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QVC, Inc. and Subsidiaries Index to consolidated financial statements

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 9, 2013APRIL 30, 2014

Registration No. 333-        


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



QVC, Inc.
(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
 5961
(Primary Standard Industrial
Classification Code Number)
 23-2414041
(I.R.S. Employer
Identification No.)

FOR ADDITIONAL REGISTRANTS, SEE
"TABLE OF ADDITIONAL REGISTRANT GUARANTORS" BELOW



1200 Wilson Drive
West Chester, Pennsylvania 19380
(484) 701-1000
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)

Lawrence R. Hayes, Esq.
QVC, Inc.
1200 Wilson Drive
West Chester, Pennsylvania 19380
(484) 701-1000
(Name, Address, Including Zip Code and Telephone Number, Including
Area Code, of Agent for Service)



COPIES OF ALL COMMUNICATIONS TO:
Steven D. Miller, Esq.
Jeffrey R. Kesselman, Esq.
Sherman & Howard L.L.C.
633 Seventeenth Street, Suite 3000
Denver, Colorado 80202
(303) 297-2900



Approximate date of commencement of proposed sale of the securities to the public:
As soon as practicable after this Registration Statement becomes effective.



            If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box o

            If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the "Securities Act"), check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

            If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

            Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act").

Large accelerated filer o Accelerated filer o Non-accelerated filer ý
(Do not check if a
smaller reporting company)
 Smaller reporting company o



            If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

            Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) o

            Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) o



CALCULATION OF REGISTRATION FEE

        
 
Title of each class of securities
to be registered

 Amount to be
registered

 Proposed maximum
offering price per
unit(1)

 Proposed maximum
aggregate offering
price

 Amount of
registration fee

 

4.375% Senior Secured Notes due 2023

 $750,000,000 100% $750,000,000 $102,300
 

5.950% Senior Secured Notes due 2043

 $300,000,000 100% $300,000,000 $40,920
 

Guarantees of 4.375% Senior Secured Notes due 2023(2)

    
 

Guarantees of 5.950% Senior Secured Notes due 2043(2)

    
 

Total

 $1,050,000,000 100% $1,050,000,000 $143,220

 

        
 
Title of each class of securities
to be registered

 Amount to be
registered

 Proposed maximum
offering price per
unit(1)

 Proposed maximum
aggregate offering
price

 Amount of
registration fee

 

3.125% Senior Secured Notes due 2019

 $400,000,000 100% $400,000,000 $51,520
 

4.850% Senior Secured Notes due 2024

 $600,000,000 100% $600,000,000 $77,280
 

Guarantees of 3.125% Senior Secured Notes due 2019(2)

    
 

Guarantees of 4.850% Senior Secured Notes due 2024(2)

    
 

Total

 $1,000,000,000 100% $1,000,000,000 $128,800

 

(1)
Estimated pursuant to Rule 457 under the Securities Act of 1933, as amended, solely for the purpose of calculating the registration fee.

(2)
No separate consideration will be received for the guarantees, and no separate fee is payable pursuant to Rule 457(n) under the Securities Act of 1933, as amended.



            The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said section 8(a), may determine.

   


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Table of additional registrant guarantors

Exact name of registrant
as specified in its charter
 State or other
jurisdiction of
incorporation or
organization
 Primary Standard
Industrial
Classification
code number
 I.R.S.
Employer
Identification
 Address and telephone number
of principal executive office

Affiliate Investment, Inc. 

 Delaware  6719  51-0394501 Suite 205A Second Floor

Bancroft Building

3411 Silverside Rd.

Concord Plaza

Wilmington, DE 19810

(302) 478-7451

Affiliate Relations Holdings, Inc. 

 
Delaware
  
6719
  
52-2009511
 

Suite 205A Second Floor
Bancroft Building
3411 Silverside Rd.
Wilmington, DE 19810
(302) 478-7451

Bancroft Building

3411 Silverside Rd.

Wilmington, DE 19810

(302) 478-7451

AMI 2, Inc. 

 
Delaware
  
6799
  
26-4282165
 

Suite 205 B Bancroft Building

3411 Silverside Rd.

Wilmington, DE 19810

(302) 478-4370

ER Marks, Inc. 

 
Delaware
  
6719
  
52-2009512
 

Suite 205 B Bancroft Building
3411 Silverside Rd.
Wilmington, DE 19810
(302) 478-4370

3411 Silverside Rd.

Wilmington, DE 19810

(302) 478-4370

QVC International LLC

 
Delaware
  
6719
  
51-0353786
 

1200 Wilson Drive

West Chester, PA 19380

(484) 701-1000

QVC Rocky Mount, Inc. 

 
North Carolina
  
4225
  
52-2217907
 

100 QVC Boulevard

Rocky Mount, NC 27801

(252) 467-6600

QVC San Antonio, LLC

 
Texas
  
7389
  
52-1765495
 

9855 Westover Hills Boulevard

San Antonio, TX 78251

(210) 522-4300


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The information in this prospectus is not complete and may be changed. We may not commence the exchange offer or sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities or a solicitation of an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JULY 9, 2013APRIL 30, 2014

Prospectus

LOGO

QVC, Inc.

Exchange Offer for
$750,000,000 4.375%400,000,000 3.125% Senior Secured Notes due 20232019
$300,000,000 5.950%600,000,000 4.850% Senior Secured Notes due 20432024



         We are offering to exchange up to $750,000,000$400,000,000 aggregate principal amount of our registered 4.375%3.125% Senior Secured Notes due 2023,2019, or the "2023"2019 exchange notes," for any and all of the unregistered 4.375%3.125% Senior Secured Notes due 2023,2019, or the "2023"2019 original notes," and up to $300,000,000$600,000,000 aggregate principal amount of our registered 5.950%4.850% Senior Secured notes due 2043,2024, or the "2043"2024 exchange notes" and together with the 20232019 exchange notes, the "exchange notes", for any and all of the unregistered 5.950%4.850% Senior Secured Notes due 2043,2024, or the "2043"2024 original notes" and together with the 20232019 original notes, the "original notes". We issued the original notes in a private offering on March 18, 2013.2014. We refer to the original notes and the exchange notes together in this prospectus as the "notes." We refer to this exchange as the "exchange offer." The exchange notes are substantially identical to the original notes, except the exchange notes are registered under the Securities Act of 1933, as amended, or the "Securities Act," and the transfer restrictions and registration rights, and related special interest provisions, applicable to the original notes will not apply to the exchange notes. The exchange notes will represent the same debt as the original notes and we will issue the exchange notes under the same indenture used in issuing the original notes. If you fail to tender your original notes, you will continue to hold unregistered notes that you will not be able to transfer freely.

         No public market currently exists for the original notes or the exchange notes.

Terms of the exchange offer:

         See "Risk factors" beginning on page 1816 for a discussion of risks you should consider in connection with the exchange offer and an investment in the exchange notes.

         Neither the Securities and Exchange Commission ("SEC") nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

         Each broker-dealer that receives exchange notes in exchange for original notes acquired for its own account as a result of market making or other trading activities must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. By so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by broker-dealers in connection with such resales. We have agreed to make this prospectus available for a period ending on the earlier of 180 days from the effective date of the registration statement of which this prospectus forms a part and the date on which a broker-dealer is no longer required to deliver a prospectus in connection with market-making or other trading activities. See "Plan of Distribution.distribution."

The date of this prospectus is [                        ], 2013.2014.


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 Page 

Prospectus summary

  1 

Summary historical financial and operating data

  1312 

Ratio of earnings to fixed charges

  1715 

Risk factors

  1816 

Use of proceeds

  3735 

The exchange offer

  3835 

Business

  4846 

Management and corporate governance

  5856 

Executive compensation

  6160 

Security ownership

  8986 

Related party transactions

  9187 

Description of other indebtedness

  9288 

Description of notes

  9692 

U.S. federal income tax consequences

  144139 

Plan of distribution

  149144 

Legal matters

  150145 

Experts

  150145 

Where you can find more information

  150145 

Index to consolidated financial statements

  F-1 

Management's discussion and analysis of financial condition and results of operations, MarchDecember 31, 2013

  F-2

Management's discussion and analysis of financial condition and results of operations, December 31, 2012

F-39 

        YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS AND IN THE LETTER OF TRANSMITTAL ACCOMPANYING THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH ANY INFORMATION OR REPRESENT ANYTHING ABOUT US, OUR PARENT, LIBERTY INTERACTIVE CORPORATION, OR THIS PROSPECTUS THAT IS NOT CONTAINED IN THIS PROSPECTUS. IF GIVEN OR MADE, ANY SUCH OTHER INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US. WE TAKE NO RESPONSIBILITY FOR, AND CAN PROVIDE NO ASSURANCE AS TO THE ACCURACY OF, ANY OTHER INFORMATION THAT OTHERS MAY GIVE YOU. WE ARE NOT MAKING AN OFFER TO EXCHANGE THESE NOTES IN ANY JURISDICTION WHERE SUCH OFFER IS NOT PERMITTED, YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS. OUR BUSINESS, FINANCIAL CONDITIONS, RESULTS OF OPERATIONS AND PROSPECTUSPROSPECTS MAY HAVE CHANGED SINCE THAT DATE.

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Cautionary note regarding forward-looking statements

        This prospectus includes statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as forward-looking statements. All statements included in this prospectus, other than statements of historical fact or current fact, that address activities, events or developments that we or our management expect, believe or anticipate will or may occur in the future are forward-looking statements. These statements represent our reasonable judgment on the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors, many of which are beyond our control, that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate," "estimate," "project," "forecast," "plan," "may," "will," "should," "could," "expect," or the negative thereof or other words of similar meaning. In particular, these include, but are not limited to, statements of our current views and estimates of future economic circumstances, industry conditions in domestic and international markets and our future performance and financial results. These forward-looking statements are subject to a number of factors and uncertainties that could cause our actual results and experiences to differ materially from the anticipated results and expectations expressed in such forward-looking statements. We caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

        Among the factors that may cause actual results and experiences to differ from the anticipated results and expectations expressed in such forward-looking statements are the following:

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        Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors, many of which are beyond our control, including those set forth under "Risk factors."

        In addition, there may be other factors that could cause our actual results to be materially different from the results referenced in the forward-looking statements. Many of these factors will be important in determining our actual future results. Consequently, no forward-looking statement can be guaranteed. Our actual future results may vary materially from those expressed or implied in any forward-looking statements.

        All forward-looking statements contained in this prospectus are qualified in their entirety by this cautionary statement.


Special note regarding non-GAAP financial measures

        The body of generally accepted accounting principles in the United States ("U.S.") is commonly referred to as GAAP. A non-GAAP financial measure is generally defined by the SEC as one that purports to measure historical or future financial performance, financial position or cash flows but excludes or includes amounts that could not be so adjusted in the most comparable GAAP measure. Adjusted OIBDA, as presented in this prospectus, is a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP.

        We define Adjusted OIBDA as net revenue less cost of goods sold, operating expenses and selling, general and administrative expenses (excluding stock-based compensation). Our chief operating decision maker and management team use this measure of performance in conjunction with other measures to evaluate our business and make decisions about allocating resources among our operating segments. We believe this is an important indicator of the operational strength and performance of our business, including our ability to service debt and fund capital expenditures. In addition, this measure allows us to view operating results and perform analytical comparisons and benchmarking between operating segments and identify strategies to improve performance. This measure of performance excludes such costs as depreciation and amortization and stock-based compensation that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. Adjusted OIBDA has several limitations that are discussed in management's discussion and analysis of financial condition and results of operations—adjusted operating income before depreciation and amortization (Adjusted OIBDA). See also "Prospectus summary—Summary historical financial and operating data" for a quantitative reconciliation of Adjusted OIBDA to net income and operating income, the most directly comparable GAAP financial performance measures. Adjusted OIBDA as presented herein may not be comparable to similarly titled measures reported by other companies.

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Industry and market data

        Market data and other statistical data regarding us and our subsidiaries, and used throughout this prospectus, are based on independent industry publications, government publications, reports by market research firms or other published independent sources, as well as management's knowledge of, experience in and estimates about the industry and markets in which we operate. Although we believe the third-party sources to be reliable, we have not independently verified the data obtained from these sources. Although we are not aware of any misstatements regarding any market, industry or similar data presented herein, such data involves risks and uncertainties and is subject to change based on various factors, including those discussed under "Cautionary note regarding forward-looking statements" and "Risk factors."


Non-reliance on Liberty Interactive Corporation

        We are an indirect wholly-owned subsidiary of Liberty Interactive Corporation, which we refer to as "Liberty" in this prospectus. Liberty is a company whose securities are registered under the Securities Exchange Act of 1934, as amended, or the "Exchange Act," and is therefore required to file periodic and current reports and other materials with the SEC. While such information is available, investors are cautioned that Liberty is not the issuer of the notes and is not otherwise a guarantor or obligor (contingent or otherwise) with respect to the notes, and will not otherwise provide credit support for the notes, except that our sole shareholder, which is an indirect wholly owned subsidiary of Liberty, is pledging its shares of our capital stock to secure the notes.Therefore, you are directed to rely solely on this prospectus in making your decision with respect to the exchange offer.

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Prospectus summary

        This summary highlights selected information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before deciding whether to invest in the notes. For a more complete understanding of our company and this offering, we encourage you to read this entire document, including "Risk factors," our consolidated financial statements, the notes thereto and management's discussion and analysis of financial condition and results of operations. Unless otherwise indicated or required by the context, the terms "we," "our," "us," the "Company," and "QVC" refer to QVC, Inc. and its consolidated subsidiaries. The terms "domestic" and "U.S." refer to our operations in the United States. The terms "international" and "foreign" refer to our operations outside of the U.S.

Business overview

        QVC Inc. markets and sells a wide variety of consumer products primarily through live televised shopping programs distributed to approximately 214296 million households worldwide households each day (including our joint venture in China as discussed below) and via our websites and other interactive media, including QVC.com. We believe we are the global leader in television retailing and a leading multimedia retailer, with operations based in the U.S., Japan, Germany, the United KingdomU.K. and Italy. Additionally, we have a 49% interest in a retailing joint venture in China which operates through a television shopping channel.channel with an associated website. The joint venture is accounted for as an equity method investment. Our name, QVC, stands for "Quality, Value and Convenience," which is what we strive to deliver to our customers. Our operating strategy is to create a premier multimedia lifestyle brand and shopping destination for our customers, further penetrate our core customer base, generate new customers, enhance our programming distribution offerings and expand internationally to drive revenue and profitability. For the year ended December 31, 2013, we generated $8.6 billion of consolidated net revenue.

        We market our products in an engaging, entertaining format primarily through live television programs and interactive features on our websites. In the U.S., we distribute our programming live 24 hours per day, 364 days per year and present on average almost 1,000900 products every week. Internationally, we distribute live programming 17 to 24 hours per day, depending on the market. We classify our products into foursix groups: electronics, home, (including electronics), accessories (including beauty, products),jewelry, apparel and jewelry.accessories. It is our product sourcing team's mission to research and locate compelling and differentiated products from manufacturers who have sufficient scale to meet anticipated demand. We offer many QVC-exclusiveQVC exclusive products, as well as popular brand name and lesser known products available from other retailers. Many of our products are endorsed by celebrities, designers and other well-known personalities who often join our presenters to personally promote their products and provide lead-inlead in publicity on their own television shows. We believe that our ability to demonstrate product features and present "faces and places" differentiates and defines the QVC shopping experience. We closely monitor customer demand and our product mix to remain well-positionedwell positioned and relevant in popular and growing retail segments, which we believe is a significant competitive advantage relative to competitors who operate bricks-and-mortarbricks and mortar stores.

        Since our inception, we have shipped over 1.51.6 billion packages in the U.S. alone. We operate eightnine distribution centers and eight call centers worldwide and, are able to shipin 2013, shipped approximately 92%94% of our orders within 48 hours of order placement. In 2012,2013, our work force of approximately 17,00017,500 employees handled approximately 171168 million customer calls, shipped over 166169 million units globally and served approximately 11.511.8 million customers. We believe our long-termlong term relationships with major U.S. television distributors, including cable operators (e.g., Comcast and Time Warner Cable), satellite television providers (e.g., DISH Network and DIRECTV) and telecommunications companies (e.g., Verizon and AT&T), provide us with broad distribution, favorable channel positioning and significant competitive advantages. We believe that our significant market share, brand awareness, outstanding customer


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service, repeat customer base, international reach and scalable infrastructure distinguish us from our competitors.


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Liberty relationship

        We are an indirect wholly owned subsidiary of Liberty, Interactive Corporation ("Liberty"), which owns interests in a broad range of digital commerce businesses. On August 9, 2012, Liberty completed the recapitalization of its common stock into shares of the corresponding series of two new tracking stocks, Liberty Interactive (Nasdaq: LINTA, LINTB) and Liberty Ventures (Nasdaq: LVNTA, LVNTB). We are now attributed to the Liberty Interactive tracking stock, which tracks the assets and liabilities of Liberty's Interactive Group (the "Interactive Group"). The Interactive Group does not represent a separate legal entity; rather, it represents those businesses, assets and liabilities that are attributed to that group. Liberty attributedalso attributes to its Interactive Group those businesses primarily focused on digital commerce. Liberty also attributed tocommerce and its Interactive Group its 37%38% ownership interest in HSN, Inc., one of our two closest televised shopping competitors (see "Business—Competition" below for more information). To fundcompetitors.

        On October 10, 2013, Liberty announced that its board has authorized management to pursue a plan to recapitalize (the "Recapitalization") its Liberty Interactive Group tracking stock into two new tracking stocks, one (currently the cash requirementsLiberty Interactive common stock) to be renamed the QVC Group common stock and the other to be designated as the Liberty Digital Commerce common stock. In the Recapitalization, record holders of Series A and Series B Liberty Interactive common stock would receive one share of the corresponding series of Liberty Ventures,Digital Commerce common stock for each 10 shares of the renamed QVC Group common stock held by them as of the effective date. Liberty intends to attribute to the Liberty Digital Commerce Group its operating subsidiaries Provide Commerce, Inc.; Backcountry.com, Inc.; Bodybuilding.com, LLC; CommerceHub; Right Start and Evite along with cash and certain liabilities. The QVC Group, which is currently known as the Liberty Interactive Group, would have attributed $1.35 billionto it the Company and Liberty's approximate 38% interest in HSN along with cash to Liberty Ventures, which was funded by the Interactive Group. Such attributed cash balance consisted of cash from Liberty's balance sheet and $1.15 billion of dividends paid by us to Liberty through our available cash on hand and $800 million in borrowings under our senior secured credit facility. Immediately after the recapitalization, we had $870 million of total outstanding borrowings under our senior secured credit facility plus $1.13 billion of undrawn availability. The senior secured credit facility is further discussed in "Description of other indebtedness—Senior secured credit facility."certain liabilities.

        We are a "close corporation" under Delaware law and, as such, our shareholder, rather than a board of directors, manages our business. Since our shareholder is an indirect wholly owned subsidiary of Liberty, allcertain aspects of our management, including the approval of significant corporate transactions such as a change of control, are controlled by Liberty, rather than an independent governing body. Our Chief Executive Officer and President, Michael A. George, also became a named executive officer of Liberty for the year ended December 31, 2011, and Mr. George became a director of Liberty during 2011.

        Liberty's interests may not coincide with our interests or the interests of our note holders, and Liberty may cause us to enter into transactions or agreements with related parties or approve corporate actions that could involve conflicts of interest. Liberty may also enter into transactions of which note holders might not approve or make decisions with which note holders may disagree. For example, Liberty's dependence on our cash flow for servicing its debt and for other purposes is likely to result in our payment of large dividends to Liberty, which may increase our leverage and decrease our liquidity. We paid $244 million$1.0 billion of net dividends to Liberty during the three months ended March 31, 2013, $1.8 billion of net dividends to Liberty during 2012 and $205 million of net dividends to Liberty during 2011 and $9 million of net dividends to Liberty during 2010.2011. We declared and paid dividends in cash to Liberty in the amount of $517$286 million subsequent to MarchDecember 31, 2013. These dividends were funded and will be funded with draws from our revolving credit facility or from cash generated from operations. Prospective investors should bear in mind our relationship with Liberty in formulating their investment decisions. See "Risk factors—Risks relating to the notes—Our ability to pay dividends or make other restricted payments to Liberty is subject to limited restrictions."

        Neither Liberty nor any of its other affiliates will be a guarantor of the notes or otherwise provide credit support for the notes, except that our sole shareholder, which is an indirect wholly owned subsidiary of Liberty, is pledging its shares of our capital stock to secure the notes.

Recent developments

Redemption of the 2017 notes

        On March 4, 2013, we commenced a tender offer for any and all of the $500 million aggregate principal amount of our 7.125% senior secured notes due 2017 (the "2017 notes"). We purchased $124 million of the 2017 notes in the tender offer. In addition, we called for redemption all 2017 notes that were not tendered in the tender offer for the 2017 notes and on April 17, 2013, we completed the

 


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redemption ofRecent developments

        On April 16, 2014, we announced plans to expand our global presence into France. Similar to our other markets, we plan to offer a highly immersive digital shopping experience, with strong integration across e-commerce, TV, mobile and social platforms, with the remaining $376 million aggregate principal amount of 2017 notes. We used the net proceeds from the sale of the 2023 notes and the existing 5.950% notes, in addition to cash on hand, to provide the total amount of funds required to purchase the 2017 notes, to pay fees and expenses related to the tender offers and to paylaunch scheduled for the 2017 notes that we redeemed.

Distributions to Liberty

        Subsequent to March 31, 2013 and prior to the commencementsecond quarter of this exchange offer, we declared and paid dividends to Liberty in the amount of $517 million. These dividends were funded with draws from our revolving credit facility and from cash generated from operations.2015.


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Corporate information

        We are a Delaware corporation with principal executive offices located at 1200 Wilson Drive, West Chester, Pennsylvania 19380. Our main telephone number at that location is (484) 701-1000.

        Each of the wholly-owned subsidiaries of QVC listed in the table below is a guarantor of the notes. None of these subsidiaries operate any business outside of the business of QVC.


Table of additional registrant guarantors

Exact name of registrant
as specified in its charter
 State or other
jurisdiction of
incorporation or
organization
 Primary
Standard
Industrial
Classification
code number
 I.R.S.
Employer
Identification
 Address and telephone number
of principal executive office

Affiliate Investment, Inc. 

 Delaware  6719  51-0394501 Suite 205A Second Floor

Bancroft Building

3411 Silverside Rd.

Concord Plaza

Wilmington, DE 19810

(302) 478-7451

Affiliate Relations Holdings, Inc. 

 

Delaware

  
6719
  
52-2009511
 

Suite 205A Second Floor
Bancroft Building
3411 Silverside Rd.
Wilmington, DE 19810
(302) 478-7451

Bancroft Building

3411 Silverside Rd.

Wilmington, DE 19810

(302) 478-7451

AMI 2, Inc. 

 

Delaware

  
6799
  
26-4282165
 

Suite 205 B Bancroft Building

3411 Silverside Rd.

Wilmington, DE 19810

(302) 478-4370

ER Marks, Inc. 

 

Delaware

  
6719
  
52-2009512
 

Suite 205 B Bancroft Building
3411 Silverside Rd.
Wilmington, DE 19810
(302) 478-4370

3411 Silverside Rd.

Wilmington, DE 19810

(302) 478-4370

QVC International LLC

 

Delaware

  
6719
  
51-0353786
 

1200 Wilson Drive

West Chester, PA 19380

(484) 701-1000

QVC Rocky Mount, Inc. 

 

North Carolina

  
4225
  
52-2217907
 

100 QVC Boulevard

Rocky Mount, NC 27801

(252) 467-6600

QVC San Antonio, LLC

 

Texas

  
7389
  
52-1765495
 

9855 Westover Hills Boulevard

San Antonio, TX 78251

(210) 522-4300

 



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The exchange offer

        On March 18, 2013,2014, we completed a private offering of the original notes in reliance on Section 4(2) of the Securities Act, and Rule 144A and Regulation S thereunder. As part of that offering, we entered into a registration rights agreement with the initial purchasers of the original notes, which we refer to as the registration rights agreement, in which we agreed, among other things, to offer to exchange the original notes for the exchange notes. The following is a summary of the principal terms of the exchange offer. A more detailed description is contained in the section of this prospectus entitled "The exchange offer."

Original notes

 $750400 million aggregate principal amount of 4.375%3.125% Senior Secured Notes due March 15, 2023April 1, 2019 and $300$600 million aggregate principal amount of 5.950%4.850% Senior Secured Notes due March 15, 2043,April 1, 2024, which were issued in a private placement on March 18, 2013.2014.

Exchange notes

 

4.375%3.125% Senior Secured Notes due March 15, 2023April 1, 2019 and 5.950%4.850% Senior Secured Notes due March 15, 2043.April 1, 2024. The terms of the exchange notes are substantially identical to the terms of the corresponding series of original notes, except that the exchange notes are registered under the Securities Act, and the transfer restrictions and registration rights, and related special interest provisions, applicable to the original notes will not apply to the exchange notes.

Exchange offer

 

Pursuant to the registration rights agreements, we are offering to exchange up to $750$400 million principal amount of our 20232019 exchange notes and up to $300$600 million of our 20432024 exchange notes that have been registered under the Securities Act for an equal principal amount of the corresponding series of our original notes.

 

The exchange notes will evidence the same debt as the corresponding series of original notes, including principal and interest, and will be issued under and be entitled to the benefits of the same indenture that governs the corresponding series of original notes. Holders of the original notes do not have any appraisal or dissenter's rights in connection with the exchange offer. Because the exchange notes will be registered, the exchange notes will not be subject to transfer restrictions and holders of original notes that tender and have their original notes accepted in the exchange offer will no longer have registration rights or the right to receive the related special interest under the circumstances described in the registration rights agreement.

 


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Expiration date

 

The exchange offer will expire at 5:00 p.m., New York City time, on [            ], 2013,2014, which we refer to as the "Expiration Date," unless we decide to extend it or terminate it early. We do not currently intend to extend the exchange offer. A tender of original notes pursuant to this exchange offer may be withdrawn at any time on or prior to the Expiration Date if we receive a valid written withdrawal request before the expiration of the exchange offer.

Conditions to the exchange Offer

 

The exchange offer is subject to customary conditions, which we may, but are not required to, waive. We will not be required to accept for exchange, or to issue exchange notes in exchange for, any original notes, and we may terminate or amend the exchange offer if we determine in our reasonable judgment that the exchange offer would violate applicable law or any applicable interpretation of the staff of the SEC. Please see "The exchange offer—Conditions to the exchange offer" for more information regarding the conditions to the exchange offer. We reserve the right, in our sole discretion, to waive any and all conditions to the exchange offer on or prior to the Expiration Date.

Procedures for tendering original
notes

 

To participate in the exchange offer, on or prior to the Expiration Date you must tender your original notes by using the book-entry transfer procedures described in "The exchange offer—Procedures for tendering original notes," including transmission or delivery to the exchange agent of an agent's message or a properly completed and duly executed letter of transmittal, with any required signature guarantee. In order for a book-entry transfer to constitute a valid tender of your original notes in the exchange offer, U.S. Bank National Association, as registrar and exchange agent, must receive a confirmation of book-entry transfer of your original notes into the exchange agent's account at The Depository Trust Company prior to the Expiration Date. By signing or agreeing to be bound by the letter of transmittal, you will represent to us that, among other things:

 

you are acquiring exchange notes in the ordinary course of business of both you and any beneficial owner of the exchange notes;

 

you are not engaged in, and you do not intend to engage in, and you have no arrangement or understanding with any person or entity to participate in a distribution of the exchange notes;

 

you are transferring good and marketable title to the original notes free and clear of all liens, security interests, encumbrances, or rights or interests of others except your own;

 


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if you are a broker-dealer that will receive exchange notes for your own account in exchange for original notes that were acquired by you as a result of market-making or other trading activities, that you will deliver a prospectus, as required by law, in connection with any resale of your exchange notes; and

 

you are not our "affiliate" as defined in Rule 405 of the Securities Act. If you are a broker-dealer, you may not participate in the exchange offer as to any original notes you purchased directly from us.

Withdrawal

 

You may withdraw any original notes tendered in the exchange offer by sending the exchange agent notice of withdrawal at any time prior to 5:00 p.m., New York City time, on the Expiration Date. If we decide for any reason not to accept any original notes tendered for exchange or to withdraw the exchange offer, the original notes will be returned promptly after the expiration or termination of the exchange offer. For further information regarding the withdrawal of tendered original notes, please see "The exchange offer—Withdrawal of tenders."

Acceptance of original notes and
delivery of exchange notes

 

If you fulfill all conditions required for proper acceptance of the original notes, we will accept any and all original notes that you properly tender in the exchange offer before 5:00 p.m., New York City time, on the Expiration Date. For more information, please read "The exchange offer—Terms of the exchange offer."

United States federal income tax
considerations

 

The exchange of exchange notes for original notes in the exchange offer will not be a taxable event for U.S. federal income tax purposes. Please see "U.S. federal income tax consequences" for more information regarding the tax consequences to you of the exchange offer.

Use of proceeds

 

The issuance of the exchange notes will not provide us with any new proceeds. We are making this exchange offer solely to satisfy our obligations under the registration rights agreement we entered into with the initial purchasers of the original notes.

Fees and expenses

 

We will pay all expenses incident to the exchange offer.

 


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Exchange agent

 

We have appointed U.S. Bank National Association as our exchange agent for the exchange offer. You should tender your notes, direct questions and requests for assistance and requests for additional copies of this prospectus (including the letter of transmittal) to the exchange agent as follows:

 

Delivery by Mail:
U.S. Bank National Association
60 Livingston Avenue - EP - MN - WS2NAvenue—EP-MN-WS2N
St. Paul, MN 55107-2292
Attention: Specialized Finance

 

Courier or Overnight Delivery:
U.S. Bank National Association
111 Fillmore Avenue
St. Paul, MN 55107-1402
Attention: Specialized Finance

 

To Confirm by Telephone or for Information:
(651) 466-7150

 

Facsimile Transmissions:
(651) 466-7372

 

You can find more information regarding the exchange agent elsewhere in this prospectus under the caption "The exchange offer—Exchange agent."

Resales of exchange notes

 

Based on interpretations by the staff of the SEC, as set forth in no-action letters issued to third parties, we believe that the exchange notes you receive in the exchange offer may be offered for resale, resold or otherwise transferred by you without compliance with the registration and prospectus delivery provisions of the Securities Act so long as certain conditions are met. See "The exchange offer—Resale of exchange notes" and "Plan of distribution" for more information regarding resales.

Consequences of not exchanging your
original notes

 

If you do not exchange your original notes in this exchange offer, you will continue to hold unregistered original notes and you will no longer be entitled to registration rights and or the special interest provisions related thereto, except in the limited circumstances set forth in the registration rights agreement. See "The exchange offer—Consequences of failure to exchange." In addition, you will not be able to resell, offer to resell or otherwise transfer your original notes unless you do so in a transaction exempt from the registration requirements of the Securities Act and applicable state securities laws or unless we register the offer and resale of your original notes under the Securities Act. Following the exchange offer, we will be under no obligation to register your original notes, except under the limited circumstances set forth in the registration rights agreement.

 


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For information regarding the limited circumstances under which we may be required to file a registration statement after this exchange offer and the consequences of not tendering your original notes in this exchange offer, please see "The exchange offer—Consequences of failure to exchange" and "Description of exchange notes."

Additional documentation; further
information; assistance

 

Any questions or requests for assistance or additional documentation regarding the exchange offer may be directed to the exchange agent at the number set forth above. Beneficial owners of original notes should contact their broker, dealer, commercial bank, trust company or other nominee for assistance in tendering their original notes in the exchange offer.

 



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Terms of the exchange notes

        The terms of the exchange notes and those of the outstanding original notes are substantially identical, except that the exchange notes are registered under the Securities Act, and the transfer restrictions and registration rights, and related special interest provisions, applicable to the original notes will not apply to the exchange notes. The exchange notes represent the same debt as the corresponding series of original notes for which they are being exchanged. Both the original notes and the exchange notes are governed by the same indenture.

Issuer

 QVC, Inc.


Notes offered


 


$750,000,000400,000,000 aggregate principal amount of 4.375%3.125% Senior Secured Notes due 2023.2019.



 


$300,000,000600,000,000 aggregate principal amount of 5.950%4.850% Senior Secured Notes due 2043.2024.


Maturity dates


 


The 20232019 notes will mature on March 15, 2023.April 1, 2019.



 


The 20432024 notes will mature on March 15, 2043.April 1, 2024.


Interest


 


Interest on the 20232019 notes will accrue at a rate per annum equal to 4.375%3.125%.



 


Interest on the 20432024 notes will accrue at a rate per annum equal to 5.950%4.850%.


Interest payment dates


 


Interest on the 20232019 notes will be payable on March 15April 1 and September 15October 1 of each year, beginning on September 15, 2013.October 1, 2014. Interest will accrue from March 18, 2013.2014.



