common stock is convertible, at the option of the holder, into one share of Class A common stock or Class B common stock at any time.

	•	voting rights;
	•	dividend rights;
	•	dividend rates;
	•	liquidation preferences;
	•	redemption provisions;
	•	sinking fund terms;
	•	conversion or exchange rights;
	•	the number of shares in the series; and
	•	other rights, preferences, privileges and restrictions.

A4-177

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						Weighted-
		Number of				average
		SARs				base price
Outstanding at beginning of year			—			$	—
Granted during the year			32,165,550			$	4.69
Cancelled during the year			(78,280	)		$	4.59
Exercised during the year			—			$	—
Outstanding at end of year			32,087,270			$	4.69
Exercisable at end of year			—			$	—

							Fair				Base
Base price			Number				value				price
Less than market price(1)				15,081,775			$	5.44			$	3.74
Equal to market price(2)				15,081,775			$	6.88			$	5.44
Equal to market price				2,002,000			$	4.91			$	6.13
Greater than market price				—			$	—			$	—
	Total(3)			32,165,550			$	4.33			$	4.69

(1)	We originally granted these SARs below fair market value on date of grant; however, upon exercise the holder will receive only the difference between the base price and the lesser of $5.44 or the fair market value of our Class A common stock on the date of exercise.
(2)	We originally granted these SARs at fair market value on date of grant. As a result of the UGC Europe Exchange Offer and merger transaction in December 2003, we substituted UGC SARs for UGC Europe SARs.
(3)	All the SARs granted during Fiscal 2003 vest in five equal annual increments. Vesting of the SARs granted would be accelerated upon a change of control of UGC as defined in the Amended Incentive Plan. The table does not reflect the adjustment to the base prices on all outstanding SARs in January 2004. As a result of the dilution caused by our subscription rights offering that closed in February 2004, all base prices have since been reduced by $0.87.

A4-178

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			Outstanding												Exercisable
							Weighted-
							average
							remaining
							contractual				Weighted-								Weighted-
							life				average								average
Base price range			Number				(years)				base price				Number				base price
$3.74				15,042,635				9.97			$	3.74				—			$	—
$5.44				15,042,635				9.97			$	5.44				—			$	—
$6.13				1,997,000				9.75			$	6.13				—			$	—
$7.20				5,000				9.90			$	7.20				—			$	—
	Total			32,087,270				9.95			$	4.69				—			$	—

A4-179

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		Year ended December 31,
		2003				2002				2001
Risk-free interest rate			3.40%				4.62%				4.78%
Expected lives			6  years				6  years				6  years
Expected volatility			100%				100%				95.13%
Expected dividend yield			0%				0%				0%

		Year ended December 31,
		2003								2002								2001
						Weighted-								Weighted-								Weighted-
						average								average								average
						exercise								exercise								exercise
		Number				price				Number				price				Number				price
Outstanding at beginning of year			16,964,230			$	7.88				5,141,807			$	16.16				4,770,216			$	16.95
Granted during the year			—			$	—				11,970,000			$	4.43				543,107			$	10.08
Cancelled during the year			(3,067,084	)		$	5.90				(147,577	)		$	16.66				(157,741	)		$	20.12
Exercised during the year			(151,454	)		$	3.92				—			$	—				(13,775	)		$	5.30
Outstanding at end of year			13,745,692			$	8.36				16,964,230			$	7.88				5,141,807			$	16.16
Exercisable at end of year			8,977,124			$	9.91				7,371,369			$	10.28				3,125,596			$	13.70

		Year ended December 31,
		2003								2002								2001
						Weighted-								Weighted-								Weighted-
						average								average								average
						exercise								exercise								exercise
		Number				price				Number				price				Number				price
Outstanding at beginning of year			1,080,000			$	10.52				1,110,416			$	11.24				630,000			$	18.13
Granted during the year			—			$	—				200,000			$	5.00				500,000			$	5.00
Cancelled during the year			—			$	—				(230,416	)		$	9.20				(19,584	)		$	73.45
Exercised during the year			(160,000	)		$	4.75				—			$	—				—			$	—
Outstanding at end of year			920,000			$	11.53				1,080,000			$	10.52				1,110,416			$	11.24
Exercisable at end of year			702,290			$	13.48				569,999			$	12.81				487,290			$	12.99

A4-180

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			Year ended December 31,
			2002												2001
							Fair				Exercise								Fair				Exercise
Exercise price			Number				value				price				Number				value				price
Less than market price				2,900,000			$	4.53			$	2.64				3,149			$	9.65			$	5.96
Equal to market price				—			$	—			$	—				100,000			$	13.71			$	17.38
Greater than market price				9,270,000			$	3.71			$	5.00				939,958			$	4.10			$	6.62
	Total			12,170,000			$	3.91			$	4.44				1,043,107			$	5.03			$	7.64

			Options outstanding												Options exercisable
							Weighted-average				Weighted-								Weighted-
							remaining				average								average
							contractual life				exercise								exercise
Exercise price range			Number				(years)				price				Number				price
$4.16–$4.75				407,000				3.75			$	4.29				407,000			$	4.29
$5.00–$5.00				10,977,808				8.09			$	5.00				6,203,710			$	5.00
$5.11–$7.13				996,182				3.89			$	5.75				974,677			$	5.77
$7.75–$86.50				2,284,702				5.84			$	27.66				2,094,027			$	28.68
	Total			14,665,692				7.33			$	8.56				9,679,414			$	10.17

		Year ended December 31,
		2002				2001
Risk-free interest rate			3.16%				4.15%
Expected lives			5 years				5 years
Expected volatility			118.33%				112.19%
Expected dividend yield			0%				0%

A4-181

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16.	Segment Information

A4-182

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					Year ended December 31,
					2003				2002				2001
					in thousands
Europe:
	UPC Broadband
		The Netherlands			$	592,223			$	459,044			$	365,988
		Austria				260,162				198,189				163,073
		Belgium				31,586				24,646				22,318
		Czech Republic				63,348				44,337				38,588
		Norway				95,284				76,430				59,707
		Hungary				165,450				124,046				93,206
		France				113,946				92,441				83,811
		Poland				85,356				76,090				132,669
		Sweden				75,057				52,560				40,493
		Slovak Republic				25,467				18,852				17,607
		Romania				20,189				16,119				12,710
			Total			1,528,068				1,182,754				1,030,170
		Germany				—				28,069				45,848
		Corporate and other(1)				32,563				35,139				51,762
			Total			1,560,631				1,245,962				1,127,780
	chellomedia
		Priority Telecom(1)				121,330				112,637				206,149
		Media(1)				98,463				69,372				75,676
		Investments				528				465				—
			Total			220,321				182,474				281,825
	Intercompany Eliminations					(127,055	)			(108,695	)			(176,417	)
			Total			1,653,897				1,319,741				1,233,188
Latin America:
	Broadband
		Chile				229,835				186,426				166,590
		Brazil, Peru, Uruguay				7,798				7,054				6,044
			Total			237,633				193,480				172,634
Australia
	Broadband					—				—				145,423
	Content					—				—				9,973
	Other					—				—				235
			Total			—				—				155,631
Corporate and other (United States)						—				1,800				441
			Total		$	1,891,530			$	1,515,021			$	1,561,894

(1)	Primarily The Netherlands.

A4-183

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					Year ended December 31,
					2003				2002				2001
					in thousands
Europe:
	UPC Broadband
		The Netherlands			$	267,075			$	119,329			$	40,913
		Austria				98,278				64,662				40,583
		Belgium				12,306				8,340				4,367
		Czech Republic				24,657				9,241				9,048
		Norway				27,913				17,035				5,337
		Hungary				63,357				41,487				26,555
		France				13,920				(10,446	)			(25,678	)
		Poland				24,886				15,794				(8,633	)
		Sweden				31,827				15,904				6,993
		Slovak Republic				10,618				4,940				2,802
		Romania				7,545				6,044				3,165
		Other				386				535				1,434
			Total			582,768				292,865				106,886
		Germany				—				12,562				22,197
		Corporate and other(1)				(46,091	)			(25,727	)			(93,781	)
			Total			536,677				279,700				35,302
	chellomedia
		Priority Telecom(1)				14,530				(3,809	)			(79,758	)
		Media(1)				22,874				(4,851	)			(100,599	)
		Investments				(1,033	)			(374	)			—
			Total			36,371				(9,034	)			(180,357	)
			Total			573,048				270,666				(145,055	)
Latin America:
	Broadband
		Chile				69,951				41,959				26,860
		Brazil, Peru, Uruguay				8				(3,475	)			(4,016	)
			Total			69,959				38,484				22,844
Australia
	Broadband					—				—				(32,338	)
	Content					—				—				(6,849	)
	Other					—				(282	)			(832	)
			Total			—				(282	)			(40,019	)
Corporate and other (United States)						(14,125	)			(12,494	)			(29,013	)
			Total		$	628,882			$	296,374			$	(191,243	)

(1)	Primarily The Netherlands.

A4-184

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				Year ended December 31,
				2003				2002				2001
				in thousands
Total segment Adjusted EBITDA				$	628,882			$	296,374			$	(191,243	)
Depreciation and amortization					(808,663	)			(730,001	)			(1,147,176	)
Impairment of long-lived assets					(402,239	)			(436,153	)			(1,320,942	)
Restructuring charges and other					(35,970	)			(1,274	)			(204,127	)
Stock-based compensation					(38,024	)			(28,228	)			(8,818	)
	Operating income (loss)				(656,014	)			(899,282	)			(2,872,306	)
Interest expense, net					(314,078	)			(641,786	)			(966,134	)
Foreign currency exchange gain (loss), net					121,612				739,794				(148,192	)
Gain on extinguishment of debt					2,183,997				2,208,782				3,447
Gain (loss) on sale of investments in affiliates, net					279,442				117,262				(416,803	)
Other expense, net					(14,884	)			(120,832	)			(265,512	)
		Income (loss) before income taxes and other items			1,600,075				1,403,938				(4,665,500	)
Other, net					395,293				(415,670	)			150,735
		Income (loss) before cumulative effect of change in accounting principle			1,995,368				988,268				(4,514,765	)
Cumulative effect of change in accounting principle					—				(1,344,722	)			20,056
		Net income (loss)		$	1,995,368			$	(356,454	)		$	(4,494,709	)

A4-185

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					Investments in affiliates								Long-lived assets								Total assets
					December 31,								December 31,								December 31,
					2003				2002				2003				2002				2003				2002
					in thousands
Europe:
	UPC Broadband
		The Netherlands			$	222			$	215			$	1,334,294			$	1,310,783			$	2,493,134			$	1,884,044
		Austria				—				—				307,758				282,628				700,209				450,526
		Belgium				—				—				22,596				22,395				88,725				44,444
		Czech Republic				—				—				117,527				120,863				201,103				127,691
		Norway				—				—				219,651				226,981				280,528				249,761
		Hungary				1,708				—				249,515				251,120				541,139				343,287
		France				—				—				246,307				573,167				274,180				608,650
		Poland				15,049				3,277				118,586				124,088				302,216				245,122
		Sweden				—				—				94,414				87,339				321,961				237,619
		Slovak Republic				—				—				35,697				26,896				67,027				33,428
		Romania				—				—				15,235				9,403				42,503				31,078
			Total			16,979				3,492				2,761,580				3,035,663				5,312,725				4,255,650
		Corporate and other(1)				65,279				112,507				14,154				39,455				374,876				576,568
			Total			82,258				115,999				2,775,734				3,075,118				5,687,601				4,832,218
	chellomedia
		Priority Telecom(1)				3,232				—				182,491				202,986				241,909				261,301
		Media(1)				2,257				4,037				43,578				48,625				232,527				72,554
			Total			5,489				4,037				226,069				251,611				474,436				333,855
			Total			87,747				120,036				3,001,803				3,326,729				6,162,037				5,166,073
Latin America:
	Broadband
		Chile				—				—				322,606				293,941				602,762				509,376
		Brazil, Peru, Uruguay				3,522				33,817				9,584				9,448				18,388				55,381
			Total			3,522				33,817				332,190				303,389				621,150				564,757
Corporate and other (United States)						3,969				—				8,750				10,093				316,484				200,764
			Total		$	95,238			$	153,853			$	3,342,743			$	3,640,211			$	7,099,671			$	5,931,594

(1)	Primarily The Netherlands.

A4-186

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					Depreciation and amortization												Capital expenditures
					Year ended December 31,												Year ended December 31,
					2003				2002				2001				2003				2002				2001
					in thousands
Europe:
	UPC Broadband
		The Netherlands			$	(225,638	)		$	(230,852	)		$	(252,356	)		$	(63,451	)		$	(97,841	)		$	(213,846	)
		Austria				(85,589	)			(71,924	)			(68,513	)			(43,751	)			(38,388	)			(92,679	)
		Belgium				(6,877	)			(5,952	)			(7,531	)			(3,473	)			(2,884	)			(8,367	)
		Czech Republic				(18,665	)			(16,317	)			(24,577	)			(12,294	)			(4,706	)			(26,287	)
		Norway				(36,765	)			(37,288	)			(35,918	)			(9,714	)			(7,050	)			(60,562	)
		Hungary				(39,102	)			(34,889	)			(35,202	)			(23,004	)			(16,659	)			(31,599	)
		France				(99,913	)			(85,940	)			(78,732	)			(48,810	)			(19,688	)			(114,596	)
		Poland				(28,487	)			(28,517	)			(126,855	)			(8,476	)			(4,464	)			(35,628	)
		Sweden				(19,668	)			(13,519	)			(37,098	)			(9,778	)			(8,974	)			(28,767	)
		Slovak Republic				(8,939	)			(7,478	)			(13,124	)			(3,848	)			(501	)			(5,005	)
		Romania				(2,984	)			(2,494	)			(1,578	)			(5,286	)			(4,547	)			(3,433	)
			Total			(572,627	)			(535,170	)			(681,484	)			(231,885	)			(205,702	)			(620,769	)
		Germany				—				(9,240	)			(107,799	)			—				(3,357	)			(12,788	)
		Corporate and other(1)				(86,939	)			(61,543	)			(74,420	)			(35,666	)			(6,491	)			(47,773	)
			Total			(659,566	)			(605,953	)			(863,703	)			(267,551	)			(215,550	)			(681,330	)
	chellomedia
		Priority Telecom(1)				(60,952	)			(45,239	)			(80,887	)			(16,727	)			(30,658	)			(69,710	)
		UPC Media(1)				(17,706	)			(20,565	)			(37,305	)			(5,779	)			(6,241	)			(50,051	)
			Total			(78,658	)			(65,804	)			(118,192	)			(22,506	)			(36,899	)			(119,761	)
			Total			(738,224	)			(671,757	)			(981,895	)			(290,057	)			(252,449	)			(801,091	)
Latin America:
	Broadband
		Chile				(66,928	)			(54,458	)			(54,027	)			(41,391	)			(80,006	)			(135,821	)
		Brazil, Peru, Uruguay				(2,206	)			(2,371	)			(7,824	)			(1,582	)			(2,679	)			(10,418	)
			Total			(69,134	)			(56,829	)			(61,851	)			(42,973	)			(82,685	)			(146,239	)
Australia
	Broadband					—				—				(100,489	)			—				—				(48,291	)
	Other					—				—				(1,282	)			—				—				—
			Total			—				—				(101,771	)			—				—				(48,291	)
Corporate and other (United States)						(1,305	)			(1,415	)			(1,659	)			(94	)			(58	)			(790	)
			Total		$	(808,663	)		$	(730,001	)		$	(1,147,176	)		$	(333,124	)		$	(335,192	)		$	(996,411	)

(1)	Primarily The Netherlands.

A4-187

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17.	Impairment of Long-Lived Assets

			Year ended December 31,
			2003				2002				2001
			in thousands
UPC Broadband			$	(402,239	)		$	(75,305	)		$	(682,633	)
Priority Telecom				—				(359,237	)			(418,413	)
Swiss wireless license				—				—				(91,260	)
Microsoft contract acquisition rights				—				—				(59,831	)
Other				—				(1,611	)			(68,805	)
	Total		$	(402,239	)		$	(436,153	)		$	(1,320,942	)

A4-188

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A4-189

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18.	Restructuring Charges and Other

											Programming				Asset
			Employee								and lease				disposal
			severance and				Office				contract				losses and
			termination(2)				closures				termination				other				Total
			in thousands
	Restructuring charges		$	46,935			$	16,304			$	93,553			$	47,335			$	204,127
	Cash paid and other releases			(13,497	)			(6,386	)			(14,814	)			(3,294	)			(37,991	)
	Foreign currency translation adjustments			127				38				12,468				(29,537	)			(16,904	)
Restructuring liability as of December 31, 2001				33,565				9,956				91,207				14,504				149,232
	Restructuring charges (credits)			13,675				7,884				(32,035	)			11,750				1,274
	Cash paid and other releases			(30,944	)			(4,622	)			(32,231	)			(24,449	)			(92,246	)
	Foreign currency translation adjustments			3,133				978				9,920				2,590				16,621
Restructuring liability as of December 31, 2002				19,429				14,196				36,861				4,395				74,881
	Restructuring charges (credits)(1)			177				7,506				—				(605	)			7,078
	Cash paid and other releases			(13,628	)			(5,934	)			(5,981	)			(1,991	)			(27,534	)
	Foreign currency translation adjustments			2,427				1,053				3,519				643				7,642
Restructuring liability as of December 31, 2003			$	8,405			$	16,821			$	34,399			$	2,442			$	62,067
Short-term portion			$	3,682			$	6,002			$	3,795			$	794			$	14,273
Long-term portion				4,723				10,819				30,604				1,648				47,794
	Total		$	8,405			$	16,821			$	34,399			$	2,442			$	62,067

(1)	Restructuring charges and other in 2003 also includes other litigation settlements totaling $22.2 million and costs incurred by UGC Europe related to the UGC Europe Exchange Offer and merger of $6.7 million.
(2)	Included nil and 45 employees scheduled for termination as of December 31, 2003 and 2002, respectively.

A4-190

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19.	Income Taxes

				December 31,
				2003				2002
				in thousands
Deferred tax assets:
	Tax net operating loss carryforward of consolidated foreign subsidiaries			$	1,017,895			$	1,431,785
	U.S. tax net operating loss carryforward				9,258				—
	Accrued interest expense				20,985				91,036
	Investment valuation allowance and other				33,619				22,442
	Property, plant and equipment, net				310,657				40,063
	Intangible assets, net				20,701				—
	Other				48,743				38,213
		Total deferred tax assets			1,461,858				1,623,539
	Valuation allowance				(1,331,778	)			(1,607,089	)
		Deferred tax assets, net of valuation allowance			130,080				16,450
Deferred tax liabilities:
	Cancellation of debt and other				(110,583	)			(110,583	)
	Intangible assets				(82,679	)			(12,056	)
	Other				(25,937	)			(41	)
		Total deferred tax liabilities			(219,199	)			(122,680	)
		Deferred tax liabilities, net		$	(89,119	)		$	(106,230	)

A4-191

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				Year ended December 31,
				2003				2002				2001
				in thousands
Expected income tax expense (benefit) at the U.S. statutory rate of 35%				$	560,026			$	491,379			$	(1,632,925	)
Tax effect of permanent and other differences:
	Change in valuation allowance				(516,810	)			173,604				814,612
	Gain on sale of investment in affiliate				(133,211	)			(51,774	)			—
	Tax ruling regarding UPC reorganization				107,922				—				—
	Enacted tax law changes, case law and rate changes				(92,584	)			—				—
	Revenue for book not for tax				75,308				—				—
	Other				26,122				(11,415	)			(5,063	)
	Financial instruments				15,280				95,178				—
	Non-deductible interest accretion				8,680				110,974				81,149
	State tax, net of federal benefit				7,193				42,118				(139,965	)
	International rate differences				(5,857	)			58,407				187,027
	Non-deductible foreign currency exchange results				(3,595	)			(104,598	)			—
	Non-deductible expenses				1,870				12,024				14,740
	Gain on extinguishment of debt				—				(728,754	)			(1,310	)
	Goodwill impairment				—				114,039				559,028
	Amortization of goodwill				—				—				84,020
	Gain on issuance of common equity securities by subsidiaries				—				—				(1,974	)
		Total income tax expense (benefit)		$	50,344			$	201,182			$	(40,661	)

			Year ended December 31,
			2003				2002				2001
			in thousands
Current:
	U.S. Federal		$	1,008			$	23,801			$	—
	State and local			1,674				4,966				—
	Foreign jurisdiction			2,916				5,592				2,506
				5,598				34,359				2,506
Deferred:
	U.S. Federal		$	61,768			$	138,746			$	—
	State and local			8,519				19,136				—
	Foreign jurisdiction			(25,541	)			8,941				(43,167	)
				44,746				166,823				(43,167	)
Income tax expense (benefit)			$	50,344			$	201,182			$	(40,661	)

A4-192

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			Tax loss								Expiration
Country			carryforward				Tax asset				date
The Netherlands			$	1,293,157			$	446,139				Indefinite
France				786,516				278,662				Indefinite
Norway				302,860				84,801				2007-2012
Chile				273,619				45,147				Indefinite
Austria				226,173				76,899				Indefinite
Hungary				142,158				22,746				2004-2009
Poland				88,286				16,774				2004-2008
Other				163,602				46,727				Various
	Total		$	3,276,371			$	1,017,895

A4-193

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20.	Earnings Per Share

				Year ended December 31,
				2003				2002				2001
				in thousands
Numerator (Basic):
	Income (loss) before cumulative effect of change in accounting principle			$	1,995,368			$	988,268			$	(4,514,765	)
	Gain on issuance of Class A common stock for UGC Europe preference shares				1,423,102				—				—
	Equity transactions of subsidiaries				6,555				—				—
	Accrual of dividends on Series B convertible preferred stock				—				(156	)			(1,873	)
	Accrual of dividends on Series C convertible preferred stock				—				(2,397	)			(29,750	)
	Accrual of dividends on Series D convertible preferred stock				—				(1,621	)			(20,125	)
	Basic income (loss) attributable to common stockholders before cumulative effect of change in accounting principle				3,425,025				984,094				(4,566,513	)
	Cumulative effect of change in accounting principle				—				(1,344,722	)			20,056
		Basic net income (loss) attributable to common stockholders		$	3,425,025			$	(360,628	)		$	(4,546,457	)
Denominator (Basic):
	Basic weighted-average number of common shares outstanding, before adjustment				418,874,941				390,087,623				99,834,387
	Adjustment for rights offering in February 2004				43,149,291				40,183,842				10,284,175
	Basic weighted-average number of common shares outstanding				462,024,232				430,271,465				110,118,562
Numerator (Diluted):
	Income (loss) before cumulative effect of change in accounting principle			$	1,995,368			$	988,268			$	(4,514,765	)
	Gain on issuance of Class A common stock for UGC Europe preference shares				1,423,102				—				—
	Equity transactions of subsidiaries				6,555				—				—
	Accrual of dividends on Series B convertible preferred stock				—				—				(1,873	)
	Accrual of dividends on Series C convertible preferred stock				—				(2,397	)			(29,750	)
	Accrual of dividends on Series D convertible preferred stock				—				(1,621	)			(20,125	)
	Diluted income (loss) attributable to common stockholders before cumulative effect of change in accounting principle				3,425,025				984,250				(4,566,513	)
	Cumulative effect of change in accounting principle				—				(1,344,722	)			20,056
		Diluted net income (loss) attributable to common stockholders		$	3,425,025			$	(360,472	)		$	(4,546,457	)
Denominator (Diluted):
	Basic weighted-average number of common shares outstanding, as adjusted				462,024,232				430,271,465				110,118,562
	Incremental shares attributable to the assumed exercise of outstanding stock appreciation rights				109,544				—				—
	Incremental shares attributable to the assumed exercise of contingently issuable shares				92,470				—				—
	Incremental shares attributable to the assumed exercise of outstanding options (treasury stock method)				220,115				9,701				—
	Incremental shares attributable to the assumed conversion of Series B convertible preferred stock				—				224,256				—
		Diluted weighted-average number of common shares outstanding			462,446,361				430,505,422				110,118,562

A4-194

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21.	Related Party Transactions

A4-195

---

 

22.	Subsequent Events

	Liberty Acquisition of Controlling Interest

A4-196

---

 

A4-197

---

 

