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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)



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

For the quarterly period ended September 30, 2008.

OR



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

For the transition period from  to
 .

Commission file number: 333-133895





AFFINION GROUP, INC.

(Exact name of Registrant as specified in its charter)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Delaware                                                       |  | 16-1732152                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)

100 Connecticut Avenue

Norwalk, CT 06850

(Address, including zip code, of principal executive
offices)

(203) 956-1000

(Registrants telephone number, including area code)





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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



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

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

The number of shares outstanding of the registrants common stock, $0.01 par value, as of October 29, 2008 was 100.









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TABLE OF CONTENTS



|                                                                                                                          |  |     
|------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                          |  | Page
|Part I. FINANCIAL INFORMATION                                                                                             |  | 1   
|                                                                                                                          | 
|Item 1.                                                                                                                   |  |     
|                                                                                                                          | 
|Financial Statements                                                                                                      |  | 1   
|                                                                                                                          | 
|Unaudited Condensed Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007                            |  | 1   
|                                                                                                                          | 
|Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2008 and
2007 |  | 2   
|                                                                                                                          | 
|Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2008 and
2007           |  | 3   
|                                                                                                                          | 
|Notes to Unaudited Condensed Consolidated Financial Statements                                                            |  | 4   
|                                                                                                                          | 
|Item 2.                                                                                                                   |  |     
|                                                                                                                          | 
|Managements Discussion and Analysis of Financial Condition and Results of Operations                                     |  | 23  
|                                                                                                                          | 
|Item 3.                                                                                                                   |  |     
|                                                                                                                          | 
|Quantitative and Qualitative Disclosures About Market Risk                                                                |  | 41  
|                                                                                                                          | 
|Item 4T.                                                                                                                  |  |     
|                                                                                                                          | 
|Controls and Procedures                                                                                                   |  | 42  
|                                                                                                                          | 
|Part II. OTHER INFORMATION                                                                                                |  | 44  
|                                                                                                                          | 
|Item 1.                                                                                                                   |  |     
|                                                                                                                          | 
|Legal Proceedings                                                                                                         |  | 44  
|                                                                                                                          | 
|Item 1A.                                                                                                                  |  |     
|                                                                                                                          | 
|Risk Factors                                                                                                              |  | 44  
|                                                                                                                          | 
|Item 2.                                                                                                                   |  |     
|                                                                                                                          | 
|Unregistered Sales of Equity in Securities and Use of Proceeds                                                            |  | 44  
|                                                                                                                          | 
|Item 3.                                                                                                                   |  |     
|                                                                                                                          | 
|Defaults Upon Senior Securities                                                                                           |  | 44  
|                                                                                                                          | 
|Item 4.                                                                                                                   |  |     
|                                                                                                                          | 
|Submission of Matters to a Vote of Security Holders                                                                       |  | 44  
|                                                                                                                          | 
|Item 5.                                                                                                                   |  |     
|                                                                                                                          | 
|Other Information                                                                                                         |  | 44  
|                                                                                                                          | 
|Item 6.                                                                                                                   |  |     
|                                                                                                                          | 
|Exhibits                                                                                                                  |  | 44  
|                                                                                                                          | 
|SIGNATURES                                                                                                                |  | S-1 



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Part I. FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

AFFINION GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2008 AND DECEMBER 31, 2007

(In millions, except share amounts)



|                                                                                                                             |  |                   |         |   |                  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                             |  | September 30,2008 |         |   | December 31,2007 |  
|Assets                                                                                                                       |  |                   |         |   |                  |   |         |  
|Current assets:                                                                                                              |  |                   |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                    |  | $                 | 18.3    |   |                  | $ | 14.2    |  
|Restricted cash                                                                                                              |  |                   | 29.3    |   |                  |   | 29.1    |  
|Receivables (net of allowance for doubtful accounts of $1.1 and $1.3, respectively)                                          |  |                   | 75.5    |   |                  |   | 73.3    |  
|Receivables from related parties                                                                                             |  |                   | 34.7    |   |                  |   | 12.1    |  
|Profit-sharing receivables from insurance carriers                                                                           |  |                   | 83.2    |   |                  |   | 58.8    |  
|Prepaid commissions                                                                                                          |  |                   | 57.5    |   |                  |   | 62.1    |  
|Deferred income taxes                                                                                                        |  |                   | 0.8     |   |                  |   | 0.9     |  
|Other current assets                                                                                                         |  |                   | 40.6    |   |                  |   | 39.4    |  
|                                                                                                                             |  |                   |         |   |                  |   |         |  
|Total current assets                                                                                                         |  |                   | 339.9   |   |                  |   | 289.9   |  
|Property and equipment, net                                                                                                  |  |                   | 86.9    |   |                  |   | 90.8    |  
|Contract rights and list fees, net                                                                                           |  |                   | 46.0    |   |                  |   | 63.2    |  
|Goodwill                                                                                                                     |  |                   | 302.3   |   |                  |   | 302.0   |  
|Other intangibles, net                                                                                                       |  |                   | 642.2   |   |                  |   | 809.1   |  
|Receivables from related parties                                                                                             |  |                   | 6.4     |   |                  |   |        |  
|Other non-current assets                                                                                                     |  |                   | 52.4    |   |                  |   | 46.2    |  
|                                                                                                                             |  |                   |         |   |                  |   |         |  
|Total assets                                                                                                                 |  | $                 | 1,476.1 |   |                  | $ | 1,601.2 |  
|                                                                                                                             |  |                   |         |   |                  |   |         |  
|Liabilities and Stockholders Equity (Deficit)                                                                               |  |                   |         |   |                  |   |         |  
|Current liabilities:                                                                                                         |  |                   |         |   |                  |   |         |  
|Current portion of long-term debt                                                                                            |  | $                 | 0.3     |   |                  | $ | 0.2     |  
|Accounts payable and accrued expenses                                                                                        |  |                   | 301.3   |   |                  |   | 264.2   |  
|Payables to related parties                                                                                                  |  |                   | 10.1    |   |                  |   | 13.3    |  
|Deferred revenue                                                                                                             |  |                   | 242.5   |   |                  |   | 255.1   |  
|Income taxes payable                                                                                                         |  |                   | 1.5     |   |                  |   | 3.0     |  
|                                                                                                                             |  |                   |         |   |                  |   |         |  
|Total current liabilities                                                                                                    |  |                   | 555.7   |   |                  |   | 535.8   |  
|Long-term debt                                                                                                               |  |                   | 1,309.8 |   |                  |   | 1,347.3 |  
|Deferred income taxes                                                                                                        |  |                   | 22.7    |   |                  |   | 20.2    |  
|Deferred revenue                                                                                                             |  |                   | 39.9    |   |                  |   | 41.6    |  
|Other long-term liabilities                                                                                                  |  |                   | 63.0    |   |                  |   | 61.2    |  
|                                                                                                                             |  |                   |         |   |                  |   |         |  
|Total liabilities                                                                                                            |  |                   | 1,991.1 |   |                  |   | 2,006.1 |  
|                                                                                                                             |  |                   |         |   |                  |   |         |  
|Minority interests                                                                                                           |  |                   | 0.6     |   |                  |   | 0.6     |  
|                                                                                                                             |  |                   |         |   |                  |   |         |  
|Commitments and contingencies (Note 6)                                                                                       |  |                   |         |   |                  |   |         |  
|Stockholders Equity (Deficit):                                                                                              |  |                   |         |   |                  |   |         |  
|Common stock and additional paid-in capital, $0.01 par value, 1,000 shares authorized, and 100 shares issued and outstanding |  |                   | 311.7   |   |                  |   | 348.7   |  
|Accumulated deficit                                                                                                          |  |                   | (836.8  | ) |                  |   | (766.5  | )
|Accumulated other comprehensive income                                                                                       |  |                   | 9.5     |   |                  |   | 12.3    |  
|                                                                                                                             |  |                   |         |   |                  |   |         |  
|Total stockholders equity (deficit)                                                                                         |  |                   | (515.6  | ) |                  |   | (405.5  | )
|                                                                                                                             |  |                   |         |   |                  |   |         |  
|Total liabilities and stockholders equity (deficit)                                                                         |  | $                 | 1,476.1 |   |                  | $ | 1,601.2 |  
|                                                                                                                             |  |                   |         |   |                  |   |         |  

See accompanying notes to the unaudited condensed consolidated financial statements.



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AFFINION GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(In millions)



|                                                                                     |  |                            |       |   |                           |   |       |                   |  |   |                   |   |  |   |         |  
|------------------------------------------------------------------------------------ |  | -------------------------- | ----- | - | ------------------------- | - | ----- | ----------------- |  | - | ----------------- | - |  | - | ------- | -
|                                                                                     |  | For the Three Months Ended |       |   | For the Nine Months Ended |  
|                                                                                     |  | September 30,2008          |       |   | September 30,2007         |   |       | September 30,2008 |  |   | September 30,2007 |  
|Net revenues                                                                         |  | $                          | 364.8 |   |                           | $ | 330.6 |                   |  | $ | 1,058.3           |   |  | $ | 984.4   |  
|                                                                                     |  |                            |       |   |                           |   |       |                   |  |   |                   |   |  |   |         |  
|Expenses:                                                                            |  |                            |       |   |                           |   |       |                   |  |   |                   |   |  |   |         |  
|Cost of revenues, exclusive of depreciation and amortization shown separately below: |  |                            |       |   |                           |   |       |                   |  |   |                   |   |  |   |         |  
|Marketing and commissions                                                            |  |                            | 160.1 |   |                           |   | 149.3 |                   |  |   | 475.3             |   |  |   | 452.9   |  
|Operating costs                                                                      |  |                            | 96.7  |   |                           |   | 79.6  |                   |  |   | 277.2             |   |  |   | 251.2   |  
|General and administrative                                                           |  |                            | 24.1  |   |                           |   | 25.9  |                   |  |   | 77.9              |   |  |   | 89.5    |  
|Depreciation and amortization                                                        |  |                            | 68.4  |   |                           |   | 82.9  |                   |  |   | 205.6             |   |  |   | 242.1   |  
|                                                                                     |  |                            |       |   |                           |   |       |                   |  |   |                   |   |  |   |         |  
|Total expenses                                                                       |  |                            | 349.3 |   |                           |   | 337.7 |                   |  |   | 1,036.0           |   |  |   | 1,035.7 |  
|                                                                                     |  |                            |       |   |                           |   |       |                   |  |   |                   |   |  |   |         |  
|Income (loss) from operations                                                        |  |                            | 15.5  |   |                           |   | (7.1  | )                 |  |   | 22.3              |   |  |   | (51.3   | )
|Interest income                                                                      |  |                            | 0.4   |   |                           |   | 0.9   |                   |  |   | 1.4               |   |  |   | 3.6     |  
|Interest expense                                                                     |  |                            | (35.6 | ) |                           |   | (38.7 | )                 |  |   | (87.1             | ) |  |   | (107.7  | )
|Other income, net                                                                    |  |                            | 2.8   |   |                           |   |      |                   |  |   | 2.6               |   |  |   |        |  
|                                                                                     |  |                            |       |   |                           |   |       |                   |  |   |                   |   |  |   |         |  
|Loss before income taxes and minority interests                                      |  |                            | (16.9 | ) |                           |   | (44.9 | )                 |  |   | (60.8             | ) |  |   | (155.4  | )
|Income tax (expense) benefit                                                         |  |                            | (3.1  | ) |                           |   | 1.7   |                   |  |   | (8.9              | ) |  |   | (1.0    | )
|Minority interests, net of tax                                                       |  |                            | (0.3  | ) |                           |   | (0.1  | )                 |  |   | (0.6              | ) |  |   | (0.2    | )
|                                                                                     |  |                            |       |   |                           |   |       |                   |  |   |                   |   |  |   |         |  
|Net loss                                                                             |  | $                          | (20.3 | ) |                           | $ | (43.3 | )                 |  | $ | (70.3             | ) |  | $ | (156.6  | )
|                                                                                     |  |                            |       |   |                           |   |       |                   |  |   |                   |   |  |   |         |  

See accompanying notes to the unaudited condensed consolidated financial statements.



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AFFINION GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF

CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(In millions)



|                                                                                |  |                           |       |   |                   |   |        |  
|------------------------------------------------------------------------------- |  | ------------------------- | ----- | - | ----------------- | - | ------ | -
|                                                                                |  | For the Nine Months Ended |      
|                                                                                |  | September 30,2008         |       |   | September 30,2007 |  
|Operating Activities                                                            |  |                           |       |   |                   |   |        |  
|Net loss                                                                        |  | $                         | (70.3 | ) |                   | $ | (156.6 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                           |       |   |                   |   |        |  
|Depreciation and amortization                                                   |  |                           | 205.6 |   |                   |   | 242.1  |  
|Amortization of favorable and unfavorable contracts                             |  |                           | (2.3  | ) |                   |   | (2.2   | )
|Amortization of debt discount and financing costs                               |  |                           | 4.4   |   |                   |   | 5.0    |  
|Unrealized (gain) loss on interest rate swaps                                   |  |                           | (8.1  | ) |                   |   | 2.2    |  
|Stock-based compensation                                                        |  |                           | 2.3   |   |                   |   | 1.8    |  
|Deferred income taxes                                                           |  |                           | 3.8   |   |                   |   | (10.3  | )
|Payment received for assumption of loyalty points program liability             |  |                           | 7.4   |   |                   |   |       |  
|Net change in assets and liabilities:                                           |  |                           |       |   |                   |   |        |  
|Restricted cash                                                                 |  |                           | 0.6   |   |                   |   | (1.1   | )
|Receivables                                                                     |  |                           | (2.2  | ) |                   |   | 3.0    |  
|Receivables from related parties                                                |  |                           | (17.3 | ) |                   |   | 3.1    |  
|Profit-sharing receivables from insurance carriers                              |  |                           | (24.4 | ) |                   |   | (12.5  | )
|Prepaid commissions                                                             |  |                           | 3.5   |   |                   |   | 13.7   |  
|Other current assets                                                            |  |                           | (2.2  | ) |                   |   | 3.0    |  
|Contract rights and list fees                                                   |  |                           | (0.1  | ) |                   |   | (0.9   | )
|Other non-current assets                                                        |  |                           | (1.6  | ) |                   |   | (5.3   | )
|Accounts payable and accrued expenses                                           |  |                           | 31.1  |   |                   |   | (10.7  | )
|Payables to related parties                                                     |  |                           | (5.2  | ) |                   |   | (4.9   | )
|Deferred revenue                                                                |  |                           | (9.9  | ) |                   |   | (4.6   | )
|Income taxes receivable and payable                                             |  |                           | (1.5  | ) |                   |   | 7.4    |  
|Other long-term liabilities                                                     |  |                           | (4.4  | ) |                   |   | (6.9   | )
|Minority interests and other, net                                               |  |                           | (0.8  | ) |                   |   | (0.2   | )
|                                                                                |  |                           |       |   |                   |   |        |  
|Net cash provided by operating activities                                       |  |                           | 108.4 |   |                   |   | 65.1   |  
|                                                                                |  |                           |       |   |                   |   |        |  
|Investing Activities                                                            |  |                           |       |   |                   |   |        |  
|Capital expenditures                                                            |  |                           | (25.6 | ) |                   |   | (18.6  | )
|Restricted cash                                                                 |  |                           | (1.1  | ) |                   |   |       |  
|Acquisition-related payment, net of cash acquired                               |  |                           |      |   |                   |   | (0.8   | )
|                                                                                |  |                           |       |   |                   |   |        |  
|Net cash used in investing activities                                           |  |                           | (26.7 | ) |                   |   | (19.4  | )
|                                                                                |  |                           |       |   |                   |   |        |  
|Financing Activities                                                            |  |                           |       |   |                   |   |        |  
|Repayments under line of credit, net                                            |  |                           | (38.5 | ) |                   |   |       |  
|Principal payments on borrowings                                                |  |                           | (0.2  | ) |                   |   | (75.1  | )
|Dividends paid to parent company                                                |  |                           | (37.0 | ) |                   |   | (32.1  | )
|Distribution to minority shareholder of a subsidiary                            |  |                           | (0.4  | ) |                   |   | (0.4   | )
|                                                                                |  |                           |       |   |                   |   |        |  
|Net cash used in financing activities                                           |  |                           | (76.1 | ) |                   |   | (107.6 | )
|                                                                                |  |                           |       |   |                   |   |        |  
|Effect of changes in exchange rates on cash and cash equivalents                |  |                           | (1.5  | ) |                   |   | 0.1    |  
|                                                                                |  |                           |       |   |                   |   |        |  
|Net increase (decrease) in cash and cash equivalents                            |  |                           | 4.1   |   |                   |   | (61.8  | )
|Cash and cash equivalents, beginning of period                                  |  |                           | 14.2  |   |                   |   | 84.3   |  
|                                                                                |  |                           |       |   |                   |   |        |  
|Cash and cash equivalents, end of period                                        |  | $                         | 18.3  |   |                   | $ | 22.5   |  
|                                                                                |  |                           |       |   |                   |   |        |  
|Supplemental Disclosure of Cash Flow Information:                               |  |                           |       |   |                   |   |        |  
|Interest payments                                                               |  | $                         | 69.5  |   |                   | $ | 80.5   |  
|                                                                                |  |                           |       |   |                   |   |        |  
|Income tax payments                                                             |  | $                         | 6.6   |   |                   | $ | 4.9    |  
|                                                                                |  |                           |       |   |                   |   |        |  
|Non-cash investing and financing activities:                                    |  |                           |       |   |                   |   |        |  
|Accrued capital expenditures                                                    |  | $                         | 0.6   |   |                   | $ | 0.1    |  
|                                                                                |  |                           |       |   |                   |   |        |  
|Capital leases                                                                  |  | $                         | 0.7   |   |                   | $ |       |  
|                                                                                |  |                           |       |   |                   |   |        |  

See accompanying notes to the unaudited condensed consolidated financial statements.



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AFFINION GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise noted, all dollar amounts are in millions, except per share amounts)



|1. | BASIS OF PRESENTATION AND BUSINESS DESCRIPTION
|-- | ----------------------------------------------

Basis of Presentation  On October 17, 2005, Cendant Corporation (Cendant) completed the sale of the Cendant Marketing Services Division (the Predecessor) to Affinion Group, Inc. (the
Company or Affinion), an affiliate of Apollo Management V, L.P. (Apollo), pursuant to a purchase agreement dated July 26, 2005 for approximately $1.8 billion (the Transactions). The purchase price
consisted of approximately $1.7 billion of cash, net of estimated closing adjustments, plus $125.0 million face value of newly issued preferred stock (fair value of $80.4 million) of Affinion Group Holdings, Inc. (Affinion
Holdings), the Companys parent company, and a warrant (fair value of $16.7 million) that is exercisable into 4,437,170 shares of common stock of Affinion Holdings upon the earlier of four years or the achievement by Apollo of certain
investment return hurdles, and $38.1 million of transaction-related costs. Pursuant to the purchase agreement, Affinion acquired all of the outstanding capital stock and membership interests of the Predecessor, as well as substantially all of
the Predecessors assets and liabilities.

All references to Cendant refer to Cendant Corporation, which changed its name to Avis
Budget Group, Inc. in August 2006, and its consolidated subsidiaries, particularly in context of its business and operations prior to, and in connection with, the Companys separation from Cendant.

The Predecessor was a combined reporting entity that was comprised of the assets and liabilities used in managing and operating the marketing services
businesses of Cendant. The entities that comprise the Predecessor included Affinion Group, LLC (formerly known as Cendant Marketing Group, LLC) (AGLLC), Affinion Membership Services Holdings Subsidiary LLC (formerly known as Cendant
Membership Services Holdings Subsidiary LLC), Trilegiant Corporation (Trilegiant), TRL Group, Inc. (TRL Group), Affinion Benefits Group, Inc. (formerly known as Progeny Marketing Innovations Inc.), Affinion Loyalty Group,
Inc. (formerly known as Trilegiant Loyalty Solutions, Inc.) (TLS), Cendant Travel, Inc. (CTI), Affinion International Holdings Limited (formerly known as Cendant International Holdings Limited) (Affinion
International) and related companies. All of the entities that comprised the Predecessor were acquired by Affinion on October 17, 2005.

The accompanying unaudited condensed consolidated financial statements include the accounts and transactions of the Company. In presenting these unaudited condensed consolidated financial statements, management makes estimates and
assumptions that affect reported amounts of assets and liabilities and related disclosures, and disclosure of contingent assets and liabilities, at the date of the financial statements, and reported amounts of revenues and expenses during the
reporting periods. Estimates, by their nature, are based on judgments and available information at the time. As such, actual results could differ from those estimates. In managements opinion, the unaudited condensed consolidated financial
statements contain all normal recurring adjustments necessary for a fair presentation of interim results reported. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire year
or any subsequent interim period.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance
with the instructions to Form 10-Q and following the guidance of Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the U.S. Securities and Exchange Commission (the SEC). As permitted under such
rules, certain notes and other financial information normally required by accounting principles generally accepted in the United States of America have been condensed or omitted; however, the unaudited condensed consolidated financial statements do
include such notes and financial information sufficient so as to make the interim information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial
statements and related notes of the Company as of December 31, 2007 and 2006, and for the years ended December 31, 2007 and 2006 and for the period from October 17, 2005 (commencement of operations) to December 31, 2005, and the
combined financial statements of the Predecessor for the period from January 1, 2005 to October 16, 2005, included in the Companys Annual Report on Form 10-K for the year ended December 31, 2007 filed with the SEC on
February 29, 2008 (the Form 10-K).

Business Description  The Company is a leading global provider of
comprehensive marketing services and loyalty programs to many of the largest and most respected companies in the world. The Company partners with these leading companies to develop customized marketing programs that provide valuable products and
services to their end customers using its creative design and product development capabilities. These products and services enable the Companys marketing partners to strengthen their customer relationships, as well as generate significant
incremental revenue, generally in the form of commission payments paid by the Company. The Company has substantial expertise in deploying various types of media, such as direct mail and the Internet, and bundling unique benefits to offer valuable
products and services to the end customers of its marketing partners on a highly targeted basis. The Company provides credit monitoring and identity-theft resolution, accidental death and dismemberment insurance (AD&D), discount
travel services, loyalty programs, various checking account and credit card enhancement services and other products and services.



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| |  |  | Affinion North America. Affinion North America comprises the Companys Membership, Insurance and Package, and Loyalty product operations in North
America.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Membership Products. The Company designs, implements and markets membership programs that provide members with access to a variety of discounts and
shop-at-home conveniences in such areas as retail merchandise, travel, automotive and home improvement as well as personal protection benefits and value-added services including credit monitoring and identity-theft resolution services.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Insurance and Package Products. The Company markets AD&D and other insurance programs and designs and provides checking account enhancement programs
primarily to financial institutions.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Loyalty Products. The Company designs, implements and administers points-based loyalty programs for financial, travel, auto and other companies. The Company
also provides enhancement benefits to major financial institutions in connection with their credit and debit card programs.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Affinion International. Affinion International comprises the Companys Membership, Package and Loyalty product operations outside North America.
The Company expects to leverage its current Western European operational platform to expand its range of products and services, develop new affinity partner relationships in various industries and grow its geographical footprint.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Recently Adopted Accounting Standards

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. In February 2008, the FASB issued FASB Staff Position No. FAS 157-2 (FSP-FAS 157-2), delaying the effective date of
SFAS 157 for certain nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008. In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities  Including an Amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and other items at fair value. The fair
value option permits entities to choose to measure eligible items at fair value at specified election dates. Unrealized gains and losses on items for which the fair value option has been elected would be recognized in earnings at each subsequent
reporting date. Generally, the fair value option may be applied instrument by instrument and is irrevocable unless a new election date occurs. Effective January 1, 2008, the Company adopted SFAS 157 and SFAS 159. Adoption of SFAS 157 and SFAS
159 did not have a material impact on the Companys consolidated financial position, results of operations and cash flows as the Company did not elect the fair value option available under SFAS 159 for any of its financial instruments. The
Companys adoption of SFAS 157 for certain nonfinancial assets and nonfinancial liabilities in accordance with FSP-FAS 157-2 is not expected to have a material impact on the Companys consolidated financial position, results of operations
and cash flows. See Note 9 for additional information.

Recently Issued Accounting Pronouncements

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141R, Business Combinations (SFAS 141R),
which replaced Statement of Financial Accounting Standards No. 141, Business Combinations (SFAS 141). SFAS 141R retains the fundamental requirements in SFAS 141 that the acquisition or purchase method of accounting be
used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141R defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the
acquisition date as the date that the acquirer achieves control. SFAS 141R also retains the guidance in SFAS 141 for identifying and recognizing intangible assets separately from goodwill. SFAS 141R applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. SFAS 141R cannot be applied prior to that date.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging
Activities  an amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities to provide enhanced disclosures about (a) how and why an
entity uses derivative instruments, (b) how derivative instruments and related items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entitys
financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Companys
adoption of SFAS 161 will not have any impact on the Companys consolidated financial position, results of operations and cash flows.

In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, The Hierarchy of Generally Accepted Accounting Principles (SFAS 162). SFAS 162 identifies the sources of accounting principles
and the framework for selecting the principles to be used in the preparation of financial statements of non-governmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States
(the GAAP hierarchy). Generally, SFAS 162 is effective 60 days following additional SEC approval. The Companys adoption of SFAS 162 is not expected to have any impact on the Companys consolidated financial position, results of
operations and cash flows.



5



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##### Table of Contents

|2. | INTANGIBLE ASSETS
|-- | -----------------

Intangible assets consisted of:



|                                  |  |                     |         |                         |   |        |                   |  |   |      
|--------------------------------- |  | ------------------- | ------- | ----------------------- | - | ------ | ----------------- |  | - | -----
|                                  |  | September 30, 2008 
|                                  |  | GrossCarryingAmount |         | AccumulatedAmortization |   |        | NetCarryingAmount
|Amortizable intangible assets:    |  |                     |         |                         |   |        |                   |  |   |      
|Member relationships              |  | $                   | 808.7   |                         | $ | (484.1 | )                 |  | $ | 324.6
|Affinity relationships            |  |                     | 578.0   |                         |   | (298.1 | )                 |  |   | 279.9
|Proprietary databases and systems |  |                     | 54.2    |                         |   | (52.3  | )                 |  |   | 1.9  
|Trademarks and tradenames         |  |                     | 26.2    |                         |   | (5.3   | )                 |  |   | 20.9 
|Patents and technology            |  |                     | 25.0    |                         |   | (10.9  | )                 |  |   | 14.1 
|Covenant not to compete           |  |                     | 1.0     |                         |   | (0.2   | )                 |  |   | 0.8  
|                                  |  |                     |         |                         |   |        |                   |  |   |      
|                                  |  | $                   | 1,493.1 |                         | $ | (850.9 | )                 |  | $ | 642.2
|                                  |  |                     |         |                         |   |        |                   |  |   |      
|                                  | 
|                                  |  | December 31, 2007  
|                                  |  | GrossCarryingAmount |         | AccumulatedAmortization |   |        | NetCarryingAmount
|Amortizable intangible assets:    |  |                     |         |                         |   |        |                   |  |   |      
|Member relationships              |  | $                   | 809.7   |                         | $ | (388.5 | )                 |  | $ | 421.2
|Affinity relationships            |  |                     | 583.3   |                         |   | (250.5 | )                 |  |   | 332.8
|Proprietary databases and systems |  |                     | 54.2    |                         |   | (38.8  | )                 |  |   | 15.4 
|Trademarks and tradenames         |  |                     | 26.6    |                         |   | (3.8   | )                 |  |   | 22.8 
|Patents and technology            |  |                     | 25.0    |                         |   | (9.1   | )                 |  |   | 15.9 
|Covenant not to compete           |  |                     | 1.0     |                         |   |       |                   |  |   | 1.0  
|                                  |  |                     |         |                         |   |        |                   |  |   |      
|                                  |  | $                   | 1,499.8 |                         | $ | (690.7 | )                 |  | $ | 809.1
|                                  |  |                     |         |                         |   |        |                   |  |   |      

Amortization expense relating to intangible assets was as follows:



|                                  |  |                            |      |                           |   |                   |  |                   |       |  |   |      
|--------------------------------- |  | -------------------------- | ---- | ------------------------- | - | ----------------- |  | ----------------- | ----- |  | - | -----
|                                  |  | For the Three Months Ended |      | For the Nine Months Ended
|                                  |  | September 30,2008          |      | September 30,2007         |   | September 30,2008 |  | September 30,2007
|Member relationships              |  | $                          | 32.4 |                           | $ | 38.2              |  | $                 | 96.2  |  | $ | 114.7
|Affinity relationships            |  |                            | 16.8 |                           |   | 23.0              |  |                   | 50.7  |  |   | 68.6 
|Proprietary databases and systems |  |                            | 4.6  |                           |   | 4.5               |  |                   | 13.6  |  |   | 13.3 
|Trademarks and tradenames         |  |                            | 0.5  |                           |   | 0.5               |  |                   | 1.6   |  |   | 1.3  
|Patents and technology            |  |                            | 0.6  |                           |   | 0.6               |  |                   | 1.8   |  |   | 1.9  
|Covenant not to compete           |  |                            | 0.1  |                           |   |                  |  |                   | 0.2   |  |   |     
|                                  |  |                            |      |                           |   |                   |  |                   |       |  |   |      
|                                  |  | $                          | 55.0 |                           | $ | 66.8              |  | $                 | 164.1 |  | $ | 199.8
|                                  |  |                            |      |                           |   |                   |  |                   |       |  |   |      

Based on the Companys amortizable intangible assets as of September 30, 2008, the
Company expects the related amortization expense for fiscal 2008 and the four succeeding fiscal years to be $207.1 million in 2008, $153.9 million in 2009, $127.5 million in 2010, $110.1 million in 2011 and $88.8 million in 2012.