 


Interest on the 20432024 notes will be payable on March 15April 1 and September 15October 1 of each year, beginning on September 15, 2013.October 1, 2014. Interest will accrue from March 18, 2013.2014.


Guarantees


 


Each series of notes will be guaranteed by each of our material domestic subsidiaries that guarantee the borrowings under our senior secured credit facility and our Existing Notes (together, our "existing secured indebtedness").



 


For the year ended December 31, 2012, our non-guarantor subsidiaries accounted for $2.8 billion, or 33.4%, of our consolidated net revenue and $195 million, or 15.4%, of our operating income. For the three months ended March 31, 2013, our non-guarantor subsidiaries accounted for $654 million, or 33.1%, of our consolidated net revenue and $23 million, or 8.8%, of our operating income and, at March 31, 2013, our non-guarantor subsidiaries accounted for $2.9 billion, or 22.9%33.8%, of our consolidated net revenue and $256 million, or 20.6%, of our operating income. As of December 31, 2013, our non-guarantor subsidiaries accounted for $3.0 billion, or 22.8%, of our consolidated assets.


Security


 


Each series of notes will be secured on apari passu basis by the same collateral that secures our existing secured indebtedness and certain future indebtedness, subject as to priority and otherwise to certain exceptions and subject to certain permitted liens. See "Description of notes—Security."

 


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Ranking

 

The notes will not be secured by a lien on any assets of QVC, Inc. or any of its subsidiaries. So long as the notes are secured solely by a lien on all shares of our capital stock, the holders of each series of notes will have only an unsecured claim against our assets and the assets of the guarantors. Any such unsecured claim will rank equally in right of payment with all other unsecured unsubordinated indebtedness and other obligations of us and the guarantors, including trade payables. Each series of notes will rank equally in right of payment with all of our existing and future senior obligations and senior in right of payment to all of our existing and future subordinated obligations. The guarantees will rank equally in right of payment with the guarantors' existing and future senior obligations and senior in right of payment to their existing and future subordinated obligations. Each series of notes and guarantees will be structurally subordinated to all the liabilities of any of our subsidiaries that do not guarantee the notes, and effectively subordinated to the claims of lienholders with prior permitted liens to the extent of the value of the applicable collateral. See "Description of notes—Ranking" and "—Security." Although under certain circumstances each series of notes could benefit from liens on certain additional assets in the future, there can be no assurances that such circumstances will ever arise.



 


As of MarchDecember 31, 2013, after giving effect to the redemptionissuance of 2017 notes described in "—Recent developments—Redemption of the 2017 notes" and the issuance of original notes and the use of proceeds therefrom described in "Use of Proceeds"proceeds", we and our guarantor subsidiaries would have had total debt, other than our capital lease obligations, of approximately $3.6$3.8 billion, consisting of (1) approximately $2.8 billion of secured indebtedness under our Existing Notes, $0.7 billion outstanding underin each case, secured by a first priority perfected lien on all shares of our senior secured credit facilitycapital stock and an additional $1.3$2.0 billion of unused capacity under our senior secured credit facility, all of which would rank equally with and share in the collateral securing the notes. In addition, we and our guarantor subsidiaries had $82$80 million of capital lease obligations that are secured by collateral that does not secure the notes.



 


As of MarchDecember 31, 2013, after giving effect to the redemption of 2017 notes described in "—Recent developments—Redemption of the 2017 notes" and the issuance of notes and the use of proceeds therefrom described in "Use of proceeds", our non-guarantor subsidiaries would have had $1.4$0.6 billion of obligations (consisting predominantly of trade payables, deferred tax liabilities, certain other liabilities and no indebtedness for borrowed money), all of which would be structurally senior to the notes.


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Optional redemption


 


We may redeem all or a part of the notes at any time at a redemption price equal to the greater of 100% of the principal amount of the notes or a "make-whole" amount and, in each case, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date as set forth in "Description of notes—Optional redemption."


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Change of control

 

If we experience specific kinds of changes of control, we will be required to make an offer to purchase the notes at a purchase price of 101% of the principal amount thereof, plus accrued and unpaid interest to, but not including, the repurchase date. See "Description of notes—Change of control."


Certain covenants


 


The indenture governing the notes will restrict our ability and the ability of our restricted subsidiaries to, among other things:

 

incur additional indebtedness;

 

pay dividends and make certain distributions, investments and other restricted payments;

 

create certain liens or use assets as security in other transactions;

 

sell assets;

 

change our line of business;

 

enter into transactions with affiliates;

 

limit the ability of restricted subsidiaries to make payments to us;

 

enter into sale and leaseback transactions;

 

merge, consolidate, sell or otherwise dispose of all or substantially all of our assets; and

 

designate subsidiaries as unrestricted subsidiaries.



 


These covenants are subject to important exceptions and qualifications. See "Description of notes—Certain covenants."



 


If the notes are assigned investment grade ratings by both Moody's and S&P and no default or event of default has occurred and is continuing, certain covenants will be eliminated. See "Description of notes—Certain covenants—Fall-away event."


Transfer restrictions


 


The exchange notes generally will be freely transferable.


Risk factors


 


See "Risk factors" beginning on page 1816 and the other information contained in this prospectus for a discussion of factors you should carefully consider prior to making an investment decision regarding the notes.

 



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Summary historical financial and operating data

        The following table sets forth our summary historical financial and operating data at the dates and for the periods indicated. The statement of operations, balance sheet and other financial data in the following summary historical financial data as of December 31, 20122013 and 2011,2012, and for each of the years in the three-year period ended December 31, 2012,2013, is derived from our audited consolidated financial statements included elsewhere in this prospectus. The statement of operations and other financial data included in the following selected historical financial data for the three months ended March 31, 2013 and 2012 and the balance sheet data as of March 31, 2013 have been derived from the unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. The balance sheet data as of December 31, 2010 included in the following summary historical financial data2011 and the statement of operations, balance sheet and other financial data included in the following summary historical financial data as of and for the years ended December 31, 20092010 and 20082009 have been derived from our audited consolidated financial statements which are not included in this prospectus.

        You should read the information contained in this table in conjunction with the financial statements, the accompanying notes thereto and management's discussion and analysis of financial condition and results of operations included elsewhere in this prospectus.

        The results of operations for any partial period are not necessarily indicative of the results of operations for other periods or for the full fiscal year.


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Statement of operations data:


 Fiscal year ended Three months ended  Fiscal year ended 
(in millions)
 December 31,
2008
 December 31,
2009
 December 31,
2010
 December 31,
2011
 December 31,
2012
 March 31,
2012
 March 31,
2013
  December 31,
2009
 December 31,
2010
 December 31,
2011
 December 31,
2012
 December 31,
2013
 

  
  
  
  
  
 (unaudited)
 (unaudited)
 

Net revenue(1)

 $7,303 $7,374 $7,813 $8,268 $8,516 $1,932 $1,974  $7,374 $7,813 $8,268 $8,516 $8,623 

Cost of goods sold

 (4,719) (4,755) (5,008) (5,278) (5,419) 1,230 1,252  (4,755) (5,008) (5,278) (5,419) (5,465)
                          

Gross profit

 2,584 2,619 2,805 2,990 3,097 702 722  2,619 2,805 2,990 3,097 3,158 
                          

Operating expenses:

            

Operating

 (703) (684) (701) (744) (715) (175) (173) (668) (701) (744) (715) (740)

Selling, general and administrative, including stock-based compensation

 (394) (388) (449) (535) (588) (142) (155) (404) (449) (535) (588) (615)

Depreciation

 (131) (125) (128) (135) (126) (31) (30) (125) (128) (135) (126) (127)

Amortization of intangible assets

 (400) (403) (395) (439) (400) (96) (104) (403) (395) (439) (400) (431)
                          

 (1,628) (1,600) (1,673) (1,853) (1,829) (444) (462) (1,600) (1,673) (1,853) (1,829) (1,913)
                          

Operating income

 956 1,019 1,132 1,137 1,268 258 260  1,019 1,132 1,137 1,268 1,245 
                          

Other income (expense):

 

Other (expense) income:

           

(Loss) gain on investments

  (6) 105 (2) (4)  1  (6) 105 (2) (4) (4)

(Loss) gain on financial instruments

 (24) 32 40 50 48 11 12 

Interest expense

 (249) (357) (415) (231) (235) (55) (63)

Interest income

 376 6 2 2 2 1  

Foreign currency (loss) gain

 (63) 19 (8) (2) 2 6 (1)

Gain on financial instruments

 32 40 50 48 15 

Interest expense, net

 (351) (413) (229) (233) (214)

Foreign currency gain (loss)

 19 (8) (2) 2 1 

Other expense

 (2) (15) (23)    (41) (15) (23)   (57)
                          

 38 (321) (299) (183) (187) (37) (92) (321) (299) (183) (187) (259)
                          

Income before income taxes

 994 698 833 954 1,081 221 168  698 833 954 1,081 986 

Income tax expense

 (353) (281) (282) (342) (394) (82) (62) (281) (282) (342) (394) (353)
                          

Net income

 641 417 551 612 687 139 106  417 551 612 687 633 

Less: Net income attributed to the noncontrolling interest

 (34) (38) (47) (52) (63) (14) (12) (38) (47) (52) (63) (45)
                          

Net income attributable to QVC, Inc. shareholder

 $607 $379 $504 $560 $624 $125 $94  $379 $504 $560 $624 $588 
           
           

(1)
Gross merchandise sales plus shipping and handling revenue less a provision for returns. See Note 2(j) to the audited consolidated financial statements included in this prospectus for information about the provision for returns.

 


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Other financial data:

 
 Fiscal year ended Quarter ended 
(dollars in millions)
 December 31,
2008
 December 31,
2009
 December 31,
2010
 December 31,
2011
 December 31,
2012
 March 31,
2012
 March 31,
2013
 
 
  
  
  
  
  
 (unaudited)
 (unaudited)
 

U.S. % of net revenue

  67.2% 67.6% 67.1% 65.5% 65.6% 64.2% 65.7%

International % of net revenue

  32.8% 32.4% 32.9% 34.5% 34.4% 35.8% 34.3%

E-Commerce % of net revenue(2)

  21.9% 25.1% 28.3% 31.3% 34.5% 32.6% 36.2%

Gross Margin %(3)

  35.4% 35.5% 35.9% 36.2% 36.4% 36.3% 36.6%

Adjusted OIBDA(4)

 $1,502 $1,565 $1,673 $1,733 $1,828 $390 $404 

Adjusted OIBDA Margin %(4)(5)

  20.6% 21.2% 21.4% 21.0% 21.5% 20.2% 20.5%

Capital expenditures

 $144 $181 $220 $259 $246 $45 $33 

 
 Fiscal year ended 
(dollars in millions)
 December 31,
2009
 December 31,
2010
 December 31,
2011
 December 31,
2012
 December 31,
2013
 

U.S. % of net revenue

  67.6% 67.1% 65.5% 65.6% 67.8%

International % of net revenue

  32.4% 32.9% 34.5% 34.4% 32.2%

E-Commerce % of net revenue(2)

  25.1% 28.3% 31.3% 34.5% 37.6%

Gross Margin %(3)

  35.5% 35.9% 36.2% 36.4% 36.6%

Adjusted OIBDA(4)

 $1,565 $1,673 $1,733 $1,828 $1,841 

Adjusted OIBDA Margin %(4)(5)

  21.2% 21.4% 21.0% 21.5% 21.3%

Capital expenditures, net

 $181 $220 $259 $246 $211 

(2)
Net revenue generated from our U.S. and international websites and mobile applications divided by consolidated net revenue.

(3)
Gross profit divided by net revenue.

(4)
We define Adjusted OIBDA as net revenue less cost of goods sold, operating expenses and selling, general and administrative expenses (excluding stock-based compensation). Our chief operating decision maker and management team use this measure of performance in conjunction with other measures to evaluate our business and make decisions about allocating resources among our businesses. We believe this is an important indicator of the operational strength and performance of our business, including our ability to service debt and fund capital expenditures. In addition, this measure allows us to view operating results and perform analytical comparisons and benchmarking among our businesses and identify strategies to improve performance. This measure of performance excludes such costs as depreciation and amortization and stock-based compensation that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. Adjusted OIBDA has several limitations that are discussed in management's discussion and analysis of financial condition and results of operations—adjusted operating income before depreciation and amortization (Adjusted OIBDA).

(5)
Adjusted OIBDA divided by net revenue.

 


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Reconciliation of net income and operating income to Adjusted OIBDA:


 Fiscal year ended Quarter ended  Fiscal year ended 
(in millions)
 December 31,
2008
 December 31,
2009
 December 31,
2010
 December 31,
2011
 December 31,
2012
 March 31,
2012
 March 31,
2013
  December 31,
2009
 December 31,
2010
 December 31,
2011
 December 31,
2012
 December 31,
2013
 

  
  
  
  
  
 (unaudited)
 (unaudited)
 

Net income

 $641 $417 $551 $612 $687 $139 $106  $417 $551 $612 $687 $633 

(Loss) gain on investments

  (6) 105 (2) (4)  1 

(Loss) gain on financial instruments

 (24) 32 40 50 48 11 12 

Interest expense

 (249) (357) (415) (231) (235) (55) (63)

Interest income

 376 6 2 2 2 1  

Foreign currency (loss) gain

 (63) 19 (8) (2) 2 6 (1)

Loss (gain) on investments

 6 (105) 2 4 4 

Gain on financial instruments

 (32) (40) (50) (48) (15)

Interest expense, net

 351 413 229 233 214 

Foreign currency (gain) loss

 (19) 8 2 (2) (1)

Other expense

 (2) (15) (23)    (41) 15 23   57 

Income tax expense

 (353) (281) (282) (342) (394) (82) (62) 281 282 342 394 353 
                          

Operating income

 956 1,019 1,132 1,137 1,268 258 260  1,019 1,132 1,137 1,268 1,245 

Depreciation and amortization of intangible assets

 (531) (528) (523) (574) (526) (127) (134) 528 523 574 526 558 

Stock-based compensation expense

 (15) (18) (18) (22) (34) (5) (10) 18 18 22 34 38 
                          

Adjusted OIBDA

 $1,502 $1,565 $1,673 $1,733 $1,828 $390 $404  $1,565 $1,673 $1,733 $1,828 $1,841 
           
           

Balance sheet data (at end of period):

(in millions)
 December 31,
2008
 December 31,
2009
 December 31,
2010
 December 31,
2011
 December 31,
2012
 March 31,
2013
  December 31,
2009
 December 31,
2010
 December 31,
2011
 December 31,
2012
 December 31,
2013
 

  
  
  
  
  
 (unaudited)
 

Cash and cash equivalents(6)

 $685 $748 $621 $560 $540 $439  $748 $621 $560 $540 $457 

Working capital(7)

 $1,867 $1,228 $1,209 $1,375 $1,190 $1,182  $1,228 $1,209 $1,375 $1,190 $1,255 

Total assets

 $14,841 $14,852 $13,820 $13,570 $13,438 $12,898  $14,852 $13,820 $13,570 $13,438 $13,056 

Total debt(8)

 $5,285 $4,039 $2,820 $2,490 $3,477 $3,596  $4,039 $2,820 $2,490 $3,477 $3,813 

Total equity

 $6,183 $7,228 $7,654 $8,019 $6,834 $6,590  $7,228 $7,654 $8,019 $6,834 $6,341 

(6)
Excludes restricted cash.

(7)
Total current assets less total current liabilities.

(8)
Long-term portion of debt and capital lease obligations, plus current portion of debt and capital lease obligations.

 


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Ratio of earnings to fixed charges

        The following table presents our ratio of earnings to fixed charges for the periods presented.


 Fiscal year ended Three months ended  Fiscal year ended 
(in millions)
 December 31,
2008
 December 31,
2009
 December 31,
2010
 December 31,
2011
 December 31,
2012
 March 31,
2012
 March 31,
2013
  December 31,
2009
 December 31,
2010
 December 31,
2011
 December 31,
2012
 December 31,
2013
 

Fixed charges:

            

Interest expense(1)

 249 360 420 233 236 55 63  360 420 233 236 217 

Estimate of interest within rental expense

 6 5 6 6 9 2 2  5 6 6 9 7 
                          

Total fixed charges

 255 365 426 239 245 57 65  365 426 239 245 224 
                          

Earnings:

            

Income before income taxes

 994 698 833 954 1,081 221 168  698 833 954 1,081 986 

Add amortization of capitalized interest

  3 1 2 2 1 1  3 1 2 2 2 
                          

Subtotal

 994 701 834 956 1,083 222 169  701 834 956 1,083 988 

Fixed charges per above

 255 365 426 239 245 57 65  365 426 239 245 224 

Less interest capitalized during the period

 (1) (3) (5) (2) (2)    (3) (5) (2) (2) (1)
                          

Total earnings

 1,248 1,063 1,255 1,193 1,326 279 234  1,063 1,255 1,193 1,326 1,211 
                          

Ratio of earnings to fixed charges

 4.9 2.9 2.9 5.0 5.4 4.9 3.6  2.9 2.9 5.0 5.4 5.4 

(1)
Includes the sum of the following: (a) interest expensed and capitalized and (b) amortized premiums, discounts and capitalized expenses related to indebtedness.

 


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Risk factors

        An investment in the notes involves a high degree of risk. You should carefully consider the risks and uncertainties described below, as well as the other information included in this prospectus, before deciding to participate in the exchange offer. The risks described below are not the only ones facing our Company. In the event any of the following risks actually occurs, our business, financial condition and results of operations could be materially adversely affected. The value of the notes could decline due to any of these risks, and you may lose all or part of your investment in the notes. The risks described below are those that we currently believe may materially affect us. For purposes of this section, the phrase "material adverse effect" is meant to refer to a material adverse effect on our financial condition, results of operations and/or the value of the notes.

        This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks described below and elsewhere in this prospectus. See "Cautionary note regarding forward-looking statements."

Risks related to our business

Continuing weakWeak economic conditions worldwide including in the United States and Europe, may reduce consumer demand for our products and services

        The recentprolonged economic downturnuncertainty in the United States and in othervarious regions of the world in which our subsidiaries and affiliates operate could adversely affect demand for our products and services since a substantial portion of our revenue is derived from discretionary spending by individuals, which typically falls during times of economic instability. Global financial markets continue to experience disruptions, including increased volatility and diminished liquidity and credit availability. In particular, the current European debt crisis, particularly most recently in Greece, Italy, Ireland, Portugal and Spain, and related European financial restricting efforts may cause volatility in the European currencies and reduce the purchasing power of European customers. In the event that one or more countries were to replace the Euro with their legacy currency, then our revenue and operating results in such countries, or Europe generally, would likely be adversely affected until stable exchange rates were established and economic confidence restored. In addition, the European crisis is contributing to instability in global credit markets. The world has recently experienced a global macroeconomic downturn, and if economic and financial market conditions in the United StatesU.S. or other key markets, including Japan and Europe, remain uncertain, persist, or deteriorate further, our customers may respond by suspending, delaying, or reducing their discretionary spending. A suspension, delay or reduction in discretionary spending could adversely affect revenue. Accordingly, our ability to increase or maintain revenue and earnings could be adversely affected to the extent that relevant economic environments remain weak or decline further. Such weak economic conditions may also inhibit our expansion into new European and other markets. We currently are unable to predict the extent of any of these potential adverse effects.

The retail business environment is subject to intense competition, and we may not be able to effectively compete for customers

        We operate in a rapidly evolving and highly competitive retail business environment. Although we are the U.S.'s largest television shopping retailer, we have numerous and varied competitors at the national and local levels, ranging from large department stores to specialty shops, electronic retailers, direct marketing retailers, wholesale clubs, discount retailers, other televised shopping retailers such as HSN and ShopNBCShopHQ in the U.S., Shop Channel in Japan, HSE 24 in Germany and Ideal World in the United Kingdom,U.K., infomercial retailers, internetInternet retailers, and mail-order and catalog companies. Many of our current and potential competitors have greater resources, longer histories, more customers and greater brand recognition than we do. They may secure better terms from vendors, adopt more


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aggressive pricing, offer free or subsidized shipping and devote more resources to technology, fulfillment and marketing. Other companies also may enter into business combinations or alliances that strengthen their competitive positions.

        We also compete for access to customers and audience share with other providers of televised, online and hard copy entertainment and content. We face similar competition in our international markets. Our inability to compete effectively with regard to the assortment, product price, shipping terms, shipping pricing or free shipping and quality of the


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merchandise we offer for sale or to keep pace with competitors in our marketing, service, location, reputation, credit availability and technologies, could have a material adverse effect.

Our net revenue and operating results depend on our ability to predict or respond to consumer preferences

        Our net revenue and operating results depend, in part, on our ability to predict or respond to changes in consumer preferences and fashion trends in a timely manner. We develop new retail concepts and continuously adjust our product mix in an effort to satisfy customer demands. Consumer preferences may be affected by many factors outside of our control, including responses of competitors and general economic conditions. Any sustained failure by us to identify and respond to emerging trends in lifestyle and consumer preferences could have a material adverse effect.

Our long-term success depends in large part on our continued ability to attract new customers and retain existing customers and we may not be able to do that in a cost-effective manner

        In an effort to attract and retain customers, we engage in various merchandising and marketing initiatives, which involve the expenditure of money and resources, particularly in the case of the production and distribution of our television programming and, to a lesser but increasing extent, online advertising. We have spent, and expect to continue to spend, increasing amounts of money on, and devote greater resources to, certain of these initiatives, particularly in our continuing efforts to increasingly engage customers through online and mobile channels and to personalizing our customers' shopping experience. These initiatives, however, may not resonate with existing customers or consumers generally or may not be cost-effective. In addition, costs associated with the production and distribution of our television programming and costs associated with online marketing, including search engine marketing (primarily the purchase of relevant keywords), have increased and are likely to continue to increase in the foreseeable future and, if significant, could have a material adverse effect to the extent that they do not result in corresponding increases in net revenue.

We depend on the television distributors that carry our programming, and no assurance can be given that we will be able to maintain and renew our affiliation agreements on favorable terms or at all

        We currently distribute our programming through affiliation or transmission agreements with many television providers, including, but not limited to, Comcast, DIRECTV, DISH Network and Time Warner Cable DIRECTV and DISH Network in the U.S., JCN, Jupiter Telecommunications, Ltd., Sky Perfect and World Hi-Vision Channel, Inc. in Japan, Kabel Deutschland Vertrieb und Service GmbH, Media Broadcast GmbH, SES ASTRA, British TelecommunicationsSES Platform Services GmbH, Telekom Deutschland GmbH and Unitymedia Kabel DeutschlandBW GmbH in Germany, A1 Telekom Austria AG and UPC Telekabel Wien GmbH in Austria, Arqiva, British Sky Broadcasting, Freesat, SDN and Virgin Media Arqiva and Freesat in the United KingdomU.K. and Mediaset and Sky Italia S.r.l. and Telecom Italia Media Broadcasting S.r.l. in Italy. Our affiliation agreements with distributors are scheduled to expire between 20132014 and 2022.

        As part of normal course renewal discussions, occasionally we have disagreements with our distributors over the terms of our carriage, such as channel placement or other contract terms. If not resolved through business negotiation, such disagreements could result in litigation or termination of an existing agreement. Termination of an existing agreement resulting in the loss of distribution of our programming to a material portion of our television households may adversely affect our growth, net revenue and earnings.


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        The renewal negotiation process for affiliation agreements is typically lengthy. In some cases, renewals are not agreed upon prior to the expiration of a given agreement while the programming continues to be carried by the relevant distributor without an effective agreement in place. We do not have distribution agreements with some of the cable operators that carry our programming. In total, we are currently providing programming without affiliation agreements to distributors representing 7%6% of our U.S. distribution, and short-term, rolling 90 day letters of extension, to distributors who represent


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approximately 36%22% of our U.S. distribution. Some of our international programming may continue to be carried by distributors after the expiration dates on our affiliation agreements with them have passed.

     ��  We may be unable to obtain renewals with our current distributors on acceptable terms, if at all. We may also be unable to successfully negotiate affiliation agreements with new or existing distributors to carry our programming. Although we consider our current levels of distribution without written agreement to be ordinary course, the failure to successfully renew or negotiate new affiliation agreements covering a material portion of television households could result in a discontinuation of carriage that may adversely affect our viewership, growth, net revenue and earnings.

The failure to maintain suitable placement for our programming could adversely affect our ability to attract and retain television viewers and could result in a decrease in revenue

        We are dependent upon the continued ability of our programming to compete for viewers. Effectively competing for television viewers is dependent, in substantial part, on our ability to negotiate and maintain placement of our programming at a favorable channel position, such as in a basic tier or within a general entertainment or general broadcasting tier. The advent of digital compression technologies and the adoption of digital cable have resulted in increased channel capacity, which together with other changing laws, rules and regulations regarding cable television ownership, impacts our ability to negotiate and maintain suitable channel placement with our distributors. Increased channel capacity could adversely affect the ability to attract television viewers to our programming to the extent it results in:

        In addition, if our programming is carried exclusively by a distributor on a digital programming tier, we may experience a reduction in revenue to the extent that the digital programming tier has less television viewer penetration than the basic or expanded basic programming tier. We may experience a further reduction in revenue due to increased television viewing audience fragmentation to the extent that not all television sets within a digital cable home are equipped to receive television programming in a digital format. Our future success will depend, in part, on our ability to anticipate and adapt to technological changes and to offer elements of our programming via new technologies in a cost-effective manner that meet customer demands and evolving industry standards.

Any continued or permanent inability to transmit our programming via satellite would result in lost revenue and could result in lost customers

        Our success is dependent upon our continued ability to transmit our programming to television providers from our satellite uplink facilities, which transmissions are subject to the Federal


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Communications Commission ("FCC") compliance in the U.S. and foreign regulatory requirements in our international operations. In most cases, we have entered into long-term satellite transponder leases to provide for continued carriage of our programming on replacement transponders and/or replacement satellites, as applicable, in the event of a failure of either the transponders and/or satellites currently carrying our programming. However, we do have a transponder service agreement in the United KingdomU.K. that will expire in 2013.2014. Although we believe we take reasonable and customary measures to ensure continued


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satellite transmission capability and we believe that this international transponder service agreement can be renewed (or replaced, if necessary) in the ordinary course of business, termination or interruption of satellite transmissions may occur, particularly if we are not able to successfully negotiate renewals or replacements of any of our expiring transponder service agreements in the future. Although we consider the transponder service agreement that is expiring in 20132014 to be in the ordinary course, the failure to successfully renew or negotiate a new transmission agreement that results in an inability to transmit our programming would result in lost revenue and could result in lost customers.

Our business is subject to online security risks, including security breaches and identity theft

        To succeed, we must be able to provide for secure transmission of confidential information over public networks. Any penetration of network security or other misappropriation or misuse of personal consumer information could cause interruptions in the operations of our business and subject us to increased costs, litigation and other liabilities. Security breaches could also significantly damage our reputation with consumers and third parties with whom we do business. We may be required to expend significant capital and other resources to protect against and remedy any potential or existing security breaches and their consequences. We also face risks associated with security breaches affecting third parties with which we are affiliated or otherwise conduct business online.

System interruption and the lack of integration and redundancy in these systems and infrastructures may adversely affect our ability to transmit our television programs, operate websites, process and fulfill transactions, respond to customer inquiries and generally maintain cost-efficient operations

        Our success depends, in part, on our ability to maintain the integrity of our transmissions, systems and infrastructures, including the transmission of our television programs, as well as our websites, information and related systems, call centers and fulfillment facilities. We may experience occasional system interruptions that make some or all transmissions, systems or data unavailable or prevent us from transmitting our signal or efficiently providing services or fulfilling orders. We are in the process of implementing new technology systems such as the mobile applications, and upgrading others, such as our warehouse management systems.others. Our failure to properly implement these new systems or delays in implementing these new systems could impair our ability to provide services, fulfill orders and/or process transactions. We also rely on affiliate and third-party computer systems, broadband, transmission and other communications systems and service providers in connection with the transmission of our signal,signals, as well as to facilitate, process and fulfill transactions. Any interruptions, outages or delays in our signal transmissions, systems and infrastructures, our business, our affiliates and/or third parties, or deterioration in the performance of these transmissions, systems and infrastructures, could impair our ability to provide services, fulfill orders and/or process transactions. Fire, flood, power loss, telecommunications failure, hurricanes, tornadoes, earthquakes, acts of war or terrorism, acts of God and similar events or disruptions may damage or interrupt television transmissions, computer, broadband or other communications systems and infrastructures at any time.

        Any of these events could cause transmission or system interruption, delays and loss of critical data, and could prevent us from providing services, fulfilling orders and/or processing transactions. While we have backup systems for certain aspects of our operations, these systems are not fully redundant and disaster recovery planning is not sufficient for all possible risks. In addition, we may not have adequate insurance coverage to compensate for losses from a major interruption.

We may be subject to claims for representations made in connection with the sale and promotion of merchandise or for harm experienced by customers who purchase merchandise from us

        The manner in which we sell and promote merchandise and related claims and representations made in connection with these efforts is regulated by federal, state and local law, as well as the laws of the foreign countries in which we operate. We may be exposed to potential liability from claims by


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purchasers or from regulators and law enforcement agencies, including, but not limited to, claims for personal injury, wrongful death and damage to personal property relating to merchandise sold and misrepresentation of merchandise features and benefits. In certain instances, we have the right to seek indemnification for related liabilities from our vendors and may require such vendors to carry minimum


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levels of product liability and errors and omissions insurance. These vendors, however, may be unable to satisfy indemnification claims, obtain suitable coverage or maintain this coverage on acceptable terms, or insurance may provide inadequate coverage or be unavailable with respect to a particular claim. See "Business—Government regulation" for further discussion of regulations to which we are subject.

        In 2000, we became subject to a consent decree issued by the Federal Trade Commission ("FTC") barring us from making certain deceptive claims for specified weight-loss products and dietary supplements. We also became subject to an expanded consent decree issued by the FTC in 2009 that terminates on the later of March 4, 2029, or 20 years from the most recent date that the U.S. or the FTC files a complaint in federal court alleging any violation thereunder. Pursuant to this expanded consent decree, we are prohibited from making certain claims about specified weight-loss, dietary supplement and anti-cellulite products unless we have competent and reliable scientific evidence to substantiate such claims. Violation of this consent decree may result in the imposition of significant civil penalties for non-compliance and related redress to consumers and/or the issuance of an injunction enjoining us from engaging in prohibited activities.

Failure to comply with existing laws, rules and regulations, or to obtain and maintain required licenses and rights, could subject us to additional liabilities

        We market and provide a broad range of merchandise through television shopping programs and our websites. As a result, we are subject to a wide variety of statutes, rules, regulations, policies and procedures in various jurisdictions, including foreign jurisdictions, which are subject to change at any time, including laws regarding consumer protection, privacy, the regulation of retailers generally, the license requirements for television retailers in foreign jurisdictions, the importation, sale and promotion of merchandise and the operation of retail stores and warehouse facilities, as well as laws and regulations applicable to the internetInternet and businesses engaged in online commerce, such as those regulating the sending of unsolicited, commercial electronic mail. Our failure to comply with these laws and regulations could result in a revocation of required licenses, fines and/or proceedings against us by governmental agencies and/or consumers, which could adversely affect our business, financial condition and results of operations. Moreover, unfavorable changes in the laws, rules and regulations applicable to us could decrease demand for merchandise offered by us, increase costs and/or subject us to additional liabilities. Similarly, new disclosure and reporting requirements, established under existing or new state or federal laws, such as regulatory rules regarding requirements to disclose efforts to identify the origin and existence of certain "conflict minerals" or abusive labor practices in portions of our supply chain, could increase the cost of doing business, adversely affecting our results of operations. Finally, certain of these regulations impact the marketing efforts of our brands and business.

The processing, storage, use and disclosure of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights

        In the processing of consumer transactions, our business receives, transmits and stores a large volume of personally identifiable information and other user data. The sharing, use, disclosure and protection of this information are governed by the privacy and data security policies maintained by us. Moreover, there are federal, state and international laws regarding privacy and the storing, sharing, use, disclosure and protection of personally identifiable information and user data. Specifically, personally identifiable information is increasingly subject to legislation and regulations in numerous jurisdictions around the world, the intent of which is to protect the privacy of personal information that is collected,


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processed and transmitted in or from the governing jurisdiction. Our failure, and/or the failure by the various third party vendors and service providers with which we do business, to comply with applicable privacy policies or federal, state or similar international laws and regulations or any compromise of security that results in the unauthorized release of personally identifiable information or other user


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data could damage our reputation and the reputation of our third party vendors and service providers, discourage potential users from trying our products and services and/or result in fines and/or proceedings by governmental agencies and/or consumers, any one or all of which could adversely affect our business, financial condition and results of operations.