A4-198

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		As of December 31,
		2003				2004				2004
		ThCh$				ThCh$				ThUS$
										Note 2(e)
ASSETS
CURRENT ASSETS
Cash			210,523				211,672				380
Time deposits (Note 3)			6,936,432				4,033,512				7,236
Trade receivables, net (Note 4)			2,580,504				2,022,823				3,629
Notes receivable (Note 4)			92,652				114,250				205
Miscellaneous receivables (Note 4)			2,673,926				1,426,134				2,559
Notes and accounts receivable from related companies (Note 5)			232,509				228,921				411
Recoverable income taxes, net (Note 6)			76,634				79,553				143
Prepaid expenses (Note 7)			988,849				631,278				1,133
Deferred income taxes net (Note 6)			1,375,702				1,505,421				2,701
Total current assets			15,167,731				10,253,564				18,397
PROPERTY, PLANT AND EQUIPMENT (Note 8)
Land			500,019				500,019				897
Buildings and other infrastructure			118,466,606				120,942,228				216,976
Machinery and equipment			12,044,082				13,453,463				24,136
Furniture and fixtures			4,126,938				4,380,580				7,859
Other property, plant and equipment			15,092,271				14,424,263				25,878
Less: Accumulated depreciation			(34,686,655	)			(44,929,770	)			(80,602	)
Property, plant and equipment, net			115,543,261				108,770,783				195,144
OTHER ASSETS
Investment in other companies, net (Note 9)			233,512				225,341				403
Goodwill, net (Note 10)			62,349,750				58,057,299				104,156
Intangibles, net			1,711,696				1,539,410				2,761
Deferred income taxes, net (Note 6)			8,349,411				9,536,666				17,109
Other assets (Note 11)			11,585,426				10,682,574				19,164
Total other assets			84,229,795				80,041,290				143,593
TOTAL ASSETS			214,940,787				199,065,637				357,134
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Banks and financial institutions, short-term (Note 12)			—				59,325				106
Banks and financial institutions, current portion (Note 12)			7,631,787				7,587,230				13,612
Accounts payable (Note 13)			9,258,399				7,289,371				13,077
Notes payable (Note 14)			12,133				12,193				22
Miscellaneous payables (Note 15)			1,041,968				14,508,434				26,029
Notes and accounts payable to related companies (Note 5)			753,025				11,893,748				21,338
Provisions and withholdings (Note 16)			1,297,142				1,432,338				2,570
Unearned revenues (Note 17)			736,997				680,687				1,221
Deferred taxes (Note 6)			161,459				—				—
Other current liabilities (Note 18)			4,292,744				842,019				1,511
Total current liabilities			25,185,654				44,305,345				79,486
LONG-TERM LIABILITIES
Banks and financial institutions, non-current portion (Note 12)			30,246,442				22,650,889				40,637
Long-term notes payables (Note 15)			14,761,670				—				—
Notes and accounts payable to related companies (Note 5)			—				872,688				1,566
Deferred taxes (Note 6)			3,204,918				3,015,508				5,410
Other long-term liabilities			375,491				314,247				564
Deferred gains (Note 19)			1,474,427				1,400,705				2,513
Total long-term liabilities			50,062,948				28,254,037				50,690
Minority interest			4,131,190				3,670,536				6,585
Commitments and contingencies (Note 24)			—				—				—
SHAREHOLDERS’ EQUITY (Note 20)
Paid-in capital			205,865,408				205,865,408				369,332
Price-level restatement			1,852,790				1,852,790				3,324
Accumulated deficit			(58,374,521	)			(72,157,203	)			(129,451	)
Net loss for the year			(13,782,682	)			(12,725,276	)			(22,832	)
Total Shareholders’ equity			135,560,995				122,835,719				220,373
Total Liabilities and Shareholders’ equity			214,940,787				199,065,637				357,134

A4-199

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		For the Years Ended December 31,
		2002				2003				2004				2004
		ThCh$				ThCh$				ThCh$				ThUS$
														Note 2(e)
OPERATING INCOME
Operating revenue			47,911,196				46,100,072				45,547,636				81,714
Operating costs			(43,594,223	)			(39,034,899	)			(39,864,637	)			(71,519	)
Operating margin			4,316,973				7,065,173				5,682,999				10,195
Administrative and selling expenses			(15,958,113	)			(14,279,993	)			(14,328,858	)			(25,707	)
Operating loss			(11,641,140	)			(7,214,820	)			(8,645,859	)			(15,512	)
NON-OPERATING INCOME
Financial revenue			372,907				218,122				59,530				107
Other non-operating income			58,583				306,224				416,010				746
Financial expenses			(2,431,445	)			(2,708,735	)			(2,335,803	)			(4,191	)
Other non-operating expenses (Note 21)			(1,567,912	)			(1,129,243	)			(410,524	)			(736	)
Goodwill amortization (Note 10)			(4,207,744	)			(4,289,132	)			(4,225,945	)			(7,582	)
Price-level restatement, net (Note 22)			294,056				75,810				349,259				627
Foreign currency translation (Note 22)			(974,908	)			(1,296,437	)			(213,322	)			(383	)
Non-operating loss			(8,456,463	)			(8,823,391	)			(6,360,795	)			(11,412	)
Loss before taxes and minority interest			(20,097,603	)			(16,038,211	)			(15,006,654	)			(26,924	)
Tax benefit (Note 6)			2,449,618				2,088,982				1,820,722				3,267
Minority interest			88,679				166,547				460,656				825
Net loss for the year			(17,559,306	)			(13,782,682	)			(12,725,276	)			(22,832	)

A4-200

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			For the Years Ended December 31,
			2002				2003				2004				2004
			ThCh$				ThCh$				ThCh$				ThUS$
															Note 2(e)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss				(17,559,306	)			(13,782,682	)			(12,725,276	)			(22,832	)
Charges (credits) to income that do not represent cash flows
Depreciation				8,764,859				9,748,814				10,296,535				18,471
Software and other amortization				321,353				448,062				686,750				1,232
Amortization of residential cable TV installations				2,833,638				3,621,253				4,252,345				7,629
Other current amortization				—				(14,227	)			(71,300	)			(128	)
Loss on sale of fixed assets				—				32,309				25,036				46
Deferred taxes				(2,622,653	)			(2,056,674	)			(1,810,281	)			(3,247	)
Write-offs				675,653				290,492				276,638				496
Allowance for doubtful accounts				3,113,675				1,263,257				1,005,935				1,805
Vacation accrual				169,081				157,742				139,771				251
Valuation and obsolescence provision				130,627				144,568				—				—
Goodwill amortization				4,207,744				4,289,132				4,225,945				7,582
Price-level restatement				(294,056	)			(75,810	)			(349,259	)			(627	)
Foreign Currency Translation				974,908				1,296,437				213,322				383
Accrued interest				915,808				856,174				—				—
Investment price level restatement				320,720				(198,421	)			39,646				71
Unrealised gain (loss) on forward operations				859,354				300,314				(3,587,789	)			(6,437	)
Other				(106,523	)			(101,597	)			(74,159	)			(133	)
Decrease (increase) in Assets
Trade receivables, net				(3,725,551	)			(10,629	)			(448,254	)			(804	)
Miscellaneous receivables				(707,723	)			(943,853	)			1,222,435				2,193
Notes and accounts receivable from related parties				116,186				113,671				(1,058	)			—
Income taxes recoverable, net				842,846				10,498				(2,919	)			(5	)
Prepaid expenses				1,522,124				(109,591	)			66,394				119
Other current assets, net				409,755				—				—				—
(Decrease) increase in Liabilities
Accounts and notes payable				(3,925,898	)			(3,871,445	)			(2,083,614	)			(3,738	)
Miscellaneous payables				(9,918	)			725,923				(1,092,492	)			(1,960	)
Accrued liabilities and withholdings				270,724				(55,487	)			150,899				271
Notes and accounts payable to related parties				816,683				(647,855	)			124,655				224
Unearned revenues				475,007				(112,226	)			(56,310	)			(101	)
Other current liabilities				—				313,475				137,064				246
Short-term bank obligations				—				—				59,325				106
Minority interest				(88,678	)			(166,547	)			(396,710	)			(712	)
Total cash flows provided from (used in) operating activities				(1,299,561	)			1,465,077				223,274				401
CASH FLOWS FROM FINANCING ACTIVITIES
	Issuance of subsidiary shares			—				5,047,718				—				—
	Loan proceeds			18,365,974				—				11,900,000				21,349
	Related company proceeds			—				2,612				—				—
	Other payments to related companies			—				(7,289	)			—				—
	Payments for bank obligations			—				(63,068	)			(7,421,738	)			(13,315	)
	Total cash flows from financing activities			18,365,974				4,979,973				4,478,262				8,034

A4-201

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			For the Years Ended December 31,
			2002				2003				2004				2004
			ThCh$				ThCh$				ThCh$				ThUS$
															Note 2(e)
CASH FLOWS FROM INVESTING ACTIVITIES
	Sale of property, plant and equipment			—				206,299				33,663				60
	Purchase of property, plant and equipment			(3,687,334	)			(8,420,557	)			(4,039,429	)			(7,247	)
	Purchase of software and licenses			(381,386	)			(453,475	)			(508,737	)			(913	)
	Additions to residential Cable TV installations			(4,533,873	)			(3,505,310	)			(2,915,939	)			(5,231	)
	Total cash flows used in investing activities			(8,602,593	)			(12,173,043	)			(7,430,442	)			(13,331	)
Total net cash flow for the year				8,463,820				(5,727,993	)			(2,728,906	)			(4,896	)
Effect of inflation on cash and cash equivalents				(445,612	)			(129,719	)			(172,865	)			(310	)
Increase (decrease) of cash and cash equivalents during the year				8,018,208				(5,857,712	)			(2,901,771	)			(5,206	)
Cash and cash equivalents at the beginning of the year				4,986,459				13,004,667				7,146,955				12,822
Cash and cash equivalents at the end of the year				13,004,667				7,146,955				4,245,184				7,616

A4-202

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Note 1.	The Company:

Note 2.	Significant Accounting Policies:

(a)	General:

		2002				2003				2004
		%				%				%
Pacific Televisión Limitada			99.5				99.5				99.5
Metrópolis Intercom S.A.			99.5				95.1				95.1
Cordillera Comunicaciones Limitada			99.5				99.5				99.5

(b)	Periods covered:

(c)	Price-level restatement:

A4-203

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(d)	Assets and liabilities denominated in foreign currency:

		As of December 31
		2002				2003				2004
		Ch$				Ch$				Ch$
U.S. Dollar			718.61				593.8				557.4
Unidad de Fomento			16,744.12				16,920.00				17,317.05

(e)	Convenience translation to U.S. Dollars:

(f)	Time deposits:

(g)	Marketable securities:

(h)	Trade receivables:

(i)	Prepaid expenses:

(j)	Property, plant and equipment:

		Years
Buildings and other infrastructure			20 - 38
Machinery and equipment			7 - 10
Furniture and equipment			5 - 10
Other			5 -  7

A4-204

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(k)	Leased assets:

(l)	Software:

(m)	Investment in other companies:

(n)	Goodwill:

(o)	Other assets:

(p)	Accrued vacation expense:

(q)	Revenue recognition and unearned revenues:

(r)	Current and deferred income taxes:

A4-205

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(s)	Financial derivatives:

(t)	Cash and cash equivalents:

		2003				2004
		ThCh$				ThCh$
Cash			210,523				211,672
Time deposits			6,936,432				4,033,512
Total			7,146,955				4,245,184

Note 3.	Time Deposits:

	2003:

Financial					Interest				Capital		Final
Institution			Currency		Rate				balance		Balance
									ThCh$		ThCh$
Banco BCI			Chilean Pesos			0.20%			1,064,668		1,064,738
Banco Santander-Santiago			Chilean Pesos			0.27%			928,240		931,165
Banco Santander-Santiago			Chilean Pesos			0.25%			2,050,000		2,054,783
Banco Santander-Santiago			Chilean Pesos			0.25%			1,121,760		1,124,378
Banco Santander-Santiago			Chilean Pesos			0.22%			824,100		825,308
Banco Corpbanca-Santiago			Chilean Pesos			0.23%			935,415		936,060
	Total								6,924,183		6,936,432

	2004:

Financial					Interest				Capital		Final
Institution			Currency		Rate				balance		Balance
									ThCh$		ThCh$
Banco BCI			Chilean Pesos			0.20%			1,450,000		1,450,097
Banco Santander-Santiago			Chilean Pesos			0.18%			704,500		705,092
Banco Santander-Santiago			Chilean Pesos			0.27%			817,093		817,460
Banco Santander-Santiago			Chilean Pesos			0.18%			1,060,800		1,060,863
	Total								4,032,393		4,033,512

A4-206

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Note 4.	Trade, Notes, and Miscellaneous Receivables:

		2003				2004
		ThCh$				ThCh$
Cable Services			7,111,253				7,637,629
Invoiced advertising receivable			1,767,767				1,525,687
Sub-total			8,879,020				9,163,316
Allowance for doubtful accounts-cable services monthly services			(6,165,459	)			(7,019,201	)
Allowance for doubtful accounts on advertisement			(133,057	)			(121,292	)
Total allowance for doubtful accounts			(6,298,516	)			(7,140,493	)
Total			2,580,504				2,022,823

																																			Long-term
			Short-term Receivables																																Receivables
											More than 90 days and																Total Short-term								Total Long-term
			Up to 90 days								up to 1 Year								Subtotal								Receivables (net)								Receivables
			2003				2004				2003				2004				2003				2004				2003				2004				2003				2004
			ThCh$				ThCh$				ThCh$				ThCh$				ThCh$				ThCh$				ThCh$				ThCh$				ThCh$				ThCh$
Trade receivable				2,580,504				2,022,823				6,298,516				7,140,493				8,879,020				9,163,316				2,580,504				2,022,823				—				—
Allowances for doubtful accounts				—				—				(6,298,516	)			(7,140,493	)			(6,298,516	)			(7,140,493	)			—				—
Notes receivable				92,652				114,250				190,395				197,923				283,047				312,173				92,652				114,250				—				—
Allowances for doubtful accounts				—				—				(190,395	)			(197,923	)			(190,395	)			(197,923	)			—				—				—				—
Miscellaneous Receivables				2,673,926				1,426,134				90,842				102,346				2,764,768				1,528,480				2,673,926				1,426,134				—				—
Allowances for doubtful accounts				—				—				(90,842	)			(102,346	)			(90,842	)			(102,346	)			—				—				—				—
	Total			5,347,082				3,563,207				—				—				5,347,082				3,563,207				5,347,082				3,563,207				—				—

		2002				2003				2004
		ThCh$				ThCh$				ThCh$
Beginning balance			2,149,165				5,262,840				6,579,753
Charged to expense			3,007,655				1,232,446				1,005,935
Other			106,020				84,467				(144,926	)
Ending balance			5,262,840				6,579,753				7,440,762

A4-207

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		2003				2004
		ThCh$				ThCh$
Raw materials			294,580				94,147
Advances to suppliers			412,515				120,254
Advances to employees			4,782				23,494
Receivables from cable services			1,070,971				733,776
Receivables from advertising rights			206,661				—
Network receivables			512,093				199,331
Receivables from Intercom communications			34,672				—
Other receivables			137,652				255,132
Total			2,673,926				1,426,134

Note 5.	Balances and Transactions with Related Companies:

					Short-term
Identification
Number			Company		2003				2004
					ThCh$				ThCh$
86.547.900-K			S.A. Viña Santa Rita			14,797				1,568
79.952.350-7			Red Televisiva Megavisión S.A.			1,245				185
96.539.380-3			Ediciones Financieras S.A.			—				225
Foreign Entity			Crown Media			25,983				41,105
Foreign Entity			Bresnan Communications de Chile S.A.			190,484				185,838
	Total					232,509				228,921

						Short-term				Long-term
Identification
Number				Company		2003		2004		2003				2004
						ThCh$		ThCh$		ThCh$				ThCh$
	83.032.100-4			S.y C. Hendaya S.A.		—		2			—			—
	Foreign Entity			Bresnan Communications Company Ltd partnership		173,051		158,481			—			—
	86.547.900-K			S.A. Viña Santa Rita		24,654		1,140			—			—
	79.952.350-7			Red Televisiva Megavisión S.A.		64,769		182,566			—			—
	Foreign Entity			Pramer		30,432		66,311			—			—
	Foreign Entity			Crown Media		69,994		2,669			—			—
	Foreign Entity			Discovery		356,059		300,790			—			—
	Foreign Entity			DMX		8,746		10,101			—			—
	Foreign Entity			USA Network		25,320		6,750			—			—
	Foreign Entity			Liberty Media International, Inc.		—		6,018,813			—			—
	90.331.006-6			Cristal Chile S.A.		—		5,146,125			—			872,688
	Total					753,025		11,893,748			—			872,688

A4-208

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																								Net Effect in Income Statement
												Transactions												Gain (Loss)
Company		RUT				Relationship						2002				2003				2004				2002				2003				2004
												ThCh$				ThCh$				ThCh$				ThCh$				ThCh$				ThCh$
S.A. Viña Santa Rita			86.547.900-K				Indirect			Advertising Contract			15,848				19,739				9,447				15,461				19,739				9,447
										Sale of Products			—				28,088				958				—				(7,809	)			(958	)
Red Televisiva Megavisión S.A.			79.952.350-7				Indirect			Advertising Contract			—				1,543				25,500				—				1,543				25,500
Red Televisiva Megavisión S.A.			79.952.350-7				Indirect			Advertising Contract			330,831				208,126				508,456				322,762				(208,126	)			(508,456	)
			79.952.350-8				Indirect			Loans receivable			—				—				—				1,009				—
Ediciones Financieras			96.539.380-3				Indirect			Advertising Contract			—				83,279				26,035				—				(83,279	)			(26,035	)
										Advertising Contract			—				64,877				—				—				64,877				—
										Advertising Contract			—				—				128				—				—				128
Pramer			Foreign entity				Indirect			Programming Signals			—				84,488				230,673				—				(84,488	)			(230,673	)
Discovery			Foreign entity				Indirect			Programming Signals			1,705,076				1,490,038				1,374,604				1,705,076				(1,490,383	)			(1,374,604	)
DMX			Foreign entity				Indirect			Programming Signals			11,151				44,385				1,532				11,151				(44,385	)			(1,532	)
CROWN MEDIA			Foreign entity				Indirect			Programming Signals			215,016				211,219				40,713				(318,541	)			(211,219	)			(40,713	)
Liberty Media International, Inc.			Foreign entity				Stockholder			Short-term loans			—				—				6,018,813				—				—				—
Cristal Chile S.A.							Stockholder			Short-term loans			—				—				6,018,813				—				—				—

Note 6.	Income Taxes and Deferred Taxes:

	a) Income taxes recoverable

		2003				2004
		ThCh$				ThCh$
Current income taxes and Article 21			(4,777	)			(2,213	)
Monthly income tax installments			11,565				11,283
Credit for training expenses			67,821				68,459
Credit value-added tax			2,025				2,024
Total			76,634				79,553

	b) Income taxes

			2002				2003				2004
			ThCh$				ThCh$				ThCh$
Credit for absorbed earnings				(167,509	)			—				—
Deferred income taxes				2,622,653				2,093,759				1,822,935
First category tax provision				(5,526	)			(4,777	)			(2,213	)
	Total			2,449,618				2,088,982				1,820,722

A4-209

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	c) Deferred Income Taxes:

		As of December 31, 2003																As of December 31, 2004
		Assets								Liabilities								Assets								Liabilities
		Short-term				Long-term				Short-term				Long-term				Short-term				Long-term				Short-term				Long-term
Allowance for doubtful accounts			1,105,571				—				—				—				1,247,088				—				—				—
Goods and services provision			16,665				—				—				—				35,240				—				—				—
Assets provision			—				308,839				—				—				—				348,334				—				—
Unearned revenues			182,172				—				—				—				146,889				—				—				—
Vacation provision			71,294				—				—				—				76,204				—				—				—
Accumulated depreciation			—				3,630				—				—				—				4,174				—				—
Forward contracts			—				—				(161,459	)			—				—				—				—				—
Tax loss carry forwards(1)			—				14,755,016				—				—				—				15,898,544				—				—
Trademarks			—				—				—				—				—				—				—				—
Leasing			—				58,022				—				(65,889	)			—				61,298				—				(71,751	)
Goodwill			—				—				—				(3,052,475	)			—				—				—				(2,780,206	)
Trademark rights							2,424				—				—				—				2,836				—				—
Software			—				—				—				(289,160	)			—				—				—				(260,283	)
Leased installations			—				—				—				(128,829	)			—				—				—				(124,575	)
Difference of accelerated depreciation			—				—				—				(2,294,439	)			—				—				—				(2,141,979	)
Other			—				—				—				—				—				—				—				—
Complementary account			—				(6,778,520	)			—				2,625,874				—				(6,778,520	)			—				2,363,286
Total			1,375,702				8,349,411				(161,459	)			(3,204,918	)			1,505,421				9,536,666				—				(3,015,508	)

(1)	In accordance with the current enacted tax law in Chile, accumulated tax losses can be carried-forward indefinitely.