Goodwill attributed to each of the Companys reporting segments is as follows:



|                               |  |                   |       |                  |   |      
|------------------------------ |  | ----------------- | ----- | ---------------- | - | -----
|                               |  | September 30,2008 |       | December 31,2007
|Membership products            |  | $                 | 231.1 |                  | $ | 231.1
|Insurance and package products |  |                   | 58.3  |                  |   | 58.3 
|International products         |  |                   | 12.9  |                  |   | 12.6 
|                               |  |                   |       |                  |   |      
|                               |  | $                 | 302.3 |                  | $ | 302.0
|                               |  |                   |       |                  |   |      



6



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##### Table of Contents

The change in the Companys carrying amount of goodwill in fiscal 2008 is due to changes in foreign
currency exchange rates.



|3. | CONTRACT RIGHTS AND LIST FEES, NET
|-- | ----------------------------------

Contract rights
and list fees consisted of:



|                |  |                     |      |                         |   |       |                   |  |                     |      |                         |   |      |                   |   |       |   |  |   |     
|--------------- |  | ------------------- | ---- | ----------------------- | - | ----- | ----------------- |  | ------------------- | ---- | ----------------------- | - | ---- | ----------------- | - | ----- | - |  | - | ----
|                |  | September 30, 2008  |      | December 31, 2007      
|                |  | GrossCarryingAmount |      | AccumulatedAmortization |   |       | NetCarryingAmount |  | GrossCarryingAmount |      | AccumulatedAmortization |   |      | NetCarryingAmount
|Contract rights |  | $                   | 65.6 |                         | $ | (30.9 | )                 |  | $                   | 34.7 |                         | $ | 72.5 |                   | $ | (20.6 | ) |  | $ | 51.9
|List fees       |  |                     | 16.5 |                         |   | (5.2  | )                 |  |                     | 11.3 |                         |   | 14.6 |                   |   | (3.3  | ) |  |   | 11.3
|                |  |                     |      |                         |   |       |                   |  |                     |      |                         |   |      |                   |   |       |   |  |   |     
|                |  | $                   | 82.1 |                         | $ | (36.1 | )                 |  | $                   | 46.0 |                         | $ | 87.1 |                   | $ | (23.9 | ) |  | $ | 63.2
|                |  |                     |      |                         |   |       |                   |  |                     |      |                         |   |      |                   |   |       |   |  |   |     

Amortization expense for the three and nine months ended September 30, 2008 was $5.0 million
and $15.4 million, respectively, of which $0.6 million and $1.8 million, respectively, is included in marketing expense and $4.4 million and $13.6 million, respectively, is included in depreciation and amortization expense in the unaudited
condensed consolidated statements of operations. Amortization expense for the three and nine months ended September 30, 2007 was $6.1 million and $14.9 million, respectively, of which $0.5 million and $1.6 million, respectively, is included in
marketing expense and $5.6 million and $13.3 million, respectively, is included in depreciation and amortization expense in the unaudited condensed consolidated statements of operations. Based on the Companys contract rights and list fees
as of September 30, 2008, the Company expects the related amortization expense for fiscal 2008 and the four succeeding fiscal years to be approximately $20.2 million in 2008, $16.0 million in 2009, $11.9 million in 2010, $9.3 million in
2011 and $1.2 million in 2012.



|4. | LONG-TERM DEBT
|-- | --------------

Long-term debt consisted of:



|                                                                                                                                                 |  |                   |         |   |                  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                 |  | September 30,2008 |         |   | December 31,2007 |  
|Term loan due 2012                                                                                                                               |  | $                 | 655.0   |   |                  | $ | 655.0   |  
|Revolving credit facility                                                                                                                        |  |                   |        |   |                  |   | 38.5    |  
|101/8% senior notes
due 2013, net of unamortized discount of $1.5 and $1.7, respectively, with an effective interest rate of 10.285%             |  |                   | 302.5   |   |                  |   | 302.3   |  
|111/2% senior
subordinated notes due 2015, net of unamortized discount of $3.8 and $4.2, respectively, with an effective interest rate of 11.75% |  |                   | 351.7   |   |                  |   | 351.3   |  
|Capital lease obligations                                                                                                                        |  |                   | 0.9     |   |                  |   | 0.4     |  
|                                                                                                                                                 |  |                   |         |   |                  |   |         |  
|Total debt                                                                                                                                       |  |                   | 1,310.1 |   |                  |   | 1,347.5 |  
|Less: current portion of long-term debt                                                                                                          |  |                   | (0.3    | ) |                  |   | (0.2    | )
|                                                                                                                                                 |  |                   |         |   |                  |   |         |  
|Long-term debt                                                                                                                                   |  | $                 | 1,309.8 |   |                  | $ | 1,347.3 |  
|                                                                                                                                                 |  |                   |         |   |                  |   |         |  

On October 17, 2005, the Company entered into a senior secured credit facility
(Affinion Credit Facility). The Affinion Credit Facility is comprised of a term loan that initially totaled $860.0 million due in 2012 and a $100.0 million revolving credit facility terminating in 2011. The revolving credit facility
includes letter of credit and swingline sub-facilities.

The Affinion Credit Facility is secured by all of the outstanding stock of the
Company held by Affinion Holdings and substantially all of the assets of the Company, subject to certain exceptions. Through September 30, 2008, the Company made nine voluntary principal prepayments of the term loan aggregating $205.0 million
and, therefore, all of the Companys mandatory quarterly repayment obligations have been satisfied. The Affinion Credit Facility permits the Company to obtain additional borrowing capacity up to the greater of $175.0 million and an amount equal
to Adjusted EBITDA, as set forth in the agreement governing the Affinion Credit Facility, for the most recent four-quarter period. Effective January 4, 2007, the Affinion Credit Facility was amended to decrease the interest rate on the term
loan facility by 25 basis points, initially, and to provide for an additional 25 basis point decrease if the corporate family rating of Affinion Group reached B1 or higher by Moodys and B+ or higher by S&P. The amendment also modified the
definition of change of control. The revolving credit facility carries a commitment fee of 0.5% on the unused amount. As of December 31, 2007, borrowings outstanding under the revolving credit facility were $38.5 million. There were no
borrowings outstanding under the revolving credit facility as of September 30, 2008. As of September 30, 2008, the Company had $98.5 million available for borrowing under the Affinion Credit Facility after giving effect to the issuance of
$1.5 million of letters of credit.

On October 17, 2005, the Company
issued senior notes (Senior Notes), with a face value of $270.0 million, for net proceeds of $266.4 million. The Senior Notes bear interest at 101/8% per annum, payable semi-annually on April 15 and October 15 of each year. The Senior Notes mature on October 15, 2013. The Senior Notes are senior unsecured obligations and
rank equally in right of payment with the Companys existing and future senior obligations and senior to the Companys existing and future senior subordinated indebtedness. As discussed in Note 11Guarantor/Non-Guarantor Supplemental
Financial Information, the Senior Notes are guaranteed by certain subsidiaries of the Company. The Senior Notes contain restrictive covenants related primarily to the Companys ability to distribute dividends, redeem or repurchase capital
stock, sell assets, issue additional debt or merge with or acquire other companies.



7



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##### Table of Contents

On May 3, 2006, the Company issued an
additional $34.0 million aggregate principal amount of 101/8% senior notes due 2013 (the Senior Notes). These Senior
Notes were issued as additional notes under the Senior Notes indenture dated October 17, 2005 and, together with the $270.0 million of Senior Notes originally issued under such indenture, are treated as a single class for all purposes under the
indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase.

On April 26, 2006, the Company issued $355.5 million aggregate principal amount of 111/2%
senior subordinated notes due October 15, 2015 (the Senior Subordinated Notes). The interest on the Senior Subordinated Notes is payable semi-annually, on April 15 and October 15 of each year. The Senior Subordinated Notes
are unsecured obligations of the Company and rank junior in right of payment to the Companys existing and future senior obligations and senior to the Companys future subordinated obligations. The Senior Subordinated Notes are guaranteed
by the same subsidiaries of the Company that guarantee the Affinion Credit Facility and the Senior Notes as discussed in Note 11Guarantor/Non-Guarantor Supplemental Financial Information. The Senior Subordinated Notes contain restrictive
covenants related primarily to the Companys ability to distribute dividends, redeem or repurchase capital stock, sell assets, issue additional debt or merge with or acquire other companies.

On September 13, 2006, the Company completed a registered exchange offer and exchanged all of
the then outstanding 101/8% Senior Notes due 2013 and all of the then outstanding 111/2% Senior Subordinated Notes due 2015 into a like amount of 101/8% Senior Notes due 2013 and 111/2% Senior Subordinated Notes due 2015,
respectively, that have been registered under the Securities Act of 1933, as amended.

As of September 30,
2008, the Company believes it is in compliance with all financial covenants contained in the Affinion Credit Facility and the indentures that govern the Senior Notes and the Senior Subordinated Notes.



|5. | INCOME TAXES
|-- | ------------

The Companys effective income
tax rates for the three and nine months ended September 30, 2008 were (18.6)% and (14.7)%, respectively. These rates differ from the U.S. federal statutory rate of 35% primarily due to the effects of certain state income taxes, foreign taxes,
deferred tax liabilities associated with indefinite-lived intangibles and valuation allowances required with respect to the increase in certain net deferred tax assets.

The Companys effective income tax rates for the three and nine months ended September 30, 2007 were 4.1% and (0.6)%, respectively. These rates differ from the U.S. federal statutory rate of 35% primarily
due to the effects of certain state income taxes, foreign taxes, deferred tax liabilities associated with indefinite-lived intangibles and valuation allowances required with respect to the increase in certain net deferred tax assets.

The Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement
No. 109 (FIN 48) as of January 1, 2007 and increased its tax reserves for uncertain tax positions included in other long-term liabilities by $9.4 million, decreased its long-term deferred income taxes by $7.9 million,
decreased its income taxes payable by $0.6 million and increased its January 1, 2007 accumulated deficit by $0.9 million. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. There was no
recognition of additional penalties and interest required as a result of the adoption of FIN 48. The Companys gross unrecognized tax benefits for the three and nine months ended September 30, 2008 increased by $0.7 million and $1.1
million, respectively, as a result of tax positions for the current period.

The Companys income tax returns are periodically
examined by various tax authorities. In connection with these examinations, certain tax authorities, including the Internal Revenue Service, may raise issues and impose additional assessments. The Company regularly evaluates the likelihood of
additional assessments resulting from these examinations and establishes liabilities, through the provision for income taxes, for potential amounts that may result therefrom. The recognition of uncertain tax benefits are not expected to have a
material impact on the Companys effective tax rate or results of operations. Jurisdictions which are open to examination include Federal, state, local and foreign, principally Germany and the United Kingdom. The period for which both domestic
and foreign tax years are open is based on local laws for each jurisdiction which have not been extended beyond applicable statutes. The Company does not believe that it is reasonably possible that the total amount of unrecognized tax benefits will
change significantly within the next 12 months. Any income tax liabilities or refunds relating to periods prior to October 17, 2005 are the responsibility of Cendant as discussed in Note 8.



|6. | COMMITMENTS AND CONTINGENCIES
|-- | -----------------------------

Litigation

The Company is involved in claims, legal proceedings and governmental inquiries related to employment matters, contract disputes, business practices,
trademark and copyright infringement claims and other commercial matters.



8



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##### Table of Contents

The Company is also a party to a number of lawsuits which were brought against it or its affiliates, each
of which alleges to be a class action in nature and each of which alleges that the Company violated certain federal or state consumer protection statutes (certain of which are described below). The Company intends to vigorously defend itself against
these lawsuits.

On August 9, 2005, a class action suit (the August 2005 Suit) was filed against Trilegiant in the U.S.
District Court for the Northern District of California, San Francisco Division. The claim asserts violations of the Electronic Funds Transfer Act and various California consumer protection statutes. The suit seeks unspecified actual damages,
statutory damages, attorneys fees, costs and injunctive relief. As noted in the description of the 2001 Class Action below, the parties have obtained final approval of a class-wide settlement in the 2001 Class Action that will result in the
dismissal of this lawsuit with prejudice.

On January 28, 2005, a class action complaint (the January 2005 Suit) was filed
against The Bon, Inc., FACS Group, Inc., and Trilegiant in the Superior Court of Washington, Spokane County. The claim asserts violations of various consumer protection statutes. The Company filed a motion to compel arbitration, which was denied by
the court. The case is currently pending before the court. There has been limited discovery and motion practice to date.

On
November 12, 2002, a class action complaint (the November 2002 Class Action) was filed against Sears, Roebuck & Co., Sears National Bank, Cendant Membership Services, Inc., and Allstate Insurance Company in the Circuit
Court of Alabama for Greene County alleging, among other things, breach of contract, unjust enrichment, breach of duty of good faith and fair dealing and violations of the Illinois consumer fraud and deceptive practices act. The case was removed to
the U.S. District Court for the Northern District of Alabama but was remanded to the Circuit Court of Alabama for Greene County. The Company has filed a motion to compel arbitration, which was granted by the court on January 31, 2008. In
granting the Companys motion, the court further ordered that any arbitration with respect to this matter take place on an individual (and not class) basis. On February 28, 2008, plaintiffs filed a motion for reconsideration of the
courts order. The court has yet to rule on plaintiffs motion.

On November 15, 2001, a class action complaint (the
2001 Class Action) was filed in Madison County, Illinois against Trilegiant alleging violations of state consumer protection statutes in connection with the sale of certain membership products. Motions to dismiss were denied and a class
was certified by the court. On February 14, 2008, the parties entered into a definitive settlement agreement that resolves this lawsuit and the August 2005 Suit on a class-wide basis. On February 15, 2008 the court entered an order
preliminarily approving the settlement. A final fairness hearing was held on July 18, 2008 at which the court issued a final order approving the settlement. No appeals of the final approval were taken, and therefore the settlement has become
final. Cendant has agreed to indemnify us for a significant portion of the settlement, which indemnification obligation has been assumed by Wyndham and Realogy as successors to various segments of Cendants business. The settlement payments for
which Trilegiant is responsible and does not expect to be indemnified by Cendant are not material in amount and have been accrued for in our financial statements.

The Company believes that the amount accrued for the above matters is adequate, and the reasonably possible loss beyond the amounts accrued, while not estimatable, will not have a material adverse effect on its
financial condition, results of operations, or cash flows based on information currently available. However, litigation is inherently unpredictable and, although the Company believes that accruals are adequate and it intends to vigorously defend
itself against such matters, unfavorable resolution could occur, which could have a material adverse effect on financial condition, results of operations or cash flows.

Subject to certain limitations, Cendant has agreed to indemnify the Company for actual losses, damages, liabilities, claims, costs and expenses and taxes incurred in connection with certain of the matters described
above. Cendants indemnification obligations have been assumed by Wyndham and Realogy as successors to various segments of Cendants business. See Note 8Related Party Transactions for a summary of the terms of the indemnification
agreements.

Surety Bonds and Letters of Credit

In the ordinary course of business, the Company is required to provide surety bonds to various state authorities in order to operate its membership, insurance and travel agency programs. As of September 30, 2008, the Company provided
guarantees for surety bonds totaling approximately $10.8 million and issued letters of credit totaling $1.8 million.



|7. | STOCK-BASED COMPENSATION
|-- | ------------------------

In connection with the
closing of the Transactions on October 17, 2005, Affinion Holdings adopted the 2005 Stock Incentive Plan (the 2005 Plan). The 2005 Plan authorizes the Board of Directors (the Board) of Affinion Holdings to grant
non-qualified, non-assignable stock options and rights to purchase shares of Affinion Holdings common stock to directors and employees of, and consultants to, Affinion Holdings and its subsidiaries. Options granted under the 2005 Plan have an
exercise price no less than the fair market value of a share of the underlying common stock on the date of grant. Stock awards have a purchase price determined by the Board. The Board was authorized to grant up to 4.3 million shares of Affinion
Holdings common stock under the 2005 Plan over a ten year period. On January 30, 2007, the Board adopted an amendment to the 2005 Plan to formally document the aggregate increase of 0.2 million shares previously authorized during
2006 and further increase the number of shares of common stock issuable under the 2005 Plan by 0.4 million to an aggregate of 4.9 million shares. As discussed below, no additional grants may be made under Affinion Holdings 2005 Plan
on or after November 7, 2007, the effective date of the 2007 Plan, as defined below.



9



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In November 2007, Affinion Holdings adopted the 2007 Stock Award Plan (the 2007 Plan). The
2007 Plan authorizes the Board to grant awards of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards (including cash
bonus awards) or any combination of these awards to directors and employees of, and consultants to, Affinion Holdings and its subsidiaries. Unless otherwise determined by the Board of Directors, options granted under the 2007 Plan will have an
exercise price no less than the fair market value of a share of the underlying common stock on the date of grant. Stock awards have a purchase price determined by the Board. The Board was authorized to grant up to 10.0 million shares of
Affinion Holdings common stock under the 2007 Plan over a ten year period. As of September 30, 2008, there were 9.2 million shares available under the 2007 Plan for future grants.

The Company recognizes compensation expense, net of estimated forfeitures, over the requisite service period, which is the period during which the
employee is required to provide services in exchange for the award. The Company has elected to recognize compensation cost for awards with only a service condition that have a graded vesting schedule on a straight-line basis over the requisite
service period for the entire award.

Stock Options

During the nine months ended September 30, 2007, 0.3 million stock options were granted to employees from the 2005 Plan. There were no stock options granted to employees from the 2005 Plan during the three
months ended September 30, 2007. The options were granted with an exercise price of $4.80, equal to the estimated fair market value of a share of the underlying common stock on the date of grant. Stock options granted to employees from the 2005
Plan are comprised of three tranches with the following terms:



|               |  |           |                       |           |   |                      |  |   |                     
|-------------- |  | --------- | --------------------- | --------- | - | -------------------- |  | - | --------------------
|               |  | Tranche A |                       | Tranche B |   | Tranche C           
|Exercise price |  | $         | 4.80                  |           | $ | 4.80                 |  | $ | 4.80                
|Vesting        |  |           | Ratably over 5 years* |           |   | 100% after 8 years** |  |   | 100% after 8 years**
|Term of option |  |           | 10 years              |           |   | 10 years             |  |   | 10 years            



|* | In the event of a sale of the Company, vesting for tranche A occurs 18 months after the date of sale.
|- | -----------------------------------------------------------------------------------------------------

|** | Tranche B and C vesting would be accelerated upon specified realized returns to Apollo.
|-- | ---------------------------------------------------------------------------------------

During the nine months ended September 30, 2008, 0.2 million stock options were granted to employees from the 2007 Plan. There were no stock options granted to employees from the 2007 Plan during the three
months ended September 30, 2008. These options were granted with an exercise price of $13.02, equal to the estimated fair market value of a share of the underlying common stock on the date of grant. The stock options granted to employees from
the 2007 Plan had the following terms:



|               |  |   |                     
|-------------- |  | - | --------------------
|Exercise price |  | $ | 13.02               
|Vesting period |  |   | Ratably over 4 years
|Option term    |  |   | 10 years            

During the three and nine months ended September 30, 2008 and 2007, there were no stock
options granted to members of the Board of Directors.

The fair value of each option award from the 2005 Plan during the three and nine
months ended September 30, 2007 was estimated on the date of grant using the Black-Scholes option-pricing model based on the assumptions noted in the following table. Expected volatilities are based on historical volatilities of comparable
companies. The expected term of the options granted represents the period of time that options are expected to be outstanding and is based on the average of the requisite service period and the contractual term of the option.



|                         |  |           |   |  |           |   |  |           |  
|------------------------ |  | --------- | - |  | --------- | - |  | --------- | -
|                         |  | Tranche A |   |  | Tranche B |   |  | Tranche C |  
|Expected volatility      |  | 43        | % |  | 47        | % |  | 48        | %
|Expected life (in years) |  | 6.50      |   |  | 8.43      |   |  | 8.72      |  
|Risk-free interest rate  |  | 4.40      | % |  | 4.46      | % |  | 4.46      | %
|Dividend yield           |  |          | % |  |          | % |  |          | %

The fair value of each option award from the 2007 Plan during the three and nine months ended
September 30, 2008 was estimated on the date of grant using the Black-Scholes option-pricing model based on the assumptions noted in the following table. Expected volatilities are based on historical volatilities of comparable companies. The
expected term of the options granted represents the period of time that options are expected to be outstanding, and is based on the average of the requisite service period and the contractual term of the option.



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|                         |  |      |  
|------------------------ |  | ---- | -
|Expected volatility      |  | 48   | %
|Expected life (in years) |  | 6.25 |  
|Risk-free interest rate  |  | 3.89 | %
|Dividend yield           |  |     | %

A summary of option activity for the nine months ended September 30, 2008 is presented below
(number of options in thousands):



|                                                                  |  |                                         |       |   |                                         |   |       |                                         |  |   |                            |   |                               |   |     |  |   |      |  
|----------------------------------------------------------------- |  | --------------------------------------- | ----- | - | --------------------------------------- | - | ----- | --------------------------------------- |  | - | -------------------------- | - | ----------------------------- | - | --- |  | - | ---- | -
|                                                                  |  | 2005 Plan Grants toEmployees-Tranche A |       |   | 2005 Plan Grants toEmployees-Tranche B |   |       | 2005 Plan Grants toEmployees-Tranche C |  |   | Grants toBoard ofDirectors |   | 2007 Plan Grants toEmployees |  
|Outstanding options at January 1, 2008                            |  |                                         | 2,120 |   |                                         |   | 1,056 |                                         |  |   | 1,056                      |   |                               |   | 318 |  |   | 642  |  
|Granted                                                           |  |                                         |      |   |                                         |   |      |                                         |  |   |                           |   |                               |   |    |  |   | 89   |  
|Exercised                                                         |  |                                         | (2    | ) |                                         |   |      |                                         |  |   |                           |   |                               |   |    |  |   |     |  
|Forfeited or expired                                              |  |                                         | (2    | ) |                                         |   | (1    | )                                       |  |   | (1                         | ) |                               |   |    |  |   | (5   | )
|                                                                  |  |                                         |       |   |                                         |   |       |                                         |  |   |                            |   |                               |   |     |  |   |      |  
|Outstanding options at March 31, 2008                             |  |                                         | 2,116 |   |                                         |   | 1,055 |                                         |  |   | 1,055                      |   |                               |   | 318 |  |   | 726  |  
|Granted                                                           |  |                                         |      |   |                                         |   |      |                                         |  |   |                           |   |                               |   |    |  |   | 100  |  
|Exercised                                                         |  |                                         | (1    | ) |                                         |   |      |                                         |  |   |                           |   |                               |   |    |  |   |     |  
|Forfeited or expired                                              |  |                                         | (17   | ) |                                         |   | (10   | )                                       |  |   | (10                        | ) |                               |   |    |  |   | (14  | )
|                                                                  |  |                                         |       |   |                                         |   |       |                                         |  |   |                            |   |                               |   |     |  |   |      |  
|Outstanding options at June 30, 2008                              |  |                                         | 2,098 |   |                                         |   | 1,045 |                                         |  |   | 1,045                      |   |                               |   | 318 |  |   | 812  |  
|Granted                                                           |  |                                         |      |   |                                         |   |      |                                         |  |   |                           |   |                               |   |    |  |   |     |  
|Exercised                                                         |  |                                         |      |   |                                         |   |      |                                         |  |   |                           |   |                               |   |    |  |   |     |  
|Forfeited or expired                                              |  |                                         | (46   | ) |                                         |   | (37   | )                                       |  |   | (37                        | ) |                               |   |    |  |   | (22  | )
|                                                                  |  |                                         |       |   |                                         |   |       |                                         |  |   |                            |   |                               |   |     |  |   |      |  
|Outstanding options at September 30, 2008                         |  |                                         | 2,052 |   |                                         |   | 1,008 |                                         |  |   | 1,008                      |   |                               |   | 318 |  |   | 790  |  
|                                                                  |  |                                         |       |   |                                         |   |       |                                         |  |   |                            |   |                               |   |     |  |   |      |  
|Vested or expected to vest at September 30, 2008                  |  |                                         | 2,052 |   |                                         |   | 1,008 |                                         |  |   | 1,008                      |   |                               |   | 318 |  |   | 790  |  
|                                                                  |  |                                         |       |   |                                         |   |       |                                         |  |   |                            |   |                               |   |     |  |   |      |  
|Exercisable options at September 30, 2008                         |  |                                         | 777   |   |                                         |   |      |                                         |  |   |                           |   |                               |   | 318 |  |   |     |  
|                                                                  |  |                                         |       |   |                                         |   |       |                                         |  |   |                            |   |                               |   |     |  |   |      |  
|Weighted average remaining contractual term (in years)            |  |                                         | 7.3   |   |                                         |   | 7.3   |                                         |  |   | 7.3                        |   |                               |   | 8.1 |  |   | 9.2  |  
|Weighted average grant date fair value per option granted in 2008 |  | $                                       |      |   |                                         | $ |      |                                         |  | $ |                           |   |                               | $ |    |  | $ | 6.74 |  

Based on the estimated fair values of options granted, stock-based compensation expense for the
three and nine months ended September 30, 2008 totaled $0.7 million and $2.1 million, respectively. Based on the estimated fair value of options granted, stock-based compensation for the three and nine months ended September 30, 2007 was
$0.4 million and $1.3 million, respectively. As of September 30, 2008, there was $10.2 million of unrecognized compensation cost related to unvested stock options, which will be recognized over a weighted average period of approximately
1.8 years.

In January 2007, Affinion Holdings declared a special dividend on its common stock. As a result of the special dividend, in
accordance with the 2005 Plan, Affinion Holdings modified the then-outstanding stock options to make the option holders whole. The modifications were effected through a distribution to option holders of $5.2 million and an adjustment of the
exercise price of the then-outstanding options to $1.43. The distribution to option holders was recognized by the Company as compensation expense in the first quarter of 2007.