Our business is subject to online security risks, including security breaches and identity theft

        To succeed, we must be able to provide for secure transmission of confidential information over public networks. Any penetration of network security or other misappropriation or misuse of personal consumer information could cause interruptions in the operations of our business and subject us to increased costs, litigation and other liabilities. Security breaches could also significantly damage our reputation with consumers and third parties with whom we do business. We may be required to expend significant capital and other resources to protect against and remedy any potential or existing security breaches and their consequences. We also face risks associated with security breaches affecting third parties with which we are affiliated or otherwise conduct business online.

We may fail to adequately protect our intellectual property rights or may be accused of infringing intellectual property rights of third parties

        We regard our intellectual property rights, including service marks, trademarks and domain names, copyrights (including our programming and our websites), trade secrets and similar intellectual property, as critical to our success. Our business also relies heavily upon software codes, informational databases and other components that make up their products and services.

        From time to time, we are subject to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of the trademarks, patents, copyrights and other intellectual property rights of third parties. In addition, litigation may be necessary to enforce our intellectual property rights, protect trade secrets or to determine the validity and scope of proprietary rights claimed by others. Any litigation of this nature, regardless of outcome or merit, could result in substantial costs and diversion of management and technical resources, any of which could adversely affect our business, financial condition and results of operations. Our failure to protect our intellectual property rights, particularly our proprietary brands, in a meaningful manner or third party challenges to related contractual rights could result in erosion of brand names and limit our ability to control marketing on or through the internetInternet using our various domain names or otherwise, which could adversely affect our business, financial condition and results of operations.

We have operations outside of the U.S. that are subject to numerous operational and financial risks

        We have operations in countries other than the U.S. and we are subject to the following risks inherent in international operations:


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        Ongoing financial uncertainty in Europe (including concerns that certain European countries may default in payments due on their national debt) and the resulting economic instability could cause a decline in the value of the Euro and British pound compared to the U.S. dollar, which could have an adverse effect on our revenues. In addition, if dissolution and replacement of the Euro currency and the potential reintroduction of individual European Union currencies should occur as a result of the continued Eurozone crisis, it could have a negative impact on our results of operations and could expose us to increased foreign exchange risk. Should the European Union monetary policy measures be insufficient to restore confidence and stability to the financial markets, the recovery of the global economy, including the U.S. and European Union economies where we have a significant presence, could be hindered or reversed, which could have a material adverse effect on us. There could also be a number of follow-on effects from these economic developments and negative economic trends on our business, including the inability of customers to obtain credit to finance purchases of our products; customer insolvencies; decreased customer confidence to make purchasing decisions and decreased customer demand.

        Moreover,Additionally, in many foreign countries, particularly in certain developing economies, it is not uncommon to encounter business practices that are prohibited by regulations applicable to us, such as the Foreign Corrupt Practices Act and similar laws. Although we have undertaken compliance efforts with respect to these laws, our employees, contractors and agents, as well as those companies to which we outsource certain of our business operations, may take actions in violation of our policies and procedures. Any such violation, even if prohibited by our policies and procedures or the law, could have a material adverse effect. Any failure by us to effectively manage the challenges associated with the international operation of our business could have a material adverse effect.

We rely on independent shipping companies to deliver the products we sell

        We rely on third party carriers to deliver merchandise from vendors and manufacturers to us and to ship merchandise to our customers. As a result, we are subject to carrier disruptions and delays due to factors that are beyond our control, including employee strikes, inclement weather and regulation and enforcement actions by customs agencies. Any failure to deliver products to our customers in a timely and accurate manner may damage our reputation and brand and could cause us to lose customers. Enforcement actions by customs agencies can also cause the costs of imported goods to increase, negatively affecting our profits.

        We are also impacted by increases in shipping rates charged by third party carriers, which over the past few years, have increased significantly in comparison to historical levels. We currently expect that shipping and postal rates will continue to increase. In the case of deliveries to customers, in each market where we operate, we have negotiated agreements with one or more independent, third party shipping companies, which in certain circumstances provide for favorable shipping rates. If any of these relationships were to terminate or if a shipping company was unable to fulfill its obligations under its contract for any reason, we would have to work with other shipping companies to deliver merchandise to customers, which would most likely be at less favorable rates. Other potential adverse consequences of changing carriers include:


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        Any increase in shipping rates and related fuel and other surcharges passed on to us by our current carriers or any other shipping company would adversely impact profits, given that we may not be able to pass these increased costs directly to customers or offset them by increasing prices without a detrimental effect on customer demand.


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We depend on relationships with vendors, manufacturers and other third parties, and any adverse changes in these relationships could result in a failure to meet customer expectations which could result in lost revenue

        We purchase merchandise from a wide variety of third party vendors, manufacturers and other sources pursuant to short- and long-term contracts and purchase orders. Our ability to identify and establish relationships with these parties, as well as to access quality merchandise in a timely and efficient manner on acceptable terms and cost, can be challenging. In particular, we purchase a significant amount of merchandise from vendors and manufacturers abroad, and cannot predict whether the costs for goods sourced in these markets will remain stable. We depend on the ability of vendors and manufacturers in the U.S. and abroad to produce and deliver goods that meet applicable quality standards, which is impacted by a number of factors, some of which are not within the control of these parties, such as political or financial instability, trade restrictions, tariffs, currency exchange rates and transport capacity and costs, among others.

        Our failure to identify new vendors and manufacturers, maintain relationships with a significant number of existing vendors and manufacturers and/or access quality merchandise in a timely and efficient manner could cause us to miss customer delivery dates or delay scheduled promotions, which would result in the failure to meet customer expectations and could cause customers to cancel orders or cause us to be unable to source merchandise in sufficient quantities, which could result in lost revenue.

We face significant inventory risk

        We are exposed to significant inventory risks that may adversely affect our operating results as a result of seasonality, new product launches, rapid changes in product cycles and pricing, defective merchandise, changes in consumer demand, consumer spending patterns, changes in consumer tastes with respect to our products and other factors. We endeavor to accurately predict these trends and avoid overstocking or understocking products we sell. Demand for products, however, can change significantly between the time inventory or components are ordered and the date of sale. In addition, when we begin selling a new product, it may be difficult to establish vendor relationships, determine appropriate product or component selection, and accurately forecast demand. The acquisition of certain types of inventory or components may require significant lead-time and prepayment and they may not be returnable. We carry a broad selection and significant inventory levels of certain products, and we may be unable to sell products in sufficient quantities or during the relevant selling seasons. Any one of the inventory risk factors set forth above may adversely affect our operating results.

The seasonality of our business places increased strain on our operations

        Our net revenue in recent years indicates that our business is seasonal due to a higher volume of sales in the fourth calendar quarter related to year-end holiday shopping. In recent years, we have earned, on average, between 22% and 23% of our global revenue in each of the first three quarters of the year and 32% of our global revenue in the fourth quarter of the year. If our vendors are not able to provide popular products in sufficient amounts such that we fail to meet customer demand, it could significantly affect our revenue and our future growth. If too many customers access our websites within a short period of time due to increased holiday demand, we may experience system interruptions that make our websites unavailable or prevent us from efficiently fulfilling orders, which may reduce the volume of goods we sell and the attractiveness of our products and services. In addition, we may be unable to adequately staff our fulfillment and customer service centers during these peak periods and delivery and other third party shipping (or carrier) companies may be unable to meet the seasonal demand.

        To the extent we pay for holiday merchandise in advance of the holidays (i.e., in August through November of each year), our available cash may decrease, resulting in less liquidity. We have limited


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availability under our revolving credit facility and may not be able to access financing to the extent our cash balance is impaired. We may be unable to maintain a level of cash sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness, including the notes.

Failure to effectively manage our Easy-Pay and revolving credit card programs could result in less income

        We offer Easy-Pay in the U.S. and U.K (known as Q Pay in Germany and the United Kingdom)Germany), a payment plan that when offered by QVC, allows customers to pay for certain merchandise in two or more monthly installments. We cannot predict whether customers will pay all of their Easy-Pay installments.


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        In addition, QVC-U.S. has an agreement with a large consumer financial institution (the "Bank") pursuant to which the Bank provides revolving credit directly to our customers for the sole purpose of purchasing merchandise from us with a QVC branded credit card ("Q Card"). We receive a portion of the net economics of the credit card program according to percentages that vary with the performance of the portfolio. We cannot predict the extent to which customers will use the Q Card, ornor the extent that they will make payments on their outstanding balances.

Our success depends in large part on our ability to recruit and retain key employees capable of executing our unique business model

        We have a business model that requires us to recruit and retain key employees, including management, with the skills necessary for a unique business that demands knowledge of the general retail industry, television production, direct to consumer marketing and fulfillment and the internet.Internet. We cannot assure you that if we experience turnover of our key employees we will be able to recruit and retain acceptable replacements because the market for such employees is very competitive and limited.

Risks relating to our organizational structure

We have not voluntarily implemented various corporate governance measures, in the absence of which note holders may have more limited protections against interested transactions, conflicts of interest and similar matters

        Federal legislation, including the Sarbanes-Oxley Act of 2002, encourages the adoption of various corporate governance measures designed to promote the integrity of corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges are those that address board of directors' independence and audit committee oversight.

        As a "close corporation" under Delaware law, our shareholder, rather than a board of directors, manages our business. Our shareholder is an indirect wholly owned subsidiary of Liberty, meaning that we do not have any independent governing body. In addition, we have not adopted corporate governance measures such as the implementation of an audit committee or other independent governing body. It is possible that if we were to appoint a board of directors and include one or more independent directors and adopt some or all of these corporate governance measures, note holders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. However, because our shareholder is responsible for managing our business, subject to the limitations in the indenture for the notes and our other debt documents as described below under "Description of other indebtedness," our shareholder has the ability to make decisions regarding transactions with related parties and corporate actions that could involve conflicts of interest. In addition, our Chief Executive Officer and President, Michael A. George, wasbecame a named executive officer of Liberty for the year ended December 31, 2011, and Mr. George became a director of Liberty during 2011. Prospective investors should bear in mind our current lack of independent directors, the


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positions with Liberty that are held by Mr. George, and corporate governance measures in formulating their investment decisions.

The interests of our shareholder may not coincide with note holders and our shareholder may make decisions with which you may disagree

        Our shareholder is an indirect wholly owned subsidiary of Liberty. As a "close corporation" under Delaware law, our shareholder, rather than a board of directors, manages our business. As a result, Liberty controls allcertain aspects of our management, including the approval of significant corporate


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transactions such as a change of control. The interests of Liberty may not coincide with our interests or the interests of note holders. Accordingly, Liberty could cause us to enter into transactions or agreements of which note holders might not approve or make decisions with which note holders may disagree. For example, Liberty's dependence on our cash flow for servicing Liberty's debt and for other purposes, including payments of dividends on Liberty's capital stock, stock repurchases or to fund acquisitions or other operational requirements of Liberty and its subsidiaries is likely to result in our payment of large dividends to Liberty when permitted by law, the terms of our senior secured credit facility and the indentures governing the notes and our Existing Notes, which may deplete our equity or require us to borrow under our senior secured credit facility, increasing our leverage and decreasing our liquidity. We have made significant distributions to Liberty in the past. We paid $244 million$1.0 billion of net dividends to Liberty during the three months ended March 31, 2013, $1.8 billion of net dividends to Liberty during 2012 and $205 million of net dividends to Liberty during 2011 and $9 million of net dividends to Liberty during 2010.2011. We declared and paid dividends in cash to Liberty in the amount of $517$286 million subsequent to MarchDecember 31, 2013.

Risks relating to the exchange offer

If you do not properly tender your original notes, you will continue to hold unregistered notes and your ability to transfer those original notes may be adversely affected

        If you do not exchange your original notes for exchange notes in the exchange offer, you will continue to be subject to the restrictions on transfer of your original notes described in the prospectus distributed in connection with the private placement of the original notes. In general, you may only offer or sell the original notes if they are registered under the Securities Act and applicable state securities laws or if they are offered and sold under an exemption from those requirements. We do not plan to register the offer and resale of the original notes under the Securities Act, unless required to do so under the limited circumstances set forth in the registration rights agreement. A sale of the original notes pursuant to an exemption from the registration requirements of the Securities Act and applicable state securities law may require the delivery of an opinion of counsel to us and the registrar or co-registrar for the original notes. In addition, the issuance of the exchange notes may adversely affect the liquidity of the trading market for untendered, or tendered but unaccepted, original notes. For further information regarding the consequences of not tendering your original notes in the exchange offer, see "The exchange offer—Consequences of failure to exchange."

        We will only issue exchange notes in exchange for original notes that you timely and properly tender into the exchange offer. Therefore, you should allow sufficient time to ensure timely delivery of your original notes and other required documents to the exchange agent and you should carefully follow the instructions on how to tender your original notes. Neither we nor the exchange agent are required to tell you of any defects or irregularities with respect to your tender of original notes. We may waive any defects or irregularities with respect to your tender of original notes, but we are not required to do so and may not do so. We are not offering guaranteed delivery procedures in connection with the exchange offer. See "The exchange offer—Procedures for tendering original notes."


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Some holders who exchange their original notes may be deemed to be underwriters and hence subject to subsequent transfer restrictions

        If you exchange your original notes in the exchange offer for the purpose of participating in a distribution of the exchange notes, you may be deemed to have received restricted securities and, if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction involving the exchange notes. See "The exchange offer—Resale of exchange notes" and "Plan of distribution."


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Risks relating to the notes

We have a substantial amount of indebtedness, which could adversely affect our financial position and your investment in the notes, and prevent us from fulfilling our obligations under the notes

        We have a substantial amount of indebtedness. As of MarchDecember 31, 2013, after giving effect to the redemption of 2017 notes described in "Prospectus summary—Recent developments—Redemptionissuance of the 2017 notes" and the issuance oforiginal notes and the use of proceeds therefrom described in "Use of proceeds", we would have had total debt of approximately $3.6$3.9 billion, consisting of $2.8$3.8 billion under our Existing Notes $0.7 billion outstanding under our senior secured credit facility and $82$80 million of capital lease obligations. We would have also had an additional $1.3$2 billion available for borrowing under our senior secured credit facility as of that date. We may incur significant additional indebtedness in the future.

Our level of indebtedness could limit our flexibility in responding to current market conditions, adversely affect our financial position, prevent us from meeting our obligations under our debt instruments, including the notes, or otherwise restrict our business activities

        The existence of and limitations on the availability of our debt could have important consequences. The existence of debt could, among other things:

        Limitations imposed as a part of the debt, such as the availability of credit and the existence of restrictive covenants may, among other things:


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We may not be able to generate sufficient cash to service our debt obligations, including our obligations under the notes

        Our ability to make payments on our indebtedness, including the notes, will depend on our financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal,


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premium, if any, and interest on our indebtedness, including our senior secured credit facility, our Existing Notes and the notes.

We may need to refinance certain existing indebtedness prior to the maturity of the notes

        Our senior secured credit facility matures on March 1, 2018. See "Description of other indebtedness—Senior secured credit facility." Certain of ourOur Existing Notes other than the 5.950% notes due 2043 mature on April 1, 2019, October 1, 2019, October 15, 2020, and July 2, 2022 and March 15, 2023 which dates are earlier than the maturity of the 2024 exchange notes offered hereby. See "Description of other indebtedness." Although we expect to refinance or otherwise repay this indebtedness, we may not be able to refinance this indebtedness on commercially reasonable terms or at all. The financial terms or covenants of any new credit facility, notes or other indebtedness may not be as favorable as those under our senior secured credit facility and our Existing Notes. Our ability to complete a refinancing of our senior secured credit facility and our Existing Notes prior to their respective maturities will depend on our financial and operating performance, as well as a number of conditions beyond our control. For example, if disruptions in the financial markets were to exist at the time that we intended to refinance this indebtedness, we might be restricted in our ability to access the financial markets. If we are unable to refinance our indebtedness, our alternatives would include negotiating an extension of the maturities of our senior secured credit facility and our Existing Notes with the lenders and seeking or raising new equity capital. If we were unsuccessful, the lenders under our senior secured credit facility and the holders of our Existing Notes could demand repayment of the indebtedness owed to them on the relevant maturity date. As a result, our ability to pay the principal of and interest on the notes would be adversely affected.

Despite our current level of indebtedness, we may still incur substantially more indebtedness, which could exacerbate the risks associated with our existing indebtedness

        We and our subsidiaries may incur substantial additional indebtedness in the future. Our senior secured credit facility and the terms of the indentures for the notes and our Existing Notes will limit, but not prohibit, us or our subsidiaries from incurring additional indebtedness. Also, our subsidiaries could incur additional indebtedness that is structurally senior to the notes or we and our subsidiaries could incur indebtedness secured by a lien on assets that do not constitute collateral, including assets of ours and our subsidiaries, and the holders of such indebtedness will have the right to be paid first from the proceeds of such assets. If we incur any additional indebtedness that ranks equally with the notes and the guarantees, the holders of that indebtedness will be entitled to share ratably with the holders of the notes and the guarantees in any proceeds distributed in connection with our insolvency, liquidation, reorganization or dissolution. This may have the effect of reducing the amount of proceeds paid to the note holders. In addition, note holder rights to the collateral would be diluted by any increase in the indebtedness secured by this collateral. If new indebtedness is added to our current debt levels, the related risks that we and our subsidiaries now face could intensify.


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The notes constitute obligations of us and our material domestic subsidiaries and will not be obligations of Liberty, its other affiliates or of our non-guarantor subsidiaries; in addition, the notes will be structurally subordinated in right of payment to all obligations of any of our current and future subsidiaries that do not guarantee the notes and if the guarantees are deemed unenforceable, the remaining assets of such guarantors may not be sufficient to make any payments on the notes

        The notes will be guaranteed by each of our material domestic subsidiaries but will not receive a guarantee or other credit support from Liberty or any of its other affiliates, except that our sole shareholder, which is an indirect wholly owned subsidiary of Liberty, is pledging its shares of our capital stock to secure the notes.

        In addition, the notes will not be guaranteed by certain immaterial domestic subsidiaries or by any of our foreign subsidiaries. The notes and guarantees will therefore be structurally subordinated to all


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of the liabilities of our current and future subsidiaries that do not guarantee the notes. For the year ended December 31, 2012, our non-guarantor subsidiaries accounted for $2.8 billion, or 33.4%, of our consolidated net revenue and $195 million, or 15.4%, of our operating income. For the three months ended March 31, 2013, our non-guarantor subsidiaries accounted for $654 million, or 33.1%, of our consolidated net revenue and $23 million, or 8.8%, of our operating income and, at March 31, 2013, our non-guarantor subsidiaries accounted for $2.9 billion, or 22.9%33.8%, of our consolidated net revenue and $256 million, or 20.6%, of our operating income. As of December 31, 2013, our non-guarantor subsidiaries accounted for $3.0 billion, or 22.8%, of our consolidated assets. As of MarchDecember 31, 2013, after giving effect to the redemptionissuance of 2017the original notes and the use of proceeds therefrom described in "Prospectus summary—Recent developments—Redemption"Use of the 2017 notes"proceeds", our non-guarantor subsidiaries would have accounted for approximately $1.4$0.6 billion of obligations (consisting predominantly of trade payables, deferred tax liabilities, certain other liabilities and no indebtedness for borrowed money), all of which would be structurally senior to the notes.

        Although the guarantees provide the holders of the notes with a direct claim as a creditor against the assets of the subsidiary guarantors, the guarantees may not be enforceable as described in more detail below. If the guarantees by the subsidiary guarantors are not enforceable, the notes would be effectively subordinated to all liabilities of the subsidiary guarantors, including trade payables. As a result of being effectively subordinated to the liabilities of a subsidiary, if there was a dissolution, bankruptcy, liquidation or reorganization of such subsidiary, the holders of the notes would not receive any amounts with respect to the notes until after the payment in full of the claims of creditors of such subsidiary.

Our ability to meet our obligations under our debt, in part, depends on the earnings and cash flows of our subsidiaries and the ability of our subsidiaries to pay dividends or advance or repay funds to us

        We conduct a significant portion of our business operations through our subsidiaries. In servicing payments to be made on the notes, we will rely, in part, on cash flows from these subsidiaries, mainly dividend payments and other distributions. The ability of these subsidiaries to make dividend payments to us will be affected by, among other factors, the obligations of these entities to their creditors, requirements of corporate and other law, and restrictions contained in agreements entered into by or relating to these entities. In addition, our foreign subsidiaries may be subject to currency controls, repatriation restrictions, withholding obligations on payments to us and other limits.

Covenants in our debt agreements will restrict our business in many ways

        Our senior secured credit facility and the indentures governing the notes and our Existing Notes contain various covenants that limit our ability and/or our restricted subsidiaries' ability to, among other things:


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        These covenants are subject to important exceptions and qualifications as described under "Description of notes." In addition, our senior secured credit facility contains restrictive covenants and requires us to maintain a specified leverage ratio. Our ability to meet this leverage ratio can be affected by events beyond our control, and we may be unable to meet those tests. A breach of any of these covenants could result in a default under our senior secured credit facility, which in turn could result in a default under the indentures governing the notes and our Existing Notes. Upon the occurrence of an event of default under our senior secured credit facility, the lenders could elect to declare all amounts outstanding under our senior secured credit facility to be immediately due and payable and terminate all commitments to extend further credit. If we were unable to repay those amounts, the lenders could proceed against the collateral granted to them to secure that indebtedness. Our senior secured credit facility, our Existing Notes and certain future indebtedness will be secured by a first priority perfected lien in all shares of our capital stock. If the lenders and counterparties under our senior secured credit facility, our Existing Notes and certain future indebtedness accelerate the repayment of obligations, we may not have sufficient assets to repay such obligations, including the notes. See "Description of other indebtedness." Our borrowings under our senior secured credit facility are, and are expected to continue to be, at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness will also increase even though the amount borrowed remains the same, and our net income would decrease.

Many of the covenants in the indenture will cease to apply if such notes are rated investment grade by both Moody's and Standard & Poor's

        Many of the covenants in the indenture governing the notes will no longer apply to the notes if such notes are rated investment grade by both Moody's and Standard & Poor's at a time that no default has occurred and is continuing. These covenants will restrict, among other things, our ability to pay distributions, incur debt and to enter into certain other transactions. Termination of these covenants would allow us to engage in certain transactions that are not permitted while these covenants are in force. There can be no assurance that the notes will be rated investment grade by both Moody's and Standard & Poor's, or that the notes will maintain such ratings. Even if the notes subsequently fail to be rated investment grade, the terminated covenants would not be reinstated. See "Description of notes—Certain covenants—Fall-away event."

An adverse rating of the notes may cause their value to decline

        If a rating agency rates the notes, it may assign a rating that is lower than expected. Ratings agencies also may lower ratings on the notes in the future. If rating agencies assign a lower-than-expected rating or reduce, or indicate that they may reduce, their ratings or outlook in the future, the value of the notes could significantly decline.


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If we default on our obligations to pay our indebtedness, we may not be able to make payments on the notes

        Any default under the agreements governing our indebtedness, including a default under our senior secured credit facility, that is not waived by the required lenders thereunder, and the remedies sought by the holders of such indebtedness, could prevent us from paying principal, premium, if any, and interest on the notes and substantially decrease the market value of the notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness (including covenants in our senior secured credit facility and the indentures governing the notes offered hereby and our Existing Notes), we could be in default under the terms of the agreements governing such indebtedness, including our senior secured credit facility and the indentures governing the notes offered hereby and our Existing Notes. In the event of such default, the


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holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under our senior secured credit facility could elect to institute foreclosure proceedings against our capital stock, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may need to obtain waivers from the required lenders under our senior secured credit facility to avoid being in default. If we breach our covenants under our senior secured credit facility and seek a waiver, we may not be able to obtain a waiver from the required lenders. If we could not obtain a waiver, we would be in default under our senior secured credit facility, which would result in a default under the indenture, the lenders could exercise their rights, as described above, and we could be forced into bankruptcy or liquidation.

We may not be able to purchase the notes upon a change of control or an offer to repurchase the notes as required by the indenture

        Upon the occurrence of specific types of change of control events, we will be required to offer to repurchase all of the notes, as well as the Existing Notes, at a price equal to 101% of the aggregate principal amount of the notes repurchased, plus accrued and unpaid interest and additional interest, if any, up to, but not including, the date of repurchase. We may not have sufficient funds available to repurchase all of the notes tendered pursuant to any such offer and any other debt, including the Existing Notes, that would become payable upon a change of control. Any failure to purchase the notes would be a default under the indenture, which would trigger a default under our senior secured credit facility. In that event, we would need to cure or refinance our senior secured credit facility before making an offer to purchase.

        Additionally, a change of control (as defined in our senior secured credit facility) would also constitute a default under our senior secured credit facility. Upon any such default, the lenders may declare any outstanding obligations under our senior secured credit facility immediately due and payable. If such debt repayment were accelerated, we may not have sufficient funds to repurchase the notes and repay the debt. There can be no assurance that we would be able to refinance our indebtedness or, if a refinancing were to occur, that the refinancing would be on terms favorable to us.

        Courts interpreting change of control provisions under New York law (which will govern the indenture) have not provided clear and consistent meanings of such change of control provisions. In addition, the Delaware Court of Chancery has questioned whether a change of control provision contained in an indenture could be unenforceable on public policy grounds. Therefore, no assurances can be given as to how a court would interpret or even if a court would enforce the change of control provisions in our indenture as written for the benefit of the holders.

        In addition, if a change of control occurs, we may not be able to borrow under our senior secured credit facility which could adversely affect our financial situation and our ability to conduct our business.


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A court could cancel the notes or the guarantees under fraudulent conveyance laws or certain other circumstances

        Our issuance of the notes and the issuance of the guarantees by certain of our subsidiaries may be subject to review under federal or state fraudulent transfer or conveyance or similar laws. If we or such guarantor becomes a debtor in a case under the U.S. bankruptcy code or encounter other financial difficulty, under federal or state laws governing fraudulent transfer or conveyance, renewable transactions or preferential payments, a court in the relevant jurisdiction might avoid or cancel the guarantees and/or the liens created by the security interests. The court might do so if it found that, when the guarantor entered into its guarantee or, in some states, when payments become due thereunder, (a) it received less than reasonably equivalent value or fair consideration for such guarantee and (b) either (i) was or was rendered insolvent, (ii) was left with inadequate capital to


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conduct its business, (iii) believed or should have believed that it would incur debts beyond its ability to pay, or (iv) was a defendant in an action for money damages or had a judgment for money damages docketed against us or such guarantor, if, in either case, after final judgment, the judgment was unsatisfied. The court might also avoid such guarantee, without regard to the above factors, if it found that the guarantor entered into its guarantee with actual or deemed intent to hinder, delay or defraud our creditors.

        Similarly, if we become a debtor in a case under the U.S. bankruptcy code or encounter other financial difficulty, a court might cancel our obligations under the notes, if it found that when we issued the notes (or in some jurisdictions, when payments become due under the notes), factors (a) and (b) above applied to us, or if it found that we issued the notes with actual intent to hinder, delay or defraud our creditors.

        A court would likely find that a guarantor did not receive reasonably equivalent value or fair consideration for its guarantee unless it benefited directly or indirectly from the issuance of the notes. If a court avoided such guarantee, holders of the notes would no longer have a claim against such subsidiary. In addition, the court might direct holders of the notes to repay any amounts already received from such subsidiary. If the court were to avoid any guarantee, we cannot assure you that funds would be available to pay the notes from another subsidiary or from any other source. Further, the voidance of the notes could result in an event of default with respect to our and our subsidiaries' other debt that could result in acceleration of such debt.

        The indenture states that the maximum liability of each guarantor under its guarantee shall in no event exceed the amount that can be guaranteed by such guarantor under applicable federal and state laws relating to the insolvency of debtors (after giving effect to rights of contribution established in connection with the guarantees). This limitation may not protect the guarantees from a fraudulent transfer or conveyance attack or, if it does, the guarantees may not be in amounts sufficient, if necessary, to pay obligations under the notes when due.

        As a general matter, value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or an antecedent debt is secured or satisfied. A debtor will generally not be considered to have received value in connection with a debt offering if the debtor uses the proceeds of that offering to make a dividend payment or otherwise retires or redeems equity securities issued by the debtor. We cannot be certain as to the standards a court would use to determine whether or not we or the guarantors were solvent at the relevant time or, regardless of the standard that a court uses, that the issuance of the guarantees would not be further subordinated to our or any of our guarantors' other debt. Generally, however, an entity would be considered insolvent if, at the time it incurred indebtedness:


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    the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

    it could not pay its debts as they become due.

There could be circumstances in which certain guarantees are released automatically, without your consent or the consent of the trustee

        There could be circumstances, other than repayment or discharge of the notes, where certain guarantees will be released automatically, without your consent or the consent of the trustee. For example, a guarantor will be released from its guarantee in the event of dissolution of such guarantor, if such guarantor is designated as an unrestricted subsidiary or otherwise ceases to be a restricted


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subsidiary, in each case in accordance with the provisions of the indenture governing the notes, or upon the release or discharge of the guarantee by such guarantor of the senior secured credit facility. See "Description of notes—Note Guarantees."

We cannot assure you that an active trading market for the notes will develop

        The notes constitute a new issue of securities for which there is no existing market. We do not intend to apply for listing of either series of notes on any securities exchange or inclusion of either series of notes in any automated quotation system. We cannot provide you with any assurances regarding the future development of a market for the notes, the ability of holders of the notes to sell their notes or the price at which such holders may be able to sell their notes. If such a market were to develop, the notes could trade at prices that may be higher or lower than the initial offering price depending on many factors, including prevailing interest rates, our results of operations and financial condition, and the market for similar securities and the other factors discussed here under "Risk factors." The initial purchasers have advised us that they currently intend to make a market in the notes. However, the initial purchasers are not obligated to do so, and any market-making with respect to the notes may be discontinued at any time without notice. If an active market does not develop or is not maintained, the market price and liquidity of the notes may be adversely affected. We cannot assure you as to the liquidity of the market for the notes or the prices at which you may be able to sell the notes. In addition, subsequent to their initial issuance, the notes may trade at a discount from their initial offering price, depending upon prevailing interest rates, the market for similar notes, our performance and other factors.

The book-entry registration system of the notes may limit the exercise of rights by the beneficial owners of the notes

        Because transfers of interests in the global notes representing the notes may be effected only through book entries at the Depository Trust Company ("DTC") and its direct and indirect participants (including Clearstream and Euroclear), the liquidity of any secondary market in the notes may be reduced to the extent that some investors are unwilling to hold notes in book-entry form in the name of a DTC direct or indirect participant. The ability to pledge interests in the global notes may be limited due to the lack of a physical certificate. In addition, beneficial owners of interests in global notes may, in certain cases, experience delay in the receipt of payments of principal and interest, since the payments will generally be forwarded by the paying agent to DTC, which will then forward payment to its direct and indirect participants, which (if they are not themselves the beneficial owners) will then forward payments to the beneficial owners of the global notes. In the event of the insolvency of DTC or any of its direct and indirect participants in whose name interests in the global notes are recorded, the ability of beneficial owners to obtain timely or ultimate payment of principal and interest on global notes may be negatively affected.


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        A holder of beneficial interests in the global notes will not have a direct right under the notes to act upon any solicitations that we may request. Instead, holders will be permitted to act only to the extent they receive appropriate proxies to do so from DTC or, if applicable, DTC's direct or indirect participants. Similarly, if we default on our obligations under the notes, holders of beneficial interests in the global notes will be restricted to acting through DTC, or, if applicable, DTC's direct or indirect participants. We cannot assure holders that the procedures of DTC or DTC's nominees or direct or indirect participants will be adequate to allow them to exercise their rights under the notes in a timely manner.

Our ability to pay dividends or make other restricted payments to Liberty is subject to limited restrictions

        Although the notes contain limitations on Restricted Payments (as defined under "Description of notes"), those limitations are subject to a number of important exceptions and qualifications (see


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"Description "Description of notes—Certain covenants—Limitations on restricted payments"). In particular, there are no restrictions on our ability to pay dividends or make other restricted payments if we are not in default on the notes and our Consolidated Leverage Ratio (as defined under "Description of notes") is no greater than 3.50 to 1.0 (which ratio is 3.25 to 1.0 under our senior secured credit facility). As a result, Liberty will, in many instances, be permitted to rely on our cash flow for servicing Liberty's debt and for other purposes, including payments of dividends on Liberty's capital stock, if declared, or to fund acquisitions or other operational requirements of Liberty and its subsidiaries. These events may deplete our equity or require us to borrow under our senior secured credit facility, increasing our leverage and decreasing our liquidity. We may make and have made significant distributions to Liberty in the past, such as the distribution to Liberty made in connection with the recapitalization of Liberty's common stock into shares of the corresponding series of two tracking stocks, Liberty Interactive and Liberty Ventures. In addition, subsequent to MarchDecember 31, 2013, and prior to the commencement of this offering, we declared and paid dividends in cash to Liberty in the amount of $517$286 million. These dividends were funded with draws from our revolving credit facility andor from cash generated from operations. In the ordinary course of business we have made and may make additional distributions to Liberty. See "Summary—"Prospectus summary—Liberty relationship" and "Related party transactions."