A4-210

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		2003				2004
		ThCh$				ThCh$
Programming rights			24,874				20,926
Advertising rights			180,839				173,657
Prepaid transmission post usage rights			378,272				13,544
Prepaid rent			15,922				9,789
System maintenance services			—				60,509
Rental space for fiber optics			196,800				192,000
Other			192,142				160,853
Total			988,849				631,278

Note 8.	Property, Plant and Equipment:

				December 31, 2003												December 31, 2004
								Accumulated												Accumulated
				Gross Value				Depreciation				Depreciation				Gross Value				Depreciation				Depreciation
				ThCh$				ThCh$				ThCh$				ThCh$				ThCh$				ThCh$
Land					500,019				—				—				500,019				—				—
	Total Land				500,019				—				—				500,019				—				—
Buildings and construction:
Buildings					129,330				(25,150	)			(3,317	)			129,331				(43,311	)			(4,490	)
External Networks					115,016,029				(18,826,777	)			(6,092,788	)			117,426,344				(25,122,856	)			(6,296,079	)
Head Installations					1,611,503				(784,885	)			(102,687	)			1,629,638				(897,113	)			(112,229	)
Equipment Hub					1,709,744				(98,553	)			(44,585	)			1,756,915				(184,391	)			(85,837	)
	Total buildings and construction				118,466,606				(19,735,365	)			(6,243,377	)			120,942,228				(26,247,671	)			(6,498,635	)
Machinery and Equipment					12,044,082				(7,284,298	)			(1,488,070	)			13,453,463				(9,011,896	)			(1,727,597	)
		Total machinery and equipment			12,044,082				(7,284,298	)			(1,488,070	)			13,453,463				(9,011,896	)			(1,727,597	)
Office furniture and fixtures					4,126,938				(2,825,005	)			(502,389	)			4,380,580				(3,281,016	)			(469,760	)
	Total office furniture and fixtures				4,126,938				(2,825,005	)			(502,389	)			4,380,580				(3,281,016	)			(469,760	)
Other property, plant and equipment:
Vehicles					650,300				(451,829	)			(118,173	)			601,342				(492,286	)			(93,794	)
Tools and instruments					156,390				(64,252	)			(27,247	)			170,301				(95,478	)			(31,226	)
Fixed assets in transit					59,838				—				—				—				—				—
Rented office installations					1,225,051				(467,233	)			(72,610	)			1,288,550				(555,756	)			(88,523	)
Cable TV materials					4,255,507				—				—				1,764,499				—				—
Work in progress					1,464,705				—				—				588,888				—				—
Decoding equipment					6,938,997				(3,844,929	)			(1,292,481	)			9,523,417				(5,180,464	)			(1,335,543	)
Leased assets					341,483				(13,744	)			(4,467	)			487,266				(65,203	)			(51,457	)
	Total other property, plant and equipment				15,092,271				(4,841,987	)			(1,514,978	)			14,424,263				(6,389,187	)			(1,600,543	)
Total property, plant and equipment					150,229,916				(34,686,655	)			(9,748,814	)			153,700,553				(44,929,770	)			(10,296,535	)

A4-211

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Note 9.	Investment in Other Companies:

		2003				2004
		ThCh$				ThCh$
Bazuca.Com Chile S.A.			157,041				143,819
Internet Holding S.A.			283,560				283,560
Provision			(207,089	)			(202,038	)
Total			233,512				225,341

Note 10.	Goodwill, net:

	2003:

		December 31, 2003
						Accumulated
		Gross Value				Amortization				Net Value
		ThCh$				ThCh$				ThCh$
Metropolis			50,137,914				(30,773,552	)			19,364,362
Goodwill generated from the purchase of CTC stocks			53,086,511				(6,635,814	)			46,450,697
Price-level restatement			1,032,245				(377,274	)			654,971
Amortization			—				(4,279,614	)			(4,279,614	)
Total			104,256,670				(42,066,254	)			62,190,416
Goodwill generated from the purchase of CTC Plataforma Técnica Red Multimedia S.A.			193,133				(24,281	)			168,852
Amortization of CTC			—				(9,518	)			(9,518	)
			193,133				(33,799	)			159,334
Balance as of December 31, 2003			104,449,803				(42,100,053	)			62,349,750

	2004:

		December 31, 2004
						Accumulated
		Gross Value				Amortization				Net Value
		ThCh$				ThCh$				ThCh$
Metropolis			49,404,189				(41,040,248	)			8,363,941
Goodwill generated from the purchase of CTC stocks			52,309,635				—				52,309,635
Price-level restatement			2,542,846				(1,092,511	)			1,450,335
Amortization			—				(4,216,289	)			(4,216,289	)
Total			104,256,670				(46,349,048	)			57,907,622
Goodwill generated from the purchase of CTC Plataforma Técnica Red Multimedia S.A.			193,133				(33,799	)			159,334
Amortization of CTC			—				(9,657	)			(9,657	)
			193,133				(43,456	)			149,677
Balance as of December 31, 2004			104,449,803				(46,392,504	)			58,057,299

A4-212

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Note 11.	Other Assets:

			2003				2004
			ThCh$				ThCh$
Other investments				2,104				2,084
Rental guarantees				118,168				114,453
Residential cable TV installations				20,390,501				23,352,776
Accumulated amortization of Residential Cable TV installations				(9,830,394	)			(14,082,739	)
Rental hubs, external net				422,779				931,205
Administrative projects-in-progress				34,837				41,520
Other assets				447,431				322,275
	Total			11,585,426				10,682,574

Note 12.	Banks and Financial Institutions:

		Types of currency and readjustment
		U.S. Dollars								UF								TOTAL
Bank or Institution		2003				2004				2003				2004				2003				2004
		ThCh$				ThCh$				ThCh$				ThCh$				ThCh$				ThCh$
Short-term
Banco BCI			—				59,325				—				—				—				59,325
Total			—				59,325				—				—				—				59,325
Total capital owed							59,296																59,296
Annual Average Interest Rate							3.46	%															3.46	%
Current portion of long-term
Banco Santander-Santiago			—				—				3,077,651				3,061,244				3,077,651				3,061,244
Banco BCI			—				—				1,470,568				1,461,600				1,470,568				1,461,600
Banco Estado			—				—				1,541,565				1,532,298				1,541,565				1,532,298
Banco Corpbanca			—				—				1,542,003				1,532,088				1,542,003				1,532,088
Total			—				—				7,631,787				7,587,230				7,631,787				7,587,230
Total Capital owed											7,561,611				7,550,296
Annual Average Interest Rate															3.14	%

		December 31,
		2003				2004
Total short-term liabilities denominated in foreign currency			0.0	%			0.8	%
Total short-term liabilities denominated in local currency			100.0	%			99.2	%

A4-213

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											December 31,
											2003				December 31, 2004
							Interest				Total Long-																								Total
							rate				term				Due in				Due in				Due in				More than								Long-term
Financial institution			Currency				%				Obligations				1-2 Years				2-3 Years				3-5 Years				5 Years				Maturity				Obligations
											ThCh$				ThCh$				ThCh$				ThCh$				ThCh$								ThCh$
Banco Santander-Santiago				U.F.				3.00%				12,206,882				3,047,154				3,047,154				3,047,155				—				Dec-2008				9,141,463
Banco BCI				U.F.				3.13%				5,825,926				1,454,302				1,454,302				1,454,302				—				Dec-2008				4,362,906
Banco Corpbanca				U.F.				3.13%				6,106,824				1,524,422				1,524,422				1,524,422				—				Dec-2008				4,573,266
Banco Estado				U.F.				3.00%				6,106,810				1,524,418				1,524,418				1,524,418				—				Dec-2008				4,573,254
	Total											30,246,442				7,550,296				7,550,296				7,550,297				—								22,650,889

		December 31,
		2003				2004
Total liabilities denominated in foreign currency			0.0%				0.0%
Total liabilities denominated in local currency			100.0%				100.0%

Note 13.	Accounts Payable:

		2003				2004
		ThCh$				ThCh$
Suppliers			5,501,600				4,778,425
Programming			2,804,636				1,959,010
Fees			5,416				5,920
Other accounts payable			946,747				546,016
Total			9,258,399				7,289,371

Note 14.	Notes Payable:

		2003				2004
		ThCh$				ThCh$
Uncollected stale dated checks			12,133				12,193
Total			12,133				12,193

A4-214

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Note 15.	Miscellaneous Payables:

		2003				2004
		ThCh$				ThCh$
Telefónica CTC Chile S.A.(1)			219,227				14,496,161
Comunicaciones Intercom S.A.			85,531				—
San Felipe-Los Andes network			724,217				—
Others			12,993				12,273
Total			1,041,968				14,508,434

(1)

On July 30, 2001, in connection with the purchase transaction involving Companía de Telecomunicaciones de Chile S.A. (CTC), the Company entered into a loan agreement with CTC for a total of ThUS$20,000 payable over 5 years with an annual interest rate of 6%. The accounts payable balance resulting from this transaction as of December 31, 2003 was classified as long-term debt and amounted to ThCh$14,761,670. In 2004, the long-term debt was reclassified to short-term and as of December 31, 2004 amounted to ThCh$14,496,161.

								Long-term
Principal				Principal				2003				2004
ThUS$				ThUS$				ThUS$				ThUS$
	20,000				11,146,000				14,761,670				—

Note 16.	Provisions and withholdings:

		2003				2004
		ThUS$				ThUS$
Vacations			487,092				520,943
Audit fees			3,467				3,463
Withholdings			686,627				799,376
Suppliers			89,644				73,945
Others			30,312				34,611
Total			1,297,142				1,432,338

Note 17.	Unearned Revenues:

A4-215

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Note 18.	Other Current Liabilities:

		2003				2004
		ThCh$				ThCh$
Forward contract rights			(24,573,611	)			(7,246,200	)
Forward contract obligations			29,927,432				8,108,271
Deferred loss from forward contract			(949,758	)			—
Deferred interest from forward contract			(484,948	)			(47,803	)
Deferred interest amortization from forward contract			373,629				27,751
Total			4,292,744				842,019

Financial										Deferred
Institution		Amount in US$				Maturity		Rate		Income (loss)				Net income
										Th$				Th$
BCI			250,000			01-06-04		2.13%			—			(33,683)
SECURITY			1,000,000			01-02-04		1.61%			—			(139,949)
SECURITY			500,000			01-02-04		1.26%			—			(68,700)
SECURITY			500,000			01-02-04		1.17%			—			(68,344)
SECURITY			1,000,000			01-05-04		0.97%			—			(132,126)
SECURITY			250,000			01-05-04		1.41%			—			(33,840)
SECURITY			250,000			01-06-04		2.27%			—			(33,935)
SECURITY			250,000			01-06-04		2.04%			—			(33,251)
CORPBANCA			500,000			01-06-04		1.07%			—			(66,406)
CORPBANCA			250,000			01-06-04		1.45%			—			(33,909)
CORPBANCA			250,000			01-06-04		2.10%			—			(33,620)
BCI			500,000			01-30-04		1.50%			—			(78,147)
SECURITY			500,000			01-31-04		0.00%			—			(83,896)
SECURITY			500,000			02-01-04		3.10%			—			(82,045)
SECURITY			500,000			02-02-04		1.76%			—			(83,447)
SECURITY			500,000			02-03-04		1.75%			—			(83,401)
SECURITY			500,000			02-04-04		1.71%			—			(83,262)
SECURITY			500,000			02-05-04		1.78%			—			(83,494)
SECURITY			500,000			02-06-04		1.68%			—			(83,170)
SECURITY			1,000,000			02-07-04		2.33%			—			(168,878)
SECURITY			500,000			02-08-04		1.48%			—			(86,718)
CORPBANCA			500,000			02-09-04		2.48%			—			(82,931)
CORPBANCA			500,000			02-10-04		2.30%			—			(82,282)
CORPBANCA			500,000			02-11-04		2.81%			—			(84,066)
BCI			500,000			02-12-04		2.52%			—			(87,201)
BCI			500,000			02-13-04		2.67%			—			(87,669)

A4-216

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Financial										Deferred
Institution		Amount in US$				Maturity		Rate		Income (loss)				Net income
										Th$				Th$
BCI			500,000			02-14-04		2.55%			—			(87,286)
BCI			250,000			02-15-04		2.64%			—			(43,792)
SECURITY			500,000			02-16-04		2.32%			—			(86,720)
SECURITY			500,000			02-17-04		0.87%			(81,781	)		—
SECURITY			500,000			02-18-04		0.75%			—			(78,310)
SECURITY			500,000			02-19-04		1.08%			(74,423	)		—
BCI			550,000			02-20-04		1.53%			—			(76,646)
BCI			500,000			02-21-04		1.49%			—			(69,565)
BCI			500,000			02-22-04		1.47%			—			(69,527)
BCI			250,000			02-23-04		2.43%			—			(35,358)
BCI			250,000			02-24-04		2.23%			—			(35,084)
BCI			500,000			02-25-04		2.43%			—			(70,716)
BCI			1,000,000			02-26-04		2.23%			—			(140,316)
BCI			1,000,000			02-27-04		2.09%			—			(139,550)
BCI			500,000			02-28-04		2.05%			—			(69,660)
BCI			500,000			02-29-04		2.20%			—			(70,082)
SECURITY			600,000			03-01-04		0.72%			—			(86,075)
SECURITY			2,500,000			03-02-04		1.74%			—			(351,342)
SECURITY			750,000			03-03-04		1.53%			(102,090	)		—
SECURITY			750,000			03-04-04		1.12%			(98,624	)		—
CORPBANCA			450,000			03-05-04		1.52%			—			(62,693)
SECURITY			3,000,000			03-06-04		1.76%			—			(354,082)
SECURITY			1,000,000			03-07-04		2.48%			—			(120,464)
SECURITY			500,000			03-08-04		2.48%			—			(60,232)
SECURITY			500,000			03-09-04		2.43%			—			(60,122)
SECURITY			1,000,000			03-10-04		1.69%			—			(118,089)
CORPBANCA			750,000			03-11-04		2.13%			(94,050	)		—
ESTADO			750,000			03-12-04		2.00%			(90,699	)		—
ESTADO			750,000			03-13-04		1.98%			(90,632	)		—
ESTADO			300,000			03-14-04		1.76%			(38,305	)		—
ESTADO			200,000			03-15-04		1.69%			(25,500	)		—
ESTADO			250,000			03-16-04		1.53%			(31,748	)		—
ESTADO			500,000			03-17-04		1.38%			(62,029	)		—
ESTADO			500,000			03-18-04		1.23%			(61,805	)		—
ESTADO			500,000			03-19-04		0.75%			(51,336	)		—
ESTADO			500,000			03-20-04		0.69%			(46,736	)		—
Subtotal			37,350,000								(949,758	)		(4,304,081)
ESTADO			500,000			01-30-04		2.49%			—			1,491
ESTADO			1,500,000			02-27-04		1.58%			—			4,124
ESTADO			1,000,000			01-30-04		0.94%			—			5,722
Subtotal			3,000,000								—			11,337
Total											(949,758	)		(4,292,744)

A4-217

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Financial														Deferred
Institution		Amount in US$				Maturity				Rate				Income (loss)				Net income
														ThCh$				ThCh$
ESTADO			1,125,000				07-01-05				0.70	%			—				(38,369	)
ESTADO			2,250,000				07-01-05				1.11	%			—				(148,894	)
SECURITY			250,000				07-01-05				0.08	%			—				(13,086	)
SECURITY			250,000				07-01-05				(0.11	)%			—				(12,862	)
SECURITY			250,000				07-01-05				0.04	%			—				(12,120	)
SECURITY			375,000				07-01-05				0.43	%			—				(25,970	)
ESTADO			300,000				07-01-05				(0.40	)%			—				(17,142	)
ESTADO			500,000				07-01-05				(0.14	)%			—				(25,657	)
ESTADO			1,000,000				07-01-05				0.13	%			—				(48,896	)
ESTADO			375,000				07-01-05				0.20	%			—				(25,604	)
ESTADO			1,125,000				07-01-05				0.24	%			—				(77,164	)
SECURITY			1,125,000				07-01-05				0.27	%			—				(77,325	)
ESTADO			500,000				07-01-05				1.10	%			—				(39,535	)
ESTADO			1,000,000				07-01-05				1.45	%			—				(80,367	)
ESTADO			750,000				07-01-05				0.11	%			—				(59,660	)
ESTADO			825,000				07-01-05				1.00	%			—				(69,043	)
SECURITY			1,000,000				07-01-05				(0.57	)%			—				(70,325	)
Total			13,000,000												—				(842,019	)

A4-218

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		Paid-in				Price-level				Accumulated				Net loss
		Capital				restatement				Deficit				for the year				Total
		ThCh$				ThCh$				ThCh$				ThCh$				ThCh$
Balance as of January 1, 2002			193,063,828				1,737,575				(24,279,630	)			(13,997,522	)			156,524,251
Reclassification of prior year net loss			—				—				(13,997,522	)			13,997,522				—
Price-level restatement			5,791,915				52,126				(1,148,315	)			—				4,695,726
Net loss for the year			—				—				—				(16,961,416	)			(16,961,416	)
Balance as of December 31, 2002			198,855,743				1,789,701				(39,425,467	)			(16,961,416	)			144,258,561
Price-level restatement for comparison purposes			200,844,300				1,807,600				(39,819,722	)			(17,131,030	)			145,701,148
Balance as of January 1, 2003			198,855,743				1,789,701				(39,425,467	)			(16,961,416	)			144,258,561
Reclassification of prior year net loss			—				—				(16,961,416	)			16,961,416				—
Price-level restatement			1,988,557				17,899				(563,869	)			—				1,442,587
Net loss for the year			—				—				—				(13,446,519	)			(13,446,519	)
Balance as of December 31, 2003			200,844,300				1,807,600				(56,950,752	)			(13,446,519	)			132,254,629
Price-level restatement for comparison purposes			205,865,408				1,852,790				(58,374,521	)			(13,782,682	)			135,560,995
Balance as of January 1, 2004			200,844,300				1,807,600				(56,950,752	)			(13,446,519	)			132,254,629
Reclassification of prior year net loss			—				—				(13,446,519	)			13,446,519				—
Price-level restatement			5,021,108				45,190				(1,759,932	)			—				3,306,366
Net loss for the year			—				—				—				(12,725,276	)			(12,725,276	)
Balance as of December 31, 2004			205,865,408				1,852,790				(72,157,203	)			(12,725,276	)			122,835,719

Note 21.	Other non-operating expenses:

		2002				2003				2004
		ThCh$				ThCh$				ThCh$
Disposal of equipment			(811,091	)			(290,492	)			(280,536	)
Write-off of investments			(209,155	)			—				—
Provision for obsolescence			(121,037	)			(144,568	)			—
Other			(426,629	)			(694,183	)			(129,988	)
Total			1,567,912				(1,129,243	)			(410,524	)

A4-219

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Note 22.	Price-Level Restatement and Foreign Currency Translation:

(a)	Price Level Restatement

		2002				2003				2004
		ThCh$				ThCh$				ThCh$
Shareholders’ equity			(4,885,680	)			(1,486,080	)			(3,322,980	)
Non-monetary assets			6,190,388				1,982,111				4,574,684
Liabilities denominated in foreign currencies			(1,045,644	)			(405,590	)			(832,510	)
Revenue accounts			34,992				(14,631	)			(69,935	)
Price-level restatement, net			294,056				75,810				349,259

(b)	Foreign Currency Translation

			2002				2003				2004
			ThCh$				ThCh$				ThCh$
Non-monetary assets				1,594,773				(5,566,768	)			(1,336,350	)
Non-monetary liabilities				(2,569,681	)			4,270,331				1,123,028
	Net loss for foreign currency translation			(974,908	)			(1,296,437	)			(213,322	)

Note 23.	Board of Directors Compensation:

Note 24.	Contingencies and Commitments:

(a)	Commitments

(b)	Contingencies

A4-220

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Note 25.	Relevant Events:

A4-221

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I.	Differences in measurement methods

	(a) Inflation accounting:

	(b) Deferred income taxes:

(i)	A deferred tax liability or asset is recognized for the estimated future tax effects attributable to temporary differences and tax loss carry-forwards.
(ii)	The measurement of deferred tax liabilities and assets is based on the provisions of the enacted tax law. The effects of future changes in tax laws or rates are not anticipated.
(iii)	The measurement of deferred tax assets are reduced by a valuation allowance, if based on the weight of available evidence, it is more likely than not that some portion of the deferred tax assets will not be realized.

A4-222

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	(c) Goodwill:

A4-223

---

 

		For the Years Ended December 31,
		2002				2003				2004
		ThCh$				ThCh$				ThCh$
Goodwill			104,449,801				104,449,801				104,449,801
Accumulated amortization			(25,926,695	)			(25,926,695	)			(25,926,695	)
Goodwill, net			78,523,106				78,523,106				78,523,106

	(d) Derivative instruments:

	(e) Depreciation:

A4-224

---

 

	(f) Revenue recognition:

	(g) Investments in marketable securities:

	•	Investments held for trading purposes
	•	Investments available-for-sale
	•	Investments held to maturity

	(h) Issuance of shares in subsidiary:

A4-225

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	(i) Effect of minority interests on U.S. GAAP adjustments:

	(j) Effect of conforming net loss and shareholders’ equity to U.S. GAAP:

		For the Year Ended December 31,
		2002				2003				2004
		ThCh$				ThCh$				ThCh$
Net loss in accordance with Chilean GAAP			(17,559,306	)			(13,782,682	)			(12,725,276	)
Deferred taxes (paragraph b)			(2,023,771	)			(1,042,069	)			(1,124,442	)
Amortization of goodwill (paragraph c)			4,269,791				4,289,132				4,225,945
Derivative instruments (paragraph d)			153,218				(1,155,215	)			1,039,953
Depreciation (paragraph e)			(1,254,758	)			(1,531,846	)			(742,030	)
Issuance of subsidiaries shares (paragraph h)			—				(18,665	)			(73,721	)
Effect of minority interests on U.S. GAAP adjustments (paragraph i)			—				309,040				82,970
Net loss and comprehensive loss in accordance with U.S. GAAP			(16,414,826	)			(12,932,305	)			(9,316,601	)

		As of December 31,
		2003				2004
		ThCh$				ThCh$
Shareholders’ equity, in accordance with Chilean GAAP			135,560,995				122,835,719
Deferred income taxes (paragraph b)			(3,225,187	)			(4,349,629	)
Effect in amortization of goodwill (paragraph c)			16,239,862				20,465,806
Derivative instruments (paragraph d)			(998,224	)			41,729
Depreciation (paragraph e)			(4,320,097	)			(5,062,127	)
Issuance of subsidiary shares (paragraph h)			(972,327	)			(1,046,048	)
Effect of minority interests on U.S. GAAP adjustments (paragraph i)			309,039				392,010
Shareholders’ equity, in accordance with U.S. GAAP			142,594,061				133,277,460

		For the Year Ended December 31,
		2002				2003				2004
		ThCh$				ThCh$				ThCh$
Balance as of January 1			172,894,854				156,480,028				142,594,061
Issuance of subsidiary shares (paragraph h)			—				(953,662	)			—
Net loss and comprehensive loss in accordance with U.S. GAAP			(16,414,826	)			(12,932,305	)			(9,316,601	)
Balance as of December 31			156,480,028				142,594,061				133,277,460

A4-226

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	II.     Additional disclosure requirements

	(a) Income taxes:

			2003				2004
			ThCh$				ThCh$
Deferred Tax Assets
Allowance for doubtful debts				1,105,571				1,247,088
Goods and services provision				16,665				35,240
Assets provision				—				—
Unearned revenues				182,172				146,889
Vacation provision				71,294				76,204
Forward contract				169,698				(7,094	)
Tax loss carry-forwards				14,755,016				15,898,544
Trademarks				—				—
Assets provision				308,839				348,334
Leasing				58,022				61,298
Trademark rights				2,424				2,836
Accumulated depreciation				738,046				864,735
	Total deferred tax assets			17,407,747				18,674,074
Deferred Tax Liabilities
Forward contracts				(161,459	)			—
Leasing operations				(65,889	)			(71,751	)
Accumulated depreciation				(2,294,439	)			(2,141,979	)
Goodwill				(4,972,368	)			(4,933,213	)
Software				(289,160	)			(260,283	)
Rented installations				(128,829	)			(124,575	)
	Total deferred tax liabilities			(7,912,144	)			(7,531,801	)
Net deferred tax asset (liability) before valuation allowance				9,495,603				11,142,273
Valuation allowance				(6,362,054	)			(7,465,323	)
Net deferred tax asset (liability)				3,133,549				3,676,950

		2003				2004
		ThCh$				ThCh$
Short-term			1,383,942				1,498,327
Long-term			8,111,661				9,643,946
Net deferred tax liabilities			9,495,604				11,142,273

A4-227

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		2002				2003				2004
		ThCh$				ThCh$				ThCh$
Deferred income tax benefit, Chile GAAP — Note 6			2,449,618				2,088,982				1,820,722
Additional deferred tax adjustment, U.S. GAAP, net			(2,023,771	)			(1,042,069	)			(1,124,442	)
Deferred income tax benefit under U.S. GAAP			425,847				1,046,913				696,280

	Permanent differences

	(b) Foreign currency forward contract capacity:

	(c) Lease agreements:

			Capital
			ThCh$
2005				51,070
2006				32,518
2007				29,808
2008				32,518
Thereafter				230,354
	Total future minimum lease payments			376,268
Interest				(99,603	)
	Present value of net minimum lease payments			276,665

		2003				2004
Short-term			38,625				94,313
Long-term			278,357				275,519

	(d) Advertising costs:

A4-228

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	(e) Reclassification differences between Chilean GAAP and U.S. GAAP:

		Year Ended December 31, 2002
		Chilean								U.S. GAAP
		GAAP				Reclassification				Presentation
		ThCh$				ThCh$				ThCh$
Operating loss			(11,641,140	)			(5,286,981	)			(16,928,121	)
Non-operating expenses			(8,456,463	)			5,286,981				(3,169,482	)

		Year Ended December 31, 2003
		Chilean								U.S. GAAP
		GAAP				Reclassification				Presentation
		ThCh$				ThCh$				ThCh$
Operating loss			(7,214,820	)			(4,894,029	)			(12,108,849	)
Non-operating expenses			(8,823,391	)			4,894,029				(3,929,362	)

		Year Ended December 31, 2004
		Chilean								U.S. GAAP
		GAAP				Reclassification				Presentation
		ThCh$				ThCh$				ThCh$
Operating loss			(8,645,859	)			(4,220,459	)			(12,866,318	)
Non-operating expenses			(6,360,795	)			4,220,459				(2,140,336	)

Year Ended December 31, 2003

Chilean

U.S. GAAP

GAAP

Reclassification

Presentation

ThCh$

ThCh$

ThCh$

Total current assets

15,167,731

949,757

16,117,488

Total current liabilities

25,185,654

949,757

24,235,897

Year Ended December 31, 2004

Chilean

U.S. GAAP

GAAP

Reclassification

Presentation

ThCh$

ThCh$

ThCh$

Total current liabilities

44,305,345

22,650,889

66,956,234

Total long-term liabilities

28,254,037

(22,650,889

)

5,603,148

A4-229

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	(f) Condensed balance sheet and income statement in accordance to US GAAP:

				2003				2004
				ThCh$				ThCh$
ASSETS
Current Assets
Cash and equivalents					7,146,955				4,245,184
Receivables					5,579,591				3,792,128
Other current assets					3,390,942				2,216,252
Total current assets					16,117,488				10,253,564
PROPERTY, PLANT AND EQUIPMENT
PP&E					150,229,916				153,700,553
Accumulated depreciation					(39,006,752	)			(49,991,897	)
Property, plant and equipment, net					111,223,164				103,708,656
OTHER ASSETS
Goodwill					78,523,106				78,523,106
Other long-term assets					18,551,666				17,641,457
Total other assets					97,074,772				96,164,563
		Total assets			224,415,424				210,126,783
LIABILITIES
CURRENT-TERM LIABILITIES
Banks and financial inst.					7,631,787				30,297,444
Payables					11,065,525				33,703,746
Other					8,266,625				2,920,409
Total current-term liabilities					26,963,937				66,921,599
LONG-TERM LIABILITIES
Banks and financial inst					30,246,442				—
Other					18,342,079				4,202,444
Total long-term liabilities					48,588,521				4,202,444
Minority interest					6,268,905				5,725,280
SHAREHOLDERS’ EQUITY
Shareholders’ equity					155,526,366				142,594,061
Net loss					(12,932,305	)			(9,316,601	)
Total shareholders’ equity					142,594,061				133,277,460
	Total Liabilities and shareholders’ equity				224,415,424				210,126,783

A4-230

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		2002				2003				2004
		ThCh$				ThCh$				ThCh$
OPERATING INCOME
Operating revenues			47,911,196				46,100,072				45,547,636
Operating costs			(46,358,310	)			(41,389,764	)			(40,601,181	)
Operating margin			1,552,886				4,710,308				4,946,455
Administrative and selling expenses			(15,958,113	)			(14,279,993	)			(14,328,858	)
Operating loss			(14,405,227	)			(9,569,685	)			(9,382,403	)
NON-OPERATING INCOME
Financial income (expenses)			(2,058,538	)			(2,490,613	)			(2,276,273	)
Other non-operating income			153,218				—				1,039,953
Other non-operating expense			—				(1,173,880	)			(73,721	)
Goodwill amortization			62,047				—				—
Price-level restatement and Foreign currency translation			(680,852	)			(1,220,627	)			135,937
Non-operating loss			(2,524,125	)			(4,885,120	)			(1,174,104	)
Loss before taxes and minority interest			(16,929,352	)			(14,454,805	)			(10,556,507	)
Tax benefit			425,847				1,046,913				696,280
Minority interest			88,679				475,587				543,626
Net loss for the year			(16,414,826	)			(12,932,305	)			(9,316,601	)

	(g) Estimated fair value of financial instruments and derivative financial instruments:

	•	The data excludes non-financial assets and liabilities, such as property, plant and equipment, and goodwill.
	•	While the data represents management’s best estimates, the data is subjective and involves significant estimates regarding current economic and market conditions and risk characteristics.