Restricted Stock

In connection with the Transactions, the Chief Executive Officer was granted
105,000 shares of restricted stock of Affinion Holdings with a purchase price of $0.01 per share. This award was scheduled to vest 100% after five years of service or earlier upon a change of control of Affinion Holdings. In March 2007, the Board
accelerated the vesting date to April 2, 2007. The fair value of this award was estimated to be $0.5 million, based upon the grant date fair value per common share of Affinion Holdings of $4.76 and the remaining unamortized compensation expense
was recognized in general and administrative expense as stock-based compensation expense in the first quarter of 2007.

In January 2007,
the Board granted 21,000 shares of restricted stock of Affinion Holdings with a purchase price of $0.01 per share to the Companys Chief Financial Officer. This award vests 100% upon the earlier of three years of service or a change in control
of Affinion Holdings. The fair value of the award is estimated to be $0.2 million, based upon the estimated fair value per share of common stock of Affinion Holdings, and is being amortized on a straight-line basis to general and administrative
expense over the service period.



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##### Table of Contents

In May 2007, the Board granted 42,000 shares of restricted stock of Affinion Holdings with a purchase
price of $0.01 per share to Affinion Internationals Chief Financial Officer. This award vests 100% upon the earlier of three years of service or a change in control of Affinion Holdings. The fair value of the award is estimated to be $0.4
million, based upon the estimated fair value per share of common stock of Affinion Holdings, and is being amortized on a straight-line basis to general and administrative expense over the service period.

A summary of restricted stock activity is presented below (number of shares of restricted stock in thousands):



|                                                             |  |                           |  |                                      |     
|------------------------------------------------------------ |  | ------------------------- |  | ------------------------------------ | ----
|                                                             |  | Number ofRestrictedShares |  | Weighted AverageGrant Date FairValue
|Outstanding restricted unvested awards at January 1, 2008    |  | 63                        |  | $                                    | 9.52
|Granted                                                      |  |                          |  |                                      |    
|Vested                                                       |  |                          |  |                                      |    
|Forfeited                                                    |  |                          |  |                                      |    
|                                                             |  |                           |  |                                      |     
|Outstanding restricted unvested awards at March 31, 2008     |  | 63                        |  | $                                    | 9.52
|Granted                                                      |  |                          |  |                                      |    
|Vested                                                       |  |                          |  |                                      |    
|Forfeited                                                    |  |                          |  |                                      |    
|                                                             |  |                           |  |                                      |     
|Outstanding restricted unvested awards at June 30, 2008      |  | 63                        |  | $                                    | 9.52
|Granted                                                      |  |                          |  |                                      |    
|Vested                                                       |  |                          |  |                                      |    
|Forfeited                                                    |  |                          |  |                                      |    
|                                                             |  |                           |  |                                      |     
|Outstanding restricted unvested awards at September 30, 2008 |  | 63                        |  | $                                    | 9.52
|                                                             |  |                           |  |                                      |     
|Weighted average remaining contractual term (in years)       |  | 1.5                       |  |                                      |     

Based on the estimated fair values of restricted stock granted, stock-based compensation expense
for the three and nine months ended September 30, 2008 totaled less than $0.1 million and $0.1 million, respectively. Based on the estimated fair values of restricted stock granted, stock-based compensation expense for the three and nine months
ended September 30, 2007 totaled $0.1 million and $0.5 million, respectively. As of September 30, 2008, there was $0.3 million of unrecognized compensation cost related to the remaining vesting period of restricted stock granted under
the Plan. This cost will be recorded in future periods as stock-based compensation expense over a weighted average period of approximately 0.8 years.



|8. | RELATED PARTY TRANSACTIONS
|-- | --------------------------

Post-Closing Relationships with
Cendant

Cendant has agreed to indemnify the Company, Affinion Holdings and the Companys affiliates (collectively the
indemnified parties) for breaches of representations, warranties and covenants made by Cendant, as well as for other specified matters, certain of which are described below. Affinion Holdings and the Company have agreed to indemnify
Cendant for breaches of representations, warranties and covenants made in the purchase agreement, as well as for certain other specified matters. Generally, all parties indemnification obligations with respect to breaches of representations
and warranties (except with respect to the matters described below) (i) are subject to a $0.1 million occurrence threshold, (ii) are not effective until the aggregate amount of losses suffered by the indemnified party exceeds $15.0 million
(and then only for the amount of losses exceeding $15.0 million) and (iii) are limited to $275.1 million of recovery. Generally, subject to certain exceptions of greater duration, the parties indemnification obligations with respect to
representations and warranties survived until April 15, 2007 with indemnification obligations related to covenants surviving until the applicable covenant has been fully performed.

In connection with the purchase agreement, Cendant agreed to specific indemnification obligations with respect to the matters described below.

Excluded Litigation. Cendant has agreed to fully indemnify the indemnified parties with respect to any pending or future
litigation, arbitration, or other proceeding relating to accounting irregularities in the former CUC International, Inc. announced on April 15, 1998.

Certain Litigation and Compliance with Law Matters. Cendant has agreed to indemnify the indemnified parties up to specified amounts for: (a) breaches of its representations and warranties with respect to
legal proceedings that (1) occur after the date of the purchase agreement, (2) relate to facts and circumstances related to the business of AGLLC or Affinion International and (3) constitute a breach or violation of its compliance
with law representations and warranties, (b) breaches of its representations and warranties with respect to compliance with laws to the extent related to the business of AGLLC or Affinion International and (c) the August 2005 Suit and the
January 2002 Class Action (as defined in the Companys Annual Report on Form 10-K for the year ended December 31, 2006).



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Cendant, Affinion Holdings and the Company have agreed that losses up to $15.0 million incurred with
respect to these matters will be borne solely by the Company and losses in excess of $15.0 million will be shared by the parties in accordance with agreed upon allocations. The Company has the right at all times to control litigation related to
shared losses and Cendant has consultation rights with respect to such litigation.

Other Litigation. Cendant has agreed to
indemnify the Company for specified amounts with respect to losses incurred in connection with the 2001 Class Action.

The Company will
retain all liability with respect to the November 2002 Class Action and will not be indemnified by Cendant for losses related thereto.

Other Transactions. As publicly announced, as part of a plan to split into four independent companies, Cendant has (i) distributed the equity interests it previously held in its hospitality services business
(Wyndham) and its real estate services business (Realogy) to Cendant stockholders and (ii) sold its travel services business (Travelport) to a third party. Cendant continues as a publicly traded company which
owns the vehicle rental business (Avis Budget, together with Wyndham and Realogy, the Cendant Entities). Subject to certain exceptions, Wyndham and Realogy have agreed to share Cendants contingent and other liabilities
(including its indemnity obligations to the Company described above and other liabilities to the Company in connection with the Transactions) in specified percentages. If any Cendant Entity defaults in its payment, when due, of any such liabilities,
the remaining Cendant Entities are required to pay an equal portion of the amounts in default. Wyndham continues to hold a portion of the preferred stock and warrant issued in connection with the Transactions, while Realogy was subsequently acquired
by an affiliate of Apollo.

The Company entered into agreements pursuant to which the Company will continue to have cost-sharing
arrangements with Cendant and/or its subsidiaries relating to office space and customer contact centers. These agreements have expiration dates and financial terms that are generally consistent with the terms of the related intercompany arrangements
prior to the Transactions. The revenue earned for such services was $0.3 million and $1.1 million for the three and nine months ended September 30, 2008, and $0.4 million, respectively, and $0.9 million for the three and nine months ended
September 30, 2007, respectively, and is included in net revenues in the accompanying unaudited condensed consolidated statements of operations. The Company incurred expenses of $0.1 million and $0.3 million for the three and nine months ended
September 30, 2008, respectively, which is included in operating expenses in the accompanying unaudited condensed consolidated statements of operations. There were no expenses for the three and nine months ended September 30, 2007.

New marketing agreements permit the Company to continue to solicit customers of certain Cendant subsidiaries for the Companys
membership programs through various direct marketing methods. The marketing agreements generally provide for a minimum amount of marketing volume or a specified quantity of customer data to be allotted to the relevant party. The payment terms of the
marketing agreements provide for either (1) a fee for each call transferred, (2) a bounty payment for each user that enrolls in one of the Companys membership programs, or (3) a percentage of net membership revenues. These
agreements generally expire in December 2010 and are generally terminable by the applicable Cendant party following December 31, 2007, upon six months written notice to the Company. In the event that a Cendant subsidiary terminates an agreement
prior to December 31, 2010, then the Cendant subsidiary is required to pay a termination fee based on the projected marketing revenues that would have been generated from such agreement had the marketing agreement been in place through
December 31, 2010. The expense incurred for such services was $1.1 million and $2.9 million for the three and nine months ended September 30, 2008, respectively, and $1.0 million and $2.6 million for the three and nine months ended
September 30, 2007, respectively, and is included in marketing and commissions in the accompanying unaudited condensed consolidated statements of operations.

Under the loyalty and rewards program administration agreements, the Company will continue to administer loyalty programs for certain Cendant subsidiaries. The agreements provide for the Company to earn fees for the
following services: an initial fee to implement a new loyalty program, a program administration fee, a redemption fee related to redeemed rewards and a booking fee related to travel bookings by loyalty program members. The loyalty and reward program
agreements expire on December 31, 2009. The total amounts included in net revenues in the accompanying unaudited condensed consolidated statements of operations for such services was $2.2 million and $8.5 million for the three and nine months
ended September 30, 2008, respectively, and $2.8 million and $8.7 million for the three and nine months ended September 30, 2007, respectively. In connection with these agreements, the Company formed Affinion Loyalty, LLC
(Loyalty), a special-purpose, bankruptcy-remote subsidiary which is a wholly-owned subsidiary of TLS. Pursuant to the loyalty agreements, TLS has provided a copy of the object code, source code and related documentation of certain of its
intellectual property to Loyalty under a non-exclusive limited license. Loyalty entered into an escrow agreement relating to such intellectual property with Cendant and its affiliates in connection with the parties entering into the loyalty and
reward agreements. Loyalty sub-licenses such intellectual property to Cendant on a non-exclusive basis but will only provide access to such intellectual property either directly or indirectly through the escrow agent in the event that TLS
(1) becomes bankrupt or insolvent, (2) commits a material, uncured breach of a loyalty and reward agreement, or (3) transfers or assigns its intellectual property in such a way as to prevent it from performing its obligations under
any agreement relating to Cendants loyalty and rewards programs. Upon access to the escrowed materials, Cendant will be able to use the escrowed materials for a limited term and for only those purposes for which TLS was using it to provide the
services under the loyalty and reward agreements prior to the release of the escrowed materials to Cendant.



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On June 30, 2008, the Company entered into an Assignment and Assumption Agreement (AAA)
with certain ex-Cendant entities. Prior to this transaction, the ex-Cendant entities provided certain loyalty program-related benefits and services to credit card holders of a major financial institution and received a fee from this financial
institution based on spending by the credit card holders. Under the AAA, the Company assumed all of the liabilities and obligations of the ex-Cendant entities relating to the loyalty program, including the fulfillment of the then-outstanding loyalty
program points obligations. In connection with the transaction, on the June 30, 2008 closing date, the Company received cash and receivables with a fair value substantially equivalent to the fair value of the fulfillment obligation relating to
the loyalty program points outstanding as of the closing date. The receivables are due and payable to the Company over a three year period following the closing date.

Affinion International entered into an agreement pursuant to which it agreed to continue to use RCI Europe, a subsidiary of Cendant, as its exclusive provider of travel services for the benefit of Affinion
International members in the U.K., Germany, Switzerland, Austria, Italy, Belgium, Luxembourg, Ireland and the Netherlands. Pursuant to this agreement, RCI Europe will have a right of first refusal to offer travel services in other countries where
Affinion International members are located. Affinion International will indemnify RCI Europe in the event its profit margin under this arrangement falls below 1.31%. Under the terms of the agreement, RCI Europe has elected to terminate the agreement
for convenience. As such, the agreement will terminate on October 31, 2008. The expense for such services was $2.0 million and $2.8 million for the three and nine months ended September 30, 2008, respectively, and $1.7 million and $4.7
million for the three and nine months ended September 30, 2007, respectively, and is included in operating costs in the accompanying unaudited condensed consolidated statements of operations.

On August 22, 2008, the Company entered into an agreement to acquire certain assets of RCI Europe. Under the agreement, the Company will acquire all
of the assets of RCI Europes travel services business and will provide travel services directly to its customers. The acquisition is expected to close during the fourth quarter of 2008 for nominal consideration.

The Company entered into agreements pursuant to which it had profit-sharing arrangements with Fairtide Insurance Limited (Fairtide), a
subsidiary of Cendant. AIH and certain of the Companys subsidiaries market certain insurance programs and Fairtide provided reinsurance for the related insurance policies provided by a third-party insurer. Those agreements have been terminated
effective November 1, 2007 and Fairtide will have no further liability for any claims made under those insurance policies on or after November 1, 2007. The total amount included in net revenues in the accompanying unaudited condensed
consolidated statements of operations for such services was less than $0.1 million and $0.2 million for the three and nine months ended September 30, 2007, respectively.

The Company earns referral fees from Wyndham for hotel stays and travel packages. The amount included in net revenues in the accompanying unaudited
condensed consolidated statements of operations for such services was $0.4 million and $1.4 million for the three and nine months ended September 30, 2008, respectively, and less than $0.1 million and $0.1 million for the three and nine
months ended September 30, 2007, respectively.

Apollo Agreements

On October 17, 2005, Apollo entered into a consulting agreement with the Company for the provision of certain structuring and advisory services. The consulting agreement will also allow Apollo and its affiliates
to provide certain advisory services for a period of twelve years or until Apollo owns less than 5% of the beneficial economic interests of the Company, whichever is earlier. The agreement may be terminated earlier by mutual consent. The Company is
required to pay Apollo an annual fee of $2.0 million for these services commencing in 2006. The amounts expensed related to this consulting agreement were $0.5 million and $1.5 million for the three and nine months ended September 30, 2008,
respectively, and $0.5 million and $1.5 million for the three and nine months ended September 30, 2007, respectively, and are included in general and administrative expenses in the accompanying unaudited condensed consolidated statement of
operations. If a transaction is consummated involving a change of control or an initial public offering, then, in lieu of the annual consulting fee and subject to certain qualifications, Apollo may elect to receive a lump sum payment equal to the
present value of all consulting fees payable through the end of the term of the consulting agreement.

In addition, the Company will be
required to pay Apollo a transaction fee if it engages in any merger, acquisition or similar transaction. The Company will also indemnify Apollo and its affiliates and their directors, officers and representatives for potential losses relating to
the services to be provided under the consulting agreement.

In July 2006, Apollo acquired one of the Companys vendors, SOURCECORP
Incorporated, that provides document and information services to the Company. The fees incurred for these services were $0.3 million and $0.9 million for the three and nine months ended September 30, 2008, respectively, and $0.2 million
and $0.8 million for the three and nine months ended September 30, 2007, respectively, and are included in cost of revenues in the accompanying unaudited condensed consolidated statements of operations.



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|9. | FINANCIAL INSTRUMENTS, DERIVATIVES AND FAIR VALUE MEASURES
|-- | ----------------------------------------------------------

The Company entered into an interest rate swap as of December 14, 2005. This swap converts a notional amount of the Companys floating rate debt into a fixed rate obligation. The notional amount of the swap was $200.0 million at
September 30, 2008 and reduces in accordance with a contractual amortization schedule through December 31, 2010 when the swap terminates.

In January 2008, the Company entered into an interest rate swap effective February 21, 2008. This swap has an initial notional amount of $450.0 million, increasing to $500.0 million on February 21, 2009 and $600.0 million on
February 21, 2010. Under this swap, the Company has agreed to pay a fixed rate of interest of 2.86% in exchange for receiving floating payments based on a three-month LIBOR on the notional amount for each applicable period. The effect of this
swap, in conjunction with the Companys previously existing swap, is to convert substantially all of the variable rate debt to a fixed rate obligation.

The interest rate swaps are recorded at fair value, either as a non-current asset or non-current liability. The swaps are not designated as hedging instruments and therefore changes in the fair value of the swaps are
recognized currently in earnings in the accompanying unaudited condensed consolidated statements of operations.

The Company adopted SFAS
No. 157 as of January 1, 2007, which, among other things, requires enhanced disclosures about investments that are measured and reported at fair value. SFAS No. 157 establishes a fair value hierarchy that distinguishes between
(1) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) the reporting entitys own assumptions about market participant assumptions
developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy in SFAS 157 prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, giving the highest
priority to Level 1 inputs and the lowest priority to Level 3 inputs. Level 1 inputs to a fair value measurement are quoted market prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to
access at the measurement date. Level 2 inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or
liability.

The fair values of certain financial instruments as of September 30, 2008 are shown in the table below:



|                                                             |  |                                               |          |   |                                                             |   |        |                                            |  |   |                                        |   |  |  
|------------------------------------------------------------ |  | --------------------------------------------- | -------- | - | ----------------------------------------------------------- | - | ------ | ------------------------------------------ |  | - | -------------------------------------- | - |  | -
|                                                             |  | Fair Value Measurements at September 30, 2008
|                                                             |  | Fair Value atSeptember 30, 2008               |          |   | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   |        | Significant OtherObservableInputs(Level 2) |  |   | SignificantUnobservableInputs(Level 3)
|                                                             |  | (in millions)                                
|Trading securities (included in other current assets)        |  | $                                             | 0.1      |   |                                                             | $ | 0.1    |                                            |  | $ |                                       |   |  | 
|Long-term debt                                               |  |                                               | (1,271.7 | ) |                                                             |   | (616.4 | )                                          |  |   | (655.3                                 | ) |  | 
|Interest rate swap (included in other non-current assets)    |  |                                               | 7.8      |   |                                                             |   |       |                                            |  |   | 7.8                                    |   |  | 
|Interest rate swap (included in other long-term liabilities) |  |                                               | (3.8     | ) |                                                             |   |       |                                            |  |   | (3.8                                   | ) |  | 

The fair value of the trading securities and publicly-traded debt is the published market price
per unit multiplied by the number of units held or issued without consideration of transaction costs. The fair value of the non-publicly-traded debt, substantially all of which is variable-rate debt, approximates its face amount due to the variable
interest rate which fluctuates with the market. The fair value of the interest rate swaps are based on significant other observable inputs, adjusted for contract restrictions and other terms specific to the interest rate swaps. The counterparty to
the interest rate swaps is a major financial institution with a long-term rating of Aa1 by Moodys and AA- by Standard & Poors and Fitch Ratings as of October 21, 2008 and the Company does not expect any losses from
non-performance by this counterparty.



|10. | SEGMENT INFORMATION
|--- | -------------------

Management evaluates the
operating results of each of its reportable segments based upon revenue and Segment EBITDA, which is defined as income from operations before depreciation and amortization. The presentation of Segment EBITDA may not be comparable to
similarly titled measures used by other companies.

The Segment EBITDA of the Companys four operating segments does not include
general corporate expenses. General corporate expenses include costs and expenses that are of a general corporate nature or managed on a corporate basis, including primarily stock-based compensation expense and consulting fees paid to Apollo. In
accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, general corporate expenses have been excluded from the presentation of the Segment EBITDA for the Companys four operating
segments because they are not reported to the chief operating decision maker for purposes of allocating resources among operating segments or assessing operating segment performance. The accounting policies of the reporting segments are the same as
those described in Note 2Summary of Significant Accounting Policies in the Companys Form 10-K for the year ended December 31, 2007.



15



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##### Table of Contents

Net Revenues



|                                |  |                            |       |   |                           |   |       |                    |  |   |                    |   |  |   |       |  
|------------------------------- |  | -------------------------- | ----- | - | ------------------------- | - | ----- | ------------------ |  | - | ------------------ | - |  | - | ----- | -
|                                |  | For the Three Months Ended |       |   | For the Nine Months Ended |  
|                                |  | September 30, 2008         |       |   | September 30, 2007        |   |       | September 30, 2008 |  |   | September 30, 2007 |  
|Affinion North America          |  |                            |       |   |                           |   |       |                    |  |   |                    |   |  |   |       |  
|Membership products             |  | $                          | 183.1 |   |                           | $ | 172.6 |                    |  | $ | 529.7              |   |  | $ | 515.1 |  
|Insurance and package products  |  |                            | 95.1  |   |                           |   | 89.3  |                    |  |   | 281.9              |   |  |   | 275.9 |  
|Loyalty products                |  |                            | 21.0  |   |                           |   | 14.4  |                    |  |   | 51.6               |   |  |   | 40.6  |  
|Eliminations                    |  |                            | (1.1  | ) |                           |   | (1.3  | )                  |  |   | (3.2               | ) |  |   | (3.7  | )
|                                |  |                            |       |   |                           |   |       |                    |  |   |                    |   |  |   |       |  
|Total North America             |  |                            | 298.1 |   |                           |   | 275.0 |                    |  |   | 860.0              |   |  |   | 827.9 |  
|Affinion International products |  |                            | 66.7  |   |                           |   | 55.6  |                    |  |   | 198.3              |   |  |   | 156.5 |  
|                                |  |                            |       |   |                           |   |       |                    |  |   |                    |   |  |   |       |  
|                                |  | $                          | 364.8 |   |                           | $ | 330.6 |                    |  | $ | 1,058.3            |   |  | $ | 984.4 |  
|                                |  |                            |       |   |                           |   |       |                    |  |   |                    |   |  |   |       |  
|                                | 
|Segment EBITDA                  |  |                            |       |  
|                                |  | For the Three Months Ended |       |   | For the Nine Months Ended |  
|                                |  | September 30, 2008         |       |   | September 30, 2007        |   |       | September 30, 2008 |  |   | September 30, 2007 |  
|Affinion North America          |  |                            |       |   |                           |   |       |                    |  |   |                    |   |  |   |       |  
|Membership products             |  | $                          | 38.3  |   |                           | $ | 30.2  |                    |  | $ | 93.6               |   |  | $ | 68.2  |  
|Insurance and package products  |  |                            | 30.3  |   |                           |   | 34.5  |                    |  |   | 99.8               |   |  |   | 105.4 |  
|Loyalty products                |  |                            | 6.2   |   |                           |   | 5.0   |                    |  |   | 15.3               |   |  |   | 11.3  |  
|                                |  |                            |       |   |                           |   |       |                    |  |   |                    |   |  |   |       |  
|Total North America             |  |                            | 74.8  |   |                           |   | 69.7  |                    |  |   | 208.7              |   |  |   | 184.9 |  
|Affinion International products |  |                            | 10.4  |   |                           |   | 6.7   |                    |  |   | 23.7               |   |  |   | 14.8  |  
|                                |  |                            |       |   |                           |   |       |                    |  |   |                    |   |  |   |       |  
|Total products                  |  |                            | 85.2  |   |                           |   | 76.4  |                    |  |   | 232.4              |   |  |   | 199.7 |  
|Corporate                       |  |                            | (1.3  | ) |                           |   | (0.6  | )                  |  |   | (4.5               | ) |  |   | (8.9  | )
|                                |  |                            |       |   |                           |   |       |                    |  |   |                    |   |  |   |       |  
|                                |  | $                          | 83.9  |   |                           | $ | 75.8  |                    |  | $ | 227.9              |   |  | $ | 190.8 |  
|                                |  |                            |       |   |                           |   |       |                    |  |   |                    |   |  |   |       |  

Provided below is a reconciliation of Segment EBITDA to income (loss) from operations:



|                              |  |                            |       |   |                           |   |       |                    |  |   |                    |   |  |   |        |  
|----------------------------- |  | -------------------------- | ----- | - | ------------------------- | - | ----- | ------------------ |  | - | ------------------ | - |  | - | ------ | -
|                              |  | For the Three Months Ended |       |   | For the Nine Months Ended |  
|                              |  | September 30, 2008         |       |   | September 30, 2007        |   |       | September 30, 2008 |  |   | September 30, 2007 |  
|Segment EBITDA                |  | $                          | 83.9  |   |                           | $ | 75.8  |                    |  | $ | 227.9              |   |  | $ | 190.8  |  
|Depreciation and amortization |  |                            | (68.4 | ) |                           |   | (82.9 | )                  |  |   | (205.6             | ) |  |   | (242.1 | )
|                              |  |                            |       |   |                           |   |       |                    |  |   |                    |   |  |   |        |  
|Income (loss) from operations |  | $                          | 15.5  |   |                           | $ | (7.1  | )                  |  | $ | 22.3               |   |  | $ | (51.3  | )
|                              |  |                            |       |   |                           |   |       |                    |  |   |                    |   |  |   |        |  



|11. | GUARANTOR/NON-GUARANTOR SUPPLEMENTAL FINANCIAL INFORMATION
|--- | ----------------------------------------------------------

The following condensed consolidating information presents, in separate columns, the condensed consolidating balance sheets as of September 30, 2008 and December 31, 2007, and the related condensed consolidating statements of
operations and cash flows for the three month and nine month periods ended September 30, 2008 and 2007 for (i) the Company (Affinion Group, Inc.) on a parent-only basis, with its investment in subsidiaries recorded under the equity method,
(ii) the Guarantor Subsidiaries on a combined basis, (iii) the Non-Guarantor Subsidiaries on a combined basis and (iv) the Company on a consolidated basis. The guarantees are full and unconditional and joint and several obligations of
each of the guarantor subsidiaries, all of which are 100% owned by the Company. There are no significant restrictions on the ability of the Company to obtain funds from any of its guarantor subsidiaries by dividends or loan. The supplemental
financial information has been presented in lieu of separate financial statements of the guarantors as such separate financial statements are not considered meaningful.

Certain prior year amounts have been revised to conform with current year presentation. Affinion Group, Inc.s parent-only stockholders equity in the accompanying condensed consolidating balance sheet as of
December 31, 2007 has been revised to include components of other comprehensive income of the non-guarantor subsidiaries. The accompanying condensed consolidating statements of operations for the three and nine months ended September 30,
2007 have been revised to present corporate allocations as adjustments to the applicable expense category within income (loss) from operations. Intercompany receivables and payables were reclassified from cash flows provided by (used in) operating
activities to cash flows used in financing activities in the accompanying condensed consolidating statement of cash flows for the nine months ended September 30, 2007. These revisions did not have any impact on the consolidated balance sheet,
statements of operations or statement of cash flows for any of these periods, as each of these items was eliminated in consolidation.