Risks relating to the collateral

The collateral is limited to a pledge of the capital stock of QVC, and the holders of the notes will have only an unsecured claim against our assets and the guarantors' assets

        The notes will be secured on apari passu basis by the same collateral that secures our existing secured indebtedness and certain future indebtedness (the "Collateral"). The Collateral consists solely of a first priority perfected lien and security interest in the shares of our capital stock, which is pledged by our parent to secure the obligations under the existing secured indebtedness and the Existing Notes. Although there are certain circumstances under which additional assets of QVC or our subsidiaries may be pledged to secure the notes offered hereby, there can be no assurance that this will occur. If any such assets were to become subject to a lien for the benefit of the holders of the notes, such a lien would be shared with the lenders under our senior secured credit facility and the holders of the Existing Notes, as well as the holders of certain other indebtedness we may incur in the future. You should not assume that collateral to secure the notes and the guarantees consisting of our assets or the assets of any of the subsidiary guarantors will ever be provided or that, if provided, it would not subsequently be released and/or avoided. See "Description of other indebtedness" and "Description of notes—Security."

        Unless any such security interest is provided, holders of the notes will have only an unsecured claim against our and the guarantors' assets ranking equally in right of payment with all of our other unsecured unsubordinated indebtedness and other obligations, including trade payables.


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Note holder rights to receive proceeds from the sale of collateral securing the notes will be pari passu with the claims of lenders and counterparties under our existing secured indebtedness and certain future indebtedness and there may not be sufficient collateral to pay all or any portion of the notes, our senior secured credit facility, our Existing Notes and certain future indebtedness

        Note holders will receive distributions from any foreclosure proceeds of any Collateral on a pro rata basis with the lenders under our existing secured indebtedness and certain future indebtedness. No appraisal of the value of the Collateral has been made in connection with this offering or otherwise, and the fair market value of the Collateral is subject to fluctuations based on factors that include, among others, general economic conditions and the availability of suitable buyers for the Collateral. By its nature, the Collateral may be illiquid and may have no readily ascertainable market value, and could be impaired in the future as a result of changing economic conditions, competition or other future trends. In the event of a foreclosure, liquidation, bankruptcy or similar proceeding, we cannot assure


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you that the proceeds from any sale or liquidation of the Collateral will be sufficient to pay our obligations under the notes, our existing secured indebtedness and certain future indebtedness. Also, we cannot assure you that the fair market value of the Collateral securing the notes, our existing secured indebtedness and certain future indebtedness would be sufficient to pay any amounts due under such obligations following their acceleration. If the proceeds of any sale of the Collateral are not sufficient to repay all amounts due on the notes, the holders of the notes (to the extent not repaid from the proceeds of the sale of the Collateral) would have only an unsecured claim against our and the guarantors' assets and, in the context of a bankruptcy case by or against us, will mean that you may not be entitled to receive interest payments or reasonable fees, costs or charges due under the notes, and may be required to repay any such amounts already received by you. Any such unsecured claim will rank equally in right of payment with all of our other unsecured unsubordinated indebtedness and other obligations, including trade payables.

        To the extent that liens securing obligations under our Existing Notes and senior secured credit facility and other liens permitted under the indenture and other rights, encumber any of the Collateral securing the notes, those parties have or may exercise rights and remedies with respect to the Collateral that could adversely affect the value of the collateral and the ability of the collateral agent, the trustee under the indenture or the holders of the notes to realize or foreclose on the Collateral.

        In addition, the indenture governing the notes and the indenture governing Existing Notes and the senior secured credit facility permits us, subject to compliance with certain financial tests, to issue additional secured debt, including debt secured equally and ratably by the same assets pledged for the benefit of the holders of the notes. This would reduce amounts payable to holders of the notes from the proceeds of any sale of the Collateral.

Holders of notes will not control decisions regarding collateral

        Although our Existing Notes, our senior secured credit facility, the notes offered hereby and certain future indebtedness will be secured on apari passu basis by the same collateral, holders of the notes will not be able to exercise any control over decisions regarding the Collateral. The security agreement governing the Collateral provides, among other things, that (a) the collateral agent, taking instruction from the lenders under our senior secured credit facility, controls substantially all matters related to the Collateral; and (b) the holders of such indebtedness may foreclose on or take other actions with respect to such Collateral with which holders of the notes may disagree or that may be contrary to the interests of holders of the notes, in each case, regardless of the amount of the obligations under our senior secured credit facility relative to the obligations under the notes.


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Any future pledge of collateral might be avoidable in bankruptcy

        Any future pledge of collateral in favor of the trustee, including pursuant to security documents delivered after the date of the indenture governing the notes, might be avoidable by the pledgor (as debtor in possession) or by its trustee in bankruptcy if certain events or circumstances exist or occur, including if the pledgor is insolvent at the time of the pledge, the pledge permits the holders of the notes to receive a greater recovery than if the pledge had not been given and a bankruptcy proceeding in respect of the pledgor is commenced within 90 days following the pledge, or, in certain circumstances, a longer period.


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Use of proceeds

        The exchange offer is intended to satisfy our obligations under the registration rights agreement relating to the original notes. We will not receive any proceeds from the issuance of the exchange notes in the exchange offer. In consideration for issuing the exchange notes as contemplated in this prospectus, we will receive, in exchange, outstanding original notes in like principal amount. We will cancel all original notes tendered in exchange for exchange notes in the exchange offer. Interest on each exchange note will accrue interest on the same terms as the original notes and such interest will accrue (a) from the later of (i) the last interest payment date on which interest was paid on the note surrendered in exchange therefor or (ii) if the note is surrendered for exchange on a date in a period that includes the record date for an interest payment date to occur on or after the date of such exchange and as to which interest will be paid, the date of such interest payment date or (b) if no interest has been paid on such note, from the original issue date of the notes. As a result, the issuance of the exchange notes will not result in any increase or decrease in our indebtedness or in the early payment of interest.

        The net proceeds from the sale of the original notes on March 18, 2013,2014, after deducting the initial purchasers' discount and offering expenses payable by us, were approximately $1,036$986 million. We used the net proceeds, in addition to cash on hand, to provide the total amount of funds required to purchase $124 million of outstanding 2017 notes and $231 million of outstanding 2019 notes in certain tender offers that closed on March 18 and April 2, to pay all fees and expenses related to the tender offers, and to redeem all remaining 2017 notes that were not tendered in the tender offers. To the extent that the net proceeds from the sale of the original notes exceeded the amount of funds required to purchase the tendered and redeemed notes, we utilized the excess funds for general corporate purposes, which included the refinancing ofrepay indebtedness under our senior secured credit facility.


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The exchange offer

        This section of the prospectus describes the exchange offer. While we believe that the description covers the material terms of the exchange offer, this summary may not contain all of the information that is important to you. You should carefully read this entire document for a complete understanding of the exchange offer.

Purpose of the exchange offer

        The purpose of the exchange offer is to satisfy our obligations under the registration rights agreement that we entered into with the initial purchasers of the original notes. We originally issued and sold $750,000,000$400,000,000 principal amount of 20232019 original notes and $300,000,000$600,000,000 of 20432024 original notes in a private placement on March 18, 2013.2014. We did not register the offer and sale of the original notes in reliance upon the exemption provided in Section 4(2) of the Securities Act and Rule 144A and Regulation S thereunder.

        We are offering to exchange up to the entire $750,000,000$400,000,000 principal amount of 20232019 original notes and the entire $300,000,000$600,000,000 of 20432024 original notes for a like principal amount of the corresponding series of exchange notes.

        Under the registration rights agreement, we are required, among other things, to:

    file and cause a registration statement registering the proposed offer and exchange of any and all original notes for registered exchange notes with substantially identical terms to be declared

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      effective under the Securities Act on or prior to December 13, 20132014 (the 270th day after the issue date of the original notes); and

    keep the exchange offer open for not less than 20 business days after the date notice thereof is mailed to holders of the original notes.

        In addition, under certain circumstances, we may be required to file a shelf registration statement to cover resales of original notes. Specifically, in the event that, with respect to the notes:

    we are not required to file the exchange offer registration statement or permitted to consummate the exchange offer because of any change in law or in currently prevailing interpretations of the Staffstaff of the SEC;

    an exchange offer is not consummated within the time period set forth above;

    in certain circumstances, certain holders of unregistered exchange notes so request; or

    in the case of any holder that participates in an exchange offer, such holder does not receive exchange notes on the date of the exchange that may be sold without restriction under state and federal securities laws (other than due solely to the status of such holder as an affiliate of ours within the meaning of the Securities Act),

then, in each case, we will, at our sole expense,

    within 30 days file a shelf registration statement covering resales of the notes;

    use all commercially reasonable efforts to cause such shelf registration statement to be declared effective within 75 days of the filing thereof;

    keep effective such shelf registration statement until the earliest of (i) two years after the original issue date of the notes, or (ii) such time as all of the notes have been sold thereunder; and

    in the event that a shelf registration statement is filed, provide to each holder whose notes are registered under such shelf registration statement copies of the prospectus that is a part of such

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      shelf registration statement, notify each such holder when such shelf registration statement has become effective and take certain other actions as are required to permit unrestricted resales of the notes. A holder that sells notes pursuant to a shelf registration statement will be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the registration rights agreement that are applicable to such a holder (including certain indemnification rights and obligations).

        If (1) we do not comply with the time periods set forth above in this section; or (2) the registration statement of which this prospectus forms a part, or any shelf registration statement covering resales of the notes required to be filed by the registration rights agreement, ceases to be effective at any time during which it is required to be so effective (subject to certain exceptions), then additional interest shall accrue on the principal amount of the notes at a rate of 0.25% per annum (which rate will be increased by an additional 0.25% per annum for each subsequent 90-day period that such registration default continues, provided that the rate at which such additional interest accrues may in no event exceed 1.0% per annum); provided, however, that upon the exchange of exchange notes for all notes tendered (in the case of clause (1) above) or upon the effectiveness of the required registration statement (in the case of clause (2) above), additional interest on such notes as a result of such clause, as the case may be, shall cease to accrue and the interest rate on the applicable notes will be reduced to the original interest rate borne by such notes. All accrued additional interest will be paid in arrears on each semi-annual interest date.


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        Participation in the exchange offer is voluntary and you should carefully consider whether to participate. We urge you to consult your financial and tax advisors in making your decision on whether to participate in the exchange offer.

Resale of Exchange Notesexchange notes

        We have not requested, and do not intend to request, an interpretation by the staff of the SEC with respect to whether the exchange notes may be offered for sale, resold or otherwise transferred by any holder without compliance with the registration and prospectus delivery provisions of the Securities Act. Based on interpretations by the staff of the SEC set forth in no-action letters issued to third parties, includingExxon Capital Holdings Corp. (available May 13, 1988),Morgan Stanley & Co. Incorporated (available June 5, 1991) andShearman & Sterling (available July 2, 1993), we believe the exchange notes may be offered for resale, resold and otherwise transferred by any holder without compliance with the registration and prospectus delivery provisions of the Securities Act provided such holder meets the following conditions:

    such holder is not a broker-dealer who purchased original notes directly from us for resale pursuant to Rule 144A or any other available exemption under the Securities Act;

    such holder is not our "affiliate" within the meaning of Rule 405 under the Securities Act; and

    such holder acquires exchange notes in the ordinary course of business of such holder and any beneficial owner of the exchange notes and has no arrangement or understanding with any person to participate in the distribution of the exchange notes.

        If you do not satisfy all of the above conditions, you cannot participate in the exchange offer. Rather, in the absence of an exemption you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a resale of the original notes. Any holder that complies with such registration and prospectus delivery requirements may incur liabilities under the Securities Act for which the holder will not be entitled to indemnification from us.


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        A broker-dealer that has bought original notes for its own account as part of its market-making or other trading activities must deliver a prospectus in order to resell the exchange notes it receives therefor pursuant to the exchange offer. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer for such purpose, and we have agreed in the registration rights agreement to make this prospectus available to such broker-dealers for a period ending on the earlier of 180 days from the effective date of the registration statement of which this prospectus forms a part and the date on which a broker-dealer is no longer required to deliver a prospectus in connection with market-making or other trading activities. See "Plan of Distribution.distribution." Each broker-dealer that receives exchange notes for its own account in the exchange offer must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of exchange notes. The accompanying letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.

Consequences of failure to exchange

        Original notes that are not exchanged for exchange notes in the exchange offer will remain "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, and will therefore continue to be subject to restrictions on transfer. Holders of such original notes will not be able to require us to register them under the Securities Act, except in the limited circumstances set forth in the registration rights agreement. Accordingly, following completion of the exchange offer any original notes that remain outstanding may not be offered, sold, pledged or otherwise transferred except:

    (1)
    to us, upon redemption thereof or otherwise,


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    (2)
    to a person whom the seller reasonably believes is a qualified institutional buyer within the meaning of Rule 144A, purchasing for its own account or for the account of a qualified institutional buyer in a transaction meeting the requirements of Rule 144A under the Securities Act,

    (3)
    in an offshore transaction in accordance with Regulation S under the Securities Act,

    (4)
    pursuant to an exemption from registration in accordance with Rule 144, if available, under the Securities Act,

    (5)
    in reliance on another exemption from the registration requirements of the Securities Act, or

    (6)
    pursuant to an effective registration statement under the Securities Act.

        In all of the situations discussed above, the resale must be in compliance with the Securities Act, any applicable securities laws of any state of the United States and any applicable securities laws of any foreign country. Any resale of original notes will also be subject to certain requirements of the registrar being met, including receipt by the registrar of a certification and, in the case of (3), (4) and (5) above, an opinion of counsel reasonably acceptable to us and the registrar.

        To the extent original notes are tendered and accepted in the exchange offer, the principal amount of the corresponding series of outstanding original notes will decrease with a resulting decrease in the liquidity in the market therefor. Accordingly, the liquidity of the market of the corresponding series of original notes could be adversely affected following completion of the exchange offer. See "Risk Factors—factors—Risks Relatedrelated to the Exchange Offer—exchange offer—If you do not properly tender your original notes, you will continue to hold unregistered notes and your ability to transfer those original notes may be adversely affected."


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Terms of the exchange offer

        Upon the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal, a form of which is filed as an exhibit to the registration statement of which this prospectus forms a part, we will accept any and all original notes validly tendered (and not withdrawn) on or prior to the Expiration Date. We will issue $1,000 principal amount of exchange notes in exchange for each $1,000 principal amount of the corresponding series of original notes accepted in the exchange offer. Interest on each exchange note will accrue (a) from the later of (i) the last interest payment date on which interest was paid on the note surrendered in exchange therefor or (ii) if the note is surrendered for exchange on a date in a period that includes the record date for an interest payment date to occur on or after the date of such exchange and as to which interest will be paid, the date of such interest payment date or (b) if no interest has been paid on such note, from the original issue date of the notes. All accrued interest on the original notes will become obligations under the corresponding series of exchange notes. Holders may tender some or all of their original notes pursuant to the exchange offer. However, original notes may be tendered only in denominations of $2,000 and integral multiples of $1,000 principal amount in excess thereof.

        The form and terms of the exchange notes are the same as the form and terms of the corresponding series of original notes, except that:

    the offer and sale of the exchange notes for the original notes will have been registered under the Securities Act, and the exchange notes will not bear legends restricting their transfer pursuant to the Securities Act, and

    except as otherwise described above, holders of the exchange notes will not be entitled to any rights under the registration rights agreement.

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        The exchange notes will evidence the same debt as the corresponding series of original notes that they replace, and will be issued under, and be entitled to the benefits of, the indenture which governs the original notes, including the payment of principal and interest.

        We are sending this prospectus and the letter of transmittal to holders of the original notes through the facilities of The Depositary Trust Company, or DTC, whose nominee, Cede & Co, is the registered holder of the original notes. The original notes are represented by permanent global notes in fully registered form, without coupons, which have been deposited with the trustee for the notes, as custodian for DTC. Ownership of beneficial interests in each global note is limited to persons who have accounts with DTC, or DTC participants, or persons who hold interests through DTC participants. The term "holder," as used in this prospectus, means those DTC participants in whose name interests in the global notes are credited on the books of DTC, and those persons who hold interests through such DTC participants. The term "original notes," as used in this prospectus, means such interests in the global notes. Like the original notes, the exchange notes will be deposited with the trustee for the notes as custodian for DTC, and registered in the name of Cede & Co., as nominee of DTC.

        Holders of the original notes do not have any appraisal or dissenter's rights under Delaware law or the indenture governing the notes in connection with the exchange offer. We intend to conduct the exchange offer in accordance with the requirements of the Exchange Act and the SEC's rules and regulations thereunder.

        We will be deemed to have accepted validly tendered original notes when, as and if we have given written notice thereof to the exchange agent, which is U.S. Bank National Association. The exchange agent will act as agent for the tendering holders of the original notes for the purposes of receiving the exchange notes. The exchange notes delivered in the exchange offer will be issued promptly after the Expiration Date.


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        If any tendered original notes are not accepted for exchange because they do not comply with the procedures set forth in this prospectus and the accompanying letter of transmittal, our withdrawal of the exchange offer, the occurrence of certain other events set forth herein or otherwise, such unaccepted original notes will be returned, without expense, to the tendering holder promptly after the Expiration Date or our withdrawal of the exchange offer. Any acceptance, waiver of default or a rejection of a tender of original notes shall be at our discretion and shall be conclusive, final and binding.

        Holders who tender original notes in the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of the original notes in the exchange offer. We will pay all charges and expenses, other than certain taxes, in connection with the exchange offer. See "—Fees and Expenses.expenses."

        We are not making the exchange offer to, nor will we accept surrenders for exchange from, holders of original notes in any jurisdiction in which this exchange offer or its acceptance would not comply with applicable state securities laws or applicable laws of a foreign jurisdiction.

Expiration date; extensions; amendments

        The term "Expiration Date" with respect to the exchange offer means 5:00 p.m., New York City time, on [                ], 20132014 unless we, in our sole discretion, extend the exchange offer, in which case the term "Expiration Date" shall mean the latest date and time to which the exchange offer is extended.

        If we extend the exchange offer, we will notify the exchange agent of any extension by written notice and will make a public announcement thereof, each prior to 9:00 a.m., New York City time, no later than on the next business day after the previously scheduled Expiration Date.


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        We reserve the right, in our sole discretion,

    to extend the exchange offer,

    if any of the conditions set forth below under "—Conditions to the Exchange Offer" have not been satisfied, to terminate the exchange offer or waive any conditions that have not been satisfied, or

    to amend the terms of the exchange offer in any manner.

        We may effect any such extension, waiver, termination or amendment by giving written notice thereof to the exchange agent.

        Except as specified in the second paragraph under this heading, we will make a public announcement of any such extension, termination, amendment or waiver as promptly as practicable. If we amend or waive any condition of the exchange offer in a manner determined by us to constitute a material change to the exchange offer, we will promptly disclose such amendment or waiver in a prospectus supplement that will be distributed to the holders of the original notes. The exchange offer will then be extended for a period of five to ten business days, as required by law, depending upon the significance of the amendment or waiver and the manner of disclosure to the registered holders.

        We will make a timely release of a public announcement of any extension, termination, amendment or waiver to the exchange offer to an appropriate news agency.

Procedures for tendering original notes

        Tenders of Original Notes; Book-Entry Delivery Procedure.    All of the original notes are held in book-entry form, and tenders may only be made through DTC's Book-Entry Transfer Facility.


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        In connection with the commencement of the exchange offer, the exchange agent will establish an account with respect to the original notes at DTC for purposes of the exchange offer, and any financial institution that is a participant in DTC that wishes to participate in the exchange offer may make book-entry delivery of the original notes by causing DTC to transfer such original notes into the exchange agent's account in accordance with DTC's procedures for such transfer. The confirmation of a book-entry transfer into the exchange agent's account at DTC is referred to as a "Book-Entry Confirmation." In addition, DTC participants on or before the Expiration Date must either

    properly complete and duly execute the letter of transmittal (or a facsimile thereof), and any other documents required by the letter of transmittal, and mail or otherwise deliver the letter of transmittal or such facsimile, with any required signature guarantees, to the exchange agent at one or more of its addresses below, or

    transmit their acceptance through DTC's Automated Tender Offer Program, or ATOP, for which the exchange offer is eligible, and DTC will then edit and verify the acceptance and send an Agent's Message to the exchange agent for its acceptance.

        The term "Agent's Message" means a message transmitted by DTC to, and received by, the exchange agent and forming a part of the Book-Entry Confirmation, which states that DTC has received an express acknowledgment from the participant in DTC tendering the original notes that such participant has received the letter of transmittal and agrees to be bound by the terms of the letter of transmittal, and that we may enforce such agreement against such participant.

        Although delivery of original notes is to be effected through book-entry at DTC, the letter of transmittal (or facsimile thereof), with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other required documents, must, in any case, be transmitted to and received by the exchange agent at one or more of its addresses set forth below on


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or prior to the Expiration Date. Delivery of the letter of transmittal or other required documents to DTC does not constitute delivery to the exchange agent.

        The tender by a holder of original notes pursuant to the procedures set forth above will constitute the tendering holder's acceptance of all of the terms and conditions of the exchange offer. Our acceptance for exchange of original notes tendered pursuant to the procedures described above will constitute a binding agreement between such tendering holder and us in accordance with the terms and subject to the conditions of the exchange offer. Only holders are authorized to tender their original notes.

        The method of delivery of original notes and letters of transmittal, any required signature guarantees and all other required documents, including delivery through DTC and any acceptance or Agent's Message transmitted through ATOP, is at the election and risk of the persons tendering original notes and delivering letters of transmittal. If you use ATOP, you must allow sufficient time for completion of the ATOP procedures during normal business hours of DTC on or prior to the Expiration Date. Tender and delivery will be deemed made only when actually received by the exchange agent. If delivery is by mail, it is suggested that the holder use properly insured, registered mail, postage prepaid, with return receipt requested, and that the mailing be made sufficiently in advance of the Expiration Date to permit delivery to the exchange agent prior to such date.

        Except as provided below, unless the original notes being tendered are delivered to the exchange agent on or prior to the Expiration Date (accompanied by a completed and duly executed letter of transmittal or a properly transmitted Agent's Message), we may, at our option, reject the tender of such original notes. The exchange of exchange notes for original notes will be made only against the tendered original notes, which must be deposited with the exchange agent prior to or on the Expiration Date, and receipt by the exchange agent of all other required documents prior to or on the Expiration Date.


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        Tender of Original Notes Held Through a Nominee.    If you beneficially own original notes through a bank, depository, broker, trust company or other nominee and wish to tender your original notes, you must instruct such holder to cause your original notes to be tendered on your behalf. A letter of instruction from your bank, depository, broker, trust company or other nominee may be included in the materials provided along with this prospectus, which the beneficial owner may use to instruct its nominee to effect the tender of the original notes of the beneficial owner.

        Signature Guarantees.    Signatures on all letters of transmittal must be guaranteed by a recognized member of the Medallion Signature Guarantee Program or by any other "eligible guarantor institution," as that term is defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing, an "Eligible Institution"), unless the original notes tendered thereby are tendered (1) by a participant in DTC whose name appears on a DTC security position listing as the owner of such original notes who has not completed either the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the letter of transmittal, or (2) for the account of an Eligible Institution. See Instructions 1 and 4 of the letter of transmittal. If the original notes are in the name of a person other than the signer of the letter of transmittal or if original notes not accepted for exchange or not tendered are to be returned to a person other than the holder of such original notes, then the signatures on the letter of transmittal accompanying the tendered original notes must be guaranteed by an Eligible Institution as described above. See Instructions 1 and 4 of the letter of transmittal.

        No Guaranteed Delivery Procedures.    No guaranteed delivery procedures are being made available in connection with the exchange offer. Therefore, to participate in the exchange offer your original notes must be transferred into the exchange agent's account at DTC, and the exchange agent must receive a properly completed and duly executed letter of transmittal (and any other required


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documents) or an Agent's Message transmitted through ATOP, in each case on or prior to the Expiration Date.

        Your Representations to Us.    By signing or agreeing to be bound by the letter of transmittal, you will represent to us that, among other things:

        Determination of Validity.    All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered original notes will be determined by us, which determination will be conclusive, final and binding. Alternative, conditional or contingent tenders of original notes will not be considered valid and may be rejected by us. We reserve the absolute right to reject any and all original notes not properly tendered or any original notes our acceptance of which, in the opinion of our counsel, would be unlawful.


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        We also reserve the right to waive any defects, irregularities or conditions of tender as to particular original notes. The interpretation of the terms and conditions of our exchange offer (including the instructions in the letter of transmittal) by us will be conclusive, final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of original notes must be cured within such time as we shall determine.

        Although we intend to notify holders of defects or irregularities with respect to tenders of original notes through the exchange agent, neither we, the exchange agent nor any other person is under any duty to give such notice, nor shall they incur any liability for failure to give such notification. Tenders of original notes will not be deemed to have been made until such defects or irregularities have been cured or waived.

        Any original notes tendered into the exchange agent's account at DTC that are not validly tendered and as to which the defects or irregularities have not been cured or waived within the timeframes established by us in our sole discretion, if any, or if original notes are submitted in a principal amount greater than the principal amount of original notes being tendered by such tendering holder, such unaccepted or non-exchanged original notes will be credited back to the account maintained by the applicable DTC participant with such book-entry transfer facility.

Withdrawal of tenders

        Tenders of original notes in the exchange offer may be withdrawn at any time on or prior to the Expiration Date.


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        To be effective, any notice of withdrawal must specify the name and number of the account at DTC to be credited with such withdrawn original notes and must otherwise comply with DTC's procedures.

        If the original notes to be withdrawn have been identified to the exchange agent, a signed notice of withdrawal meeting the requirements discussed above is effective immediately upon the exchange agent's receipt of written or facsimile notice of withdrawal even if physical release is not yet effected. A withdrawal of original notes can only be accomplished in accordance with these procedures. Any failure to follow these procedures will not result in any original notes being withdrawn. The company and the exchange agent may reject any withdrawal request not in accordance with these procedures.

        All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by us, which determination shall be final and binding on all parties. No withdrawal of original notes will be deemed to have been properly made until all defects or irregularities have been cured or expressly waived. Neither we, the exchange agent nor any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or revocation, nor shall we or they incur any liability for failure to give any such notification. Any original notes so withdrawn will be deemed not to have been validly tendered for purposes of the exchange offer and no exchange notes will be issued with respect thereto unless the original notes so withdrawn are retendered on or prior to the Expiration Date. Properly withdrawn original notes may be retendered by following the procedures described above under "—Procedures for tendering original notes" at any time on or prior to the Expiration Date.

        Any original notes which have been tendered but which are not accepted for exchange due to the rejection of the tender due to uncured defects or the prior termination of the exchange offer, or which have been validly withdrawn, will be returned to the holder thereof unless otherwise provided in the letter of transmittal, promptly following the Expiration Date or, if so requested in the notice of withdrawal, promptly after receipt by us of notice of withdrawal without cost to such holder.


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Conditions to the exchange offer

        The exchange offer will not be subject to any conditions, other than:

        If we determine in our reasonable discretion that any of the conditions to the exchange offer are not satisfied, we may:


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    terminate the exchange offer,

    extend the exchange offer and retain all original notes tendered prior to the Expiration Date, subject, however, to the rights of holders to withdraw such original notes, or

    waive such unsatisfied conditions with respect to the exchange offer and accept all validly tendered original notes which have not been withdrawn.

        If our waiver of an unsatisfied condition constitutes a material change to the exchange offer, we will promptly disclose such waiver by means of a prospectus supplement that will be distributed to the holders of the original notes, and will extend the exchange offer for a period of five to ten business days, depending upon the significance of the waiver and the manner of disclosure to the registered holders, if the exchange offer would otherwise expire during such five to ten business day period.

Exchange agent

        U.S. Bank National Association, the trustee under the indenture governing the notes, has been appointed as exchange agent for the exchange offer. The exchange agent will not be (i) liable for any act or omission unless such act constitutes its own gross negligence or bad faith and in no event will the exchange agent be liable to a security holder, QVC, Inc., or any third party for special, indirect or consequential damages, or lost profits, arising in connection with the exchange offer or its duties and responsibilities related to the exchange offer; (ii) obligated to take any legal action with respect to the exchange offer which might in its judgment involve any expense or liability, unless it will be furnished with indemnity satisfactory to it; and (iii) liable or responsible for any statement contained in this prospectus.

        We will indemnify the exchange agent with respect to certain matters relating to the exchange offer.


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        You should direct questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for other documents to the exchange agent as follows:

Delivery by Mail:
U.S. Bank National Association
60 Livingston Avenue - EP - MN - WS2NAvenue—EP-MN-WS2N
St. Paul, MN 55107-2292
Attention: Specialized Finance

Courier or Overnight Delivery:
U.S. Bank National Association
111 Fillmore Avenue
St. Paul, MN 55107-1402
Attention: Specialized Finance

To Confirm by Telephone or for Information:
(651) 466-7150

Facsimile Transmissions:
(651) 466-7372

Fees and expenses

        We will bear the expenses of soliciting tenders.    The principal solicitation is being made by mail by the exchange agent; however, additional solicitation may be made by telecopy, telephone or in person by our or our affiliates' officers and regular employees.


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        No dealer-manager has been retained in connection with the exchange offer and no payments will be made to brokers, dealers or others soliciting acceptance of the exchange offer. However, reasonable and customary fees will be paid to the exchange agent for its services and it will be reimbursed for its reasonable out-of-pocket expenses.

        Our out-of-pocket expenses for the exchange offer will include fees and expenses of the exchange agent and the trustee under the indenture governing the notes, accounting and legal fees and printing costs, among others.

Transfer taxes

        We will pay all transfer taxes, if any, applicable to the exchange of the original notes pursuant to the exchange offer. If, however, a transfer tax is imposed for any reason other than the exchange of the original notes pursuant to the exchange offer, then the amount of any such transfer taxes (whether imposed on the tendering holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to such tendering holder.

Accounting treatment for the exchange offer

        The exchange notes will be recorded at the carrying value of the original notes and no gain or loss for accounting purposes will be recognized. The expenses of the exchange offer will be amortized over the term of the exchange notes.


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Business

Overview

        QVC, Inc. markets and sells a wide variety of consumer products primarily through live televised shopping programs distributed to approximately 214296 million (including our joint venture in China as discussed below in further detail) worldwide households each day and via our websites and other interactive media, including QVC.com.QVC.com (unless otherwise indicated or required by the context, the terms "we," "our," "us," "the Company," and "QVC" refer to QVC, Inc. and its consolidated subsidiaries). We believe we are the global leader in television retailing and a leading multimedia retailer, with operations based in the U.S., Japan, Germany, the United KingdomU.K. and Italy. Additionally, we have a 49% interest in a retailing joint venture in China, which operates through a television shopping channel.channel with an associated website. The joint venture is accounted for as an equity method investment. Our name, QVC, stands for "Quality, Value and Convenience," which is what we strive to deliver to our customers. Our operating strategy is to create a premier multimedia lifestyle brand and shopping destination for our customers, further penetrate our core customer base, generate new customers, enhance our programming distribution offerings and expand internationally to drive revenue and profitability. For the year ended December 31, 2012,2013, approximately 91%92% of our worldwide net revenue wasshipped sales were from repeat and reactivated customers (i.e., customers who made a purchase from us during the prior twelve months and customers who previously made a purchase from us but not during the prior twelve months, respectively). In the same period, we attracted approximately 3.1 million new customers. Our global e-commerce operation comprised $2.9$3.2 billion, or 34%38%, of our consolidated net revenue for the year ended December 31, 2012.2013.

        We market our products in an engaging, entertaining format primarily through live television programs and interactive features on our websites. In the U.S., we distribute our programming live 24 hours per day, 364 days per year and present on average almost 1,000900 products every week. Internationally, we distribute live programming 17 to 24 hours per day, depending on the market. We classify our products into foursix groups: electronics, home, (including electronics), accessories (including beauty, products),jewelry, apparel and jewelry.accessories. It is our product sourcing team's mission to research and locate compelling and differentiated products from manufacturers who have sufficient scale to meet anticipated demand. We offer many QVC-exclusive products, as well as popular brand name and lesser known products available from other retailers. Many of our products are endorsed by celebrities, designers and other well-known personalities who often join our presenters to personally promote their products and provide lead-in publicity on their own television shows. We believe that our ability to demonstrate product features and present "faces and places" differentiates and defines the QVC shopping experience. We closely monitor customer demand and our product mix to remain well-positioned and relevant in popular and growing retail segments, which we believe is a significant competitive advantage relative to competitors who operate bricks-and-mortar stores.

        Since our inception, we have shipped over 1.51.6 billion packages in the U.S. alone. We operate eightnine distribution centers and eight call centers worldwide and are able to ship approximately 92%94% of our orders within 48 hours of order placement. In 2012,2013, our work force of approximately 17,00017,500 employees handled approximately 171168 million customer calls, shipped over 166approximately 169 million units globally and served approximately 11.511.8 million customers. We believe our long-term relationships with major U.S. television distributors, including cable operators (e.g., Comcast and Time Warner Cable), satellite television providers (e.g., DISH Network and DIRECTV) and telecommunications companies (e.g., Verizon and AT&T), provide us with broad distribution, favorable channel positioning and significant competitive advantages. We believe that our significant market share, brand awareness, outstanding customer service, repeat customer base, international reach and scalable infrastructure distinguish us from our competitors.