	•	Cash and cash equivalents approximate fair value because of the short-term maturity of these instruments.
	•	For current liabilities that are contracted at variable interest rates, the book value is considered to be equivalent to their fair value.
	•	For interest-bearing liabilities with an original contractual maturity of greater than one year, the fair values are calculated by discounting contractual cash flows at current market origination rates with similar terms.

A4-231

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		December 31,
		2003								2004
		Chilean								Chilean
		GAAP								GAAP
		Carrying				Estimated				Carrying				Estimated
		Amount				Fair Value				Amount				Fair Value
		ThCh$								ThCh$
Assets
Cash and cash equivalents			7,146,726				7,146,726				4,245,184				4,245,184
Short-term accounts receivable			2,580,504				2,580,504				2,022,823				2,022,823
Notes receivable			92,652				92,652				114,250				114,250
Miscellaneous receivables			2,673,926				2,673,926				1,426,134				1,426,134
Notes and accounts receivable from related companies			232,509				232,509				228,921				228,921
Liabilities
Short-term bank debt			—				—				(59,325	)			(59,325	)
Current portion of long-term bank debt			(7,631,787	)			(7,631,787	)			(7,587,230	)			(7,587,230	)
Accounts payable			9,258,399				9,258,399				7,289,371				7,289,371
Current notes and accounts payable to related companies			753,025				753,025				11,893,748				11,893,748
Forward contracts			(4,292,744	)			(5,290,969	)			(842,019	)			(800,290	)
Notes payable			(12,133	)			(12,133	)			(12,193	)			(12,193	)
Miscellaneous payables			1,041,968				1,041,968				14,508,434				14,508,434
Long-term bank debt			(30,246,442	)			(30,246,442	)			(22,650,889	)			(22,650,889	)
Long-term notes payable			(14,761,670	)			(14,761,670	)			—				—
Long-term notes and accounts payable to related companies			—				—				872,688				872,688

	(h) Cash and cash equivalents:

	Supplementary Cash flow information:

		2002				2003				2004
		ThCh$				ThCh$				ThCh$
Assets acquired under capital leases			—				—				85,440
Interest paid during the year			(1,500,630	)			(1,852,560	)			(1,268,197	)

		2002				2003				2004
		ThCh$				ThCh$				ThCh$
Revenues recognized from barter transactions			774,333				725,574				518,338
Expenses recognized from barter transactions			31,593				62,601				24,957

A4-232

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	(i) Defaults:

	(j) Recently issued accounting pronouncement:

	Amendment of Statement 133 on Derivative Instruments and Hedging Activities

A4-233

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	KPMG LLP

A4-234

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				December 31
				2004				2003
								Unaudited
ASSETS
Current assets:
	Cash and cash equivalents			$	6,947,650			$	12,370,241
	Accounts receivable, net of allowance of doubtful accounts of $2,622,128 and $4,574,337, respectively				25,418,844				22,680,843
	Due from affiliates				747,187				906,469
	Broadcast rights, net				3,405,589				9,837,575
	Prepaid expenses and other current assets				1,796,695				626,730
		Total current assets			38,315,965				46,421,858
Property and equipment, net					631,762				393,835
Other assets					2,180,686				748,268
		Total assets		$	41,128,413			$	47,563,961
LIABILITIES AND MEMBERS’ (DEFICIT) EQUITY
Current liabilities:
	Accounts payable			$	5,581,428			$	8,306,630
	Accrued expenses				5,220,339				5,291,422
	Broadcast rights payable				3,383,745				8,180,097
	Current portion notes payable to members				7,500,000				—
	Due to affiliates				2,280,231				3,183,068
	Income taxes payable				600,000				—
	Deferred revenue				2,990,444				966,669
		Total current liabilities			27,556,187				25,927,886
Notes payable to members					19,700,000				22,745,424
Accrued interest to members					4,768,169				1,684,109
		Total liabilities			52,024,356				50,357,419
Commitments
Members’ deficit					(10,895,943	)			(2,793,458	)
				$	41,128,413			$	47,563,961

A4-235

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				2004				2003				2002
								Unaudited				Unaudited
Net advertising and subscriber revenue				$	90,804,007			$	80,507,973			$	57,034,958
Sale of broadcast rights					6,772,714				6,001,730				9,427,462
		Total revenue			97,576,721				86,509,703				66,462,420
Cost of revenue					77,724,516				85,118,256				93,859,489
		Gross margin (loss)			19,852,205				1,391,447				(27,397,069	)
Selling, general, and administrative expenses					19,306,028				19,610,630				20,358,515
		Operating income (loss)			546,177				(18,219,183	)			(47,755,584	)
Other income (expense):
	Interest expense				(3,084,060	)			(1,684,109	)			—
	Other income (expense), net				(411,340	)			1,207,027				(487,654	)
		Net loss before income taxes			(2,949,223	)			(18,696,265	)			(48,243,238	)
Income tax expense					(5,121,238	)			(4,173,940	)			(2,870,825	)
		Net loss		$	(8,070,461	)		$	(22,870,205	)		$	(51,114,063	)

A4-236

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								Accumulated
				Members’				other
				capital				comprehensive				Accumulated				Total members’
				contributions				income				deficit				(deficit) equity
Balance at February 5, 2002 (date of merger) (unaudited)				$	31,776,237			$	—			$	—			$	31,776,237
	Capital contributions (unaudited)				33,541,416				—				—				33,541,416
	Net loss (unaudited)				—				—				(51,114,063	)			(51,114,063	)
	Foreign currency translation adjustment (unaudited)				—				3,908,958				—				3,908,958
		Comprehensive loss (unaudited)															(47,205,105	)
Balance at December 31, 2002 (unaudited)					65,317,653				3,908,958				(51,114,063	)			18,112,548
	Capital contributions (unaudited)				4,791,461				—				—				4,791,461
	Net loss (unaudited)				—				—				(22,870,205	)			(22,870,205	)
	Foreign currency translation adjustment (unaudited)				—				(2,827,262	)			—				(2,827,262	)
		Comprehensive loss (unaudited)															(25,697,467	)
Balance at December 31, 2003 (unaudited)					70,109,114				1,081,696				(73,984,268	)			(2,793,458	)
	Net loss				—				—				(8,070,461	)			(8,070,461	)
	Foreign currency translation adjustment				—				(32,024	)			—				(32,024	)
		Comprehensive loss															(8,102,485	)
Balance at December 31, 2004				$	70,109,114			$	1,049,672			$	(82,054,729	)		$	(10,895,943	)

A4-237

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					2004				2003				2002
									Unaudited				Unaudited
Net loss					$	(8,070,461	)		$	(22,870,205	)		$	(51,114,063	)
Adjustments to reconcile net loss to net cash used in operating activities:
	Bad-debt expense					1,868,463				1,687,504				4,790,420
	Equity in earnings of investment, net of amortization					(1,056,361	)			(533,710	)			105,967
	Depreciation and amortization					106,280				19,779				18,483
	Deferred income taxes					—				200,940				(200,940	)
	Changes in operating assets and liabilities:
		Accounts receivable				(5,208,686	)			(2,648,885	)			(16,435,972	)
		Prepaid expense and other assets				(1,352,179	)			(1,057,510	)			4,326,198
		Accounts payable				1,374,325				3,233,976				1,783,825
		Accrued expenses				(1,889,614	)			3,957,291				123,008
		Due from/to affiliates				287,270				(243,651	)			12,120,987
		Accrued interest				3,084,060				1,684,109				—
		Deferred revenue				2,023,775				959,624				(245,037	)
		Broadcast rights				1,632,589				(943,080	)			1,289,674
		Income taxes payable				414,123				71,233				28,987
			Net cash used in operating activities			(6,786,416	)			(16,482,585	)			(43,372,463	)
Cash flows from investing activities:
	Purchases of property and equipment					(581,562	)			(127,330	)			(308,970	)
			Net cash used in investing activities			(581,562	)			(127,330	)			(308,970	)
Cash flows from financing activities:
	Members capital contributions					—				4,791,461				36,957,840
	Proceeds from notes payable from affiliates and members					1,954,576				15,245,424				—
			Net cash provided by financing activities			1,954,576				20,036,885				36,957,840
			Net decrease (increase) in cash and cash equivalents			(5,413,402	)			3,426,970				(6,723,593	)
Cash and cash equivalents, beginning of period						12,370,241				9,283,174				15,495,751
Effect of foreign currency on cash flow						(9,189	)			(339,903	)			511,016
Cash and cash equivalents, end of period					$	6,947,650			$	12,370,241			$	9,283,174
Supplemental information:
	Cash paid for taxes				$	4,644,046			$	4,512,817			$	2,862,867
	Non-cash transactions				$	2,500,000			$	7,500,000			$	—

A4-238

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(1)	Organization and Nature of Business

(a)	Description of Business

(b)	Basis of Financial Statement Presentation

(2)	Liquidity and Capital Requirements

(3)	Summary of Significant Accounting Policies

(a)	Cash and Cash Equivalents

(b)	Revenue Recognition

A4-239

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			2004				2003				2002
							Unaudited				Unaudited
United States			$	28,351,516			$	24,608,432			$	19,734,131
Latin America				69,225,205				61,901,271				46,728,289
	Total Revenue		$	97,576,721			$	86,509,703			$	66,462,420

(c)	Allowance for Doubtful Accounts Receivable

(d)	Property and Equipment

(e)	Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

(f)	Investments in T&T Sports Marketing Ltd

A4-240

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		2004				2003				2002
		Unaudited				Unaudited				Unaudited
Current assets		$	3,503,653			$	4,077,109			$	6,633,826
Noncurrent assets			20,000				480,000				20,000
Current liabilities			2,247,157				6,834,637				8,270,904
Noncurrent liabilities			—				250,000				3,669,174
Stockholders’ equity			1,276,496				(2,527,528	)			(5,286,252	)
Revenue			39,500,871				37,742,137				37,930,912
Net income			3,804,024				2,758,724				1,478,955

(g)	Income Taxes

(h)	Marketing Costs

(i)	Foreign Currency Translation

(j)	Broadcast Rights

A4-241

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(k)	Comprehensive Income

(l)	Concentration of Credit and Other Risks

(m)	Fair Value of Financial Instruments

(n)	Recent Accounting Pronouncements

(4)	Property and Equipment

			December 31
			2004				2003
							Unaudited
Furniture and fixtures			$	737,372			$	456,727
	Less accumulated depreciation			(105,610	)			(62,892	)
			$	631,762			$	393,835

(5)	Related-Party Transactions

	Fox Sports International

	Torneos y Competencias S.A.

A4-242

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	T&T Sports Marketing Company Ltd

(6)	Income Taxes

			2004				2003				2002
							Unaudited				Unaudited
Current — foreign			$	5,121,238			$	3,973,000			$	3,071,765
Deferred — foreign				—				200,940				(200,940	)
	Total income tax expense		$	5,121,238			$	4,173,940			$	2,870,825

				2004				2003
								Unaudited
Deferred tax assets:
	Accounts receivable, principally due to allowance for doubtful accounts			$	2,359,784			$	2,157,768
	Accrued liabilities				1,332,167				1,872,673
	Other items				3,859				3,858
	Deferred revenues				1,153,928				373,069
	Net operating loss and tax credit carryforwards				17,062,146				17,908,661
		Total deferred tax assets			21,911,884				22,316,029
		Net deferred tax asset before valuation allowance			21,911,884				22,316,029
	Less valuation allowance				(21,911,884	)			(22,316,029	)
		Net deferred tax asset		$	—			$	—

A4-243

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		2004				2003				2002
						Unaudited				Unaudited
Expected income tax benefit		$	(1,032,228	)		$	(6,543,693	)		$	(16,885,533	)
State income taxes			(21,731	)			(305,443	)			(1,345,215	)
Meals & entertainment			159,270				61,011				58,450
Devaluation reserve			412,300				(225,400	)			1,400,000
Impact of LLC status			1,217,946				1,184,152				856,488
Changes in valuation allowance			(404,074	)			6,359,093				15,956,935
Foreign income taxes			4,521,000				3,973,000				2,726,000
Differential in tax rates			350,730				348,120				(109,800	)
Flow through of income/loss from deemed foreign income			(681,975	)			(676,900	)			213,500
Miscellaneous other			600,000				—				—
		$	5,121,238			$	4,173,940			$	2,870,825

(6)	Notes Payable to Members

Senior promissory notes with due dates beginning on April 28, 2005, bearing interest at an annual rate of 8%			$	10,000,000
Subordinated Convertible Credit Agreement due March 1, 2009, bearing interest at an annual rate of 12%				17,200,000
			$	27,200,000
	Current portion of notes payable to members			7,500,000
			$	19,700,000

A4-244

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2005		$	7,500,000
2006			2,500,000
2007			—
2008			—
2009			17,200,000
		$	27,200,000

(7)	Members’ Equity

		Percentage
Member		ownership
Pan American Sports Enterprises, Co.			52	%
FSI SPV, Inc.			38
Liberty Finance, LLC			10
			100	%

(8)	Commitments

2005		$	55,078,437
2006			53,232,500
2007			40,369,324
2008			39,002,000
2009			39,002,000
Thereafter			39,002,000
		$	265,686,261

(9)	Event Subsequent to Date of Report of Independent Registered Public Accounting Firm (Unaudited)

A4-245

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	Barbier Frinault & Autres
	Ernst & Young
	/s/ Bruno Bizet
	Bruno Bizet

A4-246

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					December 31,				December 31,				December 31,
					2001				2002				2003
ASSETS
Non-current assets
	Intangible assets, net
		Goodwill				48,452				45,522				42,597
		Concessions, patents and brands				19,844				20,585				10,375
		Other intangible assets and in progress				694,471				654,403				163,187
						762,767				720,510				216,159
	Tangible assets, net
		Land				253				147				147
		Constructions, net				474,998				484,613				456,998
		Technical fixtures, net				84,925				64,659				60,360
		Other tangible assets, net				25,116				22,151				17,336
		Fixed assets under construction				65,500				51,010				17,775
						650,792				622,580				552,616
			Investments			4,405				880				782
	Total non-current assets					1,417,964				1,343,970				769,557
	Current assets
		Inventories, net				5,693				5,550				1,774
		Advances and payment on account				12,713				9,651				14,297
		Trade receivables				26,643				20,699				17,456
		Other receivables				50,243				40,489				53,950
		Marketable securities				23				—				1,215
		Cash and cash equivalents				8,040				3,757				6,657
		Prepaid expenses				9,611				9,045				2,695
Total current assets						112,966				89,191				98,044
TOTAL ASSETS						1,530,930				1,433,161				867,601
LIABILITIES AND SHAREHOLDERS’ EQUITY
Shareholders’ equity
	Capital stock					470,371				470,371				470,371
	Additional paid-in capital					378,287				378,287				378,287
	Accumulated deficit					(17,254	)			(152,589	)			(463,668	)
	Net loss for the year					(135,335	)			(311,079	)			(622,713	)
Total Shareholders’ equity						696,069				384,990				(237,723	)
Contingencies and loss provisions						23,643				26,024				17,936
Liabilities
	Bank debt					232,034				214,489				210,558
	Other debt					332,020				589,235				663,055
	Customers deposits					34,734				40,520				43,548
	Advanced payment received					1,407				173				1,146
	Trade payables					115,542				109,035				114,814
	Tax and social liabilities					11,619				24,721				22,859
	Amounts due to suppliers of fixed assets					76,934				39,289				20,953
	Other liabilities					4,706				2,775				7,046
	Deferred income					2,222				1,910				3,409
Total liabilities						811,218				1,022,147				1,087,388
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY						1,530,930				1,433,161				867,601

A4-247

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		Year ended				Year ended				Year ended
		December 31,				December 31,				December 31,
		2001				2002				2003
Net sales			140,864				276,333				299,039
Other operating revenues			3,126				14,493				15,444
Total revenues			143,990				290,826				314,483
Purchases of materials			2,456				7,160				10,388
Other external operating expenses			138,926				218,781				169,563
Taxes			2,647				7,301				7,866
Payroll expenses			32,558				67,014				46,641
Depreciation, amortization (excluding goodwill amortization)			80,786				162,663				166,112
Other operating expenses			4,284				8,841				9,386
Operating expenses			261,657				471,760				409,956
Operating loss			(117,667	)			(180,934	)			(95,473	)
Financial income (expense), net			(15,405	)			(48,132	)			(62,656	)
Loss before income tax and exceptional items			(133,072	)			(229,066	)			(158,129	)
Exceptional items, net			(166	)			(79,752	)			(462,009	)
Income taxes			(121	)			(44	)			(358	)
Net loss before goodwill amortization			(133,359	)			(308,862	)			(620,496	)
Goodwill amortization			(1,976	)			(2,217	)			(2,217	)
Net loss			(135,335	)			(311,079	)			(622,713	)
Basic loss per share (in euro)			(4.4	)			(10.1	)			(20.2	)
Diluted loss per share (in euro)			(4.4	)			(10.1	)			(20.2	)

A4-248

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			Year ended				Year ended				Year ended
			December 31,				December 31,				December 31,
			2001				2002				2003
Cash flows from operating activities:
Net loss				(135,335	)			(311,079	)			(622,713	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
	Amortization, depreciation and allowances			79,547				207,908				593,703
	Gains and losses from disposals, net of tax			(780	)			81				9,362
	Other			1,885				10,689				3,859
Cash flows from operating activities before changes in working capital				(54,683	)			(92,401	)			(15,789	)
Net changes in working capital:
	Inventories			(5,593	)			143				3,776
	Receivables/ Payables			(60,481	)			22,971				(6,170	)
Cash flow from operating activities				(120,757	)			(69,287	)			(18,183	)
Additions to intangible assets				(3,394	)			(7,722	)			(1,846	)
Additions to property, plant and equipment				(102,121	)			(166,685	)			(45,235	)
Additions to investments				1,535				1,023				317
Proceeds from disposals of fixed assets				5,147
Proceeds from investments				141				881
Net cash used in investing activities				(98,692	)			(172,503	)			(46,764	)
Net change in customers deposits				4,957				5,786				2,313
Variance in loans and other financial liabilities				211,253				244,226				60,163
Net cash provided by financing activities				216,210				250,012				62,476
Net change in cash and cash equivalents				(3,239	)			8,222				(2,471	)
Cash and cash equivalents at the beginning of the period				(5,405	)			(8,644	)			(422	)
Cash and cash equivalents at the end of the period				(8,644	)			(422	)			(2,893	)

A4-249

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1.	Highlights of 2001, 2002 and 2003.

•	A contribution of Suez’s investments in Lyonnaise Communications and Auxipar to the Group.
•	A contribution of France Telecom’s investments in Lyonnaise Communications, Paris Cable and Rapp 16 to the Group. Rapp 16 owns a right of use of civil engineering through cable network (owned by France Telecom) for a period of 20 years.
•	A € 154 million capital increase.
•	A shareholder’s loan.

Suez			50.1%
NTL Inc.			22.9%
MSDW			27.0%

A4-250

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	•	Build 16,400 home-passed, for a total cost of € 3.8 million, for the North zone within 24 months following the official announcement date.
	•	Build 26,700 home-passed, for a total cost of € 6 million, for the South zone within 24 months following the official announcement date.
	•	Create a company called “Plaque Trois”, with a capital stock of € 1.0 million. This wholly owned subsidiary of Lyonnaise Communications will be required to conduct engineering and financial studies for a total cost of € 0.5 million (of which € 0.2 million had already been incurred by SIPPEREC at December 31, 2003). In addition, Lyonnaise Communications undertakes to contribute to the new company all of its rights on fixed assets (such as network head-ends and other equipments) and intangible assets (studies) for a total amount of € 3.3 million at December 31, 2003. Therefore, the Lyonnaise Communications’ total investment amounts to € 4.8 million. Lyonnaise Communications undertakes to sell at a symbolic price its entire stake in this company to any buyer vetted by SIPPEREC. This agreement, signed for a period of 18 months, shall allow the parties to continue their contractual relations.
	•	Negotiate, within a reasonable time frame, a formula for continuing capital expenditure that respects the economic balance of the concession.

	•	Waive its right to claim penalties relating to the period ranging from the implementation of the concession agreement to the expiration of the compromise settlement agreements,
	•	Waive any other form of contractual claim.

A4-251

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2.	Basis of Preparation

	Year 2001 Consolidated Financial Statement

	Change in the Presentation of the Consolidated Statement of Income

3.	Summary of Significant Accounting Policies

A4-252

---

 

Preliminary expenses			3 years
Acquired software			3 years
Internally developed software			4 years
Civil engineering rights of use (Rapp 16)(*)			20  years
Civil engineering rights of use (Other)(*)			30  years
Digital documentation			8 years

A4-253

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Buildings			30 years
Engineering design work			30 years
Civil engineering work			30 years
Active electronics			8 years
Cables and connectors			15 years
Fixtures and fittings			8 years
Wiring			15 years
Boxes and Modems(*)			5 years
Technical fixtures and tooling			5 years
Office equipment and computers			3 to 5 years
Furniture			8 years

(*)	Boxes and Modems correspond to rent items. At the end of each contract, assets are reviewed for impairment or brought back into service after inspection if possible.

