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424B3
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORP filed this Form 424B3 on 09/02/1999
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<PAGE>   459
             CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
 
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
termination of employment for any reason, other than for cause or disability.
Options not exercised accumulate and are exercisable, in whole or in part, in
any subsequent period, but not later than ten years from the date of grant.
 
     Options outstanding as of June 30, 1999, are as follows:
 

<TABLE>
<CAPTION>
                                               OPTIONS OUTSTANDING                      OPTIONS
                              -----------------------------------------------------   EXERCISABLE
                                                                       REMAINING      -----------
                              NUMBER OF   EXERCISE      TOTAL          CONTRACT        NUMBER OF
                               OPTIONS     PRICE       DOLLARS      LIFE (IN YEARS)     OPTIONS
                              ----------  --------   ------------   ---------------   -----------
<S>                           <C>         <C>        <C>            <C>               <C>
Outstanding as of January 1,
  1999......................   7,044,127   $20.00    $140,882,540         9.4          1,761,032
Granted:
  February 9, 1999..........   9,050,881    20.00     181,017,620         9.5                 --
  April 5, 1999.............     443,200    20.73       9,187,536         9.7                 --
                              ----------   ------    ------------         ---          ---------
Outstanding as of June 30,
  1999......................  16,538,208   $20.02    $331,087,696         9.5          1,761,032
                              ==========   ======    ============         ===          =========
</TABLE>

 
     The Company follows Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" to account for the option plans. Stock option
compensation expense of $38.2 million has been recorded in the financial
statements since the exercise prices are less than the estimated fair values of
the underlying membership interests on the date of grant. Estimated fair values
were determined by the Company using the valuation inherent in the Paul Allen
Transaction and valuations of public companies in the cable television industry
adjusted for factors specific to the Company. Compensation expense is being
accrued over the vesting period of each grant that varies from four to five
years. As of June 30, 1999, deferred compensation remaining to be recognized in
future periods totalled $126 million. Had compensation expense for the option
plans been determined based on the fair value at the grant dates under the
provisions of SFAS No. 123, the Company's net loss for the six months ended June
30, 1999, would have been $234.0 million. The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option pricing model with
the following assumptions: no dividend yield, expected volatility of 44.0%, risk
free rate of 5.00%, and expected option lives of 10 years.
 
7.  ACCOUNTING STANDARD NOT YET IMPLEMENTED:
 
     SFAS No. 137 "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133 -- An
Amendment of FASB Statement No. 133" has delayed the effective date of SFAS No.
133 to fiscal years beginning after June 15, 2000. We have not yet quantified
the impact of adopting SFAS No. 133 on our consolidated financial statements nor
have we determined the timing or method of our adoption of SFAS No. 133.
However, SFAS No. 133 could increase volatility in earnings (losses).
 
8.  SUBSEQUENT EVENT:
 
     In the third quarter of 1999, the Company acquired cable television systems
in three separate transactions for an aggregate purchase price of $648.0
million. The Company has also entered into definitive agreements to purchase
additional cable television systems, including a exchange of cable television
systems, for approximately $2.3 billion. The exchange of cable television
systems will be recorded at the fair value of the systems exchanged. The
additional acquisitions are expected to close no later than December 31, 1999.
 
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