16



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##### Table of Contents

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET

AS OF SEPTEMBER 30, 2008

(In
millions)



|                                                     |  |                     |         |   |                       |   |         |                           |  |              |       |  |              |          |   |  |   |         |  
|---------------------------------------------------- |  | ------------------- | ------- | - | --------------------- | - | ------- | ------------------------- |  | ------------ | ----- |  | ------------ | -------- | - |  | - | ------- | -
|                                                     |  | AffinionGroup, Inc. |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  | Eliminations |       |  | Consolidated |         
|Assets                                               |  |                     |         |   |                       |   |         |                           |  |              |       |  |              |          |   |  |   |         |  
|Current assets:                                      |  |                     |         |   |                       |   |         |                           |  |              |       |  |              |          |   |  |   |         |  
|Cash and cash equivalents                            |  | $                   |        |   |                       | $ | 3.8     |                           |  | $            | 14.5  |  | $            |         |   |  | $ | 18.3    |  
|Restricted cash                                      |  |                     |        |   |                       |   | 23.6    |                           |  |              | 5.7   |  |              |         |   |  |   | 29.3    |  
|Receivables, net                                     |  |                     | 0.2     |   |                       |   | 48.3    |                           |  |              | 27.0  |  |              |         |   |  |   | 75.5    |  
|Receivables from related parties                     |  |                     | 0.6     |   |                       |   | 33.9    |                           |  |              | 0.2   |  |              |         |   |  |   | 34.7    |  
|Profit-sharing receivables from insurance carriers   |  |                     |        |   |                       |   | 83.2    |                           |  |              |      |  |              |         |   |  |   | 83.2    |  
|Prepaid commissions                                  |  |                     |        |   |                       |   | 47.0    |                           |  |              | 10.5  |  |              |         |   |  |   | 57.5    |  
|Deferred income taxes                                |  |                     |        |   |                       |   | 0.8     |                           |  |              |      |  |              |         |   |  |   | 0.8     |  
|Other current assets                                 |  |                     | 4.0     |   |                       |   | 21.2    |                           |  |              | 15.4  |  |              |         |   |  |   | 40.6    |  
|                                                     |  |                     |         |   |                       |   |         |                           |  |              |       |  |              |          |   |  |   |         |  
|Total current assets                                 |  |                     | 4.8     |   |                       |   | 261.8   |                           |  |              | 73.3  |  |              |         |   |  |   | 339.9   |  
|Property and equipment, net                          |  |                     | 1.9     |   |                       |   | 68.4    |                           |  |              | 16.6  |  |              |         |   |  |   | 86.9    |  
|Contract rights and list fees, net                   |  |                     |        |   |                       |   | 12.0    |                           |  |              | 34.0  |  |              |         |   |  |   | 46.0    |  
|Goodwill                                             |  |                     |        |   |                       |   | 289.5   |                           |  |              | 12.8  |  |              |         |   |  |   | 302.3   |  
|Other intangibles, net                               |  |                     |        |   |                       |   | 588.4   |                           |  |              | 53.8  |  |              |         |   |  |   | 642.2   |  
|Receivables from related parties                     |  |                     |        |   |                       |   | 6.4     |                           |  |              |      |  |              |         |   |  |   | 6.4     |  
|Investment in subsidiaries                           |  |                     | 1,391.6 |   |                       |   |        |                           |  |              |      |  |              | (1,391.6 | ) |  |   |        |  
|Intercompany receivables                             |  |                     |        |   |                       |   | 528.2   |                           |  |              |      |  |              | (528.2   | ) |  |   |        |  
|Other non-current assets                             |  |                     | 33.0    |   |                       |   | 14.9    |                           |  |              | 4.5   |  |              |         |   |  |   | 52.4    |  
|                                                     |  |                     |         |   |                       |   |         |                           |  |              |       |  |              |          |   |  |   |         |  
|Total assets                                         |  | $                   | 1,431.3 |   |                       | $ | 1,769.6 |                           |  | $            | 195.0 |  | $            | (1,919.8 | ) |  | $ | 1,476.1 |  
|                                                     |  |                     |         |   |                       |   |         |                           |  |              |       |  |              |          |   |  |   |         |  
|Liabilities and Stockholders Equity (Deficit)       |  |                     |         |   |                       |   |         |                           |  |              |       |  |              |          |   |  |   |         |  
|Current liabilities:                                 |  |                     |         |   |                       |   |         |                           |  |              |       |  |              |          |   |  |   |         |  
|Current portion of long-term debt                    |  | $                   |        |   |                       | $ | 0.3     |                           |  | $            |      |  | $            |         |   |  | $ | 0.3     |  
|Accounts payable and accrued expenses                |  |                     | 100.1   |   |                       |   | 148.1   |                           |  |              | 53.1  |  |              |         |   |  |   | 301.3   |  
|Payables to related parties                          |  |                     | 6.3     |   |                       |   | 1.1     |                           |  |              | 2.7   |  |              |         |   |  |   | 10.1    |  
|Deferred revenue                                     |  |                     |        |   |                       |   | 207.7   |                           |  |              | 34.8  |  |              |         |   |  |   | 242.5   |  
|Income taxes payable                                 |  |                     | 0.7     |   |                       |   | (0.1    | )                         |  |              | 0.9   |  |              |         |   |  |   | 1.5     |  
|                                                     |  |                     |         |   |                       |   |         |                           |  |              |       |  |              |          |   |  |   |         |  
|Total current liabilities                            |  |                     | 107.1   |   |                       |   | 357.1   |                           |  |              | 91.5  |  |              |         |   |  |   | 555.7   |  
|Long-term debt                                       |  |                     | 1,309.3 |   |                       |   | 0.5     |                           |  |              |      |  |              |         |   |  |   | 1,309.8 |  
|Deferred income taxes                                |  |                     | (8.4    | ) |                       |   | 18.2    |                           |  |              | 12.9  |  |              |         |   |  |   | 22.7    |  
|Deferred revenue                                     |  |                     |        |   |                       |   | 27.0    |                           |  |              | 12.9  |  |              |         |   |  |   | 39.9    |  
|Intercompany payables                                |  |                     | 524.7   |   |                       |   |        |                           |  |              | 3.5   |  |              | (528.2   | ) |  |   |        |  
|Other long-term liabilities                          |  |                     | 14.2    |   |                       |   | 20.7    |                           |  |              | 28.1  |  |              |         |   |  |   | 63.0    |  
|                                                     |  |                     |         |   |                       |   |         |                           |  |              |       |  |              |          |   |  |   |         |  
|Total liabilities                                    |  |                     | 1,946.9 |   |                       |   | 423.5   |                           |  |              | 148.9 |  |              | (528.2   | ) |  |   | 1,991.1 |  
|Minority interests                                   |  |                     |        |   |                       |   |        |                           |  |              | 0.6   |  |              |         |   |  |   | 0.6     |  
|Stockholders equity (deficit)                       |  |                     | (515.6  | ) |                       |   | 1,346.1 |                           |  |              | 45.5  |  |              | (1,391.6 | ) |  |   | (515.6  | )
|                                                     |  |                     |         |   |                       |   |         |                           |  |              |       |  |              |          |   |  |   |         |  
|Total liabilities and stockholders equity (deficit) |  | $                   | 1,431.3 |   |                       | $ | 1,769.6 |                           |  | $            | 195.0 |  | $            | (1,919.8 | ) |  | $ | 1,476.1 |  
|                                                     |  |                     |         |   |                       |   |         |                           |  |              |       |  |              |          |   |  |   |         |  



17



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##### Table of Contents

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2007

(In
millions)



|                                                     |  |                     |         |   |                       |   |                           |  |   |              |   |  |              |          |   |  |   |         |  
|---------------------------------------------------- |  | ------------------- | ------- | - | --------------------- | - | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | - |  | - | ------- | -
|                                                     |  | AffinionGroup, Inc. |         |   | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|Assets                                               |  |                     |         |   |                       |   |                           |  |   |              |   |  |              |          |   |  |   |         |  
|Current assets:                                      |  |                     |         |   |                       |   |                           |  |   |              |   |  |              |          |   |  |   |         |  
|Cash and cash equivalents                            |  | $                   |        |   |                       | $ | 3.0                       |  | $ | 11.2         |   |  | $            |         |   |  | $ | 14.2    |  
|Restricted cash                                      |  |                     |        |   |                       |   | 23.9                      |  |   | 5.2          |   |  |              |         |   |  |   | 29.1    |  
|Receivables, net                                     |  |                     | 0.1     |   |                       |   | 42.4                      |  |   | 30.8         |   |  |              |         |   |  |   | 73.3    |  
|Receivables from related parties                     |  |                     |        |   |                       |   | 11.9                      |  |   | 0.2          |   |  |              |         |   |  |   | 12.1    |  
|Profit-sharing receivables from insurance carriers   |  |                     |        |   |                       |   | 58.8                      |  |   |             |   |  |              |         |   |  |   | 58.8    |  
|Prepaid commissions                                  |  |                     |        |   |                       |   | 48.2                      |  |   | 13.9         |   |  |              |         |   |  |   | 62.1    |  
|Income tax receivable                                |  |                     |        |   |                       |   | 1.1                       |  |   | (0.2         | ) |  |              |         |   |  |   | 0.9     |  
|Other current assets                                 |  |                     | 3.6     |   |                       |   | 17.5                      |  |   | 18.3         |   |  |              |         |   |  |   | 39.4    |  
|                                                     |  |                     |         |   |                       |   |                           |  |   |              |   |  |              |          |   |  |   |         |  
|Total current assets                                 |  |                     | 3.7     |   |                       |   | 206.8                     |  |   | 79.4         |   |  |              |         |   |  |   | 289.9   |  
|Property and equipment, net                          |  |                     | 0.5     |   |                       |   | 77.7                      |  |   | 12.6         |   |  |              |         |   |  |   | 90.8    |  
|Contract rights and list fees, net                   |  |                     |        |   |                       |   | 12.2                      |  |   | 51.0         |   |  |              |         |   |  |   | 63.2    |  
|Goodwill                                             |  |                     |        |   |                       |   | 289.5                     |  |   | 12.5         |   |  |              |         |   |  |   | 302.0   |  
|Other intangibles, net                               |  |                     |        |   |                       |   | 741.4                     |  |   | 67.7         |   |  |              |         |   |  |   | 809.1   |  
|Investment in subsidiaries                           |  |                     | 1,375.3 |   |                       |   |                          |  |   |             |   |  |              | (1,375.3 | ) |  |   |        |  
|Intercompany receivables                             |  |                     |        |   |                       |   | 406.4                     |  |   | 1.5          |   |  |              | (407.9   | ) |  |   |        |  
|Other non-current assets                             |  |                     | 29.1    |   |                       |   | 12.1                      |  |   | 5.0          |   |  |              |         |   |  |   | 46.2    |  
|                                                     |  |                     |         |   |                       |   |                           |  |   |              |   |  |              |          |   |  |   |         |  
|Total assets                                         |  | $                   | 1,408.6 |   |                       | $ | 1,746.1                   |  | $ | 229.7        |   |  | $            | (1,783.2 | ) |  | $ | 1,601.2 |  
|                                                     |  |                     |         |   |                       |   |                           |  |   |              |   |  |              |          |   |  |   |         |  
|Liabilities and Stockholders Equity (Deficit)       |  |                     |         |   |                       |   |                           |  |   |              |   |  |              |          |   |  |   |         |  
|Current liabilities:                                 |  |                     |         |   |                       |   |                           |  |   |              |   |  |              |          |   |  |   |         |  
|Current portion of long-term debt                    |  | $                   |        |   |                       | $ | 0.2                       |  | $ |             |   |  | $            |         |   |  | $ | 0.2     |  
|Accounts payable and accrued expenses                |  |                     | 49.1    |   |                       |   | 149.5                     |  |   | 65.6         |   |  |              |         |   |  |   | 264.2   |  
|Payables to related parties                          |  |                     | 3.7     |   |                       |   | 4.5                       |  |   | 5.1          |   |  |              |         |   |  |   | 13.3    |  
|Deferred revenue                                     |  |                     |        |   |                       |   | 220.0                     |  |   | 35.1         |   |  |              |         |   |  |   | 255.1   |  
|Income taxes payable                                 |  |                     | 0.6     |   |                       |   | 1.6                       |  |   | 0.8          |   |  |              |         |   |  |   | 3.0     |  
|                                                     |  |                     |         |   |                       |   |                           |  |   |              |   |  |              |          |   |  |   |         |  
|Total current liabilities                            |  |                     | 53.4    |   |                       |   | 375.8                     |  |   | 106.6        |   |  |              |         |   |  |   | 535.8   |  
|Long-term debt                                       |  |                     | 1,347.2 |   |                       |   | 0.1                       |  |   |             |   |  |              |         |   |  |   | 1,347.3 |  
|Deferred income taxes                                |  |                     | (7.9    | ) |                       |   | 12.6                      |  |   | 15.5         |   |  |              |         |   |  |   | 20.2    |  
|Deferred revenue                                     |  |                     |        |   |                       |   | 29.4                      |  |   | 12.2         |   |  |              |         |   |  |   | 41.6    |  
|Intercompany payables                                |  |                     | 407.9   |   |                       |   |                          |  |   |             |   |  |              | (407.9   | ) |  |   |        |  
|Other long-term liabilities                          |  |                     | 13.5    |   |                       |   | 11.8                      |  |   | 35.9         |   |  |              |         |   |  |   | 61.2    |  
|                                                     |  |                     |         |   |                       |   |                           |  |   |              |   |  |              |          |   |  |   |         |  
|Total liabilities                                    |  |                     | 1,814.1 |   |                       |   | 429.7                     |  |   | 170.2        |   |  |              | (407.9   | ) |  |   | 2,006.1 |  
|Minority interests                                   |  |                     |        |   |                       |   |                          |  |   | 0.6          |   |  |              |         |   |  |   | 0.6     |  
|Stockholders equity (deficit)                       |  |                     | (405.5  | ) |                       |   | 1,316.4                   |  |   | 58.9         |   |  |              | (1,375.3 | ) |  |   | (405.5  | )
|                                                     |  |                     |         |   |                       |   |                           |  |   |              |   |  |              |          |   |  |   |         |  
|Total liabilities and stockholders equity (deficit) |  | $                   | 1,408.6 |   |                       | $ | 1,746.1                   |  | $ | 229.7        |   |  | $            | (1,783.2 | ) |  | $ | 1,601.2 |  
|                                                     |  |                     |         |   |                       |   |                           |  |   |              |   |  |              |          |   |  |   |         |  



18



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UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008

(In millions)



|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|------------------------------------------------------------------------------------ |  | ------------------- | ----- | - | --------------------- | - | ----- | ------------------------- |  | - | ------------ | - |  | ------------ | ----- | - |  | - | ----- | -
|                                                                                     |  | AffinionGroup, Inc. |       |   | GuarantorSubsidiaries |   |       | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |      
|Net revenues                                                                         |  | $                   |      |   |                       | $ | 298.1 |                           |  | $ | 66.7         |   |  | $            |      |   |  | $ | 364.8 |  
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Expenses:                                                                            |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Cost of revenues, exclusive of depreciation and amortization shown separately below: |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Marketing and commissions                                                            |  |                     |      |   |                       |   | 135.7 |                           |  |   | 24.4         |   |  |              |      |   |  |   | 160.1 |  
|Operating costs                                                                      |  |                     |      |   |                       |   | 65.9  |                           |  |   | 30.8         |   |  |              |      |   |  |   | 96.7  |  
|General and administrative                                                           |  |                     | 2.2   |   |                       |   | 19.9  |                           |  |   | 2.0          |   |  |              |      |   |  |   | 24.1  |  
|Depreciation and amortization                                                        |  |                     |      |   |                       |   | 59.4  |                           |  |   | 9.0          |   |  |              |      |   |  |   | 68.4  |  
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Total expenses                                                                       |  |                     | 2.2   |   |                       |   | 280.9 |                           |  |   | 66.2         |   |  |              |      |   |  |   | 349.3 |  
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Income (loss) from operations                                                        |  |                     | (2.2  | ) |                       |   | 17.2  |                           |  |   | 0.5          |   |  |              |      |   |  |   | 15.5  |  
|Equity in income (loss) of subsidiaries                                              |  |                     | 15.9  |   |                       |   |      |                           |  |   |             |   |  |              | (15.9 | ) |  |   |      |  
|Interest income                                                                      |  |                     | 0.1   |   |                       |   | 0.2   |                           |  |   | 0.1          |   |  |              |      |   |  |   | 0.4   |  
|Interest expense                                                                     |  |                     | (33.7 | ) |                       |   | (0.7  | )                         |  |   | (1.2         | ) |  |              |      |   |  |   | (35.6 | )
|Other income, net                                                                    |  |                     |      |   |                       |   |      |                           |  |   | 2.8          |   |  |              |      |   |  |   | 2.8   |  
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Income (loss) before income taxes and minority interests                             |  |                     | (19.9 | ) |                       |   | 16.7  |                           |  |   | 2.2          |   |  |              | (15.9 | ) |  |   | (16.9 | )
|Income tax (expense) benefit                                                         |  |                     | (0.4  | ) |                       |   | (2.2  | )                         |  |   | (0.5         | ) |  |              |      |   |  |   | (3.1  | )
|Minority interests, net of tax                                                       |  |                     |      |   |                       |   |      |                           |  |   | (0.3         | ) |  |              |      |   |  |   | (0.3  | )
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Net loss                                                                             |  | $                   | (20.3 | ) |                       | $ | 14.5  |                           |  | $ | 1.4          |   |  | $            | (15.9 | ) |  | $ | (20.3 | )
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008

(In millions)



|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |         |  
|------------------------------------------------------------------------------------ |  | ------------------- | ----- | - | --------------------- | - | ----- | ------------------------- |  | - | ------------ | - |  | ------------ | ----- | - |  | - | ------- | -
|                                                                                     |  | AffinionGroup, Inc. |       |   | GuarantorSubsidiaries |   |       | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |      
|Net revenues                                                                         |  | $                   |      |   |                       | $ | 860.0 |                           |  | $ | 198.3        |   |  | $            |      |   |  | $ | 1,058.3 |  
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |         |  
|Expenses:                                                                            |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |         |  
|Cost of revenues, exclusive of depreciation and amortization shown separately below: |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |         |  
|Marketing and commissions                                                            |  |                     |      |   |                       |   | 400.8 |                           |  |   | 74.5         |   |  |              |      |   |  |   | 475.3   |  
|Operating costs                                                                      |  |                     |      |   |                       |   | 185.9 |                           |  |   | 91.3         |   |  |              |      |   |  |   | 277.2   |  
|General and administrative                                                           |  |                     | 7.0   |   |                       |   | 58.0  |                           |  |   | 12.9         |   |  |              |      |   |  |   | 77.9    |  
|Depreciation and amortization                                                        |  |                     |      |   |                       |   | 178.0 |                           |  |   | 27.6         |   |  |              |      |   |  |   | 205.6   |  
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |         |  
|Total expenses                                                                       |  |                     | 7.0   |   |                       |   | 822.7 |                           |  |   | 206.3        |   |  |              |      |   |  |   | 1,036.0 |  
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |         |  
|Income (loss) from operations                                                        |  |                     | (7.0  | ) |                       |   | 37.3  |                           |  |   | (8.0         | ) |  |              |      |   |  |   | 22.3    |  
|Equity in income (loss) of subsidiaries                                              |  |                     | 19.4  |   |                       |   |      |                           |  |   |             |   |  |              | (19.4 | ) |  |   |        |  
|Interest income                                                                      |  |                     | 0.1   |   |                       |   | 0.9   |                           |  |   | 0.4          |   |  |              |      |   |  |   | 1.4     |  
|Interest expense                                                                     |  |                     | (81.9 | ) |                       |   | (1.5  | )                         |  |   | (3.7         | ) |  |              |      |   |  |   | (87.1   | )
|Other income, net                                                                    |  |                     |      |   |                       |   |      |                           |  |   | 2.6          |   |  |              |      |   |  |   | 2.6     |  
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |         |  
|Income (loss) before income taxes and minority interests                             |  |                     | (69.4 | ) |                       |   | 36.7  |                           |  |   | (8.7         | ) |  |              | (19.4 | ) |  |   | (60.8   | )
|Income tax (expense) benefit                                                         |  |                     | (0.9  | ) |                       |   | (6.4  | )                         |  |   | (1.6         | ) |  |              |      |   |  |   | (8.9    | )
|Minority interests, net of tax                                                       |  |                     |      |   |                       |   |      |                           |  |   | (0.6         | ) |  |              |      |   |  |   | (0.6    | )
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |         |  
|Net loss                                                                             |  | $                   | (70.3 | ) |                       | $ | 30.3  |                           |  | $ | (10.9        | ) |  | $            | (19.4 | ) |  | $ | (70.3   | )
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |         |  



19



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##### Table of Contents

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2007

(In millions)



|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|------------------------------------------------------------------------------------ |  | ------------------- | ----- | - | --------------------- | - | ----- | ------------------------- |  | - | ------------ | - |  | ------------ | ---- | - |  | - | ----- | -
|                                                                                     |  | AffinionGroup, Inc. |       |   | GuarantorSubsidiaries |   |       | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |     
|Net revenues                                                                         |  | $                   |      |   |                       | $ | 275.1 |                           |  | $ | 55.5         |   |  | $            |     |   |  | $ | 330.6 |  
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Expenses:                                                                            |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Cost of revenues, exclusive of depreciation and amortization shown separately below: |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Marketing and commissions                                                            |  |                     |      |   |                       |   | 130.3 |                           |  |   | 19.0         |   |  |              |     |   |  |   | 149.3 |  
|Operating costs                                                                      |  |                     |      |   |                       |   | 53.1  |                           |  |   | 26.5         |   |  |              |     |   |  |   | 79.6  |  
|General and administrative                                                           |  |                     | 0.6   |   |                       |   | 21.0  |                           |  |   | 4.3          |   |  |              |     |   |  |   | 25.9  |  
|Depreciation and amortization                                                        |  |                     |      |   |                       |   | 70.6  |                           |  |   | 12.3         |   |  |              |     |   |  |   | 82.9  |  
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Total expenses                                                                       |  |                     | 0.6   |   |                       |   | 275.0 |                           |  |   | 62.1         |   |  |              |     |   |  |   | 337.7 |  
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Loss from operations                                                                 |  |                     | (0.6  | ) |                       |   | 0.1   |                           |  |   | (6.6         | ) |  |              |     |   |  |   | (7.1  | )
|Equity in income (loss) of subsidiaries                                              |  |                     | (5.7  | ) |                       |   |      |                           |  |   |             |   |  |              | 5.7  |   |  |   |      |  
|Interest income                                                                      |  |                     |      |   |                       |   | 0.6   |                           |  |   | 0.3          |   |  |              |     |   |  |   | 0.9   |  
|Interest income  intercompany                                                       |  |                     | 0.3   |   |                       |   |      |                           |  |   |             |   |  |              | (0.3 | ) |  |   |      |  
|Interest expense                                                                     |  |                     | (37.2 | ) |                       |   |      |                           |  |   | (1.5         | ) |  |              |     |   |  |   | (38.7 | )
|Interest expense  intercompany                                                      |  |                     |      |   |                       |   |      |                           |  |   | (0.3         | ) |  |              | 0.3  |   |  |   |      |  
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Income (loss) before income taxes and minority interests                             |  |                     | (43.2 | ) |                       |   | 0.7   |                           |  |   | (8.1         | ) |  |              | 5.7  |   |  |   | (44.9 | )
|Income tax (expense) benefit                                                         |  |                     | (0.1  | ) |                       |   | (1.0  | )                         |  |   | 2.8          |   |  |              |     |   |  |   | 1.7   |  
|Minority interests, net of tax                                                       |  |                     |      |   |                       |   |      |                           |  |   | (0.1         | ) |  |              |     |   |  |   | (0.1  | )
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Net loss                                                                             |  | $                   | (43.3 | ) |                       | $ | (0.3  | )                         |  | $ | (5.4         | ) |  | $            | 5.7  |   |  | $ | (43.3 | )
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007

(In millions)



|                                                                                     |  |                     |        |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |         |  
|------------------------------------------------------------------------------------ |  | ------------------- | ------ | - | --------------------- | - | ----- | ------------------------- |  | - | ------------ | - |  | ------------ | ---- | - |  | - | ------- | -
|                                                                                     |  | AffinionGroup, Inc. |        |   | GuarantorSubsidiaries |   |       | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |     
|Net revenues                                                                         |  | $                   |       |   |                       | $ | 828.0 |                           |  | $ | 156.4        |   |  | $            |     |   |  | $ | 984.4   |  
|                                                                                     |  |                     |        |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |         |  
|Expenses:                                                                            |  |                     |        |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |         |  
|Cost of revenues, exclusive of depreciation and amortization shown separately below: |  |                     |        |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |         |  
|Marketing and commissions                                                            |  |                     |       |   |                       |   | 401.0 |                           |  |   | 51.9         |   |  |              |     |   |  |   | 452.9   |  
|Operating costs                                                                      |  |                     |       |   |                       |   | 173.4 |                           |  |   | 77.8         |   |  |              |     |   |  |   | 251.2   |  
|General and administrative                                                           |  |                     | 8.9    |   |                       |   | 66.0  |                           |  |   | 14.6         |   |  |              |     |   |  |   | 89.5    |  
|Depreciation and amortization                                                        |  |                     |       |   |                       |   | 210.7 |                           |  |   | 31.4         |   |  |              |     |   |  |   | 242.1   |  
|                                                                                     |  |                     |        |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |         |  
|Total expenses                                                                       |  |                     | 8.9    |   |                       |   | 851.1 |                           |  |   | 175.7        |   |  |              |     |   |  |   | 1,035.7 |  
|                                                                                     |  |                     |        |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |         |  
|Loss from operations                                                                 |  |                     | (8.9   | ) |                       |   | (23.1 | )                         |  |   | (19.3        | ) |  |              |     |   |  |   | (51.3   | )
|Equity in income (loss) of subsidiaries                                              |  |                     | (44.4  | ) |                       |   |      |                           |  |   |             |   |  |              | 44.4 |   |  |   |        |  
|Interest income                                                                      |  |                     |       |   |                       |   | 2.9   |                           |  |   | 0.7          |   |  |              |     |   |  |   | 3.6     |  
|Interest income  intercompany                                                       |  |                     | 0.8    |   |                       |   |      |                           |  |   |             |   |  |              | (0.8 | ) |  |   |        |  
|Interest expense                                                                     |  |                     | (104.1 | ) |                       |   | (0.1  | )                         |  |   | (3.5         | ) |  |              |     |   |  |   | (107.7  | )
|Interest expense  intercompany                                                      |  |                     |       |   |                       |   |      |                           |  |   | (0.8         | ) |  |              | 0.8  |   |  |   |        |  
|                                                                                     |  |                     |        |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |         |  
|Income (loss) before income taxes and minority interests                             |  |                     | (156.6 | ) |                       |   | (20.3 | )                         |  |   | (22.9        | ) |  |              | 44.4 |   |  |   | (155.4  | )
|Income tax (expense) benefit                                                         |  |                     |       |   |                       |   | (6.0  | )                         |  |   | 5.0          |   |  |              |     |   |  |   | (1.0    | )
|Minority interests, net of tax                                                       |  |                     |       |   |                       |   |      |                           |  |   | (0.2         | ) |  |              |     |   |  |   | (0.2    | )
|                                                                                     |  |                     |        |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |         |  
|Net loss                                                                             |  | $                   | (156.6 | ) |                       | $ | (26.3 | )                         |  | $ | (18.1        | ) |  | $            | 44.4 |   |  | $ | (156.6  | )
|                                                                                     |  |                     |        |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |         |  