A4-254

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A4-255

---

 

4.	Scope of Consolidation

% of

Parent company: Suez Lyonnaise Telecom

Legal

voting

Financial

Consolidation

Siren: 402.986.707, 20 place des vins de France 75012 Paris

structure

rights

interests

method

From the constitution of the Group:

ALPINE DE VIDEOCOMMUNICATION

SA

100

100

IG

Siren: 348 804 923, 20 place des Vins de France 75012 PARIS

AUXIPAR

SA

100

100

IG

Siren: 390 263 069, 20 place des Vins de France 75012 PARIS

COMTOISE DE VIDEOCOMMUNICATION

SA

100

100

IG

Siren: 348 313 412, 20 place des Vins de France 75012 PARIS

CLERMONTOISE DE VIDEOCOMMUNICATION

SA

100

100

IG

Siren: 345 193 791, 20 place des Vins de France 75012 PARIS

LYONNAISE COMMUNICATIONS

SA

100

100

IG

Siren: 335 354 379, 20 place des Vins de France 75012 PARIS

CABLE ET VIDEOCOMMUNICATION DE L’OUEST

SA

100

100

IG

Siren: 348 487 042,20 place des Vins de France 75012 PARIS

ARTESIENNE DE VIDEOCOMMUNICATION

SA

100

100

IG

Siren: 348 075 227, 20 place des Vins de France 75012 PARIS

SNERC (MENTON)

SNC

100

100

IG

Siren: 378 442 255, 20 place des Vins de France 75012 PARIS

ORLEANAISE DE VIDEOCOMMUNICATION

SA

100

100

IG

Siren: 347 859 274, 20 place des Vins de France 75012 PARIS

PARIS CABLE

SA

100

100

IG

Siren: 329 108 278, 20 place des Vins de France 75012 PARIS

RAPP 16

SA

100

100

IG

Siren: 428 748 081, 20 place des Vins de France 75012 PARIS

SARCELLES TV CABLE

SA

100

100

IG

Siren: 350 145 348, 20 place des Vins de France 75012 PARIS

STRASBOURG TV CABLE

SNC

100

100

IG

Siren: 351 309 695, 20 place des Vins de France 75012 PARIS

VIDEOCOMMUNICATION DE SUD OUEST

SA

100

100

IG

Siren: 351 541 537, 20 place des Vins de France 75012 PARIS

A4-256

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% of

Parent company: Suez Lyonnaise Telecom

Legal

voting

Financial

Consolidation

Siren: 402.986.707, 20 place des vins de France 75012 Paris

structure

rights

interests

method

From Nov 2001:

REGION PARISIENNE COMMUNICATIONS

SNC

100

100

IG

Siren: 387 879 737, 7-9 rue de la Croix-Martre 91120 Palaiseau

COMMUNICATIONS 91

SNC

100

100

IG

Siren: 351 746 664, 7-9 rue de la Croix-Martre 91120 Palaiseau

PACA COMMUNICATIONS

SNC

100

100

IG

Siren: 341 724 474, Centre Mayol, Place Pompidou 83000 Toulon

IDF COMMUNICATIONS Holding SAS

SAS

100

100

IG

Siren: 423 375 542, 7-9 rue de la Croix-Martre 91120 Palaiseau

IDF COMMUNICATIONS SAS

SAS

100

100

IG

Siren: 423 557 925, 7-9 rue de la Croix-Martre 91120 Palaiseau

ESSONNE COMMUNICATIONS

SNC

100

100

IG

Siren: 342 159 613, 7-9 rue de la Croix-Martre 91120 Palaiseau

From its incorporation in October 2003:

SDP3 (Société de Développement de la Plaque 3)

SAS

100

100

IG

Siren: 450 406 418, 20 place des Vins de France 75012 PARIS

5.	Detailed Notes to the Financial Statements

		December 31,				December 31,				December 31,
		2001				2002				2003
		in million of euros
Goodwill (Gross)			58.5				58.5				58.5
Concessions, patents and brands			40.2				50.0				55.3
“Fonds commerciaux”			0.8				0.9				0.9
Other intangible assets and in-progress*			728.0				724.0				715.4
Other intangible assets and in progress (Gross)			769.0				774.9				771.6
Additions			4.2				5.9				1.3
Disposals			—				—				(4.6	)

*	Mainly include civil engineering and networks rights of use.

A4-257

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		December 31,				December 31,				December 31,
		2001				2002				2003
		in million of euros
Land			0.2				0.1				0.1
Constructions			707.0				804.7				828.9
Technical fixtures			171.0				211.2				226.1
Other tangible assets			46.3				52.2				52.2
Fixed assets under construction			73.2				55.0				35.3
Tangible assets (Gross)			997.7				1,123.2				1,142.6
Additions			126.6				128.2				30.2
Disposals			(0.9	)			(2.7	)			(10.8	)

		December 31,				December 31,				December 31,
		2001				2002				2003
		in million of euros
Goodwill			10.1				13.0				15.9
Depreciation in the period			1.7				2.9				2.9
Disposal and reversal			—				—				—
Concessions, patents and brands			20.8				29.8				45.1
“Fonds commerciaux”			0.3				0.5				0.7
Other intangible assets and in-progress			33.5				69.6				552.3
Total other Intangible assets			54.6				99.9				598.1
Depreciation in the period			51.0				45.4				498.2
Disposal and reversal			—				(0.1	)			—
Constructions			232.0				320.1				371.9
Technical fixtures			86.1				146.5				165.7
Other tangible assets			21.1				30.1				34.9
Fixed assets under construction			7.7				4.0				17.5
Total Tangible assets			346.9				500.7				590.0
Depreciation in the period			26.5				157.3				100.0
Disposal and reversal			—				(3.5	)			(10.7	)

A4-258

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			Allocation				Impact				Impact				At
			December 31,				net income				net income				December 31,
			2001				2002				2003				2003
			in millions of euros
Network Operating Center (NOC)				(1.5	)			0.1				0.1				(1.3	)
Networks				(5.6	)			0.6				0.6				(4.4	)
Voluntary Departure Plan (Exceptional items)				(1.0	)			1.0				—				—
Rental and relocation costs (Other operating expenses)				(0.7	)			0.7				—				—
Rental (reversal included in operating income)				(0.5	)			—				0.5				—
	TOTAL			(9.3	)			2.4				1.2				(5.7	)

			December 31,				December 31,				December 31,
			2001				2002				2003
			in millions of euros
Investments in non-consolidated companies(1)				0.3				0.1				0.1
Loans to non-consolidated companies				0.5				—				—
Loans(2)				2.7				—				—
Other investments(3)				0.9				0.8				0.7
	Investments (net)			4.4				0.9				0.8

(1)	In 2002, Lyonnaise Communications sold its 8.8% investment in the company “Chaîne Histoire”, which the Group continues to broadcast.
(2)	Refers to salary loans reimbursed during the year 2002.
(3)	Other investments are mainly rent deposits.

				% held as of
Companies		Activity		December 2003				Cost
SAEM Mantes TV Cable		Local TV channel			36.72%				13,995€
SAEM Vidéocâble 91		Local TV Channel			18.30%				53,357€
					35% until 2002
SEM Le Palace Epinal		Movie complex			2.78%				3,811€

A4-259

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			December 31,				December 31,				December 31,
			2001				2002				2003
			in millions of euros
Inventories (Gross)				7.7				7.6				4.0
Allowance				(2.0	)			(2.0	)			(2.2	)
	Inventories (net)			5.7				5.6				1.8

		December 31,				December 31,				December 31,
		2001				2002				2003
		in millions of euros
Advances and payment on account			12.7				9.7				14.3
Trade receivables (Gross)			36.5				37.5				40.2
Allowance for bad debt			(9.9	)			(16.8	)			(22.8	)
Trade receivables (Net)			26.6				20.7				17.4
Other receivables			50.2				40.5				54.0

														Net loss
		Capital				Share				Accumulated				for the
		stock				premium				deficit				year				Total
		in millions of euros
Opening balance			1.6				10.7				(17.3	)							(5.0	)
Issuance of shares			31.6				122.3												153.9
Contribution May 18, 2001			437.2				1,694.8												2,132.0
Goodwill allocation							(1,449.5	)											(1,449.5	)
Net loss for the year															(135.3	)			(135.3	)
December 31, 2001			470.4				378.3				(17.3	)			(135.3	)			696.1
Change in capital Net income for the prior year															(135.3	)			135.3
Net loss for the year															(311.1	)			(311.1	)
December 31, 2002			470.4				378.3				(152.6	)			(311.1	)			385.0
Change in capital Net income for the prior year															(311.1	)			311.1
Net loss for the year															(622.7	)			(622.7	)
December 31, 2003			470.4				378.3				(463.7	)			(622.7	)			(237.7	)

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																		At
																		December 31,
		2001				Allowances				Uses				Others				2002
		in millions of euros
Employee litigation			1.1				0.3				(0.2	)							1.2
Restructuring			0				10.1												10.1
Boxes not returned			2.5				0.4								(2.5	)			0.4
VAT Gap on boxes			1.4				0.7												2.1
Contracts break-up fees			2.4				0.2				(0.2	)			(0.9	)			1.5
Tax risk provision			0.5								(0.1	)							0.4
Project “telephone” abandon			5.1				0.6												5.7
Provision for retirement			1.4				0.4												1.8
NTL badwill impact			2.2								(1.7	)							0.5
Miscellaneous			7.0				0.7				(4.8	)			(0.6	)			2.3
Contingencies and loss provisions			23.6				13.4				(7.0	)			(4.0	)			26.0

																		At
																		December 31,
		2002				Allowances				Uses				Others				2002
		in millions of euros
Employee litigation			1.2				0.8				(1.1	)							0.9
Restructuring			10.1				3.3				(13.0	)							0.4
Boxes not returned			0.4												(0.4	)			0.0
VAT Gap on boxes			2.1				0.5				(0.5	)							2.1
Contracts break-up fees			1.5				7.0								(1.1	)			7.4
Tax risk provision			0.4				1.2				(0.4	)							1.2
Project “telephone” abandon			5.7								(2.5	)							3.2
Provision for retirement			1.8				0.1				(1.4	)							0.5
NTL negative goodwill impact			0.5								(0.5	)							0.0
Miscellaneous			2.3				1.0				(0.5	)			(0.5	)			2.3
Contingencies and loss provisions			26.0				13.9				(19.9	)			(2.0	)			18.0

Assumptions
• Discount rate			5	%
• Rate of inflation			1.7	%
• Future salary increases			3.2	%
• Social security threshold upgrade			Inflation +0.5	%
• Mortality rate			INSEE tables

A4-261

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		As of
		December 31,
		2001
		in millions
		of euros
Bank borrowings			215.3
Bank overdrafts			16.7
Total bank debt			232.0
Shareholder’s loan			291.5
Deferred price on NTL shares(1)			37.8
Other			2.7
Total other debt			332.0

(1)	Portion of the NTL purchase price due in 2006 with interests due in fine calculated each month at a Euribor +4% rate. As of December 31, 2001, this debt includes a principal amount of € 37.5 million and interests for € 0.3 million.

		As of
		December 31,
		2002
		in millions
		of euros
Bank borrowings			210.3
Bank overdrafts			4.2
Total bank debt			214.5
Shareholder’s loan			548.6
Deferred price on NTL shares(1)			40.6
Total other debt			589.2

(1)	Portion of the NTL purchase price due in 2006 with interests due in fine calculated each month at a Euribor +4% rate. As of December 31, 2002, this debt includes a principal amount of € 37.5 million and interests for € 3.1 million.

		At				Maturity
		December 31,
		2003				<1 year				1-5 years
		in millions of euros
Bank borrowings(1)			199.8				122.6				77.2
Bank overdrafts			10.8				10.8				—
Total bank debt			210.6				133.4				77.2
Shareholder’s loan(3)			619.9				619.9				—
Deferred price on NTL shares(2)			43.2				—				43.2
Total other debt			663.1				619.9				43.2

(1)	These borrowings, guaranteed by Suez, were immediately repayable in the event of a change in the ownership structure of Suez Lyonnaise Telecom. Moreover, the Group renegotiated in December 2003 this debt to postpone the maturity date by six months. Over the years 2001-2003, interest rates were based on Euribor + margin and these bank borrowings as of December 31, 2003 were fully reimbursed in April 2004.
(2)	Portion of the NTL purchase price due in 2006 with interests due in fine calculated each month at a Euribor +4% rate. As of December 31, 2003, this debt includes a principal amount of € 37.5 million and interests for € 5.7 million.

A4-262

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(3)	Shareholder’s loan:

			2001				2002				2003
			in millions of euros
Principal				287.5				536.8				607.0
Interests				4.0				11.8				12.9
	TOTAL			291.5				548.6				619.9

		December 31,
		2003
		in millions
		of euros
Ordinary losses			251.0
Ever green losses			101.4
Non deductible provision			160.3
TOTAL			512.7
Tax proof
Net income before tax			(620.1	)
Theoretical tax			—
Effective tax			(0.4	)

			December 31,				December 31,				December 31,
			2001				2002				2003
			in millions of euros
Wages and salaries				21.7				44.4				32.3
Payroll taxes and benefits				10.9				22.6				14.4
	Payroll and expenses			32.6				67.0				46.7

A4-263

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		2001				2002				2003
Managers			361				392				332
Employees			304				314				256
Workers			390				358				213
Average number of employees			1055				1064				801

			December 31,				December 31,				December 31,
			2001				2002				2003
			in millions of euros
INTANGIBLE ASSETS Depreciation				51.0				45.4				48.3
Impairment losses				—				—				449.9
TANGIBLE ASSETS Depreciation				26.5				108.4				100.0
Impairment losses				—				48.9				—
INVESTMENTS: Valuation allowances				—				—				—
Allowances on current assets				3.3				8.9				11.4
Prepaid expenses				—				—				6.4
	Total			80.8				211.6				616.0
Including in operating expenses				80.8				162.7				166.1
Including in exceptional items				—				48.9				449.9

		December 31,				December 31,				December 31,
		2001				2002				2003
		in millions of euros
Shareholders			(8.7	)			(36.9	)			(47.4	)
Interests on banks loans			(5.7	)			(8.4	)			(6.2	)
Interests on deferred price on NTL shares			(0.3	)			(2.8	)			(2.6	)
Others			(1.0	)			—				—
Financial income			0.3				—				—
Bank commissions and borrowing fees											(6.5	)
Financial expense (net)			(15.4	)			(48.1	)			(62.7	)

A4-264

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			December 31,				December 31,				December 31,
			2001				2002				2003
			in millions of euros
Impairment of long-lived assets(1)				—				(32.3	)			(449.9	)
Costs related to project abandonment, net of allowances variances(2)				(2.9	)			(16.6	)			(0.7	)
SIPPEREC penalties(3)				—				(6.0	)			6.0
Supply contract break-up fees(4)				—				(11.4	)			(5.9	)
Restructuring-net of reversals(5)				0.2				(10.1	)			(10.1	)
Provision for retirement-net of reversals(6)				(0.5	)			(0.3	)			1.2
Other				3.0				(3.1	)			(2.6	)
	Exceptional items (net)			(0.2	)			(79.8	)			(462.0	)

(1)	Impairment of tangible assets (SIPPEREC) for the year 2002 and of Civil engineering rights of use in 2003.
(2)	The projects abandoned are mainly related to telephony and network development.
(3)	Penalties due to SIPPEREC recognized in 2002 were reversed in 2003 in accordance with the agreement reached in 2003. (See §1.4.2) (4) The Group broke-up several contracts with contractors and suppliers, in particular, in relation with the evolution in networks development plans.
(5)	Expenses related to the restructuring plan initiated in 2000 and to the voluntary departure plan initiated in 2002.
(6)	The decrease in number of employees in 2003 induced a reduction in pension obligations.

6.	Off Balance Sheet Commitments at December 31, 2003

Beneficiaries		Object		Amounts				Comments
				in millions of euros
SIPPERREC		Penalties			13.3			See §1.3
SIPPERREC		Commitment to perform construction works and produce engineering studies			10.2
SIPPERREC		Payment warranty			3.0
SSIMI & Ville de PARIS		Rent payment warranty			1.2
NTL Inc.		Earn-out clause provision for NTL shares			100.0			See below(1)
SAGEM		Commitment to buy terminals			1.2
France TELECOM		Commitment to purchase the Cannes and Epinal networks from France Telecom:			12.3			See below(2)
Villes Franciliennes		Restructuring of the 5 NTL networks			26.7			See below(3)
BNP-Paribas		Joint guarantee			10.2			See below(4)
TOTAL					178.1

(1)	The earn-out clause provision is subject to certain conditions up to a maximum of € 100 million. This earn-out provision represented as of December 31, 2003 the main off balance sheet liability but has expired in 2004 due to the final agreement signed with NTL on May 2004.
(2)	Commitment amounting to € 12.3 million, related to the purchase of the Cannes and Epinal networks from France Telecom, related to the operation of May 18, 2001. The commitment was called in by its beneficiary in October 2003 even though conditions were not fully met. As a consequence, this commitment was kept in off balance sheet liability as of December 31, 2003 until the payment, funded by a shareholder loan increase, which occurred in June 2004.

A4-265

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(3)	Restructuring of the 5 NTL networks: The company had undertaken to renovate a certain number of home-passed per year and per network. To date, part of the work has been performed and 31% of the home-passed have been renovated. The initial commitment of € 38.1 million was scaled back to € 26.7 million
(4)	Joint guarantee of € 10.2 million, given by Lyonnaise Communications to BNP-Paribas in relation with the credit facility granted to Paris Cable. This guarantee has expired in 2004 as a consequence of the repayment.

Commitment
provided by				Object		Amounts				Comments
						in millions of euros
	SUEZ			Comfort letter (on the behalf of LCO) to the CCF			76.2			See below(1)
	SUEZ			Comfort letter (on the behalf of LCO) to Natexis			61.0			See below(1)
	SUEZ			Comfort letter (on the behalf of Paris Cable) to BNP-Paribas			10.2			See below(1)
	SUEZ			Comfort letter (on the behalf of Auxipar) to Natexis			45.7			See below(1)
	SUEZ			Undrawn portion of the credit facility			98.0
	SUEZ			Commitment provided under the SIPPEREC agreement			11.2			See § 1.4.2
	SSIMI			Compensation commitment for rent variation			8.9			See below(2)
TOTAL							311.2

(1)	As a consequence of the early repayment of bank borrowings in 2004 and of the purchase of the Group by Mediareseaux, all commitments received from Suez have come to an end.
(2)	The commitment received from SSIMI is amortized over the remaining period of the lease.

7.	Additional Data

7.1	Related Party Transactions in Accordance with the Standard CRC 99.02

				December 31,				December 31,				December 31,
Companies		Object		2001				2002				2003
				in millions of euros
M6 Thématiques		Broadcasting rights			4.1				2.6				2.4
Paris Première		Broadcasting rights			4.1				3.0				2.9
Sub-total		Broadcasting rights			8.2				5.6				5.3
SSIMI		Rental			3.2				4.1				(1.8	)
ZEUS		Rental			1.8				0				—
TOTAL					13.2				9.7				3.5

A4-266

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			December 31,				December 31,				December 31,
Related party			2001				2002				2003
			in millions of euros
Groupe M6				—				—				0.2
Paris Première				—				—				—
SSIMI				1.1				0.2				0.1
ZEUS				0.7				—				—
	TOTAL			1.8				0.2				0.3

7.2	Management Compensation

7.3	Miscellaneous

8.	Summary of Differences Between Accounting Policies Generally Accepted in the United States of America and France.

A4-267

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				Year ended				Year ended
				December 31,				December 31,
				2003				2002
				in millions of euros
Consolidated net income (loss) as determined in accordance with French GAAP					(622.7	)			(311.1	)
U.S. GAAP reconciling adjustments:
	Business combinations:
		Goodwill impairment and cancellation of amortization			2.9				(254.5	)
		Amortization of other intangible assets			(10.0	)			(10.0	)
		Auxipar acquisition			4.2				4.2
	Long term assets impairment				(105.1	)			32.3
	Restructuring provision (“Voluntary				(10.1	)			10.1
	Redundancy Plan”) Logistical costs				3.7				(1.1	)
	Equipment depreciation				(4.6	)			(6.4	)
	Deferred tax effects of above adjustments
Total U.S. GAAP adjustments, net					(119.0	)			(225.4	)
Consolidated net income (loss) as determined in accordance with U.S. GAAP					(741.7	)			(536.5	)

				December 31,				December 31,
				2003				2002
				in million of euros
Consolidated shareholders’ equity (deficit) as determined in accordance with French GAAP					(237.7	)			384.9
U.S. GAAP reconciling adjustments:
	Business combinations:
		Goodwill impairment and cancellation of amortization			(251.6	)			(254.5	)
		Auxipar acquisition			(50.2	)			(54.4	)
		Paris Cable acquisition			332.3				342.3
		Other acquisitions			37.7				37.7
	Long term assets impairment				(72.8	)			32.3
	Restructuring provision (“Voluntary				—				10.1
	Redundancy Plan”) Logistical costs				—				(3.7	)
	Equipment depreciation				2.5				7.1
	Deferred tax effects of above adjustments
Total U.S. GAAP adjustments, net					(2.1	)			116.9
Consolidated shareholders’ equity (deficit) as determined in accordance with U.S. GAAP					(239.8	)			501.8

A4-268

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	•	Auxipar acquisition

	•	Paris Cable acquisition

	•	Amortization of other intangible assets

	•	Goodwill impairment and cancellation of amortization

A4-269

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A4-270

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A4-271

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	“Affiliate” of the Company means any corporation, partnership or other business association that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the Company.
	“Agreement” means a stock option agreement, stock appreciation rights agreement, restricted shares agreement, stock units agreement, cash award agreement or an agreement evidencing more than one type of Award, specified in Section 11.5, as any such Agreement may be supplemented or amended from time to time.
	“Approved Transaction” means any transaction in which the Board (or, if approval of the Board is not required as a matter of law, the stockholders of the Company) shall approve (i) any consolidation or merger of the Company, or binding share exchange, pursuant to which shares of Common Stock of the Company would be changed or converted into or exchanged for cash, securities, or other property, other than any such transaction in which the common stockholders of the Company immediately prior to such transaction have the same proportionate ownership of the Common Stock of, and voting power with respect to, the surviving corporation immediately after such transaction, (ii) any merger, consolidation or binding share exchange to which the Company is a party as a result of which the Persons who are common stockholders of the Company immediately prior thereto have less than a majority of the combined voting power of the outstanding capital stock of the Company ordinarily (and apart from the rights accruing under special circumstances) having the right to vote in the election of directors immediately following such merger, consolidation or binding share exchange, (iii) the adoption of any plan or proposal for the liquidation or dissolution of the Company, or (iv) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company.
	“Award” means a grant of Options, SARs, Restricted Shares, Stock Units, Performance Awards, Cash Awards and/or cash amounts under the Plan.
	“Board” means the Board of Directors of the Company.
	“Board Change” means, during any period of two consecutive years, individuals who at the beginning of such period constituted the entire Board cease for any reason to constitute a majority thereof unless the election, or the nomination for election, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period.