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History

        QVC was founded on June 13, 1986 by Joseph Segel. Our first U.S. live broadcast took place at 7:30 PM ET on November 24 of that year, reaching 7.6 million TV homes. Initially broadcast live from


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7:30 PM ET until midnight each weekday and all day Saturdays and Sundays, the channel extended its live U.S. programming to 24 hours per day in January 1987.

        On February 2,In 1995, Comcast purchased a majority shareholding in QVC, taking control of the Company. In July 2003, Comcast sold its majority share to Liberty.Liberty Interactive Corporation ("Liberty," formerly known as Liberty Media Corporation).

        Please see "QVC-U.S." and "International operations" below for information on the development of our U.S. and international businesses.

QVC-U.S.

        Our live televised shopping programs are distributed nationally, 24 hours per day, 364 days per year, to approximately 106 million television households and approximately 98% of television households, defined as households subscribing to services offered by television distributors. QVC-U.S. programming is also available on QVC.com, our U.S. website and mobile applications via streaming video. QVC-U.S., including QVC.com, contributed $5.8 billion, or 67.8%, of consolidated net revenue for the year ended December 31, 2013.

        In March 2013, QVC-U.S. launched over-the-air broadcasting in designated U.S. markets that can be accessed by any television household in such markets, regardless of whether it subscribes to a paid television service. This will allow QVC-U.S. to reach new customers who previously did not have access to the program through other television platforms.

        In August 2013, QVC-U.S. launched an additional channel, QVC Plus, which is being distributed through cable and satellite systems. The channel generally offers the same programming as the live channel, but on a three hour pre-recorded delay, which will allow viewers to have access to a broader range of QVC programming options as well as more relevant programming for viewers in differing time zones.

        We have established QVC-U.S. as the televised shopping leader after building a track record of outstanding quality and customer service, establishing favorable channel positioning and generating repeat business from our core customer base. We estimate our share of the U.S. televised shopping revenue in 2012,2013, among QVC-U.S. and its two primary televised shopping competitors HSN and ShopNBC,ShopHQ, to be approximately two-thirds. We believe QVC-U.S. also compares favorably in terms of sales to general, non-television based retailers due to our extensive customer reach and efficient cost structure.

        QVC.com, launched in 1996, complements our televised shopping programs by allowing consumers to purchase a wide assortment of goods offered on our televised programs, as well as other products that are available only on QVC.com. We view e-commerce as a natural extension of our business, allowing us to stream live video and offer on-demand video segments of items recently presented live on our televised programs. QVC.com allows shoppers to browse, research, compare and perform targeted searches for products, control the order-entry process and conveniently access their QVC account. For the year ended December 31, 2013, approximately 69% of our new U.S. customers made their first purchase through QVC.com.


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        The table below illustrates QVC.com's growth since 2010:2011:


 Fiscal year ended
December 31,
  Years ended December 31, 
(dollars in millions)
 2010 2011 2012 
(in millions)
 2011 2012 2013 

QVC.com net revenue

 $1,728 $1,993 $2,239  $1,993 2,239 2,501 

Total U.S. net revenue

 $5,241 $5,412 $5,585  5,412 5,585 5,844 

QVC.com % of total U.S. net revenue

 33.0% 36.8% 40.1% 36.8% 40.1% 42.8%

International operations

        Our televised shopping programs reached approximately 115120 million television households outside of the U.S., primarily in Japan, Germany, the United KingdomU.K. and Italy. In addition, our joint venture in China reached approximately 4870 million homes. The programming created for most of these markets is also available via streaming video on our international websites located in each market.and mobile applications. Our international businesses each employ product sourcing teams who select products tailored to the interests of each local market. For the year ended December 31, 2012,2013, our international operations generated $2.9$2.8 billion of consolidated net revenue and $536$489 million of Adjusted OIBDA, and our international websites generated $696$741 million, or 23.8%26.7%, of our total international net revenue.

        QVC-Japan.    We own 60% of QVC-Japan through a joint venture with Mitsui & Co., LTD ("Mitsui"). QVC-Japan launched in April 2001 and generated positive Adjusted OIBDA in its third


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year of operation. QVC-Japan broadcasts 24 hours of live programming each day and reachesreached approximately 2627 million total households. For the year ended December 31, 2013, QVC-Japan produced $1,024 million in net revenue, which was 11.9% of our consolidated net revenue.

        QVC-Germany.    QVC-Germany went on air in December 1996 and generated positive Adjusted OIBDA in its seventh year of operation. QVC-Germany broadcasts 23 hours of live programming each day and reachesreached approximately 41 million total households whichthat are located in both Germany and Austria. Beyond the main channel, QVC-Germany also broadcasts pre-recorded shows on two additional channels, QVC Beauty and QVC Plus, which allows viewers to access a broader range of programming options. For the year ended December 31, 2013, QVC-Germany produced $971 million in net revenue, which was 11.3% of our consolidated net revenue.

        QVC-United Kingdom.QVC-U.K.    QVC-U.K. went on air in October 1993 and generated positive Adjusted OIBDA in its fifth year of operation. QVC-U.K. broadcasts 17 hours of live programming each day and reachesreached approximately 2627 million total households whichthat are located in both the United KingdomU.K. and the Republic of Ireland. Beyond the main channel, QVC-U.K. also broadcasts pre-recorded shows on three additional channels, QVC Beauty, QVC Extra and QVC Style, which allows viewers to access a broader range of programming options. For the year ended December 31, 2013, QVC-U.K. produced $657 million in net revenue, which was 7.6% of our consolidated net revenue.

        QVC-Italy.    QVC-Italy went on air in October 2010 and is currently in its thirdfourth year of operation. QVC's shopping program in Italy reachesreached approximately 1725 million households and is broadcast live for 17 hours aeach day on satellite and digital terrestrial television and an additional seven hours aeach day of recorded programming on satellite and seven hours aeach day of general interest programming on digital terrestrial television. For the year ended December 31, 2013, QVC-Italy produced $127 million in net revenue, which was 1.5% of our consolidated net revenue.

        China Joint Venture.    On July 4, 2012, we entered into a joint venture with Beijing-based China Broadcasting Corporation, a limited liability company owned by China National Radio ("CNR"), China's government-owned radio division. The joint venture, CNR Home Shopping Co., Ltd. ("CNRS"), is owned 49% by QVC and 51% by CNR through subsidiaries of each company. CNRS operates a retailing business in China through a shopping television channel with an associated website.


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This joint venture is expected to combinecombining CNRS's existing knowledge of the digital shopping market and consumers in China with QVC's global experience and know-how in multimedia retailing. CNRS distributes live programming for 15 hours each day and recorded programming for nine hours each day. The CNRS joint venture is accounted for as an equity method investment recorded as equity in losses of investee in the consolidated statements of operations.

Adjusted operating income before depreciation and amortization (Adjusted OIBDA)

        QVC defines Adjusted OIBDA as net revenue less cost of goods sold, operating expenses and selling, general and administrative expenses (excluding stock compensation). QVC's chief operating decision maker and management team use this measure of performance in conjunction with other measures to evaluate the businesses and make decisions about allocating resources among the businesses. QVC believes that this is an important indicator of the operational strength and performance of the businesses, including the ability to service debt and fund capital expenditures. In addition, this measure allows QVC to view operating results, perform analytical comparisons and perform benchmarking among its businesses and identify strategies to improve performance. This measure of performance excludes such costs as depreciation, amortization and stock compensation that are included in the measurement of operating income pursuant to U.S. GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with U.S. GAAP.

        The primary material limitations associated with the use of Adjusted OIBDA as compared to GAAP results are (i) it may not be comparable to similarly titled measures used by other companies in the industry, and (ii) it excludes financial information that some may consider important in evaluating QVC's performance. QVC compensates for these limitations by providing disclosure of the difference between Adjusted OIBDA and GAAP results, including providing a reconciliation of Adjusted OIBDA to GAAP results, to enable investors to perform their own analysis of QVC's operating results. Refer to note 15 to the consolidated financial statements for a reconciliation of Adjusted OIBDA to income before income taxes.

Operating segments

        We have identified five reportable operating segments, which correspond to the geographic areas in which we have operations. As such, our five reportable segments are QVC-U.S., QVC-Japan, QVC-Germany, QVC-U.K. and QVC-Italy. For financial information about our operating segments and corresponding geographic areas, please refer to note 17 to15 of our audited consolidated financial statements, as well as to "Management's Discussionmanagement's discussion and Analysisanalysis of Financial Conditionfinancial condition and Resultsresults of Operations,"operations, each of which are included elsewhere in this prospectus.document.

Merchandise

        We believe that our ability to combine product and programming helps us create competitive advantages over traditional bricks-and-mortar and internetInternet retailers. We seek to offer our customers an assortment of compelling, high-quality products. In the U.S., we present on average almost 1,000900 products every week on our live televised programming, approximately 22% of which have not been presented previously to our television audience. We offer customers high-quality and brand name products marketed in a creative, informative, entertaining and engaging style. We provide a differentiated shopping experience by offering customers the opportunity to experience not only the product being sold, but the people and places behind that product, thereby enhancing their overall shopping experience.


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        Our global merchandise mix is similar to that of a high-quality department store, featuring the best in: (i) electronics, (ii) home, (including electronics), (ii) accessories (including(iii) beauty, products), (iii)(iv) jewelry (v) apparel and (iv) jewelry,(vi) accessories, which, in 2012,2013, accounted for approximately 43%12%, 28%31%, 17%, 12%, 16% and 13%12%, respectively, of our consolidated gross revenue.shipped sales. For the year ended December 31, 2012, such percentages were 13%, 30%, 16%, 13%, 16% and 12%, respectively. For the year ended December 31, 2011, such percentages were 45%13%, 26%31%, 15%, 14%, 16% and 14%, respectively. For the year ended December 31, 2010, such percentages were 44%, 26%,


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15% and 15%11%, respectively. Many of our brands are exclusive, while others are created by well-known designers.

        A key difference between us and traditional bricks-and-mortar retailers is that we are able to quickly adapt what merchandise we present as a direct response to what is selling and what is not. We utilize a test and re-order model to determine initial customer demand. Through constant monitoring, we manage our product offerings to maximize net revenue and fulfill current demand in large growth segments where we can gain a greater share of our customers' purchases. Our merchandising team is dedicated to consistently researching, pursuing and launching new products and brand opportunities. With a management mandate to deliver hard-to-find value, this product search group constantly pursues securing quality goods from manufacturers with enough scale to offer sufficient supply to our existing and future customers. We maintain strong relationships with our vendors, many of which find our marketing distribution channel attractive due to the showcasing and story-telling elements of our programming, the velocity of our sales and our pricing model integrity. This efficient sales/marketing strategy is mirrored on our websites.

        We purchase, or obtain on consignment, products from U.S. and foreign manufacturers and wholesalers, often on favorable terms based upon the volume of the transactions. We have attracted some of the world's most respected consumer brands as well as celebrities, entrepreneurs and designers to promote these brands. Brand leaders such as Dell, Dooney & Bourke, Philosophy, Dell, Panasonic, Judith Ripka, Panasonic and Bare EscentualsPhilosophy reach a broad audience while product representatives share the stories behind these brands. We have agreements with celebrities, entrepreneurs and designers such as Joan Rivers,Isaac Mizrahi, Rachael Ray, Nicole Richie and Isaac MizrahiJoan Rivers enabling us to provide entertaining and engaging programming that develops a lifestyle bond with our customers. These celebrity personalities and product representatives often provide pre-appearance publicity for their QVC products on other television shows, enhancing demand during their QVC appearances. We cross-promote between our e-commerce and mobile platform and our television programming to promote the use of each platform as a standalone entity. Our e-commerce efforts are focused on creating a community of online shoppers by translating our televised themes, personalities and shopping experience for each platform.

        We do not depend on any single supplier or designer for a significant portion of our inventory purchases.

Distribution

        We distribute our television programs, via satellite and optical fiber, to cable television and direct-to-home satellite system operators for retransmission to their subscribers in the U.S., Japan, Germany, and the United KingdomU.K. and neighboring countries. We also transmit our television programs over digital terrestrial broadcast television to viewers throughout Italy, and the United Kingdom,U.K. and to viewers in certain geographic regions in the U.S and Germany. In the U.S., we uplink our analog and digital programming transmissions using a third-partythird party service. Both transmissions are uplinked to protected, non-preemptible transponders on two U.S. satellites. "Protected" status means that, in the event of a transponder failure, our signal will be transferred to a spare transponder or, if none is available, to a preemptible transponder located on the same satellite or, in certain cases, to a transponder on another satellite owned by the same service provider if one is available at the time of the failure. "Non-preemptible" status means that, in the event of a transponder failure, our transponders cannot be preempted in favor of a user of a failed transponder, even another user with "protected status." Our international business units each obtain uplinking services from third parties and transmit their


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programming to non-preemptible transponders on four international satellites. Our transponder service agreementagreements for our U.S. transponders expiresexpire at the earlier of the end of the lives of the satellites or the service agreement, which are currently estimated to beagreements. The service agreements in eitherthe U.S. expire in 2019 orthrough 2020. Our transponder service agreements for our international transponders expire in 20132014 through 2022.


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        We continually seek to expand and enhance our television and e-commerce platforms, as well as to further our international operations and multimedia capabilities. We launched QVCHD in the U.S. in April 2008, and in May 2009, we became the first U.S. multimedia retailer to offer a native HD service. QVCHD is a high-definition simulcast of our U.S. telecast utilizing the full 16x9 screen ratio, while keeping the side panel for additional information. High-definition, or HD, programming allows us to utilize a typically wider television screen with crisper and more colorful images to present a larger "storefront," which we believe captures the attention of channel "surfers" and engages our customers. In the U.S., QVCHD reachesreached approximately 4870 million television households, as we continue to develop and launch features to further enrich the television viewing experience.

        Beyond the main QVC channels, including QVCHD, the U.S., Germany and the U.K also broadcast pre-recorded shows on additional channels that offer viewers access to a broader range of QVC programming options. These channels include QVC Plus in the U.S., QVC Beauty and QVC Plus in Germany and QVC Beauty, QVC Extra and QVC Style in the U.K.

Affiliation agreements

        We enter into long-term affiliation agreements with certain of our television distributors who downlink our programming and distribute the programming to their customers. In the U.S., our programming is distributed to approximately 99 million television households, or approximately 98% of all television households as of December 31, 2012, defined as households subscribing to television services offered by cable operators (e.g., Comcast and Time Warner Cable), satellite television providers (e.g., DISH Network and DIRECTV) and telecommunications companies (e.g., Verizon and AT&T). Our affiliation agreements with both U.S. and international distributors have termination dates ranging from 20132014 to 2022. Our ability to continue to sell products to our customers is dependent on our ability to maintain and renew these affiliation agreements in the future. Although we are typically successful in obtaining and renewing these agreements, we do not have distribution agreements with some of the distributors that carry our programming. In total, we are currently providing programming without affiliation agreements to distributors representing approximately 7%6% of our U.S. distribution, and short-term, rolling 90 day letters of extension, to distributors who represent approximately 36%22% of our U.S. distribution. Some of our international programming may continue to be carried by distributors after the expiration dates on our affiliation agreements with them have passed.

        In return for carrying our signals, each programming distributor in the U.S. receives an allocated portion, based upon market share, of up to 5% of the net sales of merchandise sold via the television programs and from certain internetInternet sales to customers located in the programming distributor's service areas. In Japan, Germany, the United KingdomU.K. and Italy, programming distributors predominately receive an agreed-upon annual fee, a monthly fee per subscriber regardless of the net sales, or a variable percentage of net sales.sales or some combination of the above arrangements.

        In addition to sales-based commissions or per-subscriber fees, we also make payments to distributors primarily in the U.S. for carriage and to secure positioning within a broadcast area or within the general entertainment area on the distributor's channel line-up. We believe that a portion of our sales is attributable to purchases resulting from channel "surfing" and that a channel position near broadcast networks and more popular cable networks increases the likelihood of such purchases. As technology evolves, we will continue to monitor optimal channel placement and attempt to negotiate agreements with our distributors to maximize the viewership of our television programming.

Demographics of customers

        We enjoy a very loyal customer base, as demonstrated by the fact that for the twelve monthsyear ended December 31, 2012,2013, approximately 86% of our worldwide net revenueshipped sales came from repeat customers (i.e., customers who made a purchase from us during the prior twelve months), who spent an average


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of $1,335 each during this period. An additional 5%6% of net revenueshipped sales in that period came from reactivated customers (i.e., customers who previously made a purchase from us, but not during the prior twelve months).


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        We believe our core customer base represents an attractive demographic target market. Based on internal customer data, approximately 64%51% of our 7.37.5 million U.S. customers for twelve monthsyear ended December 31, 20122013 were women between the ages of 35 and 64.

Order taking and fulfillment

        We strive to be prompt and efficient in order taking and fulfillment. We have three U.S. phone centers located in San Antonio, Texas; Port St. Lucie, Florida; and Chesapeake, Virginia that can direct calls from one call center to another as volume mandates. This ability to transfer calls reduces a caller's hold time, helping to ensure that orders will not be lost as a result of abandoned or unanswered calls. We also have one phone center in each of Japan, the United KingdomU.K. and Italy and two call centers in Germany. Many markets also utilize home agents to handle calls, allowing staffing flexibility for peak hours. In addition, we utilize computerized voice response units, which handle approximately 33%30% of all orders taken on a worldwide basis.

        In addition to taking orders from our customers through phone centers and online, we continue to expand our ordering platforms. We are expanding mobile phonedevice ordering capabilities and over the past several years have launched iPhone, and iPad, applications, Android and Blackberry applications, a WAP (wireless application protocol) mobile website and a robust SMS (short message services) program. On a global basis, customers placed approximately 8%12% of all orders directly through their mobile devices in 2012. Customers in Japan placed approximately 13% of all orders directly through their mobile phones.2013.

        Through our eightnine worldwide distribution centers, we shipped approximately 92%94% of our orders within 48 hours of order placement in the year ended December 31, 2012.2013. Our U.S. distribution centers are located in Suffolk, Virginia; Lancaster, Pennsylvania; West Chester, Pennsylvania; Rocky Mount, North Carolina; and Florence, South Carolina. Our U.S. distribution centers have shipped over 500,000 units in a single day. We also have distribution centers in Sakura-shi, Chiba, Japan; Hücklehoven, Germany (which supports QVC-GermanyGermany; Knowsley, U.K. and QVC-Italy); and Knowsley, United Kingdom.Castel San Giovanni, Italy.

        We have built a scalable operating infrastructure focused on sustaining efficient, flexible and cost-effective sale and distribution of our products. Since our physical store locations are minimal, we require lower inventory levels and capital expenditures compared to traditional bricks-and-mortar retailers. In recent years, we have made significant investments in our distribution centers and information technology systems that we believe will accommodate our foreseeable growth needs. Further, since we have no set "floor plan" and can closely manage inventory levels at our centralized warehouses, we believe we have the flexibility to analyze and react quickly to changing trends and demand by shifting programming time and product mix. Our cost structure is highly variable, which we believe allows us to consistently achieve attractive margins relative to bricks-and-mortar retailers.

        Our web and mobile platforms are fully integrated with our televised programming and product distribution capabilities. Our web and mobile platform features include a live video stream of our television programming, full integration with our order fulfillment and product branding, as well as the thematic offerings and events that have become fundamental to our televised programming.

        Third party carriers transport our packages from our distribution centers to our customers. In each market where we operate, we have negotiated long-term contracts with shipping companies, which in certain circumstances provide for favorable shipping rates.

Competition

        We operate in a rapidly evolving and highly competitive retail business environment. Based on U.S. net revenue for the twelve monthsyear ended December 31, 2012,2013, we are the leading television retailer in the U.S.


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and generate substantially more net revenue than our two closest televised shopping competitors, HSN (an entity in which Liberty had a 37%38% ownership interest as of December 31, 2012)


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2013) and ShopNBC. However,ShopHQ. Our international operations face similar competition in their respective markets, such as Shop Channel in Japan, HSE 24 in Germany and Ideal World in the U.K. Additionally, we have numerous and varied competitors at the national and local levels, ranging from large department stores to specialty shops, electronic retailers, direct marketing retailers, wholesale clubs, discount retailers, other television shopping retailers such as HSN and ShopNBC, infomercial retailers, internetInternet retailers, and mail-order and catalog companies. Our international operations face similar competition in their respective markets, such as Shop Channel in Japan, HSE 24 in Germany and Ideal World in the United Kingdom.

        We also compete for access to customers and audience share with other providers of televised, on-lineonline and hard copy entertainment and content. The price and availability of other programming and the conversion to digital programming platforms may unfavorably affect the placement of our programming in the channel line-ups of our distributors, and may affect our ability to obtain distribution agreements with small cable distributors. Competition from other programming also affects the compensation that must be paid to distributors for carriage, which continues to increase. Principal competitive factors for us include (i) value, quality and selection of merchandise; (ii) customer experience, including customer service and reliability of fulfillment and delivery services and (iii) convenience and accessibility of sales channels.

Employees

        We employed approximately 17,00017,500 full-time and part-time employees as of December 31, 2012.2013. Employment levels fluctuate due to seasonal factors affecting our business. Additionally, we utilize independent contractors and temporary personnel to supplement our workforce, particularly on a seasonal basis. We consider our employee relations to be good.

Properties

        We own our corporate headquarters and operations center in West Chester, Pennsylvania, which consists of office space and includes executive offices, television studios, showrooms, broadcast facilities and administrative offices for QVC. We also own call centers in San Antonio, Texas; Port St. Lucie, Florida; Chesapeake, Virginia; Bochum and Kassel, Germany, as well as a call center and warehouse in Knowsley, United Kingdom.U.K. We own a distribution center in Hücklehoven, Germany and distribution centers in Lancaster, Pennsylvania and West Chester, Pennsylvania; Suffolk, Virginia; Rocky Mount, North Carolina; Florence, South Carolina andCarolina; Sakura-shi, Chiba, Japan.Japan and Hücklehoven, Germany. To supplement the facilities we own, we also lease various facilities in the United States,U.S., Japan, Germany, the United KingdomU.K. and Italy for retail outlet stores, office space, warehouse space, and call center locations.locations and a distribution center. In 2013, QVC-Japan is finalizing atransitioned to its new headquarters in Japan that will include executive offices,includes television studios, showrooms, broadcast facilities, administrative offices and a call center for QVC-Japan.center. The total expected project cost iswas approximately $230 million$220 million. QVC-Germany owns its headquarters in Germany that includes television studios, broadcast facilities and is expected to be completed in the first half of 2013. The cumulative cost of this project was $205 million through December 31, 2012.administrative offices. In 2012, QVC-U.K. transitioned to its new leased headquarters in the U.K. that includes executive offices, television studios, showrooms, broadcast facilities and administrative offices for QVC-U.K. in 2012.offices. QVC-U.K. made certain improvements to its new leased facility costing approximately $50 million. In 2014, QVC-Italy will take ownership of its current leased headquarters in Italy that includes television studios, broadcast facilities, administrative offices and a call center for approximately $22 million, of which $14 million was deposited in 2013.

        We believe that the duration of each lease is adequate and we do not anticipate any future problems renewing or obtaining suitable leases for our principal properties. We believe that our principal properties, whether owned or leased, are currently adequate for the purposes for which they are used and are suitably maintained for these purposes. From time to time, we consider various alternatives related to our long termlong-term facilities needs. While our management believes existing facilities are adequate to meet our short term needs, it may become necessary to lease or acquire additional or alternative space to accommodate future growth.


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Legal proceedings

        We are not a party to or subject to any material pending legal proceedings. We are parties to various claims and pending litigation as part of the normal course of business. In the opinion of management, the nature and disposition of these matters are considered routine and arising in the ordinary course of business.

Government regulation

        The manner in which we sell and promote merchandise and related claims and representations made in connection with these efforts is regulated by federal and state law. Some examples of regulatory agencies and regulations that affect the manner in which we sell and promote merchandise include the following:

        In 2000, we became subject to a consent decree issued by the FTC barring us from making certain deceptive claims for specified weight-loss products and dietary supplements. We also became subject to an expanded consent decree issued by the FTC in 2009 that terminates on the later of March 4, 2029, or 20 years from the most recent date that the U.S. or the FTC files a complaint in federal court alleging any violation thereunder. Pursuant to this expanded consent decree, we are prohibited from making certain claims about specified weight-loss, dietary supplement and anti-cellulite products unless we have competent and reliable scientific evidence to substantiate such claims. To help mitigate against the risk of future claims, we increased our staffing to provide additional review of claims related to weight-loss, dietary supplement and anti-cellulite products that we offer for sale.

        Congress enacted the Commercial Advertisement Loudness Mitigation ("CALM") Act (the "CALM Act") in 2010. The CALM Act directs the FCC to incorporate into its rules and make mandatory a technical standard that is designed to prevent digital television commercial advertisements from being transmitted at louder volumes than the program material they accompany. The FCC's CALM Act implementing regulations became effective on December 13, 2012. Although the FCC's CALM Act regulations place direct compliance responsibility on broadcasters and multichannel video programming distributors ("MVPDs"), the FCC adopted a "safe harbor" compliance approach applicable to commercials


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commercials embedded in programming provided by programmers, such as the Company. Under the FCC's safe harbor approach, broadcasters and MVPDs may meet their CALM Act compliance obligations through reliance on programmer-provided CALM Act compliance certifications that are made "widely available" to broadcasters and MVPDs through a website or other means. The Company has determined that its programming is CALM Act compliant, and in response to requests from its affiliates, and in order to allow its affiliates to meet the FCC's safe harbor, the Company has posted a CALM Act compliance certification to a website that is available to its affiliates.

        We market and provide a broad range of merchandise through television shopping programs and our websites. As a result, we are subject to a wide variety of statutes, rules, regulations, policies and procedures in various jurisdictions that are subject to change at any time, including laws regarding consumer protection, privacy, the regulation of retailers generally, the importation, sale and promotion of merchandise and the operation of retail stores and warehouse facilities, as well as laws and regulations applicable to the internetInternet and businesses engaged in online commerce, such as those regulating the sending of unsolicited, commercial electronic mail.

        Our business is also dependent upon our continued ability to transmit our programming to television distributors from our third party satellite uplink facilities, which transmissions are subject to FCC compliance in the U.S. and foreign regulatory requirements in our international operations.

Intellectual property

        We regard our trademarks, service marks, copyrights, domain names, trade dress, trade secrets, proprietary technologies and similar intellectual property as critical to our success. We rely on a combination of trademark and copyright law, trade-secret protection, and confidentiality and/or license agreements with our employees, customers, suppliers, affiliates and others to protect these proprietary rights. We have registered, or applied for the registration of, a number of domain names, trademarks, service marks and copyrights by U.S. and foreign governmental authorities and vigorously protect our proprietary rights against infringement.

        In the U.S., we have registered trademarks and service marks for a variety of items including, but not limited to our brand name, "QVC" and "Quality Value Convenience," the "Q QVC Ribbon Logo" and our proprietary products sold such as "Arte D'Oro," "Cook's Essentials," "Denim & Co.," "Diamonique," "Nature's Code," "Northern Nights" and "Ultrafine Silver." Similarly, foreign registrations have been obtained for many trademarks and service marks for our brand name and propriety products including, but not limited to, "QVC," the "Q QVC Ribbon Logo," "Breezies," "Denim & Co.," "Diamonique" and "Northern Nights." We consider the service mark for the "QVC" name the most significant trademark or service mark held by us because of its impact on market awareness across all of our geographic markets and on customers' identification with us. As with all U.S. trademarks or service marks, our trademark and service mark registrations in the United StatesU.S. are for a ten year period and are renewable every ten years, prior to their respective expirations, as long as the trademarks or service marks are used in the regular course of trade.

Liberty relationship and related party transactions

        We are an indirect wholly owned subsidiary of Liberty, which owns interests in a broad range of digital commerce businesses. On August 9, 2012, Liberty completed the recapitalization of its common stock into shares of the corresponding series of two new tracking stocks, Liberty Interactive (Nasdaq: LINTA, LINTB) and Liberty Ventures (Nasdaq: LVNTA, LVNTB). We are now attributed to the Liberty Interactive tracking stock, which tracks the assets and liabilities of Liberty's Interactive Group (the "Interactive Group"). The Interactive Group does not represent a separate legal entity; rather, it represents those businesses, assets and liabilities that are attributed to that group. Liberty attributedalso attributes to its Interactive Group those businesses primarily focused on digital commerce. Liberty also attributed tocommerce and its 38%


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its Interactive Group its 37% ownership interest in HSN, Inc., one of our two closest televised shopping competitors (see above section, "Competition"). To fund

        In October 2013, Liberty announced that its board has authorized management to pursue a plan to recapitalize (the "Recapitalization") its Liberty Interactive Group tracking stock into two new tracking stocks, one (currently the cash requirementsLiberty Interactive common stock) to be renamed the QVC Group common stock and the other to be designated as the Liberty Digital Commerce common stock. In the Recapitalization, record holders of Series A and Series B Liberty Interactive common stock would receive one share of the corresponding series of Liberty Ventures, Liberty attributed $1.35 billion in cash to Liberty Ventures, which was funded by the Interactive Group. Such attributed cash balance consisted of cash from Liberty's balance sheet and $1.15 billion of dividends paid by us to Liberty through our available cash on hand and $800 million in borrowings under our senior secured credit facility. Immediately after the recapitalization, we had $870 million of total outstanding borrowings under our senior secured credit facility and $1.13 billion of undrawn availability. The senior secured credit facility is further discussed in note 9Digital Commerce common stock for each 10 shares of the audited consolidated financial statements and note 6renamed QVC Group common stock held by them as of the unaudited interim condensed consolidated financial statements, each ofeffective date. Liberty intends to attribute to the Liberty Digital Commerce Group its operating subsidiaries Provide Commerce, Inc.; Backcountry.com, Inc.; Bodybuilding.com, LLC; CommerceHub; Right Start and Evite along with cash and certain liabilities. The QVC Group, which are included elsewhereis currently known as the Liberty Interactive Group, would have attributed to it the Company and Liberty's approximate 38% interest in this prospectus,HSN, along with cash and in "Description of other indebtedness—Senior secured credit facility."certain liabilities.

        We are a "close corporation" under Delaware law and, as such, our shareholder, rather than a board of directors, manages our business. Since our shareholder is an indirect wholly owned subsidiary of Liberty, allcertain aspects of our management, including the approval of significant corporate transactions such as a change of control, are controlled by Liberty, rather than an independent governing body. Our Chief Executive Officer and President, Michael A. George, also became a named executive officer of Liberty for the year-ended December 31, 2011 and Mr. George became a director of Liberty during 2011.

        Liberty's interests may not coincide with our interests or yours and Liberty may cause us to enter into transactions or agreements with related parties or approve corporate actions that could involve conflicts of interest. For example, Liberty's dependence on our cash flow for servicing its debt and for other purposes is likely to result in our payment of large dividends to Liberty, which may increase our leverage and decrease our liquidity. We paid $244 million$1.0 billion of net dividends to Liberty during the three months ended March 31, 2013, $1.8 billion of net dividends to Liberty during 2012 and $205 million of net dividends to Liberty during 2011 and $9 million of net dividends to Liberty during 2010.2011. We declared and paid dividends in cash to Liberty in the amount of $517$286 million subsequent to MarchDecember 31, 2013.


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Management and corporate governance

Management by our shareholder

        We are a Delaware close corporation that has elected to be managed by our shareholder, which is an indirect wholly owned subsidiary of Liberty. Thus, our shareholder, rather than a board of directors, manages our business.


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Executive officers

        The following table sets forth the name, age and position of individuals who currently serve as our executive officers. Ages are as of MarchDecember 31, 2013.

Name
 Age Position(s)

Michael A. George

  5152 President & Chief Executive Officer, QVC

Steve Hofmann

  4748 Chief Executive Officer, QVC-Europe and QVC-ItalyQVC-Germany (Acting)

John Thomas

  5253 Chief Executive Officer, QVC-Japan

Claire A. Watts

  53 Chief Executive Officer, QVC-U.S.

Thaddeus J. Jastrzebski

52Executive Vice President, Chief Financial Officer & Treasurer, QVC

Linda Dillman

  5657 Executive Vice President & Chief Information Officer, QVC

Matthew Goldberg

43Senior Vice President Global Market Development

Lawrence R. Hayes

  5253 Senior Vice President, General Counsel & Secretary, QVC

Elizabeth A. Rubino

  50 Executive Vice President of Human Resources and Workplace Services, QVC

        The following is a biographical summary of the experience of our executive officers:

        Michael A. George.    Mr. George was named President of QVC in November 2005 and Chief Executive Officer in April 2006. Mr. George is responsible for overseeing QVC's operations in the United States, United Kingdom,U.K., Germany, Japan and Italy. Mr. George came to us from Dell Inc., where he was the Chief Marketing Officer and General Manager of Dell's U.S. consumer business. At Dell, he was responsible for building the Dell brand globally across all customer segments and developing Dell's global e-business and CRMcustomer relationship management capabilities. Mr. George also led Dell's U.S. consumer business, with responsibility for all products and services sold into the home market, including PCs, TVs, printers, software, video and music content, and home technology services. Prior to his time with Dell, Mr. George was a senior partner at McKinsey & Co., Inc. and led the firm's North American Retail Industry Group. At McKinsey, Mr. George served retail and consumer goods companies on areas of corporate strategy and organization, marketing and merchandising, sales-force operations and information technology.