20



---

##### Table of Contents

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008

(In millions)



|                                                                                |  |                     |       |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |       |  
|------------------------------------------------------------------------------- |  | ------------------- | ----- | - | --------------------- | - | ------ | ------------------------- |  | - | ------------ | - |  | ------------ | ----- | - |  | - | ----- | -
|                                                                                |  | AffinionGroup, Inc. |       |   | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |      
|Operating Activities                                                            |  |                     |       |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Net loss                                                                        |  | $                   | (70.3 | ) |                       | $ | 30.3   |                           |  | $ | (10.9        | ) |  | $            | (19.4 | ) |  | $ | (70.3 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                     |       |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Depreciation and amortization                                                   |  |                     |      |   |                       |   | 178.0  |                           |  |   | 27.6         |   |  |              |      |   |  |   | 205.6 |  
|Amortization of favorable and unfavorable contracts                             |  |                     |      |   |                       |   | (1.7   | )                         |  |   | (0.6         | ) |  |              |      |   |  |   | (2.3  | )
|Amortization of debt discount and financing costs                               |  |                     | 4.4   |   |                       |   |       |                           |  |   |             |   |  |              |      |   |  |   | 4.4   |  
|Unrealized gain on interest rate swaps                                          |  |                     | (8.1  | ) |                       |   |       |                           |  |   |             |   |  |              |      |   |  |   | (8.1  | )
|Stock-based compensation                                                        |  |                     | 2.3   |   |                       |   |       |                           |  |   |             |   |  |              |      |   |  |   | 2.3   |  
|Equity in income (loss) of subsidiaries                                         |  |                     | (19.4 | ) |                       |   |       |                           |  |   |             |   |  |              | 19.4  |   |  |   |      |  
|Deferred income taxes                                                           |  |                     |      |   |                       |   | 5.8    |                           |  |   | (2.0         | ) |  |              |      |   |  |   | 3.8   |  
|Payment received for assumption of loyalty points program liability             |  |                     |      |   |                       |   | 7.4    |                           |  |   |             |   |  |              |      |   |  |   | 7.4   |  
|Net change in assets and liabilities:                                           |  |                     |       |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Restricted cash                                                                 |  |                     |      |   |                       |   | 0.3    |                           |  |   | 0.3          |   |  |              |      |   |  |   | 0.6   |  
|Receivables                                                                     |  |                     | (0.1  | ) |                       |   | (4.5   | )                         |  |   | 2.4          |   |  |              |      |   |  |   | (2.2  | )
|Receivables from related parties                                                |  |                     | (0.6  | ) |                       |   | (16.7  | )                         |  |   |             |   |  |              |      |   |  |   | (17.3 | )
|Profit-sharing receivables from insurance carriers                              |  |                     |      |   |                       |   | (24.4  | )                         |  |   |             |   |  |              |      |   |  |   | (24.4 | )
|Prepaid commissions                                                             |  |                     |      |   |                       |   | 1.1    |                           |  |   | 2.4          |   |  |              |      |   |  |   | 3.5   |  
|Other current assets                                                            |  |                     | 0.1   |   |                       |   | (3.6   | )                         |  |   | 1.3          |   |  |              |      |   |  |   | (2.2  | )
|Contract rights and list fees                                                   |  |                     |      |   |                       |   | (0.1   | )                         |  |   |             |   |  |              |      |   |  |   | (0.1  | )
|Other non-current assets                                                        |  |                     | 0.2   |   |                       |   | (1.8   | )                         |  |   |             |   |  |              |      |   |  |   | (1.6  | )
|Accounts payable and accrued expenses                                           |  |                     | 50.3  |   |                       |   | (11.0  | )                         |  |   | (8.2         | ) |  |              |      |   |  |   | 31.1  |  
|Payables to related parties                                                     |  |                     | 0.3   |   |                       |   | (3.4   | )                         |  |   | (2.1         | ) |  |              |      |   |  |   | (5.2  | )
|Deferred revenue                                                                |  |                     |      |   |                       |   | (14.6  | )                         |  |   | 4.7          |   |  |              |      |   |  |   | (9.9  | )
|Income taxes receivable and payable                                             |  |                     | 0.1   |   |                       |   | (1.7   | )                         |  |   | 0.1          |   |  |              |      |   |  |   | (1.5  | )
|Other long-term liabilities                                                     |  |                     | 0.7   |   |                       |   | (0.4   | )                         |  |   | (4.7         | ) |  |              |      |   |  |   | (4.4  | )
|Minority interest and other, net                                                |  |                     |      |   |                       |   | (0.3   | )                         |  |   | (0.5         | ) |  |              |      |   |  |   | (0.8  | )
|                                                                                |  |                     |       |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Net cash provided by operating activities                                       |  |                     | (40.1 | ) |                       |   | 138.7  |                           |  |   | 9.8          |   |  |              |      |   |  |   | 108.4 |  
|                                                                                |  |                     |       |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Investing Activities                                                            |  |                     |       |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Capital expenditures                                                            |  |                     | (1.4  | ) |                       |   | (15.7  | )                         |  |   | (8.5         | ) |  |              |      |   |  |   | (25.6 | )
|Restricted cash                                                                 |  |                     |      |   |                       |   |       |                           |  |   | (1.1         | ) |  |              |      |   |  |   | (1.1  | )
|                                                                                |  |                     |       |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Net cash used in investing activities                                           |  |                     | (1.4  | ) |                       |   | (15.7  | )                         |  |   | (9.6         | ) |  |              |      |   |  |   | (26.7 | )
|                                                                                |  |                     |       |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Financing Activities                                                            |  |                     |       |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Repayments under line of credit, net                                            |  |                     | (38.5 | ) |                       |   |       |                           |  |   |             |   |  |              |      |   |  |   | (38.5 | )
|Principal payments on borrowings                                                |  |                     |      |   |                       |   | (0.2   | )                         |  |   |             |   |  |              |      |   |  |   | (0.2  | )
|Dividends paid to parent company                                                |  |                     | (37.0 | ) |                       |   |       |                           |  |   |             |   |  |              |      |   |  |   | (37.0 | )
|Intercompany receivables and payables                                           |  |                     | 116.8 |   |                       |   | (121.8 | )                         |  |   | 5.0          |   |  |              |      |   |  |   |      |  
|Intercompany dividend                                                           |  |                     | 0.2   |   |                       |   | (0.2   | )                         |  |   |             |   |  |              |      |   |  |   |      |  
|Distribution to a minority shareholder of a subsidiary                          |  |                     |      |   |                       |   |       |                           |  |   | (0.4         | ) |  |              |      |   |  |   | (0.4  | )
|                                                                                |  |                     |       |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Net cash used in financing activities                                           |  |                     | 41.5  |   |                       |   | (122.2 | )                         |  |   | 4.6          |   |  |              |      |   |  |   | (76.1 | )
|                                                                                |  |                     |       |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Effect of changes in exchange rates on cash and cash equivalents                |  |                     |      |   |                       |   |       |                           |  |   | (1.5         | ) |  |              |      |   |  |   | (1.5  | )
|                                                                                |  |                     |       |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Net increase in cash and cash equivalents                                       |  |                     |      |   |                       |   | 0.8    |                           |  |   | 3.3          |   |  |              |      |   |  |   | 4.1   |  
|Cash and cash equivalents, beginning of period                                  |  |                     |      |   |                       |   | 3.0    |                           |  |   | 11.2         |   |  |              |      |   |  |   | 14.2  |  
|                                                                                |  |                     |       |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Cash and cash equivalents, end of period                                        |  | $                   |      |   |                       | $ | 3.8    |                           |  | $ | 14.5         |   |  | $            |      |   |  | $ | 18.3  |  
|                                                                                |  |                     |       |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |       |  



21



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UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007

(In millions)



|                                                                                          |  |                     |        |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |        |  
|----------------------------------------------------------------------------------------- |  | ------------------- | ------ | - | --------------------- | - | ------ | ------------------------- |  | - | ------------ | - |  | ------------ | ----- | - |  | - | ------ | -
|                                                                                          |  | AffinionGroup, Inc. |        |   | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |      
|Operating Activities                                                                      |  |                     |        |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |        |  
|Net loss                                                                                  |  | $                   | (156.6 | ) |                       | $ | (26.3  | )                         |  | $ | (18.1        | ) |  | $            | 44.4  |   |  | $ | (156.6 | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |                     |        |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |        |  
|Depreciation and amortization                                                             |  |                     |       |   |                       |   | 210.7  |                           |  |   | 31.4         |   |  |              |      |   |  |   | 242.1  |  
|Amortization of favorable and unfavorable contracts                                       |  |                     |       |   |                       |   | (1.7   | )                         |  |   | (0.5         | ) |  |              |      |   |  |   | (2.2   | )
|Amortization of debt discount and financing costs                                         |  |                     | 5.0    |   |                       |   |       |                           |  |   |             |   |  |              |      |   |  |   | 5.0    |  
|Unrealized loss on interest rate swap                                                     |  |                     | 2.2    |   |                       |   |       |                           |  |   |             |   |  |              |      |   |  |   | 2.2    |  
|Stock-based compensation                                                                  |  |                     | 1.8    |   |                       |   |       |                           |  |   |             |   |  |              |      |   |  |   | 1.8    |  
|Equity in income (loss) of subsidiaries                                                   |  |                     | 44.4   |   |                       |   |       |                           |  |   |             |   |  |              | (44.4 | ) |  |   |       |  
|Deferred income taxes                                                                     |  |                     | (0.3   | ) |                       |   | (0.2   | )                         |  |   | (9.8         | ) |  |              |      |   |  |   | (10.3  | )
|Net change in assets and liabilities:                                                     |  |                     |        |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |        |  
|Restricted cash                                                                           |  |                     |       |   |                       |   | (1.1   | )                         |  |   |             |   |  |              |      |   |  |   | (1.1   | )
|Receivables                                                                               |  |                     |       |   |                       |   | 2.8    |                           |  |   | 0.2          |   |  |              |      |   |  |   | 3.0    |  
|Receivables from related parties                                                          |  |                     |       |   |                       |   | 3.0    |                           |  |   | 0.1          |   |  |              |      |   |  |   | 3.1    |  
|Profit-sharing receivables from insurance carriers                                        |  |                     |       |   |                       |   | (12.5  | )                         |  |   |             |   |  |              |      |   |  |   | (12.5  | )
|Prepaid commissions                                                                       |  |                     |       |   |                       |   | 15.3   |                           |  |   | (1.6         | ) |  |              |      |   |  |   | 13.7   |  
|Other current assets                                                                      |  |                     | (3.4   | ) |                       |   | 7.8    |                           |  |   | (1.4         | ) |  |              |      |   |  |   | 3.0    |  
|Contract rights and list fees                                                             |  |                     |       |   |                       |   | (0.9   | )                         |  |   |             |   |  |              |      |   |  |   | (0.9   | )
|Other non-current assets                                                                  |  |                     | (0.9   | ) |                       |   | (4.3   | )                         |  |   | (0.1         | ) |  |              |      |   |  |   | (5.3   | )
|Accounts payable and accrued expenses                                                     |  |                     | 44.9   |   |                       |   | (58.2  | )                         |  |   | 2.6          |   |  |              |      |   |  |   | (10.7  | )
|Payables to related parties                                                               |  |                     | (0.1   | ) |                       |   | 1.1    |                           |  |   | (5.9         | ) |  |              |      |   |  |   | (4.9   | )
|Deferred revenue                                                                          |  |                     |       |   |                       |   | (18.7  | )                         |  |   | 14.1         |   |  |              |      |   |  |   | (4.6   | )
|Income taxes receivable and payable                                                       |  |                     | 0.6    |   |                       |   | 3.0    |                           |  |   | 3.8          |   |  |              |      |   |  |   | 7.4    |  
|Other long-term liabilities                                                               |  |                     | 0.3    |   |                       |   | 1.1    |                           |  |   | (8.3         | ) |  |              |      |   |  |   | (6.9   | )
|Minority interests and other, net                                                         |  |                     | (0.4   | ) |                       |   | 0.5    |                           |  |   | (0.3         | ) |  |              |      |   |  |   | (0.2   | )
|                                                                                          |  |                     |        |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |        |  
|Net cash provided by (used in) operating activities                                       |  |                     | (62.5  | ) |                       |   | 121.4  |                           |  |   | 6.2          |   |  |              |      |   |  |   | 65.1   |  
|                                                                                          |  |                     |        |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |        |  
|Investing Activities                                                                      |  |                     |        |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |        |  
|Capital expenditures                                                                      |  |                     | (0.2   | ) |                       |   | (16.3  | )                         |  |   | (2.1         | ) |  |              |      |   |  |   | (18.6  | )
|Acquisition-related payments, net of cash acquired                                        |  |                     |       |   |                       |   | (0.8   | )                         |  |   |             |   |  |              |      |   |  |   | (0.8   | )
|                                                                                          |  |                     |        |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |        |  
|Net cash used in investing activities                                                     |  |                     | (0.2   | ) |                       |   | (17.1  | )                         |  |   | (2.1         | ) |  |              |      |   |  |   | (19.4  | )
|                                                                                          |  |                     |        |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |        |  
|Financing Activities                                                                      |  |                     |        |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |        |  
|Principal payments on borrowings                                                          |  |                     | (75.0  | ) |                       |   | (0.1   | )                         |  |   |             |   |  |              |      |   |  |   | (75.1  | )
|Intercompany loan                                                                         |  |                     | 10.0   |   |                       |   |       |                           |  |   | (10.0        | ) |  |              |      |   |  |   |       |  
|Dividends paid to parent company                                                          |  |                     | (32.1  | ) |                       |   |       |                           |  |   |             |   |  |              |      |   |  |   | (32.1  | )
|Intercompany receivables and payables                                                     |  |                     | 159.8  |   |                       |   | (156.3 | )                         |  |   | (3.5         | ) |  |              |      |   |  |   |       |  
|Distribution to a minority shareholder of a subsidiary                                    |  |                     |       |   |                       |   |       |                           |  |   | (0.4         | ) |  |              |      |   |  |   | (0.4   | )
|                                                                                          |  |                     |        |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |        |  
|Net cash used in financing activities                                                     |  |                     | 62.7   |   |                       |   | (156.4 | )                         |  |   | (13.9        | ) |  |              |      |   |  |   | (107.6 | )
|                                                                                          |  |                     |        |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |        |  
|Effect of changes in exchange rates on cash and cash equivalents                          |  |                     |       |   |                       |   |       |                           |  |   | 0.1          |   |  |              |      |   |  |   | 0.1    |  
|                                                                                          |  |                     |        |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |        |  
|Net decrease in cash and cash equivalents                                                 |  |                     |       |   |                       |   | (52.1  | )                         |  |   | (9.7         | ) |  |              |      |   |  |   | (61.8  | )
|Cash and cash equivalents, beginning of period                                            |  |                     |       |   |                       |   | 59.6   |                           |  |   | 24.7         |   |  |              |      |   |  |   | 84.3   |  
|                                                                                          |  |                     |        |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |        |  
|Cash and cash equivalents, end of period                                                  |  | $                   |       |   |                       | $ | 7.5    |                           |  | $ | 15.0         |   |  | $            |      |   |  | $ | 22.5   |  
|                                                                                          |  |                     |        |   |                       |   |        |                           |  |   |              |   |  |              |       |   |  |   |        |  



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

This Report is prepared by Affinion Group, Inc. Unless otherwise indicated or the context otherwise requires, in this Report all references to
Affinion, the Company, we, our and us refer to Affinion Group, Inc. and its subsidiaries on a consolidated basis after giving effect to the consummation of the Transactions (as discussed
under The Transactions below), but for periods prior to the consummation of the Transactions, refer to the historical operations of the Predecessor.

The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our audited consolidated financial statements as of December 31, 2007 and 2006, and
for the years ended December 31, 2007 and 2006 and for the period from October 17, 2005 (commencement of operations) to December 31, 2005 and the Predecessors combined financial statements for the period from January 1,
2005 to October 16, 2005 included in our Annual Report on Form 10-K for the year ended December 31, 2007 (the Form 10-K) and with the unaudited condensed consolidated financial statements and related notes thereto presented in
this Quarterly Report on Form 10-Q.

Disclosure Regarding Forward-Looking Statements

Our disclosure and analysis in this Form 10-Q may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, or the Securities Act, Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Private Securities Litigation Reform Act of 1995, that are subject to risks and uncertainties. Forward-looking
statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify these statements by the fact that they do not relate strictly
to historical or current facts. These statements may include words such as anticipate, estimate, expect, project, intend, plan, believe and other words and terms of
similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. All statements other than statements of historical facts included in this Form 10-Q that address activities,
events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements.

These
forward-looking statements are largely based on our expectations and beliefs concerning future events, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known
market conditions and other factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control.

Although we believe our estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, managements assumptions
about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this Form 10-Q are not guarantees of future performance, and we cannot assure any reader that those statements will be
realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to the factors listed under Item 1A. Risk Factors in our
Form 10-K and the Managements Discussion and Analysis of Financial Condition and Results of Operations section of this Quarterly Report on Form 10-Q. All forward-looking statements speak only as of the date of this Form 10-Q. We do
not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise, except as required by law. These cautionary statements qualify all forward-looking statements attributable to us or
persons acting on our behalf.

Introduction

Managements discussion and analysis of financial condition and results of operations (MD&A) is provided as a supplement to the unaudited condensed consolidated financial statements and the related notes thereto
included elsewhere herein to help provide an understanding of our financial condition, results of our operations and changes in our financial condition. The MD&A is organized as follows:



| |  |  | Overview. This section provides a general description of our business and operating segments, as well as recent developments that we believe are important in
understanding our results of operations and financial condition and in anticipating future trends.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Results of operations. This section provides an analysis of our results of operations for the three and nine months ended September 30, 2008 and 2007.
This analysis is presented on both a consolidated basis and on an operating segment basis.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Financial condition, liquidity and capital resources. This section provides an analysis of our cash flows for the nine months ended September 30, 2008
and 2007 and our financial condition as of September 30, 2008, as well as a discussion of our liquidity and capital resources.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Critical accounting policies. This section discusses certain significant accounting policies considered to be important to our financial condition and
results of operations and which require significant judgment and estimates on the part of management in their application. In addition, we refer you to our audited consolidated financial statements as of
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| | December 31, 2007 and 2006, and for the years ended December 31, 2007 and 2006 and for the period from October 17, 2005 (commencement of
operations) to December 31, 2005, and the Predecessors combined financial statements for the period from January 1, 2005 to October 16, 2005, included in our Form 10-K for a summary of our significant accounting policies.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Overview

Description of Business

We are a leading global provider of comprehensive marketing services and loyalty programs to many of the largest and most respected
companies in the world. We partner with these leading companies to develop customized marketing programs that provide valuable products and services to their end customers using our creative design and product development capabilities. These
products and services enable our marketing partners to strengthen their customer relationships, as well as generate significant incremental revenue, generally in the form of commission payments paid by us. We have substantial expertise in deploying
various types of media, such as direct mail and the Internet, and bundling unique benefits to offer valuable products and services to the end customers of our marketing partners on a highly targeted basis. We provide credit monitoring and
identity-theft resolution, accidental death and dismemberment insurance (AD&D), discount travel services, loyalty programs, various checking account and credit card enhancement services and other products and services. We believe we
are a market leader in each of our product areas and that our portfolio of products and services is the broadest in the industry. Our scale, combined with our nearly 35 years of experience, unique proprietary database, proven marketing techniques
and strong marketing partner relationships, position us to perform well and grow in a variety of market conditions.

As of
September 30, 2008, we had approximately 65 million members and end customers worldwide.

We organize our business into two
operating units:



| |  |  | Affinion North America. Affinion North America comprises our Membership, Insurance and Package, and Loyalty product operations in North America
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Membership Products. We design, implement and market membership programs that provide members with access to a variety of discounts and shop-at-home
conveniences in such areas as retail merchandise, travel, automotive and home improvement as well as personal protection benefits and value-added services including credit monitoring and identity-theft resolution services.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Insurance and Package Products. We market AD&D and other insurance programs and design and provide checking account enhancement programs primarily to
financial institutions.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Loyalty Products. We design, implement and administer points-based loyalty programs and manage loyalty points for financial, travel, auto and other
companies. We also provide enhancement benefits to major financial institutions in connection with their credit and debit card programs.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Affinion International. Affinion International comprises our Membership, Package and Loyalty product operations outside North America. We expect to leverage
our current Western European operational platform to expand our range of products and services, develop new affinity partner relationships in various industries and grow our geographical footprint.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We offer all of our products and services through both retail and wholesale arrangements, although on a wholesale basis, currently we primarily provide
services and benefits derived from our credit card registration, credit monitoring and identity theft resolution products. In our retail arrangements, we incur marketing expenses to acquire new customers for our subscription-based membership,
insurance and package enhancement products with the objective of building highly profitable and predictable recurring future revenue streams and cash flows. For our membership and package enhancement products, these marketing costs are expensed when
the campaign is launched, while in our insurance products these costs were capitalized and amortized over 12 years in proportion to the revenue expected to be earned from those campaigns through the date of the Transactions. For periods following
the closing of the Transactions, we have changed our accounting policy so that these insurance marketing costs are expensed when the costs are incurred as the campaign is launched, similar to our accounting for the marketing costs associated with
our membership and package products. This change eliminates the historical differences between our actual cash marketing spend and the marketing costs expensed in a period.

Our membership programs are offered under a variety of terms and conditions. Members are usually offered incentives (e.g. free credit reports or other
premiums) and one to three month risk-free trial periods to encourage them to use the benefits of membership before they are billed. We do not recognize any revenue during the trial period and expense the cost of all incentives and program benefits
and servicing costs as incurred.



24



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##### Table of Contents

Customers of our membership programs typically pay their membership fees either annually or monthly. Our
membership products may have significant timing differences between the receipt of membership fees for annual members and revenue recognition. Historically, memberships were offered primarily under full money back terms whereby a member could
receive a full refund upon cancellation at any time during the current membership term. These revenues are recognized upon completion of the membership term when they are no longer refundable. Depending on the length of the trial period, this
revenue may not be recognized for up to 16 months after the related marketing spend is incurred and expensed. Currently, annual memberships are primarily offered under pro-rata arrangements in which the member is entitled to a prorated refund for
the unused portion of his membership term. This allows us to recognize revenue ratably over the annual membership term. In late 2003, we began to expand the types of memberships that we offer to include memberships under monthly payment programs. In
the first nine months of 2008, approximately 64% of our new member enrollments were in monthly payment programs. Revenue is recognized monthly under both annual pro rata and monthly memberships, allowing for a better matching of revenues and related
servicing and benefit costs when compared to annual full money back memberships. Memberships remain under the billing terms in which they were originated.

As we replace annual memberships with monthly memberships we receive less cash at the beginning of the membership term and, therefore, have lower deferred revenue, resulting in temporarily higher Segment EBITDA (as
discussed under Financial Condition, Liquidity and Capital ResourcesReconciliation of Non-GAAP Financial Measures to GAAP Financial Measures below) than cash flows from operations. We believe that once monthly memberships, as
a percentage of all members within the membership base, reach a constant level, Segment EBITDA and cash flows from operations will be more closely aligned.

We generally utilize the brand names, customer contacts and billing vehicles (credit or debit card, checking account, mortgage or other type of billing arrangement) of our affinity partners in our marketing campaigns.
We usually compensate our affinity partners either through commissions based on revenues we receive from members (which we expense in proportion to the revenue we recognize) or up-front marketing payments, commonly referred to as bounties (which we
expense when incurred). The commission rates which we pay to our affinity partners differ depending on the arrangement we have with the particular affinity partner and the type of media we utilize for a given marketing campaign. For example,
marketing campaigns utilizing direct mail and online channels generally have lower commission rates than other marketing channels which we use. As a result of changes in affinity partner arrangements and a higher percentage of our new customers
being acquired through the direct mail and online media, our membership commission rates for the past five years have consistently decreased as a percentage of revenue.

We serve as an agent and third-party administrator for the marketing of AD&D and our other insurance products. Free trial periods and incentives are generally not offered with our insurance programs. Insurance
program participants typically pay their insurance premiums either monthly or quarterly. Insurance revenues are recognized ratably over the insurance period and there are no significant differences between cash flows and related revenue recognition.
We earn revenue in the form of commissions collected on behalf of the insurance carriers and participate in profit-sharing relationships with the carriers that underwrite the insurance policies that we market. Our estimated share of profits from
these arrangements is reflected as profit-sharing receivables from insurance carriers on the accompanying unaudited condensed consolidated balance sheets and any changes in estimated profit sharing are periodically recorded as an adjustment to net
revenue. Revenue from insurance programs is reported net of insurance costs in the accompanying unaudited condensed consolidated statements of operations.

In our wholesale arrangements, we provide products and services as well as customer service and fulfillment related to such products and services supporting our affinity partners programs that they offer to their
customers. Our affinity partners are typically responsible for customer acquisition, retention, and collection and generally pay us one-time implementation fees and on-going monthly service fees based on the number of members enrolled in their
programs. Implementation fees are recognized ratably over the contract period while service fees are recognized in the month earned. Wholesale revenues also include revenues from transactional activities associated with our programs such as the
sales of additional credit reports and discount shopping and travel purchases by members. The revenues from such transactional activities are recognized in the month earned.

We have made significant progress in increasing the flexibility of our business model by transitioning our operations from a highly fixed-cost structure
to a more variable-cost structure by combining similar functions and processes, consolidating facilities and outsourcing a significant portion of our call center and other back-office processing. This added flexibility should better enable us to
redeploy our marketing expenditures globally across our operations to maximize returns.

Factors Affecting Results of Operations and Financial
Condition

Competitive Environment

As a leader in the affinity direct marketing industry, we compete with many other organizations, including certain of our affinity partners, to obtain a share of the customers business. As affinity direct
marketers, we derive our leads from customer contacts, which our competitors also seek access to, and we must generate sufficient earnings per lead for our affinity partners to compete effectively for access to their customer contacts.



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We compete with companies of varying size, financial strength and availability of resources. Our
competitors include marketing solutions providers, financial institutions, insurance companies, consumer goods companies, internet companies and others, as well as direct marketers offering similar programs. Some of our competitors are larger than
we are, with more resources, financial and otherwise.

We expect this competitive environment to continue in the foreseeable future.

Financial Industry Trends

Historically, financial institutions have represented a significant majority of our affinity partner base. In the past few years, a number of our existing financial institution affinity partners have been acquired by, or merged with, or
acquired certain assets of other financial institutions. Several recent examples include Bank of America Corporation and Countrywide Financial Corp., JPMorgan Chase & Co. and Washington Mutual, Inc., Wells Fargo & Co. and Wachovia
Corporation and Bank of America Corporation and MNBA Corp. As we generally have relationships with either the acquirer, the target or, as in most cases, both the acquirer and the target, this industry consolidation has not, to date, had a material
long-term impact on either our marketing opportunities or our margins, but has created delays in new program launches while the merging institutions focus on consolidating their internal operations.

In certain circumstances, our financial affinity partners have sought to source and market their own in-house programs, most notably programs that are
analogous to our credit card registration, credit monitoring and identity-theft resolution services. As we have sought to maintain our market share and to continue these programs with our partners, in some circumstances, we have shifted from a
retail marketing arrangement to a wholesale arrangement, which has lower net revenue, but unlike our retail arrangement, has no related commission expense. As a result, we have experienced a revenue reduction in our membership business. This trend
has also caused some reductions in our profit margins, most notably in the in-bound telemarketing channel.

Internationally, our package
products have been primarily offered by some of the largest financial institutions in Europe. As these banks attempt to increase their own net revenues and margins, we have experienced significant price reductions when our agreements come up for
renewal from what we had previously been able to charge these institutions for our programs. We expect pricing pressure on our international package offerings to continue in the future, although at a lesser rate than over the past several years.

Regulatory Environment

We are subject to federal and state regulation as well as regulation by foreign authorities in other jurisdictions. Certain regulations that govern our operations include: federal, state and foreign marketing laws; federal, state and
foreign privacy laws; and federal, state and foreign insurance and consumer protection regulations. Federal regulations are primarily enforced by the Federal Trade Commission and the Federal Communications Commission. State regulations are primarily
enforced by individual state attorneys general. Foreign regulations are enforced by a number of regulatory bodies in the relevant jurisdictions.

These regulations primarily impact the means we use to market our programs, which can reduce the acceptance rates of our solicitation efforts, and impact our ability to obtain updated information from our members and end-customers. In our
insurance products, these regulations limit our ability to implement pricing changes.

We incur significant costs to ensure compliance with
these regulations; however, we are party to lawsuits, including class action lawsuits, and state attorney general investigations involving our business practices which also increase our costs of doing business.

Seasonality

Historically,
seasonality has not had a significant impact on our business. Our revenues are more affected by the timing of marketing programs which can change from year to year depending on the opportunities available and pursued.

Business History

General. Our business
started with our North American membership products in 1973. Over a decade later we expanded our business to include North American insurance and package products. In 1988, we acquired a loyalty and enhancement programs business and in the early
1990s, we expanded our membership and package products internationally. During these periods, the various products within the combined financial statements operated independently and were subject to certain non-compete agreements between them which
limited their access to new channels, affinity partners, products and markets.



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In 2004, we terminated the non-compete agreements described above and streamlined our organizational
structure to integrate these historically separately managed product lines. Accordingly, our North American membership, insurance, package and loyalty products came under common management beginning in the first quarter of 2004 and the North
American management team assumed responsibility for our international products in late 2004 and oversight of the travel agency in the first quarter of 2005.