A5-1

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	“Cash Award” means an Award made pursuant to Section 10.1 of the Plan to a Holder that is paid solely on account of the attainment of one or more Performance Objectives that have been preestablished by the Committee.
	“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute or statutes thereto. Reference to any specific Code section shall include any successor section.
	“Committee” means the committee of the Board appointed pursuant to Section 3.1 to administer the Plan.
	“Common Stock” means each or any (as the context may require) series of the Company’s common stock.
	“Company” means Liberty Media International, Inc., a Delaware corporation, provided, however that contingent upon and immediately following the consummation of the Mergers, “Company” means Liberty Global, Inc., a Delaware corporation.
	“Control Purchase” means any transaction (or series of related transactions) in which (i) any person (as such term is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), corporation or other entity (other than the Company, any Subsidiary of the Company or any employee benefit plan sponsored by the Company or any Subsidiary of the Company) shall purchase any Common Stock of the Company (or securities convertible into Common Stock of the Company) for cash, securities or any other consideration pursuant to a tender offer or exchange offer, without the prior consent of the Board, or (ii) any person (as such term is so defined), corporation or other entity (other than the Company, any Subsidiary of the Company, any employee benefit plan sponsored by the Company or any Subsidiary of the Company or any Exempt Person (as defined below)) shall become the “beneficial owner” (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the then outstanding securities of the Company ordinarily (and apart from the rights accruing under special circumstances) having the right to vote in the election of directors (calculated as provided in Rule 13d-3(d) under the Exchange Act in the case of rights to acquire the Company’s securities), other than in a transaction (or series of related transactions) approved by the Board. For purposes of this definition, “Exempt Person” means each of (a) the Chairman of the Board, the President and each of the directors of Liberty Media International, Inc. as of the Distribution Date, and (b) the respective family members, estates and heirs of each of the Persons referred to in clause (a) above and any trust or other investment vehicle for the primary benefit of any of such Persons or their respective family members or heirs. As used with respect to any Person, the term “family member” means the spouse, siblings and lineal descendants of such Person.
	“Disability” means the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.
	“Distribution Date” means the date on which Liberty Media International, Inc. ceased to be a wholly owned subsidiary of Liberty Media Corporation, a Delaware corporation.
	“Dividend Equivalents” means, with respect to Restricted Shares to be issued at the end of the Restriction Period, to the extent specified by the Committee only, an amount equal to all dividends and other distributions (or the economic equivalent thereof) which are payable to stockholders of record during the Restriction Period on a like number and kind of shares of Common Stock.
	“Domestic Relations Order” means a domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder.
	“Effective Date” has the meaning ascribed thereto in Section 1.2.
	“Equity Security” shall have the meaning ascribed to such term in Section 3(a)(11) of the Exchange Act, and an equity security of an issuer shall have the meaning ascribed thereto in Rule 16a-1 promulgated under the Exchange Act, or any successor Rule.
	“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor statute or statutes thereto. Reference to any specific Exchange Act section shall include any successor section.
	“Fair Market Value” of a share of any series of Common Stock on any day means the last sale price (or, if no last sale price is reported, the average of the high bid and low asked prices) for a share of such series of Common Stock on such day (or, if such day is not a trading day, on the next preceding trading day) as reported on the consolidated transaction reporting system for the principal national securities exchange on which shares of such series of Common Stock are listed on such day or if such shares are not then listed on a national securities

A5-2

---

 

	exchange, then as reported on Nasdaq. If for any day the Fair Market Value of a share of the applicable series of Common Stock is not determinable by any of the foregoing means, then the Fair Market Value for such day shall be determined in good faith by the Committee on the basis of such quotations and other considerations as the Committee deems appropriate.
	“Free Standing SAR” has the meaning ascribed thereto in Section 7.1.
	“Holder” means a Person who has received an Award under the Plan.
	“Mergers” means the merger of a transitory merger subsidiary of Liberty Global, Inc., a subsidiary of Liberty Media International, Inc., with and into Liberty Media International, Inc. and the merger of a transitory merger subsidiary of Liberty Global, Inc. with and into UnitedGlobalCom, Inc. pursuant to an Agreement and Plan of Merger dated as of January 17, 2005 by and among Liberty Media International, Inc., UnitedGlobalCom, Inc., Liberty Global, Inc. and other parties thereto.
	“Nasdaq” means The Nasdaq Stock Market.
	“Nonqualified Stock Option” means a stock option granted under Article VI.
	“Option” means a Nonqualified Stock Option.
	“Performance Award” means an Award made pursuant to Article X of the Plan to a Holder that is subject to the attainment of one or more Performance Objectives.
	“Performance Objective” means a standard established by the Committee to determine in whole or in part whether a Performance Award shall be earned.
	“Person” means an individual, corporation, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture or other entity of any kind.
	“Plan” means this Liberty Media International, Inc. 2004 Incentive Plan, as amended and restated herein, provided however, that contingent upon and immediately following the consummation of the Mergers, the name of the Plan shall become the “Liberty Global, Inc. 2005 Incentive Plan”.
	“Restricted Shares” means shares of any series of Common Stock or the right to receive shares of any specified series of Common Stock, as the case may be, awarded pursuant to Article VIII.
	“Restriction Period” means a period of time beginning on the date of each Award of Restricted Shares and ending on the Vesting Date with respect to such Award.
	“Retained Distribution” has the meaning ascribed thereto in Section 8.3.
	“SARs” means stock appreciation rights, awarded pursuant to Article VII, with respect to shares of any specified series of Common Stock.
	“Stock Unit Awards” has the meaning ascribed thereto in Section 9.1.
	“Subsidiary” of a Person means any present or future subsidiary (as defined in Section 424(f) of the Code) of such Person or any business entity in which such Person owns, directly or indirectly, 50% or more of the voting, capital or profits interests. An entity shall be deemed a subsidiary of a Person for purposes of this definition only for such periods as the requisite ownership or control relationship is maintained.
	“Tandem SARs” has the meaning ascribed thereto in Section 7.1.
	“Vesting Date,” with respect to any Restricted Shares awarded hereunder, means the date on which such Restricted Shares cease to be subject to a risk of forfeiture, as designated in or determined in accordance with the Agreement with respect to such Award of Restricted Shares pursuant to Article VIII. If more than one Vesting Date is designated for an Award of Restricted Shares, reference in the Plan to a Vesting Date in respect of such Award shall be deemed to refer to each part of such Award and the Vesting Date for such part.

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	(a) Form of Payment. An Option shall be exercised by written notice to the Company upon such terms and conditions as the Agreement may provide and in accordance with such other procedures for the exercise of Options as the Committee may establish from time to time. The method or methods of payment of the purchase price for the shares to be purchased upon exercise of an Option and of any amounts required by Section 11.9 shall be determined by the Committee and may consist of (i) cash,
	(ii) check, (iii) promissory note (subject to applicable law), (iv) whole shares of any series of Common Stock, (v) the withholding of shares of the applicable series of Common Stock issuable upon such exercise of the Option, (vi) the delivery, together with a properly executed exercise notice, of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds required to pay the purchase price, or (vii) any combination of the foregoing methods of payment, or such other consideration and method of payment as may be permitted for the issuance of shares under the Delaware General Corporation Law. The permitted method or methods of payment of the amounts payable upon exercise of an Option, if other than in cash, shall be set forth in the applicable Agreement and may be subject to such conditions as the Committee deems appropriate.

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	(b) Value of Shares. Unless otherwise determined by the Committee and provided in the applicable Agreement, shares of any series of Common Stock delivered in payment of all or any part of the amounts payable in connection with the exercise of an Option, and shares of any series of Common Stock withheld for such payment, shall be valued for such purpose at their Fair Market Value as of the exercise date.
	(c) Issuance of Shares. The Company shall effect the transfer of the shares of Common Stock purchased under the Option as soon as practicable after the exercise thereof and payment in full of the purchase price therefor and of any amounts required by Section 11.9, and within a reasonable time thereafter, such transfer shall be evidenced on the books of the Company. Unless otherwise determined by the Committee and provided in the applicable Agreement, (i) no Holder or other Person exercising an Option shall have any of the rights of a stockholder of the Company with respect to shares of Common Stock subject to an Option granted under the Plan until due exercise and full payment has been made, and (ii) no adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of such due exercise and full payment.

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	(a) Any shares of Common Stock which are part of an Award of Stock Units may not be assigned, sold, transferred, pledged or otherwise encumbered prior to the date on which the shares are issued or, if later, the date provided by the Committee at the time of the Award.
	(b) Such Awards may provide for the payment of cash consideration by the Person to whom such Award is granted or provide that the Award, and any shares of Common Stock to be issued in connection therewith, if applicable, shall be delivered without the payment of cash consideration; provided, however, that the issuance of any shares of Common Stock in connection with an Award of Stock Units shall be for at least the minimum consideration necessary to permit such shares to be deemed fully paid and nonassessable.
	(c) Awards of Stock Units may provide for deferred payment schedules, vesting over a specified period of employment, the payment (on a current or deferred basis) of dividend equivalent amounts with respect to the number of shares of Common Stock covered by the Award, and elections by the employee to defer payment of the Award or the lifting of restrictions on the Award, if any, provided that any such deferrals shall comply with the requirements of Section 409A of the Code.
	(d) In such circumstances as the Committee may deem advisable, the Committee may waive or otherwise remove, in whole or in part, any restrictions or limitations to which a Stock Unit Award was made subject at the time of grant.

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	(a) Death or Disability. If a Holder’s employment shall terminate by reason of death or Disability, notwithstanding any contrary waiting period, installment period, vesting schedule or Restriction Period in any Agreement or in the Plan, unless the applicable Agreement provides otherwise: (i) in the case of an Option or SAR, each outstanding Option or SAR granted under the Plan shall immediately become exercisable in full in respect of the aggregate number of shares covered thereby; (ii) in the case of Restricted Shares, the Restriction Period applicable to each such Award of Restricted Shares shall be deemed to have expired and all such Restricted Shares, any related Retained Distributions and any unpaid Dividend Equivalents shall become vested and any related cash amounts payable pursuant to the applicable Agreement shall be adjusted in such manner as may be provided in the Agreement; and (iii) in the case of Stock Units, each such Award of Stock Units shall become vested in full.
	(b) Approved Transactions; Board Change; Control Purchase. In the event of any Approved Transaction, Board Change or Control Purchase, notwithstanding any contrary waiting period, installment period, vesting schedule or Restriction Period in any Agreement or in the Plan, unless the applicable Agreement provides otherwise: (i) in the case of an Option or SAR, each such outstanding Option or SAR granted under the Plan shall become exercisable in full in respect of the aggregate number of shares covered thereby; (ii) in the case of Restricted Shares, the Restriction Period applicable to each such Award of Restricted Shares shall be deemed to have expired and all such Restricted Shares, any related Retained Distributions and any unpaid Dividend Equivalents shall become vested and any related cash amounts payable pursuant to the applicable Agreement shall be adjusted in such manner as may be provided in the Agreement; and (iii) in the case of Stock Units, each such Award of Stock Units shall become vested in full, in each case effective upon the Board Change or Control Purchase or immediately prior to consummation of the Approved Transaction. The effect, if any, on a Cash Award of an Approved Transaction, Board Change or Control Purchase shall be prescribed in the applicable Agreement. Notwithstanding the foregoing, unless otherwise provided in the applicable Agreement, the Committee may, in its discretion, determine that any or all outstanding Awards of any or all types granted pursuant to the Plan will not vest or become exercisable on an accelerated basis in connection with an Approved Transaction if effective provision has been made for the taking of such action which, in the opinion of the Committee, is equitable and appropriate to substitute a new Award for such Award or to assume such Award and to make such new or assumed Award, as nearly as may be practicable, equivalent to the old Award (before giving effect to any acceleration of the vesting or exercisability thereof), taking into account, to the extent applicable, the kind and amount of securities, cash or other assets into or for which the applicable series of Common Stock may be changed, converted or exchanged in connection with the Approved Transaction.

(a) General. If a Holder’s employment shall terminate prior to an Option or SAR becoming exercisable or being exercised (or deemed exercised, as provided in Section 7.2) in full, or during the Restriction Period with respect to any Restricted Shares or prior to the vesting or complete exercise of any Stock Units, then such Option or SAR shall thereafter become or be exercisable, such Stock Units to the extent vested shall thereafter be exercisable, and the Holder’s rights to any unvested Restricted Shares, Retained Distributions, unpaid Dividend Equivalents and related cash amounts and any such unvested Stock Units shall thereafter vest, in each case solely to the extent provided in the applicable Agreement; provided, however, that, unless otherwise determined by the Committee and provided in the applicable Agreement, (i) no Option or SAR may be exercised after the

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	scheduled expiration date thereof; (ii) if the Holder’s employment terminates by reason of death or Disability, the Option or SAR shall remain exercisable for a period of at least one year following such termination (but not later than the scheduled expiration of such Option or SAR); and (iii) any termination of the Holder’s employment for cause will be treated in accordance with the provisions of Section 11.2(b). The effect on a Cash Award of the termination of a Holder’s employment for any reason, other than for cause, shall be prescribed in the applicable Agreement.
	(b) Termination for Cause. If a Holder’s employment with the Company or a Subsidiary of the Company shall be terminated by the Company or such Subsidiary for “cause” during the Restriction Period with respect to any Restricted Shares or prior to any Option or SAR becoming exercisable or being exercised in full or prior to the vesting or complete exercise of any Stock Unit or the payment in full of any Cash Award (for these purposes, “cause” shall have the meaning ascribed thereto in any employment agreement to which such Holder is a party or, in the absence thereof, shall include insubordination, dishonesty, incompetence, moral turpitude, other misconduct of any kind and the refusal to perform his duties and responsibilities for any reason other than illness or incapacity; provided, however, that if such termination occurs within 12 months after an Approved Transaction or Control Purchase or Board Change, termination for “cause” shall mean only a felony conviction for fraud, misappropriation, or embezzlement), then, unless otherwise determined by the Committee and provided in the applicable Agreement, (i) all Options and SARs and all unvested or unexercised Stock Units and all unpaid Cash Awards held by such Holder shall immediately terminate, and (ii) such Holder’s rights to all Restricted Shares, Retained Distributions, any unpaid Dividend Equivalents and any related cash amounts shall be forfeited immediately.
	(c) Miscellaneous. The Committee may determine whether any given leave of absence constitutes a termination of employment; provided, however, that for purposes of the Plan, (i) a leave of absence, duly authorized in writing by the Company for military service or sickness, or for any other purpose approved by the Company if the period of such leave does not exceed 90 days, and (ii) a leave of absence in excess of 90 days, duly authorized in writing by the Company provided the employee’s right to reemployment is guaranteed either by statute or contract, shall not be deemed a termination of employment. Unless otherwise determined by the Committee and provided in the applicable Agreement, Awards made under the Plan shall not be affected by any change of employment so long as the Holder continues to be an employee of the Company.

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	(a) General. Unless the Plan shall theretofore have been terminated as hereinafter provided, no Awards may be made under the Plan on or after the tenth anniversary of the Effective Date. The Plan may be terminated at any time prior to the tenth anniversary of the Effective Date and may, from time to time, be suspended or discontinued or modified or amended if such action is deemed advisable by the Committee.
	(b) Modification. No termination, modification or amendment of the Plan may, without the consent of the Person to whom any Award shall theretofore have been granted, adversely affect the rights of such Person with respect to such Award. No modification, extension, renewal or other change in any Award granted under the Plan shall be made after the grant of such Award, unless the same is consistent with the provisions of the Plan. With the consent of the Holder and subject to the terms and conditions of the Plan (including Section 11.7(a)), the Committee may amend outstanding Agreements with any Holder, including any amendment which would (i) accelerate the time or times at which the Award may be exercised and/or (ii) extend the scheduled expiration date of the Award. Without limiting the generality of the foregoing, the Committee may, but solely with the Holder’s consent unless otherwise provided in the Agreement, agree to cancel any Award under the Plan and grant a new Award in substitution therefor, provided that the Award so substituted shall satisfy all of the requirements of the Plan as of the date such new Award is made. Nothing contained in the foregoing provisions of this Section 11.7(b) shall be construed to prevent the Committee from providing in any Agreement that the rights of the Holder with respect to the Award evidenced thereby shall be subject to such rules and regulations as the Committee may, subject to the express provisions of the Plan, adopt from time to time or impair the enforceability of any such provision.

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1.	Statement of Purpose.

•	maintaining the reliability and integrity of the Corporation’s accounting policies, financial reporting practices and financial statements;
•	the independent auditor’s qualifications and independence;
•	the performance of the Corporation’s internal audit function and independent auditor; and
•	confirming compliance with U.S. Federal laws and regulations, and the requirements of any stock exchange or quotation system on which the Corporation’s securities may be listed.

2.	Committee Membership.

3.	Executive Sessions.

4.	Functions and Responsibilities.

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	(a) Financial Statement and Disclosure Matters.

	(i) Review and discuss with management and the independent auditor the Corporation’s annual audited financial statements, including disclosures made in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and recommend to the Board whether the audited financial statements should be included in the Corporation’s Form 10-K.
	(ii) Review and discuss with management and the independent auditor the Corporation’s quarterly financial statements, including disclosures made in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” prior to the filing of its Form 10-Q, including the results of the independent auditor’s review of the quarterly financial statements.
	(iii) Review and discuss with management and the independent auditor, as applicable, (A) significant issues regarding accounting principles and financial statement presentations, including any significant changes in the Corporation’s selection or application of accounting principles, major issues as to the adequacy of the Corporation’s internal controls and any special audit steps adopted in light of material control deficiencies; (B) analyses prepared by management or the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative generally accepted accounting principles (“GAAP”) methods on the financial statements; (C) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Corporation; and (D) earnings press releases (paying particular attention to any use of “pro forma” or “adjusted” non-GAAP information) as well as financial information and earnings guidance (generally or on a case-by-case basis) provided to analysts and rating agencies.
	(iv) Hold meetings on a quarterly basis to review and discuss quarterly reports from the independent auditor on (A) all critical accounting policies and practice to be used; (B) all alternative treatments of financial information within GAAP that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and treatments preferred by the independent auditor; and (C) other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.
	(v) Discuss with management the Corporation’s major financial risk exposures and the steps management has taken to monitor and control such risk exposures, including the Corporation’s risk assessment and risk management policies or guidelines.

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	(vi) Discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit or any review services, including any difficulties encountered in the course of the audit or review work, any restrictions on the scope of activities or access to requested information, and any significant disagreements with management.
	(vii) Review disclosures made to the Audit Committee by the Corporation’s CEO and CFO during their certification process for the Form 10-K and Form 10-Q about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in the Corporation’s internal controls.

	(b) Oversight of the Corporation’s Relationship with the Independent Auditor.

	(i) (1) Obtain and review a formal written statement from the independent auditor at least annually regarding (A) the audit firm’s internal quality-control procedures, (B) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by an inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm, (C) any steps taken to deal with such issues, and (D) all relationships between the independent auditor and the Corporation (consistent with Independence Standards Board Standard 1); (2) evaluate the qualifications, performance and independence of the independent auditor, including a review and evaluation of the lead partner of the independent auditor, considering whether the auditor’s internal quality-controls are adequate, considering whether the provision of permitted non-audit services is compatible with maintaining the auditor’s independence and actively engaging in a dialogue with the auditors with respect to any disclosed relationship or services that may impact the objectivity and independence of the independent auditor, taking into account the opinions of management and the Corporation’s internal auditors; and (3) present its conclusions and consequent recommendations with respect to the independent auditor to the Board.
	(ii) Ensure the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law.
	(iii) Recommend to the Board policies for the Corporation’s hiring of employees or former employees of the independent auditor who were engaged on the Corporation’s account or otherwise participated in any audit of the Corporation.
	(iv) Discuss with the independent auditor any accounting or auditing issues with respect to which the Corporation’s audit team consulted with the independent auditor’s national office.
	(v) Review with the independent auditor any audit problems or difficulties and management’s response.
	(vi) Meet with the independent auditor prior to the audit to discuss the planning and staffing of the audit.

	(c) Oversight of the Corporation’s Internal Audit Function.

	(i) Ensure the Corporation maintains an internal audit function.
	(ii) Discuss with the independent auditor and management the internal auditor function’s responsibilities, budget and staffing and any recommendations or suggested changes in the planned scope of the internal audit.
	(iii) Review with the internal auditor, on a periodic basis as appropriate, the results of specified projects assigned to the internal auditor, and coordinate with management to ensure that any significant findings or control weaknesses are addressed and resolved.

	(d) Compliance Oversight Responsibilities.

	(i) Review any reports of the independent auditor mandated by Section 10A of the Exchange Act and obtain from the independent auditor any information with respect to illegal acts in accordance with Section 10A.
	(ii) Establish procedures for the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or audit matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.

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	(iii) Take actions necessary to enforce the Code of Business Conduct and Ethics adopted by the Board, including the establishment of procedures to consider alleged violations of such code and reporting and disclosure of such violations and any waivers granted by the Board under such code.

5.	Limitation on Audit Committee’s Role.

	/s/ Donne F. Fisher
	Donne F. Fisher
	/s/ David E. Rapley
	David E. Rapley
	/s/ J. David Wargo
	J. David Wargo

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					Page
ARTICLE I DEFINITIONS AND CONSTRUCTION						B-1
	1.1		Certain Definitions			B-1
	1.2		Terms Generally			B-8
ARTICLE II HOLDING COMPANY AND MERGER SUBSIDIARIES						B-8
	2.1		Organization of HoldCo			B-8
	2.2		Directors and Officers of HoldCo			B-8
	2.3		Organization of Merger Subsidiaries			B-9
	2.4		Directors and Officers of LMI Merger Sub and UGC Merger Sub			B-9
	2.5		Certain Actions of LMI			B-9
ARTICLE III THE MERGERS AND RELATED MATTERS						B-9
	3.1		The Mergers			B-9
	3.2		Closing			B-10
	3.3		Conversion of Securities			B-10
	3.4		UGC Election Procedures; Proration			B-12
	3.5		Exchange of Certificates			B-13
	3.6		LMI Stock Options, Stock Appreciation Rights and Restricted Stock			B-15
	3.7		UGC Stock Options, Stock Appreciation Rights and Restricted Stock			B-16
ARTICLE IV CERTAIN ACTIONS						B-17
	4.1		Stockholder Meetings			B-17
	4.2		Registration Statement and Other SEC Filings.			B-17
	4.3		Identification of Affiliates			B-18
	4.4		Commercially Reasonable Efforts			B-18
	4.5		No Solicitations; Other Offers			B-18
ARTICLE V REPRESENTATIONS AND WARRANTIES OF UGC						B-19
	5.1		Organization and Qualification			B-19
	5.2		Authorization and Validity of Agreement			B-19
	5.3		Capitalization; Stock Option Vesting Acceleration			B-19
	5.4		Reports and Financial Statements			B-20
	5.5		No Approvals or Notices Required; No Conflict with Instruments			B-21
	5.6		Absence of Certain Changes or Events			B-21
	5.7		Registration Statement; Schedule 13E-3; Joint Proxy Statement/ Prospectus			B-22
	5.8		Legal Proceedings			B-22
	5.9		Compliance with Laws			B-22
	5.10		Tax Matters			B-22
	5.11		Employee Matters			B-23
	5.12		Brokers or Finders			B-23
	5.13		Fairness Opinion			B-23
	5.14		Vote Required			B-23
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF LMI						B-23
	6.1		Organization and Qualification			B-23
	6.2		Authorization and Validity of Agreement			B-24
	6.3		Capitalization of LMI; Stock Option Vesting Acceleration			B-24
	6.4		LMI Reports and Financial Statements			B-24
	6.5		No Approvals or Notices Required; No Conflict with Instruments			B-25
	6.6		Absence of Certain Changes or Events			B-25

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					Page
	6.7		Registration Statement; Schedule 13E-3; Joint Proxy Statement/ Prospectus			B-26
	6.8		Legal Proceedings			B-26
	6.9		Compliance with Laws			B-26
	6.10		Tax Matters			B-26
	6.11		Employee Matters			B-27
	6.12		Brokers or Finders			B-27
	6.13		Fairness Opinion			B-27
	6.14		Vote Required			B-27
	6.15		Merger Subsidiaries			B-27
ARTICLE VII TRANSACTIONS PRIOR TO CLOSING						B-28
	7.1		Information and Access			B-28
	7.2		Public Announcements			B-28
	7.3		Conduct of UGC’s Business Pending the Effective Time			B-28
	7.4		Expenses			B-29
	7.5		Indemnification			B-29
	7.6		Notification of Certain Matters			B-30
	7.7		Defense of Litigation			B-30
	7.8		Actions by LMI			B-30
	7.9		Section 16 Matters			B-30
	7.10		Tax Treatment of Transactions			B-31
	7.11		State Takeover Laws			B-31
	7.12		Conduct of LMI			B-31
ARTICLE VIII CONDITIONS PRECEDENT						B-31
	8.1		Conditions Precedent to the Obligations of Each Party			B-31
	8.2		Conditions Precedent to the Obligations of LMI			B-32
	8.3		Conditions Precedent to the Obligations of UGC			B-32
ARTICLE IX TERMINATION						B-33
	9.1		Termination and Abandonment			B-33
	9.2		Effect of Termination			B-34
ARTICLE X MISCELLANEOUS						B-34
	10.1		Effectiveness of Representations, Warranties and Agreements			B-34
	10.2		Notices			B-34
	10.3		Entire Agreement			B-35
	10.4		Assignment; Binding Effect; Benefit			B-35
	10.5		Amendment			B-35
	10.6		Extension; Waiver			B-35
	10.7		Headings			B-36
	10.8		Counterparts			B-36
	10.9		Applicable Law			B-36
	10.10		Jurisdiction			B-36
	10.11		Waiver of Jury Trial			B-36
	10.12		Joint Participation in Drafting this Agreement			B-36
	10.13		Enforcement of this Agreement			B-36
	10.14		Limited Liability			B-37
	10.15		Severability			B-37

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B-5

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B-6

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B-7

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B-8

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B-9

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	(i) each share of LMI Series A Stock issued and outstanding immediately prior to the Effective Time (other than any shares cancelled pursuant to Section 3.3(a)(v)) will be converted into and represent the right to receive, and will be exchangeable for, one validly issued, fully paid and nonassessable share of HoldCo Series A Stock (the “LMI Series A Consideration”);
	(ii) each share of LMI Series B Stock issued and outstanding immediately prior to the Effective Time (other than any shares cancelled pursuant to Section 3.3(a)(v)) will be converted into and represent the right to receive, and will be exchangeable for, one validly issued, fully paid and nonassessable share of HoldCo Series B Stock (the “LMI Series B Consideration”);
	(iii) each share of LMI Series C Stock, if any, issued and outstanding immediately prior to the Effective Time (other than any shares cancelled pursuant to Section 3.3(a)(v)) will be converted into and represent the right to receive, and will be exchangeable for, one validly issued, fully paid and nonassessable share of HoldCo Series C Stock (the “LMI Series C Consideration”);

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	(iv) each share of LMI Preferred Stock, if any, issued and outstanding immediately prior to the Effective Time (other than any shares cancelled pursuant to Section 3.3(a)(v)) will be converted into and represent the right to receive, and will be exchangeable for, one validly issued, fully paid and nonassessable share of a corresponding series of HoldCo Preferred Stock having a substantially equivalent designation of rights and preferences as such series of LMI Preferred Stock (the “LMI Preferred Stock Consideration” and, together with the LMI Series A Consideration, the LMI Series B Consideration and the LMI Series C Consideration, the “LMI Consideration”); and
	(v) each share of LMI Stock held in treasury of LMI immediately prior to the Effective Time shall automatically be cancelled, retired and cease to exist without payment of any consideration therefor and without any conversion thereof.