        Steve Hofmann.    Mr. Hofmann was named Chief Executive Officer of QVC-Europe in May 2012. In this role, he provides oversight of all of QVC's European markets in addition to his role as Chief Executive Officer of QVC-Italy.markets. In October 2013, Mr. Hofmann was namedalso took on the role of interim CEO QVC-Italy in January 2010, where he established the frameworkof QVC-Germany while a search is conducted for QVC's operations in Italy and is now responsiblea permanent replacement for overseeing those operations.that position. Mr. Hofmann previously served as Chief Executive Officer of QVC-Italy and QVC-U.K. Mr. Hofmann joined QVC in September 2007 from Jupiter Shop Channel in Japan, where he served as co-Chief Executive Officer. Including his experience in television retailing, Mr. Hofmann brings more than 14 years of global television experience to QVC. He joined NBC in New York in 1996 and worked with NBC in Hong Kong and Singapore as the Chief Financial Officer of Asian operations. Mr. Hofmann has also been with Jupiter TV, Japan's largest multi-channel television provider, as Chief Financial Officer. He started his career at PricewaterhouseCoopers LLP, where he spent six years.


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        John Thomas.    Mr. Thomas was named Chairman and CEO of QVC JapanQVC-Japan in September 2011. In this role, Mr. Thomas is responsible for overseeing QVC's operations in Japan. Mr. Thomas joined QVC as senior vice president of global business development in January 2011. In this position, he was responsible for the development of QVC's market expansion strategy. Mr. Thomas brings to QVC more than 25 years experience in CEO and executive assignments with a focus on technology and marketing companies to QVC.companies. He had served as a consultant supporting QVC's global growth plans and was instrumental in the launch of QVC Italy.QVC-Italy. He was also president and CEO of Global Marketing and Consulting Enterprises Inc. In addition Mr. Thomas was president and partner of Specialty Products


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Global L.C. and held leadership positions at a diverse list of companies including Samkoo Corporation of America, Samkoo System Integration L.C. and Speer Communications.

        Claire A. Watts.    Ms. Watts joined QVC inon January 7, 2008, and assumed the role of President of U.S. Commerce in May 2008. She was named CEO,Chief Executive Officer, QVC-U.S. in January 2010. In this position, Ms. Watts is responsible for the overall strategy and operations of QVC's U.S. business. Ms. Watts oversees teams responsible for merchandising, planning, sales, programming, marketing, public relations, creative production, affiliate sales, broadcasting, QVC.com, new media, consumer insights and quality and supply chain. Ms. Watts also oversees QVC's Customer Fulfillment Services team as well as QVC's Customer Service and Distribution departments. Ms. Watts brings more than 25 years of broad retail and merchandising experience with industry leaders in the department store, specialty, catalog and mass segments. She began her career in the May Company's Executive Training Program. Ms. Watts then served in senior merchandising and product roles at Paul Harris, The Limited and Lands' End. She spent the 10 years prior to joining QVC with Wal-Mart in various executive positions, most recently serving as Executive Vice President of Merchandising. Her experience in this role included apparel, jewelry, accessories and home product categories.

        Thaddeus J. Jastrzebski.    Mr. Jastrzebski joined QVC on July 22, 2013, and assumed the role of Executive Vice President, Chief Financial Officer and Treasurer. In this position, Mr. Jastrzebski is responsible for overseeing our financial operations and administrative services, including accounting, budget and planning, tax and treasury, accounts payable, payroll, purchasing and customer payments. He is also responsible for the management of the financial operations of our international operations. Mr. Jastrzebski brings more than 20 years of business and financial leadership experience. Prior to joining QVC, Mr. Jastrzebski served from January 2011 until June 2013 as Senior Vice President and President of Hershey Americas. From September 2004 until December 2010, Mr. Jastrzebski worked for Hershey International, as Senior Vice President and President from December 2007 until December 2010 and as Vice President, Finance, from September 2004 until December 2007. Prior to joining Hershey, Mr. Jastrzebski served from July 2002 until September 2004 as Senior Vice President, Finance, IT and Administration and CFO at CARE, a non-profit, international health development organization. From October 1999 until June 2002, he served as Vice President and CFO at Project HOPE, an international health development non-profit. Prior to joining Project Hope, Mr. Jastrzebski spent 14 years at Procter & Gamble where he held various financial management positions in the U.S., Poland, Egypt and India.

Linda Dillman.    Ms. Dillman was named Executive Vice President and Chief Information Officer of QVC in January 2012. In this position, Ms. Dillman provides strategic oversight and direction on the design, development and implementation of technology solutions and is responsible for the day-to-day management of the U.S. and corporate information technology operations. Additionally, in partnership with the international market leaders, Ms. Dillman helps set the direction of the information technology organizations in QVC's markets around the world. Prior to joining QVC, Ms. Dillman was Senior Vice President of Global Information Technology for Hewlett-Packard Company, where she was responsible for development, support and management of all IT applications for the Enterprise Services business unit and all global functions. She has also held positions at Wal-Mart Stores Inc., Navistar International Corp. and Monaco Coach Corp.

        Matthew Goldberg.    Mr. Goldberg joined QVC on September 30, 2013, and assumed the role of Senior Vice President Global Market Development. In this position, Mr. Goldberg is responsible for overseeing global market expansion, which includes assessing, and selecting priority markets, identifying and evaluating partners, building and executing launch plans, and transitioning new businesses from startup to operational mode with designated leadership teams. Mr. Goldberg brings more than thirteen years of business development and leadership experience. Prior to joining QVC, Mr. Goldberg served from February 2009 until September 2013 as CEO of Lonely Planet, overseeing the company's


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expansion in China and market entry in India, Brazil and Russia. Prior to joining Lonely Planet, Mr. Goldberg worked from March 2003 until February 2009 at Dow Jones/The Wall Street Journal where he held various senior management and business development positions, including serving as Senior Vice President, Digital Strategy & Operations from December 2008 until February 2009, and as Vice President, Franchise Development & Partnerships, DJ Consumer Media Group from January 2006 until December 2008. From August 2000 until March 2003, Mr. Goldberg worked for Bertelsmann, Inc. where he held various business and corporate development positions.

Lawrence R. Hayes.    Mr. Hayes was appointed Senior Vice President and General Counsel in March 2008 and Secretary in August 2008. Mr. Hayes manages all aspects of our Legal and Internal Audit departments, as well as QVC's Global Business Development department.departments. Mr. Hayes previously served, since 2000, as Vice President, Legal, and Assistant Secretary of QVC. In this position, Mr. Hayes provided legal advice and services to Information Technology, QVC.com, Facilities and Human Resources. He also supervised outside attorneys in commercial and litigation matters. Mr. Hayes began his career with QVC in 1992 as associate counsel and, in 1998, was promoted to senior counsel. Prior to joining QVC, Mr. Hayes was an attorney for seven years at the Philadelphia law firm of Mesirov, Gelman, Jaffe, Cramer & Jamieson.

        Elizabeth A. Rubino.    Ms. Rubino was named Senior Vice President of Human Resources in August 2007 and Executive Vice President of Human Resources and Workplace Services in November 2011. In this position, Ms. Rubino is responsible for overseeing all talent acquisition and development, total rewards and client services. Additionally, Ms. Rubino is responsible for internal communications, community affairs, security, environmental health and safety, facilities and food services at our worldwide headquarters in West Chester, Pennsylvania. Ms. Rubino, who joined QVC in 1995,


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previously served as Vice President of Human Resources Operations and Services, and was responsible for talent acquisition and training for all U.S. locations, including call centers and distribution centers. Prior to this promotion, Ms. Rubino was the Director of Human Resources Operations and Services, responsible for all human resources functions within the call centers and distribution centers, supporting nearly 10,000 team members. Ms. Rubino also served as the Director of Human Resources Training and Development. Prior to joining us, Ms. Rubino had served as Director of Training, Management and Organization for PECO Energy and then General Manager of its Philadelphia call center.

        Daniel T. O'Connell was named Executive Vice President, Chief Financial Officer and Treasurer for QVC in February 2007 and served in such capacities until his retirement on May 31, 2013. Mr. O'Connell has entered into a consulting agreement with us through April 30, 2014. During the term of the consulting agreement, Mr. O'Connell will provide certain levels of general business advice and counsel in order to facilitate an orderly transition process.

        On June 4, 2013, we announced that Ted Jastrzebski was appointed to the position of Chief Financial Officer to fill the vacancy left by the retirement of Dan O'Connell. Mr. Jastrzebski is expected to assume his position in July 2013.

        Mr. Jastrzebski will be responsible for overseeing our financial operations and administrative services, including accounting, budget and planning, tax and treasury, accounts payable, payroll, purchasing and customer payments. He will also be responsible for the management of the financial operations of our international operations. Mr. Jastrzebski brings more than 20 years of business and financial leadership experience. Prior to joining QVC, Mr. Jastrzebski served from January 2011 until June 2013 as Senior Vice President and President of Hershey Americas. From September 2004 until December 2010, Mr. Jastrzebski worked for Hershey International, as Senior Vice President and President from December 2007 until December 2010 and as Vice President, Finance, from September 2004 until December 2007. Prior to joining Hershey, Mr. Jastrzebski served from July 2002 until September 2004 as Senior Vice President, Finance, IT and Administration and CFO at CARE, a non-profit, international health development organization. From October 1999 until June 2002, he served as Vice President and CFO at Project HOPE, an international health development non-profit. Prior to joining Project Hope, Mr. Jastrzebski spent 14 years at Procter & Gamble where he held various financial management positions in the U.S., Poland, Egypt and India.


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Executive Compensationcompensation

Executive Compensation

        This section sets forth information relating to, and an analysis and discussion of, compensation paid by our company or our parent, Liberty, Interactive Corporation (formerly known as Liberty Media Corporation,LIC), to:

We collectively refer to these persons as "our named executive officers."

Compensation Discussion and Analysis

        During calendar year 2012,2013, we were, and continue to be, a wholly owned subsidiary of LIC.Liberty. As a result, the Chief Executive Officer of LIC,Liberty, Gregory B. Maffei, is responsible for overseeing and approving the compensation package paid to our CEO and President, Mr. George. Mr. George's compensation package is also subject to the approval of the LICLiberty compensation committee because he was a named executive officer of LICLiberty for the calendar year 2012.2013. The compensation packages paid to our other named executive officers are subject to the oversight and approval of Mr. George and Mr. Maffei. In addition, the LICLiberty compensation committee administers the Liberty Interactive Corporation 2007 Incentive Plan (As Amended and Restated Effective November 7, 2011) (the2007 Incentive Plan), the Liberty Interactive Corporation 2010 Incentive Plan (As Amended and Restated Effective November 7, 2011) (the2010 Incentive Plan) and the Liberty Interactive Corporation 2012 (the2012 Incentive Plan and, together with the 2007 Incentive Plan and the 2010 Incentive Plan, theLICLiberty Incentive Plans) and has the sole authority to make and modify equity grants under, and to approve or disapprove participation in, the LICLiberty Incentive Plans. All of our named executive officers (with the exception of Mr. George) participated in the LICLiberty Incentive Plans in 2012, and two of our named executive officers participated in LIC's Option Modification Program (as described in more detail below).2013.

        The compensation program for our named executive officers was designed to meet the following objectives that align with and support our strategic business goals:


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        The following principles are used to guide the design of our executive compensation program and to ensure that the program is consistent with the objectives described above:

        Our CEO establishes all elements of each of the other named executive officer's compensation package. In making these determinations, Mr. George evaluates the performance and contributions of each of the other named executive officers given his or her respective area of responsibility. Mr. George's determinations are then submitted to Mr. Maffei, the CEO of our parent company, LIC,Liberty, for his approval. Mr. Maffei is responsible for approving, and recommending to the LICLiberty compensation committee for its approval, all elements of Mr. George's compensation package. In addition, all grants of equity awards are subject to the approval of the LICLiberty compensation committee. The following qualitative factors are taken in account in making executive compensation recommendations for all of our named executive officers:

        In addition, each of our named executive officers is party to an employment agreement (or, in the case of Mr. O'Connell, following May 31, 2013, a consulting agreement) with our company which governs the terms of his or her compensation. See "—Executive Compensation Arrangements" below. In 2012,2013, we entered into a new(i) an employment agreement with Ms. WattsMr. Jastrzebski in connection with his employment as our Executive Vice President and Chief Financial Officer, (ii) an amendment to ensure her long-term service with our company, and we amended Mr. Hofmann'sO'Connell's employment agreement in connection with his promotionretirement and service as a consultant to Chief Executive Officerour company and (iii) an amendment to Mr. Hofmann's expatriate agreement in connection with the extension of QVC Europe and Chief Executive Officer for QVC Italia, S.r.l. (QVC Italy).his assignment with our company, based in Italy. Mr. George had primary responsibility


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for negotiating and approving Ms. Watts' newMr. Jastrzebski's employment agreement, Mr. O'Connell's amended employment agreement and Mr. Hofmann's amended employmentexpatriate agreement, subject to Mr. Maffei's approval of the definitive terms thereof.


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        In designing the compensation packages for our named executive officers, including our performance-based bonus program, the range of total compensation paid by companies in the retail, broadcasting, consumer goods and online commerce industries, as well as by companies of comparable revenue size to QVC outside of these industries (collectively, ourreference set), are considered and used as a guide to ensuring that our named executive officers receive competitive compensation packages. With respect to our cash compensation, we aim to pay at the median of the market. At times, total compensation, or any specific element thereof, payable to our named executive officers may exceed that of our reference set or may be less than that of our reference set.

        As a general matter, our compensation philosophy is to weigh incentive compensation more heavily than cash compensation, which is a practice that may not be consistently followed by our reference set.

        For 20122013 the principal components of compensation for the named executive officers were:

        Base Salary.    The base salaries of the named executive officers are reviewed on an annual basis, as well as at the time of any change in responsibilities. Historically, increases have been granted consistent with the annual salary increase pool determined generally for QVC as a whole, adjusted (upward or downward) to reflect a named executive officer's individual job performance, as determined by Mr. Maffei with respect to Mr. George and by Mr. George with respect to all other named executive officers. As a general matter, however, our policy is for base salary to represent a relatively smaller portion of each named executive officer's overall compensation package, thereby aligning the interests of our executives more closely with those of our company and LIC'sLiberty's stockholders. With respect to 2012,2013, each of our named executive officers received 3% increases in their base salary ranging from 3% to 6% based on their performance evaluations for 20122013 (with the exception of Messrs. HofmannGeorge and George).Jastrzebski and Ms. Watts), effective in March 2013. Mr. George's increase was determined pursuant to the terms of his employment agreement and was effective in January 2013, Mr. Hofmann'sJastrzebski's employment with our company did not commence until July 2013 and, pursuant to the terms of her employment agreement, Ms. Watts did not receive an increase was attributable to his promotion.in her base salary for 2013.

        20122013 Performance-based Bonuses.    ForIn 2012, we adopted a new annual, performance-based bonus program for all of our senior officers, including each of our named executive officers.officers, which we continued in 2013. The bonus program was reviewed and approved by Mr. Maffei and, as it relates to Mr. George, the LICLiberty compensation committee. In past years, ourOur performance-based bonus program for certain of our senior officers had been specifically tied to that senior officer's specific geographic market. However, in 2012, we adopted ais global-based program, whichand was designed to deliver rewards to our executives for strong business results through aligning our company's global leaders with a common bonus measure which linkedlinking participants in the performance-based bonus program to both country-specific and overall company goals. As Mr. Jastrzebski's employment commenced in July 2013, he did not participate in the performance-based bonus program for the year ended December 31, 2013.


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        Pursuant to the program, each named executive officer (other than Mr. Jastrzebski, who was not eligible to participate in 2013) was assigned a target bonus amount. In the case of Messrs. George and O'Connell, this target bonus amount would bewas based upon the global


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EBITDA growth year over year for QVC for fiscal year 2012.2013. The target bonuses for each of Messrs. George and O'Connell were established as 100% and 60%, respectively, of each of their respective base salaries. Global EBITDA was defined as earnings before interest, taxes, depreciation and amortization for fiscal year 2012.2013. The EBITDA-based payout ranged from a threshold payment of 70% of target for 5%4% global EBITDA growth to 200% of target for 10.5%9.2% global EBITDA growth. The EBITDA-based performance bonus would then bewas subject to increase of up to 150%130% of target or decrease down to zero based upon a review of the individual's performance over the year. Pursuant to the terms of his employment agreement and his consulting agreement, Mr. O'Connell's potential bonus for 2013 was subject to pro-ration for the period from January 1, 2013 through May 31, 2013.

        Each of Mr. Thomas and Ms. Watts was assigned a target bonus amount of which 90% would bewas paid based upon the EBITDA growth year over year for QVC JapanQVC-Japan and QVC U.S.QVC-U.S., respectively, and of which 10% would bewas based upon the global EBITDA growth year over year for our company as described above, in each case, for fiscal year 2012.2013. The target bonuses for each of Mr. Thomas and Ms. Watts were established as 60% and 90%100%, respectively, of each of their respective base salaries. EBITDA for each of QVC JapanQVC-Japan and QVC U.S.QVC-U.S. was defined as earnings before interest, taxes, depreciation and amortization for fiscal year 2012.2013. With respect to QVC Japan,QVC-Japan, the EBITDA-based payout ranged from a threshold payment of 70% of target for 9%2.6% EBITDA growth to 200% of target for 15.1%7.6% EBITDA growth. With respect to QVC U.S.QVC-U.S., the EBITDA-based payout ranged from a threshold payment of 70% of target for 4%3% EBITDA growth to 200% of target for 9%7% EBITDA growth. The EBITDA-based performance bonus would then bewas subject to increase of up to 150%130% of target or decrease down to zero based on the individual performance over the year.

        Mr. Hofmann was assigned a target bonus amount of which (i) 25% would be paid based upon the full year EBITDA for QVC-Italy, (ii) 25% would be paid based upon the EBITDA growth year over year for QVC-Germany, (iii) 25% would be paid based upon the EBITDA growth year over year for QVC-UK, (iv) 10% would be paid based upon the global EBITDA growth year over year for our company as described above, and (v) 15% would be paid on a discretionary basis based on his business development efforts, in each case, for fiscal year 2013. The target bonus for Mr. Hofmann was established as 65% of his base salary. EBITDA for each of QVC-Italy, QVC-Germany and QVC-UK was defined as earnings before interest, taxes, depreciation and amortization for fiscal year 2013. With respect to QVC-Italy, the EBITDA-based payout ranged from a threshold payment of 50% of target for (€10,000,000) EBITDA to 200% of target for €0 EBITDA. With respect to QVC-Germany, the EBITDA-based payout ranged from a minimum payment of 25% of target (as required under applicable local regulations) to 200% of target for €144,400,000 EBITDA. With respect to QVC-UK, the EBITDA-based payout ranged from a threshold payment of 70% of target for 10.3% EBITDA growth to 200% of target for 16.3% EBITDA growth. The EBITDA-based performance bonus was subject to increase of up to 130% of target or decrease down to zero based on the individual performance over the year.

        On a global scale, QVC achieved a 6.3%3.1% EBITDA growth for the year ended December 31, 20122013 (for which target EBITDA growth target was 7.5%6.1%), which resulted in an actual payout of 85%0% of target for each of the EBITDA-based performance bonuses for Messrs. George and O'Connell and the global EBITDA component of the EBITDA-based performance bonuses for Mr. Thomas and Ms. Watts. QVC U.S.QVC-U.S. achieved a 5.3%4.7% EBITDA growth for the year ended December 31, 20122013 (for which EBITDA growth target was 6%4.6%), which resulted in a potential payout (pending an adjustment based on individual performance) of 90%104% of target for the QVC U.S.-specificQVC-U.S.-specific EBITDA component of the EBITDA-based performance bonus for Ms. Watts. QVC Japan achieved a 19%QVC-Japan did not achieve its EBITDA growth target of 4.6% for the year ended December 31, 2012,2013, which resulted in an actual payout of 0% of


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target for the QVC-Japan-specific EBITDA component of the EBITDA-based performance bonus for Mr. Thomas. QVC-Italy achieved (€10,000,000) EBITDA for the year ended December 31, 2013 (for which EBITDA target was (€3,200,000)), which resulted in a potential payout (pending an adjustment based on individual performance) of 200%50% of target for the QVC Japan-specificQVC-Italy-specific EBITDA component of the EBITDA-based performance bonus for Mr. Thomas.Hofmann. QVC-Germany achieved €130,600,000 EBITDA for the year ended December 31, 2013, which was less than the growth target; however, Mr. Hofmann was entitled (pending any adjustment based on individual performance) to 25% of his target bonus for the QVC-Germany-specific EBITDA component of the EBITDA-based performance bonus as a result of applicable local regulations. QVC-UK achieved a 13.7% EBITDA growth for the year ended December 31, 2013 (for which EBITDA growth target was 13.3%), which resulted in a potential payout (pending an adjustment based on individual performance) of 115.3% of target for the QVC-UK-specific EBITDA component of the EBITDA-based performance bonus for Mr. Hofmann.

        None of our named executive officers who received bonuses pursuant to the performance-based bonus program received an adjustment to their performance-based bonus based on his or her individual performance over the year. The performance-based bonus for each named executive officer was then calculated as follows:

Name
 Target
Bonus
 Global
EBITDA
Performance
(as a
percentage of
Global Target
Payout)
 Country-
Specific
EBITDA
Performance
(as a
percentage of
Country
Target
Payout)
 Blended
Payout (as a
percentage of
Total Target
Payout)
 Total Payout 

Michael A. George

 $1,060,900  0% N/A  0%$0 

Daniel T. O'Connell

 $121,333  0% N/A  0%$0 

John P. Thomas

 $331,001  0% 0% 0%$0 

Steven M. Hofmann

 $468,650  0%  (a)(b) 63%$295,250 

Claire A. Watts

 $943,824  0% 104% 93.6%$887,195 

Name
 Target
Bonus
 Global
EBITDA
Performance
(as a
percentage of
Global Target
Payout)
 Country-
Specific
EBITDA
Performance
(as a
percentage of
Country
Target
Payout)
 Blended
Payout (as a
percentage of
Total Target
Payout)
 Total
Payout
 

Michael A. George

 $1,030,000  85% N/A  85%$875,500 

Daniel T. O'Connell

 $282,716  85% N/A  85%$240,309 

John P. Thomas

 $321,360  85% 200% 189%$607,370 

Claire A. Watts

 $849,442  85% 90% 90%$764,497 
(a)
QVC-Italy's EBITDA for the year 2013 resulted in a payout of 50% of target; QVC-Germany's EBITDA performance resulted in a payout of 25% of target; and QVC-UK's EBITDA performance resulted in a payout of 115.3% of target.

(b)
The discretionary portion of Mr. Hofmann's bonus based on his business development efforts resulted in a payout of 100% of the target for such portion.

        For more information regarding these bonus awards, please see the "Grants of Plan-Based Awards" table below.

        Bonuses.    In 2012, two2013, one of our named executive officers, Messrs. Thomas and Hofmann,Mr. Jastrzebski, received two bonuses outside of our performance-based bonus program.


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        Pursuant to the terms of his employment agreement, Mr. ThomasJastrzebski was entitled to receive one-time bonuses upon the closingan aggregate signing bonus of $200,000, 50% of which, or $100,000, was payable within thirty days of the launch of certain international operations for our company prior to December 31, 2012. In July 2012, our company entered into a joint venture with Beijing-based China Broadcasting Corporation, launching CNR Home Shopping Co., Ltd. For his efforts in orchestrating the launch of this joint venture, in 2012 Mr. Thomas received a bonus of $250,000.

        Mr. Hofmann is entitled, pursuant to the termseffective date of his employment agreement, to participate in our company's performance-based bonus program.agreement. The remaining $100,000 is payable within ten days of the first anniversary of the effective date of his employment agreement. Pursuant to the terms of his employment agreement, for his initial year in his new role, Mr. HofmannJastrzebski was entitled to receive a bonus for work performed in 2012 equal to no less than 75%2013 that was not prorated based on the start date of his target bonus underemployment. Although Mr. Jastrzebski was not eligible to participate in our performance-based bonus program (whichin 2013, the target (and actual) bonus for Mr. Jastrzebski was 65%established as 60% of his base salary). Thus, Mr. Hofmann received a bonussalary, which percentage was consistent with the target percentages applicable to certain of $341,250 (which amount was equalour executives at the executive vice president-level who were eligible to 75% of his target bonus underparticipate in our performance-based bonus program), as he would haveprogram


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in 2013. Thus, Mr. Jastrzebski received a lowerdiscretionary cash bonus payment amount under our performance-based bonus program due to the EBITDA growth performance of our company's European markets. In determining to pay this alternative bonus, we took into account Mr. Hofmann's exceptional performance as CEO Europe$330,000 for work performed in light of the current state of the European markets, and determined that the bonus amount paid to Mr. Hofmann was commensurate with his performance.2013.

        Equity Incentive Compensation.    Consistent with our compensation philosophy, we seek to align the interests of our named executive officers with those of LIC'sLiberty's stockholders by awarding stock-based incentive compensation. This ensures that our executives have a continuing stake in our long-term consolidated success. We weigh stock-based compensation more heavily than cash compensation in determining each named executive officer's overall compensation mix.

        The LICLiberty Incentive Plans provide for the grant of a variety of incentive awards, including stock options, restricted shares, restricted stock units, stock appreciation rights and performance awards. Our executives are granted stock options and awards of restricted stock in preference to other awards because of LIC'sLiberty's belief that options and restricted shares better promote retention of key employees through the continuing, long-term nature of an equity investment. Upon making the recommendation to grant equity incentive awards to our named executive officers, Mr. Maffei, in the case of Mr. George, and Mr. George, in the case of the other named executive officers (with the approval of Mr. Maffei), establish the value of the awards to be granted. In September 2011, LIC split-offApril 2014, Liberty effected a 2 for 1 stock split of its former wholly owned subsidiary (then-known as Liberty Media Corporation) (theOld LMC Split-Off). Prior to the Old LMC Split-Off, the grants to our named executive officers were made with respect to LIC's Liberty Interactive tracking stock because our company was attributed to the then-Liberty Interactive tracking stock group. Following the Old LMC Split-Off, LIC's only remaining class of common stock was the Liberty Interactive common stock; hence, the equity awards of the named executive officers were not affected by the Old LMC Split-Off. In August 2012, LIC re-implemented a tracking stock structure by creating the Liberty Ventures tracking stock group through means of a dividend of shares of Liberty Ventures common stock to LIC's stockholders. As our company is now attributed to the new Liberty Interactive tracking stock group, the equity awards of our named executive officers were not affected by the creation of the Liberty Ventures tracker, except that (1) Mr. George, as a director of LIC, received adjustments to his equity awards such that he received equity awards with respect to Liberty Ventures common stock and (2) holders of restricted shares of Liberty Interactive common stock received restricted shares of Liberty Ventures common stock in connection with the dividend of the Liberty Ventures common stock. Equity awards granted to our namedFor purposes of this discussion regarding executive officers will continue to be with respect tocompensation and the Liberty Interactive common stock.tables that follow, we have not taken into account this stock split, except where specifically noted.

        Annual Grant of Equity Awards.Awards.    Stock options are awarded with an exercise price equal to fair market value on the date of grant, measured by reference to the closing sale price on the grant date. The LICLiberty compensation committee has historically made option grants once a year with a term of seven years and vesting over a three to five year period. In late 2009 and early 2010, however, the LICLiberty compensation committee determined to make larger grants (equaling approximately four to five years


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value of the annual grants made in 2009) that vest between four and five-and-three-quarters years after grant, rather than making annual grants over the same period, to the LICLiberty named executive officers. These multi-year grants provide for back-end weighted vesting to encourage the recipient executives to remain with LICLiberty over the long-term and to better align them with LIC'sLiberty's stockholders. In keeping with this compensation philosophy, in March 2011, Mr. George (who became a named executive officer of LICLiberty in 2011) received a multi-year stock option award. One-half of the shares subject to Mr. George's options vest in each of December 2014 and December 2015 and the options expire 7 years from grant. Thus, because Mr. George received a multi-year award in 2011, he did not receive any equity awards in 2012.2013. In March 2013, Ms. Watts received a multi-year stock option award. One-half of the shares subject to Ms. Watts's options vest in each of December 2016 and December 2017 and the options expire 7 years from grant.

        In connection with the execution of his employment agreement and to compensate him for the loss of equity from his former employer upon the commencement of his employment with our company, Mr. Jastrzebski received a grant of restricted shares which award vests one-third on each of the first, second and third anniversary of the grant date.

        Our other named executive officers however,(other than Mr. O'Connell) received option awards and restricted stock awards or restricted stock units in March 2012,2013, which are subject to more customary vesting terms consisting of semi-annual vesting over a four year term with an expiration date of March 2, 20194, 2020 for the options and annual vesting over a four-year term for the restricted stock awards or restricted stock units. Due to his retirement from our company, Mr. Hofmann also received an option award and restricted stock units in connection withO'Connell did not receive any grants of equity awards for the execution of his amended employment agreement and his promotion to CEO, QVC Europe and CEO, QVC Italy which are subject to customary vesting and expiration terms.year ended December 31, 2013. For more information regarding these equity incentive grants, please see the "Grants of Plan-Based Awards" table below.

Option Modification Program.    In November and December 2012, LIC's compensation committee determined to complete an equity modification program (theOption Modification Program) for the following reasons:

For income tax purposes, the exercise of the vested and unvested options pursuant to the Option Modification Program will allow LIC to record deductions in 2012 for compensation expenses totaling $242 million. The cash tax benefit of these deductions was estimated at $85 million.

        On December 4, 2012 (theGrant Date), LIC's compensation committee approved the acceleration of (i) each unvested in-the-money option to acquire shares of LIC's Series A Liberty Interactive common stock (LINTA) and (ii) each unvested in-the-money option to acquire shares of LIC's Series A Liberty Ventures common stock (LVNTA), in each case, held by certain officers of LIC and its subsidiaries (collectively, theEligible Optionholders), including Mr. George and Ms. Watts. Following this acceleration, also on the Grant Date, each Eligible Optionholder exercised, on a net settled basis, substantially all of his or her outstanding in-the-money vested and unvested options to acquire LINTA shares and LVNTA shares (theEligible Options), and:


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For more information regarding these awards, please see the "Grants of Plan-Based Awards" table below.

        Perquisites and Other Personal Benefits.    The perquisites and other personal benefits available to our executives (that are not otherwise available to all of our salaried employees, such as matching


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contributions to the QVC 401(k) Matched Savings Retirement Plan and Success Sharing Plan for employees of QVC U.S.QVC-U.S. and the payment of life insurance premiums) consist of:

        Executives of QVC U.S.QVC-U.S. with an annual rate of pay greater than $200,000 are eligible to participate in the QVC 1996 Deferred Compensation Plan, as Amended and Restated (theDeferred Compensation Plan), under which each eligible executive may elect to defer all or any portion of the total cash remuneration for services he or she would have received in the following year. For more information regarding the Deferred Compensation Plan, please see "—Executive Compensation Arrangements—1996 Deferred Compensation Plan, As Amended and Restated" below. In 2013, none of our named executive officers participated in the Deferred Compensation Plan.

        We provide to our executive officers resident in the U.S. who accept an assignment overseas customary expatriate benefits, including allowances for certain forms of transportation, subsidized housing and utilities (subject to a monthly cap), tax equalization payments for overseas employees on international assignment and a one-time relocation benefit. We also adjust their cash compensationprovide an allowance for the cost-of-goods-and-services differential.

        We also make generally available to our employees tax gross-ups relating to certain out of state income taxes to which they are subject in connection with the performance of their duties outside of our headquarters. In 2012,2013, each of Messrs. George and O'Connell and Ms. Watts received such tax gross-ups. (including, in the case of Mr. George and Ms. Watts, certain out of state income taxes resulting from their participation in the Option Modification Program.

