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STRONG BUSINESSES Delivering Results Proxy Statement | 10-K | Letter to Stockholders 2008 ANNUAL REPORT www.AllianceData.com TO OUR STOCKHOLDERS Today more than ever, a successful growth company must be nimble and willing to take swift but judicious action on opportunities related to clients, the marketplace and a tumultuous economy. We’ve demonstrated the willingness and ability to address changes head-on and take the necessary steps to keep our company financially strong and resilient, now and for the future. Strong Businesses Focused on Results In 2008 we made important decisions about our company, including exiting businesses that were not aligned with Alliance Data’s long term strategy. These decisive actions left us with strong businesses having one common focus—providing transaction-based marketing and loyalty solutions that deliver real and measurable results for our clients. These businesses capture and analyze transaction-rich data to gain actionable insight into how and why consumers buy. Using this consumer intelligence, we develop solutions that increase sales and customer loyalty for our clients. Loyalty Services—Our AIR MILES® Reward Program had a tremendous year—growing top line revenue by 20% and adjusted EBITDA by 55%. We renewed key program sponsors—the most notable being Shell Canada and RONA, Canada’s largest home improvement retailer. We also expanded our relationship with our largest sponsor, Bank of Montreal, and added the Hilton HHonors® program as a sponsor. Epsilon Marketing Services—In 2008 the demand for traditional database services as well as growth in email marketing drove solid financial results. Our client commitments were strong—both in terms of new clients and in extending partnerships with existing clients, including Marriott International, Beech-Nut Nutrition, Commerce Bank and the National Multiple Sclerosis Society. This further demonstrates the on-going shift of marketing spend from traditional, non-accountable mass media to marketing programs like ours, which drive measurable results. Private Label Services—We signed a record number of new private label and co-brand programs in 2008. Our experience is that retailers are looking for proven strategies to help them battle the current retail sales environment. We added Orchard Brands, Beall’s Department Stores and Hot Topic’s Torrid brand, and we launched new programs for Gander Mountain and Ann Taylor. Private Label Credit—The challenges in 2008 were in great part attributable to tough macro-economic and retail environments, as well as the loss of a significant client at the end of 2007. However, as we exited the year, we saw our portfolio returning to positive growth, our yields strong and our funding costs declining. Sustained Growth We further extended our track record of double-digit earnings growth and meeting or exceeding guidance every quarter since our IPO in June 2001. In 2008 our cash earnings per share were $4.42, an increase of 14% over the previous year. Our revenue from continued operations was $2 billion, adjusted EBITDA for the year increased 4% to $655 million and operating EBITDA increased 5% to $711 million. It is of interest to note that over the last five years, our business mix has shifted and now Loyalty Services, Epsilon Marketing Services and Private Label Services collectively represent 70% of Alliance Data’s operating EBITDA, with Private Label Credit representing the remaining 30%. In 2008 we took advantage of the weak equity markets and repurchased more than 17 million shares of our outstanding common stock for $1 billion. The repurchase will provide an additional lever for driving cash earnings per share through 2009. Finally, our liquidity remains strong and we have tremendous flexibility to continue to invest in our growth and success. Looking Ahead We have built a company that is resilient by keeping an eye on the future, while continuing to focus on the here and now. We have identified key priorities for the year and by acting on all of these we intend to both deliver in 2009 and emerge an even stronger company as the economy and markets return to a more normal state. Specifically, we intend to: s Seize opportunities in the marketplace—most notably by adding bulk to our private label business. While our competitors are uncertain in their commitment to this business, we believe in it. We will take advantage of developing relationships with retailers who are looking for proven strategies to increase wallet share and loyalty with their customers. s Continue to purchase our common stock—we believe Alliance Data is a great value. s Manage our liquidity by continuing to pursue an overall balanced funding strategy. We will utilize several liquidity sources as we continue to see opportunities for well-positioned companies like Alliance Data. s And as we approach 2010, we have plans to announce initiatives in our Loyalty Services and Epsilon Marketing Services businesses that will further add some “sizzle” to our story. In closing, I want to express my gratitude to our more than 7,000 associates for their dedication and commitment to helping our clients succeed. Their tenacity and focus over the last year is clearly why we’ve continued our track record of successfully delivering on our promises to our clients and to our stockholders. My thanks to our clients, who continue to have confidence and trust in our ability to help them create and nurture stronger relationships with their customers. And to our stockholders, particularly those who have been with us for the long haul, thank you for your continued confidence in our great company, and I hope that you share in our excitement about the future. Let me say again, we believe there’s no better investment than Alliance Data. Sincerely, Edward J. Heffernan President and Chief Executive Officer Stockholders may visit the following web site for electronic access to Annual Reports and Proxy materials: http://www. edocumentview.com/ADS ALLIANCE DATA SYSTEMS CORPORATION 17655 Waterview Parkway Dallas, Texas 75252 (972) 348-5100 NOTICE OF 2009 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 15, 2009 To the stockholders of Alliance Data Systems Corporation: We will hold the 2009 annual meeting of our stockholders at our corporate headquarters, 17655 Waterview Parkway, Dallas, Texas 75252, on Monday, June 15, 2009 at 2:00 p.m. (local time), for the following purposes: Proxy (1) the election of three class III directors; (2) the ratification of the selection of Deloitte & Touche LLP as the independent registered public accounting firm of the company for 2009; and (3) the transaction of such other business as may properly come before the annual meeting or any adjournments or postponements thereof. Stockholders of record as of April 16, 2009 are the only stockholders entitled to vote at the meeting and any adjournments or postponements thereof. You are cordially invited to attend the meeting, but whether or not you expect to attend in person, we urge you to grant your proxy to vote your shares by telephone or through the Internet by following the instructions included on the Notice of Internet Availability of Proxy Materials that you received, or if you received a paper copy of the proxy card, to mark, date, sign and return the proxy card in the envelope provided. You may still vote in person if you attend the meeting, even if you have given your proxy. Please note, however, that if a broker or other nominee holds your shares of record and you wish to vote at the meeting, you must obtain from that registered holder a proxy card issued in your name. Pursuant to rules promulgated by the SEC, we are providing access to our proxy materials, including this proxy statement and our annual report on Form 10-K for the year ended December 31, 2008, over the Internet. As a result, we are mailing to many of our stockholders a Notice of Internet Availability of Proxy Materials instead of a paper copy of our proxy materials. The notice contains instructions on how to access those proxy materials over the Internet, as well as instructions on how to request a paper copy of our proxy materials. All stockholders who do not receive a notice will receive a paper copy of our proxy materials by mail. We believe that this new process will reduce the environmental impact and lower the costs of printing and distributing our proxy materials. By Order of the Board of Directors Alan M. Utay Corporate Secretary April 23, 2009 Dallas, Texas ALLIANCE DATA SYSTEMS CORPORATION 17655 Waterview Parkway Dallas, Texas 75252 PROXY STATEMENT 2009 Annual Meeting of Stockholders To be Held on June 15, 2009 The board of directors of Alliance Data Systems Corporation is soliciting your proxy to vote at the 2009 annual meeting of stockholders to be held on June 15, 2009 at 2:00 p.m. (local time) and any adjournments or postponements of that meeting. The meeting will be held at our corporate headquarters, 17655 Waterview Parkway, Dallas, Texas 75252. Proxy The Notice of Internet Availability of Proxy Materials or this proxy statement and the accompanying proxy card, notice of meeting and annual report on Form 10-K for the year ended December 31, 2008 were first mailed on or about April 23, 2009 to all stockholders of record as of April 16, 2009. Our only voting securities are shares of our common stock of which there were 58,912,001 shares outstanding as of April 16, 2009. We will have a list of stockholders available for inspection for at least ten days prior to the annual meeting at our principal executive offices at 17655 Waterview Parkway, Dallas, Texas 75252 and at the annual meeting. Questions and Answers about the Proxy Process Why did I receive a Notice of Internet Availability of Proxy Materials this year instead of a paper copy of the proxy materials? This year, like last year and pursuant to rules first promulgated by the SEC in 2007, we are providing access to our proxy materials over the Internet.

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