	(i) subject to the provisions of Section 3.4(f), each share of UGC Common Stock with respect to which an election to receive the Cash Consideration has been validly made and not validly revoked pursuant to Section 3.4 (a “Cash Election”) shall be converted into and represent the right to receive, and be exchangeable for, the Cash Consideration;
	(ii) each share of UGC Common Stock with respect to which an election to receive the Stock Consideration has been validly made and not validly revoked pursuant to Section 3.4 (a “Stock Election”) shall be converted into and represent the right to receive, and will be exchangeable for, a fraction of a validly issued, fully paid and nonassessable share of HoldCo Series A Stock equal to the Exchange Ratio (together with cash in lieu of the issuance of any fractional share of HoldCo Series A Stock to any holder thereof to be paid in accordance with Section 3.5(d)) (the “Stock Consideration” and, together with the Cash Consideration and the LMI Consideration, the “Merger Consideration”);
	(iii) each share of UGC Common Stock other than shares of UGC Common Stock with respect to which a Cash Election or a Stock Election is validly made and not validly revoked pursuant to Section 3.4 (and other than Excluded Shares) (each a “Deemed Stock Election”) shall be converted into and represent the right to receive, and will be exchangeable for, the Stock Consideration;
	(iv) each share of UGC Common Stock held immediately prior to the Effective Time by LMI or any of its Wholly Owned Subsidiaries shall be converted into and represent the right to receive, and will be exchangeable for, one validly issued, fully paid and nonassessable share of the corresponding class of common stock of the Surviving UGC Corporation; and
	(v) each share of UGC Common Stock held in treasury of UGC immediately prior to the Effective Time shall automatically be cancelled, retired and cease to exist without payment of any consideration thereof and without any conversion thereof.

B-11

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B-12

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	(i) Promptly after the Effective Time, HoldCo shall deposit with the Exchange Agent, for the benefit of the stockholders of LMI and UGC, (A) certificates or, at HoldCo’s option, evidence of shares in book entry form, representing shares of HoldCo Stock in such denominations as the Exchange Agent may reasonably specify and (B) cash, in each case as are issuable or payable, respectively, pursuant to this Article III in respect of shares of UGC Common Stock or shares of LMI Stock, as applicable, for which Certificates or Book-Entry Shares have been properly delivered to the Exchange Agent and cash to be paid in lieu of fractional shares. Such certificates (or evidence of book-entry form, as the case may be) for shares of HoldCo Stock and such cash so deposited, together with any dividends or distributions with respect thereto, are hereinafter referred to as the “Exchange Fund”.
	(ii) The Exchange Agent shall invest any cash deposited with the Exchange Agent by HoldCo as directed by HoldCo, provided that no such investment or losses thereon shall affect the Cash Consideration payable to holders of shares of UGC Common Stock entitled to receive such consideration or cash in lieu of fractional interests, and HoldCo and LMI shall promptly provide additional funds to the Exchange Agent for the benefit of holders of shares of UGC Common Stock entitled to receive such consideration in the net amount of any such losses. Any interest or income produced by such investments shall not be deemed part of the Exchange Fund and shall be payable to HoldCo or LMI, as HoldCo directs.

(i) As soon as reasonably practicable after the Effective Time, HoldCo shall cause to be mailed to (x) each record holder, as of the Effective Time, of shares of UGC Common Stock as to which a Deemed Stock Election is made (each holder a “Deemed Stock Election Holder”) and (y) each record holder, as of the Effective Time, of shares of LMI Stock (such holders, “Former LMI Holders” and such shares, “Former LMI Shares”)): (A) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates held by such holder representing such shares of UGC Common Stock to which a Deemed Stock Election is made or Former LMI Shares, as the case may be, shall pass, only upon proper delivery of the Certificates to the Exchange Agent or, in the case of Book-Entry Shares, upon adherence to the procedures set forth in the letter of transmittal) and (B) instructions for use in effecting the surrender of the Certificates or, in the case of Book-Entry

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	Shares, the surrender of such shares, for payment of the Merger Consideration therefor. Such letter of transmittal shall be in such form and have such other reasonable provisions as HoldCo may specify.
	(ii) (x) Each former stockholder of UGC who properly made a Cash Election or Stock Election shall be entitled to receive in exchange for such stockholder’s shares subject to the Cash Election or Stock Election: (A) the number of whole shares of HoldCo Series A Stock, if any, into which such holder’s shares of UGC Common Stock represented by such holder’s properly surrendered Certificates or Book-Entry Shares, as applicable, were converted in accordance with this Article III, and such Certificates or Book-Entry Shares so surrendered shall be forthwith cancelled, and (B) a check in an amount of U.S. dollars (after giving effect to any required withholdings pursuant to Section 3.5(g)) equal to (I) the aggregate amount of cash (including the Cash Consideration plus cash in lieu of fractional interests in shares of HoldCo Series A Stock to be paid pursuant to Section 3.5(d)), if any, into which such holder’s shares of UGC Common Stock represented by such holder’s properly surrendered Certificates or Book-Entry Shares, as applicable, were converted in accordance with this Article III, plus (II) any cash dividends or other distributions that such holder has the right to receive pursuant to Section 3.5(c); and (y) upon surrender by a Deemed Stock Election Holder to the Exchange Agent of a Certificate or Book-Entry Shares, as applicable, together with a letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, each Deemed Stock Election Holder shall be entitled to receive in exchange therefor: (A) the number of whole shares of HoldCo Series A Stock, if any, into which such holder’s shares of UGC Common Stock represented by such holder’s properly surrendered Certificates or Book-Entry Shares, as applicable, were converted in accordance with this Article III, and such Certificates or Book-Entry Shares so surrendered shall be forthwith cancelled, and (B) a check in an amount of U.S. dollars (after giving effect to any required withholdings pursuant to Section 3.5(g)) equal to (I) the amount of cash in lieu of fractional interests in shares of HoldCo Series A Stock to be paid pursuant to Section 3.5(d), if any, into which such holder’s shares of UGC Common Stock represented by such holder’s properly surrendered Certificates or Book-Entry Shares, as applicable, were converted in accordance with this Article III, plus (II) any cash dividends or other distributions that such holder has the right to receive pursuant to Section 3.5(c).
	(iii) Upon surrender by a Former LMI Holder to the Exchange Agent of a Certificate or Book-Entry Shares, as applicable, together with a letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, each Former LMI Holder shall be entitled to receive in exchange therefor: (A) the number of whole shares of HoldCo Stock into which such holder’s shares of LMI Stock represented by such holder’s properly surrendered Certificates or Book-Entry Shares, as applicable, were converted in accordance with this Article III, and such Certificates or Book-Entry Shares so surrendered shall be forthwith cancelled, and (B) a check in an amount of U.S. dollars (after giving effect to any required withholdings pursuant to Section 3.5(g)) equal to any cash dividends or other distributions that such holder has the right to receive pursuant to Section 3.5(c).
	(iv) If payment or issuance of the Merger Consideration is to be made to a Person other than the Person in whose name the surrendered Certificate is registered, it shall be a condition of payment or issuance that the Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and that the Person requesting such payment or issuance shall have paid to the Exchange Agent any transfer and other taxes required by reason of the payment or issuance of the Merger Consideration to a Person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Exchange Agent that such tax either has been paid or is not applicable. In the event that any Certificate shall have been lost, stolen or destroyed, upon the holder’s compliance with the replacement requirements established by the Exchange Agent, including, if necessary, the posting by the holder of a bond in customary amount as indemnity against any claim that may be made against it with respect to the Certificate, the Exchange Agent shall deliver in exchange for the lost, stolen or destroyed Certificate the applicable Merger Consideration payable in respect of the shares of UGC Common Stock or LMI Stock, as the case may be, represented by the Certificate pursuant to this Article III.
	(v) No interest shall be paid or accrued for the benefit of holders of the Certificates or Book-Entry Shares on the Merger Consideration payable in respect of the Certificates or Book-Entry Shares. Until surrendered as contemplated hereby, each Certificate or Book-Entry Share shall, after the Effective Time, represent for all purposes only the right to receive upon such surrender the applicable Merger Consideration as contemplated by this Article III, the issuance or payment of which (including any cash in lieu of fractional shares) shall be deemed to be the satisfaction in full of all rights pertaining to shares of UGC Common Stock converted in the UGC Merger and shares of LMI Stock converted in the LMI Merger.

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(vi) At the Effective Time, the stock transfer books of UGC and LMI shall be closed, and thereafter there shall be no further registration of transfers of shares of UGC Common Stock or LMI Stock, respectively, that were outstanding prior to the Effective Time. After the Effective Time, Certificates or Book-Entry Shares presented to UGC or LMI for transfer shall be canceled and exchanged for the consideration provided for, and in accordance with the procedures set forth, in this Article III.

B-15

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B-16

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B-17

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B-18

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	(a) The authorized capital stock of UGC consists of (i) 1,000,000,000 shares of UGC Class A Stock, (ii) 1,000,000,000 shares of UGC Class B Stock, (iii) 400,000,000 shares of UGC Class C Stock and (iv) 10,000,000 shares of UGC Preferred Stock, issuable in series.
	(b) As of the close of business on December 31, 2004, (i) 413,206,357 shares of UGC Class A Stock were issued and outstanding, (ii) 10,493,461 shares of UGC Class B Stock were issued and outstanding, (iii) 379,603,223 shares of UGC Class C Stock were issued and outstanding, (iv) no shares of UGC Preferred Stock were issued and outstanding and no action had been taken by the UGC Board with respect to the designation of the rights and preferences of any series of UGC Preferred Stock and (v) 13,174,660 shares of UGC Class A Stock were held in treasury or by Wholly Owned Subsidiaries of UGC and no other shares of UGC Common Stock or UGC Preferred Stock were held in the treasury of UGC or held by Subsidiaries of UGC. Except as set forth in the preceding sentence or in clause (e) below, at the close of business on December 31,

B-19

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	2004, no shares of capital stock or other securities or other equity interests of UGC and no phantom shares, phantom equity interests, or stock or equity appreciation rights relating to UGC were issued, reserved for issuance or outstanding. Except as set forth in the UGC SEC Filings filed with the SEC and publicly available prior to the date of this Agreement or in clause (e) below, at the close of business on December 31, 2004, no shares of capital stock or other securities or other equity interests of any Significant UGC Subsidiary and no phantom shares, phantom equity interests, or stock or equity appreciation rights relating to any Significant UGC Subsidiary were issued, reserved for issuance or outstanding. Since the close of business on December 31, 2004, no shares of capital stock or other securities or other equity interests of UGC and no phantom shares, phantom equity interests, or stock or equity appreciation rights relating to UGC or any Significant UGC Subsidiary have been issued other than shares of UGC Common Stock issued (A) upon exercise of the options or rights referred to in clause (e)(ii) below in accordance with their terms or (B) upon conversion of UGC Convertible Notes outstanding at the close of business on December 31, 2004 in accordance with their terms.
	(c) All outstanding shares of UGC Common Stock are duly authorized, validly issued, fully paid and nonassessable, and no class of capital stock of UGC is entitled to preemptive rights with respect to the issuance thereof, except that LMI and its Affiliates are entitled to certain contractual preemptive rights with respect to the issuance of shares of UGC Class A Stock and certain rights to acquire shares of UGC Class A Stock.
	(d) There are no issued or outstanding bonds, debentures, notes or other Indebtedness of UGC or any of its Subsidiaries that have the right to vote (or that are convertible into other securities having the right to vote, other than the UGC Convertible Notes) on any matters on which stockholders of UGC may vote (the “Voting Debt”).
	(e) There are no, and immediately after the Effective Time there will be no, outstanding or authorized subscriptions, options, warrants, securities, calls, rights, commitments or any other Contracts of any character to or by which UGC or any Significant UGC Subsidiary is a party or is bound that, directly or indirectly, obligate, or after the Effective Time will obligate, UGC or any Significant UGC Subsidiary or HoldCo (contingently or otherwise) to issue, deliver or sell or cause to be issued, delivered or sold any shares of UGC Common Stock or any UGC Preferred Stock or other capital stock, securities, equity interests or Voting Debt of UGC or any Significant UGC Subsidiary or HoldCo, any securities convertible into, or exercisable or exchangeable for, or evidencing the right (contingent or otherwise) to subscribe for any such shares, securities, interests or Voting Debt, or any phantom shares, phantom equity interests or stock or equity appreciation rights, or obligating UGC or any Significant UGC Subsidiary or HoldCo to grant, extend or enter into any such subscription, option, warrant, security, call, right or Contract (collectively, “Convertible Securities”), other than (i) the UGC Convertible Notes, (ii) options or other rights representing in the aggregate the right to purchase or otherwise acquire on the date of this Agreement up to 45,594,482 shares of UGC Class A Stock and 3,000,000 shares of UGC Class B Stock and (iii) Convertible Securities relating to Significant UGC Subsidiaries that were outstanding on January 1, 2002. Neither UGC nor any Significant UGC Subsidiary is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock.
	(f) Except as disclosed in the UGC SEC Filings filed with the SEC and publicly available prior to the date of this Agreement, neither UGC nor any of the Significant UGC Subsidiaries has adopted, authorized or assumed any plans, arrangements or practices for the benefit of its officers, employees or directors that require or permit the issuance, sale, purchase or grant of any capital stock, securities or other equity interests or Voting Debt of UGC or any Significant UGC Subsidiary, or any phantom shares, phantom equity interests or stock or equity appreciation rights or any Convertible Securities of UGC or any Significant UGC Subsidiary.
	(g) The UGC Board has adopted a resolution stating that the transactions contemplated by this Agreement do not constitute a change of control or any comparable event which would permit or result in an acceleration of vesting or exercisability of any outstanding awards (including UGC Options, UGC SARs and UGC Restricted Stock) under any UGC Plan.

B-20

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	(i) assuming the UGC Stockholder Approval is obtained, conflict with or violate the UGC Charter or UGC’s Bylaws, or the charter or bylaws of any Significant UGC Subsidiary, or any other instrument or document governing any Significant UGC Subsidiary that is not a corporation;
	(ii) require any consent, approval, order or authorization of or other action by any Governmental Entity (a “Government Consent”) or any registration, qualification, declaration or filing with or notice to any Governmental Entity (a “Governmental Filing”), in each case on the part of or with respect to UGC or any Subsidiary of UGC, except for (A) the filing with the SEC of the Registration Statement, the Schedule 13E-3 and the Joint Proxy Statement/ Prospectus and such reports under Sections 13(a) and 16(a) of the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby, (B) the filing of the UGC Certificate of Merger with the Delaware Secretary of State and appropriate documents with the relevant authorities of other states in which UGC is qualified to do business, (C) such Government Consents and Governmental Filings as will have been obtained or made prior to the Effective Time and (D) such Government Consents and Governmental Filings the absence or omission of which will not, either individually or in the aggregate, have a UGC Material Adverse Effect;
	(iii) assuming the UGC Stockholder Approval is obtained, require, on the part of UGC or any Subsidiary of UGC, any consent by or approval or authorization of (a “Contract Consent”) or notice to (a “Contract Notice”) any other Person (other than a Governmental Entity), whether under any License or other Contract or otherwise, except where the failure to obtain such Contract Consent or to give such Contract Notice will not, either individually or in the aggregate, have a UGC Material Adverse Effect;
	(iv) conflict with or result in any violation or breach of or default (with or without notice or lapse of time, or both) under, or give rise to a “put” or “call” right or a right of termination, cancellation, suspension, modification or acceleration of any obligation or any increase in any payment required by or the impairment, loss or forfeiture of any material benefit, rights or privileges under or the creation of a Lien, Restriction or other encumbrance on any assets pursuant to (any such conflict, violation, breach, default, right of termination, cancellation, suspension, modification or acceleration, loss or creation, a “Violation”) any contract (including any note, bond, indenture, mortgage, deed of trust, lease, franchise, permit, authorization, license, contract, instrument, employee benefit plan or practice, or other agreement, obligation, commitment or concession of any nature (each, a “Contract”)) to which UGC or any Subsidiary of UGC is a party, by which UGC or any Subsidiary of UGC or any of their respective assets or properties is bound or affected or pursuant to which UGC or any Subsidiary of UGC is entitled to any rights or benefits (including any Licenses), except for such Violations (other than Violations in respect of the UGC Indenture) which would not, individually or in the aggregate, have a UGC Material Adverse Effect; or
	(v) assuming the UGC Stockholder Approval is obtained and assuming that the Government Consents and Governmental Filings specified in clause (ii) of this Section 5.5 are obtained, made and given, result in a Violation of, under or pursuant to any law, rule, regulation, order, judgment or decree applicable to UGC, any Subsidiary of UGC or by which any of their respective properties or assets are bound or affected, except for such Violations which would not, individually or in the aggregate, have a UGC Material Adverse Effect.

B-21

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B-22

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B-23

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B-24

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	(i) assuming the LMI Stockholder Approval is obtained, conflict with or violate the LMI Charter or LMI’s Bylaws, or the charter or bylaws of any Significant LMI Subsidiary, or any other instrument or document governing any Significant LMI Subsidiary that is not a corporation;
	(ii) require any Government Consent or Governmental Filing on the part of or with respect to LMI or any Subsidiary of LMI, except for (A) the filing with the SEC of the Registration Statement, the Schedule 13E-3 and the Joint Proxy Statement/ Prospectus and such reports under Sections 12(g), 13(a), 13(d) and 16(a) of the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby, (B) the filing of the LMI Certificate of Merger with the Delaware Secretary of State and appropriate documents with the relevant authorities or other states in which LMI is qualified to do business, (C) appropriate filings with and consents or approvals of the Federal Communications Commission and the Puerto Rico Telecommunications Regulatory Board, or (D) such Government Consents and Governmental Filings the absence or omission of which will not, either individually or in the aggregate, have a LMI Material Adverse Effect;
	(iii) require on the part of LMI or any Subsidiary of LMI any Contract Consent or Contract Notice to any other Person (other than a Governmental Entity), whether under any License or other Contract or otherwise, except where the failure to obtain such Contract Consent or to give such Contract Notice will not, either individually or in the aggregate, have a LMI Material Adverse Effect or prevent or materially delay the consummation of the Mergers;
	(iv) result in a Violation of any Contract to which LMI or any Subsidiary of LMI is a party, by which LMI or any Subsidiary of LMI or any of their respective assets or properties is bound or affected or pursuant to which LMI or any Subsidiary of LMI is entitled to any rights or benefits (including any Licenses), except for such Violations which would not, individually or in the aggregate, have a LMI Material Adverse Effect; or
	(v) assuming adoption of this Agreement at the LMI Special Meeting by the requisite vote of LMI’s stockholders, and assuming that the Government Consents and Governmental Filings specified in clause (ii) of this Section 6.5 are obtained, made and given, result in a Violation of, under or pursuant to any law, rule, regulation, order, judgment or decree applicable to LMI, any Subsidiary of LMI or by which any of their respective properties or assets are bound or affected, except for such Violations which would not, individually or in the aggregate, have a LMI Material Adverse Effect.

B-25

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B-26

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B-27

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	(a) conduct its business only in, and not take any action except in, the ordinary and usual course of its business and consistent with past practices;
	(b) submit to a vote of its board of directors (or executive committee thereof) or other governing body any matter of a nature or in any amount that, consistent with past practices or existing board or other governing body resolutions or policies, would have been required, or would have been expected, to be submitted to such a vote prior to the date hereof;
	(c) not (i) make any change or amendments in its charter, bylaws or partnership agreement or other governing instrument or document (as the case may be); (ii) authorize for issuance, issue, grant, sell, deliver, dispose of, pledge or otherwise encumber any shares of its capital stock or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for any shares of its capital stock or other equity or voting interests, or any rights, options, warrants, calls, commitments or other agreements of any character to purchase or acquire any shares of its capital stock or other equity or voting interests, or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for, any shares of its capital stock or other equity or voting interests, other than shares of UGC Common Stock issued upon exercise of UGC Options, conversion of UGC Convertible Notes or upon the exercise of other rights outstanding as of the date hereof under UGC Plans or otherwise disclosed pursuant to this Agreement, in accordance with the terms thereof; (iii) split, combine, subdivide or reclassify the outstanding shares of its capital stock or other equity or voting interests, or declare, set aside for payment or pay any dividend, or make any other actual, constructive or deemed distribution in respect of any shares of its capital stock or other equity or voting interests, or otherwise make any payments to stockholders or owners of equity or voting interests in their capacity as such (other than dividends or distributions paid by any Wholly-Owned Subsidiary of UGC to UGC or another Wholly-Owned Subsidiary of UGC); (iv) redeem, purchase or otherwise acquire, directly or indirectly, any outstanding shares of capital stock or other securities or equity or voting interests of UGC or any Subsidiary of UGC; (v) make any other changes in its capital or ownership structure; (vi) sell or grant a Lien or Restriction with respect to any stock, equity or partnership interest

B-28

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	owned by it in any Subsidiary of UGC; or (vii) enter into or assume any contract, agreement, obligation, commitment or arrangement with respect to any of the foregoing;
	(d) not (i) enter into any new employment agreements with or increase the compensation of (x) any officer or director of UGC or (y) any member of senior executive management of any Subsidiary whose annual income exceeds $100,000 per annum, other than as required by written agreements in effect on the date hereof, (ii) establish, amend or modify any UGC Plan or any other employee benefit plan, except in the ordinary course of business, consistent with past practice and to the extent not material and except to the extent required by any applicable law or the existing terms of such UGC Plan or by the provisions of this Agreement; (iii) make any capital expenditures which individually or in the aggregate are in excess of the amount provided for capital expenditures in the most recent capital budget for UGC and its Subsidiaries approved by the UGC Board (provided such budget itself is an Approved Matter) or (iv) enter into or assume any contract, agreement, obligation, commitment or arrangement with respect to any of the foregoing;
	(e) not incur (which will not be deemed to include entering into credit agreements, lines of credit or similar arrangements until borrowings are made under such arrangements) any material amount of Indebtedness for borrowed money or guarantee any such Indebtedness other than in the ordinary course of business; provided, however, that the foregoing will not prohibit any renewal, extension, amendment or refinancing of existing Indebtedness (provided there is no increase in the interest rate or the principal amount of such Indebtedness);
	(f) not acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial equity interest in or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire or agree to otherwise acquire any assets that are material, individually or in the aggregate, to UGC and its Subsidiaries taken as a whole, other than in the ordinary course of business;
	(g) not make any material change in any accounting, financial reporting or Tax practice or policy;
	(h) not take any action that would reasonably be expected to result in any of the conditions to the Mergers set forth in Article VIII not being fulfilled; and
	(i) not authorize or enter into any contract, agreement, commitment or arrangement to do any of the foregoing.