        In those instances where we grant equity-based incentive compensation, we include in the related agreement with the executive a right, in favor of LIC,Liberty, to require the executive to repay or return to the company any cash, stock or other incentive compensation (including proceeds from the disposition of shares received upon exercise of options or stock appreciation rights). That right will arise if (1) a material restatement of any of LIC'sLiberty's financial statements is required and (2) in the reasonable judgment of the LICLiberty compensation committee, (A) such restatement is due to material noncompliance with any financial reporting requirement under applicable securities laws and (B) such noncompliance is a result of misconduct on the part of the executive. In determining the amount of such repayment or


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return, the LICLiberty compensation committee may take into account, among other factors it deems relevant, the extent to which the market value of LIC'sLiberty's common stock was affected by the errors giving rise to the restatement. The cash, stock or other compensation that we may require the executive to repay or return must have been received by the executive during the 12-month period beginning on the date of the first public issuance or the filing with the SEC, whichever occurs earlier, of the financial statement requiring restatement. The compensation required to be repaid or returned will include (1) cash or company stock received by the executive (A) upon the exercise during that 12-month period of any stock appreciation right held by the executive or (B) upon the payment during that 12-month period of any incentive compensation, the value of which is determined by reference to the value of company stock, and (2) any proceeds received by the executive from the disposition during that 12-month period of company stock received by the executive upon the exercise, vesting or payment during that 12-month period of any award of equity-based incentive compensation.


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SUMMARY COMPENSATION TABLE

Name and Principal Position
(as of 12/31/12)
 Year Salary
($)
 Bonus
($)
 Stock
Awards
($)(1)
 Option
Awards
($)(1)
 Non-Equity
Incentive Plan
Compensation
($)
 Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(2)
 All Other
Compensation
($)
 Total ($) 

Michael A. George

  2012  1,030,000      16,110,137(3) 875,500    223,977(4)(5)(6) 18,239,614 

President and Chief Executive

  2011  1,000,000      27,867,300(7) 700,000    54,102(4)(5)(6)(8) 29,621,402 

Officer

                            

Daniel T. O'Connell

  
2012
  
468,538
  
  
220,449
  
514,837
  
240,309
  
838
  
20,809

(4)(5)(6)
 
1,465,781
 

CFO, QVC, Inc.

  2011  453,050    206,785  480,594  175,275  65,743  19,009(4)(5)(6)(8) 1,400,456 

Steven M. Hofmann

  
2012
  
700,000
  
341,250

(9)
 
1,191,817

(10)
 
2,783,373

(10)
 
  
  
288,192

(4)(6)(11)
 
5,304,632
 

CEO, QVC Europe and CEO,

                            

QVC Italy

                            

John P. Thomas

  
2012
  
533,000
  
250,000

(12)
 
279,785
  
653,387
  
607,370
  
  
400,010

(4)(6)(13)
 
2,723,552
 

Chief Executive Officer, Japan

  2011  506,667  512,000(14)   992,180(15)     249,819(4)(13) 2,260,666 

Claire A. Watts

  
2012
  
934,920
  
  
638,748
  
2,735,466

(3)
 
764,497
  
  
19,417

(4)(5)(6)
 
5,093,049
 

Chief Executive Officer, US

  2011  882,000    523,959  1,217,794  560,952    13,418(4)(5)(6)(8) 3,198,123 
Name and Principal Position
 Year Salary
($)
 Bonus
($)
 Stock
Awards
($)(1)
 Option Awards
($)(1)
 Non-Equity
Incentive Plan
Compensation
($)
 Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(2)
 All Other
Compensation
($)(3)
 Total
($)
 

Michael A. George

  2013  1,060,900            160,831(4)(5)(6) 1,221,731 

President and Chief

  2012  1,030,000      16,110,136(7) 875,500    223,977(4)(5) 18,239,613 

Executive Officer

  2011  1,000,000      27,867,300(8) 700,000    54,102(4)(5)(9) 29,621,402 

Daniel T. O'Connell(10)

  
2013
  
379,865
  
  
  
  
  
  
19,010

(4)(5)
 
398,875
 

Formerly CFO, QVC, Inc.

  2012  468,538    220,449  514,837  240,309  838  20,809(4)(5) 1,465,780 

  2011  453,050    206,785  480,594  175,275  65,743  19,009(4)(5)(9) 1,400,456 

Thaddeus J. Jastrzebski

  
2013
  
246,090
  
430,000

(11)
 
1,799,997

(12)
 
  
  
  
10,755

(13)
 
2,486,842
 

CFO, QVC, Inc.

                            

Steven M. Hofmann

  
2013
  
717,500
  
  
346,007
  
804,342
  
295,250
  
  
199,545

(5)(14)
 
2,362,644
 

CEO, QVC-Europe and

  2012  700,000  341,250(15) 1,191,817(16) 2,783,373(16)     288,192(5)(14) 5,304,632 

QVC-Germany (Acting)

                            

John P. Thomas

  
2013
  
548,990
  
  
248,702
  
578,139
  
  
  
439,769

(5)(17)
 
1,815,600
 

CEO, QVC-Japan

  2012  533,000  250,000(18) 279,785  653,387  607,370    400,010(5)(17) 2,723,552 

  2011  506,667  512,000(19)   992,180(20)     249,819(17) 2,260,666 

Claire A. Watts

  
2013
  
943,824
  
  
  
14,922,827

(21)
 
887,195
  
  
11,092

(4)(5)
 
16,764,938
 

Chief Executive Officer,

  2012  934,920    638,748  2,735,466(6) 764,497    19,417(4)(5) 5,093,048 

US

  2011  882,000    523,959  1,217,794  560,952    13,418(4)(5)(9) 3,198,123 

(1)
The grant date fair value (or, in the case of awards granted pursuant to the Option Modification Program, the incremental fair value) has been computed in accordance with FASB ASCFinancial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718 Compensation—Stock Compensation, but (pursuant to SEC regulations) without reduction for estimated forfeitures. For a description of the assumptions applied in these calculations, see Note 1110 to our consolidated financial statements for the year ended December 31, 20122013 (which are included elsewhere in our Annual Report on Form 10-K as filed with the SEC on February 28, 2013)this prospectus).

(2)
Includes the above market earnings credited to the deferred compensation account of Mr. O'Connell. See "—Executive Compensation Arrangements—1996 Deferred Compensation Plan, As Amended and Restated" below.

(3)
These option awards set forth with respect to Mr. George and a portion of the option awards set forth with respect to Ms. Watts were received in connection with the Option Modification Program (as described in more detail above), wherein LIC's compensation committee approved the acceleration the Grant Date of (i) each unvested in-the-money option to acquire shares of LINTA and (ii) each unvested in-the-money option to acquire shares of LVNTA, in each case, held by the Eligible Optionholders, including Mr. George and Ms. Watts. Following this acceleration, also on the Grant Date, each Eligible Optionholder exercised, on a net settled basis, substantially all of his or her Eligible Options, and:

    with respect to each vested Eligible Option, LIC's compensation committee granted the Eligible Optionholder a vested new option with substantially the same terms and conditions as the exercised vested Eligible Option, except that the exercise price for the new option was the closing price per LINTA or LVNTA share, as applicable, on The Nasdaq Global Select Market on the Grant Date; and

    with respect to each unvested Eligible Option:

    the Eligible Optionholder sold to LIC the shares of LINTA or LVNTA, as applicable, received upon exercise of such unvested Eligible Option on the Grant Date for cash equal to the closing price per LINTA or LVNTA share, as applicable, on The Nasdaq Global Select Market on the Grant Date;

    each Eligible Optionholder used the proceeds of that sale to purchase from LIC at that price an equal number of restricted LINTA or LVNTA shares, as applicable, which have a vesting schedule identical to that of the unvested Eligible Option; and

    LIC granted the Eligible Optionholder an unvested new option, with substantially the same terms and conditions as the unvested Eligible Option, except that (a) the number of shares underlying the new option was equal to the number of shares underlying such unvested Eligible Option less the number of restricted shares purchased from LIC as described above and (b) the exercise price of the new option was the closing price per LINTA or LVNTA share, as applicable, on The Nasdaq Global Select Market on the Grant Date.

(4)
Includes life insurance premiums paid by our company in the amount of $1,242 on behalf of each of Messrs. George, O'Connell and Thomas and Ms. Watts and $810 on behalf of Mr. Hofmann.Hofmann, $621 on behalf of Mr. Jastrzebski and $968 on behalf of Mr. O'Connell.

(5)(4)
Includes tax gross-ups in the following amounts relating to certain out of state income taxes to which Messrs. George and O'Connell and Ms. Watts were subject in connection with the performance of their duties outside of QVC's headquarters:


 Amounts ($)  Amounts ($) 
Name
 2012 2011  2013 2012 2011 

Michael A. George

 207,735 34,843  134,289 207,735 34,843 

Claire A. Watts

 8,826 1,300  412 8,826 1,300 

Daniel T. O'Connell

 4,567 261  6,050 4,567 261 
(6)(5)
Includes, with respect to the named executive officers listed below, matching contributions made by our company to the QVC, Inc. 401(k) Matched Savings Retirement and Success Sharing Plan, as Amended and Restated, as set forth below. See "—Executive Compensation Arrangements—QVC, Inc.

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 Amounts ($)  Amounts ($) 
Name
 2012 2011  2013 2012 2011 

Michael A. George

 15,000 16,367  15,300 15,000 16,367 

Claire A. Watts

 9,349 9,226  9,438 9,349 9,226 

John P. Thomas

 15,000   15,300 15,000  

Daniel T. O'Connell

 15,000 15,856  11,992 15,000 15,856 

Steven M. Hofmann

 15,000   15,300 15,000  
(6)
Includes $10,000 in charitable contributions made on behalf of Mr. George by Liberty pursuant to Liberty's political action committee matching contribution program.

(7)
These option awards set forth with respect to Mr. George and a portion of the option awards set forth with respect to Ms. Watts were received in connection with Liberty's 2012 option modification program.

(8)
Represents the grant date fair value of Mr. George's multi-year option award granted in March 2011.

(8)(9)
Includes, with respect to each of Messrs. George and O'Connell and Ms. Watts, $1,650 with respect to the Pension Restoration Plan.

(9)(10)
Mr. O'Connell served as our Chief Financial Officer through May 31, 2013 and has since served as a consultant to our company.

(11)
Represents a signing bonus of $100,000 paid to Mr. Jastrzebski in connection with the commencement of his employment agreement and a discretionary annual bonus payment of $330,000.

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(12)
Represents the aggregate grant date fair value of restricted stock awards granted to Mr. Jastrzebski in connection with the commencement of his employment with our company.

(13)
Includes $10,124 paid to Mr. Jastrzebski for relocation assistance and travel expenses pursuant to his employment agreement.

(14)
Includes the following amounts with respect to Mr. Hofmann:

 
 Amounts ($) 
 
 2013 2012 

Use of company car

  24,618  23,821 

Mobility allowances and related benefits

  158,817  139,161 

Tax equalization payments

    109,400 
(15)
Represent a discretionary bonus paid to Mr. Hofmann based on his performance as CEO, QVC EuropeQVC-Europe during 2012.

(10)(16)
Represents the aggregate grant date fair value of option and restricted stock awardsunits granted to Mr. Hofmann as part of his annual grant of equity awards and separately in connection with his promotion to CEO, QVC EuropeQVC-Europe and CEO, QVC Italy,QVC-Italy, as follows:


 Grant Date Fair Value ($)  Grant Date Fair Value ($) 

 Restricted Stock Awards Option Awards  Restricted
Stock
Units
 Option
Awards
 

Grant in connection with promotion

 815,193 1,903,816  815,193 1,903,816 

Annual grant of equity awards

 376,624 879,557  376,624 879,557 
(11)
Includes the following amounts with respect to Mr. Hofmann:


Amounts ($)

Use of company car

23,821

Mobility allowances and related benefits

139,161

Tax equalization payments

109,400
(12)
Represents a bonus paid based on the successful launch of QVC's joint venture in China.

(13)(17)
Includes the following amounts with respect to Mr. Thomas:


 Amounts ($)  Amounts ($) 

 2012 2011  2013 2012 2011 

Transportation allowance

 81,860 5,201  67,655 81,860 5,201 

Mobility allowances and related benefits

 301,908 186,126(a) 236,699 301,908 186,126(a)

Tax equalization payments

  57,250  118,873  57,250 

(a)
Includes a lump sum payment to Mr. Thomas at the time of his hire for relocation from Florida to Pennsylvania, a bonus paid to Mr. Thomas in connection with his assignment to Japan, various goods and services and housing allowances and other benefits related to his assignment to Japan.
(14)(18)
Represents a bonus paid based on the successful launch of QVC's joint venture in China.

(19)
Comprised of a sign-onsigning bonus of $200,000 and a discretionary annual bonus of $312,000.

(15)(20)
Represents the aggregate grant date fair value of option awards granted to Mr. Thomas in connection with the commencement of his employment with our company and separately his promotion to CEO of QVC Japan.QVC-Japan.

(21)
Represents the grant date fair value of Ms. Watts's multi-year option award granted in March 2013.

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Executive Compensation Arrangements

        On May 3, 2011, we entered into an employment agreement with Mr. George.George, which was amended effective December 4, 2012, to reflect the changes to his equity awards that occurred in Liberty's option modification program (as described below) and to clarify and update certain other information in his employment agreement. The agreement provides for, among other things, a five year employment term beginning January 1, 2011 and ending December 15, 2015, with an annual base salary of $1 million, increasing annually by 3% of the prior year's base salary, and an annual target cash bonus equal to 100% of the applicable year's annual base salary which will be determined by the chief executive officer of LICLiberty pursuant to criteria established in our annual bonus program (which program is approved each year by LIC'sLiberty's chief executive officer) or, in the event Mr. George is considered a "covered employee" for any given year for purposes of Section 162(m) of the Code, his bonus will be determined by LIC'sLiberty's compensation committee based on such criteria as approved in advance by such committee and that are designed in a manner such that the bonus will be treated as "qualified performance-based compensation" within the meaning of Section 162(m). Also pursuant to the agreement, Mr. George is entitled to certain welfare, retirement and fringe benefits available to our senior-level executives.


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        On March 2, 2011, Mr. George was granted 3.8 million options to acquire shares of LINTA (the2011 Granted Awards) at an exercise price of $16.01 per share, which was the closing price of LINTA on such date. As a result of adjustments made to equity awards in connection with the Old LMC Split-Off, the creation of LIC'sLiberty's Liberty Ventures tracking stock and the Option Modification Program,Liberty's option modification program, as of March 31, 2014, Mr. George's 2011 Granted Awards now consist of options to acquire 3,166,911 shares of LINTA at an exercise price of $19.255 per share and 146,180 shares of LVNTA at an exercise price of $58.80 per share, 540,383 restricted LINTA shares and 39,194 restricted LVNTA shares. The options have a term of 7 years. It is anticipated that Mr. George will not receive any additional equity award grants during the term of his employment agreement other than those associated with his participation in the Option Modification Program. See "Compensation Discussion and Analysis—Elements of 2012 Executive Compensation—Equity Incentive Compensation—Option Modification Program" above.Liberty's option modification program.

        The agreement provides that, in the event Mr. George is terminated for cause (as defined in the agreement), he will be entitled to his accrued base salary through the date of termination, unpaid expenses, his vested benefits and any amounts due under applicable law. In addition, all equity awards granted to Mr. George prior to January 1, 2011 that are outstanding and unvested at the time of his termination for cause, including equity awards granted to Mr. George after such date pursuant to the December 2012 option modification program and certain other events, as defined more specifically in the agreement (thePre-2011 Unvested Awards) and all 2011 Granted Awards then held by Mr. George that have not become exercisable as of the date of such termination will be forfeited, and all equity awards granted to Mr. George prior to January 1, 2011 that are outstanding and vested but unexercised at the time of such termination, including equity awards granted to Mr. George after such date pursuant to the December 2012 option modification program and certain other events, as defined more specifically in the agreement (thePre-2011 Vested Awards) and all 2011 Granted Awards that are outstanding and vested but unexercised as of the date of such termination will remain exercisable for a period of up to 90 days after the date of such termination or until the original expiration date of the options if sooner. If Mr. George terminates his employment without good reason (as defined in the agreement), he will be entitled to his accrued base salary though the date of termination, any declared but unpaid bonus for the calendar year prior to the year of termination, unpaid expenses, his vested benefits and any amounts due under applicable law. He will forfeit all rights to any Pre-2011 Unvested Awards and to any 2011 Granted Awards then held that have not become exercisable as of the date of his termination, any Pre-2011 Vested Awards that are options or similar rights will be treated as specified in the applicable agreement governing such equity award, and any 2011 Granted Awards that are outstanding and vested but unexercised as of the date of termination will be exercisable for a period of 90 days after the date of termination or until the original expiration date of the options if


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sooner. If, however, Mr. George terminates his employment for good reason or if his employment is terminated by QVC without cause, then he is entitled to receive his base salary for a period of one year and a lump sum payment of $1.5 million, in addition to accrued base salary through the date of termination, unpaid expenses, his vested benefits and any other amounts due under applicable law. In addition, any Pre-2011 Unvested Awards held on the date of termination that would have vested during the 365-day period following the date of such termination had Mr. George continued to be employed by us during such period will vest as of the date of termination. Further, a pro rata portion of each tranche of theeach 2011 Granted AwardsAward that is not vested on the date of termination will vest as of such date, with such pro rata portion based on the portion of time Mr. George was employed by us and our affiliates during the vesting period of such tranche plus 365 days. The exercisability of any Pre-2011 Vested Awards, any vested 2011 Granted Awards and any Pre-2011 Unvested Awards that vest pursuant to the foregoing sentence will be extended to the earlier of (i) the original expiration date of the option or (ii) two years from the date of the termination.termination or, if Mr. George were to die prior to the expiration of such two year period, the close of business on the first business day following the later of the expiration of (x) the two year period or (y) the one-year period beginning on the date of Mr. George's death, but in no event will such awards be exercisable following their respective stated terms. In the case of Mr. George's death or disability (as defined in the agreement), the agreement provides for the right to receive his base salary for a period of one year, his accrued base salary through the date of termination, unpaid expenses, any declared but unpaid bonus for the calendar year prior to the year in which the termination occurs, his vested benefits and any amounts due under applicable law. In addition, the Pre-2011 Vested Awards, the Pre-2011 Unvested Awards and the 2011 Granted Awards will immediately vest and become exercisable (to the extent not already vested) and will be exercisable throughout the remainder of the full original term of such equity award. As a condition to


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Mr. George's receipt of any continuing base compensation payments or severance payments or the acceleration or extension of his equity awards, Mr. George must execute a severance agreement and release in favor of our company in accordance with the procedures set forth in his employment agreement.

        2003 Employment Agreement.    On October 1, 2003, we entered into an employment agreement, as amended on September 24, 2009, with Mr. O'Connell. The agreement providesprovided for, among other things, an initial one year employment term beginning on October 1, 2003 and ending on October 1, 2004, with an annual base salary of $172,000, subject to annual increases at our discretion, and an annual discretionary bonus based on the results of our operations and Mr. O'Connell's performance. After the initial term, the agreement continuescontinued for consecutive one year periods unless either party givesgave written notice of termination six months prior to the expiration of a term. Also pursuant to the agreement, Mr. O'Connell iswas entitled to certain fringe benefits available to our employees.

        The agreement providesprovided that, in the event Mr. O'Connell iswas terminated for cause (as defined in the agreement), he willwould be entitled to his accrued but unpaid base salary through the date of termination. In the case of Mr. O'Connell's death or disability (as defined in the agreement), the agreement providesprovided for payment of accrued but unpaid base salary to him or his estate, as applicable. If, however, Mr. O'Connell's employment iswas terminated other than for death, disability or cause, he iswould be entitled to receive his then current base salary for the longer of (i) six months after termination of employment or (ii) the remaining period of time from the termination of employment to the expiration of the then current annual period if his employment iswas terminated prior to the initial term of his agreement or the expiration of the then current extended term if his employment iswas terminated after the initial term of his agreement and during an extended term period.

        2012 Amendment to Employment Agreement.    On August 15, 2012, we entered into an amended employment agreement with Mr. O'Connell. The agreement providesprovided for a final term of employment


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beginning on August 15, 2012 and ending on April 30, 2013, with a bonus for 2012 and a pro-rated bonus payment for the period from January 1, 2013 to April 30, 2013, each of which willwould be determined by us pursuant to criteria established in our annual performance-based bonus program. At the end of the final term, Mr. O'Connell's employment willwould terminate and he willwould be engaged as a consultant pursuant to a consulting agreement, as described below. The agreement providesprovided that, upon termination of his employment at the expiration of the final term, he shallwould be entitled to any accrued but unpaid base salary and bonus payments (upon the determination of such bonus payment, if necessary). Except as modified by the amendment, Mr. O'Connell's employment agreement, described above, remains in effect.

        2013 Amendment to Employment Agreement.    On March 18, 2013, we entered into an amendment to the employment agreement with Mr. O'Connell. As amended, the agreement providesprovided that the final term of Mr. O'Connell's employment willwould end on May 31, 2013 and his pro-rated 2013 bonus period willwould end on May 31, 2013.

        Consulting Agreement.    On August 27, 2012, we entered into a consulting agreement, as amended, which is to be effectivetook effect as of June 1, 2013, with Mr. O'Connell. The consulting agreement providesprovided for a one year term ending May 31, 2014 during which Mr. O'Connell will provideprovided general business advice and counsel for up to thirty hours per month for a fee of $30,000 per month. Under the terms of the consulting agreement, all of Mr. O'Connell's equity awards will ceaseceased to vest as of April 30, 2013 and all such awards which were unvested as of such date will bewere forfeited as of such date. In addition, any equity awards held by Mr. O'Connell as of such date which continuecontinued to be exercisable for a period following such date will remainremained exercisable as provided for the award agreements and incentive plans governing such awards. In the case of Mr. O'Connell's death or disability (as defined in the


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agreement), the consulting term shall be terminated, and the agreement provides for payment to Mr. O'Connell of a pro-rata portion of the fees for any services previously provided. If the consulting term is terminated other than for death or disability, the agreement provides for payment of a pro-rata portion of the fees for any services previously provided. Following the end of the consulting term, the consulting agreement provides for a 24 month non-compete, non-solicit and non-interference period. In consideration for Mr. O'Connell's compliance with such restrictive covenants, the consulting agreement provides for payment of $42,500 per calendar quarter during the 24 month period.

        On May 25, 2013, we entered into an employment agreement with Mr. Jastrzebski in connection with his employment with our company as Executive Vice President and Chief Financial Officer. The agreement provides for, among other things, an initial 3 year employment term beginning July 22, 2013 and ending July 22, 2016, an annual base salary of $550,000, subject to annual adjustment at our discretion and an annual discretionary bonus based on the results of our operations and Mr. Jastrzebski's performance. Mr. Jastrzebski is also entitled to certain fringe benefits available to our employees, as well as relocation assistance and travel expenses of up to $20,000 per year for a period of four years or until Mr. Jastrzebski relocates to the West Chester, Pennsylvania area, whichever is sooner. After the initial term, the agreement continues for consecutive one year periods, although we may terminate Mr. Jastrzebski's employment at any time with or without prior notice and with or without cause (as defined in the agreement) and Mr. Jastrzebski may terminate his employment at any time for good reason and at any time other than for good reason (as defined in the agreement) by providing three months' prior written notice. Pursuant to the terms of the agreement, Mr. Jastrzebski received a one-time signing bonus of $200,000, 50% of which was paid within 30 days of the effective date of his employment agreement and 50% of which will be paid within ten days after the first anniversary of the effective date of his employment agreement. Pursuant to the terms of the agreement, Mr. Jastrzebski was eligible to receive, subject to the approval of the board of directors of Liberty, and did receive in August 2013, restricted shares of LINTA with a grant value of $1.8 million (theInitial Grant). The agreement provides that one-third of the number of shares of LINTA stock subject to the


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grant shall become vested on the first anniversary of the date of the grant, one-third of the number of shares of LINTA stock subject to the grant shall become vested on the second anniversary of the date of the grant and one-third of the number of shares of LINTA stock subject to the grant shall become vested on the third anniversary of the date of the grant. For as long as Mr. Jastrzebski is employed by our company, he is entitled to participate in any of our long term incentive programs. For the calendar year 2014, Mr. Jastrzebski is entitled to receive an award pursuant to our long term incentive programs that is not prorated based on the start date of his employment.

        The agreement also provides that, in the event Mr. Jastrzebski is terminated for cause or without good reason (each such term as defined in the agreement), he will be entitled to his accrued but unpaid base salary through the date of termination. In the case of Mr. Jastrzebski's death or disability (as defined in the agreement), the agreement provides for payment of accrued but unpaid base salary through the date of termination to him or his estate, as applicable. If, however, Mr. Jastrzebski terminates his employment for good reason or if his employment is terminated other than for death, disability or cause, he is entitled to (i) receive his then current base salary for one year and (ii) accelerated vesting of a pro rata portion of each tranche of the Initial Grant that has not vested on the date of such termination. Such pro rata portion will be a fraction of the unvested tranche, the numerator of which is the number of days Mr. Jastrzebski was employed by our company during the vesting period plus 365 and the denominator of which is the number of days in the entire vesting period for such tranche.

        Employment Agreement.    On October 7, 2009, we entered into an employment agreement with Mr. Hofmann in connection with his employment with our company as the Chief Executive Officer for QVC Italy,QVC-Italy, which was later amended on February 17, 2012 and May 21, 2012 in connection with his promotion to Chief Executive Officer for QVC EuropeQVC-Europe and Chief Executive Officer for QVC Italy.QVC-Italy. The agreement, as amended, provides for an initial 3 year employment term beginning on January 1, 2010 and ending January 1, 2013, with an annual base salary of $700,000 effective November 1, 2011, subject to annual increases at our discretion, and an annual discretionary bonus based on the results of our operations and Mr. Hofmann's performance. Pursuant to the terms of the agreement, Mr. Hofmann's annual target bonus is set at an amount equal to 65% of his base salary, and Mr. Hofmann's target bonus for 2012 was set at an amount not less than 75% of his target bonus rate of 65% of his base salary. After the initial term, the agreement continues for consecutive one year periods unless either party gives written notice of termination six months prior to the expiration of a term. The agreement may also be terminated by us with or without prior notice and with or without cause (as defined in the agreement) and by Mr. Hofmann upon one year's prior written notice to us. Also pursuant to the agreement, Mr. Hofmann is entitled to certain fringe benefits available to our employees.

        Pursuant to the terms of the agreement (which included the approval of the LICLiberty board of directors), Mr. Hofmann received in March 2012, 227,099 options to acquire shares of LINTA and 43,757 LINTA restricted stock units. For as long as Mr. Hofmann is employed by our company, he is entitled to participate in any of our long term incentive programs. Subject to the approval of the board of directors of LIC,Liberty, Mr. Hofmann was entitled to receive restricted stock units and/or options to acquire shares of LINTA equivalent to 165% of his annual base salary, subject to Mr. Hofmann's performance.

        The agreement provides that, in the event Mr. Hofmann is terminated for cause (as defined in the agreement), he will be entitled to his accrued but unpaid base salary through the date of termination. In the case of Mr. Hofmann's death or disability (as defined in the agreement), the agreement provides for payment of accrued but unpaid base salary to him or his estate, as applicable. If, however, Mr. Hofmann's employment is terminated other than for death, disability or cause during the period between January 1, 2014 and March 1, 2017, he is entitled to severance in an amount equal to two


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times the sum of his then current base salary and his annual target bonus for the year in which his employment was terminated, less applicable taxes, payable over twelve months. If Mr. Hofmann's employment is terminated other than for death, disability or cause at any other time, he is entitled to receive his then current base salary and receive certain fringe benefits for the longer of (i) six months from the termination of his employment or (ii) the remaining period of time from the termination of his employment to the expiration of the current term.

        Expatriate Agreement.    �� On October 7, 2009, we entered into a letter agreement with Mr. Hofmann. The letter agreement provides for Mr. Hofmann's three year assignment as CEO of QVC Italy,QVC-Italy, based in Italy, which ended pursuant to the terms of the letter agreement on December 31, 2012 but continues in principal.principle. Pursuant to the letter agreement, Mr. Hofmann will continue to receive his base salary and benefits as stated in his employment agreement, with a goods and services differential, which may be adjusted quarterly, to compensate for the higher costs of goods and services in Italy, based


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upon a notional annual salary of $185,000. The letter agreement provides that, while in Italy, Mr. Hofmann will receive the use of a car, as well as subsidized housing, utilities and property fees and taxes up to a per month maximum established by an independent international consulting firm. The letter agreement also provides for equalization of Mr. Hofmann's income tax bill, a one time relocation payment of $50,000 and certain other benefits in connection with the assignment. If Mr. Hofmann's employment is terminated by QVC while abroad, we will pay all repatriation expenses. If Mr. Hofmann's employment is terminated as the result of his resignation prior to his repatriation, we will not pay for any of Mr. Hofmann's repatriation expenses unless Mr. Hofmann's gives prior written notice of his resignation with an effective date of separation after December 31, 2016.

        2013 Amendment to Expatriate Agreement.    On August 9, 2013, we entered into a letter agreement with Mr. Hofmann, which amends his expatriate agreement. As amended, the expatriate agreement provides that Mr. Hofmann's assignment with our company, based in Italy, will be extended through December 31, 2014.

        Employment Agreement.    On November 2, 2010, we entered into an employment agreement with Mr. Thomas in connection with his employment with our company as Senior Vice President, Global Business Development, which was later amended on October 31, 2011 in connection with his promotion to CEO of QVC Japan.QVC-Japan. The agreement, as amended, provides for, among other things, an initial 4 year employment term beginning January 1, 2011 and ending January 1, 2015, with an annual base salary of $520,000, subject to annual increases at our discretion, and an annual discretionary bonus based on the results of our operations and Mr. Thomas' performance. After the initial term, the agreement continues for consecutive one year periods unless either party gives written notice of termination six months prior to the expiration of a term. Pursuant to the terms of the agreement, Mr. Thomas received a one-time signing bonus of $200,000. While employed with our company, Mr. Thomas is also eligible to receive one-time bonuses in connection with his involvement in the launch of any new operations in China, France or Canada by December 31, 2012 in the amounts of $250,000, $187,000 or $25,000, respectively. Such new operations in China have been launched in 2012. Also pursuant to the agreement, Mr. Thomas is entitled to certain fringe benefits available to our employees and was entitled to receive a one time relocation assistance payment of $25,000 along with other relocation benefits in connection with his transfer to QVC corporate headquarters in West Chester, PA, which were paid to Mr. Thomas in 2011.

        Pursuant to the terms of the agreement, Mr. Thomas was eligible to receive, subject to the approval of the board of directors of LIC,Liberty, and did receive in March 2011, options to acquire shares of LINTA. The agreement provides that 12.5% of the number of shares of LINTA stock subject to the grant shall vest every six months from the date of the grant until 100% of the options are fully vested. For as long as Mr. Thomas is employed by our company, he is entitled to participate in any of our long


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term incentive programs. Mr. Thomas also received a grant of options in November 2011 in connection with his promotion to CEO of QVC Japan.QVC-Japan.

        The agreement provides that, in the event Mr. Thomas is terminated for cause or without good reason (each such term as defined in the agreement), he will be entitled to his accrued but unpaid base salary through the date of termination. In the case of Mr. Thomas' death or disability (as defined in the agreement), the agreement provides for payment of accrued but unpaid base salary to him or his estate, as applicable. If, however, Mr. Thomas terminates his employment for good reason or if his employment is terminated other than for death, disability or cause, he is entitled to receive his then current base salary for one year.

        Expatriate Assignment Agreement.    On October 31, 2011, we entered into a letter agreement with Mr. Thomas. The letter agreement provides for Mr. Thomas' five year assignment as CEO of QVC Japan,QVC-Japan, based in Japan, beginning September 1, 2011 and ending September 1, 2016, which assignment may be extended by mutual agreement. Pursuant to the letter agreement, Mr. Thomas will continue to receive his base salary and benefits as stated in his employment agreement, with a goods and services differential, which may be adjusted quarterly, to compensate for the higher costs of goods and services in Japan, based upon a notional annual salary of $185,000. The letter agreement provides that, while in


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Japan, Mr. Thomas will receive the use of a car, as well as subsidized housing, utilities and property fees and taxes up to a maximum of $20,000 per month. The letter agreement also provides for equalization of Mr. Thomas' income tax bill, a one time relocation payment of $20,000 and certain other benefits in connection with the assignment. If Mr. Thomas' employment is terminated while abroad other than for cause (as defined by his employment agreement) or due to his resignation from our company following the satisfactory completion of his assignment in Japan, we will pay all repatriation expenses. If Mr. Thomas' employment is terminated for cause (as defined in Mr. Thomas' employment agreement) or as the result of his resignation prior to his repatriation, we will not pay for any of Mr. Thomas' repatriation expenses. If Mr. Thomas' employment is terminated for cause or as the result of his resignation within six months of his repatriation, then Mr. Thomas will be obligated to refund our company for all repatriation expenses paid by our company.