Integration and the 2005 Reorganization. In February 2004, we began integrating the North American membership, insurance and package product operations. The organizational structures supporting these product
lines were realigned to combine departments and eliminate redundant functions. We reorganized the sales forces to be more aligned with the needs of our affinity partners and have a unified and comprehensive approach to the North American market. We
also combined our marketing and procurement functions to take advantage of the larger scale of the combined businesses. In 2005, we developed reorganization plans for our international and North American travel agency operations based on our
successful earlier integration efforts, including facility consolidation, outsourcing of our call centers and other back office functions, as well as eliminating redundant functions and centralizing oversight for common processes (the 2005
Reorganization). We anticipated no offsetting increases in expenses or decreases in revenues at the time as a result of these initiatives.

The
Transactions

On October 17, 2005, Cendant Corporation (Cendant) completed the sale of the Cendant Marketing Services
Division (the Predecessor) to Affinion Group, Inc. (the Company or Affinion), an affiliate of Apollo Management V, L.P. (Apollo), pursuant to a purchase agreement dated July 26, 2005 for
approximately $1.8 billion (together with the related financings, the Transactions). The purchase price consisted of approximately $1.7 billion of cash, net of estimated closing adjustments, plus $125.0 million face value of 125,000
shares of newly issued preferred stock (then fair value of $80.4 million) of Affinion Group Holdings, Inc. (Affinion Holdings), our parent company, and a warrant (then fair value of $16.7 million) that is exercisable for 4,437,170 shares
of common stock of Affinion Holdings, subject to customary anti-dilution adjustments, and $38.1 million of transaction-related costs.

The
warrant was exercisable on or after October 17, 2009 (or earlier, if Apollo achieved certain returns on its investment or if a dividend or distribution was paid on Affinion Holdings common stock). As a result of a special dividend on its
common stock distributed by Affinion Holdings in January 2007, the warrant became exercisable at an exercise price of $10.38 per share. The warrant will expire 30 days after notice is received by the warrant holders from Affinion Holdings that
Apollo and its affiliates have received certain specified investment returns.

The preferred stock entitles its holder to receive dividends
of 8.5% per annum (payable, at Affinion Holdings option, either in cash or in kind) and ranks senior to shares of all other classes or series of stock with respect to rights upon a liquidation or sale of Affinion Holdings at a price of
the then-current face amount, plus any accrued and unpaid dividends. The preferred stock is redeemable at Affinion Holdings option at any time, subject to the applicable terms of our debt instruments and applicable laws. In conjunction with a
special dividend on its common stock distributed by Affinion Holdings in January 2007, Affinion Holdings also redeemed 95,107 shares of its preferred stock at its initial face amount plus accrued and unpaid dividends. Immediately following the
redemption, 29,893 shares of preferred stock with a face amount of $33.3 million, representing an initial face amount of $29.9 million plus accrued and unpaid dividends of $3.4 million, were outstanding.

On October 14, 2005, the Predecessor acquired all of the outstanding shares of common stock of TRL Group, Inc. (TRL Group) not owned by
the Predecessor for approximately $15.7 million and the credit agreement provided by Cendant to TRL Group was terminated. Pursuant to the purchase agreement, we acquired all of the outstanding capital stock and membership interests of the
Predecessor, as well as substantially all of the Predecessors assets and liabilities. Certain assets and liabilities of the Predecessor were retained by Cendant pursuant to the purchase agreement.

As part of the Transactions, we made a special tax election referred to as a 338(h)(10) election with respect to the Predecessor. Under the
338(h)(10) election, the companies constituting the Predecessor were deemed to have sold and repurchased their assets at fair market value. By adjusting the tax basis in such assets to fair market value for U.S. federal income tax purposes, the
aggregate amount of our tax deductions for depreciation and amortization will increase, which will reduce our cash taxes in the future and thus further enhance our free cash flow generation.



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Results of Operations

Supplemental Data

The following table provides data for selected business segments (member and insured amounts in
thousands except per average member amounts and percentages).



|                                                                           |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|-------------------------------------------------------------------------- |  | ------------------------------- | ------ | - | ------------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                           |  | Three Months EndedSeptember 30, |        |   | Nine Months EndedSeptember 30, |  
|                                                                           |  | 2008                            |        |   | 2007                           |   |        | 2008 |  |   | 2007   |  
|Affinion North America                                                     |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Membership Products -                                                      |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Retail                                                                     |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Average Members(1)                                                         |  |                                 | 7,750  |   |                                |   | 8,011  |      |  |   | 7,934  |   |  |   | 8,262  |  
|% Monthly Members                                                          |  |                                 | 43.0   | % |                                |   | 34.8   | %    |  |   | 41.2   | % |  |   | 36.2   | %
|% Annual Members                                                           |  |                                 | 57.0   | % |                                |   | 65.2   | %    |  |   | 58.8   | % |  |   | 63.8   | %
|Annualized Net Revenue Per Average Member(2)                               |  | $                               | 82.75  |   |                                | $ | 74.39  |      |  | $ | 76.80  |   |  | $ | 71.31  |  
|Wholesale                                                                  |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Average Members(1)                                                         |  |                                 | 2,833  |   |                                |   | 3,543  |      |  |   | 3,076  |   |  |   | 3,652  |  
|Portion for service formerly retail and other(3)                           |  |                                 | 2,158  |   |                                |   | 2,307  |      |  |   | 2,253  |   |  |   | 2,228  |  
|Average Retail Members including wholesale formerly retail and other(3)    |  |                                 | 9,908  |   |                                |   | 10,318 |      |  |   | 10,187 |   |  |   | 10,490 |  
|Insurance and Package Products -                                           |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Insurance                                                                  |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Average Basic Insured(1)                                                   |  |                                 | 22,831 |   |                                |   | 25,535 |      |  |   | 23,508 |   |  |   | 26,078 |  
|Average Supplemental Insured                                               |  |                                 | 4,771  |   |                                |   | 5,053  |      |  |   | 4,838  |   |  |   | 5,134  |  
|Annualized Net Revenue Per Supplemental Insured(2)                         |  | $                               | 58.44  |   |                                | $ | 51.49  |      |  | $ | 57.47  |   |  | $ | 52.27  |  
|Package                                                                    |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Average Members(1)                                                         |  |                                 | 5,485  |   |                                |   | 6,020  |      |  |   | 5,561  |   |  |   | 6,226  |  
|Annualized Net Revenue Per Average Member(2)                               |  | $                               | 13.84  |   |                                | $ | 13.53  |      |  | $ | 13.67  |   |  | $ | 13.56  |  
|Affinion International                                                     |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|International Products -                                                   |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Package                                                                    |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Average Members(1)                                                         |  |                                 | 16,343 |   |                                |   | 16,365 |      |  |   | 16,155 |   |  |   | 16,433 |  
|Annualized Net Revenue Per Average Package Member(2)                       |  | $                               | 8.88   |   |                                | $ | 8.52   |      |  | $ | 9.17   |   |  | $ | 8.07   |  
|Other Retail Membership                                                    |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Average Members(1)                                                         |  |                                 | 1,693  |   |                                |   | 1,900  |      |  |   | 1,755  |   |  |   | 2,221  |  
|Annualized Net Revenue Per Average Member(2)                               |  | $                               | 38.26  |   |                                | $ | 31.79  |      |  | $ | 38.24  |   |  | $ | 25.25  |  
|New Retail Membership                                                      |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Average Members(1)                                                         |  |                                 | 498    |   |                                |   | 225    |      |  |   | 444    |   |  |   | 210    |  
|Annualized Net Revenue Per Average Member(2)                               |  | $                               | 100.83 |   |                                | $ | 111.95 |      |  | $ | 101.75 |   |  | $ | 112.15 |  
|Global Membership Products -                                               |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Retail                                                                     |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Average Members(1)(4)                                                      |  |                                 | 8,248  |   |                                |   | 8,236  |      |  |   | 8,378  |   |  |   | 8,472  |  
|Annualized Net Revenue Per Average Member(2)                               |  | $                               | 83.84  |   |                                | $ | 75.42  |      |  | $ | 78.12  |   |  | $ | 72.32  |  
|Average Retail Members including wholesale formerly retail and other(3)(4) |  |                                 | 10,406 |   |                                |   | 10,543 |      |  |   | 10,631 |   |  |   | 10,700 |  



|(1) | Average Members and Average Basic Insured for the period are each calculated by determining the average members or insureds, as applicable, for each month (adding the number of
members or insureds, as applicable, at the beginning of the month with the number of members or insureds, as applicable, at the end of the month and dividing that total by two) for each of the months in the period and then averaging that result for
the period. A members or insureds, as applicable, count is removed in the period in which the member or insured, as applicable, has cancelled.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Annualized Net Revenue Per Average Member and Annualized Net Revenue Per Supplemental Insured are each calculated by taking the revenues as reported for the period and dividing it
by the average members or insureds, as applicable, for the period. Quarterly periods are then multiplied by four to annualize this amount for comparative purposes. Upon cancellation of a member or an insured, as applicable, the members or
insureds, as applicable, revenues are no longer recognized in the calculation.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(3) | Certain programs historically offered as retail arrangements are currently offered as wholesale arrangements where the Company receives lower annualized price points and pays no
related commission expense. Additionally, more recently, the Company has entered into other relationships with new and existing affinity partners, including arrangements where the affinity partner offers the Companys membership programs at
point of sale retail locations to their customers and the Company receives lower annualized price points and pays no related commission expense.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Includes International Operations New Retail Average Members.
|--- | -------------------------------------------------------------

In late 2002, our membership operations changed its strategic focus to overall profitability and generating higher revenue from each member rather than the size of our member base. This has historically resulted in lower average members,
partially offset by higher average revenues per member at lower commission rates and lower variable cost and higher contribution per member. Following a competitive analysis of the marketplace, we recognized that our products were priced below
similar products offered in the marketplace. Additionally, we recognized that there were opportunities to further optimize marketing campaigns that had the effect of acquiring less members but nonetheless such members were more profitable in the
aggregate. By raising prices and marketing more efficiently, we were able to increase our revenues even though less aggregate members joined our programs. For example, 100 consumers joining a product with a $100 annual fee is likely to generate
more revenue than 120 consumers joining a product with a $75 annual fee. Accordingly, by increasing the prices for our products and engaging in marketing campaigns that were designed to achieve a greater return on marketing investment, we may be
able to increase our revenues even though the aggregate number of members in our base has previously declined.

Wholesale members include
members where we typically receive a monthly service fee to support programs offered by our affinity partners. Certain programs historically offered as retail arrangements have switched to wholesale arrangements with lower annualized price points
and no commission expense.

Basic insureds typically receive $1,000 of AD&D coverage at no cost to the consumer since the affinity
partner pays the cost of this coverage. Supplemental insureds are customers who have elected to pay premiums for higher levels of coverage. Average supplemental members have decreased primarily due to reductions in new marketing spend. Average
annualized net revenue per insured has increased primarily due to the introduction of higher priced programs and higher levels of AD&D insurance coverage.

Domestic package members have declined primarily due to certain client terminations, some of which were at lower prices than the net revenue per average member.

Segment EBITDA

Segment EBITDA consists of
income from operations before depreciation and amortization. Segment EBITDA is the measure management uses to evaluate segment performance and we present Segment EBITDA to enhance your understanding of our operating performance. We use Segment
EBITDA as one criterion for evaluating our performance relative to that of our peers. We believe that Segment EBITDA is an operating performance measure, and not a liquidity measure, that provides investors and analysts with a measure of operating
results unaffected by differences in capital structures, capital investment cycles and ages of related assets among otherwise comparable companies. However, Segment EBITDA is not a measurement of financial performance under U.S. GAAP, and Segment
EBITDA may not be comparable to similarly titled measures of other companies. You should not consider Segment EBITDA as an alternative to operating or net income determined in accordance with U.S. GAAP, as an indicator of operating performance or as
an alternative to cash flows from operating activities determined in accordance with U.S. GAAP, or as an indicator of cash flows, or as a measure of liquidity.

Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007

The following
table summarizes our consolidated results of operations for the three months ended September 30, 2008 and 2007:



|                                                                                     |  |                                     |       |   |                                     |   |       |                                              |  |   |                         |   |  |   |      |  
|------------------------------------------------------------------------------------ |  | ----------------------------------- | ----- | - | ----------------------------------- | - | ----- | -------------------------------------------- |  | - | ----------------------- | - |  | - | ---- | -
|                                                                                     |  | Three MonthsEndedSeptember 30, 2008 |       |   | Three MonthsEndedSeptember 30, 2007 |   |       | Increase(Decrease)Related to theTransactions |  |   | Increase(Decrease)Other |  
|                                                                                     |  | (in millions)                       |      
|Net revenues                                                                         |  | $                                   | 364.8 |   |                                     | $ | 330.6 |                                              |  | $ | 4.3                     |   |  | $ | 29.9 |  
|Expenses:                                                                            |  |                                     |       |   |                                     |   |       |                                              |  |   |                         |   |  |   |      |  
|Cost of revenues, exclusive of depreciation and amortization shown separately below: |  |                                     |       |   |                                     |   |       |                                              |  |   |                         |   |  |   |      |  
|Marketing and commissions                                                            |  |                                     | 160.1 |   |                                     |   | 149.3 |                                              |  |   | 1.7                     |   |  |   | 9.1  |  
|Operating costs                                                                      |  |                                     | 96.7  |   |                                     |   | 79.6  |                                              |  |   | 0.7                     |   |  |   | 16.4 |  
|General and administrative                                                           |  |                                     | 24.1  |   |                                     |   | 25.9  |                                              |  |   |                        |   |  |   | (1.8 | )
|Depreciation and amortization                                                        |  |                                     | 68.4  |   |                                     |   | 82.9  |                                              |  |   | (15.0                   | ) |  |   | 0.5  |  
|                                                                                     |  |                                     |       |   |                                     |   |       |                                              |  |   |                         |   |  |   |      |  
|Total expenses                                                                       |  |                                     | 349.3 |   |                                     |   | 337.7 |                                              |  |   | (12.6                   | ) |  |   | 24.2 |  
|                                                                                     |  |                                     |       |   |                                     |   |       |                                              |  |   |                         |   |  |   |      |  
|Income (loss) from operations                                                        |  |                                     | 15.5  |   |                                     |   | (7.1  | )                                            |  |   | 16.9                    |   |  |   | 5.7  |  
|Interest income                                                                      |  |                                     | 0.4   |   |                                     |   | 0.9   |                                              |  |   |                        |   |  |   | (0.5 | )
|Interest expense                                                                     |  |                                     | (35.6 | ) |                                     |   | (38.7 | )                                            |  |   |                        |   |  |   | 3.1  |  
|Other income, net                                                                    |  |                                     | 2.8   |   |                                     |   |      |                                              |  |   |                        |   |  |   | 2.8  |  
|                                                                                     |  |                                     |       |   |                                     |   |       |                                              |  |   |                         |   |  |   |      |  
|Loss before income taxes and minority interests                                      |  |                                     | (16.9 | ) |                                     |   | (44.9 | )                                            |  |   | 16.9                    |   |  |   | 11.1 |  
|Income tax (expense) benefit                                                         |  |                                     | (3.1  | ) |                                     |   | 1.7   |                                              |  |   | (1.8                    | ) |  |   | (3.0 | )
|Minority interests, net of tax                                                       |  |                                     | (0.3  | ) |                                     |   | (0.1  | )                                            |  |   |                        |   |  |   | (0.2 | )
|                                                                                     |  |                                     |       |   |                                     |   |       |                                              |  |   |                         |   |  |   |      |  
|Net loss                                                                             |  | $                                   | (20.3 | ) |                                     | $ | (43.3 | )                                            |  | $ | 15.1                    |   |  | $ | 7.9  |  
|                                                                                     |  |                                     |       |   |                                     |   |       |                                              |  |   |                         |   |  |   |      |  



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Summary of Operating Results for the Three Months Ended September 30, 2008

The following is a summary of changes affecting our operating results for the three months ended September 30, 2008.

Purchase accounting adjustments made in the Transactions had a less significant impact on our results of operations for the three months ended
September 30, 2008 as compared to September 30, 2007. These entries, which are non-cash in nature, increased net revenues by $4.3 million and income (loss) from operations by $16.9 million. The effect of purchase accounting adjustments,
which are primarily related to deferred revenue, for the three months ended September 30, 2008 as compared to September 30, 2007 increased net revenues by $4.3 million, marketing and commissions expense by $1.7 million and operating costs
by $0.7 million. We recorded $15.0 million less depreciation and amortization expense for the three months ended September 30, 2008 which positively affected results of operations.

Excluding the effects of the Transactions, net revenues increased $29.9 million, or 9.0%, for the three months ended September 30, 2008 as compared
to the same period in the prior year. Net revenues increased by $9.4 million in our International segment primarily from a combination of new program introductions and growth in other retail products. Net revenues of our Membership products
increased $8.1 million primarily due to higher average revenues per retail member and higher wholesale revenues, partially offset by lower retail member volumes. Net revenues of our Loyalty products increased $6.5 million, primarily from growth
in both new and existing programs, including fee-based revenue related to a points redemption program acquired on June 30, 2008. Net revenues of our Insurance and Package products increased $5.7 million primarily due to lower cost of insurance
as a result of lower claims experience along with higher fee-based net revenues from our NetGain product, partially offset by lower revenues from fewer Package members.

Excluding the effects of the Transactions, Segment EBITDA increased $6.2 million, primarily due to higher net revenues along with lower net commissions and lower general and administrative costs. The lower general and
administrative costs were primarily due to a decrease in general corporate expenses. Segment EBITDA decreased as a result of higher global marketing expenses and increased operating costs. The higher operating costs were primarily due to higher
product, servicing and employee-related costs incurred in our Membership, Loyalty and International businesses, primarily as a result of the increased revenues.

Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007

The following
section provides an overview of our consolidated results of operations for the three months ended September 30, 2008 as compared to the three months ended September 30, 2007. Calculated percentages are based on amounts as reported which,
for the three months ended September 30, 2008 and 2007, reflect the impact of purchase accounting.

Net Revenues. During the
three months ended September 30, 2008, we reported net revenues of $364.8 million, an increase of $34.2 million, or 10.3%, as compared to net revenues of $330.6 million in the comparable 2007 period. Approximately $4.3 million of the
increase, or 1.3%, was primarily due to an adjustment to deferred revenue related to the Transactions in 2005. Deferred revenue was originally written down as part of purchase accounting. The majority of the negative impact of this adjustment was
recognized in 2005 through 2007, and such impact will continue to decline in future periods. Net revenues excluding the impact of the Transactions increased $29.9 million, or 9.0%, due to increases in all businesses. International products increased
$9.4 million, Membership products increased $8.1 million and Loyalty and Insurance and Package products increased $6.5 million and $5.7 million, respectively. International products net revenues increased primarily due to new program
introductions for our new and other retail programs. Membership net revenues increased primarily due to higher average revenues per retail member and higher wholesale revenues from programs that were formerly retail, partially offset by lower retail
member volumes. Loyalty products net revenues increased primarily due to growth from existing programs and new programs, including fee-based revenue related to a points redemption program acquired on June 30, 2008. Insurance and Package
products increased primarily due to lower cost of insurance as a result of lower claims experience along with higher fee-based revenues from our NetGain product, partially offset by lower revenues from fewer Package members.



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Marketing and Commissions Expense. Marketing and commissions expense increased by $10.8 million,
or 7.2%, to $160.1 million for the three months ended September 30, 2008 from $149.3 million for the three months ended September 30, 2007. Excluding the impact of the Transactions, marketing and commissions expense was $9.1 million,
or 6.1%, higher primarily due to increased global marketing costs, partially offset by lower commissions. Commissions decreased in our Membership business primarily as a result of the continuing shift of marketing spend to lower commission media and
was partially offset by higher commissions in our International business primarily from revenue growth in new retail programs. Approximately $1.7 million, or 1.1%, of the increase was the result of higher commission expense from recording non-cash
purchase accounting adjustments to prepaid commissions related to deferred revenues.

Operating Costs. Operating costs increased by
$17.1 million, or 21.5%, to $96.7 million for the three months ended September 30, 2008 from $79.6 million for the three months ended September 30, 2007. Excluding the impact of the Transactions, operating costs were $16.4 million, or
20.6%, higher than 2007, primarily due to higher product, servicing and employee-related costs in our Membership, Loyalty and International businesses, primarily as a result of the increase in net revenues. Operating costs increased as a result of
the Transactions by $0.7 million, or 0.9%, primarily related to an adjustment for a liability recorded in purchase accounting to service our members (for which no revenue will be recognized in the future) as a result of the Transactions.

General and Administrative Expense. General and administrative expense decreased by $1.8 million, or 6.9%, to $24.1 million for the three
months ended September 30, 2008 from $25.9 million for the three months ended September 30, 2007, principally due to decreases in general corporate expenses primarily for lower employee-related expenses in our International business and
lower professional fees in our Membership business.

Depreciation and Amortization Expense. Depreciation and amortization expense
decreased by $14.5 million for the three months ended September 30, 2008 to $68.4 million from $82.9 million for the three months ended September 30, 2007, primarily from recording higher amortization expense in 2007 on the fair value of
intangible assets resulting from the Transactions as the majority of the intangibles are amortized on an accelerated basis. This amortization expense is based upon an allocation of values to intangible assets and is being amortized over lives
ranging from 3 years to 15 years. Excluding the impact of the Transactions, depreciation and amortization expense increased due to higher amortization of member relationships, partially offset by lower amortization of contract rights.

Interest Expense. Interest expense decreased by $3.1 million, or 8.0%, to $35.6 million for the three months ended September 30, 2008 from
$38.7 million for the three months ended September 30, 2007, primarily due to lower net interest accrued on debt of approximately $5.3 million, primarily the result of the prepayments made on our term loan throughout 2007. This decrease was
partially offset by a less favorable impact of approximately $2.3 million on interest rate swaps in 2008 as compared to 2007.

Income
Tax Expense. Income tax expense increased by $4.8 million for the three months ended September 30, 2008 as compared to the three months ended September 30, 2007, primarily due to the changes in the valuation allowance recorded during
the period attributable to state and foreign deferred tax assets, partially offset by a decrease in both current state and foreign tax liabilities.

Operating Segment Results

Net revenues and Segment EBITDA by operating segment are as follows:



|                                |  |                                  |       |                   |      |   |       |                                              |  |                         |     |      |   |      |      |   |       |                                              |  |                         |       |   |  |   |      |  |   |      |  
|------------------------------- |  | -------------------------------- | ----- | ----------------- | ---- | - | ----- | -------------------------------------------- |  | ----------------------- | --- | ---- | - | ---- | ---- | - | ----- | -------------------------------------------- |  | ----------------------- | ----- | - |  | - | ---- |  | - | ---- | -
|                                |  | Three Months Ended September 30, |      
|                                |  | Net Revenues                     |       | Segment EBITDA(1) |     
|                                |  | 2008                             |       |                   | 2007 |   |       | Increase(Decrease)Related to theTransactions |  | OtherIncrease(Decrease) |     | 2008 |   |      | 2007 |   |       | Increase(Decrease)Related to theTransactions |  | OtherIncrease(Decrease) |      
|                                |  | (in millions)                    |      
|Affinion North America          |  |                                  |       |                   |      |   |       |                                              |  |                         |     |      |   |      |      |   |       |                                              |  |                         |       |   |  |   |      |  |   |      |  
|Membership products             |  | $                                | 183.1 |                   |      | $ | 172.6 |                                              |  | $                       | 2.4 |      | $ | 8.1  |      | $ | 38.3  |                                              |  | $                       | 30.2  |   |  | $ | 0.9  |  | $ | 7.2  |  
|Insurance and package products  |  |                                  | 95.1  |                   |      |   | 89.3  |                                              |  |                         | 0.1 |      |   | 5.7  |      |   | 30.3  |                                              |  |                         | 34.5  |   |  |   | 0.1  |  |   | (4.3 | )
|Loyalty products                |  |                                  | 21.0  |                   |      |   | 14.4  |                                              |  |                         | 0.1 |      |   | 6.5  |      |   | 6.2   |                                              |  |                         | 5.0   |   |  |   | 0.1  |  |   | 1.1  |  
|Eliminations                    |  |                                  | (1.1  | )                 |      |   | (1.3  | )                                            |  |                         |    |      |   | 0.2  |      |   |      |                                              |  |                         |      |   |  |   |     |  |   |     |  
|                                |  |                                  |       |                   |      |   |       |                                              |  |                         |     |      |   |      |      |   |       |                                              |  |                         |       |   |  |   |      |  |   |      |  
|Total North America             |  |                                  | 298.1 |                   |      |   | 275.0 |                                              |  |                         | 2.6 |      |   | 20.5 |      |   | 74.8  |                                              |  |                         | 69.7  |   |  |   | 1.1  |  |   | 4.0  |  
|Affinion International products |  |                                  | 66.7  |                   |      |   | 55.6  |                                              |  |                         | 1.7 |      |   | 9.4  |      |   | 10.4  |                                              |  |                         | 6.7   |   |  |   | 0.8  |  |   | 2.9  |  
|                                |  |                                  |       |                   |      |   |       |                                              |  |                         |     |      |   |      |      |   |       |                                              |  |                         |       |   |  |   |      |  |   |      |  
|Total products                  |  |                                  | 364.8 |                   |      |   | 330.6 |                                              |  |                         | 4.3 |      |   | 29.9 |      |   | 85.2  |                                              |  |                         | 76.4  |   |  |   | 1.9  |  |   | 6.9  |  
|Corporate                       |  |                                  |      |                   |      |   |      |                                              |  |                         |    |      |   |     |      |   | (1.3  | )                                            |  |                         | (0.6  | ) |  |   |     |  |   | (0.7 | )
|                                |  |                                  |       |                   |      |   |       |                                              |  |                         |     |      |   |      |      |   |       |                                              |  |                         |       |   |  |   |      |  |   |      |  
|Total                           |  | $                                | 364.8 |                   |      | $ | 330.6 |                                              |  | $                       | 4.3 |      | $ | 29.9 |      |   | 83.9  |                                              |  |                         | 75.8  |   |  | $ | 1.9  |  |   | 6.2  |  
|                                |  |                                  |       |                   |      |   |       |                                              |  |                         |     |      |   |      |      |   |       |                                              |  |                         |       |   |  |   |      |  |   |      |  
|Depreciation and amortization   |  |                                  |       |                   |      |   |       |                                              |  |                         |     |      |   |      |      |   | (68.4 | )                                            |  |                         | (82.9 | ) |  |   | 15.0 |  |   | (0.5 | )
|                                |  |                                  |       |                   |      |   |       |                                              |  |                         |     |      |   |      |      |   |       |                                              |  |                         |       |   |  |   |      |  |   |      |  
|Income (loss) from operations   |  |                                  |       |                   |      |   |       |                                              |  |                         |     |      |   |      |      | $ | 15.5  |                                              |  | $                       | (7.1  | ) |  | $ | 16.9 |  | $ | 5.7  |  
|                                |  |                                  |       |                   |      |   |       |                                              |  |                         |     |      |   |      |      |   |       |                                              |  |                         |       |   |  |   |      |  |   |      |  



|(1) | See Segment EBITDA above and Note 10 to the unaudited condensed consolidated financial statements for a discussion of Segment EBITDA and a reconciliation of Segment EBITDA to income
(loss) from operations.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Affinion North America

Membership Products. Membership products net revenues increased by $10.5 million, or 6.1%, to $183.1 million for the three months ended September 30, 2008 as compared to $172.6 million for the three months
ended September 30, 2007. Excluding the effects of the Transactions, net revenues increased by $8.1 million, or 4.7%, primarily due to higher average revenues per retail member and higher wholesale revenues from programs that were formerly
retail, partially offset by lower retail member volumes. Net revenues increased $2.4 million, or 1.4%, related to purchase accounting adjustments from the Transactions.