B-29

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B-30

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	(a) Stockholder Approvals. The LMI Stockholder Approval and the UGC Stockholder Approval shall have been obtained.
	(b) Minority Approval. The Minority Approval shall have been obtained.
	(c) Registration. The Registration Statement (as amended or supplemented) will have been declared effective and will be effective under the Securities Act at the Effective Time, and no stop order suspending effectiveness will have been issued, and no action, suit, proceeding or investigation seeking a stop order or to suspend the effectiveness of the Registration Statement will be pending before or threatened by the SEC.
	(d) Absence of Injunctions. No permanent or preliminary Injunction or restraining order or other order by any court or other Governmental Entity of competent jurisdiction, or other legal restraint or prohibition, preventing consummation of the transactions contemplated hereby as provided herein, or permitting such consummation only subject to any condition or restriction that has or would have a UGC Material Adverse Effect or a LMI Material Adverse Effect, will be in effect; and there shall not be any action taken, or any statute, rule, regulation or order (whether temporary, preliminary or permanent) enacted, entered or enforced which makes the consummation of the Mergers illegal or prevents or prohibits the Mergers.
	(e) Tax Opinion Relating to the Effect of the LMI Merger and the UGC Merger on the Distribution. LMI and HoldCo shall have received the opinion of Skadden, Arps, Slate, Meagher & Flom LLP or another nationally recognized law firm reasonably acceptable to UGC (acting with the approval of the Special Committee), dated the Closing Date, to the effect that, for U.S. federal income tax purposes, provided that the Distribution would otherwise have qualified as a tax-free distribution under Section 355 of the Code to LMC and the LMC

B-31

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	shareholders, the transactions contemplated by this Agreement should not cause the Distribution to fail to qualify as a tax-free distribution to LMC under Section 355(e) of the Code. In rendering such opinion, Skadden, Arps, Slate, Meagher & Flom LLP or such other alternate firm may require and rely upon (and may incorporate by reference) representations and covenants made in certificates provided by the parties hereto and upon such other documents and data as Skadden, Arps, Slate, Meagher & Flom LLP or such other alternate firm deems appropriate as a basis for such opinion.
	(f) Governmental Entity Approvals. All authorizations, consents, orders or approvals of, or declarations or filings with, or expiration of waiting periods imposed by, any Governmental Entity, if any, necessary for the consummation of the Mergers shall have been filed, expired or been obtained, other than those that, individually or in the aggregate, the failure of which to be filed, expired or obtained would not be reasonably likely to have a UGC Material Adverse Effect or a LMI Material Adverse Effect.
	(g) Nasdaq Listing. The shares of HoldCo Common Stock to be issued pursuant to this Agreement will have been approved for listing on the Nasdaq, subject only to official notice of issuance.

	(a) Accuracy of Representations and Warranties. All representations and warranties of UGC contained in this Agreement will, if specifically qualified by reference to a UGC Material Adverse Effect, be true and correct and, if not so qualified, be true and correct except where the failure to be so true and correct would not have a UGC Material Adverse Effect, except for the representations and warranties set forth in Section 5.3, which will be true and correct in all material respects, in each case as of the date of this Agreement and (except to the extent such representations and warranties speak as of a specified earlier date) on and as of the Closing Date as though made on and as of the Closing Date, except for changes permitted or contemplated by this Agreement.
	(b) Performance of Agreements. UGC will have performed in all material respects all obligations and agreements, and complied in all material respects with all covenants and conditions, contained in this Agreement to be performed or complied with by it prior to or on the Closing Date.
	(c) Officers’ Certificates. LMI will have received such certificates of UGC, dated the Closing Date, in each case signed by an executive officer of UGC (but without personal liability thereto), to evidence satisfaction of the conditions set forth in Sections 8.1(a), 8.1(b), 8.2(a) and 8.2(b) (insofar as each relates to UGC), as may be reasonably requested by LMI.
	(d) No Adverse Enactments. There will not have been any action taken, or any statute, rule, regulation, order, judgment or decree proposed, enacted, promulgated, entered, issued, enforced or deemed applicable by any foreign or United States federal, state or local Governmental Entity that imposes or is reasonably likely to result in imposition of material limitations on the ability of HoldCo effectively to exercise full rights of ownership of shares of capital stock of the Surviving LMI Corporation or the Surviving UGC Corporation (including the right to vote such shares on all matters properly presented to the stockholders of the relevant entity) or makes the holding by HoldCo of any such shares illegal.
	(e) Tax Opinion. LMI shall have received the opinion of Baker Botts L.L.P. or another nationally recognized law firm, dated the Closing Date, to the effect that, for United States federal income tax purposes, (i) the LMI Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code, (ii) no gain or loss will be recognized by HoldCo, LMI, any Wholly-Owned Subsidiary of LMI that owns shares of UGC Common Stock, or UGC as a result of the LMI Merger or the UGC Merger, and (iii) no gain or loss will be recognized by the shareholders of LMI with respect to shares of LMI Stock converted solely into HoldCo Stock as a result of the LMI Merger. In rendering such opinion, Baker Botts L.L.P. or such alternate firm may require and rely upon (and may incorporate by reference) representations and covenants made in certificates provided by the parties hereto and upon such other documents and data as such counsel deems appropriate as a basis for such opinion.

B-32

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	(a) Accuracy of Representations and Warranties. All representations and warranties of LMI contained in this Agreement will, if specifically qualified by reference to a LMI Material Adverse Effect, be true and correct, and, if not so qualified, be true and correct except where the failure to be so true and correct would not have a LMI Material Adverse Effect, except for (i) the representations and warranties set forth in Section 6.3, which shall be true and correct in all material respects, and (ii) the representations and warranties set forth in Section 6.6(b), which shall be true and correct, in each case as of the date of this Agreement and (except to the extent such representations and warranties speak of a specified earlier date) on and as of the Closing Date as though made on and as of the Closing Date, except for changes permitted or contemplated by this Agreement.
	(b) Performance of Agreements. Each of HoldCo and LMI will have performed in all material respects all obligations and agreements, and complied in all material respects with all covenants and conditions, contained in this Agreement to be performed or complied with by it prior to or on the Closing Date.
	(c) Officers’ Certificates. UGC will have received such certificates of HoldCo and LMI, dated the Closing Date, in each case signed by an executive officer of HoldCo or LMI (but without personal liability thereto) to evidence satisfaction of the conditions set forth in Sections 8.1(a), 8.3(a) and 8.3(b) (insofar as each relates to HoldCo or LMI), as may be reasonably requested by UGC.
	(d) Tax Opinion. UGC shall have received the opinion of Debevoise & Plimpton LLP or another nationally recognized law firm, dated the Closing Date, to the effect that, for United States federal income tax purposes, (i) when viewed as a collective whole with the LMI Merger, the conversion of shares of UGC Common Stock into shares of HoldCo Series A Stock that is effected pursuant to the UGC Merger will qualify as an exchange within the meaning of Section 351 of the Code, (ii) no gain or loss will be recognized by HoldCo or UGC as a result of the UGC Merger, and (iii) no gain or loss will be recognized by the shareholders of UGC with respect to shares of UGC Common Stock converted solely into HoldCo Series A Stock pursuant to the UGC Merger. In rendering such opinion, Debevoise & Plimpton LLP or such alternate firm may require and rely upon (and may incorporate by reference) representations and covenants made in certificates provided by the parties hereto and upon such other documents and data as Debevoise & Plimpton LLP or such alternate firm deems appropriate as a basis for such opinion.

	(a) by mutual consent of LMI and UGC authorized by their respective Boards of Directors (with the approval of the Special Committee in the case of UGC);
	(b) by LMI if UGC has not filed the UGC 10-K with the SEC by May 15, 2005 (the “Filing Termination Date”). LMI may terminate this Agreement within five business days after the Filing Termination Date; provided, that LMI may extend the Filing Termination Date to June 15, 2005, if it determines not to terminate this Agreement during the five business day period following the initial Filing Termination Date;
	(c) by either UGC (with the approval of the Special Committee) or LMI if either of the Mergers has not been consummated before September 30, 2005 (the “Drop Dead Date”); provided, that the right to terminate this Agreement pursuant to this Section 9.1(c) shall not be available to any party whose action or failure to act has been the cause of or resulted in the failure of either of the Mergers to occur on or before the Drop Dead Date and such action or failure to act constitutes a breach of this Agreement.
	(d) by either UGC (with the approval of the Special Committee), on the one hand, or LMI, on the other hand: (A) if there has been a breach of any representation, warranty, covenant or agreement on the part of the other party contained in this Agreement such that the conditions set forth in Sections 8.2(a) or (b) or Section 8.3(a) or (b), as the case may be, shall have become incapable of fulfillment, or (B) if any court of competent jurisdiction or other competent governmental authority will have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the Mergers and such order, decree, ruling or other action will have become final and nonappealable;

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	(e) by LMI if the UGC Board (with the approval of the Special Committee) has withdrawn or modified in any manner adverse to LMI its recommendation to the UGC stockholders referred to in Section 5.2(b); or
	(f) By either LMI or UGC (with the approval of the Special Committee) if (x) the UGC Stockholder Approval and the Minority Approval or (y) the LMI Stockholder Approval has not been obtained at the UGC Special Meeting or the LMI Special Meeting as contemplated by Section 8.1.

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B-36

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	NEW CHEETAH, INC.

	By:	/s/ Elizabeth M. Markowski

	Name: Elizabeth M. Markowski

	Title:	Secretary

	LIBERTY MEDIA INTERNATIONAL, INC.

	By:	/s/ Elizabeth M. Markowski

	Name: Elizabeth M. Markowski

	Title:	Senior Vice President

	UNITEDGLOBALCOM, INC.

	By:	/s/ Michael T. Fries

	Name: Michael T. Fries

	Title:	President and CEO

	CHEETAH ACQUISITION CORP.

	By:	/s/ Elizabeth M. Markowski

	Name: Elizabeth M. Markowski

	Title:	Secretary

	TIGER GLOBAL ACQUISITION CORP.

	By:	/s/ Elizabeth M. Markowski

	Name: Elizabeth M. Markowski

	Title:	Secretary

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	(a) Authority. Stockholder has all requisite power and authority to enter into this Agreement. This Agreement has been duly executed and delivered by Stockholder and constitutes a valid and binding obligation of Stockholder enforceable in accordance with its terms.
	(b) No Conflicts; Required Filings and Consents.

(i) Neither the execution and delivery of this Agreement by Stockholder, nor compliance by Stockholder with the terms hereof will violate any law, rule or regulation applicable to Stockholder or conflict with or result in a breach, or constitute a default (with or without due notice, lapse of time or both) under any provision of, any trust agreement, loan or credit agreement, note, bond, mortgage, indenture or other agreement, to which Stockholder is a party or by which Stockholder is bound, other than such violations,

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	conflicts, breaches or defaults which would not, individually or in the aggregate, prevent or materially delay the performance by Stockholder of his obligations under this Agreement.
	(ii) The execution and delivery of this Agreement by Stockholder does not, and the performance by Stockholder of his obligations under this Agreement will not, require any Government Consent or Governmental Filing, except (x) Governmental Filings to be made pursuant to the federal securities laws and (y) where the failure to obtain such Government Consent or make such Governmental Filing would not, individually or in the aggregate, prevent or materially delay the performance by Stockholder of his obligations under this Agreement.

	(c) The Subject Shares. Stockholder is the record and beneficial owner of, and has good and valid title to, the Subject Shares, free and clear of any Restriction, other than as set forth on Schedule 1.1(c) and other than this Agreement. Other than (i) the Trust Shares, (ii) Stockholder’s interest in LMI Series A Stock held in LMI’s 401(k) Plan and (iii) shares with respect to which Stockholder does not possess sole voting or dispositive power, Stockholder does not own of record or beneficially, any shares of capital stock of LMI other than the Subject Shares. Stockholder has the sole right to vote the Subject Shares.
	(d) The Trust Shares. Stockholder is the sole trustee of each of the trusts owning the Trust Shares and, subject to any fiduciary and similar duties owed to the beneficiaries of such trusts, has the sole right to vote the Trust Shares.
	(e) Reliance by UGC. Stockholder understands and acknowledges that UGC is entering into the Merger Agreement in reliance upon his execution and delivery of this Agreement.
	(f) Litigation. There is no action or proceeding pending or, to the actual knowledge of Stockholder, threatened, against Stockholder that questions the validity of this Agreement or any action taken or to be taken by Stockholder in connection with this Agreement.

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	(a) Sell, assign, transfer, grant a participation interest in, option, pledge, hypothecate or otherwise dispose of or encumber (each a “Transfer”) any Subject Shares or options to acquire additional shares of LMI capital stock (“Options”), or any interest therein, unless (i) Stockholder provides prior notice to the Special Committee of such Transfer; (ii) the transferee executes a voting agreement in the form of this Agreement, and (iii) Stockholder remains liable for any breach of such voting agreement by such transferee;
	(b) grant any proxies or power of attorney or enter into a voting agreement or other arrangement relating to the matters covered by Section 2.1 with respect to any Subject Shares or Options; or
	(c) deposit any Subject Shares or Options into a voting trust.

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	UNITEDGLOBALCOM, INC.

	By:	/s/ Michael T. Fries

	Name: Michael T. Fries

	Title:	President and Chief Executive Officer

		/s/ John C. Malone

	John C. Malone

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	a) reviewed certain publicly available financial statements and other information of UGC and LMI;
	b) reviewed certain internal financial statements and other financial and operating data concerning UGC and LMI prepared by the managements of UGC and LMI, respectively;
	c) reviewed certain financial projections prepared by the respective managements of UGC and LMI;
	d) discussed the past and current operations and financial condition and prospects of UGC and LMI with senior executives of UGC and LMI, respectively;
	e) considered information relating to certain strategic, financial and operational benefits anticipated from the Merger, discussed with the management of UGC;
	f) discussed the strategic rationale for the UGC Merger with the senior executives of UGC;

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	g) reviewed the reported prices and trading activity for the UGC Class A Common Stock and the Series A common stock of LMI, $.01 par value per share (the “LMI Series A Stock”);
	h) compared the financial performance of UGC and LMI, as well as the prices and trading activity of the UGC Class A Common Stock and the LMI Series A Stock with that of certain other comparable publicly-traded companies and their securities;
	i) reviewed the financial terms, to the extent publicly available, of selected minority buy-back transactions;
	j) participated in discussions and negotiations among representatives of UGC and LMI and their respective financial and legal advisors;
	k) reviewed the proposed Merger Agreement and certain related documents; and
	l) performed such other analyses and considered such other factors as we have deemed appropriate.

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	Very truly yours,
	MORGAN STANLEY & CO. INCORPORATED

	By:	/s/ Richard S. Brail

	Richard S. Brail
	Managing Director

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	(i) reviewed certain publicly available financial statements and other business and financial information of the Company and the Merger Partner, respectively;
	(ii) reviewed certain internal financial statements and other financial and operating data concerning the Company and the Merger Partner, respectively;
	(iii) analyzed certain financial forecasts to which we were directed by the management of the Merger Partner;
	(iv) reviewed and discussed with senior executives of the Merger Partner information relating to certain benefits anticipated from the Transaction;
	(v) discussed the past and current operations, financial condition and prospects of the Company with senior executives of the Company and discussed the past and current operations, financial condition and prospects of the Merger Partner with senior executives of the Merger Partner;
	(vi) reviewed the reported prices and trading activity for the Company common stock and the Merger Partner common stock;
	(vii) compared the financial performance of the Company and the prices and trading activity of the Company common stock with that of certain other publicly traded companies we deemed relevant;
	(viii) compared certain financial terms of the Transaction to financial terms, to the extent publicly available, of certain other business combination transactions we deemed relevant;
	(ix) participated in discussions and negotiations among representatives of the Company and the Merger Partner and their financial and legal advisors;

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	(x) reviewed the January 16, 2005 draft of the Agreement (the “Draft Agreement”) and certain related documents; and
	(xi) performed such other analyses and considered such other factors as we have deemed appropriate.

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	Very truly yours,
	/s/ Banc of America Securities LLC
	BANC OF AMERICA SECURITIES LLC

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	(1) The name of the Corporation is Liberty Global, Inc. The original Certificate of Incorporation of the Corporation was filed on January 13, 2005. The name under which the Corporation was originally incorporated is Liberty Global, Inc. A Certificate of Amendment to Certificate of Incorporation was filed on January 18, 2005, changing the name of the Corporation to Liberty Global, Inc.
	(2) This Restated Certificate of Incorporation restates and amends the Certificate of Incorporation of the Corporation, as amended prior to the date hereof.
	(3) This Restated Certificate of Incorporation has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware.
	(4) This Restated Certificate of Incorporation shall become effective upon its filing with the Secretary of State of the State of Delaware.
	(5) Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware, the text of the Certificate of Incorporation is hereby restated to read in its entirety as follows:

	(a) One billion fifty million (1,050,000,000) shares shall be of a class designated Common Stock, par value $0.01 per share (“Common Stock”), such class to be divided into series as provided in Section A of this Article IV; and
	(b) Fifty million (50,000,000) shares shall be of a class designated Preferred Stock, par value $0.01 per share (“Preferred Stock”), such class to be issuable in series as provided in Section B of this Article IV.

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(a) a Share Distribution (i) consisting of shares of Series A Common Stock (or Convertible Securities that are convertible into, exchangeable for or evidence the right to purchase shares of Series A Common Stock) may be declared and paid to holders of Series A Common Stock, Series B Common Stock and Series C Common Stock, on an equal per share basis; or (ii) consisting of shares of Series B Common Stock (or Convertible Securities that are convertible into, exchangeable for or evidence the right to purchase shares of Series B Common Stock) may be declared and paid to holders of Series A Common Stock, Series B Common Stock and Series C Common Stock, on an equal per share basis; or (iii) consisting of shares of Series C Common Stock (or Convertible Securities that are convertible into, exchangeable for or evidence the right to purchase shares of Series C Common Stock) may be declared and paid to holders of Series A Common Stock, Series B Common Stock and Series C Common Stock, on an equal per share basis; or (iv) consisting of shares of Series A Common Stock (or Convertible Securities that are convertible into, exchangeable for or evidence the right to purchase shares of Series A Common Stock) may be declared and paid to holders of Series A Common Stock, shares of Series B Common Stock (or Convertible Securities that are convertible into, exchangeable for or evidence the right to purchase shares of Series B Common Stock) may be declared and paid to holders of Series B Common

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	Stock and shares of Series C Common Stock (or Convertible Securities that are convertible into, exchangeable for or evidence the right to purchase shares of Series C Common Stock) may be declared and paid to holders of Series C Common Stock, in each case on an equal per share basis; and
	(b) a Share Distribution consisting of shares of any class or series of securities of the Corporation or any other Person other than Series A Common Stock, Series B Common Stock or Series C Common Stock (or Convertible Securities that are convertible into, exchangeable for or evidence the right to purchase shares of Series A Common Stock, Series B Common Stock or Series C Common Stock), may be declared and paid either on the basis of a distribution of (i) identical securities, on an equal per share basis, to holders of Series A Common Stock, Series B Common Stock and Series C Common Stock, (ii) separate classes or series of securities, on an equal per share basis to the holders of each series of Common Stock or (iii) a separate class or series of securities to the holders of one or more series of Common Stock and, on an equal per share basis, a different class or series of securities to the holders of all other series of Common Stock; provided, that, in the case of clauses (ii) and (iii), (x) such separate classes or series of securities (and, if the distribution consists of Convertible Securities, the securities into which such Convertible Securities are convertible or for which they are exchangeable or which they evidence the right to purchase) do not differ in any respect other than their relative voting rights (and related differences in designation, conversion and Share Distribution provisions), with holders of shares of Series B Common Stock receiving securities of the class or series having (or convertible into, exchangeable for or evidencing the right to purchase securities having) the highest relative voting rights and the holders of shares of each other series of Common Stock receiving securities of a class or series having (or convertible into, exchangeable for or evidencing the right to purchase securities having) lesser relative voting rights, in each case without regard to whether such rights differ to a greater or lesser extent than the corresponding differences in voting rights (and related differences in designation, conversion and Share Distribution provisions) among the Series A Common Stock, the Series B Common Stock and the Series C Common Stock, and (y) in the event the securities to be received by the holders of shares of Common Stock other than the Series B Common Stock consist of different classes or series of securities, with each such class or series of securities (or the securities into which such class or series is convertible or for which such class or series is exchangeable or which such class or series evidences the right to purchase) differing only with respect to the relative voting rights of such class or series (and the related differences in designation, conversion, redemption and Share Distribution provisions), then such classes or series of securities shall be distributed to the holders of each series of Common Stock (other than the Series B Common Stock) (A) as the Board of Directors determines or (B) such that the relative voting rights (and related differences in designation, conversion, redemption and Share Distribution provisions) of the class or series of securities (or the securities into which such class or series is convertible or for which such class or series is exchangeable or which such class or series evidences the right to purchase) to be received by the holders of each series of Common Stock (other than the Series B Common Stock) corresponds to the extent practicable to the relative voting rights (and related differences in designation, conversion, redemption and Share Distribution provisions) of such series of Common Stock, as compared to the other series of Common Stock (other than the Series B Common Stock).

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	(i) the distinctive serial designations and the number of authorized shares of such series, which may be increased or decreased, but not below the number of shares thereof then outstanding, by a certificate made, signed and filed as required by law (except where otherwise provided in a Preferred Stock Designation);
	(ii) the dividend rate or amounts, if any, for such series, the date or dates from which dividends on all shares of such series shall be cumulative, if dividends on stock of such series shall be cumulative, and the relative preferences or rights of priority, if any, or participation, if any, with respect to payment of dividends on shares of such series;
	(iii) the rights of the shares of such series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, if any, and the relative preferences or rights of priority, if any, of payment of shares of such series;
	(iv) the right, if any, of the holders of such series to convert or exchange such stock into or for other classes or series of a class of stock or indebtedness of the Corporation or of another Person, and the terms and conditions of such conversion or exchange, including provision for the adjustment of the conversion or exchange rate in such events as the Board of Directors may determine;
	(v) the voting powers, if any, of the holders of such series;
	(vi) the terms and conditions, if any, for the Corporation to purchase or redeem shares of such series; and
	(vii) any other relative rights, powers, preferences and limitations, if any, of such series.

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	(a) the amendment, alteration or repeal of any provision of this Certificate or the addition or insertion of other provisions herein; provided, however, that this clause (a) shall not apply to any such amendment, alteration, repeal, addition or insertion (i) as to which the laws of the State of Delaware, as then in effect, do not require the consent of this Corporation’s stockholders, or (ii) that at least 75% of the members of the Board of Directors then in office have approved;
	(b) the adoption, amendment or repeal of any provision of the Bylaws of the Corporation; provided, however, that this clause (b) shall not apply to, and no vote of the stockholders of the Corporation shall be required to authorize, the adoption, amendment or repeal of any provision of the Bylaws of the Corporation by the Board of Directors in accordance with the power conferred upon it pursuant to Section F of Article V of this Certificate;
	(c) the merger or consolidation of this Corporation with or into any other corporation; provided, however, that this clause (c) shall not apply to any such merger or consolidation (i) as to which the laws of the State of Delaware, as then in effect, do not require the consent of this Corporation’s stockholders, or (ii) that at least 75% of the members of the Board of Directors then in office have approved;
	(d) the sale, lease or exchange of all, or substantially all, of the assets of the Corporation; provided, however, that this clause (d) shall not apply to any such sale, lease or exchange that at least 75% of the members of the Board of Directors then in office have approved; or
	(e) the dissolution of the Corporation; provided, however, that this clause (e) shall not apply to such dissolution if at least 75% of the members of the Board of Directors then in office have approved such dissolution.

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	LIBERTY GLOBAL, INC.

	By:

	Name:
	Title:

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	(1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in subsection (f) of § 251 of this title.
	(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to §§ 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except:

	a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof;
	b. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders;
	c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or
	d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph.

	(3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under § 253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation.

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	(1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of such stockholder’s shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder’s shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder’s shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or
	(2) If the merger or consolidation was approved pursuant to § 228 or § 253 of this title, then either a constituent corporation before the effective date of the merger or consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holder’s shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder’s shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder’s shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given.

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