        2007 Employment Agreement.    On November 27, 2007, we entered into an employment agreement, as amended, with Ms. Watts. The agreement provides for, among other things, an initial 5 year employment term beginning January 7, 2008 and ending January 7, 2013, an annual base salary of $700,000, subject to annual increases at our discretion, an annual bonus equal to a bonus rate, which represents a percentage based on our EBITDA growth for the applicable calendar year, multiplied by Ms. Watts' annual base salary and certain fringe benefits available to our employees. After the initial term, the agreement will continue for consecutive one year periods unless either party gives written notice of termination six months prior to the expiration of a term. Pursuant to the agreement, Ms. Watts is eligible to receive, on an annual basis, restricted shares of and/or options to purchase LINTA with an award value equal to 220% of her base salary at an exercise price of 100% of the fair market value of LINTA on the grant date.

        The agreement provides that, in the event Ms. Watts is terminated for cause (as defined in the agreement), she will be entitled to her accrued but unpaid base salary through the date of termination. In the case of Ms. Watts' death or disability (as defined in the agreement), the agreement provides for payment of accrued but unpaid base salary to her or her estate, as applicable. If however, during the initial term of her employment, Ms. Watts terminates her employment for good reason (as defined in the agreement) or if her employment is terminated other than for death, disability or cause, she is entitled to receive her then current base salary for the longer of (i) six months after termination of employment or (ii) the remaining period of time from termination of employment to the expiration of the then current annual period if her employment is terminated prior to the initial term of her


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agreement or the expiration of the then current extended term if her employment is terminated after the initial term of her agreement and during an extended term period.

        2012 Amended and Restated Employment Agreement.    On September 6, 2012, we entered into an amended and restated employment agreement with Ms. Watts. The agreement provides for, among other things, an initial five year term beginning January 1, 2013 and ending January 1, 2018, with an annual base salary of $943,824, increasing annually by 3% of the prior year's base salary after the first two years of the term, and an annual target cash bonus equal to 100% of the applicable year's annual base salary which will be determined by us pursuant to criteria established in our annual performance-based bonus program or, in the event Ms. Watts is considered a "covered employee" for any given year for purposes of Section 162(m) of the Code, her bonus will be determined by LIC'sLiberty's compensation committee based on such criteria as approved in advance by such committee and that are designed in a manner such that the bonus will be treated as "qualified performance-based compensation" within the meaning of Section 162(m). Also pursuant to the agreement, Ms. Watts is entitled to certain fringe benefits available to our employees.

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LINTA stock with a Black Sholes Value equal to $15,000,000 (the2013 LINTA Options) at an exercise price equal to the fair market value (as defined in the LICLiberty incentive plan under which the equity awards will be granted) of LINTA on the grant date. One-half of the 2013 LINTA Options will vest on December 31, 2016 with the remaining options vesting on December 31, 2017. The options will have a term of 7 years. It is anticipated that Ms. Watts will not receive any additional equity award grants during the term of her employment agreement.

        The agreement provides that, in the event Ms. Watts is terminated for cause (as defined in the agreement), she will be entitled to her accrued but unpaid base salary through the date of termination, unpaid expenses, her vested benefits and any amounts due under applicable law. In addition, all equity awards granted to Ms. Watts prior to January 1, 2013 that are outstanding and unvested at the time of her termination for cause (thePre-2013 Unvested Awards) and all 2013 LINTA Options then held by Ms. Watts that have not become exercisable as of the date of such termination will be forfeited, and all equity awards granted to Ms. Watts prior to January 1, 2013 that are outstanding and vested but unexercised at the time of such termination (thePre-2013 Vested Awards) and all 2013 LINTA Options that are outstanding and vested but unexercised as of the date of such termination will remain exercisable for a period of up to 90 days after the date of such termination or until the original expiration date of the options if sooner. If Ms. Watts terminates her employment without good reason (as defined in the agreement), she will be entitled to her accrued base salary though the date of termination, any declared but unpaid bonus for the calendar year prior to the year of termination, unpaid expenses, her vested benefits and any amounts due under applicable law. She will forfeit all rights to any Pre-2013 Unvested Awards and to any 2013 LINTA Options then held that have not become exercisable as of the date of her termination, any Pre-2013 Vested Awards that are options or similar rights and any 2013 LINTA Options that are outstanding and vested but unexercised will be treated as specified in the applicable agreement governing such equity award. If, however, Ms. Watts terminates her employment for good reason or if her employment is terminated without cause, then she is entitled to receive her base salary for a period of 12 months and a prorated bonus for the calendar year in which her employment was terminated, in addition to accrued base salary through the date of termination, unpaid expenses, her vested benefits and any other amounts due under applicable law. In addition, any Pre-2013 Unvested Awards held on the date of termination that would have vested during the 365-day period following the date of such termination had Ms. Watts continued to be employed by us during such period will vest as of the date of termination. Further, a pro rata portion of each tranche of the 2013 LINTA Options that is not vested on the date of termination will vest as of such date, with such pro rata portion based on the portion of time Ms. Watts was employed by us and our


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affiliates during the vesting period of such tranche plus 365 days. The exercisability of any Pre-2013 Vested Awards, any vested 2013 LINTA Options and any Pre-2013 Unvested Awards that vest pursuant to the foregoing sentence will be extended to the earlier of the original expiration date of the option or two years from the date of the termination. In the case of Ms. Watts' death or disability (as defined in the agreement), the agreement provides for the right to receive her base salary for a period of 12 months, her accrued base salary through the date of termination, unpaid expenses, any declared but unpaid bonus for the calendar year prior to the year in which the termination occurs, her vested benefits and any amounts due under applicable law. In addition, the Pre-2013 Vested Awards, the Pre-2013 Unvested Awards and the 2013 LINTA Options will immediately vest and become exercisable (to the extent not already vested) and will be exercisable throughout the remainder of the full original term of such equity award. As a condition to Ms. Watts' receipt of any continuing base compensation or bonus payments or the acceleration or extension of her equity awards, Ms. Watts must execute a severance agreement and release in favor of our company in accordance with the procedures set forth in her employment agreement.


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        The 2007 Incentive Plan, the 2010 Incentive Plan and the 2012 Incentive Plan are administered by the compensation committee of the LICLiberty board of directors. Its compensation committee has full power and authority to grant eligible persons the awards described below and to determine the terms and conditions under which any awards are made. The LICLiberty Incentive Plans are designed to provide additional remuneration to certain employees and independent contractors for exceptional service and to encourage their investment in LICLiberty and its subsidiaries. LIC'sLiberty's compensation committee may grant non-qualified stock options, SARs, restricted shares, cash awards, performance awards or any combination of the foregoing under the LICLiberty Incentive Plans (collectively,awards).

        The maximum number of shares of LICLiberty common stock with respect to which awards may be issued under the 2007 Incentive Plan is 38,185,000, under the 2010 Incentive Plan is 42,950,000 and under the 2012 Incentive Plan is 40,000,000, subject, in each case, to anti-dilution and other adjustment provisions of the respective plans. With limited exceptions, no person may be granted in any calendar year awards covering more than 6,439,698 shares of LIC common stock under the 2007 Incentive Plan, 6,874,244 shares of LICLiberty common stock under the 2010 Incentive Plan and 8,000,000 shares of LICLiberty common stock under the 2012 Incentive Plan (subject, in each case, to anti-dilution and other adjustment provisions of the plans), nor may any person receive under each of the existing incentive plans payment for cash awards during any calendar year in excess of $10 million. Shares of LICLiberty common stock issuable pursuant to awards made under the LICLiberty Incentive Plans are made available from either authorized but unissued shares or shares that have been issued but reacquired by LIC.Liberty. Each of the 2007 Incentive Plan, the 2010 Incentive Plan and the 2012 Incentive Plan has a 5 year term. The 2007 Incentive Plan expired according to its terms on June 30, 2012, and as a result no further grants are permitted under this plan.

        Executives of QVC U.S.QVC-U.S. with an annual rate of pay greater than $200,000 are eligible to participate in the Deferred Compensation Plan. Each eligible executive may elect to defer all or any portion of the total cash remuneration for services he or she would have received in the following calendar year. Deferred compensation elections were required to be made in advance of certain deadlines and must have included (1) the time of payment, subject to certain restrictions and (2) the form of distribution, such as a lump sum payment or substantially equal monthly or annual installments over a five, ten or fifteen year period. Compensation deferred under the Deferred Compensation Plan earns interest at the rate of (1) 12% per annum for elections made prior to December 31, 2005 which have not been subsequently redeferred under any special transition elections or, (2) for all other amounts the prime lending rate identified by the Bank of New York, plus 3%, each compounded


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annually at the end of the calendar year. The Deferred Compensation Plan can be amended or terminated at any time.

        The Pension Restoration Plan is unfunded and is maintained primarily for the purpose of providing a select group of QVC U.S.QVC-U.S.'s management with a nonqualified defined contribution benefit. Effective as of January 1, 2012, the Pension Restoration Plan has been frozen so that no additional amounts may be credited to the Pension Restoration Plan, and no additional employees may be eligible to participate. Participants' existing account balances will continue to be credited with earnings at the rate of, (1) for the period prior to December 31, 2005, 12% per annum for amounts credited for the period from the date on which such amount was credited through October 31, 2011 or, (2) for all other amounts, the prime lending rate identified by the Bank of New York, plus 3%, each compounded annually at the end of the calendar year. Distribution of participants' vested percentages will be made in a single lump sum payment on the first day of the month following such participant's separation from service, with the exception of specified employees who are subject to Section 409A of the Internal Revenue Code of 1986, as amended, and thus receive the payment on the first day of the sixth month


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of such employee's separation. The Pension Restoration Plan can be amended or terminated at any time.

        The QVC, Inc. 401(k) Matched Savings Retirement and Success Sharing Plan, as Amended and Restated, (theSavings Plan) allows a participating U.S. employee to elect to defer between 1% and 50% of his or her annual base salary, including overtime but excluding bonuses. Participants are eligible to receive contributions from QVC after one year of service. We will match $1 for each $1 contributed by the employee (or, in the case of plan years prior to January 1, 2010, $0.50 for each $1.00 contributed by the employee), up to a maximum of 6% of the employee's annual compensation subject to additional statutory limitations. We may also make certain discretionary retirement and profit sharing contributions to the Savings Plan. A participant has a vested interest in the retirement contributions, profit sharing contributions and pre-2010 matching contributions when he or she has completed three years of service.


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Grants of Plan-Based Awards

        The following table contains information regarding plan-based incentive awards granted during the year ended December 31, 20122013 to our named executive officers.


  
  
  
  
  
 All other
option
awards:
Number
of
securities
underlying
options
(#)
  
  
 

  
 

Estimated Future Payouts under
Non-equity Incentive Plan Awards
  
  
  
   
  
  
  
  
 All other
option
awards:
Number of
securities
underlying
options
(#)
  
  
 

  
 All other
stock awards:
Number of
shares of
stock or
units (#)
  
  All other
option
awards:
Number
of
securities
underlying
options
(#)
  
 Estimated Future Payouts
under Non-equity Incentive
Plan Awards
  
  
  
 

  
 Grant date
fair value of
stock and
option awards
($)
   
 All other stock
awards: Number of
shares of stock or
units
(#)
 Grant date
fair value of
stock and
option awards
($)
  All other
option
awards:
Number of
securities
underlying
options
(#)

  
   
 
Name
 Grant
Date
 Threshold
($)
 Target
($)
 Maximum
($)(1)
  Grant
Date
 Threshold
($)
 Target
($)
 Maximum
($)(1)
 

Michael A. George

 3/29/2012(2)  1,030,000 3,090,000       1,060,900 2,758,340   

LINTA

 12/4/2012    19,820(3)  

LINTA

 12/4/2012    55,545(3)   (4)

LINTA

 12/4/2012    84,512(3)   (4)

LINTA

 12/4/2012    540,383(3)   (4)

LVNTA

 12/4/2012    3,417(3)   (4)

LVNTA

 12/4/2012    4,402(3)   (4)

LVNTA

 12/4/2012    1,031(3)   (4)

LVNTA

 12/4/2012    39,194(3)   (4)

LINTA

 12/4/2012     22,859(3) 19.255 92,005(4)

LINTA

 12/4/2012     103,646(3) 19.255 417,165(4)

LINTA

 12/4/2012     185,010(3) 19.255 724,388(4)

LINTA

 12/4/2012     400,924(3) 19.255 1,569,778(4)

LINTA

 12/4/2012     98,371(3) 19.255 402,839(4)

LINTA

 12/4/2012     694,943(3) 19.255 2,845,861(4)

LINTA

 12/4/2012     3,166,911(3) 19.255 7,184,771(4)

LVNTA

 12/4/2012     1,103(3) 58.80 21,521(4)

LVNTA

 12/4/2012     5,179(3) 58.80 101,047(4)

LVNTA

 12/4/2012     8,614(3) 58.80 136,169(4)

LVNTA

 12/4/2012     20,051(3) 58.80 316,964(4)

LVNTA

 12/4/2012     4,742(3) 58.80 94,055(4)

LVNTA

 12/4/2012     34,737(3) 58.80 688,988(4)

LVNTA

 12/4/2012     146,180(3) 58.80 1,514,586(4)

Daniel T. O'Connell

 
3/29/2012

(2)
 
 
282,716
 
848,149
 
 
 
 
    
 
121,333
 
315,465
 
 
 
 
 

LINTA

 3/2/2012    11,833   220,449 

Thaddeus J. Jastrzebski

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

LINTA

 3/2/2012     61,413 18.63 514,837  8/8/2013    77,653   1,799,997 

Steven M. Hofmann

    
 
468,650
 
1,218,490
 
 
 
 
 

LINTA

 3/2/2012    63,973   1,191,817  3/4/2013    16,414   346,007 

LINTA

 3/2/2012     332,018 18.63 2,783,373  3/4/2013     98,575 21.08 804,342 

John P. Thomas

 
3/29/2012

(2)
 
 
321,360
 
964,080
 
 
 
 
    
 
331,001
 
860,602
 
 
 
 
 

LINTA

 3/2/2012    15,018   279,785  3/4/2013    11,798   248,702 

LINTA

 3/2/2012     77,940 18.63 653,387  3/4/2013     70,853 21.08 578,139 

Claire A. Watts

 
3/29/2012

(2)
 
 
849,442
 
2,548,325
 
 
 
 
    
 
943,824
 
2,453,942
 
 
 
 
 

LINTA

 3/2/2012    34,286   638,748  3/4/2013     1,828,845 21.08 14,922,827 

LINTA

 12/4/2012    12,515(3)   (4)

LINTA

 12/4/2012    34,878(3)    

LINTA

 12/4/2012    3,245(3)   (4)

LINTA

 12/4/2012    22,398(3)   (4)

LINTA

 12/4/2012    16,682(3)   (4)

LINTA

 3/2/2012     177,944 18.63 1,491,740 

LINTA

 12/4/2012     5,924(3) 19.255 23,844(4)

LINTA

 12/4/2012     34,877(3) 19.255 140,376(4)

LINTA

 12/4/2012     3,779(3) 19.255 15,475(4)

LINTA

 12/4/2012     32,334(3) 19.255 126,601(4)

LINTA

 12/4/2012     24,714(3) 19.255 28,060(4)

LINTA

 12/4/2012     68,669(3) 19.255 155,789(4)

LINTA

 12/4/2012     74,604(3) 19.255 292,105(4)

LINTA

 12/4/2012     97,768(3) 19.255 221,806(4)

LINTA

 12/4/2012     160,486(3) 19.255 182,216(4)

LINTA

 12/4/2012     14,030(3) 19.255 57,454(4)

(1)
Represents the maximum amount that would have been payable assuming (x) the highest applicable EBITDA growth targets were achieved and (y) the individual performance warranted the maximum applicable increase of the participant's EBITDA-based

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(2)
Reflects the date on which the LIC compensation committee established the terms of the 2012 performance-based bonus program, as described under "—Compensation Discussion and Analysis—Elements of 2012 Executive Compensation—2012 Performance-based Bonuses."

(3)
Represents equity awards issued in connection with the Option Modification Program in December 2012. See "—Compensation Discussion and Analysis—Elements of 2012 Executive Compensation—Equity Incentive Compensation—Option Modification Program". For more information regarding the vesting terms of these awards, see "Outstanding Equity Awards at Fiscal Year End" below.

(4)
With respect to options awards issued in connection with the Option Modification Program, represents the incremental fair value of each award. With respect to restricted stock awards issued in connection with the Option Modification Program, such awards have no incremental fair value to report.

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Outstanding Equity Awards at Fiscal Year-End

        The following table contains information regarding unexercised options and unvested shares of LINTA and LVNTA which were outstanding as of December 31, 20122013 and held by our named executive officers, including those awards granted during 20122013 and reflected in the "Grants of Plan-Based Awards" table above.above (other than Mr. O'Connell, who had no outstanding equity awards as of December 31, 2013 due to the termination of his employment as our Chief Financial Officer as of May 31, 2013).


 Option awards Stock awards  Option awards Stock awards 
Name
 Number of
securities
underlying
unexercised
options (#)
Exercisable
 Number of
securities
underlying
unexercised
options (#)
Unexercisable
 Option
exercise
price ($)
 Option
expiration
date
 Number of
shares or units
of stock that
have not vested
(#)
 Market value of
shares or units
of stock that
have not vested
($)
  Number of
securities
underlying
unexercised
options (#)
Exercisable
 Number of
securities
underlying
unexercised
options (#)
Unexercisable
 Option
exercise
price ($)
 Option
expiration
date
 Number of
shares or units
of stock that
have not vested
(#)
 Market
value of
shares or units
of stock that
have not vested
($)
 

Michael A. George

              

Option Awards

              

LINTA

 103,646  19.255 2/27/2016    22,859  19.255 2/27/2016   

LINTA

 694,943  19.255 4/6/2016    103,646  19.255 2/27/2016   

LINTA

 400,924  19.255 3/1/2017    694,943  19.255 4/6/2016   

LINTA

  22,859(1) 19.255 2/27/2016    98,371  19.255 4/6/2016   

LINTA

  98,371(2) 19.255 4/6/2016    400,924  19.255 3/1/2017   

LINTA

  185,010(3) 19.255 3/1/2017    123,340 61,670(1) 19.255 3/1/2017   

LINTA

  3,166,911(4) 19.255 3/2/2018     3,166,911(2) 19.255 3/2/2018   

LVNTA

 5,179  58.80 2/27/2016    5,179  58.80 2/27/2016   

LVNTA

 34,737  58.80 4/6/2016    1,103  58.80 2/27/2016   

LVNTA

 20,051  58.80 3/1/2017    34,737  58.80 4/6/2016   

LVNTA

  1,103(1) 58.80 2/27/2016    4,742  58.80 4/6/2016   

LVNTA

  4,742(2) 58.80 4/6/2016    20,051  58.80 3/1/2017   

LVNTA

  8,614(3) 58.80 3/1/2017    5,742 2,872(1) 58.80 3/1/2017   

LVNTA

  146,180(4) 58.80 3/2/2018     146,180(2) 58.80 3/2/2018   

Stock Awards

              

LINTA

     19,820(1) 390,058      26,786(3) 786,169 

LINTA

     84,512(2) 1,663,196      18,515(1) 543,415 

LINTA

     53,572(6) 1,054,297      540,383(2) 15,860,241 

LINTA

     55,545(3) 1,093,126 

LINTA

     540,383(4) 10,634,737 

LINTA

     100,000(5) 1,968,000 

LVNTA

     1,031(1) 69,861      1,339(3) 164,148 

LVNTA

     4,402(2) 298,280      1,139(1) 139,630 

LVNTA

     2,678(6) 181,461      39,194(2) 4,804,792 

LVNTA

     3,417(3) 231,536 

LVNTA

     39,194(4) 2,655,785 

LVNTA

     5,000(5) 338,800 

Daniel T. O'Connell

 

Thaddeus J. Jastrzebski

 
 
 
 
 
 
 
 
 
 
 
 
 

Stock Awards

             

LINTA

     77,653(4) 2,279,116 

Steven M. Hofmann

 
 
 
 
 
 
 
 
 
 
 
 
 

Option Awards

              

LINTA

  11,501(1) 2.95 2/27/2016    275,446  2.95 2/27/2016   

LINTA

 43,948 11,498(1) 5.45 2/27/2016    25,000  8.97 9/8/2016   

LINTA

 3,966 3,972(2) 3.10 4/6/2016    120,000 230,568(5) 16.91 3/2/2019   

LINTA

 3,965 3,973(2) 5.45 4/6/2016    12,321 86,254(6) 21.08 3/4/2020   

Stock Awards

             

LINTA

     47,980(7) 1,408,213 

LINTA

     16,414(8) 481,751 

LVNTA

     2,400(7) 294,216 

John P. Thomas

 
 
 
 
 
 
 
 
 
 
 
 
 

Option Awards

             

LINTA

 17,904 7,155(2) 5.45 4/6/2016     13,271(9) 14.53 3/2/2018   

LINTA

 7,151 7,154(2) 3.10 4/6/2016     55,149(10) 13.76 11/10/2018   

LINTA

 73,424 44,055(3) 11.77 3/1/2017     6,138(11) 13.76 11/10/2018   

LINTA

 27,099 45,167(7) 14.53 3/2/2018     54,125(5) 16.91 3/2/2019   

LINTA

 8,529 59,707(8) 16.91 3/2/2019     61,997(6) 21.08 3/4/2020   

Stock Awards

              

LINTA

     8,680(6) 170,822      11,264(7) 330,598 

LINTA

     9,687(8) 190,640      11,798(8) 346,271 

LINTA

     10,140(5) 199,555 

LINTA

     11,833(9) 232,873 

LVNTA

     434(6) 29,408      563(7) 69,018 

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 Option awards Stock awards  Option awards Stock awards 
Name
 Number of
securities
underlying
unexercised
options (#)
Exercisable
 Number of
securities
underlying
unexercised
options (#)
Unexercisable
 Option
exercise
price ($)
 Option
expiration
date
 Number of
shares or units
of stock that
have not vested
(#)
 Market value of
shares or units
of stock that
have not vested
($)
  Number of
securities
underlying
unexercised
options (#)
Exercisable
 Number of
securities
underlying
unexercised
options (#)
Unexercisable
 Option
exercise
price ($)
 Option
expiration
date
 Number of
shares or units
of stock that
have not vested
(#)
 Market
value of
shares or units
of stock that
have not vested
($)
 

LVNTA

     484(10) 32,796 

LVNTA

     507(5) 34,354 

LVNTA

     592(9) 40,114 

Steven M. Hofmann

 

Claire A. Watts

             

Option Awards

              

LINTA

 372,263 53,183(1) 2.95 2/27/2016    5,924  19.255 2/27/2016   

LINTA

 30,642 10,214(11) 8.97 9/8/2016   

LINTA

 46,113 322,795(8) 16.91 3/2/2019   

Stock Awards

 

LINTA

     3,375(12) 66,420 

LINTA

     63,973(9) 1,258,989 

LVNTA

     169(12) 11,451 

LVNTA

     3,199(9) 216,764 

John P. Thomas

 

Option Awards

 

LINTA

 13,270 22,119(7) 14.53 3/2/2018   

LINTA

 6,135 10,229(13) 13.76 11/10/2018   

LINTA

 27,574 82,724(14) 13.76 11/10/2018   

LINTA

 10,825 75,775(8) 16.91 3/2/2019   

Stock Awards

 

LINTA

     15,018(9) 295,554 

LVNTA

     750(9) 50,820 

Claire A. Watts

 

Option Awards

 

LINTA

 5,924  19.255 2/27/2016    34,877  19.255 2/27/2016   

LINTA

 14,030  19.255 4/6/2016    14,030  19.255 4/6/2016   

LINTA

 32,334  19.255 3/1/2017    3,779  19.255 4/6/2016   

LINTA

 68,669  19.255 3/2/2018    32,334  19.255 3/1/2017   

LINTA

 24,714  19.255 3/2/2019    49,736 24,868(1) 19.255 3/1/2017   

LINTA

  34,877(1) 19.255 2/27/2016    68,669  19.255 3/2/2018   

LINTA

  3,779(2) 19.255 4/6/2016    39,107 58,661(9) 19.255 3/2/2018   

LINTA

  74,604(3) 19.255 3/1/2017    45,853 114,633(5) 19.255 3/2/2019   

LINTA

  97,768(7) 19.255 3/2/2018    24,714  19.255 3/2/2019   

LINTA

  160,486(8) 19.255 3/2/2019     1,828,845(12) 21.08 3/4/2020   

Stock Awards

              

LINTA

     34,878(1) 686,399      9,556(3) 280,469 

LINTA

     3,245(2) 63,862      7,466(1) 219,127 

LINTA

     19,112(6) 376,124      16,364(13) 480,283 

LINTA

     22,398(3) 440,793      10,010(9) 293,794 

LINTA

     24,546(10) 483,065      25,715(7) 754,735 

LINTA

     16,682(7) 328,302      8,940(5) 262,389 

LINTA

     2,025(5) 39,852 

LINTA

     34,286(9) 674,748 

LINTA

     12,515(8) 246,295 

LVNTA

     955(6) 64,711      478(3) 58,598 

LVNTA

     1,227(10) 83,142      818(13) 100,279 

LVNTA

     101(5) 6,844      1,287(7) 157,773 

LVNTA

     1,715(9) 116,208 

(1)
Vests semi-annually (based on original amount of grant) over 4 years from February 27,2009original March 1, 2010 grant date.

(2)
Vests semi-annually (based on original amount of grant) over 4 years from April 6, 2009 grant date.

(3)
Vests semi-annually (based on original amount of grant) over 4 years from March 1, 2010 grant date.

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(4)
Vests 50% on December 15, 2014 and 50% on December 15, 2015.

(5)(3)
Vests annually (based on original amount of grant) over 4 years from February 27, 2009original March 1, 2010 grant date.

(4)
Vests annually over 3 years from original August 8, 2013 grant date.

(5)
Vests semi-annually (based on original amount of grant) over 4 years from original grant March 2, 2012 grant date.

(6)
Vests semi-annually (based on original amount of grant) over 4 years from original March 4, 2013 grant date.

(7)
Vests annually (based on original amount of grant) over 4 years from original March 1, 20102, 2012 grant date.

(7)(8)
Vests annually (based on original amount of grant) over 4 years from original March 4, 2013 grant date.

(9)
Vests semi-annually (based on original amount of grant) over 4 years from original March 2, 2011 grant date.

(8)
Vests semi-annually (based on original amount of grant) over 4 years from March 2, 2012 grant date.

(9)
Vests annually (based on original amount of grant) over 4 years from March 2, 2012 grant date.

(10)
Vests annually (based on original amount of grant) over 4 years from March 2, 2011 grant date.

(11)
Vests semi-annually (based on original amount of grant) over 4 years from September 8, 2009 grant date.

(12)
Vests annually (based on original amount of grant) over 4 years from September 8, 2009 grant date.

(13)
Vests semi-annually in eight equal installments (based on original amount of grant) beginning on March 2, 2011

(14)
Vests semi-annually (based on original amount of grant) over 4 years from November 10, 2011 grant date.

(11)
Vests semi-annually in eight equal installments (based on original amount of grant) beginning on March 2, 2011.

(12)
Vests 50% on December 31, 2016 and 50% on December 31, 2017.

(13)
Vests annually (based on original amount of grant) over 4 years from original March 2, 2011 grant date.

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Option Exercises and Stock Vested

        The following table sets forth information concerning (i) the exercise of vested options with respect to shares of LINTA and LVNTA (ii) with respect to Mr. George and Ms. Watts, the exercise of options with respect to shares of LINTA and LVNTA that were unvested at the date of the Option Modification Program that were then accelerated in connection with the Option Modification Program (2012 unvested options), and (iii)(ii) the vesting of restricted shares or restricted stock units with respect to shares of LINTA and LVNTA held by our named executive officers, in each case, during the year ended December 31, 20122013 (other than Mr. Thomas,Jastrzebski, who did not exercisehold any vested options with respect to shares of LINTA or LVNTA or have any vesting events with respect to restricted stock units with respect toawards of shares of LINTA or LVNTA).

        As described in more detail above, in November and December 2012, in response to the wide-spread "fiscal cliff" concerns, the compensation committee of Liberty Interactive determined to complete the Option Modification Program. The values shown in the "Option Awards—Value Realized on Exercise" column below include $30,364,185, which equals the aggregate amount related to the exercise by Mr. George and Ms. Watts of 2012 unvested options pursuant to the terms of the Option Modification Program. The aggregate value related to the exercise of the 2012 unvested options included in the table below, net of amounts withheld for taxes, equals $18,036,326.


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        Under the Option Modification Program, the 2012 unvested options were required to be replaced (with the exception of shares withheld for payment of taxes) with a combination of new unvested options and new unvested restricted stock awards that have the same vesting requirements and similar terms as the 2012 unvested options. As a result, the unvested options and unvested restricted shares received upon exercise of the 2012 unvested options will not vest and will be subject to forfeiture by Mr. George and Ms. Watts until they satisfy the vesting and other requirements applicable to such awards. See "—Compensation Discussion and Analysis—Elements of 2012 Executive Compensation—Equity Incentive Compensation—Option Modification Program" for additional information concerning the Option Modification Program.


 Option Awards Stock Awards  Option Awards Stock Awards 
Name
 Number of
shares
acquired on
exercise (#)(1)(2)
 Value
realized on
exercise ($)(2)
 Number of
shares
acquired on
vesting (#)(1)
 Value
realized on
vesting ($)
  Number of
shares
acquired on
exercise (#)(1)
 Value
realized on
exercise ($)
 Number of
shares
acquired on
vesting (#)(1)
 Value
realized on
vesting ($)
 

Michael A. George

          

LINTA

 5,647,924 41,404,444 126,786 2,352,505    268,148 2,628,881(2)

LVNTA

 268,650 7,223,630      14,050 458,691(2)

Daniel T. O'Connell

  
 
 
 
 
 
 
 
 

LINTA

 194,368 2,893,562 17,709 329,423  263,488 3,522,635 20,667 429,390 

LVNTA

   1,033 74,912 

Steven M. Hofmann

  
 
 
 
 
 
 
 
 

LINTA

 184,196 4,078,434 19,368 414,378 

LVNTA

   968 72,964 

John P. Thomas

 
 
 
 
 
 
 
 
 

LINTA

   3,375 64,463  128,824 1,167,643 3,754 78,308 

LVNTA

   168 8,262    187 13,623 

Claire A. Watts

  
 
 
 
 
 
 
 
 

LINTA

 939,271 7,934,500 19,762 369,800    91,636 590,095(2)

LVNTA

   1,415 102,867 

(1)
Includes shares withheld by LICLiberty in payment of withholding taxes at the election of the holder. In

(2)
On December 4, 2012 (theGrant Date), to effect Liberty's 2012 option modification program, Liberty's compensation committee approved the aggregate, $12,327,859 was withheldacceleration of each unvested in-the-money option to acquire shares of LINTA and LVNTA held by LIC for taxes payable bycertain of its and its subsidiaries' officers (collectively, theEligible Optionholders), including our then- and our current-named executive officers Mr. George and Ms. Watts relatedWatts. Following this acceleration, also on the Grant Date, each Eligible Optionholder exercised, on a net settled basis, substantially all of his or her outstanding in-the-money vested and unvested options to the exercise of 2012 unvested options.

(2)
Withacquire LINTA or LVNTA shares (theEligible Options) and with respect to Mr. George and Ms. Watts, includeseach unvested Eligible Option, each Eligible Optionholder acquired LINTA or LVNTA shares which have a vesting schedule identical to that of the following exercises of vested and 2012 unvested options in connection with the Option Modification Program (see "—Compensation Discussion and Analysis—Elements of 2012 Executive Compensation—Equity Incentive Compensation—Option Modification Program"). Eligible Option.

The "2012 Unvested Option Awards"Value column below includes valuesrepresents the value related to awards that arewere subject to continued vesting requirements withas of the exceptionGrant Date, but which vested during the twelve months ended December 31, 2013. Such value was realized by the applicable named executive officer in 2012 and therefore included in the prospectus forming a part of shares and amounts that were withheld for taxes:our Registration Statement on Form S-4, as

 
 Vested Option Awards 2012 Unvested Option
Awards
 
Name
 Number of
shares
acquired on
exercise (#)
 Value
realized on
exercise ($)
 Number of
shares
acquired on
exercise (#)
 Value
realized on
exercise ($)
 

Michael A. George

             

LINTA

  1,199,513  14,971,545  4,173,411  22,699,638 

LVNTA

  59,967  2,467,454  208,683  4,756,176 

Claire A. Watts

             

LINTA

  145,671  924,481  461,232  2,908,371 

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Name
 Executive
contributions
in 2012 ($)
 Registrant
contributions
in 2012 ($)
 Aggregate
earnings in
2012 ($)
 Aggregate
withdrawals/
distributions ($)
 Aggregate
balance at
12/31/12 ($)
  Number of
shares
acquired upon
lapse of
restriction (#)
 Value ($) 

Daniel T. O'Connell

   838 614,442  

Michael A. George

     

LINTA

 141,362 2,721,925 

LVNTA

 7,711 453,407 

Claire A. Watts

 
 
 
 
 

LINTA

 63,302 1,218,880 

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