Segment EBITDA increased by $8.1 million for the three months ended September 30, 2008 as compared to the three months ended September 30, 2007. Excluding the effects of the Transactions, Segment EBITDA
increased $7.2 million, primarily due to higher net revenues of $8.1 million and lower marketing and commissions of $4.3 million. General and administrative costs decreased $0.6 million, principally the result of decreases in general corporate
expenses. Segment EBITDA decreased as a result of higher product and employee-related costs of $5.8 million. Segment EBITDA related to the Transactions was positively affected by a $0.9 million adjustment recorded in purchase accounting,
net of increased prepaid commissions and amortization of the liability to service our members (for which no revenue will be recognized in the future) recorded in purchase accounting.

Insurance and Package Products. Insurance and package products reported net revenues of $95.1 million for the three months ended
September 30, 2008, an increase of $5.8 million, or 6.5%, as compared to the three months ended September 30, 2007. Excluding the effects of the Transactions, Insurance revenue increased approximately $4.7 million, principally due to lower
cost of insurance as a result of lower claims experience. Package revenue increased approximately $1.0 million, as higher fee-based revenues from our NetGain product were partially offset by lower revenue from fewer Package members. In addition, net
revenues as a result of the Transactions increased $0.1 million due to a non-cash deferred revenue adjustment recorded in purchase accounting.

Excluding the effects of the Transactions, Segment EBITDA decreased by $4.3 million for the three months ended September 30, 2008 as compared to the three months ended September 30, 2007, primarily due to higher marketing costs
and increased product costs totaling $10.0 million, which more than offset the higher net revenues of $5.7 million. Segment EBITDA related to the Transactions increased $0.1 million from a deferred revenue adjustment described above.

Loyalty Products. Revenues from Loyalty products increased by $6.6 million, or 45.8%, for the three months ended September 30, 2008 to $21.0
million as compared to $14.4 million for the three months ended September 30, 2007. Net revenues increased $5.5 million from new programs, primarily from fee-based revenue related to a recently acquired points redemption program, and $1.1
million due to member growth within existing client programs.

Segment EBITDA increased by $1.2 million for the three months ended
September 30, 2008 as compared to the three months ended September 30, 2007, primarily due to revenue growth from new and existing programs, net of higher product and servicing costs.

Affinion International

International
Products. International products net revenues increased by $11.1 million, or 20.0%, to $66.7 million for the three months ended September 30, 2008 as compared to $55.6 million for the three months ended September 30, 2007. Net revenues
excluding the results of the Transactions increased $9.4 million, or 16.9%, primarily due to higher revenues of $7.0 million from new program introductions for our new retail offerings, $1.6 million from growth in our other retail business and $1.0
million from a lower cost of insurance associated with certain package and retail programs. Net revenues decreased $0.4 million from the currency effect of the change in the U.S. dollar, due to a strengthening against the British pound and a
weakening against the Euro. Net revenues also increased $1.7 million, or 3.1%, from a non-cash deferred revenue adjustment recorded in purchase accounting as a result of the Transactions.



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Segment EBITDA increased by $3.7 million for the three months ended September 30, 2008 as compared
to the three months ended September 30, 2007. Excluding the effect of the Transactions, Segment EBITDA increased $2.9 million. The increase in net revenue of $9.4 million along with lower general and administrative costs of $2.0 million
was partially offset by $8.5 million of higher marketing and commissions and increased operating costs, primarily to support our new retail programs. Segment EBITDA increased $0.8 million as a result of purchase accounting adjustments primarily
related to a deferred revenue adjustment, net of commissions, and the amortization of the service liability to service our members (for which no revenue will be recognized in the future) as a result of the Transactions.

Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007

The following table summarizes our consolidated results of operations for the nine months ended September 30, 2008 and 2007:



|                                                                                     |  |                                    |         |   |                                    |   |         |                                              |  |   |                         |   |  |   |       |  
|------------------------------------------------------------------------------------ |  | ---------------------------------- | ------- | - | ---------------------------------- | - | ------- | -------------------------------------------- |  | - | ----------------------- | - |  | - | ----- | -
|                                                                                     |  | Nine MonthsEndedSeptember 30, 2008 |         |   | Nine MonthsEndedSeptember 30, 2007 |   |         | Increase(Decrease)Related to theTransactions |  |   | Increase(Decrease)Other |  
|                                                                                     |  | (in millions)                      |        
|Net revenues                                                                         |  | $                                  | 1,058.3 |   |                                    | $ | 984.4   |                                              |  | $ | 10.3                    |   |  | $ | 63.6  |  
|                                                                                     |  |                                    |         |   |                                    |   |         |                                              |  |   |                         |   |  |   |       |  
|Expenses:                                                                            |  |                                    |         |   |                                    |   |         |                                              |  |   |                         |   |  |   |       |  
|Cost of revenues, exclusive of depreciation and amortization shown separately below: |  |                                    |         |   |                                    |   |         |                                              |  |   |                         |   |  |   |       |  
|Marketing and commissions                                                            |  |                                    | 475.3   |   |                                    |   | 452.9   |                                              |  |   | 3.7                     |   |  |   | 18.7  |  
|Operating costs                                                                      |  |                                    | 277.2   |   |                                    |   | 251.2   |                                              |  |   | 2.4                     |   |  |   | 23.6  |  
|General and administrative                                                           |  |                                    | 77.9    |   |                                    |   | 89.5    |                                              |  |   |                        |   |  |   | (11.6 | )
|Depreciation and amortization                                                        |  |                                    | 205.6   |   |                                    |   | 242.1   |                                              |  |   | (44.6                   | ) |  |   | 8.1   |  
|                                                                                     |  |                                    |         |   |                                    |   |         |                                              |  |   |                         |   |  |   |       |  
|Total expenses                                                                       |  |                                    | 1,036.0 |   |                                    |   | 1,035.7 |                                              |  |   | (38.5                   | ) |  |   | 38.8  |  
|                                                                                     |  |                                    |         |   |                                    |   |         |                                              |  |   |                         |   |  |   |       |  
|Income (loss) from operations                                                        |  |                                    | 22.3    |   |                                    |   | (51.3   | )                                            |  |   | 48.8                    |   |  |   | 24.8  |  
|Interest income                                                                      |  |                                    | 1.4     |   |                                    |   | 3.6     |                                              |  |   |                        |   |  |   | (2.2  | )
|Interest expense                                                                     |  |                                    | (87.1   | ) |                                    |   | (107.7  | )                                            |  |   |                        |   |  |   | 20.6  |  
|Other income, net                                                                    |  |                                    | 2.6     |   |                                    |   |        |                                              |  |   |                        |   |  |   | 2.6   |  
|                                                                                     |  |                                    |         |   |                                    |   |         |                                              |  |   |                         |   |  |   |       |  
|Loss before income taxes and minority interests                                      |  |                                    | (60.8   | ) |                                    |   | (155.4  | )                                            |  |   | 48.8                    |   |  |   | 45.8  |  
|Income tax (expense) benefit                                                         |  |                                    | (8.9    | ) |                                    |   | (1.0    | )                                            |  |   | 8.7                     |   |  |   | (16.6 | )
|Minority interests, net of tax                                                       |  |                                    | (0.6    | ) |                                    |   | (0.2    | )                                            |  |   |                        |   |  |   | (0.4  | )
|                                                                                     |  |                                    |         |   |                                    |   |         |                                              |  |   |                         |   |  |   |       |  
|Net loss                                                                             |  | $                                  | (70.3   | ) |                                    | $ | (156.6  | )                                            |  | $ | 57.5                    |   |  | $ | 28.8  |  
|                                                                                     |  |                                    |         |   |                                    |   |         |                                              |  |   |                         |   |  |   |       |  

Summary of Operating Results for the Nine Months Ended September 30, 2008

The following is a summary of changes affecting our operating results for the nine months ended September 30, 2008.

Purchase accounting adjustments made in the Transactions had a less significant impact on our results of operations for the nine months ended
September 30, 2008 as compared to September 30, 2007. These entries, which were non-cash in nature, increased net revenues by $10.3 million and income (loss) from operations by $48.8 million. The effect of purchase accounting adjustments,
which were primarily related to deferred revenue, for the nine months ended September 30, 2008 as compared to September 30, 2007 increased net revenues by $10.3 million, marketing and commissions expense by $3.7 million and operating costs
by $2.4 million. We recorded $44.6 million less depreciation and amortization expense for the nine months ended September 30, 2008 which positively affected results of operations.

Excluding the effects of the Transactions, net revenues increased $63.6 million, or 6.5%, for the nine months ended September 30, 2008 as compared
to the same period in the prior year. Net revenues increased by $37.2 million in our International segment primarily from a combination of new program introductions, growth in other retail and package products and a net weakness in the U.S. dollar.
Net revenues of our Loyalty products increased $10.9 million primarily from growth in both new and existing programs, including fee-based revenue related to a points redemption program acquired on June 30, 2008. Net revenues of our Membership
products increased $9.5 million primarily due to higher average revenues per retail member and higher wholesale revenues, partially offset by lower retail member volumes. Net revenues of our Insurance and Package products increased $5.5 million
primarily due to lower cost of insurance as a result of lower claims experience and the increase in net revenue per supplemental insured which was partially offset by lower Package revenue primarily from lower Package members, partially offset by
increased fee-based revenues from our NetGain product.

Excluding the effects of the Transactions, Segment EBITDA increased $32.9 million
for the nine months ended September 30, 2008 as compared to the same period in the prior year, primarily due to higher net revenues along with lower net commissions and lower general and administrative costs. The lower general and
administrative costs were primarily due to the



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absence in 2008 of a charge for a distribution to option holders recorded in the first quarter of 2007 and a decrease in general corporate expenses,
principally lower professional fees. Segment EBITDA was negatively impacted by higher global marketing expenses and increased operating costs, primarily higher product and servicing costs incurred in our International and Loyalty businesses as a
result of the increased revenues and the net impact of the change in the U.S. dollar.

Nine Months Ended September 30, 2008 Compared to Nine
Months Ended September 30, 2007

The following section provides an overview of our consolidated results of operations for the
nine months ended September 30, 2008 as compared to the nine months ended September 30, 2007. Calculated percentages are based on amounts as reported which, for the nine months ended September 30, 2008 and 2007, reflect the impact of
purchase accounting.

Net Revenues. During the nine months ended September 30, 2008, we reported net revenues of $1,058.3
million, an increase of $73.9 million, or 7.5%, as compared to net revenues of $984.4 million in the comparable period in 2007. Approximately $10.3 million of the increase, or 1.0%, was primarily due to an adjustment to deferred revenue related
to the Transactions. Deferred revenue was originally written down as a part of purchase accounting. The majority of the negative impact of this adjustment was recognized in 2005 through 2007, and such impact will continue to decline in future
periods. Net revenues excluding the impact of the Transactions increased $63.6 million, or 6.5%, primarily due to increases in all businesses. Net revenues from International products increased $37.2 million, revenues from Loyalty products
increased by $10.9 million and Membership and Insurance and Package products increased $9.5 million and $5.5 million, respectively. International products net revenues increased primarily due to new program introductions for our new and other retail
programs, growth in the package business and a favorable currency impact due to the continued weakness of the U.S. dollar. Loyalty products net revenues increased primarily due to growth from existing programs and new programs, including fee-based
revenue related to a points redemption program acquired on June 30, 2008. Membership products net revenues increased primarily due to higher average revenues per retail member and higher wholesale revenues from programs that were formerly
retail, partially offset by lower retail member volumes. Insurance and Package products net revenues increased primarily due to lower cost of insurance as a result of lower claims experience and the increase in net revenue per supplemental insured
which was partially offset by lower Package revenue primarily from lower Package members, which more than offset higher fee-based net revenues from our NetGain product.

Marketing and Commissions Expense. Marketing and commissions expense increased by $22.4 million, or 4.9%, to $475.3 million for the nine months ended September 30, 2008 from $452.9 million for the
nine months ended September 30, 2007. Excluding the impact of the Transactions, marketing and commissions expense was $18.7 million, or 4.1%, higher primarily due to increased global marketing costs, partially offset by lower commissions.
Commissions decreased in our Membership business primarily as a result of the continuing shift of marketing spend to lower commission media and was partially offset by higher commissions in our International business, primarily from revenue growth
in new retail programs. Approximately $3.7 million, or 0.8%, of the increase was the result of higher commission expense related to the recording of non-cash purchase accounting adjustments to prepaid commissions related to deferred revenues.

Operating Costs. Operating costs increased by $26.0 million, or 10.4%, to $277.2 million for the nine months ended
September 30, 2008 from $251.2 million for the nine months ended September 30, 2007. Excluding the impact of the Transactions, operating costs were $23.6 million, or 9.4%, higher than those incurred in 2007, primarily due to higher
product, servicing and employee-related costs in our Loyalty, International and Membership businesses and higher costs due to the net impact of the change in the U.S. dollar. Operating costs increased as a result of the Transactions by $2.4 million,
or 1.0%, primarily related to an adjustment for a liability recorded in purchase accounting to service our members (for which no revenue will be recognized in the future) as a result of the Transactions.

General and Administrative Expense. General and administrative expense decreased by $11.6 million, or 13.0%, to $77.9 million for the nine
months ended September 30, 2008 from $89.5 million for the nine months ended September 30, 2007, primarily due to the absence in 2008 of a $5.4 million charge for a cash distribution to option holders in the first quarter of 2007 in
connection with the special dividend paid by Affinion Holdings in addition to lower general corporate expenses, primarily lower professional fees in our Membership business and lower employee-related expenses in our International business.

Depreciation and Amortization Expense. Depreciation and amortization expense decreased by $36.5 million for the nine months
ended September 30, 2008 to $205.6 million from $242.1 million for the nine months ended September 30, 2007, primarily from recording higher amortization expense in 2007 on the fair value of intangible assets resulting from the
Transactions as the majority of the intangibles are amortized on an accelerated basis. This amortization expense is based upon an allocation of values to intangible assets and is being amortized over lives ranging from 3 years to 15 years. This
decrease was partially offset by an increase in the amortization of member relationships acquired subsequent to the date of the Transactions.

Interest Expense. Interest expense decreased by $20.6 million, or 19.1%, to $87.1 million for the nine months ended September 30, 2008 from $107.7 million for the nine months ended September 30, 2007, primarily due to a
more favorable impact of approximately $8.2 million on interest rate swaps in 2008 as compared to 2007 in addition to lower net interest accrued on debt of approximately $13.2 million, primarily the net result of the prepayments made on our term
loan throughout 2007 and the current utilization of our revolving credit facility. These decreases were partially offset by increased accreted interest of $0.5 million related to deferred payments.



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Income Tax Expense. Income tax expense increased by $7.9 million for the nine months ended
September 30, 2008 as compared to the nine months ended September 30, 2007, primarily due to the changes in the valuation allowance recorded during the period attributable to state and foreign deferred tax assets, partially offset by a
decrease in both current state and foreign tax liabilities and recording a state tax benefit associated with the utilization of tax attributes which are reimbursable under the purchase agreement.

Operating Segment Results

Net revenues and
Segment EBITDA by operating segment are as follows:



|                                |  |                                 |         |                    |      |   |       |                                              |  |                         |      |      |   |      |      |   |        |                                              |  |                         |        |   |  |   |      |  |   |      |  
|------------------------------- |  | ------------------------------- | ------- | ------------------ | ---- | - | ----- | -------------------------------------------- |  | ----------------------- | ---- | ---- | - | ---- | ---- | - | ------ | -------------------------------------------- |  | ----------------------- | ------ | - |  | - | ---- |  | - | ---- | -
|                                |  | Nine Months Ended September 30, |        
|                                |  | Net Revenues                    |         | Segment EBITDA (1) |     
|                                |  | 2008                            |         |                    | 2007 |   |       | Increase(Decrease)Related to theTransactions |  | OtherIncrease(Decrease) |      | 2008 |   |      | 2007 |   |        | Increase(Decrease)Related to theTransactions |  | OtherIncrease(Decrease) |       
|                                |  | (in millions)                   |        
|Affinion North America          |  |                                 |         |                    |      |   |       |                                              |  |                         |      |      |   |      |      |   |        |                                              |  |                         |        |   |  |   |      |  |   |      |  
|Membership products             |  | $                               | 529.7   |                    |      | $ | 515.1 |                                              |  | $                       | 5.1  |      | $ | 9.5  |      | $ | 93.6   |                                              |  | $                       | 68.2   |   |  | $ | 1.6  |  | $ | 23.8 |  
|Insurance and package products  |  |                                 | 281.9   |                    |      |   | 275.9 |                                              |  |                         | 0.5  |      |   | 5.5  |      |   | 99.8   |                                              |  |                         | 105.4  |   |  |   | 0.5  |  |   | (6.1 | )
|Loyalty products                |  |                                 | 51.6    |                    |      |   | 40.6  |                                              |  |                         | 0.1  |      |   | 10.9 |      |   | 15.3   |                                              |  |                         | 11.3   |   |  |   | 0.1  |  |   | 3.9  |  
|Eliminations                    |  |                                 | (3.2    | )                  |      |   | (3.7  | )                                            |  |                         |     |      |   | 0.5  |      |   |       |                                              |  |                         |       |   |  |   |     |  |   |     |  
|                                |  |                                 |         |                    |      |   |       |                                              |  |                         |      |      |   |      |      |   |        |                                              |  |                         |        |   |  |   |      |  |   |      |  
|Total North America             |  |                                 | 860.0   |                    |      |   | 827.9 |                                              |  |                         | 5.7  |      |   | 26.4 |      |   | 208.7  |                                              |  |                         | 184.9  |   |  |   | 2.2  |  |   | 21.6 |  
|Affinion International products |  |                                 | 198.3   |                    |      |   | 156.5 |                                              |  |                         | 4.6  |      |   | 37.2 |      |   | 23.7   |                                              |  |                         | 14.8   |   |  |   | 2.0  |  |   | 6.9  |  
|                                |  |                                 |         |                    |      |   |       |                                              |  |                         |      |      |   |      |      |   |        |                                              |  |                         |        |   |  |   |      |  |   |      |  
|Total products                  |  |                                 | 1,058.3 |                    |      |   | 984.4 |                                              |  |                         | 10.3 |      |   | 63.6 |      |   | 232.4  |                                              |  |                         | 199.7  |   |  |   | 4.2  |  |   | 28.5 |  
|Corporate                       |  |                                 |        |                    |      |   |      |                                              |  |                         |     |      |   |     |      |   | (4.5   | )                                            |  |                         | (8.9   | ) |  |   |     |  |   | 4.4  |  
|                                |  |                                 |         |                    |      |   |       |                                              |  |                         |      |      |   |      |      |   |        |                                              |  |                         |        |   |  |   |      |  |   |      |  
|Total                           |  | $                               | 1,058.3 |                    |      | $ | 984.4 |                                              |  | $                       | 10.3 |      | $ | 63.6 |      |   | 227.9  |                                              |  |                         | 190.8  |   |  | $ | 4.2  |  |   | 32.9 |  
|                                |  |                                 |         |                    |      |   |       |                                              |  |                         |      |      |   |      |      |   |        |                                              |  |                         |        |   |  |   |      |  |   |      |  
|Depreciation and amortization   |  |                                 |         |                    |      |   |       |                                              |  |                         |      |      |   |      |      |   | (205.6 | )                                            |  |                         | (242.1 | ) |  |   | 44.6 |  |   | (8.1 | )
|                                |  |                                 |         |                    |      |   |       |                                              |  |                         |      |      |   |      |      |   |        |                                              |  |                         |        |   |  |   |      |  |   |      |  
|Income (loss) from operations   |  |                                 |         |                    |      |   |       |                                              |  |                         |      |      |   |      |      | $ | 22.3   |                                              |  | $                       | (51.3  | ) |  | $ | 48.8 |  | $ | 24.8 |  
|                                |  |                                 |         |                    |      |   |       |                                              |  |                         |      |      |   |      |      |   |        |                                              |  |                         |        |   |  |   |      |  |   |      |  



|(1) | See Segment EBITDA above and Note 10 to the unaudited condensed consolidated financial statements for a discussion of Segment EBITDA and a reconciliation of Segment EBITDA to income
(loss) from operations.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Affinion North America

Membership Products. Membership products net revenues increased by $14.6 million, or 2.8%, to $529.7 million for the nine months ended September 30, 2008 as compared to $515.1 million for the nine months
ended September 30, 2007. Excluding the effects of the Transactions, net revenues increased by $9.5 million, or 1.8%, primarily due to higher average revenues per retail member and higher wholesale revenues from programs that were formerly
retail, partially offset by lower retail member volumes. In addition, net revenues increased $5.1 million, or 1.0%, primarily related to a deferred revenue adjustment recorded in purchase accounting from the Transactions.

Segment EBITDA increased by $25.4 million for the nine months ended September 30, 2008 as compared to the nine months ended September 30, 2007.
Excluding the effects of the Transactions, Segment EBITDA increased by $23.8 million primarily due to lower marketing and commissions of $14.4 million and higher net revenues of $9.5 million. Segment EBITDA also increased due to lower general and
administrative costs of $6.8 million, principally a result of decreases in general corporate expenses, primarily lower professional fees. Segment EBITDA decreased as a result of higher product and employee-related costs of $6.9 million. Segment
EBITDA related to the Transactions for the nine months ended September 30, 2008 was positively affected by a $1.6 million deferred revenue adjustment recorded in purchase accounting, net of increased prepaid commissions and the amortization of
the liability to service our members (for which no revenue will be recognized in the future) recorded in purchase accounting.

Insurance
and Package Products. Insurance and package products reported net revenues of $281.9 million for the nine months ended September 30, 2008, an increase of $6.0 million, or 2.2%, as compared to the $275.9 million reported for the nine months
ended September 30, 2007. Excluding the effects of the Transactions, Insurance net revenues increased approximately $6.8 million, principally due to the continued increase in net revenue per supplemental insured and lower cost of insurance
resulting from lower claims experience. Package net revenues declined $1.3 million, primarily due to lower Package members, partially offset by an increase in fee-based net revenues from our NetGain product. In addition, net revenues as a result of
the Transactions increased $0.5 million due to a non-cash deferred revenue adjustment recorded in purchase accounting.



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Excluding the effects of the Transactions, Segment EBITDA decreased by $6.1 million for the nine months
ended September 30, 2008 as compared to the nine months ended September 30, 2007, primarily due to higher marketing costs of approximately $12.0 million, which more than offset the higher net revenues of $5.5 million. Segment EBITDA
related to the Transactions increased $0.5 million from a deferred revenue adjustment described above.

Loyalty Products. Revenues
from Loyalty products increased by $11.0 million, or 27.1%, for the nine months ended September 30, 2008 to $51.6 million as compared to $40.6 million for the nine months ended September 30, 2007. Net revenues increased $6.5 million,
primarily from new programs, including fee-based revenue from a points redemption program acquired on June 30, 2008, and $4.5 million due to member growth within existing client programs.

Segment EBITDA increased by $4.0 million for the nine months ended September 30, 2008 as compared to the nine months ended September 30, 2007,
primarily due to revenue growth from new and existing programs, net of higher product and servicing costs.

Affinion International

International Products. International products net revenues increased by $41.8 million, or 26.7%, to $198.3 million for the nine months ended
September 30, 2008 as compared to $156.5 million for the nine months ended September 30, 2007. Net revenues excluding the results of the Transactions increased $37.2 million, or 23.8%, primarily due to higher revenues of $17.0 million from
new program introductions for our new retail offerings, $7.7 million from growth in our other retail business, $4.0 million from growth in our package business and $1.6 million from a lower cost of insurance associated with certain package and
retail programs. The package business experienced a net year over year reduction in members, however the majority of the lost members generated a minimal amount of revenue and were substantially offset by new members at higher price points. In
addition, net revenues increased $6.8 million from the net impact of the change in the U.S. dollar. Net revenues also increased $4.6 million, or 2.9%, from a non-cash deferred revenue adjustment recorded in purchase accounting as a result of the
Transactions.

Segment EBITDA increased by $8.9 million for the nine months ended September 30, 2008 as compared to the nine months
ended September 30, 2007. Excluding the effect of the Transactions, Segment EBITDA increased $6.9 million. The increase in revenue of $37.2 million along with lower general and administrative costs of $1.9 million was partially offset by $26.4
million of higher marketing and commissions and increased operating costs primarily to support our new retail programs. The net impact of the change in the U.S. dollar increased costs and reduced Segment EBITDA by approximately $5.8 million. In
addition, Segment EBITDA increased $2.0 million as a result of purchase accounting adjustments primarily related to a deferred revenue adjustment, net of commissions, and the amortization of the service liability to service our members (for which no
revenue will be recognized in the future) as a result of the Transactions.

Corporate

For the nine months ended September 30, 2008, corporate costs decreased by $4.4 million as compared to the nine months ended September 30, 2007
primarily due to the absence in 2008 of a $5.4 million charge related to a payment to option holders in the first quarter of 2007, in connection with the special dividend paid by Affinion Holdings.

Financial Condition, Liquidity and Capital Resources

Financial
Condition  September 30, 2008 and December 31, 2007



|                                     |  |                   |         |   |                  |   |         |                    |  |   |        |  
|------------------------------------ |  | ----------------- | ------- | - | ---------------- | - | ------- | ------------------ |  | - | ------ | -
|                                     |  | September 30,2008 |         |   | December 31,2007 |   |         | Increase(Decrease) | 
|                                     |  | (in millions)     |        
|Total assets                         |  | $                 | 1,476.1 |   |                  | $ | 1,601.2 |                    |  | $ | (125.1 | )
|Total liabilities                    |  |                   | 1,991.1 |   |                  |   | 2,006.1 |                    |  |   | (15.0  | )
|Total stockholders equity (deficit) |  |                   | (515.6  | ) |                  |   | (405.5  | )                  |  |   | (110.1 | )

Total assets decreased by $125.1 million due to (i) a decrease in intangible assets of $166.9
million, principally due to amortization expense of $164.1 million (substantially all of the intangible assets were acquired as a result of the Transactionssee Notes 1 and 2 to our unaudited condensed consolidated financial statements), and
(ii) a net decrease in contract rights and list fees of $17.2 million due to amortization expense for the period in excess of the cost of acquired contract rights. These decreases were partially offset by (i) an increase in profit-sharing
receivables from insurance carriers of $24.4 million due to timing of receipts from the insurance carriers, (ii) an increase in receivables from related parties of $29.0 million principally due to a receivable from certain ex-Cendant entities
for the reimbursable portion of a litigation settlement and recognition of long-term receivables related to the assumption of a loyalty points program liability, and (iii) an increase in other non-current assets of $6.2 million primarily
due to a change in the fair value of interest rate swaps of $7.8 million.



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Total liabilities decreased $15.0 million primarily due to (i) a decrease in debt of $37.4 million
primarily as a result of net repayments under the line of credit and (ii) a decrease in deferred revenues of $14.3 million primarily due to the continued shift in the retail membership customer base from memberships billed on an annual basis
and memberships with full money back terms to memberships billed on a monthly basis. These decreases were partially offset by an increase in accounts payable and accrued expenses of $37.1 million, principally due to the accrual of a litigation
settlement and the recognition of a liability to loyalty points program holders related to the assumption of a loyalty points program liability.

Total stockholders equity (deficit) decreased by $110.1 million due to a net loss of $70.3 million and dividend payments to the Companys parent of $37.0 million and a currency effect of $2.8 million.

Liquidity and Capital Resources

Our primary
sources of liquidity on both a short-term and long-term basis are cash on hand and cash generated through operating and financing activities. Our primary cash needs are for working capital, capital expenditures and general corporate purposes, and to
service the indebtedness incurred in connection with the Transactions. We believe that, based on our current operations and anticipated growth, our cash on hand, cash flows from operating activities and borrowing availability under our revolving
credit facility will be sufficient to meet our liquidity needs for the next twelve months and in the foreseeable future.

Cash Flows
 Nine Months Ended September 30, 2008 and 2007

At September 30, 2008, we had $18.3 million of cash and cash equivalents
on hand, a decrease of $4.2 million from $22.5 million at September 30, 2007. The following table summarizes our cash flows and compares changes in our cash and cash equivalents on hand to the same period in the prior year.



|                                        |  |                                 |       |   |      |   |        |        |  |   |      |  
|--------------------------------------- |  | ------------------------------- | ----- | - | ---- | - | ------ | ------ |  | - | ---- | -
|                                        |  | Nine Months Ended September 30, |      
|                                        |  | 2008                            |       |   | 2007 |   |        | Change | 
|                                        |  | (in millions)                   |      
|Cash provided by (used in):             |  |                                 |       |   |      |   |        |        |  |   |      |  
|Operating activities                    |  | $                               | 108.4 |   |      | $ | 65.1   |        |  | $ | 43.3 |  
|Investing activities                    |  |                                 | (26.7 | ) |      |   | (19.4  | )      |  |   | (7.3 | )
|Financing activities                    |  |                                 | (76.1 | ) |      |   | (107.6 | )      |  |   | 31.5 |  
|Effect of exchange rate changes         |  |                                 | (1.5  | ) |      |   | 0.1    |        |  |   | (1.6 | )
|                                        |  |                                 |       |   |      |   |        |        |  |   |      |  
|Net change in cash and cash equivalents |  | $                               | 4.1   |   |      | $ | (61.8  | )      |  | $ | 65.9 |  
|                                        |  |                                 |       |   |      |   |        |        |  |   |      |  

Operating Activities

During the nine months ended September 30, 2008, we generated $43.3 million more cash from operating activities than during the nine months ended
September 30, 2007. Segment EBITDA, excluding the non-cash impacts of purchase accounting, increased by $37.1 million for the nine months ended September 30, 2008 as compared to the nine months ended September 30, 2007 (see
Results of Operations). In addition, in 2008 we received $7.4 million (net of transaction costs) in connection with the assumption of a loyalty points program liability.

Investing Activities

We used $7.3
million more cash in investing activities during the nine months ended September 30, 2008 as compared to the same period in 2007, principally due to increased capital expenditures, which were $25.6 million and $18.6 million for the nine months
ended September 30, 2008 and 2007, respectively.

Financing Activities

We used $31.5 million less cash in financing activities during the nine months ended September 30, 2008 as compared to the same period in 2007.
During the nine months ended September 30, 2008, we had net repayments under our line of credit of $38.5 million and paid dividends to our parent of $37.0 million. During the nine months ended September 30, 2007, we made
$75.0 million of voluntary prepayments of the term loan, and we paid dividends to our parent of $32.1 million. In addition, during 2008 and 2007, one of our majority-owned consolidated subsidiaries made a distribution to its minority
shareholder of $0.4 million.



37



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##### Table of Contents

Credit Facilities and Long-Term Debt

Following the completion of the Transactions we became a highly leveraged company, having incurred substantial debt. As of September 30, 2008, we had
approximately $1.3 billion in indebtedness. Payments required to service this indebtedness have substantially increased our liquidity requirements as compared to prior years.

As part of the Transactions, we (a) issued $270.0 million principal amount of 101/8% senior notes due October 15, 2013 (the senior notes) ($266.4 million net of discount), (b) entered into our new senior secured
credit facilities consisting of a term loan facility in the principal amount of $860.0 million (which amount does not reflect the $205.0 million in principal prepayments that we made through September 30, 2008) and a revolving credit facility
in an aggregate amount of up to $100.0 million and (c) entered into a senior subordinated bridge loan facility in the principal amount of $383.6 million. At September 30, 2008, we had $304.0 million ($302.5 million net of premiums and
discounts) outstanding under the senior notes, $655.0 million outstanding under the term loan facility, $355.5 million ($351.7 million net of discounts) outstanding under the senior subordinated notes and $98.5 million available under the revolving
credit facility after giving effect to the issuance of $1.5 million of letters of credit.

Any borrowings under the revolving credit
facility are available to fund our working capital requirements, capital expenditures and for other general corporate purposes. The senior secured credit facility also generally requires us to prepay borrowings under the term loan with proceeds from
asset dispositions, excess cash flow beginning in July 2006 and the net cash proceeds from certain debt issued in the future. The remaining balance of the term loan is due and payable in full in 2012. The revolving credit facility is available until
2011. The term loan provides, at our option, for interest rates of a) adjusted LIBOR plus 2.50% or b) the higher of i) Credit Suisse, Cayman Island Branchs prime rate and ii) the Federal Funds Effective Rate plus 0.5% (ABR), in
each case plus 1.50%. The revolving credit facility provides, at our option, for interest rates of adjusted LIBOR plus 2.50% or ABR, plus 1.50% subject to downward adjustment based on our senior secured bank leverage ratio, as set forth in the
agreement governing the revolving credit facility. Effective January 4, 2007, the senior secured credit facility was amended to decrease the interest rate on the term loan facility by 25 basis points, initially, and to provide for an additional
25 basis point decrease if the corporate family rating of Affinion Group reached B1 or higher by Moodys and B+ or higher by S&P. The amendment also modified the definition of change of control.

On October 17, 2005, we issued $270.0 million aggregate principal amount of senior notes and applied the gross proceeds of $266.4 million to finance
a portion of the Transactions. On May 3, 2006, we issued an additional $34.0 million aggregate principal amount of senior notes and applied the gross proceeds, together with cash on hand, to repay the then remaining outstanding borrowings under
our bridge loan facility. The interest on our senior notes is payable semi-annually. We may redeem some or all of the senior notes at any time on or after October 15, 2009 at the redemption prices (generally at a premium) set forth in the
indenture governing the senior notes. In addition, on or before October 15, 2008, we may redeem up to 35% of the aggregate principal amount of our senior notes with the net proceeds of certain equity offerings, provided that at least 65% of the
aggregate principal amount of our senior notes initially issued remain outstanding immediately after such redemption. The senior notes are unsecured obligations. The senior notes are guaranteed by the same subsidiaries that guarantee our
$960.0 million senior secured credit facility and our senior subordinated notes. The senior notes contain restrictive covenants related primarily to our ability to distribute dividends, redeem or repurchase capital stock, sell assets, issue
additional debt or merge with or acquire other companies.

Our senior subordinated
bridge loan facility has since been refinanced with the proceeds from the offering of senior subordinated notes (as defined below) and additional senior notes. On April 26, 2006 we issued $355.5 million aggregate principal amount of 111/2% senior subordinated notes due October 15, 2015 (the senior subordinated notes) and applied the gross proceeds of
$350.5 million to repay $349.5 million of outstanding borrowings under our senior subordinated loan facility, plus accrued interest, and used cash on hand to pay fees and expenses associated with such issuance. The interest on our senior
subordinated notes is payable semi-annually. We may redeem some or all of the senior subordinated notes at any time on or after October 15, 2010 at the redemption prices (generally at a premium) set forth in the agreement governing the senior
subordinated notes. In addition, on or before October 15, 2008, we may redeem up to 35% of the aggregate principal amount of our senior subordinated notes with the net proceeds of certain equity offerings, provided that at least 65% of the
aggregate principal amount of our senior subordinated notes initially issued remain outstanding immediately after such redemption. The senior subordinated notes are unsecured obligations. The senior subordinated notes are guaranteed by the same
subsidiaries that guarantee our $960.0 million senior secured credit facility and senior notes. The senior subordinated notes contain restrictive covenants related primarily to our ability to distribute dividends, redeem or repurchase capital
stock, sell assets, issue additional debt or merge with or acquire other companies.

Covenant Compliance

Our senior secured credit facility and the indentures that govern our senior notes and our senior subordinated notes contain various restrictive
covenants. They prohibit us from prepaying indebtedness that is junior to such debt (subject to certain exceptions). Our credit facility requires us to maintain a specified minimum interest coverage ratio and a maximum consolidated leverage ratio.
The interest coverage ratio as defined in the credit facility (Adjusted EBITDA, as defined, to interest expense, as defined) must be greater than 1.75 to 1.0 at September 30, 2008. The consolidated leverage ratio as defined in the credit
facility (total debt, as defined, to Adjusted EBITDA, as defined) must be less than 6.00 to 1.0 at September 30, 2008. In addition, our credit facility, among other



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##### Table of Contents

things, restricts our ability to incur indebtedness or liens, make investments or declare or pay any dividends. The indenture governing the senior notes and
the indenture governing the senior subordinated notes, among other things: (a) limit our ability and the ability of our subsidiaries to incur additional indebtedness, incur liens, pay dividends or make certain other restricted payments and
enter into certain transactions with affiliates; (b) place restrictions on the ability of certain of our subsidiaries to pay dividends or make certain payments to us; and (c) place restrictions on our ability and the ability of our
subsidiaries to merge or consolidate with any other person or sell, assign, transfer, convey or otherwise dispose of all or substantially all of our assets. However, all of these covenants are subject to significant exceptions.

We have the ability to incur additional debt, subject to limitations imposed by our credit facility, senior notes indenture, and senior subordinated
notes indenture. Under our indentures governing the senior notes and the senior subordinated notes, in addition to specified permitted indebtedness, we will be able to incur additional indebtedness as long as on a pro forma basis our fixed charge
coverage ratio (the ratio of Adjusted EBITDA to consolidated fixed charges) is at least 2.0 to 1.0. As discussed above, since the Transactions, our cash flow has allowed us to make nine voluntary principal prepayments of the term loan through
September 30, 2008 aggregating $205.0 million.

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures

Adjusted EBITDA consists of income from operations before depreciation and amortization further adjusted to exclude non-cash and unusual items and other
adjustments permitted in our debt agreements to test the permissibility of certain types of transactions, including debt incurrence. We believe that the inclusion of Adjusted EBITDA is appropriate as a liquidity measure. Adjusted EBITDA is not a
measurement of liquidity or financial performance under U.S. GAAP and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. You should not consider Adjusted EBITDA as an alternative to cash flows from operating
activities determined in accordance with U.S. GAAP, as an indicator of cash flows, as a measure of liquidity, as an alternative to operating or net income determined in accordance with U.S. GAAP or as an indicator of operating performance.

Set forth below is a reconciliation of our consolidated net cash provided by operating activities for the twelve months ended
September 30, 2008 to Adjusted EBITDA.



|                                                                                         |  |                                          |       |  
|---------------------------------------------------------------------------------------- |  | ---------------------------------------- | ----- | -
|                                                                                         |  | Twelve MonthsEndedSeptember 30, 2008 (a) |      
|                                                                                         |  | (in millions)                            |      
|Net cash provided by operating activities                                                |  | $                                        | 145.1 |  
|Interest expense, net                                                                    |  |                                          | 121.9 |  
|Income tax expense                                                                       |  |                                          | 12.6  |  
|Amortization of favorable and unfavorable contracts                                      |  |                                          | 3.1   |  
|Amortization of debt discount and financing costs                                        |  |                                          | (5.9  | )
|Unrealized gain on interest rate swaps                                                   |  |                                          | 5.2   |  
|Deferred income taxes                                                                    |  |                                          | (8.2  | )
|Payment received for assumption of loyalty points program liability                      |  |                                          | (7.4  | )
|Changes in assets and liabilities                                                        |  |                                          | 40.8  |  
|Effect of the Transactions, reorganizations, certain legal costs and net cost savings(b) |  |                                          | 2.6   |  
|Other, net(c)                                                                            |  |                                          | 0.7   |  
|                                                                                         |  |                                          |       |  
|Adjusted EBITDA(d)                                                                       |  | $                                        | 310.5 |  
|                                                                                         |  |                                          |       |  



|(a) | Represents consolidated financial data for the year ended December 31, 2007, minus consolidated financial data for the nine months ended September 30, 2007, plus
consolidated financial data for the nine months ended September 30, 2008.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Eliminates the effect of the Transactions, prior business reorganizations, non-recurring revenue and gains, legal expenses for certain legal matters and certain severance costs.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | Eliminates stock-based compensation, non-recurring Sarbanes-Oxley implementation costs, a $2.0 million annual consulting fee paid to Apollo and certain other costs.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(d) | Adjusted EBITDA does not give pro forma effect to our acquisition of a base of approximately half a million members and the associated fee revenue stream from a U.S.-based financial
institution that was completed in December 2007. However, we would be permitted to make such pro forma adjustment as if such acquisition had occurred on October 1, 2007 in calculating the Adjusted EBITDA under our credit facility and the
indentures governing our senior notes and senior subordinated notes.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Set forth below is a reconciliation of our consolidated
net loss for the twelve months ended September 30, 2008 to Adjusted EBITDA as required by our senior secured credit facility agreement, the indenture governing our senior notes and the indenture governing our senior subordinated notes.



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|                                                                                    |  |                                          |        |  
|----------------------------------------------------------------------------------- |  | ---------------------------------------- | ------ | -
|                                                                                    |  | Twelve MonthsEndedSeptember 30, 2008 (a) |       
|                                                                                    |  | (in millions)                            |       
|Net loss                                                                            |  | $                                        | (104.8 | )
|Interest expense, net                                                               |  |                                          | 121.9  |  
|Income tax expense                                                                  |  |                                          | 12.6   |  
|Minority interests, net of tax                                                      |  |                                          | 0.7    |  
|Other expense, net                                                                  |  |                                          | (2.5   | )
|Depreciation and amortization                                                       |  |                                          | 274.3  |  
|Effect of the Transactions, reorganizations and non-recurring revenues and gains(b) |  |                                          | 1.6    |  
|Certain legal costs(c)                                                              |  |                                          | (1.4   | )
|Net cost savings(d)                                                                 |  |                                          | 2.4    |  
|Other, net(e)                                                                       |  |                                          | 5.7    |  
|                                                                                    |  |                                          |        |  
|Adjusted EBITDA(f)                                                                  |  | $                                        | 310.5  |  
|                                                                                    |  |                                          |        |  
|Interest coverage ratio(g)                                                          |  |                                          | 2.60   |  
|Consolidated leverage ratio(h)                                                      |  |                                          | 4.18   |  
|Fixed charge coverage ratio(i)                                                      |  |                                          | 2.66   |  



|(a) | Represents consolidated financial data for the year ended December 31, 2007, minus consolidated financial data for the nine months ended September 30, 2007, plus
consolidated financial data for the nine months ended September 30, 2008.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Effect of the Transactions, reorganizations and non-recurring revenues and gainseliminates the effects of the Transactions, prior business reorganizations and non-recurring
revenues and gains.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | Certain legal costsrepresents legal costs for certain litigation matters.
|--- | --------------------------------------------------------------------------



|(d) | Net cost savingsrepresents the elimination of costs associated with severance incurred.
|--- | ----------------------------------------------------------------------------------------



|(e) | Other, netrepresents: (i) net changes in other reserves, (ii) the elimination of stock-based compensation expense, (iii) non-recurring Sarbanes-Oxley
implementation costs, and (iv) consulting fees paid to Apollo.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(f) | Adjusted EBITDA does not give pro forma effect to our acquisition of a base of approximately half a million members and the associated fee revenue stream from a U.S.-based financial
institution that was completed in December 2007. However, we would be permitted to make such pro forma adjustment as if such acquisition had occurred on October 1, 2007 in calculating the Adjusted EBITDA under our credit facility and the
indentures governing our senior notes and senior subordinated notes.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(g) | The interest coverage ratio is defined in our senior secured credit facility (Adjusted EBITDA, as defined, to interest expense, as defined). The interest coverage ratio must be
greater than 1.75 to 1.0 at September 30, 2008.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(h) | The consolidated leverage ratio is defined in our senior secured credit facility (total debt, as defined, to Adjusted EBITDA, as defined). The consolidated leverage ratio must be
less than 6.00 to 1.0 at September 30, 2008.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(i) | The fixed charge coverage ratio is defined in the indentures governing the senior notes and the senior subordinated notes (Consolidated Cash Flows, as defined, which is equivalent
to Adjusted EBITDA (as defined in the Affinion Credit Facility), to fixed charges, as defined).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Affinion Group Holdings, Inc.s
Dependence on Us to Service its Obligations

On January 31, 2007, our parent, Affinion Group Holdings, Inc.
(Holdings), entered into a five-year senior unsecured term loan facility (the Holdings Loan Agreement) with Deutsche Bank Trust Company Americas (Deutsche Bank), Bank of America, N.A., and certain other banks as
the initial lenders, with Deutsche Bank Securities Inc. and Banc of America Securities LLC (BAS) as the joint lead arrangers and book-running managers, Deutsche Bank as administrative agent, and BAS as syndication agent. The principal
amount of the Holdings Loan Agreement is $350.0 million. Loans under the Holdings Loan Agreement initially accrue cash interest at the rate of six month LIBOR plus 6.25%, but the interest rate is subject to additional increases over time and further
increases if, in lieu of paying cash interest, the interest is paid by adding such interest to the principal amount of the loans. Holdings has the independent ability to pay such non-cash payment in kind interest in lieu of cash interest. If
Holdings elects to pay cash interest, the cash required to service the debt in 2008, net of the impact of three interest rate swaps entered into by Holdings discussed below, will be approximately $37.2 million payable semi-annually on March 1
and September 1. In addition, the Holdings preferred stock entitles its holders to receive dividends of 8.5% per annum (payable, at Holdings option, in either cash or in kind) and ranks senior to shares of all other classes or series
of stock with respect to rights upon a liquidation or sale of holdings at a price of the then-current face amount, plus any accrued and unpaid dividends. As a holding company with no significant assets other than the ownership of 100% of our common
stock, Holdings depends on our cash flows to service its debt and to pay cash dividends (if any) on its preferred stock.

On
January 23, 2008 and January 25, 2008, Holdings entered into two separate two-year interest rate swap agreements, with the interest rate swap agreements having a combined notional amount of $300.0 million. Under the January 23, 2008
interest rate swap agreement, which has a notional amount of $200.0 million, Holdings has agreed to pay a fixed interest rate of 2.79%, payable on a semi-annual basis, for the period beginning on March 1, 2008 through March 1, 2010, with
the first interest payment due on



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September 1, 2008, in exchange for receiving floating payments based on a six-month LIBOR on the same $200.0 million notional amount for the same
period. Under the January 25, 2008 interest rate swap agreement, which has a notional amount of $100.0 million, Holdings has agreed to pay a fixed interest rate of 3.19%, payable on a semi-annual basis, for the period beginning on March 1,
2008 through March 1, 2010, with the first interest payment due on September 1, 2008, in exchange for receiving floating payments based on a six-month LIBOR on the same $100.0 million notional amount for the same period.

On September 15, 2008, Holdings entered into a two-year interest rate swap agreement with Deutsche Bank AG having a notional amount of $50.0
million. Under the swap agreement, Holdings has agreed to pay a fixed interest rate of 3.17%, payable on a semi-annual basis, for the period beginning on September 1, 2008 through September 1, 2010, with the first interest payment due on
March 2, 2009, in exchange for receiving floating payments based on a six-month LIBOR on the same $50.0 million notional amount for the same period. The effect of this swap, in conjunction with the two swaps entered into in January 2008 is to
convert 100% of Holdings variable rate debt to a fixed rate obligation.

As
described above, we expect that Holdings will rely on distributions from us in order to pay cash amounts due (if any) in respect of the Holdings Loan Agreement and to pay cash dividends (if any) on its preferred stock. However, our ability to make
distributions to Holdings is restricted by covenants contained in our senior secured credit facility and the indentures governing our 101/8% senior notes and our 111/2% senior subordinated notes and by Delaware law. To the extent we
make distributions to Holdings, the amount of cash available to us to pay principal of, and interest on, our outstanding debt, including our credit facility, our 101/8% senior notes and our 111/2% senior subordinated notes, will be reduced,
and we would have less cash available for other purposes, which could negatively impact our financial condition, our results of operations and our ability to maintain or expand our business. A failure to pay principal of, or interest on, our debt,
including our credit facility, our 101/8% senior notes and our 111/2% senior subordinated notes, would constitute an event of default under the applicable debt agreements, giving the holders of that debt the right to accelerate its
maturity. If any of our debt is accelerated, we may not have sufficient cash available to repay it in full and we may be unable to refinance such debt on satisfactory terms or at all.

Potential Debt Repurchases

Our affiliates
have purchased a portion of Holdings and our indebtedness and we or our affiliates from time to time may purchase additional portions of Holdings or our indebtedness. Any such future purchases may be made through open market or privately
negotiated transactions with third parties or pursuant to one or more tender or exchange offers or otherwise, upon such terms and at such prices as we or any such affiliates may determine.

Critical Accounting Policies

In presenting
our unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, we are required to make estimates and assumptions that affect the amounts reported therein. We
believe that the estimates, assumptions and judgments involved in the accounting policies related to revenue recognition, accounting for marketing costs, valuation of goodwill and intangible assets, and valuation of tax assets and liabilities could
potentially affect our reported results and as such, we consider these to be our critical accounting policies. Several of the estimates and assumptions we are required to make relate to matters that are inherently uncertain, as they pertain to
future events. However, certain events outside our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. We believe that the estimates and assumptions used when preparing our unaudited
condensed consolidated financial statements were the most appropriate at the time. In addition, we refer you to our audited consolidated financial statements as of December 31, 2007 and 2006, and for the years ended December 31, 2007 and
2006 and for the period from October 17, 2005 (commencement of operations) to December 31, 2005, and the Predecessors combined financial statements for the period from January 1, 2005 to October 16, 2005, included in our
Form 10-K for a summary of our significant accounting policies.



|Item 3. | Quantitative and Qualitative Disclosures about Market Risk.
|------- | -----------------------------------------------------------

Following is a description of our risk management policies.

Interest Rate Swaps

We entered into an interest swap as of December 14, 2005. This swap converts a notional amount of our floating rate credit facility into a fixed rate
obligation. The notional amount of the swap was $200.0 million at September 30, 2008 and reduces in accordance with a contractual amortization schedule through December 31, 2010 when the swap terminates.

In January 2008, we entered into an interest rate swap effective February 21, 2008. The swap has an initial notional amount of $450.0 million,
increasing to $500.0 million on February 21, 2009 and $600.0 million on February 21, 2010. Under this swap, we have agreed to pay a fixed rate of interest of 2.86% in exchange for receiving floating payments based on a three-month LIBOR on
the notional amount for each applicable period. The effect of this swap, in conjunction with our previously existing interest rate swap, is to convert substantially all of the variable rate debt to a fixed rate obligation.



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The interest rate swaps are recorded at fair value either as a non-current asset or a non-current
liability. The swaps are not designated as hedging instruments and therefore changes in the fair value are recognized currently in earnings in the accompanying unaudited condensed consolidated statements of operations.

The following table provides information about our financial instruments that are sensitive to changes in interest rates. The table presents principal
cash flows and related weighted-average interest rates by expected maturity for our long-term debt as of September 30, 2008 (dollars are in millions unless otherwise indicated).



|                                         |  |      |       |   |      |   |       |      |  |   |       |   |  |      |       |   |                    |   |       |       |  |                                |       |   |  |   |       |  |   |      
|---------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | - |  | ---- | ----- | - | ------------------ | - | ----- | ----- |  | ------------------------------ | ----- | - |  | - | ----- |  | - | -----
|                                         |  | 2008 |       |   | 2009 |   |       | 2010 |  |   | 2011  |   |  | 2012 |       |   | 2013 andThereafter |   |       | Total |  | Fair Value AtSeptember 30,2008
|Fixed rate debt                          |  | $    | 0.1   |   |      | $ | 0.2   |      |  | $ |      |   |  | $    |      |   |                    | $ |      |       |  | $                              | 659.5 |   |  | $ | 659.8 |  | $ | 616.7
|Average interest rate                    |  |      | 11.08 | % |      |   | 11.08 | %    |  |   | 11.08 | % |  |      | 11.08 | % |                    |   | 11.08 | %     |  |                                | 11.08 | % |  |   |       |  |   |      
|Variable rate debt                       |  | $    |      |   |      | $ |      |      |  | $ |      |   |  | $    |      |   |                    | $ | 655.0 |       |  | $                              |      |   |  | $ | 655.0 |  | $ | 655.0
|Average interest rate(a)                 |  |      | 5.35  | % |      |   | 5.35  | %    |  |   | 5.35  | % |  |      | 5.35  | % |                    |   | 5.35  | %     |  |                                |      |   |  |   |       |  |   |      
|Variable to fixed-interest rate swaps(b) |  |      |       |   |      |   |       |      |  |   |       |   |  |      |       |   |                    |   |       |       |  |                                |       |   |  |   |       |  | $ | 4.0  
|Average pay rate                         |  |      | 3.48  | % |      |   | 3.34  | %    |  |   | 3.02  | % |  |      | 2.86  | % |                    |   |       |       |  |                                |       |   |  |   |       |  |   |      
|Average receive rate                     |  |      | 3.10  | % |      |   | 3.16  | %    |  |   | 3.66  | % |  |      | 4.25  | % |                    |   |       |       |  |                                |       |   |  |   |       |  |   |      



|(a) | Average interest rate is based on rates in effect at September 30, 2008.
|--- | ------------------------------------------------------------------------



|(b) | The fair value of the interest rate swaps is included in other non-current assets ($7.8) and other long-term liabilities ($3.8) at September 30, 2008.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------

We do not use derivatives for trading or speculative purposes.

Credit Risk and Exposure

Financial instruments that potentially subject us to concentrations of credit risk consist
primarily of receivables, profit-sharing receivables from insurance carriers and prepaid commissions. We manage such risk by evaluating the financial position and creditworthiness of such counterparties. As of September 30, 2008, there were no
significant concentrations of credit risk. Receivables and profit-sharing receivables from insurance carriers are from various marketing, insurance and business partners and we maintain an allowance for losses, based upon expected collectibility.
Commission advances are periodically evaluated as to recovery.



|Item 4T. | Controls and Procedures.
|-------- | ------------------------

Evaluation of
Disclosure Control and Procedures. The Company, under the direction of the Chief Executive Officer and the Chief Financial Officer, has established disclosure controls and procedures (Disclosure Controls) that are designed to ensure
that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SECs rules and
forms. The Disclosure Controls are also intended to ensure that such information is accumulated and communicated to the Companys management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosures.

Our management, including the Chief Executive Officer and Chief Financial Officer, does not
expect that our Disclosure Controls or our internal controls over financial reporting (Internal Controls) will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to
their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by
management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective
control system, misstatements due to error or fraud may occur and not be detected. Notwithstanding the foregoing, our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.

As of September 30, 2008, an evaluation was performed under the supervision and with the participation of the Companys management, including
the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934. Based upon their
evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of September 30, 2008, the Companys disclosure controls and procedures are effective at the reasonable assurance level.



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Changes in Internal Control over Financial Reporting. There have not been any changes in the
Companys internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.



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PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings.
|------- | ------------------

Information required by this
Item is contained in Note 6 to our consolidated financial statements within Part I of this Form 10-Q.



|Item 1A. | Risk Factors
|-------- | ------------

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form
10-K for the year ended December 31, 2007.



|Item 2. | Unregistered Sales of Equity in Securities and Use of Proceeds.
|------- | ---------------------------------------------------------------

None.



|Item 3. | Defaults Upon Senior Securities.
|------- | --------------------------------

None.



|Item 4. | Submission of Matters to a Vote of Security Holders.
|------- | ----------------------------------------------------

None.



|Item 5. | Other Information.
|------- | ------------------

None.



|Item 6. | Exhibits.
|------- | ---------



|              |  |                                                                                      
|------------- |  | -------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                          
|              | 
|31.1*         |  | Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a).
|              | 
|31.2*         |  | Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a).
|              | 
|32.1*         |  | Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.     
|              | 
|32.2*         |  | Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.     



|* | Filed herewith.
|- | ---------------



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



|                       |  |  |  |                      |  |                        |  |                                                     
|---------------------- |  |  |  | -------------------- |  | ---------------------- |  | ----------------------------------------------------
|                       |  |  |  | AFFINION GROUP, INC.
|                       |  |  | 
|Date: October 30, 2008 |  |  |  | By:                  |  | /s/ Thomas A. Williams
|                       |  |  |  |                      |  |                        |  | Thomas A. Williams                                  
|                       |  |  |  |                      |  |                        |  | Executive Vice President and Chief Financial Officer



S-1